Archives: 07/2012

The Muzzle Awards

The Boston Phoenix announces its 15th Annual Muzzle Awards:

The Muzzle Awards were inspired by noted civil-liberties lawyer and Phoenix contributor Harvey Silverglate, who wrote the sidebar accompanying this article. They are named after similar awards given by the Thomas Jefferson Center for the Protection of Freedom of Expression.

This year’s edition, as always, was compiled by tracking the previous year’s free-speech stories in New England. Nominations were also solicited from American Civil Liberties Union (ACLU) chapters in Massachusetts, Maine, and Rhode Island. This article is based on reporting by various news organizations and Web sites — including the Boston Globe, the Cambridge Chronicle, the Providence Journal, the Portland Press Herald, the Bangor Daily News, the Enterprise of Brockton, the Associated Press, Down East, the Republican of Springfield, the New York Times, GoLocalProv, the North Providence Breeze, OpenCourt, wbur.org, the New England First Amendment Center at Northeastern University, and Talking Points Memo.

The envelopes, please.

Beyond Manufacturing

Yesterday, a World Trade Organization panel ruled that certain actions taken by China related to the processing of electronic payments (e.g., credit cards) violate WTO rules on trade in services.  As the Office of the U.S. Trade Representative put it in the press release announcing victory:

Electronic payment services (EPS) are vital to facilitating commerce in any modern economy and are familiar to any consumer. EPS are what make possible payments using credit, debit, prepaid, and other payment cards. EPS enable, facilitate and manage the flow of information and the transfer of funds from cardholders’ banks to merchants’ banks. Most of the world’s top providers of electronic payment services for credit and debit card transactions are headquartered in the United States. By industry estimates, the U.S. stands to gain 6,000 jobs related to EPS.

Each year well over one $1 trillion worth of electronic payment card transactions are processed in China. China’s regulator of EPS, the People’s Bank of China, issued a series of measures – dating back to 2001 – that discriminate against foreign suppliers of EPS at every stage of a payment card transaction. China’s measures impose requirements on institutions in China that issue payment cards, on all point-of-sale terminal and payment card processing equipment in China, and on the institutions in China that have the relationship with the EPS supplier and handle payment card transactions for Chinese merchants.

The 6,000 jobs figure mentioned by the USTR may be a stretch, but what this case makes clear is that, despite recent political rhetoric to the contrary, jobs do exist outside of the manufacturing sector. Not only do they exist, but they are good jobs, ones that China was seeking through its measures, and jobs the USTR was fighting for in the trade litigation arena. All of this suggests that obsessing over (allegedly) lost manufacturing jobs is based on a misunderstanding of how modern economies operate.

Topics:

Let Sequestration Happen

Some members of Congress are anxious to undo sequestration, ignoring the inconvenient fact that they created the process in the first place. Instead of accepting responsibility, they are proposing legislation that would force the White House to outline the effects of the cuts. And people wonder why Congress’s approval rating is at an all-time low.

But there is more than enough blame to go around. The Republican-controlled House, the Democratic-led Senate, and the Obama White House had a chance to implement a range of proposals aimed at deficit reduction last summer. They chose to kick the can down the road, empowering an independent, bipartisan panel to make the tough choices for them. That effort failed.

If the Super Committee was unable to hammer out a compromise when the conditions were ripe last summer, it is unlikely that one will materialize this summer. Sequestration may be the only way to achieve real spending cuts. Let’s let it happen.

To be clear, sequestration is not the best way to cut the military budget, or federal spending overall. It wasn’t supposed to happen at all; the threat of spending cuts was supposed to compel the various parties to reach a compromise. But it may be the only feasible way to cut spending. And it isn’t going to get any easier in the future.

The Democrats are beginning to show their hand: this was never about cutting spending; it was always about raising taxes. Sen. Patty Murray (D-WA) explained yesterday that her party would allow the cuts in defense and nondefense spending to go forward, and the Bush tax cuts to expire, if Republicans didn’t agree to tax hikes on the wealthy. That isn’t likely to happen, and not just because the GOP is being stubborn. A sizable majority of Americans—Republicans and Democrats alike—are in favor of cutting military spending. More than half want to extend the Bush tax cuts for all.

Still, there are some Republican politicians who have always been willing to raise taxes in order to protect the Pentagon, despite what the public says it wants. I don’t fault Democrats for holding Pentagon spending hostage as much as I fault Republicans for allowing themselves to be maneuvered into a corner.

The GOP has a straightforward way out of the box: allow the defense and nondefense cuts to go forward, refuse a tax increase, and renegotiate a debt reduction deal that doesn’t leave entitlements—the real drivers of our long-term fiscal calamity—off the table.

