Good News, Bad News for Free Speech

Many bloggers will like this rule being considered by the Federal Election Commission (via The Volokh Conspiracy):

No expenditure results where an individual, acting independently or as a volunteer, without receiving compensation, performs Internet activities using computer equipment and services that he or she personally owns for the purpose of influencing any Federal election, whether or not the individual’s activities are known to or coordinated with any candidate, authorized committee or party committee.

That’s the “good” news. The bad news it that such a rule might be required in the first place. Whatever happened to this quaint concept:

Congress shall make no law…abridging the freedom of speech…. [Amendment I, Constitution of the United States of America]

If it was good enough for little Jemmy Madison, it should be good enough for the intellectual pipsqueaks who now prowl the corridors of Congress.

Killing Free Speech in Order to Save It

UPDATED THRICE BELOW

We all know about McCain-Feingold. Now we have the slippery logic of Prof. Geoffrey R. Stone of the University of Chicago Law School. Stone is a colleague of Cass Sunstein, a fellow traveler on the road to thought control.

Stone is debating Eugene Volokh at Legal Affairs Debate Club, on the topic “Forget Free Speech?” Stone slides this immodest proposal into his rather slick “defense” of free speech:

I agree that private employers are different. Even in employment discrimination law, we recognize that it would be inappropriate for the law to intrude too deeply into personal relationships. Thus, small employers are exempt. Similarly, we don’t make it unlawful for a person to refuse to date a person of another race. Thus, the law shouldn’t concern itself with individuals who decide not to buy the Dixie Chicks’s records because they dislike their political views.

But the logic of this doesn’t extend to a decision, for example, by General Motors to refuse to employ people who oppose the war in Iraq. Large corporations have substantial market power, and I see no reason to allow them to leverage that market power in this way any more than we let them discriminate on the basis of religion….

To the point about using antidiscrimination laws to promote tolerance of people of other races, religious, and ethnicities, I would say the same about political differences. Isn’t that the view that Lee Bollinger championed as a primary function of the First Amendment itself? Certainly, a more “tolerant society,” a less polarized society, one in which citizens come to understand, in Jefferson’s words, that not “every difference of opinion is a difference of principle,” is something to which we should aspire. And, as for the Klansman, perhaps tolerating his presence in the workplace would be good both for him and for us. No?

So, let’s just take another big slice out of liberty and prosperity by placing yet another burden on the private sector, the burden of being an equal-viewpoint employer. Why should General Motors, regardless of its size, be required to operate under such constraints? General Motors ought to be able to hire persons whose performance will help the bottom line, and thus help society. If an employee says something that embarrasses General Motors and potentially hurts its bottom line, General Motors ought to be able to fire that person — no ifs, ands, or buts.

But in the world of Sunstein and Stone, we can — and must — legislate and regulate our way to a “tolerant society.” Hah! Notice how well it worked when forced busing was used to integrate schools?

Stone, slippery lawyer that he is, doesn’t give a hoot about Klansmen. What he really wants is to make it illegal for employers to fire anyone for saying anything that seems critical of government policy (Republican policy, in particular). When that’s done, he can take up the cudgels for the Dixie Chicks and go after radio stations that refuse to play their songs.

What Sunstein and Stone mean by “free speech” is “forced listening.” Reminds me of the brainwashing scene in the movie 1984. They’ll like the results as long as they get to play Big Brother.

UPDATE: Yep, Big Brother. Here’s Stone in a later installment of the debate:

Even if I concede arguendo that private discrimination on the basis of viewpoint need not be equated with private discrimination on the basis of race, religion, or gender, we have to be concerned about private discrimination that begins seriously to threaten the marketplace of ideas. The point isn’t that such private discrimination would be unconstitutional, but that the government should step in and prohibit such discrimination through legislation if it begins to warp public debate.

In other words, if I’m in control of government and I decide that “private discrimination on the basis of viewpoint” has threatened “the marketplace of ideas,” I should step in to prohibit such discrimination when, in my infallible judgment, it begins to “warp” public debate. I therefore decree the following:

An employer can’t fire anyone who makes a public statement critical of the employer.

A right-wing radio talk-show host who has a huge audience must give equal time to left-wing ideas.

What Stone and his ilk don’t seem to understand (or choose to ignore) is that government involvement (choosing sides) warps the public debate. For every employer who fires a critical employee and for every popular right-wing talk-show host there are legions of protestors and political opponents whose messages the mainstream media amplify, with gusto. That’s the marketplace of ideas in action. Or do Stone and his ilk favor the suppression of the mainstream media? I doubt it very much. They’re just looking for a pseudo-legal justification for the suppression of speech they don’t like.

What the marketplace of ideas needs is less government involvement, not more.

UPDATE II: Stone, in his most recent volley, adds this:

My argument does not meet any of the conditions for McCarthyism (unless you think I am being intentionally manipulative in order to score partisan political gain).

He said it.

UPDATE III: And Eugene Volokh nails him:

It does sound, though, like the definition of “McCarthyism” that’s being suggested is mighty convenient for its users….After all, under this definition exactly the same criticisms—with exactly the same level of substantive merit—would be “McCarthyism” when used by one side and quite proper when used by the other.

