ThrutchBlog

Government Intervention for Your Happiness: Terence Corcoran does a good job of exposing the latest iteration of pseudo-justifications for big government. I'd add only two thoughts, first that though there will probably never be a clear measure of happiness, the best one to use in this kind of thought experiment, at least on a macro level, is net immigration/emigration. It's pretty clear to me that if people were allowed to follow their personal desires (i.e. if there weren't such restrictive immigration and emigration laws around the world), there'd be a one way torrent of emigrants to the West, even in its current state. Second, I find it somewhat positive that the socialists now must give their arguments in some type of personal form; it's perhaps an indication that the collective notion of public or social good no longer has any weight. Original entry: See link at top of this post

Radiation Hormesis: Petr Beckmann used to argue that the linear hypothesis regarding radiation wasn't just off, its sign was often wrong as low level radiation could actually be beneficial. (He used the term hormesis to describe the more general phenomenon.) An article in the WSJ cites more evidence for this view: In the early 1980s, a Taiwan steel company accidentally mixed some highly radioactive cobalt-60 into a batch of steel rebar. The radioactive rods were then used in the construction of 1,700 apartments. As a result, people living in these buildings were subject to radiation up to 30 times the normal amount received from the natural background. When dismayed officials discovered this enormous error 15 years later, they surveyed past and present apartment dwellers expecting to find an epidemic of cancer. Normal incidence would have predicted 160 cancers among the 10,000 residents. To their astonishment, the researchers discovered only five cases of cancer—97% lower than the anticipated amount. Birth defects were also 94% below the anticipated rate. These findings were published in the Journal of American Physicians and Surgeons in 2004. As one researcher phrased it, exposure to high levels of background radiation had apparently bestowed upon residents "an effective immunity from cancer." The article also does a good job of showing why the linear hypothesis doesn't gibe with our more general experience: The real problem, however, may be in the public's overestimation of the danger posed by small exposures to radiation. In order to avoid any possible charge of negligence, regulatory bodies around the world have adopted what is called a "linear-no-threshold" or "no safe dose" standard for radiation safety. This says, quite simply, that because huge doses of radiation—the kind you might get from standing in the same room with a spent fuel rod—can cause illness or cancer, we must assume that even the smallest doses will have the same effect on a smaller scale. It's exactly the same as saying that because jumping off a 10-story building will break every bone in your body, stepping off a one-foot curb will also cause some minor damage. I hope that someday soon science will prevail over fear mongering in the energy arena... Original entry: See link at top of this post

Creating a Culture: Amazing statistics regarding California's decline highlighted in this WSJ article. California's rising standards of living and outstanding public schools and universities once attracted millions seeking upward economic mobility. But then something went radically wrong as California legislatures and governors built a welfare state on high tax rates, liberal entitlement benefits, and excessive regulation. The results, though predictable, are nonetheless striking. From the mid-1980s to 2005, California's population grew by 10 million, while Medicaid recipients soared by seven million; tax filers paying income taxes rose by just 150,000; and the prison population swelled by 115,000. California's economy, which used to outperform the rest of the country, now substantially underperforms. The unemployment rate, at 10.9%, is higher than every other state except Nevada and Rhode Island. With 12% of America's population, California has one third of the nation's welfare recipients. The statistics about net paying tax filers should give pause to those who argue that tax rates are relatively unimportant in people's decisions on where to live. Original entry: See link at top of this post

A Plan to Balance the Federal Budget: This seems like a step in the right direction, as I think it's much better to cut rights-infringing functions of the government (e.g. the departments of energy and education) than it is to simply cut budgets across the board a la Gary Johnson (with the implication that all current spending is equally justifiable). Original entry: See link at top of this post

The Virtues of Competition: Car shoppers today are less likely to end up with a lemon. In the past five years, global competition has forced automakers to improve the quality and reliability of their vehicles — everything from inexpensive mini-cars to decked-out luxury SUVs. The newfound emphasis on quality means fewer problems for owners. It also means more options for buyers, who can buy a car from Detroit or South Korea and know it will hold up like a vehicle from Japan. With few exceptions, cars are so close on reliability that it's getting harder for companies to charge a premium. So automakers are trying to set themselves apart with sleek, cutting-edge exterior designs and more features such as luxurious interiors, multiple air bags, dashboard computers and touch-screen controls. "It's a great time to be a consumer," says Jesse Toprak, vice president of industry trends for the TrueCar.com auto pricing website. "You can't really screw up too badly in terms of your vehicle choice." Read the whole article, and imagine what competition might make possible if we'd throw off the regulatory handcuffs in such fields as medicine, aviation and education. (Remembering too that the automotive industry is very far from free.) Original entry: See link at top of this post

