Saved and Created Just for You: Summer of Recovery Part Three!

The Late Stage Social Welfare State and "Rent Seeking"

The Al Gore quagmire: to conspicuously consume -or-conspicuously non-consume

Quote of the Day - Wall Street Journal Political Diary 06/27/2011

"Al Gore can consume more carbon than whole villages in the developing world. He can consume more electricity than most African schools, incur more carbon debt with one trip in a private plane than most of the earth's toiling billions will pile up in a lifetime -- and he doesn't worry. A father of four, he can lecture the world on the perils of overpopulation. Surely, skeptics reason, if the peril were as great as he says and he cares about it as much as he claims, Gore's sense of civic duty would call him to set an example of conspicuous non-consumption. This general sleeps in a mansion, and lectures the soldiers because they want tents. What this tells the skeptics is that Vice President Gore doesn't really believe the gospel he proclaims. That profits from his environmental advocacy enable his affluent lifestyle only deepens their skepticism of the messenger and therefore of the message. And when they see that the rest of the environmental movement accepts this flagrant contradiction, they conclude, naturally enough, that the other green leaders aren't as worried as they claim to be. Al Gore's lifestyle is a test case for the credibility of his gospel -- and it fails. The tolerance of Al Gore's lifestyle by the environmental leadership is a further test -- and that test, too, the greens fail. The average citizen is all too likely to conclude that if Mr. Gore can keep his lifestyle, the average American family can keep its SUV and incandescent bulbs. If Gore can take a charter flight, I don't have to take the bus. If Gore can have many mansions, I can use the old fashioned kind of shower heads that actually clean and toilets that actually flush. Al Gore looks to the average American the way American greens look to poor people in the third world: hypocritically demanding that others accept permanently lower standards of living than those the activists propose for themselves. There are gospels that can be preached by the comfortable and the well fed. But radical environmentalism is not one of them" -- journalist Walter Russell Mead writing at the-american-interest.com on June 24."

Links to Walter Russell Mead's article and 06/27/2011 follow up article appear below:

The Failure of Al Gore: Part One
http://blogs.the-american-interest.com/wrm/2011/06/24/the-failure-of-al-gore-part-one/

The Failure of Al Gore: Part Deux

http://blogs.the-american-interest.com/wrm/2011/06/27/the-failure-of-al-gore-part-deux/

Release of the Strategic Nut Reserve

Dateline: Your Backyard.

In a move to boost economic activity the Supreme Squirrel announced from the Oval Patio he has determined that releasing nuts from the Strategic Nut Reserve will alleviate current nut supply problems and drive down the price of nuts. However, the Supreme Squirrel determined he will not resupply the nut reserve, he merely will put nuts into the supply chain.

Many squirrel pundits immediately pointed out that the nut reserves being released on the market is only a 36 hour nut supply and will do little to reduced the price of nuts. However, proponents of the nut release point out that speculation has been occurring on the SNX (Squirrel Nut Exchange) and that the released supply of nuts will ring out marginal nut speculators hence reducing the price of nuts.

Others complain that the Department of Nuts, formed in 1977, by then Supreme Squirrel Nut Carter III has done little more than take up oak tree space and reduce nut supply.

A separate news conference was also held at the Third-Maple-Tree-from-the-Fence in which attendees discussed long run supply and that squirrels are losing their long held reputation as store'rs-of-nuts. Squirrel exceptionalism was the headline topic.

Meanwhile, other squirrel nut leaders gathered at The-Big-Oak-Next-to-the-Garbage-Can and called for more subsidies for renewable nuts. Wax fruit and nut manufacturers were heard complaining about the recent reduction in subsides regarding wax nut technology.

At the Old-Toledo-Scales-Sitting-Over-by-the-Shed, Milton Fredrick Squirrel pointed out the need for a long term solution. That nut market intervention and over nut regulation is impeding nut markets.

A statement was also issued at The-Down-Spout-by-the-Rain-Barrel in which gathered squirrels advocated their long held position of Gather-Baby-Gather!

The day's activity did not amuse the Oak Producing Exporting Coppice.

