Monthly Archives: July 2011

Mail 683 Wednesday, July 13, 2011

· The Iron Law at work

· The Debt Limit and the Dance

· Phone Hacking in England

· The Libyan Adventure

· Spectacular Hubble pictures

· Taxes, property, and the rule of law

·

When you send mail to me it may be published unless specifically marked as not for publication. Be aware. I get a great deal of mail. I try to read all of it.

Our government at work

Jerry,

Yesterday, as part of a Church outreach effort, I took a man down to the Office of Public Assistance to apply for SNAP (Supplemental Nutritional Assistance Program) which is what they call the Food Stamp program now. This man is a Veteran, living close to edge, and will likely be homeless before winter without help (we’re working to correct that).

As I sat with him in the office, some interesting things happened. We had gathered all the paperwork the forms had required, such as Identification, Social Security Cards, rent expenses, utility bills, bank accounts, etc. As we began to pass over the bank account information (the man had less than $100 in a checking account) the interviewer (a very talkative person) said., "Oh, we don’t require that anymore … the truth is, you could have a million dollars in the bank, but we only care about expenses and income." While I was still reeling from that statement, she continued, "…and besides, we’re trying to get more money into the economy as part of the stimulus program."

Now, there is no doubt this man needed help, and the SNAP program would help him. He wasn’t what she termed as a ‘lifer’ on benefits, or someone who works for a few months, then gets public assistance for a vacation, then goes back to work for a while. This man was clearly embarrassed to be there, but needed help and I felt we (the taxpayers) should help him both as a Veteran and a man who had worked hard all his life, but had lost his way when he turned to alcohol.

But it’s pretty clear from her comments that the system, which has been abused before, is being abused again as a tool for the "stimulus package" liberals love so much.

Tracy

Hardly astonishing. The Iron Law of Bureaucracy insures that. But understand, these are entitlements. This is not discretionary spending. Nothing can be done about this, because it is not discretionary; or so goes the argument. Which is why the whole game needs to be changed.

Debt limit

I see that Megan McArdle has a couple of interesting posts on what would happen if the debt limit were not raised.

http://www.theatlantic.com/business/archive/2011/07/gop-base-spending-cuts-now-or-never/241461/

http://www.theatlantic.com/business/archive/2011/07/debt-politics-the-lunatics-are-burning-down-the-asylum/241355/

Granted that servicing the debt is highest priority, it sounds as though we would be in serious trouble regardless. This year the percentage of deficit to total revenue is huge. If we can’t borrow more, we suddenly have to cut the spending by 44% – and that’s far beyond anything that even conservatives think they can do sensibly. You apparently need to cut defense salaries or Social Security, for instance. And it wouldn’t happen sensibly, it would hit an overwhelmed Treasury which generally prints millions of checks automatically.

If we are going to draw a line in the sand, I really think that it made more sense to do it over the budget, when all that was at stake was a trivial little government shut-down.

mkr

It is certain that at some point the debt limit will be raised. The Republicans will have no choice. The question is whether they can stop, not the bleeding, but the INCREASES in bleeding. In Washington as in California the liberals are adding to entitlements, the overspending is increasing, and any curtailment of increases is “a cut” to balance the budget on the backs of the poor.

If something cannot go on forever, it will stop. These increases in the deficits cannot continue.

UK Phone Hacking Scandal

They even hacked the phones of the police investigating them. Some stories:

http://www.independent.co.uk/news/uk/crime/police-chief-99-sure-of-hacking-2312389.html

http://www.independent.co.uk/news/uk/crime/gordon-browns-shock-that-his-family-medical-records-were-hacked-2312095.html

http://www.telegraph.co.uk/news/uknews/phone-hacking/8617707/News-of-the-World-phone-hacking-live.html

http://www.theregister.co.uk/2011/07/12/mps_grill_met_police_chief_over_phone_hacking/

http://www.guardian.co.uk/media/2011/jul/12/phone-hacking-gordon-brown-news-international

http://www.bbc.co.uk/news/uk-14116786

By the way, the housing market in Mariposa has taken off in the last two weeks. If this is representative of America, the recovery is underway. Of course, it may just be bottom-feeding.

—

Harry Erwin

Why the Hacking Scandal has such drastic effects

This is purely my opinion but I believe the story, which has been quietly a well known secret for years with almost all papers, including the Guardian which broke this, hacking at some time or another., is now such a major storm. The BB’Cs virtual monopoly of British broadcasting is being threatened by Murdock’s expansion of his control of Sky the satellite broadcaster so they are pushing this story hard.

