Month: March 2004

Cowardice or Fear?

Many bloggers are accusing Spaniards of cowardice because they rejected the Aznar government in the aftermath of the Madrid bombings. I think “fear” is the better word in the circumstances. Spaniards voted as they did because they feared that Spain’s continuing involvement in Iraq would lead to more terrorist attacks. That they acted out of fear make their action no less palatable.

Civilized nations must act with resolve in the face of terror, even if the cost of resolve is sometimes high. In the end, the cost of submission to terror will be far greater than the cost of combating it.

The Terrorists’ Election Strategy? Take 3

A few days ago, I suggested that “terrorists might stage a spectacular attack in the U.S. and claim that it’s retribution for the invasion and occupation of Iraq. Such a claim would be cynical, of course, but it would probably swing the election to Kerrry.”

Well, it seems to have worked in Spain.

IQ and Politics

This content of this post is now incorporated in “Intelligence, Personality, Politics, and Happiness.”

IQ and Personality

This content of this post is now incorporated in “Intelligence, Personality, Politics, and Happiness.”

The Terrorists’ Election Strategy? Take 2

The Terrorists’ Election Strategy? Take 2

A few days ago I suggested that terrorists might “[w]ithhold attacks on the U.S. until after November 2, to distract Americans — enough of them anyway — from the war on terror. That would divert attention from Bush’s (rightful) strength as a war leader and toward the economy, where Bush (wrongly) seems to be vulnerable.”

Here’s another possibility: Terrorists might stage a spectacular attack in the U.S. and claim that it’s retribution for the invasion and occupation of Iraq. Such a claim would be cynical, of course, but it would probably swing the election to Kerrry.

The Rule of Law

So, the Cailfornia Supreme Court has ordered San Francisco not to issue any more marriage licenses to gay couples. Although the court didn’t rule on the legality of gay marriage in California, it has, in effect, upheld a state law and voter referendum that say marriage is a union between a man and a woman. Perhaps, in its subsequent decision on the merits of the case, the court will find authority for gay marriage in California’s constitution.

Whatever the outcome of the case, California’s high court has upheld the rule of law. The court — not the impetuous mayor of San Francisco — should decide the legality of gay marriage. And if the citizens of California don’t like the court’s ruling, they can strive to negate the ruling by amending California’s constitution.

The Terrorists’ Election Strategy?

Withhold attacks on the U.S. until after November 2, to distract Americans — enough of them anyway — from the war on terror. That would divert attention from Bush’s (rightful) strength as a war leader and toward the economy, where Bush (wrongly) seems to be vulnerable.

Campaign Rhetoric

The two sides (if not more) of John Kerry:

1. The war on terror

a. Kerry will proclaim the war on terror a phony war if there is no significant terrorist attack against the U.S., its overseas interests, or its forces in the Middle East.

b. Kerry will proclaim Bush’s war on terror a failure if there is a significant terrorist attack.

2. The recession

a. Kerry will continue to blame Bush II for the recession, which began under Clinton.

b. Kerry will seek to identify himself with the so-called Clinton boom of the 1990s, which began under Bush I (or Reagan, if you prefer).

3. Consistency

a. Kerry will oppose Bush on every issue, even if it means that Kerry must contradict his earlier positions on many of the issues.

b. Kerry will fault Bush for having done what he said he would do about Iraq.

And so it will go.

Kerry for President of What?

A report in yesterday’s New York Times about John Kerry’s decision-making style includes this observation about Kerry’s inability to take a position and stick to it: “Some aides and close associates say Mr. Kerry’s fluidity is the mark of an intellectual who grasps the subtleties of issues, inhabits their nuances and revels in the deliberative process.”

I worked for a CEO who might have been described in just the same way: He, like Kerry, fancied himself an intellectual and sought every nuance of every issue before making a decision — which he would then almost invariably regret if not reverse. He, like Kerry, mistook his “style” for nuance and intellectual rigor, when it merely betrayed his self-doubt and lack of consistent principles.

My former CEO ran a think tank and was very well compensated for all of his intellectual pains. Kerry would do the country a great favor if he would retire to a similar sinecure.

