Mail 683 Friday July 15, 2011

· Your tax dollars at work

· China overtakes US?

Dear Jerry,

One new application of technology to the arts you may be interested to know

about:

In recent years I’ve had the good fortune to become water brothers with rock legend David Crosby, of the Byrds, Crosby Stills and Nash, Crosby-Nash, and other groups. He tells me he and Graham Nash now have a new, extremely lucrative profit center: when you leave a Crosby-Nash concert, by the time you can get your butt out of the chair and out to the lobby…they’re already waiting to sell you THE CONCERT YOU JUST HEARD on a USB thumb drive, directly from the soundboard in high quality mp3, all tracks correctly identified, nearly three hours of music you know for a fact is great, for US$40. And they get to keep ALL the money–as opposed to the miserable fraction of the ticket price (or CD price) that ever reaches them.

At the end of a tour, they’ll put EACH CONCERT up for sale at their website.

In effect, they’ve finally become their own record company. The means of production have passed into the hands of the people; all power to the people! David and Graham are both terribly pleased. It was David’s idea.

He’ll be 70 in another month, making him a Sixties Survivor twice over, and he’s hard at work on a splendid new solo album….produced by his son, James Raymond.

Be well and prosper, my friend.

–Spider Robinson

Subject: Cost of Rural Broadband Access

A study shows that the stimulus of 2009 went out and spent $350,000 per household to bring broadband to rural areas. I won’t waste your time listing the alternatives that would have cost less.

http://blogs.forbes.com/nickschulz/2011/07/05/how-effective-was-the-2009-stimulus-program/

—

Dwayne Phillips

Lie to Me –

http://abcnews.go.com/Blotter/spot-tsa-airport-security-program-catch-terrorist/story?id=14062893

"The U.S. government has already spent approximately $750 million on the Screening of Passengers by Technique (SPOT) program, which in part trains airport security officers to look out for "micro-expressions" of travelers that may betray nefarious planning, and plans to add another $254 million to the program in 2012"

Of course we know that not a single terrorist has been identified during TSA screening of any kind. Even so,

"But a spokesman for the TSA told ABC News that the SPOT program was just one in several layers of airport security that have successfully deterred another Sept. 11-style attack and the many arrests resulting from SPOT show that it is an effective tool in detecting deception, whether in criminals or potential terrorists." The lie that really needs detecting is the one about TSA having stopped another 9/11-style attack. A plane won’t be used as a missile again simply because it is too hard to get to the pilots now and the passengers won’t sit still for it.

R,

Rose

we also have to understand that we have the lowest individual tax rate in the industrialized world.

– depends on how we define the terms.

It is of course a side issue. Still it ought not be ignored, overlooked and put aside in discussion.

Stock ownership is now much in the hands of groups (Calpers?) such that (shades of Coase) there isn’t much of a coalition to scream about the double taxation of taxing the business income then taxing the owner’s income.

(then too much of the business income goes to senior management rather than to ownership as funds rely on appreciation over dividends another distortion in the natural course of events)

That fight about double taxation and Sub Chapter S pattern – pass the profits through and tax the owner – has been abandoned to argue about the so called death tax which mostly winds up the estate and collects on sheltered income.

Still it’s worth considering the effect if imputed income were taxed at the various individual rates – of course folks can’t pay money on imputed income they haven’t received. So we see such things as Boeing building the -80 with money that would otherwise have been paid as excess profits tax. But I digress.

The point is that to speak of individual tax rates without addressing the tax on returns on equity and on capital both at the business level and at the capital gains tax level is flat misleading and so unproductive in any ultimate sense.

Regards

CEM

==

The important point continues to be: who is more likely to invest wisely? A command economy says government experts are better able to allocate resources. This does not appear to be true. To the point:

Jerry,

If a Capitalist society is the economic equivalent of a Maxwellian gas, the command economy is the economic equivalent of a laser: it can achieve spectacular results — at the cost of wasting 95% of the total energy (productivity) of the system.

Jim

Precisely.

