Some States Are Getting Screwed by the Stimulus

The Wall Street Journal released a cool map today that shows how much money per capita is going to each state. One might think that Congress would divy up the money based on how bad the recession was in individual states, but you would be wrong.

Which state is getting the most money per capita? Utah! The same Utah that is currently enjoying an unemployment rate of 4.3%, better than 45 other states.

What about Utah's neighboring state of Nevada with it's unemployment rate of 9.1% (5th worst in the country)? It will receive the 3rd LEAST amount of money. Odd how a Republican state is getting the lion's share (and voted No), but Senate Majority Leader Harry Reid's state is getting screwed.

How about North Dakota with it's 3.5% unemployment? Well, it's getting the 3rd MOST amount of money. Surely, Florida, with it's skyrocketing unemployment (up from 4.9% to 8.1% in just 9 months) is getting it's fair share? Don't be silly, it's getting the least!

Let's dig a little deeper and find where the vaunted "Infrastructure investments" are going. One would think that infrastructure spending would go to states with large population growth rates to accomodate future needs. Using the WSJ map, you can toggle and see where that money is going. Of course, one would be wrong!

Which states are getting the largest proportional "investment" in their infrastructure? The booming populations of Wyoming and North Dakota! You know North Dakota, it's the one with fewer people now than in the 1930's.

Surely, one of these fast growing states is nearer the top: Florida, Nevada, Arizona, Utah, Colorado and North Carolina. No, these are actually the bottom 6! Or perhaps California with it's notorious congestion? No, it's the 7th least! How about fast growing Texas? No, it's the 10th least.

Looking at the map, it is generally states with the lowest population growth rates getting the most money per capita: The Great Plains, the Northeast, Alaska, Arkansas, Oklahoma...

Thank goodness we have the brightest minds dishing out this money.

Maybe House Republicans are Starting to Get It

The stimulus passed the House, but...

From Bloomberg:

Obama had traveled to Capitol Hill earlier this week to personally lobby for Republican support for the stimulus bill, an effort that included a private session with the party’s House members. He failed to win any converts. In yesterday’s vote, all of the 244 “yes” votes came from Democrats. Voting “no” were 177 Republicans and 11 Democrats.

Not a single Republican voted for the stimulus. Good job guys!

Should we support Secession?

Always. Given two conditions.

Why is secession good? Because small states (governments) must trade and compete leading to more laissez faire governments.

A large state can harbor the belief that it is self-sufficient. By having an abundance of land, the random distribution of natural resources should dictate that it has large enough sources to sustain itself. A small state, is unlikely to be so fortunate. There are few places in the world with ample supplies of farm land, forests, iron, oil, and water all within a few thousand square miles. This puts pressure on that state to trade with other countries.

On a basic subsistence level, a large state is an unlikely victim of regional droughts or other natural calamities. Broad swaths of land allow it to hedge bad weather or pestilence with other areas not affected. A small state can easily fall to this sort of misfortune. If a small state does not trade, it faces great risks to its people. This again, puts pressure to trade.

As a state increases in wealth, the benefits of trade to a small country become ever more apparent as the gains from specialization are too great to ignore. In order to reap the full benefits of trade a society must drop tariffs and industrial subsidies. Protectionism, on the scale desired by some large countries, seems delusional for a small country.

Opening trade also exposes countries to the pressures of competition. If corporate taxes in your neighboring country are lower, you will lose business to them. If your regulatory environment is less complex, you will gain businesses. This will put pressure on these countries to seek lower taxes and less regulation.

Small nations lead to more competition that pressure governments to be smaller (as a percentage of the economy) and more business friendly. This is pressure, not certainty. Because I believe less government leads to more prosperity, more countries will be forced to compete regionally and internationally by shedding the economic and moral ill effects of socialism and protectionism.

The two caveats I mentioned for recognition are these:

1) The secession has to be by popular vote. I would not support some gangster creating a fiefdom by force.

2) The citizens have to be allowed to emigrate out of the state. Other countries may not allow them to immigrate, but that’s not the fault of their nation of origin. I would not support some cult or other totalitarian regime forming and trapping an unwilling minority.

Note - Because I have mentioned Somaliland before, I figured I would add that I now fully support Somaliland's international recognition. By all accounts that I can find, they now meet both of these conditions. I know that they have had democratic elections, but I'm not certain as to their emigration policies. Since my last blog post about Somaliland was linked by several Somaliland groups perhaps one of them can leave a comment about their country's emigration rules.

