2012 June

June 30, 2012

Creating Tax-Cheats

By Don Kirk in Economics, Social Regress & Social Progress, Socialism's "intellectual suicide"

The Supreme Court ruled the mandate in the Affordable Care Act is constitutional, by declaring the fine for non-participation is actually a “tax.” Politicians from both major parties are falling all over themselves to pin or avoid the tax label on their policy.

The ‘fine’ is approximately $750 for not purchasing health insurance. The cost of the health insurance is expected to be around $5,000 per year, or a bit more than $400 per month, around $100 per week.

Hmm. Pay a ‘fine’ or ‘tax’ of $750 for something many Americans cannot afford, or pay $5,000 for something many do not want at such a high price. What will millions of taxpayers do? Will they avoid paying the $5,000 full cost, or will they happily pay the fine, in addition to the full cost? Or will human nature intrude, and millions of people simply avoid both joining and not paying the fine?

The disincentive unintentionally built into the mandate is to cheat. When the massive scale of the tax cheating in the health care reform becomes obvious in a few years, then the Congress will move to subsidize the insurance costs for the Middle Class. They likely will have to increase taxes on the Middle Class to pay for the tax increase on the Middle Class, effectively doubling down on the economic “death spiral” of socialized health care.

[Email comments welcome: duosim@sbcglobal.net]

June 28, 2012

Facts cost less than Ideology

By Don Kirk in Economics, Politics

The Supreme Court ruled 5-4 today that the individual mandate in Mr. Obama’s health care reform is constitutional. This decision will require approximately 20 million more American citizens enroll in the United States’ health care system, which from the chart above–kudos to The Economist magazine–is already the world’s largest and most expensive.

A fundamental law of economics is that an increase in demand results in an increase in price. Adding 20 million new participants to the health care system will not drive down costs–which is the ideological propaganda used to sell the program–instead, the dramatic increase in demand will drive up costs.

In may well be that capitalism is at a stage where it can afford universal health care. The real difficulty is that the addition of so many more beneficiaries is done with the old thinking of the 1930′s: have the taxpayer pay for it. A much less expensive system could be created whereby the truly poor are subsidized while incentives–instead of mandates–would have citizens responsible for their health care financing. As one possible example of incentivizing health care, if the tax codes rewarded greater supply of health care, then the costs would fall.

[Email comments welcome: duoism@sbcglobal.net]

June 27, 2012

Quixotic Politics

By Don Kirk in Political Theory, Politics

Yesterday concluded the primary election season in American politics, and as ever, incumbency won. There are many thousands of citizen activists across the country trying to create a greater turnover of politicians on Election Day, and some are well-funded, but they all promote ideas of how to turn out incumbents without any clear understanding of why incumbents win. Like Don Quixote tilting at windmills, they mis-identify the true enemy.

Unable or unwilling to see the actual reasons why incumbents win, activists flail about in the political arena playing politics by the rules established by the incumbents. The activists are inspired by the disapproval ratings for Congress of 80%, but then make the mental leap that such extraordinary unpopularity means local citizens will vote out their incumbent Congressman. Naive, idealistic thinking, as well as bad math.

Charlie Rangel of New York is a longtime Congressman with serious problems in his personal taxes and off-shore luxury properties. Anti-incumbents went after Rangel tooth and nail, came close but ultimately failed yesterday. Aged Rangel won the primary, despite his well-known reputation for personal lack of integrity. How is this possible?

The answer is not the primary, nor the general election. The answer is not money, or the lack of money, or organization or lack of organization. They key to understanding American politics is understanding that whoever controls the nominating process wins elections, and a structure deliberately built to reward incumbency will prevail on Election Day. That’s all we really need to know: who controls nominations, and how are incumbents rewarded with re-election?

Charlie Rangel just proved it. Not incidentally, only 4 out of 435 Members of Congress lost in their primary yesterday, a reward for incumbency of 99%. If there is to be any meaningful reform of insulated incumbents facing a real turn-over threat, how to reward incumbency differently has to be the first thing addressed.

June 26, 2012

Creative Capital v Human Capital

By Don Kirk in Philosophy of Freedom

Building the biggest pile of dust of any book on my bookshelves is Richard Florida’s 2002 work, The Rise of the Creative Class. It is the only book I have ever put down in disgust after reading just a few pages. Frank Bures in the new 32 Magazine ran an article on the thinking of the book in the June 15th issue.