Of course I thought of you…

http://www.theregister.co.uk/2011/06/09/psych_grads_knacked/

“A study in America has found that taking a degree in Psychology condemns you to a lifetime of being lower paid than those who study proper sciences, and lower paid than the average among university graduates.”

Of course, I don’t know if this study is “proper science” itself…

Chris

I tend to agree. My original intent as an undergraduate was to go to medical school, and a psychology degree offered the best opportunity to have a very high grade point average. Fortunately I got interested in history – Dr. George Mosse saw to that. And I was steered into a second major in European Literature and Thought, and Rupert King got me interested in ecology at a time when that was not a popular subject. I had an undergraduate assistantship with Van Allen for a while. But I did not take much in the way of hard science. After Vertebrate Embryology made it clear that I wasn’t going to get into medical school I was left with psychology – and Paul Horst promptly sent me to the math department to learn real mathematics and probability. That led to Operations Research and it was as an OR man that I was an aerospace professional even though my first aerospace job was as Aviation Psychologist and Human Factors Engineer. A varied career. I do not think an undergraduate degree in psychology is very valuable, but then my opinion of most of the “social sciences” is not high: see my Essays on The Voodoo Sciences.

China Overtakes US?

A new Pew Global Attitudes survey released today finds that while the U.S. is better regarded around the world now than it was in the Bush years, in 15 of 22 nations surveyed most say that China either will replace or already has replaced America as the world’s “leading superpower.” This view is especially widespread in Western Europe, where at least six in 10 respondents in Britain, France, Germany and Spain see China eventually overtaking the U.S.

The emerging perception of China’s superpower status no doubt reflects global recognition of its growing economic might, and the fact that the U.S. is increasingly seen as trailing China economically. Nowhere is this more evident than in Western Europe, where the percentage naming China as the world’s “leading economic power” has increased markedly over the past two years, along with the view that it will ultimately eclipse the U.S. as global superpower.

http://online.wsj.com/article/SB10001424052702303678704576442400450218990.html?mod=googlenews_wsj

——– Most Respectfully,

Joshua Jordan, KSC

Not astonishing. Regretable, but not astonishing. Walter Lippman once said that diplomacy is akin to writing checks; actual military and economic power are the bank accounts against which those checks are written. We have drained both of those accounts.

Apparently, David Slater, a well-known nature photographer, left his camera on the ground in an Indonesian national park, and a macaque monkey walked over and snapped a bunch of photos, including this (remarkable!) self-portrait:

MONKEY SELF-PORTRAIT

Cheers,

Dan

Bastille

Jerry,

Not to forget that DeSade himself spent years in the Bastille. In 1777, Sade was tricked into visiting his supposedly ill mother, who in fact had recently died, in Paris. He was arrested there and imprisoned in the Château de Vincennes. He successfully appealed his death sentence in 1778 but remained imprisoned under the lettre de cachet. He escaped but was soon recaptured. He resumed writing and met fellow prisoner Count de Mirabeau who also wrote erotic works.

In 1784, Vincennes was closed and Sade was transferred to the Bastille. On 2 July 1789, he reportedly shouted out from his cell, to the crowd outside, "They are killing the prisoners here!" causing something of a riot. Two days later, he was transferred to the insane asylum at Charenton near Paris, and missed the major event of the French Revolution on 14 July.

Henry Barth

Dublin

View 683 Friday July 15, 2011

Sowing the Wind

Debt Ceiling and More Government Services We Don’t Need

The President insisted on enormous deficit spending as a stimulus to restart the economy. It didn’t work. The shovel ready jobs were not ready, and much of the money was put to questionable uses, but one things that was predictable in advance happened as expected: the deficit went up and up. Now the President is saying that without a raise in the debt ceiling we are ruined. He will have to shut down much of the government, and of course he will start with the things that hurt most.

Of course the US can’t default: the cost would be enormous. The Deficit Dance continues, and so long as we have the current administration there’s not much to be done. The Republicans will have to make the best deal they can.

