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First as Tragedy, then as Farce August 30, 2006

Posted by federalist in Government, Social Politics.
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Are there people too stupid for democracy?  The Palestinians seem determined to press the question.  Today’s news has this report about unemployed Palestinians in an organized protest against their elected government.  Armed with pita bread they chant “We are starving.”

Maybe the Palestinians are just putting on a farce for the world’s entertainment.  If not, well… maybe it’s just that the media have confused them as to how democracy is supposed to work.  A little background:

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Keep Your Laws Off My Meds! August 25, 2006

Posted by federalist in Government Regulation, Healthcare.
3 comments

More evidence that prescription drug regulation is more about politics than consumer protection:

Plan B consists of two pills taken 12 hours apart within three to five days of sexual intercourse. The dosage of contraceptive drug in these pills is 12 to 15 times that of a regular contraceptive pill. Remember: Plan B is now cleared to be sold OTC, yet the lower-dose conventional Pill still requires a prescription. Odd. Never before has a higher dose of a particular drug been made available OTC while a lower-dose preparation still requires a prescription.

The contrast is, as Homer Simpson might say, “Ovuliscious.”

Why not just get government out of our medicine cabinet, and let adults buy whatever pharmaceuticals they want?

Account for Global Public Goods August 24, 2006

Posted by federalist in Finance, Government Spending, Taxation.
2 comments

This is a problem worth drawing attention to: Old Europe’s bloviations are writing checks their defense budgets can’t cash.

In fact a majority of the world’s countries are not paying their fair share for the security they enjoy.  It seems easy to argue that, at least in a free country, GDP is a fair measure for assessing security taxes.  After all the more production the more a country depends on the world markets and the more utility it enjoys from increased world security.

According to the World Factbook we can see that most free countries are not spending as much as the United States on defense, as a fraction of GDP.  Americans are devoting 4% of our production to defense.  And as we have seen time and time again, our peerless military is the only force capable of successfully overthrowing genocidal and terrorist regimes, securing world commerce, and acting as a first-responder to both global catastrophes like the 2004 tsunami and regional conflagrations like the invasion of Kuwait.

When an American pays $4 in taxes to secure Middle-Eastern oil, stop genocide in Serbia, and hem in that North Korean maniac menacing the Pacific Rim, a German pays just $1.50, and our self-righteous neighbors to the North are spending just $1.10.  But everyone benefits from the global peace and security we are providing.

It’s time for the United States to start billing for its services.  Granted, we have no authority to tax other countries.  But we could start accounting for the defense debts of other nations.  For example, Spain spending just 1.2% of GDP on defense is short its fair share by $27BB for last year alone.  For 2005 Italy owes $32BB and Japan is down over $110BB.

The next time these countries start whining about the U.S. not paying its dues to the United Nations or not donating enough cash to earthquake victims let’s just add up their security debts to the United States — already trillions of dollars, and growing!

And if for some reason the United States agreed to an economically burdensome treaty like, for example, the Kyoto Protocol, we should first deduct our defense credits from our share.  It would be a long time before we had to cut any of our carbon emissions.

State-Sponsored Terrorism: The New World Order August 20, 2006

Posted by federalist in Social Politics.
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Kevin Ferris has a wonderful modest proposal in his essay, “Maybe West needs its own Hezbollah.”

We certainly have a lot to learn from the latest battle between Hezbollah and Israel.  Consider:

  • “U.N. Resolution 1701 calls for a cease-fire between a nation-state, Israel, that was responding to an attack, and a terrorist group, Hezbollah, that crossed an internationally recognized border to kill and kidnap Israeli soldiers.”
  • Hezbollah is armed and funded by Syria and Iran.
  • Hezbollah openly flaunts all laws of warfare: intentionally targeting civilians, using human shields, fighting without uniforms, taking hostages, and abusing prisoners.
  • Hezbollah overtly abrogates treaties and agreements even when it has signed on to them.  (“Our struggle will end only when [Israel] is obliterated. We recognize no treaty with it, no cease-fire, and no peace agreements….”)

Meanwhile, Israel adheres to the laws of war and respects its treaties (but is still roundly indicted for engaging in defensive warfare).  Israel is like a responsible adult trying to defend itself against a vicious gang of teenagers who know that they can get away with almost anything because in today’s world juveniles are only rehabilitated, never punished as adults.

