Street Light Economics

It is dark. Jim is looking around under a streetlight.

Frank:  What are you looking for?
Jim:    I lost my keys up the street a way.

Frank:  Why are you looking for them here?
Jim:    The light is better here.

This is a funny comment on human nature. The tragedy is that this type of thinking rules our political and policy world. It is the problem of the seen and unseen. Politicians and economists report in official tones about their measurement of what is under the light, when there is a big, complicated world in the darkness. They should know better

Prosperity and Vacations

Suppose that a Prof  (Professor of Economics) studies past spending on vacation travel and lodging, and finds that periods of higher income are definitely associated with higher spending on vacations. The Prof has assembled the data with statistical precision.

So, the Prof proposes to raise everyone's income and end a recession by requiring that people use their savings to spend more on vacations.

He says that this will increase GDP directly (Gross Domestic Production), and vacation spending was associated in the past with even larger gains in personal income. He calls this the "Vacation Spending Multiplier". Everyone will become wealthier when they buy more vacations.

That advice would be crazy.

A cushion of savings gives people some flexibility in uncertain times when they might lose their own job. Yes, spending more on vacations would temporarily employ more people. But, at the end of the forced spending, those other people would again lose their jobs, and the buyers would have spent their savings. They would only have some nice memories.

The Prof has completely confused cause and effect. People buy more vacations when their income increases. More vacations is not the key to building the wealth of society.

Prosperity and Government Spending ...

Prosperity and Government Spending

Instead, the Prof  (one of many government economists) reports that past periods of increasing personal income highly associate with increasing GDP and higher government spending. The Prof has assembled the data with statistical precision.

So, the Prof proposes to raise everyone's income and end this recession through massive government borrowing applied to massively higher spending.

Not only does this increase GDP directly, but it has associated in the past with even larger gains in personal income. The Prof calls this the "Government Spending Multiplier".

The Prof says that everyone will become wealthier when they indirectly buy more of anything through the government.

That policy is crazy. That is our current policy.

Yes, spending more on government bureaucracies, planning meetings in Hawaii, and filing cabinets has temporarily employed more people. But, at the end of the forced spending, those other people have again lost their jobs, and the people of our country miss their savings. They don't even get a nice memory of a vacation.

The Other Guy

The public is truly doing the buying, because it will have to pay back the government loans from the economy created from that extra spending. Additional sidewalks, filing cabinets, and regulations do not support producing more things that support people's lives.

You may think that the other guy, the rich guy, is going to pay back the loans, so why worry?

• The amounts are so large that the politicians are coming after you through innovative taxes.
• Even if the rich pay an outsized portion, that comes from money that they would have invested in things that produce more opportunities for jobs. They are only trying to make a profit, but they will want to hire you along the way. More businesses produce a long-lasting need for more workers and managers.

  Government borrowing has a temporary effect and wastes resources. It is unsustainable at the current, massive levels.

• The government may convince the rich that they can't gain anything personally from investing. So, they will stop, and go on vacation. OK for them, bad for you.

Professionals

I might forgive Jim above for looking only under the light. He might figure that he has no chance of finding his keys in the dark. He is an amateur.

But, people who call themselves economists claim to have studied the situation. They claim to be experts about the dark. They should know the probability of finding those keys. They should be expert at presenting just what is seen and unseen, known and unknown.

Instead, they crunch statistics about past events, ignore the uncertainties, mash together the complexities into simplistic measures such as GDP itself, and recommend policy based on the numeric results of untested (and often unverifiable) "models". Not all economists, but almost all who advise the government.

A Choice

We mistakenly trust in supposed experts who bask in the precision of their statistics. Yet, they measure only what is under the light, and then recommend using government force to guide the public through the darkness.

We are going to face a world-wide breakdown caused by governments printing money, borrowing wealth, and wasting it. Immoral and ignorant politicians have failed to provide the utopia promised to a gullible public. The outcome will depend on what the populace comes to believe.

Some politicans will say that this is another stage in the collapse of Capitalism, unable to be restrained by a caring government.

Or, people may see that government was in control, printed the money, borrowed the wealth, and failed miserably. Maybe, as after WWII, the people will reject goverment plans and promises and cut the power of government. Another prosperous period of growth and power like the 50's and 60's would follow.

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Spending did not end the Great Depression
Reduced spending and lowered tax rates did it.

[edited] What happened in 1945 at the end of WWII? FDR was convinced the only way to employ the 12 million returning soldiers was another New Deal program, but he died before he could impose his plan. The new President Truman proposed it, along with national healthcare.

Both the Congress and Senate had Democratic majorities. They said "No" to the whole New Deal revival:  no federal program for health care, no full-employment act, only limited federal housing, and no increase in minimum wage or Social Security benefits.

Instead, Congress reduced taxes across the board. Top marginal corporate tax rates effectively went from 90% to 38% after 1945.

By the late 1940s, a revived economy was generating more annual federal revenue than the US had received during the higher tax rates of the war years. Price controls ended in late 1946. The US began running budget surpluses.

Unemployment had remained double-digit throughout the whole New Deal. One year after the end of New Deal policies and the return of economic freedom, it was under 4%,  despite the return of a huge number of soldiers.

Bankruptcy of the West

Official:  The government offers a great life. I get a good salary and very nice retirement benefits, including lifetime healthcare.
10 Year Old:  Dude, whatever.

The West is bankrupt. The solution is to declare bankruptcy. People were stupid to loan resources to their governments, and they will receive the usual reward for their stupidity.

The meaning of government debt is that governments have taken real, current resources and have applied those resources to whatever is now built. Almost all has been wasted, building the wrong things in the wrong places, or building nothing. Politicians have nice houses by lakes and on beautiful hilltops. That is all.

Let the people who bought government bonds take the loss. Sorry, they should have looked into the plans and the planners before entrusting their wealth to those guys. Investing with crooks will always result in losing your wealth, especially when those loans are promoted as "riskless". Their only expectation of repayment was by the use of government force to extract higher taxes from the populace. That expectation was ruthless and immoral.

Bill the children ...

Don't come to me, or my children, or anyone's children and say that the politicians were acting on their behalf, so they must be bond slaves and return the stolen wealth to the oh-so-trusting baby boomers who lent that wealth to the government.

If you say "rule of law" to me, I will reply "rule by liars and thieves", trading wealth for votes to remain in power. The rule of law will recover only when rule by thieves is outlawed in the common mind. Unfortunately, collapse is the only way that the organized theft will stop.

The dictator Idi Amin stole billions from loans to Uganda made by international agencies. Most of this debt was written off as worthless, because no one in good conscience could enslave the people of Uganda to pay off debts extended to a psychopathic criminal who ruled their country.

US politicians do not always show the psycopathology of Idi Amin, but they have been quite effective in stealing the wealth of our society. The willing participants were the bond buyers.

Most of the public collected some of that borrowing and stealing. That wealth cannot be recovered. Possibly there are some nice houses on lakes and hills which can be recovered, houses paid for by malfeasance in office.

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Obamacare Bails Out Medicare

The government is ending the free market in healthcare. Our policy makers have already designed a system of price controls that doesn't work. Their next plan is to cover up this failure by blaming "the market". The market is short for the freedom of people to produce and cooperate among themselves, always delivering value and achieving efficiencies that government cannot match.

That freedom is what the government has taken and is taking away, in favor of higher hidden taxes and rationing. Our leaders have been buying votes with lavish promises of what the government will deliver. Their plan is to put us all in one boat, then make us pay for their promises to prevent the boat from sinking.

