Monthly Archives: December 2008

25 More Reasons for Criminal Justice Reform

20 months ago I wrote a post (click here) to recognize the successful efforts of The Innocence Project in exonerating 200 wrongly convicted (14 of which were on death row). In the time between that post and this one, the Innocence Project has helped 25 more wrongfully convicted regain their freedom! If this trend continues, we could see 275+ wrongfully convicted set free by the organization’s 20th anniversary in 2012. While this is all very good news for these individuals and their families, much more needs to be done to prevent others from being victimized by the state.

Many states offer nothing with regard to compensation for the wrongfully convicted. Of those which do, the IRS insists on collecting taxes from this compensation (a complete moral outrage). The Innocence Project is working to correct this injustice.

25 states do not have laws which require forensic evidence to be preserved post conviction. For those who wish to appeal and challenge their convictions, the chances of proving their innocence are much dimmer. One of the main reasons these states refuse to preserve biological evidence is the costs associated with storage.*

There are many other reforms which need to be made with regard to the use of informants (who have an incentive to tell the authorities what they want to hear to shorten their sentences), government fraud and misconduct, and unsound science (among other needed reforms).

I would also submit that it is time to revisit the issue of the death penalty. We now have 225** reasons to demand a national moratorium on the death penalty; 225 cases where the system failed, convicted the wrong person, and allowed the real perpetrators walk free. Even one innocent person killed by the state is too many.

In closing, the following is statistical data about the 225 exonerations In the Innocence Project’s winter 2008 Newsletter: The Innocence Project in Print.

Innocence by the Numbers: Eyewitness Misidentification

Percentage of wrongful convictions cases later overturned through DNA testing that involved eyewitness misidentifications 76%

Percentage of those misidentifications that were cross-racial 51%

Percentage of those cross-racial misidentification cases where a Caucasian witness’ misidentification led to the wrongful conviction of an African-American or Latino defendant 90%

Percentage where an African-American or Latino witness’ misidentification led to the wrongful conviction of a Caucasian defendant 1%

Percentage of all the misidentification cases where eyewitness testimony was the central evidence used against the defendant (without other contributing evidence like false confessions, invalid or improper forensic science, or snitch testimony) 20%

Percentage where more than one eyewitness misidentified the same innocent defendant 37%

Highest number of eyewitnesses misidentifying the same innocent defendant 10

States where eyewitness misidentifications have contributed to a wrongful conviction 32

States that have passed reforms to improve eyewitness identification procedures 7

States Legislatures considering eyewitness identification reforms for 2009 12 and the District of Columbia

» Read more

Pricing And Politics

I firmly believe that many political problems are born of the average Americans inability — and unwillingness — to try to think and understand the world around them rather than accept conventional wisdom. This is clearly evident in peoples’ lack of understanding of pricing; it is disturbingly evident in the political policies they seek as a result of this lack. It’s clear enough when you hear about “price gouging”, and every economic argument that prices must rise to avoid shortages falls on deaf ears. But it’s the same principle when folks rail in favor of “windfall profits taxes”, as if businesses have the power to just arbitrarily select the level of profits they’ll earn.

Someone should really tell Ford, GM, and Chrysler, because they seem to be having some trouble with this concept!

Given that this is such an important concept, and given that it’s really quite simple, it’s surprising that the simple rules of pricing aren’t more apparent. But it’s not something that most people regularly have to think about. And sadly, because it’s so simple, it is not often explained — which I’d like to change.

The misconception of pricing is obvious. Most people think that prices are determined by a simple formula:

Price = Cost of materials + Cost of labor + Overhead + reasonable profit

It sounds so axiomatic that it is taken at face value. It’s so often true (but for a different reason) that it seems correct. But it’s not that clear.

Pricing is actually determined by the following equation, with a second equation added for clarity:

Price = whatever the market will bear
Profit (or loss) = Price – Cost of inputs – Cost of labor – Overhead

Note the difference between the two. Price is not a PRODUCT of the equation of material/labor/overhead/profit. Price is determined through a wholly different process, and profit or loss is the product of the pricing equation.
» Read more

Free Speech Or Slander ?

A case in Maryland is requiring that state’s highest Court to find the line between freedom of speech and business disparagement:

In a First Amendment case with implications for everything from neighborhood e-mail lists to national newspapers, an Eastern Shore businessman argued to Maryland’s highest court yesterday that the host of an online forum should be forced to reveal the identities of people who posted allegedly defamatory comments.

It is the first time the Maryland Court of Appeals has confronted the question of online anonymity, an issue that has surfaced in state and federal courts over the past few years as blogs and other online forums have increasingly become part of the national discourse.

The businessman, Zebulon J. Brodie, contends that he was defamed by comments about his shop, a Dunkin’ Donuts in Centreville, posted on NewsZap.com. The shop was described as one “of the most dirty and unsanitary-looking food-service places I have seen.”

The comment was posted in a 2006 exchange among anonymous posters named CorsicaRiver, RockyRacoonMd and others. Brodie is not certain which poster is responsible for that and other remarks that he claims were defamatory, and he has only their screen names. Brodie is demanding that Independent Newspapers Inc., the company that owns the site, divulge the identities of his critics.