Cheney says that voting for Kerry would endanger the nation. That’s McCarthyism, because it comes from this bad administration. Nancy Pelosi says that voting for Bush would endanger the nation. That’s just fine, if you think Democrats are open-minded, unself-righteous (except, of course, when they’re harshly deriding the Bush Administration), attentive to separation of powers and the rule of law, interested in debate, and sophisticated and introspective, with complex views of faith and suitable appreciation for gray areas. Oh, and also respectful of international law and filibusters.

Such use of the term “McCarthyism,” which seems to presuppose what it’s trying to show—which is that one’s targets are bad people—isn’t terribly useful for sober analysis. Wouldn’t it have been more profitable to instead discuss, for instance, whether voting for Bush or Kerry would indeed endanger the nation? That was actually a pretty important question a few months ago.

As best I can tell, public debate about the Administration, the war, civil liberties, and the best ways to fight terrorism has been quite vibrant. If there’s a “substantial chilling effect on the willingness of individual citizens to criticize the government,” I haven’t noticed it. The 2004 Democratic election campaign, for instance, didn’t seem to be unduly obsequious to the Bush Administration. Nor do I see much evidence of “an exaggerated sense of fear in the public,” or even attempts to create such a fear. The world is a dangerous place and I have no reason to think that people are any more fearful of terrorism than they ought to be.

So I think free speech in America is pretty healthy. There are some exceptions; I have long, for instance, criticized hostile environment harassment law, a vague, broad, and viewpoint-based set of speech restrictions. Likewise, some media responses to supposedly unpatriotic speech have indeed been misplaced; Bill Maher, for example, got a bum deal. And, sure, many people in many places—government, universities, the media—are smug and closed-minded, and too often try to name-call people into submission. That ought to be fought. Still, things today are pretty good.

And tomorrow? No-one can tell for sure, but fortunately there are plenty of people and organizations who will fight future attempts at repression, whether from the left or from the right. Geof, I know you’ll be one of them, and I’m very glad about that.

In other words, if you really favor free speech, you favor it for everyone,* not just the lefties favored by Stone.
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* I make an exception for overtly traitorous speech, which I come to in a future post about legal absolutism.

Crime and Punishment

Crime, like charity, begins at home, and home is therefore the first line of defense against crime.

A second line of defense is necessary and — in these times — essential to the general welfare. That line of defense is justice, administered by the community through the state.

The linch-pin of justice is punishment by law. The operative word is “punishment” — not “correction” or rehabilitation.” Crime is not deterred or prevented by the promise of rehabilitation. (Who commits a crime in the hope or fear of being rehabilitated?)

Even though deterrence seems to work generally, it doesn’t always work. For sociopaths and psychopaths who are undeterred by the concept of punishment, the answer is punishment of a kind that will ensure that they can no longer do harm to others: life in prison or death at the hands of the state.

There are those who equate death at the hands of the state with murder. This is nonsense and sentimental clap-trap on a par with counseling unilateral disarmament or pacifism in the face of an invading horde. By such reasoning, we would not have (finally) risen to the task of removing Herr Hitler from the scene. How many sob-sisters (of whatever gender) would wish that we had stayed on the sidelines while Hitler applied the “final solution”?

Justice serves civilization and social solidarity. First, of course, it deters and prevents wrong-doing. Second, it meets the deep, common need for catharsis through vengeance, while protecting the innocent (and all of us) by replacing mob rule with due process of law.

Justice — to serve its purposes — must be swift, sure, and hard. That is, it must work and be seen to work, by the just and unjust alike.

Our Lives, Our Fortunes, and Our Sacred Honor

…certain unalienable Rights, that among these are Life(when it isn’t inconvenient to others), Liberty (in name only) and the pursuit of Happiness(through a maze of taxes, laws, and regulations).

Protecting Your Civil Liberties

Judge Won’t Order Schiavo Tube Reinserted

The ACLU, of course, applauds the decision:

Howard Simon, executive director of the American Civil Liberties Union (news – web sites) of Florida, praised the ruling: “What this judge did is protect the freedom of people to make their own end-of-life decisions without the intrusion of politicians.”

But Terri Schiavo didn’t make her own “end-of-life” decision. It’s her putative husband’s decision, not hers.

UPDATE: Timing is everything. Terri Schiavo suffered the heart attack that brought on her “persistent vegitative state” in 1990. She received “continuing neurological testing, and regular and aggressive speech/occupational therapy through 1994.” Why did Michael Schiavo wait until May 1998 before petitioning a court for the removal of his wife’s feeding tube?

And on what basis did Judge George W. Greer in February 2000 decide that Terri Schiavo would have chosen to have her feeding tube removed? He made a god-like decision to kill Terri Schiavo, pursuant to Michael Schiavo’s petition. His decision was predicated not on Terri Schiavo’s expressed wishes — which are undocumented — but on his view that Terri Schiavo cannot be healed.

A month later, as if to prove himself right, Judge Greer refused to allow “swallowing tests” on Terri Schiavo. Then, in April 2001, he refused to entertain testimony from a former girlfriend of Michael Schiavo that he had lied about Terri Schiavo’s wishes. Why? Because the testimony would have been “untimely.” Judge Greer had already made up his mind to kill Terri Schiavo, you see.

UPDATE II: Donald Sensing (One Hand Clapping) has a post about Judge Andrew Napolitano’s take on the case:

[Napolitano] said that the relevant transcripts, which he has examined, reveal that the Florida courts ruled that it was Terri’s actual desire, based on testimony by Michael Schiavo and others, all of whom were cross-examined, that she had legitimately expressed a desire not to be kept alive in the medical condition she came into….

