Sunday, December 25, 2011
Ron Smith was known on the air under the moniker, "The Voice of Reason," (or alternatively, "Talk Show Man"). I take the time to post some thoughts about him because he consistently gave voice to the principles of limited government. For 26 years, his show was a wonderful blend of commentary and interviews that was always entertaining and always informative. Ron's guests weren't always politicians parsing every word, but rather he spoke to authors and policy wonks and provided in-depth analysis of complicated issues that was far more educational than the talking points and platitudes spewed by nationally syndicated talk radio hosts. Even if you didn't agree with Ron Smith, you could learn a lot from his show. For a time he had a big government liberal political science professor from UMBC (University of Maryland, Baltimore County), Tom Schaller, co-host with him on Friday afternoons to give an opposing view and liberal Democrat activist Frank DeFilippo was a regular guest on Monday afternoons. So respected was Ron Smith that even local Democrat politicians such as Baltimore mayor and later Maryland Governor Martin O'Malley and Senator Ben Cardin have regularly appeared and taken questions from listeners (Senator Cardin deserves a gold star for venturing into the lion's den as often as he did) and the statist-leaning Baltimore Sun newspaper invited him to contribute an opposing view column every week. Blair Lee IV and Towson University Professor of Rhetoric, Rick Vats were also frequent guests. Blair Lee is an almanac of Maryland politics and Professor Vats often gave interesting insight on major speeches, such as State of the Union addresses. At 4 PM every day, financial planner Jonathan Murray would join Ron for the closing bell report. Murray and Ron shared a commitment to free markets and Murray often provided sunny optimism to contrast Ron's pessimism. But, the respect and friendship they felt for each other was obvious on the air. At the holidays, Ron would be joined on the air by his wife, June, and lighter topics would be covered. Mrs. Reason also has an engaging on-air friendliness and could've been a successful radio personality in her own right.
I have lived in Maryland most of my life, other than four years in Virginia. I listened to the Ron Smith show infrequently before I moved to Virginia, but I became an avid listener after I moved back (at least until the bone-headed WBAL moved him from my afternoon commute home to 9 AM in the morning while I was at work....). Ron Smith was a true libertarian and non-partisan. He regularly challenged the orthodoxy of both political parties. One of his favourite quips was that one party was stupid and the other evil (he was always deliberately vague about which was which) and therefore any bipartisan legislation was guaranteed to be both stupid and evil. He lost a lot of conservative listeners when he lambasted the Bush administration for the invasion of Iraq. I, however, was happy to find a voice in the wilderness echoing what I felt - that it didn't make one a "liberal" (i.e. leftist) to oppose an immoral and unnecessary war. We in Maryland were very lucky to have a local show of this quality and a local talent this great.
Ron Smith was an amazing radio talent and a tireless defender of liberty. His passing is a great loss to the Maryland community and he will be greatly missed.
Thursday, December 22, 2011
But, the most concerning attack is one resurrected from his campaign four years ago when the New Republic reported on newsletters (links to the actual newsletters are in the New Republic piece) published under his name in the late 1980's and early 1990's that included racist and anti-Semitic views. Four years ago, Congressman Paul addressed these newsletters stating that he did not write them, disavowed their content, and that he should have been more careful and provided more oversight to what was being published under his name. In a recent interview with Gloria Borger, he was clearly annoyed at having to address this again when he has answered these questions before.
The question is, are his answers satisfactory? Does Ron Paul harbor racism or was he ignorant of the garbage that was being published under his name while he was out of Congress and practicing obstetrics? I think it is safe to say that the answer is yes, his answers are satisfactory and he was ignorant of what was being published under his name. Nothing in Congressman Paul's public career suggests support for policies that are racist or anti-Semitic. In the 198o's he defended Israel when they bombed an Iraqi nuclear plant, even though members of his own party were critical of the action (at the time, Iraq was an ally of the U.S. against Iran). He has been consistently opposed to the drug war and cites as part of his opposition that African-Americans are disproportionately incarcerated. Similarly, he changed his view (the man who never changes his views) on capital punishment and now opposes it because it is disproportionately applied to African-Americans. I think it is pretty clear from his record that Ron Paul is not a racist and didn't write those newsletters. In fact, because of his positions on the drug war and capital punishment, Ron Paul actually polls better with minority voters than any of the other GOP candidates.
It is ridiculous to have to state the obvious about a man dedicated to equality, liberty and peace. But I will state it anyway - the newsletters are nonsense, he didn't write them and they don't reflect his views in any way. The truth is out there and expanded upon in more detail in the Daily Paul. I stand by my endorsement of Congressman Ron Paul for President of the United States as he represents our best hope for real change.
Sunday, November 27, 2011
While this position is no different from that of either the last Republican president or the last Republican nominee for president, it has created political trouble for the Speaker's campaign. Rivals for the nomination from "also rans" like Michele Bachmann to Gov. Mitt Romney have accused Speaker Gingrich of advocating "amnesty," (although the Speaker has been clear that he doesn't advocate a path to citizenship for anyone here illegally). It appears that the GOP has a new litmus test and that there is a zero tolerance policy regarding any policy seen to favour illegal immigrants. Gov. Rick Perry's decline in the polls began before his brain freeze in the debate in which he couldn't remember his own talking points. It began when he defended a law he signed in Texas that would grant in-state tuition rates at public universities to the children of illegal immigrants (after all, it was their parents that actually broke the law, not the children), a position he actually shares with former Republican governor of Arkansas, Mike Huckabee.
