Friday, September 09, 2005
I agree with those who say that the trouble these people have endured is a scandal and a terrible comment on race relations. No question about it. However, the discomfort caused means we have to wonder what is wrong with this picture.
Think about it. We are looking at a group of people who literally were unable to get out of town. Many of them may have no family ties outside of the city. Many have probably lived in a welfare culture for decades, born and raised. Such persons have been robbed of their basic human dignity. This is a group of people who have been socially engineered into passivity and helplessness. The possibilities for sociological study are astounding. How many of them have ever held a job, have ever left the city of New Orleans, have ever left their state, have ever drawn a check from any entity other than a government agency? How many have any family member in a position to help?
Once you consider it, this is an unacceptable existence for anyone and we should not settle for it. Before 9-11, we were hearing story after story of the amazing successes due to welfare reform. We heard about people who held jobs for the first time, people who had pride in accomplishing something on their own for the first time, and children who could view their parents as role models for living a broader life for the first time. We heard about former Clinton officials who resigned in protest over welfare reform and now strongly endorsed it.
We have got to get back to addressing this situation. The War on Poverty failed -- possibly made things much worse -- and we must once again get people out of this institutional lifestyle where they are so terribly encapsuled in hopelessness and passivity.It's time to bring welfare reform and school choice back out of the closet. We've seen the cost of not moving forward with a better solution.
Today I try to focus on the people who did the best job of all and started the earliest - the boys of our Coast Guard. They made us very proud with their performance in New Orleans.
And we must educate ourselves to what was, and what must never be again, by reading this horrific account by two other EMTs who happened to be at a New Orleans hotel for a conference when Katrina dropped by.
Thursday, September 08, 2005
But I fear the classical reference here is to the Myth of Sisyphus (well-appropriated by the modernist/failed sentimentalist Albert Camus) where the cosmically condemned pushes a boulder up a hill only to have it roll down the other side, ad eternum ad infinitum.
I consulted a really cool guy named Mortimer Adler on this and he had already given it some thought. (Like they say, read the whole thing.)
If we're going to get retro about it (there is an amnesia in the modern academy from Plato [c. 400 BCE] to the Enlightenment [c. 1400-1800 CE]), philosophy's first question, its First Thing, was to ask, "What is Good?"
In a Socratic dialogue, everybody hanging with Socrates was asking the same question. They had a common purpose. But this is not the case in 2000+ CE. We are all solipsists, each at the center of our own universe. To seek wisdom and the resonances of a higher moral order and purpose is no longer our joint enterprise. Everyman for himself.
Adler points out that the modern philosophical enterprise shuns First Things, metaphysics and the question of what is good, and skips to Second Things, science and empiricism, that which we can measure and prove, and epistemology, how we know that we know.
For those of us who seek those ineffable First Things (and the ancient Greeks and today's Buddhists did and do that, without the aid of "revelation"), the discussion of Second Things is kindergarten, and hardly worth the sense of occasion that vivifies those nights with that party animal Socrates and made them worth preserving for 2400 years.
I mean, the name of God is on the lips of every drunk, but a night with Sisyphus, even if you're trying to help, is a lot like work. A gathering of the Socrateans was always a party. Right now, The Reform Club's Second Things charity case is caught in No Man's Land, appealing to First Things even as he denies their existence. The question in the original post continues to beg itself---What is Good? That it can be asked at all provides its own answer. Good exists.
(This occasionally humble correspondent has been MIA of late due to illness in the family. My thanks for the gentle encouragement of those who wrote me, and to those who would have if they'd have known. Received good news tonight---recovery is coming, albeit slowly. I suppose that if my family were of the Peter Singer/Second Things mold, we'd have flushed her over dependence and quality of life issues. But she ain't heavy, she's my mother.)
Homnick is, of course, correct. PR is the Bush Administration's Achilles heel (like the attempt to use Armstrong Williams, the Uncle Tom's Uncle Tom, to promote "No Child Left Behind" to Black America). Karl Rove may be a consummate political operator, but he's no Dick Morris. Morris would have had a poll done before the first breeze stirred and a media blitz underway before the first raindrop reached the ground.
