Saturday, October 29, 2011

Elizabeth Warren's Famous Rant

Elizabeth Warren achieved national fame overnight with some pungent words, widely reported"There is nobody in this country who got rich on his own — nobody.

"You built a factory out there? Good for you. But I want to be clear. You moved your goods to market on the roads the rest of us paid for..."

The rest is quoted below. She makes a powerful appeal in the populist, soak-the-rich tone the White House has been setting. But I find her understanding flawed. It overlooks (or ignores) that before we, the "rest of us," pay for anything, there must be enterprise and profit first of all. Most of us pay taxes out of wages, and wages come ultimately from the existence of profitable enterprises. That is true even of wages paid by the government--since those come out of taxes, and taxes come out of wages, and out of profits.
That has, of course, been true all along and it is true now. The government would have nothing to spend on roads, schools, police or fire fighters if there were no business being done. She has put the cart before the horse.
 She is arguing the status quo, as if it justified more of the same. That is a trifle dangerous: Could not the reverse be argued at least as well? All that is at issue is the amount of profit that should transfer from the private sector to the government. She obviously believes the proportion should increase, but that is not the case she made.
We already have rather considerable levels of taxation and regulatory overhead and business leaders are saying less of that  kind of thing would help them expand their enterprises. To turn Elizabeth Warren's argument on its head for a moment, "You built a factory out there? Good for you. But I want to be clear. You already paid, directly or indirectly, for all the government services we have. You paid, by paying the wages the rest of us earned, for the roads, for the taxes we paid to educate our children, for the cops and firemen. What that didn't cover you paid for directly, through business taxes and fees and all the rest. God bless--keep an even bigger hunk of it, so you can do even more business. Grow the economy, employ more of your neighbors, build a thriving economy in which we all may benefit. We can struggle along with less government spending, somehow."
Of course she's saying the opposite. What she is doing is a little too clever, arguing the obvious as if it supported her case. You're not supposed to notice that.

"I hear all this, you know, ‘Well, this is class warfare, this is whatever.' No. There is nobody in this country who got rich on his own — nobody.
You built a factory out there? Good for you. But I want to be clear. You moved your goods to market on the roads the rest of us paid for. You hired workers the rest of us paid to educate. You were safe in your factory because of police-forces and fire-forces that the rest of us paid for. You didn’t have to worry that marauding bands would come and seize everything at your factory — and hire someone to protect against this — because of the work the rest of us did.
Now look, you built a factory and it turned into something terrific, or a great idea. God bless — keep a big hunk of it. But part of the underlying social contract is, you take a hunk of that and pay forward for the next kid who comes along.”

Sunday, October 23, 2011

More Rule Four -- a death this time

This story out of Oregon is a tragic one, a young life snuffed out in a failure to apply Rule Four: Be sure of your target and what is beyond your target.

I remarked on a similar story just last month. To repeat: It is hard to imagine how you are going to have a shooting misadventure if you internalize the Four Rules pertaining to gun safety and always hold yourself to them.

If you do not know what the rules are, or have forgotten them--if you cannot repeat them off the top of your head--lock away your gun until you can recite them, with feeling.

Saturday, October 22, 2011

How to reduce defense spending

The U.S. started out without a large standing army and with militia units under state authority, that could be transferred into federal service at need. The idea was to avoid the risks to liberty, and the expense, of having a lot of armed federal employees trampling about.

Militia defense is a robust system. No one fights harder than someone defending his own turf. We saw this, for example, in the Second World War. The Japanese defending Japanese territory, on Iwo Jima and Okinawa, were reported by those on our side to be the damnedest thing you ever saw. These Japanese were regulars, in a national army, not militia, but the feeling--as reported from their side--was it was now personal. Other examples, from other countries, may come to mind.

Switzerland has a good example of a modern militia system. Their stance has long been one of neutrality backed by good riflemen. It seems to have worked very well: They have managed to stay out of the wars for a long time, with obvious benefits. Peace and prosperity generally go hand in hand.

The drawback of this kind of system is it is no good for conducting large scale wars abroad. I do not see this as a great drawback, for the world has not exactly fallen over itself thanking America for our foreign wars. Going back to a militia system would require a shift in emphasis to territorial defense. That idea is perhaps a little bit scary, as it might lead to war in our own streets, not someone else's. But if we are really clever about it, like the Swiss, we are unlikely to need to fight. Their habits of being financially welcoming, politically neutral and stubbornly independent are things we might advantageously consider.

The unpleasant solution to the public benefits problem

Social welfare schemes have a built-in tendency to grow and multiply, as politicians discover it is in their interest to expand them, and add new ones. Recipients of public largess tend--understandably--to support parties, politicians and programs that deliver the benefits.

