Monday, April 25, 2011

Cognitive Dissonance on Government vs Private Sector Investment

Just a thought resulting from a conversation last Thursday at the Cato Institute:

If it's crazy for a venture capitalist to invest in something, why is it sane for the government to invest in the exact same thing? And if you support the government investing in it, and yet question the supposed market failure of the venture capitalist not being crazy enough to invest in it, aren't you undermining your own argument for the government investing in something? Because after all, with the venture capitalist, his clients and he understand the risks and it's only their money at risk. With the government, it's our money at risk (without our explicit consent), and government has a repeated history of failure in industrial policy.

It's quite a cognitive dissonance that I ran into during that conversation, and worth thinking through in full here, but for now it's up here to remind me to do so, rather than being forgotten in the mists of sleep.

Monday, April 11, 2011

Reading "Getting Our Way" and its Resonance with our Current Foreign Policy

A friend of mine, knowing my avid interest in history, particularly of the Anglo-American strain, recently lent me a book she had enjoyed, Getting Our Way.

I've just started reading it, but already I'm enthralled and nodding my head. Though the book's audience is intended to be the British people, I can't help but think how applicable the book's discussion is to American foreign policy:

Foreign policy - what is to be done - and diplomacy - how it is to be done - begin and end with the national interest. Without that, all is drift and muddle. Nowadays, to our damage as a nation, we have allowed the necessary rigour of foreign policy to become diluted by fashionable but fraudulent notions of the post-modern state, which elevate the daft utopianism of 'global values' at the expense of the national interest. 

And how that resonates with our foreign (mis)adventures over the past decade! Iraq, Afghanistan, and Libya certainly seem to quality as "drift and muddle."

Enough ink has been spilled over Libya, incidentally, but I would argue that view of foreign policy casts the Secretary of State and the President as utterly negligent of our national interest. And that is even before you consider that our actions in Libya, essentially war, are likely unconstitutional.

As I read Getting Our Way, I'll be writing more about my thoughts on it.

And for now, I leave you with some of the articles/media I've been reading on our current foreign policy debacle. No doubt people will disagree with the views in these articles/podcasts. No doubt some people may consider my entertainment of the views in these articles as extreme. But I have to ask, since we are supposed to live in a nation under the rule of law rather than the rule of man, why is it too much to ask that the President follow the Constitution? Especially when pre-election, he stated that it is required by the Constitution that the President seek a declaration of war from Congress before non-defensive military acts can commence (excepting conditions under the War Powers Act, which the current situation does not meet).

Or maybe we're just encountering that old bias Lord Acton so eloquently expressed: All power tends to corrupt, and absolute power corrupts absolutely. Great men are almost always bad men, even when they exercise influence and not authority: still more when you superadd the tendency or certainty of corruption by full authority. There is no worse heresy than that the office sanctifies the holder of it. [Emphasis added]

The emphasis above is usually on the first sentence. In this case I choose to emphasize the second sentence since I have no doubt plenty of people think Obama a great man, but I think Obama's actions recently proved that insight of Acton's.

Anyway, I hope these articles and the podcast cause you to think from a different viewpoint if you disagree with my viewpoint above.

By What Authority Has Obama Gone to War in Libya?

Why We Should Be Against Armed Humanitarianism

UN "Authorization" is the Emperor's New Fig Leaf

What Happened to the American Declaration of War? - a great piece by Stratfor discussing why American presidents neglect of the declaration of war has had a negative impact on their political prospects.

Libya, War Power and Impeachment - podcast with Rep Tom McClintock's reaction on our acts in Libya, its unconstitutionality, and the potential for impeachment

Why the Libyan War is Unconstitutional

Thursday, April 7, 2011

Thank Goodness for the CSA...

Because with it, I get great quality food at a cheaper price than I'll usually find at a supermarket. It's a win-win transaction. Though that's not to say that my supermarket transactions are not win-win. They are - otherwise I would not make them. But during the summer and fall, when I have the CSA option, I get more value from that than transacting at the supermarket.

One of the websites I frequent, the Mises Institute, happily reminded me of such while also teasing about the philosophy of a number of farm stand customers:

I am engaging in an enterprise that is the essence of pure capitalism while surrounded by those to whom the very word "capitalism" is one of the greatest of obscenities. It is voluntary exchange; it is a relationship where everyone feels as if they have won. Isn't that the essence of the free market?

Anyway, I thought it amusing and thought-provoking in the sense that articles about everyday activities can be at times. I honestly wonder what one of those customers who Mugnaini would think if they read this article. Would a lightbulb go off in his or her head? Would that person gain an appreciation of another viewpoint that would give that person some more perspective? Or would that person fall prey to confirmation bias and dismiss it as hogwash? 

If you want to read the Mugnaini's whole entry, click here.