A Circuit Court judge in Queen Anne’s County ordered the company to hand over the information. The company appealed, setting up yesterday’s argument in Annapolis.

(…)

A number of state courts have heard similar cases, and Levy urged the Maryland judges to follow the lead of New Jersey, where in 2001 an appeals court crafted a standard for cases involving subpoenas to identify anonymous Internet speakers. The court required plaintiffs to produce “sufficient evidence” of their cause of action and mandated that judges balance First Amendment rights against the strength of the plaintiffs’ case and the need for identities to be disclosed.

But Poltrack argued that the circuit judge, Thomas G. Ross, conducted a balancing test of his own and concluded that Independent Newspapers was obligated to identify the users sought by Brodie.

Poltrack said that requiring plaintiffs to provide evidence at such an early stage was unfair. “It’s a tremendous and onerous burden,” he told the judges.

It may well be, but the bias should always been in favor of freedom of speech, and anonymity is an important part of the right to speak freely.

In this case, it seems very unclear that an anonymous post that the Plaintiff’s store was “dirty and unsanitary-looking” would not seem to rise to the level necessary for a Plaintiff to be able to pierce the veil of anonymity. At most, it’s an expression of opinion.

Ted Stevens, William Jefferson, Rod Blagojevich, And The Corruption Of State Power

In light of yet another example of the eternal truth that power corrupts, and absoulte power corrupts absolutely, Steve Horwitz wonders why we’re still talking about handing yet more power over to the government:

I simply do not understand how those who are in favor of giving government all of these new powers because they sincerely believe that doing so will work out the way their blackboard designs intended can keep a straight face. What kind of cognitive dissonance must it take to believe that the people YOU are handing power over to are “not like” Ted Stevens or Rod Blagojevich? How deeply must one be in denial or engage in rationalization to believe that they are “different?” How blind must one be to think that trillions of dollars in bailout money won’t go to the highest bidder (as the lobbyists line up on K Street…) in a process different only in its wink-and-a-nod courtesies than Blagojevich’s auctioning off of a Senate seat?

For me, the key insight of public choice is the same insight that underlies Austrian economics: it is the institutional framework that is the key to understanding the choices people make and the unintended outcomes they produce. As I said to a class last week: “Governments can’t act like businesses because businesses only act like businesses because they operate in the institutional environment of private property, monetary exchange, and competition.” In the same way, getting politicians to stop selling off their power isn’t a matter of ethics or psychology, rather it’s about changing the rules of the game such that they do not have as much power to sell. Unfortunately, the current bailout mania is changing those rules in utterly the wrong direction.

Look at it this way: the bailouts are already becoming just a legal form of the essentially the same behavior for which the governor has been indicted.

Why should we ever accept “Oh, but he’s different” as an answer to the claim that explicit bribery and selling off power are just a less subtle form of politics as usual?

The examples of Ted Stevens, William Jefferson, and, now, Rod Blagojevich make clear that the answer is that we shouldn’t.

We shouldn’t trust the Treasury Secretary with unrestricted, unreviewable authority to spend $ 700 billion in taxpayer funds.

We shouldn’t trust a “car czar” to oversee a government-run auto industry in a manner that gives priority to making a profit rather than being politically correct.

For the very reasons that the Founding Fathers enunciated 232 years ago, we shouldn’t trust government with the power we seem all to willing to give it.

There are lessons that can be learned from the political scandals that we’ve seen over the past few years, but I doubt that most people will recognize them.

H/T: Hit & Run

Cross-posted from Below The Beltway

Oil — Where Is It Going? Up, Up And Away!

Last week, I posted about my belief that oil has currently dropped to a price level that is damaging to the long-term stability of the oil market, and that while it seems wonderful right now, it won’t last.

Today we find a bit of evidence that may only support this point:

The $25 low-end estimate [Francisco] Blanch recites is based upon a furthering destruction of Chinese and other emerging-market growth in 2009, and it is astounding if it turns out to be true.

We have witnessed the perfect storm of declining commodity pricing in the last six months — a tsunami of credit tightening, capital withdrawal on a massive scale, dollar strength, weakening emerging-market growth and finally a deflationary spiral that seems to never be ending.

The oil markets, if they represent perfect efficiency as the equity markets normally do, would indicate either that Francisco is very, very wrong with his oil predictions or that we are in for far deeper problems with the rest of our economy. Far-forward contracts of oil are trading at a premium to front months rarely seen before in my history of trading the stuff and in a way that looks unbelievable to other longtime participants.

As I write this piece, January crude is trading for delivery later this month at $43.40 a barrel. Amazingly, January crude for delivery in December of 2009 is trading at $57.50 a barrel, a premium of more than 32%. This premium (contango) nature of the markets has rarely been so great and would allow for a riskless trade. One could buy crude oil for delivery this month, store it and sell next January’s contract for delivery 12 months later. With margin, storage and financing costs, you’d still clear a healthy 11% profit.

