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The Informed Celebrity Test

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There are many celebrities who appear to be confused. They think that they have a pulpit to pronounce on economics and politics because their celebrity status gives them access, whether or not they actually have any backing for their opinions.

Celebrities do not have a monopoly on being ill-informed. However, they have an ability to be heard that ordinary private citizens do not enjoy. They have a ready platform to get their message out and attempt to influence others. This platform is not available to the rest of us.

To compensate for the access advantages a celebrity has over any other citizen, I offer this simple test for celebrities to take before they tell the rest of us how we ought to vote. The positions taken are not as important as the support offered for them.

  1. The Department of Labor has announced changes to the regulations under the Fair Labor Standards Act (FLSA), to go into effect on 1 December 2016. Specifically, the earnings limit for salaried employees who must be paid overtime will be raised to $47,476/year, with an automatic adjustment every three years (at this writing, the limit is $23,660/year).
    1. Should a salaried employee receive overtime? Why or why not?
    2. What is the principle that guides your answer to the previous question?
    3. Under what constitutional authority is this change to the law being made?
    4. What are two regulations regarding labor and wages that the original FLSA, passed in 1938, established?
    5. Name two employer practices relating to wage payments for adult workers that used to occur before the 1930s and caused people to want federal labor law.
    6. The same change sets the income level of a “highly compensated employee” at $134,004/year, which is obtained by finding the 90th percentile of full-time salaried workers across the nation. What multiple of that number did you make last year?
  2. The Citizens United v. Federal Election Commission case [558 U.S. 310] involves the regulation of political activity by organizations.
    1. The case was appealed when a lower court declined to provide injunctive relief to Citizens United. What was the Federal Election Commission doing that Citizens United sought an injunction to stop?
    2. What was the majority finding of the court?
    3. In the dissent authored by Justice Stevens, what differences between a corporation and a human person did he identify?
    4. Where do you put the boundary between free speech and “electioneering communication”? Does it matter who is doing the speaking? Explain.
    5. How does Congress direct and control the actions of the Federal Election Commission, including assertion of accountability by commissioners for their actions?
  3. The Kelo v. City of New London case [545 U.S. 469] involved a particular use of eminent domain by the City of New London, CT.
    1. What was the twist on eminent domain particular to this case?
    2. What was the majority opinion?
    3. In the dissent written by Justice O’Connor, what was her point?
    4. Must there be a public use to be a public purpose? Why or why not?
  4. There have been various public discussions this year as to whether one or the other of the major party candidates is unqualified to be President.
    1. What are the qualifications given by the Constitution for a President?
    2. What other qualifications would you assert? On what grounds?
  5. The US national debt is, at the time of this writing, $19.6 trillion.
    1. What is the difference between the debt and the budget deficit?
    2. About 88% of the federal budget is consumed by six major items. Name four.
    3. What are the three ways available to finance government operations?
    4. Do we ever have to pay down the debt? Could we just keep running it up for the foreseeable future? Explain.
    5. The Federal government has the exclusive authority to coin money? Could the government just print its way out of debt? Why or why not?
    6. If the Federal government just repudiated the debt, what would happen? Who would be affected?
  6. In most elections, including this one, there have been discussions about what the candidates will do to create jobs.
    1. What direct authority does the President have to create jobs?
    2. What means are available to the President to influence the creation of jobs?
    3. In the 1930s, several programs were created to put people to work during the Great Depression, most notably the Works Progress Administration (WPA) and Civilian Conservation Corps (CCC). Do you think such programs could be used to effectively reduce unemployment on a permanent basis? Why or why not?

You have all the time you need.

Written by srojak

October 13, 2016 at 8:38 pm

Bad History

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This picture came my way on Facebook. It was too bad not to hang on to.

.. when you did what?

.. when you did what?

What’s wrong with it? Well, let’s review.

Ending the Depression

Roosevelt did not end the Depression; World War II did. See this article for the actual unemployment data.

Unemployment was never under 10% from the time FDR took office until war spending began in earnest in 1940. The economy went into a relapse in 1937, as Roosevelt’s Second New Deal created uncertainty and investment slowed. Amity Shlaes summarized it this way:

The story of the mid-1930s is the story of a heroic economy struggling to do recuperate but failing to do so because of perverse federal policy.
— Shlaes, The Forgotten Man, p. 392.