Sunday, April 3, 2011

A Curious Statistic

Reading through the latest policy analysis from the Cato Institute (Bankrupt: Entitlements and the Federal Budget by Michael Tanner), I was struck by the following statistic: the wealth of all millionaires (defined in the report at people earning $1 million or more per year) is approximately a year of U.S. GDP.

The total obligations of the U.S. government, including off-balance sheet liabilities of Medicare and Social Security are around 9 times GDP. To put this in further perspective, the federal government's revenues, as a percentage of GDP, have averaged 17.7% since 1950. From 2000 to 2010, the average was 17.2%. (Data source) If all our tax revenues were set aside to pay for these liabilities, it would take 50 years to do so (assuming the luxury of not needing to spend for defense, transportation, NIH, and other programs). Of course, since we already overspend tax revenues today, it's not as if we can set aside an amount each year for Medicare and Social Security right now.

But maybe we need to tax the rich? Class warfare and all that jazz, right? Well, remember the above. Confiscating the entire wealth of the wealthiest people in the US will reduce those liabilities only by 11%. (It would also be blatantly immoral, arbitrary, anti-property rights, and ruinous in regard to any incentive to work hard or innovate to create a high demand product consumers want and become wealthy as a result.) And I highly doubt most people who are not rich want to pay higher taxes. I certainly don't. So at least be a bit skeptical the next time the popular topic of class warfare comes up as a budgetary solution.

While I certainly am not an expert in regard to how to solve the problem (the above policy analysis has good ideas though), it seems obvious to me that one way of not solving the problem is higher taxes. Consequently, spending and obligations need to go down (much of those liabilities are future obligations, so cutting the promised benefits would cut the off balance sheet liabilities of Medicare).

Ultimately, I wonder if Medicare and Social Security are even morally sound. I dislike it that 12+% or so of my pre-tax payroll each year goes to pay for retirement and medical care for people who never saved enough money for healthcare and living because of government promises (moral hazard). And by paying that tax, that creates the expectation that I've paid into the system and hence should get something out of it. But unlike traditional insurance, where your premiums from that year go into a pool that will pay for you should an event occur, or annuities where your money goes into a pool that will pay you out when the annuity event occurs, Medicare and Social Security takes the money I pay today and immediately pays it out to cover the costs of current beneficiaries. (Isn't that a Ponzi scheme? I guess the government is allowed to run Ponzi schemes, but no one else is.) So by the time I'm eligible, none of the money I paid in is there - I'm depending on people younger than me to pay for this program. More likely, I'm depending on my fiscal prudence because I doubt Medicare and Social Security will survive as it is today by the time I am eligible. And that makes me just a bit furious at the inequity of the situation.

In regard to Medicare, instead of my taxes going to the government, maybe I would be better off with a private insurance company setting up an elderly healthcare insurance policy or annuity where you can pay into it from whenever you choose, and what you get out is based on when you subscribed to the policy and the amount of premiums you paid. Ditto Social Security taxes either going into a private account that I can invest, even if restricted to index funds unless you pass an exam showing that you're an investment expert and hence can be given full control; or Social Security taxes going into a private annuity. I think it would get rid of the moral hazard of people not saving enough because they're depending on government promises. And I think it would reduce demand pressures on healthcare spending too, because instead of the elderly using other people's money for their medical bills and hence not worrying too much about silly things like "How much is this going to cost?", it'll be their money from their policy and they'll have more incentive to minimize costs (i.e. more preventative measures). Finally, because the private healthcare and retirement solutions would be dependent on the premiums I've paid in and the investments I've made, it would be a much more equitable and hence morally fair solution than our current government scheme (and I use scheme in all its negative connotations).

Oh, and those who don't pay into a private healthcare policy account like that or a special retirement account? Well, they can reap the lack of benefits that they sowed. Irresponsibility should have consequences. That it does not because of the current entitlement scheme is an example of moral hazard, one that ought to be remedied. Maybe not in as radical way as I'd like, but it needs to be. Otherwise, my generation is going to be stuck paying for the budgetary sins of our grandfathers and fathers.

Note: Consider listening to this podcast from the Cato Institute, where I got some of the above statistics. When I have the time, I'll likely read the policy paper they put out on the subject. If you happen to know of any contrary views, please forward them to me, as I believe one should always understand the opposition's viewpoint to see if they have any valid points or if they're just rent-seekers determined to preserve the status quo.

Further Note: Reference #122 in the analysis points to a study of Switzerland's healthcare system where individuals can purchase a long term contract while young that extends into their elderly years. Apparently this system works quite well, probably in large part because the individual gets it and it is tied to the individual no matter where he or she is employed, unlike the U.S. where if we want to enjoy the tax benefit of healthcare we get it through the employer and lose it when leaving that employer. At some point, after the insanity of tax time is over, maybe I'll get a chance to read it.