Doomsday Update

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May 21 has come and gone, and so far as I can tell, Judgment Day has not occurred. Whether that’s good or bad is a debatable question.

What is not debatable is the discrediting of one of the world’s best publicized prophecies, and one of the few prophecies specific enough to be fully disconfirmable. I refer, of course, to the Family Radio network’s prediction that the Rapture and the beginning of Judgment would occur on May 21, 2011.

Harold Camping, Family Radio’s “Bible teacher,” went down with his flag nailed to the mast. Throughout last week, he told callers on his daily call-in program that he wouldn’t even consider questions about the possibility that the Rapture wouldn’t happen on the 21st. On May 17, for instance, he remarked, “If you were talking to me three or four years ago, I would have said, well, there’s a high likelihood [of climactic events in 2011]. . . . But beginning about three years ago, God has shown us proof after proof and given us sign after sign. . . . I know absolutely, without any shadow of a doubt whatsoever, that it is going to happen on May 21. . . . It is absolutely going to be May 21. The Bible guarantees it, without any question. So we cannot countenance any other idea. It is absolutely going to happen.”

Liberty provided one of the first nationally published heads-ups and explanations about this matter in its December issue, in the article entitled "An Experiment in Apocalypse." Early this month I continued the discussion. The topic has proven surprisingly interesting to our readers, as it has to millions of other people, worldwide. I am receiving a lot of requests for updates, and I will provide them.

The really interesting thing, of course, isn’t the fact that Family Radio has been proven wrong. The interesting thing is seeing how individuals and institutions respond to the disconfirmation of ideas that they regarded as fully justified by reason and authority. Full evidence about Family Radio’s response will take a while to come in. Its offices were closed over the weekend (starting on Friday, May 20), and all or almost all programming from then till now has been prerecorded. (I write in the early evening of May 22.) The swarm of media attention simply washed over the recumbent form of Family Radio, occasionally sweeping out one or another follower who discussed his disappointment in vague, colorless terms.

But we can expect to learn more, and I have already learned some things. One interesting thing to me is the fact that throughout May 20 and 21 — even as late as 6:30 p.m. on the latter day — the station was still broadcasting invitations to call up and order “Judgment Day, May 21” pamphlets and bumper stickers — thus making itself even more ridiculous than it would have become, had it simply ceased all ads for mail-order material several days before.

Nevertheless, even the most ridiculous things in life happen because somebody decides to make them happen. Somebody — and a number of people would have to be involved — decided to keep running those ads. Somebody scheduled them. Somebody provided them to local stations. Somebody at the local stations ran them. In only one instance (at 1:25 a.m., PST, on the purported day of Rapture) did I hear evidence that an ad might have been spiked by the national network or my local station, with four minutes of music substituted. As I write, Family Radio’s website still declares in bold letters: “Judgment Day, May 21, 2011: The Bible Guarantees It!”, and its clock says there are “00 Days Left.” Yet someone at Family Radio switched Camping’s prerecorded lecture, which runs on Saturday evening and Sunday afternoon, from one of his constant Judgment Day diatribes to a discussion of divorce (he’s against it) that was broadcast “25 or 26 years ago,” according to the prerecorded announcement — which also says that copies of the divorce lecture will be “available this week” if you call or write for them. Divorce is exactly what would interest you, on Judgment Day or immediately afterward, right? It should be noted that on May 10, a woman called in to ask Camping about that very topic, divorce, and he told her that “it’s all academic,” because the world was ending and her husband wouldn’t have time to divorce her anyway.

Absurdity upon absurdity. But what do these absurd contradictions mean?

They may show the depth of institutional inertia, even within a relatively small, voluntary organization, an organization, mind you, that is operated by zealots, not by the pension-pursuers at the DMV. The thinking may have been, “We’ll just keep running whatever we’ve been running, whether it makes sense or not. That’s what we do” — even if it makes our own cause ridiculous. If Family Radio can achieve inertia like this, imagine what a government can do, in the face of all the evidence against its theories and programs.

The contradictions may, however, indicate something exactly opposite to inertia, but equally significant. They may indicate that dissenters within Family Radio, of whose existence there has already been a good deal of evidence, decided to assist the organization in rendering itself absurd, thus making the ousting of its current leadership more likely. These people could have halted the post-Doomsday ads for Doomsday literature; they could have snaked out some lecture that wasn’t about (of all things) divorce. But they used their individual initiative to do something more complicated.