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Downgrading the West
03/09/12 - OpenMarket by Matt Patterson

[edited]:  The government has been spending our wealth for decades. First everything we made, then everything we are ever going to make, and now everything our children and their children will ever make.

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The Real Federal Deficit
05/18/12 - USA Today   (via Dinocrat)

[edited]:  The typical American household would have paid 85% of its income in taxes last year to balance the budget, if the government used standard accounting rules.

Standard accounting gives a deficit last year of $42,054 per household, nearly four times the official number. Median income is $49,445.

The official deficit was $1.3 trillion ($1,300 billion). Liabilities (future promises) for Social Security, Medicare, and other retirement programs increased by $3.7 trillion, for a total of $5 trillion.

Standard accounting used by companies, states, and local governments must include retirement commitments. Congress ignores them when reporting the deficit.

The total wealth (Gross Domestic Product) created in the US in 2011 was about $13 trillion ($13,000 billion).   ( A trillion dollars on display. )

In proportion by wealth, if a family earned $50,000, that would be like borrowing and spending $5,000, and also promising to pay an additional $14,250 to the parents when they retire. All in one year.

Do you think that the parent's retirement is secure? Will the children pay?

The Systematic Organization of Hatreds

Assistant:  We won! Now we can accomplish some good things.
Senator:  And, punish our enemies.

Economics usually studies the gains from cooperation. People and businesses usually cannot force others to serve them. They must offer beneficial, voluntary arrangements.

Politics distributes power. It is not surprising that politicians use that power not just for the good, but to punish their competitors, their "enemies", and anyone else they may dislike. Who is going to stop them?

The Systematic Organization of Hatreds
05/05/12 - The Beacon by Robert Higgs [edited]

Democrats and Republicans are but two wings of the predatory government that rules the United States. Why does their feuding reach such vitriolic extremes? Despite their similarity of fundamental positions, they are somewhat different sorts of people and tend to dislike and sometimes despise one other. Although inclined to conspire and cut deals, they also represent their supporter's hatreds.

When we move some decision from private life into politics and government, we will likely move it from a world where hatred is incidental and avoidable to a world in which hatred is central and inescapable.

A government imposes one rule and one outcome on everyone. The hatreds within that outcome become infused throughout the society. We live in a politicized world fashioned in large part by those organized expressions of hatred.

Small wonder that some of us view the entire apparatus of politics and government as the living embodiment of evil.

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EPA Official explains his "crucify" enforcement policy

[edited]  In a 2010 video, EPA Region VI Administrator Al Armendariz explained his philosophy of enforcement to his staff, which he acknowledged being crude and perhaps inappropriate, but shared anyway:

It is kind of like how the Romans conquered villages in the Mediterranean. They’d go into a Turkish town, find the first five guys, and crucify ‘em. That little town was really easy to manage for the next few years.

You make examples out of people who are not complying with the law. You hit ‘em as hard as you can. There’s a deterrent effect. And companies that are smart see that. They decide that it’s time to clean up. And that won’t happen unless you have somebody out there making examples.

This might be excused if the EPA were enforcing a few laws with clearly beneficial results. But, this is the EPA enforcing thousands of vague laws, most with huge costs and imperceptible results.

Waiting for Oil

Fred:  I wish we had half as much oil as Saudi Arabia.
Mike:  Shhh. We do, but it's illegal.
Fred:  I suppose what we don't know won't hurt our politicians.

Proven Oil Reserves

Worldwide "proven oil reserves" is a very restricted definition. Even those reserves have been expanding as technology has improved and as the oil price has stayed high. There is no "peak oil" on the horizon.

Saudi Aramco is the world's largest oil company. Radford by Bill KovarikIts CEO said in 2006:

[edited]  There are more than 4.5 trillion barrels of potentially recoverable oil, 140 years at our current rate of consumption. The world has consumed about 18% of conventional oil potential. That fact alone should discredit the argument that peak oil is imminent, and put our minds at ease concerning future petrol supplies.

US proven oil reserves are defined by US law as oil in the ground which can be recovered under current  prohibitions and regulations. For example, Alaskan ANWR oil is not included, as its development is not allowed.

US Energy Information Administration

EIA defines proved reserves as those volumes of oil and natural gas that geologic and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions.

North America Radfordhas 400 billion barrels of recoverable oil with current technology. That is one-half of the 800 billion barrels in Saudi Arabia, if there were more reasonable regulation.

The US consumes 21 million barrels/day.  400 billion barrels at that rate would last 52 years. That is plenty of time to develop new technologies without turning our lives over to government energy controls.

Time to Market

The time needed to develop new US oil is commonly reported as 10 years. Yes, under those same regulations.

Less than ten years to develop offshore oil if regulations were modified
July 2008  -  Next Big Future

[edited]  Monica Showalter at Investors Daily proposes that California's 10 billion barrels in offshore oil could be brought to market in as little as a year if the moratorium were lifted. The oil is under shallow water and drilling platforms already exist.

The time offered to develop oil resources includes regulatory delays. It is not an engineering limit of technology. The Gulf of Mexico offers an example. There is a dramatic slowdown in approvals in an area which has had oil development for 50 years. This followed a large accidental spill which was remediated by the BP oil company. The extreme slowdown is not required as a technical response to prevent future spills.

Regulations Delay Revenue, Jobs, and Oil Supplies
07/22/11 - Rigzone

[edited]  The permit moratorium in the gulf of Mexico ended October, 2010. The federal approval process has not returned to previous levels in the following six months.

• 86% fewer approvals/month for plans.
• 38% more time needed to approve plans.
• 2.5 times greater backlog of deepwater plans pending approval. It was 18 per year, and now is 67 per year.
• 60% fewer drill permits (combined shallow water and deepwater).

When you want to fool the peasants public about possibilities in life, write a regulation and only report what is possible under that regulation, no discussion needed.

More About Oil Prices and Speculators ...

Oil Supply and Speculation

Is Obama Responsible for High Gas Prices?
03/10/12 - EconLog by David Henderson

[edited]  The primary reason for the increased price of gasoline is the price of oil in the world market.

People are nervous about war with Iran, which would likely cut Iran's production. The world uses 90 MBD (million barrels per day) and prices are inelastic. Cutting supply by just 1 MBD (1.1%) would raise the market price by about 10%. Speculators anticipate this, bid up the future price, and the current price follows upward.

A price is "inelastic" when small changes in supply produce large changes in price. The world already conserves oil by applying it almost entirely to productive uses. Living patterns are established, and people must get to work, manufacture products, and have heat and hot water. It takes a large change in price to cause people to use less oil.

Higher US oil production would shift oil costs lower. Obama talks about US oil production as being an insignificant fraction of world production. He is correct that oil prices are determined mostly by world production, and incorrect that our production doesn't matter.

The US could easily produce 1% to 2% more of world production, which would lower prices by 10% to 20%. This competition at the current price would remove pricing power from big producers such as Saudi Arabia, Russia, and Iran. They would lower their expectations, set lower long term prices, and increase planned production.

Is 1% insignificant? Consider that 1% for a full-time worker is 2.5 days of additional paid vacation.

Oil Prices
04/07/08 - Economist Robert P. Murphy

[edited]  The demand for oil is unpredictable. This partially explains record-high oil prices.

The major oil companies in the 1980's and 90's underestimated the economic growth 25 years later in countries such as China and India. The necessary infrastructure was not in place to comfortably meet the increase in oil consumption. So, spare capacity margins have become extremely narrow, leading to price spikes.

