Sunday, October 31, 2010

Underutilized Labor

During debates on immigration, more sophisticated progressives often present the argument that a relatively high flow of immigration is essential for the economic welfare of the United States. This argument is used to justify raising the number of visas, as well as the non-enforcement of existing laws.

After driving through the West Side of Chicago, I realized that there is a flaw in this argument: it does not take into account the large pool of underutilized labor that is present in the United States. Specifically, in the middle of the day, I encountered quite a few apparently unemployed, young African-Americans. This presented me with several fundamental questions of why these individuals were not working (or not hired) when there existed a myriad of positions that employers had to fill with immigrant labor? Where progressives right that there exists a large class of labor that even unemployed, native born Americans were unwilling to do?

The answer to the last question is "yes, there are a host of jobs that many unemployed Americans are unwilling to fill, given the incentive structure that has evolved over the last 40 years. The incentives (SSI, subsidized food, housing & health care) provided by the state to not work were often greater than the incentives (wages) provided by employers to work. The increase in the supply of unskilled labor decreased wages for unskilled labor, lowering incentives to work. So, the economic logic of welfare dependency is clear. And as costly as it may be for the nation as a whole, the countless government bureaucrats employed by the welfare state have no incentives to lessen dependency on it.

This equation also involves cultural factors, primarily the distinctly American belief that each individual is entitled to employment that is more economically and personally fulfilling than that which their parents and grandparents had. In most cases, this has held true; the children of poor immigrants do better than their parents. But, this has been less true in the case of African-Americans, historically this stemmed from deeply entrenched discrimination in the work force that made in difficult for many to progress into the white color or even skilled blue color sectors.

With the onset of strong sanctions against employer discrimination formal barriers to upward mobility have significantly decreased. However, in its place, an even more daunting barrier has emerged - the (relative) lack of academic progress among African-Americans. In other words, the large pool of underutilized labor that I encountered lacked the education and skills necessary to obtain more prestigious employment, yet were not enthusiastic about low wage, entry level positions available to them. A multitude of theories exist to explain this, but I believe that two of the most significant factors are: abysmal public schools, family structure (70% rate of single motherhood) that does not lend itself towards academic achievement. Even good public schools offer little or no training to prepares students for relatively high wage blue collar positions, such as being a plumber or electrician. Another pertinent cultural factor, is the general failure (that cuts across race, culture and class) of most Americans to recognize that the experience that low paying entry level positions can be vital for long term economic advancement.

During this time, government policies that increased the actual cost of legal labor, provided more incentives for employers to seek more flexible undocumented labor. Rising payroll taxes (social security, medicare, unemployment & work-men's compensation), liability (risk of lawsuits) and regulation increased incentives for employers to choose undocumented labor rather than seek workers from the large pool of underutilized labor. Limited access to the welfare state, harsher penalties (deportation) for criminal conduct and a culture that (for historical reasons) views labor more favorably, generally made undocumented immigrants far more enthusiastic workers than their low skilled American counterparts. Coupled with this, the decline in the rate of government sanctions against employers , further increased their incentives to choose undocumented laborers.

So, progressives who claim to be concerned about the fate of poor African-Americans should take heed of policies that can help improve employment opportunities for them:

1) Welfare bureaucracies should make employment a prerequisite for receiving any benefits and forever excise the notion that any honest labor is below the dignity of Americans.

2) Welfare bureaucrats should be offered financial incentives for finding employment for their clients and weaning them of their dependency on the state.

3) Schools must offer training in high paying blue collar trades for students who show an interest and aptitude in them.

4) Government policies, especially the tax codes, must be revised to offer greater incentives for employers to hire native born Americans and documented immigrants.

5) Immigration policies that increase the supply of low skill labor must be eliminated, until employers show that they cannot find individuals from the already existing labor pool to fill a position.

6) Policies that make it costly to set up businesses in blighted areas must be eliminated. For example, Chicago's high taxes and burdensome regulations dissuade many employers from setting up shop in the city, much to the detriment of Chicago's large pool of underutilized labor.

More Victims of the War on Drugs (part II)

Dr. Ron Paul is the most outspoken critic of the war on drugs, needless warfare in the middle east and Washington's destructive fiscal policies. I urge you to really listen to Dr. Paul and although you may not agree with every one of his points, you will see that he is intelligent, honest and willing to challenge the status quo.

Saturday, October 30, 2010

Implied Progressive Racism? (part I)

During a discussion led by David Horowitz, he asked a Muslim American college student if she was for or against Hezbollah's stated goal that all Jews should gather in Israel so that he wouldn't have to hunt them down globally. In other words, Mr. Horowitz sought to determine if she supported the genocide of Jews. To this she responded she was "for it."

Can you imagine the protests, condemnations and calls for action if a Christian student called for the genocide of Jews or Muslims? Campus progressives would demand that the university reprimand the individual, make them attend diversity seminars and then investigate the "right wing Christian student groups" that incited them. Clearly not all individuals and communities are held to the same standards.

This hearkens me back to the Los Angeles Riots when mostly African-American and Hispanic mobs plundered predominantly Korean owned shops. Rather than condemn the (small minority of) individuals who chose to steal, a litany of socio-economic explanations were used to absolve them of their crimes. The first problem that we encounter with this narrative is that it fails to take into account the vast majority of African-Americans and Hispanics who chose to address their grievances in an intelligent, constructive fashion. And if one individual is responsible for their wise decisions, is not the other equally responsible for their foolish ones?

In the past when white mobs terrorized African-Americans and other groups, progressives correctly reproached them as individuals who were morally responsible for their abhorrent behavior. So, why then do most progressive narratives present minorities as passive groups, rather than as morally engaged individuals?

I believe that the problem is that many progressive can only conceptualize minorities as victims rather than perpetrators. And when they do acknowledge examples of hate and violence, usually it is explained away a response to socio-economic injustice. Of course I do not deny the existence of racism and injustice, but such explanations fundamentally reduce individuals to passive agents, products of their environment. By failing to treat individuals as active, intelligent moral agents who are responsible for their actions, we negate their individuality and treat them like children, an endeavor which is implicitly racist and demeaning.

Progressive Paralysis: Eric Holder

Recently, Juan Williams, a former senior national correspondent of NPR stated:

“I think, look, political correctness can lead to some kind of paralysis where you don’t address reality.”

One of the clearest examples of this is seen during Attorney General Eric Holder's testimony before the House Judiciary Committee on 5/13/2010. During this hearing Mr. Holder was asked if three recent terrorist attacks may have been incited by Radical Islam," which prompted Mr. Holder to uncomfortably dance around an obvious fact for several minutes.

The greatest flaw in political correctness is that it is based in intellectual dishonesty, which leads to ineffective strategies to address very real problems. And for this reason, educated and intelligent liberals pursue many deeply flawed policies in issues ranging from education, to economics, especially when they involve sensitive topics like race and religion.

Monday, October 25, 2010

On Fair Housing (And Other Never Ending Crusades)

In the 1960's civil rights activists successfully campaigned to outlaw housing discrimination based on race and ethnicity. In later years laws were expanded to protect the handicapped and other groups from housing discrimination. Although I am reserved about allowing the state to mandate how individuals utilize their private property, I am generally supportive of fair housing laws, because they defend individual rights and promote social mobility and integration.

Anyone with a modicum of knowledge of history will know that when an individual or organization achieves the primary goals that justified their existence, most will do almost anything to avoid becoming irrelevant. Rather than gracefully retire, they will invent new demons and never ending crusades to pursue. Even after winning the war, the general will invent new threats and wage new wars to justify the maintenance of a large army, to perpetuate his importance. And the once great civil rights activist Jesse Jackson now circles the nation like a vulture desperately seeking discrimination that will thrust him in front of the camera.

When I came across an article published by the Lawyers' Committee For Better Housing, I realized that this phenomena holds true for many fair housing activists. Through their prior efforts, clear mechanisms were established to protect individuals from housing discrimination on the grounds of race, religion, ethnicity, sexual orientation, family status (having children) and physical status (being handicapped). Federal, state and local bodies exist to investigate claims of discrimination and those found guilty can face steep penalties. But, rather than gracefully bow out, they have organized a new crusade to justify their continued existence - "the protection of section-8 voucher holders against discrimination, or more specifically to force property owners to participate in a government program.