Speaker Gingrich's support in the polls has already started to weaken as a result of his position on this issue, just as he has emerged as the chief rival to Mitt Romney for the nomination. While I have many issues with the Speaker and have endorsed a rival of his for the nomination, I would suggest that Gingrich is one of the few people in the GOP who has an adult view of this issue. There are an estimated 11 million illegal immigrants in the United States. If none of them are going to granted some sort of legal status, using criteria similar to those laid out by Speaker Gingrich, and U.S. laws are going to be enforced, then the U.S. government is obligated to literally round up all 11 million people and deport them to their countries of origin. Not only would this disrupt families in the cases of those who have children who are U.S. citizens, but it should strike anyone that such a task is impossible. It would require devoting almost all resources of the federal government to this task at the exclusion of all else. Furthermore, it would require endowing the federal government with incredible police powers that would ultimately threaten the liberty of every American. Speaker Gingrich has done nothing more than acknowledge the obvious: some portion of these 11 million people are going to remain in the United States. Shouldn't the U.S. government have a policy that brings them out of the shadows and criteria for deciding who of those 11 million are going to remain?
Saturday, November 19, 2011
GOP Presidential candidate Herman Cain has stirred up debate by proposing sweeping reform of the tax code. Under his 9-9-9 plan, there would be a 9% flat federal income tax, a 9% flat federal corporate tax, and a 9% federal sales tax instead of the current system. He has been, predictably, attacked from both sides of the political spectrum. The left have criticized the flat income tax and the sales tax as regressive. But, even the right have attacked him for creating a new revenue stream for the federal government in the form of a consumption tax, even though his plan calls for income taxes and corporate taxes to be much lower than current rates (although many pay less because of deductions and exemptions that would not exist in Mr. Cain's plan, the lowest marginal income tax rate currently is 10%).
However, there is a long tradition of support for a consumption tax in conservative politics. In 1994 Rep. Bill Archer (R-TX), then chair of the House Ways and Means committee began advocating for a national retail sales tax to replace the federal income tax. In 1996, Representatives Dan Schaefer (R-CO) and Billy Tauzin (R-LA) introduced legislation proposing such a tax. John Linder (R-GA) introduced the Fair Tax Act (H.R. 2525) calling for a 23% national sales tax to replace the federal income tax. Linder popularized the act in a 2005 book co-authored by conservative radio talk show host Neal Boortz entitled The Fair Tax Book. Governor Mike Huckabee (R-AK) made the Fair Tax the centerpiece of his 2008 campaign for the Republican nomination for President. Granted, these proposals all sought to replace the federal income tax completely and not add a consumption tax to an income tax, albeit at a lower income tax rate.
Although the size and scope of government should probably be much smaller than it currently is, there is a legitimate role for government (see previous post).
Since government, as Jefferson put it, is a necessary evil, it needs to have revenue to accomplish those tasks. There is no other way for government to obtain revenue other than taxation. Therefore, there will always be taxes and the notion that we can live in a nation without taxes is the the right's version of the what Milton Friedman called the great myth of government - that everyone can live at everyone else's expense. Although the size and scope of government should probably be much smaller than it currently is, there is still going to be a need for some government and therefore a need for some taxation.
If there has to be taxation, there are many reasons to prefer a consumption tax. First of all, it is less coercive than an income tax as you can always choose to do without or not to buy the goods and service being taxed (granted you don't have that choice if it is being levied on food...), or at least to limit your tax liability by limiting your consumption. You have no such recourse for an income tax. A consumption tax you pay only when you choose to spend, and you have chosen to spend money anyway - it simply raises the price of the good or service you have chosen to purchase. An income tax takes your money before you even see it and does so even if you are trying to save your earnings. The second reason to favour a consumption tax is related: when you tax something you get less of it. We tax savings in this country and thus the savings rate is abysmal. As a consequence, our central bank creates credit out of thin air to encourage economic growth because there is no pool of saved capital for banks to lend. This creates economic bubbles and further discourages savings because they do so through an artificially low interest rate. As a consequence many Americans are overleveraged and our economic growth is never sustainable (furthermore the lack of savings has everyone turning to government for their retirement, which further compounds the problem). If we taxed consumption we would encourage savings and have growth that actually stems from real accumulated capital... Thirdly, the consumption tax is economically neutral. It is applied across the board, equally and to everyone and is therefore less hampering to economic growth. It does not discourage job creation by taxing job creators at a higher rate. Fourth, it is a more efficient tax. At a lower rate it can collect more revenue because it is much harder to avoid or defraud and it collects tax from a lot of people who currently don't pay taxes. Furthermore it collects this tax in a way that is fair and behaviour neutral rather than taxing one group more or less than another depending on their willingness to jump through certain behavioural hoops (like buying a house or putting in green light bulbs...). Fifthly it, it is a tax that favours American manufacturing. As it is levied on imports and taken off on exports, it makes imported goods less competitive on the domestic market and our exports more competitive overseas.
Progressives argue that a consumption tax is regressive and will put the pinch on working class families by making their food, clothing, and shelter more expensive. This is largely a straw man however because no one is talking about adding a consumption tax to the current income tax. If the consumption tax either replaces the income tax or allows for a lower income tax, the burden isn't necessarily higher. It is, however, more transparent. The cost of goods and services wouldn't necessarily be higher if a consumption tax either replaced or allowed for lower income and corporate taxes. You don't notice that the fact that you as a consumer have to pay your share of the corporate tax on everything you buy as it gets added into the cost of production. You would be very aware of paying the consumption tax, but it would replace a lot of invisible taxation. Although it is preferable to tax all things at the same rate, for the reasons given above, there are ways to minimize its regressivity, such as a prebate for lower income families or exempting grocery items from the tax (as the state of Maryland does with its sales tax).