Florida’s premise is that tolerant people are especially creative, congregate together, and construct islands of prosperity because their creativity causes greater entrepreneurship. So, the deduction is, if a city is experiencing slow or falling economic growth, all it has to do is encourage open-minded tolerant people to its environs and economic growth will result. Most prominent among the people who are tolerant are gays, lesbians, artists and illegal immigrants.

So many economic studies in Europe and America have refuted Florida’s flawed causal thinking one has to wonder why he still attracts cities as paying clients for his advice. A person’s sexual practices do not indicate whether they are more entrepreneurial than anyone else, and being an illegal immigrant in Italy or Germany or Spain or the United States is no measure of superior open-mindedness, let alone creativity and entrepreneurial spirit.

Economic growth–and even cultural growth–is a function of risk-taking, productivity, economic liberties and especially human capital. There is no creative class unless it is an entrepreneurial class designated by its risk-taking and better education, neither of which distinguishes between sexual practices or immigration status. Being a successful businesswoman is completely independent of whom she sleeps with or which country she was born in. There is simply no such thing as the entrepreneurial Creative Class.

In the philosophy of freedom, human creativity is universal to all members of the species and is a considerable source of happiness. Much psychology research has been done correlating adult creativity with sadness and depression, but only Florida correlates creativity with tolerance. There are too many examples of intolerant people being extraordinarily creative: Wagner created stunning works of music, but he was a notorious, intolerant anti-Semite.

Freedom is compromised in Florida’s elitist, creative class distinction, because the world-view that history is driven by classes (as in Marx and Hitler) murdered more than 115.2 million people in the 20C.

[Email comments welcome: duoism@sbcglobal.net]

June 24, 2012

Public v. Private Unemployment

By Don Kirk in Economics

There’s unemployment, and there is unemployment. Both Republicans and Democrats argue over which is worse, and display grossly selective data to make their ideological points.

Here’s a chart of the actual data. If you are a federal government employee, you are doing better in the recession than anyone else, by an astounding amount. All government employees, including federal employees, are a cost to the economy, which means the continued increase in their numbers perpetuated the rising cost of government. Extropolate from the chart: no one else in the Middle Class had their incomes rise 11.6% during the three-year Great Recession & Stagnation.

If your costs continue to rise faster than the rise of your income to pay for the added costs, you go broke, a fact which is utterly lost in the ideolgical propaganda about unemployment between Democrats and Republicans. For Democrats, the rise of government workers grows the Middle Class. For Republicans, the rise of government workers grows socialist labor unions. They are both more wrong than they are correct.

Yes, government workers are Middle Class, but they are, nevertheless, a cost which has to be paid solely by private workers, most of whom are in the Middle Class. And who cares if workers unionize if management was fair and just? The point is, we are going broke paying for government services that rise in cost much faster than our ability to pay for them.

June 22, 2012

One, Two, Three

By Don Kirk in Philosophy of Freedom, Political Theory

Casting about the Web and reading the political news, nearly all the news is reporting what one political point of view said or did, and what the opposing point of view said or did in response. At least we have two points of view.

One view means no freedom. Two views means freedom, but note that two is the absolute minimum one can experience to have freedom. It would be better for freedom if we had news on three points of view.

But one never sees a third view on the news. No Sunday news program includes the third view; only the Left against the Right is on stage for the viewers and voters to consider. One never sees a Libertarian, or a Constitutionalist, or a Whig, or a Moderate as a regular guest on the major network news, let alone as a news broadcaster. Never a nonpartisan, either. Only Left against Right, moderated by someone who is either Left or Right.

Did you ever stop to consider how many mistakes our government has made could have possibly been avoided if a third voice, that disagreed with the other two, participated in the discussions and decisions? The duece-only is so predictable, so insulated, so hateful of the other, that it makes one cringe to watch.

Many of us simply ‘click’ and move on, which defeats freedom, doesn’t it?

[Email comments welcome: duoism@sbcglobal.net]

June 20, 2012

Is Executive Privilege Anti-Freedom?