But it is essentially a failure, or let's say an imperfection, in Bush's own constitution; our quarterback has flaws and he fumbled this snap. Why?
Dubya won every "Least Likely To" poll until he experienced a spiritual conversion later in his adult life. Politics ended up seeking him out, rather than the other way around. He remains unpolished in the showbiz aspect of the game, unlike Bill Clinton, Al Gore, and John F. Kerry, who knew before they reached the age of majority that their destiny was the presidency.
Bush could no sooner say "I feel your pain" with a straight face than we could likewise listen to him say it. It just ain't him. His loss in his first election for Congress, where he put on the false skin of the Harvard-educated professional pol, made him resolve to never be untrue to himself again.
I've noticed that in our interpersonal relationships, we don't want the truth, we want to be handled. We want the other person to understand our vulnerabilities, and treat us accordingly. This isn't a bad thing; kindness and mercy, Aquinas' white lie as it were, are of higher moral value than truth. But our friends on the Loud Left to the contrary, for Bush to BS us is false to him, even if it is what we demand or even require.
And require it, we all do, and I mean that without sarcasm. Unfortunately, Bush is not up to that task. We are all faint of heart, and a little ill-founded optimism has turned the tide oftentimes in world history.
But this is a democracy, and a democracy of The Information Age. We shall each learn the facts on our own, and we shall each be responsible for our own spirits. If we are to believe the polls, this nation, or at least most of it, understands that. Good on us. Perhaps we're growing up after all.
In his latest article, he examines the likely contenders to replace Justice O'Connor on the Supreme Court. Miranda looks at three categories of judges, each having political pluses and minuses. The interesting thing is that he identifes numerous strong jurists who fit Bush's criteria for judicial philosophy and temperament, which means that political and confirmability considerations may well be a very large factor in the president's decision-making process.
Most interesting was the mention of three Senators who could do the job but would not fit the perceived need for an additional woman to be named to the Court with the current choice. Bush went outside the original expected candidates in previously choosing John Roberts for O'Connor's vacating seat, and a surprise candidate remains a possibility. The list Miranda compiles, however, is plausible, as are his comments on the candidates. Read it here.
So, let's work it out. The basic allegation by Tlaloc seems to be that the tobacco companies have immorally lied for profit and have sold an addictive drug for profit. The basic rules being put forth seem to be:
1. It is wrong to lie without a compelling justification (such as to save a life -- e.g. lying to the Nazi S.S. about the Jew hiding in your closet). Lying for mere monetary profit is particularly bad.
2. It is wrong to subject others to the harm of unhealthy addiction for the sake of personal enrichment. It is further wrong to lie about the fact that one is doing that.
Now, here's the money question. Why wouldn't these rules stand up as universal moral values? When would it ever be right to lie for profit without any compelling justification? When would it ever be right to subject others to addiction for no better reason than to get rich?
Tuesday, September 06, 2005
Well, my wife prevailed upon me to see The Constant Gardener this weekend. How can I say this gently: Don’t waste your money. A new tuberculosis strain is wreaking havoc across Africa, you see, and a corrupt pharmaceutical firm has developed an effective treatment that, sadly, has the unfortunate side effect of killing many of those taking the drug. We know this because UN aid workers in Kenya, using only the most rigorous of statistical analytic tools, say so. And so the poor Africans killed by this drug are secretly buried in lime pits, while the official records of their lives are expunged. Only Soviet-style airbrushing of photos failed to have been included. Meanwhile, the starlet---Ms. Rachel Weisz, aka Tessa Quayle in the film---learns that the evil pharmaceutical firm, aided by some corrupt British officials, is covering up the obvious evidence of the drug’s deadly effects because fixing the formula would cost millions and take considerable time, during which the firm’s competitors could create their own effective drugs that would not kill people, thus cutting into the corrupt firm’s profits, etc., etc. And this perfidy makes sense because the epidemic is likely to spread worldwide, creating a large demand for the drug, and suppression of the deadly side effects will guarantee a huge market in Asia and the West. It’s all about the money, you see.
