Saturday, January 31, 2009

Pelosi Boondoggler

Obama's Dream of Bipartisan Support for Stimulus Package In House Unfullfilled

Surprisingly, opposition to the stimulus was bipartisan. 11 Democrats, Baby! They're not as sheepish as I thought.

Update:
I guess you knew that already.

F*** you, Colbert (Actually, I think he's awesome)

Sicko: Socialized Medicine Myths aka Opportunity Costs

I finally got around to watching Michael Moore's Sicko. I must admit, it pulls at the heart strings. And that's part of my problem with the film. By choosing his scenes and case studies, Moore gives a false impression: that all we have to do is implement socialized medicine and that would fix all our health care problems. It would, as he claims, reduce the number of individuals who receive below average care, but I argue here that the cost of getting everyone to average is too high.

I'm not one to say that the US health care system cannot be improved. But I do want to point out the hidden cost of socialized medicine. Socialized medicine (like any socialized program) over supplies a service (or product) via artificial demand, resulting in market inefficiencies and suboptimal global production through the opportunity cost of its implementation. Lemme 'splain.

In the film, Moore compares the cases of two individuals who have lost fingers in an accident. The American must pay a fee to reattach his fingers (if he chooses), while the other individual's socialist government program picks up the tab (and when the government is paying, of course you have your fingers reattached). The film heaps scorn on the American system for forcing the American to pay for the medical services, especially since he decides to only have one of two fingers reattached.

But the cost of the doctor in the socialist system has not disappeared, nor even been reduced. In fact, Moore goes to great lengths to document how well a doctor under a socialist system lives. The tab for his service is picked up by the government and relayed and distributed to the people. But that's basically what insurance companies do. The socialist government acts as one big insurance company, who's premiums and deductibles are paid for through taxes. But unlike in the United States, you don't get to choose your insurance plan: everyone must get complete coverage. When everyone gets complete coverage, everyone has fingers reattached. With more fingers being reattached, you have to have more doctors to reattach them (and more hospitals for the doctors to work at, and more Audis for the doctors to drive - as the one in the movie did).

If we have more doctors, we must, concomitantly, have less individuals in some other career. To make my point obvious, let's say that one of the doctors, had s/he not become a doctor; would have become a mechanical engineer, who built a better saw, which led to a sharp decline in finger cutting accidents. How many people would; instead of paying a doctor to sew their fingers back on; instead pay the same fee to not have their fingers cut off in the first place? That's the opportunity cost. And also a good plot line for the Sopranos.

I've simplified the argument, and there's more to this problem - including common corruption problems in both socialist and capitalist systems, arbitrage examples, freedom of choice, etc. But you get the idea: socialism sucks, capitalism rocks!

Thursday, January 29, 2009

Tuesday, January 27, 2009

Why Bush Shouldn't Be Prosecuted

There are a lot of things I didn't like about Bush and his administration, but we had plenty of time to impeach him. We didn't. We did elect him. Twice. Get over it.

Philisophical Differences Are Moral Differences

Obama has asked Republicans to put aside political and philosophical differences and "do the American people's business right now." But really, what he's saying is put aside your values, morals, principles, and ignore the promises that you made to your constituants and do what the Democratic majority, and Obama himself, want.

All he's doing is forcing the Republicans into a no win situation. If they stick to their guns, they look like they're obstructing an economic recovery (which will actually cause more problems). If they cave, they share the blame when this thing doesn't work and lose their political credibility as Republicans.

Don't do it! Block harmful government spending! Taxing from (and/or borrowing on behalf of) a naive or unwilling population is theft!

Sunday, January 25, 2009

How Obama Could: Not Screw Things Up (Much), and Appease the Collectivists

This is how I see it. Obama needs to "do something" to show his supporters that he's working to "fix the economy". But there are two separate issues: there's the show, and there's the fix. The show needs to satisfy: "I'm doing something that my supporters think will solve their problem", and the fix is solving the problem itself. But, what is the problem?