Now, I’m a big fan of futures markets. However, futures markets don’t represent truth, they represent an aggregate of belief — and are often trustworthy because it’s belief backed up with money. As such, futures markets tend to be extremely accurate when correct. When wrong, though, they’re often spectacularly wrong, because when groupthink takes over, belief becomes decoupled with reason. This could be easily seen in the housing market, houses representing a similar case to a futures market (i.e. you buy and hold, betting the price in the long-term future will continue to rise, and then even more so recently with house “flippers” speculating on near-term future prices), where the belief that it will simply keep going up only enhances the height it reaches before the inevitable crash.

But I don’t think that is the case here. The pundits are all asking “how low will oil go.” The futures market says it’s headed up. If the futures traders were trading these contracts at $25/bbl, I’d call it groupthink, the belief that things are just going to spiral down worse out of control. But they’re not, they’re exercising a contrarian point with the $57/bbl price. When pundits and futures traders disagree, I know who I’m more likely to trust.

I think what we’re seeing here is a confluence of unintended consequences that many people only purport to understand. Extremely complex are markets making moves that appear contrary to “normal” behavior, and thus everything is becoming very unpredictable. Bailouts here, money-printing there, and debt deflation out of left field have all thrown markets out of whack. It’s going to take time to sort this out, but the oil futures traders are assuming that when it finally happens, we’re more likely to be at $57+/bbl than $25/bbl.

They [and I] may be wrong… When dealing with such complex systems, it’s hard to gauge all the inputs and outputs and every relationship between them. But when you take the prospective theories about what’s going on, I think the plausibility of demand destruction creating a 70% downward move in prices is in question. I think the belief that this is a strong dollar / credit crunch issue is a lot more plausible, and with all the money-printing going on worldwide, I don’t see how anyone can reasonably predict $25/bbl oil.

No Philosophy?

Several times over the past few years, well respected and well known people, have written that the reason liberty oriented people fail in the political arena, or achieve limited results that they cannot follow up on or capitalize on; is because there is no coherent philosophy behind the notion of liberty.

In fact, the common notion is that liberty is antithetical to philosophy; a notion reinforced by many peoples conception of Ayn Rands book “Philosophy, who needs it”; which is in fact a philosophical tract (as are all her books).

The thing is though, it isn’t true. There IS a philosophy of liberty. It’s internally consistent, complete, and comprehensive.

It’s also so simple, that many people ignore it, pass it over, or don’t recognize it as a philosophy. So it irks me that otherwise quite intelligent folks write that there is no philosophy, when I KNOW that people have been talking about it in front of them, or even with them, for years.

It’s called the non-initiation, or non-aggression principle, and it is the only philosophical framework and ethical system that doesn’t require either an appeal to divine authority, or appeal to collectivism… (actually perhaps it should best be stated as simply not requiring an appeal to authority at all), to be internally justified and consistent.

It is the core of libertarian thought and philosophy; and it’s completely simple:

  1. You own your entire self (body, mind, and soul).
  2. You have the absolute right to:
    • self determination
    • freedom of conscience
    • your own property legitimately acquired (which includes your entire self) and the employment thereof
    • the efforts, products, and outputs of all the above
  3. You have the absolute right to defend those things, and the product or output of them; up to and including lethal force.
  4. There are no other rights. All other privileges, powers, and immunities, are less than rights; and are either derived from, or in opposition to them.
  5. You cannot initiate force or fraud against any other to abrogate their rights; or for any reason other than the defense of those rights; but including defending those rights for others who either cannot defend themselves, or those who delegate that defense to you.
  6. None may initiate force or fraud against you to abrogate those rights, or for any reason other than the defense of those rights; including defending others rights from you.
  7. There are no rights, privileges, powers, or immunities which are not derived from the rights of the individual. A collective cannot arrogate rights on itself which are not delegated to it by individuals; therefore no collective may exercise more or different rights than any individual, nor may it exercise those rights which have not been explicitly delegated to it.
  8. You have absolute responsibility for all of the above. All consequences are yours, good or bad.

It’s very simple really; though as with so many simple things, it isn’t necessarily easy.

Unfortunately different people/groups have slightly different definitions of force or aggression, and slightly different definitions of initiation.

For example: is pre-emptive self defense ethical? If so, how do you separate that from the initiation of unjustified aggression etc… etc…

So, the various liberty oriented subgroups spend all their time arguing about angels and pinheads.

I have said many times in the past that I am not what I have called “a non-aggressionist”; which to an extent is true; however I do subscribe to the philosophy above.

I state in my post “The Politics of Liberty”:

“My beliefs on government are rooted in three core tenets.

  • The coercive restraint of human liberty is inherently evil. Control of ones person, property, and behavior should be the exclusive province of the sovereign man.
  • The only legitimate limitation of liberty is that which prevents transgression on the liberty of others, or which compensates those transgressed upon.
  • Without a disinterested arbiter, maintaining a monopoly of legitimate force with which it resolves disputes and enforces compacts between men, the liberty of the weak will be abrogated by the will of the strong”

And this is where my conflict with the non-aggressionists begins.