Got that? Anyway, the evil pharmaceutical firm through its allies in Kenya arranges for the murder of the fair Tessa and her ally, a Kenyan doctor both humanitarian and seemingly the only man in the country both unpoor and uncorrupt, before they can expose the plot. After all, that is not the kind of direct-to-consumer advertising that sells medicine. And so Tessa’s loving husband Justin picks up the torch, exposes the evildoers for what they are, and then allows himself to be murdered by the same nefarious forces so that he can be together again with his beloved Tessa in heaven. Who says that Hollywood is not religious?
Well, if Big Pharma is motivated only by money, why would they expose themselves so crudely to the plaintiff’s bar in the West? After all, people would start dying in the West also; can we even imagine the sums that the juries would award in such cases? And would the FDA and the other regulatory agencies in Europe simply accept the results of such African “clinical trials?” And what about the brand name capital of the offending pharmaceutical firm? Does it not have a profit motive to protect it by marketing only drugs the benefits of which justify the downside risks?
This flick is so silly—-so Michael Moore-like in its excess and mendacity—-that the pharmaceutical industry has little to fear from it in terms of adverse p.r. It’s good thing, as Martha might put it, when those out to destroy capitalism prove themselves so crude.
Whenever you're upside down on a car because you owe more than it is worth, the cure-all is to literally drive your way out of it by keeping the car until the loan balance falls below the market value. Be prepared to do the same with a new-home purchase. If your feeling is that you're going to move in three years, it is time to make plans for other contingencies. Can you afford a mortgage that offers a fixed rate for a longer period, such as a 10/1 ARM or a 30-year fixed-rate mortgage? If not, continue renting. The transaction costs of buying and selling are steep, and any downturn in price over such a short holding period will clobber the unsuspecting buyer.
The home is first and foremost where you live. Get past the "my home is an investment" mentality to protect against the bursting bubble. The home is indeed an investment, but a long-term investment.
I think that the idea of paying off principle as quickly as possible is vitally important. If, when you find that you must or strongly wish to sell your house, the rise in value turns out to be less than you might have hoped, you will benefit greatly by having real equity built up. Shorter terms, such as ten or fifteen years, are much better than longer ones, as you pay the financing institution much less in interest, which means that more of your money is going into buying the house instead of renting money. In addition, stay away from adjustable rate mortgates, as the article warns (in contradiction to Fed chairman Alan Greenspan's advice), as they cause you to have to pay the most when the value of your house is rising most slowly or declining
Some people can make a nice profit by buying a scrotty house, fixing it up, and selling it at a profit, but that is not the same as riding value waves. The former is real investment, whereas the latter is speculation. One can succeed at the latter, but it is dependent more on luck than on skill. A real investment is one that a person puts work into.
Monday, September 05, 2005
from The Public Interest, Fall 1978:
“Reality in One Lesson”
The marvelous audacity of the title The Way the World Workswill attract some, repel others. Amazingly, it is appropriate. This actually is an attempt to explain political and economic events throughout the ancient and modern world in terms of a manage-able number of general principles. Even more remarkable, this heroic effort is frequently successful-illuminating many of the mysteries of history, from the decline of Rome to the stock market crash of 1929 and today's global stagflation.
The book is deceptively easy to read, which may cause those who associate economic wisdom with impenetrable prose mistakenly to interpret its clarity as a lack of depth. As his unsigned Wall Street Journal editorials attest, Wanniski is a master of illustration, and each piece of the political-economic model he propounds is carefully interwoven with folksy examples, then amply documented with rigorous historical evidence.
