Free Markets, Free People

Dale Franks

Dale Franks’ QandO posts

California’s Amazon tax has been successful…

…In encouraging Internet entrepreneurs to leave California. Who saw that coming? Besides, you know, everyone outside of Sacramento.

Last month, news broke of one California-based online entrepreneur who had decided to ditch California and move to Nevada in the aftermath of Gov. Jerry Brown signing the law.  ”I always figured that in California, home to Silicon Valley and a million tech startups, they’d never pass a law like this,” said Nick Loper, who formerly operated ShoesRUs and has now opened a new venture, ShoeSniper.

Per the piece in which Loper is quoted, more than 70 affiliates had at that stage already left California, according to online businesses.

Then, last Thursday, another online entrepreneur, Erica Douglass, posted a mock “It’s Over” letter to California on her blog. Douglass, who sold an internet company she had built for $1.1 million in 2007 when she was just 26, cited multiple reasons for moving to Austin.  Among them were unnecessary paperwork requirements mandated by the state, and high taxes as well as business fees.  However, the straw that broke the camel’s back, was according to Portfolio, Brown signing the Amazon Tax into law.

Apparently, the thinking was that Amazon would never halt its California affiliate program—though they’ve done so in every state that’s passed a similar law—and, Lord, the money, it would start rolling in! And even if Amazon did close down the California affiliate programs, why, the affiliates would simply switch to other affiliate programs, and the state would still get it’s money. It was a win-win for everyone.

Well, Sacramento was right about one thing: The affiliates are switching. To other states.

To be fair, it was slightly more realistic than Sacramento’s other plan, which was that flying unicorns would swoop in to sprinkle magic pixie dust on the state’s economy. Sadly, that plan was tabled in the Assembly’s budget committee. At least if they’d gone with that, I’d still be able to make a little spending money off Amazon.

Is it just me, or is the Tree of Liberty looking a little…parched?

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Dale Franks
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And after that, let’s raise the minimum wage to $100/hr

It’s true that to be a progressive, one has to have the ability to believe nine impossible things before breakfast. But, surely even progressives have some limits to credulity. I’d like to think so, but then I see something like this, that even the barely literate should recognize as foolishness.

President Obama has lately been pushing a number of policies that he says will create jobs, including extending unemployment benefits. This is puzzling, since new benefits obviously will not create jobs for unemployed people, who after all are the ones who need work. But White House Press Secretary Jay Carney explained Thursday that paying out unemployment checks “is one of the most direct ways to infuse money directly into the economy because people who are unemployed and obviously aren’t running a paycheck are going to spend the money that they get. They’re not going to save it, they’re going to spend it.” True, they probably will spend the money, on their mortgages, on food, and other necessary expenses. But Mr. Carney attributed miraculous qualities to these government handouts, saying “every place that, that money is spent has added business and that creates growth and income for businesses that leads them to decisions about jobs, more hiring.”

Of course, unemployment benefits do none of those things.

Quite apart from anything else, unemployment benefits are usually far less than than, say, an actual paycheck from an actual job. The very best that might be said about unemployment benefits is that they cause job losses overall to be slightly less severe than they might otherwise be, as the distribution of said benefits ameliorates the chain reaction of job losses as unemployed workers receive some money, rather than no money at all. And, of course, it prevents the jobless from going completely under financially.

But to believe Mr. Carney, one must believe that larger numbers of people receiving and spending substantially less money creates more economic growth. This is magical thinking. If it were true, the obvious solution would be to completely shut down the productive economy, and provide every inhabitant with a government dole check. No doubt economic growth would explode if Mr. Carney were correct, although who would then be available to fill the millions of new jobs is quite beyond me.

Further, it could be argued that for low-skilled—hence, low-income—workers, extended unemployment benefits are a positive disincentive to get a job at all. After all, why work 30 hours a week delivering pizzas, if, in return for an abundance of leisure time, you can simply cash a government check every week? And, perhaps, do a little work under the table to help get by.