Napolitano didn’t discuss the fact the Florida law allowed for acceptance in this case of hearsay testimony that Terri had expressed a desire not to be kept alive in her present condition.

Hearsay testimony. How convenient. The next steps down this slippery slope will go something like this:

1. A family will petition a court to end the life of an aged parent who is sentient but in declining health.

2. The family will produce as evidence for their petition a sociological study on a par with Kenneth Clark’s phony “doll test,” on which the Supreme Court relied in Brown v. Board of Education (1954). The study will “prove” that persons over the age of 80 have a death-wish.

3. A court will approve the petition.

4. The court’s decision will become a controlling precedent.

5. Say “goodnight,” Gracie.

FINAL UPDATE: Yankee from Mississippi, in a post titled “This Is All I’ll Say,” says it best:

I think that with the current structure of the law, there is no legitimate way to save [Terri Schiavo’s] life. And by legitimate, I mean any way that would not seriously call into question the competency and institutional credibility of our justice system. Whether or not this should be the law is, of course, an entirely different matter. Perhaps once everyone is done fighting for and over this poor woman, they will get down to actually solving the problem, one way or the other.

The way to solve the problem, in my opinion, is to enact a “presumption of life” amendment to the U.S. Constitution. That amendment would require documentary evidence of a person’s wish to die when the alternative is life on a feeding tube or respirator. The amendment would authorize Congress to specify, by law, a simple and legally binding testatmentary form that could be executed in the presence of impartial witnesses. A properly executed form would be uncontestable.

Metaphor of the Day…

…if not the century. Apropos the Schiavo case, especially “those who brim with passion not just for the state-approved quietus, but with fury for those who oppose it,” James Lileks concludes, “you never think you have need of any chocks until you’re in the truck, and you realize it’s rolling down the hill. Backwards.” Down a slippery slope.

UPDATE: Then, there’s this, from Mark Steyn:

In practice, a culture that thinks Terri Schiavo’s life…has no value winds up ascribing no value to life in general. Hence, the shrivelled fertility rates in Europe and in blue-state America: John Kerry won the 16 states with the lowest birth rates; George W Bush took 25 of the 26 states with the highest.

The 19th-century Shaker communities were forbidden from breeding and could increase their number only by conversion. The Euro-Canadian-Democratic Party welfare secularists seem to have chosen the same predicament voluntarily, and are likely to meet the same fate. The martyrdom culture of radical Islam is a literal dead end. But so is the slyer death culture of post-Christian radical narcissism. This is the political issue that will determine all the others: it’s the demography, stupid.

The Twisted Logic of Euthanasia

From NRO‘s K.J. Lopez:

‘Killing a defective infant is not morally equivalent to killing a person. Sometimes it is not wrong at all.”

Peter Singer, a bioethics professor at Princeton University, penned this chillingly cold line in his book “Practical Ethics.”

In case you’re not freezing yet: Singer explains that, “Newborn human babies have no sense of their own existence over time.” Hence, they’re disposable.

And when you’re asleep you have no sense of your own existence over time. Moral: Don’t fall asleep or Dr. Singer will have you euthanized.

Sick.

My Kind of Justice

UPDATED BELOW

An Iranian serial killer who murdered at least 20 children has been executed in front a large crowd of spectators. Eugene Volokh goes along with it. So do I. Coincidentally, a friend sent this today:

LOL, as they say.

UPDATE: Volokh recants. I don’t. He and his conscience, Mark Kleiman, simply assume that we’re stuck with the sorry state to which criminal justice has descended in this country. But that’s giving up on the game before it has started. It’s not possible to return to swift, certain, and harsh justice — that is, to justice that punishes and deters crime — without trying to do so.

Rousseau’s Daycare

That’s the title of an article which appears in Latin Mass (Winter 2005). The article isn’t on line, but here are some snippets:

Apparently, the frustration of the spoiled child who cannot assert himself in society resulted in the “alienation” that is at the heart of Marx’s theory and which concept was inherited from Rousseau.

It is undoubtedly a fear of personal responsibility, guided by the doctrine of modern secularism, that has helped build the modern daycare regime that caters to adults as well as their unfortunate offspring.

My own thoughts about Rousseau are here, here, here, here, and here.

Funding the Welfare State

Arnold Kling points to a debate between Tyler Cowen and Max Sawicky about the future of the welfare state, at WSJ Online. Tyler would have won the debate hands down if he had shown, as I have, that free markets — protected by strict enforcement of laws against force and fraud — would make almost everyone wealthier. So much wealthier that they could easily afford to buy off the few remaining free-loaders.

But reason and facts seem unlikely to prevail. Sawicky is probably right when he says “Social Security and Medicare spending will increase faster than GDP, requiring increases in taxes, and there is not a damn thing anyone can do about it.” Consider this headline: “Senate Passes Budget With Medicaid Intact.”

I fear that we’re faced with this:

Here’s the prospect: In the coming decades the productive sectors of the economy will be taxed another 15-20 percent of GDP for the support of the nonproductive sectors of the economy. That will bring the total bill for government to something like 60 percent of the output of the productive sectors of the economy (see this). Why will it happen? Because Congress is afraid to make the transition from unproductive transfer payments to productive investments.