Unions vs Jobs: Canada's National Post has a good article emphasizing the role of force in typical union "negotiations". I think they're correct in pointing out that, to the extent that free trade exists across the globe, the less viable such a model is even in the short term. In the long term it can't work, with Detroit being the paragon case. Original entry: See link at top of this post

The AMA, Medicare and Monopolies: The Washington Times has an informative article on the AMA's gradual selling out to its government masters. Here's an excerpt, but it's worth reading the whole thing: You see, the once-proud AMA of the 1960s, the organization that fought a battle against Medicare in its current form, the one whose president, Dr. Edward Annis, famously predicted the problems we face today, sold its soul to the government in 1983. Dr. Annis spoke to an empty Madison Square Garden in May 1962 because the media would not televise his direct response to President Kennedy’s speech pushing for the creation of Medicare, then called the King-Anderson Bill. Dr. Annis predicted the top-down government controls; the rules and regulations; the giant bureaucracy, and even the fiscal insolvency that looms large today. But the train left the station in 1965 with the passage of Medicare, and in 1983, the AMA jumped on board - for money and the promise of control. The government was looking for a way to standardize medical billing for Medicare, and the AMA had just the thing. We call it Current Procedural Terminology. The AMA owns it, and the organization signed an exclusive agreement with the government in 1983 that made it the coding system for all Medicare billing. Gradually, the terminology became the standard for all medical billing - private insurance and government plans. The AMA has a government-granted monopoly, and it enjoys a lucrative stream of income as a result. Original entry: See link at top of this post

Pelosi: Do Whatever, Taxpayers will Pay For It: Original entry: See link at top of this post

Progress in New Jersey: The WSJ has an interesting update on Governor Christie's progress in New Jersey. A few excerpts: Economically, unemployment in the state has fallen to 9% from a high of 9.8%. With almost 3.9 million people working, New Jersey has added almost 60,000 private-sector jobs since he took office, while shedding more than 21,000 government jobs. Reforms of the pension and health programs for government employees will save taxpayers an estimated $120 billion over the next 30 years. A new limit on local property-tax increases appears to be working. Mr. Christie says that he can now push for the tax cuts that he promised would happen if the state controlled its spending. The governor made that promise while seeking the job in 2009, and he recalls the skepticism at various newspapers during the campaign: "They looked at me like I was an alien." Because many media folk couldn't believe the state government could afford to reduce tax rates, "They just basically accused me of lying to get elected." [...] Having spent his first two years playing defense against unsustainable spending, Mr. Christie is eager to start competing with neighboring states for jobs, talent and capital. Step one was to decide which tax reform would be the biggest draw for new residents and new businesses. He chose to attack the income tax because "that will be the thing that will make us the most competitive from a jobs perspective." His decision was made easier when he saw neighboring New York Gov. Andrew Cuomo push through an income-tax increase in December. "When Governor Cuomo raised taxes over here that made it even more attractive for me to go after the income tax . . . from a competitive perspective." He adds that with Gov. Dannel Malloy also enacting a tax increase in Connecticut last year, "it's a strategic decision as much as a philosophical decision." New Jersey has a long way to go. This week the Tax Foundation again rated it dead last among the 50 states for its overall business tax climate. As for individual income taxes, Mr. Christie notes that since 2003 the top marginal rate has risen to 8.9% from 6.25%. If Mr. Christie succeeds in knocking that top rate down to a flat 8%, Jersey will still be above Connecticut's 6.7%. But since Connecticut now edges New Jersey for the country's highest property taxes, according to the Tax Foundation, the Garden State is at least in the ball game. Original entry: See link at top of this post

Bernanke Explains Central Banking: For those of you wishing to gain some insight into our genius overlords' thinking, these four classes by Ben Bernanke (Central Planner in Chief) might be of interest. Original entry: See link at top of this post

Shipping Industry as Example of the Business Cycle: I'm a proponent of monetary policy having the potential to create boom - bust cycles (which I guess makes me a "bubble head" in some people's estimation). This article on the boom and bust in container shipping (created in large part by artificial Chinese demand) is an interesting case study. Original entry: See link at top of this post