It also ignores the reality of where the money for these government benefits is actually coming from. It either has to be extracted from the productive economy in the form of taxes or it has to be borrowed. If it’s the former, it means less money is available in the private sector to, say, invest and create jobs. If the latter, then it adds more debt to the economy, which may not be the most practical solution if the problem is too much government debt in the first place, crowding out private investment and hindering growth.

Seriously, at what point does even the sheep-like herd of White House correspondents rise from their supine positions and tell Mr. Carney that some arguments are too stupid to be presented to their readers with a straight face?

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Dale Franks
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I, for one, welcome our new alien overlords

Paul Krugman was on CNN yesterday, as a guest on “Fareed Zakaria GPS”. I’m glad of it, because he provided us with this gem:

If we discovered that, you know, space aliens were planning to attack and we needed a massive buildup to counter the space alien threat and really inflation and budget deficits took secondary place to that, this slump would be over in 18 months. And then if we discovered, oops, we made a mistake, there aren’t any aliens, we’d be better–

I guess since the Nazis and Imperial Japan are no longer with us, an alien attack threat is all he’s got left. In one sense, he’s right. If aliens were coming to attack us, we’d do whatever we had to do, and damn the expense. Of course, the aliens, assuming they were really interested in killing us all off, would probably stop close to the asteroid belt and drop bolides on us until we said "uncle". Or were extinct. Which would solve our financial problems.

Here’s the thing about military spending. we consider a lot of military spending to be on durable goods.  We count it that way as part of GDP. But these goods are NOT durable goods.  They are consumables. We build them with the expectation that they will be quickly, and violently consumed in combat. And outside of combat, they generally have no useful role in society.

But let’s assume he’s right. We have a massive space armaments buildup, everyone goes back to work, and we borrow another $14 trillion to do it. Great. 18 months later, everybody is working in the armaments factories, thousands of "space fighters" and orbital x-ray lasers are buzzing around in near earth orbit, command bunkers are built deep in the earth’s crust…woo hoo! The economy is booming again.

Then we find the threat has been mistaken.  There aren’t any aliens coming to attack us. Are we really better off? I mean, we’ve been better off for a couple of years, while we were preparing for the aliens, and everybody was working. But what happens now?

Now we have a huge stockpile of useless military equipment that we have to destroy, or borrow more money to maintain. Demand for plasma cannon and shield generators disappears. The armaments factories close down, and those jobs are gone forever. We have rung up a $30 trillion debt to purchase a massive amount of goods that have no constructive purpose, and generate no wealth. And what wealth we did have is now sunk into space weaponry we can’t use for…well…anything. What we can use, we have a glut of, and have to either destroy or surplus out.

So, where do all the jobs go now? How are we better off? All the alien-fighting military and civilian jobs evaporate, our national wealth has been sunk into useless alien-fighting equipment, and we’re now carrying a debt of 200% of GDP. It seems to me that we’re now worse off than we were before the alien scare.

This is Keynesianism taken to the furthest logical extreme: We’d be better off creating a massive buildup of useless and unusable military equipment, because it would stimulate the economy. The trouble is, how do we pay for it once we’ve done it?

Frankly, if the aliens do come, I’d prefer that we do nothing. If they can cross the vastness of interstellar space, their technology is so far ahead of ours that any attempt at defense would be futile. And, of course, I presume that any society so advanced would, if nothing else, deliver us from Prof. Krugman’s brand of irrational economics once and for all.

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Dale Franks
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The anti-Perry full-court press begins

I‘ll be honest with you. I dunno if Rick Perry would be a good president or not. I don’t even know if he’s been a particularly good governor of Texas. But it’s becoming apparent he’s perceived as a pretty big threat to Barack Obama. The guy entered the race less than 48 hours ago, and we’re already being treated to things like this, this, and this, from the usual suspects on the left. It’s like the oppo research has already been done, and they were just waiting to go with it. As hard as that might be to believe.

In the next couple of weeks, we’re going to learn more about Rick Perry than we ever thought possible. Which kind of inclines me to think that anybody that has the Left jumping in to castigate them this quickly must have something going for him.

What’s especially interesting about this response is that we knew what Rick Perry’s college grades were before he even announced his candidacy, and 2.5 years into Obama’s presidency, we can merely state, with some degree of confidence, where he went to college.

