Tag: socialism

Paul Ryan and Political Discipline

Today POLITICO Arena asks:

Paul Ryan’s budget – hard-headed fiscal sanity or inhumane?

My response:

Either we discipline ourselves, painfully, or soon enough the Chinese and other lenders will do it for us, more painfully still, by refusing to loan to us any longer at currently low interest rates. And in that event, the debt service will be all consuming. Neither individuals nor nations can go down the road we’re on without paying the price.

Margaret Thatcher put it plainly: “The trouble with socialism” – let’s be honest, we’re socializing the costs of our appetites by imposing them on our children and grandchildren – ”is that eventually you run out of other people’s money.”

Inhumane? The inhumanity is among those demagogues who put us on this path, promising something for nothing year in and year out. Paul Ryan deserves our gratitude for biting the bullet at last. The ball is now in the court of the demagogues.

Bailout Coming for the Postal Service?

The U.S. Postal Service is in financial trouble. Undermined by advances in electronic communication, weighed down by excessive labor costs and operationally straitjacketed by Congress, the government’s mail monopoly is running on fumes and faces large unfunded liabilities. Socialism apparently has its limits.

While the Europeans continue to shift away from government-run postal monopolies toward market liberalization, policymakers in the United States still have their heads stuck in the twentieth century. That means looking for an easy way out, which in Washington usually means a bailout.

Self-interested parties – including the postal unions, mailers, and postal management – have coalesced around the notion that the U.S. Treasury owes the USPS somewhere around $50-$75 billion. (Of course, “U.S. Treasury” is just another word for “taxpayers.”)  Policymakers with responsibility for overseeing the USPS have introduced legislation that would require the Treasury to credit it with the money.

Explaining the background and validity of this claim is very complicated. Fortunately, Michael Schuyler, a seasoned expert on the USPS for the Institute for Research on the Economics of Taxation, has produced such a paper.

At issue is whether the USPS “unfairly” overpaid on pension obligations for particular employees under the long defunct Civil Service Retirement System. The USPS’s inspector-general has concluded that the USPS is owed the money. The Office of Personnel Management, which administers the pensions of federal government employees, and its inspector-general have concluded otherwise. Again, it’s complicated and Schuyler’s paper should be read to understand the ins and outs.

Therefore, I’ll simply conclude with Schuyler’s take on what the transfer would mean for taxpayers:

Given the frighteningly large federal deficit and the mushrooming federal debt, a $50-$75 billion credit to the Postal Service and debit to the U.S. Treasury will be a difficult sell, politically and economically. Although some advocates of a $50-$70 billion transfer assert it would be “an internal transfer of surplus pension funds” that would allow the Postal Service to fund promised retiree health benefits “at no cost to taxpayers,” the reality is that the transfer would shift more obligations to Treasury, which would increase the already heavy burden on taxpayers, who ultimately pay Treasury’s bills. (The Congressional Budget Office (CBO) prepares the official cost estimates for bills before Congress. Judging by how it has scored some earlier postal bills, CBO would undoubtedly report that the transfer would increase the federal budget deficit.) For those attempting to reduce the federal deficit, the transfer would be a $50-$70 billion setback.

Sounds like a bailout to me.

See this Cato essay for more on the U.S. Postal Service and why policymakers should be moving toward privatization.

A Pacifist Finds Her Call to Arms

The ongoing war of words between Glenn Beck and Frances Fox Piven over the prospect of workers rioting in the streets isn’t just a two-way dance. Stanley Kurtz has provided insight into Piven’s work over the years in his book, Radical-in-Chief, and a prominent figure of the left, Barbara Ehrenreich, has fired back. In an op-ed for the Los Angeles Times, Ehrenreich said that the reaction to Piven’s writings shows that America is “no longer a democracy but a tyranny of the heavily armed.”

Ehrenreich’s position contains a kernel of truth, but the real armed tyranny is the one Piven seeks to impose.

We have a window into Ehrenreich’s thoughts on violent struggle from her book on the subject, Blood Rites: Origins and History of the Passions of War. I attended a presentation Ehrenreich gave during my senior year of college precisely because of the contrast it might provide to my own views. Ehrenreich was a pacifist seeking to understand the passions that drive war so that they might be stifled or stamped out, while I was about to take a commission in the Army and head off to Infantry Officer Basic Course and Ranger School.