The major oil companies are all owned by foreign governments. Exxon is a bit player in that world. Does it reassure you that our government has hindered US oil development for those 25 years? High oil and gasoline prices are a predictable result of government refusal to allow expanded US oil production.

Are Oil Speculators Bad or Good?
08/04/08 - Economist Robert P. Murphy

Many companies want to arrange for the delivery of oil to them in the future. This is agreeable to oil producers who want to "lock in" a sale today, to cover their expenses producing that oil for future delivery. The collection of these contracts is the Oil Futures Market. The public prices of these contracts allow anyone to estimate or guarantee what their oil will cost for some time into the future.

Every contract specifies actual delivery of the oil. "Speculators" are companies or people who buy or sell such contracts without having any means for either producing or receiving that oil. They expect to hold these contracts and sell them back into the market for a higher price at some time before they would have to take actual delivery (or produce the oil). If they are wrong, they must "unwind" their position at a loss.

[edited]  Have speculators "artificially" driven futures prices far above the level justified by fundamentals? We don't see indicators of this, neither higher futures prices nor large increases in stored oil inventories. Oil prices have been lower in the futures market for much of the run-up in prices, and commercial oil inventories in the United States have hovered in a stable range for a decade.   (Talk like a traderWhen the future price of oil is higher than the current "spot" price, the market is "in contango". When the future price is lower, the market is "in backwardation".).

Say that we knew that speculators were responsible for a huge increase in oil prices to $140 per barrel. Ironically, there would be a good case for saluting their behavior!

For example, people fear that Israel may bomb Iran, and Iran will cut off exports and mine the Strait of Hormuz to block tanker traffic. Spot oil prices (outside already arranged contracts) might then exceed $400 per barrel. People would then be grateful for large inventories that had accumulated because of the speculative increases in prices, and grateful for the conservation that $140 oil had enforced in the months before the war.

Free-market economists understand the beneficial role that prices play in smoothing out production and consumption. This role holds true for futures prices and the allocation of resources between present and future uses. True speculators ensure that futures prices are as accurate as possible, so futures prices coordinate production and use as effectively as possible.

People risking their own money have the highest incentive to apply their knowledge correctly. If you do not have knowledge about oil production, delivery, and demand, then you had better not buy or sell those contracts. If you do have fundamental knowledge, that market is the best mechanism for collecting your knowledge and paying you for sharing it, to all of our benefit.

The futures market of participants and speculators collects the best information about how to balance current and future supply, demand, risk, and reward.

Raise Tax Rates - Collect Less

High Official:  Our deep and nuanced understanding of reality gives us the duty and privilege to plan, invest, and guide our society. We must collect more resources, and so we will raise tax rates.

Assistant:  Rates are quite high now, sir.
Official:  We will set them higher.

Assistant:  We will almost certainly collect less revenue and injure economic growth.
Official:  That doesn't feel right. How could that be? I don't believe it. What fun is there in not raising rates? That is one nuance too far.

Why Doesn’t Obama Realize that Higher Tax Rates are All Pain and No Gain?
02/27/12 - by Dan Mitchell

[edited]:  Higher tax rates cripple growth and drive more people into the underground economy.

Even the International Monetary Fund agrees in this analysis of the Greek economic situation. At some point, tax rates become so punitive that the government collects less revenue. A remarkable admission. IMF Survy Online, December 16, 2011:

[edited]:  Reducing the Greek deficit is going to be hard without structural spending reforms. Their deficit will be 9% this year, well above their target of 7.5%.

Thomsen: "We have reached the limit of what can be done by increasing taxes. Any further measures should be done by reducing government spending."

Obama's Tax Priorities, The English Experiment, and the Bankrobber Willie Sutton as Leftist Theorist ...

 

Obama's Tax Priorities

Obama on Taxes - 12/16/10 - American Thinker by Allan J. Favish. Obama wants to raise the capital gains tax rate.

Transcript of the April 16, 2008 debate between Barack Obama and Hillary Clinton, moderated by Charles Gibson. [edited excerpt]

Gibson:  You favor an increase in the capital gains tax. You said on CNBC,  "I certainly would not go above what existed under Bill Clinton."

The capital gains tax is now 15%. It was 28% under Bill Clinton, almost double what it is now. Actually, Bill Clinton in 1997 signed legislation that lowered the capital gains tax to 20%. And George Bush has taken it down to 15%.

Obama:  Right.

Gibson:  In the 1980s, when the capital gains tax increased to 28%, revenues went down. And in each instance when the tax rate decreased, revenues from that tax went up and the government took in more money.

So why raise it at all, given that 100 million people in this country own stock and would be affected?

Obama:  What I've said is that I would look at raising the capital gains tax for purposes of fairness.

We saw an article today that the top 50 hedge fund managers made $29 billion last year. But, they are paying a lower tax rate than their secretaries. That's not fair.  [And not correct] Click, then see the entry "Rich Pay Higher Tax Rates Than Secretaries" at the upper right.

Economist Mark J. Perry:  The US federal income tax is highly progressive. Warren Buffett is wrong in his "analysis" of tax rates on himself and his employees.

Most secretaries would pay a federal tax rate averaging 9-12%. Most "super-rich" bosses with incomes of $200,000+ would pay a tax rate averaging at least 25%, about three times the average of their secretarial staff. If you include payroll taxes on everyone, the super-rich are paying at twice the average rate of secretaries.

I do not want oppressive taxation. I want businesses to thrive, and I want people to be rewarded for their success. But, I also want our tax system to be fair, and to finance health care, and to invest in infrastructure and schools.

You can't take out a credit card  [borrow massively]  from the Bank of China in the name of our children and our grandchildren, and then say that you're cutting taxes.

I believe that you pay as you go. You don't propose tax cuts unless you are closing other tax breaks for individuals. You don't increase spending unless you are eliminating some spending or you are finding some new revenue. That's how we got an additional $4 trillion worth of debt under George Bush which is helping to undermine our economy. This is going to change when I'm President of the United States.

Gibson:  But, history shows that when you drop the capital gains tax, revenues go up.

Obama:  Well, that might happen, or it might not. It depends on what's happening on Wall Street and how business is going. The biggest problem that we have on Wall Street is that we have a housing crisis that President Bush has not been attentive to, and that it took John McCain three tries before he got it right.

If we can stabilize that market and we can get credit flowing again, then I think we'll see stocks do well. And once again, I think we can generate the revenue that we need to run this government and hopefully to pay down some of this debt.

 

Repeated experience shows that lower tax rates produce higher economic growth, more jobs, and increased tax revenue. Despite this experience, Obama says "maybe yes, and maybe no".

Obama has two priorities: A fair tax system, and one that raises more revenue. These oppose each other at our current levels of taxation. Higher tax rates are more fair in Obama's judgment, but they will raise less revenue. What does he really want?

Actually, to collect much more revenue, he must collect more tax from the people earning $50,000 to $200,000 per year, because that is where most of the personal income is. Sorry.

Obama proposes the goal to "stabilize the housing market and get credit flowing again."  But, he does not provide a policy which would accomplish that. Lowering tax rates has brought countries out of recession. Raising rates has never done it.
 

The 50% Rate English Experiment

We don't have to rely on past results. England has run the experiment again, at great cost, to show us how the world works. They raised the income tax rate on the rich.

