Archives: 01/2013

President Obama Falls for a Fallacy

In his second inaugural address, President Obama made a series of direct and indirect references to the Declaration of Independence and other founding documents to make his case for collective (read: state) action. In doing so, he fell into the fallacy of argument ad antiquitatem – an illegitimate appeal to ages past in order to justify present and future actions.

Most people, including most Americans, would be surprised to learn that the word “democracy” does not appear in the Declaration of Independence (1776) or the Constitution of the United States of America (1789). They would also be shocked to learn the reason for the absence of the word democracy in the founding documents of the U.S.A.  Contrary to what propaganda has led the public to believe, America’s Founding Fathers were skeptical and anxious about democracy.  They were aware of the evils that accompany a tyranny of the majority.  The Framers of the Constitution went to great lengths to ensure that the federal government was not based on the will of the majority and was not, therefore, democratic.

If the Framers of the Constitution did not embrace democracy, what did they adhere to?  To a man, the Framers agreed that the purpose of government was to secure citizens in John Locke’s trilogy of the rights to life, liberty and property.

The Constitution was designed to further the cause of liberty, not democracy.  To do that, the Constitution protected individuals’ rights from the government, as well as from their fellow citizens.  To that end, the Constitution laid down clear, unequivocal and enforceable rules to protect individuals’ rights. In consequence, the government’s scope and scale were strictly limited.  Economic liberty, which is a precondition for growth and prosperity, was enshrined in the Constitution.

The Bill of Rights establishes the rights of the people against infringements by the State.  The only thing that the citizens can demand from the State, under the Bill of Rights, is for a trial by a jury. The rest of the citizens’ rights are protections from the State.

While invoking America’s founding documents and predecessors to justify collective action might appear as cleverness on the part of the President, it is a brazenly overused rhetorical instrument: an argument ad antiquitatem.

Two Wrongs Don’t Make a Right

Global Science Report is a weekly feature from the Center for the Study of Science, where we highlight one or two important new items in the scientific literature or the popular media. For broader and more technical perspectives, consult our monthly “Current Wisdom.”

As economic heavyweights assembled for their annual summit held by the World Economic Forum (WEF) in Davos, Switzerland, they were greeted by a call for $700 billion/yr of increased spending out to the year 2030 to “to close the green investment gap worldwide, leading to sustainable economic growth that attains global climate change goals.” They were told that this goal can be reached through an additional $36 billion/yr investment from the world’s governments (on top of the $96 billion/yr currently spent) that will “spur up to US$ 570 billion in private capital needed to avoid devastating climate impacts on economy.”

This call was made by the WEF’s own Green Growth Action Alliance as it released its first Green Investment Report at the outset of the Davos conference.

The Green Growth Action Alliance justified the call for the extra spending this way:

Such investments are urgently needed to avoid the potentially devastating impacts of climate change and extreme weather events as witnessed in many parts of the world in 2012. Scientists agree that extreme weather has become the “new norm” and comes at a huge, and rising, cost to the global economic system. Without further action, the world could see a rise in average global temperatures by 4ºC by the end of the century. According to scientists, this could lead to further devastating impacts, including extreme heat waves, more intense tropical storms, declining global food stocks and a sea-level rise affecting hundreds of millions of people.

Using a poor excuse to call for a bad idea doesn’t seem much like progress.

The science of global warming re extreme events is hardly compelling.  The data noise, generated from both natural processes and from other human influences, largely overwhelms any anthropogenic greenhouse effect signal in most cases.

However, compelling evidence is emerging that the magnitude of the climate sensitivity—that is, how much warming we should expect from a doubling of atmospheric carbon dioxide concentration—has been overestimated. Even if there was good scientific evidence that higher temperatures lead to a more “extreme” climate (there’s just about as much evidence for the opposite), an overestimate of the sensitivity would lead to an overestimate of extremes.

And these overestimates are being used by the Green Growth Action Alliance to oversell the need to do something about climate change.

In fact, there are much more pressing needs.