" Last night (Thurs) the BBC news was almost entirely devoted to the hacking story story; followed by Question Time where all the questions selected by the BBC except for 1 in the last 3 minutes were the same; followed by Andrew Neil on the same. 2 1/2 hours on this story and virtually none on the rest of the world’s news That would be justified if we were seeing a breaking news story like 9/11 but for nothing less.

Broadcasting in Britain is essentially a monopoly of the BBC and people they approve of and this monopoly. legally committed to “balance” is in fact the propaganda arm of the British state (along with the Guardian which survives on government advertising). Murdoch’s attempt to buy all of Sky http://www.belfasttelegraph.co.uk/entertainment/film-tv/news/rupert-murdoch-awaits-backing-from-ec-for-sky-buyout-15034536.html would weaken that monopoly slightly.

I do not consider it a coincidence that this scandal, which journalists of all newspapers have been guilty of for years, has suddenly broken on Murdoch’s head alone."

Neil Craig

I watch all this in awe.

"Rope a dope"

Dear Dr. Pournelle,

I want to direct your attention to the following column on events in Libya.

http://pajamasmedia.com/richardfernandez/2011/07/11/rope-a-dope/

In particular, I want to direct your attention to the comments section, specifically, comment #8 by one wretchard. I thought he had an interesting observation:

"The principal advantage Khadaffy has over NATO is freedom of decision. He can do stuff: risk his life, suffer deaths within his inner circle, decide to change his foreign policy depending on his calculations. He can do whatever he needs to do. The West cannot.

Any kind of real movement — whether it be military action, labor market reform, budget reduction or even cracking down on crime — in Western societies is now nearly impossible. Whole societies have been paralyzed by the need to service the status quo. Keeping things going, with only minor excursions, is now the prime directive of Western politics. Everyone spies on everyone else to enforce political correctness. Britain today is mesmerized by — News of the World! But it doesn’t give a hoot about Julian Assange. It has almost forgotten it is fighting Khadaffy and losing.

Instead it is obsessed with ludicrously small issues. The political system worries endlessly about soap opera problems, sexual politics, racial quotas, “climate change” etc. This littleness promotes people like Herman Von Rompuy or Julia Gillard or Barack Obama — complete ciphers — to positions of power for no other reason than that they check all the boxes. A terrible diminuation of mind, an unbelievable poverty of thinking, has descended on the Western world."

I think he has nailed our problem exactly. Our society is at a crisis point, unable to act or respond due to a failure of imagination and our existing obligations. How to break out of that without also breaking the society is a question I don’t yet know how to answer.

Respectfully,

Brian P.

The Libyan adventure is a puzzlement. The United States has ample reason to wish Qassaffi dead or at least deposed, but for reasons of state that never happened; one supposes there were reasons not to do that. But now the enmity is open, we are breaking things and killing people in Libya, but it still continues for weeks. If we want Qaddaffi out we can (1) kill him, or (2) use silver bullets. The second method is cheaper, but it will involve finding him a safe haven and providing him with enough money to make him rich. Of course we spend more than that every day, even if we have to bribe some country to take Khaddafi and his brood into their protection. Silver bullets are fairly cheap. The alternative, killing him, would require operations by the special forces teams, meaning a Presidential order. That isn’t very likely with this President. The result is that we go one breaking things, killing people, and spending money.

Thai Drama

Described by the administrators as a "spectacular coup", the jet, was

on Tuesday slapped with forms and stickers from the bailiffs,

photographs provided by the administrating firm show.

"We have been seeking payment of more than 30 million euros for years

and this drastic measure is virtually the last resort," administrator

Werner Schneider said.

The debt goes back more than 20 years to when German firm Dywidag

helped build a 26-km toll road between Bangkok and Don Muang airport.

Dywidag merged in 2001 with Walter Bau AG, which later became

insolvent.

</>

http://www.reuters.com/article/2011/07/13/uk-germany-thaiprince-idUSLNE76C03X20110713

——–

Most Respectfully,

Joshua Jordan, KSC

At least we are not paying for it.

Hubble images Neptune 6/25/11 – 6/26/11 to commemorate its discovery

Jerry,

Here are the HST images of Neptune a few weeks before Neptune’s completed its first orbit of the Sun after its discovery.

<http://hubblesite.org/newscenter/archive/releases/2011/19/image/a/>

Regards, Charles Adams Bellevue, NE

Very nice indeed. Thanks.