In other news, John B. Squirrel, leader of the House of Nuts, stated the progressives always make the argument that [paraphrasing] "....if we began gathering nuts right now it would not effect nut prices for years to come...". John pointed out that the apparent nut logic is:

(1) the medium and long run do exist, but the medium and long run are not related in any way to the short run,

(2) the short run has no relationship to the medium and long run especially when it comes to price,

(3) that somehow, someway the period "long run" [a future period] is not supplanted by the short run [a present period].

John went further by explaining the fallacy with this particular nut logic ["....if we began gathering right now it would not effect nut prices for years to come..."]  is that "price" is in fact a signal and is in fact influenced by the short, medium and long run albeit at different degrees. The nut logic appears to leave one always in the present [short run] when in fact time does march on and the present [the short run] does in fact find its way into the future [the short run finds its way into what was once the past long run]. In 1970 we might say that 2011 was the super long run. Today, in 2011, we find ourselves in the the short run [present] of the once considered super long run.

John went onto to point out that gathering now for the future has always been the best path to squirrel prosperity.

-Backyard Nut News (BNN), all rights reserved.

USA Today: Is Social Security an investment Ponzi scheme?

' Q: Is Social Security an investment Ponzi scheme?


A: The Social Security system is under intense pressure as its method of taking current workers' contributions to pay for current retirees is under strain. And it's that method, which often draws criticism for resembling a Ponzi scheme.

Before we can decide if Social Security's structure qualifies it as a Ponzi scheme, a quick definition is in order. A Ponzi scheme "is an investment fraud that involves the payment of purported returns to existing investors from funds contributed by new investors," according to the Securities and Exchange Commission.

Some investors think that the fact that Social Security pays existing investors with cash collected by new investors makes it a Ponzi scheme. But that's not true, says Jack Coffee, professor of law and securities law expert at Columbia Law School. "This is less a question and more an aggressive assertion," he says.

Social Security is not a Ponzi scheme because it wasn't an intentional fraud, he says. In fact, the system has worked as expected since its creation in the 1930s. What's happening now is that, like many corporate pension plans, Social Security is running the risk of being underfunded as obligations grow faster than contributions. But again, Social Security wasn't created with this aim, he says. "It was a system that was quite adequate for a long time," he says.

Changes are certainly needed to keep Social Security working to reach the goals it was established to meet, he says. Either benefits will need to be curtailed or the government will need to kick in funding, he says. But again, it's not a Ponzi scheme, but a retirement system where the demographics have changed, he says. "It's a system where almost everyone agrees needs reform." ' - Matt Krantz, USA Today (1)



What about this depiction of Social Security? Is it accurate?

Regarding the Ponzi scheme portion of the article it tries to delineate between intentional fraud and good intentions. Let us revisit Coffee's statement:

'Social Security is not a Ponzi scheme because it wasn't an intentional fraud, he says. In fact, the system has worked as expected since its creation in the 1930s. What's happening now is that, like many corporate pension plans, Social Security is running the risk of being underfunded as obligations grow faster than contributions. But again, Social Security wasn't created with this aim, he says. "It was a system that was quite adequate for a long time," he says.'

Examine this statement: "...it wasn't an intentional fraud".  Is the statement including an implicit assumption that fraud existed but it wasn't intentional?

Examine this statement: 'But again, Social Security wasn't created with this aim, he says. "It was a system that was quite adequate for a long time," he says.'

Are those statements accurate? Regarding "...Social Security wasn't created with this aim" one needs to revisit the 1930's and the arguments put forth by the politicos through the mechanism of government for the enactment of Social Security. Yes, there was no populous movement for Social Security creation. That is, Social Security was a politico creation not a voter movement for the creation of a government sponsored retirement scheme. Hence the creation and aim were clearly politico driven. (2) The "....adequate for a long time" assertion is questionable because the arguments clearly included congressional hearings in which discussions of "inadequacy" occurred by Travelers Insurance Company Actuary W.R. Williamson (3)

Coffee's "wasn't an intentional fraud" and "wasn't created with this aim" are questionable statements. That is, arguments regarding funding with one generation paying for the next generation were clearly given and debated by politicos in the 1930's regarding Social Security. (4)

Upon Further Review

Coffee also states "....government will need to kick in funding". Government produces nothing that the private sector would not have produced if a transfer payment had never been made from the private sector to establish the public sector. Hence how does the entity "government" kick in funds? The answer is: it doesn't. Only the transfer payment from the private sector can increase funding with government merely acting the part of transfer agent.