On Benghazi, the Buck Stops with Hillary

Secretary of State Hillary Clinton will face the wrong questions when she testifies today on the September 11, 2012, terrorist attack in Benghazi. The buck stops with Secretary Clinton—and it should. But members of Congress will focus on politically charged and distracting issues. The terrorist attack on the consulate was abhorrent. However, a broader discussion about the NATO-led regime change in Libya—and its unfolding political aftermath in Mali—would be a better use of Congress’s time. The consequences of intervention should not be ignored, and its antecedents must be explored.

Secretary Clinton was among the handful of U.S. and European officials who urged Western military action in Libya, a mission that entangled the United States in yet another volatile, post-revolutionary Muslim country, and accelerated neighboring Mali’s destabilization. North Africa’s vortex of Islamist crosscurrents has now sucked America and France into Mali. Indeed, the reverberations of NATO-led regime change in Libya impelled U.S. and French involvement in Mali. Like the conflict in Libya, France cannot do the heavy lifting in Mali on its own. Senators should ask: How far will the conflict in Mali go? Will the United States end up holding the broken pieces once again? Is America now “leading from behind”?

Furthermore, Congress should ask Secretary Clinton about how the White House shamelessly recast the word “war” into “kinetic military operations.” That Orwellian revisionism allowed the administration to side step the War Powers Act and bypass congressional authorization. In the course of supposedly demonstrating America’s selflessness in the promotion of democracy abroad, the administration compromised the integrity of our institutions at home. In that respect, the Libyan adventure has added to the steady aggrandizement of America’s imperial presidency

Secretary Clinton probably won’t go into any of that, and pitchfork wielding senators likely won’t ask her about those far-reaching consequences.

Budget Zombies

The Washington Post’s David Fahrenthold reports on a tiny federal program that House Republicans and even the Obama administration would like to terminate but that is seemingly invincible. The Christopher Columbus Fellowship Foundation, a grant program created in 1992, was supposed to pay for itself from the proceeds of coins honoring the 500th anniversary of Columbus’s landing in the new world. 

After the coin money ran out, however, the foundation’s board of directors ran to Congress. In 2008, Mississippi Republican Sen. Thad Cochran came to the program’s rescue with a $600,000 appropriation. It has received an annual handout ever since: 

“It’s a sort of a national treasure, if you want to know the truth about it,” said James H. Herring, a lawyer who was the board’s vice chairman until recently. Herring was also a former chairman of the Mississippi Republican Party, which had donated more than $28,000 to Republican causes, including $1,250 to Cochran’s campaigns. 

A spokesman for Cochran said the senator supported the program long before Herring, his fellow Mississippi Republican, was put on its board. Cochran, he said, believes that the program has merit and has produced “notable accomplishments.” 

Cochran himself was unavailable for an interview this week.

Yep, just a coincidence there. 

It’s almost impossible to find a program that both Democrats and Republicans want to kill. And the Columbus program is miniscule. So what does it say about the prospects for spending cuts when politicians from both parties can’t even get rid of a dinky program that neither supports?  

California’s One-Man Laffer Curve

I’ve already condemned the foolish people of California for approving a referendum to raise the state’s top tax rate to 13.3 percent.

This impulsive and misguided exercise in class warfare surely will backfire as more and more productive people flee to other states – particularly those that don’t impose any state income tax.

We know that people cross state borders all the time, and it’s usually to travel from high-tax states to low-tax states. And we’ve already seen some evidence that the state’s new top tax rate is causing a loss of highly valued jobs.

This mobility of labor and talent is one of the reasons why California is going to get a very painful lesson about the Laffer Curve.

Politicians (with help from short-sighted voters) can raise tax rates. But they can’t force people to earn income.

Now it looks like one of the super-rich is fed up and looking to make himself less vulnerable to California’s kleptocrats.

Here are some excerpts from an ESPN story.