That’s a guess. But here’s the idea, in brief: what happens within organizations and individuals is a contest between inertia and initiative, each with its own set of rewards: security, stability, and conservation of energy on the one hand; new opportunities (for power, for revenge, for simple rightness) on the other. If enough data emerge, the next stage of Family Radio’s existence will constitute a fascinating experiment in conflict, institutional and individual.

I will keep on this beat. My own prediction is that Mr. Camping will be ousted from leadership during the coming week by irresistible forces of change in the organization he founded. But this prediction is disconfirmable. Stay tuned.




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The Audacity of a 1% Hope

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Federal Judge Roger Vinson of the Northern District of Florida has declared Obamacare unconstitutional in a lawsuit joined by numerous states seeking to escape from the onerous burdens that the law places upon them. But when I read that his rationale is that the mandate requiring people to buy health insurance exceeds the power of Congress under the commerce clause, I became a little bit sad — sad not because Judge Vinson is just dangling the dream of a new attempt to use commerce clause jurisprudence to limit the government’s meddling in the economy, but because there is only about a one in 100 chance that the United States Supreme Court will agree with his reasoning.

There was a time when Congress could only pass laws authorized by the specific enumerated powers of the Constitution. (This is ostensibly still true, but most congressmen don’t take it seriously.) One of those powers, indicated by the commerce clause, is the major one that Congress uses to destroy — I mean, to regulate — the economy. The commerce clause states: “Congress shall have power… to regulate commerce with foreign nations, and among the several states, and with the Indian tribes.” In my constitutional law class final exam two years ago, I argued that the commerce clause clearly gives Congress precisely the same power to regulate economic activity within a state that it has to regulate economic activity within foreign nations, and since we obviously cannot march into France and order them to have a minimum wage or a health insurance mandate, and we can really only regulate goods from France that come across the Atlantic Ocean, the commerce clause means that Congress can only regulate goods that physically cross state lines. I got an A in the class.

However, most lawyers don’t think that way. Even back in the 1800s the commerce clause case law said that Congress could regulate anything that did not take place entirely within one state. There was a time before the New Deal when the Supreme Court still took the commerce clause seriously and tried its hardest to allow Congress only to regulate interstate commerce. But this interfered with the New Deal. So, after FDR threatened the court with his infamous court-packing scheme, the Court made a “switch in time that saved nine,” in the landmark case of NLRB v. Jones & Laughlin Steel Corp. (1937); it began to undermine the commerce clause by permitting the commerce power to extend wherever commerce within one state had effects across state lines.

Later, US v. Darby (1941) made it clear that the commerce clause was now a joke and Congress could do anything it wanted. To throw a little paint on the feces, the Court decided Wickard v. Filburn (1942), which said that a private individual’s private behavior within one state could be “interstate commerce” under an aggregation theory that proposed the questions: “What if everybody did this? Would the aggregate cumulative effects have an impact on interstate commerce?” This meant that a person growing tomatoes in his own farm for his personal consumption could be engaged in interstate commerce, even though the tomatoes never left his farm, because he was somehow magically connected to all the other tomato farmers out there — a conclusion that is ridiculous only if one does not understand that it is a mere pretext for socialism. FDR’s supporters argued that economics had somehow fundamentally changed since America’s founding, and the law needed to change with it.

Commerce clause jurisprudence remained buried for decades, but in a shallow grave. In the 1990s, Chief Justice Rehnquist, with help from Justice Thomas and the Court’s other conservatives, tried to revive the distinction between economic and noneconomic, and national and local, in cases such as US v. Lopez (1995), which struck down a gun ban under the commerce power, and US v. Morrison (2000), which struck down an anti-gender violence law as having nothing to do with interstate commerce. Then Justice Scalia murdered Rehnquist’s commerce clause revival in Raich v. Gonzales (2005), saying that the commerce power authorized the criminalization of medical marijuana because of the necessary and proper clause: “Congress shall have power . . . to make all laws which shall be necessary and proper for carrying into execution the foregoing powers.” For some reason, Scalia failed to understand that the necessary and proper clause is irrelevant if Congress cannot pass a law under the commerce clause in the first place.

The fate of America’s healthcare system now turns on how the Supreme Court will interpret the commerce clause, whether the justices will hold that the aggregate effects of choosing not to buy health insurance constitute interstate commerce. I predict that the vote will go along political ideological lines, as the choice of whether to take the commerce clause seriously as a limit on Congress’s power is as much a political as a legal decision. But there is no way to tell how Justice Kennedy will vote, and it is still too early to tell how Obama’s appointees will vote. Still, I estimate that there is only a 1% chance that Obamacare will be struck down. It has been many decades since the commerce clause limitation had teeth; and the Court will be afraid of accusations that it is frustrating the will of the American voters if it strikes Obamacare down, even though it is the role of the judiciary to check the tyranny of the majority, and most Americans don’t like Obamacare, anyway.