In order to fully understand how flawed and troubling this crusade is, we must acknowledge that there are many landlords who are not opposed to the program in principle, but simply cannot bear the bureaucratic burden. For example, I have been personally presented with a 5 hour window by a section-8 inspector. Within 48 hours I had completed the minor list of repairs that the inspector had mandated, but I was forced to wait 2 weeks for another inspection. After waiting several hours, I was met by a different inspector who was indifferent to the fact that I had meticulously attended to each and every repair that his associate had ordered. In order to justify his position, this inspector generated a whole other list of repairs, which I immediately attended to. And two weeks later I was met by an entirely different inspector who was equally indifferent to the files of his predecessors. To make a long story short, the landlord endured 3 months of bureaucracy, 3 months of lost income and in the end the rent was $200 less than expected. So, when asked for my opinion of the program, my response is "my section-8 tenants have been great...I wish I could say the same for the bureaucrats who administer it..."

The Lawyers' Committee presented some heavy handed recommendations to the city, including:

"Mandatory education for landlords and housing management companies on fair housing generally and specifically on the Chicago Fair Housing Ordinance's prohibition of discrimination based on the use of housing voucher."

"Increased monitoring and testing of Chicago landlords and housing management companies for compliance with fair housing laws."

The phenomena of the never ending crusade also explains the inflation of old rights and the invention of whole new rights. New rights are rarely invented by the people who they are designed to benefit, but by activists who fear their own unemployment and obsolescence. I whole heartedly support the right of these activists to partake in any government program of their choice, but ask that they not force others to do so.

Saturday, October 23, 2010

A Surprise For My Readers!

It will come as a surprise to most of my readers that I am not inherently opposed to having the government provide "affordable" health care, housing, higher education or generous subsidies to spur a "green revolution." And I am even willing to accept multi-billion dollar corporate bailouts and our role as the great "nation builder" in the middle east. My opposition to these programs is one of accounting, not ideology. To put it simply, our efforts to simultaneously pursue all of these goals is leading us towards national bankruptcy.

One of the first lessons of economics is that resources are scarce, thus we must prioritize and make painful choices that involve difficult trade offs. This lesson is obvious to individuals and families that must pay their bills every month and strive for financial security, but apparently not for most politicians. Because, unlike the federal government, you and I do not have the capacity to print money and borrow endlessly from foreign governments. And with few exceptions, politicians are more generous and reckless in spending your money on themselves and their constituents than you would be.

One major factor, among many, are the costly adventures in warfare and nation building, largely initiated by G.W. Bush and his neoconservative cohorts. Yet, overall I am more skeptical of the capacity of progressives and liberals to make painful choices and compromises that are necessary in re-establishing a sound fiscal path. This is not because they lack intelligence or good will. This stems from several interrelated facts. First, as worthy as they may be, most of the social and economic initiatives that they deem necessary are extremely costly. Second, the majority of progressive individuals support the simultaneous pursuit of their entire platform, rather than prioritize in the face of fiscal limitations. For example, in a relatively brief period of time, the majority of politicians who pursued costly health care reform, also backed the stimulus plan and cap-and-trade. Compounding this tendency is the fact that progressives tend to form "coalitions of yes," special interests, that are held together by the understanding that they will simultaneously support each other's pet programs and policies, irregardless of the fiscal ramifications. Before you choose who to vote for, ask yourself which candidate will help your community and nation live within its means or push us closer to financial insolvency; everything else is just details.

Wednesday, October 20, 2010

Help Wanted?

Interesting article that makes the claim that in the midst of high unemployment nearly 3.0 million jobs have gone unfilled because of skills and geographic mismatch. Skills mismatch implies a lack of synchronicity between labor supply and labor demand. For example, a massive surplus of low skill service industry workers exist, while skilled blue collar positions like mechanics, electricians and welders remain vacant. Various factors have contributed to this mismatch, the first one being that the real estate bubble created a mis-allocation of labor, in other words countless individuals who could have (for example) pursued a career in engineering or nursing were drawn towards real estate. The second one is that school curricula is overwhelmingly college-centered and offers little opportunities for students who demonstrate an aptitude for the trades. I also suspect that extended unemployment benefits have lowered incentives for many workers to either invest sufficient time and resources towards developing skills that are in demand or filling low skill, low wage positions. Last, but not lease, a three decade long contraction of the manufacturing sector eliminated many skilled positions and there has not been sufficient time for workers to become trained to meet the new demand in the (somewhat) rebounding manufacturing sector.

For various reasons, geographic mismatch may also figure prominently into the existence of unfilled positions. An example of geographic mismatch is seen in South Dakota, which with a 4.1% unemployment rate faces a labor shortage and Michigan with an unemployment rate of 12.8% faces a surplus of labor. Economic logic dictates that labor would flow to South Dakota, but two factors inhibit this: many individuals are unable to sell their homes, while others desire to remain in their communities.

Unfortunately no amount of stimulus spending or quantitative easing can address skills and geographic mismatch; gradually workers will have to abandon their hope of returning to moribund sectors of the economy or remaining in communities and states with a labor surplus. Individually more workers will have to develop the skills necessary to fill new positions in regions of the country that face a labor shortage. What the government can do is shift curricula to provide more opportunities for career development for students that are able and interested in skilled labor. Surely it is better to be an employed mechanic with $10,000 in student loans than an unemployed lit student with $50,000 in student loans.

Skilled worker positions go unfilled, despite high unemployment

Employers cannot find job candidates with the most sought-after ability

By John Schmid of the Journal Sentinel

Sept. 11, 2010 (60) Comments

The good news first: Pockets of economic growth are springing up all over the country. Going by job listings, companies are scrambling to hire managers with the savvy to navigate the new niches as well as the sorts of engineers and tradespeople who can perform in high-productivity teams.

Now the bad news: Despite long lines of long-term unemployed, those same employers paradoxically cannot find candidates with the most sought-after skills.

"We still have a very serious mismatch in Milwaukee," said Timothy Sullivan, chief executive of Bucyrus International Inc., the Milwaukee-area manufacturer of mining machinery and heavy equipment. Bucyrus has sounded an alarm for several years that it cannot find and train enough welders, once a common trade in Milwaukee's machine shops.

According to Manpower Inc., the global job-placement company, the nation has a gaping disconnect between openings and qualified candidates - a gap contributing to around 3 million unfilled U.S. jobs - which in turn hampers growth.

Manpower's research shows that the United States is fragmented like never before into myriad sectors that move in different speeds and directions, meaning candidates with sought-after skills can get multiple job offers at the same time that others with commodity skills wait for years.

"The issue is not a lack of candidates, but rather a talent mismatch," said Jonas Prising, Manpower president of the Americas.

"This increasing gap between the haves and the have-nots, in my view, is the biggest challenge facing the United States to remain competitive on a global basis," Prising said last week in an interview.

One in seven U.S. employers polled this year had difficulty filling key positions, according to the most recent Manpower poll. Milwaukee-based Manpower, whose stock in trade is matching employers and workers, expects the gap to widen at a time when organizations are pressured to accomplish more with fewer hands, meaning businesses and even governments are demanding ever-more specific skills and behaviors.

Talent shortages span a broad scale, from engineers who can contribute to global development teams to electricians, mechanics and other specialized machine-shop skills that have seen waves of retirees exit the workforce in recent years without a commensurate wave of apprenticeships to replace them.

Many express disbelief that such a disconnect exists, Prising said. "Some go ballistic and say you are crazy when you say there's a skills shortage," he said.

Employers throughout Wisconsin and the nation's industrial heartland feel the gap acutely. In Manpower's 2010 poll, the U.S. jobs that were most in demand were skilled trades - electricians, welders, mechanics, boilermakers and other skills that often require a at least two years of technical college. In 2009, the No. 1 in-demand occupation in the U.S. was engineers, which fell to No. 8 this year.

"We continue to be very disappointed and frustrated at Bucyrus in trying to fill almost 150 highly paid vacancies with skilled labor," Sullivan said.

Milwaukee has launched several innovative apprenticeship training programs in recent years tied directly to the needs of Bucyrus and other local industry.

"Notwithstanding all our best efforts in attempting to fix the system with recent improvements in workforce development, the pipeline is broken," Sullivan said. "The fact that virtually all (kindergarten through 12th grade) education in southeastern Wisconsin is based solely on a college prep curriculum, with no exposure to industrial arts, means we are not feeding the market with the right skill sets."