Housing Bubbles Around the World

The blame for the American housing bubble has been a battle between the Left and the Right. The Left wants to vaguely blame deregulation and a yet still undefined "Greed". The Right over plays its hand by including minor distortions caused by the Community Reinvestment Act, Fannie Mae/Freddie Mac, and Barney Frank. Both sides, with some cause, have blamed the Federal Reserve and it's easy credit policies. As I have said before, they ignore land use planning, to their peril.

Wendell Cox and Hugh Pavletich, released their 5th annual Demographia International Housing Affordability Survey: 2009. (HT: ObjectifLiberte).

Lots of pretty charts and graphs, not a standard and dull academic paper, so at least skim it.

What hurts the case for much of the Right and destroys the claims on the Left, is the international nature of the boom and bust. How exactly did regulation in the United States cause housing booms and busts in the U.K., Ireland, Canada, Australia, and New Zealand? How did regulation cause a massive boom on the West Coast, Florida, and the Northeast, but not in Texas, Georgia, and North Carolina when the latter states have more population growth?

For regular readers, none of this will come as a surprise because I've already linked to half the articles and studies mentioned in the paper.

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In related news:

Last year I attended the 6th Annual Preserving the American Dream Conference in Houston. This year, the conference is being held in Seattle. I thought it was fantastic last year. I was able to speak to aforementioned Wendell Cox for a few minutes, which was a treat. Also note that Vincent Benard, who writes Objectif Liberte and occasionally leaves comments on my site, will be making the trek from France to present at that conference as well.

Will Obama Get the Blame for Afghanistan?

It has been mentioned for months, but I hadn’t seen any data until recently. The chart below is the number of American combat deaths by month in Afghanistan fom Icasualties.org



According to ABC’s Jake Tapper’s Politcal Punch: (HT: EPJ)

As the U.S. military under the Obama administration increases efforts in Afghanistan and the surrounding region, there will be more American casualties, Vice President Biden said this morning on CBS' "Face the Nation."

"I hate to say it, but yes, I think there will be," Biden said in response to a question from host Bob Schieffer. "There will be an uptick. Because as the commander in Afghanistan said, he said, 'Joe, we will get this done, but we're going to be engaging the enemy much more.'"

A Heavy Gun Takes Aim At The Stimulus

When people support the stimulus, they will offer up Nobel Prize winning economist Paul Krugman to lend weight to their cause. Well, another heavy hitter came out today in the Wall Street Journal to pillory the Obama Stimulus. Robert Barro, is a Harvard macro economist, and listed as the 3rd most influential working economist based on the number of times his papers have been published in major journals, cited by other major papers, and purchased, according to University of Connecticut Econ Department’s IDEAS ranking. Mr. Krugman, is #15. If you sort by citations alone, Barro rises to 2nd. As a note, when I was in grad school Barro was mentioned quite often, Krugman never that I recall.

Here are some excerpts from his Wall Street Journal piece:

Back in the 1980s, many commentators ridiculed as voodoo economics the extreme supply-side view that across-the-board cuts in income-tax rates might raise overall tax revenues. Now we have the extreme demand-side view that the so-called "multiplier" effect of government spending on economic output is greater than one -- Team Obama is reportedly using a number around 1.5.
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The explanation for this magic is that idle resources -- unemployed labor and capital -- are put to work to produce the added goods and services. Brian's note - Economist Robert Murphy eviscerates this argument here
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If the multiplier is greater than 1.0, as is apparently assumed by Team Obama, the process is even more wonderful. In this case, real GDP rises by more than the increase in government purchases. Thus, in addition to the free airplane or bridge, we also have more goods and services left over to raise private consumption or investment. In this scenario, the added government spending is a good idea even if the bridge goes to nowhere, or if public employees are just filling useless holes. Of course, if this mechanism is genuine, one might ask why the government should stop with only $1 trillion of added purchases.

What's the flaw? The theory (a simple Keynesian macroeconomic model) implicitly assumes that the government is better than the private market at marshaling idle resources to produce useful stuff. Unemployed labor and capital can be utilized at essentially zero social cost, but the private market is somehow unable to figure any of this out. In other words, there is something wrong with the price system.
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In any event, when I attempted to estimate directly the multiplier associated with peacetime government purchases, I got a number insignificantly different from zero.

