Questions and Observations

Free Markets, Free People

Zyklon B 2.0

Barack Obama recounted the contributions of Islam yesterday during his speech in Cairo. This may not have been what he was talking about:

German media outlets reported last week that a Saudi inventor’s application to patent a “killer chip,” as the Swiss tabloids put it, had been denied.

The basic model would consist of a tiny GPS transceiver placed in a capsule and inserted under a person’s skin, so that authorities could track him easily.

Model B would have an extra function — a dose of cyanide to remotely kill the wearer without muss or fuss if authorities deemed he’d become a public threat.

The inventor said the chip could be used to track terrorists, criminals, fugitives, illegal immigrants, political dissidents, domestic servants and foreigners overstaying their visas.

Another wonderful tool for the state.  My guess is it will be beta tested in NoKo.

~McQ

[HT: Neo]

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“More Czars Than The Romanovs”

That’s what John McCain has said about the Obama tendency to appoint “czars” to oversee various issues. As McCain points out, these czars operate outside of any real oversight.

And apparently there’s going to be another new “czar” in town. A – are you ready for this? – “pay czar”.

The Obama administration plans to appoint a “Special Master for Compensation” to ensure that companies receiving federal bailout funds are abiding by executive-pay guidelines, according to people familiar with the matter.

The administration is expected to name Kenneth Feinberg, who oversaw the federal government’s compensation fund for victims of the Sept. 11, 2001, terrorist attacks, to act as a pay czar for the Treasury Department, these people said.

A tendency toward fascism?

I’d have to say yes. There’s no question that this is a very deep intrusion into the management of a company which will have negative consequences on down the road (the companies still compete for talent in the same pool as companies not under these restrictions). But apparently their competitive health is less important than enforcing some arbitrary and political level of “fair” compensation.

~McQ

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Government Motors? Oh Yeah …

Politics and special interests now run General Motors – a company which should be making business decisions based on what is best for the company and its future and not what is best for some politician:

Rep Barney Frank (D-Mass.) won a stay of execution on Thursday for a General Motors plant in his district that the automaker had announced it would close.

No other lawmaker has managed to halt the GM ax. As chairman of the House Financial Services Committee Frank oversees the government’s bailout program, known as TARP. Frank’s staff said the lawmaker spokes with GM CEO Fritz Henderson on Wednesday and convinced him to keep the Norton, Mass. plant open for at least 14 months.

Because what happens in about 14 months boys and girls?

The 2010 midterms. And who controls all the bailout programs? Why the guy who was able to change Government Motors mind on the plant in his district.

Of course had some backbench freshman congressman from a red state district made the same request, what do you suppose the answer would have been?  It doesn’t get any more blatant than this — but who among our “leaders” has the stones to call him on it?

About the only thing you could hope for in this instance is a bankruptcy judge would say “no dice” and force GM to carry out its original plan, but as stagemanaged as this whole bankruptcy procedure is, I doubt something like that would happen.

~McQ

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Twitters Moved

You may have  noticed that the twitter posts about the daily economic stats are gone.  They have been moved over to the sidebar, under the add banners.

This will give me the ability to provide the ongoing econ updates via my phone–just as I am posting this–while keeping the main blog section untouched.

This should be a solution that pleases everyone.

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Socialism In America

Perhaps the time has come to be perfectly frank. We Americans live in a socialist country. In point of fact, we have for quite some time, even though private property has a long, continuing and still revered position in our society. To be sure, we aren’t an entirely socialist country, but instead a mixed one that teeters between the two extremes of collectivism and freedom (i.e. socialism and capitalism). In the past century or so, however, the scale tipped noticeably toward the socialism side, and we are now at the point where capitalism is not the dominant force. Of course, there are many who will disagree with my assessment.

Conor Clarke, for example, offers the following to dispel notions that we have become a socialist country:

Government vs. Private Ownership

Government vs. Private Ownership

Conor explains:

Have you heard that the United States is headed toward socialism? Jonah Goldberg says it is. Alabama Senator Richard Shelby says it is. Phyllis Schlafly says it is. Richard Viguerie says it is. The Republican National Committee says it is. We must be getting pretty close.

[…]

The hot-pink portion of this pie chart is the percentage of listed American business assets that have recently been nationalized by the American government (ie, General Motors). Obama’s version of socialism is so sneaky you can hardly see it!