Where will it end? The United States will become a third-rate economic power, burdened by a massive welfare state and tied in knots by social and economic regulations. We are on The Road to Serfdom — no doubt about it — unless Congress takes my advice.

The Social Welfare Function

Arnold Kling asks:

Does the usefulness of the concept of a social welfare function stand or fall on its mathematical properties?

And I answer:

The concept of a “social welfare function” (with or without mathematical properties) is meaningless. You can write equations until kingdom come, but no equation you write can make commensurate the happiness or unhappiness of individuals.

Consider the case in which a nation (call it US) is formed in order to defend its citizens from outside attack by an enemy nation (call it AQ). (That’s the main reason the United States was formed, strange as it may now seem.) Assuming that the citizens of US are unanimous in their opposition to AQ, and unanimous in their support of measures taken to deter AQ, each of them will be happier if their unified support actually deters an attack by AQ. But AQ will be unhappy (or less happy) because it can’t attack US with impunity. The happiness of US (even if it could be expressed mathematically), isn’t offset by the unhappiness of AQ (even if it could be expressed mathematically). In fact, US’s happiness is increased by AQ’s unhappiness, even though neither can be quantified.

Suppose, however, that a faction of US citizens (call it LW) is unhappy because of certain actions being taken to prevent an attack by AQ. The actions that make LW unhappy don’t make me unhappy. In fact, they add to my happiness because I despise LW; anything that makes LW unhappy makes me happier. Thus, I’ll continue to be happy, despite LW’s unhappiness, unless and until (a) LW’s unhappiness leads to a political decision to stop defending US against AQ or (b) AQ attacks US successfully.

I could go on, but I think you get the idea. My happiness (or unhappiness) is mine, and yours is yours. The best we can say is that voluntary exchange in free markets, protected by strict enforcement of laws against force and fraud, would make almost everyone happier — and wealthier. So much wealthier that there’d be plenty of money with which to buy off the free-loaders. But that’s another story.

(See also this post.)

The Destruction of Income and Wealth

PRACTICAL LIBERTARIANISM FOR AMERICANS

ADDENDUM TO PART V:
THE DESTRUCTION OF INCOME AND WEALTH BY THE STATE
(Links to previous entries in this series are at the end of this post.)

The Destruction of Income

I wrote in Part V about the loss of income that has resulted from the intrusions of the regulatory-welfare state into America’s economy.

Real (inflation-adjusted) GDP began to rise sharply after the Civil War, thanks mainly to the Second Industrial Revolution. Despite the occasional slump — which the economy worked its way out of, thank you — things continued to go well until about 1906. Then the trajectory of GDP growth fell suddenly, sharply, and (it seems) permanently. The Panic of 1907 coincided with, but did not cause, the deceleration of America’s economy.

Data on real GDP for 1870-2003 are from Louis Johnston and Samuel H. Williamson, “The Annual Real and Nominal GDP for the United States, 1789 – Present.” Economic History Services, March 2004, URL: http://www.eh.net/hmit/gdp/. Real GDP for 2004 estimated by deflating nominal 2004 GDP (source at footnote a) by increase in CPI between 2000 and 2004 (from Bureau of Labor Statistics).

The stock market — an accurate, if volatile, indicator of the nation’s economic health — corroborates my judgment about the downward shift in economic growth. After 1906 the S&P 500 (as reconstructed back to 1870) dropped to a new trendline that has a shallower slope and an intercept that is 48 percent lower than that of the trendline for 1870-1906.

Real S&P price index constructed from annual closing prices of the S&P 500 Composite Index (series “S&P 500® Composite Price Index (w/GFD extension)”), available at Global Financial Data, Inc., and the GDP deflator (see notes for previous chart).

What happened around 1906? First, the regulatory state began to encroach on American industry with the passage of the Food and Drug Act and the vindictive application of the Sherman Antitrust Act, beginning with Standard Oil (the Microsoft of its day). There followed the ratification of the Sixteenth Amendment (enabling the federal government to tax incomes); the passage of the Clayton Antitrust Act (a more draconian version of the Sherman Act, which also set the stage for unionism); World War I (a high-taxing, big-spending, economic-control operation that whet the appetite of future New Dealers); a respite (the boom of the 1920s, which was owed to the Harding-Coolidge laissez-faire policy toward the economy); and the Great Depression and World War II (truly tragic events that imbued in the nation a false belief in the efficacy of the big-spending, high-taxing, regulating, welfare state).

The stock-market debacle of 1916-20 was as bad as the crash of 1929-33 (see second chart above), and the ensuing recession of 1920-21 was “sharp and deep,” as the unemployment rate rose to 12 percent in 1921. But Americans and American politicians didn’t panic and scramble to “fix” the economy by adopting one perverse scheme after another. Thus prosperity ensued.

But less than 10 years later — at the onset of the Great Depression — Americans and American politicians lost their bearings and joined Germany, Italy, and Russia on the road to serfdom. Most Americans still believe that government intervention brought us out of the Depression. That bit of shopworn conventional wisdom has been debunked thoroughly by Jim Powell, in FDR’s Folly: How Roosevelt and His New Deal Prolonged the Great Depression, and Murray N. Rothbard, in America’s Great Depression. The bottom line of FDR’s Folly is stark:

The Great Depression was a government failure, brought on principally by Federal Reserve policies that abruptly cut the money supply; unit banking laws that made thousands of banks more vulnerable to failure; Hoover’s tariff’s, which throttled trade; Hoover’s taxes, which took unprecedented amounts of money out of people’s pockets at the worst possible time; and Hoover’s other policies, which made it more difficult for the economy to recover. High unemployment lasted as long as it did because of all the New Deal policies that took more money out of people’s pockets, disrupted the money supply, restricted production, harassed employers, destroyed jobs, discouraged investment, and subverted economic liberty needed for sustained business recovery [p. 167].