…in terms of fiscal-stimulus proposals, it would be unfortunate if the best Team Obama can offer is an unvarnished version of Keynes's 1936 "General Theory of Employment, Interest and Money." The financial crisis and possible depression do not invalidate everything we have learned about macroeconomics since 1936.

Much more focus should be on incentives for people and businesses to invest, produce and work. On the tax side, we should avoid programs that throw money at people and emphasize instead reductions in marginal income-tax rates -- especially where these rates are already high and fall on capital income. Eliminating the federal corporate income tax would be brilliant. On the spending side, the main point is that we should not be considering massive public-works programs that do not pass muster from the perspective of cost-benefit analysis. Just as in the 1980s, when extreme supply-side views on tax cuts were unjustified, it is wrong now to think that added government spending is free.

I recommend the whole thing, but it's a little dense for the uninitiated.

Democrats, and the Problem with Act Utilitarianism

Utilitarianism is probably the most commonly used moral philosophy in modern Western Society, but so often people will exclusively use the form of “Act” utilitarianism as opposed to “Rule” utilitarianism. Jeremy Bentham, the originator of utilitarianism, defines it in brief with his phrase, "the greatest happiness of the greatest number". When you hear a leftist implore this phrase, they are falling prey to the weakness of Act utilitarianism and embrace an ad hoc approach to running our country.

Wikipedia does a good job of explaining the difference between “Act” and “Rule” Utilitarianism.

“Act utilitarianism states that, when faced with a choice, we must first consider the likely consequences of potential actions and, from that, choose to do what we believe will generate most pleasure. The rule utilitarian, on the other hand, begins by looking at potential rules of action. To determine whether a rule should be followed, he looks at what would happen if it were constantly followed.”

I do not believe in the morality of utilitarianism, but it does accurately describe how people behave. I hold it as a matter observed fact that when presented with a choice, humans will try to calculate their self-interest (Act Utilitarianism) and/or rely on a pre-established rule (Rule Utilitarianism). Much of modern economics is based on this premise.

In our personal lives we run into situations where we must make, what many would call, a moral decision. Say, you have not started on a project that your boss is expecting you to finish and he/she has come by to ask about your progress. Should you lie or should you admit your progress and assure him/her that it will be finished on time?

The Act utilitarian would mull whether he thought he could get away with the lie. Because of our limited faculties, this is a difficult calculation. Might the boss immediately ask, “Can I see what you have so far?”, or will he naively believe you. We possess an arrogance that we can calculate these events with high accuracy. This is why policemen have an enormous advantage when questioning a suspect. They have the resources to check all the available facts, yet the suspect must rely on his memory to formulate an alibi without contradiction to reality.

The Rule utilitarian would have decided beforehand whether he would lie. Perhaps he would decide never to lie to anyone. By choosing this, he is knowingly giving up the opportunity to gain from lying, but assuring that he will not suffer the consequences of being caught. In making this choice, the rule utilitarian can rely on a broad history of his own experiences and the experiences of others. He is using a large amount of information, whereas the Act utilitarian is using a very limited information set.

Libertarians are labeled ideologues because we quickly reject ideas when we hear that which does not fit the rules that we have developed around our understanding of how the world works. This belittlement is akin to the thinking of teenagers and college students who chafe at parental suggestions of appropriate behavior. They arrogantly believe that they can enjoy the fruits of licentious behavior and avoid the fateful consequences. If the calculation of Act Utilitarianism is so difficult for an individual, how could one reasonably believe that the calculation of coercion over millions of individuals in aggregate would be anything but impossible?

Unfortunately, our leaders are drunk with this conceit. The tendency now is to eschew principles and toss aside careful deliberation, as the new President said at his inauguration, “the state of the economy calls for action, bold and swift.” Hundred billion dollar “fixes” come across the newswires every few days. Warnings of graft, unintended side effects, and futility are mocked as fears born of “worn-out dogmas.” The calculations one needs to perform Act utilitarianism through government planning number in the trillions of trillions, but haste cannot afford to be troubled with reality. We charge forth into battle, assured that mere courage will overcome the entrenched and daunting reality.

Wherefore Art Thou Liberty?

Over a number of months I have been mulling how liberty can be advanced. I believe that I have finally started to make headway, so I thought I would share some of my ideas.