Phil Mickelson said he will make “drastic changes” because of federal and California state tax increases. …The 42-year-old golfer said he would talk in more detail about his plans — possibly moving away from California or even retiring from golf… Mickelson said. “I’ll probably talk about it more in depth next week. …There are going to be some drastic changes for me because I happen to be in that zone that has been targeted both federally and by the state and, you know, it doesn’t work for me right now. So I’m going to have to make some changes.” …”If you add up all the federal and you look at the disability and the unemployment and the Social Security and the state, my tax rate’s 62, 63 percent,” said Mickelson, who lives in Rancho Santa Fe. “So I’ve got to make some decisions on what I’m going to do.”

He’s actually overstating his marginal tax rate. I suspect it’s closer to 50 percent.

But so what? It’s still outrageous and immoral that government is confiscating one-half of the income he generates.

Heck, medieval serfs were virtually slaves, yet they only had to give at most one-third of their output to the Lord of the Manor.

I hope he’s serious and that he escapes from the Golden State’s fiscal hell-hole.

And if he does, what will it mean for California government finances?

Well, here’s what Wikipedia says about his income.

According to one estimate of 2011 earnings (comprising salary, winnings, bonuses, endorsements and appearances) Mickelson was then the second-highest paid athlete in the United States, earning an income of over $62 million, $53 million of which came from endorsements.

Now let’s bend over backwards to make sure we’re not exaggerating. Notwithstanding the Wikipedia estimate, let’s assume his annual taxable income will be only $40 million for 2013 and beyond.

With a 10.3 percent top tax rate, California would collect about $4.12 million per year. And Mickelson apparently thought that was tolerable.

But guess how much the politicians will collect if he leaves the state? I’m tempted to say zero, but they may still get some revenue because of California-based tournaments and other factors.

I can say with great confidence, however, that California won’t collect $5.32 million, which is probably what the politicians assumed when they seduced voters into approving the 13.3 percent tax rate.

After all, that assumption only works if Mickelson is willing to be a fiscal slave for Jerry Brown and the rest of the crooks in Sacramento.

As such, I’ll also state with certainty that California’s politicians won’t collect $4 million if Mickelson leaves for another state. Or $3 million. Or $2 million. Or even $1 million.

The best they can hope for is that Mickelson decides to stay in the state while also reducing his taxable income. In that scenario, the politicians might still pocket a couple of million dollars.

Not as much as they collected when the tax rate was 10.3 percent, and far less than what they erroneously assumed they would get with a 13.3 percent rate.

Regardless of Mickelson’s ultimate decision, California is going to be in trouble because most rich people – whether they’re golfers, celebrities, investors, or entrepreneurs – have considerable control over the timing, level, and composition of their income. And they can afford to move.

This is why you don’t want to be on the downward-sloping portion of the Laffer Curve. Everyone’s a loser, both politicians and taxpayers.

So we’re going to see the Laffer Curve get revenge on California and I’ll be first in line to say “serves you right, you blood-sucking parasites.”

If you want more information, here’s my video on the Laffer Curve.

And if you want to watch the full three-part series, they’re all included in this Laffer Curve lesson that I put together for the President. He seems oblivious to real-world evidence, but others may find the information useful.

Obama Overplays “We” in Inaugural Speech

When liberals make reference to U.S. economic history, they typically: 1) downplay the role of entrepreneurs, 2) suggest that bold government action has driven growth, and 3) fail to mention the scandals and screw-ups caused by federal interventions.

President’s Obama’s inaugural address reflected some of those mistakes:

Together we determined that a modern economy requires railroads and highways to speed travel and commerce….

No single person can … build the roads and networks and research labs that will bring new jobs and businesses to our shores… Now, more than ever, we must do these things together, as one nation, and one people.

It is not true that America first invested in railroads and highways because “we determined” to do it through the federal government. In the 19th century, those investments were made by thousands of entrepreneurs and businesses. My new study on infrastructure notes:

Before the 20th century, for example, more than 2,000 turnpike companies in America built more than 10,000 miles of toll roads. And up until the mid-20th  century, most urban rail and bus services were private. With respect to railroads, the federal government subsidized some of the railroads to the West, but most U.S. rail mileage in the 19th century was in the East, and it was generally unsubsidized.

Railroads, streetcars, bus systems, and, to an extent, roads were financed and developed over many decades by innovative businesses taking risks and making gutsy decisions in the marketplace.

