Category Archives: Libertarian opinion

Lost in translation

Like millions of Americans you probably have received a letter like this (see below) from your health insurance provider (for both individual or group plans). As the farmer said to the pigs about to be slaughtered, “We’re going to be transitioning you to an environment free of worldly concerns.” Reading between the lines can often be critical to our own well-being, therefore, in that vein I shall endeavor to offer a translation of the following:

 Dear Subscriber:

The federal Affordable Care Act (“ACA”) has been changing how Americans get their health care coverage. The next big step begins in 2014. For many individuals like you with coverage through their employers, it includes important changes to coverage.

 ACA requires us to make significant changes to our health benefit plan designs. We have redesigned our entire employer portfolio to include new health benefit plans that comply with 2014 ACA requirements.

 There is nothing for you to do at this time. Your employer’s existing policy will continue until your next renewal. We are unable to renew your employer’s existing plan in 2014, but your employer can purchase any of our new plans with the 2014 ACA requirements for your coverage.

 We value you as a member and look forward to a long-standing relationship with you.

Sincerely

Health Insurance Company

 

Dear person-now-required-to-buy-our-product-under-penalty-of-law,

Obamacare has transformed a government manipulated healthcare market into a government controlled healthcare market. Unadulterated fascism rears its ugly head once again in America in 2014 (fascism = state control of a putative private market). For those of you who already get insurance through your employer, the paltry level of choice you used to have will be whittled down to next to nothing.

Obamacare requires us to add on coverage options we formerly begged you to buy but now you are forced to buy, therefore we have the perfect excuse to inflate premiums as high as possible. Apparently Nancy Pelosi thinks you are too stupid to make your own decisions when it comes to buying health insurance, therefore she has empowered bureaucrats to make those decisions for you. Do not fret gentle citizen; you will be well cared for in Obama’s gentle bosom.

You are helpless to avoid this, so sit back and enjoy the ride. You have a few months left to see your doctor before multi-hour waiting room camp-outs and month long waiting lists for medical procedures turn the US into Canada 2.0. We are unable to renew your employer’s existing plan in 2014, but that’s just fine with us because we’re content to get in bed with the government and be more tightly regulated if it means we will be guaranteed a steady stream of customers and profit. Crony capitalism and fascism is what made this country great after all!

We value you as our cash cow and look forward to milking this relationship for all its worth until either the federal government collapses under its own weight or the American public becomes so irate that they finally elect people that will remove all government influences from the medical market so that prices can naturally fall until medical insurance is no more costly than auto-insurance.

Sincerely

Health Insurance Company (a wholly owned subsidiary of the Federal Government, Inc.)

One Banana, Two Banana …

As the political pundits and state apologists breathed a sigh of relief over last week’s deal in Congress to end the government “shutdown” a subtle wrinkle in this deal went largely unnoticed. But this wrinkle, like the proverbial butterfly whose flapping wings results in a hurricane, sets the stage for the transformation of the American Empire into a banana republic and with it the ultimate collapse of that empire. How could this go unnoticed? As with all new government initiatives it is cloaked in the innocence of being “temporary.” As the astute observer of history Milton Friedman once observed, “there is nothing so permanent as a temporary government program.”

The deal that was rushed through Congress last week is, like Obamacare, now withering under the light of public scrutiny of those very details our overlords wished to keep hidden. Although laced with several “special deals” in order to buy the votes of particular congressmen, this deal carries with it something far more sinister than the usual run of the mill horse trading. It carries with it the “temporary suspension” of the debt limit until February 7, 2014. What does that mean in practical terms? Quite simply that the US Treasury may issue an unlimited amount of debt between now and February 7. They could issue treasury bonds for tens of trillions of dollars if they wished and it would all be nice and legal. Now is it likely they will do that? Not really. That is not the source of the hidden danger. The real danger lies in the fact that this “temporary” suspension of the debt limit will never end. This is because through procedural gamesmanship this component of the deal was added in such a way that it will take a two-thirds (!) majority of both the house and senate to reverse it. Considering both sides of the aisle are too craven to face the hard choice of reducing spending or increasing taxes you can lay down good money on the fact that they will never vote against something that would require them to ultimately face that quandary of a decision.

