New Year’s Resolutions

1. I resolve to sell liberty by appealing to the self-interest of each prospect, rather than preaching to people and expecting them to suddenly adopt my ideas of right and wrong.

2. I resolve to keep from being drawn into arguments or debates. My purpose is to inspire people to want liberty — not to prove that they’re wrong.

3. I resolve to listen when people tell me of their wants and needs, so I can help them see how a free society will satisfy those needs.

4. I resolve to identify myself, when appropriate, with the social goals someone may seek — a cleaner environment, more help for the poor, a less divisive society — and try to show him that those goals can never be achieved by government, but will be well served in a free society.

5. I resolve to be compassionate and respectful of the beliefs and needs that lead people to seek government help. I don’t have to approve of their subsidies or policies — but if I don’t acknowledge their needs, I have no hope of helping them find a better way to solve their problems.

6. No matter what the issue, I resolve to keep returning to the central point: how much better off the individual will be in a free society.

7. I resolve to focus on the ways America could be so much better with a very small government — not to dwell on all the wrongs that exist today.

8. I resolve to cleanse myself of hate, resentment, and bitterness. Such things steal time and attention from the work that must be done.

9. I resolve not to raise my voice in any discussion. In a shouting match, no one wins, no one changes his mind, and no one will be inspired to join our quest for a free society.

10. I resolve to be civil to my opponents, and treat them with respect. However anyone chooses to treat me, it’s important that I be a better person than my enemies.

Death spiral states

Forbes magazine published the following article on 11/25/12:

http://www.forbes.com/sites/baldwin/2012/11/25/do-you-live-in-a-death-spiral-state/

The highlights of this article are as follows:

Don’t buy a house in a state where private sector workers are outnumbered by folks dependent on government.  Thinking about buying a house? Or a municipal bond? Be careful where you put your capital. Don’t put it in a state at high risk of a fiscal tailspin.

Two factors determine whether a state makes this elite list of fiscal hellholes. The first is whether it has more takers than makers. A taker is someone who draws money from the government, as an employee, pensioner or welfare recipient. A maker is someone gainfully employed in the private sector.

The taker count is the number of state and local government workers plus the number of people on Medicaid plus 1 for each $100,000 of unfunded pension liabilities.

The second element in the death spiral list is a scorecard of state credit-worthiness done by Conning & Co., a money manager known for its measures of risk in insurance company portfolios.

A state qualifies for the Forbes death spiral list if its taker/maker ratio exceeds 1.0 and it resides in the bottom half of Conning’s ranking.

The list of states in a death spiral:

New Mexico

Mississippi

California

Alabama

Maine

New York

South Carolina

Kentucky

Illinois

Hawaii

Ohio

The Philosophy of Liberty

The following video is written by Ken Schoolland. It is a short (8 min) flash animation based on the prologue of Ken's book "The Adventures of Jonathan Gullible."  (Please note that there is no soundtrack):

http://youtu.be/JEZBIhaZW9w

Squeezy the Pension Python

Illinois Governor Pat Quinn has a solution to the Illinois unfunded pension liability crisis.  His solution is brilliant and creative.  To solve this crisis he has created an animated mascot.  Meet "Squeezy the Pension Python" by viewing this short video:

http://thisismyillinois.com/

Not everyone is convinced that Squeezy will be able to solve the crisis.  Some of the comments can be found in this Chicago Tribune article:

http://www.chicagotribune.com/news/local/ct-met-governor-quinn-pension-reform-20121119,0,3422889.story

These quotes are from the Tribune article:

After months of promising a major grass-roots effort to win public support for reforming the state's government worker pension system, Gov. Pat Quinn on Sunday unveiled a plan that featured an incomplete online strategy, children wearing red plastic megaphones and an animated "Squeezy the Pension Python" mascot.

There were, however, no solutions offered on how to fix the nation's most underfunded retirement system.

The Democratic governor, known for a style that sometimes veers into the corny, attempted to jump-start the pension overhaul push by lauding the power of "the people of Illinois, good and true" through what he called the "electronic democracy" of Twitter and Facebook. Quinn went so far as to encourage families gathering at the Thanksgiving dinner table to "speak to each other" about the pension crisis.

The approach left some lawmakers questioning whether the governor demeaned the severity of one of the most pressing unresolved problems facing state government in Illinois. State Rep. Jack Franks, D-Marengo, called Quinn's strategy "juvenile."

"If he wants to do a grass-roots campaign, he should talk to the people directly about his proposal. But he doesn't even have one, which is why we can't get anything done. You can't follow someone who doesn't lead," Franks said.

"This has to be comprehensive reform. It can't be done in a vacuum and it can't be done with slogans and it certainly can't be done with cartoon characters," Franks said. "It's going to take some hard work."

The State of Illinois pension system's unfunded liability now is estimated to be at least $96 billion.  Please note that this unfunded liability is calculated using an anticipated annual return on invested pension funds of 8% per year.  Do you think it is possible that Illinois will be able to generate 8% annual returns?  If they generate less than 8% the unfunded liability goes up.  If there is another big down year for the financial markets the unfunded liability goes up dramatically.

The only solution to this crisis is to cut benefits to future retirees.  Illinois is so deep in debt that they may be forced to cut benefits to current retirees.

I, Pencil the video

My favorite essay about free markets and the division of labor has been made into a video.  You can view this video at this link:

http://ipencilmovie.org/

I think that the video is well made and will help explain this subject to many who may not be inclined to read the essay.  In my opinion the essay is more powerful than the video.  You can read the essay at this link:

http://defendingcivilsociety.blogspot.com/2012/07/i-pencil.html

Currently there are 2 additional videos on the I, Pencil movie website.  These 2 videos explain economic topics that I, Pencil briefly touches on.  I highly recommend watching both of these videos:

http://ipencilmovie.org/2012/11/14/i-pencil-extended-commentary-spontaneous-order/

http://ipencilmovie.org/2012/11/14/i-pencil-extended-commentary-connectivity/

The extended commentary videos move rather quickly, so I recommend that you watch them more than once.

Ron Paul's Farewell Speach

Ron Paul’s farewell address to Congress (delivered 11/14/12) can be viewed at the following link:

http://youtu.be/Zqi6paX3ong

The text of this speech is at this link:

http://www.campaignforliberty.org/national-blog/transcript-of-farewell-address/

In my opinion these are the highlights from this speech (I have added bold text to the passages that I feel most important):

This may well be the last time I speak on the House Floor.  At the end of the year I’ll leave Congress after 23 years in office over a 36 year period.  My goals in 1976 were the same as they are today:  promote peace and prosperity by a strict adherence to the principles of individual liberty.

It was my opinion, that the course the U.S. embarked on in the latter part of the 20th Century would bring us a major financial crisis and engulf us in a foreign policy that would overextend us and undermine our national security.

To achieve the goals I sought, government would have had to shrink in size and scope, reduce spending, change the monetary system, and reject the unsustainable costs of policing the world and expanding the American Empire.

The problems seemed to be overwhelming and impossible to solve, yet from my view point, just following the constraints placed on the federal government by the Constitution would have been a good place to start.

I have thought a lot about why those of us who believe in liberty, as a solution, have done so poorly in convincing others of its benefits.  If liberty is what we claim it is- the principle that protects all personal, social and economic decisions necessary for maximum prosperity and the best chance for peace- it should be an easy sell.  Yet, history has shown that the masses have been quite receptive to the promises of authoritarians which are rarely if ever fulfilled.

If authoritarianism leads to poverty and war and less freedom for all individuals and is controlled by rich special interests, the people should be begging for liberty.  There certainly was a strong enough sentiment for more freedom at the time of our founding that motivated those who were willing to fight in the revolution against the powerful British government.