What Liberals and Conservatives Have in Common

So-called liberals (or “progressives” as many of them now prefer) and conservatives (as distinguished from libertarians or libertarian conservatives) have this in common: a penchant for using the coercive power of the state to enforce their views of proper economic and social arrangements.

Because the courts have in the past 70 years allowed the Executive and Legislative Branches to assume unconstitutionally broad power, and because that broad power has been mainly at the service of liberals, we now live under a highly regulated economic and social regime.

Would the courts restrain non-libertarian conservatives if they were to hold a strong majority in both houses of Congress for a considerable time, while the presidency was also held by a non-libertarian conservative?

Don’t bet on it. Sooner or later the courts “follow the election returns.”

P.S. on Privatizing Social Security

The plan I outlined in the previous post assumes that the government will force people to save for their retirement. Why should the government do that? Any forced savings plan, be it traditional Social Security or private accounts, implies a governmental obligation to bail out those who make imprudent investment decisions. If very many private accounts go sour because of imprudent decisions, there will be a hue and cry to bail out the holders of those accounts. (If it was done for Chrysler it will certainly be done for a bloc of voters.)

When individuals are confronted with the consequences of their actions — as they still are to some extent under criminal law — they tend to make better decisions. A case in point: I took my private retirement savings out of the stock market before the bubble burst in 2000. I, like many contemporary observers, could see that there was a bubble. If more investors had been like me, the bubble wouldn’t have been as large and there would have been less damage when it burst.

Government guarantees — implicit or explicit — have perverse results. They foster imprudent decisions and transfer the cost of those decisions to the taxpaying public.

Why It Makes Sense to Privatize Social Security

1. The Social Security system will begin running a deficit in 2018, a deficit that will grow ever larger unless Congress enacts a combination of benefit cuts and tax increases. Retirees will be “taxed” by benefit cuts; workers will be taxed at higher rates to sustain those reduced benefits.

2. Why is there a looming crisis in Social Security? Social security taxes yield an effective return of about 3%, and that return will diminish as the ratio of workers paying taxes to workers receiving benefits declines.

3. A worker who makes $40,000 a year (in 2004 dollars), for example, will receive about $15,000 a year in Social Security benefits if he retires in 2018 at age 66. Workers who make the same amount but retire later will receive less than $15,000 a year (unless those then working pay higher taxes).

4. If a worker making $40,000 a year had been allowed to invest his taxes (including the so-called employer’s share) in a strong instrument (e.g., AAA corporate bonds) he would receive an income of more than $30,000 a year beginning in 2018, even if he had paid income taxes on the interest he earned. Moreover, he would be able to draw a larger income every year as a hedge against inflation.

5. What about the transition from the present system to a private system? Who will pay current retirees and those who retire having worked under both systems. Simple: Guarantee that every worker will receive at least as much as he would have under the present system, then collect just enough Social Security tax to meet that guarantee. That tax would diminish over time until all retirees are covered by private accounts. (Those who can’t afford to pay the residual Social Security tax in addition to investing in their private accounts would be allowed to tap their private accounts to pay the tax.)

6. At the end of the transition, the government will no longer have a liability on its hands and every worker will be far better off than under the present system.

P.S.

The examples in the previous post illustrate an important truth about economics: It may be dismal but it’s not science.

On the Other Hand, Let’s Kill All the Economists

The old saying has it that if all the economists in the world were laid end to end they wouldn’t reach a conclusion. Economists can’t agree on the past, let alone the future. Who needs them?

There are, for example, economists who say that Clinton’s 1993 tax increase caused the subsequent economic boom by (a) reducing the deficit, which (b) resulted in lower interest rates, which (c) stimulated consumer and business spending. There are, on the other hand, economists who say that (a) deficits have no discernible effect on interest rates and, therefore, (b) the boom of the ’90s was a normal post-recession recovery pumped up by rapid gains in productivity — phenomena beyond the influence of presidential power.

The Bush tax cuts have economists equally divided, pro and con. Some economists argue that reversing the cuts in higher tax brackets wouldn’t harm economic recovery but would reduce the deficit, which would in turn…blah, blah, blah. Other economists say that reversing any of the Bush cuts would put the economy into a nosedive by discouraging investments in new technology and business ventures.