What’s a rational state to do?  Simple: Recruit its own gang of juvenile gangsters to take on its enemies.  Finally we could wage a defensive battle (by proxy) without all those pesky rules against terror, torture, political assassinations, and so forth getting in the way.  As Ferris points out, if anyone complains about our state-backed militias, “the West can simply mouth pieties about ‘freedom fighters’ and the ‘legitimate aspirations of a people’.”

It works for Islamofascists.  Why not let it work for us?

Who Pays Estate Taxes? August 20, 2006

Posted by federalist in Taxation.
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Hendrik Van den Berg offers a good perspective on death taxes (a.k.a. “estate” or “inheritance” taxes) in a letter in today’s WSJ:  

The relevant question is whether the inheritance tax is more or less harmful than the other taxes that have to to be levied to pay for what our government spends. Are inheritance taxes worse than higher income taxes that discourage work and innovation? Are they worse than higher property taxes that discourage the accumulation of wealth? Are they worse than higher corporate profits taxes that discourage issuing equity and shift business offshore? Clearly not.

Given the government’s budget deficits, its immense need for revenue and the high economic costs of obtaining that revenue through other types of taxes, it makes little sense to cut a tax that is relatively less harmful to the economy and falls entirely on people who are, because of their wealth, relatively well-positioned to efficiently deal with the costs.

That’s the end of his letter.  The obvious question to follow this fine reasoning is: Given that the estate tax is 100% avoidable, and given that the wealthy are “well-positioned to efficiently deal with” the tax, who actually pays it?  Is this a real source of revenue for the government, or just a “hose-the-rich” measure that never hits anyone in practice?

For as little as a few thousand dollars a wealthy individual can create trusts, family offices, or insurance arrangements that legally and completely avoid the death tax.

Presumably, then, the only people who actually pay this tax are:

  1. People who want to leave half of their estate to the government instead of to their designated beneficiaries.
  2. People who didn’t know their assets were so large as to be subject to confiscation upon their death.
  3. People who didn’t want to pay the tax and knew they were subject to it, but who died before they implemented the avoidance measures available to them.

 In other words, this is effectively a tax on rich people who are stupid, disorganized, or unfortunate.

Journalists Heap Abuse on the First Amendment August 19, 2006

Posted by federalist in Government Regulation, Social Politics.
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Amendment I: Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the government for a redress of grievances. 

Perhaps no amendment in the Bill of Rights has been more abused than the first.  Today Leftists imagine that this amendment enshrines:

  1. Some sort of formal “Separation of Church and State”
  2. An obligation for Librarians to provide the Public unfettered access to pornography, and to keep lending records from government intelligence efforts.
  3. A blanket immunity for “the Press” to break any law in the course of obtaining or publishing information it believes is in the public interest.

Theodore Boutrous argues in defense of this third point today, claiming that a panel of the D.C. Circuit erred in upholding a judgment in Boehner v. McDermott.

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Sexy Diseases Get All the Money August 19, 2006

Posted by federalist in Government Spending, Social Politics.
2 comments

Here is a distressing situation:

Haiti has the highest child mortality rate in the Western Hemisphere.  One in eight children dies by age five, and a third are chronically malnourished.  [T]he major causes of infant mortality in Haiti [are] diarrhea, fever, acute respiratory infections, malaria, measles, and malnutrition….  [O]nly 34% fully immunized, Haiti’s children continue to be plagued by limited protection against the most common childhood diseases

This is a crisis that cries out for foreign charity: basic medical services could save the lives of most children dying in Haiti.  And since charity these days seems to be run through the government, we should not be surprised to see gobs of foreign government aid pouring in.  But where is it going?

McClatchy today runs a report on some of this foreign aid, which has included more than $100MM specifically to treat AIDS.  This turns out to be a story of utterly perverse priorities:

Haiti long has had the highest AIDS rate outside Africa.

[A] story making the rounds in Haiti describes patients who become distraught when they learn they do not have AIDS – because they know that AIDS patients receive free medicine, treatment and sometimes food often unavailable to those with other illnesses.

