Sunday, November 29, 2009

The Income Tax System is Broken (part III)

In order to become a citizen, immigrants are tested on their knowledge of the American constitution, culture and history. The logic behind this is that in order to positively contribute to political and civic life certain knowledge is needed. I cannot help but think that it would improve the quality of our politics and policies if we subjected native born Americans to the same requirements. Something to think about.

The Income Tax System is Broken (part II)

All evidence indicates that the percentage of people who are net recipients of tax dollars will continue to increase, which will diminish government oversight and accelerate spending, both of which will accelerate the growth of the national debt.

What makes fiscal reform so difficulty is that the growing population of tax consumers vote in politicians who support these unsustainable policies. Or, in simpler terms, tax consumers are increasingly able to "vote themselves a raise."

My solution is to only allow net tax producers to vote. Those who do not pay taxes cannot be allowed to vote themselves a raise at the expense of the general public. This policy would allow for the election of more fiscally and socially responsible politicians. Rather than disenfranchise millions of citizens, I am hoping that a modest income tax would be imposed on them. Although this would generate little revenue, having all citizens share the burden of "free programs" would
surely increase their sense of civic and fiscal responsibility.

Next we would need a team of 10,000 hulking lawyers to defend against the onslaught of lawsuits from the ACLU. Any volunteers?

The Income Tax System is Broken (part I)

At least 43% of Americans do not pay federal income taxes. I cannot stress how huge the economic and political implications of this article are. Keep in mind that this is not a conservative issue; the left leaning Brookings Institute and Urban Institute co-authored this report.

The Income Tax System is Broken



43 Percent Of Americans Pay No Federal Income Tax, A Sign That Something's Wrong, Writes Declan McCullagh

By Declan McCullagh

(CBS) On April 15, don't be surprised if the line at your local post office is a bit shorter than usual. That's because your neighbors may not be paying any income taxes this year.

An astonishing 43.4 percent of Americans now pay zero or negative federal income taxes. The number of single or jointly-filing "taxpayers" - the word must be applied sparingly - who pay no taxes or receive government handouts has reached 65.6 million, out of a total of 151 million.

Those numbers come from an analysis published yesterday by the Tax Policy Center, a joint project of the Urban Institute and Brookings Institution. Neither is a low-tax or conservative advocacy group; the Urban Institute was created under the Johnson administration during the Great Society era, and it receives most of its funding from the federal government.

"You've got a larger and larger share of people paying less and less for the services provided by the federal government," says Roberton Williams, a senior fellow at the Tax Policy Center. "The concern is that the majority can say, 'Let's have more benefits, spend more,' if they're not paying for it. It's 'free.' That's not a good thing to have."

By historic standards, today's situation is an aberration. Between 1950 and 1990, the number of owe-no-money federal tax returns averaged 21 percent, dipping to 18 percent in 1986, according to Tax Foundation data. In the 1990s, the owe-no-money percentage hovered around 25 percent of taxpayers.

But then politicians began another round of tinkering with the tax code, adding reams of new pages to an already incomprehensible set of rules that even the guy overseeing the IRS can't seem to figure out.

Democrats wanted to lower taxes on the least affluent, while Republicans wanted to lower taxes on everyone. The result was bipartisan enthusiasm for tax credits aimed at everything from children (1997) and college students (1997) to hybrid cars (2005) and homebuyers (2009). Many of these credits dole out cash to people even if they report no income, making them mere government handouts.

"There's no difference at all in terms of the effects on the federal deficit," says Williams of the Tax Policy Center. "It's perfectly equivalent. It's just easier to say, 'I cut your taxes' as opposed to 'I created a new federal program to send money to people.'"

I'm talking here about federal income taxes, not other taxes like Social Security, Medicare, state income taxes, sales taxes, or car registration taxes, some of which are extracted through payroll deductions. The owe-no-money crowd tends to get hit by at least some of those.

The perils of today's situation should be obvious. The United States is close to a tipping point - where most people can skip the post office run on April 15 to mail a check because they're expecting one from the government instead.

"It is somewhat odd that you have a decreasing number of folks paying into the federal income tax system, a decreasing number of folks who have a stake in what the government pays for," says Matt Moon of the non-partisan Tax Foundation in Washington, D.C.

It then becomes tempting to vote for politicians promising more and more handouts, paid for by money forcibly extracted from an ever-shrinking number of their neighbors. In addition to being immoral, it's poor public policy: people who pay no taxes but nevertheless get benefits are less likely to be careful overseers of their elected representatives.

"At some point people become less and less invested in making sure their government is accountable and frugal," says Peter Sepp, vice president for policy and communications at the National Taxpayers Union, a lower-tax advocacy group. "If you pay very little for getting all kinds of government benefits, you might view those programs as a bargain, even though they may waste tens of billions of dollars a year."

As a candidate, President Obama promised still more tax credits, including ones aimed at child care, "clean cars," and savings accounts. As the Wall Street Journal explained at the time: "You can receive these checks even if you have no income-tax liability. In other words, they are an income transfer - a federal check - from taxpayers to nontaxpayers. Once upon a time we called this 'welfare,' or in George McGovern's 1972 campaign a 'Demogrant.'"

A recession, the stimulus, and innumerable bailouts have placed Mr. Obama's plans on hold. But the expiration of the Bush tax cuts at midnight on December 31, 2010 will renew interest in a tax law rewrite.

That will be an opportunity to gut the current system and replace it with something simpler and fairer. After all, if government is important enough to force most of us to work until April 13 to pay its bills, why shouldn't everyone share the pain?

http://www.cbsnews.com/stories/2009/04/15/politics/otherpeoplesmoney/main4945874.shtml

Saturday, November 28, 2009

Steve Scores Another Bullseye.



As usual, Steve Malanga presents facts, figures and flawless reason in a debate that is dominated by feelings. If Mr. Malanga were to get sufficient air time, we can be certain that Janet Murguia of La Raza would unleash a campaign to get his "hate speech" taken off the airwaves.

How Unskilled Immigrants Hurt Our Economy

By Steven Malanga

A handful of industries get low-cost labor, and the taxpayers foot the bill.

The day after Librado Velasquez arrived on Staten Island after a long, surreptitious journey from his Chiapas, Mexico, home, he headed out to a street corner to wait with other illegal immigrants looking for work. Velasquez, who had supported his wife, seven kids, and his in-laws as a campesino, or peasant farmer, until a 1998 hurricane devastated his farm, eventually got work, off the books, loading trucks at a small New Jersey factory, which hired illegals for jobs that required few special skills. The arrangement suited both, until a work injury sent Velasquez to the local emergency room, where federal law required that he be treated, though he could not afford to pay for his care. After five operations, he is now permanently disabled and has remained in the United States to pursue compensation claims.

“I do not have the use of my leg without walking with a cane, and I do not have strength in my arm in order to lift things,” Velasquez said through an interpreter at New York City Council hearings. “I have no other way to live except if I receive some other type of compensation. I need help, and I thought maybe my son could come and work here and support me here in the United States.”

Velasquez’s story illustrates some of the fault lines in the nation’s current, highly charged, debate on immigration. Since the mid-1960s, America has welcomed nearly 30 million legal immigrants and received perhaps another 15 million illegals, numbers unprecedented in our history. These immigrants have picked our fruit, cleaned our homes, cut our grass, worked in our factories, and washed our cars. But they have also crowded into our hospital emergency rooms, schools, and government-subsidized aid programs, sparking a fierce debate about their contributions to our society and the costs they impose on it.

Advocates of open immigration argue that welcoming the Librado Velasquezes of the world is essential for our American economy: our businesses need workers like him, because we have a shortage of people willing to do low-wage work. Moreover, the free movement of labor in a global economy pays off for the United States, because immigrants bring skills and capital that expand our economy and offset immigration’s costs. Like tax cuts, supporters argue, immigration pays for itself.

But the tale of Librado Velasquez helps show why supporters are wrong about today’s immigration, as many Americans sense and so much research has demonstrated. America does not have a vast labor shortage that requires waves of low-wage immigrants to alleviate; in fact, unemployment among unskilled workers is high—about 30 percent. Moreover, many of the unskilled, uneducated workers now journeying here labor, like Velasquez, in shrinking industries, where they force out native workers, and many others work in industries where the availability of cheap workers has led businesses to suspend investment in new technologies that would make them less labor-intensive.

Yet while these workers add little to our economy, they come at great cost, because they are not economic abstractions but human beings, with their own culture and ideas—often at odds with our own. Increasing numbers of them arrive with little education and none of the skills necessary to succeed in a modern economy. Many may wind up stuck on our lowest economic rungs, where they will rely on something that immigrants of other generations didn’t have: a vast U.S. welfare and social-services apparatus that has enormously amplified the cost of immigration. Just as welfare reform and other policies are helping to shrink America’s underclass by weaning people off such social programs, we are importing a new, foreign-born underclass. As famed free-market economist Milton Friedman puts it: “It’s just obvious that you can’t have free immigration and a welfare state.”

Immigration can only pay off again for America if we reshape our policy, organizing it around what’s good for the economy by welcoming workers we truly need and excluding those who, because they have so little to offer, are likely to cost us more than they contribute, and who will struggle for years to find their place here.

Hampering today’s immigration debate are our misconceptions about the so-called first great migration some 100 years ago, with which today’s immigration is often compared. We envision that first great migration as a time when multitudes of Emma Lazarus’s “tired,” “poor,” and “wretched refuse” of Europe’s shores made their way from destitution to American opportunity. Subsequent studies of American immigration with titles like The Uprooted convey the same impression of the dispossessed and displaced swarming here to find a new life. If America could assimilate 24 million mostly desperate immigrants from that great migration—people one unsympathetic economist at the turn of the twentieth century described as “the unlucky, the thriftless, the worthless”—surely, so the story goes, today’s much bigger and richer country can absorb the millions of Librado Velasquezes now venturing here.