At least we won’t have to worry about whether Rick Perry gets properly "vetted".

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Dale Franks
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Observations: The QandO Podcast for 14 Aug 11

In this podcast, Bruce, Michael, and Dale discuss The Ames Straw Poll and the 2012 election.

The direct link to the podcast can be found here.

Observations

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The shape of things to come

The US Postal service has a financial problem.  That’s not a surprise, especially is a time when the entire US government has a financial problem.  Unlike the rest of the US government, the USPS is relatively limited in the amount of government money it can receive, and is more or less—and often less, granted—supposed to rely on postage to fund its operations. It still manages to get nice subsidies from the government, but even then it’s supposed to pay those back. Eventually.

In other respects, though, it operates like the rest of the government. Nice federal workers’ and union bennies, heavy bureaucracy, a monopoly on the service it provides, etc., etc. So, that makes it sort of a canary in the coal mine when it comes to government financing. Which makes this interesting:

The U.S. Postal Service would eliminate about 220,000 full-time jobs and shutter about 300 processing facilities by 2015 under a proposal to bring its finances in order, a postal official said on Friday.

The Postal Service needs to cut payrolls to about 425,000 employees and take over its retirement and health benefits instead of participating in federal programs, Postmaster General Patrick Donahoe told Reuters.

This will require abrogating union contracts on layoffs on retirements and health care, and restructuring its employment and benefit rules, close about 3,000 post offices, and contract out mail services to private organizations.

Naturally the unions are already screaming, as are some Democratic lawmakers.

*shrug*

Cry me a river. This is what financial reality looks like.  This is the reality that’s coming to the rest of the Federal government in the not-too-distant future. Get used to it.

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Dale Franks
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Republican Debate Liveblog

Well, CoverItLive completely crapped out. So I guess the live bit is down to me manually updating the liveblog, like some kind of animal.

1917: Ron Paul says we need to mind our own business. Iran is a problem because we overthrew Mossadegh and installed the Shah.

1919: Ron Paul now seems to be saying we have to try terrorists, and not reject the rule of law. Not just say someone is a terrorist and then shoot ‘em.

1921: Yeah, I’m sure Rick Santorum is extremely concerned that Iran’s mullahs violate the rights of gays. Paul: That’s war propaganda.

1922: Ron Paul is quite the isolationist. I get Paul’s stance, but I certainly worry that ignoring the world will result in another Pearl Harbor. Although, having said that, we spent several years ticking the Japanese off prior to Pearl.

1929: The Lovely Christine thinks Herman Cain is weak. “Go back to selling pizzas.”

1931: Romney wants a Federal Marriage amendment to the Constitution to ban gay marriage. Jon Huntsman, on the other hand, loves him some Civil Unions for gays. Ron Paul could care less. Rick Santorum doesn’t like it all. Doesn’t think much of abortion, either. Even in cases of rape.

1939: Romney wants personal unemployment accounts, rather than unemployment benefits.

1942: Huntsman wants to end the EPA’s regulatory power, and have more industry in the US.

1943: Bachmann: This increase in debt and the debt ceiling is madness, and the S&P downgrade proves it.

1945: Cain: Cap gains tax to 0%. Tax breaks to companies that bring profits back to the US.

1947: The Fed needs more transparency, according to Gingrich, and needs a sound money policy. But we still need it. Paul is happy that the issue of the Fed is getting some traction.

1949: Santorum thinks the Fed should be audited, but Ron Paul is a crank. Pot. Kettle.

1954: Huntsman says No Child Left behind should be scrapped. Cain says the federal Govermne t should be out of the business of micro-managing education.

1959: Closing statements of any interest: Ron Paul: Liberty is my chief value. Perhaps the only candidate for which that’s true. Romney: Obama is an economic incompetent. Huntsman: This nation is hurting and it’s bankrupt. Debt is killing us. Gingrich: The election is 15 months away. This country is in crisis now. We need leadership.

So, that was it. No one really grabbed me. Did anyone grab you?