During my time in Congress the appetite for liberty has been quite weak; the understanding of its significance negligible.  Yet the good news is that compared to 1976 when I first came to Congress, the desire for more freedom and less government in 2012 is much greater and growing, especially in grassroots America. Tens of thousands of teenagers and college age students are, with great enthusiasm, welcoming the message of liberty.

Without an intellectual awakening, the turning point will be driven by economic law.  A dollar crisis will bring the current out-of-control system to its knees.

If it’s not accepted that big government, fiat money, ignoring liberty, central economic planning, welfarism, and warfarism caused our crisis we can expect a continuous and dangerous march toward corporatism and even fascism with even more loss of our liberties.  Prosperity for a large middle class though will become an abstract dream.

If the underlying cause of the crisis is not understood we cannot solve our problems. The issues of warfare, welfare, deficits, inflationism, corporatism, bailouts and authoritarianism cannot be ignored.  By only expanding these policies we cannot expect good results.

Everyone claims support for freedom.  But too often it’s for one’s own freedom and not for others.  Too many believe that there must be limits on freedom. They argue that freedom must be directed and managed to achieve fairness and equality thus making it acceptable to curtail, through force, certain liberties.

Some decide what and whose freedoms are to be limited.  These are the politicians whose goal in life is power. Their success depends on gaining support from special interests.

But there is good evidence that the generation coming of age at the present time is supportive of moving in the direction of more liberty and self-reliance. The more this change in direction and the solutions become known, the quicker will be the return of optimism.

Our job, for those of us who believe that a different system than the  one that we have  had for the  last 100 years, has driven us to this unsustainable crisis, is to be more convincing that there is a wonderful, uncomplicated, and moral system that provides the answers.  We had a taste of it in our early history. We need not give up on the notion of advancing this cause.

It worked, but we allowed our leaders to concentrate on the material abundance that freedom generates, while ignoring freedom itself.  Now we have neither, but the door is open, out of necessity, for an answer.  The answer available is based on the Constitution, individual liberty and prohibiting the use of government force to provide privileges and benefits to all special interests.

Too many people have for too long placed too much confidence and trust in government and not enough in themselves.  Fortunately, many are now becoming aware of the seriousness of the gross mistakes of the past several decades.  The blame is shared by both political parties.  Many Americans now are demanding to hear the plain truth of things and want the demagoguing to stop.  Without this first step, solutions are impossible.

Seeking the truth and finding the answers in liberty and self-reliance promotes the optimism necessary for restoring prosperity.  The task is not that difficult if politics doesn't get in the way.

Humanitarian arguments are always used to justify government mandates related to the economy, monetary policy, foreign policy, and personal liberty.  This is on purpose to make it more difficult to challenge.  But, initiating violence for humanitarian reasons is still violence.  Good intentions are no excuse and are just as harmful as when people use force with bad intentions.  The results are always negative.

The immoral use of force is the source of man’s political problems.  Sadly, many religious groups, secular organizations, and psychopathic authoritarians endorse government initiated force to change the world.  Even when the desired goals are well-intentioned—or especially when well-intentioned—the results are dismal.  The good results sought never materialize.  The new problems created require even more government force as a solution.  The net result is institutionalizing government initiated violence and morally justifying it on humanitarian grounds.

This is the same fundamental reason our government  uses force  for invading other countries at will, central economic planning at home, and the regulation of personal liberty and habits of our citizens.

It is rather strange, that unless one has a criminal mind and no respect for other people and their property, no one claims it’s permissible to go into one’s neighbor’s house and tell them how to behave, what they can eat, smoke and drink or how to spend their money.

Yet, rarely is it asked why it is morally acceptable that a stranger with a badge and a gun can do the same thing in the name of law and order.  Any resistance is met with brute force, fines, taxes, arrests, and even imprisonment. This is done more frequently every day without a proper search warrant.

Government in a free society should have no authority to meddle in social activities or the economic transactions of individuals. Nor should government meddle in the affairs of other nations. All things peaceful, even when controversial, should be permitted.

Liberty can only be achieved when government is denied the aggressive use of force.  If one seeks liberty, a precise type of government is needed.  To achieve it, more than lip service is required.

Two choices are available.

1. A government designed to protect liberty—a natural right—as its sole objective.  The people are expected to care for themselves and reject the use of any force for interfering with another person’s liberty.  Government is given a strictly limited authority to enforce contracts, property ownership, settle disputes, and defend against foreign aggression.

2. A government that pretends to protect liberty but is granted power to arbitrarily use force over the people and foreign nations.  Though the grant of power many times is meant to be small and limited, it inevitably metastasizes into an omnipotent political cancer.  This is the problem for which the world has suffered throughout the ages.  Though meant to be limited it nevertheless is a 100% sacrifice of a principle that would-be-tyrants find irresistible.  It is used vigorously—though incrementally and insidiously.  Granting power to government officials always proves the adage that:  “power corrupts.”

Today’s mess is a result of Americans accepting option #2, even though the Founders attempted to give us Option #1.

Ultimately, the people have to decide which form of government they want; option #1 or option #2.  There is no other choice.  Claiming there is a choice of a “little” tyranny is like describing pregnancy as a “touch of pregnancy.”  It is a myth to believe that a mixture of free markets and government central economic planning is a worthy compromise.  What we see today is a result of that type of thinking.  And the results speak for themselves.

Some argue it’s only a matter of “fairness” that those in need are cared for. There are two problems with this. First, the principle is used to provide a greater amount of benefits to the rich than the poor. Second, no one seems to be concerned about whether or not it’s fair to those who end up paying for the benefits. The costs are usually placed on the backs of the middle class and are hidden from the public eye. Too many people believe government handouts are free, like printing money out of thin air, and there is no cost. That deception is coming to an end. The bills are coming due and that’s what the economic slowdown is all about.

Sadly, we have become accustomed to living with the illegitimate use of force by government.  It is the tool for telling the people how to live, what to eat and drink, what to read and how to spend their money.

To develop a truly free society, the issue of initiating force must be understood and rejected.  Granting to government even a small amount of force is a dangerous concession.

Productivity and creativity are the true source of personal satisfaction. Freedom, and not dependency, provides the environment needed to achieve these goals. Government cannot do this for us; it only gets in the way. When the government gets involved, the goal becomes a bailout or a subsidy and these cannot provide a sense of personal achievement.

Achieving legislative power and political influence should not be our goal. Most of the change, if it is to come, will not come from the politicians, but rather from individuals, family, friends, intellectual leaders and our religious institutions.  The solution can only come from rejecting the use of coercion, compulsion, government commands, and aggressive force, to mold social and economic behavior.  Without accepting these restraints, inevitably the consensus will be to allow the government to mandate economic equality and obedience to the politicians who gain power and promote an environment that smothers the freedoms of everyone. It is then that the responsible individuals who seek excellence and self-esteem by being self-reliance and productive, become the true victims.

The #1 responsibility for each of us is to change ourselves with hope that others will follow.  This is of greater importance than working on changing the government; that is secondary to promoting a virtuous society.  If we can achieve this, then the government will change.

To achieve liberty and peace, two powerful human emotions have to be overcome.  Number one is “envy” which leads to hate and class warfare.  Number two is “intolerance” which leads to bigoted and judgmental policies.  These emotions must be replaced with a much better understanding of love, compassion, tolerance and free market economics. Freedom, when understood, brings people together. When tried, freedom is popular.