This is not a story you will hear on PBS specials or read in a high school textbook. But both the statistics and the memory of the generation that lived through the Depression substantiate it. My mother and others of her age cohort used to say that wars were good for the economy. That is obviously untrue: in a war, you take wealth out into a field and blow it up. But that is the way their generation experienced relief from the Great Depression.

Creating the Middle Class

In what universe do people making minimum wage constitute the middle class? The middle class as we came to know it by 1970 was created by World War II and the economic boom that followed it.

At the end of the war, it was not clear at all that there would be economic prosperity. The outcome considered most likely was inflation once prices were free to rise and money earned in wartime production that could not have been spent during the war was loosed to bid up prices. This did not happen, and the fact that it did not was the accomplishment of Harry Truman and Federal Reserve Chairman Marriner Eccles.

Ending Elderly Poverty

I reckon that this claim is factual, as far as it goes. Over the next 80 years, Social Security did end elderly poverty — by transferring wealth from the young. If this scheme were managed by a private enterprise, it would be fraud; but since the government is in charge, everything is just dandy.

Was Roosevelt a Socialist?

Many of his opponents accused Roosevelt of being a socialist, but the evidence does not really stack up.

You know I am a juggler, and I never let my right hand know what my left hand does … and furthermore I am perfectly willing to mislead and tell untruths if it will help win the war.
— FDR to Henry Morgenthau, 1942. Quoted in Fleming, The New Dealers’ War.

Before the war, Roosevelt was willing to mislead if it would help perpetuate him in office. Even if he had left a body of political thought, it would be risky to put too much stock in it. Roosevelt has to be evaluated on his actions.

The actions of the Roosevelt administration were fundamentally corporatist. Under corporatism, government, business, labor, education and social organizations would work together to plan the economy and implement these plans. What’s wrong with that? For starters, plan the economy is a pleasant euphemism for plan your daily life.

At the time, the smart money believed that planned states had inherent advantages over liberal republics because the former could realize cohesive action. This was augmented by the work of Ferdinand Tönnies (1855-1936), one of the early thinkers in sociology. Tönnies distinguished between the Gesellschaft and the Gemeinschaft. To give a quick-and-dirty distinction, think of the Gesellschaft as a market town or bustling port, whereas the Gemeinschaft is closer to a rural village with deep traditions, where “everybody knows everybody, and everybody looks after everybody.” Also where everybody sticks their nose into everybody else’s business, but some people like that.

 The 1930’s are remembered as the Red Decade. Democracy itself appeared to be inadequate to the task of managing the modern nation. The idea of Gemeinschaft was in vogue, and in Italy, Mussolini appeared to be having success implementing his vision of corporatism — if you didn’t look too closely or ask what happened to people who didn’t get with the program.

The form of U.S. corporatism was thus gradual, incremental, societal corporatism, not the abrupt, authoritarian state corporatism of so many of the interwar European countries. And it was “loose”: pragmatic, piecemeal, nonideological, pluralist, with few sanctions or tight controls, and very American. It tended to be advisory rather than compulsory, but that changed over time.
— Howard Wiarda, Corporatism and Comparative Politics, p. 138.

Corporatism offered Roosevelt limitless avenues to expand his power. The government could sit as mediator and honest broker in disputes between two large industries, or between big business and big labor.

However, World War II permanently associated corporatism with fascism, and the National Socialist implementation of Gemeinschaft led to war and genocide. That did not mean the methods had to be abandoned, just that they needed to be rebranded and repositioned.

Why Don’t People Know This?

Why should children believe what they learn in American history, if their textbooks are full of distortions and lies? Why should they bother to learn it?
Luckily, … they don’t.
— James Loewen, Lies My Teacher Told Me, p. 297.

Very few people want to hear that FDR’s programs were not effective in defeating the Depression. In part, this is because Progressives have a preponderance of control of the education system and the media, but there is a more basic reason. If it took a global war to see off the Depression of the 30’s, what will it take to defeat the next one? The fact is that we don’t know how to cure a large-scale economic depression, which is why government policy has been focused on making sure another one does not happen.

Books about the Roosevelt administration typically concentrate on what historians call the First New Deal, which ended in 1935 with the Schechter decision that voided Title I of the National Industrial Recovery Act. Jonathan Alter’s The Defining Moment focuses on the first Hundred Days. Adam Cohen’s Nothing to Fear contains one chapter that covers the time after 1933; it summarizes the standard legislative achievements that are revered among Progressives, including the Social Security Act, but does not discuss their effectiveness. Only Amity Shlaes stands out as a historian of the entire Depression.