A few pressures exist on any society or nation that adopts a framework (like the United States has a Constitution) that provides for liberty. The political leanings of a society change over time as new ideas and new people, slowly change the original viewpoints. A free and successful society can flourish while striving upwards, but faces less pressure to maintain freedom’s zeal once at that inevitable zenith. Societies change because people change and their ideas change. No framework can prevent digression forever.

The first 120 years or so of American history revealed us capable of maintaining a great amount of liberty, but as the ideas of socialism and progressivism began to infect our thinking, the classical answers were losing their emotional punch. The progressive politics in the late 1890’s and early 1900’s began to spread and individual liberty began to decline. The Income Tax was made permanent, conscription grew, liquor was banned, and slowly, but surely, the government took a greater role in the economy. This role exploded under Herbert Hoover and then was cemented by Roosevelt. Today, the economic liberty that Americans once enjoyed would shock the sensibilities of those accustomed to governmental parenting, and inculcated with fairytales of apocalypse that liberty supposedly breeds.

On immigration, don’t get me wrong, I am all for it. How can I begrudge someone attracted to America’s peace and prosperity while living in grinding poverty? Many people, however, immigrate to countries with greater prosperity without fully comprehending the freedoms that lead to prosperity. I would wager a substantial sum that amongst most nationalities wanting to come to United States, few, if any, are propelled to find likeminded adherents to Hayek, Rand, or Rothbard.

Lastly, with success there is a tendency to embrace laziness and shortsightedness. California is a clear example of this. While they have had their share of economic calamities in the last 10 years they still don’t feel compelled to make the hard choices needed to avoid them in the future. There is an arrogance that wealth and popularity is endless, and government intervention in economic decision-making has no effect. Even with staggering budget deficits, horrendous unemployment, and a massive outflow of domestic emigration, they have refused to recognize the dull reality creeping in on them.

With failure, the incentives are the opposite. By the early 1980’s, Ireland’s status as a backwater was unquestioned. The impetus for change was thick in the air, and over the next 25 years they chose for themselves a staggering number of fruitful changes. The Irish sold off government owned enterprises, and slashed taxes, spending, and regulation. In barely a generation, the British hegemony was broken. With a surging economy, wealth and confidence soared, and for the first time in a thousand years Irish noses rose above those of its stodgy neighbor to the east.

The advance of freedom is mostly inevitable. A Darwinian process where individuals pursue their best interests rewards those freer societies with larger and smarter populations. I don’t think anyone can point to a time in the past where so many around the world enjoyed such freedom as now. It moves in fits and starts, and rises and falls in waves, but nonetheless, freedom is on the march, just not always where we hang out.

The academic arena is an important one and trying to defeat the ideas of would be authoritarians is noble, but not everyone can take part at that level. While new ideas almost exclusively come from the intelligentsia, they do get it wrong from time to time (think Communism, Fascism, Phrenology and Eugenics) and are often rejected by a recalcitrant public holding to tradition long enough to weather the edicts of excitable eggheads.

It is fun to best someone in a hard fought debate, but the battle of ideas should not come at the expense of failing to cultivate those most open to and in need of change. If we want to be at the front, moving liberty foward, we need to find the people and places where economic liberty stands in most glaring contrast to the failures of government. For all of us who support individual liberty, I recommend that we do a few things. Continue to sharpen our knowledge. Simplify our persuasion into short and easily understood methods. Keep our eyes and ears open for opportunities to enlighten the minds of our friends and neighbors.

Sweatshops - A Needed Solution

After reading this article by Nicholas Kristof at the NY Times, I had to link to it. (HT: Club for Growth)

Mr. Kristof makes the case, quite irrefutably, that sweatshops are a symptom of poverty, not a cause. They should not be shunned, but seen as a tool to lift the world's poorest from unimaginable squalor.

Here are some excerpts, but try to read the whole thing at the link:

The miasma of toxic stink leaves you gasping, breezes batter you with filth, and even the rats look forlorn. Then the smoke parts and you come across a child ambling barefoot, searching for old plastic cups that recyclers will buy for five cents a pound. Many families actually live in shacks on this smoking garbage.
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Talk to these families in the dump, and a job in a sweatshop is a cherished dream, an escalator out of poverty, the kind of gauzy if probably unrealistic ambition that parents everywhere often have for their children.
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When I defend sweatshops, people always ask me: But would you want to work in a sweatshop? No, of course not. But I would want even less to pull a rickshaw. In the hierarchy of jobs in poor countries, sweltering at a sewing machine isn’t the bottom.
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Look, I know that Americans have a hard time accepting that sweatshops can help people. But take it from 13-year-old Neuo Chanthou, who earns a bit less than $1 a day scavenging in the dump. She’s wearing a “Playboy” shirt and hat that she found amid the filth, and she worries about her sister, who lost part of her hand when a garbage truck ran over her.