I subscribe to the philosophy of liberty, but exclude myself from the “non-aggressionist” description, because my definitions of “initiate” and “force” or “aggression”, are considerably different from those who consider themselves strict non-aggressionists.

For example, I think it’s perfectly reasonable to kill someone who is planning to kill you, before they ever pick up a gun. To a strict non-aggressionist, this is unethical and morally wrong.

I also believe that you are responsible not just to yourself, but to your wife and children for example; and that they are responsible to you. I also believe that it is perfectly acceptable for you to make choices for your kids to protect them, until they are able to do so on their own.

Again, the non-aggressionists think that is wrong.

In fact, they would strongly object to the way I wrote points 5 and 6 above; because they would consider defending someone elses rights an unjustified initiation of force, unless that individual specifically and explicitly delegates that right to you.

I believe that without governments, at least as voluntary collectives; the strong will inevitably violate the rights of the weak; until the strong are too powerful to be resisted, at which point they will enforce tyranny.

Non aggressionists believe that because no government can be perfect, according to their interpretation of the philosophical system of liberty; all government is therefore illegitimate and cannot be allowed to exist.

Personally, I believe that strict non-aggressionism is a voluntary mental illness.

(Oh and on a strictly personal basis, I’m a catholic… and I see no contradiction between Catholicism, and the philosophy of liberty. I’m also a veteran, and I see no conflict between voluntary military service, and the politics of liberty. Those two make most of their heads just explode.)

So, there must be some pragmatism involved; as there must be with any system of philosophy, morality, and ethics.

The problem with this philosophy of course is that it is SO simple, that it isn’t sexy or saleable. There is no hidden advantage. There is no tribal secret. There is no group to identify with.

Of course, that is the point.

It’s about individualism. Individual rights, individual responsibilities, individual rewards, and individual consequences. This is why I call myself a muscular minarchist individualist, and not a non-aggressionist; or even a libertarian.

Amazingly to me, at least on an emotional visceral level (I understand it to be true intellectually, and some of the reasoning behind it, I just think it’s absurd, or even obscene); is that this whole idea is uncomfortable, or frightening, or simply preposterous to many people.

I write, quite a lot, and I play games, and I instruct; and there’s something I’ve found common to all those activities:

Most people, when given a broad base of possibilities with limited restrictions, have difficulty in orienting themselves, and deciding what to do.

Being put into such a situation makes them uncomfortable, or even fearful.

This is the problem the philosophy of liberty presents.

Those people inevitably do better, the more strictures and structures are put up around them. It helps them orient themselves, and constrains their analysis. It gives them something to hold on to. They lose their fear in the reassuring embrace of “the system”. They get reassurance from “the system” that they are not at risk, and that they are doing “the right thing”.

The ultimate examples of this of course are Fascism and Communism; both philosophies based on totalitarian control; and both are very attractive to those who feel lost or frightened or paralyzed without such limitations.

It is my belief that there are essentially two types of individual: Those who do not wish to be controlled, and those who do.

The problem, is that those who wish to be controlled, almost universally have a desire to control others; or at the least to force all others to be controlled. The rest of us just want to be left alone; but by nature, the former philosophies grow stronger the more adherents they get, until they, inevitably, impose tyranny.

I also believe that those who wish to be controlled FAR outnumber those who do not; perhaps as much as 20 to 1.

They construct philosophies and ethical systems which conform to their own personal desires; and then justify their coercive actions against others within the framework of those philosophies; so that it becomes legitimate to use coercive power against those who do not subscribe to that philosophy…

…and so the beast is born.

I am a cynically romantic optimistic pessimist. I am neither liberal, nor conservative. I am a (somewhat disgruntled) muscular minarchist… something like a constructive anarchist.

Basically what that means, is that I believe, all things being equal, responsible adults should be able to do whatever the hell they want to do, so long as nobody’s getting hurt, who isn’t paying extra

Open Thread — Off-Topic / Notebook vs. Netbook

This is somewhat off-topic, but as I know many bloggers and blog-readers are technophiles, I wanted to get advice from the best place I could.

The time has come for us to replace my wife’s laptop. It’s about as old and decrepit as a laptop can be and still run Windows, and is a constant source of frustration for her. As any married guy knows, that means that it’s a constant source of frustration for me as well.

Her computing needs are very sparse, so performance is not an issue. At the moment, I’m toying with the idea of getting her a netbook rather than a notebook. I’m sure several readers here have played with the netbooks, and can give an idea of whether they are functional enough to be her primary computer. She will be using it primarily to run her business, but most of that is email and web-based, with occasional document editing.

Considerations:

Cost — The decision is between netbook and low-end notebook, not netbook vs. high-end notebook. Note that this also rules out the ultra-slim notebooks, as you typically pay for the small size.

Operating System — I prefer WinXP. For her, it can’t be Linux, for me, I’d prefer it’s not Vista. We could live with Vista if we had enough horsepower, though.

Storage — Rotating HDD. I know more about SSD technology than most (it’s my job), but the cost/capacity equation is wrong for her application. As a primary PC, and with a lot of storage of digital photos, 8-16 GB would disappear in months.