What’s the difference between AIDS and, say, malnourishment or measles?  All are killing people in Haiti.  But there are a number of reasons that we should be much more eager to treat the latter than the former:

  • There are cheap and fully effective vaccines for measles.  There is no vaccine for AIDS.
  • Vaccinated people do not communicate diseases against which they are vaccinated.  Malnourishment is not communicable or contagious.  AIDS is.  By spending money to keep people with AIDS alive, we are also spending money to keep another HIV carrier in the population.
  • There are known behaviors that communicate the Human Immunodeficiency Virus.  Though not all people infected with the virus are necessarily guilty of those risky behaviors, the fact that a person carries HIV suggests that they are at higher risk for communicating the virus.
  • AIDS is at best a disease that can be controlled with expensive drugs, and at worst will still lead to an early death.  Malnourishment and measles are very cheap to prevent and treat, and once treated will not adversely impact a person’s life expectancy or quality of life.

So where would a rational charity concentrate its work?

Today, History is Written by the Stereotypers August 19, 2006

Posted by federalist in Social Politics.
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This article on how public school textbook makers deal with diversity quotas is a lot of fun.

Amusingly, it’s not enough for pictures to represent statistical reality, or even the desired reality.  Textbooks today have to strive to reflect the appearance of the desired reality.

This means that pictures of real Hispanics have to be scrapped if they don’t look Hispanic enough.  American Indians can stand in for Pacific Islanders, and vice versa.  And non-handicapped models are seated in wheelchairs to meet quotas for depicting “disabled” children.

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Transportation Stupidity Administration August 15, 2006

Posted by federalist in Government Regulation, Transportation.
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Gotta love that TSA motto: “Vigilant, Effective, Efficient.”  Is this government newspeak an intentional allusion to 1984, or just a spooky self-satire?

Granted, the airport security charade has been amply criticized before.  But here we go again: overreacting to yesterday’s threat.  Terrorists dusted off an old plot to use liquid explosives and now we have passengers getting double-searched to ensure they aren’t carrying any toothpaste or lip balm onto a plane.

This is stupid.  If terrorists want to smuggle liquid explosives on board as passengers they can still do it.  They can flatten sealed chemical bags and either sew them into carry-ons or strap them tight to their body.  Is that woman really in her third trimester, or does she have 30 pounds of hermetically sealed plastic explosive molded around her breasts and stomach?  Only a stripsearch could tell for sure.

The billions spent harrassing commerical airline passengers only creates bigger targets on the ground.  The one thing that is actually keeping us safe is intelligence programs to find terrorists and disrupt their organizations and plans before they can strike.

Moral Ethics August 12, 2006

Posted by federalist in Social Politics.
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There are three principles for moral ethics innate to humans: Autonomy, community, and divinity. Modern liberals recognize only the first of these as a valid principle.

Haidt and Graham draft a fascinating paper for the academic journal Social Justice Research in which they further decompose these moral principles into “five psychological systems, each with its own evolutionary history that give rise to moral intuitions across cultures.”

Using this theory they bring remarkable clarity to the “culture war” raging in the United States.

How did it come to pass that in much of Europe, and in some parts of the United States, moral concerns have been restricted to issues related to harm/welfare/care and justice/rights/fairness?

They also issue an amusing call for tolerance and understanding to an academic community so liberal that “conservatism” is explicitly assumed to be a degenerate psychosis.

Even if social justice researchers never come to care about group cohesion, institutional integrity, or divinity as much as conservatives do, it will still be crucial for them to understand these cares, especially when they conflict with the virtues of compassion, justice, and equality that the social justice community values so dearly.

Social justice researchers might therefore benefit from stepping out of the “good versus evil” mindset that is often present in our conferences, our academic publications, and our private conversations.

Another Perspective on Social Security Reform August 9, 2006

Posted by federalist in Economic Policy, Government Spending, Social Politics.
3 comments

I am baffled by the persistence of the concept of retirement.  Retirement is for coal miners and cotton pickers.  There are enough low-impact, low-skill jobs out there that any resident of a developed country can work, at least part time, as long as they can put one foot in front of the other.