Sequestration likely won’t be as bad as special interests and those in favor of ever-increasing military spending claim. The reductions would only apply to FY 2013 budget authority, not outlays. The Pentagon and Congress will then have greater flexibility starting in FY 2014 to adjust the reductions under the BCA spending caps. In the meantime, many programs could continue on funding already authorized.

We must also keep the cuts in proper perspective. The DoD base budget under sequestration would total $469 billion, about what we spent in 2006, which was not exactly a lean year for the Pentagon. And as for the claim that the military cuts will result in perhaps one million lost jobs, that seems implausible considering that the cuts would amount to less than three tenths of one percent of GDP.

More to the point, the defense budget should never be seen as a jobs program. In a dynamic, market economy, capital and resources adjust to changing demand. Some regions and municipalities that are relatively more dependent upon military spending might suffer some short-term effects, but there is evidence that economies reliant on the military can recover. Some regions could emerge stronger and more diversified. Other reporting indicates that some businesses are already positioning themselves to weather reduced government spending.

Americans spend more today on our military—in real, inflation-adjusted terms—than during the high point of the Reagan buildup. Some might justify these expenditures by claiming that the world is much more dangerous today. But the evidence for that is pretty thin. The Soviet Union on its worst day could do more damage in a few minutes than al Qaeda has managed to inflict in over a decade. We are safer than most politicians are willing to admit.

If they embraced our good fortune, policymakers could cut military spending without undermining U.S. security. Shifting resources from a relatively unproductive and inefficient sector to a more productive one would be good for the economy. And lower military spending could even improve our foreign policy.

It simply isn’t fair to saddle fewer troops with more missions. If we cut spending and reduced the size of the U.S. military, policymakers would have to be more discriminating in the use of force. But greater restraint by the United States would encourage other countries to take responsibility for their own security, and share in the costs and risks of policing the global commons.

Strategic spending cuts informed by a realistic assessment of today’s threats would be ideal. Sequestration may not reach this ideal, but it may be the only way to achieve actual cuts in military spending.

Cross-posted from the Skeptics at the National Interest.

A Cartoon Showing the Logic (or lack thereof) of Keynesian Economics

I’ve run across very few good cartoons about Keynesian economics. If my aging memory is correct, I’ve only posted two of them.

But at least they’re both very good. We have one involving Obama, sharks, and a lifeboat, and another one involving an overburdened jockey.

Now we have a third cartoon, by Australian freelancer Jon Kudelka, to add to the collection:

To provide a bit of additional background, the cartoon is channeling Bastiat’s broken-window insight that make-work projects don’t create prosperity, as explained in this short video narrated by Tom Palmer.

I make similar points in this post mocking Paul Krugman’s wish for an alien invasion and this post explaining why Obama’s green energy programs lead to net job destruction.

P.S. This Wizard of Id parody is the best cartoon about economics, but it teaches about labor markets rather than Keynesianism.

Wisconsin Health Secretary: ‘No Such Thing as a State-Run Exchange’

Dennis Smith directed the Medicaid program for President George W. Bush and was a health care analyst at the Heritage Foundation before becoming Wisconsin Gov. Scott Walker’s (R) secretary of health. The following excerpts are from a [subscription only] article at WisPolitics.com:

In his first extensive interview since a U.S. Supreme Court ruling largely upheld the federal law, the Department of Health Services chief said fed deadlines are likely to change and that the lack of guidance on setting up the exchanges makes any state-run exchange “a fantasy.”

Part of the reason why Smith says Wisconsin hasn’t moved forward with a health exchange plan is because he believes the deadlines will be pushed back.

“We have no other plan that we are taking because we think the reality is the federal government cannot meet its deadlines for implementing PPACA,” Smith said. “No one knows what a federal exchange looks like. The two major components that an exchange is supposed to do, which is determine eligibility and to complete the business transaction to pay premiums to health care plans that millions of Americans are supposed to pick, nobody knows what those look like. The administration has failed to release a credible business plan where objective observers could conclude that they’re going to pull this off.

Smith also said that none of the states currently setting up exchanges would likely meet federal regulations and that there’s “no such thing as a state-run exchange.”

“They were going to be asking for the resumes for the people who sit on the board of overseeing an exchange,” Smith said. “They were micromanaging the governance structure. They didn’t have to do that, they chose to do that. But that’s slowing the process and the decision making.”

The secretary especially pointed to questions on who will be eligible for the exchanges and the appropriate level of tax credits for participants. He claimed the rules on determining accuracy of tax credit payments were too “nonchalant,” and could result in the IRS having to recover thousands of dollars because of potential inaccuracies.