Keynesians (and, scandalously, some Republican candidates for President) oppose the sales tax because it discourages spending. This presumes that all spending is good and all economic growth is a result of spending. That view of economics has landed us where we are today, a debtor nation with almost no savings rate. Prolific spending can produce impressive economic growth - a boom, but that will be followed by a bust because it is not sustainable. On the other hand, if more saving was encouraged the accumulation of capital would be the market force that drives interest rates down and encourage lending out of capital that already exists rather than lending out of artificially created capital. As the interest rate came down from the encouragement of savings, people would start saving less, which would then force interest rates up again to encourage savings again. The market could set the interest rate, rather than a central bank making up how large the money supply would be - and by inflating the currency to encourage "growth" making us all poorer. That would be the path to sustainable economic growth, rather than Keynesian boom and bust.
Furthermore, experience doesn't bare out the canard that consumption taxes hamper economic growth. First and foremost, people are still going to consume and their consumption habits aren't going to change that much (particularly since the net effect on cost might not be that much once the invisible taxes are removed). Secondly, the tax is applied equally across all sectors of the economy, so the net effect on economic activity is zero - it doesn't favour one type of economic behaviour over another (other than favouring saving, which in the long run is probably a good thing) and it doesn't distort economic activity. Contrast that with the current federal income tax and corporate tax structure which actually discourages savings, investment, and hiring and ask your self which is more detrimental to economic growth (not to even get into the distortions in the market place created by all the different loopholes, exemptions, and deductions). Texas has only a consumption tax and a rather high one (if memory serves, 8.25%), but has had incredible economic growth and is one of the few states whose economy is still growing in this recession. Canada enjoyed unprecedented economic growth in the the 1990's and 2000's after initiating a federal sales tax - if the consumption tax is so detrimental to the economy, why wasn't Canada left behind when the rest of the world was booming? The combination of the more efficient consumption tax and massive cuts in government spending allowed Canada to get its debt under control (Canadian debt was 80% of GDP in the early 90's, which is where U.S. debt is now), limit inflation, and eventually even cut income tax rates. As a consequence, Canada has fared much better in the current recession, hasn't needed to bail out a single bank (although they did help bail out Chrysler and GM) and the Canadian dollar went from being equal to about 70 cents USD to being essentially equal to the U.S. dollar. Most Canadians (certainly all of my relatives in Canada) hate the tax because it is visible and the Conservative government that passed it was decimated in the next election, but it is really hard to argue that it hasn't served Canada well.
Although it would be preferable to replace the federal income tax with a consumption tax, the Canadian experience suggests that simply having a consumption tax and lower income tax and corporate tax rates would be much better than the current system.
Sunday, October 16, 2011
My dear Herodotus, first of all, of course I understand what happens to uninsured patients in the system. You and I work at the same hospital and we have both cared for a lot of uninsured patients. Our hospital uses the amount of indigent care it provides to negotiate higher bed fees with the state (which regulates what hospitals can charge per night) to make up the difference from the insured patients, so yes we all pay. Hopefully you have not misconstrued my comments to mean that I support the fact that some people don’t have health insurance. But, supporting a goal of universal coverage and supporting an individual mandate to buy health insurance from a private insurance company is most assuredly not the same thing. There are other ways to increase coverage (or even provide universal coverage by expanding Medicare a la Canada style and as Howard Dean has proposed) without necessarily having a mandate that everyone buy a product from a private company that is more interested in its profits than your health. This is what Candidate Obama argued for. The reason for his backtrack is insurance companies lobbied that they couldn’t afford the new rules on pre-existing conditions unless all of those young and healthy people (and yes, I realize they could need catastrophic coverage and really shouldn’t be going without coverage even though many choose to) who are low risk were made to buy policies too to defray the cost of insuring higher risk people with pre-existing conditions. So the individual mandate is nothing more than a give away to big insurance companies and I think there is some hypocrisy in a President promoting a policy he previously said himself was unconstitutional and rhetorically railing against health insurance companies to promote it, when all the while he was really doing their bidding….
Nor is making this a federalism issue an avoidance tactic. A federal mandate for everyone to buy a particular product is unprecedented and 50 state mandates for auto insurance are NOT the same thing when each was a separate act of 50 different state legislatures. Like it or not, we have a federal system. The states have powers and the federal government has powers. Federal powers are enumerated in the constitution and everything else, according the tenth amendment is state authority. The tenth amendment has been watered down by the 14th. While the 13th Amendment abolished slavery, it was the 14th that made sure that similar infringements to liberty aren’t protected by states rights again with the equal protection clause. This amendment paved the way for the Civil Rights Act 100 years later, which would’ve been unconstitutional without the 14th amendment. Because this amendment broadens federal authority and we have lived in that era, I think we sometimes forget that there are limits on federal authority and states are sovereign over some things. States still do retain the authority to regulate medical practice, for example. You and I are licensed by the state and even though there is now a standardized licensing exam, rather than 50 exams, it is still the state the sets our CME requirements and it is a state panel that reviews allegations about our professionalism, etc. There are state standards for our professionalism and if a license needs to be revoked, the state does it. Oregon is the only state in union with an assisted suicide law, again it is their right to do so because states regulate medical practice and it would be wrong to ban that at the federal level (school curriculum, police and fire services, and most road-building are other examples of primarily state functions). What I find hypocritical about Republicans is not that they can support a state insurance mandate and not a federal one, but rather that they only use the states rights card when it suits them. This supposedly states rights party under Attorney General Ashcroft used the Controlled Substances Act (itself of dubious constitutionality) to prosecute physicians in Oregon who used narcotics to help people die and aggressively prosecuted medical marijuana clinics that were in compliance with their state laws. Under the Bush administration they intervened shamefully in the Terri Schiavo case and set federal education standards in No Child Left Behind. These are all things Republicans should be against if they believe in state sovereignty. But similarly state sovereignty by definition under the tenth amendment would give states the authority to impose any sort of insurance mandate whereas the federal government does not retain that authority. The real issue here in the legal sense is what grants the federal government the power to do this? The Obama administration has argued two things: first that the revenue raising measures qualify the bill as a tax and that it is constitutional because the federal government is granted the power to tax in the constitution. Talk about rank hypocrisy! He insisted there were no taxes in the bill when he sold it to the American people and now he says it’s constitutional because it’s a tax! The second argument is that the interstate commerce clause is broad enough to include this. The problem with that view is that the health insurance industry is also something that historically has been regulated by states (which again makes the federal mandate an unprecedented thing). Each state has its own laws regarding what must be covered, etc. and in some states there are lots of plans that meet requirements and in others the regulations limit to just a few providers. In most states it is illegal to buy health insurance across state lines because most states don’t want you to evade their minimum standards by buying a plan in a different state that does not have the same standards (that’s the official reason, the real reason is health insurance companies have lobbied for that to limit their own competition). So it’s hard to justify the mandate in terms of the interstate commerce clause, particularly since the only measure that would have made it interstate commerce, a provision to allow people to buy insurance across state lines, was stripped from the bill.