Coffee goes onto say "But again, it's not a Ponzi scheme, but a retirement system where the demographics have changed....". This statement appears to assume that changed demographics were an unknown-unknown. Once again one must visit the 1930's and examine the politico arguments surrounding social security. In point of fact, demographic changes were in fact discussed and warnings were given regarding the changing demographics in the future.(5)

Finally Coffee states the obvious or does he misstate the obvious when he says "....Social Security is running the risk of being underfunded". The term underfunded carries with it the implicit assumption that a fund exists and that that fund may not be adequate. What fund exists that is underfunded?  No fund exists. (6)

Notes:

(1) http://www.usatoday.com/money/perfi/columnist/krantz/2011-06-21-social-security-ponzi-scheme_n.htm

(2)  Carolyn L. Weaver, The Crisis in Social Security: Economic and Political Origins, Durham, NC: Duke Press Policy Studies, 1982, p.63.

(3) Jim Powell, FDR's Folly, Chapter Thirteen, How Did Social Security Contribute to Higher Unemployment, pages 173 - 186.

(4) Ibid

(5) Ibid

(6) Dr. Donald Boudreaux, George Mason University, More on the ‘Trust-Fund’ Fraud, 03/16/2011,  http://cafehayek.com/2011/03/more-on-the-trust-fund-fraud.html

Pelosi: "We have to pass the health care bill so that you can find out what is in it".

What is in it? When you base a plan on a price fixing scheme in conjunction with an ultra complex central planning scheme, the cascading unintended consequences will be devastating.

Cascading unintended consequence of ObamaCare example 2,632:

"President Barack Obama's health care law would let several million middle-class people get nearly free insurance meant for the poor, a twist government number crunchers say they discovered only after the complex bill was signed".

'Medicare chief actuary Richard Foster says the situation keeps him up at night.


"I don't generally comment on the pros or cons of policy, but that just doesn't make sense," Foster said during a question-and-answer session at a recent professional society meeting.' - AP report

AP Exclusive: Medicaid for the middle class? Link to entire article appears below:

http://news.yahoo.com/s/ap/20110622/ap_on_bi_ge/us_health_overhaul_glitch

Jared "the king of spin" Bernstein and the Dopeler Effect: the tendency of stupid ideas to seem smarter when they come at you rapidly.

Ah yes, Jared Bernstein, the non-economist chief economist. Yes, the non-economist chief economist for Vice President Joseph Robinette "Joe" Biden, Jr.  Jared, one of the main designers of the 2009 stimulus plan [American Recovery and Reinvestment Act of 2009] also known as the spruce goose of all stimulus plans ever concocted. The one trillion dollar (with interest) social engineering plan times some multiplier of Keynesian foolishness. The stimulus plan that would never allow unemployment to exceed 8%.

In two minutes and twenty seconds of the opening of the above video Jared Bernstein manages to fire off  vilification through verbal virtuosity using such trite taking points such as: trickle down economics (a non existent economic theory), slashing spending, hurting most vulnerable people in the economy, Robin Hood in reverse, less jobs and income for the middle class, deregulation hurts finance, etc. Yes, the Dopeler Effect: the tendency of stupid ideas to seem smarter when they come at you rapidly.

Better yet, Jared even manages to refer to himself as an "economist". The Double Bass major from the Manhattan School of Music is an economist? Really? "...graduated from the Manhattan School of Music with Bachelors Degree in Fine Arts where he studied double bass with Orin O'Brien. He earned a Masters Degree in Social Work from the Hunter School of Social Work, and, from Columbia University, he received a Masters Degree in Philosophy and Ph.D. in Social Welfare". (1) Yes, Jared, quite the philosophical, musical, social worker.

