Wednesday, August 25, 2010

And now for something deeply unpopular.

Future generations (and the future is now), in my opinion, have no moral obligation to perpetuate the Social Security Ponzi Scheme - and that includes paying out benefits to people who "paid into it."

If the money had gone into an actual trust fund that would be one thing, but it didn't - it went into a "wink, wink, nudge, nudge" pretend trust fund while the actual money was actually spent. No matter what euphemism they tagged it with, the reality is that it was (and still is) a tax being used to pay for current expenditures... not something being saved for the future. This is one of the great dangers of collectivism - no sane individual would (absent coercion) participate in such a scam. Considering the behavior of government over time, it would be like investing your life's savings in an alcoholic's drinking binges. It's a scam, it is and has been well-reported as being a scam, the politicians running it certainly know it's a scam, but enough people decided to cover their ears, close their eyes, shut up and go along with it to allow it to perpetuate.

The question becomes: are future generations (that is to say, us) beholden to this scam? Are we morally obliged to pay real returns on their pretend investments? I would say no, we're not.

If people were to raise a great hue and cry at this (and they certainly would), we could simply issue their payments in Monopoly Money (the game kind; not a trite reference to fiat currency) and assure them that these payments are every bit as real as the investments they made.

Friday, July 2, 2010

Andy Grove wants to start a trade war. There's a better way.

It's always sad seeing somebody you've admired for years propose something completely crazy. Andy Grove, pretty much The Guy Who Built Intel, has written in BusinessWeek that the best thing for America's economy is to shift from chopping its own head off (by offshoring) to shooting itself in the head (start a trade war). He starts off on the right foot. I would agree that moving manufacturing jobs away from the US contributes to local unemployment and drains our local economy. However, I would also add that it improves our standard of living by making nonessential items much less expensive. The question becomes what to do about it. Mr. Grove starts with the idea of taxing offshored employment. This is a problematic notion at best - it would simply result in offshoring the company headquarters as well (we're already starting to see this happen for less significant reasons). He then moves on to the laughable idea of putting the tax money into a lockbox account that would be used to fund local manufacturing jobs - if this doesn't have you doubled over on the floor laughing, crying, vomiting, or some combination of the three then you should probably crack a history book. Or at least check out the current state of Social Security and Medicare.

Local jobs or cheap products? It's a tough choice. What's overlooked is the fact that you can have both. There's a good reason that low-end manufacturing jobs have left: we've outlawed them in this country. Between minimum wage laws, the grossly excessive power given to unions, and other costly employee mandates (you can now add health care to this), the only way we can locally manufacture these precious new Silicon Valley inventions is to price them far above what the market will allow. I'd love to have a locally-made iPhone, but I'm not willing to pay $600 (or whatever) more for it. And neither is anyone else.

We may not be able to get local manufacturing costs down as low as China, but we could make them considerably lower than they are now. It's important to keep in mind that manufacturing in China isn't free - there are language and cultural barriers (often requiring additional employees and / or consultants to manage), the hassle of dealing with people in a vastly different time zone, and the expense of shipping stuff halfway around the world. We don't have to match the Chinese, we just have to get a bit closer. It should also be kept in mind that China has been keeping its currency artificially weak for some time now - this can't go on forever, and when the Yuan's value does adjust the costs of everything made in China will go up considerably.

American industry thrives on innovation and competition and it does exceptionally well ... when the government lets it. Now what would really help local manufacturing is if we had millions of people come into our country willing to take jobs with low wages... just imagine what you could accomplish with a crazy situation like that.

Monday, May 17, 2010

Arizona's SB1070 - Fighting Stupid with Stupid

An incredible quantity of physical and virtual ink has been spilled over Arizona's SB1070, the alleged* intent of which is to help control illegal immigration and smuggling from Mexico into that state. I can certainly understand the frustration of Arizona and its citizens with the status quo. I currently live in a city that borders Mexico and, with a snarky nod to Sarah Palin, I can see Mexico from my house. While SB1070 will probably have a very minor short-term impact, it's just another example of fighting stupid government policies with even more government stupidity. It won't work because it does nothing to solve any of the underlying causes. It's like trying to hold more water in your hands by squeezing harder.