Software — 95% Firefox. 5% OpenOffice, Picture Viewing, etc.

Size — It needs to be portable enough for her to carry, since she runs a business and needs connectivity on a regular basis. She’s also trucking around one 16-month old child with her, and in another 6-7 months, will have two. So smaller is better in this sense.

Convenience — If a small screen & keyboard (luckily she has small fingers) will grow tiresome quickly, she may need to move up to the notebook.

If I didn’t regularly use one laptop for everything, I’d probably be using a netbook for travel and general connectivity. But I’m sure it would get very old for me quickly, as I’m used to large high-resolution screens and full-size keyboards.

What do you think? I’m thinking of buying a netbook retail for Christmas, letting her play with it for a few weeks, and then if she hates the small keyboard/screen, returning it for a real notebook. But if the general consensus is that she’ll hate it right up front, I might as well save myself a trip.

Return Of The WPA

Prior to the election, the question loomed — would a potential Obama administration govern as a political moderate?

The recession and financial crisis have solidified the answer… FDR and LBJ may have nothing on BHO!

President-elect Barack Obama is focusing his economic recovery strategy on making the biggest investment in the nation’s infrastructure since President Dwight D. Eisenhower created the interstate highway system a half-century ago.

Speaking yesterday at a Chicago news conference and on NBC’s “Meet the Press,” Obama said state governors have many such projects that are “shovel ready,” meaning they could be undertaken swiftly and have an immediate impact on jobs.

He declined to specify a price tag for the stimulus, saying his advisers are “busy working, crunching the numbers, looking at the macroeconomic data to make a determination as to what the size and the scope of the economic recovery plan needs to be. But it is going to be substantial.

How substantial? Let’s just say that price is no object to this administration:

Later at the Chicago news conference, he said “more aggressive steps” are needed to cope with the housing crisis.

Even with the prospect of a federal budget shortfall approaching $1 trillion, “we can’t worry, short term, about the deficit,” he said on NBC. “We’ve got to make sure that the economic stimulus plan is large enough to get the economy moving.”

It seems we’re in stage three of Reagan’s aphorism:

Government’s view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it.

And oh, the subsidies will be expensive. We’ll all pay for them, whether through crushing taxation or runaway inflation, but we’ll pay. Welcome to the United State Formerly Known As America, people.

ABC Shows Us Just How Little Anti-Terrorism The Homeland Security Apparatus Does

Reality TV junkie? Also a State-worshipper? Then you’re in luck!

Every day the men and women of the Department of Homeland Security patrol more than 100,000 miles of America’s borders. This territory includes airports, seaports, land borders, international mail centers, the open seas, mountains, deserts and even cyberspace. Now viewers will get an unprecedented look at the work of these men and women while they use the newest technology to safeguard our country and enforce our laws, in “Homeland Security USA,” which debuts with the episode “This is Your Car on Drugs,”

How much of this “epic” TV show will actually have to do with terrorism? Will this finally belie the claim that the Department of Homeland Security was created with purely “keeping us safe from evildoers” as it’s mandate, or will it be another dose of soma “reality television” for the unquestioning masses. Bear in mind, that’s a rhetorical question, we all know the answer is the latter.

Why Nationalization Damages Liberty and Prosperity

Many progressives are looking forward to increased government oversight over the auto industry. They see this as a chance to influence the types of vehicles that are produced and to dictate that production be turned to socially beneficial uses, including the manufacture of green cars that auto manufacturers are not manufacturing. These vehicles are not manufactured presently because car manufacturers see bigger profits in continuing to produce SUV’s and more cheaply built sedans. Viewing this judgment as short-sighted, progressives are overjoyed at the prospect of including non-monetary considerations such as ecology or social needs in deciding what to produce. We who oppose the nationalization are viewed either as being too stupid to recognize the benefits of introducing considerations other than profits to production decisions, or as being wed to outdated economic theories or to be apologists for fat-cat capitalists.

This is incorrect. Rather, the progressives who support nationalization are being very short-sighted and are threatening to return society back to feudalism and are threatening to destroy the development of new technologies, technologies that will be vital to improving our standard of living while reducing the amount of pollution and natural resources needed to maintain such comfort. This not hyperbole but rather simple fact.

The problem, which has plagued all fascist and socialist economies throughout history, is that nationalization destroys the ability of the economy to rationally allocate capital goods and invest in the future. It is this incapability that is behind the phenomenon where communist countries seem to become mired in the past with stagnant technology, bare shelves in shops and factories that routinely fail to meet production quotas. » Read more

I am an anarcho-capitalist living just west of Boston Massachussetts. I am married, have two children, and am trying to start my own computer consulting company.

Welcome To The New American Auto Industry

If the Democrats in Congress get what they want, the real headquarters of Ford, GM, and Chrysler won’t be in Detroit any more:

All three restructuring plans are heavy on promises to build the “green” cars that a Democratic Congress wants built. GM promises 15 hybrid models by 2012 and 37 miles per gallon on average for its cars. Chrysler commits to putting flex-fuel engines, which can run on ethanol or gasoline, in half of its cars. Ford promises to save 16 billion gallons of gas by using “advanced technology” and to invest $14 billion to improve fuel efficiency.