Wanniski's economic model is simply brilliant and brilliantly simple. The starting point is to examine the supply side of an economy -to ask what motivates people to add to the quantity and quality of marketed goods and services. The answer builds upon a broad definition of work as a complex combination of physical and intellectual effort. Most work is in the barter economy-housework, do-it-yourself projects, trading tasks with family or friends. Smith the carpenter and Jones the plumber will exchange services with each other in the marketplace only "when it is easier to trade their work for somebody else's in the public economy." Otherwise, Smith will fix his own sink and Jones his own kitchen cabinet, each thus depriving the other of a job.
There are enormous efficiencies in specialization and additional gains from using money to expand the scope of possible exchanges within, and even beyond, national boundaries. But entering the public economy to specialize makes the transaction visible and therefore subject to government taxes, tariffs, and regulations. When the government imposes too heavy a burden on transactions in the public economy, people drop back into the inefficient private barter economy (friends, "do=it-yourself," and casual labor for cash), or they substitute leisure for taxed income.
This brings us to the "wedge model," attributed to Professor Arthur Laffer of the University of Southern California, which explains how a variety of taxes and regulations form a wedge between what employers pay for workers and what employees ultimately receive in after-tax income. Reducing this wedge makes it cheaper for employers to offer jobs and more lucrative for employees to accept and retain jobs. A similar wedge between what business pays for capital and what suppliers of capital (investors) ultimately receive in after-tax income reduces savings, investment, and economic growth.
According to Wanniski, the practice of taxing additions to income at sharply increasing rates-the progressive income tax-has a particularly demoralizing effect on personal effort and specialization. "Workers now have less incentive to become skilled workers or foremen, foremen have less incentive to become salespeople, sales-men have less incentive to become managers, and managers less incentive to become entrepreneurs." This effect has been com-pounded by inflation, which pushes unreal increases in incomes into higher and higher marginal tax brackets, thus discouraging supply and producing the apparent paradox of "stagflation."
"The only way government can increase production," concludes Wanniski, "is by making work more attractive than non-work." The Soviet Union accomplishes this task with the least generous welfare, retirement, and unemployment benefits in the civilized world. They use the stick to replace the carrot. Western countries, however, have tended to forget the stick and tax the carrot with policies that discourage work and subsidize non-work, with the predictable result that we are getting less effort and more "leisure."
The most famous illustration of the model, the "Laffer Curve," rests on the crucial distinction between tax rates and tax revenues: "There are always two tax rates that yield the same revenues." A zero rate yields zero revenue, and so does a 100-percent rate (be-cause the taxed activity would cease). Between these extremes lies an optimal point "at which the electorate desires to be taxed." Raising tax rates beyond that point lowers both the public economy's output and the government's revenue. The optimal tax rate can be very high during war time, but high rates at other times will normally generate wholesale tax evasion and a reversion to inefficient, unspecialized barter.
A chapter on the Crash of 1929 meshes the theory with some truly original historical research. The stock market always reflects the best available information about the future course of the economy, Wanniski argues, and therefore could not have been grossly overpriced at the 1929 peak. The market's fall must instead have reflected a previously unexpected increase in the political cost of doing business (the "wedge").
Treasury Secretary Andrew Mellon emerges as the principal political hero of the book for slashing back the income-tax rates several times from 1921 through 1929 (rates ranged from 4 percent to 73 percent in 1920, 0.4 percent to 24 percent in 1929) while simultaneously running budget surpluses. The much-maligned Coolidge era provided five years of 3.5-percent unemployment and 0.5-percent annual inflation-a combination that is impossible in Keynesian theory (especially with budget surpluses), and certainly unmatched in Keynesian practice.
If the Coolidge tax cuts were such a successful application of Wanniski's model, what brought on the market's crash? By sifting through newspapers of the day, Wanniski demonstrates beyond reasonable doubt that the stock market crash of 1929 ensued be-cause of the growing likelihood of passage of the Smoot-Hawley Tariff Act of 1930. A domestic tax is "a wedge between the trading of Jones and Smith. The tariff is a wedge between the trading of Jones, a national, and Schmidt, a foreigner. The effects on commerce are precisely the same."