“It’s not that they don’t have answers because they’re withholding it from us, it’s that they don’t have answers because they don’t have answers,” Smith said. “These are critical policy issues, critical technical issues. Again, what are you building if you don’t know who’s eligible? What are you building if you don’t know what the flow is out of the treasury to the health plan?”

…”They have a mess on their hands,” Smith said… “You have to fundamentally say, ‘No, that just isn’t working, we have to go back to the drawing board.’

“And that is not being partisan in the slightest. That is facing reality.”

And that’s from a guy who continues to support the concept of a government-created health insurance exchange.

Obama’s Elizabeth Warren Moment

Our president’s channeling Elizabeth Warren. Speaking in Roanoke, Obama hit all her government’s-the-reason-we-have-nice things notes. “I’m going to reduce the deficit in a balanced way,” he said. “We’ve already made a trillion dollars’ worth of cuts. We can make another trillion or trillion-two, and what we then do is ask for the wealthy to pay a little bit more.”

Why should the wealthy–who already pay quite a lot, mind you–pay a little bit more?

[B]ecause [the wealthy] want to give something back. They know they didn’t–look, if you’ve been successful, you didn’t get there on your own. … I’m always struck by people who think, well, it must be because I was just so smart. There are a lot of smart people out there. It must be because I worked harder than everybody else. Let me tell you something–there are a whole bunch of hardworking people out there.

About this, Obama’s right. Lots of very smart people aren’t rich. (I’ll assume that’s what the president means by “successful” and roll with it, while remaining totally aware that there are myriad ways to define “success” that don’t involve accumulated wealth.) Lots of hardworking people aren’t rich, either. Which means getting rich, while often involving both smarts and hard work, depends on other things, too. Such as background, family, networks, opportunities, and just plain luck.

Back to Obama:

If you were successful, somebody along the line gave you some help. There was a great teacher somewhere in your life. Somebody helped to create this unbelievable American system that we have that allowed you to thrive.

Again, true. Every successful person in this county benefited from the help of someone. None of us are capable of getting far at all entirely on our own.

The confusion for Obama and his fellow progressives comes in locating that “someone.” Because for Obama, “someone” isn’t friends, family, colleagues. It’s government.

The point is, is that when we succeed, we succeed because of our individual initiative, but also because we do things together. There are some things, just like fighting fires, we don’t do on our own. I mean, imagine if everybody had their own fire service. That would be a hard way to organize fighting fires.

At some fundamental level, Obama simply doesn’t understand that “we” are not the state. For him, acting together simply is the same thing as legislating, regulating, and taxing. That’s why he can say with a straight face such inanities as his fire service line above. He appears unable to comprehend voluntary, cooperative, non-governmental coordination. The government doesn’t run bookstores, but we don’t each have our own Barnes & Noble or Amazon.com.

And while he’s right that there are some things we probably can’t do without government (or, at least, can’t do as efficiently without government), that class of activities is vanishingly small when compared to all the things Obama wants government to do–and wants you and me to pay for.

The argument against paying more taxes or creating more federal programs is not that we all should keep our money even if it means accomplishing nothing and having no nice things. Rather it’s that if we kept our money and had fewer federal programs, we’d accomplish more and have more nice things. Without the state stifling innovation, hindering entrepreneurs, wasting resources, and crowding out private action, we would get even more done together.

Of course, this doesn’t mean we haven’t each gained something from Obama’s welfare/warfare state. But the fact that we have doesn’t do much to support the president’s call for higher taxes. After all, even an abusive parent can give birthday presents.

There’s a certain class of argument that sounds utterly convincing to those already convinced–and entirely preposterous to those not. Obama’s remarks exemplify it. In order for his argument to get off the ground, Obama has to assume the truth of his conclusions. He asks us to believe that it is only through government that good things happen. He asks to us accept that we’d be helpless without Washington’s officiousness.

Obama wants us to think that we, as free citizens striving to better our own lives and our world, are incapable of the task.

The president hasn’t made an argument so much as he’s demonstrated a failure of the imagination–and a lack of faith in the American people.

Here’s a related video discussion:

No More Subsidies to the OECD from American Taxpayers

I realize it’s a bold assertion, but the $100 million that American taxpayers send to Paris every year to subsidize the Organization for Economic Cooperation and Development is – on a per-dollar basis – the most destructively wasteful part in the federal budget.

This video will give you some evidence.

But the video also is a couple of years old, so it doesn’t even include some of the more recent and most outrageous examples of OECD perfidy.

The good news is that more and more people are sounding the alarm bells about this wretched bureaucracy.

Richard Rahn excoriates the statist swamp in his Washington Times column.