The Harms of Welfare: More and more I'm coming to accept the conclusion that not only does welfare harm those who are robbed to support others, but it also harms the recipients of those stolen goods. This is true both at the individual level and when one looks at groups of individuals. This story on the failures of massive subsidies to the city of Buffalo is a good example of the latter. Buffalo may be the paradigmatic example of why expensive government revitalization efforts often fail. Back in 2004, the Buffalo News estimated that the city had garnered more federal redevelopment aid per capita than any other city in the country, a total of more than half a billion dollars since the 1970s. Yet, the paper noted, the city had virtually nothing to show for the money. Officials squandered millions granting loans and subsidies to projects that went bust. There was a proposed trade center near the famed Peace Bridge that was never completed even after the city granted it federally backed loans; a failed shopping plaza on William Street; and several hotels that defaulted on their government loans. Among the past three decades' failures have been a dozen or so businesses in the theater district—"one of Western New York's most heavily subsidized stretches of real estate," said the Buffalo News. [...] Sometimes these schemes have done real harm. In the 1970s, the federal government decided to invest $530 million to build a 6.2-mile light-rail system through downtown Buffalo. It was supposed to further spur redevelopment, of course. Opened in 1985 and anchored by a transit mall that banned cars, the rail line fell well below ridership projections—and downtown businesses suffered mightily from the lack of traffic. As Buffalo landlord Stephen P. Fitzmaurice wrote in 2009: "Walk down Main Street on the transit mall; aside from a few necessities like drug and cell phone stores, blight dominates." Last month the city received a $15 million federal grant to restore traffic to Main Street. These massive investment subsidies failed partly because officials were ill-suited to select the right projects and often instead gave money to favored insiders. Even former Mayor Anthony Masiello described the federal government's redevelopment funds as "a politically motivated system trying to please everybody." Read the whole thing to see how taxes and regulations also play into Buffalo's poverty. Original entry: See link at top of this post

Bain Capital: While I'm not a fan of Romney, the attacks on his work at Bain Capital by other Republicans are revealing of their attitude towards capitalism. This editorial in the WSJ does a good job of making the point. An excerpt: One Bain investment during Mr. Romney's tenure was to back an entrepreneur named Tom Stemberg, who was convinced he could provide savings for small-business owners if they were willing to shop at a store instead of taking deliveries. Today, the Staples chain of business-supply stores employs 90,000 people. Bain also backed a start-up called Bright Horizons that now manages child-care centers for more than 700 corporate clients around the world. Many other venture bets failed, but that's capitalism, which is supposed to be a profit and loss system. The loss part is what seems to trouble the Gingrich-Perry-Obama critics, especially in Bain's private-equity business. Like some 2,300 other such U.S. equity firms, Bain looks to buy companies that are underperforming or undervalued and turn them around. Far from "looting," this is a vital contribution to capitalism and corporate governance. One of the persistent gripes of the left is that too many CEOs make too much money even as their companies flounder. Private-equity firms target such companies or subsidiaries, replace their management, and try to unlock the underlying value in the enterprise. Read the whole piece. Original entry: See link at top of this post

Debt and Unfunded Liabilities: This week's Mauldin letter has a good chart showing the extent of debt and liabilities for several Western nations. It's very unlikely that these will be paid off as they stand, even with increased inflation. (My understanding is that Japan's situation is even worse, but I don't have the exact numbers.) Original entry: See link at top of this post

Debt and Unfunded Liabilities: This week's Mauldin letter has a good chart showing the extent of debt and liabilities for several Western nations. It's very unlikely that these will be paid off as they stand, even with increased inflation. (My understanding is that Japan's situation is even worse, but I don't have the exact numbers.) Original entry: See link at top of this post