People are saying that the problem is that we need more jobs. Well, sort of. But who really wants a job? I don't. If I could keep my lifestyle without working (and not burdening others), well, that's fine with me. I'd spend more time pursuing my own interests. But, that's not realistic. In the real world most of our needs and wants are satisfied through labor, either our own or someone else's. We usually trade the products we are most efficient at producing for products that someone else is most efficient at producing so that both parties may work less and/or have more. Note that I'm ignoring services, but the same rationale applies.

But what happens when someone in society doesn't have anything to trade? When demand decreases for the product of their labor? Ideally, they develop a new skill that is more desirable in the current market. They may, alternatively, turn to crime. I very few idealistic individuals might lower their lifestyles or perish.

Someone may step in and provide for those who can not participate in the fair exchange of goods. If the producer does this (think charities) it is a noble act: they are willingly giving from their production to help someone they value. If the government does this by taxing (or borrowing with the promise to tax later) the producer against his/her will, it is institutionalized theft via coercion – even if the perpetrators believe this is the utilitarian optimum.

The situation becomes more complex when you add in a fiat currency, long term contracts, monopolies/cartels, and inflation/deflation. I'll just describe the current problem as I see it with few extra details: deflationary pressure with long term contracts, specifically the cost of labor and the housing market. Labor contracts may be considered somewhat long term, and mortgages are very long term. When there is deflationary pressure, a company cannot charge as much for their product, so they need to cut costs to stay in business. Usually, they can expect their raw materials to decrease in price, so they don't need to cut back on quality or quantity. However, their labor costs don't adjust because of the long term nature of the contracts (and this can be exacerbated via unionization). Ideally, they could ask employees to take a pay cut, and some companies are doing this. Usually, they just axe workers in accordance with the realities of cost/benefit. These workers will hopefully find new employment, likely at a lower wage because of the deflationary environment. Fixed mortgages, however, do not adjust to deflation, and we have seen that variable rate mortgages are, curiously, not helpful either. So people must sell their houses (sometimes at a loss), or go into foreclosure, because they're not able to make payments.

I have to address one more reality before I get to a solution: why we're experiencing deflation. I don't know for sure, but my understanding is that foreign countries (China especially) are holding dollars and charging interest by investing in treasuries, companies are saving to make sure they have enough cash on hand, and banks aren't lending much (while still collecting principle and interest on outstanding loans). You may notice a problem in there: interest payments without (explicit) money creation.

Hopefully I've identified the (current) problem at this point: deflation caused by interest (and savings), combined with long term contracts only honorable through a stable or inflating currency.

With these assumptions, a “stimulus package” looks promising. By increasing government spending you'll get money to the currently unemployed, address deflation, and maybe even produce things like roads and bridges and such. The problem is that the government will either tax or borrow for the money, and the unemployed are those that normal employers have already deemed as not producing sufficiently in their cost/benefit analysis. So you end up paying people more than they're worth to produce things that consumers probably don't need or want (because if people needed or wanted these things an entrepreneur would have already capitalized on it, or for the few projects that cannot be addressed through the market (roads, etc) the government should handle it as part of it's normal function and not overcompensate/overproduce during desperate times).

So what is a newly elected savior to do? To satisfy the “show” I think he must initiate some infrastructure projects. I don't think this is the government's proper place and I think in the long run it will cause more harm than good, but I don't see a way around it from his perspective. So something like a government prize for green, domestic energy production solutions and innovations, with low interest loans to start businesses for the winners might work. I can see T. Boone Picken's natural gas vehicles, and improved solar panels coming out of this, with the businesses making consumer products and eventually becoming viable enough to get off the government tit. He might even provide grant money for contestants.

The other thing he could do is go back to his employee tax credit idea. As I mentioned, a problem for businesses during deflationary periods is the cost of labor. A tax credit per employee would decrease the impetus for businesses to shed employees, and would keep employees working at something they're good at and for companies producing products that are in demand in the market. There are problems with this idea, but this post is already too long so I'll stop here.

