Archive for November, 2010

One of the ironic things about the WikiLeaks scandal is that people who hold a security clearance cannot go to or otherwise access the WikiLeaks website to view or download information contained on the site.  Here is the content of an Air Force memo to this effect that applies to all of its personnel (I think the story improperly suggests that these limits apply to government computers when in fact they apply to individuals).  This is because Executive Order 13526 Section 1.1(4)(c) makes clear that “(c) Classified information shall not be declassified automatically as a result of any unauthorized disclosure of identical or similar information.” 

That makes it pretty hard for military personnel and others with security clearances to have a reasonably informed opinion or conversation about the controversy and/or the material leaked.  Indeed, those with a clearance would probably want to avoid any and all public discussion of the issues involved to ensure compliance with regulations.

So isn’t it funny that the entire world – including our enemies in Afghanistan, Pakistan, and elsewhere – can view the documents and discuss them but those with a clearance can’t?!?

As for my overall take on the matter, I think that the security breach (or breaches) that resulted in the scandal is an egregious violation of a public trust given to whomever leaked the documents.  Therefore, I’m with Chris Preble at the Cato Institute on this specific point below

Because I don’t trust individual leakers to be able to discern which material is legitimately classified, and which is not, I believe that individuals who possess classified material and knowingly release it to people not cleared for such information should be prosecuted to the full extent of the law.

Finally, as a practical matter, I am particularly leery of individuals passing judgment on when to follow the rules, and when to ignore them, in cases involving national security. We rightly condemn military officers who defy civilian authority over the conduct of war. We should be equally critical of people who choose to go their own way in the conduct of information warfare. People with access to classified material have chosen to work in the government. They therefore choose to abide by the government’s rules, and should expect to pay a penalty if they violate them.

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Guido Fawkes makes the case for letting banks fail, comparing the trajectories of two economies massively damaged by the financial crisis: Iceland and Ireland. Iceland let its banks fail, while Ireland has bailed out its banks, to massive expense:

The Irish bail-out plan will cost €54,800 per Irish household. Ireland’s future thus looks a lot more bleak than Iceland’s path of debt default and a devaluation of 60% two years ago which has the country rebounding: exports and manufacturing are growing by 20%, tourism is back near all-time highs, real wages are rising, unemployment is declining sharply, interest rates fell from 18% to 5.5% and the stock market has rebounded 50% from its lows.

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Wikileaks and Incompetence

George Orwell once noted: “During times of universal deceit, telling the truth becomes a revolutionary act.” I am not certain that the release of the newest Wikileaks documents is very revolutionary, even if the times meet Orwell’s description. David Rothkopf captures my general reaction in his brief column at Foreign Policy:

“the 250,000 State Department cables contained in the release offer up no single revelation as striking as the overall message they contain: The dark shadowy world of diplomacy and international intrigue is working just about precisely as you suspect it is.”

There are some interesting if not surprising revelations, of course. For example, who would have guessed that Slovenia was promised an audience with President Obama if it accepted a former Gitmo detainee? This seems overly ham-handed and hardly a glide path to closing Gitmo in 6 months 1 year 2 years…never. And HRC seems to be on her way to assembling an impressive database on UN diplomats via her National Humint Collection Directive which, according to der Spiegel, sought out “personal credit card information, frequent flyer customer numbers, as well as e-mail and telephone accounts. In many cases the State Department also requested ‘biometric information,’ ‘passwords’ and ‘personal encryption keys.’ Perhaps HRC’s days as FLOTUS taught her the high costs of working with asymmetrical information.

The most shocking aspect is the leak itself. The government’s secrets were downloaded by a private first class, burned, and smuggled out as a Lady GaGa CD. This evident incapacity to control secret documents should give pause to anyone who still believes the government can be trusted with maintaining the confidentiality of electronically transmitted medical records…or anything else, to be frank.

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So saith Doug Bandow in the American Spectator. (BTW, how far has the American Spectator come in publishing a piece like this?)

Why hasn’t the South put its resources to better military effect? Because it doesn’t have to.

So long as America offers a security guarantee, maintains a tripwire troop presence on the peninsula, and promises to do whatever is necessary to protect the ROK, the South Koreans have little incentive to take over their own defense. Granted, it’s a bit humiliating to constantly beg Washington for aid: it would be a bit like the U.S. going hat-in-hand around the world asking for help to defend against Mexico. Still, better for Seoul to get the gullible Americans to pay its defense bill than to have to cover the cost itself.

Making the ROK’s behavior even more outrageous has been Seoul’s attempt to buy off Pyongyang while relying on American military support.

The argument here is for an interesting combination of noninterventionism (on the part of the United States) and muscular deterrence (by South Korea). It just goes to show that you don’t have to be a dove to be a noninterventionist. Still, Bandow doesn’t go so far as to advocate withdrawal of the U.S. nuclear deterrent shield from South Korea.

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Favorite Books of 2010

This was a fine year for books. I am embarrassed to admit that I read little in the way of fiction this year and what I read was quite dated (e.g., Oakley Hall, Warlock). But I have some recommendations under biography and memoirs, economics, and religion.  I am most interested in hearing what you would recommend to me and fellow Pileus readers.

Biography and Memoirs:  I read a lot of biographies this year (on Nash, Keynes, McCarthy, Hamilton, Arthur, Eisenhower, Truman, Hoover, Bush, and Roosevelt). All were fine in their own ways, but the best single work was Jennifer Burns, Goddess of the Market. I am not much of an Ayn Rand fan (in fact, I’m not a fan at all). Burns’ biography succeeded in painting a complex portrait of Rand that made me appreciate her (even if I remain unconvinced about the novelty and virtues of her thought). In the memoir department, I strongly recommend Keith Richards, Life. Having spent most of my life playing guitar (telecaster thinline, in case you are interested) and marveling at the amazing rhythm licks of Keith Richards, this book was one of my favorites. Richards presents a refreshing uncensored window into the Stones, while offering a course in musicology (focusing on the blues) and some extraordinary discussions of the intellectual process that led him to embrace open tunings.  I just finished a second memoir, George W. Bush, Decision Points. While the book carries the heavy hand of a ghostwriter, it succeeds in bringing out the complexities of many of the issues faced during the Bush presidency. Bush is, at times, painfully honest about some of the results of his eight years in office. At other times, he seems oblivious to the damage done by core decisions (e.g., Medicare Modernization, the war in Iraq).

The Financial Crisis and Beyond: Many of the best books came out in 2009 but I only got to them in this calendar year. Carmen Reinhart and Kenneth Rogoff, This Time is Different, provides an impressive tutorial in the history of financial crises and the underlying dynamics. It is a fantastic, if heavy, read. Gary Gorton, Slapped by the Invisible Hand, is well worth the investment. Gorton has written some fascinating papers on the shadow banking system (focusing on the repo market) and they are brought together in this fine volume.Robert Reich’s Aftershock is an interesting read even if you disagree with 80 percent of what Reich writes. Reich seeks to place the collapse within a history of stagnant wages (a product of deindustrialization and the decline of unions) and growing inequality. Whether you agree or disagree with Reich’s larger argument, it is a lively book that is pitched to a generalist audience.

Two other books that require little in the way of specialized knowledge include Nouriel Roubini and Stephen Mihm, Crisis Economics and Ian Bremmer’s The End of the Free Market. Bremmer’s book is particularly interesting. It explores the phenomenon of state capitalism and the difficulties the US faces in competing with these regimes. If anyone is interested in sovereign wealth funds and the industrial policies embraced by state capitalists, this book  is made to order.

If all of these books leave you pessimistic, you can find relief in  Matt Ridley’s new book, The Rational Optimist. While this book was not as compelling as The Origins of Virtue, it was nonetheless a great read. And if you really want relief, turn to P.J.O’Rourke’s new book, Don’t Vote. While not in the same category as Parliament of Whores or Eat the Rich, this is a fantastically enjoyable read.