All we got out of the New Deal was an addiction to government intervention, as people were taught to fear the free market and to believe, perversely, that government intervention led to economic salvation. The inculcation of those attitudes set the stage for the vast regulatory-welfare state that has arisen in the United States since World War II. (See footnote c.)

You know the rest of the story: Spend, tax, redistribute, regulate, elect, spend, tax, redistribute, regulate, elect, ad infinitum. We became locked into the welfare state in the 1970s (see the chart at footnote a), and the regulatory burden on Americans is huge and growing. The payoff:

Real GDP (in year 2000 dollars) was about $10.7 trillion in 2004.

If government had grown no more meddlesome after 1906, real GDP might have been $18.7 trillion (see first chart above).

That is, real GDP per American would have been about $63,000 (in year 2000 dollars) instead of $36,000.

That’s a deadweight loss to the average American of more than 40 percent of the income he or she might have enjoyed, absent the regulatory-welfare state.

That loss is in addition to the 40-50 percent of current output which government drains from the productive sectors of the economy.

And that is the price of privilege — of ceding liberty piecemeal in the mistaken belief that helping this interest group or imposing that regulation will do little harm to the general welfare, and might even increase it.

The Destruction of Wealth

The destruction of income necessarily results in the destruction of wealth; income not received cannot be saved and invested.

How much wealth has been forgone because of the vast amounts of income that have been destroyed in the past 100 years? I can’t hazard a guess. But by drawing on the data presented in the charts above I can estimate how much higher stock prices would be today if government were no more intrusive than it had been a century ago. Consider this chart of the relationship between GDP and the S&P index (data for 1870-1906 are plotted in green, data for 1907-2004 are plotted in red):

As I noted above, GDP in 2004 might have been $18.7 trillion if government had grown no more intrusive after the early 1900s. Taking that level of GDP and using the relationship between GDP and the S&P for 1870-1906 (shown in green), the S&P price index for 2004 would have been 30.8 (with 1870 = 1). The actual S&P price index for 2004 stood at 20.4.* In other words, the stocks of corporations in the S&P 500 are currently undervalued by one-third because of the depradations of the regulatory-welfare state, which have lowered investors’ expectations for future earnings.** The effect of those lowered expectations is shown in the difference between the green (1870-1906) and red (1907-2004) trendlines.

And that’s only the portion of wealth that’s represented in the S&P 500. Think of all the other forms in which wealth is stored: stocks not included in the S&P 500, corporate bonds, mortgages, home equity, and so on.

If government had left its grubby hands off the economy, there never would have been a Great Depression, Social Security, Medicare, Medicaid, and the myriad regulations that have us tied in knots.
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* The index for 2004 is significantly out of line with the trendline for 1907-2004, which suggests that there is still some air in the stock market bubble. Or it could be that the market is anticipating the expected growth surge I wrote about toward the end of Part V — a surge that may not take place if environmental hysteria prevails and Social Security taxes are raised.

** As Jeremy Siegel, author of Stocks for the Long Run, explains in a piece at the Library of Economics and Liberty:

The price of a share of stock, like that of any other financial asset, equals the present value of the expected stream of future cash payments to the owner. The cash payments available to a shareholder are uncertain and subject to the earnings of the firm….

[T]he price of a stock can rise even if the firm does not pay a dividend and never intends to do so. If and when the assets of these firms are sold or liquidated, a cash distribution will be made and shareholders will realize a capital gain. Some firms pursue this policy to enable their shareholders to realize lower taxes, since taxes on capital gains are deferred and often paid at a lower rate.

LINKS TO PREVIOUS ENTRIES IN THIS SERIES

I. Introduction

II. Terminology

Addendum to Part II: Notes on the State of Liberty in American Law

III. The origin and essence of rights

IV. Liberty and its prerequisites

Addendum to Part IV: More Hayek

V. The economic consequences of liberty

Get Ready for Higher Social Security Taxes and Slower Economic Growth

From “Beltway Buzz” at National Review Online:

Senate Splits On Early Social Security Vote

The Senate voted 50-50 yesterday on a nonbinding measure declaring Congress should reject a Social Security reform plan that requires “deep benefit cuts or a massive increase in debt.”

Five Republicans voted with all 44 Democrats and one independent.

The Senate also voted 100-0 to declare strengthening Social Security is a “national priority.”

There’s a lot of political posturing in those votes, of course, but they point to this outcome: Congress will not go along with any sort of privatization scheme. Congress will instead vote to raise Social Security taxes so that it can avoid “deep benefit cuts or a massive increase in debt.”

Precisely how will Congress raise Social Security taxes? Most likely it will raise the salary cap, in order to collect more taxes from the “rich” who make more than $90,000 a year. The predictable result: Money will be diverted from private purchases of stocks and bonds, which finance growth-producing capital investments, and directed to the elderly, who will apply it toward the consumption of non-producing goods and services.* That will impede economic growth and make it even harder to fund “promised” Social Security benefits, which will trigger further increases in Social Security taxes, etc., etc., etc.