50% tax rate 'failing to boost revenues’
02/21/12 - Telegraph UK by Robert Winnett and James Kirkup

[edited, rearranged]
The amount of income tax collected fell sharply last month. This is the first formal indication that the new, higher 50% rate is not raising the expected amount of revenue.

The British Treasury received £10.35 billion in personal income tax payments in January, £509 million  (5%)  less than January 2011. Most other taxes produced higher revenues over the same period. This is the first year following the introduction of the 50% rate, which was expected to raise individual tax revenues by more than £1 billion.

A Treasury source said the drop in revenues was partly due to highly-paid individuals arranging their affairs. There is some fear that it is forcing entrepreneurs to relocate abroad.

Liberal Democrats have insisted that the 50% rate must stay, because it is important to demonstrate that the rich are paying their fair share.

Like Obama, the English Left is determined to take more money from successful people, regardless of raising more funds for government. That is true dedication to an ideology of "fairness".
 

Where the Money Is

The bank robber Willie Sutton was asked why he robbed banks. He supposedly replied "Because that is where the money is". His full reply is more interesting.

[edited]  Why did I rob banks? Because I enjoyed it. I loved it. I was more alive when I was inside a bank, robbing it, than at any other time in my life. I enjoyed everything about it so much that one or two weeks later I'd be out looking for the next job. To me the money was the chips, that's all. Go where the money is, and go there often.

Maybe the Left is more like Willie Sutton than like an efficient, pragmatic manager. They want to go for the money and go often. The amount collected is of secondary importance.

Tennessee Mosque

Reporter:  There is another side to the "Hate the Mosque" story.
Editor:  Islamaphobic bigot.

Ex-Kos-mmunicated
02/22/12 - Advice Goddess Blog by Amy Alkon

[edited]  Amy Alkon:  Eric Allen Bell at The Daily Kos started a film about a mosque being built in Tennessee. The Kos party line is that it is Islamophobia to criticize Islam. He toed that line, then some research changed his tune. He was unwelcome back in Kos-land.

[edited]  Eric Allen Bell:  I wanted to show what happens to countries when they gain a Muslim majority, how women are treated, that homosexuals were executed, that free speech did not exist, that the forced Islamic Law was not consistent with Democratic values. I reported anything and everything I could think of that ought to strike a chord with the Liberal mindset.

The response I received was, "Eric you are starting to sound like an Islamophobe. We don't want to make a movie that promotes fear. Let's just stick with the existing plan, okay?"

The Oil Market Panic

Fred:  Gas prices are going up. The oil companies are gouging us.
Mike:  Iran's desire for nuclear weapons is shaking up the Middle East. Oil companies are just mice among the elephants.

Fred:  Well, the government should limit the price.
Mike:  Do you want shortages, rationing, and two-hour lines at $3.00 per gallon, or to adapt in your own way at $4.50 per gallon? You are going to use less gas either way.

The Oil Market Panic
02/20/12 - Hoover.org by Richard A. Epstein

[edited and paraphrased]:  The rise in oil prices traces to a renegade Iran. The West sees that the Iranian nuclear threat is not just bluster. Iran poses far greater risks to world peace and the political order than even a major disruption in oil supplies.

An anxious West is making a concerted, effective effort to cut off Iran from the world’s banking system and to block the international use of Iranian oil. The Saudis have helped the West by expanding their shipments into world markets. One-third of world oil travels through the Strait of Hormuz. The Iranian threat to close the Strait and the movement of the U.S. aircraft carrier Abraham Lincoln into the Strait are serious.

These developments have driven the price of North Sea Brent crude oil to around $119 per barrel, a potential gasoline price of $4.25 per gallon. Ordinary Americans are being forced to tighten their belts. The best response is to allow this free-market adaptation to reality. A worse response is for the government to undermine the market by capping price increases or dictating its vision of the right price.

Any system of government subsidies or controls will disrupt the vital market process of continuous adaptation. It will also cost a fortune. The “hands off” motto of laissez-faire capitalism has never been more pertinent than in this oil crisis. Government interference in the market will make the effects worse.

Leading political figures on both sides have responded sophomorically. Their shared, incorrect premise is that price changes are evidence of a market failure, and this justifies intervention. It doesn't. Price increases should not lead to a call for price limits.

The real problem is the trouble brewing in Iran and the Strait of Hormuz. Politicians should neither panic nor pander. Their political energies are needed to reach a diplomatic or military solution for a serious international breakdown that requires our urgent and unified national attention.

The current rise in US oil and gasoline prices comes from reasonable fear of a conflict with Iran, and the current attempt by the US and other countries to cut off Iran's income through buying less Iranian oil, to pressure an agreement on nuclear weapons. This necessarily increases oil prices, but hopefully this will be less expensive than going to war.

This price increase is not primarily Obama's fault. But, we can rightfully blame him for denying the US much productive work and jobs developing the huge US oil reserves, and for refusing to make the US less dependent on foreign sources.

Development of domestic oil would not completely change the world oil price. Oil is an international commodity. But, a large domestic supply would more insulate the US from threats to foreign supplies.

We rely now on the  Strategic Petroleum Reserve, storing 726 million barrels of oil, to back up US consumption of 21 million bbl/day (34 days usage). It would be much better if the US were producing that 21 MMbbl domestically, rather than the current 5.8 MMbbl/day.

Hating Lottery Winners

Max:  Big companies are making obscene profits. Those lucky bastards should be paying their windfall profits back into the government, to help me.
Fred:  Yeah, and let's get back more money from those lucky bastard lottery winners, and from top athletes and movie stars, and popular writers, and super models.

Max:  Uh, I don't think you see the point.
Fred:  I thought the point was that no one should be lucky.

Why should businessmen be disliked and pay high taxes because their success is partly luck, while all-luck lottery winners are generally accepted as deserving their winnings?

Lotteries are a bad bet

Lotteries return only 60% of what is bet, and only 18-30% in the big prizes. Many people with a social conscience hate lotteries because they are designed to take money from people without much money, and states promote this scam on the people.

The following explains nicely the odds against winning anything and gives the social argument.

I hate the lottery  -  10/10/2010  -  Graham Templeton

[edited excerpts]  What kind of government runs a crooked game on its citizens? Well, it appears that is the Government of Canada.

The odds of hitting the jackpot on the Lotto 6/49 are about 1 in 64 million. Some unkind fellows have referred to this as a “stupidity tax,” arguing that if the players are dumb enough to take such a fool’s bet, they deserve the resultant siphoning off of their finances.

In some circumstances, I would be okay with that. Freedom costs money sometimes. But, rugged individualists refer to the right of a citizen to run a successful business. That argument does not apply to the government, which should not play on the mathematical illiteracy of its population.

This government runs massive ad campaigns to convince you to throw your money away on the lottery. But it won’t let you start a casino because gambling is bad for the community. Lottery rackets have been highly illegal, and they still are, unless you’re the government.

The government restricts our freedom, moralizing at us, and empowering itself to make our financial decisions for us. But, it plays commercials for its own brand of cocaine, while telling us to Just Say No to other brands.

Lottery winners and businessmen ...

Lottery winners are OK

Many people don't like the lottery because it doesn't pay enough or because the winnings are taxed. Almost no one hates lottery winners. I Googled "hate lottery winners" and found just one post hating a particular winner.

I hate lotto winners  - 07/06/10  -  Bun Boy Eats LA

[edited]  This woman with a stupid name just won a multi-million dollar lottery. For the 4th time with a friggin’ scratch ticket!!!