Religion: I made my first trip to Israel this year and in preparation I explored a number of books from the Jerusalem School of Synoptic Research. The authors—Christians and Jews—seek to place the gospels in the context of 1st century A.D. Judaism and understand where Jesus fit in the larger rabbinical tradition.  If this kind of thing interests you, I can recommend David Bivin and Roy Blizzard, Understanding the Difficult Words of Jesus, David Biven, New Light on the Difficult Words of Jesus, Brad Young, Jesus the Jewish Theologian, and Ron Mosely, Yeshua. I have also been intrigued by the debates inspired by the so-called new atheists (Dawkins, Hitchens, etc) and the response of Christians. Most of the work of the new atheists is polemical. However, some rather sophisticated essays on apologetics can be found in Robert Lane Craig and Chad Meister, God is Great, God is Good. If one is troubled by the problem of evil or wishes to explore the Islamic contributions to the cosmological argument, this is a great place to start.

All is all, it was a decent year for books. With the exception of Keith Richard’s memoir and the recent piece by O’Rourke,  you could provide any of these books to those you love without embarrassment (your mother may not be interested in some of the more seedy adventures of the Rolling Stones).

I await suggestions for great books I missed (and, of course, correctives on the poor books I praised).






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Sunday Morning Quotation is back, this time with a quotation from Damon Linker’s new book The Religious Test:

Unlike so many of their predecessors and contemporaries, the first liberals treated disagreement and discord about the highest good as a given and then proposed that civil peace in a deeply divided society could best be established and maintained by excluding as much as possible the most divisive questions – metaphysical questions – from political life.  Citizens would still have strongly held views about the highest good, but they would no longer presume that their neighbors or the political community as a whole would collectively endorse those views.   

Too bad so many people today, conservatives and modern liberals, want to turn the clock back and politicize so many things (high and low) that should be left in the private sphere.

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Honorific Resolutions

Jonathan Adler, a very smart law professor and one of my favorite bloggers over at the Volokh Conspiracy, notes that  “Republicans may eliminate honorific resolutions (e.g. resolutions endorsing National Potato Day and National Pi Day, or honoring the 75th anniversary of Radio Shack’s listing  on the NYSE — all real examples) from Congressional business.  This would be a nice symbolic gesture.  Such resolutions seem trivial, but they cost time and money — and they add up.” 

I’m really tempted to agree, and Jonathan is probably right.  Such resolutions are silly and a distraction when we know that Congressmen and women are so pressed for time that they can’t even read the full texts of important legislation. 

However, as I note in the comments at the VC:

“Idle hands…

But this issue does tap into the age-old question among classical liberals of whether we are better off with an efficient government or not. In theory, of course, we’d prefer an efficient, strong but limited government. But if we had an efficient and strong government, would it remain limited in practice? I guess in Italy one might prefer an inefficient government given how much the state could do based on what is on the books. But in New Hampshire, more efficiency — but maybe not so much people would be tempted to try and extend government too far. In other words, the inefficiency of the DMV might be a good thing since it provides a check on enthusiasm for the extension of the state.”

I didn’t see any estimations (in the original article Jonathan references) of the costs of such resolutions.  Anyone know?

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Is Margaret Wente from the Globe and Mail correct across the board here?

Mercifully, nobody will pay attention to the climate conference at Cancun next week, where a much-reduced group of delegates will go through the motions. The delusional dream of global action to combat climate change is dead. Barack Obama’s cap-and-trade scheme is dead. Chicago’s carbon-trading market is dead. The European Union’s supposed reduction in carbon emissions has been exposed as a giant fraud. (The EU is actually responsible for 40 per cent more CO2 today than it was in 1990, if you count the goods and services it consumed as opposed to the ones that it produced.) Public interest in climate change has plunged, and the media have radically reduced their climate coverage.

The point of the whole article, though, isn’t to bash environmentalism but to bash the form it has taken.  Instead of placing climate change on top of the environmental agenda, Wente thinks that environmentalists should focus on conservation instead of  “unenforceable treaties and radical utopian social reform.”

So, should those of us concerned about the environment focus on the smaller, more manageable problems that still require collective action or the big one that could potentially do the most overall harm?  Or  have I posed a false question altogether since we can do more than one thing at a time (but is there enough room on the agenda if climate change heads it up?) or because I’ve overstated the danger of climate change?

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Palin vs. the Media Via Obama

Making light of a person’s verbal gaffes is not very generous, especially given that few of us are so skilled as to avoid them.  Moreover, the occasional verbal miscue does not seem to be all that relevant to whether one is intelligent, a good leader, etc.  (though there are some politicians out there who have made so many repeated or egregious mistakes that they seem to be relevant data). 

However, given how much grief she has taken for her gaffes, one could understand why Sarah Palin put together this paragraph (with links) to point out that the media is holding her to a bit of a double standard and that perhaps they (and we) should cut her a little slack*:

My fellow Americans in all 57 states, the time has changed for come. With our country founded more than 20 centuries ago, we have much to celebrate – from the FBI’s 100 days to the reforms that bring greater inefficiencies to our health care system. We know that countries like Europe are willing to stand with us in our fight to halt the rise of privacy, and Israel is a strong friend of Israel’s. And let’s face it, everybody knows that it makes no sense that you send a kid to the emergency room for a treatable illness like asthma and they end up taking up a hospital bed. It costs, when, if you, they just gave, you gave them treatment early, and they got some treatment, and ah, a breathalyzer, or an inhalator. I mean, not a breathalyzer, ah, I don’t know what the term is in Austrian for that…  

* And no, I don’t hang out on Palin’s Facebook page nor do I support her candidacy in 2012; I saw the link to her post on another site, I think Real Clear Politics, but can’t find it there now.

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I am thankful for many, many things today.  But I’m feeling particularly grateful for those brave souls who have–in many places and in many times–stood up for the cause of human liberty.   So, to Patrick Henry and Rosa Parks and William Wilberforce and Liu Xiaobo and Aung San Suu Kyi and many countless others, both great and small, I say Thank You.

May we all remember their sacrifices, particularly those who have made the ultimate sacrifice, in defense of liberty.

Have a grateful day!


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Happy Thanksgiving, readers of Pileus.  Some lighter fare mixed with a few more serious dishes.

1.  If you want to see a college football playoff system instead of the current farce BCS system, root root root for Boise State and TCU to win out, Auburn to lose to Alabama this weekend, and Oregon to lose one of its last two games.  That could give us a BCS title game of Boise State and TCU.  And being shut out of the title game using their own rigged system could tick off the big conferences so much that some could support a playoff system.  Then again, even if all of the action on the field worked according to my clockwork, I still think there is a very small chance of a playoff system being adopted in the near to medium term.  In other words, wake up and smell the coffee Grover.  There are way too many interests lined up against such a system.  But could the NCAA and college presidents please stop saying they oppose a playoff because of its impact on the student-athletes?  Have they seen the long semester-spanning basketball and hockey seasons? 

2.  Common wisdom seems to be that Sarah Palin entering the 2012 Republican presidential primary could lead to her victory, which in turn would guarantee a second term for Obama.*  Hence some speculate that this is why the MSM and libgressive talking heads want to keep her in the news, sucking the air out of the system (and thus suffocating better but less-known possible challengers).  In this case, the common wisdom that Obama would clean her clock is right, and a Palin challenge would lead to a Republican defeat even if structural factors favor the Republicans (which is certainly no given – indeed I’d guess the opposite will be the case and so a particularly strong Republican challenger will be needed to defeat Obama for that party to win). 

That being said (I assume that a strong Republican candidate like Mitch Daniels would be more friendly to liberty than Obama so would prefer Palin not enter and lose to Obama), I kinda enjoyed her well-aimed response to Barbara Bush’s barbed plea for Palin to stay in Alaska.  As reported on CNN:

“I don’t think the majority of Americans want to put up with the blue-bloods,” Palin said in a radio interview on the Laura Ingraham Show Wednesday. “With all due respect because I love the Bushes, the blue-bloods who want to pick and choose their winners instead of allowing competition.”

And no, I’m not a populist (though blue-bloods can be really annoying).  I just admire a nice retort aimed at the opposition’s weak spot.

* I don’t think Palin will win the nomination.  Republicans, just like they did in 1996 and 2008, will rush to safety – and safely lose the presidency.  This means Mitt Romney should try to keep Palin in the race.  But given “safety” is Mitt Romney of MassCare fame, this means that Republican partisans should unite behind someone other than Romney if they don’t want to lose honorably like in 1996 and 2008. 