So although there will still technically be a debt-limit on the books, it will for all intents and purposes not exist since all who are bound by it have agreed to simply ignore it. Once this new reality becomes the status quo there will be absolutely NOTHING holding back Congress from spending as much as they desire. As they further inflate the currency through more and more debt creation, prices will rise year after year. This will further devalue the purchasing power of the dollar. Eventually, one day soon the United States’ largest creditors (foreign governments) will decide the US dollar is simply not an asset worth holding (would you continue to own a stock whose price dropped every year?) and will cease buying US Treasury debt and will also begin selling the debt they do own (further plunging the value of the dollar). Once that happens it will be declared a “crisis” by those in power who will once again clamor for a “temporary” suspension of even the most tenuous of rules that support the façade of separation between Fed and State. Currently it is illegal for the Federal Reserve to directly purchase US Treasury bonds (although they can do so indirectly through “the market”). However if no one is willing to buy our debt that leaves just one customer standing: the customer that has the legal monopolistic right to create counterfeit money out of thin air – the Federal Reserve. Once the Federal Reserve is “temporarily” permitted to begin buying US Treasury debt, that will be the last nail in the coffin of the American Empire. History has taught us clearly time and time again that once a government starts printing its own currency with no restraints of any kind, hyperinflation is not very far behind.

Perhaps this might seem like hyperbole to some, however if we combine the lessons of history along with our current government’s unwillingness to cut spending and face the economic failures of their socialist inroads into our economy (i.e. subsidization of ANY economic activity) there is simply no other plausible outcome. So get ready, the roller coaster is poised to plunge straight into the ground. And it all begins not with a “bang” but a mere unnoticed whimper.

The Giving Tree of Debt

It’s that special time of year once again – The Giving Tree in Washington DC sheds its last few monetary leaves as fall approaches. The congressional summer recess has left the tree starving for the one thing it needs to flourish and produce those precious greenbacks: BS. As the pontificating blowhards in Congress resume their duties there is once again a renewed hope that The Giving Tree will be restored to health via the abundance of manure spewed forth by inept congressmen and a credulous media who act merely as an amplifier for Washington inspired propaganda.

That’s right, it’s time to raise the debt ceiling. I could write an entire book on what is wrong with the system (although there is little need to do so as Tom Woods’ “Nullification” leaves no stone unturned in that endeavor) and why we are in the mess we’re in. However, space constraints compel me to simply address the two most salient points of disinformation making the rounds of the mainstream media outlets.

Fallacy 1: We have to raise the debt ceiling because we as a country are legally committed to making good on all financial obligations made by our government. It’s like agreeing to pay your credit card bill after you charged the goods on it.

FALSE: No, no, no (sound of head banging desk). It is not at all comparable to agreeing to pay your credit card bill (i.e. committing to purchases AFTER funds are secured). The more apt example would be signing a contract to buy a house BEFORE you have secured the ability to pay for it and then going to the bank and demanding a loan because you “have made a commitment buy the house.”  Clearly, the only result of raising one’s credit limit every time one goes over said limit would be to instill an overriding sense of restraint and fiscal responsibility. Even if one subscribes to the flimsy moral precept that one has a duty to repay financial obligations made by total strangers who happen to reside in the same geographical region as yourself, one must agree shifting the burden of that repayment onto one’s children is the act of a coward. If you believe we have this obligation, fine, then don’t use debt to pay for it, use taxes – raise them through the roof. Because were the present generation to bear the full financial burden of the government programs they pine for they would quickly come to realize they are not so necessary after all.

Fallacy 2: If we don’t raise the debt limit then the US government will be in default and (insert scare tactic) that would undermine confidence and collapse the financial markets.