To make matters worse, income taxes were increased again and again during the 1930's (ranging from 4 percent to 79 percent by1936), and became particularly punitive toward people worth high incomes by virtue of their ability to add value to enterprises. The politics of the day liked employment but hated employers, a situation that wasn't really improved until another of the book's heroes, President Kennedy, cut tariffs and slashed tax rates (from a 20-percent to 91-percent range to a more moderate 14-percent to 70-percent range), while simultaneously reducing Federal spending and borrowing.
Wanniski goes too far, however, in denying that the collapse of the banking system and the related destruction of a third of the U.S. money stock had any effect in prolonging the Great Depression. "If prices could have risen by one third," he says, "there would have been no need for the banking collapse." But it was the banking collapse that produced the falling prices, and it could have been prevented.
Those of us who have labored under the accusation of employing "19th-century economics" will enjoy Wanniski's clever uses of 18th-century, classical economics to browbeat the current intellectual fashions.
Marx is accused of a fixation on economic contraction, which requires "submerging individualism into collectivism, because it is the untrammeled individual who is viewed as driving the capitalist system toward overproduction, boom and bust." Each worker is supposed to work harder in Marxist economies simply because of the ideological promise that others will do the same.
Like the Marxist model, says Wanniski, the Keynesian model is primarily a rationale for redistributing income (sharing misery) during periods of economic decline. Keynesian theory rests uneasily on "bond illusion"-people's presumed failure to recognize that an increase in government debt must require higher taxes in the future to repay or pay interest on that debt. Deficit spending just replaces present taxes with future taxes, and people will not "work for bonds, under the illusion that they can be exchanged for real goods."
If Keynesians base their theory on "bond illusion," monetarists stand indicted for peddling "money illusion"-"the notion that people will work for `money' as a form of wealth, whether or not there is anything that money can buy." Some monetarists do argue that an unanticipated inflation can briefly reduce unemployment (because prices rise faster than wages), but only until adjustments are made. Indeed, the "rational expectations" school of monetarism even goes further than Wanniski in denying illusion, since Wanniski remarks that "creditors suffer and debtors benefit by an unanticipated switch in coin by the government." If lenders never suffered even temporary money illusion, then interest rates would always be high enough to compensate for any loss of purchasing power.
The real problem, of course, is long-term contracts in a changing world. If employers agree to pay 10-percent annual wage increases for three years in the expectation of being able to raise prices by 7 percent a year, a lower than anticipated monetary inflation will toss them into a cost-price squeeze, requiring layoffs. Imperfect foresight isn't really a matter of illusion, as Wanniski suggests, any more than the stock market suffered illusion in 1929 before the news about tariffs changed so quickly.
In Wanniski's model, it would apparently make no difference if there were a 100-percent inflation one day and a 100-percent deflation the next, except insofar as it distorted the tax structure. All prices and wages not only adjust to changing money growth, but do so evenly and instantaneously. Expectations are not only rational, in the sense of incorporating each day's best information, but also perfectly correct in anticipating future policy shifts. This is a useful simplification for some purposes, notably in drawing attention to the real factors that ultimately determine long-run economic growth, but it is not sufficiently precise to erase even temporary links between money, spending, and production.
If there is a prime villain of the book, a Darth Vader, it must be Professor Nicholas Kaldor of Cambridge University. Kaldor has been a principal exponent of the notion that developing nations must impose draconian taxes in order to extract the "savings" to finance grandiose government "investments" (uneconomic steel mills and other monuments).
Wanniski traces the Kaldor theme back to mid-19th-century India, where British railroad builders plied their trade at the cost of an onerous debt burden on Indian taxpayers. Economic imperial-ism is thus nearly defined as "the exploitation of the underdeveloped world by pushing it beyond its capacity to develop, in the process burdening the masses of people in the Third World with indebtedness and taxes."