But that argument distorts the realities of the first great migration. Though fleeing persecution or economic stagnation in their homelands, that era’s immigrants—Jewish tailors and seamstresses who helped create New York’s garment industry, Italian stonemasons and bricklayers who helped build some of our greatest buildings, German merchants, shopkeepers, and artisans—all brought important skills with them that fit easily into the American economy. Those waves of immigrants—many of them urban dwellers who crossed a continent and an ocean to get here—helped supercharge the workforce at a time when the country was going through a transformative economic expansion that craved new workers, especially in its cities. A 1998 National Research Council report noted “that the newly arriving immigrant nonagricultural work force . . . was (slightly) more skilled than the resident American labor force”: 27 percent of them were skilled laborers, compared with only 17 percent of that era’s native-born workforce.

Many of these immigrants quickly found a place in our economy, participating in the workforce at a higher rate even than the native population. Their success at finding work sent many of them quickly up the economic ladder: those who stayed in America for at least 15 years, for instance, were just as likely to own their own business as native-born workers of the same age, one study found. Another study found that their American-born children were just as likely to be accountants, engineers, or lawyers as Americans whose families had been here for generations.

What the newcomers of the great migration did not find here was a vast social-services and welfare state. They had to rely on their own resources or those of friends, relatives, or private, often ethnic, charities if things did not go well. That’s why about 70 percent of those who came were men in their prime. It’s also why many of them left when the economy sputtered several times during the period. For though one often hears that restrictive anti-immigration legislation starting with the Emergency Quota Act of 1921 ended the first great migration, what really killed it was the crash of the American economy. Even with the 1920s quotas, America welcomed some 4.1 million immigrants, but in the Depression of the 1930s, the number of foreign immigrants tumbled far below quota levels, to 500,000. With America’s streets no longer paved with gold, and without access to the New Deal programs for native-born Americans, immigrants not only stopped coming, but some 60 percent of those already here left in a great remigration home.

Today’s immigration has turned out so differently in part because it emerged out of the 1960s civil rights and Great Society mentality. In 1965, a new immigration act eliminated the old system of national quotas, which critics saw as racist because it greatly favored European nations. Lawmakers created a set of broader immigration quotas for each hemisphere, and they added a new visa preference category for family members to join their relatives here. Senate immigration subcommittee chairman Edward Kennedy reassured the country that, “contrary to the charges in some quarters, [the bill] will not inundate America with immigrants,” and “it will not cause American workers to lose their jobs.”

But, in fact, the law had an immediate, dramatic effect, increasing immigration by 60 percent in its first ten years. Sojourners from poorer countries around the rest of the world arrived in ever-greater numbers, so that whereas half of immigrants in the 1950s had originated from Europe, 75 percent by the 1970s were from Asia and Latin America. And as the influx of immigrants grew, the special-preferences rule for family unification intensified it further, as the pool of eligible family members around the world also increased. Legal immigration to the U.S. soared from 2.5 million in the 1950s to 4.5 million in the 1970s to 7.3 million in the 1980s to about 10 million in the 1990s.

As the floodgates of legal immigration opened, the widening economic gap between the United States and many of its neighbors also pushed illegal immigration to levels that America had never seen. In particular, when Mexico’s move to a more centralized, state-run economy in the 1970s produced hyperinflation, the disparity between its stagnant economy and U.S. prosperity yawned wide. Mexico’s per-capita gross domestic product, 37 percent of the United States’ in the early 1980s, was only 27 percent of it by the end of the decade—and is now just 25 percent of it. With Mexican farmworkers able to earn seven to ten times as much in the United States as at home, by the 1980s illegals were pouring across our border at the rate of about 225,000 a year, and U.S. sentiment rose for slowing the flow.

But an unusual coalition of business groups, unions, civil rights activists, and church leaders thwarted the call for restrictions with passage of the inaptly named 1986 Immigration Reform and Control Act, which legalized some 2.7 million unauthorized aliens already here, supposedly in exchange for tougher penalties and controls against employers who hired illegals. The law proved no deterrent, however, because supporters, in subsequent legislation and court cases argued on civil rights grounds, weakened the employer sanctions. Meanwhile, more illegals flooded here in the hope of future amnesties from Congress, while the newly legalized sneaked their wives and children into the country rather than have them wait for family-preference visas. The flow of illegals into the country rose to between 300,000 and 500,000 per year in the 1990s, so that a decade after the legislation that had supposedly solved the undocumented alien problem by reclassifying them as legal, the number of illegals living in the United States was back up to about 5 million, while today it’s estimated at between 9 million and 13 million.

The flood of immigrants, both legal and illegal, from countries with poor, ill-educated populations, has yielded a mismatch between today’s immigrants and the American economy and has left many workers poorly positioned to succeed for the long term. Unlike the immigrants of 100 years ago, whose skills reflected or surpassed those of the native workforce at the time, many of today’s arrivals, particularly the more than half who now come from Central and South America, are farmworkers in their home countries who come here with little education or even basic training in blue-collar occupations like carpentry or machinery. (A century ago, farmworkers made up 35 percent of the U.S. labor force, compared with the under 2 percent who produce a surplus of food today.) Nearly two-thirds of Mexican immigrants, for instance, are high school dropouts, and most wind up doing either unskilled factory work or small-scale construction projects, or they work in service industries, where they compete for entry-level jobs against one another, against the adult children of other immigrants, and against native-born high school dropouts. Of the 15 industries employing the greatest percentage of foreign-born workers, half are low-wage service industries, including gardening, domestic household work, car washes, shoe repair, and janitorial work. To take one stark example: whereas 100 years ago, immigrants were half as likely as native-born workers to be employed in household service, today immigrants account for 27 percent of all domestic workers in the United States.

Although open-borders advocates say that these workers are simply taking jobs Americans don’t want, studies show that the immigrants drive down wages of native-born workers and squeeze them out of certain industries. Harvard economists George Borjas and Lawrence Katz, for instance, estimate that low-wage immigration cuts the wages for the average native-born high school dropout by some 8 percent, or more than $1,200 a year. Other economists find that the new workers also push down wages significantly for immigrants already here and native-born Hispanics.

Consequently, as the waves of immigration continue, the sheer number of those competing for low-skilled service jobs makes economic progress difficult. A study of the impact of immigration on New York City’s restaurant business, for instance, found that 60 percent of immigrant workers do not receive regular raises, while 70 percent had never been promoted. One Mexican dishwasher aptly captured the downward pressure that all these arriving workers put on wages by telling the study’s authors about his frustrating search for a 50-cent raise after working for $6.50 an hour: “I visited a few restaurants asking for $7 an hour, but they only offered me $5.50 or $6,” he said. “I had to beg [for a job].”

Similarly, immigration is also pushing some native-born workers out of jobs, as Kenyon College economists showed in the California nail-salon workforce. Over a 16-year period starting in the late 1980s, some 35,600 mostly Vietnamese immigrant women flooded into the industry, a mass migration that equaled the total number of jobs in the industry before the immigrants arrived. Though the new workers created a labor surplus that led to lower prices, new services, and somewhat more demand, the economists estimate that as a result, 10,000 native-born workers either left the industry or never bothered entering it.

In many American industries, waves of low-wage workers have also retarded investments that might lead to modernization and efficiency. Farming, which employs a million immigrant laborers in California alone, is the prime case in point. Faced with a labor shortage in the early 1960s, when President Kennedy ended a 22-year-old guest-worker program that allowed 45,000 Mexican farmhands to cross over the border and harvest 2.2 million tons of California tomatoes for processed foods, farmers complained but swiftly automated, adopting a mechanical tomato-picking technology created more than a decade earlier. Today, just 5,000 better-paid workers—one-ninth the original workforce—harvest 12 million tons of tomatoes using the machines.

The savings prompted by low-wage migrants may even be minimal in crops not easily mechanized. Agricultural economists Wallace Huffman and Alan McCunn of Iowa State University have estimated that without illegal workers, the retail cost of fresh produce would increase only about 3 percent in the summer-fall season and less than 2 percent in the winter-spring season, because labor represents only a tiny percent of the retail price of produce and because without migrant workers, America would probably import more foreign fruits and vegetables. “The question is whether we want to import more produce from abroad, or more workers from abroad to pick our produce,” Huffman remarks.

For American farmers, the answer has been to keep importing workers—which has now made the farmers more vulnerable to foreign competition, since even minimum-wage immigrant workers can’t compete with produce picked on farms in China, Chile, or Turkey and shipped here cheaply. A flood of low-priced Turkish raisins several years ago produced a glut in the United States that sharply drove down prices and knocked some farms out of business, shrinking total acreage in California devoted to the crop by one-fifth, or some 50,000 acres. The farms that survived are now moving to mechanize swiftly, realizing that no amount of cheap immigrant labor will make them competitive.

As foreign competition and mechanization shrink manufacturing and farmworker jobs, low-skilled immigrants are likely to wind up farther on the margins of our economy, where many already operate. For example, although only about 12 percent of construction workers are foreign-born, 100,000 to 300,000 illegal immigrants have carved a place for themselves as temporary workers on the fringes of the industry. In urban areas like New York and Los Angeles, these mostly male illegal immigrants gather on street corners, in empty lots, or in Home Depot parking lots to sell their labor by the hour or the day, for $7 to $11 an hour.

That’s far below what full-time construction workers earn, and for good reason. Unlike the previous generations of immigrants who built America’s railroads or great infrastructure projects like New York’s bridges and tunnels, these day laborers mostly do home-improvement projects. A New York study, for instance, found that four in ten employers who hire day laborers are private homeowners or renters wanting help with cleanup chores, moving, or landscaping. Another 56 percent were contractors, mostly small, nonunion shops, some owned by immigrants themselves, doing short-term, mostly residential work. The day laborer’s market, in other words, has turned out to be a boon for homeowners and small contractors offering their residential clients a rock-bottom price, but a big chunk of the savings comes because low-wage immigration has produced such a labor surplus that many of these workers are willing to take jobs without benefits and with salaries far below industry norms.