Nonetheless, if libertarians are to make ourselves known in the legal world, then the commerce clause is one of the main weapons that will need to be in our arsenal. We can hope that one day our constitutional jurisprudence will return America to the Founding Fathers’ vision of a federal government that cannot do whatever it wants. As my constitutional law professor was fond of saying, constitutional doctrines fade away, but they can always come back, and there are libertarian legal doctrines from American history that we can revive if and when we develop the power to make our voices heard in within the legal system.




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Awesome, Dudes!

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Recently, I drove down the Southern California coast to attend a philosophy conference in San Diego. All along the way, and when I later sat in my hotel room overlooking the harbor, I kept thinking: how can a state as beautiful and as blessed as this one be so screwed up?

But an article I read just the other day helps me see, once again, the problem with California. The problem is its deeply demented government.

The story reports that Newport Beach, a wealthy city south of LA, is paying all but one of its full-time lifeguards over $100,000 a year in salary and benefits. $100K a year! And over half of them earn over $100,000 a year in salary alone! In fact, the two highest-earning lifeguards earn well over $200,000!

Additionally, these lifeguards retire after 30 years (or as young as age 50) with a pension of 90% of their highest salary.

Now, granted, Orange County, where Newport Beach is located, is one of the wealthiest counties in the US. But even in Orange County, the median household income ($71,735) is far lower than what these dudes and dudettes earn.

This of course raises a fascinating question: if the freaking lifeguards are earning this kind of money, what is the city paying its other workers? I shudder to think what the city is paying its police and firefighters. And can you imagine what the city officials must be getting?

Here, it just gets crazier, day by day.




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Strauss-Kahn, Exemplar of Socialism

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The libertarian critique of socialism, or “social democracy,” has usually gone something like this:

The socialist program demands a planned economy. A planned economy can result only from plans. Plans must be made by a group of experts who are not subject to the vagaries of the electoral process. To form and implement their plans, the planner-kings must know everything crucial to the economy. They must know everything significant to their own plans, and be able to predict everything significant that may result from them.

But that is impossible.

This being true, the people who become planners will be those who are either stupid enough to believe that Plans can succeed or cynical enough to care only about the personal power that can be acquired by Planning.

The libertarian critique has a logic that no socialist program ever possessed.

Now we witness the reductio ad absurdum of the socialist idea: Dominique Strauss-Kahn, head of the International Monetary Fund, chief honcho of the French Socialist Party, and prospective president of France, who was arrested Saturday on charges of trying to force a maid in his $3,000 a night hotel suite to have sex with him.

Suppose that the charges turn out not to be true. Suppose that Strauss-Kahn’s nickname, “the great seducer,” means nothing. Suppose that consensual sex is nobody’s business but one’s own. Suppose all these things — the last of which is certainly true. The $3,000 a night hotel remains a problem.

As a self-chosen representative of socialism, and an anointed planner of the world's economy, Strauss-Kahn has supposedly devoted his life to the good of the people. How, then, $3,000 a night? On what premise must the people of the world pay for that?

I’ll tell you. The premise is that Strauss-Kahn, a product of those inner-circle French schools whose graduates automatically get high government jobs, deserves his perquisites of office, because he is somehow qualified to plan the world's economy.

Is he?

No. And anyone who thinks that he himself is so qualified, and uses that idea to justify his perquisites of office, is likely to present a strange moral profile.

World economic planning is allegedly justified on humanitarian and charitable grounds. Planners, allegedly, exist to help people, especially the deserving poor. Planners are supposed to be performing an altruistic work, the modern form of a religious mission. Yet among these managers of the world economy there is a strange absence of people who live in modest circumstances, practice some kind of religious or ethical discipline, or have anything to do with normal human beings, except when the maid arrives a few minutes early in their $3,000 a night hotel suite.

There are plenty of smart people in this world. Many modest people, skeptical of their own conclusions because they are actually in touch with their fellow citizens and knowledgeable about their lives, are also smart people. Strangely, many of these smart people are socialists, but their ambition is not to become world socialist leaders.

Why?