Ehrenreich traces man’s capacity for conflict back to the time when he was not at the top of the food chain. Early man’s violent instinct grew out of necessity; the need to build primitive weapons and fight in groups to kill natural predators, primarily lions and other big cats.

A rallying instinct lies at the heart of a successful hunt. Members of a hunting party must be willing to lay down their lives for each other, facing a beast with speed and natural weapons that would overwhelm each man individually. The bond produced by this group experience surpasses anything that develops on the football field. Indeed, combat is the only place where the phenomenon exists today.

In Ehrenreich’s view, this rallying instinct made the move from a hunter-gatherer society possible, but it also facilitated conflict between tribes and nations. Tribes rallied around the skin of an impressive kill or a totem symbolizing their most-feared predator when in conflict over land and natural resources.

As we began to aggregate our self-interests into larger groups, the totem became a flag, and the rallying instinct became nationalism or patriotism. The political class, the villains in Ehrenreich’s telling of the tale, could then use patriotism to manipulate the masses toward war.

While Ehrenreich takes a few feminist detours along the way, her theory on the origin of a rallying instinct I understood – patriotism – rang true. Ehrenreich’s assertion that we all have a remnant of this tribal instinct is consistent with thinkers across the spectrum. Blood Rites may make an appropriate companion to Victor Davis Hanson’s The Father of Us All: War and History, Ancient and Modern.

Ehrenreich admitted defeat at the end of the presentation. She noted that while some of the best of man’s nature is brought forth by war – think of a grunt throwing himself on a grenade to save his brothers in arms – she saw no way to turn these selfless instincts against war itself.

This is why Ehrenreich’s defense of Piven is a bit disappointing (though not surprising – both are Honorary Chairs at the Democratic Socialists of America). Piven’s citation of the riots in Greece as an example for American workers to follow is hardly an example of non-violence in action.

More disturbing is Ehrenreich’s blindness to – or obfuscation of – the fact that government is organized violence, and a push for government to do more is not a pacifistic stance. The rule of law is the threshold at which the government will spill blood and confiscate treasure. Changing the rule of law to guarantee equality of outcomes, not simply equality of opportunity, is a proposal for violence.

Government enforcement of a redistributive policy – taxes to support more handouts have to come from somewhere – is done with at least the implicit threat of violence sanctioned by the state. Try and resist and at some point men with guns – the police, IRS, or Marshals – get involved. SEIU President Andy Stern put this option on the table, explaining that his organization was using the “power of persuasion” before getting government to use the “persuasion of power.”

Ehrenreich talks a good game about seeking peace, but in the end she’s simply cheerleading from the other side of the battlefield. But this battlefield should remain rhetorical. The threats against Piven are inexcusable. We should oppose redistributive instincts – peacefully – now, not after the coercion of government takes the field in support of progressive efforts to “spread the wealth around.”

Is Obama Serious?

Today POLITICO Arena asks:

Although President Obama proposed a five-year, $40 billion per year freeze in non-security, discretionary spending, and Republicans want to cut spending by at least $100 billion a year, is either side serious about real spending cuts?

My response:

With uncontrolled deficits well into the future and a debt exceeding $14 trillion, for Obama to propose saving only $40 billion per year in discretionary spending over the next five years, while “investing” in pie-in-the-sky things like high-speed rail, wind farms, environmentally destructive ethanol, and the like, is worse than unserious – it’s an insult to our intelligence. Like Obama, many Republicans too treat military spending, among other things, as sacrosanct, but at least they’re proposing more serious budget cuts.

The deeper problem, of course, is systemic. Socialism, a large dose of which we have in America today, brings out the very worst in people. In the name of collective responsibility, it saps and then destroys individual responsibility, leading to a war of all against all. No one wants “his” entitlement cut for fear that his neighbor might profit at his expense – because, after all, “we’re all in this together.” Suspicion and envy are the order of the day. Meanwhile, dreamers like Obama (at least that’s his pose), who promote our collective drift, either can’t or won’t grasp the hard reality until it crashes down upon them, and us, as it is doing now in several of our states and in Europe. For the “hard-hearted” realists among us, November 2012 can’t come soon enough.

