Fix Detroit Overnight: Declare it a Free City
“Declare Detroit a free city tomorrow; it will become a beacon forthe rest of America – showing the path to liberty and prosperity.”
“Declare Detroit a free city tomorrow; it will become a beacon forthe rest of America – showing the path to liberty and prosperity.”
“There is no crying in Montana.”
“Welcome to Montana – Now go home.”
“Police have become like the military and the military like the police. This is disastrous for police, the military and the American people.”
“Private cameras photographed Tsarnevs. Private citizens identified them. A private citizen found Dzhokhar. Government failed Boston.”
“There was a pattern; these were not random acts of malevolence.”
“Government is a malevolent force in all matters both big and small.”
Government Failure at Every Level and in Every Branch
By: George Noga – July 15, 2013
Since I live in Seminole County, I couldn’t escape the media frenzy over the Trayvon Martin case. Mercifully, it ended this weekend but not before it became the poster child for government malfunction in all three branches and at each and every level from the City of Sanford all the way up to the the President of the United States of America.
The Sanford police initially investigated and concluded not to charge George Zimmerman with a crime – in hindsight clearly the correct decision. For this act of competence the Sanford police chief was unceremoniously sacked. Government failure at the city level – check!
“The media bought into a counterfactual fantasia.”
Then came the massive media paroxysm. The media bought into a counterfactual fantasia sans independent checking. The media malpractice, combined with outside agitators with prior agendas, caused Governor Scott to appoint a special prosecutor, Angela Corey. I feel certain that, whether implicit or explicit (wink, wink, nod, nod), Scott and Corey understood what was to happen. This was not Rick Scott’s finest hour. Government failure at the state level- check!
Dante has a special place reserved for Angela Corey. The fix was in from the outset. Corey skipped taking the case to a grand jury because she knew she couldn’t get an indictment. She then charged Zimmerman with a crime that couldn’t be proven, all for political expediency and correctness. Moreover, she and the prosecutorial team withheld evidence from the defense. She deserves severe sanctions for her lese majeste conduct. State level government failure – check!
Next congress got into the act. The Congressional Black Caucus insisted this should be a civil rights case and demanded the Justice Department (“DOJ”) open an investigation. Government failure at the federal legislative level – check! The DOJ then sent its “community affairs” team to Sanford to stir up the pot and foment trouble. They initiated a civil rights investigation which remains open today. Government failure at the federal executive level – check! Not to be outdone, Barack Obama gratuitously opined that if he had a son, he probably would look a lot like Trayvon Martin. Government failure at the highest level in the land – check!
“All levels and branches of government failed – city, state and federal as well as the executive, legislative and judicial branches.”
Nor does Judge Nelson come out of this smelling like a rose. It was apparent to any scient person the state could not prove second degree murder. Judge Nelson should have dismissed that charge – although that would have required a heavy dose of courage. No one from any government involved in the case qualified for a profile in courage; instead, they could fill many chapters in a book titled Profiles in Cowardice. Government failure at the judicial level – check! Note: The book Profiles in Courage was not written by John Kennedy even though he received the Pulitzer Prize; the real author was Ted Sorensen. How’s that for a profile in courage?
Government failure was massive and endemic throughout the Trayvon Martin debacle; indeed, it is difficult to find one instance of a government official who acted properly. There was failure at the city, state and federal levels as well as in the executive, legislative and judicial branches. This case should become the poster child for government run amok. As I point out time and again, government is inherently a malevolent force; this is just one more example.
The Declaration states: “He (King George) has forbidden his Governors to pass laws of immediate and pressing importance.” Obama has acted to prevent several states (Arizona) from enforcing laws to protect their citizens from imminent harm.
The Declaration reads: “He has suspended laws in their operation until his assent should be obtained.” Obama just suspended parts of the Patient Protection and Affordable Care Act – unilaterally. Obama also has vowed not to enforce parts of our immigration laws and, in fact, to take actions directly contrary to such laws.
Again the Declaration: “He has dissolved representative houses for opposing his invasions of the rights of the people.” His recess appointments while the Senate clearly was NOT in recess are tantamount to dissolving a representative house solely because he knew the house (Senate) would not assent. Subsequently, even though federal courts have ruled the ersatz recess appointments illegal, the appointees continue in office and to oppose the rights of the people. This final action goes even beyond any horrors promulgated by King George III.
