4/25/13

The 99% vs. the 1%. Abuse of Power, Part One

It’s hard to believe that less than two years ago the Occupy Wall Street movement started. It was instantly  lionized by the mainstream media as well as by quite a few politicians.  As you may recall, the OWS crowd, with the modesty typical of grandstanders everywhere, claimed to represent the “99%”  of us in an epic battle against the oppressive “1%” epitomized by Wall Street.

To the extent that OWS was a protest against bailing out private businesses with taxpayer dollars, or the “crony capitalism” of government favors bestowed on private enterprises, maybe for a brief instant OWS did represent the ninety-nine percent of us.  Some initial proposals, such as reinstating the Glass-Steagle Act, were sensible ideas. However, OWS soon morphed into a typical left wing protest: down with corporations, tax the rich, blah, blah, blah.

There was an unofficial list of “demands” posted on an OWS website that “demanded”, amongst other things, a minimum wage of $20 per hour, free college, free health care and, my number one knee slapper: Guaranteed living wage regardless of employment. (My emphasis.)

As Fredrich Bastiat wisely observed a very long time ago (he died in 1850), “Government is the great fiction, through which everybody endeavors to live at the expense of everybody else.” It seems some things never change.

The Occupy New York website listed 23 grievances against corporations that was almost as nonsensical. You’ll have to read it to believe it. (Google: Declaration Occupy New York.) My favorite: They have donated large sums of money to politicians who are responsible for regulating them. Wow!

In typical myopic fashion, they blame corporations for things that corporations can only do with the backing of the government.  In fact, It is the GOVERNMENT that is abusing power, something it is prone to do on behalf of all sorts of constituents, e.g. unions, seniors, veterans, “poor” people, and on and on and, yes, corporations, too.

I once had a union official tell me that since WalMart received so many taxpayer subsidies, governments should be represented on WalMart’s Board of Directors. he was highly critical of WalMar for the subsidies given to them by governments. What a moron.

For a while, pundits tried to equate the TEA Party to Occupy Wall Street.  This is a fundamentally flawed comparison, because the TEA Party is a reaction to abuse of power by government, an abuse OWS has a hard time seeing.

A perfect example is the housing crisis which caused the recent recession.  Wall Street investment banks, main street banks, mortgage originators, rating agencies, community organizers, et al, all had a hand in it.  However, the number one villain was the Department of Housing and Urban Development, HUD, and HUD‘s legion of political enablers, e.g. Barney Frank and Chris Dodd.

HUD was the supervisor of the two government sponsored agencies that were the engines of destruction: The Federal National Mortgage Association, and the Federal Home Loan Mortgage Corporation, known as Fannie Mae and Freddie Mac.  I would bet few, if any, of the Occupy protestors know the role former HUD Secretary and now Democratic Governor of New York, Andrew Coumo, had in the housing meltdown.

In fact, I don’t think any of the Occupy crowd has ever picketed the huge HUD headquarters in Washington, D.C. No, most of the Occupy crowd would rather picket the local Bank of America office, holding up placards that, regardless of what is written on them, secretly convey the message: “Look at me. I’m morally superior.”

The fact that no B of A official has ever been indicted for a crime involving the housing collapse is something ignored by the marchers.  Doesn’t matter. I doubt if any of them know the difference between an income statement and a balance sheet, or what an MBS is, or have ever heard of the Community Reinvestment Act.  Pesky facts only get in the way of a good old-fashioned display of righteous indignation.

What do the picket signs say when I read them? “Look at me. I’m stupid.”

4/23/13

Why Government Programs Almost Always Become Corrupt and Wasteful.

Obamacare, objective observers said, would be a financial disaster, and it looks like they were being optimistic.  It was an easy call. Government programs have a long history of being “sold” with cost projections far below what the actual costs turn out to be and, sure enough, Obamacare cost estimates have risen 40% from only two years ago.  There will be more to come.

There’s precedent. When Medicare was enacted in 1965, the 25 year cost projection was $9 billion. The actual 1990 cost was $67 billion. Are these cost underestimates intentional? I think so. Proponents know that once in place, such programs are almost impossible to eliminate.

This is because government programs quickly develop political constituencies and economic clout, ensuring their survival, often long after their purpose is fulfilled. The “war on poverty” for instance, now spends over $60,000 per year on every “poor” family.  Most of the spending, of course, is on the warriors, not the poor.