Because the idea that a small group of people is smart enough and knowledgeable enough to plan the financial lives — in fact, the lives — of six billion people is an idea that no one with any ethical understanding would apply to himself. An ordinary moralist would ask, “Who am I to do that? I don’t know enough. I could never know enough.”

Strauss-Kahn presents little evidence of any such moral or practical reflection. But what he did with his life was predictable, under the modern socialist system. A beneficiary of unmerited advancement, he did his best to “stabilize” the world’s economy by using political means to get the productive countries to support the spendthrift countries. He who wasn't producing anything himself.

I don’t presume that an alcoholic is incapable of becoming a good author. Faulkner did. Hemingway did. And I don’t presume that a “great seducer” is incapable of becoming a great thinker. Plenty of examples argue otherwise. But I do not presume that a drunk will be good at running an airline. I do not presume that a person who lacks discretion even about consensual sex affairs will have enough discretion to plan the future of six billion humble families.

To put this in another way: how did someone as stupid as Dominique Strauss-Kahn become one of the small group of people appointed to oversee the fiscal life of planet earth?

The answer is: the logical necessities of the socialist idea. If you want socialism, you are voting for fools like Dominique Strauss-Kahn. You may not know it, but you are. Otherwise — I’m sorry, you can’t have socialism on any other terms. The fact that Strauss-Kahn rose to the top is only a sign that the rest of the candidates were actually less competent than he.

To conclude: if you want someone running your life, and the life of the world, you can be assured that it will be someone like Dominique Strauss-Kahn — and if not him, then worse.




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The Significance of Ron Paul

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Rep. Ron Paul, Republican of Texas, is once again running for president.

No member of the House of Representatives has run for president and won since James A. Garfield in 1880 (and Garfield had been elected to the Senate just before his election as president). No one as old as Paul has been elected president. He would be 77 when he took the oath of office. Ronald Reagan was 69.

Most of all, no one as radical as Paul has been elected president during the modern era.

There are hopes that this time around, Paul will break through to mainstream America because his argument against foreign war, for a sound currency, and for large cuts in spending will catch fire. It will with some voters, but political ideas acceptable to the American public don’t change that fast.

I said this two weeks ago in a talk to my state’s conservative activists — an audience that included Paul supporters. I said I agreed with Paul on some important things, but that he could not win. One came up to me afterward and said, “You know, every time you say that, you hurt his movement. He got as far as he did last time because thousands of people thought he could win.”

And they were mistaken. But he changed some minds. He made arguments that nobody else would have made — and some of those arguments look better four years later.

In 2007, no Republican candidates were arguing against the wars in Iraq and Afghanistan except Paul. Now the Politico website reports a rise of war weariness and even “isolationism” among the Republicans in Congress. They are far from a majority, but they are a faction. And there is another libertarian candidate in the race, former governor Gary Johnson of New Mexico, who also calls for getting out of the foreign wars immediately.

Four years ago, no Republican candidates other than Paul were talking about protecting the value of the dollar. I still haven’t heard them doing it — but gold is above $1,500 an ounce, and the US dollar is below the Canadian and Australian dollars. The topic ripens.

Four years ago, there was no quasi-libertarian Tea Party movement, and Ron Paul’s quasi-libertarian son Rand Paul was not in the US Senate.

The ground has changed.

Still, it has not changed enough to elect Ron Paul as president. There is no point collecting dandelion seeds, such as the CNN/Opinion Research poll last week, which showed Paul running stronger against President Obama than any other Republican candidate. I have heard that poll cited several times, never mentioning that the split was Obama, 52%, Paul, 45%. Anyway, it was a poll taken 15 months before the election, which means it was a poll of a public not paying attention. Paul, in particular, had not been seriously attacked.

A few days later, he was. Conservative columnist Michael Gerson of the Washington Post ripped into him for his answer to a reporter’s question. The question was whether Paul favored the legalization of heroin.

There is a purpose in questions like that. It is to see whether the reporter can catch the candidate saying something crazy — not crazy, maybe, to a social scientist or a philosopher, but crazy to a political operative, or Joe Sixpack.

The role of the radical candidate is to take the taboo stands, fight valiantly, lose, and change the political ground.

In his answer, Paul compared freedom to use drugs to freedom of religion. Here is how Gerson paraphrased it: “If you tolerate Zoroastrianism, you must be able to buy heroin at the quickie mart.” This, Gerson sneered, is the essence of libertarianism.