IRS Precision

I remember when I thought I won a Farari in a contest. They called me

and said I won; I later discovered I won a lesser prize. But, I was

worried about taxes and such. After that, I never entered one of

those contests again. Now, I’ll make sure I don’t accept any gifts

like that either. What a bummer. Government takes the fun out of

everything.

The tax man may be on the hunt for the super fan who caught Derek

Jeter’s 3,000th hit.

Christian Lopez, 23, recovered the prized ball his father fumbled

after The Captain hammered it into their section of the stands in the

third inning of the Yankees’ win over Tampa Bay on Saturday.

The Verizon salesman from Highland Mills, N.Y., gave the ball back to

Jeter, whom he called an "icon," and the Yankees lavished a slew of

prizes, including luxury box seats for every remaining home game this

season and post-season and some signed memorabilia.

Now the IRS wants a piece. The prizes Lopez received are estimated to

be worth more than $32,000 — and, like game show contestants, Lopez

may have to pay taxes on the gifts and prizes because the IRS

considers them income.

http://www.nbcnewyork.com/news/local/
Fan-Who-Caught-Jeters-3000th-Hit-May-
Owe-IRS-Thousands-125406723.html

——–

Most Respectfully,

Joshua Jordan, KSC

It used to be that we had rule of law, and respect for property rights. Now you have a “right” to what the government will let you keep. Weep for the Republic, or rejoice, for equality is at hand. As you choose. And as you sow, so shall you reap. We have for decades sown the wind.

Dr. Pournelle,

Your correspondent asked "If Iran can seal its border, why can’t we?"

He answers his own question a couple of lines further down; it’s not the money we can afford and they can’t, it’s something else entirely:

"Nearly 4,000 police and Revolutionary Guards have been killed since then, either by Afghan smugglers bringing drugs in, or shooting at those building the fence that has been built along the border."

Neither the US, nor any other Western democracy, would put up with even 40 casualties in such a cause, never mind 400, and certainly not 4000.

Slowly getting used to the new layout!

Andrew Duffin

View 683 Wednesday, July 13, 2011

Friday the 13th falls on Wednesday this month.

The Budget Deficit Dance continues. The problem is summarized nicely here:

Budget woes

Long time subscriber and truly enjoy reading your thoughts on these issues.

I understand that we have enough money to pay for the debt service. However, we can’t truly argue that cutting off social security checks to seniors, for many their only source of income, with no warning or notice would be a healthy thing for the country. That is how revolutions begin.

While I do pay a lot of money in taxes, we also have to understand that we have the lowest individual tax rate in the industrialized world. I certainly don’t support federal bunny inspectors, and we have to root those out, but this type of expense is minuscule compared to the overall federal budget — in fact getting rid of all discretionary spending wouldn’t come close to alleviating our deficit problem.

I think the president’s idea of cutting back some corporate loopholes and cutting spending at the same time makes sense as a first approach. We then have to get the voters to continue to pressure all of our politicians (federal and state) to continue to make progress.

Alex

In other words, there is no choice but to raise revenues. The command economy must continue.

Note that no one is advocating cutting Social Security, although President Obama has used this a a threat to scare Social Security recipients in the hopes that the nation will demand higher taxes rather than cuts in government. Note also that the argument here is that we are undertaxed. We are simply not raising enough revenue. After all. “getting rid of all discretionary spending wouldn’t come close to alleviating our deficit problem.” No, the only solution is to raise taxes, preferably on someone else.

But what is this about “discretionary spending?” While servicing the national debt – of which Social Security is a part, by the way, since the Social Security Trust Fund monies have been spent for years, leaving nothing but IOU’s in the lock box – is not discretionary, what does it mean non-discretionary? Apparently all the entitlements are no longer discretionary. If you have told your children you will give them an allowance, then you lose your job, has the allowance now become a non-discretionary entitlement, something that must be paid no matter that you have to shoplift to get the money? How did all these programs become fixed in stone?

If something cannot go on forever it will stop. If we continue to consider transfer payments like negative income tax, Americans with Disabilities Act enforcement, Head Start, Free School Lunches, Medicare, Medicaid, Free Liver Transplants, Food Stamps, etc., etc., as non-discretionary, as items that cannot be reduced or eliminated, then we will continue to have rising deficits. That can’t go on forever. The more deficit financing, the more the costs of debt servicing – which truly is non-discretionary – rises in proportion to the income, and the more money has to be borrowed. It’s a spiral that has long been out of control.

