Saturday, January 30, 2010

Don't Blame Proposition Thirteen

California is once again facing a budgetary shortfall, after the politicians managed to come up with a "fix" that balanced the state budget for a few more months. This has happened several times over the past year, and each time there is a predictable chorus of people blaming Proposition Thirteen for the inability of politicians to not spend more than is collected in taxes.

The first argument is that Proposition Thirteen makes it impossible to raise taxes. Given that in February of 2009 the largest state tax increase in the history of the United States was passed, that is truly an absurd argument to make. If Proposition Thirteen really did make it impossible, instead of merely more difficult, to raise taxes, the tax increase of 2009 would never have happened.

The other argument is that Proposition Thirteen somehow leads to minority rule. The problem with that argument should be obvious to everyone - two thirds is not a minority. If two thirds of politicians vote for something, a majority has voted for that something.

A more sophisticated version of that false argument is that the majority, in order to pass anything, the majority must convince part of the minority to vote with the majority, and this in a very weak way this results in minority rule. But in truth this once again is still majority rule, and if the minority under persuasion demands something the majority is unwilling to give that minority cannot pass anything - it is a minority.

The real reason there is a budget crisis is because those in government are unwilling to control their spending. The situation in California is identical to a person who continuously lives beyond his means and then blames his employer for not giving him enough money once the credit card bill is due. If an individual makes that argument, the absurdity of the claim is readily apparent.

But when a government official makes that claim, for some reason people actually take it seriously. Assemblywoman Noreen Evans made exactly that claim: "There is this mantra out there 'living within our means' and while it sound really nice it sounds really simple and it sound really responsible it's meaningless. Our means are completely within our control". It's not her fault that she approves spending far beyond what tax revenues will allow, it's the tax payers for not writing her a blank check.

She blames Proposition Thirteen for the lack of a blank check. The real reason there is no blank check is because they don't exist.

Saturday, January 23, 2010

Government steals retirement funds

It is being reported that agencies with governmental power are considering mandating that people with retirement investments, either in IRAs or 401(k)s, convert part of their savings into government bonds for the purpose of making annuity payments. Allegedly this is to protect investors who have seen the value of their investments decline due to the decay of the housing bubble and the decay of the stock market.

China is unwilling to buy ever increasing amounts of government debt, and private investors are unwilling to buy debt at what amounts to a negative interest rate. The Federal Reserve cannot, at this point and for political instead of economic reasons, raise interest rates. So how will the government unload these toxic assets?

It is noted due to recent United States interactions with Switzerland, that the United States government is desperate for cash. Increased pressure on tax evaders will slightly slow but will not stop this crisis as the true cluprit is spending far in excess of what the government receives in tax reveues.

That leaves the government searching for what money is still available to be seized.

Those who are currently working are not using their retirement funds. They will not notice in the short run if those funds disappear. Eventually, when it is time to collect on the government debt that the retirement money was used to buy, it will become obvious that the funds are no longer there.

This would turn every retirement fund into Social Security, a pile of promises from the government to repay what has been taken, backed by no real value other than the potential of future taxes collected. It is well known that it is difficult for a person to live off of Social Security when retired, that a retiree must have either other savings or family that can be relied on. This move, if it happens, would eliminate the other savings.

The end result, should this pass, is to ensure that when it is time to retire, everyone who was saving will be poorer.


Doug Casey on Lew Rockwell
Wendy McElroy
Seeking Alpha
Business Week

Saturday, January 16, 2010

Nine Basic Economic Systems

The economic axis, as represented by the Nolan Chart or other similar charts is much too simple, really, to describe the various ways in which people propose to intervene in the economy. The Vosem Chart described two different economic spectra, one for personal finances and one for corporate finances. That may not be enough. It could be up to three somewhat parallel lines, that meet at each end at the pure endpoints, but balloon outwards in the middle, giving a series of spectra that when charted looks rather similar in shape to a football. The different threads would be regulatory, ownership, and redistribution.

While there are as many ways to interfere in the operations of the free market as there are those who stand to benefit by each particular intervention, there are several basic economic systems if similarities of intervention are grouped together. These are Capitalism, Georgism, Monetarism, Mercantilism, Welfarism, Keynesianism, Socialism, Fascism, and Communism, with Capitalism and Communism comprising the pure endpoints at the extreme ends of the football spectrum.

Capitalism here represents the absence of external interventions in the marketplace. There are no regulations on what can be bought or sold, who can buy or sell it, or with what it is paid for.

Georgism and Monetarism are both "Capitalism but..." in that both allege to be basically free market systems but each believes there to be one particular special commodity that needs to be handled outside of the free market. With Georgism it is real estate, and with Monetarism it is the money supply. Georgism also has three basic varieties.

Under Taxation Georgism, a redistributionist system, the government heavily taxes all revenues from real estate, removing profit from real estate. Under Regulatory Georgism, the government controls real estate through regulation. Under Ownership Georgism, the government is the actual owner of the land. In all three the government also attempts to manipulate the use of the land, ostensibly to ensure full productive use of the land.

Monetarism, the economic system of Irving Fisher and his student Milton Friedman, has the one unique commodity being the currency. The government produces and maintains the money supply, and attempts to manipulate it in order to ensure full employment.

Beyond the "Capitalism but..." systems, there are systems that are much more heavily mixed, Mercantilism, Welfarism, and Keynesianism.

Mercantilism, also called "crony capitalism", "protectionism", and sometimes "corporatism" is technically an economic system although it lacks in the way of a theoretical basis. The state attempts to protect domestic industries from foreign competition, and promote exports and reduce imports through the use of tariffs and quotas. This can be done in terms of the general trade balance (light mercantilism) or protection of specific industries (heavy mercantilism). Some object to the use of the term “mercantilism” due to it being used to describe economic situations other than 19th century England while on the gold standard, but the basic theory (such as it is) is the same so the same term can be used.