In my view, the checks and balances between federal and state authority are as important a guarantor of liberty as the checks and balances between branches of the federal government. Is this system of government perfect? No. It makes mistakes. Sometimes the checks prevent bad policy from happening, but sometimes they prevent good policy too. Clearly state sovereignty protected slavery for many years, which is the classic example of states rights gone awry. However medical marijuana laws are the modern example of a heavy-handed federal law restricting liberty in individual states… On balance I think it is important to have these checks and if we decide that health insurance reform is one of those issues that the checks get in the way of the solution then the answer is not to ignore the checks, but rather to find a constitutional way to do something or amend the constitution. Taking short cuts around a small part of the constitution for altruistic purposes only sets the precedent for making similar dodges around more important parts of the constitution (like protections on free speech for example). I hate to sound like a lawyer here and I know it’s frustrating when technicalities get in the way of good policy, but I think it is a more dangerous precedent in the long term for us to get in the practice of ignoring our own rules…
Furthermore, there are fundamental differences between health insurance and auto insurance. One of them you mentioned, which is you can choose not to drive. That was the point you made that I was most impressed by, simply because in my libertarian echo chamber I had never thought of it quite the way you do and I am always grateful when someone gives me an alternate way of looking at things. As a libertarian I have always thought that an auto insurance mandate is different from a health insurance one, even on the state level, because if I don’t want to purchase auto insurance, I can choose not to drive. I can live close enough to work to bike or walk. I can take mass transit, etc. On the other hand, the only way I could avoid a health insurance mandate if I didn’t want to to buy health insurance is to choose not to breathe…. Your point that the other way of looking at that is I can change my situation so that I don’t need auto insurance but can’t opt out of a need for health care is clever. But, I would still point out that having health insurance is not the same as receiving health care. You and I provide health care and have both provided it to plenty of people without insurance. Likewise the insured has to find providers that accept his or her insurance and may have care denied by their insurance company….
But there is a second important difference between auto insurance and health insurance. Auto insurance is catastrophic insurance. You use it for accidents or expensive work on your car. You don’t use it to rotate your tires, change your oil, put gas in your car or do other routine maintenance (whereas you use your health insurance for well visits, routine blood work, etc.) – even though the routine maintenance can help prevent a major problem down the road (no pun intended). The purpose of a state auto insurance mandate is precisely the point you make about uninsured patients – it costs everyone when an uninsured driver causes an accident and can’t pay (or at best the person not responsible for the accident would be stuck with the bill). In medicine this is the uninsured patient who gets into a car accident or walks into the ER with an MI, or is diagnosed unexpectedly and young with cancer. So there is certainly some rationale for a health insurance mandate (particularly a state one which would be constitutional), but neither the Obamacare mandate nor the Romneycare mandate are mandates for catastrophic coverage only, they are mandates for full coverage when merely catastrophic coverage would solve the moral hazard problem of the uninsured. So using the auto insurance analogy is like comparing apples to oranges (or at best oranges to grapefruits).
Unlike your thoughtful response, my dear Herodotus, the Spitzer piece largely glossed over these important distinctions and was nothing more than an amalgam of Democrat-party pro-Obama care talking points. It is the type of intellectual laziness I would expect from Republicans (whom I have already pointed out are generally for state rights until they oppose the policy of a particular state, then they want the feds to control it) and far beneath the usual standards of Slate (although I have to admit the only person I actually ever read in Slate is Christopher Hitchens, who I think is the most brilliant writer of our times, even though I disagree with him at least half the time). I have to say, however, that I was unaware that South Carolina makes you buy car insurance even if you don’t drive and if that was in the Spitzer piece and I missed it then I owe a small apology to the former Governor. Again, although the apple that is a state car insurance mandate has little bearing on the orange that is a federal health insurance mandate, for all the reasons detailed above. I must confess that I had no idea SC required people to buy car insurance whether or not they drive. I agree that is completely ridiculous and I don’t know how any sane person of any party can support forcing someone who doesn’t drive to buy auto insurance. GEICO must be a big donor…
Sunday, October 2, 2011
Awlaki's assassination was discussed on the Fox News Sunday round table this morning. All of the panelists agreed with the administration's action. However, Juan Williams did at least ask that the administration put forth publicly some sort of standards or criteria for when targeted assassinations will be used. In his rebuttal to Mr. Williams' reticence, Britt Hume labeled Awlaki an, "enemy combatant," with, "no rights," who has joined an organization with which we have de facto, "declared war."
Nothing could be more absurd than Mr. Hume's comments. The last time the United States declared war on anyone it was Germany and Japan in 1941. There is no declaration of war to justify the government using wartime measures against U.S. citizens. Awlaki also was never accused of being a combatant and participating personally in acts of violence against the U.S. and he was not killed on a battlefield. He was accused of inciting others to violence against the U.S. His crime was treason, but even accused traitors are entitled to a trial and due process of law.