The typical pattern has been for the private sector to experiment with new technologies, and then, once certain products or types of infrastructure take off,  politicians want to get in on the action by subsidizing and regulating them. In turn, those interventions have usually led to distortions, scandals, and cost inflation.

Entrepreneurs, for example, had already put in place about 30,000 miles of railroads before the federal government started subsidizing them through the Pacific Railroad Act of 1862. And in an early illustration of the problems with such crony capitalism, the railroad subsidies led to the huge Credit Mobilier scandal of 1872.

It also turned out that America didn’t need subsidies for railroads. With his Great Northern Railway, entrepreneur James Hill showed that you could build a cross-country rail system without federal help. Federal involvement in U.S. transportation history is discussed further here and here.

So, no Mr. Obama, we don’t need Washington to build our “roads and networks and research labs.” Indeed, more than ever we should be encouraging entrepreneurs to take on those tasks. You and your economic advisors, for example, should check out the beautiful new Jordan Bridge in Virginia, which was constructed with $142 million of private funds.

Attenborough’s Nonsense

According to Sir David Attenborough, the famous British broadcaster and naturalist, “humans are threatening their own existence and that of other species by using up the world’s resources.” In a recent interview, Attenborough said that “the only way to save the planet from famine and species extinction is to limit human population growth.”

We are a plague on the Earth,” he continued. “It’s coming home to roost over the next 50 years or so. It’s not just climate change; it’s sheer space, places to grow food for this enormous horde. Either we limit our population growth or the natural world will do it for us, and the natural world is doing it for us right now… We keep putting on programmes about famine in Ethiopia; that’s what’s happening. Too many people there.

In 2006, Sir David Attenborough was voted Britain’s greatest living icon. Popularity, however, is no substitute for wisdom. As I have explained in a previous blog post, “[The] rate of global population growth has slowed. And it’s expected to keep slowing. Indeed, according to experts’ best estimates, the total population of Earth will stop growing within the lifespan of people alive today. And then it will fall… the long-dreaded resource shortage may turn out not to be a problem at all.”

Some of the reasons why Attenborough is as mistaken about the “over-population problem” today as Paul Ehrlich was when he published his infamous The Population Bomb in 1968, include:

  1. Increase in urbanization. In 1950, 29 percent of the world’s population lived in cities. By 2050, 67 percent of people will live in cities. City dwellers have less of an impact on the environment than do rural dwellers, because “When you have a critical mass of people like in London or New York, public transport becomes a feasible option for many, while people in more rural areas rely more on cars. And a flat that is surrounded by others is more efficient to heat than a free-standing house.”
  2. Technological change will make it possible is making it possible to feed, clothe and house more people while using fewer resources. In their book Abundance: The Future is Better than You Think, Peter Diamandis and Steven Kotler point to some fascinating technological innovations that will revolutionize supply of water, food, energy, and so on. Put differently, Attenborough’s Malthusian thinking about the relationship between population growth and resources is as outdated as a horse-drawn cart.

What is to be said about Attenborough’s take on the famine in Ethiopia? In a word: embarrassing.

To start with, population density in Monaco is 17,676 people per square kilometer. It is 79 people per square kilometer in Ethiopia. Monaco is one of the richest countries in the world and Ethiopia one of the poorest. If anything, there is an inverse relationship between population density and poverty. Some of the world’s most populated places (Hong Kong, Singapore, The Netherlands, etc.) are very rich, while some of the least heavily populated countries (Central African Republic, Chad, the two Congos, etc.) are very poor.

The real reasons for Ethiopian famines are altogether different. First, Ethiopia was a Marxist dictatorship and like many Marxist dictatorships (USSR, PRC and Cambodia), it experienced both economic collapse and civil war. Second, Ethiopia has almost no economic freedom. All land, to give one example, is owned by the state – and the state can take it away. As a consequence, farmers have little incentive to make long term plans and undertake necessary investment, and agricultural production suffers.

Attenborough is, in many ways, a great man and I love watching his programs. But, he thinks he knows more than he does. A little intellectual humility would not be amiss.