Switching from macroeconomics (the study of aggregate economic activity) to microeconomics (the study of, what else, disaggregate economic activity), we find opposing camps on such issues as the minimum wage. Some economists say that raising the minimum wage has little effect on the employment of minimum-wage earners. Others argue the opposite. Both sides have data to support their conclusions — of course.

Then there’s Social Security — the economic issue of the Twenty-first Century. Some economists argue that Social Security can be “saved” by “tweaking” the system, namely, by increasing Social Security taxes (oops–“contributions”) and/or cutting Social Security benefits. Others argue that the system is moribund and the only way to save it is to kill it and replace it with private retirement accounts.

Now, if you’ve been reading carefully you’ll have noticed a trend. There are those economists who think the federal government should intervene in the economy (unless there’s a Republican president), and there are the others who believe we’d all be better off if the federal government didn’t try to fine-tune the economy, kept its hands out of taxpayers’ wallets, didn’t interfere with businesses’ (legal) operations, and didn’t run (badly) the world’s largest ponzi scheme (oops — pension program).

Can you guess which side I’m on?

Next post: why Social Security should be privatized, in one easy lesson.

Miscellany, Potpourri, and Other Stuff That Comes to Mind

* Taxes and regulations drain almost half of the output of the U.S. economy. Where’s the outrage?

* Truth is to government as daylight is to vampires.

* Democrats — having embraced balanced budgets as a sign of “fiscal responsibility” — must keep taxes high to keep the welfare state intact. They know where their votes come from.

* Remember “urban sprawl”? Of course there’s urban sprawl. Not everyone wants to live in the hot, crowded, noisy, filthy confines of downtown Washington, D.C., and other centers of urban elegance.

* Remember the budget surplus? Sorry it has vanished? Well, just remember that the surplus was your money. When politicians were arguing about what to do with the surplus they sounded just like thieves arguing about how to split the loot from a bank heist.

* If the President is responsible for the state of the economy, he must be responsible for the state of the weather as well.

* Those who say that the era of big government is over he must be talking about the Soviet Union.

* Here’s a success strategy for the Republicans: Drive the religious right out of the party and into the arms of the Democrats.

First Principles

A society is formed by the voluntary bonding of individuals into overlapping, ever-changing groups whose members strive to serve each others’ emotional and material needs. Government — regardless of its rhetoric — is an outside force that cannot possibly replicate societal bonding, or even foster it. At best, government can help preserve society — as it does when it deters aggression from abroad or administers justice. But in the main, government corrodes society by destroying bonds between individuals and dictating the terms of social and economic intercourse — as it does through countless laws, regulations, and programs, from Social Security to farm subsidies, from corporate welfare to the hapless “war” on drugs, from the minimum wage to affirmative action. On balance, the greatest threat to society is government itself.

The constitutional contract charges the federal government with keeping peace among the States, ensuring uniformity in the rules of inter-State and international commerce, facing the world with a single foreign policy and a national armed force, and assuring the even-handed application of the Constitution and of constitutional laws. That is all.

The business of government is to protect the lawful pursuit and enjoyment of income and wealth, not to redistribute them.

Liberty is the right to make mistakes, to pay for them, and to profit by learning from them.

The most precious right is the right to be left alone.

Political Parlance

Constitution
Archaic document viewed by politicians on the left as an impediment to progress by judicial fiat.

Entitlement
Legislative term for handout.

Fiscal responsibility
Shibboleth of big-government liberals, whose version of a balanced budget requires higher taxes to pay for “social programs.” Formerly a New Deal ploy characterized as “tax and spend, spend and elect.”

Gridlock
Something we could use less of on Washington’s streets and more of in the Capitol building.

Liberal
Someone who wants the best of everything for everyone, at the expense of those who have achieved more than mediocrity.

People’s business, The
Something which, it seems, cannot be conducted without imposing more taxes and regulations upon the people.

Socialism
Foreign political movement founded on the principle of “to each according to his needs, from each according to his ability.” Thought to be defunct but thriving in the United States, thanks to “progressive” taxation, “protective” regulation, and myriad “social programs” at all levels of government.

Social Security
Welfare program disguised as pension plan. Robs otherwise hard-working individuals of the incentive and ability to invest wisely toward retirement.

Unfinished business
Whatever it is that Congress hasn’t done lately to impede the economy and trammel liberty.