Not limited to U.S.
The disconnect is hardly limited to the U.S., according to Manpower, which polled 35,000 employers in 36 nations this year on global talent mismatches.

Each nation that advances in technology, innovation or productivity automatically begins to demand workers with those new and specific skills.

In a report called the "China Talent Paradox," Manpower's researchers explored how talent shortages can exist in a nation of 1.3 billion people. In its 2010 survey, 40% of Chinese employers surveyed said they had difficulty filling key positions.

Exhibiting a readiness to take extreme actions, Beijing's top leaders last week said they will explore a relaxation of the nation's "one child" policy - a population-control control measure imposed in the 1970s amid extreme poverty and rapid population growth. International human rights critics often decry the restrictions, citing forced sterilizations and abortions. But now China said it is focused more on the need for workers to replace an aging generation of laborers, leading to the announcement of a pilot program to loosen the multi-child ban in provinces with low birth rates.

Seeking a 'teachable fit'
The mismatch is such a defining issue that it will force new patterns of migration and immigration around the U.S. and other nations, according to Manpower.

Emphasizing that international labor must comply with visa law, Manpower prefers terms like "strategic migration" policies instead of politically charged terms like "immigration."

"I can post a job in the U.S. and a talented Indian will move to Des Moines," Manpower Chief Executive Officer Jeff Joerres said last week.

In a trend that's likely to repeat itself with increasing frequency, a Manpower report last month notes that some U.S. shipbuilders recruit experienced shipyard workers from Mexico and Croatia. "Skilled tradespeople are hard to find when and where they are needed. Their work can't be off-shored, but they can be on-shored," the report said.

Another change that seems pre-ordained, Manpower said, is a shift in the expectations of employers. This is a change that presents potentially huge opportunities for those looking for a paycheck.

Resigned they might not find the exact candidates they need, even from abroad, employers will begin to abandon the notion of the ideal candidate. Instead, they will seek the most "teachable fit."

This is a new breed of job candidate - folks who lack some qualifications "but whose capability gaps can be filled in a timely and cost-effective way." Employers who are willing to set up in-house training academies increasingly will look outside their traditional industries.

In an age of questionable results from stimulus spending, Manpower urges that the nation should redirect money to retraining. Testifying in February before the congressional Joint Economic Committee, Joerres told lawmakers that direct industrial subsidy "does not drive job creation."

***U.S. jobs most in demand, 2010

1. Skilled trades (mechanics, electricians, welders)

2. Sales representatives

3. Nurses

4. Technicians

5. Drivers

6. Restaurants, hotel staff

7. Management/executives

8. Engineers

9. Doctors

10. Customer support and service

Source: Manpower Inc.

Sunday, October 17, 2010

(Un)civil Servants?

In 2007, Michelle Rhee was appointed superintendent of Washington D.C.'s dismal public school system. It's per pupil expenditures ($14,594) was the 4th highest in the nation, yet its students scored at the bottom among the 11 major city school systems. This was not simply a reflection of the socio-economic status of its student body, because "even when poor children are compared only with other poor children. Thirty-three percent of poor fourth-graders across the nation lacked basic skills in math, but in the District, the figure was 62 percent. It was 74 percent for D.C. eighth-graders, compared with 49 percent nationally."

In her three years at the post, student achievement significantly improved. Secondary schools raised the test pass rates in standardized tests by 14% in reading and 17% in math, while elementary school pass rates have improved 6% in reading and 15% in math. System wide graduation rates also improved by 3%, up to 72%. Rhee's reform program involved a 20% pay raise for high performing teachers. And perhaps more importantly, the regimen of teacher tenure was weakened, allowing Rhee to fire 241 teachers for poor evaluations and grant other low performing teachers a year to improve their performance. These much needed reforms outraged D.C.'s power teacher unions and their allies, which led to her resignation.

This demonstrates a flaw in the progressive narrative that tends to present public sector workers and their unions in a favorable manner. Such groups are said to pursue broad, public interests, in contrast to the private sector which pursues their "narrow self interests." While there are many outstanding teachers and civil servants, as a whole public sector unions guard their self interest and defend the status quo, even to the detriment of the public. And only the most uncivil of civil servants can deny the need to grant schools greater leeway in firing incompetent teachers, especially in schools that are miserably failing underprivileged students.

Your Tax Dollars At Work!

Nearly 100 arrested in drug probe in Evanston, Rogers Park

September 28, 2010 7:30 PM

A months-long narcotics investigation by several law enforcement agencies resulted in the arrests of nearly 100 people, including drug dealers accused of using LINK cards to buy narcotics instead of groceries.

The five-month investigation, dubbed "Operation Hard Swipe," targeted people in Evanston and Rogers Park whom authorities accused of selling drugs and funneling money to street gangs. In some cases, authorities said today, drug dealers used taxpayer money to buy and sell drugs.

Authorities said in those cases, gang members coerced a convenience store owner to sell drugs. A cashier would bill the "customer" for $100 worth of groceries, but give the suspect crack cocaine and $20 instead, said Evanston Chief of Police Richard Eddington. The store in turn would pocket whatever money was left from the transaction.

The scheme is not new, authorities said.

"We've been suspicious for quite a long time," Eddington said. "If you go back five to 10 years you would see the same series of events."

Eddington said the operation's key objective was to capture high-level members of street gangs, including Gangster Disciples and Four Corner Hustlers. To do so, they enlisted the help of the Cook County Sheriff's Office, which at the time was working on an undercover investigation in the western suburbs.

"Operation Wood View Park," which started in February, targeted drug dealers who crossed into Maywood, Bellwood, Broadview and other municipalities to sell drugs. It developed from information gathered during a 2009 operation that focused on drug and gun trafficking at motels and hotels near O'Hare International Airport, said Cook County Sheriff Thomas Dart.

Dart said that investigations are ongoing, as the various law enforcement agencies continue to gather information from the people arrested.

-- Alejandra Cancino

Thank You Mr. Holder!

Thank you Mr. Holder, I am hoping that your threats to negate the rights of the people of California and the other states that oppose the federal government's absurd and extremely costly drug policies will awaken progressives to the importance of state's rights. And as I have said on many occasions, be very careful about encouraging the federal government to impose its will on other states and communities, even when you find their policies distasteful, because one day they will use that very same power to squash your community's right to self governance.

Feds to Enforce U.S. Drug Laws Even if California Legalizes Marijuana

Buzz kill. Even if California voters legalize marijuana next month, federal law enforcement officials will still "vigorously enforce" drug laws against people who grow, distribute or sell pot, Attorney General Eric Holder said.

Holder sent a letter this week to nine former chiefs of the Drug Enforcement Administration clarifying his agency's position on California's Proposition 19, The Los Angeles Times reported Friday.

"Let me state clearly that the Department of Justice strongly opposes Proposition 19. If passed, this legislation will greatly complicate federal drug enforcement efforts to the detriment of our citizens," Holder wrote.

The ballot initiative allows state residents 21 and older to possess up to an ounce of marijuana and grow up to 25 square feet worth of pot plants. It also authorizes cities and counties to oversee cultivation and sales.

But the federal Controlled Substances Act forbids the possession and sale of marijuana, and it's that statute that Holder said he will continue to uphold -- no matter what happens in California.

"We will vigorously enforce the CSA against those individuals and organizations that possess, manufacture or distribute marijuana for recreational use, even if such activities are permitted under state law," wrote Holder (pictured).

Dale Sky Jones, a spokeswoman for the Prop. 19 campaign, told the Times the federal government is continuing to enforce "a failed policy."

"We're not necessarily surprised that the establishment is coming down on the side of the status quo . . . If the federal government is going to disregard the voters, this is a states' rights issue," Jones told the newspaper.

It's unclear whether the controversial measure will pass. Polls have shown that California residents are split evenly on the issue of legalization.

Saturday, October 9, 2010

A Sliding Scale of Government Control

Many conservatives resist calls for greater regulation of the banking industry, presenting such initiatives as an assault on individual liberty. I find their reasoning troubling because they fail to make a qualitative moral distinction between the regulation of large, corporate enterprises vrs the infringement of individual economic freedom. Even champions of liberty and limited government, like Thomas Jefferson, held that banks and corporate entities need not be granted the same rights as individuals. In fact, Jefferson frequently expressed reservations about powerful banking interests. By failing to draw this distinction, segments of the Republican Party are responsible for the widespread belief that being conservative is synonymous with the promotion of corporate interests, rather than individual liberty. A wise strategy would be to adopt a sliding scale of government control, in other words, the smaller and more local the entity in question is, the more relevant questions of liberty become. And accordingly, the more intolerable government control becomes. And conversely, the larger and less local the entity in question is, the more we should frame the debate in terms of economics and general welfare.