The Declaration: “He has erected a multitude of new offices and sent hither swarms of officers to harass our people and to eat our their substance.” President Obama appointed a multitude of unaccountable czars. His administration directed the IRS to harass his political enemies. He is hiring tens of thousands more IRS agents to enforce his dysfunctional and hated health care law. His EPA, NLRB and HHS have run amok with countless, mind numbing and prolix regulations.
“We constantly are bumfuzzled by politicians acting illogically.”
This comes as no surprise but politicians are far more interested in winning the next election than in doing the right thing. Their desire to win elections far outstrips their duty to the country. Their personal incentives are grossly misaligned with the public interest.
Politics is extremely shortsighted, favoring debt financing over taxes; that explains why we have had deficits in 47 of the last 52 years. Politicians love to make unfunded promises such as unsustainable pensions and benefits. They want to provide immediate benefits while borrowing, hiding or deferring the costs as far into the future as possible.
Special interest groups and rent seekers (those who extract value from government without giving value in return – such as public sector unions) dominate the process. Politicians always favor highly concentrated and organized groups (that return the favor in various ways) at the public expense and contrary to the public interest. A great example is sugar subsidies where a few growers share nearly $1 billion a year in added profits while all 310 million of us Americans pay $30 too much for sugar each year.
There is a myth that central planning leads to good decisions. This ignores the real world preferences of real people, creates perverse incentives and disincentives and inevitably creates a myriad of unintended consequences. The real world is far more complex and dynamic than any central planner or computer model can ever simulate.
“Red light cameras are all about money – not safety.”
“Governments choose tax money over safety of motorists.”
By: George Noga – June 17, 2013
Our hearts go out to the victims of the building collapse in Bangladesh; they were hard workers striving simply to build a better future. The government building inspectors and all others who are complicit deserve severe punishment. However, it is crucial we learn the correct lessons from the workers’ terrible sacrifice. The media and their liberal camp followers have been quick to draw conclusions and to apportion blame; among the things they believe are:
Each and every one of the above beliefs is wrong; they are voodoo economics and the consequences of acting on these beliefs is highly destructive. The masses in Bangladesh already are living at bare subsistence; anything that increases the cost of employing them – be it higher wages or better conditions – comes at their expense and results in unemployment. The higher the price of anything, the less will be bought; this applies universally including in Bangladesh.
“Economic Liberty – not government intervention – creates wealth.”
Everyone desires higher wages and better working conditions for third-world workers. Ignoring the laws of economics (media and liberals) only worsens the situation. To actually bring about such results requires the maximum degree of economic freedom and the dead minimum of government and outside interference. We have seen time and time again – in Hong Kong, South Korea, India, and now China that within one generation workers are much better off. New factories open with more advanced equipment and competition for labor intensifies leading to higher wages. As wages rise, workers are willing to trade off for better conditions.
Globalization – Free Trade – Child Labor – Boycotts
Globalization and free trade benefit the poor in particular. To the chagrin of elitists, the poor grasp this viscerally; that’s why, inter alia, they embrace Wal-Mart. The greatest beneficiaries are those who live in poor countries (including Bangladesh) with whom we trade. Voluntary labor – yes including children – and even at low wages and less than ideal conditions – is not exploitative. Workers choose to work because it is better than what they had before and offers a path to a better life. This is how they work their way out of poverty.
Workers (including children) in Dickensian England were better off in the factories than the life they voluntarily left. It was the same in the United States where child labor was common until the early part of the twentieth century. My uncle began working in the coal mines at age six because young children with their small, lithe bodies could crawl into small places.
“Who do you trust to look out for children: government or parents?”
In England and the US, child labor had vanished well before the passage of child labor laws. As soon as humanly possible, parents remove their children from the labor force. It comes down to who do you trust to have the best interests of children at heart – their parents or government?
Boycotts are primarily the province of economically illiterate movie stars with too much time on their hands. Even if a boycott could be effective, the greatest harm would befall the displaced workers trying desperately to lift their families out of poverty. Low income Americans also are harmed by having to pay more for many products just to pander to the falsetto angst of Hollywood types who feel but do not think.