Because government programs are almost always monopolies, the discipline of competition is missing. There is no need to economize, innovate, or to be particularly concerned about putting customers first.  The Post Office would not exist if it faced open market competition.

On a personnel level, government bureaucracies always become overstaffed with highly paid, impossible to fire bureaucrats, whose number one job is to preserve their job, regardless of what the original mission was. The best way to do that is to make sure their “mission” gets bigger and more popular.

As Ronald Reagan, once observed, “Government programs, once launched, never disappear. Actually, a government bureau is the nearest thing to eternal life we’ll ever see on this earth!”

Many of our government programs have outlived their usefulness. Some are trivial, like the mohair subsidy started in WW I to ensure enough fiber for military uniforms. Others are not so trivial. The Environmental Protection Agency is a prime example of the latter.

Our environment is essentially cleaned up, and the EPA should be little more than a monitoring agency, but there’s always a few more parts-per-million of something to be removed from the air or water, cost benifets be damned, or there is an old problem to resolve with new regulations, such as storm water runoff. Or, joy of joys, along comes a brand new “pollutant’ that the EPA must regulate to save mankind, e.g. carbon dioxide.

As Captain Red Legs Terrill said in the movie, “The Outlaw Josey Wales“:  “Doin’ right ain’t got no end.”

Other agencies and programs that come to mind as no longer needed or that have proved to be downright toxic, are the EEOC, the entire Departments of Energy, Education, and HUD, the Farmers Home Administration, the Small Business Administration, and on and on. Of course, each of these programs has dedicated employees and ardent supporters.

Probably the biggest problem with government programs is that politicians can’t resist fooling with them. Social Security is a perfect example. In 1961, it was apparent that life expectancies had been steadily rising in the previous twenty years, and it looked like the trend would continue. Plus, the post WWII baby boom was going to put a lot of people onto the Social Security rolls in 50 years.  What to do?

By a vote of 399 to 14, the House voted to allow early retirement at age 62, precisely the opposite of what they should have done.  After all, the problem was fifty years down the road, let’s get reelected now!

Guess what?  It’s 50 years later.  Ironically, people often cite Social Security as an example of a SUCCESSFUL government program, which is like celebrating the Titanic at twenty-one minutes to midnight, April 14, 1912, right about the time the Officer of the Deck was saying, “What’s that?”

The GI Bill and Social Security Disability are two more programs often cited as being proof of the good things government can do. In spite of my Libertarian leanings, I tend to agree, BUT each of these programs also  illustrates the inevitability of  political meddling.  The GI Bill morphed into the student loan program, which has grown into a TRILLION dollar debt problem.  Lots of indebted history majors out there with NO job prospects

Similarly, Social Security Disability Insurance has turned into welfare-on-steroids, with the number of people in the program recently exploding way beyond any justifiable level. It’s a national disgrace. Furthermore, even at it’s best, the SSDI has its dark side.  I had a good friend, recently deceased,  who went on SSDI in his late forties because he suffered from severe narcolepsy.  I once asked him, if he could wake up tomorrow completely cured BUT no longer getting his government check, would he do it?  He said, “I’d have to think about it.”

There can certainly be “too much of a good thing.”

4/9/13  Minimum Wage, Part Four

Some years ago, I read an article where an individual said that Republicans lacked the “moral courage” to raise the minimum wage.  Partisanship aside, when has it ever taken “moral courage” to pander to the economic ignorance of the electorate?

Where is the “moral courage” in passing laws that require others, in this case employers, but not you, to make sacrifices? It’s so easy to be morally superior with someone else’s payroll.

Economic fundamentals aside, where is the morality in blaming poverty on employers, which is an implicit, if unrecognized, assumption of minimum wage laws?

Where is the morality in a law that takes away the freedom of individuals to sell their labor for less than what is considered  “minimum” by moral busybodies? Who are you to tell me I can’t take a job as a night watchman, or any other job,  for $5.00 an hour?

Where is the morality in a law that has unquestionably proven to cause higher unemployment for unskilled and inexperienced workers, especially black teenagers? Is this any way to treat the poorest among us, to deny them opportunity for the sake of a “moral courage” that is really just pretense and ignorance?