The problem we have faced over the years has been that economic interventionists are swayed by envy, whereas social interventionists are swayed by intolerance of habits and lifestyles. The misunderstanding that tolerance is an endorsement of certain activities, motivates many to legislate moral standards which should only be set by individuals making their own choices. Both sides use force to deal with these misplaced emotions. Both are authoritarians. Neither endorses voluntarism.  Both views ought to be rejected.

I have come to one firm conviction after these many years of trying to figure out “the plain truth of things.”  The best chance for achieving peace and prosperity, for the maximum number of people world-wide, is to pursue the cause of LIBERTY.

A Man-Made Disaster

The Ludwig von Mises Institute recently published an article by George Reisman.  The subject of this article is price gouging regulations and their effects on the supply of basic necessities.  The article can be viewed at this link:

http://mises.org/daily/6278/PostSandy-A-ManMade-Disaster

Here are some of the highlights of this article:

Hurricane Sandy caused the closing of a majority of the gasoline stations in the New York City area, did major damage to petroleum terminals, and reduced the ability of barges carrying fuel to reach their docks. All of this represented a substantial reduction in the supply of gasoline and other petroleum products in the New York metropolitan area.  In a free market, the effect of a good's becoming scarcer is not to cause a shortage of it, but a rise in its price. The rise in price serves to reduce the amount of the good buyers seek to buy to a point that is within the limit of the reduced supply available.

What all this implies is that the shortages of gasoline now being experienced in the New York metropolitan area and elsewhere in the path of destruction left by Hurricane Sandy simply do not need to exist. They could be made to disappear very quickly, within a matter of hours. All that would be necessary is to remove the threat of prosecution of gas station owners, and all others in the chain of supply of gasoline, for raising their prices to the extent necessary to reduce the quantity of gasoline demanded to conform with the reduced supply of it available.  What caused the shortages and stops them from being overcome in this way is the fact that the necessary rise in prices is illegal. It is against the law.

Thus state laws are what make it impossible for the market immediately to put an end to the shortages. It is these state laws that allowed the shortages to come into existence in the first place, by prohibiting the immediate rise in prices that would have prevented them, and that then make the shortages persist.

The same state laws make it impossible for the market speedily to restore supplies to their normal level, which would serve quickly to bring down prices from their abnormal heights.

If prices were allowed to be "unconscionably" high, it would be possible to bring in vital supplies that are more costly. For example, gasoline from more remote refineries. At prices of $10 to $20 per gallon, it would pay for tanker trucks to bring in gasoline from several hundred miles away. This would serve to spread the loss of supplies caused by the hurricane over a much wider area, with a corresponding reduction in the severity of loss experienced in the area of the hurricane's path.

The "unconscionable" rise in the retail price of gasoline that made it possible for the gas stations to pay higher prices to their wholesalers and distributors bringing in gasoline from remote refineries would also cover the high costs of speedy repairs, such as those entailed in round-the-clock repair work, using extra crews, and paying premium wage rates. Thus, in the absence of the price controls, in very short order New York/New Jersey area refineries, terminals, and docks would be repaired, and the gas stations now closed would reopen. This would serve to achieve a full restoration of supplies, along with a return of the gasoline distribution system to normal. These results would quickly bring gasoline prices down to their normal level.

All of this is prevented for no other reason than that our government officials are utterly ignorant of economic law.
In a society in which economic law was widely understood, legislators and prosecutors who sought to prevent price increases in cases of emergencies would be regarded as public enemies and barred from office. They would be barred not by a mere lack of support, but by a lack of support manifested in the utmost public contempt and ridicule for their ignorance and destructiveness.

New York and New Jersey are in an emergency situation. It is intolerable that their people be made to suffer the effects of disastrous legislation piled on top of a natural disaster and thereby needlessly enlarging and extending the effects of the natural disaster.

Meatless Mondays

The Los Angeles City Council has taken a bold step to solve one of mankind's great problems.  On Wednesday October 24, 2012 a resolution was passed that decrees:

NOW, THEREFORE, BE IT RESOLVED, that the Council of the City of Los Angeles hereby declares all Mondays as "Meatless Mondays" in support of comprehensive sustainability efforts as well as to further encourage residents to eat a more varied plant-based diet to protect their health, protect animals and protect the environment.

The local news article is at this link (note that this resolution passed unanimously) :

http://www.nbclosangeles.com/news/local/Los-Angeles-City-Council-Embraces-Meatless-Mondays-Vegetarian-178244541.html

If you still think that this is a joke, the original council resolution is at this link:

http://clkrep.lacity.org/onlinedocs/2012/12-1721_RESO_10-31-12.pdf

I bet that Mayor Michael Bloomberg of New York is angry that he did not think of this first.

Who would have thought that the LA City Council would agree with the Vatican?  For those of you who grew up in a Catholic family Friday was our “meatless” day of the week.  Too bad that the LA City Council didn't choose Friday that way the Catholics would be leading the trend.   I guess that “meatless Mondays” has a better rhyme.  Another problem with meatless Fridays is that Hollywood loves to party on Friday night.  This would have put a damper on those glamorous celebrities.  It would not be the same standing around drinking Crystal and munching on carrot sticks.

By the way, Catholics are still required to abstain from meat on “penitential days”:

http://www.vatican.va/archive/ENG1104/__P4O.HTM

Canon  1250 The penitential days and times in the universal Church are every Friday of the whole year and the season of Lent.
Canon  1251 Abstinence from meat, or from some other food as determined by the Episcopal Conference, is to be observed on all Fridays, unless a solemnity should fall on a Friday. Abstinence and fasting are to be observed on Ash Wednesday and Good Friday.

It appears that the environmental and vegetarian movements have now formally become a religion.  Now they only need to appoint a high priest (or maybe a pope).  My vote goes to Al Gore (lately he looks like he could really use the meatless days).

Vote early, vote often

James O'Keefe president of Project Veritas has released an undercover video of a Democratic Party campaign worker giving advice on how to commit voter fraud.  The news story is at this link:

http://times247.com/articles/moran-s-son-resigns-after-voter-fraud-video-airs

The highlights of the undercover video along with the full unedited version can be viewed at this link:

http://times247.com/articles/caught-moran-s-son-conspires-to-commit-voter-fraud

Is America Exceptional?

The following link is to the October 2012 edition of "Imprimis".  This issue of Imprimis is adapted from a speech delivered on September 20, 2012, in Washington, D.C., at Hillsdale College’s third annual Constitution Day Dinner.  This speech was presented by Norman Podhoretz Former Editor-in-Chief, Commentary magazine.

http://www.hillsdale.edu/news/imprimis/archive/issue.asp?year=2012&month=10

These are some of the highlights:

ONCE UPON A TIME, hardly anyone dissented from the idea that, for better or worse, the United States of America was different from all other nations. This is not surprising, since the attributes that made it different were vividly evident from the day of its birth. Let me say a few words about three of them in particular.

First of all, unlike all other nations past or present, this one accepted as a self-evident truth that all men are created equal. What this meant was that its Founders aimed to create a society in which, for the first time in the history of the world, the individual’s fate would be determined not by who his father was, but by his own freely chosen pursuit of his own ambitions. In other words, America was to be something new under the sun: a society in which hereditary status and class distinctions would be erased, leaving individuals free to act and to be judged on their merits alone. There remained, of course, the two atavistic contradictions of slavery and the position of women; but so intolerable did these contradictions ultimately prove that they had to be resolved—even if, as in the case of the former, it took the bloodiest war the nation has ever fought.

Secondly, in all other countries membership or citizenship was a matter of birth, of blood, of lineage, of rootedness in the soil. Thus, foreigners who were admitted for one reason or another could never become full-fledged members of the society. But America was the incarnation of an idea, and therefore no such factors came into play. To become a full-fledged American, it was only necessary to pledge allegiance to the new Republic and to the principles for which it stood.