Welfarism, simple wealth redistribution, is the opposite side of the coin from Mercantilism in that it too lacks much in the way of a theoretical basis beyond "we have to help the poor". Its meaning is obvious, but it should be differentiated from technical academically defined Socialism since that system does have a precise meaning even though the term "Socialism" is often used to describe Welfarism.

Keynesianism is a full fledged full interventionist economic system. There are no aspects of the economy left untouched by the government in an effort to achieve a productive economy. Although the initial theory is that the government should run a surplus in times of prosperity and run a deficit in times of recession, in practice all areas of the economy that are not directly part of the government are influenced by government regulation. Because it is such a sweeping system, it has several varieties and derivative systems, including supply side economics and demand side economics. Right Keynesians get along well with Mercantilists and Supply Siders. Left Keynesians get along well with Welfarists and Demand Siders.

Then there are the systems that are almost entirely government, Fascism and Socialism.

By the textbook definition, Socialism refers to the ownership of the means of production being in the hands of "the people", which in practice means the government. That really is the entirety of the textbook definition, which is why it is something different from Welfarism. That gives the government near complete control over the economy.

Fascism is actually a different system, in that instead of the means of production being owned by the government, they are controlled by the government. Given a Misean definition of ownership that includes the right to make decisions, the difference between Fascism and Socialism is "a difference without a difference" in that instead of direct ownership being socialized, merely the power of ownership is socialized.

Finally there is the other pure system at the opposite end of the spectrum. Under Communism, every aspect of the economy is owned and controlled by the government directly. Not only are the means of production centrally owned and operated, the products themselves are property of the government.

It is useful to remember to keep these separate, as there are many who would include in the definition of "Capitalism" all of those listed except for Socialism and Communism. There are nine listed economic systems, not two or three. Any attempt to obfuscate that is an attempt to lay at the feet of capitalism the faults of the other systems.

Saturday, January 09, 2010

TSA Voyeurism

As any engineer can explain, any capability that has been downgraded can be re-upgraded. Any capability that has been disabled is a capability that can be re-enabled. And that applies to the whole body imaging technology of the Transportation Security Administration.

Images that had been approved by the TSA were released showing more detail than had been previously admitted to, causing a reaction described here, but it turns out the images were far more revealing.

First there was a video released to Liveleak showing that the TSA has the ability to magnify those downgraded images, providing much more detail than the released sample images. What, exactly, does the TSA need that much resolution for? To count body hairs?

Then there are the images revealed by Stephan Kinsella at the Lew Rockwell blog.

A not suitable for work image

According to the TSA, the Whole Body Imagers do not reveal very much detail. The images are safe for Reader’s Digest and could even be posted in pre-schools. That is an exaggeration for even the downgraded images. That is an absurdity for the images that the Screener actually sees.

It is fascinating that these better images came out now. First the TSA had one of their security screening manuals leaked. Then they allowed the Nigerian crotch-bomber to fly – while it is true that the flight did not originate in the United States, the United States government received and approved the passenger list before the plane even took off. Then to respond the TSA harassed some bloggers and got caught. Then these more revealing images were released, including a video.

While Britain is undergoing a rather unfortunate bout of sex predator hysteria, causing parents to be considered suspects just for wanting to see their own kids in a school play, the hysteria there has had the beneficial side effect of having the government declare that the machines cannot be used on children. The TSA has admitted that minors are subject to full screening.

Finally, in spite of the many pronouncements about the medically safe millimeter wave technology being used, it appears that the TSA is also deploying unsafe X-Ray technology along side the millimeter wave technology, and that the person being screened is not likely to know which is being used. The only issues with millimeter wave technology are legal and constitutional. The only issues with X-Ray technology are legal, constitutional, and medical!

The TSA is being shown to the public for what it is, and it is ugly.

Friday, January 01, 2010

Social Creationism

A common accusation hurled at those who support a market without a central plan, is that of "Social Darwinism." The term is never explicitly defined in these particular cases, because a precise definition of the term renders it useless as any sort of attack against those who prefer markets that lack central plans.

But taking the critics of the free market at their words, hypothetically assuming there may be a basis to the epithet that is used in place of an argument, what exactly is the antithesis of Social Darwinism?

Since in the debates between science and religion the term "Darwinist" is used as an epithet against scientists by creationists, then would it not be proper to consider those who use the term "Social Darwinist" against free markets to be "Social Creationist"?

It may seem a silly line of reasoning, but consider the implications of "Social Creationism." It would imply that each person is born into a specific set social class and that the classes, like the species, are immutable. True, there may be "Micro Social Darwinism" where someone in the lower class can become a wealthier member of the lower class, and an aristocrat can fall upon hard times and become a less wealthy aristocrat, but no matter how wealthy a peasant is always a peasant and less of a person than the nobility. These roles are defined at the moment of creation and cannot be changed.

This fits very neatly with Marx' "class logic' where there was a 'proletarian logic' and a 'bourgeois logic'. One is a member of their class and it cannot be changed. In Marx' system, the different classes were inevitably at war and cannot be reconciled.

That is a point of view that also fits neatly with the pre-enlightenment mentality of nobility itself, that the peasants were beneath the nobility. Thus Aristocracy and Marxism are both Social Creationist philosophies.

It's an interesting mental exercise, and it would probably confound the person using "Social Darwinism" as an epithet if the rebuttal is to call the person a "Social Creationist."