I weep.

UPDATE: But perhaps I should dry my tears of rage and frustration:
Numbers You Don’t See Everyday

Rasmussen Reports, who were very accurate in their 2004 presidential election prediction, have some contrarian numbers on Social Security.

In their poll of 2,000 adults, Rasmussen finds that only 28 percent prefer doing nothing about Social Security, while 60 percent favor change.

38 percent favor personal retirement accounts, while 46 percent are opposed. A percentage large enough to lift either side above 50 percent remains undecided.

When asked if they prefer personal accounts or “no change”, 45 to 37 percent favor personal accounts.

Finally, 51 to 27 percent favor personal accounts with no benefit changes to those over 55.

Thanks, again, to “Beltway Buzz.”
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* Alex Tabarrok of Marginal Revolution, writes about Public Finance and Public Policy, a new textbook by Jonathan Gruber. According to Tabarrok, one of Gruber’s findings is that “Social security crowds out about 35 cents of private savings for every social security dollar.”

Liberty, Democracy, and Voting Rights

I wrote recently that

we have come to [the regulatory-welfare] state because public opinion, elite opinion, and the media have combined to undo the great work of the Framers, whose Constitution prevented tyranny by the majority. Unchecked democracy has become the enemy of liberty and, therefore, of material progress. As Michael Munger says, “The real key to freedom is to secure people from tyranny by the majority, or freedom from democracy.”

The last best hope for liberty and prosperity lies in the neutralization of public opinion through a renewal of constitutional principles.

A post at the now-defunct Blogger News Network caused me to leave this comment (edited lightly):

Restrict voting to persons aged 30 or older whose adjusted gross income in the preceding year was no less than one standard deviation below the mean for all filers of Form 1040 (or one of its variants). A registrant must be able to pass two tests: (1) a standardized literacy test at a level of comprehension equivalent to that of the average graduate of a suburban high school in the Midwest, circa 1955; and (2) a test of constitutional literacy, consisting of 25 multiple-choice questions on such topics as the functions of the three branches of the federal government, the rights reserved to States and people, and enumerated powers.

In other words, voters ought to have a real stake in the outcome, a modicum of intelligence, and an understanding of the proper role of government. Our drift away from those three principles that has brought us to the point where democracy — as it’s practiced in the United States — is the enemy of liberty.

An Unreconstructed Stalinist Mangles History

Eric (The Red) Hobsbawm of the Guardian Unlimited, writes about “The last of the utopian projects,” subtitled “Perestroika plunged Russia into social ruin – and the world into an unprecedented superpower bid for global domination.”

Unprecedented? Lest we forget, there were the Greeks, the Romans, the Huns, the Portuguese, the Spanish, the English, the Axis, and the Russians — to name several aspiring dominators of the globe (or those portions of it worth dominating) that come immediately to mind.

But Hobsbawm will leap into any rhetorical chasm for the sake of celebrating communism and denigrating the United States. He betrays himself at the outset of his fatuous flapdoodle when he says this:

I have a lasting admiration for Mikhail Gorbachev. It is an admiration shared by all who know that, but for his initiatives, the world might still be living under the shadow of the catastrophe of a nuclear war….

Poppycock! We’re not “living under the shadow of the catastrophe of a nuclear war” because Reagan stared down Gorbachev.

But what do you expect from an old Stalinist?

Analysis Paralysis

During the late presidential campaign I observed of John Kerry:

The difference between Kerry and Bush isn’t experience, it’s temperament. I worked for a Kerry-like CEO — always asking questions, probing answers, asking more questions, ad infinitum. He always postponed decisions as long as possible, not because he lacked the facts but because he had confused himself with the facts. He sought facts for their own sake, not because they would help him plot the best path toward a specific goal. He was almost purely inductive, hoping to find his principles in a morass of information.

That’s how Kerry, with his limitless flip-flopping, has struck me — a man without principles who hopes to discover them in the next piece of information that he receives….

To change metaphors: You don’t advance the ball down the field by counting the laces on it. You advance the ball down the field by knowing where the goal is and then choosing the plays that will help you reach it. Kerry knows how many laces there are. Bush figures out where to throw the ball, and all Kerry knows how to do is carp like an armchair quarterback when some of the passes aren’t caught.

I was reminded of that passage by this one, from an essay by Larry McMurtry:

A compulsion to over-informedness is most apt to occur in individuals who have been arrested at a graduate school level of development; it is an intellectual infirmity, rather than a sign of health, and is so common now that it perhaps deserves to be elevated to the status of a syndrome: the Star-Pupil syndrome. If the desire to shine as a pupil is sustained too long it can cause even the most committed worker to work badly. [Film Flam: Essays on Hollywood, “Movie Tripping: My Own Rotten Film Festival,” p. 204.]

That is why, in my experience, persons who have acquired a Ph.D. — or who lack one but work in a “learned institution” — tend to count the laces on the football instead of trying to advance it down the field.

Shakespeare said it best, in Hamlet (Act III, Scene 1):

And thus the native hue of resolution
Is sicklied o’er with the pale cast of thought,
And enterprises of great pith and moment
With this regard their currents turn awry,
And lose the name of action.

Bankruptcy Reform Update

I’ve updated an earlier post about the bankruptcy-reform bill that’s making its way through Congress. An e-mail from a reader prompted the update.