Thirdly, in all other nations, the rights, if any, enjoyed by their citizens were conferred by human agencies: kings and princes and occasionally parliaments. As such, these rights amounted to privileges that could be revoked at will by the same human agencies. In America, by contrast, the citizen’s rights were declared from the beginning to have come from God and to be “inalienable”—that is, immune to legitimate revocation.

In my own younger days, I was on the Left, and from the utopian vantage point to which leftism invariably transports its adherents, it was the flaws in American society—the radical 1960s trinity of war, racism, and poverty—that stood out most vividly. It rarely occurred to me or my fellow leftists to ask a simple question: Compared to what is America so bad?

So far as liberty is concerned, until recently no one but libertarians have been arguing that we were insufficiently free in the United States. If anything, some conservatives, dismayed by such phenomena as the spread of pornography and sexual license, thought that we had too much freedom for our own good. But thanks to modern liberalism’s barely concealed hostility to the free market, not to mention the threat posed by Obamacare to religious and economic freedom, many conservatives are now echoing these libertarian arguments, if in a milder form.

Judging by what they say and the policies they pursue, modern liberals are not all that concerned about liberty. What they really care about, and what they assign a higher value to, is economic equality (as reflected in the now famous phrase, “spread the wealth around”).

Hence the Democrats never stop claiming that the rich are failing to pay their fair share of taxes. Yet after surveying the numbers, the economist Walter Williams of George Mason University asks an excellent question: “What standard of fairness dictates that the top ten percent of income earners pay 71 percent of the federal income tax burden while 47 percent of Americans pay absolutely nothing?” To which an editorial in the Wall Street Journal replies: “There is nothing fair about confiscatory tax policy that reduces growth, denies opportunity, and keeps more people in poverty.”

Then too there is the assumption, blithely accepted by the party of economic equality, that the gap between rich and poor—or even between the rich and the middle class—self-evidently amounts to a violation of social justice. Yet far from being self-evident, this assumption stems from a highly questionable concept of social justice—one that rules out or minimizes the role played by talent, character, ambition, initiative, daring, work, and spirit in producing unequal outcomes in “the pursuit of happiness.”

Furthermore, both the assumption and its correlative concept of social justice run counter to the American grain. As study after study has shown, and as the petering out of the Occupy Wall Street movement has recently confirmed, what Tocqueville observed on this point in the 1830s remains true today: Americans, unlike Europeans, he wrote, “do not hate the higher classes of society” even if “they are not favorably inclined toward them . . . .” Which is to say that most Americans are not prone to the envy of the rich that eats away at their self-appointed spokesmen on the Left.

Tocqueville also put his finger on a second and related reason for the persistence of this particular feature of American exceptionalism: “The word poor is used here in a relative, not an absolute sense. Poor men in America would often appear rich in comparison with the poor of Europe.” A story I was once told by a Soviet dissident provides an amusing illustration. It seems that the Soviet authorities used to encourage the repeated screening of The Grapes of Wrath, a movie about the Great Depression-era migration of starving farmers from the Dust Bowl to California in their broken-down pickups. But contrary to expectation, what Soviet audiences got from this film was not an impression of how wretched was the plight of the poor in America. Instead they came away marvelling that in America, “even the peasants own trucks.”

With all exceptions duly noted, I think it is fair to say that what liberals mainly see when they look at America today is injustice and oppression crying out for redress. By sharp contrast, conservatives see a complex of traditions and institutions built upon the principles that animated the American Revolution and that have made it possible—to say yet again what cannot be said too often—for more freedom and more prosperity to be enjoyed by more of its citizens than in any other society in human history. It follows that what liberals—who concentrate their attention on the relatively little that is wrong with America instead of the enormous good embodied within it—seek to change or discard is precisely what conservatives are dedicated to preserving, reinvigorating, and defending.

Shortly before the election of 2008, then-candidate Obama declared that his election would usher in “a fundamental transformation of America.” The desirability of such a transformation—which would entail the wiping away of as many more traces of American exceptionalism as it will take to turn this country into a facsimile of the social-democratic regimes of western Europe—is the issue at the heart of our politics today. And in the long run, I hope and trust, Americans will reject such a transformation, and elect instead to return to the principles that have made this nation so exceptional—yes, exceptional—a force for good both at home and abroad.

A Federal Deficit Space Jump

I checked the math (because I live for that sort of thing) and these number are correct.  To pay for 1 year of our Federal Budget deficit in $100.00 bills, the stack of bills would be 746.5 miles tall!

Calling a spade a spade

A friend of ours forwarded a short video to me.  It is an interview with Congressmen Allen West.  Congressmen West represents the 22nd district in Florida.  He was first elected to Congress in 2010 and is very popular with the TEA Party.  The video is available at this link:

http://tinyurl.com/77jdm8q

Allen West does not back down from any opponent, especially ones in the media.  Apparently the reporters asking questions in this video were not familiar with West's personality.  He can not be intimidated.

Economic Freedom of the World

The Fraser Institute a Canadian “think tank” publishes an annual report concerning the economic freedom of each country.

The annual Economic Freedom of the World report is the premier measurement of economic freedom, using 42 distinct variables to create an index ranking of countries around the world based on policies that encourage economic freedom. The cornerstones of economic freedom are personal choice, voluntary exchange, freedom to compete, and security of private property. Economic freedom is measured in five different areas: (1) size of government, (2) legal structure and security of property rights, (3) access to sound money, (4) freedom to trade internationally, and (5) regulation of credit, labor, and business.

The complete 2012 report is at this link:

http://www.freetheworld.com/2012/EFW2012-complete.pdf

An executive summery of the 2012 report can be viewed at this link:

http://www.freetheworld.com/2012/EFW2012-exsum.pdf

Here are the rankings from the current report:

In this year’s index, Hong Kong retains the highest rating for economic freedom, 8.90 out of 10. The other top 10 nations are: Singapore, 8.69; New Zealand, 8.36; Switzerland, 8.24; Australia, 7.97; Canada, 7.97; Bahrain, 7.94; Mauritius, 7.90; Finland, 7.88; and Chile, 7.84.

The rankings (and scores) of other large economies in this year’s index are the United Kingdom, 12th (7.75); the United States, 18th (7.69); Japan, 20th (7.64); Germany, 31st (7.52); France, 47th (7.32); Italy, 83rd (6.77); Mexico, 91st, (6.66); Russia, 95th (6.56); Brazil, 105th (6.37); China, 107th (6.35); and India, 111th (6.26).

The researchers who wrote this study felt compelled to include the following section:

The United States, long considered the standard bearer for economic freedom among large industrial nations, has experienced a remarkable plunge in economic freedom  during the past decade. From 1980 to 2000, the United States was generally rated the third freest economy in the world, ranking behind only Hong Kong and Singapore.  After increasing steadily during the period from 1980 to 2000, the chain-linked EFW  rating of the United States fell from 8.65 in 2000 to 8.21 in 2005 and 7.70 in 2010. The chain-linked ranking of the United States has fallen precipitously  from second in 2000 to eighth in 2005 and 19th in 2010 (unadjusted ranking of 18 th ).  By 2009, the United States had fallen behind Switzerland, Canada, Australia, Chile, and Mauritius, countries that chose not to follow the path of massive growth in government financed by borrowing that is now the most prominent characteristic of US fiscal policy. By 2010, the United States had also fallen behind Finland and Denmark, two European welfare states. Moreover, it now trails Bahrain, the United Arab Emirates, Estonia, Taiwan, and Qatar, countries that are not usually perceived of as bastions of economic freedom. The United States has now reached a point where  even small additional decreases in the rating will cause large ranking changes because  there are so many more countries clustered in this range of the index.