If we want to know how all this ends we need look no farther afield than the countries of the Euro zone. Greece is the first to crack under the strain of debts it cannot pay; it will not be the last. Here in the United States are not at the breaking point yet but we are getting there. We are making the same mistake; we are spending money we do not have. Of course it seems like a good idea at first to dole out benefits at public expense, but there is a very considerable downside. It is  difficult to shrink social spending, a process that amounts to clawing back benefits from people who have become accustomed to think they deserve them.

Indeed, the United States' highly touted welfare reform under Clinton did not lead to permanent reductions in welfare spending; the total outlay has instead increased, when you consider all programs combined.

Well, if that isn't going to work there is another solution, which is to do nothing, or give lip service to the idea of reform while making only small cosmetic changes, and let the costs run up. That can't go on forever, but it will eventually solve the problem, when everyone wakes up and sees they are redistributing less pie as time goes on. When there is no more pie the situation will obviously require fresh consideration. I don't know if anything less than that--a large scale economic breakdown--will be sufficient to prompt reconsideration of the basic dynamic: social programs are easy to grow, difficult to shrink.

Tuesday, October 18, 2011

The 'Hands Off My Department' Department

In this article the IRS commissioner claims that cutting his operating budget would be disastrous. Where have we heard that before? Why, we hear it every time anyone proposes cutting any spending in Washington. Can't be done! Preposterous! Impossible! It would wreck the economy or be cruel to the least fortunate, or something.

It happens every single time! A government spending cut is proposed and then the howling starts--oh no, you must not cut this. So you move along to the next thing, only to be told you can't cut that, either. Or the other thing! It ends up in a big double shuffle in which you're told you can't cut anything. At all. Ever. At least nothing serious--maybe the Marines have too much coffee money. Take it up with them.

The Puerto Rican Resident Commissioner opposes cuts for Puerto Rico.
“I recognize the need to reduce our nation’s deficit in a thoughtful and deliberate manner. But, as a recent editorial stated, ‘these are the wrong cuts, to the wrong programs, at the wrong time,’ said the Resident Commissioner in a statement he submitted for the Congressional Record.

Okay, Mr. Commissioner. Give us a call when it's the right time for you, and let us know what programs you want cut. You know--when it's convenient.

A suggestion to trim the Federal Aviation Administration budget was shot down by opponents who said it would hinder economic growth and was dangerous.

I can never find a story where the response is, "Why sure, cut our budget if you like; we're mostly useless in this department, anyway."

Could every government project we are funding be all that valuable? I guess so! To hear them tell it in Washington, not only do all projects need doing, we shouldn't propose to do them for less money. It's the wrong time. Dangerous. Disastrous. Or cruel. They all say it, so it must be true.

Just for fun: Search Google for "opposes budget cuts."

Monday, October 10, 2011

The invisible hand is clutching our throat

The economy is on everybody's mind these days. No one, aside from a few professionals, thinks about the economy when it is good. It's like your health: You only think of it when you are sick. Here are a few thoughts that are rattling around in my head, these days.

1. The bailouts were categorically mistaken. When businesses fail they should collapse. This is as natural, and as necessary, as fallen leaves providing mulch for the forest floor. When businesses fail in the normal and proper way, the people who take the losses are those who invested in questionable schemes and the rest of us get off scot free. New opportunities are created for new businesses that will seek to avoid the mistakes of their predecessors. This leads to improved business practices and a better economy over time, but of course that only works if people bear their own risks and take their own losses.

2. I knew just what was wrong when I heard Dubya gabbling about violating free market principles to save the free market.  I knew we were doing something stupid and self defeating. There would have been severe short-term disruptions in the economy if nothing had been done. So we traded that for long drawn out suffering with no end in sight. That was not an intelligent tradeoff.  We should have taken our medicine--ridden out the crash, then gotten on with our lives and rebuilding the economy.

3. But, having committed ourselves to the course of bailouts and takeovers and 'quantitative easing' (over my objections) we are now stuck with it. If we could claw back the TARP money and all the rest, the same thing would happen that the government's interference was meant to avert, the collapse of some firms that are called too big to fail and short term disruptions to the  delivery of goods and services. There is some reason to suppose the crunch would be worse now than it would have been had it occurred a few years back, for we are now maxed out on public debt.

4. We have at best postponed the inevitable reckoning. At worst, we have distorted the economy in ways that assure a Greater Depression. I am not an economist. I have some measure of business experience and it has taught me to respect the 'invisible hand' economists talk about. TANSTAAFL! Instead of dealing with our problems in ways that honestly confronted over-valued assets and runaway debt, we have masked the underlying problem with more debt. So far as I can see, the present economic policy is composed entirely of moonbeams.We can't get traction for a real recovery because we won't face the real problems.