FALSE: This is the same line of fallacious reasoning employed by Obama when he compared the only possible outcome of not raising the debt limit to being equivalent to a homeowner simply deciding to not pay his mortgage. So apparently the concept of prioritization has never occurred to Obama? Naturally if one has a pay cut or loses their job their first instinct is to cease their mortgage payments so that they can continue paying their cable bill and manicurist. Duh, no, you prioritize and pay your food, housing and utilities first, then you cut off all non-essentials remaining. So if the projected 2014 budget were $1 we see that the government now collects 84¢ in taxes and can pay out 67¢ to fully fund all debt interest, Social Security, Medicare, Medicaid and defense payments. Yes, the remaining 33¢ of spending would have to be economized over the 17¢ of remaining revenue, but the point is it would not be the “essential” obligations that for some bizarre reason are perennially assumed would hit the chopping block first.

Continuing to give the addict money because you’re afraid he won’t buy food provides him no incentive to end the addiction because it insulates him from having to make the choice between the addiction or eating. With the money he can have both. Without it, a choice must be made.

Barricading Liberty

“We’ve been told to make life as difficult for people as we can” said a National Park Service Ranger in Washington, DC recently. The revelation of this directive has only served to add more color to the canvas of a feckless presidency. What sort of leader seeks to augment, rather than minimize, the impact of a deleterious event upon those he putatively serves?

“We’ve been told to make life as difficult for people as we can”

The behavior of the Obama administration during this current government “shutdown” is reprehensible and petty. The deliberate closures of a number of “public” parks – un-manned, un-ticketed, open air parks mind you – says more about Obama than any of his self-serving oratory. These are the actions of a petulant, spoiled child. He’s not getting what he wants (unconstrained limitless federal spending) so rather than leading (engaging in and brokering a meaningful dialog between both sides) he’s lashing out at the very citizenry he is supposedly serving by using them as pawns in a game of Congressional chess. Obama and his minions are well aware that most of what the federal government does on a daily basis does not impact the public in any obvious manner. The longer the shutdown continues unnoticed by John Q. Public, the weaker his position becomes. Therefore, to strengthen his hand he must make the public squirm as much as possible, even if that means spending additional funds to pay people to barricade open-air facilities that cost nothing to keep open (bike lanes, children’s playgrounds, unmanned parking lots, etc). Even virtual resources such as websites and Twitter accounts have gone dark despite the fact that they are either free or already paid for. But the “shutdown” of public resources was not sufficient. They are now deliberately blocking access to private businesses as well because they happen to be leasing government owned buildings. These businesses make the government money (leases). They do not cost them money (Pigash Inn in North Carolina is just one example). That’s like quitting your job because you ran out of money – it simply defies all rationality! And then there is poor George Washington; he must surely be spinning in his grave because even his house (Mt. Vernon Museum) was shut down by Mr. Obama! Why? The parking lot for the facility is jointly owned by the Mount Vernon Ladies Association (the private owners of the Mt. Vernon facility) and the National Parker Service (NPS), so apparently the NPS felt it necessary to barricade an un-ticketed and un-manned parking lot that the NPS bears no daily cost to operate. How long will it be until Obama orders all US interstate highways shutdown as well?

These actions have revealed an essential truth of a state run society: there is no “public” property. There is only the property of the Royal Court – the federal government that is – and the king (Obama) may do whatsoever he pleases with his property. If he doesn’t get what he wants, then just as a petulant child would, he will pick up his ball and go home. Or rather, he’s going to barricade off the playground so no one else can play either.

The strategy here is of course plain to see. If he can’t pressure Congress, then he can pressure the public by taking away those things the federal government has so graciously bequeathed to the “people”. If the people value them, then they should rightly be mad at Congress for forcing their poor king to take away their goodies. Fortunately most people are not this blind to his manipulative strategy. In perhaps the best publicized exampled, the day the shutdown began the NPS barricaded the WWII memorial in Washington DC, preventing numerous veterans from visiting the site. However, the veterans were not so easily intimidated. These dauntless men pushed the barriers aside and again demonstrated their strength of character. Character that, ironically, is honored by the very memorial this President strove to separate them from. By fighting the will of past and present tyrants they have set an example for us all. If we value our liberty, then we have a duty to overturn both the barricades to liberty and those that would erect them.

