Yearly Archives: 2012

“Wimpy” Governance

“When I use a word,” Humpty Dumpty said, in rather a scornful tone, “it means just what I choose it to mean—neither more nor less.”

Words to live by for those in government. For example, the word “surplus” is supposed to denote the result of consuming less than one receives. But that is not the meaning employed by our wise overlords. Or rather, they choose to cherry-pick what constitutes “receive” and “consume” so that the difference between those terms can be any value they desire. It’s time for some myth busting: there was no Clinton surplus. The entire thing is a fabrication, an accounting sleight of hand. “Hogwash!” you’re thinking! Certainly if this had been the case the conservatives pundits would have been all over this, right? Wrong. Their collective silence speaks volumes in testament to the fact that the same “math” used to show a surplus under Clinton also shows smaller deficits under their guys (e.g. Bush Sr. claimed $1 trillion in deficits, but it was actually $1.5 trillion, likewise Clinton claimed a $62 billion surplus but actually had a $1.4 trillion deficit)

Here is the essence of the subterfuge:  Let us imagine a single mom, let’s call her, I don’t know, Julia. Julia earns $30,000 a year. She receives $5,000 a year from her ex-husband that is to be put into a savings account for her son’s education. However she has $32,000 a year in expenses and a $1,000 credit card debt. So she “borrows” $5,000 from the education account. $2,000 of it goes to the extra expenses, and $1,000 of it goes to pay off the credit card debt. Quite pleased with the situation she tells her friends she has paid off her credit cards and has a $2,000 surplus to boot! To celebrate she spends the “surplus” $2,000 on clothes and a new TV. She rationalizes owing the $5,000 to her son’s account with the idea that in the future she’ll make more money and pay it back later, but she needs it now for her and her son’s benefit, so that makes it ok. Fast forward 18 years and we find that although her pay has increased, so have her expenses, and she has continued to accumulate $5,000 IOU’s each year such that the account contains nothing but $90,000 in IOU’s. In any other arena except government this process is known as embezzlement.

One difference between what Julia did and what the government does is that the theft is legally mandated: all federal government trust funds (there are others besides social security) are required to turn over excess funds to the federal government by way of purchasing special government bonds (IOUs). The government then counts these “excess” funds as REVENUE, even though that money is obligated to future recipients. Let me repeat: the government is counting loaned money as income! That might balance cash flow but it is merely “Wimpy” can-kicking governance: “I’ll gladly pay you Tuesday for a hamburger today.” Guess what? Today is Tuesday.

“I’ll gladly pay you Tuesday for a hamburger today.”

The effect of this fake revenue is to decrease the gap between normal tax revenue and spending (the deficit), which is why every administration loves this technique. However even the government can’t hide from the effects of ignoring reality. Any money the government borrows from itself is added to the Intra-Government debt holdings account. The IG debt account is distinct from the “Public Debt” account (money lent to the government by non-government entities). The Public Debt went down under Clinton by using IG debt to pay it down (i.e. using credit card A to pay off credit card B). Adding these two numbers together reveals that total debt went up. If you don’t believe me, check for yourself; see the US Treasury data. Each and every year from 1992 to 2000 the “Historical Debt Outstanding” increases. Pundits can try and confuse the public with jargon, but at the end of the day it simply is a matter of checking just one number (total debt). If it goes up, there was a deficit, if it goes down, there was a surplus. End of story.

Human Action

In the wake of the senseless shooting tragedy in Newtown, Connecticut we attempt to ease our collective pain by latching onto the only hope of extracting anything useful from this event, that is, to learn from what is now history so that it is never repeated. But what have we learned? Superficially this shooting is no different than any of the other mass killings: heavily armed killer walks into an area designated as a “gun free zone” and then proceeds to open fire on the unarmed. For example, it is a deliberately ignored fact (or rather an inconvenient truth) in the mainstream media that the Cinemark theater chain (where the infamous “Dark Knight” shootings took place in Aurora, Colorado) had a “gun-free” policy. Several of the victims were recent veterans who could have expeditiously put down the shooter had they been permitted to carry arms into the theater. It is highly improbable that the following is mere coincidence: with only one exception (Gabrielle Giffords shooting in 2011) every public shooting in the US since 1950 in which there were at least three fatalities have occurred in gun-free areas (schools, malls, post offices, etc.) The killers may be sociopaths but they aren’t stupid. Such shootings do not occur at police stations or gun shows for a reason. If you are still unconvinced that gun-free zones simply inform evil-doers where they may proceed unmolested then I issue to you the following challenge: place a “this is a gun-free zone” sign on your front lawn. Still feel safe?

Eliminating gun-free zones is however not a panacea. It ironically suffers from the same “whack-a-mole” problem as extreme gun control. For example, if you could achieve the holy grail of gun control, i.e. eliminate all guns, then would-be killers would simply convert to other methods of mass killing (knives (see the oddly coincidental knifing of 22 children in China), explosives, gas, biological, etc.) some of which have a much greater potential for inflicting harm than guns. Yes, one could outlaw each of those weapons in turn but given their prevalence in warfare (and food preparation) it’s simply naive to think such weapons will not “leak” into the civilian population. Likewise, if would-be killers know that armed citizens could be anywhere, then they will engage in more stealthy killings. You can’t shoot back at what you can’t see. There are a lot of ways to kill people without exposing yourself to harm (it’s the entire modus operandi of warfare). So while eliminating gun free zones would help in those situations involving crazy and stupid and/or suicidal, it would not help when crazy and smart is a factor.

The sad fact is that nothing can ever solve the cancer of random mass killings. Humans are random, willful beings whose actions and interactions are impossible to predict, monitor and manipulate with 100% effectiveness. Absent the Panopticon of an Orwellian police state there is nothing government can do to “solve” this problem. If laws could actually alter human behavior then our prisons would be empty. The only possibility of a solution comes from the collective actions of all of us. To the extent all human action is influenced by the actions of others we each have it within our power to potentially alter the actions of others by making each of our own actions positive ones. For example, many of these killers were outcasts, loners, just a little bit different than the rest of us. These differences invited mocking and ridicule which only exacerbated the isolation of these individuals. The killers are not “victims” nor are their unreasonable actions in any way justified, but just because a response is not justified does not mean we should expect it wouldn’t occur. Negative actions invite negative responses (whether such responses are justified is irrelevant to the goal of eliminating such response). We should always be mindful that we do not live in a vacuum and that our actions may have far reaching consequences for others. The “Golden Rule” may not solve the problem, but I’m quite certain it can’t possibly make it worse.

This Butt’s for You

I saw you PCI 3798. I saw you blithely flick a cigarette butt out your car window whilst I was trailing you in traffic. But you’re not alone. I often see smokers discarding their used cigarettes with the casual lack of concern befitting the monarchs of old. Why do others and I find such littering so disturbing? Is it merely because of the visual damage to our surroundings? No, I think the animus runs beyond mere cosmetic harm. Our outrage toward the litterer is a result of recognizing the arrogance the litterer holds to believe they are so important that it is the job of others to clean up their mess (no, cigarette butts are not biodegradable). But wait – isn’t that what we do when we go to a nice restaurant (expect others to clean up our mess after we’re done eating)? Aren’t we expecting others to provide a service for us whenever we purchase a good or service? But this expectation is not arrogance because we in fact provide something in return by paying for such services. The litterer expects (dare I say feels entitled to the notion) that someone else should clean up after them without giving anything in return. It is this sense of entitlement, this sense of “others should bear the cost of cleaning up my mess” that we object to.

How did we as a society arrive at a framework wherein it can occur to someone to feel they are entitled to others cleaning up after themselves at no cost? What created this framework? Government naturally. Only government can create “public” resources by decree. Public ownership of resources is that paradoxical state wherein a resource is owned by everyone and no one simultaneously. Any public resource carries with it the burden of the “free-rider” problem, which is a subset of the “tragedy of the commons.” The tragedy of the commons refers to the use of “free” public resources in a disproportionate manner that maximizes individual benefit. Overuse occurs because there is no direct cost linked to such usage. Direct costs act as a feedback mechanism to meter usage. “Free” public resources have no such feedback and thus overuse results.

Whether it is roads or healthcare, anything made “public” will be utilized disproportionately by some because the over utilizers are able to acquire the goods at artificially lowered free-ride prices paid for (subsidized) by others. In the case of public road, litterers over utilize the limitless ability to litter because others bear the clean up costs. And which “others” bear this cost? Not the government. The government is a terrible environmental steward. They do not as a matter of policy clean up litter. Public roads often bear much similarity to public bathrooms for this reason. Rather, private citizens and organizations freely choose to sacrifice their time in road beautification efforts. Would there be no littering on private roads? Of course not. However the ability to shift more of the direct cost of littering (through tolls) onto the litterer would tend to decrease the frequency of littering. It is also possible behavior would not change at all, in which case road owners would simply clean up the mess and incorporate the cost of clean up into the tolls. But at least the roads would be clean. That is not the situation today.

We really can’t blame the litterer. He has rationally determined the cost of littering (to him) is $0 due to the warped incentives made possible by government interference in the market. In fact we should praise the litterer! He serves as the ubiquitous example of the result of government interference in society. If we can see that socially undesirable behavior is the result of government, then perhaps it will give us reason to reflect on what other kinds of less obvious damage government is inflicting on society (runaway housing, healthcare and education costs perhaps?).


The War on Droopy Drawers

It has been recently reported (here and here that the Madison City Council is exploring a new ordinance that would criminalize uncouth couture, that is, droopy drawers. The objective of said ordinance is “…. to get … appearance to be decent” (Councilman Fred Perriman). This statement of course presumes (a) decency can be objectively defined and (b) it is the proper role of government to impose arbitrary cultural notions of “decency.” Traditionally “decency” has been directly correlated with the amount of skin covered as well as the degree of looseness of said coverings. So using this metric it would seem women wearing a hijab (traditional Muslim head and body covering) are perhaps the most “decent” people around. I’m not suggesting the Council plans on imposing mandatory hijabs, however I am curious as to what underlying objective principle affords one the ability to demarcate a point between “hijabs for all” and “down with droopy drawers” wherein “decent” lies on one side and “indecent” on the other? Other than simply the subjective “I don’t like the way that looks” of course.

If we are not free to look like complete idiots, then are we truly free?

Now don’t get me wrong, I personally think saggy pants look incredibly goofy and frankly can’t figure out how they can walk around like that without tripping over themselves. But just because someone finds something to be idiotic is no justification to take advantage of the monopoly of the exclusive use of legal violence (or threat of violence) that government currently possesses in order impose his or her personal preferences on society.

Does this mean we are helpless to object to things we find offensive or undesirable? No. Private property owners are (or should be) free to impose whatever strictures they desire to anyone on their property (for example restaurants commonly have minimum dress code standards, as well as the familiar “no shirts, no shoes, no service” policy). Schools and businesses commonly have dress codes. Subdivisions as a collection of private dwellings have the right to impose any such standards as they see fit for those that enter the private domain of that subdivision (it should be noted it is not uncommon to require unanimity to make changes to homeowners association covenants, thus even in the private realm we recognize it is unfair for a majority to impose their will on a minority). In short, people are free to associate with whomever they wish and to set up rules governing those associations.

So, one might now ask, “What’s wrong with government imposing these nanny-state type rules? Isn’t this no different than a private subdivision setting up similar rules?” Actually, no, it is quite different. Firstly, these ordinances typically override private rules (i.e. if a restaurant permitted saggy pants, the ordinance would still fine the person). Secondly, even if the ordinance only pertains to the public sphere (non-private property) it is still invalid insofar as the “ownership” of such public spaces by the government is illegitimate. All public property was either confiscated directly or purchased with confiscated funds (taxes). So if “public” spaces have no legitimate owner then no one can legitimately make rules to govern such spaces without also admitting that a thief may legitimately control the use of property he has stolen.

This does not imply that all laws are invalid if they occur on “public” spaces. Laws that pertain to the protection of the natural (negative) rights (e.g. life, liberty, pursuit of happiness) cannot logically be constrained by location or time frame. “Nanny-state” laws are time and location dependent (i.e. such and such act is ok before some date and in some location but then after that date or in that location it is then magically illegal), that is, they are completely arbitrary in nature.

If we are not free to look like complete idiots, then are we truly free?

Arbitrary Fairness

With the fiscal cliff looming there has been renewed discussion of “fair share” and how it’s only “fair” to ask the wealthiest Americans to be pay more taxes. Yes, “ask”. I believe that is the same kind of “asking” a mugger engages in when he “asks” for your wallet. I have yet to have revealed to me a definition of “fair share” so perhaps it is time to offer one myself. The income tax system is built on the notion that one’s payment burden should correlate to net income. If your share of society’s aggregate income is 25% then it logically follows under such a system that it is not unfair to demand you pay at least 25% of total taxes. A “progressive” tax system (the one we have today and which is a plank in the Communist Manifesto) demands one pay more than their proportionate revenue stream. Some argue this is “fair” on the grounds that mere ability to pay more is sufficient grounds to take more because on balance society (supposedly) benefits. However there exists no non-arbitrary method that reveals precisely how much more above one’s revenue proportion one’s tax burden should be. How exactly do these wise sages propose to derive a fair ratio between tax burden and income share that results in a perfect balance between societal benefits at the expense of the individual? Is a 2:1 ratio fair, but a 3:1 ratio not fair? If not, why not?

Sadly the mainstream media leaves us (unsurprisingly) with the impression that top taxpayers are paying less than their proportionate share. Nothing could be further from the truth. For 2010 (IRS data) 3% of taxpayers (earning above $200,000/year) had a 27% share of income and a 52% share of all personal income taxes with an average tax rate of 22%. Yes you read that correctly, 3% of taxpayers pay over HALF of all personal income taxes even though they earn only ONE-QUARTER of income. Earners between $75k – $200k (18% of taxpayers) receive and pay about a third in income and taxes with an average tax rate of 11%, so in terms of balancing income and tax burden this group is perhaps the most “fairly” taxed. Those solidly in the middle class ($25k-$75k – 38% of taxpayers) earn 30% of all income and pay only 14% of the tax burden with an average tax rate of 6%. And lastly those in the under $25k (41% of taxpayers) range earn 9% of all income but pay a mere 1% of the tax burden with a 1% average tax rate. Including payroll and corporate taxes would alter the numbers somewhat however the overall analysis remains the same: there is only one segment of taxpayers paying far in excess of their share of national income and for some bizarre reason they as a group are the ones most vilified for not paying enough. I’m not suggesting those in the lower brackets pay more and the top less. What I am suggesting is we cut spending so that everyone can pay less.

Due to the persistent fairly tale that there was a budget surplus during the Clinton years people somehow imagine that if we simply let rates rise back to where they were under Clinton we will magically close the budget gap and have surpluses again. As the Democrats are fond of saying “the math just doesn’t work.” Allowing the top marginal rate to rise on 3% of taxpayers would raise only approximately $100 billion/year. Coupled with a projected $900 billion deficit for 2013 that barely scratches the surface.

Consider what a $100 billion increase in taxes means. It is $100 billion removed from the private sector where it could be spent OR used to build new factories, hire more employees or invest in R&D. All of these events occur regardless of current demand. They are the direct result of the speculation incentive, that is, the incentive to possibly make more money in the future by spending money today. Increasing taxes kills the speculation incentive on two fronts: slowing the rate of investment (as more money goes to taxes and less to saving) and decreasing the incentive to invest due to lowered potential after tax returns.

Instead the tax dollars are redirected to government favored entities. If you think this might produce a net benefit, then ask yourself: Is society really better off if we allow the government to funnel money to those businesses that are most effective at the art of lobbying and suckling at the government teat (the political entrepreneur) by taking from those businesses and individuals that are most effective at actually producing things people want (the market entrepreneur)? Until we can face the reality that wants are infinite but resources finite nothing will stop us from going over that fiscal cliff.

Warning, Warning!

“New Jersey has a tough price gouging law to ensure that profiteers will not take unfair advantage of people at their most vulnerable” Governor Chris Christi

Unfair advantage – so who exactly is the Solomonesque arbiter of that which is fair and unfair? In this case the states of New Jersey and New York. And how is unfairness defined? By pulling arbitrary numbers out of thin air of course! In New Jersey it is holy writ that a 10% markup above normal price level is perfectly justified and fair, but 11% is the act of a wanton criminal. In New York it is left to the highly subjective discretion of a judge to decide if one has breached the barrier of “unconscionably excessive” pricing.

The state of New Jersey is currently charging 8 businesses with violation of its “anti-gouging” laws. How horribly high must one raise prices to be so charged? Thirty-dollars. One hotel charged $119 a night rather than the usual $90 a night! Oh the humanity! Give me a break. Hotels routinely raise prices this much or more when demand is high for other reasons. So apparently it’s criminal if a storm increases demand but not criminal if the Super Bowl does? Even the gas stations under indictment only raised price by $2/gallon, which translates into an extra $20-$40 per tank. Which would you prefer? No gas at all (or the prospect of waiting for hours in line) OR a quick fill up that cost an extra $40.

Anti-gouging laws are probably the most convincing proof that politicians are completely ignorant of economics. About on part with someone ignorant of physics trying to cool their house with a refrigerator. Anti-gouging laws give birth to another set of laws that try to repair the damage caused by the anti-gouging laws: rationing laws. If controlling the seller makes a mess then try to control the buyer. Genius.

Such laws are the sole cause for all shortages following in the wake of a disaster. Although supplies can become constrained, actual shortages arise because price controls cause demand to outstrip supply (e.g. if the government decreed all BMW’s cost only $1,000 the increased demand would quickly create a shortage). Not convinced shortages are demand and not supply driven? Consider this: what happens every time there is even a whisper of possible snowfall here in Georgia? Everybody and their cousin rushes straight to the grocery store and buys up every last loaf of bread and gallon of milk. This is entirely irrational. But people are irrational beings and will irrationally increase their demand for goods they do not need. High prices are a way of telling people “hold your horses there – do you really need those 10 loaves of bread?” If a loaf of bread were allowed to go from $2 to $10 chances are high you will reconsider just how badly you need it. This will leave more available for those that truly need it.

Think of high prices as flashing red lights in the cockpit of the economy saying “warning, warning – supplies are constrained, please devote resources over here to relieving the constraint” Government’s brilliant solution is to disconnect the light. Entrepreneurs flock to high prices like cats to catnip, rapidly increasing supply and lowering prices through competition. For example, absent such laws a gas station might hire a tanker truck to travel out of state, buy up as much $3/gallon gas as it can find, haul it back and sell it for $6/gallon. But because prices can’t be raised this scenario and many others do not happen, and we are left with long lines and shortages.

Anti-gouging laws are about as effective as outlawing fevers by requiring the ill to take ibuprofen. Masking the symptoms does not cure the disease; it only prolongs the illness.

Keynesian Coin Toss

Hurricane Sandy wrought not only terrible destruction this past week, it likewise whipped a few economic fallacies to the surface. Chief among these was the unwarranted attacks on the “price gougers” and the stunning ignorance of those pontificating on the “prosperity through destruction” meme. I shall defer my defense of the gougers and turn my attention toward the “destructionists”. What pray tell might be the upside to destruction? Jobs. The same old hackneyed drivel that was laid to rest 160 years ago by Frédéric Bastiat (see “the fallacy of the broken window”) and yet it keeps popping up with every natural disaster like the game of Whack-A-Mole. Even Ph.D. economists (Duncan Black, USA Today) who should know better continue to espouse such drivel. His recent article is illustrative toward this way of thinking insofar as he seems to be suggesting that a storm is primarily beneficial not because of the illusory short term economic benefit, but rather because it is a useful tool to teach the unwashed masses how non-voluntary spending can spur economic expansion and job creation. Such an example can then be used to justify to those obstructionist dimwits in Congress that we need much larger and grander government sponsored non-voluntary (stimulus) spending. The core premise of this argument is akin to a eulogy in which the grieving are instructed to take solace in the fact that the undertaker will benefit financially from the death of their loved one.

To be sure, there will be a localized economic uptick following any rebuilding. That is the “seen” benefit. But as Bastiat taught, one must also consider the “unseen” losses. That is, all the things that could have been done but were not. This is called “opportunity” cost. We experience this every time we buy something insofar as we could have bought something else. There is nothing wrong with that. The problem arises when our will, our desires, are overridden by an outside force that corrals us into choosing something we would not, absent such coercion, freely choose. When that force is Mother Nature we don’t like it, but we accept it and move on. The Keynesian understands that if they can convince us that Mother Nature’s destruction might be positive then we will be that much more willing to accept it when Man (through his proxy the State) imposes his diversionary will upon us. In other words, if I can convince you that getting hit in the face isn’t all that bad, you’ll be much more willing to put up with having your foot stomped on.

The Keynesian tries to rationalize their position by suggesting that funds “tied up” by insurance companies or unpatriotic savers are simply “idle.” * Well, parked cars are “idle” too. Should we melt them down and make a bunch of toasters? That would certainly benefit the toaster makers and their employees, but somehow I don’t think the car owners would appreciate this. This is how the Keynesian’s sell their ideas, by dishonestly pointing at only what we can see and mumbling zombie-like “jobs” while conveniently ignoring those that provided the resources. Money is never idle. If it’s not being spent then it is being saved or invested. Saved money is lent out and spent. Invested money supports new and existing businesses and jobs. Consider what would happen if all of the “idle” stock of a company were converted to cash by a company and paid to shareholders. That company would cease to exist insofar as every asset would have been sold. I’ll say it again: money is never idle. Repairing destroyed property involves removing active resources from the economy. In order for insurance companies to pay claims they need cash, which they either (a) withdraw from a bank, thereby decreasing lendable funds or (b) they sell assets, thereby decreasing the ability of those that buy the assets to further spend. Each dollar devoted to repairs in one area of the economy represents another dollar removed elsewhere. In other words, there is no such thing as a free lunch.

Natural disasters and government stimulus are two sides of the same will-manipulating coin – wealth destruction on one side and wealth diversion on the other.


* Because these articles are published in newspapers where I am under a word count constraint sometimes I must leave out some discussions that are entirely germane but simply will not fit. But as this is the online mirror of the article I will include a bit more of the economics discussion here. There is in fact a legitimate route by which disasters and destructions can and do result in increased productive output. I’m not suggesting this is a good thing, but I would be remiss if I did not bring up this point and clarify that however true it can sometimes be there is a cost involved that is always overlooked when brought in the mainstream press. 

Natural disasters can in theory produce enhanced productive output, however whether you view this as good or bad depends on whether you view working 12 hours a day preferable to working 8 hours a day. The basic premise is this: if your house burns down and you have to rebuild it yourself while still carrying on all the other duties you previously had you will indeed be more productive. Not only are you building a house you are still producing enough to continue feeding and sheltering yourself as much as you were before. The obvious tradeoff here is leisure time. Formerly you could work 8 hours a day but now you must work 12 or 14, the excess time being devoted to recreating that which was destroyed. If this is indeed beneficial then perhaps the government should mandate everyone work 12 hours a day and we could grow GDP in this country by 50% in one year!

Leisure time also has value but this value, being subjective, is non-monetary. It is impossible for the state economists to account for the loss of this value when factoring in the apparent expanded productivity following a disaster. Obviously people aren’t rebuilding their own homes but the net aggregate effect is the same. If resources in the economy are devoted to (a) normal home building + (b) home reconstruction then those in the construction industry are either working more than they normally would choose to (with concomitant less leisure time) or if they are not working more then one must bid up the price of getting a home built which has the effect of you having to work more in order to afford what you want OR more people are attracted into construction keeping costs down but the loss of those employment resources from other sectors of the economy results in scarcity in those other sectors which drives wages up and hence prices, and thus we all must work more in order to afford what we used to afford in those other sectors: net result, we’re working and producing more but only obtaining the same amount of goods and services we used to get when we worked less prior to the destructive event.

 If we do not work more but borrow more then increased demand for borrowed funds will drive up interest rates which will still cost us more in the long term requiring us to work more than we otherwise would have or if money lending demand is met and interest rates stay low that means more people are saving and making do with less which is the functional equivalent of working more for the same. We either choose less leisure time and more work to have 100 units of “stuff” or we choose the same amount of leisure time and accept higher costs and therefore accept we can only now get 80 units of “stuff”. Either way the destructive event is a loss, either to goods or to leisure time.

Staples… yeah, we’ve got that!

Among the many positions being voted on November 6 is the rather mundanely named “Public Service Commissioner.” In Georgia we have a government granted monopoly for providers of various utilities (electric, natural gas, telecommunications) and in order to keep Joe Citizen from getting gouged by a state imposed monopolistic system the Public Service Commission was established to allow the citizens to have an indirect voice in keeping prices in check. I suspect that this innocuous naming was a concession to those regulated industries in order to minimize the potential that the public might actually become aware they could exercise such control. Perhaps “Monopoly Justice League” might garner more voter attention.

Why do I bring up this seemingly sleepy little race? Because it is one of those rare circumstances where Democrats, Republicans and Libertarians can (or should) all agree that ethics trumps party affiliation. The incumbent candidate for PSC District 5, Stan Wise (R), has engaged in behavior that while following the letter of the law clearly does not follow its intent. People associated with the utilities he regulates have contributed about 90% of the funds received in his reelection campaign.  I see no need to waste words on painting the obvious conflict of interest. Of course I suppose it is possible such donations had no such influence. Just as it is entirely possible Mr. Wise coincidentally voted repeatedly in a way that benefited the regulated industry at the expense of the citizens. It is possible.

Fortunately there is a choice in the District 5 race: David Staples (L). David has taken a pledge to accept NO gifts of any kind from anyone connected to regulated industries. Although David is a Libertarian, allow me to set aside any concerns those of you who normally vote D or R might have (well I suppose just R, as for the D’s reading this, it should be an easy sell to vote for David insofar as you are voting against the Republican – there is no Democrat candidate in the District 5 race). Even if you disagree with Libertarians on some issues, those issues are irrelevant on the PSC owing to the limited powers the PSC has from an ideological and legislative standpoint (i.e. the PSC can’t legalize drugs!). Basically the PSC votes on rate increases and monitors functions that will impact consumer costs (e.g. nuclear reactor construction). That’s about it. They cannot make or introduce new law. From a financial standpoint a libertarian is the ideal candidate for this position. Just as they turn a skeptical eye to big government proposals for increased spending, they will turn the same skeptical eye toward big utility proposals for rate increases. Likewise, a libertarian will seize on opportunities to enhance free market competition within the boundaries of the current monopoly system. Competition should be encouraged since it can only reduce prices. For example, it is illustrative to see the views of current commissioners regarding competition. Currently the Territorial Electric Service Act of 1973 does not allow any business to compete with a utility in its “region” (turf). This policy has thus far barred from Georgia the possibility of increased use of solar energy through a market based (rather than taxpayer funded subsidy based) approach that would eliminate the high upfront cost barrier. It is therefore illegal for a company to install solar panels free of charge on a customer’s home and simply charge the customer on a per kWh basis just as an electric utility would.

David Staples would vote to allow such entities to enter the market when and if that act is modified by the legislature. However, Stan Wise holds the paternalistic view that Georgia is “far from ready” for such arrangements.  Gee, thanks Stan, but I’ll make that decision on my own, I don’t need your guidance. On November 6 vote for ethics and for choice. Vote for David Staples. See & this interview for more info.

Permission to live

The state of Georgia has officially made it illegal to make a living UNLESS you are willing to ask your master for permission first (namely the state & federal government). To wit: I discovered today that in order to maintain the extreme privilege of operating a business in Georgia one must now sign a sworn affidavit and provide documentary evidence that one is a US citizen.

So now not only are business owners drafted into being unwilling arms of the state apparatus by being required to make their employees prove they are US citizens, but now business owners themselves must prove to the state they are US citizens (because clearly that is a real problem, undocumented illegal aliens coming to this country to establish self-sustaining businesses).

What pray tell could be the rationale for this: Well according to OCGA §50-36-1 any “public benefit” one might receive requires said recipient to prove they are a US citizen. However their definition of “public benefit” is quite odd insofar as it includes “benefits” that the state itself REQUIRES business owners to obtain from the state, namely business or other occupational licenses. If a business license given to me by the state is a “benefit” that is causing them so much distress is doling out, I’ll be the first to volunteer that they can keep it. Somehow I think businesses would run just fine absent a framed piece of paper on the wall.

To those not familiar with the regulatory hurdles one must go thorough to operate a business in this state (and I assume most states): this is not merely a one time annoyance, i.e. get your license and you’re done. Oh no, this is an annual event, every year I must prove to my overlords that I was a US citizen last year and oddly enough 12 months later I’m still a US citizen. I need to provide copies of citizenship records, I need an affidavit signed and notarized.  A few years ago it was one form, last year it was 2, now it is 3 this year and I will be shortly required to obtain the not so euphemistically named “Federal work authorization user identification number” in order to enjoy the simple privilege of operating a business and being permitted to hire employees.

But I’m a good little slave to the state and I signed my document with tail tucked between my legs knowing that if I refused to the bitter end I would ultimately be dragged from my home or office at gunpoint – all because I simply see no reason any human being should ask for permission of another human being whether they can work or not. Here’s a copy of the form to which I attached my own “Signing Statement”. If it’s a bit hard to read, here’s what I said:

“Signing statement: I sign this document under duress owing to the implied threat of violence resulting from non-compliance. OCGA §50-36-1 is morally unsound law. My inalienable right to peacefully engage in trade is not predicated or dependent on the prior approval of another person or persons. The state has no authority to say I have no right to work or trade unless I kiss their ring.”

Hunting with a BB Gun

“[The recent fungal meningitis outbreak] marks a lapse in the responsibility of government to protect against such a disaster.” – Editorial board, Washington Post, October 16, 2012

This statement (regarding an outbreak of fungal meningitis due to contamination at a New England compounding pharmacy) reflects a fundamentally paternalistic view of the world. It presumes government can and should be our protector against all the ills that might befall us in life. Click our seat belt, put on our helmet, limit our soda, license those who cut our hair, force us to buy insurance – it’s all for our own good, we’re just too ignorant to know better. The world is scary, understandably we want to be in control, but this is the real world and there simply cannot exist a magical entity that can protect us from all harm. We are adults and this desire for a paternalistic caretaker is a step backward into childhood and dependency and stands in stark contrast to stepping forward into adulthood and independence.

The danger in believing government can actually protect us is that we become complacent and assume there are no dangers lurking out there, how could there be, isn’t government in control? Why should I bother investigating this drug or this company, I mean, the FDA would never let anything dangerous through, right?  In this particular case the FDA actually did not have oversight control of the compounding pharmacy where contaminated injectable steroids (for back pain) were produced. The local state licensing boards had authority, however oversight was lax and even the regulations that were ignored were simply paperwork related and could not have prevented this disaster. But the average consumer doesn’t know all the ins and outs of government regulation; they just assume Big Brother is looking out for them. Is the answer then to give the FDA total control over everything then? Well only if you think the best answer to a failure of government is even more and bigger government. When it comes to a product as critical as drugs we obviously want someone double checking what it is we’re putting in our bodies. But I would feel a whole lot better knowing that if the entity doing the checking has an incentive not to fail because I can sue them too. The FDA (and state boards) have no such incentive; they are immune from all prosecution. Failure of the regulators has no consequences.

Government regulation is a government response to a government created problem. In this case the problem is corporate liability protection. Government creates by fiat entities that are mostly immune to liability for errors and misdeeds (LLCs, Corporation, LLPs, etc.). In order to reign in the moral hazard created by such government granted limited liability, government then decides it must regulate the beast it has created. Doing away with all liability protections and threatening owners with unlimited liability for harm (intentional or not) will be the incentive that will drive the creation of a private regulatory market wherein businesses owners insure themselves against loss and are then tightly regulated by their insurers who have an incentive to eliminate events that would result in paying damage claims. Insurers would hire FDA-like companies to closely monitor their insured and only those most effective at regulating and minimizing losses would survive (as they too could be sued for failure). Government simply stands as the backstop against any unscrupulous insurer that refused to pay valid claims (although such insurers would naturally go out of business quickly as that reputation spread).

Government regulation lulls citizens into a false sense of security. This is as dangerous as going on a lion hunt with a guide whose rifle actually turns out to be a BB gun.