For example, we could argue that tightly regulating or even eliminating credit default swaps is an economically unsound decision, however it should not be conceived as an infringement on individual liberty. In contrast, the federal government's plan to coerce individuals to purchase health care is a moral question, is a question of freedom and the liberty. Even if such a plan were to promote greater public welfare, it would constitute undue infringement of individual rights. And Chicago's heavy regiment of taxes, regulations and restrictions on individuals and small businesses should also be conceived as intolerable restrictions of personal freedom. Limiting the economic freedom of a larger corporation or industry may indirectly and modestly harm millions of small investors and consumers, whereas burdening an independently owned business can directly and drastically threaten the livelihood and liberty of individuals and families.

There are practical factors that lend credence to a sliding scale of government control, primarily the questions of risk and externalities. Take the issue of construction. I have personally witnessed the City of Chicago arbitrarily levy heavy fines and verbally berate an individual for constructing a closet in the basement of his own single family home without a permit. This constitutes an intolerable infringement on this individual's rights, because owing to the small scale in question, the risk that his actions would harm or imposing externalities on the public was slim to none. On the other hand, if a large firm were to construct a new building from scratch without permits, the city would be right to fine them, because if ill executed, such a project could pose significant risks to the public. So, conservatives and libertarians should fight tooth and nail to protect the property rights of individuals and families, but should not necessarily extend such concern to larger firms.

Another important factor that is mitigated by scale is the speed and extent to which the market can punish a business for poor quality goods and services. For example, when a local restaurant makes its clients ill, the information will be clearly and rapidly conveyed to the public and if it does not immediately correct its behavior, the company will be rapidly driven out of business. The benefit of this is that other restaurants will certainly alter their behavior to avoid the fate of their former competitor. However, if a company pours toxins into the water, it may takes years for the public to become ill and even longer to determine the source of their ailments. Once the information is known, market mechanisms will either correct the behavior or drive the company out of business, but by then the damage to public welfare would have been unduly high. And to have the government foot the bill for such externalities is the worst (and most prevalent) form of socialism in modern America.

While the restriction of corporate entities should not be treated as a violation of fundamental liberties, we must still take heed; when a city, state or nation imposes heavy tax and regulatory burdens, large firms will leave, taking jobs and opportunities with them. So, be judicious in how you restrict larger firms and be uncompromising in your defense of the rights of individuals and small businesses.

Friday, October 8, 2010

The Great Awakening?

Often online comments posted by the public are more interesting and telling than the actual article. A recent Huffington Post article by Fernando Espuelas entitled "Want Economic Growth? Legalize 12 Million People" generated overwhelmingly negative responses from its readers. This would not be surprising if the Huffington Post were a conservative journal, however the core of Huffington Post readers are center-left. During economic booms and times of plenty, bad policies and the questionable arguments used to promote them are able to thrive, because large segments of the population are shielded from their consequences. Not by coincidence, deeply flawed left wing concepts took hold during the post war economic boom. But during times of scarcity, fewer people have the luxury of supporting flawed positions and policies that can only thrive in the hermetically sealed world of academia. Of course Mr. Espuelas could present an ethical argument for the legalization of 12,000,000 undocumented immigrants, but his economic arguments are divorced from reality. Perhaps our great recession is doing what the writings of Jefferson, Friedman and Sowell could not: reacquaint millions of Americans with economic reality and common sense. To view the article and the public commentary, click on the link below:

On the Limits of Central Banks...

As most of you are aware, the Federal Reserve has been granted an enormous amount of power and resources to pursue the recovery of the American economy. Under the Bush and Obama administrations they have spent trillions of dollars with little to show. In theory, a powerful central bank could be exercised for the benefit of the people, but like most examples of having the state seek to command the economy, it is limited by the competency and corruption of its administrators. Nowhere is this better demonstrated than in a public hearing in which the federal reserve inspector general is questioned where trillions of dollars spent by the federal reserve have gone:

Federal Reserve Cannot Account For $9 Trillion

By Gold Investments on May 14, 2009

Rep. Alan Grayson talks to the Federal Reserve Inspector General Elizabeth Coleman of the Federal Reserve, asking her questions regarding trillions of dollars that came from the Fed’s expanded balance sheet and what the losses on its $2 trillion portfolio are.

The Inspector General does not have the answers Grayson is looking for.

Grayson asked Coleman if her agency had done any research into the decision not to save Lehman Brothers, which “sent shockwaves through the entire financial system,” Coleman said it had not.

“What about the $1 trillion plus expansion of the Federal reserve’s balance sheet since last September?” Grayson asked.

“We have different connotations,” Coleman replied. “We’re actually conducting a fairly high-level review of the various lending facilities collectively.”

Translation: Nobody at the Fed knows where the money went.

Do you know what who got the $1 trillion or more in the Fed’s expansion of its balance, Grayson pressed.

“I do not know. We have not looked at this specific area at the particular point on that specific review,” Coleman answer.

What about the trillions of off-balance transactions since last September, Grayson asked.

Coleman demurred again, saying the IG does not have jurisdiction to audit the Federal Reserve.

Grayson pointed out that it was the inspector general’s job to audit such spending and asked again if the office had done any investigation at all.

Coleman’s answer: Not enough yet to even respond. “We are in not a position to say if there losses.”

Grayson concluded, “I am shocked to find out that nobody at the Federal Reserve, including the inspector general, is keeping track of this.”

The Money of Fools

Dr. Thomas Sowell lucidly presents problems with the concept of "social justice" and much of the language we use in political discourse.

Jewish World Review Sept. 8, 2010 / 29 Elul, 5770

The Money of Fools

By Thomas Sowell Seventeenth century philosopher Thomas Hobbes said that words are wise men's counters, but they are the money of fools.

That is as painfully true today as it was four centuries ago. Using words as vehicles to try to convey your meaning is very different from taking words so literally that the words use you and confuse you.

Take the simple phrase "rent control." If you take these words literally-- as if they were money in the bank-- you get a complete distortion of reality.

New York is the city with the oldest and strongest rent control laws in the nation. San Francisco is second. But if you look at cities with the highest average rents, New York is first and San Francisco is second. Obviously, "rent control" laws do not control rent.

If you check out the facts, instead of relying on words, you will discover that "gun control" laws do not control guns, the government's "stimulus" spending does not stimulate the economy and that many "compassionate" policies inflict cruel results, such as the destruction of the black family.

Do you know how many millions of people died in the war "to make the world safe for democracy"-- a war that led to autocratic dynasties being replaced by totalitarian dictatorships that slaughtered far more of their own people than the dynasties had?

Warm, fuzzy words and phrases have an enormous advantage in politics. None has had such a long run of political success as "social justice."

The idea cannot be refuted because it has no specific meaning. Fighting it would be like trying to punch the fog. No wonder "social justice" has been such a political success for more than a century-- and counting.

While the term has no defined meaning, it has emotionally powerful connotations. There is a strong sense that it is simply not right-- that it is unjust-- that some people are so much better off than others.

Justification, even as the term is used in printing and carpentry, means aligning one thing with another. But what is the standard to which we think incomes or other benefits should be aligned?
Is the person who has spent years in school goofing off, acting up or fighting-- squandering the tens of thousands of dollars that the taxpayers have spent on his education-- supposed to end up with his income aligned with that of the person who spent those same years studying to acquire knowledge and skills that would later be valuable to himself and to society at large?

Some advocates of "social justice" would argue that what is fundamentally unjust is that one person is born into circumstances that make that person's chances in life radically different from the chances that others have-- through no fault of one and through no merit of the others.

Maybe the person who wasted educational opportunities and developed self-destructive behavior would have turned out differently if born into a different home or a different community.

That would of course be more just. But now we are no longer talking about "social" justice, unless we believe that it is all society's fault that different families and communities have different values and priorities-- and that society can "solve" that "problem."

Nor can poverty or poor education explain such differences. There are individuals who were raised by parents who were both poor and poorly educated, but who pushed their children to get the education that the parents themselves never had. Many individuals and groups would not be where they are today without that.