Anwar al-Awlaki was a bad man who probably got what he deserved. But, his execution sets a precedent that threatens the liberty of American citizens for generations to come. If we accept that our government can kill an American citizen overseas without due process of law or without establishing some sort of objective criteria to apply to when such extreme measures are warranted and sharing publicly with the American people some of the evidence against that person, then what is to stop our government from doing that to any of us?
Saturday, September 3, 2011
The problem is that these rules and ostensible consumer protections are written by a government which everyone has a constitutional right to petition. It is intuitive that those with more money are better positioned to petition the government than those with less. Therefore the regulations written will be influenced the most by the very people that they are to regulate. Simply holding the position that it is the job of government to regulate the economy is an open invitation for moneyed interests to influence those regulations to benefit them, rather than the consumer they are ostensibly meant to protect. Such regulations end up protecting entrenched business interests from competition at the expense of consumers. Even if campaigns were completely publicly funded, moneyed interests would still prevail due to their increased ability to hire lobbyists and fund advertising campaigns. The very notion that government should regulate the market rather than allow the alleged excesses of the free market guarantees, regardless of which party is in power, that the worst sort of crony capitalism (called crapitalism in a previous post) will occur. The only way to avoid subsidies, bailouts, tax breaks, and other backroom deals that transfer wealth from the less affluent to the wealthy is to subject business to all the risks of loss they would experience from bad business practices in a truly free and competitive market.
Friday, June 17, 2011
THE ECONOMIC CASE FOR RON PAUL
In the fall of 2008, the 2008 election suddenly became a referendum on the economy when the housing bubble collapsed and banks with bad debt started to fail. The Republican candidate, Senator John McCain, enjoyed a slight lead in the polls, even after Sarah Palin's gaffes, until the stock market crashed less than a week after Senator McCain proclaimed, "the fundamentals of the economy are strong." McCain followed this with the second gaffe of suspending his campaign to rush to Washington to, "do something," about a financial crisis he didn't even see on the horizon a week earlier. Saddled with these gaffes and being the candidate of the party presiding over the collapse, McCain's lead vanished and Barack Obama became the 44th President of the United States.
Ron Paul had been warning about a collapse in the housing bubble since 2002. Easy credit, fueled by the Federal Reserve maintaining artificially low interest rates and risky lending encouraged by the Community Reinvestment Act, greed and subprime lending, and securitization of bad debt by quasi-government lenders, such as Fannie Mae and Freddie Mac, led to the creation of a lot of bad debt and skyrocketing real estate prices from increasing demand. None of this was sustainable and when the U.S. dollar began to weaken from the Fed's expansion of the money supply, the bubble burst. What has been the response of politicians on both sides of the aisle? They have tried to re-inflate the bubble with bail outs, TARP and continued low interest rates. Candidate Bill Clinton once reminded us that one definition of insanity is doing the same thing over and over and expecting a different result. Yet politicians on both sides of the aisle have responded to our current recession with the same policies that got us in to it. The other candidates for President, on both sides of the aisle, propose only additional Keynesianism to get us out: either tax cuts or stimulus spending. Congressman Paul also recognizes the moral hazard of government securitizing bad loans. When investors reap all the profits, but taxpayers will take all the losses, risky lending is encouraged.
Establishment politicians and mainstream media paint Ron Paul's economic ideas as extreme by focusing on his desire to return to the gold standard and his call to end the Federal Reserve. Clearly neither is likely to happen in a Ron Paul administration as both would require acts of Congress to achieve. But, the salient economic point here is that Dr. Paul recognizes that one source of our economic woes is the weakening of our dollar. This is caused by printing and borrowing to cover excessive government spending and lowering interest rates which sends signals that there is a surplus of capital available for borrowing, when in reality there is not (which fuels borrowing against artificial wealth instead of true accumulated capital). The surplus of printed dollars devalues the savings of every American and particularly reduces the buying power of those at the lower end of the socioeconomic scale. A commodity backed currency (i.e. the gold standard) is not readily inflatable and it is the Federal Reserve that carries out this policy of printing dollars and lowering interest rates. While a return to a commodity currency and abolishing the Federal Reserve may not be practical, clearly our current monetary policy which creates economic bubbles and robs us all of wealth needs to change. In the Republican presidential debate in New Hampshire last week, Congressman Paul was the only candidate who discussed the importance of a change in monetary policy to address the structural problems in our economy. Canada, despite also having a fiat currency, has developed the strongest currency in the western hemisphere, if not the world, through sounder monetary policy. Ron Paul's proposals to allow commodity currency to compete openly with Federal Reserve notes and to give Congress greater autonomy to audit the Federal Reserve may go a long way toward achieving a sounder U.S. dollar, even if his ideals of a gold standard and abolishing the Federal Reserve are neither achievable nor desirable.
THE FISCAL CASE FOR RON PAUL
Our federal debt has reached over $14 trillion USD. This is about 90% of GDP and the federal debt is projected to exceed 100% of GDP by the end of this fiscal year (Greek debt was about 125% of GDP when their fiscal crisis came to a head). An ever growing percentage of the federal budget is devoted to paying interest on this debt to our creditors (including China), which diverts resources away from other functions of government. Added to the burden of accumulated federal debt is the underfunded liability of entitlement programs. Both Medicare and Social Security are funded by taxing current workers to pay the benefits of current retirees, and not out of some sort of trust fund that allowed your contributions to grow into your benefits. They are Ponzi schemes that become unsustainable as the ratio of workers to retirees dwindles. That day of reckoning is soon as retirees are living longer and the baby boomer generation (the largest generation in U.S. history) is leaving the work force and joining the ranks of retirees. Escalation of health care costs (which, contrary to rhetoric, the "Obama-care," health insurance reform did nothing to address) make the solvency of Medicare particularly precarious and the both the Bush and Obama administrations saw fit to burden the taxpayer with additional health care entitlements.