Saving Hayek from the People Who Think They’re Saving Hayek

I’ve been noticing a game lately played in the bookish corners of the left side of American politics. We’ll call it “We Know Hayek Better Than You.” It’s a game not without some attendant dangers. But it’s nothing if not fun.

Writing at Ezra Klein’s spot in the Washington Post, Karl Smith quotes Friedrich Hayek as follows:

That the ideal of justice of most socialists would be satisfied if merely private income from property were abolished and the differences between the earned incomes of different people remained what they are now, is true. What these people forget is that in transferring all property in the means of production to the state they put the state in a position whereby its action must in effect decide all other incomes.

He glosses:

That is, as Hayek goes on to explain, there is nothing fundamentally wrong with communal ownership of the means of production. The mistake is to think that the government could facilitate such ownership because then the government is effectively a monopolist and that would give the government almost unlimited power.

The idea that in principle it would be okay to completely redistribute all capital wealth is far to the left of anything proposed in modern America.

I hate to say it, but this is quite the dog’s breakfast of confusion, misinterpretation, and strained reading. One ought to be suspicious when your author writes an entire book entitled The Mirage of Social Justice. Perhaps he’s not really too enthused about social justice, you know.

Although it’s probably true that most socialists’ idea of justice would be satisfied if income from private property were abolished, it does not follow that this was Hayek’s idea of justice. Hayek didn’t think it was “okay” to collectivize the entire means of production, whether by the state or by private action.

The ability to accumulate capital and to believe that one held it justly was, for Hayek, a most important incentive for the formation of responsible individuals. If the means of production were collectivized, individual character would suffer, and society would suffer with it. He wrote:

A free society will not function or maintain itself unless its members regard it as right that each individual occupy the position that results from his action and accept it as due to his own action. Though it can offer to the individual only chances and though the outcome of his efforts will depend on innumerable accidents, it forcefully directs his attention to those circumstances that he can control as if they were the only ones that mattered (The Constitution of Liberty, Chicago: University of Chicago Press, 1978, p. 78).

The sense of responsibility has been weakened in modern times as much by overextending the range of an individual’s responsibilities as by exculpating him from the actual consequences of his actions… To be effective, responsibility must be both definite and limited, adapted both emotionally and intellectually to human capacities. It is quite as destructive of any sense of responsibility to be taught that one is responsible for everything as to be taught that one cannot be held responsible for anything…

Responsibility, to be effective, must be individual responsibility. In a free society there cannot be any collective responsibility of the members of a group as such, unless they have, by concerted action, all made themselves individually and severally responsible… If the same concerns are made the responsibility of many without at the same time imposing a duty of joint and agreed action, the result is usually that nobody really accepts responsibility. As everybody’s property in effect is nobody’s property, so everybody’s responsibility is nobody’s responsibility (ibid., p 83).

So no, Hayek wouldn’t have thought it was a good idea to collectivize the means of production. There are some interesting theoretical questions hereabouts regarding corporations, their appropriate size, responsibilities, and attendant knowledge problems, but I suspect that my friends on the left aren’t actually pining for one megacorporation to rule them all. (Are they? I know it can be tough to keep up, but really, this is too much. Even I don’t support that.)

Hayek tells us we have private property and private capital because it does good things to the individual character. While there will be accidents, and while life is sometimes truly unfair, the best course of action is nonetheless for everyone to work as though their efforts actually mattered. And the best way to ensure that they will do so is to allow their efforts, whenever possible, to matter.

And when individual initiative has failed, what did Hayek want then? He wanted a modest system of social insurance – with emphasis on the modesty. After that, he wanted very stern incentives for people to get back up on their feet and leave that system.

One incentive that he considered at least reasonable was to forbid welfare recipients (and government workers!) from voting – an idea far to the right of anything now being considered in America. But not a bad idea in the abstract. He wrote:

It is also possible for reasonable people to argue that the ideals of democracy would be better served if, say, all the servants of government or all recipients of public charity were excluded from the vote (ibid., 105).

I look forward to my friends on the left continuing to deepen their knowledge of Hayek, and maybe entertaining this modest proposal. Were it not for my overwhelming concerns about how our current welfare system entraps its recipients, I might even support it myself.