Notes:

(1) Education: Bernstein attended Ridgefield High School in Ridgefield, Connecticut,[4] and graduated from the Manhattan School of Music with Bachelors Degree in Fine Arts where he studied double bass with Orin O'Brien. He earned a Masters Degree in Social Work from the Hunter School of Social Work, and, from Columbia University, he received a Masters Degree in Philosophy and Ph.D. in Social Welfare.

http://en.wikipedia.org/wiki/Jared_Bernstein#Education

Kansas Congressman Tim Huelskamp's letter to Secretary Sebelius regarding ObamaCare Waiver Process

"The process by which waivers are approved and denied remains largely unknown," Congressman Huelskamp said. "I asked my colleagues to join in this letter in the name of transparency, fairness, and due process. We are hoping Secretary Sebelius will shine some sunshine on the waiver process, making it known how businesses and labor unions are chosen or denied exemptions." - Congressman Huelskamp's congressional web site


Link to full article and letter appears below:







http://huelskamp.house.gov/index.php?option=com_content&view=article&id=3368:huelskamp-calls-on-secretary-sebelius-to-let-the-sun-shine-on-waiver-process&catid=48:2011-press-releases

Nothing is so permanent as a temporary government program. - Milton Friedman

The "State" Represents itself as the Shirking Partner in the form of Tax

‘A tax levied on corporate profit reduces the care and effort owners put into its operation, since part of the return that would have been received by owners will go to the state. Defacto, private owners of the corporation are saddled with a shirking partner, the state, which takes part of the revenue and provides none of the effort to improve the firm’s return. Consequently the greater is the corporate tax rate, the greater the incentive for corporate owners and management to pursue the “quiet life”.’ - Harold Demsetz’s, From Economic Man to Economic System, Chapter 10, pages 141 -159, The Public Corporation: Its Ownership and Control.
 
In essence, the state represents itself as the shirking partner in the form of tax. Since firms are merely a collection of households, both the firm and accompanying households are saddled with shirking partner which takes part of the revenue and provides none of the effort.
 
Its worth considering Demsetz's proposition before one deliberates what the shirking partner does with the revenue taken. That is, decouple the two propositions of state through tax acting as a shirking partner -from- what the shirking partner ultimately does with the revenue taken.
 
Tax certainly is a disincentive. However, "disincentive" is rather abstract until you place the face upon disincentive as the shirking partner. That the disincentive in fact is the shirking partner providing zero effort yet taking revenue. If one was saddled with a shirking partner other than state, would one continue with such a partner?
 
The second item is what does the shirking partner, that provided zero effort yet took revenue, do with such revenue? What if the shirking partner took the revenue and created more disincentives in the form of regulation (another form of tax). Not necessary regulation associated with the minimal state, rather regulation associated with the ever expanding state. What if the shirking partner paid its subordinates high wages? What if the shirking partner took the revenue and enriched itself and its subordinates in the form of benefit plans and retirement plans? What if the shirking partner redistributed the revenue to those that suffer no tax (no shirking partner)?
 
Its no wonder James and Jane Goodfellow have such a low opinion of "state". What opinion other than a negative opinion could one possibly have regarding a shirking partner providing no effort yet taking revenue, then taking such revenue to create more tax, enrich itself, and redistribute "efforts"?

If you take away the bun, where does the Weiner go?

“New York must lose two House seats in 2012 due to slow population growth, and one of those districts is almost certain to be in New York City. Mr. Weiner represents a sprawling district in Queens and Brooklyn that borders six other congressional districts and thus could be an easy target for elimination. Due to the Voting Rights Act, none of the existing districts with a majority of black or Hispanic voters can be realistically rubbed out. But Mr. Weiner lacks that protection and already sits in a district where he is on shaky political ground, having won with only 59% of the vote in the Democratic landslide year of 2010“. - John Fund, Wall Street Journal Political Diary, 06/07/2011

An Educational Paradox: Collectivist Visions Delivered Through Collectivist Models

Horace Mann's grand collectivist scheme of "free education" also known as the K-12 scheme, also known as public schools. The “free” [taxpayer subsidized] scheme that costs hundreds of billions of dollars each year. Public universities are tax payer subsidized as well.

Enter Milton Friedman

Keeping K-12 and public universities in mind, consider this statement by Milton Friedman when considering the current taxpayer supported systems regarding the investment in education: "In a private market economy, the individual would get his return as his personal income, yet if the investment were subsidized, he would have borne none of the costs". (1)

An argument point to keep in mind

One might want to keep the following argument points in mind put forth by collectivists regarding the presumed need to funnel more and more and more tax dollars to public education: "children are our future", "we will have an educated and more productive society", “democracy is better served by the better educated”, etc..