Counting, Government Style

As Obamacare looms nigh small employers such as myself who are near the margins of the 50 employee threshold of being an “applicable large employer for Section 4980H” have found it necessary to waste time and money just trying to figure out if we have reached that threshold or not (and yes, we already provide health insurance). At face value it seems like this should be simple enough: just count. But as with most things generated via government bureaucracy nothing is ever as simple as it seems. The statute is filled with ambiguous and undefined terms such as “stability period”, “measurement period”, “standard measurement period”, “upcoming stability period”, “safe harbor”, and so on. I’m actually trying to comply with this nightmare of a law but even our accountants admit some of the questions simply can’t be answered yet. Typical government: “Here, comply with this” – “Ok, how do I do that?” – “We haven’t decided yet, but don’t worry, if you get it wrong we’ll let you know with a fine.”

For example, there are two calculations that must be done. The first determines how many full time employees there are and the second determines how many “full time equivalent” employees there are. However a full time employee is only eligible to be measured as such if they are considered to be an “ongoing employee” (meaning they are employed for at least one “measurement period”). But… if they become full time during the measurement period or otherwise have a status change then there is a whole different set of rules for counting them – except those rules have not yet been issued (insert picture of chimpanzee with pencil scratching his head).

Assuming we have figured out who the “ongoing employees” are, we are now ready to determine if they are part time or full time. This calculation procedure all too predictably betrays the fact that whoever came up with it clearly has never worked in the private sector. They are laboring under the delusion that employees are paid on a calendar monthly basis as opposed to a weekly or biweekly basis (perhaps because governments reserve to themselves the exclusive right to pay monthly – that practice is illegal for private employers). “Fine”, you may say, there are 4 weeks in a month, what’s the big deal? Well, in fact, no, there are not 4 weeks in a month – there are up to 4.42 weeks in a month. So we cannot simply add up 4 weeks of payroll hours for a part time employee and divide by 120 to see if they exceed an average of 30 hours per week (the newly defined “full time” standard under Obamacare). No, rather than simply using data we already have (weekly or biweekly hours worked) for each employee, instead we must now warehouse up to 7-times more data by saving daily hours details. Although all employers already track daily punches, smaller employers store this massive amount of raw data off-line after getting the totals for payroll. Why waste resources if there is nothing to be gained by storing the number “8” five times vs storing the number “40” one time. The storage space is not the central issue however, it’s that we must incur a cost to reprogram payroll systems – in short wasting money to rebuild something we already had.

With monthly hour data in hand, we can now count up the employees that exceed 130 hours and count them as “full-time”. For all other employees we total up the lesser of actual hours worked or 120 and then divide that sum by 120 to get the “full time equivalents”. This means, in short, that two part time employees working 60 hours in a month will count as one full time employee. This calculation subtly explains the incentive behind large employers (such as Trader Joe’s or Kroger) who already fall under Obamacare but who are nevertheless cutting back their part time employee’s hours to below 30. This allows them to reduce their potential fine exposure. For example, in the case of Kroger, if all of their 340,000 employees work at least 30 hours, then they will be counted 340,000 full-time employees. However, if this same number of employees works only 29 hours per week, then they would be equivalent to 328,666 employees or a net potential savings of $23-34 million in Obamacare fines. That’s nothing to sneeze it at, but if you do at least you’ll be covered under Obamacare.

But… but… the roads!