The reason why we need to get the history right is simple. If we don’t even understand the history, we have almost no chance of learning from past mistakes. If we tell ourselves that the actions were not really mistakes, there is nothing to learn from.

Written by srojak

June 5, 2016 at 12:34 am

That Which Cannot Continue

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From time to time, I mention the idea of a day of reckoning for the United States. What would prompt it? How do I know? When will it happen?

The Cause

The cause of the reckoning will be inability to pay for all the entitlements. We have been voting ourselves rich for almost 85 years now. As we have moved through time and got away with it, we have become bolder. Like most other civilizations that were prosperous in their day, we have convinced ourselves that we are too cool, too rich and too slick to be constrained by the same reality that applies to others.

We moved as the Spirit listed. They never altered their pace,
Being neither cloud nor wind-borne like the Gods of the Market Place,
But they always caught up with our progress, and presently word would come
That a tribe had been wiped off its icefield, or the lights had gone out in Rome.
— Rudyard Kipling, “The Gods of the Copybook Headings” (1919)

I didn’t originate this idea myself. Not only do I have a degree in economics, but I have been reading the thoughts of others for decades. Howard Ruff was forecasting a day of reckoning before I graduated high school. He wrote books like How to Prosper During the Coming Bad Years. But the Coming Bad Years never came. So what happened?

What happened was an active defense. Washington is full of people whose job, really, is to postpone the day of reckoning, whether or not they accept the idea that one is coming. People in Treasury looked at the same data that Howard Ruff was looking at. They also saw that we were jeopardizing the health of the economy by financing entitlements through inflation. So, during the Eighties, they switched to financing entitlements through debt.

Economists have forecast twelve of the past seven recessions.
— Old economics joke

However, continued experience in getting away with it just emboldens people. They start reaching farther and grasping for more. As the decades have passed, politicians have promised more goodies to more people.

With the Hopes that our World is built on they were utterly out of touch,
They denied that the Moon was Stilton; they denied she was even Dutch;
They denied that Wishes were Horses; they denied that a Pig had Wings;
So we worshipped the Gods of the Market Who promised these beautiful things.
— Kipling, loc. cit.

How I Know

In the face of almost nine decades of experience, not to mention contrary assertions from Nobel laureate economists, how can I maintain that a day of reckoning is coming?

Moral Principles of Reality

I work in software engineering. The computer really doesn’t care how much pressure you are under or how badly you want the application to work. If you haven’t written the application properly, it has a defect. You can ignore the defect. You can claim it’s not a bug, but a feature. You can polish the turd: tell everyone who will listen why they should really want the behavior that they’re experiencing. At the end of the day, however, you have a defect, whether you recognize it or whistle past it.

Software does not respond to enthusiasm.
— William L. Livingston, Have Fun at Work (1988)

Economics, like other social sciences, has physics envy; practitioners seek quantitative support for their pronouncements, substituting precision for accuracy when necessary. Any serious normative discussion in economics — what should be, as opposed to what is — relies on assertions from below, from ethics.

A tree falling in the forest really does make a sound, whether or not anyone is there to hear it. Ideas and actions have consequences, whether or not anyone wants to acknowledge them. This is the moral aspect of reality. You can refuse to believe that you are walking off a cliff: on the way down, you can be proud of having given your life for your beliefs. Then — splat!

How Decline Works

I have seen a number of organizations decline and collapse over my lifetime. From my study of history, I have learned about many more. There is a pattern to decline.

How decline works.

How decline works.

The declining organization can marshal its resources to mask the extend of decline for some time. Most people want to believe that all is well, and seize upon favorable evidence provided by outward appearances, while ignoring or excusing the occasional crack in the wall. By the time intractable problems become really noticeable, the rot has become quite advanced.

At a national scale, the machinery to produce happy tunes is massive. It really has to be, since we have fiat money: if the leadership caused the people to lose confidence in the currency, it would in fact become worthless.

The Humanitarian Impulse

We have experienced a 250-year-long explosion in rampant humanitarianism. What’s wrong with that? Well, that depends on how humanitarianism is understood. By most people, it is understood poorly.