All kinds of chance encounters-- with particular people, information or circumstances-- have marked turning points in many individual's lives, whether toward fulfillment or ruin.

None of these things is equal or can be made equal. If this is an injustice, it is not a "social" injustice because it is beyond the power of society.

You can talk or act as if society is both omniscient and omnipotent. But, to do so would be to let words become what Thomas Hobbes called them, "the money of fools."

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Dismantling America by Dr. Thomas Sowell

I understand that temptation that leads many people to bend the clearly intended meaning of the constitution; we see vexing social and economic problems and we want to expand the power of the federal government to decisively and rapidly address them. To rely on the limited resources of state and local governments, of civil society and individual initiative to seems almost criminal when we have more powerful federal tools at our disposal. Most progressives and some conservatives are so convinced of the moral imperative of their positions that they cannot bear to allow "ignorant" states and localities the right to pursue contrary policies. So, they seek to use the power of the federal government to advance their agenda across the land. This is seen in issues as diverse as health care, the war on drugs, immigration and gay marriage. But, we must resist the temptation of bending the constitution in order to "achieve the greater good."

The authors of the constitution were aware that throughout the history of mankind, the tyranny of rulers over individuals and communities was the general rule. Even wisely governed republics and democracies had degenerated into anarchy or despotism. Accordingly, they placed clear
limits on the power of politicians and the power of the central (federal) government. And they understood that the expanded powers that you grant the federal government in order to achieve your "enlightened" policies, one day will be used to impose the "backwards" policies of your opponents on you and your community. So, even with its foibles and its frustrating pace of progress, we would be wise to accept limited, constitutional governance as the lesser of all evils.

Jewish World Review August 17, 2010 / 7 Elul, 5770

Dismantling America

By Thomas Sowell

"We the people" are the familiar opening words of the Constitution of the United States-- the framework for a self-governing people, free from the arbitrary edicts of rulers. It was the blueprint for America, and the success of America made that blueprint something that other nations sought to follow.

At the time when it was written, however, the Constitution was a radical departure from the autocratic governments of the 18th century. Since it was something so new and different, the reasons for the Constitution's provisions were spelled out in "The Federalist," a book written by three of the writers of the Constitution, as a sort of instruction guide to a new product.

The Constitution was not only a challenge to the despotic governments of its time, it has been a continuing challenge-- to this day-- to all those who think that ordinary people should be ruled by their betters, whether an elite of blood, or of books or of whatever else gives people a puffed-up sense of importance.

While the kings of old have faded into the mists of history, the principle of the divine rights of kings to impose whatever they wish on the masses lives on today in the rampaging presumptions of those who consider themselves anointed to impose their notions on others.

The Constitution of the United States is the biggest single obstacle to the carrying out of such rampaging presumptions, so it is not surprising that those with such presumptions have led the way in denigrating, undermining and evading the Constitution.

While various political leaders have, over the centuries, done things that violated either the spirit or the letter of the Constitution, few dared to openly say that the Constitution was wrong and that what they wanted was right.

It was the Progressives of a hundred years ago who began saying that the Constitution needed to be subordinated to whatever they chose to call "the needs of the times." Nor were they content to say that the Constitution needed more Amendments, for that would have meant that the much disdained masses would have something to say about whether, or what kind, of Amendments were needed.

The agenda then, as now, has been for our betters to decide among themselves which Constitutional safeguards against arbitrary government power should be disregarded, in the name of meeting "the needs of the times"-- as they choose to define those needs.

The first open attack on the Constitution by a President of the United States was made by our only president with a Ph.D., Woodrow Wilson. Virtually all the arguments as to why judges should not take the Constitution as meaning what its words plainly say, but "interpret" it to mean whatever it ought to mean, in order to meet "the needs of the times," were made by Woodrow Wilson.

It is no coincidence that those who imagine themselves so much wiser and nobler than the rest of us should be in the forefront of those who seek to erode Constitutional restrictions on the arbitrary powers of government. How can our betters impose their superior wisdom and virtue on us, when the Constitution gets in the way at every turn, with all its provisions to safeguard a system based on a self-governing people?

To get their way, the elites must erode or dismantle the Constitution, bit by bit, in one way or another. What that means is that they must dismantle America. This has been going on piecemeal over the years but now we have an administration in Washington that circumvents the Constitution wholesale, with its laws passed so fast that the public cannot know what is in them, its appointment of "czars" wielding greater power than Cabinet members, without having to be exposed to pubic scrutiny by going through the confirmation process prescribed by the Constitution for Cabinet members.

Now there is leaked news of plans to change the immigration laws by administrative fiat, rather than Congressional legislation, presumably because Congress might be unduly influenced by those pesky voters-- with their Constitutional rights-- who have shown clearly that they do not want amnesty and open borders, despite however much our betters do. If the Obama administration gets away with this, and can add a few million illegals to the voting rolls in time for the 2012 elections, that can mean reelection, and with it a continuing and accelerating dismantling of America.

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Thomas Sowell Archives

© 2006, Creators Syndicate

Cheering Immaturity

Agree or disagree with Dr. Sowell, his reasoning is sound and (pleasant or not) his conclusions are always thought provoking.

Jewish World Review August 10, 2010 / 30 Menachem-Av 5770

Cheering Immaturity

By Thomas Sowell A graduating senior at Hunter College High School in New York gave a speech that brought a standing ovation from his teachers and got his picture in the New York Times. I hope it doesn't go to his head, because what he said was so illogical that it was an indictment of the mush that is being taught at even our elite educational institutions.

Young Justin Hudson, described as "black and Hispanic," opened by saying how much he appreciated reaching his graduation day at this very select public high school. Then he said, "I don't deserve any of this. And neither do you." The reason? He and his classmates were there because of "luck and circumstances."

Since Hunter College High School selects its applicants from the whole city on the basis of their test scores, "luck" seems a strange way to characterize why some students are admitted and many others are not. If you can't tell the difference between luck and performance, what has your education given you, except the rhetoric to conceal your confusion from others and perhaps from yourself?

Young Mr. Hudson's concern, apparently, is about what he referred to as the "demographics" of the school-- 41 percent white and 47 percent Asian, with blacks, Hispanics and others obviously far behind. "I refuse to accept" that "the distribution of intelligence in this city" varies by neighborhood, he said.

Native intelligence may indeed not vary by neighborhood but actual performance-- whether in schools, on the job or elsewhere-- involves far more than native intelligence. Wasted intelligence does nothing for an individual or society.

The reason a surgeon can operate on your heart, while someone of equal intelligence who is not a surgeon cannot, is because of what different people actually did with their intelligence. That has always varied, not only from individual to individual but from group to group-- and not only in this country, but in countries around the world and across the centuries of human history.

One of the biggest fallacies of our time is the notion that, if all groups are not proportionally represented in institutions, professions or income levels, that shows something wrong with society. The very possibility that people make their own choices, and that those choices have consequences-- for themselves and for others-- is ignored. Society is the universal scapegoat.

If "luck" is involved, it is the luck to be born into families and communities whose values and choices turn out to be productive for themselves and for others who benefit from the skills they acquire. Observers who blame tests or other criteria for the demographic imbalances which are the rule-- not the exception-- around the world, are blaming whatever conveys differences for creating those differences.

They blame the messenger who brings bad news.

If test scores are not the same for people from different backgrounds, that is no proof that there is something wrong with the tests. Tests do not exist to show what your potential was when you entered the world but to measure what you have actually accomplished since then, as a guide to what you are likely to continue to do in the future. Tests convey a difference that tests did not create. But the messenger gets blamed for the bad news.

Similarly, if prices are higher in high-crime neighborhoods, that is often blamed on those who charge those prices, rather than on those who create the higher costs of higher rates of shoplifting, robbery, vandalism and riots, which are passed on to those who shop in those neighborhoods. The prices convey a reality that the prices did not create. If these prices represent simply "greed" for higher profits, then why do most profit-seeking businesses avoid high-crime neighborhoods like the plague?

It is painful that people with lower incomes often have to pay higher prices, even though most people are not criminals, even in a high-crime neighborhood. But misconstruing the reasons is not going to help anybody, except race hustlers and politicians.

One of the many disservices done to young people by our schools and colleges is giving them the puffed up notion that they are in a position to pass sweeping judgments on a world that they have barely begun to experience. A standing ovation for childish remarks may produce "self-esteem" but promoting presumptuousness is unlikely to benefit either this student or society.