And why shouldn’t they?  The reality is that this country has neither the means nor the moral obligation to support its citizens through more than 25 years of unproductive “retirement.”  Sitting by ponds, playing golf, or watching TV all day every day are luxuries.  Unproductive retirement should not be an entitlement.

Granted, there was this social security program enacted during a period of depression and high unemployment to get older people out of the way of younger ones, while ensuring a basic level of welfare for those legions of manual laborers who couldn’t physically continue working into their later years.  And every worker alive today has paid a share of his wages into this system on the promise he would get them back upon “retirement.”

But that promise was made in a time when people died younger and when most work was more physically demanding than it is today.  We should decide that social security taxes were just that: taxes.  Fungible government revenue that was spent without regard to the costs of entitlements promised under the same name.

Some workers were counting on that social security check.  Some will need it.  We shouldn’t pull the rug out from under those citizens.  And so we should replace the social security entitlement with a Social Security Work Program:  Anyone who wants to claim social security must present himself for work in a sort of Senior Americorps arrangement.  It doesn’t have to be fulltime work, and it doesn’t have to be backbreaking work not suited to the elderly.  But some nominal work requirement would keep seniors who do not require social security from taking the money.  And we wouldn’t have capable seniors who do take money from the government sitting idly in front of the TV for the rest of their life.

Arlen Specter noted for Platitudinous Political Pomp August 8, 2006

Posted by federalist in Energy, Government Regulation.
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Arlen Specter is a paragon of the pandering politician, which is why he is the new winner of my award for Platitudinous Political Pomp.

In a recent letter to me he noted,

“I have been the lead Republican sponsor of an amendment to the energy bills of the 106th and 107th Congresses that would require the federal government to enact policies to reduce United States consumption of oil by one million barrels per day….”

This perennial amendment of his has never been passed into law, but what exactly was he proposing?  A staffer in his DC office explained that it’s exactly what it sounds like:  He is proposing to require the executive branch — by law — to figure out how to reduce oil consumption.  That’s right: No consideration of the means or costs of this proposal was to be had from Arlen Specter.  He saw a problem, and proposed an arbitrary law to fix it.  Because that’s what great legislators do these days.

Which leaves one wondering: Why stop a one million barrels per day?  In fact, why not pass a law saying that the government must enact policies to cause Americans to travel primarily on unicorns powered by fairy dust whose only emissions are rainbows?

Next time you hear a politician trumpeting his legislative efforts to fix problems, pay close attention: Does he offer any real solutions, or is he just blustering his way to another term with daydreams and platitudes?

The Overdue Death of Pensions August 6, 2006

Posted by federalist in Economic Policy, Finance, Government Regulation, Government Spending, Pensions, Retirement.
6 comments

The Wall Street Journal expounds on the latest legislation to overhaul private pensions, noting, “the idea of a single company guaranteeing retirement payments for decades is no longer practical, if it ever was.”  Frankly, that is an understatement.

Defined-benefit pensions are annuities.  Annuities are an insurance product.  Unless you happen to work for an insurer, your employer has never been regulated as an insurer or rated for the health of its reserves.  What business does an airline or car manufacturer have writing insurance for its employees?  Yet that is what all these private companies were doing with their defined-benefit pensions.

It would have been fine if they had literally been funding a deferred annuity written by a proper insurer.  But as we know they neither fully funded their pensions nor did they offer the sort of portability that would come with a true annuity contract.

Fortunately, that scam seems to be coming to an end.  But there is still the matter of government defined-benefit pensions: Many federal, state, and local government agencies offer these to their employees.  I suppose that since they are being backed by governments they do not suffer the same credit risks associated with private companies.  Many agencies also collude to provide some degree of pension portability, so an employee can switch jobs without losing his benefits.

But government pensions still suffer from the underfunding hazard — with the cost and risk being dumped on taxpayers.  I suspect pensions will persist in government if for no other reason than that they are a convenient way to hide the cost to taxpayers of benefits provided to one of the classically strong special interests: government employees.  For this reason, taxpayers should demand that governments fully price and fund their pensions.  Or better yet: abolish them and let people buy their own annuities if they want.

On Welfare August 5, 2006

Posted by federalist in Economic Policy, Government Spending, Social Politics, Taxation.
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Government welfare is a dangerous thing.  After all, it is a coercive pact wherein productive individuals subsidize unproductive individuals.  What society in its right mind would adopt such an arrangement?