(And there is some reason to think this actually overstates the portion of the corporate landscape that’s been nationalized, but more on that at the end of the post.*)

While the chart above would appear at first glance to be pretty dispositive of the issue (if the federal government owns so little, can we really be socialist?), it actually begs a huge question. If the segment of the economy effectively nationalized in the past several months is so vanishingly small, why is it necessary for taxpayers to fund trillions of dollars to save it? We’ll come back to that.

Next, Jon Henke observes:

NOTE: The fact is, American has always had a mixed economy, as do all modern, developed economies. The question is not one of category – capitalism or socialism? – but of degree.

[…]

Obama is not socialist. But he is more comfortable with centralizing economic power. As that centralization proceeds, the focus of public interest will shift from “how do we fix the immediate economic problems?” to “how do we fix the problems we created when we tried to fix that temporary problem?” That is when the pendulum can swing back towards decentralization and individual empowerment.

Jon takes a more organic view of the subject. That is, he posits the governing structure of the US as subject to the tolerance of the polity for centralized control of the economy. In his view, just because Obama “is more comfortable with centralizing economic power” that does not mean that we have become a socialist nation. Instead, we are merely experiencing a swing of the political pendulum towards socialism that will inevitably swing back towards the capitalism node. Left unsaid is how often that pendulum has swung away from socialism in the past 100+ years. More importantly, Jon’s assertions beg their own question — i.e. how “comfortable” must a politician and/or the populace be with centralized power before we can safely label it socialism?

In addition to the above, another line of argument is sure to be made (if it hasn’t been already) that we cannot possibly be a socialist country because private property has not been outlawed and the people as a whole do not own and control the means of production. Truly, this is the argument that Conor attempts to support with his graph (not that Conor necessarily agrees with that argument, just that he is holding up evidence that would tend to suggest socialism is not at hand). Essentially, although socialism comes in many forms, a primary ingredient is that the state (on behalf of the people) have dominance over the means of production instead of private concerns. The most extreme form, of course, is where all private property is abolished and the state decides what will be produced, by who, when and how much. Much milder versions such as social democracy exist today that, while they allow private property and much more freedom than, say, Stalinist North Korea, maintain a firm grip over the economy as a whole. Is there any doubt that Germany is a socialist country for example? The question then is, where does America fit when it this spectrum of socialist possibilities, if it fits at all?

At bottom, the problem with these sorts of arguments is almost always definitional. If I start arguing that communism never works and use the Soviet Union as an example, someone is sure to pipe up “that wasn’t real communism” followed by a neat explanation how Lenin and Stalin perverted what the true communists wanted in order to seize power for their own means. In order to avoid that annoyance, let’s at least agree on the dictionary definition of socialism:

An economic system in which the production and distribution of goods are [owned and] controlled substantially by the government rather than by private enterprise, and in which cooperation rather than competition guides economic activity. There are many varieties of socialism. Some socialists tolerate capitalism, as long as the government maintains the dominant influence over the economy; others insist on an abolition of private enterprise. All communists are socialists, but not all socialists are communists.

The definition above comes from the The American Heritage® New Dictionary of Cultural Literacy, Third Edition, and I think sums up the idea nicely. The one thing missing is the word “ownership” which, I expect, someone will insist upon, so I’ve inserted the words “owned and” into the definition. As luck would have it, this is the very concept that I think is missed by almost everyone who discusses whether or not we are a socialist country.

Specifically, what is the difference between ownership and control? Looking again to the dictionary, here is a good legal definition of “ownership”:

“one’s exclusive right of possessing, enjoying, and disposing of a thing.” 72 So. 891. The term has been given a wide range of meanings, but is often said to comprehend both the concept of possession and, further, that of title and thus to be broader than either. See 139 N.W. 101. See fee simple.

The primary concept behind ownership is that of exclusivity, such that if I own real property, for example, I can by right exclude all others. Without the ability to exclude, my “ownership” is something less than complete and the use, enjoyment and alienation (a fancy word for selling, trading or giving away) of property is limited.

To illustrate the idea, consider that you own a piece of real property (Blackacre) which is rich with gold and silver mines, oil, and an abundance of flora and fauna. In short, it is a little slice of heaven and it is all yours. Or at least it would be if were not for the fact that the flora are mostly designated as protected, the fauna are all listed as endangered, and the mineral deposits are tightly regulated, all to the extent that you cannot make any real use of your land except to look at it from a neighbor’s yard in humble admiration for its splendor. Not only are you prevented from drilling or mining on your property, you cannot even build a house or structure of any kind because that might disturb the protected species. The rules and regulations governing Blackacre are so ominous, that you can’t even sell it without first offering it to the government for a price it will set in its own arbitrary discretion. Furthermore, just on the other side of Blackacre is the Pacific Ocean fronted by a lovely beach, to which the law declares access must be allowed for the public, and there is nothing you can do to prevent them from traipsing across your wonderland. In short, you may own Blackacre in title, but you have very little, if any, control.

