Picture, from Wikipedia, of St. Michael's Cathedral in Kiev.
March 5, 2014

What is to be done?

Владимир Ильич Ленин née Владимир Ильич Ульянов or Lenin, as he is known to those, including myself, who have trouble with the Cyrillic alphabet, once wrote a pamphlet titled Что делать? or What is to be done?

So, as events unfold in the Ukraine, and the country struggles with the mess that keeps on messing called Obamacare, and unemployment continues high, it seems only fair to ask Lenin's question again.

It has to be recognized at the outset that some things that do not seem to be related do, in fact, intertwine with each other. For example, the argument that immigration reform will supply workers for jobs Americans won't do runs up against the contraceptive/abortion industry that keeps the birth rate down, and mandates the importation of workers to supply the place of the unborn who never showed up. For a look at this topic from a secular¹ perspective see this article from the Atlantic monthly.

¹ Secular as in not a religious argument. Not secular as in hostile to religion.

But this isn't a rant about abortion. Lets start off with a couple of other things that have to do with foreign policy.

Back in 2001 the Brits were working with the Northern Alliance in Afghanistan, and they were bribing the N.A. not to grow opium poppies. So what would you do if you were bribed not to do something that was highly profitable? Well, if you're as corrupt as I would be given the chance, you'd take the bribe, and grow the poppies anyhow. So how would you keep your friends from growing the poppies? The easiest way to do that is to make it extremely unprofitable, and cause a fast and enormous drop in the price. You'd do that by legalizing the drug, and the legal producers would out-hustle the illegal ones. At least in theory. The reality is that there would be and are moral and political objections to such an action, so you'll wind up paying the bribes while your friends keep on growing the poppies.

Now how would you deal with a country that is a large oil producer, and had just invaded another country (Russia), or with one that sponsored terrorism (Iran), or that produced militant nutcases and terrorists (Saudi Arabia, most of OPEC)? If you've got oil and gas resources either off-shore, or in shale, you'd exploit them to the max. If you've got large deposits of uranium in a place such as Virginia, you'd mine that uranium, and put it into reactors to produce cheap, clean electricity.

What would be the effect of instituting a policy that maximized exploitation of natural resources for energy production? Domestically a drop in prices at the pump and at the home. Internationally, you could shift yourself, and your friends, away from dependency on oil and gas that flows through Russian pipelines. This should cause a drop in prices in Russia, Iran and OPEC generally. The nations that had been supporting terrorism would be less able to do so. Russian adventurism would be curtailed. Without the support of state sponsors a group like Hezbollah could well wither and die.

Now that may be optimistic, but as long as energy policy is in thrall to the Greens, it will never be tried, and our relations with the rest of world will be seen in relation to our dependence on others.

Throwing money away on solar and wind power will do absolutely nothing to decrease energy/carbon consumption. They are expensive, unproven technologies. Coal, gas, and nuclear are proven technologies, and coal is extremely cheap. So you scrap your crazy environmental restrictions on these forms of energy, and encourage building of plants that use these forms of energy production. Rather than hiking everyone's cost at the home, you see a reduction in cost, and more disposable income that can be used for saving/investment, or for consumer goods. Increased consumer demand should pay off in an expanding economy.

Taxes. Everyone talks about them, and like death the fear of taxes is ubiquitous. Yet no one talks about the moral justification for taxes. If you raise the topic with one of your nominally Christian liberal friends you may get some blather about Render undo Caesar…. That's all well and good, but Jesus was referring to a denarius or a sesterces that had Caesar's image, possibly that of Augustus, possibly that of Tiberius, on it. Are we to take that verse to mean that everything monetary is Caesar's, and everything else is God's? Is Caesar morally entitled to everything? If that's the case how do we live? Or is Jesus simply ducking the issue? I'm somewhat inclined toward the latter view. How does the act of taxing, differ from other acts.

Back in the summer of 1970 I had a job that required me to work from midnight till 8:00 am. I was walking to the bus when a guy stopped me, pointed a gun at me, and demanded my money. Now what did he do? He demanded money from me by means of the threat of violence upon my body, and spent that money for his purposes, not mine. Now what happens in any form of taxation? You are forced, under the threat of imprisonment, or violence upon your person, to surrender your money to a stranger who will spend it on purposes not your own. In other words, the two acts are identical. Both extract money from the unwilling by threatening violence, imprisonment, or other unpleasantness, both are done by people whose sole justification is not that they have earned it, or are exchanging one good for another, but simply that they want it. Both are done by people who spend your money for their purposes, not yours. In other words, the two acts are identical.

Progressive & Reqressive—Somehow the idea has gained hold that the rich, defined as anyone who has more than the speaker's audience, should pay more than the poor people, who are defined as the speaker's audience. Now this is intended to stir up class hatred, and nothing else. What goes unnoticed in these discussions is that there are various taxes that act in a regressive manner, they take up a greater share of your income the less you make, so they affect the poor more.

Sales tax—Since the poor, whoever they are, have less disposable income, more of their income, as a proportion, goes to non-discretionary items such as food, clothing, and so on. These things extract taxes from the poor, regardless of whether or not they pay income taxes. So they act negatively upon the poor, and inhibit savings, investment, and other discretionary spending.