Because so much of our legal and illegal immigrant labor is concentrated in such fringe, low-wage employment, its overall impact on our economy is extremely small. A 1997 National Academy of Sciences study estimated that immigration’s net benefit to the American economy raises the average income of the native-born by only some $10 billion a year—about $120 per household. And that meager contribution is not the result of immigrants helping to build our essential industries or making us more competitive globally but instead merely delivering our pizzas and cutting our grass. Estimates by pro-immigration forces that foreign workers contribute much more to the economy, boosting annual gross domestic product by hundreds of billions of dollars, generally just tally what immigrants earn here, while ignoring the offsetting effect they have on the wages of native-born workers.

If the benefits of the current generation of migrants are small, the costs are large and growing because of America’s vast range of social programs and the wide advocacy network that strives to hook low-earning legal and illegal immigrants into these programs. A 1998 National Academy of Sciences study found that more than 30 percent of California’s foreign-born were on Medicaid—including 37 percent of all Hispanic households—compared with 14 percent of native-born households. The foreign-born were more than twice as likely as the native-born to be on welfare, and their children were nearly five times as likely to be in means-tested government lunch programs. Native-born households pay for much of this, the study found, because they earn more and pay higher taxes—and are more likely to comply with tax laws. Recent immigrants, by contrast, have much lower levels of income and tax compliance (another study estimated that only 56 percent of illegals in California have taxes deducted from their earnings, for instance). The study’s conclusion: immigrant families cost each native-born household in California an additional $1,200 a year in taxes.

Immigration’s bottom line has shifted so sharply that in a high-immigration state like California, native-born residents are paying up to ten times more in state and local taxes than immigrants generate in economic benefits. Moreover, the cost is only likely to grow as the foreign-born population—which has already mushroomed from about 9 percent of the U.S. population when the NAS studies were done in the late 1990s to about 12 percent today—keeps growing. And citizens in more and more places will feel the bite, as immigrants move beyond their traditional settling places. From 1990 to 2005, the number of states in which immigrants make up at least 5 percent of the population nearly doubled from 17 to 29, with states like Arkansas, South Dakota, South Carolina, and Georgia seeing the most growth. This sharp turnaround since the 1970s, when immigrants were less likely to be using the social programs of the Great Society than the native-born population, says Harvard economist Borjas, suggests that welfare and other social programs are a magnet drawing certain types of immigrants—nonworking women, children, and the elderly—and keeping them here when they run into difficulty.


Not only have the formal and informal networks helping immigrants tap into our social spending grown, but they also get plenty of assistance from advocacy groups financed by tax dollars, working to ensure that immigrants get their share of social spending. Thus, the Newark-based New Jersey Immigration Policy Network receives several hundred thousand government dollars annually to help doctors and hospitals increase immigrant enrollment in Jersey’s subsidized health-care programs. Casa Maryland, operating in the greater Washington area, gets funding from nearly 20 federal, state, and local government agencies to run programs that “empower” immigrants to demand benefits and care from government and to “refer clients to government and private social service programs for which they and their families may be eligible.”

Pols around the country, intent on currying favor with ethnic voting blocs by appearing immigrant-friendly, have jumped on the benefits-for-immigrants bandwagon, endorsing “don’t ask, don’t tell” policies toward immigrants who register for benefits, giving tax dollars to centers that find immigrants work and aid illegals, and enacting legislation prohibiting local authorities from cooperating with federal immigration officials. In New York, for instance, Mayor Michael Bloomberg has ordered city agencies to ignore an immigrant’s status in providing services. “This policy’s critical to encourage immigrant day laborers to access . . . children’s health insurance, a full range of preventive primary and acute medical care, domestic violence counseling, emergency shelters, police protection, consumer fraud protections, and protection against discrimination through the Human Rights Commission,” the city’s Immigrant Affairs Commissioner, Guillermo Linares, explains.

Almost certainly, immigrants’ participation in our social welfare programs will increase over time, because so many are destined to struggle in our workforce. Despite our cherished view of immigrants as rapidly climbing the economic ladder, more and more of the new arrivals and their children face a lifetime of economic disadvantage, because they arrive here with low levels of education and with few work skills—shortcomings not easily overcome. Mexican immigrants, who are up to six times more likely to be high school dropouts than native-born Americans, not only earn substantially less than the native-born median, but the wage gap persists for decades after they’ve arrived. A study of the 2000 census data, for instance, shows that the cohort of Mexican immigrants between 25 and 34 who entered the United States in the late 1970s were earning 40 to 50 percent less than similarly aged native-born Americans in 1980, but 20 years later they had fallen even further behind their native-born counterparts. Today’s Mexican immigrants between 25 and 34 have an even larger wage gap relative to the native-born population. Adjusting for other socioeconomic factors, Harvard’s Borjas and Katz estimate that virtually this entire wage gap is attributable to low levels of education.

Meanwhile, because their parents start off so far behind, the American-born children of Mexican immigrants also make slow progress. First-generation adult Americans of Mexican descent studied in the 2000 census, for instance, earned 14 percent less than native-born Americans. By contrast, first-generation Portuguese Americans earned slightly more than the average native-born worker—a reminder of how quickly immigrants once succeeded in America and how some still do. But Mexico increasingly dominates our immigration flows, accounting for 43 percent of the growth of our foreign-born population in the 1990s.

One reason some ethnic groups make up so little ground concerns the transmission of what economists call “ethnic capital,” or what we might call the influence of culture. More than previous generations, immigrants today tend to live concentrated in ethnic enclaves, and their children find their role models among their own group. Thus the children of today’s Mexican immigrants are likely to live in a neighborhood where about 60 percent of men dropped out of high school and now do low-wage work, and where less than half of the population speak English fluently, which might explain why high school dropout rates among Americans of Mexican ancestry are two and a half times higher than dropout rates for all other native-born Americans, and why first-generation Mexican Americans do not move up the economic ladder nearly as quickly as the children of other immigrant groups.

In sharp contrast is the cultural capital transmitted by Asian immigrants to children growing up in predominantly Asian-American neighborhoods. More than 75 percent of Chinese immigrants and 98 percent of South Asian immigrants to the U.S. speak English fluently, while a mid-1990s study of immigrant households in California found that 37 percent of Asian immigrants were college graduates, compared with only 3.4 percent of Mexican immigrants. Thus, even an Asian-American child whose parents are high school dropouts is more likely to grow up in an environment that encourages him to stay in school and learn to speak English well, attributes that will serve him well in the job market. Not surprisingly, several studies have shown that Asian immigrants and their children earn substantially more than Mexican immigrants and their children.

Given these realities, several of the major immigration reforms now under consideration simply don’t make economic sense—especially the guest-worker program favored by President Bush and the U.S. Senate. Careful economic research tells us that there is no significant shortfall of workers in essential American industries, desperately needing supplement from a massive guest-worker program. Those few industries now relying on cheap labor must focus more quickly on mechanization where possible. Meanwhile, the cost of paying legal workers already here a bit more to entice them to do such low-wage work as is needed will have a minimal impact on our economy.

The potential woes of a guest-worker program, moreover, far overshadow any economic benefit, given what we know about the long, troubled history of temporary-worker programs in developed countries. They have never stemmed illegal immigration, and the guest workers inevitably become permanent residents, competing with the native-born and forcing down wages. Our last guest-worker program with Mexico, begun during World War II to boost wartime manpower, grew larger in the postwar era, because employers who liked the cheap labor lobbied hard to keep it. By the mid-1950s, the number of guest workers reached seven times the annual limit during the war itself, while illegal immigration doubled, as the availability of cheap labor prompted employers to search for ever more of it rather than invest in mechanization or other productivity gains.

The economic and cultural consequences of guest-worker programs have been devastating in Europe, and we risk similar problems. When post–World War II Germany permitted its manufacturers to import workers from Turkey to man the assembly lines, industry’s investment in productivity declined relative to such countries as Japan, which lacked ready access to cheap labor. When Germany finally ended the guest-worker program once it became economically unviable, most of the guest workers stayed on, having attained permanent-resident status. Since then, the descendants of these workers have been chronically underemployed and now have a crime rate double that of German youth.

France has suffered similar consequences. In the post–World War II boom, when French unemployment was under 2 percent, the country imported an industrial labor force from its colonies; by the time France’s industrial jobs began evaporating in the 1980s, these guest workers and their children numbered in the millions, and most had made little economic progress. They now inhabit the vast housing projects, or cit├ęs, that ring Paris—and that have recently been the scene of chronic rioting. Like Germany, France thought it was importing a labor force, but it wound up introducing a new underclass.

“Importing labor is far more complicated than importing other factors of production, such as commodities,” write University of California at Davis prof Philip Martin, an expert on guest-worker programs, and Michael Teitelbaum, a former member of the U.S. Commission on Immigration Reform. “Migration involves human beings, with their own beliefs, politics, cultures, languages, loves, hates, histories, and families.”

http://www.city-journal.org/html/16_3_immigrants_economy.html

Cash For Clunkers: It Gets Worse

One for the watercooler


By Leslie Moore Mira

September 1, 2009

For doubting Thomases of Cash for Clunkers handouts, here's more fodder for skepticism in the face of what proved blowout media coverage: according to a University of California-Davis study, the federal government's Cash for Clunkers program is expected to have paid "at least 10 times the 'sticker price' to reduce emissions of the greenhouse gas carbon dioxide."