One deal they probably can’t make is an off switch. There ought to be a Commission of Thrift which has this power: it can select government programs that are not needed and turn them off. The Congress would have the right and power to turn them back on, but it would have to do that: without Congressional action the designated “services:” would be turned off, and those involved would either have to find new jobs or be laid off.

We’ve already shown a few here. The Federal Department of Agriculture inspectors whose job it is to see that stage magicians have a federal – not state, not local, but Federal – permit if they use pet rabbits in their stage act, and people who sell rabbits as pets – not as snake food, or to restaurants, or to slaughterhouses, but as pets – must have a Federal license. This law is a great candidate for repeal by the Commission of Thrift. Another is the Department of Education Inspector General’s SWAT team. If the DOE IG needs to have arrests made, let him get a US Marshal, or perhaps ask for cooperation from the local sheriff; no need to hire, train, and maintain armed agents in the Department of Education.

I am sure everyone here can list more such programs that we simply can do without.

Today’s Wall Street Journal has found a very good one. See “Cellulosic Ethanol and Unicorns”. The EPA has mandated that six million gallons of ethanol generated from cellulosic sources like wood chips and switchgrass must be added to the automobile fuels sold by US gasoline suppliers. There’s only one problem. There is no cellulosic ethanol. Zero cellulosic ethanol is for sale. The last authorized supplier of cellulosic ethanol has shut down, and there don’t seem to be any new ones making applications. Meanwhile there are government officials who are standing by to license new suppliers assuming any appear. Oil refiners who sell gasoline will have to buy six million cellulosic waivers. Someone must sell those waivers, and inspectors must see to it that the waivers are bought. I don’t know what the expenses will be for all this, but it must come to tens of millions of dollars. Everything does. The whole gasohol subsidy program would be a good candidate for repeal, but surely the requirement that oil refineries buy waivers for a requirement to use six million gallons of a product of which zero gallons are made for commercial use would be an obvious candidate for elimination?

Nothing of the sort will happen, of course. If government shuts down you may be sure that the government will lay off Park Rangers long before eliminating the EPA inspectors who make certain that oil companies buy six million waivers for the mandate to use a product no one makes.

And the dance goes on.

You will have noticed that the Democrats had two years with majorities in both Houses to raise taxes and reduce the deficit. They used those years to increase spending and grow the debt, meaning that the portion of the budget that must go to debt service grows, and there is less money to spend on anything else. The trouble with socialism and the command economy is that you run out of other people’s money. Most everyone outside Harvard understands that. Reality is demonstrating it to the rest of us: the enormous stimulus packages were supposed to bring us economic recovery. Recovery Summer came and went. Now we have the Debt Limit Crisis. The new game is to blame it all on the Republicans and the era of the Country Club Republicans after the implosion of Speaker Gingrich. There’s a lot of truth in that, of course. I have been saying that the Country Club Republicans sow the wind since the inauguration of George W. Bush (Bush I). The problem is that if the Country Club Republicans were doom, their Hope and Change replacements led by Pelosi were Doom, Death, and Despair.

If something cannot go on forever it will stop. The United States spirals rapidly toward the situation in Greece. The European Union meets again to bail out Greece. They will have a price. Perhaps the People’s Republic of China will help bail out the United States. We can guess some of their price will be Taiwan; but be assured that will not be all of it. We have sown the wind. We will reap the whirlwind. There is a way out, but the way will be hard and not pleasant: easier to foist it off for a while, and continue the Dance.

Yes We Can! Yes We Can!

We have errands that will take up most of the day. This evening they start shutting down the 405 Freeway and Los Angeles believes itself to be under attack for the weekend. It’s Carmageddon. I hope it’s like the Year 2000 Crisis rather than a big earthquake. Of course nothing stops us from having both, but hope springs eternal. Those interested in global warming may find find this bit on undiscovered underseas volcanoes worthwhile.