So the command economy continues. But as I said in my previous essay, command economies distort realities and so badly misallocate resources that the economy dwindles. Recessions become permanent. Recession becomes depression. Economic miracles never happen with command economies. Some economists like to prove they can’t, using information theory; but prove it or not. we don’t see instances of economic miracles under command economies. Yes, there are economic miracles under authoritarian regimes. Franco’s Spain at one time had the highest economic growth in the world. Pinochet’s Chile came back from near economic death under socialism to become a roaring tiger. Both had economic freedom and stability of property. They were politically authoritarian governments, but they were not dedicated to ever-rising state budgets.

Command economies never work. That includes ideologies that transfer ever larger amounts from the productive to the needy. As Margaret Thatcher observed, eventually you run out of other people’s money to give away. And the gods of the copybook headings limp up to explain it again.

= = 

The Republicans would do better to look at what items can become “discretionary” and thus subject to trimming or cutting, than to continue to perform in the Kabuki play being directed from the White House.  They need to tell President Obama that, when it comes to living within our means, Yes We Can!

= = = = = = = = = = =

Lost Boy in Brooklyn

Horror in Brooklyn: an 8 year old boy walking home from the park was taken and killed. The cry goes up, what was this boy doing walking alone? Which says a great deal about the world. When I was young we most of us played in Davis Park, across the street from my house iin Memphis before we moved to Capleville. I was no more than seven. We ran around the block. We played hide and go seek. It was not unusual. But it was a different world.

= = = = = =

==

View 683 Tuesday July 12, 2011

The July Computing at Chaos Manor is posted. Go have a look. And BYTE is back.

= = = =

The President of the United States has spoken. It is time to compromise by giving in to what he wants. To the various Republican suggestions regarding the debt limit, he says:

"That is not an acceptable approach," he said at a press conference before talks resumed. "So we might as well do it now. Pull off the bandaid. Eat our peas. Now is the time to do it. If not now, when?" He added: "This is the United States of America. We don’t manage our affairs in three month increments."

He made it pretty clear that the only thing he will accept is an increase in government revenue. More taxes. Close Loopholes like deductions for mortgages and state taxes. Pay more to Washington. Eat your peas.

Otherwise, he says, the government may not have enough money to pay Veterans pensions, or make Social Security payments. We can now all join in chorus. Can we eat our peas? Yes we can! Raise the debt limit. Borrow more money so that we can pay Social Security and Veterans pensions, service the national debt – and, by the way, hire even more Bunny Inspectors and Department of Education SWAT teams, and more TSA agents to teach us how to be pliant subjects. Incidentally, al Qaeda is thinking about trying to recruit someone to smuggle explosives onto an airplane in a body implant, and therefore TSA needs more money and will soon have more exhaustive searches. It’ s the only way to insure safety. Yes we can!

There’s a famous story about a time when, back in the days of the Soviet planned economy, someone got to Stalin at a social function, and when Stalin asked how things were going, he told the Great Father that all was well except that it was hard to get copper tubing. Stalin told an underling “Let there be copper tubing!” And Lo! There was copper tubing. There were shortages of other forms of copper, but there was copper tubing in plenty.

That’s a fairly extreme example, but it’s a common enough story with command economies. A planned economy misallocates resources. If your society is wealthy enough you may not notice because there’s enough surplus to cater to the whims of the powerful and influential, but when resources are scarce the choices are more difficult.

A random example: when Los Angeles had lots of money, it had a big program to bash down the curbs at every street corner and replace them with wheelchair friendly ramps. As a result, about half the curbs in Studio City were given ramps – then the money ran out, and all that work stopped. Now I have in twenty years of walking in Studio City seen perhaps three people in wheelchairs using any of the ramps. Before Phillip Rhodes died his wife used to wheel him around the neighborhood, but they used driveways as often as those ramps to cross the street, and in fact they mostly stayed on their block which is quite large. Mostly, though, those ramps are used by nannies pushing kids in strollers. Now this is very nice for the nannies, but the fact remains that most people around here would rather that money had gone into funding pensions, or perhaps had been saved for times like these when revenues are down.

I suspect that’s pretty universal: there are a lot of things we did in those days that seem very like luxuries. The problem is that we’re still doing a lot of them. Few of those will be eliminated in the coming crunch, of course. Politicians always cut the budgets for the roads and the police before touching entitlements or the bureaucracy. In good times or in bad, das Buros steht immer, as Metternich observed.