Our major creditor’s name also ends with a vowel

One of the irritating things about being deeply in debt is dealing with your creditors. Happily, if your creditor is, say Wells Fargo, they tend to stay within strict legal bounds when dealing with you. If you’ve been unfortunate enough to seek credit from fellows whose last names end in vowels, they tend to be more…forceful in delivering their messages to you. As it happens one of the United States’ creditors also has a name that ends with a vowel: China.

And they have a message. The more or less official organ of the Chinese Communist Party—which is to say the Chinese Government—is the newspaper People’s Daily. So, it is with much interest that I read an op/ed piece in that fine journal with the title, "China must punish US for Taiwan arm sales with ‘financial weapon’". As messages go, this one’s pretty simple.

Now is the time for China to use its "financial weapon" to teach the United States a lesson if it moves forward with a plan to sale arms to Taiwan. In fact, China has never wanted to use its holdings of U.S. debt as a weapon. It is the United States that is forcing it to do so.

The U.S. House of Representatives just passed a debt ceiling bill on Aug. 1. On the next day, a total of 181 members of the House of Representatives signed a letter sent to U.S. President Barack Obama stating that the federal government should approve the sale of F-16 C/D fighter jets to Taiwan as soon as possible to help ensure peace and stability across the Taiwan Strait…

Despite knowing that major creditor countries, especially China, would be the main buyers of its new debt, certain arrogant and disrespectful U.S. Congress members have totally ignored China’s core interests by pressuring the president to sell advanced jets and even an arms upgrade package to Taiwan.

U.S. treasuries will lose value if China stops or reduces its purchases of them on a large scale, which will also affect the value of China’s U.S. treasury holdings. However,as the situation has gotten out of hand, allowing Washington politicians to continue their game might lead to more losses.

U.S. arms sales to Taiwan can only create more jobs for the United States but cannot improve the ability of Taiwan’s military force to compete with the Chinese mainland. The essence of the problem is that some U.S. Congress members hold a contemptuous attitude toward the core interests of China, which shows that they will never respect China. China-U.S. relations will always be constrained by these people and will continue along a roller coaster pattern if China does not beat them until they feel the pain.

I am mildly amused by the claim that such sales both threaten "China’s core interests", but "cannot improve the ability of Taiwan’s military force to compete with the Chinese mainland." Both of these arguments cannot simultaneously be true.

Less amusing is the common attitude of loan sharks to their creditors displayed here using much the same language that Tony "The Shark" would use: Namely, if creditors don’t do what they’re told, you have to "beat them until they feel the pain."

With the recent rise in bond prices and drop in yields, the Chinese have a number of options. The least damaging to the US would be to sit out a few bond auctions, which would force interest rates up. But they’ve also got the nuclear option of selling off as much paper as the market could bear. Yes, they’d forego some yield payments, but they’d probably make a nice tidy premium over the original purchase price to make up for it. Rising interest rates now, at a time when the economy is weak, and short-term rates are already effectively zero, would slow the US economy. At the same time, a massive repatriation of renminbi to China would cause a steep drop in the value of the dollar in foreign exchange markets. This would raise the price of imports equally steeply. This would cause something very similar to the oil price shocks of the 1970s, that plunged the US into stagflation.

Naturally, the Chinese would be hurt by the reduction in their export capability. The question then becomes, "Which of the two political systems, China or the US, is more concerned about democratic pressure to change policy in order to improve the economy?" Who is more responsive to public pressure: our government, or the government that initiated the Tiananmen Square massacre?

I don’t know about you, but I wouldn’t expect Hu "The Kommissar" Jintao to be the one that blinks first.

Of course, if we weren’t $14 trillion in debt, we wouldn’t be very vulnerable to this sort of thing.

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Dale Franks
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A vertical invasion of barbarians

Children are widely believed to be a blessing, and I suppose, in many ways, they are. But children are also a problem, in that each new generation of kids is a vertical invasion of barbarians. They have to be taught the details of how to behave in civilized society, to be instructed in its standards and norms. Moreover, those norms must be enforced, and violators must face the appropriate penalties for violating those norms.  Doing all of this is an important charge, and you fail in it at your peril. Because, as the London riots show, the result of that failure is this:

The first line of defence against crime, the justice system, is not seen as sufficiently threatening to deter the youths. One of the group says this would be my first offence, "the prisons are over-crowded. What are they going to do? Give me an ASBO? I’ll live with that."