That’s just not right. I don’t believe in the lottery, I think it’s obnoxious. I think it’s worse than Miley Cyrus’s gummy smile. I don’t believe in getting ones’ hopes up that high. No one with teeth and a desire to own outside of a trailer park ever wins.

Yes, I’m jealous. Jealous that Joan Stupidface will get to add a wing to her tacky, faux finish Vegas crack den and procure a few dozen more mangy cats to poop in all the corners.

This is why I LOVE to watch programs such as “Curse of the Lottery!”

The complaint is that few lottery winners are admirable. Even so, there is no sentiment to take away most of their winnings through special taxes. The feeling is "they took their chances and won". Canada doesn't tax lottery winnings. That shows public support for the winners to keep all of their lucky gains.

Businessmen are Not OK

Businessmen (or women) play a type of productive lottery. They use their own money (and money from voluntary investors) to produce goods and services which people want to buy. This involves much planning, skill, and persistence, with a component of luck.

Some people seem to live in a sunbeam, creating a profitable business despite character flaws. Some people fail despite the best planning. Most businesses achieve a middle success, and some find super success, making millions and even billions.

The odd part is that successful businessmen are often disliked, especially for their success. A common sentiment is that they should pay more and more taxes because they were partly lucky, and so should give back most of their gains to the rest of us.

This sentiment is common even though these businesses add to the well being of customers and workers. A lottery only moves money from some people to others, giving the state a big cut along the way. A business creates well-being at the expense of no one, actually helping people, and paying taxes along the way.

If successful people and businesses are disliked and are supposed to pay for the rest of us, then why aren't lottery winners even more disliked? There is some luck in business, but the lottery is all luck. If we dislike businessmen who are somewhat lucky in the course of delivering goods and services, then why don't we despise lottery winners, who have done nothing more than pay for a ticket?

There is nothing to dislike about businessmen or lottery winners. They each put their resources toward a strategy for success. Many of both lose their investment. Of the two, the businessmen and investors should be admired for creating good things along the way. We shouldn't be grabbing at their winnings.

An Intellectual Program

Intellectual:  We must adopt policies ... any normative concept of a just society. [applause]

Mike:  He must have a great mind. I didn't understand much of what he said, but I find myself agreeing with him.
Jim:  He's not so great. Either he is intentionally confusing, or he can't figure out how to explain it to us.

02/15/07 - Elsewhere.Org

The following is an excerpt of a significant article. Don't spend time diving into the complexity, just get a feel for it.

The Rubicon of Reality:
Precultural Socialism, Socialism and Neomaterial Capitalist Theory

By Henry Wilsonaka the computer program Pomo, Department of Deconstruction, University of North Carolina

1. Consensuses of fatal flaw

In the works of Gibson, a predominant concept is the concept of textual art. It could be said that Baudrillard promotes the use of neostructuralist constructive theory to deconstruct capitalism. The subject is contextualised into a predialectic paradigm of expression that includes narrativity as a reality.

“Sexual identity is part of the meaninglessness of truth,” says Foucault; however, according to Cameron [1] , it is not so much sexual identity that is part of the meaninglessness of truth, but rather the rubicon, and subsequent stasis, of sexual identity. Therefore, Bataille’s model of textual nationalism holds that the raison d’etre of the writer is significant form. The characteristic theme of Prinn’s [2] critique of semiotic neotextual theory is the difference between class and society.

This article and about 5,400,000 others are significant because they were generated by the computer program Postmodernism Generator. It starts with a collection of authors and quotes, and writes them out in grammatical forms without knowing any meanings. It produces high class, random gibberish, allowing the reader to supply his own meanings and puzzle about the deep and intricate ideas which might lie within.

This is a neat trick. Even if you were fooled, you might think that true intellectuals would not be.

The parody paper ...

Alan Sokal is Professor of Physics at New York University. He wrote an article Transgressing the Boundaries: Toward a Transformative Hermeneutics of Quantum Gravity and submitted it to the journal Social Text, which accepted and published it in its Spring/Summer edition of 1996.

A few months later, Sokal explained that this paper was a parody.

Social Text describes itself: Social Text covers a broad spectrum of social and cultural phenomena, applying the latest interpretive methods to the world at large. A daring and controversial leader in the field of cultural studies, the journal consistently focuses attention on questions of gender, sexuality, race, and the environment, publishing key works by the most influential social and cultural theorists.

A Physicist Experiments with Cultural Studies

[edited]  I tried a modest, uncontrolled experiment to test intellectual standards. Social Text is a leading North American journal of cultural studies. Its editorial board includes luminaries such as Fredric Jameson and Andrew Ross. Would it publish an article liberally salted with nonsense which sounded good and flattered the editors' ideological preconceptions? The answer, unfortunately, is yes.

Could the editors really not have realized that my article was written as a parody? Is it now dogma in Cultural Studies that there exists no external world? Or, that there exists an external world, but science obtains no knowledge of it?

In the second paragraph, without the slightest evidence or argument, I declare that "physical reality" is at bottom a social and linguistic construct. Not our theories of physical reality, mind you, but the reality itself. Fair enough: anyone who believes that the laws of physics are mere social conventions is invited to try transgressing those conventions from the 21st floor windows of my apartment.

I wrote the article so that any competent physicist, mathematician, or even undergraduate physics or math major would realize that it is a spoof. Evidently, the editors of Social Text felt comfortable publishing an article on quantum physics without bothering to consult anyone knowledgeable in the subject.

The fundamental silliness of my article lies in its dubious central thesis and the "reasoning" used to support it. Quantum gravity is a speculative theory of space and time applying to distances of a million billion billion billion'th of a centimeter. I claim that it has profound Progressive political implications.

I support this as follows. First, I quote some controversial philosophical pronouncements of the physicists Heisenberg and Bohr, and assert without argument that quantum physics is profoundly consonant with "postmodernist epistemology". Next, I assemble a pastiche of Derrida and general relativity, Lacan and topology, and Irigaray and quantum gravity, held together by vague rhetoric about "nonlinearity", "flux", and "interconnectedness". Finally, I jump to assert without argument that "postmodern science" has abolished the concept of objective reality.

Nowhere is there anything resembling a logical sequence of thought, only citations of authority, plays on words, strained analogies, and bald assertions.

Alan Sokal's paper was more outrageous than a computer generated one. So, it is amazing that it fooled the editors of Social Text. They didn't understand what they were publishing. They only seemed to care that it supported their political beliefs, no matter what the subject area.

Social Text refused to publish Sokal's explanation of his hoax, as not meeting its editorial standards.

- -
Alan Sokal's articles about the Social Text affair.

Thanks to Bill Quick for the link at Daily Pundit.

Workers Pay Unemployment Insurance

Max:  I'm going to take the summer off on unemployment.
Fred:  Have fun on my nickel.
Max:  Lighten up. The company will be paying through unemployment insurance.
Fred:  My wage is lower because of that cost, and I need to keep working.
Max:  Aren't you the busy bee.

About Unemployment Insurance
12/04/11 - The Money Illusion by Scott Sumner
  Via  Cafe Hayek

[edited]:  The statistical evidence on UI is overwhelming significant. When UI benefits maxed out at 26 weeks, there was a spike in the number re-employed right after the benefits ran out.

That might be efficient if due to the income effect. But, it is hard to dispute that UI insurance affects labor supply and employment. Studies show those effects even in areas with double digit unemployment.

Many Western European countries such as France saw their natural rates of unemployment rise from around 2% in the 1960s to about 10% in the 1980s. The most plausible explanations have to do with labor market policies.