3.  As I’ve said for a long, long time, Dan Duquette deserves a heck of a lot more credit for the Red Sox winning the World Series after its long drought than he is given.  It is nice to see someone else making the same argument, even if in an article not focused on making that point. 

4.  Steve Chapman rightly questions the wisdom of motorcycle helmet laws.  Here is an interesting section:

 It’s also hard to see why we single out motorcyclists for the sin of saddling everyone with higher health care costs. Plenty of patients suffer from self-inflicted ailments—lung cancer from smoking, liver damage from drinking, diabetes from eating unhealthy foods, AIDS from unprotected sex. Yet we don’t ban these activities.

Why not? Because we retain a respect for individual freedom and choice—even in matters of life and death, even when individual choices have collective costs. Motorcycle helmet laws are an unwarranted exception to our normal, sound approach, which can be summarized: It’s your life, and it’s your funeral.

The problem with this statement is that the logic of motorcycle helmet laws in an age of socialized health insurance also applies to those other activities as well.  And this means that the state will face pressure from within and without to start regulating these things too.  Of course, people represented by powerful interest groups will get to continue their “unhealthy” choices – but help you if you are simply a fat dude who loves his donuts or any other uncelebrated unhealthy activity (dare I say “choice”? – but then that would make the “public health” lobby anti-choice, wouldn’t it?!).

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David Nolan – R.I.P.

I hate to bump Roger’s fine Thanksgiving note down the blog before Thanksgiving, but I think we’d be remiss here at Pileus if we did not note the passing of David Nolan.  Nolan was famous for his “Nolan Chart” (see at right) and for helping found the Libertarian Party.  Although I’m not a member of the Libertarian Party and have certain qualms about its existence today (I tend to think it would be best if libertarians focused on becoming an interest group that the two dominant parties might court), Nolan’s struggle for liberty is certainly worth highlighting.  Wikipedia notes that Nolan eventually endorsed the Free State Project as a means to greater liberty in our lifetime.  Perhaps Jason knows more about that part of his life.  R.I.P. 

Here is Nolan’s obituary in the New York Times.

And here is a link to a (somewhat simplistic but not unhelpful) quiz based on the Nolan Chart.

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[Editor's Note: This is a special guest post from Roger Ream, president of The Fund for American Studies, which sponsors Pileus.]


To the Readers of Pileus,

The Fund for American Studies is pleased to sponsor the Pileus blog.  I thought I would use the occasion of Thanksgiving to express my gratitude to our team of bloggers and to the many readers who post interesting comments throughout the year. 

Thanksgiving has always been my favorite holiday.  Perhaps this is because I grew up the son of a Congregational minister. We Congregationalists trace our church heritage to the Separatists in England, many of whom eventually boarded the Mayflower to Plymouth, Massachusetts in 1620, following 12 years as religious refugees in Holland.  It was a harrowing journey in those days and they arrived in the New World after 65 days at sea just in time for a typically nasty New England winter.  More than half their number died that first winter, yet when the Mayflower returned to England not a one returned with it.  And, a year later they came together in Thanksgiving to offer their thanks to the Almighty.  The Pilgrims offer a remarkable example of what people will endure to find religious freedom.

Growing up as a preacher’s kid, my family started Thanksgiving morning in church with a service patterned after a traditional New England one, sans the 2–3 hour-long sermon.  My father would begin the service by reading George Washington’s Thanksgiving Proclamation (1789).  It is worth a read every Thanksgiving and is even short enough that you can read at the Thanksgiving dinner table. Washington designated the day for service to the “great and glorious Being who is the beneficent author of all the good that was, that is, or that will be; that we may then all unite in rendering unto Him our sincere and humble thanks for… the peaceable and rational manner in which we have been enable to establish constitutions of government for our safety and happiness, and particularly the national one now lately instituted for the civil and religious liberty with which we are blessed . . . .”

This morning, The Wall Street Journal ran a story suggesting that people who show gratitude improve their psychological, emotional and physical well-being; they live happier lives.  The article recommended keeping a journal to record all that one is grateful for in life and also that we express gratitude regularly.

As Americans, we have much to be grateful for this Thanksgiving.  We still have material abundance beyond the imagination of most in the world and certainly beyond the imagination of our Pilgrim ancestors and even the generation or two that proceeded us.  Much as government has grown and constrained our choices, we still have the freedom to worship as we please.  And we have few limitations on our freedom of speech; thank goodness our Pileus team is free to voice interesting and controversial opinions each day, without the censorship faced by people in China, Iran, and many other places in the world.

Best wishes to the readers of Pileus during the Thanksgiving holiday.  If you are traveling, travel safe (and beware the folks at TSA). 

Roger Ream

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Listening to the American citizens claiming that they don’t mind the pornographic body scanners or the “enhanced” pat-downs, as long as those conducting them are from the government and as long as it’s for “safety” and for “security,” I am reminded of this quote from Jefferson:

Dependence begets subservience and venality, suffocates the germ of virtue, and prepares fit tools for the designs of ambition. (Notes on the State of Virginia, 1787, Query 19)

You may recall the experiments Philip Zimbardo ran at Stanford University in 1971, in which student test subjects were randomly assigned roles as either prison guards or prisoners, and they were asked to play out these roles in an artificial setting in a building on Yale’s campus. The results were famously horrific: the “guards” became authoritarian and brutal, the “prisoners” tremulous and subservient. Why did the “guards” act to cruelly? Why didn’t the “prisoners” just leave (the doors were all unlocked)?

Zimbardo’s experiments were conducted a decade after Stanley Millgram’s famous experiment at Yale University in which he asked subjects to administer electric shocks to others, in an effort to see how far subjects would be willing to go in obedience to authority. The answer: much, much too far.

People argue about what these experiments really showed, but one thing I believe they reflect is people’s disheartening inclination to listen to whatever someone in authority tells them. That inclination is almost as strong, pervasive, and reliable as is the inclination for people to fully exploit and indeed abuse any authority or power they are given. Everyone from the lowest clerk in an office to the president of the United States will jealously guard his authority, and can be counted on to expand the scope of his power indefinitely until it reaches a point of resistance.

That observation of the natural course of human nature—obedience and subservience to authority, on the one hand, and a correlated steady and increasing exercise of power and authority, on the other—are what led some of the leading figures at America’s founding to think that the best safeguard of liberty and independence is simply not to have the apparatus of power and authority exist in the first place. If there is such an apparatus, one can count on some people seeking it out and using it to the fullest possible extent; one can also count on others bowing to it. Since both of those are evils, the only practical way to limit them is to minimize the opportunity for power in the first place. Hence: limited government.

If, to quote Jefferson again, the “natural progress of things is for liberty to yield and government to gain ground,” then we should not be surprised to discover either that our government is relentlessly expanding its power or that many of our fellow citizens are content to docilely accept, even energetically welcome, orders from their masters. Perhaps that means that a free republic was doomed to fail because it was just too foreign to deep elements of human nature.

Perhaps this dispiriting and disheartening conclusion is true. But, but, but: reflecting further on this situation, and on my own place in it, I am reminded of another famous speech, this one given in St. John’s Church in Richmond, Virginia, on March 23, 1775. Re-reading it now, I am struck by how remarkably it captures not only the situation today but also my own sentiments. I recommend the whole speech, but I will close this post with only its thundering conclusion:

Why stand we here idle? What is it that gentlemen wish? What would they have? Is life so dear, or peace so sweet, as to be purchased at the price of chains and slavery? Forbid it, Almighty God! I know not what course others may take; but as for me, give me liberty, or give me death!

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I was ever so briefly at a conference on pricing carbon this weekend at Wesleyan (I was a moderator for a session). The panelists were committed to the same goal (reduced CO2 emissions) so the discussion focused on the issue of regulatory design and policy instruments. Of the competing approaches—cap-and-trade, cap-and-dividend, and a straight carbon tax—the carbon tax, in my opinion, makes the most sense.

By way of background, I find the data on global climate change pretty persuasive even if we accept that there is a fair amount of uncertainty.  Given the benefits of reducing CO2 emissions, reducing dependency of foreign oil, etc., a transition to less carbon-intensive fuels and processes makes sense even if we determine at some point in the future that the environmental risks of climate change were less than we currently believe them to be.

Given the impossibility of establishing property rights over climate stability, the kinds of free-market environmentalist approaches that many find appealing would seem inapplicable. Thus we turn to other kinds of policy interventions.