All three CEOs also drove to Washington in hybrid vehicles as penance for their private-jet flights back in November. This bit of political obeisance was supposed to show that they’d gotten religion both on their perks and their carbon footprint. But it may not have been enough. One Congresswoman wanted to know why they couldn’t hit a 50-mpg fuel-economy target by 2015. Another asked whether, maybe, they weren’t selling enough cars because everyone in America was waiting with baited breath for the coming revolution in fuel economy.

After Barney Frank was done roughing up the CEOs, he hustled them out to hear from David Friedman of Union of Concerned Scientists and Jeffrey Sachs of the Earth Institute. Mr. Friedman warned the Members not to give one inch on fuel-economy standards and not to relax the environmental strings attached to the $25 billion Congress has already made available to the car companies.

You get the picture. If there was ever any question whether Congress actually wants to “save” Detroit, this week dispelled it. This is not a bailout that Congress is debating. It is a federal takeover. We don’t mean that in the sense that the feds will own the companies on paper, although that can’t be ruled out. What Congress wants to own is their business plan, and Detroit seems prepared to oblige.

And one can see the beginnings of that plan in the bailout that will apparently be voted on next week:

The government would order a major restructuring of Detroit’s struggling Big Three auto companies in exchange for a multibillion-dollar bailout under a plan circulating in Congress.

Skeptical lawmakers are weighing whether to dole out as much as $34 billion in aid to the automakers as the once-mighty companies make their second round of pleas for government help to keep them from collapsing by year’s end and potentially deepening an already painful recession.

With several lawmakers in both parties pressing them to consider a pre-negotiated bankruptcy – something they have consistently shunned – members of Congress and the Big Three both were contemplating a government-run restructuring that would yield similar results, including massive downsizing and labor givebacks.

As Stephen Green notes, there’s really no reason to believe that this “government oversight” will do what needs to be done to make any of the Big Three viable again:

[D]o you really see Congress axing thousands of dealers around the country, eliminating 8.5 car brands, or busting the UAW?

No, I don’t see it either. Instead, every decision about how to “save” the car companies will become politicized and the concern will be with satisfying interest groups rather than making the economic adjustments needed (i.e., brand-stripping, termination of dealer contracts, and even more massive down-sizing) to make these companies competitive.

Moreover, as both Bruce McQuain and Dave Schuler note, the amount of money being contemplated now is little more than a stop gap measure designed to keep the companies alive until sometime after January 20th when Barack Obama is President, the new Congress is in power, and those on the Hill who believe in free markets become even less able to affect the agenda.

Which is why I think these words will end up proving prophetic:

Two economists testified that the ultimate cost of this bailout would certainly be much, much higher than $34 billion. Mark Zandi of economy.com put the number at up to $125 billion — and he supports the bailout. NYU’s Edward Altman said the company proposals were “doomed to fail.” He proposed a prepackaged bankruptcy for GM and Chrysler, with the government providing the debtor-in-possession financing if necessary. His point, which ought to be sobering, was that outside of bankruptcy there is no way to make these taxpayer loans senior to existing secured debt — meaning the government might never get paid back if the companies go bankrupt later.

We’re about to give tens, and eventually hundreds, of billions of dollars that we don’t have to companies that have been dinosaurs for 30 years and, in the end, it’s quite likely that we’ll have absolutely nothing to show for it.

Anyone on Capitol Hill who votes in favor of this deal should be ashamed of themselves.

Cross-posted at Below The Beltway

Quote Of The Day

From Thoreau’s Civil Disobedience:

The progress from an absolute to a limited monarchy, from a limited monarchy to a democracy, is a progress toward a true respect for the individual. Even the Chinese philosopher was wise enough to regard the individual as the basis of the empire. Is a democracy, such as we know it, the last improvement possible in government? Is it not possible to take a step further towards recognizing and organizing the rights of man? There will never be a really free and enlightened State until the State comes to recognize the individual as a higher and independent power, from which all its own power and authority are derived, and treats him accordingly.

Happy Repeal Day !

It was 75 years ago today that America’s incredibly stupid experiment in alcohol prohibition finally ended:

asset_upload_file998_12215Prohibition was the pièce de résistance of the early 20th-century progressive’s grand social engineering agenda. It failed, of course. Miserably.

It did reduce overall consumption of alcohol in the U.S., but that reduction came largely among those who consumed alcohol responsibly. The actual harm caused by alcohol abuse was made worse, thanks to the economics of prohibitions.

Black market alcohol was of dubious origin, unregulated by market forces. The price premium that attaches to banned substances made the alcohol that made it to consumers more potent and more dangerous. And, of course, organized crime rose and flourished thanks to the new market created by the 18th Amendment and the Volstead Act.