I comment at Cafe Hayek.

The irony. Employers pay cash wages and incur employment costs which include healthcare, taxes, unemployment insurance, and employment related legal entanglements. The employer correctly sees these as part of the total cost of employing the worker.

Competition and productivity determine the total which can be spent on a worker, and employment costs determine the cash wage which can be offered. Greater expenses for unemployment insurance mean lowered wages. Companies are writing the checks for unemployment insurance, but workers are paying for that “insurance” through lower wages offered.

People with jobs are paying for the people who supposedly were fired without cause. If they realized that, there would not be much support for giving 99 weeks of compensation to the non-working. At 3-5% of payroll for unemployment insurance, many workers are giving up ten days of paid vacation each year to support the unemployed.

Wall Street Was Not Bailed Out

Occupy:  The bailouts prove Wall Street bribed our government.
Mike:  Wall Street received TARP loans and have paid them back.

Occupy:  So who was bailed out?
Mike:  Hundreds of small banks in every congressional district.

Occupy:  Small banks own the government?
Mike:  In a way. Small banks give political contributions to congressmen. And, hundreds of small bank failures would point blame at government's disastrous housing policies.

Occupy:  Occupy Main Street!
Mike:  Not quite. Try "Occupy Government".

Wall Street Was Not Bailed Out

11/26/11 - Power Line by John Hinderaker

[edited]  In what sense were “Wall Street banks” bailed out? They weren’t in fact “given” any of our money. Most of the largest banks (which were perfectly healthy) were forced to take TARP loans so that there would be no stigma attached to the few large unhealthy banks, and the many unhealthy small community and regional banks which were saved by those loans.

Almost all large “Wall Street banks” have repaid their TARP loans with interest and in short order. Three-quarters of TARP went to hundreds of small regional banks, notoriously unstable, particularly from commercial real estate lending. It is exactly those small banks who who remain “bailed out”, who lent recklessly to the real estate developers who built the bubble housing.

Taxpayers will end up paying for the government policies which directed money into housing and to automobile worker's unions. Wall Street made 3% commissions. The rest of the bailouts have gone to Main Street, the 99%.

Insane Budget Savings

Official One:  The CLASS Act was intended to provide long-term care insurance to everyone. I'm sorry to report that we will not be implementing it. It is too expensive.

Official Two:  Even worse, we won't be able to save $86 billion by implementing it.

Mike:  Too expensive, but it was going to save money. Are you nuts?

The Wall Street Journal reports that the US Department of Health and Human Services (HHS) has abandoned a part of ObamaCare.

[edited]:  The CLASS Act was intended to provide long-term care insurance for people who become unable to care for themselves.

HHS has re-examined the program as being too costly over the long run. It stopped implementation and reassigned the staff last month. HHS Secretary Kathleen Sebelius informed Congress that she does not see a viable path forward.

Fire Dog Lake explains more.

[edited]:  The Obama administration always thought that this program would need taxpayer subsidies to operate in the long-term.

Cancelling the CLASS Act forfeits $86 billion in savings [?] in the Affordable Care Act. The CLASS Act was scored by the CBO as providing revenue in the ten-year window of the legislation, because it collected more in premiums than it paid out in the early years.

The CBO is the Congressional Budget Office. "Scoring" is its official determination of the costs and savings of legislation.

US Senator Judd Gregg (R. NH) had amended the law to require that CLASS be self-sustaining for 75 years without taxpayer funds. HHS had to work within those guidelines.

My  ?  above marks a contradiction. CLASS could only be implemented with government subsidies from taxes, but the CBO scores CLASS as saving $86 billion dollars. This contradiction illustrates an insane, dishonest, and immoral budget process. This budget accounting trick is so common that officials and the mainstream press don't give it a thought.

Read more ...

The Wall St Journal  -  The Definition of Insanity
Why Democrats won't repeal a program that everyone in Washington knows is a fraud.

[edited]:  Democrats added CLASS to ObamaCare as a budget gimmick among many. These create an illusion that trillions of dollars of new spending will somehow reduce the deficit [save money].

CLASS was supposed to start in 2012. People who signed up would pay premiums immediately, but could not receive benefits for the first five years. Democrats planned to spend these premiums immediately on other things, as if the future payments to beneficiaries would never come due.

About $86 billion would have accumulated between 2012 - 2021 to help finance the rest of ObamaCare. CLASS would then go broke a few years later. That would be somebody else's problem.

The CBO estimates the revenue and cost of a proposed law over 10 years. This is usually adequate for a fair evaluation. But, social programs have a much longer life. Democrats routinely propose laws which collect money now to fund promises more than 10 years in the future. This shows up as a budget "savings" now, because it ignores promises due after the 10 year window.

Thankfully, Sen. Judd Gregg especially applied a 75 year evaluation period to CLASS. Team Obama could not work around this appeal to reality. Strangely, the zombie of the "savings" scored by the CBO still lives within the fantasy world of 10-year budget accounting.

So, HHS will not implement CLASS because it would cost too much money in reality. But, HHS will not officially kill CLASS because it is tied to a fantasy savings of $86 billion.

Immoral

The budget process is immoral. Democrats have passed programs into law which cannot be funded as advertised. This puts at greater risk any person who relies on them, and it prevents partial solutions from the private market.

A proponent might say "These plans give aid to the needy in the short run. That is good, even if the long run solution will require much larger taxes on everyone, and especially the rich".

I say that such programs involve a growing number of people who will rely on them until the time that they fail. A plan for the future is not "We will do this now, and then we will hope".

Our government (politicians) pretends that it is planning for the long-term, but it uses fraudulent accounting to justify short-term plans which are destined to fail in as little as 10 years.

Long Term Care Insurance

Private long-term care insurance (LTCI) is a variation on life insurance. The insurer enrolls a person who is not already in dire health and charges him a monthly fee (the premium) based on his current health and age. The insurer agrees to pay to him a monthly support payment for as long as he is disabled, after he suffers future ill health or an accident.

Private LTCI applies immediately after the person is accepted. For example, it would pay toward nursing home care after an accident which occurs a few days (or 20 years) after acceptance. No state would approve a plan with a five year waiting period such as CLASS.

LTCI is like fire insurance. Each participant pays in enough each month to pay for the costs of sudden disability for a few unlucky people like him, say from stroke or accident. Each person pays according to his own risk, averaged among people with the same risks as he has.

Note that he is not paying for the care of people who are much older or sicker, in the hope that younger people will pay for him when he is himself older and sicker. Voluntary insurance cannot force him to pay more in order to support people in higher risk categories. An insurer who tried this would find that other companies are charging lower premiums, attracting away new business and the insurer's healthy clients.

- -
CBO:  Social Security Trust Funds
Feb 2011 - Easy Opinions

The accounting fraud in CLASS above is to spend "excess" premiums while ignoring future promises which justified those premiums. Sadly, Social Security is a much larger and more serious fraud of the same type.

There is nothing real in the Social Security and Medicare "trust funds" (or in any US Treasury trust fund). The special Treasury bonds in these "trust funds" are only a political promise to find the money somewhere.

The shortfall is about $66 trillion in today's dollars for the combined promises of Social Security, Medicare, and Medicaid. This is about four times the entire yearly income of everyone in the US. That promise is much more than what is recorded in the trust funds, which is itself only an unfunded promise. The trust fund bonds are a promise, but they don't help to pay for themselves.

The Social Security and Medicare trust funds are only a record of what was collected and then immediately spent for things other than Social Security and Medicare.