US ratings have declined in four of the five Areas of the EFW index. The rating in Legal System and Protection of Property Rights (Area 2) dropped by more than  2 points between 2000 and 2010. While it is difficult to pinpoint the precise reason for this decline, the increased use of eminent domain to transfer property to powerful political interests, the ramifications of the wars on terrorism and drugs, and the violation of the property rights of bondholders in the bailout of automobile companies have all weakened the United States’ tradition of the rule of law and, we believe, contributed to the sharp decline of the Area 2 rating. The rating for Freedom to Trade Internationally (Area 4) fell by over one point, and the ratings for Size of Government (Area 1) and Regulation (Area 5) by more than a half point. The only Area where the United States’ rating was basically unchanged was Access to Sound Money (Area 3).

Government consumption, transfers and subsidies, and government investment  all rose during the decade, while their private-sector counterparts were lower. These changes were the major reason underlying the decline in the rating for Area 1. The time cost of clearing customs increased and government borrowing consumed a substantially larger share of the credit market, contributing to the rating reductions in Areas 4 and 5. Some of the declines between 2000 and 2010 in the ratings of individual components and sub-components were very large. For example, the rating for Protection of property rights (2C) fell to 6.8 from 9.1. The rating reflecting import and export compliance costs (4Bii) fell to 7.2 from 9.5. Reflecting the large fiscal deficits of recent years, the private-sector credit rating (5Aii) plummeted to 0.8 from 9.4. The rating reflecting burdensome administrative regulations (5Ci) plunged to 4.0 from 7.9.

The approximate one-point decline in the summary rating between 2000 and  2010 on the 10-point scale of the index may not sound like much, but scholarly work on this topic indicates that a one-point decline is associated with a reduction in the long-term growth of GDP of between 1.0 and 1.5 percentage points annually (Gwartney, Holcombe and Lawson, 2006). This implies that, unless policies undermining economic freedom are reversed, the future annual growth of the US economy will be half its historic average of 3%.

This report along the the above discussion of the decline of the USA's ratings answer many of our questions and confirm many of our intuitions.  The decline of the middle class, the feeling of economic unease and despair, and the growing consensus that "America's best days are behind it" all stem from our loss of economic freedom.

CON Game

During a discussion with a friend of ours at lunch today, I realized that a group of tremendously economically destructive laws are relatively unknown.  The type of laws that require our examination are known as "Certificate of Necessity" (CON) statutes.  These laws have been enacted by legislatures in all 50 states to regulate a variety of industries.

The basic premise of CON statutes is that the free market is inefficient and that government planning can make better decisions concerning the allocation of capital.  CON laws require government approval for new companies to enter a market or for existing businesses to expand.

CON laws were originally applied to public utilities and transportation companies.  Unfortunately in 1964 the State of New York decided to apply this legal theory to hospitals and nursing homes.  In 1974 the Federal Government required all 50 states to "have structures involving the submission of proposals and obtaining approval from a state health planning agency before beginning any major capital projects such as building expansions or ordering new high-tech devices". Many states implemented CON programs in part because of the incentive of receiving CON federal funds.

The Federal mandate was repealed in 1987 but today 36 states still maintain CON laws for health care, and the states that have repealed their original CON statues have retained some aspects of them.  Effectively today the construction of any new medical facility or the installation of any new medical equipment requires the approval of a state governmental agency.  The anti-competitive  inflationary effects of the CON statutes on the cost of heath care are astronomical.

The following article by Timothy Sandefur of the Pacific Legal Foundation is an excellent historical perspective on CON legislation:

https://object.cato.org/sites/cato.org/files/serials/files/regulation/2011/8/regv34n2-1.pdf

Some of the highlights of this article:

CON laws were originally devised to regulate railroads and other public utilities. They first appeared in Massachusetts in the 1880s, and were soon taken up in other states, where they were often applied to streetcar lines.

As William K. Jones explains in his 1979 Columbia Law Review history of CON laws, Progressive Era proponents offered five main justifications for these restrictions, they would:

1. prevent “wasteful duplication” of services,

1. prevent “ruinous competition,”

1. ensure that regulated entities would continue to serve out-of-the-way customers,

1. promote private investments in public service industries,

1. forestall certain kinds of externalities.

Many economists and social theorists of the time believed competition was economically inefficient because it wasted resources on, say, multiple railroad lines between the same destinations.  Worse, they thought competition fostered the “boom-and-bust” cycle that drove out investment and ultimately left customers without the products and services they needed.

Possibly the most foolhardy CON requirements are laws that apply to hospitals. Originally adopted to prevent what economists saw as inefficient over-expansion of hospitals, the laws were soon captured by established interests that used them to raise the cost of medical services. In the 1970s, 49 states imposed CON requirements on hospitals, leading to higher costs and less innovation in medical care. Economist Thomas E. Getzen wrote in 1997 that “almost every well-established, wealthy, and politically connected hospital that applied for certification eventually got it, while denials fell disproportionately on outsiders that threatened the status quo or weaker institutions that lacked a constituency.”

Federal CON requirements were repealed in the 1980s, but many states still employ them. For example, Hawaii bureaucrats held up construction of a new $220 million private hospital on Maui for years, forcing the island’s 144,000 residents to depend on a single, state-run facility or on clinics. The State Health Planning Development Agency rejected a 2007 proposal to build a new, state-of-the-art facility, denying it a certificate of need because it would negatively affect the existing government-run hospital.

Occupational licensing laws are among the most common abridgments of economic liberty, but CON rules are more pernicious.  They do not even pretend to protect public safety by ensuring that practitioners are educated or skilled; they exist for the explicit purpose of preventing competition. Whatever merit that might have in the context of public utilities or natural monopolies, there is no reasonable foundation for applying such rules to moving companies, taxi companies, or hospitals. In these markets, CON restrictions unfairly favor entrenched private interests, increase the cost of living for consumers, destroy economic opportunity for the most vulnerable entrepreneurs, and in the case of hospitals, threaten Americans’ very lives. Certificate of necessity laws are arbitrary, discriminatory, and economically foolish.

The National Conference of State Legislatures has a brief description of CON laws along with a discussion of individual states statutes.  There is also a "pros and cons" chart:

http://www.ncsl.org/issues-research/health/con-certificate-of-need-state-laws.aspx

This passage from the "pros" section of the chart is interesting:

Advocates of CON programs say that health care cannot be considered as a “typical” economic product. They argue that many “market forces” do not obey the same rules for health care services as they do for other products. In support of this argument, it is often pointed out that, since most health services (like an x-ray) are “ordered” for patients by physicians, patients do not “shop” for these services the way they do for other commodities. This makes hospital, lab and other services insensitive to market effects on price, and suggests a regulatory approach based on public interest.

In the above defense of CON laws we find a government program (CON) is promoted to cure the unintended consequences of a previous government program (third party payer insurance coverage).  Obviously if the patient were paying for the cost of service (or a portion of the cost of service) they would "shop" for these services the way they do for other commodities.

For our friends who live in Hawaii you can find out how to apply for a Certificate of Necessity by studying this website:

http://hawaii.gov/shpda/certificate-of-need

If you are confused by the wording on the above page or you are frustrated that the application is 17 pages long, have no fear as the State of Hawaii has prepared a flowchart for this process (who would like to bet that it takes longer than 90days?):

And so that those of you who live in Illinois do not feel left out you can submit your application for a Certificate of Necessity after reading this page:

http://hfsrb.illinois.gov/conprocess.htm

Certificate of Necessity is an unnecessary and unconstitutional intervention into commerce by state governments.  It is perpetrated by existing businesses using the power of government to restrict competition.  We are all worse off because of these statutes.  The statutes must be repealed but more importantly we must explain to our fellow citizens why it is never better to let government make decisions that should be made by individuals.