But Paul had said more than that. Wrote Gerson: “Paul concluded his answer by doing a jeering rendition of an addict’s voice: ‘Oh yeah, I need the government to take care of me. I don’t want to use heroin, so I need these laws.’ Paul is not content to condemn a portion of his fellow citizens to self-destruction; he must mock them in their decline.”

Gerson concluded that any candidate who supports “the legalization of heroin while mocking addicts” is marginal and unserious. His column was a way of looking at the Republican list and scratching out the name of Ron Paul.

Libertarians can rail against Gerson as biased, which of course he is. He is an opinion columnist. Bias is part of his job description. But if your candidate is taken seriously, which Paul was not in 2008, this is the kind of attention he is going to get — and here it is attention from a conservative. If Paul became the Republican frontrunner, the pundits of the Left would go after him with machetes and crowbars.

They haven’t, because they delight in schism on the Right. But if he becomes the frontrunner, they will. And Paul has said plenty of things they can use to make a bogeyman out of him. Legalize heroin. Imagine what they could do with that.

Here is the reality. Certain political stands are safe, others are daring, and some are taboo. The role of the radical candidate is to take the taboo stands, fight valiantly, lose, and change the political ground. It is a valuable role to play: it is changing the field so that other good candidates, later on, can win.

What other candidate? Maybe Rand Paul in 2016 or 2020. Maybe Gary Johnson. One can imagine a Mitch Daniels-Gary Johnson ticket in 2012, with Johnson running in the top position later. Once a libertarian faction has been established in the Republican Party and is built into a substantial faction, room is made for other candidates, ones aiming more directly at winning, to have a go.

On the day that Paul announced, I had lunch with his 2008 campaign manager, Lew Moore. The timing was accidental; I had met Moore among the conservative activists two weeks before, and I hadn’t seen him in years. I asked him: when Paul ran in 2008, did the congressman seriously think he could win, or was it mostly to change the debate?

Without denying that Paul had had some chance of winning, Moore said the campaign was mostly about changing the debate. He said, “That is what his whole life has been about.”

And, at 75, Paul is not done. You have to admire the man. A lone congressman from Texas, never enjoying the support of his party’s establishment, has changed the political ground within the Republican Party.

And maybe he will change it some more.




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Wind Power Wannabe

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Two recent stories about wind power went unremarked in the mainstream media, presumably because the stories don’t fit the dominant Green narrative, aka the Green Dream.

The first is the report out of the UK that wind farms produce far less energy and cause far more problems with the grid than proponents have predicted or acknowledged.

The John Muir Trust — a “conservation charity,” please note — commissioned an engineering study of wind power in the UK. The report is out, and it is revealing. While wind power farms are pitched to investors — really, lawmakers, since wind power only exists because of lavish subsidies from government — as generating, on average, 30% of their maximum output over time, in reality they average only 25%. So wind power delivers about one-sixth less electricity than promised. This is a very significant shortfall. Yet wind power averages less than 20% of capacity most of the time, and a risible 10% about a third of the time.

But there is a more severe problem. Because wind power is so erratic, it needs backup from fossil fuel power plants, and that backup has to be able to shut down quickly when the wind blows hard, or come online quickly when wind farms won’t deliver even their measly 25% power. So wind power farms must be tied very tightly to fossil fuel plants, or the grid will face a shortfall.

Even worse: the times (such as the middle of the night) when power demands on the grid are slight are often the periods when the wind blows hardest. At such times, owners of wind generators — who have to sell power whenever it shows up, even at a low price — push power onto the grid, thereby forcing other providers off.

This is because the grid is just a distribution network of power lines and transformers with little capacity for storing power when it isn’t being consumed. Yes, there is “pumped storage,” which uses excess electricity to get water up hill, then during periods of high demand lets it flow back down, turning turbines as it goes, thus generating power. But pumped storage is inefficient and limited. Currently, the United States, the world leader in pumped storage, can store only about 2.5% of the average electric power sent across the grid at any given time.

A second damaging piece of news for wind power is the report that it may have lost its enchantment even for the Dutch.

Perhaps because of its historic use of windmills, the Netherlands has invested heavily in modern wind power. It is now third in the world in offshore wind power generation — of course heavily subsidized by the government. But the new center-right government has decided that continuing the massive subsidies, which include the transfer of 4.5 billion Euros of Dutch tax dollars to a German engineering company to build and run new wind farms, is not, shall we say, defensible.

The new Dutch Prime Minister, Mark Rutte, may have come up with the perfect epitaph for wind power. He reputedly said, “Windmills turn on subsidies.” Soon fewer will be turning.