Oops. I remembered a point I meant to make in the first update, so now there’s a second update.

And a third one.

A Quasi-Jacksonian Solution

UPDATED BELOW

This:

The Pentagon is seeking to enlist help from the State Department and other agencies in a plan to cut by more than half the population at its detention facility in Guantánamo Bay, Cuba, in part by transferring hundreds of suspected terrorists to prisons in Saudi Arabia, Afghanistan and Yemen, according to senior administration officials….

The White House first embraced using Guantánamo as a holding place for terrorism suspects taken in Afghanistan, in part because the base was seen as beyond the jurisdiction of United States law. But recent court rulings have held that prisoners there may challenge their detentions in federal court.

Indeed, the Pentagon has halted, for the last six months, the flow of new terrorism suspects into the prison, Defense Department officials said. In January, a senior American official said in an interview that most prisoners at Guantánamo no longer had any intelligence value and were not being regularly interrogated.

The proposed transfers would represent a major acceleration of Pentagon efforts that have transferred 65 prisoners from Guantánamo to foreign countries.

Reminds me of this:

On March 3, 1832, Chief Justice Marshall handed down the unanimous opinion of the Court. The Cherokee Nation was sovereign. Georgia law no longer applied to the Cherokee. Justice Story wrote “The Court has done its duty. Now let the Nation do theirs.” At some point, Andrew Jackson supposedly said “Marshall made the ruling, let him enforce it.”

It seems that the White House has taken my advice, after a fashion.

UPDATE:

Judges are still getting into the act:

A federal judge on Saturday prohibited the government from transferring 13 Yemeni prisoners from the military’s detention facility at Guantánamo Bay, Cuba, until a hearing could be held on their lawyers’ fear that they might face torture if sent to another country.

With results like this:

Authorities have begun legal action against two Frenchmen for alleged terrorist-related activity following their release from the U.S. military prison at Guantanamo Bay, Cuba, judicial officials said Saturday.

Ugh! Is Right

I’ve written several times about the slippery slope of involuntary euthanasia and similar atrocities, but my hat’s off to the Hobbesian Conservative, who hits one out of the park in a post titled “Ugh!” Go read.

The Bankruptcy Bill in Perspective

UPDATED THRICE, BELOW

The bankruptcy-reform bill, as described in an article by Stephen Laboton of The New York Times:

The Senate assured final passage of the first major overhaul of the nation’s bankruptcy laws in 27 years on Tuesday….

The bill would disqualify many families from taking advantage of the more generous provisions of the current bankruptcy code that permit them to extinguish their debts for a “fresh start.” It would also impose significant new costs on those seeking bankruptcy protection and give lenders and businesses new legal tools for recovering debts.

…The senators…voted 69 to 31 to limit debate and cut off any effort to kill the legislation by filibuster.

Final passage of the measure is now an inevitable formality.

Good.

Of course, there’s the usual hand-wringing from the usual sources:

“This bankruptcy bill is mean-spirited and unfair,” said Senator Edward M. Kennedy, Democrat of Massachusetts. “In anything like its present form, it should and will be an embarrassment to anyone who votes for it. It’s a bonanza for the credit card companies, which made $30 billion in profits last year, and a nightmare for the poorest of the poor and the weakest of the weak.”

Hmmm….In other words, it’s okay for some people to rack up credit-card debt and then dishonor their obligation to repay that debt. (Think of it as a financial Chappaquiddick.) The result, of course, is that other people wind up subsidizing the deadbeats through higher prices and interest rates.

And how does Teddy K. know how much profit credit-card companies ought to make? The market should determine that, not Senator Stumblebum. If the profits of credit-card companies are “too high” it’s only because banking regulations restrict competition. But Teddy and his ilk never saw a regulation they didn’t like. Teddy has himself to blame for those “high” profits that he finds so offensive.

The bottom line: Bankruptcy reform will make goods, services, and credit somewhat cheaper for responsible citizens. And it will make responsible citizens out of many who otherwise would have racked up too much debt, knowing there was an easy way out it. Seems like a win-win situation to me.

UPDATE: And if you think otherwise, you’re just another addict of the regulatory-welfare state. As I have written:

Unless Americans become aware of the extremely high and largely hidden cost of the regulatory-welfare state, they will remain addicted to it. For reliance on government is an addictive drug — and a very expensive one. We swallow each dose in the hope that it will make us secure, and when that dose doesn’t make us secure we swallow another dose, in the hope that that dose will make us secure. And on and on. In the end, we are left with nothing but a costly addiction to government that impairs our liberty therefore ruins our economic health.

What Americans have failed to understand, is that there is less risk of coming to harm in a free-market economy — where individuals have an incentive to take care of themselves — than there is of coming to harm in the regulatory-welfare state. (See my series of posts on “Fear of the Free Market,” in three parts; my post on “Free Market Healthcare“; and my post on “Why Class Warfare Is Bad for Everyone.”) Free people do not stay mired in poverty and tend not to repeat their mistakes, if they are allowed to learn from those mistakes. (See my posts about income inequality.)

The price of addiction (from the same post):

Real GDP (in year 2000 dollars) was about $10.7 trillion in 2004.

If government had grown no more meddlesome after 1906, real GDP might have been $18.7 trillion (see first chart above).

That is, real GDP per American would have been about $63,000 (in year 2000 dollars) instead of $36,000.