"While carbon credits are projected to sell in the U.S. for about $28 per ton (today's price in Europe was $20), even the best-case calculation of the cost of the clunkers rebate is $237 per ton," the university said, citing a report by UC Davis transportation economist Christopher Knittel.

"When burned, a gallon of gasoline creates roughly 20 pounds of carbon dioxide. I combined that known value with an average rebate of $4,200 and a range of assumptions about the fuel economy of the new vehicles purchased and how long the clunkers would have been on the road if not for the program," Knittel said through the statement. "I even assumed drivers didn't change their habits, although some analysts have suggested that the owners of new vehicles will drive more than they would have with their old cars."

"In the end, the lowest cost to remove one ton of carbon from the environment was $237. More likely scenarios produced a cost of more than $500 per ton, even when we accounted for reductions in pollutants other than greenhouse gases," he said. "That suggests the Cash for Clunkers program is an expensive way to reduce carbon."

Knittel's study did not analyze the program's other goals of stimulating the economy and providing relief for automobile manufacturers, the university said. Knittel's analysis, titled "The Implied Cost of Carbon Dioxide Under the Cash for Clunkers Program," was published online by the University of California Energy Institute and was funded by the Energy Institute and the Institute of Transportation Studies.

http://www.platts.com/weblog/oilblog/2009/09/01/one_for_the_wat.html

Arigato Obama San!



I am sure that the President of Japan was thanking Obama for Cash For Clunkers, because in effect it served as a stimulus plan for foreign auto makers, as demonstrated by the statistics presented in the following article:

Cash-for-Clunkers = Cash-for-Foreign Automakers?

By Alan Tonelson

Sunday, September 13, 2009

U.S. AUTO INDUSTRY TRENDS

U.S. auto sales during first month of Cash for Clunkers program* (June-July, 2009): +16.02%

U.S. auto imports since Cash for Clunkers bill introduced** : +27.62%

U.S. auto parts imports since Cash for Clunkers bill introduced: +4.06%

U.S. auto trade deficit since Cash for Clunkers bill introduced: +56.10%

U.S. auto parts trade deficit since Cash for Clunkers bill introduced: +16.23%

Overall U.S. automotive trade deficit since Cash for Clunkers bill introduced: +43.36%

Overall U.S. trade deficit since Cash for Clunkers bill introduced: +9.71%

U.S. manufacturing trade deficit since Cash for Clunkers bill introduced: +26.36%

*change from June-July, 2009**March 17, 2009


http://www.americaneconomicalert.org/view_art.asp?Prod_ID=3296

Jimmy Carter Prize Goes to: Naomi Klein



The Jimmy Carter Prize for the Advancement of Douchebaggery goes to Naomi Klein for supporting the irrational, hateful and counterproductive cultural & economic boycott of Israel. After reading this I hope that my liberal compatriots will take Ms. Klein's other economic and political opinions with a huge bag of salt.

Enclosed are excerpts from an article by Hillel Neuer of the United Nations Watch, that explores her douchebaggery. To view the full article, click on the link at the bottom of the page:

Supporters of liberal democratic values may have a hard time understanding why anti-globalization activist Naomi Klein has recruited Jane Fonda and other stars to boycott the Toronto International Film Festival for the crime of showing films from Tel Aviv, a symbol of tolerance in a region of tyranny.

Klein has never called for a boycott of films or any other products from the dozens of Arab and Islamic countries that systematically subjugate their women, torture dissidents and persecute religious and ethnic minorities.

Nor has she ever called for the boycotting of films from the many Western democracies, including Canada, whose soldiers are fighting Islamist terrorists in Afghanistan or Iraq.

Klein's singling out of Israel -- particularly its most liberal city and cultural sector -- has no rational basis.

This should come as no surprise. For while Klein's statements and writings on Israel pose as sober analysis, the truth is that she has always acted on this subject out of intense emotion, hysteria and anger, rather than rational thought, facts or logic.

And now, in a cover story for this month's issue of Harper's Magazine, Klein offers a revisionist whitewash of the anti-Semitic Durban conference of 2001, laments the collapse of this year's Durban II conference and portrays Jewish organizations as lying profiteers who sabotaged this UN cure-all for racism. As she did in Ramallah, Klein accuses my organization, UN Watch, of "misinformation," yet fails to name a single example.

But Klein has certainly succeeded in becoming today's leading opponent of Israel in the Western world. While this is a new role for someone famous as an anti-capitalist crusader, the truth is that Klein has nurtured a strange rage against her own people, faith and national cause, from a remarkably young age.

At 12, as Klein has proudly recounted, she wrote her Bat Mitzvah speech "about Jews being racist." Her target then was attitudes supposedly held by her sixth-grade classmates in Montreal's well-respected Jewish People's School.

Klein's article was anything but normal. Its thesis sentence and blaring headline: "What Israel has become: Racism and misogyny at the core of its being.

"Israeli men," she said, "reach maturity by brutalizing and degrading Palestinians." Then there was "Israeli men's misogyny toward Israeli women.

Most disturbing, said Klein, "is something known to Israeli women as 'Holocaust pornography,' where images of emaciated women near ovens, shower heads, cattle cars and the like are used to sell clothing and other products." Jewish women, she informed her readers, "are sexualized as Holocaust victims for Israeli men to masturbate over ... the themes are fire, gas, trains, emaciation and death.

If such aberrant ads or magazines ever existed, they were well hidden. But Klein was looking to demonize -- not only Israel, but Judaism, and Jews.

"A Jewish education is an education of fear," continued Klein. "Jews made the shift from victims to victimizers with terrifying ease."

"I wish to be saved from Israel," she concluded. "I am a Jew against Israel -- just as Israel repeatedly proves itself to be against me."

In her recent op-ed calling on Toronto to boycott Israeli films, Klein attacks the Jewish state for objecting to the Goldstone inquiry on Gaza created by the UN Human Rights Council -- in which the Arab-controlled body declared Israel guilty in advance.

The path to Middle East peace requires mutual dialogue, recognition and compromise -- not irrational boycotts motivated by selective morality, anger and rage.

Hillel Neuer is executive director of UN Watch in Geneva ( www.unwatch.org).

http://network.nationalpost.com/np/blogs/fullcomment/archive/2009/09/15/hillel-neuer-the-strange-enduring-rage-of-naomi-klein.aspx

The California Paradigm



"Progressives" used to brag that California was 10 years ahead of the rest of the country. This statement is correct, but not in the sense that its authors intended. Given our current economic and political policies, the paradigm of high taxes and poor services brought on by California's "progressive" policies will increasingly be seen on a national level. With its massive deficit, deteriorating public services, flight of the middle class and growing economic inequality, California offers valuable lessons on what fiscal, social and immigration policies to not pursue.

The Big-Spending, High-Taxing, Lousy-Services Paradigm



California taxpayers don’t get much bang for their bucks.

By William Voegeli

In 1956, the economist Charles Tiebout provided the framework that best explains why people vote with their feet. The “consumer-voter,” as Tiebout called him, challenges government officials to “ascertain his wants for public goods and tax him accordingly.” Each jurisdiction offers its own package of public goods, along with a particular tax burden needed to pay for those goods. As a result, “the consumer-voter moves to that community whose local government best satisfies his set of preferences.” In selecting a jurisdiction, the mobile consumer-voter is, in effect, choosing a club to join based on the benefits that it offers and the dues that it charges.

America’s federal system allows, at the state level, for 50 different clubs to join. At first glance, the states seem to differ between those that bundle numerous high-quality public benefits with high taxes and those that offer packages of low benefits and low taxes. These alternatives, of course, define the basic argument between liberals and conservatives over the ideal size and scope of government. Except for Oregon, John McCain carried every one of the 17 states with the lowest tax levels in the 2008 presidential election, while Barack Obama won every one of the 17 at the top of the list except for Wyoming and Alaska.

It’s not surprising, then, that an intense debate rages over which model is more satisfactory and sustainable. What is surprising is the growing evidence that the low-benefit, low-tax alternative succeeds not only on its own terms but also according to the criteria used by defenders of high benefits and high taxes. Whatever theoretical claims are made for imposing high taxes to provide generous government benefits, the practical reality is that these public goods are, increasingly, neither public nor good: their beneficiaries are mostly the service providers themselves, and their quality is poor. For evidence, look to the two largest states in the nation, which are fine representatives of the liberal and conservative alternatives.

One out of every five Americans is either a Californian or a Texan. California became the nation’s most populous state in 1962; Texas climbed into second place in 1994. They are broadly similar: populous Sunbelt states with large metropolitan areas, diverse economies, and borders with Mexico producing comparable demographic mixes. Both are “majority-minority” states, where non-Hispanic whites make up just under half of the population and Latinos just over a third.

According to the most recent data available from the Census Bureau, for the fiscal year ending in 2006, Americans paid an average of $4,001 per person in state and local taxes. But Californians paid $4,517 per person, well above that national average, while Texans paid $3,235. It’s worth noting, by the way, that while state and local governments in both California and Texas get most of their revenue from taxes, the revenue is augmented by subsidies from the federal government and by fees charged for governmental services and facilities, such as trash collection, airports, public university tuition, and mass transit. California had total revenues of $11,160 per capita, more than every state but Alaska, Wyoming, and New York, while Texas placed a distant 44th on this scale, with revenues of all governmental entities totaling $7,558 per person.

What might interest Tiebout is that while California and Texas are comparable in terms of sheer numbers, their demographic paths are diverging. Before 1990, both states grew much faster than the rest of the country. Since then, only Texas has continued to do so. While its share of the nation’s population has steadily increased, from 6.8 percent in 1990 to 7.9 percent in 2007, California’s has barely budged, from 12 percent to 12.1 percent.