Cap-and-trade worked quite well for acid rain. There is little question that Title IV of the Clean Air Act Amendments of 1990 created an amazingly cost-beneficial approach to the problem. But CO2 is far more complicated for a number of reasons and it is questionable that caps could function without offsets, which open the door to endless gaming.  The carbon tax, in contrast, is a simple and transparent means of managing a negative externality.

A carbon tax would gradually increase the tax per ton of CO2, thereby making less carbon-intensive forms of fuel and processes more price competitive.  Current proposals require revenue neutrality. Some suggest returning 100% of the revenues on a per capita basis via electronic transfers, thereby limiting the opportunities for transfer seeking and gaming the system (both of which would be ubiquitous in a cap scheme with offsets or any efforts to divert some of the funds to a green industrial policy). Others make the case for “tax shifting” (e.g., using the projected $500 billion in carbon revenues to eliminate those that create disincentives to investment or are overly regressive).  Obviously, one could combine dividends and tax shifting. It would be prudent to combine the carbon tax with the immediate elimination of all subsidies for fossil fuel production. Of course, it would be a major innovation for US government to stop subsidizing the very activities we are trying to regulate….but I digress.

Regardless of how one uses the resources, there is a major hurdle: taxes are taxes (even if we call them “fees”) and in this political environment one might suppose that any proposal for new taxes would be DOA.

But not necessarily.

There is growing recognition of the huge fiscal crisis on the horizon. There is literally no hope of avoiding it through attacks on “waste, fraud and abuse,” earmarks, and domestic discretionary spending.  Yes, any of us could make the intellectual case for massive entitlement cuts or restructuring. But there is little evidence that a majority of either party will ever make the case and endure the political costs associated with substantial revisions in Social Security and Medicare.  So we turn, necessarily, to revenues.  Why not frame a carbon tax as a means of shoring up the unfunded portion of Social Security and Medicare without significant cuts—and thereby avoiding an eminent fiscal collapse.

We know that existing federal trust funds are not a store of wealth. The trick would be to assure that 100% of the revenues were placed in a real trust fund with real assets until the unfunded liabilities were reduced to manageable levels.  At that point—assuming that point ever arrived—decisions could be make to pay down the debt. None of this would preclude future reforms (indeed, they would likely remain necessary given the magnitude of the gap).

As a means of protecting existing entitlements, it might be attractive to the AARP and members of both parties who would like to find some means of avoiding the difficult decisions before us. As a means of reducing CO2 emissions, it would be attractive to environmentalists and younger voters (who would also be attracted by the beneficial impacts on entitlements they may never see under current conditions)?

Could the carbon tax provide a foundation for a potent grey-green coalition committed to fiscal and environmental sustainability?


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A couple items today on Adam Smith that I recommend:

1. A lecture from Daniel Klein, an economics professor at George Mason University, given at The Institute for Liberal Studies in Canada. Professor Klein’s lecture is entitled, “Adam Smith: A Broad Interpretation of His Work and Vision.”

2. A Russ Roberts podcast interview of distinguished scholar Nicholas Phillipson, on the occasion of Phillipson’s new book, Adam Smith: An Enlightened Life. (I am currently reading Phillipson’s book and will review it when I have completed it.) (H/T: Victor Claar.)

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Following the suggestion of one of our readers (as well as Jason’s bold spending cut-dominated march into the breach), I too attempted to solve the deficit using the New York Times’ slick online tool.  Behold, problem solved: here.  I actually produced a budget surplus  – which I’d be more than happy to refund to the taxpayers since it is their money after all and not the government’s. 

To the chagrin no doubt of my fellow classical liberals, I had to use a combination of spending cuts and tax increases given the constraints of the NY Times tool.  Perhaps with greater options I could have done it with fewer or no tax increases, but I could not honestly do so within the parameters of the tool.  Specifically, my combination was 82% budget cuts and 18% tax increases.    

A few notes on my choices: 

I didn’t cut the number of our troops in Iraq and Afghanistan.  I’m extremely reluctant to let deficit concerns dictate specific foreign policies like the troop levels in Afghanistan even if I think that our ends should be correlated with our means.  So I wish I had greater options there since I’d love to prune our overall foreign policy ends and commitments which would allow serious cutbacks in the defense budget.

I also refuse to endorse the notion that the military should “reduce the length and frequency of combat tours. No unit or person will be sent to a combat zone for longer than a year, and they will not be sent back involuntarily without spending at least two years at home.”  Although this is good for service members, it isn’t necessarily the best policy to achieve our missions (which should be the first priority assuming the missions are necessary for our national interests narrowly defined).  Indeed, I would argue that if we need to have a large footprint in Afghanistan, it might make sense to have longer and more frequent tours for many of our soldiers, sailors, airmen, and Marines given that counterinsurgency requires a deep reservoir of knowledge about the problem set, something that can best be gained by more focus on and more time in the theatre of operations.

I’m also loathe to tinker with medical malpractice.  Given that I’m not an expert in this area, I just don’t know enough about how shielding doctors and others from malpractice might harm the very important tort system.  

Given that we have to fund the government in some way through coercive means (even lotteries, if we could raise enough revenue in that fashion, would have to involve coercion since the logic of the system would require a state monopoly), I tried to choose taxes that would have the least negative consequences and perhaps even some positive ones (like a carbon tax and eliminating tax loopholes).    

Also worth noting that I had a much easier time cutting the longer term deficit than the short-term deficit.

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Of all the Pilei, I am probably most sympathetic – IN THEORY – to some of the screening methods used by the TSA.  Indeed, I think that a largely market order would probably have many of the same non-invasive procedures (especially if government intruded to the extent that they did not allow businesses to do serious profiling) – bag screening, metal detectors, wanding, etc. 

However, given the potential for serious negative externalities in the case of businesses which failed to screen properly (and assuming that the fear of torts aren’t enough to promote good behavior), I think there is a positive role for the government to play in the airline security area.  Of course, the government should be more flexible, more willing to experiment, do more cost/benefit analyses of security procedures, etc.  But I think that a good libertarian could in theory support mandatory screening for the same reason we can support drunk driving laws – there are some potentially destructive actions that are such a threat to the rights of 3rd parties that they should be policed.

And yet the TSA has really gone way over the line of late, showing again that just because there might be a good justification for a government role, the government frequently performs its work poorly and in utter disregard for common sense and the rights and dignity of its principals (us). 

Here is one of the more egregious examples of TSA bad behavior – collected and distributed by everyday people expressing their righteous indignation at a system run amok.  Since I don’t know what the laws are in terms of posting a picture of a kid without his shirt on even for legitimate political discourse, I am not embedding the video – but it is here on Youtube, as referenced by Drudge: http://www.youtube.com/watch?v=XSQTz1bccL4

By the way, notice how uncomfortable the kid seems to be as the adult tries to frisk him.  What are we teaching kids with such tactics?  


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Freedom to be a press

On September 25, 1690, Benjamin Harris issued in Boston the first and only installment of colonial America’s first multi-page newspaper, Publick Occurrences. The outraged colonial government arrested the publishers, destroyed all copies of the paper and suppressed further publication.  They also issued a blanket warning against any future attempt to communicate with the public without official license from the government.

And pretty much since that point, governments, scoundrels and a variety of well-meaning people have been trying to restrict the press for one political purpose or another.  Rather than trying to play referee or level the playing field, the 1st Amendment is the right idea–leave those who are expressing opinions alone, especially political opinions, and ESPECIALLY political opinions during an election season.

Press freedom has come a long way since that difficult start.  The recent Supreme Court decision (Citizens United v. F.E.C.) striking down the electioneering restrictions previously enforced upon corporations is a major, and long-awaited, advance in press freedom. Public debate about campaign finance regulations usually focuses on the issue of freedom of speech, but the essence of the issue is much more about press freedom than freedom of speech.

Two intrinsic characteristic of press freedom are essential to keep in mind.  First, freedom of the press is the right to engage in mass communication, to devote financial resources to disseminating ideas to a broader group of people than can be reached by standing on a soapbox in the town square.  The Founders believed in freedom of the press in spite of any guarantee, and ample evidence to the contrary, that the press would be balanced, honest, responsible, or in any way representative of the views of the electorate.  .