The government has failed to keep order, according to the group. They agree that their motivation is partially that "the government aren’t in control – because if they was we wouldn’t be able to do it could we?".

The low rate of arrest of looters is then also brought up as an incentive to loot, with one youth saying "they failed, innit? How many people have they arrested really, though? Ten." He then says "I’m not really bothered. I’ll keep doing this every day until I get caught."

The incentive to make money from their crime spree is clear: one of the youths says he has been looting because he didn’t want to "miss the opportunity to get free stuff that’s worth, like, loads of money". 

Powerless families are also shown to be a major factor in allowing the looting to take place. One youth admits to warning his family he was going to be present at the riots, and then describes a subsequent telephone conversation with a family member: "He said ‘get home, you’re in trouble’ I said ‘no’ and just put the phone down. They can’t get into town, they can’t get me, and when I get home, nothing’s going to happen to me, I’m not going to get grounded or shouted at. I might get shouted at but that’s it, I’ll live with it and keep doing it."

These youths are not being irrational.  Quite the opposite. They’ve quite fully absorbed the reality of modern life in the UK, a society that has largely abandoned the fundamental norms of civilization, giving them lip service, but without enforcing them.

Think of the very real shortcomings the attitudes above inculcate.

  • The justice system is a farce, and no severe penalties need be feared.
  • The government cannot effectively control lawlessness or protect property.
  • The property of others can be taken without real fear of reprisal.
  • Family discipline is toothless.

The larger society aids and abets these attitudes by defining self-defense as criminal vigilantism, and punishing the victims of crime for having the temerity to defend themselves, and perhaps injuring their assailants if attacked.

These youths in London and Manchester have learned their lessons well. Property owners cannot resist them, the police can’t control them, and if they are unlucky enough to get caught, sanctions will be minimal.  These are not cultural attitudes that promote civilization. Quite the reverse, in fact. They are the attitudes of barbarism, in that they reduce all of society to victims—except for those that choose to be predators. The cultural message these youths have received is that predation pays and is relatively risk free.

They’re acting on that cultural message, in a perfectly understandable and rational manner, while authorities dither for days about whether the use of water cannons or rubber bullets are an appropriate response.

What these rioters need is the type of lesson that armed property owners convey with an immediacy that the police are unable or unwilling to provide. But, of course, in modern "civilized" Britain, that’s literally the last thing they have to fear.

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Dale Franks
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Dems spin Wisconsin

As the great philosopher Monty Python once said, "Always look on the bright side of life". That’s what Democrats are doing today in response to the Wisconsin recall elections.

“The fact of the matter remains that, fighting on Republican turf, we have begun the work of stopping the Scott Walker agenda,” said state Democratic Party Chairman Mike Tate.

Phil Neuenfeldt, president of the Wisconsin State AFL-CIO, said voters sent a message that there is a growing movement to reclaim the middle class.

“Let’s be clear, anyway you slice it, this is an unprecedented victory,” he said.

Well, it certainly appears to have been a moral victory. Which is exactly like a real victory, except that it lacks, you know, victory. Republicans still control both houses of the legislature, as well as the governor’s mansion.  And, with two Democrat senators coming up for recall votes next week, losing either of those two seats—or both of them—will make their moral victory somewhat less relevant than it already is.

At the moment, though, not only does this mean that all of Gov. Walker’s previous reforms will remain intact, the Democrats cannot—except by fleeing the state again, I suppose—prevent further fiscal reforms in the state. At the end of the day, the unions dumped something like $30 million into the recall elections, and they failed to wrest control of the state senate from republicans. The most expensive single effort, the $8 million effort against Alberta Darling, failed.

One of the Democrats "successes" was against a state senator that left his wife for a 25 year-old staffer, then moved out of his district. You really had to be politically sharp to win that one.

But, I have no problems with the unions and their allies enjoying their moral victory. Perhaps Markos Moulitsos said it best: "But let me just say, if tonight was a loss, I hope we have many more such "losses" in 2012."

Me, too, Kos. Me, too.

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