At what point does a wage rate become “moral?” Is $20 an hour more “moral” than $10 an hour? If a $20 per hour minimum wage were adopted tomorrow, it would quickly become apparent that it isn’t the employer who really pays wages.  Also, those who advocated $20 per hour would quickly get to discuss, face to face,  the extent of their moral superiority with unemployed people whose old jobs paid less than $20 per hour.

Real moral courage, in the context of minimum wage laws, would be to abolish them, something we’ll never see. Politicians are too afraid of the “moral outrage” they would face from their economically unenlightened constituents.

Perhaps “unenlightened” is the wrong description.  A better one comes from the economist Walter Williams,  who had this to say in his May 26, 2010 column, “Minimum Wage Cruelty: Update.”

“Poor people are not poor because of low wages. For the most part, they’re poor because of low productivity, and wages are connected to productivity. Congress can easily mandate higher wages, but they cannot mandate higher worker productivity or that employers hire a particular worker in the first place.  The late Sen. Ted Kennedy, echoing the vision of many, said in his support of higher minimum wages, ‘I believe that anyone who works 40 hours a week, 52 weeks a year, should not live in poverty in the richest country in the world.’  It’s breathtakingly stupid to think of minimum wages as an anti-poverty tool. If it were, poverty in such places as Haiti, Ethiopia and Bangladesh could be instantly eliminated simply by proposing that these country’s legislators mandate a higher minimum wage.”

Let me rephrase that: People, and their elected representatives, who think that minimum wage laws are a way to fight poverty are BREATHTAKINGLY STUPID.

Personally, I’d give the man in the street the benefit of the doubt, because most of us don’t spend a lot of time thinking about economics, let alone minimum wage laws.  The same doesn’t apply to most of our elected representatives, who, on the subject of minimum wages, can best be described as breathtakingly stupid moral cowards.

Other than that, I have no opinion on the topic. (;~ )

4/21/13 Fat Cats and Racists, Part Three

“White liberals are the most racist people there are, because they put blacks in a box and insist that they think one way — and if they don’t, they attack them as illegitimate, all the while denying that their policies destroy blacks.”  Dr. Ben Carson

“If I have learned one thing from life, it is that race is the engine that drives the political Left.”  Ward Connerly

How do you define “racism”?  This is not a trivial question.  As discussed in my last article, racism has become an essential weapon in the Democratic Party’s arsenal, and it has also become a big industry in America.

How many people, for example, would lose their jobs if the Almighty made us all one race tomorrow? Hundreds in the Justice Department’s Civil Rights Division for sure, hundreds more at the Labor Department’s EEOC, and thousands more around corporate America as all those “diversity” personnel jobs go POOF!

A cynic — or maybe a realist– would say that since so many people have a vested interest in “racism”, it is with us to stay, in spite of what the Almighty might do, or in spite of whatever the reality of racism is.

I was reminded of all this last February when HUD issued a rule “clarifying” when certain practices may violate the Fair Housing Act as a result of discriminatory effect, even when there is no evidence of discriminatory intent.

This is called “disparate impact“, where racism is alleged to exist even when nobody knows it does. Disparate impact as a legal concept has been around for 40 years or so. It is an attempt to weed out standards that unknowingly discriminate against minorities, women, etc. It is usually associated with employment and housing issues, but is rapidly spreading to every area of the law.

Thomas Sowell has said of it: “In the legal system, ‘disparate impact’ dogma has been a gold mine for the race industry.”

In essence, if you have standards that determine to whom you will lend money to buy a house, or standards that must be met before you rent an apartment, or standards required for a job you are trying to fill, etc.,  you had better be able to justify those standards as essential to the task at hand if those rules result in a disparate impact on blacks, women, short people, whomever, as determined by numerical, or statistical outcomes.

As you can imagine, things get a little subjective in the real world, where somebody will question the need for fire fighters to be able to carry 50 pounds up five flights, or whether a 60 on a test is really required when maybe a 50 would be good enough. The burden of proof in these cases is on the defendant, contrary to normal legal practice.

The Supreme Court is long overdue to decide on disparate impact and may do so in the near future. In the meantime, if you think this is a lawyer’s dream, you’re right. If you think many corporations and other effected groups just say “To Hell with it”, and go with quotas to avoid lawsuits, you’re right. Gosh, I wonder which party gets BIG money from lawyers?  It isn’t the Libertarian Party.