It is curious that “the roads” falls among the top justifications for the existence of government. Setting aside the laughably false choice implicit in this sentiment (i.e. that roads could not exist absent government) we are left to ponder how one of the most poorly run government services is supposed to bolster, rather than weaken, the case for government. Poorly run? How so? Allow me to elaborate. Crumbling infrastructure. Traffic congestion. Traffic delays. Roads littered daily with accidents, injuries and deaths that on an annual scale reach into the millions of accidents and tens of thousands of deaths. What’s that? Unfair assessment you say? It’s the drivers causing the accidents and greedy selfish taxpayers not wanting to pay more in taxes to build more roads. Perhaps. But consider this: Imagine that a big evil corporation owned all the roads. Would there not be an outcry over these statistics? Would there not be an outcry over high prices for a poor product? Would people not say the company is more interested in profit than in making roadways safer? However, and here is the key difference in this counterfactual scenario, were a private company the owner of the roads the public would have at least one remedy not available today. The lawsuit. Private road owners, in contrast to “public” owners, are liable for events occurring on their private property. The injured could sue the road owners for providing an unsafe product. However, such suits would be few and far between. Road owners would see that problem a mile away. They would proactively invest in safety measures to ensure no one dies on their roads. There is a reason after all that air travel is statistically safer than road travel: an airline that had the same fatality rate per mile would have been sued out of existence long ago (or simply gone bankrupt as everyone stopped flying them in droves).

But such a recourse does not exist today. Those in government are immune from liability for their actions. When poor decisions are made, nobody is held accountable. Due to the revolving door structure of political office, decisions are made that maximize short-term benefits at the expense of long-term goals. This mode of operation tends to get one reelected. People naturally prefer those who promise stuff now vs later. The system can’t be “fixed” because the inherent feedback in the system drives it to always select for short-term minded stewards.

Would private roads operate any better? Given any particular owner there is no way to predict. Whether private or public, those in charge are just people. People are imperfect. However, in a private system there is a feedback mechanism that keeps the good and removes the bad. That mechanism is driven by competition and liability. An owner that keeps his roads safe, fast, and efficient is providing what the consumer wants. He stays in business. The owner that does the opposite goes out of business. Competition is the linchpin of free market regulation. It drives us to do better than the other guy. It drives us to provide a better and safer product in order to avoid the losses of liability. In short, competition is how we keep each other “in line” – no Big Brother needed.

Now armed with that knowledge, ask yourself, where is the competition in government? Voting? Please – that’s tantamount to rearranging the deck chairs on the Titanic. If AT&T were providing poor service, would you rather (a) vote concerning changing whatever policy displeases you but not be allowed to stop buying AT&T’s product if the vote does not go your way or (b) switch providers. Voting with your wallet is far more democratic than voting in the ballot box.

One might argue that roads are a natural monopoly, that there would be no competitor to switch to. This is superficially plausible, however it falls into the trap of assuming a private system must be exactly like the public system, just with a different owner. That would not be the case, the result of which would be opportunities for competition heretofore not yet envisioned (who knows, maybe we’d have our flying cars by now if the road system were private!). So, when you hear “but who will build the roads?” remember: a question is not an argument. One’s lack of imagination is not proof of anything.

A Model for Freedom… in Detroit?

If you could distill the essence of the morning hangover and turn it into a city, that city would be Detroit. Everything seems “ok” during the party as both booze and money are consumed in excess. But as with all such excesses we are eventually (and often unceremoniously) awoken to the consequences of the cold hard reality we have wrought. Not quite the “morning in America” Ronald Reagan envisioned, but it is indeed now “morning” in Detroit.

Detroit is not alone in its profligate tax and spend policies that have slowly destroyed cities like a silent cancer. Stockton, California. Jefferson County, Alabama. Pontiac, Michigan. And the list goes on. Municipal debt has nearly doubled since 2000 from $1.5 trillion to $2.8 trillion as of 2011. Since municipalities can’t print their own money like Uncle Sam can there is a municipal debt bubble getting ready to burst that will make the housing bubble look like a hiccup. But there is a bright side to all of this, and Detroit is it. How so? For sure Detroit is in the condition it is in (abandoned homes, cars, factories, etc.) because of the actions of its overlords (city council). However, the response of its citizens to those actions has yielded the city we see today. Those citizens left. Those businesses left. And the fact that they were free to do so reveals the glimmer of hope for us all. We can at least (still) leave any relationship that is injurious. If the city had erected a wall and made it illegal to leave the city, illegal to close down a business, illegal to quit a job, it would no longer be a city but a prison (or any Ayn Rand novel, take your pick).