Second, and most important, freedom of the press means freedom to be a press.  Running a political TV advertisement during an election season is as much an activity of the press as is writing an editorial for the New York Times.  An important aspect of the Court’s decision is that it increases press freedom by further weakening the established media’s grip on the flow of political opinion.

Not surprisingly, the group that has campaigned the hardest in for suppressing press freedom through campaign finance regulation are those that are most threatened by these new technologies: the mainstream media.  As George Will has said, “the media, which comprise the only intense constituency for campaign finance reform, advocate expanded government regulation of all political advocacy except that done by the media.”  And we are going to hear a lot more from journalists about this in the coming two years.  I wish I could get a dollar for every stupid story we are going to hear about “outside money” and “corporate influence” on elections.

Will the Courts’ decision in Citizens United shift the balance of power in Washington to corporate interests?  Perhaps.  But many powerful and well-financed groups (including unions) now have increased abilities to counter corporate messages, without having their messages filtered by the FEC or by established media outlets.  Furthermore, given the high percentage of ordinary Americans who are shareholders in American corporations, these corporate interests are, in an important way, the interests of ordinary Americans (I hear Calvin Coolidge ringing in my ears!).  Overpaid, greedy CEOs make handy, simple targets for our anger and frustrations.  But who else is going to create jobs, and who else is going to create the profits that fuel our 401K retirement plans?  Given the vast array of regulations faced by corporations and the taxes that corporations are subject to, I would argue that corporate interests have been underrepresented in the past, even though egregious and disgusting cases of corporate welfare are easy to identify.

Deep in the heart of nearly every journalist is the desire to tell the story as she sees it and to correct public misconceptions.  The problem comes when one group of people is allowed to say, “We are the press, and you are not.”  The decision in Citizens United says we all have the right to participate in press freedom.  If I own a press (a computer and an internet connection), I get to be part of the press.

As unseemly as free and unfettered elections can be, they are not as dangerous as the corruption of a foundational principle of democracy: the state cannot be allowed to determine who gets to communicate political opinions to the public and who does not.

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Great Idea to Flummox the TSA

Jeffrey Goldberg at the Atlantic has a great idea that will flummox the TSA without compromising security: Wear kilts on national opt-out day or any other day.  Here is the key paragraph:

But come November 24th, here’s an idea you might try to make the day extra-special. It’s a one-word idea: Kilts. Think about it — if you’re a male, and you want to bollix-up the nonsensical airport security-industrial complex, one way to do so would be to wear a kilt. If nothing else, this will cause TSA employees to throw up their hands in disgust. If you want to go the extra extra mile, I suggest commando-style kilt-wearing. While it is probably illegal to fly without pants, I can’t imagine that it’s illegal to fly without underpants.  I If you are Scottish, or part Scottish, or know someone who is Scottish, or eat Scottish salmon, or enjoy Scotch, or have a vestigial affection for “Braveheart” despite Mel Gibson, you can plausibly claim some sort of multicultural diversity privilege — the term “True Scotsman” refers to soldiers who honor their tradition and heritage by wearing kilts without drawers underneath. (This photo illustrates the possible consequences of the “True Scotsman” kilt-wearing very well.) 

I’m having problems putting in links, so here is the link long-form: http://www.theatlantic.com/national/archive/2010/11/tsa-opt-out-day-now-with-a-superfantastic-new-twist/66545/

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Dollars and sense

When coming out of a surgery, a patient’s major body systems are often out of whack.  Blood pressure, respiration, oxygen saturation, pulse rate, blood sugar, kidney function, bowel function, and many other indicators can differ from their normal levels.  This is because the body has just undergone a trauma and is trying to right itself.  The usual response to these indicators is to monitor them as they return to normal by themselves. This is why there are all those machines beeping and whizzing both during and after surgery.  The body has amazing ability to self-correct and recuperate.  Except when it doesn’t.

On Monday, September 18, 2008, the world economy flat lined.  That is the day that the Reserve Primary Fund, a money market fund with $62 billion in assets “broke the buck,” meaning it suspended redemptions.  Money market funds are viewed by many investors as essentially riskless, a half-step away from US Treasury Bills.  When this proved not to be the case, panic ensued.  On that day an electronic run on money market funds began, as scared investors, who had never experienced such a phenomenon, drained over a $100 billion from their funds. On Thursday that same week, institutional investors sought to redeem $500 billion—a heckuva lot of money—from the money markets, but were dissuaded from doing so by the personal intervention of Treasury Secretary Hank Paulsen (I wonder what he told them), though they still redeemed an additional $105 billion.  On Friday, September 19, Paulsen announced a temporary program to insure money market funds and the Federal Reserve opened up a loan program to allow borrowing to meet the demand for redemptions.  That same week regulators also restricted short sales of money market funds.  [My account of this history is based on this report from the Joint Economic Committee of Congress.]

The actions of Paulsen, Bernanke, Geithner, and President Bush that week, and during the subsequent ones, quite possibly saved the world’s financial system from a complete crash and a resulting depression that makes our current woes look like a picnic.  In many ways, their efforts remind me of one of those ER episodes where all the doctors are gone and a few medical students and nurses are trying to save a dying patient.  They flail around, knocking things over, yelling, making mistakes, trying things that don’t work and might even do damage, but they get the heart beating again.  It is not a comforting metaphor, but it captures the essence of the crisis we were in.

When the history books get written, maybe Bush’s team will get the credit they deserve.  Maybe there will be a financial 13 Days movie coming out of Hollywood that captures their heroic efforts, though I sort of doubt it, given the current animosity towards Wall Street and towards the federal government (I’m not saying that animosity isn’t well-deserved!).  Isn’t the best approach for the government to get out of the way and let markets do their thing?  In general, yes.  But it isn’t quite that simple.  Markets, like the human body, are not always self-correcting.

Let me put on my economics professor hat for a moment.  Consider the market for oranges.  If an orange farmer loses his shorts because he spends too much time tailgating at Gator football games rather than spraying his trees against insects, can the market handle it?  Of course.  These ideosyncratic risks that are faced by buyers and sellers in markets can be fully absorbed, even though they are no fun for the people who face losses.  But a systemic risk cannot be absorbed.  These might be acts of God, such as a frost that wipes out the whole US crop, or human-induced, say by farmers adopting a new fertilizer that raises yields in the short run, but kills the trees down the road.  These systemic risks can wipe out the whole US orange market.  But even these systemic risks can be absorbed in the larger market, where there are lots of substitutes for oranges, including oranges imported from other countries.  The larger and more diversified a market, the less systematic risk exists.

Participants in financial markets face massive idiosyncratic risks.  There are winners and losers.  Financial institutions who make bad decisions should be allowed to fail, in general.  That is how market discipline works, and that discipline is a healthy thing for the economy.  The social benefits of having a vibrant, dynamic financial market are enormous.  But the systemic risk that can exist in these markets can also have enormous costs.

This is for two reasons.  First, the rest of the economy depends in critical ways on the financial markets.  Even careful, risk-averse companies that have solid fundamentals rely on banks and other financial intermediaries.  Firms don’t have piles of gold lying around to meet their obligations.  They, like ordinary people, keep their liquid assets in the financial industry.  When credit freezes up and assets stop flowing, the rest of the economy can freeze up.  Even a firm without any debts still has to puts its money somewhere, and big chunk of those assets are likely to end up in conservative places, like money market funds.  This is why money markets freezing up is analogous to the economy flat lining.

The second reason systemic risk can be so dangerous in financial markets is that the whole market is based on trust.  By trust I don’t mean trust between individual traders, who don’t trust each other at all in many cases.  I mean trust in the integrity of the system.  All of these assets are held as zeros and ones in computers all over the country.  People trust that they will be able to convert those zeros and ones into dollar bills because of the nexus of commonly accepted accounting procedures, reputational capital, regulations, backups of informational systems, insurance, and other safeguards.  A CEO can walk around his plant and accessing the value of his company by looking at the machinery and workers and technologies he has in place and the products he is producing.  But financial capital consists of digits on some hard drive who knows where.  When the whole financial system starts to panic and that trust erodes, there is the potential for catastrophe.