Command economies distort the allocation of resources. Sometimes the effects are dire. An example: Senators Dodd and Kennedy (they of waitress sandwich fame), and Barney Frank decided that it would be a very good thing for more people in the United States to own their homes. They saw to it that there would be plenty of money for sub-prime mortgages. Fannie Mae would buy sub prime loans from the banks. Fannie Mae could then use those sub prime mortgages as security to borrow more money so they could buy more sub prime mortgages. The result was a frenzy of increasingly bad loans, to the point that no banker in his right mind would have made such a loan, only why not? The loan was guaranteed, wasn’t it? The result of all this was a housing boom – when there is more money chasing a particular good, the price of the good goes up, attracting people to make more of that good – and the boom became a bubble, the bubble inflated, and we now have official 9% unemployment. The command economy at work. No one willed the collapse, but the misallocation of all those resources made it likely.

My point is that a command economy solution is impossible. We have spent nearly a trillion dollars in bailouts and “stimulus” packages. The “stimulus” funds were supposed to go for “shovel ready” projects. They didn’t. The President even made a joke about it. The truth is that even when we’re supposed to be investing in national infrastructure and spreading money about as a recovery tool, it doesn’t work very well. See the New York Times for more.

Command economies don’t work, even when heavily financed from the outside. The German Economic Miracle wasn’t brought about by the Marshal Plan. It happened when General Lucius Clay, our proconsul in occupied Germany, allowed the suspension of the myriad rules and regulations and mechanism of the command economy that we had been preserving.

Freedom produces prosperity. It takes more than just freedom, of course. It takes rule of law. But freedom and rule of law tend to work: note what happened to the barren rocks of Hong Kong as opposed to the far greater resources of nearby Canton Province. In China they had disorder, then Communism, a Great Leap Forward and a Cultural Revolution, and a stifled economy. In Hong Kong they had British Colonial Rule, few physical resources, but stability, rule of law, and economic freedom. When Red China took over Hong Kong they wisely kept much of the economic freedom; they learned from that; and now China has a growing economy. Not political freedom, and there is still a great deal of misallocation through the command economy, but there is also a great relaxation of regulation, and even something like property rights.

In the United States we move in the opposite direction. More regulations, and less stability: anyone who makes money must fear, because the pressure is always to tax the rich, punish the successful; to take money wherever it can be found on the grounds that it must have been got by unfair means. But fairly obtained or not, if you have money, and the government needs money, the temptation is for the government to find ways to take it. The notion of property right is weakened. That destroys the free economy. If you can be certain that you will reap the fruits of investment, you don’t want to invest, you want to hide your money. Hidden money creates few jobs. And the beat goes on. That spiral is well known, and the US is on it. The government needs money. There are people who have money. We need to raise revenues because, well, because the alternative is to cut spending, and we can’t do that. Maintaining spending is far more important than economic freedom. The Rich don’t have any right to make us balance the budget on the backs of the poor. This is rule of law! We make the law that the rich must pay. And there goes the notion of property which is essential to economic freedom.

Economic freedom and rule of law produce prosperity. If the government wants to help, let it get out of the way. Economic freedom would result in lower cost energy – unless regulation strangles that. If we want strict regulation of energy production, then government will have to be involved. This is a very difficult thing to do: government usually mucks things up. It can provide energy at prices that are not ruinous – TVA is evidence of that – but it is never easy. Government is subject to the Iron Law, far more than competitive enterprises, and that always misallocates resources. But if you add low cost energy to economic freedom you have a sure fire formula for economic miracles.

Alas, in this era of hope and change, all the government energy investments go to “green” energy, which isn’t efficient and produces no jobs not subsidized. We burn food – and still subsidize the gasohol projects. And it will continue. When a nation gets wealthy it turns against property rights. What right have you to that property when there are so many who have none? What right have you to a house when so many are homeless? We command that something be done. Let there be houses owned by those who don’t have great credit. Let there be Affordable Housing. And so it was.

Through economic freedom Germany eventually became wealthy enough that they could adopt many of the trappings of a command economy, some of which they inherited in the absorption of East Germany. They cut back on economic freedom. Now they are expected to bail out Greece. Perhaps we can persuade Europe to bail us out with a reverse Marshal Plan?

Probably not. Instead, the Deficit Dance continues. The Department of Education keeps its SWAT team. The Department of Agriculture continues to hire and pay inspectors to be sure that stage magicians have federal licenses to use pet rabbits. But if we don’t borrow more money we won’t be able to pay Social Security.

And they never catch wise.

Or do they? Apparently McConnell has a glimmer. Eat your own darn peas.

http://www.washingtonpost.com/blogs/
right-turn/post/exclusive-
mcconnell-to-obama-eat-your-own-darn-peas/
2011/03/29/gIQAqastAI_blog.html