Most Americans probably would not approve of their tax dollars being used to support an international organization that undermines their fundamental liberties and promotes giving their hard-earned money to other governments, often run by corrupt or dictatorial regimes. This is precisely what the OECD is doing… The OECD was formed in 1960 to promote trade and investment among the developed countries. Over the years, it has morphed into an organization promoting higher taxes and the redistribution of income… Dan Mitchell, a senior fellow at the Cato Institute and well-known tax economist, has closely followed the efforts of the OECD in promoting bigger government and more statism. In his extensive work, he has described how the OECD’s “anti-tax competition project” is designed to prop up Europe’s bankrupt welfare states and how its advocacy of “higher marginal tax rates,” a “value-added tax” and “failed Keynesian stimulus” for the U.S. reduces economic growth. (Note: OECD bureaucrats work out of plush offices in Paris, travel first class and have tax-free salaries.) It is worth repeating: U.S. taxpayers are supporting high-salaried international bureaucrats who are advocating higher taxes on others, most notably U.S. taxpayers, but do not pay income taxes themselves. Hypocrisy abounds. …serious and fiscally responsible members of Congress have the ability to knock all or part of the OECD funding out of the budget through amendments, provided they can get a majority of their fellow members to vote with them. The major limited-government, free-market organizations have endorsed a cutback in OECD funding.

And here’s some of what Dennis Kleinfeld wrote for IFC Review. He starts with a bit of history and explains how OECD bureaucrats live a good life at our expense.

The Organisation of Cooperation and Development has been in existence since 1960. …The OECD’s purpose was to pave the way “for a new era of cooperation….” that started with the US and Europe and now essentially encompasses as members or to-be members virtually all the dominant industrial powers. The OECD Secretary General, Deputy Secretaries, and heads of the Directorates are non-elected administrators and policy-makers, who live in Paris tax free (except for the Americans), travel first class, live first class, and whose every expense is paid for by the member states from taxes or money borrowed. These are the guys who tell everyone else to pay their fair share of taxes and share in making sacrifices for the greater good of all. This reminds me that we should never confuse the Hippocratic Oath with hypocrisy.

He then puts forth a strong hypothesis.

In a colourful sense, the OECD is (if you remember Star Trek) the Borg of organisations. Looking around the world today, I believe it can be concluded that the OECD approach to solving the world’s problems has solved nothing but has created even greater, perhaps now nearly insurmountable difficulties.

And he backs up his assertion by pointing out how the OECD is undermining the global economy.

The OECD promotes tax policies to create tax harmony, eliminate tax competition, and end tax abuse. To achieve this, the OECD has found that it becomes ever necessary to impose draconian and oppressive measures in order to make the income tax system work. Any idea of cooperative economic prosperity, encouragement of trans-national capital flows, international trade, or making global investing a seamless effort has been sacrificed on the altar of the income tax system.

And he shows examples of how OECD-supported policies are causing trouble and reducing liberty.

The OECD has long promoted such means to enforce income tax compliance. What is becoming increasingly apparent is that FACTA has gone too far and the backlash is being dramatically felt across all sectors of the US economy. Why then is it such a surprise that combining short sighted legislation with an already failing tax policy would result in rapidly accelerating an already declining economy? The OECD is mandating and leading what seems to be a cavalry charge over the financial and social edge into chaos. Its weapon of choice, the income tax system, is not achieving success for the taxpayers in this battle; rather it is assuring the defeat of individual liberties, the natural desire for privacy, and the freedom to live without the fear of arbitrary governmental retribution. Perhaps George Orwell’s classic books 1984 and Animal Farm are not works of fiction but accurate previews of what the world will look like as the policies of the OECD create the future.

He then offers a strong conclusion about the OECD’s collectivist program.

After 61 years of the OECD providing its services in the interests of international cooperation and economic development policies, it is safe to say that there is a lack of demonstratable proof that the OECD policies have actually been a positive factor in the world’s affairs. In fact, the contrary seems to be the true. I am quite convinced that the OECD functionaries have proceeded under the fixed ideological beliefs that global social happiness and economic prosperity can only be achieved when individuals subordinate their economic freedom and liberties to the interests of the collective, a utopian view of society. They are wrong. The state of the world proves otherwise.

By the way, if you’re not convinced that the OECD is a cancer that need to be cut out, here are a few additional distressing bits of evidence.

Removing American-financed subsidies from the OECD won’t necessarily put an end to this corrupt and statist bureaucracy. But at least American taxpayers won’t be violated to subsidize the pampered officials who drive the OECD’s biased agenda.

And without America support, it is highly doubtful that the OECD would have any ability to bully nations into expanding the burden of government.

That’s a win-win situation for America and the world.