Corporate taxes—Huh⁇ How the heck do they affect the poor? Corporations are taxed because they are rich, nasty, evil, vile things that rob the poor, and enrich fat cats. What they actually do is provide things that people want in exchange for a bit of their cash, and in return they provide goods, and jobs. When the firm's accountants get around to drawing up the profit and loss statements taxes are entered as a cost. That means that the taxes paid are not some magical source of money for the government, but an item that is included in calculating the price of the iPhone, television, electricity, or anything else whatsoever. In other words the corporate tax raises the price to the consumer of every object that he uses. Again, the poor person, the guy with less disposable income, is punished by his overlords.

Now look at spending. There's a vast safety net in place, as well as numerous social programs. Perhaps it's time to rethink whether those actually do any good. Economists usually ascribe inflation to an increase in the money supply. The money supply is described under a variety of M names, M1, M2, and so on. The theory is that an increase in the money supply causes an increase in prices. The BLS has been measuring the CPI since 1913. In that time the CPI has increased more than 20×. The cost of tuition at Harvard has risen from $150 (7.5℥ of gold, or $10043.25 at today's (3/5/2014) gold prices to $38,891.² In other words the cost of education has grown 259× or a bit more than 11× faster than the cost of living. How is this possible? I've already posted about this issue before.

² Source: https://college.harvard.edu/financial-aid/how-aid-works/cost-attendance It should be noted that additional fees, including room and board cost about $23,000. That's a grand total of over $61,000. Harvard puts the total at $58,000—65,000.

Look at the slope of the line for the CPI. It took over 50 years for it to move from 10 to 50, and then another 10 years to double to 100. This was the period of the Great Society, and the expansion of government. That slope has been almost vertical for 50 years.
Now take a look at the chart. We can see a change in the slope of the curve when LBJ takes over, and begins spending money. The thing continues throughout the remaining administrations. Now if the cost of living rises faster than wages, that results in a loss of real wages. Plus, if the person's wages increase enough to push them into the next higher tax break, then the government collects more taxes from the poor slob, while cutting his real wages through inflation. So he gets shafted twice. Once by inflation, engineered by the government, and once by taxes, also engineered by the government.

So government programs inflate the costs of the goods they purport to help people obtain. The cost of education increases because it is flooded with government money. The cost of health care is probably pushed up by Medicare and Medicaid, and is in the process of being pushed even further by Obamacare. It may well be that the way to achieve affordable healthcare is to cut off the supply of government money, and let the beast starve.

Social Security and Medicaid are both pass-through systems, i.e., they are dependent on a greater number of young workers paying the costs of older or retired works. Obamacare is set up the same way, and the young workers are supposed to pay for the old folks, but the set up for Obamacare is even worse. Workers from 18—26 are allowed to stay on their parents health insurance. That's half of the class (18 to mid-30s) who are supposed to pay for the law to support the older people. Now pass-through systems simply cannot work for long if the population is not constantly expanding. When people are choosing not to have babies, that means that the system will contract, and collapse. Immigration might save it for a while, but that eventually reaches limits, and the immigrants will eventually stop having babies.

So that's why and how things got to be a mess. What to do next?