Dealing with the debt crisis is the most important issue that the next President will face and of the field, it is Ron Paul who offers long term solutions. President Obama has demonstrated that nothing will curtail his penchant for spending and offers only tax increases. Other Republican candidates offer some modest spending cuts, pay lip service to modest entitlement reform (raising retirement ages, means testing benefits...), and insist that lower taxes will generate economic growth and greater revenue. The only other Republican (who is not running) who offers a credible plan to deal with entitlement programs is Congressman Paul Ryan (WI). However the Ryan plan ignores defense spending, which amounts to substituting a warfare state for a welfare state. Ron Paul understands that it is inflatable currency that allows government to pay (at least temporarily) for expanding social programs and perpetual war. Step one in slowing growth of our debt is sounder monetary policy. Step two is realizing that the Constitution sets limits on federal government and only reducing its scope to those levels is going to bring our debt under control. Step three involves cutting military spending by ending unnecessary and immoral wars overseas and using those savings to sure up federal programs for the transition to a more constitutionally limited government while not abandoning current beneficiaries who rely on those programs. President Obama is not talking about any significant cuts in federal spending and no Republican seems willing to entertain cuts in military spending. Congressman Paul supports both as the only path out of the budgetary abyss. Only after structural spending liability is addressed and after the role of government is adjusted can a meaningful conversation about taxes (what kind of tax should we have?, who should be taxed and at what rate, etc.) occur.
THE CIVIL LIBERTIES CASE FOR RON PAUL
Excessive military spending is not only a drain on our economy, but it is also a threat to our liberty at home. Governments always assume more power and curtail liberty in time of war, but the war on terror is perpetual. In the name of security, we have accepted ever expanding encroachments on our liberty. The PATRIOT Act allows the federal government to review your library records. After illegally eavesdropping on mobile phone calls placed overseas, President Bush signed (and Barack Obama voted for) an expansion of federal wiretapping authority that makes a mockery of the FISA courts. Terror suspects are held indefinitely in offshore prisons outside the rule of law. Federal investigations use, "enhanced interrogation techniques." Airport screenings have become increasingly invasive. Of the GOP candidates for President, only Ron Paul and Gary Johnson have called for rolling back these measures. President Obama has embraced this new federal power. Gitmo remains open and indefinite detentions continue. Routine use of water boarding may have stopped, but President Obama retains his prerogative to authorize it in select cases. Iraq and Afghanistan remain occupied and the U.S. is now involved militarily in Libya without any authorization from Congress whatsoever. Not only did Senator Obama vote to expand federal wiretapping authority, but President Obama has maintained a federal program of targeted assassination of terror suspects, even if those suspects are U.S. citizens. Ron Paul has opposed all of these measures in specific and interventionist foreign policy in general. For anyone concerned about the erosion of civil liberties since 9/11, Ron Paul is the clear candidate.
THE ELECTABILITY CASE FOR RON PAUL
Why Ron Paul and not Gary Johnson? What Gary Johnson brings to the table is his experience. He was a successful two-term governor who actually did a lot of the things other Republicans only talk about in terms of shrinking government. I favour Ron Paul over Gary Johnson for two reasons, one ideological and the other practical. The ideological is that Ron Paul is a better defender of the Constitution. While Johnson is good at pointing out how and why government schemes don't or won't work, he is a self-described empiricist and if presented with data that a certain program is accomplishing a desired goal (without other unintended detrimental consequences) he could be persuaded to support it, even if it is not a proper role for federal government. I, on the other hand, believe the Constitution forbids the federal government from being involved in certain things, even if such intervention might be advantageous. The practical is, I actually do think Ron Paul is more electable. He has national organization, better name recognition, and solid fund raising. Furthermore, Paul and Johnson illustrate the libertarian divide on abortion. Unlike Gary Johnson, Ron Paul is firmly anti-abortion, which makes him more electable in a GOP primary and might go a long way to helping more socially conservative voters over look his position on drug legalization.
Because of some of his libertarian positions that are not accepted by social conservatives, establishment politicians and mainstream media (as well as many of my friends) have labeled him unelectable. In truth he is only unelectable if we continue to believe it so. With the addition of Bachmann, Gingrich, and Romney to the field; Ron Paul is no longer polling second in the GOP race. However he, Cain, Gingrich and Bachmann are polling within the margin of error of one another and Ron Paul still polls better in a head-to-head match up with Barack Obama than any GOP contender other than Mitt Romney. While Romney may seem electable, he probably is not. Not only is "Romney-care," an albatross around his neck in the GOP primary, but the truth is nothing Mitt Romney says can be believed. He has changed his positions so many times to suit the prevailing breeze, n0 one can comfortably vote for him and predict how he might govern. After two successive Presidents who said one thing and did another, it is time to elect someone with a voting record that matches his rhetoric, like Ron Paul. Only Ron Paul can credibly challenge Barack Obama on issues of civil liberties. The New Hampshire electorate is rather libertarian and increasing numbers of libertarians have moved there as part of the Free-State movement. Although Romney, who governed a neighbouring state and has a residence in New Hampshire, will almost certainly win the nation's first primary (of course we thought that in 2008 too, didn't we?); the libertarian electorate and New Hampshire's open primary, which will allow Democrats and Independents who support Ron Paul's civil liberties agenda and have no Democrat race to vote in to crossover and vote for Ron Paul, gives Ron Paul a good chance to emerge from the New Hampshire primary in the top three. Ron Paul is electable if more of us choose to believe he is and rather than holding our noses and voting for the lesser of evils instead of, "throwing away our vote," vote our conscience.
Congressman Ron Paul is the only electable candidate whose actions match his rhetoric, who is committed to ending the status quo and putting America on a different path, who will make government live within its means, address our weak economy and devalued dollar, and protect our civil liberties. For these reasons, I wholeheartedly endorse Ron Paul for President of the United States in 2012.