So, when the financial system flat lines, who is there to infuse liquidity and, more important, trust and calm back into the market?  The short answer to that question is the US federal government (as well as other governments and central banks, though when times are scary, everyone around the world seems to want US treasuries).  Ultimately, it is trust in Uncle Sam that keeps this financial house of cards afloat.  While various arguments have been made that the regulations and policies of the government were the cause of the financial crisis in the first place, those arguments are basically irrelevant to the issue of the government maintaining that essential trust that people need to have in financial institutions.

Bush’s economic team was flying by the seat of its pants during the Fall of 2008.  Now that the crisis has subsided (for the time being), we need a lot of careful study to evaluate the decisions they made and how to prevent future crises from occurring.  What we don’t need is more naiveté about how markets will correct and everything will return to normal.  As an old-fashioned, Chicago-trained economist, I like nothing better than to let markets correct themselves.  But that does not mean we simply let the whole economy flush itself down the toilet while we sing the praises of those markets to a soon-to-be impoverished nation.

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Another Note on the TSA

I am glad to see that the resistance to the TSA’s policy of pornograton-or-molestation is continuing. Jason’s recent post, and the subsequent discussion in the commentary, covers many of the issues, and there are numerous discussions around the web, most of which share the view that the policy is unjustifiable.

For my part, I think the policy is grotesque and unworthy of a free people. I made this argument some years ago—shortly after 9/11, but at a time when today’s policies still would have seemed unimaginable.

But I have a few thoughts to add to the current discussions:

First, I have to question the character and psychology of the people conducting these searches. What could bring a person to physically fondle, grope, and thus molest strangers?

How, moreover, are they getting away with it? Unless the passengers in question both consent to the pat-downs and feel as though they actually have power to say “no,” the TSA officials are engaging in what is called criminal sexual conduct, at least as defined under Title 2C of the New Jersey Code of Criminal Justice (and, I am sure, many other state codes as well). Indeed, if it involves minors, if the actor uses “physical force or coercion,” or if the actor “is armed with a weapon” (see here) it qualifies as aggravated criminal sexual conduct (see here as well). Those crimes are punishable by up to 5 years in state prison.

We presumably do not need the Nuremburg Trials or the Mai Lai Courts Marshall to remind us that “I was just following orders” does not absolve a government official from responsibility for his actions. What the TSA officials are doing does not, of course, rise to the level of those two examples. But it does seem to be clearly criminal conduct, and, especially when involving children, disgustingly criminal conduct. The fact that they are members of the federal government is irrelevant—except insofar as that means they are subject to the United States Constitution, including in particular its Fourth Amendment.

So my question remains: How are they getting away with it?

Third, Russ Roberts correctly notes that the goal of this “security theater” is not to prevent airplanes from blowing up. As he argues, if that were the goal, there are easier ways to achieve it—like banning all airplanes, for example.

Perhaps security is the goal, but there is no single optimal level of security. No one can ever be absolutely secure, so we all approach security conscious of tradeoffs and according to our schedule of preferences. Since people’s schedule of preferences vary, their tradeoff points of security vs. personal or bodily integrity will vary as well. So it might be that A wants the “enhanced” pat down to feel safe, while B does not.

Why can’t we let people choose the level of security they want? One way to do that would be to let airlines or individual airports make their own decisions about security procedures. That way we would introduce competition, and we would introduce variety to cater to people’s varied tastes. That would elminate the hamfisted one-size-fits-all policy we are currently getting from the TSA.

Fourth, the real matter at stake here is, I believe, not the isolated acts of molestation, bad as those are. It is the training in obedience to government authority that it constitutes. It habituates Americans to docile and timid subservience, which, in addition to being unworthy of a free person, is also corrosive to a free society.

And finally: What are we teaching our children when we tell them not to allow themselves to be victims, to say “no” when someone makes them uncomfortable, and that we will protect them from the unwanted advances of others . . . except when it comes from a government official?

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Pileus is generously hosted by The Fund for American Studies, a nonprofit foundation in Washington, DC dedicated to teaching undergraduate students the principles of American liberty and prosperity. It offers courses accredited by Georgetown University and internships at well over 100 institutions in the Washington, DC area for the nearly 900 students per year who attend its programs.

TFAS has programs in the United States, but it also has programs abroad. Here is a short video describing some of its international programs, with the backdrop of a student-organized retreat in Zadar, Croatia on the twentieth anniversary of the fall of the Berlin Wall.

Enjoy the video.

If you are a college student, or if you know a college student, who might be interested in a TFAS program, here is the TFAS website, which will tell you everything you need to know.

One thing the students say in the video is something I myself have heard more than once from the students I have taught for TFAS: It changes their lives.

UPDATE FROM GROVER CLEVELAND: I have had the pleasure of spending some time with a couple of different groups of TFAS program alums and found the company to be interesting and enthusiastic about wrestling with ideas.  I would think that any student would find the TFAS programs to be valuable experiences, especially since they afford one the opportunity to meet and mingle with such assemblages of fine young people.

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I just though Grover might appreciate a riff on his post.

The guy who was recently escorted out of the airport (with a hefty fine, if I recall) had made the simple statement: “Don’t touch my junk.” Maybe it’s just me, but this doesn’t seem to be an overly unreasonable request in an age of full body scans. At what point does Terrorism Theatre run its course?

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…though I thought it would sound more like Darth Vader.

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Pompeii’s Living Statues

If you missed J. E. Lendon’s brief review in The Weekly Standard of Eugene Dwyer’s Ancient Roman Lives Stolen from Death, you should read it here. Be sure to read, in particular, its stunning final paragraph.

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As you have no doubt heard, San Francisco has “taken a stand” against childhood obesity by moving to ban “Happy Meals,” which typically come with toys, if the meals are above designated levels of calories, fat, or sugar. My local newspaper, the New Jersey Star-Ledger, editorialized in favor of the move, writing, “No longer can popular freebies be used to peddle so much saturated fat to children.” The online version of that editorial is much shorter than the print version, which went into some length describing the ways that advertising “targets” children in the 5–8 age range and arguing that, because children lack adult judgment, they are being manipulated and exploited.

Here is the absolute, definitive, 100%, knock-down response to the position adopted by the San Francisco anti-Happy Mealers and the editors of the NJSL: Children do not buy anything. No 5- to 8-year-old has a job, and none has any source of income. So it doesn’t matter how much advertising is “targeting” them: They can’t buy anything even if they wanted.

The parents have money—and therein lies the total subversion of the argument. Every single Happy Meal is bought, not by a 5- to 8-year-old, but by an adult. Even when it’s, say, the babysitter, nanny, or older sister who buys the Happy Meal for the youngster, they are buying it with money given to them by parents or other adults.

Kids don’t buy Happy Meals; they eat what their parents buy for them. So the responsibility is 100%, completely, wholly, entirely, and absolutely on the parents.

Now, don’t tell me that the advertising gives kids ideas, and that the kids then badger their parents to buy things for them. Of course that’s true. As someone who has had his share of children asking, even badgering, for all sorts of things they heard about, read about, or saw on television, I understand all too well. But I also understand that in every case I had the power and authority to say “no.” Part of being a parent—indeed, an underrated, underappreciated, and underused part of being a parent—is judicious and liberal use of “no.” Parents are not relieved of their responsibility by the “please, please, please, please” or the “I’m the only one who doesn’t have one” or even the sometimes seemingly never-ending refrains of “Can I?” It may be hard, it may be unpleasant, it may be frustrating; but that’s parenthood.

Some social issues regarding parenting and childhood are complicated and difficult. This one isn’t. If the incidence of childhood obesity is on the rise, and if children are having health or other problems as a result, is the responsibility of their parents and their caregivers—whoever the adults are who are in charge of them—to take appropriate action.  Perhaps some concerted effort is required to remind parents of their responsibilities, but probably the least effective and therefore most inappropriate way to address the problem is by asking the government to do something. All they’ll come up with is something as dunderheaded as banning toys from Happy Meals.

So, save the children—but from parents looking to relieve themselves of their responsibilities, and from government do-gooders all too happy to assist. No parent is perfect, but the more we believe and communicate publicly that parenthood requires being an adult, exercising judgment, and accepting responsibilities, the better off we all, parents and children alike, will be.

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Lest we forget

Most of the time, I preach the virtues of markets and the vices of government. For good reason.  But every now and then (meaning a few times per century), the US government is the world’s last, best, and even only hope.