The Machine

The Moving Picture Institute has produced an new short video titled "The Machine".  The subject is teacher unions, taxes, and politicians.  The run time is 4 minutes 30 seconds.  Watch the video at this link:

http://youtu.be/mVyNlJUKgug

Happy Capital Day

Lawrence W. Reed is president of the Foundation for Economic Education.  He recently published this essay: 

http://www.fee.org/articles/happy-capital-day-2/

Here are some of the highlights of this essay:

Any good economist will tell you that as complementary factors of production, labor and capital are not only indispensable but hugely dependent upon each other as well.

Capital without labor means machines with no operators, or financial resources without the manpower to invest in. Labor without capital looks like Haiti or North Korea: plenty of people working but doing it with sticks instead of bulldozers, or starting a small enterprise with pocket change instead of a bank loan.

Capital can refer to either the tools of production or the funds that finance them. There may be no place in the world where there’s a shortage of labor but every inch of the planet is short of capital. There is no worker who couldn’t become more productive and better himself and society in the process if he had a more powerful labor-saving machine or a little more venture funding behind him. It ought to be abundantly clear that the vast improvement in standards of living over the past century is not explained by physical labor (we actually do less of that), but rather to the application of capital.

But this year on Labor Day weekend, I’ll also be thinking about the remarkable achievements of inventors of labor-saving devices, the risk-taking venture capitalists who put their own money (not your tax money) on the line and the fact that nobody in America has to dig a ditch with a spoon or cut his lawn with a knife.

Labor Day and Capital Day. I know of no good reason why we should have just one and not the other.

Great Moments in Government Regulation

Dr. Mark J. Perry is a professor of economics and finance in the School of Management at the Flint campus of the University of Michigan.  He writes a blog titled Carpe Diem.  He recently posted a happy little story about government regulation strangling a small business start up.  You can read the entire story here:

http://mjperry.blogspot.com/2012/08/great-moments-in-government-regulations.html

I am very impressed with Dr. Perry's closing paragraph that paraphrases our President's recent explanation of business success:

Look, if you’ve been unsuccessful, you didn’t get there on your own. If you were unsuccessful at opening or operating a small business, some government official along the line probably contributed to your failure.  There was an overzealous civil servant somewhere who might have stood in your way with unreasonable regulations that are part of our American system of anti-business red tape that allowed you to not thrive.  Taxpayers invested in roads and bridges, but you might have faced city council members who wouldn’t allow you to use them.  If you’ve been forced to close a business – it’s often the case that you didn’t do that on your own.  Somebody else made that business closing happen or prevented it from opening in the first place. You can thank the bureaucratic tyrants of the nanny state.

2016: Obama’s America

A new film "2016: Obama’s America" based on the book "The Roots of Obama’s Rage" by Dinesh D’Souza is currently playing in movies theaters.  To watch a trailer for this movie click on this link:

http://2016themovie.com/media/

To view a video of Dinesh D'Souza discussing his movie click on this link:

http://youtu.be/juGoLKZjPQU

To find a movie theater showing this film click here:

http://2016themovie.com/theaters/

Greed by Thomas Sowell

• A simple yet elegant argument.

  
  

  

Milton Friedman's century

July 31, 2012 is the 100th anniversary of Milton Friedman's birth.  On this occasion we should celebrate the legacy that he has bestowed upon us.  Milton was a champion of limited government and free markets.  His ability to clearly explain the economic principles advocating personal freedom was unrivaled.

His audience was expanded dramatically when he was asked to host a television series “Free to Choose”.  This 10 part series reached millions of viewers and exposed them to the fundamental concepts of a free society.  Rose Friedman (Milton’s wife) described the decision to air the TV series in their memoirs (Two Lucky People, U. of Chicago Press, 1998), "Milton and I have spent much of our life trying to persuade our fellow men and women of the dangers of an intrusive government and the key role that a free competitive economy plays in making a free society possible. Bringing these ideas to the large audience that a TV documentary could attract excited us."

Thankfully Milton’s ideas were not isolated to the USA.  Czech President Vaclav Klaus has this to say: “For us, who lived in the communist world, Milton Friedman was the greatest champion of freedom, of limited and unobtrusive government and of free markets. Because of him I became a true believer in the unrestricted market economy.”  Milton’s books and essays along with the “Free to Choose” documentary were smuggled into totalitarian countries around the world and became a source of inspiration for a generation of freedom fighters.

I consider myself very fortunate to have met Milton and Rose in 2005.  It gave me a great feeling of satisfaction to personally thank both of them for all that they have done to advance our personal freedom.  I hope that you will take some time to visit the websites linked in this post.  Read his words, watch his videos, and most importantly spread his message that we must all be free to choose.

Milton Friedman collection

Ten Fallacious Conclusions

A recent blog post by The Independent Institute succinctly describes our current political predicament.  The blog post can be read at this link:

The Independent Institute blog

Here is the majority of the text:

For the past century in the United States of America, the dominant ideology has been progressivism ....Nevertheless, through all its emotional and intellectual ups and downs, progressivism has retained one central element: its abiding faith that the state can and should act vigorously on as many fronts as possible to improve society both here and abroad.

An economist notes in particular that progressive ideology now embraces the following default conclusions:

1. If a social or economic problem seems to exist, the state should impose regulation to remedy it.
2. If regulation has already been imposed, it should be made more expansive and severe.
3. If an economic recession occurs, the state should adopt “stimulus” programs by actively employing the state’s fiscal and monetary powers.
4. If the recession persists despite the state’s adoption of “stimulus” programs, the state should increase the size of these programs.
5. If long-term economic growth seems to be too slow to satisfy powerful people’s standard of performance, the state should intervene to accelerate the rate of growth by making “investments” in infrastructure, health, education, and technological advance.
6. If the state was already making such “investments,” it should make even more of them.
7. Taxes on “the rich” should be increased during a recession, to reduce the government’s budget deficit.
8. Taxes on “the rich” should also be increased during a business expansion, to ensure that they pay their “fair share” (that is, the great bulk) of total taxes and to reduce the government’s budget deficit.
9. If progressives perceive a “market failure” of any kind, the state should intervene in whatever way promises to create Nirvana.
10. If Nirvana has not resulted from past and current interventions, the state should increase its intervention until Nirvana is reached

The foregoing progressive predispositions, and others too numerous to state here, provide the foundation on which the state justifies its current actions and its proposals for acting even more expansively. Progressives see no situation in which the best course of action requires that the government retrench or admit that it can do nothing constructive to help matters. They see the state as well-intentioned, sufficiently capable, and properly motivated to fix any social and economic problem whatsoever if only the public allows it to do so and bears the costs.

It follows that progressives desire a change in the state’s size, scope, and power in only one direction, regardless of past and present conditions and regardless of whether previous attempts to implement progressive panaceas have succeeded or failed—indeed, if honestly assessed, virtually all of them have failed, on balance. Progressive faith in the state, however, springs eternal.

It is a great misfortune for modern Western countries, and many others as well, that serious challenges to this currently dominant ideology do not exist. The political parties compete for office, each seeking to direct more of the state’s plunder to its supporters, but the ideological differences between the competing parties is almost entirely superficial. All politically potent parties believe in a powerful, pervasively engaged state. They differ only in regard to which specific individuals should steer the Leviathan.