The only thing worse than the law has been the discussion of it. There are many distinct and separate causes of illegal border crossings that have been mixed-up and conflated in the dialog, as have their results. I'll untangle them here, from largest to smallest:

Group #1 - People trying to get access to better economic opportunities for themselves and their families. Most of them are reasonably honest and decent people but as with any large group there are enough bad apples to, from a demagogue's perspective, spoil the bunch. There are three major "problems" caused by this influx:

A) More crimes are committed, and these crimes would not have happened if these people were not here (the Bill O'Reilly complaint). Well, duh. Within any sufficiently large population sample, there is a certain percentage of people with sociopathic tendencies. Whenever you have an increase in a population, there will be a more or less proportional increase in the number of crimes committed. What's implied (assuming somebody is thinking this through, which is seldom the case) is that the rate of crime is increased - that illegal aliens commit more property and violent crime on average than the legal population. As far as I've been able to determine, the statistics don't bear this out. My city, San Diego, has one of the lowest crime rates of any large city in the US. Arizona's crime rates have fallen steadily over recent years. I'd be interested in seeing credible evidence stating that illegal aliens commit a significantly higher number of property or violent crimes, but so far I haven't found any. This is another one of those areas where conservatives tend to be blatantly hypocritical - progressives and liberals love to trumpet any crime (real or imagined) committed by a member of the military, especially in a war. Considering how many people are in our armed forces, and the extreme stress they're under it's an amazing testament to their discipline that we have as few problems as we do. While individual crimes must be prosecuted and punished, it's grotesquely unfair for the left to pain the military with a broad brush. It's just as grotesquely unfair for the right to make the same mistake (that they so correctly condemn in one case) against another group that they happen to disapprove of - and conservatives tend to "double-down" by conflating violent crimes by smugglers with those by these economically- and freedom-driven immigrants.

B) They are an additional drain on collectivized services (welfare, public health services, public schools, etc.). This is certainly true. If somebody needs something and is presented with a "free" solution, most of the time they will take it. This applies to illegal aliens and legal residents alike, although because they are generally poorer, the illegal aliens are more likely to be faced with these needs. A more interesting question that has not been answered (or even really asked) in this debate is whether or not the overall economic impact of illegal immigrants is positive or negative. As discussed below, they fill a niche in our economy. As to them accepting collectivized services... well, that's what you get when you collectivize things. The people providing these services (government employees and agencies) are incentivized to "serve" as many people as possible. This affects legal and illegal residents alike - the government wants to make people dependent. Blaming the illegal aliens for not taking free stuff is silly - the vast majority of people will do that. It makes far more sense to blame and hold accountable the dependency pushers (government workers and other progressives).

C) They take low-end jobs from legal residents. This is also true, but there is a bit of a twist here. Rational people want to get the best value for their money when buying goods and services. However, our government fights against this by setting minimum wages for jobs and giving disproportionate power to unions, making goods and services artificially much more expensive. There is a significant disconnect, especially on the low end of the wage scale, between the economic value produced by a worker and the amount of money their employer has to pay them (plus taxes and other mandated expenses like health care). This friction creates a niche in the labor market that the illegal aliens fill - they work for less money, and we get cheaper goods and services without having to export production out of the country.

Group #2 - Smugglers (mostly of drugs) - People want to avoid reality through intoxication. This is not new - it's been going on at least as long as history has been recorded. What is fairly new and novel is the notion that we can make them stop by outlawing intoxicants. The simple fact is that this has never worked, and never will work. The only success any government has ever had in preventing intoxication is killing off the people who get drunk or high. If you really want to stop the flow of illegal drugs, reality says that's the price you have to be willing to pay.

Group #3 - Terrorists and other criminals - This is an incredibly tiny group, but it's the one that people worry the most about. There is so much illegal border traffic in the first and second categories that this group simply disappears in the crowd.