Creating Bubbles: Bloomberg has an interesting story, suggesting a bubble in 30 year mortgage bonds. As usual, it's government rules that are largely responsible: Because of the government guarantees, banks that hold these securities qualify for favorable capital treatment under risk- based-capital rules. Securities of Ginnie Mae, a government- owned entity that subsidizes affordable housing, carry a risk weight of 0 percent, meaning a bank doesn’t have to hold any capital against them. Fannie and Freddie securities carry a risk weight of 20 percent, meaning 1.6 percent capital is required rather than the normal of about 8 percent. These same capital rules allowed European banks to load up on the 0 percent risk- weighted debt of Greece and other countries on the periphery of the euro area. [...] This wouldn’t be the first financial crisis in which the 30-year fixed-rate mortgage played a large role. Twice in the last 20 years we have seen spectacular failures of U.S. housing finance, each at enormous cost to taxpayers. Both the savings and loan crisis and the Fannie-Freddie bailouts can be traced to congressional support for, and subsidization of, the 30-year fixed-rate mortgage. The S&Ls invested in 30-year mortgages that they funded with short-term deposits. By 1981, when deposit rates soared as high as 15 percent, the thrift industry found itself insolvent due to portfolios stuffed with 9 percent mortgages. Fannie and Freddie were set up to support the 30-year fixed-rate mortgage market, buying the loans from lenders, packaging them into securities and selling some of them to investors -- all with an implicit federal guarantee that helped to lower mortgage rates. In 2008, both were taken over by the government, costing taxpayers more than $160 billion and counting. Freddie, and Fannie to a lesser extent, suffered a classic liquidity squeeze. In the late summer of 2008 as debt markets became concerned about the two companies’ solvency, yields on their debt relative to U.S. Treasuries ballooned. That imperiled their ability refinance hundreds of billions in debt used to back its huge mortgage portfolio. The solution is to wean the housing market from its dependence on subsidized 30-year fixed-rate mortgages, starting with winding down Fannie and Freddie over a period of five to seven years. A private market focused on prime quality mortgages would offer borrowers a wider variety of loan choices. These loans would have varying amortization terms, prepayment options and periods of protection against changes in interest rates. In flush times, lenders should be required to build capital to better cover credit risk. Finally, risk weights should be increased to reflect price volatility inherent in securities backed by long-term mortgages. Original entry: See link at top of this post

Teaching Character: Via crossfit.com comes this article on education. There are lots of reasons to read it, e.g. to whet your appetite as to what might be possible if free-market innovation were ever let loose in the sector, but I'll highlight this: In fact, though, the character-strength approach of Seligman and Peterson isn’t an expansion of programs like CARE; if anything, it is a repudiation of them. In 2008, a national organization called the Character Education Partnership published a paper that divided character education into two categories: programs that develop “moral character,” which embodies ethical values like fairness, generosity and integrity; and those that address “performance character,” which includes values like effort, diligence and perseverance. The CARE program falls firmly on the “moral character” side of the divide, while the seven strengths that Randolph and Levin have chosen for their schools lean much more heavily toward performance character: while they do have a moral component, strengths like zest, optimism, social intelligence and curiosity aren’t particularly heroic; they make you think of Steve Jobs or Bill Clinton more than the Rev. Martin Luther King Jr. or Gandhi. If today's generally accepted ethics were actually aimed at making each of our lives go well, there would be no such divide. But under altruism it's a real problem. (This is but one example of why Yaron and Onkar argued for a new moral code --Ayn Rand's -- in a CNN editorial last year.) Their commentary is relevant to the quote above. Ask someone on the street to name a moral hero; if he isn't at a loss, he'll likely name someone like Jesus Christ or Mother Teresa. Why? Because they're regarded as people of faith who shunned personal profit for the collective good. No one would dream of naming Galileo, Darwin, Thomas Edison or John D. Rockefeller. Yet we should. It is they, not the Mother Teresas of the world, that we should strive to be like and teach our kids the same. If morality is judgment to discern the truth and courage to act on it and make something of and for your own life, then these individuals, in their capacity as great creators, are moral exemplars. Put another way, if morality is a guide in the quest to achieve your own happiness by creating the values of mind and body that make a successful life, then morality is about personal profit, not its renunciation. Original entry: See link at top of this post