I may not have been as clear as I thought about the slide into a command economy. No, we are not there yet, but we are on dangerous ground. The Republican post Millennial Spending Spree coupled with needless wars – guns and butter – tipped us in the direction of a tax, deficit, spend, deficit, raise taxes death spiral. The Republicans were not trying to create a command economy. They thought we could afford guns and butter. They thought the economy was robust enough to survive all their new entitlements, which were supposed to make them popular and ensure that they would stay in command. The bubbles began bursting. The nation was horrified at the mounting deficits coupled with enormous tax breaks (which the Republicans had set up in part to ensure that there would be non-command investments). The nation threw the Country Club Republicans out. Turn the rascals out.

Unfortunately that did not bring in normalcy and the dismemberment of the spending cycles. Instead it brought in the Pelosi /Obama group. Whatever the sentiments and wishes of most Democrats, the leaders were not horrified at the move toward a command economy. That is the goal of a number of liberal Democrats. The US should be much more like Europe, with the government controlling a lot more of the economy and allocating the resources according to the needs and enjoyment of the populace. Greater good for the greatest number. That sort of thing. The problem is that in order to distribute wealth there has to be wealth to distribute. The ratchet continued. More spending. More deficit. The remedy to that is more taxes. More government control of the economy. A spiral to a command economy.

That is where we are now. We will not get out of it by cuts alone. There will have to be some tax increases: but those must be coupled with a sharp turn toward a road that leads to less government, less government control over the economy, and this in a time when debt service costs more and more, and so long as the deficit must be financed by borrowing, the proportion of government control continues. That is a spiral to a socialist state. There are those who like this. History has not been kind to such states – they are generally not stable. They are wonderful so long as they are rich, but eventually you run out of other people’s money and have to start taking money from everyone. 

And that is where we are. Yes, there will have to be tax increases; the deficit can’t be paid off by cuts along. But there must be cuts. There must be a turn toward the notion of controlling spending; of cutting out the “services” we can’t afford any more. I have listed some of them. There are thousands more. The whole notion that if we have some money it ought to be spent on entitlements has to be turned on its head.  The notion that if there is any surplus in the economy it is the right of government to take it and spend it on entitlements must be shed, or we will continue the death spiral.  And note that in all the Kabuki dancing here there has never been anywhere in the main debate a word about needless entitlements, entitlements that we can no longer afford, and very little about the concept of property. It is becoming more and more taken for granted that if there is money, the government has more right to say how it should be spent than the people who own the money; more and more taken for granted that “the rich” do not have a right to what they have, because they do not deserve it.

That is a command economy.

Mail 683 Thursday July 14, 2011 – 2

A Modest Proposal

Dear Jerry Pournelle:

In the following email I satirically take on the persona of a Chinese Communist Party apparatchnik, sending a message to you, satirically given the persona of a higher-up official. In it I propose an offer that the Chinese would be foolish not to make, and the Americans would be hard-pressed not to accept. And it has precedent in our own history.

Satirically yet sincerely,

Nathaniel Hellerstein

***

Dear Comrade Pournelle:

I write you to propose a way for us, the People’s Republic of China, to

reclaim Taiwan without firing a shot. Our army is strong and could

easily over-run the rebel province, were it not for the Americans. Also

it would be a shame to damage the property while repossessing it; and

the use of force could have a negative propaganda effect.

The key is to convince the Americans to go. Fortunately they are

trillions of dollars in debt to us, due to their foolish greed and our

foresight. The solution, then, is simple; we need merely _buy_ Taiwan.

This has historical precedent; consider the Louisiana Purchase.

The procedure would be simplicity itself. We would merely agree to

cancel part of the debt we hold over them, along with interest payments

owed to us; and in exchange the Americans withdraw all of their armed

forces from the area; and then, for political cover, hold a referendum

on the island, agreeing to the transfer of power. The election will, of

course, be fixed to ensure the correct outcome; the Americans are

skilled at such things.

Some of your comrades in the Party will object that the barbarous

Americans are too proud to betray an ally. They are indeed proud and

bellicose, but they are also corrupt, and they are economically

vulnerable. So much so that our trillions of dollars of holdings might

depreciate badly, soon; so I suggest that we bargain that debt away

while it’s still worth something.