By Don Kirk in Philosophy of Freedom, Philosophy of Human Rights

As today’s Bloomberg national poll explodes with the news that Mr. Obama has just surged to a very large lead over Mr. Romney in their election race, the president has declared the documents demanded by the Congressional committee investigating the government’s gun-running program for Mexican drug cartels are protected by executive privilege. He will not give up the documents, arguing “serious damage” would be done if he did.

Richard Nixon redux. ‘Serious damage’ to whom???? Watergate documents were refused to Congress nearly forty years ago by Mr. Nixon invoking executive privilege. National security was never involved; his political survival was. The Chief Executive says the request for internal documents is merely political gamesmanship by Congress overstepping its Constitutional restraints in separation of powers, while Congress argues it is merely performing its Constitutional mandate to act as a check on the Executive.

The Supreme Court has ruled that the privilege exists, but is qualified if the Congress can show that it is in pursuit of suspected actual instances of criminality and not merely fishing for evidence. Traditionally, the Executive invokes the privilege but then releases all of the documentation “voluntarily,” instead of in response to a Congressional summons.

It is freedom that is lost in the Executive’s long-running argument for invoking privilege (George Washington originally invoked it, and many other presidents have as well). Any president could invoke the secrecy of privilege for anything he or she declared to be national security. If Nixon could keep secret illegal searches, and Mr. Obama can keep secret who ordered guns be sold to drug cartels, then a future president could invoke privilege to keep secret any manner of crimes or corruption.

Not to be too lurid, but privilege could be invoked by the Executive to maintain secrecy over moving trainloads of undesirable citizens. Hitler never ordered those trains, and could have argued he never knew anything about them. So? His deliberate ignorance shelters the crime?

The potential threat to freedom from Executive Privilege is too great for it to stand, and if it does stand, then all of the American people are worse off by the privilege being privileged.

[Email comments are welcome: duoism@sbcglobal.net]

June 18, 2012

Our Politics Rewards Extremism

By Don Kirk in Philosophy of Freedom, Political Theory, Politics

This is my comment to a post by Richard Fernandez at his Belmont Club blog today, about Jim DeLong’s new book on the SIS–the ‘Special Interests State’:

To Wretchard and Mr. DeLong:

If ‘SIS’ is to be brought under control by “separating the fat from the bone,” the hostage from the hostage-taker, then it must be up to the hostage to break free or have the cops allied with the hostages—not with the takers—break down the door to free the hostage and arrest the hostage-taker. What would be the ‘crime’ which the hostages could have their police enforce?

How about Fiduciary Fraud Against The Taxpayer? Any rent-seeking that does not encompass all of the American people–not just select groups such as sugar growers or corn farmers or green energy firms–is the crime of Fiduciary Fraud Against the Taxpayer. If lobbyists and politicians faced jail time for the practice of rewarding the few at the expense of the many, you could shrivel SIS down to manageable size.

But then, as Leo Linbeck would be the first to note, such legislation is impossible in the current ‘structure’ of governance built by the duopoly. The key to politics for every politician is not in getting elected the first time; it is in getting re-elected ten or twenty times. The ‘structure’ built by the duopoly since 1972-1974 assures incumbency after winning election, and no change in the SIS is possible unless a new structure is put in place that addresses how best to reward incumbency.

In a flip of the structure built in the Progressive Era, the present structure rewards partisanship and punishes bipartisanship. Another way of putting it for conservatives and Left-liberals to consider, is that the SIS has been built since 1972-1974 by rewarding ideological extremism and punishing moderation. Every ardent Republican and Democratic scream for ‘loyalty,’ or their sneering contempt for RINO’s and DINO’s and centrism, feeds the SIS, not intentionally, but because that’s how the ‘structure’ fixes how incumbents practice politics, rewarded by re-election.

Until the structure is reformed to return to the early 20C concept of rewarding incumbency by practicing bipartisanship and moderation–instead of punishing them–then the SIS is likely “locked in” until the collapse of the republic. The collapse will likely occur because the rate of growth of the national costs of government outstripped the rate of growth of national income to pay for it (as in today’s Greece). The hostage-takers will win because in America since the mid-1970′s, extremism and partisanship are valued more in our politics than moderation and bipartisanship.

Sneer all you want at ‘moderates’ and ‘independents’ and ‘centrists,’ but understand, then you are perpetuating the newer structure’s reward of incumbency for extremists who achieve re-election by their skills at satisfying special interests’ rent-seeking. If conservatives are serious about solving the SIS, they will first have to take a hard look at themselves, and what degree of ideological purity they demand of their politicians.