Unpacking the numbers is even more revealing—and, for California, disturbing. The biggest contrast between the two states shows up in “net internal migration,” the demographer’s term for the difference between the number of Americans who move into a state from another and the number who move out of it to another. Between April 1, 2000, and June 30, 2007, an average of 3,247 more Americans moved out of California than into it every week, according to the Census Bureau. Over the same period, Texas saw a net gain, in an average week, of 1,544 people. Aside from Louisiana and Mississippi, which lost population to other states because of Hurricane Katrina, California is the only Sunbelt state that had negative net internal migration after 2000. All the other states that lost population to internal migration were Rust Belt basket cases, including New York, Illinois, New Jersey, Michigan, and Ohio.

As Tiebout might have guessed, this outmigration has to do with taxes. Besides Mississippi, every one of the 17 states with the lowest state and local tax levels had positive net internal migration from 2000 to 2007. Except for Wyoming, Maine, and Delaware, every one of the 17 highest-tax states had negative net internal migration over the same period. Conservative researchers’ technical explanation for this phenomenon is: “Well, duh.” Or, as Arthur Laffer and Stephen Moore wrote in the Wall Street Journal earlier this year: “People, investment capital and businesses are mobile: They can leave tax-unfriendly states and move to tax-friendly states.”

Summarizing the findings of a report they wrote for the American Legislative Exchange Council, Laffer and Moore pointed out that between 1998 and 2007, the states without an individual income tax “created 89 percent more jobs and had 32 percent faster personal income growth” than the states with the highest individual income-tax rates. California’s tax and regulatory policies, the report predicts, “will continue to sap its economic vitality,” while Texas’s “pro-growth” policies will help it “maintain its superior economic performance well into the future.” The clear implication is that California should become more like Texas.

At this point, defenders of the high-benefit, high-tax paradigm push back. Remember the other half of Tiebout’s equation, they say. There’s no need for a state to be like Texas if its high taxes and extensive regulations are part of a package deal that yields more and better public goods and an attractive quality of life.

But that, it turns out, is a big “if.” It’s true that many people are less sensitive to taxes and more concerned about public goods, and these consumer-voters will congregate in places with extensive services. But it’s also true, all things being equal, that everyone would rather pay lower than higher taxes. The high-benefit, high-tax model can work, but only if the high taxes actually purchase high benefits—that is, public goods that far surpass the quality of those available to people who pay low taxes.

And here, California is decidedly lacking. The biggest factor accounting for California’s loss of population to the other 49 states, bond ratings that would embarrass Chrysler or GM, and state politics contentious and feckless enough to shame a banana republic, has to be its public sector’s diminishing willingness and capacity to fulfill its promises to taxpayers. “Twenty years ago, you could go to Texas, where they had very low taxes, and you would see the difference between there and California,” Joel Kotkin, executive editor of NewGeography.com and a presidential fellow at Chapman University in Southern California, told the Los Angeles Times this past March. “Today, you go to Texas, the roads are no worse, the public schools are not great but are better than or equal to ours, and their universities are good. The bargain between California’s government and the middle class is constantly being renegotiated to the disadvantage of the middle class.”

Similarly, the CEO of a manufacturing company in suburban Los Angeles told a Times reporter that his business suffered less from California’s high taxes than from its ineffectual services. As a result, the company pays “a fortune” to educate its employees, many of whom graduated from California public schools, “on basic things like writing and math skills.” According to a report issued earlier this year by McKinsey & Company, Texas students “are, on average, one to two years of learning ahead of California students of the same age,” though expenditures per public school student are 12 percent higher in California.

State and local government expenditures as a whole were 46.8 percent higher in California than in Texas in 2005–06—$10,070 per person compared with $6,858. And Texas not only spends its citizens’ dollars more effectively; it emphasizes priorities that are more broadly beneficial. In 2005–06, per-capita spending on transportation was 5.9 percent lower in California than in Texas, and highway expenditures in particular were 9.5 percent lower, a discovery both plausible and infuriating to any Los Angeles commuter losing the will to live while sitting in yet another freeway traffic jam. With tax revenues scarce and voters strongly opposed to surrendering more of their income, Texas officials devote a large share of their expenditures to basic services that benefit the most people. In California, by contrast, more and more spending consists of either transfer payments to government dependents (as in welfare, health, housing, and community development programs) or generous payments to government employees and contractors (reflected in administrative costs, pensions, and general expenditures). Both kinds of spending weaken California’s appeal to consumer-voters, the first because redistributive transfer payments are the least publicly beneficial type of public good, and the second because the dues paid to Club California purchase benefits that, increasingly, are enjoyed by the staff instead of the members.

Californians have the best possible reason to believe that the state’s public sector is not holding up its end of the bargain: clear evidence that it used to do a better job. Bill Watkins, executive director of the Economic Forecast Project at the University of California at Santa Barbara, has calculated that once you adjust for population growth and inflation, the state government spent 26 percent more in 2007–08 than in 1997–98. Back then, “California had teachers. Prisoners were in jail. Health care was provided for those with the least resources.” Today, Watkins asks, “Are the roads 26 percent better? Are schools 26 percent better? What is 26 percent better?”

The steady deterioration of California’s public services hasn’t gone unnoticed. Shortly after his stunning ascension to the governor’s office in 2003, Arnold Schwarzenegger established an advisory commission, the California Performance Review (CPR), to recommend ways to make governance in California smarter, cheaper, and better. The commission labored through 2004 before delivering a doorstop report with more than 1,200 recommendations for streamlining this and consolidating that, along with an assessment that implementing the full list of changes could save California $32 billion over the first five years.

And then . . . nothing, really. The 2,500-page report was “dead on arrival,” according to Bill Whalen of the Hoover Institution, “because it was too complicated for voters to rally behind and legislators didn’t want to see it enacted.” Citizen Schwarzenegger may have assumed that his personal star power and the CPR recommendations’ plodding good sense would make a politically irresistible combination. Such reckoning failed to account for the formidable ability of even the most obscure and otiose governmental body to hunker down, defend its turf, and outlast mere politicians.

The CPR, for example, recommended abolishing dozens of California’s commissions and advisory boards, either outright or by folding their activities into a simpler and more rational organizational structure. Five years later, few of these vestigial organs have been removed. The many that remain include the Commission on Aging, whose lead accomplishment for 2009 is getting the legislature to declare a Fall Prevention Week (which began on the first day of autumn, naturally); the Apprenticeship Council, “which has been in place since the 1930s,” according to the CPR, and “is no longer needed to perform regulatory and advisory responsibilities”; the Board of Barbering and Cosmetology; the Court Reporters Board; and the Hearing Aid Dispensers Bureau.

The point is not that turning a flamethrower on every item in the Museum of Governmental Anachronisms would have saved California a great deal of money. It is, rather, that abolishing these boards and commissions, whose names are talk-radio punch lines, would have been the easy calls, the obvious first steps toward giving California’s taxpayers a decent return on their surrendered dollars. Yet even the low-hanging fruit proved out of reach. The path of least resistance was to do the same old thing, not the sensible thing.

The resistance comes from the blob of interest groups, inside and outside government, that like California’s public sector just fine the way it is and see reform as a threat to their comfortable, lucrative arrangements. It turns out, for example, that all the pointless boards and commissions are bulletproof because they provide golden parachutes to politicians turned out of the state legislature by California’s strict term limits. In the middle of the state’s most recent budget crisis, State Senator Tony Strickland proposed a bill to eliminate salaries paid to members of boards and commissions who, despite holding fewer than two formal hearings or official meetings per month, had received annual compensation in excess of $100,000. The bill died in committee.


James Madison would have to revise—or possibly burn—Federalist No. 10 if he were forced to account for the new phenomenon of the government itself becoming the faction decisively shaping its own policy and conduct. (See “Madison’s Nightmare” in City Journal’s 2009 special issue, “New York’s Tomorrow.”) This faction dominates because it’s playing a much longer game than the politicians who come and go, not to mention the citizens who rarely read the enormous owner’s manual for the Rube Goldberg machine they feed with their dollars. They rarely stay outraged long enough to make a difference.

Take entitlements and public-employee pensions, which are, Watkins says, “the real source of the state’s fiscal distress.” A 2005 study by the Legislative Analyst’s Office (California’s version of the Congressional Budget Office) found that pensions for California’s government employees “surpassed the other states—often significantly—at all retirement ages.” California government workers retiring at age 55 received larger pensions than their counterparts in any other state (leaving aside the many states where retirement as early as 55 isn’t even possible). The California Foundation for Fiscal Responsibility periodically posts a list of retired city managers, state administrators, public university deans, and police chiefs who receive pensions of at least $100,000 per year. The latest report shows 5,115 lucky members in this six-figure club. The state’s annual bill for polishing their gold watches is $610 million.

Again, the most vivid part of the problem is not the most important. California would move only slightly closer to regaining fiscal health if it scraped the gilding off the pensions and health benefits of its most lucratively retired employees. But when even a flagrant example of a government’s serving its workforce better than its citizens is politically unassailable, it’s hard to be hopeful about the mundane reforms needed to change the rest of the economically debilitating public-employee retirement system. The California Performance Review suggested the sensible thing: gradually substituting defined-contribution for defined-benefit pension plans. (According to a report by the Pew Center on the States, just 20 percent of the nation’s private-sector employees are enrolled in a defined-benefit pension plan, compared with 90 percent of public-sector employees.) To no one’s shock, the state legislature has rejected all proposals to curb the state’s financial obligations to its retired and retiring employees.

If California doesn’t want to be Texas, it must find a way to be a better California. The easy thing about being Texas is that the government has a great deal of control over the part of its package deal that attracts consumer-voters—it must merely keep taxes low. California, on the other hand, must deliver on the high benefits promised in its sales pitch. It won’t be enough for its state and local governments to spend a lot of money; they have to spend it efficiently and effectively.