Wanniski's documentation here is devastating. We find that be-fore recent tax cuts, taxpayers in stagnant Asian countries faced 65-to 75-percent tax rates on incomes of around $7,000. In the booming Ivory Coast, marginal rates stop at 37.5 percent above $20,000, while in the similar but sluggish economy of Ghana tax rates hit 75 percent at $12,500. Anyone can pick the most troubled economies out of an extensive list by simply looking at the steepest taxes.
Economics in the real world is rarely divorced from politics, and what links the two, according to Wanniski, is the electorate's understanding of economics, which is acquired from childhood through dealings with others. "The only way an economist can know something his fellow human beings do not ... is if people them-selves do not know why they produce, distribute, and consume." It is one thing, however, to demonstrate that people understand their own economic circumstances, and quite another to claim that the electorate possesses the sorts of analytical skills and economic information needed to make political actions conform to their shared interests. Because each vote carries little weight, voters have no incentive to be as well-informed about politically determined economic issues as they are about something that affects their interests directly (such as the choice of employment or stereo components).
Some decisions nonetheless do have to be reached by political consensus: "When four people go out to dine, the wine selection requires a political decision because four tastes must be satisfied with one bottle." To solve such problems on a larger scale,the global electorate is seen pushing, at every opportunity, in the direction of systems capable of producing superior politicians. This political process has as its ultimate aim a solution to the basic economic problem that for all time has confronted the global electorate, which is the tension between income growth and income distribution.... No individual can possibly be as wise as the electorate, the consensus, in discerning the preferred tastes of all the individuals who compose the electorate.... [Every election] is the optimum reflection of the national or local interest, given the choices available to the electorate.
People know what they want, and cannot be induced to want something else, but that is not to say that politicians are not some-times mistaken or misled about the electorate's desires. When politicians lose touch with the people, the electorate is forced to find ways outside the normal political process to communicate with the politicians: revolution, religion, nationalism, and even, at times, assassination.
Unfortunately, Wanniski fails here to differentiate adequately among kinds of political action, and is left therefore with a formulation that amounts to saying that what is not upheaval is contentment.
These strained simplifications of political life are best illustrated by Wanniski's curiously charitable view of the Soviet Union's "democratic experiment." Communist systems apparently have the sup-port of their electorates, Wanniski says, "for if they did not we would expect to see more visible signs of internal dissension." But that is why such systems nationalize the means of dissent (news-papers, television, guns), so it is very difficult for outsiders-and even for other citizens-to see "visible signs" of dissension.
Wanniski's economic lessons appropriately concentrate on the political barriers to trade-tariffs and taxes-that diminish the market's efficiency in producing what is wanted. His analogy between political and economic markets would be greatly improved if it were likewise explicitly acknowledged that there are particularly formidable barriers to political "competition." These barriers make political decision making inherently less competitive and efficient than voluntary market transactions.
Still, the book offers quite a lot of anecdotal evidence that following the Laffer/Wanniski economic model is good politics-even given the great dissimilarities in traditions and expectations among people of different nations and cultures. Those who overtax the people eventually lose power, one way or another. In this sense, the political model may help to explain how the electorate pushes, albeit glacially, toward responsive government. For in the end, governments can't distribute goods and services that are not produced, or tax transactions and activities that do not take place. Production depends on the quantity and quality of work and capital, which, in turn, depend on the after-tax real rewards to productive effort and investment. When the creation and spending of money outrun production, you just get inflation. Government debt is not a source of real wealth. If The Way the World Works did nothing more than push a handful of political entrepreneurs toward such fundamental realities, as it already may have done, it would rank among the most influential books since the 1930's.
When this was published in 1978, Alan Reynolds [now a senior fellow at the Cato Institute] was Vice President of the First National Bank of Chicago, and editor of First Chicago World Report.
Sunday, September 04, 2005
Of course it helps that she is unbelievably wealthy, since she received a percentage of The Simpsons in her divorce from its creator, Sam Simon. Still, that may make you a cooler bettor, but you can't be a consistent champion like this without spectacular skills.