The previous two actions would be mostly for show. What I think would work, but will probably not be implemented, is this: gradually issue every American and business counterfeited dollars in proportion to their net worth until deflationary pressures are countered (as measured by a basket of goods). This does not redistribute wealth (domestically) since we are dealing with fiat currency, and does not warp the market, but it does counteract the deflationary pressures I mentioned previously, namely interest. It also reduces the real cost of our foreign debt, and does not increase our numeric debt. Further, it will prompt foreigners to spend our currency, thereby adding inflationary pressure. If they spend dollars on US products and services, we will see legitimate job creation. I propose a .2% distribution ASAP, doubling the amount every month, and a reversal once domestic prices stabilize. Again, this post is getting long, and I don't want to justify this solution vs the tax rebate idea, or some other proposal, but I'd be happy to respond to comments.

Finally, I want to remind you that I'm a big fan of Ron Paul. I think my solution is the opposite of returning to a gold standard. I also think that a gold standard is impractical, especially given our debt levels, though it might be practical once prices stabilize and real foreign debt is reduced. I do think this action would open up a precedent that may be abused. Further, I don't think that this solution is strictly fair to those in the world who have trusted the US to honor our debt obligations. I do, however, think that this is the best solution to actually solve the problem.

I end with this: I'm an armchair economist, and my solution is the humble exercise of a passionate amateur. I do hope, though, that my analysis and thoughts contribute positively to the marketplace of ideas.

Monday, January 19, 2009

Never Thought I'd Say It: I Agree With Rush Limbaugh

A little background: I grew up the son of two hippie liberals who moved to a rural, conservative town. My family's ideas and values got me ostracised more than once. About the time I was most affected by this situation, when I was supporting the rights of gay people to teach in public schools, Rush started a short-lived TV show. I saw him mocking the liberal leaders like I was getting mocked: as a one sided rant (ahem) against anything that wasn't hardline conservative. And his radio program was filled with more vitriol.

Fast forward to today. I will never again back an initiative supporting gay rights. Why? Because that courageous act that I performed years ago only distanced me from people I most identify with, and because I have never seen a gay person act courageously on the behalf of a breeder. Further, I have only been greeted with contempt and disparagement when I told homosexual people, who I had considered friends, that I was without question straight. That's not to say I will actively campaign to take rights away from gays - I won't. And just to piss you off if you're gay: I don't support the redefinition of marriage - you have as much right to marry a member of the opposite sex as anyone else does. I do, tentatively, support the abolishment of marriage in the legal system, though, moving it to a private, cultural, and possibly religous affair ...

But that's not what this post is supposed to be about. This post is about Rush Limbaugh being a voice of sanity for conservatives by declaring that he hopes Obama fails. And I now agree with him.

I haven't written for a while, because I felt defeated, and I knew that anything I wrote would be tinged with bitterness. I wanted to give Obama a chance before I started complaining. I was even, initially, duped by the calls to wish Obama success, because that seemed to translate to success for the people of the US. But I am not bitter any more, and I do not wish him success in his goals.

I hope Obama fails, because I believe the actions he is proposing will be bad for our country. I hope he fails to create a welfare state of slaves by burdening us with debt, inflating our currency, and stealing workers from the private sector to labor on his pet projects. If he fails to do those things and we reduce our overseas spending (wars) and don't incur civil unrest, he may be president over a very prosperous time in American history; or at least a recovery. If not, he will likely go down in history as the worst demagogue ever.

If he were to fail in his goals so supremely - that increased (domestic) competition with monopolies and big business surfaced to the benefit of consumers, that he effectively taxes externalizations instead of speculating on green technologies, that the government decreased its size and cost, that banks and the auto industry become less nationalized and are no longer "too big to fail", and if he allowed producers to retain the fruits of their production (instead of redistributing it), then he might go down as one of the greatest presidents. Then I could only complain that America became strong again despite his presidency, not because of it; instead of complaining that he oversaw the downfall of the brightest nation ever to exist.