The optimistic assessment is that things are going to get worse in California before they get better. The pessimistic assessment is that they’re going to get worse before they get much worse. As is often the case, hanging around with the pessimists is less fun but more instructive. The current recession has driven California’s state government into what amounts to a five-month budget cycle, according to Dan Walters of the Sacramento Bee. He estimates that the budget deal tortuously wrought in July should start falling apart in October, because it was predicated on pie-in-the-sky revenue estimates and because so many of its spending cuts are being challenged, often successfully, in the courts.

The recession will eventually end and California’s finances will improve, say the optimists. Given the state’s pervasive political bias against efficient and effective public services, however, the question is whether its finances will ever get truly well. States that have grown accustomed to thinking of the engine that drives their economies as an inexhaustible resource—whether it’s Michigan and the auto industry, New York and Wall Street, or California and the vision of the sunlit good life that used to attract new residents—find it tough to compete again for what they thought would be theirs forever, and to plan budgets for lean years that turn into lean decades. Instead, they invest their hopes in a deus ex machina that will rescue them from the hard choices they dread.

For California’s governmental-industrial complex, a new liberal administration and Congress in Washington offer plausible hope for a happy Hollywood ending. Federal aid will replace the dollars that California’s taxpayers, fed up with the state’s lousy benefits and high taxes, refuse to provide. Americans will continue to vote with their feet, either by leaving California or disdaining relocation there, but their votes won’t matter, at least in the short term. Under the coming bailout, the new 49ers—Americans in the other 49 states, that is—will be extended the privilege of paying California’s taxes. At least they won’t have to put up with its public services.

William Voegeli is a contributing editor of The Claremont Review of Books and a visiting scholar at Claremont McKenna College’s Salvatori Center. His book on the American welfare state will be published by Encounter in 2010.

http://www.city-journal.org/2009/19_4_california.html

Accountant Arrested for Fraud!



When accountants so grossly misrepresent the finances of their client they risk arrest; when politicians do so they receive standing ovations in congress.


We Pay Them to Lie to Us


The problem with politicians.


November 26, 2009

When you knowingly pay someone to lie to you, we call the deceiver an illusionist or a magician. When you unwittingly pay someone to do the same thing, I call him a politician.

President Obama insists that health care "reform" not "add a dime" to the budget deficit, which daily grows to ever more frightening levels. So the House-passed bill and the one the Senate now deliberates both claim to cost less than $900 billion. Somehow "$900 billion over 10 years" has been decreed to be a magical figure that will not increase the deficit.

It's amazing how precise government gets when estimating the cost of 10 years of subsidized medical care. Senate Majority Leader Harry Reid's bill was scored not at $850 billion, but $849 billion. House Speaker Nancy Pelosi said her bill would cost $871 billion.

How do they do that?

The key to magic is misdirection, fooling the audience into looking in the wrong direction.

I happily suspend disbelief when a magician says he'll saw a woman in half. That's entertainment. But when Harry Reid says he'll give 30 million additional people health coverage while cutting the deficit, improving health care and reducing its cost, it's not entertaining. It's incredible.

The politicians have a hat full of tricks to make their schemes look cheaper than they are. The new revenues will pour in during Year One, but health care spending won't begin until Year Three or Four. To this the Cato Institute's Michael Tanner asks, "Wouldn't it be great if you could count a whole month's income, but only two weeks' expenditures in your household budget?"

To be deficit-reducers, the health care bills depend on a $200 billion cut in Medicare. Current law requires cuts in payments to doctors, but let's get real: Those cuts will never happen. The idea that Congress will "save $200 billion" by reducing payments for groups as influential as doctors and retirees is laughable. Since 2003, Congress has suspended those "required" cuts each year.

Our pandering congressmen rarely cut. They just spend. Even as the deficit grows, they vomit up our money onto new pet "green" projects, bailouts for irresponsible industries, gifts for special interests, and guarantees to everyone.

Originally, this year's suspension, "the doc fix," was included in the health care bills, but when it clearly pushed the cost of "reform" over Obama's limit and threatened to hike the deficit, the politicians moved the "doc fix" to a separate bill and pretended it was unrelated to their health care work.

Megan McArdle of The Atlantic reports that Rep. Paul Ryan of Wisconsin asked the Congressional Budget Office what the total price would be if the "doc fix" and House health care overhaul were passed together. "The answer, according to the CBO, is that together they'd increase the deficit by $89 billion over 10 years." McArdle explains why the "doc fix" should be included: "They're passing a bill that increases the deficit by $200 billion in order to pass another bill that hopefully reduces it, but by substantially less than $200 billion. That means that passage of this bill is going to increase the deficit."

From the start, Obama has promised to pay for half the "reform" cost by cutting Medicare by half a trillion over 10 years. But, Tanner asks, "how likely is it that those cuts will take place? After all, this is an administration that will pay seniors $250 to make up for the fact that they didn't get a Social Security cost-of-living increase this year (because the cost of living didn't increase). And Congress is in the process of repealing a scheduled increase in Medicare premiums."

Older people vote in great numbers. AARP is the most powerful lobby on Capitol Hill. Like the cut in doctor's pay, the other cuts will never happen.

I will chew on razor blades when Congress cuts Medicare to keep the deficit from growing.

Medicare is already $37 trillion in the hole. Yet the Democrats proudly cite Medicare when they demand support for the health care overhaul. If a business pulled the accounting tricks the politicians get away with, the owners would be in prison.

John Stossel will soon host Stossel on the Fox Business Network. He's the author of Give Me a Break and of Myth, Lies, and Downright Stupidity.


http://reason.com/archives/2009/11/26/we-pay-them-to-lie-to-us

Hypocrisy in the Windy City

Well, what do you know, several politicians who promote a ban on hand guns have maintain handguns for personal protection. Gun control has great moral and intuitive appeal, after all who wouldn't want to see a reduction in violent crime. But, in cities like Chicago its effectiveness is questionable. Paradoxically law abiding citizens who could use a handgun to protect their family would respect gun control, while criminals can and easily do obtain black market handguns. How we can eliminate this pernicious black market is the question that politicians should be asking, not how to disarm law abiding citizens. But, in the world of "progressive" policies, intentions matter more than results.

Gun Control, Chicago-Style

The shameless hypocrisy of Windy City politicians

November 23, 2009

Last week, the body of Chicago school board president Michael Scott was found in the Chicago River with a single bullet wound in his head. The big story was that this powerful, well-connected public official had, according to the county medical examiner, committed suicide. The less-noticed story was that he did it with an illegal weapon.

After all, handgun ownership is not allowed in the city of Chicago, which has one of the strictest gun control laws in the country, and Scott killed himself with a .380-caliber sidearm.

Unlike most Chicagoans, Scott could have been a legal handgun owner. Because he had it before the ban was enacted, he was allowed to register and keep it. But the police department says he never did. By having it in the city, Scott was guilty of an offense that could have gotten him jail time.

Amazingly enough, he was not the first local public official to take the view that firearms restrictions are something for other, ordinary people to observe. Chicago politicians are zealously committed to gun control in law but fairly relaxed about it in practice.

In 1994, State Sen. Rickey Hendon had an unregistered handgun stolen from his home in a burglary, and he didn't feign contrition about his disregard of the ordinance.

"I have a right to protect myself," he declared, noting that he had been burglarized before—and forgetting that the state legislature of which he is a member allows Illinois cities to deprive their citizens of that right. Asked if he would replace the lost piece, Hendon said, "No comment." The police were kind enough not to charge him.

U.S. Sen. Roland Burris, another Chicagoan, has endorsed a nationwide ban on handguns and, in 1993, organized Chicago's first Gun Turn-in Day. But the following year, while running unsuccessfully for governor, he admitted he owned a handgun—"for protection," he explained—and hadn't seen fit to turn it in along with those other firearms. Lesser mortals apparently can protect themselves with forks and spoons.

Scott was shot in the abdomen while chasing a burglar in 1988, so it's understandable that he would appreciate the value of having the means to defend himself against criminals. But that understanding didn't extend to the needs of ordinary Chicagoans. When the city gun ban was challenged in court, the board of education that he headed filed a brief defending Chicago's right "to prohibit classes of arms in order to prevent crime and protect public safety."

A law banning handguns, in Scott's view, was necessary to protect public safety. But when it came to protecting his private safety, he somehow perceived the law to be a hindrance, not a help.

Does his attitude carry the distinct tang of hypocrisy? Yes, but that's not out of the ordinary for Chicago politicians. Under a state law dating back to 1872, mayors and aldermen are designated peace officers. And, conveniently, peace officers are permitted to not only own but carry handguns.

That makes aldermen a special class in Illinois, one of only two states with an almost complete ban on the carrying of concealed handguns. In most places, an adult with no criminal record or history of psychiatric commitment can get a concealed-carry license after taking a training class.

But here, we have a unique system. You want to be able to pack a weapon in public for your safety? Fine. All you have to do is 1) run for the city council and 2) win.

Why the state assumes that aldermen are fit for this prerogative is a mystery. "Law-abiding" is not the very first word that comes to mind when you think of the city council. Since 1972, 27 of its members have been convicted on charges involving malfeasance, misfeasance, nonfeasance, disfeasance, and anti-feasance with mopery aforethought.

It would be hard to come up with a group of people that has proven itself less deserving of blanket trust. The most recent convict, Arenda Troutman, got four years in prison for bribery after being caught on tape attesting that "most aldermen, most politicians are ho's." At a 1991 neighborhood meeting that got rowdy, Ald. Dorothy Tillman reportedly pulled out her handgun and waved it pugnaciously.