The Mosque Controversy

As usual, Dr. Sowell presents a clear, rational, hate-free argument.

Jewish World Review August 31, 2010 / 21 Elul, 5770

The Mosque Controversy
By Thomas Sowell The proposed mosque near where the World Trade Center was attacked and destroyed, along with thousands of American lives, would be a 15-story middle finger to America.

It takes a high IQ to evade the obvious, so it is not surprising that the intelligentsia are out in force, decrying those who criticize this calculated insult.

What may surprise some people is that the American taxpayer is currently financing a trip to the Middle East by the imam who is pushing this project, so that he can raise the money to build it. The State Department is subsidizing his travel.

The big talking point is that this is an issue about "religious freedom" and that Muslims have a "right" to build a mosque where they choose. But those who oppose this project are not claiming that there is no legal right to build a mosque near the site of the World Trade Center.

If anybody did, it would be a matter for the courts to decide -- and they would undoubtedly say that it is not illegal to build a mosque near the site of the World Trade Center attack.

The intelligentsia and others who are wrapping themselves in the Constitution are fighting a phony war against a straw man. Why create a false issue, except to evade the real issue?

Our betters are telling us that we need to be more "tolerant" and more "sensitive" to the feelings of Muslims. But if we are supposed to be sensitive to Muslims, why are Muslims not supposed to be sensitive to the feelings of millions of Americans, for whom 9/11 was the biggest national trauma since Pearl Harbor?

It would not be illegal for Japanese Americans to build a massive shinto shrine next to Pearl Harbor. But, in all these years, they have never sought to do it.

When Catholic authorities in Poland were planning to build an institution for nuns, years ago, and someone pointed out that it would be near the site of a concentration camp that carried out genocide, the Pope intervened to stop it.

He didn't say that the Catholic Church had a legal right to build there, as it undoubtedly did. Instead, he respected the painful feelings of other people. And he certainly did not denounce those who called attention to the concentration camp.

There is no question that Muslims have a right to build a mosque where they chose to. The real question is why they chose that particular location, in a country that covers more than 3 million square miles.

If we all did everything that we have a legal right to do, we could not even survive as individuals, much less as a society. So the question is whether those who are planning a Ground Zero mosque want to be part of American society or just to see how much they can get away with in American society?

Can anyone in his right mind believe that this was intended to show solidarity with Americans,
rather than solidarity with those who attacked America? Does anyone imagine that the Middle East nations, including Iran, from whom financial contributions will be solicited, want to promote reconciliation between Americans and Muslims?

That the President of the United States has joined the chorus of those calling the Ground Zero mosque a religious freedom issue tells us a lot about the moral dry rot that is undermining this country from within.

In this, as in other things, Barack Obama is not so much the cause of our decline but the culmination of it. He had many predecessors and many contemporaries who represent the same mindset and the same malaise.

There are people for whom moral preening has become a way of life. They are out in force denouncing critics of the Ground Zero mosque.

There are others for whom a citizen of the world affectation puts them one-up on those of us who are grateful to be Americans, and to enjoy a freedom that is all too rare in other countries around the world, even at this late date in human history.

They think the United States is somehow on trial, and needs to prove itself to others by bending over backwards. But bending over backwards does not win friends. It loses respect, including self-respect.

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Viable Path To Peace.

The points of contention between the Israelis and Palestinians can be boiled down to a clash between the diametrically opposed needs of Israel to maximize its security and the Palestinians to maximize their territorial integrity.For example, the Palestinians desire what every sovereign state enjoys - the right to an unimpeded movement of individuals and commerce to and from their territory. But, given the Palestinian Authority's inability or unwillingness to prevent terrorist groups from launching rockets and mortars into Israel, Israel is unwilling to relinquish control of the land, sea and air routes into Gaza and to a lesser extent the West Bank. And without a cessation of attacks, the Israelis left wing will not be able to sell painful sacrifices to the public, such as the dismantlement of West Bank settlements and the partition of Jerusalem. And clearly the Palestinian Authority will not be able to placate its radicals or even moderates with a Palestinian State that is neither territorially nor economically viable.

So, we are inevitably led to the question: does Israel's minimum security needs exceed the Palestinians' maximum capacity for territorial compromise (and vice versa)? Clearly, the answer is "yes," which means that the present peace plan has no hope of succeeding. But, since the status quo is politically, economically and socially unsustainable for all parties, an alternative path to peace must be formulated. Since a territorial viable Palestinian state is (for the time being) impossible, the only solution is:

1. For Israel to first annex territory that meets its minimum security needs. This would encompass the major clusters of settlements by Jerusalem, as well as those within the strategic Jordan Valley. It would be a torturous task to determine the new boundaries, but conceivably it could be accomplished by annexing under 25% of the territories.

2. Next Israel would dismantle all settlements that fell outside of its new boundaries.

3. Palestinians would be compensated with territory from Israel proper, specifically the Galilean Triangle and parts of the Negev, which includes the major Arab population centers of Umm Al-Fahm and Baqa al-Gharbiyye. This would serve to minimize the risk for future conflicts within Israel. These measures were first put forth in the Lieberman Plan (see below).

4. The remainder of the West Bank, along with the Galilean Triangle would be annexed to Jordan and remain an autonomous and permanently demilitarized province.

5. Gaza would become an autonomous and permanently demilitarized province of Egypt.

6. The high population density and limited economic opportunities within the territories have contributed to radicalism among the Palestinians. In order to address these serious issues, the
Palestinians would be free to migrate to other provinces of Jordan and Egypt. In addition, neighboring Arab and Islamic nations, like Saudi Arabia and Iran would be encouraged to welcome their "Palestinian Brothers."

7. Palestinians would continue to enjoy civil control over religious sites, but no political control over East Jerusalem. No nation on the face of the earth would consider dividing its capital, so Israel should not be expected to do so.

I do not expect the Arab-Islamic world to accept this plan, because it would work, which would means an end to the Arab-Israeli Conflict and the recognition of the State of Israel.


Thursday, October 7, 2010

There Are Still Heroes Among Us

Samaritan Hero: God 'Put Me Here' to Rescue Girl

AOL News (Oct. 6) -- The California man who helped rescue an 8-year-old girl abducted outside her Fresno home says he is grateful he was able to intervene, but doesn't feel he did anything out of the ordinary.

"I thank God that he put me here to help out that little girl, that's for sure," Victor Perez, the man police are now hailing as a "good Samaritan" and "hero," told KFSN-TV.

The girl was abducted in front of her Fresno home Monday night, just minutes after police had received a report about a man, believed to be the suspected kidnapper, exposing himself to two other children in the same area, according to news reports. A statewide Amber Alert was issued after the abduction.

Perez, a 29-year-old local grape picker and father of two who had decided not to go to work because of inclement weather, had heard the Amber Alert and spotted a suspect vehicle around 7 a.m. Tuesday.

"I thought, That could be the truck," Perez told CNN.

Perez did not initially see the girl inside the vehicle, but decided to pursue it and eventually saw the child stick her head up.

"I kept telling him, 'That's not your little girl,'" Perez said. "We argued. We exchanged words."

Perez said it took him several attempts to cut off the suspect vehicle, but when he finally managed to block it, the suspect, Gregorio Gonzalez, 24, pushed the child out of the vehicle.

"When she was dropped off, I just stayed with her, and the guy took off again," Perez said during an appearance on CBS's "The Early Show" today. "I didn't give chase no more 'cause the little girl was safe. So the cops took over after that."

Perez added, "She said like twice, 'I'm scared, I'm scared.' And she asked me if she was going to be OK. I said you're OK for now, and [we're] just waiting for the right people to get there to help her out."

The girl told police she had been threatened and sexually assaulted. She was taken to Community Regional Medical Center, where she was treated and reunited with her mother.

Less than an hour after the rescue, the California Highway Patrol arrested Gonzalez behind a nearby apartment complex. He is being charged with kidnapping, sexual assault and false imprisonment.

Fresno Police Chief Jerry Dyer told "The Early Show" that Perez is a hero whose intervention probably saved the girl's life.

Sponsored Links"We know that the longer a victim who has been abducted is with the assailant, the more likelihood is that we're not going to be able to recover them alive," Dyer said. "So Victor's a hero, and rightfully so, he's being recognized."