Irving Babbitt make a valiant attempt to distinguish between humanism and humanitarianism:

The humanist, then, as opposed to the humanitarian, is interest in the perfecting of the individual rather than in schemes for the elevation of mankind as a whole; and although he allows largely for sympathy, he insists that it be disciplined and tempered by judgement.
— Irving Babbitt, Literature and the American College (1908), p. 8

Babbitt found that the sentimental humanitarian was ready to deny the inner conflict between good and evil in each individual, launching into the expansive pursuit of utopian ideals.

With the progress of the new morality every one has become familiar with the type of the perfect idealist who is ready to pass laws for the regulation of everybody and everything except himself, and who knows how to envelop in a mist of radiant words schemes the true driving power of which is the desire to confiscate property.
— Babbitt, Rousseau and Romanticism (1919), p. 156.

Possessed of the moral force of an observed problem, such as poverty, and the expansive desire to make everyone else make his priority theirs also, whether they want to or not, the sentimental humanitarian seeks to wield the police power of the state to compel others to do what he deems to be good.

In the Carboniferous Epoch we were promised abundance for all, 
By robbing selected Peter to pay for collective Paul; 
But, though we had plenty of money, there was nothing our money could buy, 
And the Gods of the Copybook Headings said: “If you don’t work you die.” 
— Kipling, loc. cit.

Thus we have people who are now saying that a citizen has the right to health care. It’s understandable that they should say this, and understandable that people should want this. Health care has the potential to be ruinously expensive, and no one wants to watch a loved one die. However, how is this to be provided? Health care is a wealth-producing activity. Whom do we enslave to produce the wealth to pay for health care as a right? Apparently, the answer is: Everyone, a little bit. We can afford it, right?

Actually, no. Health care is about the worst thing you can make a right of, because the demand for health care is effectively insatiable. If we can get everyone to live to eighty, why not press on to ninety? Where are we prepared to stop? It is undiscussable.

When Will It End?

Events of this year have made it more clear to me than before that this people, firmly in the grip of sentimental humanitarianism, will heed no warning. Thus it has ever been:

When that day comes, you will cry out for relief from the king you have chosen, but the Lord will not answer you in that day.
— 1 Samuel 8:18

The people who run the country will continue to strive to keep the vote-buying engine running. It is their responsibility to do so, and they certainly do not want to have the collapse on their watch. They will continue to seek ways to postpone the consequences, preferably until they are dead and gone.

If I could identify the event that must trigger the day of reckoning, it would be the job of someone in Washington to make sure that triggering event does not occur. This active defense will continue until someone miscalculates or a series of unforeseen events box the government into a corner. There are really bright people in Washington, so the latter is more likely. In chess, it’s called zugzwang (move-compulsion); you must do something, but anything you do is profoundly disadvantageous. It’s how World War I started, among other disasters.

We are already getting a taste of how unpleasant this can be. We haven’t got to the difficult part yet. I wish I had a less unpleasant report to make, but I don’t see the country having the will to take the necessary measures until reality reveals the consequences so forcefully that only the truest of believers can ignore them.

As it will be in the future, it was at the birth of Man
There are only four things certain since Social Progress began. 
That the Dog returns to his Vomit and the Sow returns to her Mire, 
And the burnt Fool’s bandaged finger goes wabbling back to the Fire;

And that after this is accomplished, and the brave new world begins
When all men are paid for existing and no man must pay for his sins, 
As surely as Water will wet us, as surely as Fire will burn, 
The Gods of the Copybook Headings with terror and slaughter return!
— Kipling, loc. cit.

Written by srojak

May 8, 2016 at 1:17 pm

The Saturated Citizen

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How do We the People let this happen? Every presidential campaign appears worse than the last. The debates are largely content-free exercises in posturing. Very little time is spent on serious issues that are important to the future of the country.

Well, how would we change it? Most of us have lives. We have to earn a living and function. Let’s look at where the time goes.

We’ll start with eight hours of sleep a day. Some people need more, some less.

If you have a salaried job, your employer didn’t put you on salary to only get 40 hours a week from you, but to get more than that at a fixed price. Let’s say our citizen works 45 hours/week, plus an hour for lunch.

The average commute is around 22 minutes/day one way, so round up to one hour a day spent commuting.