5. I used to think it was neat being a fiscal conservative because in the long term, anyway, you are always right, regardless. If people do stupid things with money it will catch up with them. This is true when great nations or big companies do it, just as it is true for individuals. Now I'm not feeling so good about being right--it's all right to be smug when you have money, but I don't.

Saturday, October 8, 2011

The real Greek crisis

In this article, AP's Christopher Torchia gives us a somber reflective look at Greece's economic situation, and sums up with some words from Aristotle on the seductiveness of riches. I like the article but the author quotes the wrong ancient Greek. Aesop's story of the goose that laid gold eggs is more apropos.

Greece's problem is government took too much out of the economy to give to too many people for too many reasons. Greece is not the only country that is doing this and it won't be the only one to fail economically because of it. They are going first because they have relatively a small and weak economy. The others will succumb by and by.

The idea of paying people with their own money is so preposterous that, like the big lie, it escapes immediate detection.  In the long term, of course, truth comes out whether we like it or not.

Æsop. (Sixth century B.C.)  Fables.
The Harvard Classics.  1909–14.
The Goose With the Golden Egg
ONE day a countryman going to the nest of his Goose found there an egg all yellow and glittering. When he took it up it was as heavy as lead and he was going to throw it away, because he thought a trick had been played upon him. But he took it home on second thoughts, and soon found to his delight that it was an egg of pure gold. Every morning the same thing occurred, and he soon became rich by selling his eggs. As he grew rich he grew greedy; and thinking to get at once all the gold the Goose could give, he killed it and opened it only to find,—nothing.

Thursday, October 6, 2011

Science versus religion? Ah, go on with you!

People who assert that science trumps religion are making an error in reasoning. It is a subtle error but serious.

Science has for its basis the philosophical idea called naturalism. (Consider science's former name, "natural philosophy.") Naturalism is the assumption that we will explain what we observe without reference to gods, devils, ghosts or  fairy godmothers. What can repeatedly be observed and measured is the whole scope of discussion. It is a good and useful assumption: It has been a great help, in bygone times, in sorting out received superstitions from actual facts about the natural world. It has also led, in our era, to progress in finding ways to manipulate the world around us: new medicines and materials and machines and marvels galore. (It has also brought us atom bombs, gas warfare and unintended consequences like drug resistant bacteria and ways to die by accident that no one a century or two ago had heard of or imagined.)

Naturalism, though a very useful assumption, is an assumption. That is what we must not forget. By ruling out the supernatural, science can now say nothing about it. It must remain silent on such matters, because the grounds of discussion selected by science have fenced them out.

When you hear science argued as if it contradicts or disproves religious beliefs, the assumption about no gods or devils is being regurgitated as a conclusion. That is not good logic; it is an empty tautology.

The problem is not in logic itself, nor is it a flaw in science. It is a matter of exceeding one's warrant. We know logic is no bar to religious thought; some highly logical theologies show us that. We need a different starting point, that's all: for example, the assumption that the Bible describes reality as it exists beyond our everyday experience.  From a truly scientific viewpoint, that assumption is, at best, true but irrelevant. At worst it is false and irrelevant. But science is powerless to say which. How can it?

Divine revelation is a miraculous matter. A miracle, by definition, is not an everyday occurrence, but a one-off event. It is not repeatably measurable. (Notice the same is true if you do not believe in miracles.) But science relies on repeatability of observations and measurements. Something miraculous is, by definition, an exception to the usual order of things. That puts it outside what science can investigate. Science is formally incapable of passing judgment here; it hasn't the tools.

The explanation the Bible offers, for the events it recounts, is inherently outside the naturalistic assumption of no supernatural factors. A scientist can say, quite rightly, that he can't investigate that, using only the rules science gives him. He may say more if he likes, but not as a scientist.


Addendum: A scientist objected to this line of thinking by saying science does not exclude the supernatural. Science can investigate whatever it likes, by an iterative process of observation and description. I am sure he missed the point about miracles being exceptional events, rather than being part of the fixed patterns of the world's operation. There is no predictability to miracles, in the sense that making a study predicting what will happen, and when, will do you no good whatever. There is no opportunity for independent verification by repeating the event and no chance to reproduce the event for further examination.

The example I gave my scientist friend was that of Ezekiel. Christianity and Judaism say that Ezekiel received elaborate visions that revealed things about the purposes of God. It does us no good today to stand where Ezekiel stood and wonder when the next show starts. We have Ezekiel's account and that is that.

Naturalism's unannounced assumption is that the world follows fixed patterns that can repeatedly be observed. It does not deal in exceptions to this rule. I find it interesting that so many scientists feel compelled to speak, mainly in the negative, about religion; it is a subject area that their field of study is unequipped to consider at all.