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I Can’t Get a Job—I’d Lose My Benefits!

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What are we learning from the recent census?

A headline in this Thursday’s Westchester County Journal News proclaims "Census: Density in Pockets." Well, duh. Just look around New York and you'll see high-rises and low-rises that house low-income families whose housing is subsidized by "Section 8" of the welfare code, which ties rents to a percentage of income. The more you earn, the more you pay. Conversely, if you don't earn anything, you'll pay almost nothing. I have a friend who pays $117 for a one-bedroom apartment on a tree-lined street in North Yonkers.

She's one of the lucky ones. I have other friends who live in a building in South Yonkers where a different drug king controls each floor. (That's how lucrative the drug trade is in these areas. After all, it's money off the books. It won't affect the rent.) Buildings are subdivided and subdivided again to provide housing for the burgeoning population of welfare recipients in these dense "pockets."

Another friend of mine teaches junior high in the Bronx. Recently she gave her students a typical assignment: what do you want to be when you grow up? One bright young seventh-grader wrote glowingly about his desire to go to college and become a lawyer. "I'll carry a briefcase to work and wear a charcoal gray suit," he wrote. "I'll drive a BMW and I'll help people with their problems." My friend cheered his enthusiasm as she read his dream. Then she reached his final paragraph: "But if I make too much money, I'll lose my benefits," he concluded. "Maybe I shouldn't go to college after all."

What a chilling message these children are learning from their parents. I hear it too, all the time. "I can't get a job. I'll lose my Medicaid." "I can't get a job. My rent will go up." So parents teach their children how to use the system — how to get on the Section 8 rolls, how to get more food stamps, how to get more welfare. Often for a girl, that means having babies outside of marriage. Children learn how to find jobs that are off the books, income that can go unreported. Their parents don't have the courage to say, "Get out of here! Go to college and fly far away!"

This is a Reflection full of storytelling, so I'm going to tell you one more story. My friend Kelly was a single welfare mom rearing two children, with another one on the way. She was living in a tiny, grungy apartment on one of the worst streets in Yonkers. When the father of the new baby left instead of marrying her, she knew she had to change her life. So she reached out for a different safety net from Section 8 or WIC (aid to Women, Infants, and Children) or Medicaid: she called her parents. Then she moved across the country to Sacramento, where her two older boys are now enrolled in better schools with better classmates. Her mother joyfully volunteered to take care of the baby while Kelly attended school herself. This month Kelly will graduate and become a dental hygienist. By the end of the summer she will be moving into her own apartment. I am so proud of her!

Government welfare always begins with good intentions. No one wants to see young mothers abandoned on the streets. No one wants to see children go hungry or uneducated. But these "pockets" of dense population are not what anyone intended. They are sad places, full of broken dreams and lost courage.

The War on Poverty was supposed to end this mess. It has only gotten worse, as any free marketeer could have predicted. Government needs to get out of the way and stop competing with free market housing, so that more people like Kelly can find the courage to leave the grungy pockets of Section 8 and move into wider, roomier pockets somewhere else — anywhere else! —  with better schools, better opportunities, and a better way of life.




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Creation vs. Diversion

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When an investment opportunity seems too good to be true, prudence recommends asking: “Will I be sharing in wealth that I help to create, or will I taking some wealth from its real producers?”

A chain letter is an example of just diverting wealth. So is a Ponzi scheme; so is the familiar Nigerian email scam, which gains superficial plausibility from a whiff of dishonesty or illegality.

Similarly, someone engaged in a possibly though not obviously productive business — perhaps some complicated Wall Street transaction — may well ask about creation or diversion of wealth. If not conscience, then concerns about legality and the dependability of success prompt the question.

Someone offering a suspiciously attractive opportunity might dodge the question about wealth creation by saying that the success of his method, though honorable — a method of choosing stocks and timing transactions, perhaps — depends on secrecy. Even so, an answer in general terms is in order; and the vaguer the answer, the more skepticism prudence recommends.

Beyond physical objects, wealth of course includes intangibles such as education, repair and other services, transportation, entertainment, travel and tourism, and comforts of various kinds. Similarly, the production of wealth includes not just growing or physically shaping things but also specialization, the division of labor, and exchange. (Each party to a voluntary and informed transaction gains what he considers more wealth than what he gives.)

Financial operations come into the story. Arbitrage of the most obvious kind moves resources or products from where they are less scarce and valuable to where they are scarcer and more valuable; and by ironing out price discrepancies, it makes the price system more accurate in equilibrating supply and demand. A well functioning market generates knowledge and uses it productively.