Comparative Political Economy

Free-marketers often point to the varying success of pairs of countries – the United States vs. the Soviet Union, West vs. East Germany, Hong Kong and Taiwan vs. China – to illustrate the benefits of markets over planning, regulation, and socialism. Some even point out the closer but real differences in GDP per capita between the United States and Western Europe. In his 1984 book Endless Enemies (p. 380) Jonathan Kwitny added the less familiar pairs “Morocco versus Algeria, Malaysia versus Indonesia, Thailand versus Burma, Kenya versus Tanzania.” Now Rama Lakshmi reports in the Washington Post that we can see the results of two systems of political economy in one country:

It didn’t take long for the first athletes arriving in New Delhi last week for the upcoming Commonwealth Games to catch a glimpse of modern India’s two faces.

Their gateway to the country was the capital’s gleaming new international airport terminal, built by a privately led consortium and opened in June four months ahead of schedule.

But the official wristbands that the visitors were handed at the airport turned out to be an emblem of India’s famous red tape and government inefficiency. When the teams reached the athletes’ village, the police guarding the facility refused to recognize the IDs, saying that the Games Organizing Committee had not sent the required authorization order.

The jet-lagged athletes stood about under a tree for hours with their luggage, calling their embassies for help, and the problem was not finally resolved for four more days.

To observers, the incident illustrated more than just the well-documented sloppiness that has marked India’s preparations for the Games. It also underscored the gap that has emerged between a government rooted in a slower-moving, socialist era and a private entrepreneurial class that is busy building global IT companies, the world’s largest oil refineries and spectacular structures such as the $2.8 billion airport terminal.

“It is about two aspects of the India story,” said Rajeev Chandrasekhar, an entrepreneur and member of Parliament. “India’s private sector has been exposed to competition and therefore has developed capability. Accountability is firmly built into the entrepreneurial mind-set. But the government structure is a relic of the colonial past and continues to plod along.”…

For the Delhi [airport] project, [Grandhi Mallikarjuna]Rao said, his company worked with 58 government agencies.

“Our nation is in the process of transition from a command-and-control economic system to a more efficient market-driven structure,” he said. “It will take some time till this transition is complete.”

Given all this history, the interesting question is why some people in the United States want to continually transfer such vital functions as energy and health care from the competitive, accountable, capable entrepreneurial sector to the slower-moving, plodding, command-and-control bureaucratic sector. (Of course, the already-government-influenced health care and energy industries are not the most entrepreneurial sectors of the economy. But as the examples above demonstrate, even imperfect markets work better than government direction. Nor are the government-run local schools very competitive or accountable, but they are more so than they will be under tighter federal control.)

Now He Tells Us…

Here’s a story for the better-late-than-never file. Former Cuban dictator Fidel Castro confessed that communism doesn’t work and that his nation’s economic system should not be emulated.

Fidel Castro told a visiting American journalist that Cuba’s communist economic model doesn’t work, a rare comment on domestic affairs from a man who has conspicuously steered clear of local issues since stepping down four years ago. The fact that things are not working efficiently on this cash-strapped Caribbean island is hardly news. Fidel’s brother Raul, the country’s president, has said the same thing repeatedly. But the blunt assessment by the father of Cuba’s 1959 revolution is sure to raise eyebrows. Jeffrey Goldberg, a national correspondent for The Atlantic magazine, asked if Cuba’s economic system was still worth exporting to other countries, and Castro replied: “The Cuban model doesn’t even work for us anymore” Goldberg wrote Wednesday in a post on his Atlantic blog.

Too bad Castro didn’t have this epiphany 50 years ago. The Cuban people languish in abject poverty as a result of Castro’s oppressive policies. Food is harshly rationed and other basic amenities are largely unavailable (except, of course, to the party elite). This chart, comparing inflation-adjusted per-capita GDP in Chile and Cuba, is a good illustration of the human cost of excessive government. Living standards in Cuba have languished. In Chile, by contrast, the embrace of market-friendly policies has resulted in a huge increase in prosperity. Chileans were twice as rich as Cubans when Castro seized control of the island. After 50 years of communism in Cuba and 30 years of liberalization in Chile, the gap is now much larger.