Where did those citizens go? To other cities. Detroit, just like any other city, county or state must compete for citizens on the open market. Create an environment that is conducive to freedom (low taxes, low regulations, civil liberties) and you will attract citizens. Create an environment opposed to those principals and the opposite occurs. Government decentralization is the reason we still enjoy some measure of freedom today. When government competes with government they all (mostly) behave. It is no accident that those states with the highest tax rates have been steadily losing citizens and those with the lowest gaining citizens.

However, there is a movement afoot from both the left and the right to set us on a path of complete nationalization. Each side falls sway to the delusion that they’ll be the ones “in control” and thus there is nothing to worry about. Under this “one nation” path the Federal government’s judgment will reign supreme in all areas, not just the annoying few outlined by the Constitution. But this reality is not new; we started down this path long ago. For those things controlled by the Feds there is no escape in moving. Don’t like paying into a bankrupt Social Security system? or Obamacare? Or funding endless wars (on terror and drugs)? Too bad, there is nowhere to go to opt out. Removing the Federal government would not necessarily mean an end to these programs however – it would simply mean that those programs could only exist in those areas where 100% of the citizens desired them. Anyone opposed would leave for cities with different policies.

But even such a geographically decentralized system of governance is but a mere compromise on the road toward true freedom. The dream is that someday humanity will evolve beyond our territorially driven reptilian brains to the point where geographical boundaries are irrelevant in defining political allegiances. Just as religious allegiances are blind to geographical boundaries so too should political allegiances be likewise blind to such boundaries. Although we can move to escape tyranny we shouldn’t have to.

Calculating The Social Cost of Horse Manure

Imagine the following: It is the year 1700 and growth in the American colonies is threatening an economic and environmental catastrophe. Human and equine populations are expanding rapidly in tandem. The horse is integral to the economic engine that drives all economic output. But there is an unaccounted cost: manure. The horses are fed fuel (hay), do work, and out comes waste (manure). Harvard scientists have extrapolated that based on current trends there will be so many horses that manure will cover the colonies to a depth of three feet by the year 2000! Something must be done! There is clearly an unaccounted cost to all this manure lying about. The only solution to stem the tide: a manure tax.

Hopefully this seems a bit silly – it was meant to be. However our betters (those in government) are in engaging in similar sophistry. They make pie in the sky predictions cloaked in an aura of mathematical certainty concerning the “social costs of carbon” up through the year 2300. To wit: to little media fanfare the White House Working Group recently released an update to its estimates of the Social Cost of Carbon. Why is this notable?  The revised figures were up to two times larger than the previous “estimates” made by the same office only 3 years ago. Is the problem of climate changing getting worse? Hardly. The White House has merely “updated” its numbers in a climate cost-analysis model that has enough variables in it to send an algebra student screaming into the night.

These “equations” are nothing so scientifically resolute as E=mc2. No, rather they are a mathematical house of cards that can be manipulated to yield any desired value. For example, one of the key variables is something known as the “discount rate”, that is, the interest rate one would need to invest a dollar today in order to earn some amount in the future. So, if we invest $1 today that grows to $40 in one hundred years and we assume by then there will be $40 in economic losses due to one pound of carbon, then we say the cost of one pound of carbon today is $1. This is the “social cost of carbon”. The goal then is to spend $1 today to clean up one pound of carbon, thus averting $40 in damage in one hundred years. We would not spend $2 to clean it up because it would be more profitable to earn $80 and incur the $40 cost. If the social cost of carbon is low, then it is difficult to justify expensive remediation efforts, whereas if it is high then imposition of costs on the populace is that much easier to rationalize.

All we can do is pile assumptions on top of estimates of cherry picked data.