 Speculation — most obviously but not only in standard commodities — is a kind of arbitrage in time, moving things from a time when they are less valuable to a time when they are more valuable. If something, say wheat, is expected to become scarcer in the future, a speculatively bid-up price tends to hasten economies in consuming the thing and possibly hasten its production, thereby lessening its future scarcity.The speculators themselves bear the costs of being wrong. Speculation contributes to the depth and resiliency of futures and forward markets, where businesses can hedge against the risk of adverse price changes (and where, as a result, opposite risks can more or less neutralize one another).  Insurance is an obvious example of hedging against risk. 

Saving and investment make possible the increased productivity of well-chosen roundabout, time-consuming, capital-using kinds and methods of production. (Here “capital” means resources freed by savers from serving current consumption so they can serve longer-term-oriented production instead.) The stock markets and related activities help allocate capital to places where it promises to be most productive. Financial intermediation tailors the terms on which capital is available to the varied wants and needs of savers, borrowers, and companies issuing stock; securitization of loans is just one example.

Like capital, risk-bearing is an essential element in production, especially innovative production. Various kinds of stocks and bonds and derivatives, including even the notorious credit-default swaps, help place risk with the persons and institutions most willing and able to bear it. Specialization in risk-bearing enhances confident and productive business planning.

The great variety of financial operations and innovations allows scope, notorious scope, for ignorance, error, and downright fraud. (Some participants, such as Enron energy traders, reputedly, may see their business as a struggle in which the other side is supposed to lose.) More broadly, wealth comes in so many forms, and cooperation in producing it occurs in so many ways, even very indirect ways, that an answer to the question with which I started can seldom be precise.

Nevertheless, insisting on whether wealth is being created or merely diverted can provide healthy discipline.




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Dr. Jekyll and President Hide

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In one of the scenes in Citizen Kane, the protagonist's former friend Jed Leland describes the character of the flamboyant politician and tycoon. "He had a generous mind," Leland says. "But he never gave himself away. He never gave anything away. He just . . . left you a tip."

He might have been describing President Obama.

Like Kane, Obama is a colossal self-advertiser. He first made his reputation, indeed, by writing a book of quasi-autobiography. Like Kane, he can hardly get through a sentence without using the word "I." He constantly refers to government entities as "my secretary of state," "my secretary of the treasury," "my department of defense," and so on. Yet when it comes to revealing himself . . . no. He'd rather be tortured than give up any pieces of the sacred substance, or anything even associated with it.

One assumes that Obama bogarted all specifics about his supposedly close and inspiring relationship with Reverend Wright because Wright had become a political embarrassment. And one assumes that Obama wants to keep his college records secret because he wasn't a very good student. These are assumptions, however, because Obama keeps his stuff to himself even when it would do him good to give it away.

The classic example of this compulsion is his logically pointless war against the people who wanted to see his birth certificate. He conceded the struggle only when he started to fear that it was costing him support for reelection, thus torturing him beyond the limits of even his endurance. For years he had made a public fool of himself by not releasing an innocuous scrap of paper.

Why, after that performance, I expected him to surrender the Osama death photos, I don't know. Maybe I thought he had reformed, and some nice, generous, "transparent" Dr. Jekyll had replaced the clutching, anal, emotionally threatened President Hide. But whatever I thought, I was wrong. The preposterous decision not to release the pictures, ostensibly to chasten radical Islamicists with the evidence of our moral superiority, will merely convince the world that Barry Obama, like Charlie Kane, has more than a small screw loose.

But what about the "tip" — "he just left you a tip"? In Citizen Kane, the protagonist paid other people for "services rendered." He demanded their love, but "he had no love to give." So he offered them money or power or other crass "tips." And that, in his way, is what Obama does. Of all the politicians I can think of, he is the greediest for love but the least interested in other people. His speech is without stories or anecdotes. He seldom alludes to any actual historical event, anything that people actually did in the past. He appears to retain no vivid memories of the people in his own past, or any real interest in the people he meets today. He speaks always as if he were reminding his audience of things they should already have been taught, never as if he wanted to learn from their responses what they themselves would like to know. In lieu of real human concern, he professes a vast interest in abstractions — progress, equality, fairness, proving to our enemies that we are better than they are in some vague, general way.