Sunday, April 17, 2011
In 1989 the United States signed the Montreal Protocol, an agreement to phase out the use of chlorofluorocarbons (CFCs) that have been implicated in the depletion of the ozone layer. The 1990 Clean Air Act empowered to EPA to ban the use of CFCs and begin the elimination of aerosols and refrigerants that contain CFCs. Inhalers for asthma attacks contained CFCs, but the law allows exemptions for essential uses of CFCs and the FDA had labeled such inhalers as medically necessary to allow their continued use.
The most commonly prescribed inhaler for acute asthma attacks is albuterol. In 1995, the patent for albuterol expired and generic albuterol inhalers became available at lower cost than brand name. In 1996, Schering-Plough introduced an albuterol inhaler (brand name Proventil) that uses hydrofluoroalkane (HFA) as a propellant, instead of CFCs (http://health.usnews.com/usnews/health/articles/070819/27asthma_2.htm). HFA does not deplete ozone. Currently, there are only four available HFA-inhalers (http://www.fda.gov/downloads/ForConsumers/ConsumerUpdates/ucm048245.pdf). In addition to Proventil, there is Ventolin (manufactured by Glaxo-Smith-Kline), ProAir (manufactured by Teva), and Xopenex (manufactured by Sepracor). There are no generic HFA albuterol inhalers (http://asthma.emedtv.com/albuterol-inhaler/generic-albuterol-inhaler.html) and the brand name HFA inhalers cost about three times as much as generic, CFC-containing, inhalers. Acute asthma attacks can also be treated with epinephrine inhalers. Epinephrine is available generically and over-the-counter (Primatene Mist). Initially there were concerns that the epinephrine inhaler might not be as effective, nor as safe, as an albuterol inhaler, but a small study in 2005 suggested that there may be similar safety and efficacy with epinephrine compared to albuterol (http://www.ncbi.nlm.nih.gov/pubmed/16400891). In 2003, the FDA removed the essential use exemption from CFC containing albuterol inhalers because a non-ozone depleting alternative was available and all CFC containing albuterol inhalers (i.e. all generic inhalers) were removed from the market by December 31, 2008 (http://www.fda.gov/downloads/ForConsumers/ConsumerUpdates/ucm048245.pdf). In 2007, the FDA followed suit with epinephrine inhalers that contain CFCs, removing the essential use exemption. Epinephrine inhalers will become unavailable as of December 31, 2011 (http://www.fda.gov/OHRMS/DOCKETS/98fr/cd0813.pdf).
Ostensibly, this has been done to protect the environment. However, CFCs from asthma inhalers were a very small component of total CFC emissions (http://health.usnews.com/usnews/health/articles/070819/27asthma_2.htm and http://blogs.webmd.com/allergies-and-asthma/2006/03/primatene-mist-or-albuterol.html). Certainly this move is of no benefit to patients with asthma as it takes cheaper and equally effective medications off the market. It is easy to see, however, who benefits from these regulations. Schering-Plough, Glaxo-Smith-Kline, Teva, and Sepracor have had their less expensive competitors regulated out of existence and people suffering from asthma are now forced to purchase their more expensive alternatives. Indeed, in a statement to USA Today, the FDA nearly admitted as much stating that it took action because sales of the environmentally friendly inhalers were lagging behind the less expensive generic inhalers containing CFCs, "This regulation is necessary because private markets are very unlikely to preserve levels of stratospheric ozone sufficient to protect the public health." (http://health.usnews.com/usnews/health/articles/070819/27asthma_2.htm). One could argue that the FDA's hands were tied with regard to albuterol because once there was a non-ozone depleting alternative they could no longer grant an essential use exemption to albuterol inhalers. But if so, why didn't the FDA take action as soon as an HFA-albuterol inhaler was available rather than wait years and only take action after it was apparent that expensive HFA inhalers couldn't compete against cheaper generic inhalers that contained CFCs? And what about epinephrine? There is no HFA-inhaler version of epinephrine. Therefore, despite demonstrated efficacy, the FDA is essentially saying you can't use a medication that we know works as an alternative to albuterol. It seems clear that the FDA has taken these actions purely for the benefit of powerful pharmaceutical interests.
Using the Woodward and Bernstein principle of identifying who benefits and following the money, it seems almost certain that big Pharma lobbied for these rule changes to eliminate their competition form the market place. In fact, two patient advocacy groups petitioned the FDA in 2003 to remove the the essential use exemption from CFC containing albuterol inhalers. The Allergy and Asthma Network Mothers of Asthmatics launched a campaign to lift the exemption sponsored by Sepracor (and the President and Founder of this group has owned Sepracor stock) and the American Lung Association took $1 million from Teva to promote the CFC withdrawal (http://health.usnews.com/usnews/health/articles/070819/27asthma_2.htm). It stretch credulity to suggest that big Pharma money isn't behind the regulatory change for epinephrine inhalers as well. Under the guise of protecting the environment and with the lobbying of big pharmaceutical companies, the federal government has regulated competitors of the big pharmaceutical companies out of the market and caused millions of Americans to pay more to treat their asthma. Teva, Glaxo-Smith-Kline, Sepracor, Schering-Plough, all get to increase their profits at taxpayer expense, not by producing a better or more affordable product in a competitive market, but by having their competition eliminated by regulatory fiat.
This type of crony capitalism, or crapitalism, has no connection to true capitalism. In true capitalism the consumer is king because the only way competitors are eliminated from the market is when they cannot produce a product as well or as efficiently and cheaply as their competitors. In a truly capitalist society a company can only corner a market by producing the best product at the best price and in an openly competitive economy if anyone else develops a way to produce that product better or cheaper then that company will no longer corner the market. Either way, the consumer benefits. In crapitalism business interests lobby government to regulate their competitors out of existence and the consumer is then stuck with either and inferior product, or a more expensive one, or both. These anti-competitive regulations, subsidies, tariff protections, and tax breaks need to be abolished. Profits should be earned, not transferred from average Americans to influential interests by legislative or regulatory fiat.