Effectively, the unintended consequence of mid-70′s structural partisan loyalty is: the more partisan we are, the more the SIS will grow. This fact of our politics will continue so long as the duopoly mutually benefits from the structure they both created. The only practical means of creating a new structure is to form a viable third voice to take on the other two; how to reward incumbency is the key.

[Email comments are welcome: duoism@sbcglobal.net]

June 17, 2012

Appease or Resist?

By Don Kirk in Foreign Affairs, Theofascism

Yesterday, Ambassador Dennis Ross in the New Republic and the Council on Foreign Relation’s Ray Takeyh in The Washington Post had two visions of how to prevent Iran from acquiring nuclear weapons. They both made cogent arguments as a long-time diplomat and researcher should, but neither mentioned the nature of the Iranian governance as either a hindrance or help in securing Iran as a non-nuclear nation.

What if the “nature” of the regime in Iran precludes any success for either argument? One argument suggests an appeasing formulation while the other calls for more prompt resistance. What if they are both wrong, instead of just one of them being correct?

Iran’s governance is an evolved form of Fascism, known as Theofascism. So long as the world’s diplomats and academicians ignore the ‘nature’ of the regime, they are certain to offer incomplete and incorrect advice. No form of Fascism participated in diplomacy without also secretly planning the eventual death of its interlocutor.

[Email comments welcome at: duoism(at)sbcglobal.net]

June 14, 2012

Italy’s EU ‘Death Spiral’

By Don Kirk in Economics, Socialism's "intellectual suicide"

Reporting from Italy where he’s been for the past three weeks–nice work, if you can get it–Doyle McManus has a column in today’s Los Angeles Times reporting on the economy in Italy. Clearly, not good news. Unemployment is rising to double digits and interest rates are rising as well. McManus reports that austerity in Italy is publicly more acceptable to Italians than it is to Greeks in Greece, but he should wait to report on actual polling data before launching his unofficial man-in-the-street report.

An actual poll would measure Italian sentiment after Italians learned about their recent role in bailing out debt-overloaded Spanish banks. Splitting metaphors, let’s see if we can say this succinctly, crediting the irrepressible Nigel Farage when he addressed this issue in a speech from the floor at the EU parliament yesterday.

Spain, like Greece, is in a full depression, while Italy is in a recession. Spanish banks have massive amounts of unpaid debt in their portfolios, the legacy of the boom and bust in Spanish real estate a few years ago. Since no private investor wants anything to do with busted Spanish banks, to re-capitalize the banks the European Union has promised to lend the Spanish government about $125 billion dollars. (cough, cough).

“Lend,” as in more debt! The commitment by the EU means that each member of the EU has to pay its share of the loan to Spain’s government, which will pass on the loan proceeds to the broken Spanish banks. Italy’s ‘share’ of the loan is 20%. The math is fairly easy. Busted Italy with no money and already too much debt has to borrow another $25 billion dollars to lend to busted Spain which is also swamped with too much debt. Italy’s cost of borrowing is roughly 5%, and it will lend to Spain at 3%, so exactly who pays the difference, and who pays off the original $25 billion?

Italian taxpayers! For private Spanish banks! The same private banks that Jonathan Weil in today’s Bloomberg Op-Ed pointed out have “cooked the books” for more than a decade, with EU blessing! Why did the EU permit the private Spanish banks to ‘cook’ the books, in violation of its own rules and regulations of European banks? Because the dishonest accounting was done in the name of ‘counter-cyclical’ planning, which just happns to be, coincidentally perhaps, a key feature of the arguments for Keynesian/Fabian Socialism economics.

But, but, who pays off the Spanish loan to Spanish banks if the banks go broke or are nationalized? Spanish taxpayers, on behalf of crooked Spanish banks!

It is impossible to borrow one’s way out of debt unless the return on the additional debt is greater than its cost. Neither Italy at 5% or Spain at 3% is in any position to afford more debt, since their growth rates (the “return” on the debt) is negative. No one can pay off 5% or even 3% interest with -2% return. The simple math undoes the socialist ideological agenda which argues that debt generates growth. The EU has both Spain and Italy on an economic “death spiral.”

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