I, Pencil

"I, Pencil" is an incredible essay written by Leonard E. Read that was first published in 1958.

Milton Friedman said this about "I, Pencil": "I know of no other piece of literature that so succinctly, persuasively, and effectively illustrates the meaning of both Adam Smith's invisible hand—the possibility of cooperation without coercion—and Friedrich Hayek's emphasis on the importance of dispersed knowledge and the role of the price system in communicating information that "will make the individuals do the desirable things without anyone having to tell them what to do."

Donald J. Boudreaux puts this essay into perspective: "For its sheer power to display in just a few pages the astounding fact that free markets successfully coordinate the actions of literally millions of people from around the world into a productive whole, nothing else written in economics compares to Leonard Read's celebrated essay, "I, Pencil."

I have decided not to provide highlights of this essay.  Please read this essay in its entirety, you will be enlightened and uplifted:

http://www.econlib.org/library/Essays/rdPncl1.html

Yes, you did build that

On 7/13/12 in Roanoke,  Virgina our President made the following statement during a speech:

There are a lot of wealthy, successful Americans who agree with me, because they want to give something back.  They know they didn’t ---look, if you’ve been successful, you didn’t get there on your own.  You didn’t get there on your own.  I’m always struck by people who think, well, it must be because I was just so smart.  There are a lot of smart people out there.  It must be because I worked harder than everybody else.  Let me tell you something – there are a whole bunch of hardworking people out there.
If you were successful, somebody along the line gave you some help.  There was a great teacher somewhere in your life.  Somebody helped to create this unbelievable American system that we have that allowed you to thrive.  Somebody invested in roads and bridges.  If you’ve got a business. you didn’t build that.  Somebody else made that happen.

Of course President Obama has it exactly backwards. Business people created the wealth that the government confiscated to build infrastructure. The state cannot produce anything. Its very existence comes from the fruits of others.

Everyone wants to live at the expense of the state. They forget that the state lives at the expense of everyone.  - Frederic Bastiat

The Road to Totalitarianism

The Ludwig von Mises Institute recently published an article written by Henry Hazlitt.  This is a brilliant article and the most amazing aspect is that it was written in 1956.  The complete article is at this link:

The Road to Totalitarianism

The following are some of the highlights:

...the greatest threat to American liberty today comes from within. It is the threat of a growing and spreading totalitarian ideology.  Totalitarianism in its final form is the doctrine that the government, the state, must exercise total control over the individual.  The essence of totalitarianism is that the group in power must exercise total control. Its original purpose (as in communism) may be merely to exercise total control over "the economy." But "the state" (the imposing name for the clique in power) can exercise total control over the economy only if it exercises complete control over imports and exports, over prices and interest rates and wages, over production and consumption, over buying and selling, over the earning and spending of income, over jobs, over occupations, over workers — over what they do and what they get and where they go — and finally, over what they say and even what they think.

If total control over the economy must in the end mean total control over what people do, say, and think, then it is only spelling out details or pointing out corollaries to say that totalitarianism suppresses freedom of the press, freedom of religion, freedom of assembly, freedom of immigration and emigration, freedom to form or to keep any political party in opposition, and freedom to vote against the government. These suppressions are merely the end-products of totalitarianism.  All that the totalitarians want is total control. This does not necessarily mean that they want total suppression. They suppress merely the ideas which they don't agree with, or of which they are suspicious, or of which they have never heard before; and they suppress only the actions that they don't like, or of which they cannot see the necessity. They leave the individual perfectly free to agree with them, and perfectly free to act in any way that serves their purposes — or to which they may happen at the moment to be indifferent.

And it isn't too difficult to recognize the totalitarian mind when we meet one. Its outstanding mark is a contempt for liberty. That is, its outstanding mark is a contempt for the liberty of others.  The denial of freedom rests, in other words, on the assumption that the individual is incapable of managing his own affairs.

Three main tendencies or tenets mark the drift toward totalitarianism. The first and most important, because the other two derive from it, is the pressure for a constant increase in governmental powers, for a constant widening of the governmental sphere of intervention. It is the tendency toward more and more regulation of every sphere of economic life, toward more and more restriction of the liberties of the individual. The tendency toward more and more governmental spending is a part of this trend. It means in effect that the individual is able to spend less and less of the income he earns on the things he himself wants, while the government takes more and more of his income from him to spend it in the ways that it thinks wise. One of the basic assumptions of totalitarianism, in brief (and of such steps toward it as socialism, state paternalism, and Keynesianism), is that the citizen cannot be trusted to spend his own money. As government control becomes wider and wider, individual discretion, the individual's control of his own affairs in all directions, necessarily becomes narrower and narrower. In sum, liberty is constantly diminished.

The second main tendency that marks the drift toward totalitarianism is that toward greater and greater concentration of power in the central government. This tendency is most easily recognizable here in the United States, because we have ostensibly a federal form of government and can readily see the growth of power in Washington at the expense of the states....And so deep is the belief in the benevolence and necessity of uniform regulation and central planning that the federal government assumes more and more of the powers previously exercised by the states, or powers never exercised by any state; and the Supreme Court keeps steadily stretching the interstate commerce clause of the Constitution to authorize powers and federal interventions never dreamed of by the Founding Fathers. At the same time recent Supreme Court decisions treat the Tenth Amendment to the Constitution practically as if it did not exist.

The third tendency that marks the drift toward totalitarianism is the increasing centralization and concentration of power in the hands of the president at the expense of the two coordinate branches of the government, Congress and the courts. In the United States this tendency is very marked today. To listen to our pro-totalitarians, the main duty of Congress is to follow the president's "leadership" in all things; to be a set of yes-men; to act as a mere rubber-stamp.  One invariable accompaniment of the growth of Caesarism is the growing contempt expressed for legislative bodies, and impatience with their "dilatoriness" in enacting the "Leader's" program, or their actual "obstructionist tactics" or "crippling amendments." Yet in recent years derision of Congress has become in America almost a national pastime. And a substantial part of the press never tires of reviling Congress for "doing nothing" — that is, for not piling more mountains of legislation on the existing mountains of legislation — or for failing to enact in full "the President's program."

We have now outlined what I have called the three main tendencies that mark a drift toward totalitarianism. They are (1) the tendency of the government to attempt more and more to intervene, and to control economic life; (2) the tendency toward greater and greater concentration of power in the central government at the expense of local governments; and (3) the tendency toward more and more concentration of power in the hands of the executive at the expense of the legislative and judiciary.
To these I am tempted to add a fourth tendency — the pressure for a world state.
The addition of this will doubtless come as a shock to many self-styled liberals and well-intentioned idealists who would regard the establishment of a world state as the crowning achievement of liberalism and internationalism. A little examination, however, will show us that the present pressure for a world state represents a false internationalism and a retreat from freedom. It is, on the contrary, merely the equivalent on a world scale of the pressure for centralized government on a national scale.  This whole tendency makes a travesty of international freedom for the individual, which is the essence of true internationalism. For true internationalism does not consist in compelling the taxpayers or citizens of one nation or the inhabitants of one part of the globe to subsidize, or give alms to, or even to do "business" with, the citizens of any other nation or the inhabitants of any other part of the globe. True internationalism, on the contrary, consists in permitting the individual citizen or firm in any nation to buy from, or sell to, or trade with, the individual citizen or firm of any other nation.

This was Henry Hazlitt view of the road to totalitarianism in 1956.  What would his opinion be of our journey down this road today?