So those are your three groups, but 99.999% of traffic is in the first two. What's really fascinating is that all of the problems (that actually exist) associated with the first two groups fall neatly into one category - the irrational belief that government can dictate supply and demand. People believe that the government can give away free or heavily subsidize stuff like welfare, health care, and schooling (artificially increase supply) and that it won't create additional demand. They believe that the government can eliminate demand for low-cost labor by passing laws against it. They believe that the government can legislate away demand for intoxicants by making them illegal. QED - none of this stuff works.

When the government artificially inflates supply, you get fraud - in everything from welfare to the credit markets. When the government artificially restricts supply, you get black markets - in labor, drugs, gambling, etc., and the crime, violence, and chaos that tend to be associated with black markets. These are the facts, and all of the wishful thinking in the world will never change them. Messing with markets creates pressure that will be relieved somewhere - whether you want it to or not, whether you pass laws against it or not - and that pressure will be relieved at the easiest place to do so. That place will usually be the border. If you want to control the borders, you have to quit messing with the markets. Once you eliminate the causes, the symptoms go away on their own.

And then spotting the last 0.001% or so (terrorists and other serious criminals) should be a much more practical task.

*I say "alleged intent," because this law is so spectacularly ill-conceived that I can't help but believe that it's more of a political stunt than it is a serious attempt to solve a problem.

(Update) - When I said the symptoms would go away on their own, I was referring to the black markets in labor and drugs that drive a very large portion of the illegal traffic. The black market in labor is especially problematic - there's only a very weak feedback from the supply to the demand ("there are jobs up north"), rather than official communication as to how many jobs are available, what they are willing to pay, etc. The black market in drugs is much more organized, but causes by far most of the violence and other crime. Making that go away would eliminate the vast majority of the day-to-day border-related compaints.

Wednesday, February 24, 2010

California is oh so screwed

In my usual fashion, I posted my thoughts on somebody else's space rather than my own and will now enjoy 15 seconds of infamy. It's cool though - people actually read Stephen Green's site (probably because he updates it more than once a month). Anyway, for both of my readers... I've finally gotten it through my thick head that California is screwed.

I came to this conclusion yesterday. And that sucks, because I live here.

Here’s the story:

I was at a luncheon the other day with the State Controller of California (the guy who cuts the checks) speaking. He actually seemed to be a pretty stand-up guy. He was careful not to say anything too politically damaging, but he was completely up-front about that issues facing the state.

Here’s the really scary thing: he asked the group how many people would be willing to cut spending in the following areas: Education, Health Care assistance, and Prisons? These areas comprise 92% of California’s budget, so any meaningful cuts would have to touch them. I was the ONLY person in the room that raised their hand for all three. And without naming names, this was one of the most conservative groups of people you could get into a room (at least in Cali) [edit - I should say, as conservative as you get without actually being a politically-based group]).

If people don’t even have the guts to raise their hands in a room full of as like-minded a bunch as you’re going to find, how on earth do they expect their politicians to do anything?

I suspect California’s not the only place like this.

Some other thoughts on the subject:

1) John Chiang (the Controller) specifically mentioned that for arcane legal reasons (my eyes glazed over) the state can’t go into bankruptcy, but it can go into default. He said (more or less) that unless you’re into legal minutia it’s pretty much the same thing. Essentially, a judge starts ruling your life. A commenter named "Bohemond" on the VodkaPundit site claims that a major difference is that a judge overseeing a default can't void the union contracts. I have no idea.

2) The other thing that struck me during the meeting is that at no point did the possibility of “running government tasks more efficiently” arise. In fairness, it’s not the Controller’s job to dictate that – he struck me as someone who’s trying to be apolitical and give as much data to the public as he legally can. He has a crappy job where it’s impossible to please everyone (it’s not *his* fault that he has to issue IOUs), and I can tell he’s pretty much walking around on eggshells, so there’s no point in beating up on him.

Anyway, it's not encouraging.