The crisis of 2008 was one of those times, as this somewhat cheesy piece by Warren Buffett reminds us.

Something to be thankful for in this season of thanksgiving.


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I’m no fan of former Vice President Dick Cheney (I especially dislike his neoconservative foreign policy views), but he certainly has a way with words.  Indeed, his aim is much better with the quip than the shotgun.  His response to President Bush when the latter called a New York Times reporter a “major league asshole” was classic and so concise that Strunk and White would have to nod in approval: “Yeah, big time.”  Of course, sometimes Cheney isn’t all that sophisticated in his verbal rejoinders; you may remember what he told Senator Patrick Leahy back in 2004.  

So what did Cheney say this time?  At the groundbreaking for President George W. Bush’s presidential museum, Cheney took a (verbal) shot at President Obama and the stimulus by sarcastically noting that “this may be the only shovel ready project in America.”  Even if you can’t stand Cheney and his policy preferences, you gotta admit that this quip was pretty witty.

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The Revolt Against the TSA

It’s been encouraging to witness a growing grassroots revolt against the TSA’s naked-body scanners and “enhanced” screening techniques. The privacy concerns about the new regime are genuine, and the moral case against them is compelling. There are two basic arguments against the TSA’s new regime: moral and prudential. (more…)

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Two Americas

The House of Representatives electoral map tells an John Edwardsarian story: there really are two Americas.  But Edwards got his political demography wrong.  It isn’t about the rich v. the poor (a story of class warfare that has never played well).  Instead the central divide in America is between urban and non-urban.

Gerrymandering hides some of this dominant story (the big piece of blue in Utah, for instance, is really just Salt Lake City). The wide swaths of red in this map from East to West, indicate how deep the Republican penetration has become in non-urban America.  The blue pockmarks pretty much all represent cities: Denver, Indianapolis, Houston, Cleveland, Atalanta, Miami, etc., etc. and the areas that have been Gerrymandered into urban districts.  The Land of Lincoln and Obama is all red but for Chicago and East St. Louis.  Across the state line into Indiana, there is Gary, IN.

There are a few remaining non-urban Democratic districts in places such as Eastern Iowa, Western Minnesota and Maine, and a couple of liberal college towns like Madison and South Bend.  But overall the story is clear.  There are no Republican urban areas (at least that I can see) and almost no Democratic non-urban ones.  The non-urban areas include pretty much all dominantly rural districts (bonus prize for anyone who finds a dominantly rural Democratic district or a large Republican city–i.e., something much bigger than Boise) and a good share of the dominantly suburban ones as well.

Were we to do a finer-tuned analysis at the sub-district level (say precincts), the same story would prevail, but even more starkly.  Voters in my old stomping grounds , the Obama’s Hyde Park neighborhood, vote Democratic 90% of the time, even given the neighborhood’s famous racial integration (locals refer to Hyde Park as “blacks and whites united against the poor”).

This story is party about race, partly about income, partly about economics.  But the political battles of the future will be less about those demographic factors than it will be about city-dwellers v. the rest of the country.  Republican takeover of so many statehouses will likely result in even more concentration of blue in cities, and the blue pockmarks will become even smaller.

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The Fiscal Responsibility Debate Ctd.

Former OMB Director Peter Orszag has written a well-reasoned piece on the co-chair’s proposal on Social Security (see today’s NYT). Money Quote:

If Congress were to take all four of these recommended steps, it could not only eliminate the long-term deficit in Social Security but also make the system much more progressive. Even compared with the benefits promised by the current system, the recommended benefits for the poorest 20 percent of recipients would increase by about 5 percent, while those for the wealthiest retirees would fall by almost 20 percent.

One may disagree with his conclusions, but at least he has read the report and decided to report on what he read.

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Taking up commenter Bill Bachofner’s challenge, I’m posting my personal solution to the federal deficit using that nifty tool at the NY Times. I ended all short- and long-term deficits with no tax increases (except reducing employers’ health insurance tax deduction) and without raising the Social Security retirement age. Here’s the link. Of course, much of this is politically infeasible right now.

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According to George Stigler and Gary Becker (in a 1977 article) – not to mention Donald Green and Ian Shapiro (who use this to bash rational choice) – it is scientifically wrong to explain empirical anomalies that do not fit the expectations of a particular model by positing changing preferences or by using so-called ad hoc add-ons to typical rational actor models.  Dennis Mueller has a nice response – though not one that will surprise most professional social scientists – in his very interesting (but not so new [2003]) survey of public choice theory, Public Choice III (certainly not the most exciting title, but it will probably be an intellectually exciting book for those who did not cut their teeth on this stuff in grad school.  Indeed, I think many well-educated non-social scientists might enjoy it as well):

There is nothing in the rational actor methodology that demands that we assume that there is only one argument in an actor’s objective function, and that the analyst is constrained in her choice of what this one argument should be by the choices made by previous analysts.  This point is particularly important to keep in mind when considering the application of rational actor modeling to politics (pg. 661).      

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In prepared remarks, Michele Bachmann said this:

Joe Biden liked to tell audiences this election cycle that, quote, “This is not your father’s Republican Party.” Well, for once he was right. It’s a lot closer to being our Founding Fathers’ Republican Party. (emphasis added)


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Professor Krugman has an opinion piece in the NYT today chastising the “Hijacked Commission.” No one who has read Dr. Krugman’s columns before will be at all surprised with his take on the National Commission on Fiscal Responsibility and Reform. It may be “bipartisan,” he notes, but this simply means that the commission will be a compromise between “the center-right an the hard-right.”

Krugman opens his indictment with the following observation:

Start with the declaration of “Our Guiding Principles and Values.” Among them is, “Cap revenue at or below 21% of G.D.P.” This is a guiding principle? And why is a commission charged with finding every possible route to a balanced budget setting an upper (but not lower) limit on revenue?

This is a rather selective reading. The earlier pages discuss the need to reduce the debt (or soon face $1 trillion a year in interest payments) and move toward a balanced budget, lest we push the costs of our decisions on to future generations. Before discussing revenues, the report then proposes: “Bring spending down to 22% and eventually 21% of GDP.”  It is within this context that the co-chairs propose that revenues be capped at or below 21% GDP.

Professor Krugman’s question, to repeat, is: “why is a commission charged with finding every possible route to a balanced budget setting an upper (but not lower) limit on revenue?” The answer: because the limit it sets on revenue matches the limit it sets on expenditures (hence the goal of balancing a buget).

Any exercise of this type must begin with an assumption of how large the government should be relative to GDP and then explore means of reaching this goal. This would be true even if the commission had assumed 30, 40 or 50 percent of GDP. Of course, one can only speculate that there would be fewer complaints from Professor Krugman had the commission assumed that government should spend 50 percent of GDP and then proposed to cap revenues at this level.

On the issue of revenues, as noted in an earlier post, the co-chairs’ report presents three broad options for revenue reform. Within one of the options, it provides four different combinations of  marginal rates and eliminated tax expenditures/exemptions. One of these three involves eliminating all expenditures (another, for  example, maintains most of the major expenditures).  Dr. Krugman’s take:

They suggest eliminating tax breaks that, whatever you think of them, matter a lot to middle-class Americans — the deductibility of health benefits and mortgage interest — and using much of the revenue gained thereby, not to reduce the deficit, but to allow sharp reductions in both the top marginal tax rate and in the corporate tax rate.

Once again, of the three broad options discussed, one variant of one option does what Krugman suggests. By the way, this is also combined with a chart that shows who enjoys these expenditures and, contra Professor Krugman’s assertion, most of the current benefits are claimed by the top quintile not the middle class. This is nothing new, by the way. There is ample empirical support for this claim that our system of tax expenditures and exemptions strips much of the progressivity out of the tax system.

On the Social Security proposals, Dr. Krugman like others who likely wrote their critiques before reading the report (or wrote their critiques assuming, quite rationally, that no one else would read the report) focuses on the gradual increases in the retirement age without saying a word on what would be the greatest change: progressive indexing. Once again, this would retain the benefits for lower wage workers while significantly reducing benefits for upper income workers.

Why does this feature of the reform proposal go unaddressed? The simple answer: the closer you come to transforming Social Security into a means-tested policy, the more you subject it to the political dynamics that have limited the expansion of other welfare programs (or, in the case of AFDC, led to its elimination). Retain its universal benefits, and you retain the broad base of support that will lead to its ongoing expansion (until it collapses under its own weight, of course).