Back to Friedman

One of the implicit and explicit assumptions in Friedman's 1955 essay The Role of Government in Education is that individual X increases his/her potential to earn a higher income through education and many times the potential actually translates into increased earnings. However, Friedman is pointing out the potential and actual earnings increase was largely subsidized by the exogenous taxpayer. When considering the now higher earnings of individual X, one must deliberate the fact that X did not pay for the total costs associated with the increased earnings.

Back to the more productive society

The implicit assumption in slogans such as "children are our future", "we will have an educated and more productive society", “democracy is better served by the better educated”, is that a social benefit of some undefined sort accumulates. However, we also know that increased earnings accumulate. In other words, are collectivists unknowingly implying that Adam Smith’s invisible hand is at work [increased earning and increased social benefit]?

The exogenous taxpayer and subsidized increased earnings

If taxpayers A-Z are forced into a system of subsidizing the potential and many times actual increased earnings of public school and public university students, shouldn’t taxpayers A-Z demand an efficient trade-off for the forced subsidization. Stated alternatively, taxpayers A-Z who are compelled to subsidize, should not taxpayers A-Z demand that the forced subsidization of increased earning be done in a manner that produces the most efficient, least expensive, and best average output?

Is not the subsidization of potential and actual increased earnings yet another argument for the voucher system? If taxpayers A-Z are compelled to subsidize potential and actual increased earnings then why is the subsidization not delivered through the most efficient, least expensive, and best average output system? Why is the subsidization conveyed through a collectivist model delivered through monopoly [K-12] and a top heavy administration system based on tenure [public universities]. That is, the subsidization is being delivered through a late stage collectivist model suffering from rampant shirk, enrichment of the power purveyors [administrative bureaucracy], and suffering from abysmal and declining output.

The current delivery system is counter collectivist. Oh yes! If the collectivist vision unknowingly implies that Adam Smith’s invisible hand is at work [increased earning and increased social benefit], then any accrued social benefit is left un-maximized. Hence the collectivist vision delivered through collectivist models becomes a paradox.

Notes:

(1) The Role of Government in Education, Milton Friedman, 1955, http://www.freerepublic.com/focus/f-news/1173402/posts

Keynesianism Part I: It's All About Spending - econstories.tv

Postcards from Dystopia: The Welfare State Restaurant....where the bill is promised to never come due!

You share in the public debt caused by deficits resulting in accumulated national debt? You share in future unfunded entitlements? You over spent and now you owe the money? You did all this spending?


According to USA Today each U.S. household owes $212,500. (1) Ops! Scratch that. The new number is $527,000. (2) Actually it much bigger than $527,000. Ops!



You own a share of public debt? Maybe not.

In the headlines you see the term “default” associated with U.S. debt obligations regarding raising the debt ceiling. Wouldn't it be more accurate to scrub the word "default" as that frames the money owed as being associated with "debt".

It is “debt” isn’t it?

The current jaw dropping budget deficit translating into a $14 trillion national debt and another $100 trillion of unfunded future entitlements are really politico promises, past-present-future, made through the mechanism of government.

Hence its not "default", its "renege". If politicos past-present-future made/make promises knowing the promises can never be fulfilled, then promises do not default, the promises are merely reneged upon.

Moreover, we have politico promises, then we have the group purposely caused to be dependent upon  politico promises through dependent political constituency building via taxpayer money , and finally the group saddled with the responsibility of financing other peoples’ [politico] promises, that is, the taxpayer. If you find yourself as one of the dependent class, broken promises can be tough news. If you are one of the taxpayers being asked to clean up after the broken promises, good luck. What about those politicos that brought about this dystopia?  Where does the liability fall for spending other peoples' money on other people as a political constituency building exercise?

You see, at the Welfare State Restaurant, where the menu is packed full of goodies and politicos promise the check to never-ever to come due…..well… the check is due.

" If the progress of socialistic legislation be arrested, the check will be due, not so much to the influence of any thinker as to some patent fact which shall command public attention; such, for instance, as that increase in the weight of taxation which is apparently the usual, if not the invariable, concomitant of a socialist policy". - A.V. Dicey 1914 (3)

Notes:

(1) http://www.usatoday.com/news/washington/2011-06-06-us-debt-chart-medicare-social-security_n.htm#

(2) http://www.usatoday.com/news/washington/2011-06-06-us-owes-62-trillion-in-debt_n.htm

(3) Lectures on the Relation between Law and Public Opinion, (1914 ed.), p 302.