I can discern two premises for welfare: Insurance and guilt.

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Political Market Efficiency August 4, 2006

Posted by federalist in Federalism, Government, Social Politics.
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Remember when all those Angry Leftists were threatening to move to Canada or France if Bush won the election?  Threats, one might say, “… told by an idiot, full of sound and fury, signifying nothing.”  (I believe virtually all of the Angry Leftists are still here.)

That’s not to say I don’t approve of the concept.  I wish there were a separate country for every political ideal, where like-minded individuals could feel at home and harmonize on their shared political beliefs.  After all, a melting-pot democracy like the United States in the end leaves every fanatic unhappy.  If you don’t have strong political feelings you’re probably at home in the United States.  But if you’re a communist, socialist, fascist, or libertarian of any stripe you’re living a gigantic compromise.

As a federalist I wish we could maintain a vibrant political market.  But we’re lacking two key elements:

  1. Compelling alternatives: Is there even a country in existence today that is practicing a strong political philosophy?  Or does the current spectrum just range between Muddled Democracy and Tyranny?
  2. Mobility: You can’t have an efficient political market if people can’t readily choose between the alternatives.  And since countries don’t move the people have to be able to.  Which brings me to a site I came across that looks interesting: http://escapeartist.com/

After American Capital Market Hegemony? August 3, 2006

Posted by federalist in Finance, Government Regulation.
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I never thought I’d see the day that the United States would lose its hegemony in the world capital markets.  Alan Murray, in his essay yesterday, “Fees May Be Costing Wall Street Its Edge In Global IPO Market,” notes that Wall Street investment banks are roughly twice as expensive as their foreign competitors.  “Does anyone really believe they deserve 7% of the capital raised by a newly listed company?”  Of course, it may not be long before America produces a crop of discount IBanks.

But later Murray points to more systemic faults in our capital markets, and these realy could cost us our capital superiority:

New Treasury Secretary Henry “Hank” Paulson Jr. — former chief executive of Goldman Sachs — … said there’s no simple answer to America’s IPO problem. “Markets overseas are much stronger, more competitive than they were a few years ago,” he said, “so that’s one of the reasons.”

He also cited the U.S. “legal environment” (read: trial lawyers), the “enforcement environment” (read: New York Attorney General Eliot Spitzer) and the “regulatory environment” (read: Sarbanes-Oxley) as contributing to a reluctance to raise new capital in the U.S.

Welfare Incentives August 2, 2006

Posted by federalist in Economic Policy.
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The New York Times had a story about skilled, middle-aged men who choose not to work.  Dividends of the feminist revolution?  After all, if women can break into the workforce and assume any traditionally male role, doesn’t it follow that husbands can choose the role of a middle-aged housewife?  Apparently not:

Nearly 60 percent are divorced, separated, widowed or never married, up from 50 percent a decade earlier, the Census Bureau reports. Sometimes women who are working throw out men who are not, says Kathryn Edin, a sociologist at the University of Pennsylvania. In any case, without a household to support, there is less pressure to work, and for men who fall behind on support payments, an incentive exists to work off the books — hiding employment — so that wages cannot be garnisheed. 

Other than deadbeat dads, it looks like the most likely cause of voluntarily unemployed men is our perverse government welfare incentives:

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The Inefficient Market for Corporate Leadership August 1, 2006

Posted by federalist in Finance, Human Markets.
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I rarely disagree with the Wall Street Journal’s editorial board, but today’s essay on CEO compensation is incongruous.

There’s been a lot of griping about executive pay recently, and Hank McKinnell’s severance package, estimated to be worth $83 million, will do little to damp the indignation.

But Mr. McKinnell’s surprise ouster as CEO by Pfizer’s board last week illustrates the flip side of the executive-pay coin: Top executives in the U.S. are paid for performance, and today’s corporate directors are not shy about pushing out those whose performance doesn’t measure up for shareholders.

It’s great to see that boards are firing underperformers, but the thing that really shocks the conscience is the compensation levels.  And the fact that even when they fail these CEOs win.  Walking away with an $83MM severance is not what anyone would consider punishment or failure.

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