Tackling the Issue of Public Pensions: An interesting development in the pension story. Previously it seemed that pensions could not be touched, even in bankruptcy, but that may no longer be true. Here's how this NY Times article describes the situation: The last American city to work its way through Chapter 9 bankruptcy was Vallejo, Calif., which finished the process this year. It had to navigate similar stumbling blocks. Initially, it planned to cut its workers’ and retirees’ pensions, but it changed course when California’s giant state pension system, which administered Vallejo’s plan, threatened a costly and debilitating court battle. Vallejo instead cut pay, health care and other benefits, as well as city services and payments to its bondholders, and left the pensions intact. Even though the bondholders faced a loss, all parties eventually agreed they had been treated equitably, and the state passed a law making it easier for Vallejo to continue borrowing. The episode strengthened the perception that public retirement plans were unalterable, even in bankruptcy. [...] Until now, 60 percent of Central Falls police officers and firefighters have retired on full disability pensions, drawing the inflation-protected and tax-free payments even when they embarked on new careers. One of them, at 43, has become a prominent personal-injury lawyer and can be seen in television ads shooting baskets and pretending to fall down a manhole. That retiree, Robert Levine, a former police officer, said his disability was the result of an on-duty car crash where he was not at fault, and that his pension had been granted lawfully after his condition was certified by three different doctors. The retirees, who are not represented by the unions, voted in favor of their pension reductions last week. The cuts would be up to 55 percent of each retiree’s benefits, which now vary widely, from about $4,000 to $46,000 a year, depending on final salary, years of service and other factors. A few retirees would give up more than $25,000 a year. Central Falls’s police and firefighters do not participate in Social Security. Original entry: See link at top of this post

(title unknown): This is a promising development. (Of course longer term any real hope for better politics is a return to an explicit protection of individual rights, but this type of legislation can buy us time to get there.) A bill that would give the controlling party of either chamber of Congress veto power over any major new regulation passed the House of Representatives Wednesday. The measure, dubbed the Regulations From the Executive in Need of Scrutiny -- or REINS -- Act, would require Congress to sign off on any new rule estimated to cost more than $100 million. It passed 241 to 184, with a handful of Democrats crossing the aisle. Original entry: See link at top of this post

Greece as Harbinger of Socialist Europe and perhaps the US: This well-written story does a good job of concretizing the situation in Greece, including its cause: the entitlement mentality bred by the socialist state. An excerpt: Spray paint is ubiquitous, besmirching the marble steps leading up to the front of the Parliament, the walls and columns of the surrounding streets, and the storefronts in the nearby shopping district. The odor of urine is an unwelcome companion, not just in back alleys but along the sidewalks of major streets near the Parliament and along the walk to Hadrian’s Arch. Windows have been broken, marble walls and columns smashed. Let’s be very clear about who is being targeted here. The shops that have been trashed are not just the chic brand names one finds in major cities all across Europe. No, these noble protestors have not confined their destruction to icons of wealth and power. They are equally destructive of small religious goods stores and assorted “Mom and Pop” establishments. They disrespect all businesses, small and large, in the same ugly fashion. The police, union members after all, have done little to prevent the violence and property destruction. And their inaction, as we heard many say, has simply emboldened the thuggish elements among the protestors. For ordinary Athenians the ongoing “occupation” has had a variety of unpleasant consequences. A young schoolteacher we know shops for her parents; they are afraid to leave their apartment. Other Athenian friends tell us that union thugs sympathetic to the “indignants” frequently intimidate ordinary citizens, whether they are shopping or going to work or simply out for a walk. This is understandable when one considers that the protestors’ goal is to bring everything to a halt. Quite simply, that means disrupting the public’s ability to carry on with daily life. People are told they should have known what would happen, they should stay off the streets. The disruption, of course, is aimed at more than the general population. The strikes and other unannounced work stoppages cause electricity and water service outages frequently. Many of these are deliberately timed for late afternoon, to maximize discomfort for tourists checking into hotels, for restaurants preparing evening meals (it’s tough to cook and wash dishes without electricity or hot water), for merchants trying to make sales at the peak shopping time of day (electronic cash registers and inventory systems go “down” when the power fails), and so on. Automatic cross-posted from the ThruthBlog

Welfare as a Way of Life: A n interesting account of the welfare mentality as seen through the eyes of a Walmart cashier. Automatic cross-posted from the ThruthBlog

Hedge Fund Manager Kyle Bass on Europe and Trading.: Worth a listen to. I'm as much impressed with the way he handles himself in the media as with his research and trading. Automatic cross-posted from the ThruthBlog

Setting the Historical Record Straight: Brook and Watkins do a nice job showing what life was like for the minority of the poor before the rise of the Entitlement State. Automatic cross-posted from the ThruthBlog

Downsize Government by Selling Assets: Even without invoking the principle of individual rights or the question of the proper role of government, I think that articles such as this one can help return government to its proper scope and role. Automatic cross-posted from the ThruthBlog

The Market is Selfishness: I enjoyed Dr. Brook's recent talk at FEE on Ayn Rand's Moral Defense of Capitalism: