Category Archives: Anti-state

Scottish Secession: Politics as Usual

Scotland made history last week. They held a referendum election to decide whether or not they should become an independent nation or remain part of the United Kingdom. The measure was narrowly defeated (45% for independence) although strong support among the younger generations ensures this question will resurface in the not too distant future.

However what is interesting about this event is not such much the result but rather that it took place at all. Historically the general trend has been toward greater consolidation of power under a central authority. It is a rare event to find wide popular support in the other direction. Why would this be? Fear and uncertainty. Humans, like sheep, follow a herding instinct. Biologically this makes sense; there is safety in numbers. But there is a point of diminishing returns when group size changes from hundreds to thousands to millions. When the numbers scale into the millions, our hunter-gatherer mathematically challenged brains cannot make sense of such enormous numbers; we fail to realize the gains relative to the tradeoffs are negligible and so we are easily fooled by anyone promoting confederation. We are easily herded by our so-called leaders who capitalize on our fears. But confederations only last if all parties are treated fairly. Democracy itself is inimical to fair outcomes as democracy inherently marginalizes the desires of (political) minorities. Democratic countries are born in the heat and fire of common cause. But, like glass, these democracies will suffer fractures under the pressure from the repeated blows of each election cycle. As disagreements fester, the structure weakens, until eventually the confederation will shatter like so many pieces of battered glass.

What is the take home message of any secession movement? That perhaps we might all live more peacefully if we are allowed to go our separate ways rather than be forced into unions based solely on the opinions of those living nearby. If the Methodist is not required to be a citizen of the Baptist State, even when that Methodist is a minority amongst his Baptist neighbors, then why should anyone be compelled to be part of a group they have no desire to be a part of? Why are religious convictions the only thoughts worthy of such respect?

Another interesting aspect surrounding this attempted secession is that it was done so non-violently. Historically, secession attempts often trigger an overwhelmingly violent response from the “parent” who refuses to let the “child” go its own way. Americans have long lost the ability to rationally discuss the concept of secession given the Pavlovian association it has in this country with slavery. But perhaps Scotland can finally get Americans to view secession in a new light. It is possible for secession to be about something other than racism.

Secession is a fundamental right, namely the right of association, which conversely implies the right to not associate. Secession is the only tool that minority groups have in a political union insofar as the very threat of it may be sufficient to alter the behavior of the majority. For example, Scotland achieved many concessions from the UK. Sadly most of those concession had to do with granting Scotland greater power to tax its citizens, so Scotland is certainly no poster child for some sort of Randian free-market utopia.

In reality this whole process has been nothing more than political parties jockeying for power. Their goal is not a noble quest to unburden their citizens from the oppressive yoke of a foreign regime. No, their goal is to be the ones with their hands on the reins of that yoke. However Scotland is not unique in this respect. Every act of secession has been about shifting power from one group to another. The only benefit secession confers is that as power is divided, it becomes progressively weaker and hence less of a threat. One can only hope that such attrition of power will one day consume today’s “superpowers” leaving behind a collection of small, peaceful and prosperous communities that are too busy and too weak to provoke conflict in foreign lands.

Tax It Your Way

The recent announcement that Burger King will merge with a Canadian food chain (Tim Hortons) and shift its corporate headquarters from the US to Canada has predictably tripped the frothing at the mouth reflex of tax-hungry statists. Why? Because such a merger and move (known in tax lingo as “inversion”) means that Burger King no longer need pay the 35% US corporate tax rate (one of the highest in the world and despite popular media propaganda that focuses on a sliver of corporations avoiding it, it is in fact paid by 99.5% of US corporations) on income earned outside the US (they will still pay 35% on their US income). They instead will pay the much lower Canadian rate of 15%.

“Unpatriotic” is the word President Obama has used in the past to describe such tax inversions (which are completely legal) and his retinue are now all too eager to join that chorus – uncritically parroting the approved talking points put out by the administration. This sentiment of “economic patriotism” demands that one’s love of country directly correlate with one’s willingness to hand over whatever the state demands.

Obama has also said tax minimization may be legal but it’s “wrong.” Really? This is a rather warped interpretation of right and wrong. Traditionally “wrong” is reserved for those actions that violate one’s natural rights (theft, murder, rape). If Mr. Obama’s use of this term is technically correct then it betrays a scary proposition: individual ownership can not exist because all is owned by the collective, otherwise how else could it be wrong to keep one’s property, unless it was never yours to begin with.

This sentiment is shared by both the left and the right insofar as both are statist at their core. While they may differ in degree, they stand in solidarity on substance: the role of the individual in society is to serve the interests of the state. A vehement disagreement over whether 35% or 25% is a “fair” tax rate is much sound and fury signifying no disagreement. Shall the master allow his slaves one hour or four hours of rest? Clearly those in favor of one hour are godly and moral men while those supporting four are raving lunatics. But truly insane is the man who says slavery itself is immoral. Pay no heed to him, what he proposes would never “work” in the real world. So you see dear citizen, the profits earned by Burger King (or any company or person) are not really theirs. It belongs to us all, to the state, to the Homeland. How dare you attempt, even legally, to reduce by one red cent your contributive fair share to the communal pot?

The usual sort of justifications for unbounded taxation is that because a company receives benefits from the state (courts, policing, military, roads, research, education, etc.) this therefore establishes an obligate contractual relationship necessitating payment (of a unilaterally determined magnitude) for such benefits. If that is indeed true, then mobster-extorted protection money is equally legitimate.

Ignored in this false choice analysis is the possibility that these supposed benefits of the state would exist in the absence of the state. Naturally they would exist except in the minds of those bereft of an entrepreneurial spirit. The only difference is that privately produced “public” goods would be of higher quality and lower cost. If you’re unconvinced of this fact, just insert the word “public” in front of any good and consider which you would prefer in relation to the privately provided alternative (e.g. toilet, school, transit, food, clothing, car, healthcare, etc.) The difference in costs and quality between tax supported goods and market provided goods is the true dead weight tax cost and represents a net loss to society no different than if the government paid a million men to dig holes and fill them in.

It seems the tax-hungry-economic-patriot can’t decide what they want. If you protest the system they claim you’re unpatriotic and hate America and should leave. But when you take their advice and do leave you are then targeted with the vilest of epithets. But that sort of inconsistency should be expected; the ethics of the statist is consistently inconsistent insofar as they owe their allegiance to the mantra “the ends justify the means.”

If you have the right to work…

What is hypocrisy? Hypocrisy is a chain smoker that proselytizes on the dangers of smoking. Hypocrisy is an outraged thief discovering he’s been robbed. Hypocrisy is the state taking away our rights and then warning us to be vigilant against those that would deny us our rights. Or perhaps that is irony – I’m never really sure on that one. This past week my family and I stopped into an Arby’s for a quick dinner. Hanging on the wall adjacent to the registers was the most patriotic looking DHS labor rights poster you will ever see (red, white and blue with an overt flag theme to top it off). It was one of those silly “workers rights” posters that the government forces employers to post in effort to ensure that employees everywhere are aware that without the helpful fist of the state they’d all be earning 5¢ an hour on 16 hour shifts. Over the years these posters have grown in size from a mere 8.5×11 sheet to blockbuster movie poster sizes. I don’t know if this particular Arbys posted it where the customer’s could read it because they wanted their clientele to know they are doing their patriotic duty to keep them ‘ferners from stealing our jobs or if they simply ran out of wall space in the back.

In any event, what caught my eye was the prominent byline, “IF YOU HAVE THE RIGHT TO WORK, Don’t let anyone take it away.” That most people absorb this without comprehending the underlying violation of their rights is a masterful stroke of state propaganda. It first takes root within our public school system and is then nourished over a lifetime of exposure to popular media state-apologist indoctrination. People now blindly accept that our rights come from government. Most have the Bill of Rights backwards; it did not establish our rights, it simply delineated what was already ours to begin with. This enumeration was done in order to keep at bay those who believe that all that is not permitted is outlawed (a view clearly contradicted by the 10th amendment).

So at the very first word, “IF,” we find evidence of an egregious violation of a basic human right: the right to work. There can be no “if”; all humans, everywhere and always have the right to work. To work is to provide for oneself (or those in your care) with those things that make life possible (food, clothing, shelter). To deny this right is tantamount to murder. Of course by “right” I mean that in the negative, not positive, sense. No one may interfere with my right to work, however no one is obligated to provide me with a job either. If no one will (willingly, free of state interference) employee me then I am free to work for myself.

The sentiment expressed on this poster transmutes this negative right into a positive one through mere fiat, that is, the right to work becomes the privilege to work, a privilege that may only be granted by the state. So naturally once the state has given you something valuable, they want to foster a sense of dependency and gratitude by warning you to remain vigilant against those who might try to do the very thing (deny work) the state is doing through their E-verify program.

This is where the hypocrisy gets really rich. The big concern about all of these “illegal” immigrants is that they are coming here and acting as a burden on our social safety net. But, if they had jobs they would not be a burden. So naturally the response is to make it impossible for them to obtain jobs by filtering all potential employees through the E-verify net thus thrusting them into the open arms of state social support. Brilliant. E-verify does not change behavior; it merely removes the least bad option and replaces it with an even worse option.

Even if you are in the “keep them out” anti-immigration crowd, do you really desire to see America become a neo-fascist utopia where employers are mere puppets of the state? Where providing for oneself depends on the integrity of a US government database that is assumed to never produce false negatives? Where we have become so xenophobic that we willingly turn our borders into prison walls and slowly transform America into a permission based society, where all is forbidden except that which is blessed by the state? Is that price not too high?

Ferguson is the New Black

I was shocked and saddened, as most were, to read about the shooting death of Michael Brown in Ferguson, Missouri last week. What I was not, unfortunately, was surprised. Stories of police overreaction to the most innocuous of infractions (or none at all) are seemingly no longer the exception in a society where mere behavior, words, or possessions are sufficient evidence of criminality that is too frequently repelled with lethal force. The trivial nature of Brown’s misdeed (walking in the street) coupled with the rapidity and disproportionate response of the officer involved (6 bullets, including 2 to the head!) was illustrative of the small amount of daylight between life inside and outside the prison system.

I (fortunately) lack any direct experience with the prison system; however, what I have read is a realistic portrayal of that system can be found in the television series “Orange is the New Black” (warning: definitely not family friendly). In this series the main character is incarcerated (as are many others) for being involved in one of the many victimless crimes related to the “war on drugs.” The prison depicted is a federal, minimum-security women’s prison. But even under this lightest of all prison environments, life is clearly a stressful and miserable experience, in no small part due to the capricious and vindicate nature of the guards coupled with the lack of autonomy over ones life.

Naturally this is what one would expect; we all know prison is not supposed to be a vacation. It is supposed to be miserable so that it may act as a deterrent. And even when it is not a deterrent then we the public can still rest satisfied in knowing the “bad” people are being appropriately punished. But as it becomes clear that the vast majority of these prisoners are party to “crimes” with no victim, it makes the US prison system less like Dostoyevsky’s Crime and Punishment and more like Stalin’s Gulags. But I digress.

The most frightening aspect of the TV series is not its portrayal of life within prison but rather the realization that we ourselves live in a much larger prison known as the State. This prison has no escape, no furlough and no time off for good behavior. Consider: in prison perceived disrespect toward a guard or failing to immediately and mindlessly follow their directives is met with an immediate and violent response. The same fate is not uncommon for any of us who might fail to immediately comply with the “lawful order of a police officer.” In prison the guards can search the prisoners or their living space at any time for any reason. This is likewise true in many parts of the country under “stop-and-frisk” laws or with the now infamous no-knock-raids. In prison the mail correspondence and voice conversations are closely monitored. Outside prison we have the NSA to take care of that task. In prison the inmates must plead to their intermediaries (the administrative staff) for permission to engage in heretofore-unapproved activities. Outside prison we must plead with our intermediaries (elected officials) for permission (licensing) to engage in an activity so that we can avoid violent reprisals from the state. In prison the belongings of any inmate can be confiscated at any time for any reason. Outside prison our property may be confiscated (civil asset forfeiture) for nothing more than baseless whims of suspicion.The dream of the statist is to push society toward being more, not less, prison like. The statist wants nothing more than to have the power to force all to conform to their vision of the ideal society: behave this way that, not that, eat this, not that, run your business this way, not that, express yourself artistically this way, not that, smoke and drink this, but not that. Where else but in a prison are such visions of the ideal society possible through strict enforcement?

Many might say “hogwash” to all this. They’ll insist they don’t feel like prisoners, they can do whatever they want, whenever they want. That may be true, for some actions, but even prisoners may do things without asking permission or running afoul of a guard; but that does not make them free. They are simply the pinball that has not yet hit the wall. Inside prison the walls are narrow, outside prison the walls are wide – but both have walls. If you remain unconvinced and still need proof that you are but a mere serf living on the master’s (that is, the state’s) land then consider the truth found within an instinctual and visceral emotional response. What do you feel in that moment when you see flashing blue lights in your rearview mirror?

Moneyball

A US District Court judge recently ruled that the NCAA can not prohibit student athletes from receiving remuneration that goes beyond scholarships and related costs. The ruling was based on the argument that the NCAA was violating antitrust laws (trust = a small group of individuals conspiring to limit options of its customers or members). That such antitrust pronouncements emanated from a federal court (itself a monopoly) is no less ludicrous than if the KKK were to condemn the racism of the Aryan Brotherhood. Perhaps the people should file an antitrust lawsuit against the Federal Government. The executive, judicial, and legislative branches regularly conspire in trust-like behavior in order to deprive us of our rights. If we were permitted to choose from whom we will rely on for governance (without imaginary border constraints), then, and only then, could we live freely.

Apropos voluntary governance; the NCAA is a non-geographically constrained, self-governing, voluntary organization whose existence is based on the concept that those with common goals and interests can better achieve those goals through cooperation. In many respects the NCAA operates like any government. It has a legislative body that passes “laws” that its members must adhere to, it has a dispute resolution process (judiciary), and it has a chief executive (president). There is, however, one crucial difference; it relies on voluntary membership and voluntary dues payments. It cannot force schools to join merely because other member colleges happen to be nearby. All schools voluntarily join and in so doing agree to abide by its rules. Also, unlike state governments, it has competition (NAIA, NCCAA, USCAA, etc) in its metaphorical backyard. But unlike state governments, they cannot and do not use violence to inhibit such competition. Somehow this crazy, anarchical voluntary system has worked for over one hundred years! Imagine that, anarchy does work!

Or rather it works until the top gang (the Federal Government) decides it has a say concerning what the serfs do on its “turf”. You see the Crips, err, I mean the Feds decided monopolies/trusts are bad and must be stopped (even though monopolies cannot exist in a free market – only in one that suffers state interference). In order to stop them they pass “laws” that they interpret to arrive at whatever outcome supports their ideological stance du jour. Today’s seems to be “fairness.” It is only “fair” after all to allow student players to be paid. Only a troglodyte would oppose fairness. The substance of this conflict is the usual sort of economic interventionism (e.g. minimum wage, worker’s “rights”, etc) one can expect of the state. The actors may change but the narrative is always the same: Party A and Party B came to a mutually agreeable relationship, however Party C thinks that Party B is too stupid or weak to know what is best for them.

Whether students should be paid or not is irrelevant. This is not a moral issue; there is no right or wrong answer because there is no rights violation. All relationships are voluntary (NCAA, schools, students). The only ones that get to decide what is best are the students and the schools. If a school wants to pay an athlete, then they must weigh the costs and benefits of leaving the NCAA. If enough students demanded pay, then the rules would change. The fact that the rules have not changed (other than this recent external one) suggests that the vast majority values the free education and experience more than they value the other things they could be doing. In other words, if someone offers you $10 for something that you value only at $5, then it is ill advised to demand $50.

Although this issue is often cast under an egalitarian light, this ruling will result in a rather perversely inegalitarian outcome. The 1% (of athletes) will attract the lion’s share of money to themselves leaving that much less for others. On the margins fewer athletic scholarships will be given, thus harming those most in need. To paraphrase H.L. Menken, “[the student athletes] know what they want, and deserve to get it good and hard.”

Restoring Freedom?

Following the President’s recent signing of the cellphone unlock bill (“Unlocking Consumer Choice and Wireless Competition Act”) the White House issued a press release extolling the benefits of the bill. Amidst the usual self-serving propaganda (“democracy at its best”, “broke through gridlock”, etc.) we find two telling phrases that betray the consequences of accepting dominion of the state over our lives: loss of freedom.

The first is found here, “The story of how we broke through Washington gridlock to restore the freedom of consumers…” and the second here, “…consumer will now be able to enjoy the freedom…”. The unspoken but obvious question here is, How exactly did consumers lose these freedoms in the first place? Oh, that’s right, it was due to the very institution now taking credit for “restoring” those freedoms. The state exhibits the character traits of a thief with self-esteem issues: he robs you but then returns your stolen goods in order to bask in the ego trip of being praised for having done the right thing.

The story of how these freedoms were lost has its genesis in the most basic function of the state: interventionist protectionism for the few at the expense of the many. It started with a bit of intellectual property crony capitalism known as the Digital Millennium Copyright Act. Under the DMCA it is a crime to duplicate digital intellectual “property” (music, movies, books, etc) as this is considered theft. Of course it is not really theft since IP is not intellectual property but rather imaginary property; a business model that necessitates state intervention to succeed is necessarily defective and thus invalid (more of my thoughts on this here and here). Sometimes digital IP is secured with digital locks (digital rights management or DRM) and thus just as it is considered a crime to defeat someone’s padlock in the real world, it is also considered a crime under the DMCA to defeat a digital lock, even if no duplication of the unlocked software ensues. So this is where we get to cellphones; cellphones are locked by the carriers with digital locks, thus breaking those locks is likewise considered a crime under the DMCA. For many years the Librarian of Congress (no idea why it would fall to that department) had issued waivers to the DMCA for phone unlocking, however those waivers ended as of January 1, 2013 due to the increasing availability of unlocked phones directly from carriers. There soon followed a consumer backlash, which manifested itself in a “We the People” petition at whitehouse.gov, which garnered over 100,000 signatures. Congress and the White House soon worked out a bill to permanently restore this exception to the DMCA and the rest is history.

Many are now touting this series of events as a model for how democracy should work: the people spoke, the government listened, case closed. Not so fast. This is yet another lesson in the political slight of hand that hopes to misdirect a gullible public into forgetting some recent history. To be fair we need to review the whole trip, not just the last 5 minutes. The bigger picture of this “democracy in action” includes: the passage of a bad bill that provided for aggression backed support of crony capitalist imaginary property rights, that had obviously foreseeable unintended consequences which could only be avoided with a regular legislative Band-Aids, and that took 16 years to permanently fix, that whole process, that is a model of democracy in action? No wonder the state must exert monopoly control over governmental duties because I can’t imagine anyone voluntarily choosing to pay for the service of these clowns.

With a subtle edit I think this quote by Harry Browne (1996 and 2000 Libertarian Party candidate for President) captures the essence of what has transpired here: “[The State] is good at one thing: It knows how to break your legs, hand you a crutch, and say, “See, if it weren’t for the [state], you wouldn’t be able to walk.”

Invisible Borders

The recent influx of unaccompanied immigrant children has once again brought discussions of borders and immigration to the top of the brewing cauldron of crisis de jour news reporting. The xenophobic response as usual gets the most play with calls to “send them back,” and “seal the border,” accompanied with just a dash of fear-mongering regarding “disease”. Considering America’s sordid history of erecting legal barriers to immigration, (often hypocritically spearheaded by the descendants of the previously disfavored group) nothing is perhaps more American than rallying to the cry of “keep out them ‘ferners!”. This response is actually not so surprising when you consider there is no greater threat to majority rule (i.e. democracy) than new people who can transform a majority into a minority. America’s immigration policy is not about extending our ideals of equality, fairness or justice to newcomers; it’s about power and who has it. If the system of governance (democracy) is built on a foundation of denying a basic human right (movement) in order for that system to continue serving those in power, then there is something foul within that system.

Everyone has the right to move and go wherever they please insofar as they are not trespassing upon the justly acquired property rights of another. Ah! So that settles it then – America is “ours”, so our property rights in it allow us to establish a border and keep people we don’t like out. Not so fast. Part of the problem is the imprecision of the English language. We can say “this is my school, team, job” etc. without meaning literally we think we own those things. However, when those possessive pronouns are applied to our localities (“this is my city” or “ this is my country”) most fall sway to the fantasy that the geographical coordinates of their residence conveys to them an undiluted ownership interest in an arbitrarily defined area surrounding said residence. Thus they conclude they have a “right” to have a say in what products may be sold, what wages may be paid, what businesses may exist, how buildings and homes can look, what moral code must be followed, and lastly, who may be permitted to enter this ill defined fiefdom. This is the foundation upon which statism and communal governance is founded: you’re near me, so I get to tell you how to live, and your refusal to move I take as tacit agreement with these rules.

The reality is that borders are a fiction. If you don’t believe me, just look at a photo of the Earth from orbit. I have yet to find “America” printed across the Rockies. This is not to diminish the legitimacy of private property boundaries insofar as both they and political boundaries share the “invisible” line property. What makes the former legitimate and the latter not, is that the latter’s existence relies solely on a fiat declaration of its own legitimacy (n.b. if a particular piece of private property was acquired through rent seeking and cronyism (e.g. eminent domain, subsidies, etc), it too is illegitimate). Declaration of political boundaries is akin to insisting that saying “I am the King” makes me King because my rights as King make it true.

The only principled position on borders and immigration is 100% open borders with no restrictions whatsoever. As long as one does not trespass on private property then no rights violation can occur. This is not to say, however, that such travellers have a right to assistance. There is no obligation upon others to provide newly arrived travellers with shelter, food or an education. However, conversely, the right to provide such assistance should not be infringed upon. Sending these children back or walling them up in detention centers runs contrary to the humanitarian imperative of every religious and spiritual ideology; it prevents those who take those teachings seriously, and who are able, to exercise their right to help those in whatever manner they so desire. To paraphrase Ronald Reagan, “Mr. Obama, tear down this wall” – by which “wall” = border + welfare state.

Tootsie Pop Justice

Amazon.com has been accused by the Federal Trade Commission of permitting unauthorized in-app purchases by children. The FTC has filed a lawsuit against Amazon in U.S. District Court on behalf of parents affected by the activity of their children. So, apparently we need the government to protect us from our own children. This case exudes a breathtakingly absurd lack of parental accountability. Equally bad is the sycophantic credulous reporting on this case by the state media Apparatchik (in this case USA Today). Their putatively neutral reporting is laced with subliminally opinionated phrases that imply Amazon duped parent into using their children as pawns in some grand scheme. For example, USA Today says Amazon “willingly allowed” kids to make purchases within apps. Notice the clever shift of responsibility here? This phrase implies it was Amazon’s responsibility, not the parents, to be the final arbiter of their children’s behavior. No, Amazon did not “allow” the purchases. The parents allowed the purchases when they handed their unlocked and credit card enabled device over to their child. This is no different than parents handing their child a wad of cash, pointing them in the direction of the toy store and then telling them to be frugal. Meanwhile the parent wanders off somewhere else and then becomes enraged at the toy store when they find out little Johnny spent all his money there.

But, even though it was not Amazon’s responsibility, they (as well as the other two players in this market, Apple and Google) implemented some basic gatekeeping controls to mitigate (yes mitigate, not 100% eliminate all possibility of) such undesirable purchases. They required the entry of the account’s password even on an already unlocked device (the presumption being the child did not know the password but was merely handed an unlocked device by the parent). But you know what? The problem persisted. Which means parents were telling their children the password so they could make some purchases. At this point even if one were to try and make an argument that the companies had some culpability, however tenuous, that argument is completely shattered at this point. If you give your child your password for desirable purchase A then you must know there is nothing stopping them from making undesirable purchase B other than yourself. This is the classic case of the programmer’s conundrum when dealing with user feedback: I want it to work this way, except when I don’t. Stated differently the parent says: I want my child to make purchases I approve of without pestering me for a password every two minutes, except when I don’t, then I want the device to magically know I don’t approve of the purchase.

But even here Amazon did not stop in trying to please the consumer. They responded to complaints and implemented requested controls to try to solve the problem (all without any threat of state action). They implemented dollar value thresholds that required password entry, then they removed the value threshold entirely but still allowed for a short time window where re-entry of the password was not required. This was to avoid the annoyance of trying to buy five things all at once and having to enter your password five times in a row. But of course the problem persisted. Why? Because parents had already given their child the password! Outcomes did not change because the root cause of the problem remained: the parents.

And so now the parents, not recognizing their own culpability, have enlisted the aid of the state to force Amazon (after having already done so to Apple ) to protect them from their own inability to parent. The real loser in this case however is everyone else who uses similar smart-devices. We will have to endure increasingly annoying draconian licks to get to the center of the digital Tootsie Pop.

Irony Day

There is no holiday more incongruous with its stated celebratory raison d’être than the 4th of July, otherwise known as Independence Day, but perhaps more appropriately Irony Day. It purports to celebrate the complementary combination of political and individual independence (aka freedom and liberty). That it takes place in a country that actively thwarts the former while ignoring, for utilitarian reasons mind you, the latter, is perhaps more sardonic than it is ironic.

Consider for a moment what the representatives of the nascent United States did in July 1776: they made a declaration of secession. That is, they formally declared their disassociation from a larger political entity. Such is the right of all individuals. But from the vantage point of the state they had committed the most unforgivable of sins: treason (the crime of betraying one’s country wherein “betray” is equivalent to “desiring to no longer be ruled by”). It is curious indeed that a universal feature of states is that no crime is considered more egregious than for one to undermine its authority by leaving it. In this regard the United States is no different than every other country; from the Civil War to various state secession movements the US has been quite consistent in operating contrary to its founding principals. This is the mantra of the hypocrite: do as I say, not as I did. The propaganda of inviolable political solidarity permeates our most holy, secular prayer to the state-as-god, the pledge of allegiance. With its appeal to profession of undying allegiance to the very idea of “one nation… indivisible” we are indoctrinated nearly from birth with childish appeals to Manifest Destiny. Consider the absurdity of that idea for a moment. If Maine joined Canada or Florida became an independent nation, do we truly believe the other 49 states somehow could no longer continue on? One is left to wonder how 200 odd countries get along without being part of our union. The fear of secession movements is predicated on one thing: money. It is no different than a mob boss acting out against a business that decides to “secede” from the mob’s extortion racket; there is little daylight between what the State and the Mob are willing to do to retain their power.

It is easier to erect a fence around sheep than to hunt down the wolf.

 

While the 4th of July is one part celebration of history, it is another part celebration of what we believe that historical event granted us: liberty. All people have a natural and instinctual love of liberty. No one relishes the idea of being subjugated and told what to do. So this begs the question: why do we with one hand pay lip service to notions of independence and with the other hand pull the voting lever for politicians who enact laws that restrict our independence? I call it The Cage Effect: only those at the edge are aware the cage exists. Laws affect other people (at the edge), not us (in the middle). We have allowed the political class to build this cage around us; we naively believe them when they promise to keep us safe. It is easier to erect a fence around sheep than to hunt down the wolf. But the web of laws, regulations, edicts and arbitrary enforcement serve not to protect us but to subjugate us into dependence. The entrepreneurs, free thinkers, and non-conformists who try to break free are routinely frustrated. They, and those who witness their trials, try to rouse those in the interior to fight back, but they prefer to remain blissfully ignorant or assure us it is for our own good. The mantra of the statist is that if anyone leaves the cage, all will suffer, therefore no one may ever leave.

As a state becomes more totalitarian, its cage shrinks. Eventually it becomes small enough that all are affected. On July 4, 1776 the cage was quite large. Today it is much smaller. Perhaps one day we shall break free. That day will truly be Independence Day.

Student Loan Bubble & Moral Hazard

The insurance industry is unique in that its product tends to incentivize the very behavior people seek to protect themselves from. This is called “moral hazard.” For example, all things being equal, someone with collision insurance will tend to drive more recklessly than someone with no coverage. Someone with flood insurance will deliberately build their home in a flood zone. In other words, people do things they would never otherwise do absent the assumption of protection.

There are ways to tame moral hazard. Large first-dollar deductibles ensure that the insured will feel some pain with a loss – negative feedback affects one’s behavior and results in more cautious behavior. Likewise, some events are not insured if the moral hazard cannot be mitigated. For example, homeowner’s policies do not cover loss from damage attributable to failure to maintain the upkeep of one’s home. Although moral hazard is a foundational flaw in human behavior, the market (that is, people) has figured out how to tame it.

The state is an insurer (it purports to protect its citizens). It is however the worst kind of insurer because it actively encourages moral hazard. From the crony-capitalism of “too big too fail”, loan guarantees for favored industries, to student loan bailouts, the state has a sordid record of incentivizing moral hazard by encouraging behavior its minions witlessly seek to avoid. For example, the student loan program was implemented to encourage more tuition lending by banks so that more people would go to college. This created the moral hazard of banks lending to people they otherwise would never lend to, thereby vastly increasing the demand for higher education. This massive explosion in demand (quite predictably) encouraged schools to ratchet tuition upwards. Why? Supply and demand. Loan guarantees ensured ever increasing demand that was insensitive to price increases. In a normal market, increasing tuition would have decreased the pool of available funds for such lending or raised the cost of such lending, but in either case these would have both resulted in inhibition of tuition increases and a subsequent restoration of equilibrium between supply and demand. But in a market suffering state intervention, equilibrium can never be achieved, as rising prices present no inhibitory effect on the level of demand. This resulted in tuition increasing over the last 40 years at 3-times the rate of inflation.

This willful blindness of moral hazard by Obama and his ilk is not merely sad, it is downright destructive. His recent actions only serve to deepen the crisis, not ameliorate it. By executive order (royal decree) he recently extended a cap on student loan payments to cover loans made before 2007. This cap allows borrowers to limit their loan repayments to 10% of their income for 20 years and after that the loan is “forgiven” – that is, it simply vanishes like a fart into the wind, courtesy of the US taxpayer.

This executive order is symptomatic of all state interventions: heaping fixes upon fixes to fix previous fixes. To encourage lenders to make student loans to anyone with a pulse, the state removed bankruptcy protection for student loans in 1976 and then promised the lenders to act as their enforcement agent. Step 1: All risk shifts from lender to borrower. So with Uncle Sam acting as Guido the Enforcer the floodgate of loans opened. Then loan repayment became problematic for a growing number of students (due to a dismal job market resulting from state intervention in the economy) and this inability to discharge loan debt likewise became a political liability for our wise overlords. The quick fix? Step 2: Shift all risk from the borrower to the taxpayer. For now, concentrated benefits (to students) and diffuse costs (from taxpayer) ensure little mass objection. But soon enough these loan write-offs will be priced back into tuition rates. The only solution to this quagmire is the most politically painful one: end all loan guarantees, permit bankruptcy protection, and allow lenders, not the state, to determine who is a worthy credit risk and who is not.