Of course, at least here in America, the laws and regulations aren’t quite that strict. And the vast majority of people would agree to at least some controls over private property to prevent the owners from harming other property or people (e.g. pollution, building setbacks to prevent fire, etc.)[ed. – let’s ignore Coasean bargaining for now, shall we?]. At some point, however, those restrictions on the owner’s use become so burdensome as to effectively deprive the owner of any real control. The same can be said for the ownership of capital, which can be anything from money to a large factory for building tractors. When the government sets up enough rules and regulations affecting the use and enjoyment of that capital, the fact that ownership is nominally in private hands does not somehow render that government as something other than socialist.

Now, getting back to our definition of socialism, which is more important, “ownership” or “control”? To my mind, this isn’t even a close call. Without control, ownership is next to meaningless. Therefore, if the state has the ability to control the means of production (a.k.a. capital), whether directly through ownership, or indirectly through law and regulation, I contend that such state should be deemed socialist.

Think of a scale that measures the owner’s rights in her own property and how, with each new government missive, that ownership indication drops a little more. Where the state’s intervention becomes intolerable will be different for each person, but from a definitional standpoint, that intervention represents socialism. When the scale registers a significant enough intervention into the owner’s rights, socialism becomes the prevalent factor in the control of property, and private, capitalist “ownership” is either dulled or altogether neutered. Again, without the ability to control that capital, ownership is a meaningless concept that should be left out of the conversation.

Accordingly, when Conor suggests that we are not a socialist nation because the government only owns an almost immeasurable portion of the corporate assets of this country, I suggest that he use a new measurement. Specifically, one that measures the amount of control that “owners” have over their property/capital/etc. That graph would look significantly different in my estimation.

Furthermore, when Jon states that Obama is not a socialist, he’s just comfortable with centralizing economic power, I ask that he consider what ways centralizing power (i.e. control over the means of production) is not socialist, and that he provide a few examples for clarification. Also, if the pendulum is going to swing back towards more decentralization (i.e. less control over capital), how far back would it have to go before most people could be reasonably certain that we are not, in fact, a socialist nation? How far back does he think it would have to go, or is his contention that the pendulum simply hasn’t swung into socialist territory? In considering those questions, I’d ask that the concept of control, rather than titular ownership, be the dominant factor in deciding where the state stands vis-à-vis socialism.

As I see it, we’ve been living with socialism in this country for a very long time. The only difference has been one of degree and magnitude. Its pervasiveness has ebbed and flowed over the decades, but American’s tolerance for it has grown substantially, even if many of us don’t like to call the governance we desire “socialism.” Unfortunately, that’s exactly what it is, and it’s only going to become more prevalent and intrusive. After all, why would anyone who is comfortable with centralizing economic power stop it? They’ll just call it something else and move on with asserting they’re control until one day you’ll be gazing longingly at Blackacre from the public beach, because that’s the only place where you can legally see it.

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Short-sighted Partisan Politics Makes For Bad Decisions

And nothing could make that point better than this:

Defense Secretary Robert Gates isn’t ruling out spending more on missile defense than what he’s asked for in next year’s budget if North Korea or other nations increase threats against the United States.

Gates said the missile tests by North Korea over the past week appear to have attracted more support on Capitol Hill for missile interceptors.

Candidate Obama was pretty darn sure that these interceptors just weren’t needed because, you know, they just weren’t! Russia isn’t our enemy anymore and we get along fine with China – where’s the threat?!

Well during the entire lead up to the 2008 presidential campaign, North Korea and Iran were flinging missiles around right and left each, seemingly, with longer ranges and larger carrying capacity.

Ignored. In fact, as I recall, Obama dismissed Iran as not much of a threat at all. Something about Iran being a ‘tiny’ country that ‘doesn’t pose a serious threat.’ Certainly not one that required a missile defense.

Politics. All politics. Nothing based in reality, but instead dismissive rhetorical hand-waves designed to please the base. And those who controlled Congress picked up on the tune and danced to it.

Now, suddenly, by doing almost exactly the same thing they’ve done for some years, North Korea has managed to resurrect the need for a missile defense?

Why now?