Of course the rub is how does one actually figure out the cost of environmental “damage” in 100, 200 or 300 years? All we can do is pile assumptions on top of estimates of cherry picked data. For example, loss of tourism dollars at ski slopes is counted as a cost, however the shifting of those dollars to newly more temperate regions is not counted as an offsetting benefit.

Even if we assume the science is ironclad and the calculations of the costs are solid, there is still the problem of the discount rate. It is the logarithmic volume control on the stereo of climate economics. Small changes have dramatic effects. For example, a discount rate of 2.5% yields a cost of $98/ton but 5% yields only $27/ton. Curiously the WHWG ignored the government’s own Office of Management and Budget (OMB) directive to also include a value of 7% in the analysis. It is estimated that at a 7% discount rate the Social Costs of Carbon would likely have been nearly $0 or even negative (meaning that CO2 actually confers a net benefit, not cost). It is also telling that the White House Working Group also ignored the OMB directive to only integrate domestic costs into their models, not global costs, an apparent “oversight” which further tends to push the Social Costs of Carbon estimates upward. This is what is known as “stacking the deck” in your favor.

So, back to our horse manure tale. What would the outcome have been had such a tax been implemented 300 years ago? Money would have drained from the economy, thereby lowering people’s standard of living while simultaneously retarding capital growth. This lack of capital would have had a deleterious effect on future generations’ economic output. Just as people in the year 1700 never could have conceived of the technological marvels that would make their hypothetical fear moot, so should we not be so conceited as to believe future humans will not make similar discoveries that will render our fears of climate catastrophe about as realistic as drowning in a sea of manure.

Time to Raise the Hood

A common business practice is to require that all employees take some vacation time each year. It not only improves morale but also ensures that potential problems attributable to that employee will be brought to light in their absence (as co-workers unwittingly uncover latent issues). In other words, although it can be disruptive to the status quo, sometimes it is a good idea to raise the hood every now and again and make sure all is working as it should. This is nowhere more true than in government. This country has been handing out billions of dollars in foreign aid for decades. For the most part this funding is on autopilot, it’s simply rubber stamped each year as the routine process of government functioning. But there’s been a recent snag in the status quo. Some in Congress are (finally) questioning the wisdom of sending billions of dollars overseas when we face such a tremendous deficit at home. That sentiment, coupled with the recent military coup in Egypt, has brought to the forefront the legitimacy of the US continuing to send foreign aid to a country in political turmoil. Discontinuing aid should be a no-brainer even for foreign aid proponents, just turn off the money spigot until we know who is actually in charge. But alas, it is apparently not so simple after all for some senators. It turns out much of this aid is funneled right back into the home districts of many in Congress. This long obscured truth is THE dirty little secret of foreign aid.

The public has been, as they say, “sold a bill of goods” when it comes to foreign aid. The propagandized message is that such “aid” is going to help poor people overseas. In fact, the money is funneled to rich people (the well connected in foreign governments) in poor countries and to even richer people in the US. How does this money end up back here? Almost all foreign aid comes with either implicit or explicit “strings” attached that stipulate that aid must be “directed” toward the purchase of goods or services from US based corporations. And which corporations might those be? Predominantly those that are part of the “military industrial complex” – the very same crony capitalist war machines that President Eisenhower presciently warned us about over 50 years ago.

So what’s the problem with foreign aid? Is it that it spreads state of the art weaponry across the globe (weaponry that could easily fall into the hands of terrorists) resulting in a planet armed to the teeth poised at the brink of war? Is it that we are borrowing money from China to subsidize foreign governments in an attempt to bribe them into submission? Is it that food aid actually harms more than it helps by destroying farming as an occupation in countries receiving aid (who could compete with free food)? No, for those in Congress none of these deleterious effects are a problem. Why? Because “foreign aid” gets many re-elected, particularly when such aid is directed at companies in their home district (e.g. Sen. Carl Levin (D-Michigan), is rather adamant that aid not be cut off to Egypt, and by bizarre coincidence it just so happens that a General Dynamics plant is located in Michigan.