“It’s dirty, hot and smelly here,” she said wistfully. “A factory is better.”

Misunderstanding Self-Interest

Brad DeLong is the author of a popular economic blog called: Grasping Reality. If only his grip were a little tighter. He believes in pragmatism. That somehow the answer to economic problems is found in the middle. Surely, if Bob thinks that 1+1 = 2 and Bill thinks it's 3, that the true answer is around 2 1/2, eh? As dismissive of him as I am, he is more so in his attempt to disparage modern libertarianism.

His quote:

"...a truly self-interested butcher would not trade you his meat for your money but instead slaughter you and sell you as long pig."

This is ridiculous, but the basic premise is endemic to those who distrust free markets. They have a deep seeded distrust of other human beings.

His comment is also a fundamental misunderstanding of self-interest and human nature. It is apparently Mr. Delong’s belief that we are all psychopathic killers and cannibals, held back only by the force of law. Of course, his logic falls on its face, for if we are all psychopaths, how did law and order ever evolve? How did the human race ever come to be? How do animals survive at all without the intellect and advanced moral systems that we have?

Self-interest is more than just satiating our current desires and be damned the long-term consequences. This would imply that humans have no intellect and no capacity for reason. If I found myself on a desert island with only one companion, how would it serve me to cannibalize him? While I might be able to survive a few more days, it ignores the possibility of another arrangement: Specialization and Exchange.

Specialization and exchange allows us to use our diverse talents to maximize production. Were we both to try to survive on our own output, consumption and life spans would be lessened. Not killing him and coopearting allows the possibility of satiating more desires over a longer period. Clearly, this is the path that the vast majority of mankind, and even the animal world, has taken.

Now, reimagine Mr. Delong’s scenario as three men on an island, each having a gun. We land on the shore,Tom pulls out his gun, shoots Jim, and says, “Let’s eat!” Mr. Delong would ridiculously claim that he acted in his self interest. This ignores my incentive as the other island resident. If I acted in my own self-interest, I would immediately shoot Tom. How could I hope to survive the night if Tom has revealed his utter lack of willingness to negotiate an alternative production maximizing solution and his lack of hesitation at killing another human being? To maximize my lifespan, Tom has to go.

We all know this. If we tell a lie and are caught, we lose the trust of numerous people. If we steal and are caught, we lose the trust of even more. This is why with even minor offenses most of us keep these behaviors to a rarity, and some of us strive to never commit them. Any rational, self-interested person would kill Tom and kill Delong’s butcher, just like one would shoot a rabid dog. Revealing that one is capable of murder destroys the most fundamental form of trust in all human relationships: You don't kill me and I don't kill you.

It is even disconcerting to me that Brad Delong considers that murder could serve one’s self interest. Given that I do not consider self-defense as murder, I cannot conceive of a situation in which murder would serve my interest. If you can, I would wager that you are mistaken.

If Only...

If you weren't already aware...

Pam, an American, was working in the Phillipines when she and her husband found out that she was pregnant. Rather frighteningly she had also contracted amoebic dysentery. At one point she slipped into a coma. While recovering she underwent a series of strong medications. Doctors told her that the fetus had been damaged, and recommended an abortion. She chose not to.

Doctors later discovered that her placenta had separated from her uterine wall. Again, they recommended an abortion. She again said no.

Two months later, the child was born. He was malnourished, but mostly healthy. Pam survived with good health. They had called the child "Timmy" from the moment they knew he had been conceived, and now here he was in their arms.

End the end, it's hard to know what will happen to "Timmy", but so far he has exceeded expectations: 2 BCS College Football National Championships and a Heisman Trophy. Pam Tebow shows that sometimes it's better to live than to merely survive.

Oh, and he was homeschooled, from K through 12.

Note - I paraphrased some excerpts from this article at the Gainesville Sun if you want to read more about him.

Taking a Break

Friends,

A few months ago I increased my blogging significantly. However, because of my desire to only blog on topics that are unique has forced me to spend a disproportionate amount of time reading. To make a better balance of my time I've decided to scale back my blogging. I may blog once or twice a week. Thanks for all your feedback and readership over the last few months.