Well that’s easy. Now they’re governing, suddenly not having an armed missile land on friendly territory during their watch is a priority.

Politics. The only real reason they opposed it previously is because the other side wanted it.

Of course, if questioned about why this is different than when NoKo and Iran did this sort of thing the last few times, I’m sure they’d find a way to spin it that they think wouldn’t make them seem so short-sighted, petty and partisan (read the article, there’s plenty of spin included).

That won’t change the fact one bit that they were indeed short-sighted, petty and partisan.

~McQ

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Obama’s Cairo Speech

Yes, I’ve read it. As with most of Obama’s speeches, it is a good speech and as with most of his speeches, hits all the right notes and says all the right things. What it all means, however, remains to be seen. One of the things I’ve learned so far with Barack Obama is not to take what he says too seriously as he is prone to ignore his own words or change his mind.

I also wonder if it will be considered a goodwill speech or a lecture by many. I know Israel isn’t going to be particularly happy about portions of it.

I compliment him for addressing some rather controversial issues (and this is where my thoughts about “lecturing” come from) such as women’s rights, religious freedom and democracy. None of the problems he addresses will change because of his speech nor is what he said new or original. He also spoke about Jews and quoted the Torah in Egypt which I found rather interesting.

Terrorism? The word was never mentioned. The closest he gets is talking about “extremists”. While he addressed some controversial issues, he avoided this one altogether.

And, unfortunately, he validated an Al Qaeda talking point about torture by claiming “I have unequivocally prohibited the use of torture”. While he may feel that his point is important and the truth, it is a rookie mistake to hand enemies validation like this. He also tried to have it both ways with Iraq, claiming we’re better off without Saddam but essentially condemning the action that made that possible. Again, he probably thought that was an important point, but all it does is validate the other side’s talking (and recruiting) points.

Obama claims this speech establishes a framework for a new era of cooperation with the Islamic world. And, of course, that mostly has the US doing the giving and the “Islamic world” doing the taking. What that means, in real terms, about establishing a new era of cooperation with the nations of Islam, remains to be seen. But given what was outlined, it seems to pretty much be business as usual wrapped up in an eloquent rhetorical wrapper marked “new and improved”.

Anyway, just a few thoughts. You should take the time to read the speech. But, as I implied earlier, Obama is outstanding at talking the talk. Walking the walk, on the other hand, hasn’t yet proven to be his strong suit.

~McQ

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“Health Care Reform” Update (Updated)

A few new developments, none of them good.

One – Obama has indicated his willingness to entertain legislation that would tax your private health care benefits. What that means is you’ll be taxed on the money your employer spends on your health care insurance. Of course the obvious immediate effect would be to raise revenue to pay for the public portion of his health care plan.

Two – Obama has decided that making insurance mandatory may not be such a bad idea. This is 180 degree change from candidate Obama who attempted to hide his statist tendencies by pretending that he wouldn’t require mandatory insurance for Americans.

Threein a letter to Democratic senators:

He told Democratic Sens. Edward Kennedy (Mass.) and Max Baucus (Mont.) that their legislation must include a government-run insurance option that would compete against the private sector. He also reaffirmed his support for a Massachusetts-style insurance exchange.

What do you suppose will happen if government-run insurance is an option for all? Depending on how it is structured (if, for instance, if it is a universal pool), we could see massive dumping of private insurance by businesses pointing their employees to the government option.

Four:

[I]mbuing a federal panel with the power to make Medicare payment recommendations that Congress must either accept or reject in their entirety.

Obama likens this proposal, based on the current Medicare Payment Advisory Commission, to the way military base closure decisions are made. To Republicans, however, the notion smacks of the kind of “rationing” dictated by government-run healthcare programs in Europe and Canada.

Ezra Klein explains the “federal panel’s” proposed role:

The health system changes too quickly for Congress to address through massive, infrequent, efforts at total reform. New technologies and new care structures create new problems. A health care reform package signed in 2009 might miss some real deficiencies, or real opportunities, that present themselves in 2012. A health reform process that recognizes that fact is a health reform process that is continual, rather than episodic.

But the reason health reform is so infrequent is that it’s structurally difficult. Small tweaks are too technically complex for Congress to easily conduct and so are dominated by lobbyists. Large reforms attract broad interest but are impeded by polarization and the threat of the filibuster. The MedPAC changes under discussion are, in other words, nothing less than a new process for health care cost reforms. They empower experts who won’t be intimidated by the intricacy of the issues and sidestep the filibuster’s ability to halt change in its tracks.