Sincerely,

Comrade Hellerstein

= = = =  Surprise. it’s working. ===

 

Re: A Modest Proposal

Dear Comrade Pournelle:

Our plan is working perfectly. The Americans are aware of what’s

happening, but they can’t prove it, and they lack the political will to

resist. Right now they are too busy destroying their own credit rating.

I would like to brag that our agents were responsible for that triumph,

but it seems that the Americans are doing it to themselves. Amazing!

I am informed that there is another historical precedent for our plan

to purchase Taiwan; namely, the absorption of the Republic of Texas

into the United States, in exchange for assuming the Republic’s debt.

Buying instead of invading Taiwan will of course be an ideological

victory for capitalism. Perhaps the Americans will console themselves

with that.

Sincerely,

Comrade Hellerstein

Alpha, Omega

http://news.yahoo.com/blogs/upshot/two-photos-thirty-years-apart-move-192313669.html

Steven J. Dunn

"Economic miracles never happen with command economies"

The counter example to that is the USSR during the late 1920s & 30s. Stalin may have exaggerated his productivity figures but WW2 proved that the USSR’s economy really had grown from destitution to the world’s second. Much of the appeal of communism was based on this achievement (at one time it appealed to me on those grounds) while the rest of the world was in Depression and I believe it has to be explained It can partly be explained by the pure human cost paid but if the command economy was that moribund that would not have been sufficient.

My current explanation is that Trotsky became electricity commissar in 1925 and set in train a decade of 23% annual growth in electricity capacity and that, then, newish technology was the or a pivotal one and allowed the economy to grow at 10% at a time when introduction of command factors into the US economy had depressed it. However this may be an after the fact rationalisation (and iprojection onto Trotsky) and I would be interested in your thoughts.

Neil Craig

Actually, Lenin was forced to resort to his New Economic Policy much to the dismay of many devoted Marxists. Russia went from being the breadbasket of Europe to famine. Command economies can always produce some spectacular results in their areas of concentration. Intelligent masters understand that it is best not to bind the mouths of the kine who tread the grain.

"The Disappearing Recovery"

http://online.wsj.com/article/SB10001424052702304911104576443953024891120.html?mod=WSJ_Opinion_LEADTop

We can only hope America is paying attention.

Phil=

If something cannot go on forever, it will stop.

Armed guards at fast food restaurants

Dear Jerry:

The person who thinks that only China has armed guards at fast food restaurants needs to get out more. This is very common and depends, as do all such services, on the crime rate, threat level, and insurance premiums for not having such a guard. You will recall I used to sell these services. Private security officers, armed and unarmed, are used at thousands of such restaurants around the world. Here in L.A. some of them have died in the line of duty, shot by gang-bangers who didn’t like them challenging their dominance. Sometimes off-duty police officers are hired for this, but generally, they are too expensive, expect free food not just for themselves but for their fellow officers and disappear just when there is a real emergency because they get called back to duty to respond to it. The most dangerous account like this I ever sold myself was in Chicago, located at the juncture of five different gang turfs and going broke because the off-duty cops would only work it if there were two of them. We replaced them with one officer, a burned out Lieutenant from the Housing Projects force, who was a Black Muslim, and took no guff from anyone. He simply looked at anyone who acted up and they got real quiet, real fast. And that restaurant actually started making money for the first time in its history because people were no longer afraid to come there. And all our guy did was sit there and look hard at anyone who was acting out.

Sometimes the private sector can do it better.

Sincerely,

Francis Hamit

Shades of Dune

Jerry,

"The properties of shear-thickening fluids lead to the strange result, however, that while such a vest would defend against a sudden, aggressive knife attack, it wouldn’t guard against a slowly piercing one."

A Bomb-Proof Bag to Foil Terrorists

http://www.technologyreview.com/blog/helloworld/26959/?ref=rss

Reminiscent of the personal shields in Frank Herbert’s Dune.

Regards,

George