Add in some time for daily preparation, other meals and tasks to operate the household. Here is the full picture:

Mon Tue Wed Thu Fri Sat Sun Total
Sleep 8 8 8 8 8 8 8 56
Work 9 9 9 9 9 45
Lunch 1 1 1 1 1 1 1 7
Commute 1 1 1 1 1 5
Daily prep + breakfast 2 2 2 2 2 2 2 14
Dinner 1 1 1 1 1 1 1 7
Household 1 1 1 1 1 4 1 10
Sub Total 23 23 23 23 23 16 13 144
Total Available Hours 24 24 24 24 24 24 24 168
Discretionary Hours 1 1 1 1 1 8 11 24

I haven’t even considered kids in this model. Kids will blow this all to hell.

Discretionary hours are those not already committed, and include:

  • Having a marital relationship;
  • Worship;
  • Social activities;
  • Reinvestment in your career (you had better, if you want to be able to compete for jobs ten years from now);
  • Continuing education requirements for any professional certifications you may have;
  • Personal interests;
  • Volunteer work;
  • Citizenship;
  • Entertainment.

That leaves 24 hours a week, on a week in which nothing goes wrong that you have to manage the project of fixing. Five of those hours are on weekdays; they will be the first to be dissipated when you come home from work completely fried and can’t concentrate on anything. So our model citizen has 19 quality hours a week to allocate among all the competing claims.

Yes, there are optimizations you can do. You can eat your lunch at your desk and read, unless your co-workers consider you fair game for interruptions as long as they can find you. You can learn to read faster. You can work on getting by with less sleep. But there are many people who don’t have these options.

Let’s say you want to understand more about the 2008 financial crisis. You’ve heard about The Big Short by Michael Lewis, so you decide to read that. It’s about 290 pages long. If you’re typical, you can read 20-30 pages of a non-technical quality paperback an hour. Lewis is readable and accessible, so his writing won’t slow you down further. Still, you are looking at between ten and fifteen hours to read the book. If you have to spread that over multiple weekends, the amount of information you retain drops off. It’s worse if you have to spread the reading out over a couple months.

And once you’re done, what are you going to do with your newly acquired learning? Are you doing to hear the detailed plans of the presidential candidates for managing systemic risk in banking? Forget that noise. Are you going to hear financial policy issues discussed in accurate detail on cable TV news? Not likely.

Where are you going to get the information you can use now that you have this new processing apparatus? Do you have contacts in the Federal Reserve or the Treasury that can tell you what’s really going on? If not, what are you left with? I mean, besides a spouse who is mad at you for “blowing two days reading that stupid book.”

Or, how about taking some time to learn more about the Middle East. Where do you start? How do you tell the belligerents apart? How do you get oriented? Do you remember hearing anything in school about Mohammad Mosaddegh, the Suez Crisis, the Six-Day War or Black September? The people who live in the Middle East have deep, if biased, knowledge of these matters. Like Art Spiegelman, their fathers bleed history.

So if you’re an ordinary person having to earn your own way and solve your problems without a personal assistant or a graduate student, how do you manage this cyclone of data with its appallingly low signal/noise ratio? Under the circumstances, withdrawing or making surface judgments on perceptions are rational responses within the guidelines of the problem. Confronted with limited access to information, untrustworthy sources and limited time to invest in a situation over which you have little influence anyway, what other choices do you have?

It takes a lot to blast people out of this zone of indifference, and when it happens, the people to whom it happens are usually rather angry. If they weren’t angry, they would still be off living their lives and paying no attention to politics. Many of the people who have come out to Tea Party rallies never saw themselves as politically involved. They became politicized because they found the political situation of the country increasingly intolerable to them, until it tripped a switch and caused them to reallocate their discretionary time. Like any people who are newly politicized, sometimes they say questionable things. I’m sure that, if you dug up a recording of me in my twenties speaking, some of the things I said would make me wince uncomfortably.

Politicization is a process. People who are already in the political process have staying power, and they count on those who would challenge them losing interest. Anyone remember Occupy Wall Street?

Time is a scarce resource, just like money. People have to make economic decisions how to allocate their time. Look at their positions as economic agents and consider their alternatives.

Citizen involvement is a difficult problem. The Republic requires the consent of the governed, and does not work right if the governed do not understand what it is to which they are consenting. The solution is not clear, but it does not include blaming ordinary working people for failure to devote time they don’t have to digesting information that is not available to them to make a more informed choice among bad alternatives.

Written by srojak

April 9, 2016 at 1:47 pm