Sunday, March 13, 2011
The first question is what is the ultimate goal of these revolutionaries? Are they interested in individual liberty and economic freedom? Or, are these revolutions fueled by reactionary Islamist or jihadist elements bent on establishing theocracies in place of the secular autocracies? In short, are these revolutions more similar to the one in Tehran in 1979 or to the revolutions in Eastern Europe in 1989? Several features suggest the latter. First the protests, particularly in Egypt, have not been coupled with overt anti-American or anti-Western rhetoric (the burning of American flags, etc.). In fact, many on the street interviewed by western journalists have talked about how they would like to have the type of democracy enjoyed in the U.S. Secondly, the root causes of these protests have been economic. Third, in the case of Iran, it hardly seems likely that protest against an Islamic theocracy is aimed at establishing an Islamic theocracy. Although some have worried about the influence of the Muslim Brotherhood in Egypt, it should be recognized that Egypt is not a resource rich nation (i.e. not an oil producing nation) that can economically afford difficult political relations with the West. On the contrary, Egypt's largest industry is tourism and one would hope that the economic interest of Egyptians would favour stability and continued cordial relations with the West. In Libya, Colonel Qadhafi has tried to persuade his people that Al Qaeda is behind the insurgency in an effort to discredit the insurgency and dissuade Libyans from joining it. If Qadhafi thinks that associating the insurgency with Al Qaeda discredits it in the eyes of the Libyan people, then it is unlikely the Libyan people are interested in jihad.
However, the good intentions of the protesters is no guarantee of a positive outcome. History is full of examples of failed democratic revolutions in which the best of intentions produce horrendous results or the ensuing chaos and power vacuum degenerates into tyranny. The French First Republic and the Wiemar Republic provide European examples. Hugo Chavez became an autocrat by democratic means, as did Vladmir Putin. There is no guarantee that democratic revolutions will remain democratic. Many factors, discussed in two previous posts (http://freemarkets-freeminds-freesociety.blogspot.com/2008/04/orange-revolution.html and http://freemarkets-freeminds-freesociety.blogspot.com/2009/06/iran.html) are important for successful liberal democracy, including limits on government power; a concept of rule of law; private property rights; dispersal of power amongst national and local governments, public and private institutions, and between different branches of government; and independent civil and governing institutions. Simply voting and having majority rule guarantees none of these things and can be a recipe for mob rule. Capital and private property rights are important in the development of liberty. The production of wealth (and therefore a tax base for government) requires private ownership, which requires personal property rights, which then requires codification of the protection of those rights. Commerce requires freedom to travel, free speech to advertise, and therefore the codification of these freedoms. Based on this relationship between capitalism and freedom, Fareed Zakaria has observed in his wonderful book, The Future of Freedom, that successful liberal democracies tend to take hold in countries with a per capita GDP of $6,000 USD. Based on this analysis, Egypt, Libya, and Iran would not seem like fertile ground for successful democracies (in fact, Zakaria points out that resource-rich states like Iran have greater impediment because no government in Iran would be beholden to free and productive citizenry to create wealth). In the midst of all this uncertainty, surely a militant jihadist group could play on the fears of the people and their desire for stability and hijack a revolution that may have started as a democratic one.
This uncertainty is a quandary for the United States. There is great fear that these revolutions may lead to instability and the rise of more terrorist states in an already volatile region (and a region that the world depends on for oil). Furthermore, with Libya and Iran as exceptions, often the protesters are revolting against governments allied with the U.S. (such as Mubarek in Egypt and the monarchy in Bahrain). Should the United States be supporting its allies even if they do not have the support of their own people. Should we intervene to help topple dictators like Qadhafi and Ahmadinejad? Would U.S. support for insurgents undermine their legitimacy? Would U.S. involvement allow jihadists to paint these movements as American backed frauds and ride anti-western sentiment into power? Would our involvement, militarily, foment the very radicalization of these movements that we hope to avoid?
If we truly believe that it is a self-evident truth that governments derive their just powers from the consent of the governed, then we must not continue to prop up dictators in a region where our history of doing so in the past in the name of, "stability," has damaged our reputation and created the type of anger that contributes to the recruitment of terrorists. We may fear possible outcomes of these revolutions, but we have no choice but to let them play out and let the brave people of these nations chart their own destinies. They may not choose the same style of governance as ours, but we must acknowledge that the choice is theirs and not ours.
Whether or not to intervene in Libya is a more difficult question. Rebel forces seem locked in a stalemate with Colonel Qadhafi's forces and many Libyans will die before this is over. It is tempting to consider establishing a no-fly zone and perhaps even sending in ground troops to help the Libyan people get rid of an evil dictator. After all, where would the U.S. be today without the intervention of France in our revolution? However, U.S. troops in Libya, or U.S. planes over Libya would involve the U.S. in yet another middle eastern quagmire and serve as yet another example of foreign conquest to our detractors in the region. The key difference between the American Revolution and the Libyan one is the Continental Congress sent Benjamin Franklin to Paris to ask the King of France for help. While we should stand ready to provide any assistance the Libyan people ask us for (preferably in the context of a multinational effort), we must continue to understand that the fate of Libya is for Libyans to decide.
Ultimately these movements are not about the United States or our interests. We should stop talking about these revolutions as if it is up to the U.S. to decide how to manage their outcomes. It was the Athenian penchant for toppling tyrants in favour of democracies that stirred the ire of Sparta. Democratic movements and regime change have legitimacy when the arise from within, not when they are imposed from without.