Reporters assume incorrectly that something called a "trust fund" must have something valuable in it. These "funds" were created and named by politicians. They only hold IOU's from the Treasury to itself. Call it a reminder of what the Treasury took out of the fund to buy other things and is supposed to put back someday.

Fooling the Future

Government Planner:  Our next stimulus plan is really, really targeted at creating jobs and prosperity.
Mike:  What about the last stimulus plan?

Planner:  That was only sort of, kind of targeted at creating jobs and prosperity. We were distracted.
Mike:  How long will this new stimulus work?

Planner:  For about a year, probably past the next election.
Mike:  Then what?

Planner:  We'll have another stimulus plan ready, to continue the good works of the last two.

Future Economic News:

Federal Reserve Chairman Ben Bernanke has announced that Quantitative Easing Eight combined with Stimulus Six has not achieved the results that "were expected by now-fired Fed analysts". This is despite recent reports of an IRS program to increase tax audits unless "businessmen borrow money and invest in job-creating expansion, like it or not".

Quantitative Easing plus Stimulus is the following strategy:

(1) Increased government purchases and salaries cause increased demand for filing cabinets and restaurant meals. This starts a virtuous cascade of money throughout the society, leading to an explosion of wealth and prosperity.

(2) Small businessmen with "more luck than brains" are fooled into investment and expansion by a six-month, 5% increase in business. They will naturally hire more workers, at least until the six-month government buying spree ends.

"It is mystifying that this plan has yet again failed" said Bernanke. "We have run out of traditional economic levers to pull. Very few businessmen have a degree from Harvard. Yet, manipulating money and credit is failing to fool businessmen in any significant way."

"We are now forced to use non-traditional methods. We are making huge ad buys in major markets. Our message is that it is patriotic to lose money, if necessary, by expanding business and hiring workers in the current environment of regulation, taxes, and medical mandates. That is the carrot."

"We accept that business owners are unhappy. We will make it clear just how much more unhappy business owners will be if they don't do what we say. We are fundamentally pro-business. We want businesses to prosper by doing exactly what we tell them to do. One for all and all for one. That is the stick."

Wags have unfairly and mindlessly compared government policy to the South Park cartoon  Underpants Gnomes:
(1) Collect underpants.  (2) ???  (3) Produce huge profits.

(See the video starting from 17:40. Sorry for the 30 second commercial.)

- -
Cause and Effect
EO -> 10/11/11 - Knowledge Problem by Michael Giberson
( Click the link above, then see the further link at the upper right. )

The oil price increases of the 1970s prompted politicians to raise interest rates in an attempt to control inflation. The economy slowed. Was this because of the oil price increase, or the result of the higher interest rate?

This seemingly simple economic question is actually hard, with uncertain answers, like most questions about the economy.

Motto: We don't really know, but we are willing to guess.

Basic Principle of the New Deal

President:  We will now pivot and act resolutely to overcome the serious problems presented to us in these past months and years.

Reporter:  What is your plan?
President:  We will be resolute in our various policies.

Reporter:  Can you give some examples?
President:  Each problem will be solved as required, with a solution tailored to each situation.

Reporter:  Then, what is your guiding principle?
President:  Our principles will emerge as we solve each problem in turn.

Reporter:  I see. You are a big picture, idea type of leader.
President:  Yes. I would not want to limit our problem solving by committing prematurely to particulars.

"Liberal Fascism: The Secret History of the American Left, From Mussolini to the Politics of Meaning" by Jonah Goldberg   (via Ed Driscoll)

[edited]  Today in 2007, many liberals subscribe to the myth that the New Deal was a coherent, enlightened, unified endeavor encapsulated in the largely meaningless phrase “the Roosevelt legacy”.

This is poppycock. Raymond Moley was FDR’s right-hand man during much of the New Deal:

To look upon these programs as the result of a unified plan was to believe that the accumulation of stuffed snakes, baseball pictures, school flags, old tennis shoes, carpenter’s tools, geometry books, and chemistry sets in a boy’s bedroom could have been put there by an interior decorator.

Alvin Hansen was an influential economic adviser to FDR. He was asked in 1940 whether the basic principle of the New Deal was economically sound, and he responded, “I really do not know what the basic principle of the New Deal is.”

Free Ice Cream Cones

Fred:  You have a nice coffee maker there.
Mike:  It's great. It was expensive, but they gave me a coupon for $40 off which I couldn't pass up.

Fred:  But, you are not smiling.
Mike:  Funny thing. I saw one later, just like it. No coupon, but the base price was even less than I paid in total.

Fred:  Coupons are funny that way.

A political gathering in the US.

Politician on outdoor stage:  May I first say that all of you are the most intelligent, beautiful, clear thinking, generous, patriotic, and deserving people that I have met, along with all of the other great people of your town, city, and state.

Voice in the Crowd:  Yeah, whatever.

Politician:  Unlike my opponent, I want to strengthen government in all of the right ways to help you in this life of woe.

Voice:  What about the debt?

Politician:  "Debt"  is only a bad word for borrowing money. It is money that someone has little use for, which we will invest in our great country for your benefit.

Voice:  What benefit?

Politician:  Ice cream cones.

Voice:  Are you nuts?

Politician:  Which of you wonderful people would like a free ice cream cone?

Voice:  [drowned out]

Crowd:  [clapping]  Me, Us, We do, Yeah, Great.

Politician:  I will arrange for free ice cream cones, as many as you want, and other free stuff. Would you like that?

Voice:  [drowned out]

Crowd:  [loud cheers]  Yay, Yes, You said it, Gimme, I can't wait.

Voice:  [as cheering dies down]  There is no such thing as a free lunch.

Crowd:  [some booing]

Politician:  My friends, the heckler is correct. But we are not talking about lunch. We are talking about free ice cream cones.

Crowd:  [louder cheering]

Voice:  [as cheering dies down]  They will make us all pay more.

Politician:  No, we will make the rich pay. They have lots of money. In these times, when we have fewer ice cream cones than we want, it is only fair that rich people and corporations put in their fair share, much more than they are putting in now.

Voice:  [stands on park bench]  Wait! You all will pay more.

Taxes on companies will appear as higher prices. Taxes on investments will slow company growth. You and your children will have fewer and lower paying jobs.

The politicians always take a big cut. Your retirement funds will not grow as fast, as everyone invests less. The same corrupt politicians who promise to tax the rich will make deals with the rich and pass the costs onto you.

This has always been the result of promising free stuff and promising to tax the rich.  [he shouts louder]  You are being asked to vote away your own prosperity!

Crowd:  [some boos, and a stunned silence as people try to think]

Politician:  My fellow citizens. I will get you free ice cream cones. We will all work together and contribute our fair shares. Keep your faith and vote for a better future.

Voice:  [the man is pulled down from the bench]  Stop that. Let go.

Crowd:  [loud cheers toward the stage]  Yes. You're the man. We're for you. We deserve the ice cream cones.

Keynes' Brilliant Moment

Fred:  Keynes proposed that everyone would have a job if the government would print more money and distribute it widely.
Mike:  Distribute it to me, and I wouldn't have to work.

A lost recording, England 1932:

Keynes:  There must be a way to end this depression. Along the way, we can show that government can be good, and business is bad.

Assistant:  How to do it?

Keynes:  I have it! There is not enough demand for goods and services. Something changed, and people stopped wanting enough stuff. They became suddenly and disastrously frugal, and no longer want to buy things.

Assistant:  With a raise, I would buy more things.