So hospitalizations related to alcohol soared. And so did violent crime. Corruption flourished, as law enforcement officials in charge of enforcing prohibition went on the take, from beat cops all the way up to the office of the United States Attorney General. Even the U.S. Senate had a secret, illegal stash of booze for its members and their staffs.

In 1924, the great social critic H.L. Mencken wrote of prohibition:

Five years of Prohibition have had, at least, this one benign effect: they have completely disposed of all the favourite arguments of the Prohibitionists. None of the great boons and usufructs that were to follow the passage of the Eighteenth Amendment has come to pass. There is not less drunkenness in the Republic, but more. There is not less crime, but more. There is not less insanity, but more. The cost of government is not smaller, but vastly greater. Respect for law has not increased, but diminished.

(…)

When he first visited the United States in 1921, Albert Einstein wrote of America’s ban on booze: “The prestige of government has undoubtedly been lowered considerably by the prohibition law … For nothing is more destructive of respect for the government and the law of the land than passing laws which cannot be enforced.”

As in many other things, Einstein was wise in this observation.

So, go out and celebrate the end of of a stupid experiment by having a drink on me !

Roubini Advocates Nationalization Of Auto Industry

You know, Nouriel Roubini is smart. I’ve long believed that we should never treat those in opposition* like dullards, because that leads to sloppiness in fighting them. But I just don’t know how a smart person — an economist — can advocate the nationalization of our auto industry with a straight face.

“We’re spending $2 trillion to bail out financial institutions,” the economist notes. “What’s the fairness of not giving say $50 billion of low interest loans to automakers to help them restructure?

But Roubini is no ally of the auto industry CEOs currently making their case in Congress. He says any government aid must be “highly conditional” and only occur after a prepackaged bankruptcy that includes:

  • Replacement of current management
  • Concessions from both the UAW and automakers
  • A wipeout of existing equity and debt-holders
  • Temporary nationalization of the auto industry

The appointment of a “car czar” is clearly a touch subject but Roubini says those worried about moral hazard and issues like free enterprise are fighting the last war.

“There’s already massive amounts of government intervention in the economy, we’ve [crossed] that bridge,” he says. “The question now is, what are we doing to do right? If it takes an auto czar to really structure these firms, so be it.”

Have our “drug czar” or “poverty czar” or “education czar” ever solved a damn thing in their respective fields? No? So why think that an “auto czar” would actually improve things. Who’s to say that — once they get their hands in the cookie jar — the nationalization of the industry would be “temporary”? While it may not be a de jure nationalization in the future, I could see the industry going the way of the GSE’s, nominally private but publicly regulated.

Roubini seems to be offering the argument that only nationalizing some industries while letting others fall is “unfair”, as if nationalizing anything is fair. He wants the government to come in and bail out the automakers — throwing their owners [the shareholders] out the door — and take over… Just like Fannie… And he actually thinks this is a good idea?!

I’m sticking with my original instinct — let them survive or fail, hit bankruptcy if necessary, and go through the painful but required reorganization according to market economic principles. If you put an auto czar in charge, the reorganization will be done according to political principles, and we taxpayers will be saddled with these industries — and all the protectionism that goes with state-owned industries — for perpetuity.

* Of course, I wouldn’t necessarily consider Roubini in “opposition”, as an academic economist. He was rather prescient about not only the cause but the shape of our current financial meltdown. However, when someone suggests that we should have Washington appointees try to fix our ailing auto industry, I consider that a point worth opposing.

Is It Time To Take “Under God” Out Of The Pledge Of Allegiance ?

A writer at The Washington Post says the answer is yes:

First, it isn’t the 1950s anymore. As religion scholar Will Herberg noted in his influential 1955 essay “Protestant-Catholic-Jew,” at that time 68 percent of Americans were Protestant, 23 percent Catholic, and 4 percent Jewish. (The remaining 5 percent expressed no religious preference.) “Not to be a Catholic, a Protestant, or a Jew today is, for increasing numbers of American people, not to be anything.”

According to a recent Pew report, those figures have declined to 51, 23 and 2. The remaining 20+ percent express plenty of preferences, including Mormon, Muslim, Buddhist, Hindu, Atheist and Agnostic. Not to be a Catholic, a Protestant, or a Jew today is, for increasing numbers of American people, to be something else just as worthy of citizenship.

Second, the greatest threat to American freedom is no longer godless communism but “godly” terrorism — people who pledge their allegiance to God. Docherty noted that even Stalin’s Soviet Union could claim to be “one nation, indivisible, with liberty and justice for all.” Today, even a Taliban-led Afghanistan could claim to be “one nation, under God.”

In his 1954 sermon, Docherty argued that Judeo-Christian America was engaged in “mortal combat against modern, secularized, godless humanity.” Today, pluralistic America is engaged in mortal combat against anti-modern, fundamentalist, religionized humanity.

It isn’t our belief in God that makes us different. It’s our belief in the liberties (religious and other) enshrined in the Constitution. The American creed is faith in liberty for all, not the religion of most.