The media and liberals set up straw men, in this case greedy businessmen, and then rail against them. They don’t understand economics and they don’t know what they don’t know. They ignorantly call for boycotts that harm those they seek to help. Then, satisfied they have demonstrated their compassion and good intentions, they retreat back inside their plastic bubble where life is so much simpler than in the real world, where thinking rather than feeling counts.
By: George Noga – June 10, 2013
Having blogged extensively about the crisis of spending, debt and deficits, I am constantly alert for new perspectives to present the crisis in terms easier to understand. I have discovered one compelling new way to do this and it is presented herein.
First however, the media have widely reported the decline in the projected federal deficit which normally would be welcome news. Please note I referred to the projected deficit; the actual deficit continues its inexorable march to oblivion. The decline is due to two factors: (1) higher tax collections in late 2012 in advance of the Obama tax increases; and (2) payments from Fannie Mae. Both are one-time phenomena. So you may wonder, won’t the tax increases permanently shrink the deficit? If you believe thusly, you have forgotten Hauser’s Law which teaches tax rates may rise or fall, but the overall percent of revenue to GDP remains unchanged.
The Special Mathematics of a 100% Debt/GDP Ratio
Now for the fresh perspective. As the Debt/GDP ratio approaches 100%, some simple but gripping mathematics come into play. First, a few numbers. GDP now is $16 trillion and the public debt is $12 trillion (75% ratio). At the end of Obama’s term GDP will be $17 trillion, assuming a perhaps optimistic 2.0% compound growth rate. The public debt also will be right at $17 trillion based on continued annual structural deficits of just under $1 trillion combined with the frightening demographics and high annual compound growth of Medicare, Medicaid, Social Security and ObamaCare. Please note I use public debt and not total debt; this is because we must pay interest only on the public portion – a key distinction to bear in mind as you read on.
When the interest-bearing public debt equals GDP, the math gets interesting. Historically, the average maturity of US government debt is 5 years, while the average interest rate is 6%. When public debt equals GDP in 2016-2017, we can make the following observations.
“When debt and GDP are the same, the economy must grow at a rate equal to the composite rate on the debt to prevent a death spiral.”
First, the economy must grow at the same rate as the overall interest rate on government debt to keep from exploding interest costs and the deficit. If interest rates revert to the historic average of 6% while GDP grows at 2%, this will, ceteris paribus, result in a 4% larger deficit. At $17 trillion, the annual debt service (interest) will be over $1 trillion with 4%, or $680 billion, resulting from the gap between GDP growth and interest rates. Note: Interest now consumes less than 1% of GDP because of historically low interest rates – which will not last.
Second, if (miracle of miracles) the interest rate becomes equal to GDP growth, the entire benefits of the expansion of the US economy are offset by and consumed by higher debt service. To put it straight: the US economy never can grow net of interest. One can only imagine the impact of this on unemployment and every other measure of economic well being.
“If both GDP growth and interest rates were at their historic averages, there would be a differential of -2.7% , adding $400 billion a year to the deficit.”
Third, again using historic data, if the US economy grew at its average post WWII rate of 3.3% (phat chance) and also experienced its average interest rate of 6%, that would result in a differential of -2.7%, i.e. debt service would explode by nearly $400 billion more each year compounded. Even if economic growth was high at say 3+%, interest rates would be higher given the concomitant strong economy. Thus, even under such sanguine conditions, debt service would grow much faster than the economy resulting in a debt death spiral.
I hope the above perspective helps readers better understand why countries whose Debt/GDP ratios blow past 90% of their economies rarely, if ever, recover. These United States of America are headed toward a 100% Debt/GDP ratio by the end of the current presidential term. The only alternatives are: (1) massive spending cuts on the order of 30% which will wreck the social contract; (2) Draconian tax increases which will tank the economy further; (3) runaway inflation; (4) repudiation of the debt; and (5) a lost generation much like Greece is experiencing today. In fact, we are likely to experience several of the aforementioned perils. Avoiding widespread civil unrest and maintaining the rule of law will be no small feat.