  1. Reform entitlements so that they operate as private insurance/annuity systems. Eliminate pass-throughs.
  2. Drill and frack. Drill and frack. This will increase the availability of fuel, and cause drops in the global price of coal and oil. It will destabilize prices in Iran, Saudi Arabia, and the OPEC countries. It will play havoc with Putin's currency.
  3. Uranium. Virginia has a deposit of 50,000 metric tons of the stuff, and it's not being mined because of environmental and health concerns. Okay, fine I understand that no one wants uranium in their swimming pool, but why isn't more work being done to mitigate the effects on the environment and on health? Exploitation of Virgina's uranium would do go a long way to reducing carbon emissions.
  4. Gut the EPA. Much of the Green agenda is based on flawed science, and the suppression of coal is inimical to interests of the consumer, and pushes money towards schemes, solar and wind, as well as some others, that are simply not ready.
  5. Eliminate corporate taxes. The corporation acts as a transfer agent to extract money from the consumer, by embedding the tax as a cost in the price of the product. This will allow cash rich companies who have money overseas to bring it back. It will lower the cost to consumers.
  6. Go to a flat tax. Eliminate all deductions. You can then abolish the IRS, and transfer collection to a computer system. Maybe Amazon can run it. They can build a decent looking website that works.
  7. Much of the civilian side of government is either inimical to the taxpayer, or down right useless. Go through the alphabet, and gut, abolish, or sell off most of the government infrastructure. Privatize the Post Office. UPS and FedEx both do a better job anyhow. 1% or less or Americans work in agriculture. So why do we still have an Agriculture Department? Commerce runs the National Weather Service and NOAA. Sell them, and abolish Commerce. The same with Labor. Just go through the civilian side of the budget, and eliminate the deadwood, i.e., most of the government.
  8. Streamline DHS, and gut/privatize TSA. Institute the Israeli/El Al style protocols for profiling, and concentrate on young, swarthy, males from the Middle East. The scare over profiling is ridiculous. Everyone does it, sometimes it's simply avoiding someone based on their dress, or on the expectation that they'll come up and beg for money. Other times it may be more serious. But I don't know anyone who doesn't pick whether or not to associate with someone based on cues that the other party sends. So get over the profiling crud.
  9. Is the FCC really necessary? They supposedly control the radio and television spectrum which belongs to the government, but I've never heard anyone say there was a deed to those things. The FCC is supposed to grant licenses for radio and television, and ensure that stations serve a community's interests. The problem is the definition of those community interests. We've seen that the FCC, which has a coercive authority by virtue of its ability to grant licenses, can attempt to mold the station, by threats and intimidation disguised as an academic study, to its own ideas. In other words, it can, and will act as a propaganda ministry. Restrict its regulatory power, and make it a more purely licensing agency, like (shudder) the DMV.
  10. One reason that drugs cost so much and take so long to get to market is the FDA. Bring it into the 21ˢᵗ century, and streamline the approval process for new drugs and therapies.
  11. Repeal Obamacare. In its place put tort reform, the elimination of frivolous lawsuits, elimination of contingency based fees. Make insurance portable. End the ban on interstate insurance sales.
  12. Repeal the minimum wage. I've discussed the minimum wage elsewhere, notably here. If there is a market clearing price for wages then there are three kinds of equality/inequality that can exist:
    1. MW > PMCW
    2. MW = PMCW
    3. MW < PMCW
    In the first case, you have a political attempt to increase the minimum wage over the market clearing wage. The effect is to pass the cost on to the consumer, or to reduce staffing, and replace burger flipping kids with burger flipping machines. The second case sets the wage to where it already is, and has no effect. The third case sets the wage below its clearing level, and while it may increase offers of employment will not see those offers accepted. In short there is no case in which the minimum wage will have any actual positive effect on wages. What it does do is generate good feelings in the people proposing it, and buy votes from the pols constituents. Do away with it, and let wages rise and fall without any legal coercion.
    If you are successful in raising the minimum wage while maintaining employment in these jobs, then prices will be hiked, which will cause some customers to patronize cheaper places, or stay home, and so will lead to a rise in unemployment.
  13. The world is a dangerous place.
    Strengthen the military and intelligence service. Increase HUMINT. Increase Army troops, and naval ships. Keep the A-10 Warthog, which is a capable killing machine.
  14. Return to workfare. End subsidies for unemployment.
  15. Retire the debt. If you cut a trillion or two from government spending, and get the economy going again by cutting regulation, you'll be able to get rid of some of that debt.
  16. Tort reform. Eliminate what is sometimes known as champerty. While not quite the same thing, as far as I can tell, as what is described in the Wikipedia article, the practice of contingency fees encourages frivolous litigation and nuisance lawsuits. Crackdown on huge awards for class action lawsuits. You've probably seen the ads from Doug, the poor guy with mesothelioma.³ Those of us who are inclined to cynicism are of the opinion that most of that $30 billion is going to lawyers. I've seen estimates that the payout to the individual is about $500k and that the lawyers don't get that much. Still there can be little doubt that lawsuits against drug companies, restaurants, and such are frequently frivolous and serve maily to enrich lawyers while leaving the poor saps who filed frustrated. Anything that enriches lawyers is bad.

    ³ Doug died in 2012. See his obituary here.

  17. Re-open the idea of the ground based radars and missile systems with the Czech Republic and Poland. If they can quietly installed and gotten operational it will be better for Europe. Speed the entrance of the Baltic nations, including what's left of the Ukraine, into NATO. Institute economic sanctions against Russia.
  18. Do an actual reset with our allies and friends (Great Britain, Israel, Germany, Italy, etc.) Maybe start by getting a competent Secretary of State, and getting rid of pro-Arab, anti-Israel creeps in the department.
  19. Immigration reform—It does a disservice to immigrants who have waited for their place in line to come up, and who have worked hard and diligently, and have learned the language, and who are not always going on about my country to let illegal immigrants, who have entered the country, and made little or no contribution, to move ahead of them. If you're going to allow illegals to attain citizenship, they should have to work for it. Say 10–15 years in military or equivalent service subsequent to applying for amnesty and the standard waiting time after applying for citizenship
  20. Babies having babies—That used to be a popular phrase a few years ago. There is nothing morally wrong with young people having children. What is wrong is illegitimacy, and the lack of the necessary social structures to permit young people to marry, have children, and pursue education, and move into careers. Robert Heinlein once wrote that women were at their best as far as producing children goes in their teens and early twenties, but that they were at their most nurturing in their later years, past youth, and into middle age. An economy that has structures built on a large number of young workers paying for a smaller number of older workers and retirees cannot sustain itself when there is insufficient fertility to support those structures. A way has to be found to encourage more births, and still permit people to pursue education and careers.
In short get the economy going again by a real stimulus, lower taxation, less spending, particularly on unsuccessful social programs, and increase military and intelligences assets.