On some level, Waters is absolutely correct but he misses the most important reason why claiming that the United States is a “nation, under God” is inappropriate. It was expressed by America’s Third President:

Believing with you that religion is a matter which lies solely between man & his god, that he owes account to none other for his faith or his worship, that the legitimate powers of government reach actions only, and not opinions, I contemplate with sovereign reverence that act of the whole American people which declared that their legislature should make no law respecting an establishment of religion, or prohibiting the free exercise thereof, thus building a wall of separation between church and state. [Congress thus inhibited from acts respecting religion, and the Executive authorised only to execute their acts, I have refrained from presenting even occasional performances of devotion presented indeed legally where an Executive is the legal head of a national church, but subject here, as religious exercises only to the voluntary regulations and discipline of each respective sect.] Adhering to this expression of the supreme will of the nation in behalf of the rights of conscience, I shall see with sincere satisfaction the progress of those sentiments which tend to restore to man all his natural rights, convinced he has no natural right in opposition to his social duties.

America, as Jefferson noted, is not a nation founded on a specific set of religious beliefs, but on the belief in the natural rights of man, from whatever source those rights are derived.

Gohmert’s Bailout Alternative: My Letter To John Campbell (R-CA)

Earlier this morning, Stephen Littau posted a novel idea by Rep. Louie Gohmert (R-TX) to use the $350B set aside for the 2nd half of the TARP program for a two-month tax holiday early in 2009. This would eliminate the income and payroll taxes for the months of January and February, allowing workers to keep their own money.

I know, letting us keep our own money shouldn’t be declared as that much of a “novel” idea, but that’s what Congress has come to.

I personally like this idea, as I like most ideas that keep Congress’ hands out of my pocket. So I decided to let my elected representative, John Campbell (R-CA) know about it.

Below is my letter to Rep. Campbell. I highly recommend sending* similar letters to your own representatives, in order to at least propel this idea to the level of something they actually think about. Feel free to use my letter as a template, although obviously some of the aspects in there are written with the understanding that I’m speaking a Republican with some fiscal conservative street cred, so a few points may need to be massaged based on who it is sent to.

Dear Congressman Campbell,

I am writing to request your support for your colleague, Louie Gohmert (R-TX). He is currently preparing a new “bailout” bill that would declare an income and payroll tax holiday for the months of Jan-Feb 2009. For more information, see his press release at (http://gohmert.house.gov/Article.aspx?NewsID=1355).

This bill will allocate roughly $330B, an amount Congress already has available through the remainder of the original TARP program, to be used for a tax holiday. The bailout would put people’s own money back in their pockets during a time of severe economic hardship, and the expectation of extra money in the Jan/Feb time period would be sure to spur retail spending during this Christmas season.

In addition, the inclusion of the FICA tax in the proposal ensures the extra funds will go disproportionately to those of lower income, who will be more likely to spend the money rather than immediately save it, encouraging domestic consumer demand.

Finally, as a libertarian, one thing that I know you and I have in common is a desire for tax relief. Allowing workers to see, even if only for two months, what their paychecks would be like without the greedy hands of IRS withholding would go a long way towards generating political support for the extension of the 2001/2003 tax cuts. This would again help our economy.

I would love to see you work with Rep. Gohmert on his proposal, and perhaps even become a co-sponsor. It would help your constituents, the economy, and potentially even improve the chances that we can enact a more permanent tax relief in the future.

Thank you for your time.

Regards,
Brad Warbiany

Good luck, and if you send letters or receive responses, let me know.
» Read more

Big Three CEO’s Molt Before Congress — Reveal Same Snakes Inside

Just look at all the sacrifices they’ll make!

Humbled and fighting for survival, the country’s once-mighty automakers went to Congress with new promises to change their ways in return for a bailout as large as $34 billion.

They said they would sell the corporate jets. The CEOs will work for $1 a year (Chrysler boss Bob Nardelli already does). They would cancel executive bonuses and freeze raises. And, the heads of Ford, General Motors and Chrysler pledged to remake their companies by slashing their workforces, making smaller cars and fewer trucks, reducing the number of dealerships and improving fuel efficiency.

Congress will hold hearings Thursday and Friday, and the CEOs of Ford, GM and Chrysler will make the 525-mile road trip from Detroit — in hybrid cars.

Uh oh… Their wives are going to have to start making mimosas with Korbel instead of Dom Perignon, and they might even be going for their steaks at Outback instead of Ruth’s Chris! The horror!

What is this, they take one measly road trip and we’re supposed to believe they’re contrite? That’s the least they should do for $30B+ of taxpayer money. You offer me just a billion, and I’ll walk from Detroit to Washington!

Now, I don’t begrudge any CEO for their wealth. And normally I’d criticize any CEO for such a silly publicity stunt when their time would be far better spent at productive endeavors. But that’s the thing… These guys aren’t producing, they’re losing money hand over fist. I don’t begrudge their wealth, but I begrudge the fact that they’ve put themselves in a position, by following policies any intelligent person could see would lead here, and now they have the audacity to appear contrite and beg at the public trough.

All the while telling us that letting them fail will result in a Depression. Am I the only person who think it might be time to call their bluff? Bankruptcy might be bad, but let’s give it a try.

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