DC Public School Spending

Andrew J. Coulson is the director of the Cato Institute's Center for Educational Freedom.  His studies of the spending by the Washington DC public schools system are enlightening.  He has recently updated the data for public school spending in DC which you can read at the following link:

Census Bureau Confirms: DC Spends $29,409 / pupil

A brief summary of this study:

Back in March of this year I asked my then research intern to contact the Census Bureau and ask where they got their total spending data. It turns out, they got them from a DCPS official. We presented evidence to the Bureau that that DC Public Schools official had missed a few line items when completing the Census Bureau’s forms—to the tune of about $400 million. The Census Bureau agreed and is in the process of obtaining corrected data for the 2008-09 year. In the meantime, they made sure to ask DC officials to include all relevant items when filling out their forms for the 2009-10 school year. The result: Census Bureau data now show DC spent a total of $29,409 per pupil (obtained by dividing total expenditures in Table 1 by enrollment in Table 15). This is just a bit higher than my calculation for the preceding year.

Kudos to the Census Bureau for taking the initiative and getting DC to accurately report its public school expenditures. Now that education reporters can simply open a Census Bureau .pdf file and divide one number by another, I wonder if any will report what DC really spends per pupil? I suspect that they still will not, continuing to mislead the general public, but I would be delighted to be proven wrong.

Oh, and, BTW, this spending figure is about triple what the DC voucher program spends per pupil—and the voucher students have a much higher graduation rate and perform as well or better academically.

Frédéric Bastiat

Today we celebrate the 211 anniversary of the birth of an unwavering promoter of free markets, Frédéric Bastiat.   Here are a few of his quotations:

The state is the great fictitious entity by which everyone seeks to live at the expense of everyone else…Nothing enters the public treasury for the benefit of a citizen or a class unless other citizens and other classes have been forced to put it there…heavy government expenditures and liberty are incompatible…To be free, on one’s own responsibility, to think and to act, to speak and to write, to labor and to exchange, to teach and to learn—this alone is to be free.

This following paragraphs are from one of his essays:

On coming to Paris for a visit, I said to myself: Here are a million human beings who would all die in a few days if supplies of all sorts did not flow into this great metropolis. It staggers the imagination to try to comprehend the vast multiplicity of objects that must pass through its gates tomorrow, if its inhabitants are to be preserved from the horrors of famine, insurrection, and pillage. And yet all are sleeping peacefully at this moment, without being disturbed for a single instant by the idea of so frightful a prospect. On the other hand, eighty departments have worked today, without co-operative planning or mutual arrangements, to keep Paris supplied.

How does each succeeding day manage to bring to this gigantic market just what is necessary—neither too much nor too little? What, then, is the resourceful and secret power that governs the amazing regularity of such complicated movements, a regularity in which everyone has such implicit faith, although his prosperity and his very life depend upon it? That power is an absolute principle, the principle of free exchange. We put our faith in that inner light which Providence has placed in the hearts of all men, and to which has been entrusted the preservation and the unlimited improvement of our species, a light we term self-interest, which is so illuminating, so constant, and so penetrating, when it is left free of every hindrance.

Where would you be, inhabitants of Paris, if some cabinet minister decided to substitute for that power contrivances of his own invention, however superior we might suppose them to be; if he proposed to subject this prodigious mechanism to his supreme direction, to take control of all of it into his own hands, to determine by whom, where, how, and under what conditions everything should be produced, transported, exchanged, and consumed? Although there may be much suffering within your walls, although misery, despair, and perhaps starvation, cause more tears to flow than your warm-hearted charity can wipe away, it is probable, I dare say it is certain, that the arbitrary intervention of the government would infinitely multiply this suffering and spread among all of you the ills that now affect only a small number of your fellow-citizens.

Further reading can be found at this link:

The Libertarian Heritage

A letter to Santa Claus

On 6/21/12 the Court of Justice of the European Union handed down a ruling on a labor law case involving department store workers in Spain.  The workers originally won their case in a Spanish court. The National Association of Large Distribution Businesses appealed to the Supreme Court in Madrid, which then asked the Court of Justice for a ruling on how to apply European law covering working times.  The decision by the Court of Justice of the European Union is explained in a 2 page press release at this link:

Court of Justice of the European Union - Press Release No 87/12

In summary the decision by the Court of Justice of the European Union is that any employee who becomes ill while on vacation will later be entitled to additional time off for the sick days that occurred during the vacation period. The exact language from the press release is as follows:

A worker who becomes unfit for work during his paid annual leave is entitled at a later point in time to a period of leave of the same duration as that of his sick leave.
That right exists irrespective of the point at which the incapacity for work arose.

Another passage of interest from the press release:

The Court points out that, according to settled case-law, entitlement to paid annual leave must be regarded as a particularly important principle of EU social law, a principle expressly enshrined in the EU Charter of Fundamental Rights. The right to paid annual leave cannot be interpreted restrictively.

The language in the press release echos a passage from the United Nations' Universal Declaration of Human Rights.   Article 24 pertains to vacation:

Everyone has the right to rest and leisure, including reasonable limitation of working hours and periodic holidays with pay.

Jeanne Kirkpatrick, Ronald Reagan’s Ambassador to the U.N., once said the Universal Declaration of Human Rights was like “a letter to Santa Claus”.

It is unfortunate that the Court of Justice of the European Union was not able to find a way to apply this sick day policy to the 25% of Spanish workers who are unemployed.

Please keep this in mind when the USA is asked to contribute to a European bailout.

Discrimination against low skilled workers

The Cato Institute has published a Policy Analysis by Mark Wilson about Federal minimum wage laws. The complete analysis can be read at this link:

The Negative Effects of Minimum Wage Laws

These are some of the highlights of the analysis:

The competitive model has been most often used for evaluating the minimum wage. This is the basic textbook model that has been taught in university economics courses for decades. The core components of the model are a negatively sloped labor demand curve and a wage rate that clears the market and is not controlled by individual agents. In competitive markets, the imposition of a minimum wage provides a classic example of a government distortion that creates negative side effects in the marketplace.

The graph below shows a hypothetical competitive local labor market. The market demand curve for labor is DD, and the market supply curve is SS. Their intersection determines the competitive wage, Wc, with employment Ec.

If the minimum wage is set at Wm, employment is reduced to Em. The reduction in employment is smaller than the excess supply of labor (the distance AC). The excess supply of labor includes both a reduction in employment (fewer hours and job opportunities, or AB) along with a second component consisting of workers who are drawn into the labor market by the prospect of earning the higher minimum wage (BC). Although some of the workers who are drawn into the labor market (typically those with higher skills) may succeed in finding one of the minimum wage jobs, it comes at the expense of lower skilled workers who are shut out of the labor market. The excess supply of labor in this example is dispersed in several ways: a reduction in hours, fewer job opportunities, and a shift in employment from sectors covered by the wage law to sectors not covered, including the underground economy. The employment effects are typically the most pronounced in labor markets for low-skilled youth.

In the US economy, low wages are usually paid to entry-level workers, but those workers usually do not earn these wages for extended periods of time. Indeed, research indicates that nearly two-thirds of minimum wage workers move above that wage within one year.

Seventy years of empirical research generally finds that the higher the minimum wage increase is relative to the competitive wage level, the greater the loss in employment opportunities. A decision to increase the minimum wage is not cost-free; someone has to pay for it, and the research shows that low-skill youth pay for it by losing their jobs, while consumers also pay for it with higher prices.

While they are often low-paid, entry-level jobs are vitally important for young and low skill workers because they allow people to establish a track record, to learn skills, and to advance over time to a better-paying job. Thus, in trying to fix a perceived problem with minimum wage laws, policymakers cause collateral damage by reducing the number of entry-level jobs. As Milton Friedman noted, “The minimum wage law is most properly described as a law saying employers must discriminate against people who have low skills".