You’re probably saying,  “OK, Burro, what does all this have to do with defining racism?”  Well, about the time HUD came out with their “clarified” disparate impact rules, Congress and various states, New York and New Mexico among them, were emoting about the need to raise the minimum wage.

A New York Post editorial spotted a connection. The Post cited a study showing for each 10 percent hike in the minimum wage, white teens with no high school degree experienced a 2.5 percent drop in employment, and black teens a 6.5 percent drop, The Post went on to say, that since New York was proposing a 24 percent hike in the minimum, that would mean employment will fall 6 percent for young whites, but 15 percent for young blacks.

The Post then asked: “Why isn’t the New York Civil Liberties Union suing on the grounds of blatantly disparate impact of any minimum wage hike?”

A cynic might say they aren’t suing because disparate impact only applies, by definition, to unintentional acts of discrimination. The disparate impact of minimum wage laws on black teenagers has been well known for at least 40 years.

In an earlier article, “Increasing Teenage Unemployment, Especially Black Teens”, I quoted Milton Friedman from an interview in 1973: “I‘ve often said the minimum wage rate is the most anti-Negro law on the books.”

What has changed in 40 years? Nothing. Last month, Bloomberg News reported that while overall unemployment fell to 7.7 percent in February, black teenage unemployment rose to 43.1 percent. It was 28.9 percent in November, 2007 at the start of the recession. Overall teen unemployment last February was “only” 25.1 percent.

So, back to the question:  How do you define “racism”? It used to be a term connoting malevolence, but today it can mean only a statistical deviation from what someone thinks should be the norm. Of course, anybody who opposes any liberal position is in danger of being called a racist. For a recent example, from The Daily Caller last April 1: “The Student Government Association at John Hopkins University has denied official recognition to a group of pro-life students, and one SGA leader privately equated them with white supremacists.”

Considering the statistical breakdown of abortions by race, it is obvious that in this case statistics were ignored, something all of us are prone to do when the facts don’t match our opinions.

Consequently, even if you unknowingly advocate policies that severely disadvantage certain groups of minorities, in this case black teenagers, don’t be surprised if somebody accuses you of racism. If this is an unintended consequence, a “disparate impact“, of minimum wage laws, than people of good will should do something about it.

While most people support minimum wage laws, most people don’t pay much attention to economics, either.  I would bet that if people knew how harmful minimum wage laws are to teenagers, especially black teenagers, they would favor a reduced or eliminated minimum wage for those under 19 or 20.

Ignorance is no excuse, however, for the leaders and economic advisors of both the Democratic and Republican Parties, yet both parties have supported increasing the minimum wage level, time and time again. Why?

In my opinion, the Democrats push minimum wage laws because such laws are popular, and they’ve convinced their supporters, including the black community, that minimum wage laws are a way the government can help the poor. In fairness, a great many elected officials of both parties actually believe this.

It’s bad economics, but good politics. The Republicans usually go along because they’re afraid they will be cast as uncaring, or, even worse, as racists!

Somebody should be screaming to high Heaven about the racial effect of these moronic minimum wage laws, politics be damned, because it would be the right thing to do.  And it’s not just minimum wage laws that have harmed the blacks of America. The liberal policies of the last 50 years have done egregious harm, and the voices of protest have been far too feeble, especially from the Republicans.

Here’s what Thomas Sowell once wrote: “No segment of the population has lost more by the agendas of the liberal constituencies of the Democratic Party than the black population. — Yet the Republicans have never articulated that argument, and their opportunism in trying to get black votes by becoming imitation Democrats has failed miserably for decades on end.”

And it still fails.

Readers who wish to know more about disparate impact are referred to Thomas Sowell’s “Intellectuals and Race”, Basic Books, 2013, pp. 131 -136. For a recent article supporting disparate impact, Google: ProPublica Nikole Hannah-Jones Fair Housing.  A guest editorial opposing disparate impact appeared in the Wall Street Journal 2/25/13. Google: Roger Clegg: How Not to Fight Discrimination.

For a concise review of the effects wage laws have had on minorities, go to “Race & Economics”, Walter E. Williams, Hoover Institution Press, 2011, Ch. 3; Also, Sowell, ibid, pp. 95-96.

For a comprehensive look at defining racism, Sowell, ibid pp. 93-95