I strongly suggest that readers of Pileus go and examine the report (available here). It is 50 pages of PowerPoint slides. Don’t rely on editorial writers or bloggers of any ideological stripe to do the work for you.

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Sears is apparently going to be open on Thanksgiving for the first time in its long 85 year history of operating retail stores.  Other similar retail stores have been open on Thanksgiving for some time, including K-Mart.  

I’m glad that Sears has the legal right to be open on Thanksgiving or any other day it chooses – which hasn’t always been the case in many places given the existence of “Blue Laws.” 

However, I think a good argument can be made that we should avoid such stores on certain days and even express some disapprobation for those who make the choice to shop on particular holidays.  When we frequent stores on holidays, we provide an incentive for stores to remain open on those days in the future.  What that means is that many employees will have to work while preferring to be home celebrating the holiday with their families (or being incentivized to prefer work over family by the time and a half or double time pay they might receive).  I’m sure many stores essentially poll their workers to see who wants to work on holidays and who does not (and I accept that everyone may not have my – I think common – preference to spend time with family and observe certain meaningful rituals), therefore, it may not be as bad in practice as it might be in theory.  However, normalizing days like Thanksgiving will tend to undermine the ability of people to say no as these days become, like Sunday, just another date on the calendar during which King Commerce will rule. 

We shouldn’t confuse more choices with a better world despite what the “choicatarian” wing of the libertarian movement thinks.  Some options are best left, like the nasty Thanksgiving cranberry in a can, on the side of the plate and uneaten.  Of course, I’m generally not opposed to greater choices and usually think those who get upset at cereal aisles full of options are pretty silly.  But let’s not assume that “markets in everything” automatically translates into human flourishing and that satisfying all individual preferences should be celebrated even if it should be legal to do so. 

Given its policy of not being open on Sundays to give employees time for “family, worship, fellowship or rest,” it is unsurprising that Chick-fil-a will not be open on Thanksgiving.  Glad to see that I can’t satisfy any desire for a chicken sandwich after a long game of football with my kids…since this might mean others won’t be able to play football with theirs.  But I’ll certainly continue to frequent Chick-fil-a on those other days, especially given its proper appreciation of the non-economic needs and preferences of its employees.

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Paul Pierce’s mocking Tweet after the Celtics spanked the Heat for the second time this season: “It’s been a pleasure to bring my talents to South Beach now on to Memphis.”

UPDATE: But will Sven or other loyal David Brooks readers defend this travesty of a column ?  HT: Jesse Walker at Reason.

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1. Imagine your reaction if there had been a string of rapes committed in your community, and the local police tried to assure you by saying, “We are going to randomly question and search every single person we see—men and women, seniors, boys and girls, everyone.” How absurd that would be! Or suppose there were an outbreak of an infectious disease in your community, which it had been determined was carried and transmitted by mosquitoes; but authorities said they were going to randomly trap and check every single insect they could find, regardless of species. Again, how absurd, not to mention wasteful and inefficient, and even dangerous by dissipating their scarce time and resources in pointless ways.  Yet that is exactly how our airport “security” proceeds. Check every single person, old and young, male and female, everyone. How absurd.

2. I cannot figure out why ticket scalping should be illegal. What on earth can be wrong with it? No one is hurt, and the transactions reflect people’s subjective valuations of the tickets. I also think card counting at casinos should be legal. I can see why the casino doesn’t want  you to count cards, but it is not cheating—it’s just playing well. It would be like declaring it illegal to think more than two moves ahead in chess.

3. A while back I predicted that, after the bailout of Greece, other countries in Europe, including Portugal, Ireland, Italy, and Spain, might be next to require bailouts; I suggested that if that happened, Germany, which is strong but also has rising debt, might begin to totter, at which point the entire EU would face a reckoning for its decades of fiscal irresponsibility. I was not the only one to entertain this possibility, but it’s safe to say that most people, including perhaps some of my fellow Pilei, found it a tad too pessimistic. And now look at Ireland. After the—what, fourth? fifth?—bailout, hundreds of billions of dollars toward bad debt, and outright nationalization of one of its five main banks, the whole mess is about to crash. And, the EU now stands “ready to help.” So declared European Commission President José Manuel Barros, whose words, translated, mean of course that he stands ready to invade other people’s and future generations’ wealth to pay for the fiscal irresponsibility of people today. That’s big of him.

Here is a prediction. The amounts Barros is contemplating won’t be enough to save Ireland’s banks, and the spending cuts and austerity measures will prove unable to cover the mounting debt in Ireland—in the same way that similar measures are not working, despite all assurances to the contrary, in Greece. Paying for debt by assuming more debt is always a risky business; but it has gotten all out of hand in Europe and America. So what will the EU do when the good money it has poured toward bad turns out not to have been enough in Greece and Ireland? Germany and France, and thus the EU, and thus the United States, will then face a difficult choice. One shudders to think what will happen then.

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Marc Eisner notes the politics of fiscal irresponsibility. Such politics never seem to go out of style. Nevertheless, the coalition government in Great Britain is offering an object lesson in how to build political support for deep, wide-ranging cuts in government spending. With the UK’s finances in even slightly worse shape than the US’s, the Conservatives and Liberal Democrats have successfully made the case that there is no alternative. Here are some of today’s figures on polling on welfare cuts:

Making the long term unemployed spend 4 weeks doing unpaid work All voters CON voters LAB voters LD voters
Support 73 92 58 83
Oppose 17 3 31 14
Don’t know 10 5 10 3

Withdrawing Jobseekers Allowance from those who turn down a job offer or interview All voters CON voters LAB voters LD voters
Support 66 82 57 71
Oppose 21 8 33 22
Don’t know 12 9 10 6

More stringent testing for people receiving Disability Living Allowance All voters CON voters LAB voters LD voters
Support 69 86 58 70
Oppose 20 6 32 22
Don’t know 12 8 9 9

Putting a £400 a week maxium on housing benefit All voters CON voters LAB voters LD voters
Support 68 87 54 76
Oppose 20 6 37 12
Don’t know 12 7 10 12

Those are truly massive majorities.The British government is also cutting defense expenditures drastically and means-testing certain benefits, such as child care, so that the middle classes will no longer receive them. These policies are somewhat less popular but still enjoy majority support.

So how did they do it? One of the key requirements for the political “optics” of the cuts was the coalition government. With a social democratic party in the Lib Dems joining the Conservatives in supporting the cuts, the government was shielded from accusations of heartlessness or right-wing mania. Moreover, supporters of both parties outnumber Labour supporters. In the media, key Labour Party figures have been successfully characterized as “deficit deniers,” the people who caused the problem in the first place.

Coalition government is supposed to slow down the pace of change and create gridlock, just like divided government in the U.S. Nevertheless, it has worked well so far for Britain because it allows a formal structure that ties both parties to each other – neither party wants the coalition to fail, which would surely bring on a new election.

Unfortunately, this institutional characteristic of some parliamentary systems – endogenous election timing – is not available to American politicians. Nevertheless, Britain’s experience suggests that one way out of the fiscal mess in the U.S. would be a bipartisan, cross-chamber coalition of sorts, narrowly focused on solving the budget crisis. Given the midterm election results, the popular mandate is there for a radical fiscal house-cleaning, if anyone decides to take it up. Reasonable Republicans and Blue Dogs can join forces to create clear majorities in both houses and negotiate – in hard-fought, late-night sessions if need be – a package of radical spending reductions and tax reforms needed to close the budget gap.

With a bipartisan mandate, who could run against the results? The anti-tax-hike and anti-spending-cut extremists on both sides will be neutralized. President Obama will have no choice but to endorse the outcome of such a negotiation. Imagine if he vetoed the plan. He would clearly be the one responsible for shutting the government down if it came to that. He couldn’t blame the Republicans – because the cutters would have substantial Democratic support. He’d merely be making himself look even more liberal, which I’m sure his political advisors realize is not the key to victory in 2012.

We can dream, can’t we? As unlikely as this scenario sounds, the bottom line is that spending cuts need not be politically toxic. If you frame the debate as one of responsibility versus madness, voters will choose the former.

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