These are not the kind of tips you can take home and spend. The real stuff — he keeps that to himself. You're not getting any of that.

that




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Another Worm Turns

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I have reflected before on the pivotal battle fought by Republican governor Scott Walker in Wisconsin to modify the collective bargaining rights of most public employees. Despite an unprecedentedly brutal fight, with union-backed Democrat legislators fleeing to a different state to deny the Republicans a quorum, an extraordinary anti-Walker and anti-Republican propaganda blitz bankrolled by the unions, massive demonstrations organized and also bankrolled by them, Walker and the Republican legislators succeeded in pushing through their reform bill.

The unions then doubled down, running a multi-million dollar campaign to replace an independent state supreme court judge with a union stooge committed to nullifying the law. That failed, and the unions were stunned. They have seldom met with such abject failure before; the experience is beyond ken, and their ability to comprehend.

Now another blow to union domination has been struck in of all places — Massachusetts!

Yes, lawmakers in the Massachusetts House of Representatives have voted to cut back municipal employees’ ability to bargain collectively for healthcare benefits. (The Massachusetts bill, by the way, includes the police. It thus goes farther than the Wisconsin law, which exempted police and firefighters from the new rules). And they did so by an almost 3-to-1 margin.

In particular, the law would give local authorities (such as mayors) of the more than 350 cities in the state the power to modify municipal employee healthcare benefits, such as by setting deductibles and copayments. The unions are pushing an alternative: if municipal officials and municipal union negotiators cannot reach an agreement, the dispute will go to binding arbitration. This is a common union ploy. Unions know that arbitrators don’t have to face the electorate, and don’t have to balance budgets, either.

Even more remarkable is the fact that the move to rein in Massachusetts’ public employee unions was and is led in great part by Democrats. This is the most dramatic illustration of a growing split in the Democratic Party coalition: more and more Democrats are seeing that their cherished progressive programs are being defunded by the boundless greed of the public employee unions, bogarting all the tax revenues collected by the progressive states. In the case of Massachusetts, healthcare benefits for municipal workers have more than doubled in a decade. And the compensation packages (pay, pension, and healthcare benefits) for municipal workers are consuming about three-quarters of the average municipal budget.

As in Wisconsin, the unions fought viciously to stop the bill they did not want, but to no avail. And shocked they were at the turn of the worm. Robert Haynes, head of the Massachusetts’ AFL-CIO (which represents over 175,000 municipal employees), squawked, “It’s pretty stunning. These are the same Democrats that all these labor unions elected. The same Democrats who we contributed to in their campaigns. The same Democrats who tell us over and over again they’re with us, that they believe in collective bargaining, that they believe in unions. . . .” You can just hear his outrage: dammit, in the good old days, when you bought off politicians, they stayed bought!

Haynes vowed that the unions would keep fighting the reforms to “the bitter end,” and that the union myrmidons would target those renegade Democrats as surely as they target Republicans. His union is planning to expand its demonstrations, bringing in police and firefighters to participate, increase the ads run, and increase the lobbying.

Speaker of the House Robert DeLeo, a Democrat, offered a couple of large concessions to the unions and to members of his own party who are frightened by the unions. The first would give public employees 30 days to argue against proposed changes in their healthcare plans (though without the power to stop the changes), and would give union members 20% of any savings for the first year from contested healthcare changes that local officials impose. (Considering that the bill will likely save taxpayers $100 million a year, this is a pretty good deal.) The proposal brings the bill closer to what Governor Deval Patrick has himself offered. But the unions are still opposed.

It is unclear whether the bill will make it through the Massachusetts Senate, and if it does, whether Patrick will sign it. He is a very progressive liberal Democrat, but his state faces a nearly $2 billion deficit.

However, the win in the Massachusetts House is already telling. It says that we are coming to the place where voters are no longer ignorant of how much the public employee unions have been ripping them off. This awareness is only beginning to grow. It will accelerate quickly as the retirement of the Boomers brings to light just what massive fiscal frauds the employee unions have committed, and as people see their social services begin to crumble.

It also says that there is a limit to how long Democrats will do the unions’ bidding. Under public choice theory, we assume that all actors in the political process (voters, special interest groups, and politicians) are motivated primarily by self-interest. The politician wants to be reelected, and he knows that in most situations, the public isn’t paying attention to what laws are being enacted, while the special interests, such as unions, are. So it makes sense to screw the voters in exchange for special interest financial support. But when the public is aware and concerned, the politician knows that special interest money won’t compensate for the lost votes. In such cases, where voters are no longer rationally ignorant, the politician will be forced to defy the special interests.

We may be reaching that point.




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