In other words health care decisions that will directly effect you will be in the hands of an unelected and unaccountable panel of bureaucrats just as all the critics of this sort have program have been claiming since the beginning of the debate.

The effect?

MedPAC, of course, is restricted to Medicare. But there’s little doubt that where Medicare leads, the health care industry follows. Private insurers frequently set their prices in relation to Medicare’s payment rates. Hospitals are sufficiently dependent on Medicare that a reform instituted by the entitlement program becomes a de facto change for the whole institution, and thus all patients. A process that empowers Medicare to aggressively and fluidly reform itself would end up dramatically changing the face of American health care in general.

Klein is exactly right, but most likely not for the reasons he thinks he is. The level of care, innovation and incentive will follow the decline in prices driven by MedPAC. What the nation needs is insurance reform, not “health care reform”. And while that is how the proponents of this try to spin the issue as just that, MedPAC’s existence and proposed expanded role argues persuasively against that spin.

Watch carefully – the Democrats are going to try to move this quickly and with little debate.

UPDATE: Apparently the letter from Obama I spoke about above also had another effect:

President Obama’s letter to Senate lawmakers yesterday saying a healthcare package must include a public option may have stalled progress on a bipartisan deal, Sen. Judd Gregg (R-N.H.) said Thursday.

Gregg said that the president’s letter, which said a public option should be included in the legislation, stalled “significant progress” in negotiations.

“We were making great progress up until yesterday, in my opinion,” Gregg said during an interview on CNBC. “There’s a working group under Sen. Baucus that involves senior Republican and Senate senior members who are involved in the healthcare debate, and we were, I thought, making some fairly significant progress.”

The most discouraging thing about this update is the fact that Republicans, who are claiming government is too big and we’re spending too much are knee deep in negotiating more government and more spending (i.e. selling out – again) having apparently swallowed the Democratic premise that this is necessary whole.

~McQ

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Tiananmen Square 20 Years After

China, despite its economic progress, remains a rigidly totalitarian state that certainly doesn’t wish to be reminded of the pro-democracy rallies 20 years ago, or the bloody government crackdown that ended them:

China blanketed Tiananmen Square with police officers Thursday, determined to prevent any commemoration of the 20th anniversary of a military crackdown on pro-democracy protesters that left hundreds dead.

The government reacted angrily to a mention of the anniversary by Sec. State Hillary Clinton:

“The U.S. action makes groundless accusations against the Chinese government. We express strong dissatisfaction,” a Foreign Ministry spokesman, Qin Gang, told reporters at a regular briefing.

“The party and government have already come to a conclusion on the relevant issue,” he said. “History has shown that the party and government have put China on the proper socialist path that serves the fundamental interests of the Chinese people.”

And to ensure that the people of China have few venues in which to discuss this anniversary, the “fundmental interests of the Chinese people” are being “served” by blocking various internet sites:

Access was blocked to popular Internet services like Twitter, as well as to many university message boards. The home pages of a mini-blogging site and a video-sharing site warned users they would be closed through Saturday for “technical maintenance.

Known activists and dissidents are under close supervision:

One government notice about the need to seek out potential troublemakers apparently slipped onto the Internet by mistake, remaining just long enough to be reported by Agence France-Presse. “Village cadres must visit main persons of interest and place them under thought supervision and control,” read the order to Guishan township, about 870 miles from Beijing.

In a report released Thursday, the rights group Chinese Human Rights Defenders said 65 activists in nine provinces have been subjected to official harassment to keep them from commemorating the anniversary.

Ten have been taken into police custody since late May, the group said. Dozens of others, mostly from Beijing, are either under police guard or have been forced to leave their homes, according to the report.

The mass media has, as expected, cooperated with the state as well:

There was no mention of the day’s significance in Thursday’s Beijing newspapers. The state-run mass-circulation China Daily led with a story about job growth signaling China’s economic recovery.

An interesting counterpoint to the claims that China has become more democratic over the years, and is actually doing a much better job with human rights than it has in the past. The fear of a simple remembrance of government brutality 20 years ago says that’s not at all true. And the government’s concerted effort to wipe that memory away prove it.

~McQ

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Quote of the Day

Guess who is outdoing the avowed Socialists? And they’re jealous:

“Hey, Obama has just nationalized nothing more and nothing less than General Motors. Comrade Obama!” [Hugo] Chavez cheered on Venezuelan TV Tuesday. He gushingly added that he and Cuba’s Fidel Castro would now have to work harder just to keep up.

A real point of pride, huh?

~McQ

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