At its core, foreign aid is no different than other government “stimulus” programs – it simply takes money from those not in favor with the political elite (that is, us) and hands it over to those who are in favor with the political elite (the true 1%). But there is one key cost incurred by foreign stimulus not typically seen in domestic stimulus: death and suffering. These are a direct result of the weapons produced and the tyrannical regimes supported. The political unrest in Egypt has finally forced us to raise the hood and take a closer look at the wisdom of foreign aid. To those in Congress who got caught with their hand in the foreign aid cookie jar, take note: your days are numbered.

Think Different, Think Free

It is a peculiar characteristic of US anti-trust law (Sherman Anti-Trust Act) that competition itself can be characterized as “anti-competitive”. The recent e-book price-fixing case against Apple (in which Apple was ruled against on July 10) is a prime example. The case is rather “weedy” so I will provide a pared down synopsis, however for those interested in the details please see this article for an excellent summary. Prior to Apple’s entry into the e-book market in 2010, Amazon was in a monopsony position in the wholesale e-book market and a monopoly position in the retail e-book market. No, I did not misspell “monopoly” – monopsony is a situation where a market has just one buyer (as opposed to just one seller with monopolies). In this case Amazon was the only (over 90% market share) buyer of e-books from the “Big 6” publishing houses. As such it was in a position where it could dictate the terms of sale to the publishers. Amazon sold every e-book for $9.99 and often lost money on these sales. The publishing houses were not happy with this situation as they felt Amazon’s low prices tended to devalue hardcopy books in the consumer’s mind and thereby potentially weaken their sales position further in retail book outlets (as people balked at paying high prices for print copies when e-books could be had for so much less).

In comes Apple to save the day. It’s a win-win situation for Apple and the publishing houses. Apple wants to chip away at Amazon’s dominance in the e-book market and the publishers want to have an alternate buyer for their e-book wares. So the upshot of all this? E-book prices went up, Amazon made more money (due to not losing money anymore), the publishers made less money (due to decreased sales resulting from higher prices) and Apple got a foothold into the e-book market. Unfortunately the judge ruled against Apple, citing that “depriv[ing] a monopolist of some of its market power is [not] pro-competitive” merely because some e-book prices rose after the fact. In other words, for competition to be permissible in this country it must fall into a narrow and arbitrarily subjective standard of behavior. If you enter a market and cause prices to rise too much then you are a monopolist. If you enter a market and causes prices to fall too much then you are a ‘predator’. And finally, if you enter a market and charge the same price as everyone else, then you are a cartelist.

The irony is that government should be the one prosecuting supposed anti-competitive behavior when it is government itself that is the sole source of monopolies and anti-competitive behavior. For example, this country still engages in New Deal era agricultural price controls intended to prop up prices by limiting production. Tariffs, subsidies, grants, regulations, certificates of need, insurance commissions, utility boards, public schools – all are either outright government granted monopolies or are examples of policies that have the direct effect of limiting market entrance or production and thus raising prices and stifling competition.

All “anti-trust” legislation should be abolished. Such legislation is akin to anti-witch legislation; a pointless attempt to prevent something that cannot nor did exist prior to enactment in 1890, myths of “Robber Baron” monopolies notwithstanding. Trusts, cartels, and monopolies – such things cannot exist in a free market for any appreciable length of time as long as competition is not short-circuited by arbitrary government edicts. To the extent a monopoly could exist in a free market it would be a testament to the degree to which such an entity is satisfying the preferences and demands of its consumers.

The government has spent millions of dollars prosecuting Apple over its behavior in a market for a luxury good that did not even exist 5 years ago. Perhaps it never occurred to anyone that if e-book prices were too high then people would simply stop buying them? Ultimately it is the consumer, exercising control over the purse, that dictates what will and will not succeed in the market. Government “anti-trust” witch hunts do nothing but harm the consumer by scaring off potential competitors who fear censure for not competing in precisely the manner prescribed by our wise overlords.