How to Talk to Your Kids about Anthony Weiner’s Penis - Andy Borowitz

"Because I’ve dealt with this nettlesome issue so much over the past few days, I thought it might be helpful to publish the following tips to help concerned parents talk to their kids about Anthony Weiner’s penis:

Could what happened to Anthony Weiner’s penis happen to my penis?

No. Anthony Weiner’s penis has many followers on Twitter. Your penis isn’t even on Twitter. Someday, when your penis gets much older, it may be on Twitter. But that’s nothing to worry about, because many people believe the world will end before then.

If someday my penis is on Twitter and someone sends pictures of it to everyone in the world, what should I do?

Most people go through life without ever having their penis sent to everyone in the world. But if it does happen, just say that the whole thing is a “distraction.” That’s a long word which means it’s your penis but you don’t want to talk about it.

Could Anthony Weiner’s penis hack my penis’s Twitter account and send pictures of my penis to people?

No. Anthony Weiner’s penis is too busy to do something like that.

If there is a God, why does he let so much pain and suffering happen to Anthony Weiner’s penis?

God does many wonderful things. He made you, and Mommy and Daddy, and the sun and the moon and all of the food that we eat. But sometimes God gets bored, and that’s why He made the people who invented Twitter."

Link to entire article appears below:

http://www.borowitzreport.com/2011/06/02/how-to-talk-to-your-kids-about-anthony-weiners-penis/

Muni Defaults: a "dark pool"?

Free to Choose: the story of the busy bodies and the toilet.

Disincentives Matter: health care exchanges reward people for working less?

"How did health care costs in Massachusetts get so big? A major reason is that health care exchanges reward people for working less and earning less, says Shawn Tully, a senior editor-at-large with CNN.money". - National Center for Policy Analysis

Entire story and link to the original Shawn Tully story appear in hyper-link below:

http://www.ncpa.org/sub/dpd/index.php?Article_ID=19482

77,000 federal workers paid more than governors - Washington Times

77,000 federal workers paid more than governors? No way! Way!

"More than 77,000 federal government employees throughout the country — including computer operators, more than 5,000 air traffic controllers, 22 librarians and one interior designer — earned more than the governors of the states in which they work."
- By Stephen Dinan, The Washington Times.

For the complete story see link below:

http://www.washingtontimes.com/news/2011/may/31/77000-feds-paid-more-than-governors/

University of Free Marketeers.....in Guatemala??

Anemic May Job Growth, March and April Revised Down, Unemployment Rises to 9.1%

"Nonfarm payrolls increased 54,000 last month, the weakest reading since September, the Labor Department said on Friday.


Private employment rose just 83,000, the least since last June, while government payrolls dropped 29,000. Economists had expected payrolls to rise 150,000 and private hiring to increase 175,000 in May.

The government revised employment figures for March and April to show 39,000 fewer jobs created than previously estimated." - CNBC.com 06/03/2011

Full article appears in link below:

http://www.cnbc.com/id/43265008

Classic Thomas Sowell

The entire text of Thomas Sowell's original article, National Review, December 31, 1985, v37 p17 appears in the link below:

http://www.lexrex.com/informed/otherdocuments/english_primer.htm

Morgan the Cow, a Humble Amish Farmer, and the FDA

'Among a half dozen speakers who railed against the FDA was Jonathan Emord, a Washington lawyer who specializes in representing individuals and business hit on by the the FDA. He may become involved in the Allgyer case, in which the FDA has sought a permanent injunction against the farmer for shipping raw milk to the food club outside Pennsylvania. Emord gave a pretty fiery speech for a lawyer.


"When a major pharmaceutical company commits fraud in a new drug application, or markets a drug that causes heart attacks and strokes in tens of thousands of people, far from stopping the company, the FDA stands in defense of it.


"But when a humble Amish farmer dares sell unpasteurized milk, the FDA gets down to business...FDA spent a year investigating Dan and entrapping him...They should be ashamed of themselves! This nation was built by yeoman farmers just like Dan Allgyer." ' - thecompletepatient.com

Link to the entire article appears below:

http://www.thecompletepatient.com/journal/2011/5/16/morgan-the-cow-gets-top-billing-at-capitol-hill-rally-for-am.html