In Chicago, only criminals and aldermen are armed. Forgive me for being redundant.

http://reason.com/archives/2009/11/23/gun-control-chicago-style

On Dhimmitude

Those who believe that Islam is a tolerant religion are totally unversed in Sharia (Islamic Law). According to Sharia, pagans and polytheists have absolutely no rights and Dhimmis (Jews, Christians, Samaritans & Zoroastrians) have limited rights if they accept their inferior legal and social status. If they choose to protest of resist these limitations their right to life and property are totally forfeited. Click on the link to listen to an interesting discourse on Dhimmitude from Andrew Bostom: http://www.youtube.com/watch?v=cvTElEQICeI

Friday, November 27, 2009

On Short Term Kindness & Long Term Cruelty.

When we analyze the unintended consequences of many "progressive" policies, we see a pattern of "short term kindness & long term cruelty." In other words, they often address social and economic problems through means that engender even greater long term problems.

The concept of incentive structures and vicarious learning are key components in this discussion. When an individual or enterprise faces the positive or negative consequences of their behavior, that behavior is reinforced. These consequences transmit vital social and economic information to other members of society. For example, when it became widely known that a major real estate firm was heavily fined for not properly maintaining an escrow account, other real estate firms scrambled to get their books in order. And conversely, other firms observed and sough to model the behavior of the few companies that maintained profitability during the economic downturn. In other words, we learn from the consequences that others face.

The problem we find with many policies is that they shield individuals and institutions from the consequences of their behaviors. Not only does this prevent individuals and organizations from adopting more socially and economically sound behaviors, it limits the mechanisms of vicarious learning. The first example that comes to mind are the multiple bailouts of banks and automobile companies. If the Bush and Obama Administrations had not undertook these measures, the companies and their many of their workers would have faced bankruptcy and buyouts that would certainly have caused economic and social pain. But, by not allowing more financially sound and dynamic companies from buying out and restructuring them, we are left with stagnant companies that only survive with government subsidies and protections. In the medium to long run this will lead to an economy that is less dynamic and less capable of generating jobs and general prosperity. And as other CEOs witness the fall of fiscally irresponsible corporations and the executives than run them, they are fall less likely to engage in those behaviors. And as they watch their compatriots float down to a happy retirement with their golden parachutes, they chances of them vicariously learning and engaging in good corporate governance diminishes.

The principles of short term kindness and long term cruelty are most readily seen in our immigration policies. In California "progressives," ethno-political lobbyist and their corporate allies (who are addicted to cheap labor) aggressively block most enforcement efforts and even measures to limit access to welfare and social services. On an emotional level their positions are completely understandable, because they generally stem from humane and compassionate impulses. But, the problem is that millions of individuals outside the United States vicariously learn from their compatriots that if they are able to illicitly cross the border they (or at least their children) will be rewarded with generous social services. Over the long term they have allowed the population of uneducated, unskilled workers to surge, with the end results of: depressed wages, overburdened social services and a deterioration in law and order that have been most felt by Latin American immigrants and their children. And of course the increase in social services has led to a greater tax burden for California's middle class. During "crueler, pre-progressive" times, immigrants that were unable to economically advance returned to their countries of origin. This may have been harsh, but it helped foster more rapid and profound economic and social integration of immigrants and a more dynamic economy as a whole.

Another example that comes to mind are some of the single mothers I met when I managed property in the south side. One woman who had four children from several different fathers enjoyed subsidies that paid for most of her food, housing and health care. While I recognize that a humane society does not let children and their irresponsible parents suffer from a want of food, shelter and health care, I am also troubled by how the state has subsidized and reinforced her pathological behavior. This transmits information throughout a community that those who engage in such behaviors will enjoy financial rewards, rather than negative consequences. Basic psychology and economics dictates that such behaviors will increase, so predictably the phenomena of single motherhood has surged.

I am not sure how we could strike the necessary balance between providing for the needs of the children of single mothers while allowing the mothers to face the negative economic and social consequences of their behavior. Perhaps the welfare bureaucracy could have made it a prerequisite for this young lady to go on birth control after she receive benefits for her 1st child. Coupled with that she would face the penalty of receiving diminished subsidies for future children. But, since most bureaucrats have little reservations about fostering long term dependency (that ensure their job security), the chances that they would conceive of, let alone implement such measures is slim to none. And as a bureaucracy expands its client rolls, it receives increased funding, additional employees and greater influence, in other words there are zero financial incentives for them to curb the pathological behavior of their clients. An economist's answer to this would be to offer an incentive structure that would financially reward bureaucrats who fostered measurable improvements in their clients behaviors.

I do not fully blame politicians for these flawed policies, because in a sense their behaviors have been shaped by vicarious learning. For example, the few politician who proposed necessary reforms to save social security from the "long term cruelty" of financial insolvency were faced with extremely negative feedback from the public. Other politicians watched and vicariously learned from their colleagues failure to get re-elected and chose to take the path of short term kindness and not touch the benefits or structure of social security. And as the election of Obama shows, those who promise to simultaneously increase government services, while cutting taxes and the budget deficit will always get elected. Indeed we get what we deserve.

Thursday, November 26, 2009

Three Stages of Understanding

Most people believe that knowledge and understanding are linear phenomena. As our knowledge of any given social or economic phenomena increases we move further in one direction. For example, in the Masters in Education program at Loyola, there was an underlying belief that the more educated and enlightened we became, the more we would come to see that all cultures were equal. Also we were fed implicit messages that we would come to understand the injustice of capitalism and the need for an interventionist state that pursued "social justice."

But, the more I explored issues, I came to see that often the acquisition of knowledge and understanding is more circular. For example, when questioned about Islam, an American without a university education is likely to inelegantly state "dem der Moslems are purty violent!" This of course would invoke shock and horror in a college freshman who learned in his diversity seminar that "Islam is a religion of peace." If they studied a little more they would probably add "Islam is tolerant religion; the Moors in Spain and the Ottoman Turks were extremely tolerant to Jews and Christians..." But, if that college freshman were to further study Islamic history they would learn about the violent history of Muhammad, the massacres, expulsions and forced conversions of Jews and Christians in Almohad Spain and that Islamic law imposed humiliating restrictions on Dhimmis (non-Moslems) in the Ottoman Empire and other lands ruled by Shariah. And if they compared the Koran to the New Testament they would learn that in spite of extended periods of fanaticism and intolerance, within Christianity there exists a textual foundation for tolerance and the gradual separation of church and state. In other words, a little bit of knowledge allowed the student to formulate noble, but deeply flawed narratives of social phenomena and ultimately greater knowledge brought them closer to their original, "unsophisticated" position. I believe that the circular path of knowledge applies to quite a few other phenomena; from welfare, to warfare, from education to immigration and beyond.

If you spoke with an uneducated American in the 1960's about international politics, you would be likely hear something along the lines of "those blood thirsty reds must be stopped. The American way has made this the greatest country on earth..." After receiving a liberal arts education in Berkley his son would probably respond "Oh father, you are so backwards and bourgeois! The works of Marx and Mao speak about equality and an end to poverty, whereas capitalism is oppressive..." If this young man would have taken the time to study the history of Communist regimes he would have learned that more people were murdered in the Soviet Union and Red China than even in Nazi Germany. And if he embarked upon a serious study of history and economics he would see that there was much truth to what his father said: America's traditions of limited government and (comparatively) free markets led to prosperity and freedom unparalleled in the history of mankind.

The point is not to glorify the uneducated or discourage individuals from pursuing a higher education, but to demonstrate that too often a liberal arts education endows one with the rhetorical skills to embrace and argue for ideals that are not always grounded in reality. Before one arrives at exalted principles and eloquent theories, they must travel down an empirical path founded in data and experience. To argue about how businesses and industries should be regulated, restructured and run without ever having worked in a productive enterprise is an absurd undertaking that may land you a job as a Czar in the Obama Administration.

The Truth About the Gaza Conflict

Colonel Richard Kemp


A Must See - Colonel Richard Kemp testifies about Israel's unparalleled efforts to protect Palestinian civilians during the Gaza Conflict. To view a clip of his testimony scroll to the bottom and click on the link.

UN Watch Statement, delivered by Col. Richard Kemp, October 16, 2009, UN Human Rights Council Special Session on Goldstone Report

Thank you, Mr. President.

I am the former commander of the British forces in Afghanistan. I served with NATO and the United Nations; commanded troops in Northern Ireland, Bosnia and Macedonia; and participated in the Gulf War. I spent considerable time in Iraq since the 2003 invasion, and worked on international terrorism for the UK Governments Joint Intelligence Committee.

Mr. President, based on my knowledge and experience, I can say this: During Operation Cast Lead, the Israeli Defence Forces did more to safeguard the rights of civilians in a combat zone than any other army in the history of warfare.
Israel did so while facing an enemy that deliberately positioned its military capability behind the human shield of the civilian population.
Hamas, like Hizballah, are expert at driving the media agenda. Both will always have people ready to give interviews condemning Israeli forces for war crimes. They are adept at staging and distorting incidents.
The IDF faces a challenge that we British do not have to face to the same extent. It is the automatic, Pavlovian presumption by many in the international media, and international human rights groups, that the IDF are in the wrong, that they are abusing human rights.
The truth is that the IDF took extraordinary measures to give Gaza civilians notice of targeted areas, dropping over 2 million leaflets, and making over 100,000 phone calls. Many missions that could have taken out Hamas military capability were aborted to prevent civilian casualties. During the conflict, the IDF allowed huge amounts of humanitarian aid into Gaza. To deliver aid virtually into your enemy's hands is, to the military tactician, normally quite unthinkable. But the IDF took on those risks.
Despite all of this, of course innocent civilians were killed. War is chaos and full of mistakes. There have been mistakes by the British, American and other forces in Afghanistan and in Iraq, many of which can be put down to human error. But mistakes are not war crimes.
More than anything, the civilian casualties were a consequence of Hamas way of fighting. Hamas deliberately tried to sacrifice their own civilians.
Mr. President, Israel had no choice apart from defending its people, to stop Hamas from attacking them with rockets.
And I say this again: the IDF did more to safeguard the rights of civilians in a combat zone than any other army in the history of warfare.
Thank you, Mr. President.

http://www.youtube.com/watch?v=NX6vyT8RzMo

Profound Bias of the Goldstone Report

Judge Richard Goldstone

Dr. Mirela Siderer, a victim of the Hamas terror confronts Judge Richard Goldstone on the bias and disregard for Israeli civilians presented in his report on the Gaza conflict. The real shame is that while the UN hounds Israel it is largely indifferent to the rape and slaughter of civilians in Sudan and other nations. To view the clip, click here:

http://www.youtube.com/watch?v=hqyB04klExU

UN Watch - Knockout Speech!