Perez, however, is modest about his involvement in the ordeal and thanks a higher power for placing him in the right place at the right time.

"I just felt like I was doing my part. ... .I just felt like everybody should step up in their own communities and when something like this happens, come together and try to do your part to help out," Perez said. "And, you know, I just thank that God I was put in the right situation to do what I did. Thank the man above for that."

Tuesday, October 5, 2010

Subprime School Loans?

Although I am generally reserved about government subsidies, education is so vital for the economic and cultural health of a nation, that in principle I support subsidies towards higher education. Without a doubt, federal guarantees of student loans have provided countless opportunities for students of limited means to pursue a higher education, which in turn has helped facilitate greater social mobility. However, federal subsidies, in their present form have increasingly generated negative unintended consequences,the gravest being the interrelated phenomena of "sub-prime" school loans, an increase in debt and unsustainable price inflation.

In my line of work I have encountered countless students who have amassed considerable debt via their student loans. In many cases, this was an economically rational investment, because the degree that the student obtained dramatically increased their earning potential. For example,
one individual amassed $100,000 in student loans in the pursuit of his medical degree, however as a high paid surgeon he would be able to pay this off in a relatively short time. However, I also encountered individuals who amassed similar levels of debt in the pursuit of a fine arts or liberal arts degree. Unfortunately, far too many of these individuals were only able to low paying
service sector jobs. This means that the most probably outcomes that they faced were two decades of crushing debt or a default that would damage their credit and future opportunities such as a home or small business loan.

Having gone through the gruelling process of obtaining private sector loans, I am quite certain that had more students been forced to seek financing in the private sector, the number of disastrous school loans would have been significantly reduced. In contrast to the federal government, the vast majority of private banks would carefully assess the long term sustainability of a student loan. For example, a semi-competent loan officer would have analyzed the median earning opportunities for art of literature students and would have determined that a $100,000 loan would pose an undue risk to the bank, as well as the student. The bank would have factored in the credit of the student and / or their family to determine the risk of default. In contrast the federal government is generally careless with tax payer money.

Many progressives would respond "that may be true, but if the private bank denies the individual a student loan you cut them off from all opportunities for a higher education..." This is clearly a half truth, because the said student would still have other viable options. First, they could pursue an area of study that offers a higher return for their investment, which would greatly increase their chances of obtaining a loan. For example, they could pursue a practical major in architecture and a fulfilling minor in art or literature. The second option would be to pursue their education or at least their core requirements in a more affordable state or local school. The third would be to determine that their most probably option is a lower paying service sector job and forgo a formal higher education, instead treating art and literature as non-monetary cultural pursuits. Either way, the pursuit of financing through the private sector would encourage more students to pursue more economically sustainable paths.

Federal subsidies have indirectly allowed for unsustainable price inflation; in other words, student loans are a major factor in the rapid increase in the cost of tuition. Without widespread federal loans, a surge in costs would have quickly prompted a drop in demand. And when any private institution or industry faces declining demand their two options are two go out of business or restructure to drop costs. But, student loans have temporarily spared schools the
need to pursue painful but necessary cost cutting measures.

Especially with increasing needs for an educated workforce I cannot support the termination of all federal subsidies to higher education. However, we clearly the system of federal student loans needs to be reformed. But, unfortunately the Obama Administration's efforts to "cut out the middle man" and have the federal government directly issue student loans will not bring us closer to a more economically rational system. And like the federal government, students will continue to amass unsustainable levels of debt with no end in sight.

Monday, October 4, 2010

Banu Qurayza and Peace In The Muslim Word (part II)

In our previous post we discussed the massacre of the Jews of Banu Qurayza by the army of Muhammad. This elicited a thoughtful response (see below), in which similar acts of violence in the Old Testament were cited. My critic is correct; the Koran is not the only religious text which justifies acts of violence, but they are overlooking some essential facts and context:

1) In this day and age, the majority of religiously inspired violence originates in the Islamic World, not with Jewish, Christians, Buddhists or Hindu communities, hence it is far more pertinent to address negative elements in Islamic text and theology than it is to address these elements in other religions.

2) Furthermore, a significant portion of Islamic violence is occurring between different factions of the Islamic world, such as the suicide bombings and massacres committed by Sunni Muslims against Pakistan's Shi'a and Ahmadiya minorities. This makes self reflection and reform in the Islamic World even more essential.

3) Conversely, over time, Jews and other groups have been able to develop theological or social mechanisms to minimize the negative elements in their texts. For example, the book of Leviticus in the Old Testament is filled with exhortations to execute people for minor offenses like breaking the Shabbat. However, in the Talmud a multitude of restrictions were placed on the death penalty, so much so that Rabbi Eliezer Ben Azariah stated that a Sanhedrin (Jewish Court) that put a man to death even once in 70 years is considered destructive. (Mishnah, Makkot 1:10). And the great Orthodox Rabbi Aryeh Kaplan said "the rules of evidence and other safeguards that the Torah provides to protect the accused made it all but impossible to actually invoke these (death) penalties." To further increased reform and humanization of Judaism, Jews have created Conservative, Reform and Reconstructions branches. Unfortunately similar efforts by thoughtful Muslims have barely scratched the surface of the Islamic World.

They attacked Midian just as the LORD had commanded Moses, and they killed all the men. All five of the Midianite kings – Evi, Rekem, Zur, Hur, and Reba – died in the battle. They also killed Balaam son of Beor with the sword. Then the Israelite army captured the Midianite women and children and seized their cattle and flocks and all their wealth as plunder. They burned all the towns and villages where the Midianites had lived. After they had gathered the plunder and captives, both people and animals, they brought them all to Moses and Eleazar the priest, and to the whole community of Israel, which was camped on the plains of Moab beside the Jordan River, across from Jericho.

Moses, Eleazar the priest, and all the leaders of the people went to meet them outside the camp. But Moses was furious with all the military commanders who had returned from the battle. "Why have you let all the women live?" he demanded. "These are the very ones who followed Balaam's advice and caused the people of Israel to rebel against the LORD at Mount Peor. They are the ones who caused the plague to strike the LORD's people. Now kill all the boys and all the women who have slept with a man. Only the young girls who are virgins may live; you may keep them for yourselves. Numbers 31:7-18, Torah

Sunday, October 3, 2010

Why We Never Learned About Jacob Maged

In 1934 Jacob Maged, a dry cleaner, was fined $100 (a considerable sum back then) and sentenced to 30 days in jail for the crime of...pressing a man's pants for $0.35 rather than the $0.40 mandated by President Franklin Roosevelt's National Recover Administration. The theory was that prosperity would return if the federal government mandated higher prices for goods and services. An increasing number of economists and historians have argued that these policies may have prolonged the Great Depression. Thankfully, many of these policies were declared unconstitutional by the Supremee Court. FDR's response to these challenges was to push forth the Judicial Reorganization Act of 1937 that would have eviscerated the power and independence of the Supreme Court to check presidential powers.

So, the question is why we never learned about Jacob Maged in public schools? Why do most text books gloss over the questionable conduct and failed policies of FDR? Is it by chance that FDR and his policies are venerated by most public school teachers? And why do most public schools offer an uncritical, positive narrative of the massive expansion of the size and scope of the state that occurred under the New Deal and then then LBJ's Great Society?

The answer it quite simple - public employees, their unions and beneficiaries have a vested interest in propagating a curriculum that presents the expansion of the state in a positive light. Such an ideology serves to increase the resources and power granted to government bureaucracies. When I presented a progressive associate of mine an article from the Economist Magazine, their immediate response was:

"What is their agenda? Who are their sponsors and how do they stand to benefit from the their research and its conclusions?"

And when I indicated that the Economist received corporate funding, that served to automatically call into question the article's conclusions, before my associate had even read it. Why? Because "such articles simply serve to justify the corporate agenda..." Indeed, my associate may be correct, however I am troubled that they do not exercise the same skepticism and due diligence when presented with texts with a more liberal bent. In particular, they fail to ask important questions such as "how, if at all, do the economic interests of government workers and bureaucrats bias the texts that they present to students?" Hence, they fail to see that many public school teachers and other "civil servants" are no less biased and self interested than the corporate executives that they so often deride.

Trifle with the government? Just ask Jacob Maged

By George F. Will

Thursday, September 16, 2010


The crime scene at 138 Griffith St. has changed in 76 years. Today it is a barber shop. In 1934, it was a tailoring and cleaning establishment owned and run by Jacob Maged, 49.