Keynes:  Forget the raise. If only we could find Martians who would buy more of our stuff, then people would work for the Martians. The increased demand would get money flowing, like a river, and we would all be rich.

Assistant:  Sir, we had a long talk about the Martians. We have gone over that.

Keynes:  OK, yes, no Martians. Where else can we get demand?

Assistant:  How about the French and Germans?

Keynes:  They are not rich enough. They are still progessing toward wealth through adaptation to Socialism, and they haven't yet adapted. They have this stupid notion that they should sell more of their stuff to us, not buy more stuff from us.

Assistant:  If you and I both had more money, we could buy things and help to raise demand.

Keynes:  More money? Eureka! The government can print up the stuff and spread it around. And, I can get more money by advising the government. The workers will chase those pieces of paper like catnip. They will become used to working again, instead of being lazy and stupid.

Assistant:  More people may find work. But Sir, the value of money will fall and prices will go up. Everyone now working and saving will be silently taxed to employ those extra people. And, what will happen when the stimulus stops?

Keynes:  First, we and our friends in government will all have more money. That has to be a very good thing. Second, in the long run we are all dead. Forget about tomorrow, it is in the future.

Assistant:  So, I get my raise?

- -
Use Inflation to Fool People
Keynesian economists expect most people to be slow-witted and unable to make rational economic decisions. The government tries to fool people into working harder by inflating the currency to just the right amount. But, it doesn't work for long.

"Keynesian Economics" in The Political Dictionary
Understand politics by knowing the meanings of things.

Econ 201: The Myth of the Economic Multiplier
You don't create $40 in wealth by paying $10 to mow your lawn.

The Deadweight Loss of Taxes
Collecting $1 in extra tax kills $2 in production.

A Short Argument Against Stimulus
It isn't so stimulating when you know that it must be paid back.

Let's Counterfeit Our Way to Wealth
If Obama and Keynes are correct, that there is a 1.5 wealth multiplier on spending, then $100 in spending produces $150 in wealth, and we should all benefit from counterfeiting. It is not my fault that the belief in a multiplier is so outrageous that it leads to this outrageous result.

The Memory of Idiots

Fred:  I haven't seen you in a while. How are things?
Mike:  (looks up information on tablet PC)  Yes, Fred! Pretty good. Let's meet later to talk. Or, you could just review my tweets.

Future News:

A team of researchers at Columbia University [ed. what were their names again?] has used a unique perspective on home environments to conclude that most of us were raised by idiots, and probably are idiots ourselves. They pose the serious question about whether democracy should be replaced in the US by a "Platonic board of thoughtful intellectuals from Columbia".

The Team looked at original materials from homes where the mother or father cooked regularly. In almost every instance, they found dog-eared cookbooks and collections of food-stained recipe notes. "These people referred repeatedly to favorite recipes as indicated by wear and staining on the papers. Their dependency is revealed, in that they must have had these materials directly in hand while cooking."

What could explain adults repeatedly referring to written descriptions of favorite recipes? They conclude that these people could hardly remember anything. They were idiots, who spread their idiocy to their children. The implications are tragic and enormous.

- -
Is the internet negatively impacting our memory?
07/15/11 - RiehlWorldView by Sissy Willis
Inspiration for my sarcastic post above.

Marketing Capitalism

Max:  Corporate managers extract profits from the labor of the workers.

Fred:  They are paid out of the production of the company, just as you are.

Max:  They make undeserved profits. I make a well deserved salary.

There is a big marketing problem for the terms "capitalism" and "profit". "Capitalism" was constructed by Karl Marx to be negative (capital ruling over men), and profit has come to mean "excess costs which result in a higher price".

Someone noted that we eat pork, not pig, and we eat veal, not baby cow. Names matter.

We should say "a system of free exchange" instead of "capitalism", and say "net productivity" instead of "profit".

The statement "XYZ Company had an obscene net productivity in the past year under an outrageous system of free exchange" doesn't have the same Marxist zing as using the conventional terms.

- -
Are Hospital CEOs Overpaid?
07/05/11 - Insureblog

How much does CEO pay at hospitals affect the cost of care? Are non-profit hospitals always cheaper?

Police Academy

Reporter:  Tell me about the bank robbery.

Police Spokesman:  The incident may have involved removing something from the bank, possibly money, or something else valuable, maybe. We are investigating, so don't hold me to any of this. The situation is fluid and epistemology is difficult. Officially, I don't really know anything.

Via Dr. Grumpy

Fireworks Accident in North Fargo
InForum - 07/05/11

[edited]:  Hanson saw his neighbor set off a second round of a homemade or illegal artillery shell firework. Hanson heard a loud bang and saw a cloud of smoke. He walked to the scene and saw no head on his neighbor's body.

The police spokesman gave me a laugh.

[edited]:  At this point, we don’t know if he was struck or if the munition blew up, but it appears based on the information we got during our investigation that it was caused by the fireworks in some manner.

The victim’s injuries included massive head wounds from what appeared to be caused by a mortar type firework.

The police bureaucracy is guarded and uncertain about a simple, horrible incident. We have no hope when we give bureaucracies power over more complicated situations.

High Prices and Low Pay Are Good

Fred:  I can't find work, and I am barely getting by.
Alice:  Work is a rat race which literally burns resources. I am glad that you are now in accord with Gaia, rather than fighting her.

Why you should love $5 gas
05/25/11 - MSN Money  (Via Instapundit)

The above article has insights which demand to be applied to unemployment (smile).

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Stop grousing about having a lower-paid job or not having a job. Your unemployment could be good for you and good for America. Here are some benefits, and I'm not serious about any of them.

Fewer people will die on the road, including you. The less you drive, the more likely you will survive. Driving to work is the single biggest reason that people risk their lives in a car. Would you rather be poor or dead?

Demand for high-mileage cars could grow. As you become hungry and lean, you will consider driving much farther to hold a job. A high-mileage car will be your only choice, maybe subsidized by the government. If that is still uneconomic, you can move to the central city for a service job. Public transportation is not as bad as you remember it, and there is no car to park or shovel out in the winter.

Shorter airport security lines. Airline traffic will be down. You certainly won't be flying.

Less pollution and less congestion. You will be doing so much less with the little resources you must live on. This not only cuts your polution, but the polution and congestion not generated by not supplying you with all of those once-necessary conveniences you were buying. You will be surprised how little it will take for you to barely eke by.

Less work leads to more work. It will soon become clear that you are part of a large, vocal group. Entrepreneurs will be attracted to the large pool of unemployed. The government may catch on and lower the minimum wage, providing the opportunity for everyone to be employed again.

More exercise. Remember walking? Without a car you will become familiar with the sights and sounds of your local neighborhood as you walk yourself to health. Master the few blocks around your apartment, and take walks with your new roommates. A sharp eye and heightened "street smarts" will lower the chance of you getting mugged.

No more war. Wars cost money. You will have no money, so you won't support conflict with the same gusto that you used to have for adventure. Finding a cheap hamburger will be all the adventure you will need.

Local businesses could profit. Walking around will introduce you to local businesses. They will adapt by offering cheaper goods. A win-win.

It's all about Democracy. You voted for the caring, giving politicians (mostly Democrats) who have arranged for a more fair and just society. You have had a job for so long, let some others have a chance. Do you want jobs under the cruel supervision of selfish capitalists, or a more just distribution of wealth under caring politicians? We know your choice already, because you are not selfish, and you have already voted your heart. Keep the faith; don't backtrack now.