Hillel Neuer, Found of UN Watch

In the following speech, Hillel Neuer of the organization UN Watch powerfully conveys the utter hypocrisy and uselessness of the United Nations Human Rights Council. In theory unilateralism is a terrible , but when we see who are "partners" are, Bush's "lone cowboy philosophy" starts to make sense. That being said, there is much room for criticism on how Bush put unilateralism into practice. To view the speech click here: http://www.youtube.com/watch?v=uhWgZu6tcZU

To learn more about the UN Watch, click here: http://www.unwatch.org/

Wednesday, November 25, 2009

"For God's Sake, Please Stop the Aid!"



Pictured Above: Kenyan Economist, Janes Shikwati


The title of this article can be applied to virtually every “progressive” effort to help people. The lessons also apply to our domestic policies. When social and economic problems persist in the face of massive state aid and intervention, the instinct of most people is to assume that the answer is that even more money needs to be spent. Few politicians and experts are willing to consider that the very "solutions' may be exacerbating the problem. Why? Because if individuals, nations and markets have the power to correct themselves, these politicians and "experts" will be out work.

SPIEGEL INTERVIEW WITH AFRICAN ECONOMICS EXPERT

"For God's Sake, Please Stop the Aid!"

The Kenyan economics expert James Shikwati, 35, says that aid to Africa does more harm than good. The avid proponent of globalization spoke with SPIEGEL about the disastrous effects of Western development policy in Africa, corrupt rulers, and the tendency to overstate the AIDS problem.

SPIEGEL: Mr. Shikwati, the G8 summit at Gleneagles is about to beef up the development aid for Africa...

Shikwati: ... for God's sake, please just stop.

SPIEGEL: Stop? The industrialized nations of the West want to eliminate hunger and poverty.

Shikwati: Such intentions have been damaging our continent for the past 40 years. If the industrial nations really want to help the Africans, they should finally terminate this awful aid. The countries that have collected the most development aid are also the ones that are in the worst shape. Despite the billions that have poured in to Africa, the continent remains poor.

SPIEGEL: Do you have an explanation for this paradox?

Shikwati: Huge bureaucracies are financed (with the aid money), corruption and complacency are promoted, Africans are taught to be beggars and not to be independent. In addition, development aid weakens the local markets everywhere and dampens the spirit of entrepreneurship that we so desperately need. As absurd as it may sound: Development aid is one of the reasons for Africa's problems. If the West were to cancel these payments, normal Africans wouldn't even notice. Only the functionaries would be hard hit. Which is why they maintain that the world would stop turning without this development aid.

SPIEGEL: Even in a country like Kenya, people are starving to death each year. Someone has got to help them.

Shikwati: But it has to be the Kenyans themselves who help these people. When there's a drought in a region of Kenya, our corrupt politicians reflexively cry out for more help. This call then reaches the United Nations World Food Program -- which is a massive agency of apparatchiks who are in the absurd situation of, on the one hand, being dedicated to the fight against hunger while, on the other hand, being faced with unemployment were hunger actually eliminated. It's only natural that they willingly accept the plea for more help. And it's not uncommon that they demand a little more money than the respective African government originally requested. They then forward that request to their headquarters, and before long, several thousands tons of corn are shipped to Africa ...

SPIEGEL: ... corn that predominantly comes from highly-subsidized European and American farmers ...

Shikwati: ... and at some point, this corn ends up in the harbor of Mombasa. A portion of the corn often goes directly into the hands of unsrupulous politicians who then pass it on to their own tribe to boost their next election campaign. Another portion of the shipment ends up on the black market where the corn is dumped at extremely low prices. Local farmers may as well put down their hoes right away; no one can compete with the UN's World Food Program. And because the farmers go under in the face of this pressure, Kenya would have no reserves to draw on if there actually were a famine next year. It's a simple but fatal cycle.

SPIEGEL: If the World Food Program didn't do anything, the people would starve.

Shikwati: I don't think so. In such a case, the Kenyans, for a change, would be forced to initiate trade relations with Uganda or Tanzania, and buy their food there. This type of trade is vital for Africa. It would force us to improve our own infrastructure, while making national borders -- drawn by the Europeans by the way -- more permeable. It would also force us to establish laws favoring market economy.

SPIEGEL: Would Africa actually be able to solve these problems on its own?

Shikwati: Of course. Hunger should not be a problem in most of the countries south of the Sahara. In addition, there are vast natural resources: oil, gold, diamonds. Africa is always only portrayed as a continent of suffering, but most figures are vastly exaggerated. In the industrial nations, there's a sense that Africa would go under without development aid. But believe me, Africa existed before you Europeans came along. And we didn't do all that poorly either.

SPIEGEL: But AIDS didn't exist at that time.

Shikwati: If one were to believe all the horrorifying reports, then all Kenyans should actually be dead by now. But now, tests are being carried out everywhere, and it turns out that the figures were vastly exaggerated. It's not three million Kenyans that are infected. All of the sudden, it's only about one million. Malaria is just as much of a problem, but people rarely talk about that.

SPIEGEL: And why's that?

Shikwati: AIDS is big business, maybe Africa's biggest business. There's nothing else that can generate as much aid money as shocking figures on AIDS. AIDS is a political disease here, and we should be very skeptical.

SPIEGEL: The Americans and Europeans have frozen funds previously pledged to Kenya. The country is too corrupt, they say.

Shikwati: I am afraid, though, that the money will still be transfered before long. After all, it has to go somewhere. Unfortunately, the Europeans' devastating urge to do good can no longer be countered with reason. It makes no sense whatsoever that directly after the new Kenyan government was elected -- a leadership change that ended the dictatorship of Daniel arap Mois -- the faucets were suddenly opened and streams of money poured into the country.

SPIEGEL: Such aid is usually earmarked for a specific objective, though.

Shikwati: That doesn't change anything. Millions of dollars earmarked for the fight against AIDS are still stashed away in Kenyan bank accounts and have not been spent. Our politicians were overwhelmed with money, and they try to siphon off as much as possible. The late tyrant of the Central African Republic, Jean Bedel Bokassa, cynically summed it up by saying: "The French government pays for everything in our country. We ask the French for money. We get it, and then we waste it." Former Central African Republic leader Jean-Bedel Bokassa: "We ask the French for money. We get it, and then we waste it."

SPIEGEL: In the West, there are many compassionate citizens wanting to help Africa. Each year, they donate money and pack their old clothes into collection bags ...

Shikwati: ... and they flood our markets with that stuff. We can buy these donated clothes cheaply at our so-called Mitumba markets. There are Germans who spend a few dollars to get used Bayern Munich or Werder Bremen jerseys, in other words, clothes that that some German kids sent to Africa for a good cause. After buying these jerseys, they auction them off at Ebay and send them back to Germany -- for three times the price. That's insanity ...

SPIEGEL: ... and hopefully an exception.

Shikwati: Why do we get these mountains of clothes? No one is freezing here. Instead, our tailors lose their livlihoods. They're in the same position as our farmers. No one in the low-wage world of Africa can be cost-efficient enough to keep pace with donated products. In 1997, 137,000 workers were employed in Nigeria's textile industry. By 2003, the figure had dropped to 57,000. The results are the same in all other areas where overwhelming helpfulness and fragile African markets collide.

INTERACTIVE MAP

Click here to load our interactive African development aid map.

SPIEGEL: Following World War II, Germany only managed to get back on its feet because the Americans poured money into the country through the Marshall Plan. Wouldn't that qualify as successful development aid?

Shikwati: In Germany's case, only the destroyed infrastructure had to be repaired. Despite the economic crisis of the Weimar Republic, Germany was a highly- industrialized country before the war. The damages created by the tsunami in Thailand can also be fixed with a little money and some reconstruction aid. Africa, however, must take the first steps into modernity on its own. There must be a change in mentality. We have to stop perceiving ourselves as beggars. These days, Africans only perceive themselves as victims. On the other hand, no one can really picture an African as a businessman. In order to change the current situation, it would be helpful if the aid organizations were to pull out.

SPIEGEL: If they did that, many jobs would be immediately lost ...

Shikwati: ... jobs that were created artificially in the first place and that distort reality. Jobs with foreign aid organizations are, of course, quite popular, and they can be very selective in choosing the best people. When an aid organization needs a driver, dozens apply for the job. And because it's unacceptable that the aid worker's chauffeur only speaks his own tribal language, an applicant is needed who also speaks English fluently -- and, ideally, one who is also well mannered. So you end up with some African biochemist driving an aid worker around, distributing European food, and forcing local farmers out of their jobs. That's just crazy!

SPIEGEL: The German government takes pride in precisely monitoring the recipients of its funds.

Shikwati: And what's the result? A disaster. The German government threw money right at Rwanda's president Paul Kagame. This is a man who has the deaths of a million people on his conscience -- people that his army killed in the neighboring country of Congo.

SPIEGEL: What are the Germans supposed to do?

Shikwati: If they really want to fight poverty, they should completely halt development aid and give Africa the opportunity to ensure its own survival. Currently, Africa is like a child that immediately cries for its babysitter when something goes wrong. Africa should stand on its own two feet.

Interview conducted by Thilo Thielke

Translated from the German by Patrick Kessler