With his responsibilities as a father of four, Maged should have shunned a life of crime. Instead, he advertised his criminal activity with a placard in his shop window, promising to press men's suits for 35 cents. This he did, even though President Franklin Roosevelt's New Dealers, who knew an amazing number of things -- his economic aides were not called a "Brains Trust" for nothing -- knew that the proper price for pressing a man's suit was 40 cents.

The National Recovery Administration was an administrative mechanism for the National Industrial Recovery Act of 1933, which envisioned regulating the economy back to health by using, among other things, codes of fair competition. The theory was that by promoting the cartelization of labor by encouraging unions, and the cartelization of industries by codes that would inhibit competition, prices would be propped up and prosperity would return.

Soon there were more than 500 NRA codes covering the manufacture of products from lightning rods to dog leashes to women's corsets. Amity Shlaes, in "The Forgotten Man," her history of the New Deal, reports that the NRA "generated more paper than the entire legislative output of the federal government since 1789." Businesses were asked to display the Blue Eagle, an emblem signifying participation in the NRA. Gen. Hugh "Iron Pants" Johnson, an admirer of Mussolini who headed the NRA, declared, "May God have mercy on the man or group of men who attempt to trifle with this bird."

Maged trifled by his 5-cent violation of New Jersey's "tailors' code," written in conjunction with the NRA. On April 20, 1934, he was fined $100 -- serious money when the average family income was about $1,500 -- and sentenced to 30 days in jail. The New York Times reported that Maged "was only vaguely aware of the existence of a code." Not that such ignorance was forgivable. It is every citizen's duty to stay up late at night, if necessary, reading the fine print about the government's multiplying mandates.

"In court yesterday," the Times reported, "he stood as if in a trance when sentence was pronounced. He hoped that it was a joke." Maged was an immigrant from Poland, which in the Cold War would become familiar with the concept of "economic crimes" and the use of criminal law for the "re-education" of deviationists.

Actually, his sentence was a judicial jest. After Maged spent three days in jail, the judge canceled the rest of his sentence, remitted the fine and, according to the Times, "gave him a little lecture on the importance of cooperation as opposed to individualism." The judge emphasized that people "should uphold the president . . . and General Johnson" in their struggle against -- among other miscreants -- "price cutters." Then, like a feudal lord granting a dispensation to a serf, the judge promised to have Maged "measure me for a new suit."

Maged, suitably broken to the saddle of government, removed from his shop window the placard advertising 35-cent pressings and replaced it with a Blue Eagle. "Maged," reported the Times, "if not quite so ruggedly individualistic as formerly, was a free man once more." So that is freedom -- embracing, under coercion, a government propaganda symbol.

Today, as 76 years ago, economic recovery is much on the mind of the government, which is busy as a beaver -- sending another $26 billion to public employees, proposing an additional $50 billion for "infrastructure" -- as it orchestrates Recovery Summer to an appropriate climax. But at least today's government is agnostic about the proper price for cleaning a suit.

In 1937, FDR asked in his second inaugural address for "unimagined power" to enforce "proper subordination" of private interests to public authority. The biggest industrial collapse in American history occurred eight years after the stock market crash of 1929, and nearly five years into the New Deal, in . . . 1937.

Maged died here of cancer on March 31, 1939. He was 54. He remains a cautionary example of the wages of sin, understood by the progressives of his day as insubordination toward government that knows everything. The NRA lives on, sort of, in this Milton Friedman observation: Pick at random any three letters from the alphabet, put them in any order, and you will have an acronym designating a federal agency we can do without.

Yes, We Are Serious!

At a press conference, Nancy Pelosi (D-CA)was asked where in the constitution is the federal government granted the authority to mandate that individuals purchase health insurance, to which she responded "Are You Serious?!?"

At a town hall meeting, when Congressman Pete Stark (D-CA) was presented a similar question, to which he responded "the federal government can do most anything in this country."

Clearly, their responses demonstrates that they and most politicians choose to ignore the fact that they are not free to do anything they want, the congress only has powers carefully enumerated in the Constitution. Rather, they implicitly believe that the federal government is entitled to do virtually anything that the majority desires.

And on a deeper level their statements and actions demonstrate that they (and the citizens who prescribe to their political vision) do not hold the constitution in high regards and certainly do not view it as a document created to limit their power. In a sense, we cannot blame them, because the founding fathers understood that few politicians would willingly subscribe to limitations on their power. Jefferson believed that only a vigilant, educated citizenry could hold politicians in check and maintain a republic (not a democracy). But with the growing number of people who have come to view the state as their provider, fewer citizens are exercising vigilance over their politicians. Dependency always breeds complacency.

There are those who will respond: "but, times have changed, our world is so different than the one that the Founding Fathers resided in. The size and scope of the state must grow to address the needs of today's Americans..."

I am open top the idea that in theory some of Pelosi's policies may be necessary. However, rather than use cheap sophistry and a willingful misinterpretation of the Constitution to justify these measures, ammend it to the Constitution. Even if the end result were the same, it is essential to force politicians to submit to the processes laid down in the constitution. Why? Because, this would force politicians and the general public to carefully consider and debate the wisdom of the fundamental changes they are proposing, rather than push them through by hiding them in a 3,000 page bill that virtually no one has read. I would consider it a disaster if the left were able to ammend the constitution to grant the federal government the right to mandate the purchase of health insurance. But, at least this would still mean that the republic was still run by the rule of law and not through obfuscation and that the power of politicians was still held in check, as the Founding Fathers intended.

The uproar caused by Pelosi's statement led her to issue a constitutionally based justification of her desired programs. Enclosed is an article that explores and successfully challenges her arguments.

Pelosi’s Misleading Statement on the Constitutionality of Government Health Care

by Rob Natelson

Speaker Nancy Pelosi has issued a press release in which she purports to rebut those of us who have expressed doubts about the constitutionality of some health care reform plans.

Pelosi (or her ghostwriter) claims:

“The 10th amendment to the U.S. Constitution states that the powers not delegated to the federal government by the Constitution, nor prohibited by it to the states, are reserved to the states… or to the people. But the Constitution gives Congress broad power to regulate activities that have an effect on interstate commerce. Congress has used this authority to regulate many aspects of American life, from labor relations to education to health care to agricultural production. Since virtually every aspect of the heath care system has an effect on interstate commerce, the power of Congress to regulate health care is essentially unlimited. (bolded in original).

For several reasons, this is a highly misleading statement.

First, it fails to mention a concern expressed by many constitutional scholars, including those on the Left: Substantive due process.

“Substantive due process” is the doctrine by which the Supreme Court strikes down laws it deems unacceptably interfere with personal privacy or autonomy. Health care laws that, for example, limit one’s ability to fund and control one’s own health care could well run afoul of substantive due process rules.

Second, the statement fails to mention that, while the Supreme Court has upheld many delegations of power from Congress to executive branch agencies, the Court has affirmed repeatedly that there are limits. Some health care proposals involve wider delegations of authority than any since the New Deal’s National Reconstruction Adminisration (NRA) — which was invalidated by a unanimous Court.

Third, the Pelosi release disregards the fact that on several occasions the modern Supreme Court has struck down overreaching federal legislation, supposedly adopted under the Commerce Power. Also, on several occasions, the Court has interpreted congressional acts narrowly to avoid constitutional conflicts.

Fourth: Pelosi (or her speechwriter) clearly misstate the current Supreme Court’s test for laws under the Constitution’s Commerce Power. The statement that Congress can regulate “activities that have an effect on interstate commerce” should be that Congress can regulate “economic activities that have a substantial effect on interstate commerce.” Non-economic activities, such as some health care decisions, would have to meet a much stricter test. This may seem to be a minor mistake, but for legal purposes it is an important one, and one that, for the Speaker of the House of Representatives, is not easily excusable.

Finally, Pelosi (or her ghostwriter) commits the mistake of failing to look at wider judicial trends. One of these trends is the long-term movement by the Supreme Court toward interpreting the Constitution according to its real meaning – the original understanding of the Founders and Ratifiers.

And virtually no knowledgeable person thinks government health care is constitutional under that standard.

Rob Natelson is Professor of Law at The University of Montana, and a leading constitutional scholar. (See His opinions are his own, and should not be attributed to any other person or institution.