That’s a deadweight loss to the average American of more than 40 percent of the income he or she might have enjoyed, absent the regulatory-welfare state.

That loss is in addition to the 40-50 percent of current output which government drains from the productive sectors of the economy.

And that is the price of privilege — of ceding liberty piecemeal in the mistaken belief that helping this interest group or imposing that regulation will do little harm to the general welfare, and might even increase it.

Those who favor the regulatory-welfare state — in any of its manifestations — effectively favor the ill fortune of all their fellow citizens. That is either grossly immoral, grossly ignorant, or grossly stupid — take your pick.

UPDATE II: Those who believe the canard that medical bills are a major cause of bankruptcy should read this post by Gail Heriot at The Right Coast, and follow the links. Even if medical bills were a major cause of bankruptcy (which they’re not), the cause of high medical costs in the United States is an artifact of the regulatory-welfare state:

High demand is fuelled by taxpayer-subsidized healthcare facilities, laws mandating access to emergency rooms, and government “insurance” programs (e.g., Medicare and Medicaid). “Free” care and subsidized premiums discourage self-rationing.

High demand is further fuelled by tax laws that encourage employers to offer subsidized health-insurance plans, many of which must render certain legally mandated benefits. Self-rationing is discouraged by the low premiums and co-payments that result from employer subsidies.

On the supply side, there’s restrictive licensing (favored by the various “unions”: doctors, hospitals, etc.) and slow FDA approval of new drugs.

Artificially high demand plus artificially low supply equals higher healthcare costs for all, including those persons who actually need healthcare.

The solution to the minuscule problem of bankruptcies caused by medical bills — and to the real problem of high medical costs — isn’t laxer bankruptcy laws, it’s less government interference in health care.

UPDATE III: The inestimable David Broder, reliable purveyor of leftish conventional wisdom, doesn’t like the bill (my comments bolded in brackets):

This “reform,” which parades as an effort to stop folks from spending lavishly on themselves and then stiffing their creditors by filing for bankruptcy protection, is a perfect illustration of how the political money system tilts the law against average Americans….[It is an effort to discourage deadbeat-itis, whatever else it may be. You can’t take that away, David. As for the “political money system,” money always talks; the answer to “money in politics” isn’t the impossible dream of less money, it’s less government power.]

Few policy battles draw enough public and press interest for the legislators to feel real scrutiny — Social Security being a current example. Most are in a netherworld, where media coverage is cursory and interest groups’ pressure determines the outcome. That’s how bankruptcy reform made it through the Senate, and why it will soon pass the House and be signed into law by President Bush. [Oh, do you really think so? Smacks of sour grapes to me. Lots of things get passed by Congress without a lot of media coverage. You win some, you lose some.]

The recent decade’s rise in the number of bankruptcy cases has been dramatic, and it is not difficult to find cases of abuse. But most bankruptcy petitions are filed by people with real financial problems, often the result of family illness, divorce or loss of jobs. [But “they hired the money,” as Silent Cal used to say. Personal responsibility implies prudent planning.] This bill will make it harder for everyone — chiselers and innocent victims alike — to get a clean start on their future without the overhang of mounting interest payments on unpaid credit cards and other debt…[As I said above: good. There’ll be one less moral hazard on the golf course of life.]

[W]hen an amendment was offered to restrict so-called “asset protection trusts,” used by wealthy individuals to shelter their portfolios from creditors, it was rejected. Five states — Alaska, Delaware, Nevada, Rhode Island and Utah — have changed their laws to let people who live anywhere in the country establish trusts of unlimited size that cannot be reached by federal bankruptcy proceedings. The amendment would have limited this “millionaires’ loophole” to $125,000.

But Sen. Charles Grassley of Iowa, the bill’s chief sponsor, intent on blocking any amendment that might prove indigestible in the House, said, “This is an issue that just needs more time for us to determine whether there is an abuse that needs to be corrected.” With no more debate, it was rejected.

These amendments came from the liberal camp — senators such as Edward Kennedy, Russ Feingold, Richard Durbin and Charles Schumer — and were easily dismissed by the Republican majority. Even more instructive was what happened when a conservative, Republican Sen. John Cornyn of Texas, tried to put a little balance into the bill.

As attorney general of Texas, Cornyn said the Enron bankruptcy case “opened my eyes to a very real abuse in the current bankruptcy system,” the loophole that allows corporations to go “judge-shopping” for jurisdictions with permissive standards. Enron, which had 7,500 employees in Houston, filed for bankruptcy in New York, where it had 57 workers, because New York, along with Delaware, is known as being lenient on big business.

Congress recently passed a law restricting plaintiffs in class-action suits from judge-shopping in the state courts, and Cornyn argued that it should also require corporate bankruptcy cases to be filed in their principal place of business. Citing cases of Polaroid, K-Mart, WorldCom and Enron, he said the judge-shopping loophole “serves to unfairly enable corporate debtors to evade their financial commitments.”

No one rose to dispute Cornyn. So what happened? He withdrew the amendment, without a vote, “out of respect to the managers of this bill who say that amendments to this bill would endanger its ultimate passage.” [I agree that no one should get a special break when it comes to honoring debt. Absolutely, no question. But let’s take half a loaf rather than none. The present version of bankruptcy reform may not be perfect, but it’s a step in the right direction. The alternative of no reform is worse, unless you’re a class-baiting liberal like Broder.]

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