Herbert Hoover was an awful president. He caused economic disaster. Everyone agrees on that. Beyond that, many seem to argue he caused disaster by what he didn't do. In other words, he was a free marketeer who wanted to just let everything run its course, and that's how we got economic disaster. In reality, he was largely an interventionist, and the problem was caused by much of what he did.

John Nance Garner, FDR's running mate, said Hoover was,

leading the country down the path of socialism

and FDR accused Hoover of

"reckless and extravagant" spending and for thinking "that we ought to center control of everything in Washington as rapidly as possible,"

Source: FDR's Disputed Legacy, P. 4

FDR and Garner were largely correct, for the following reasons:

1. Smoot-Hawley Tariff Act: Passed in 1930, it raised tariffs a fixed number on certain items, not by a %, but by a $ amount. The argument was tariffs would force people to buy more things made domestically, and solve the unemployment problem. The problem is, trade is a two-way street, by definition. When we enact tariffs, consumers lose (higher prices, and less money to spend on other things), the company the consumer would have bought from with that extra money loses, the workers of that company therefore lose, the foreign exporters lose from less business (obviously), and the American exporters whom the foreign exporters (or people in that country) would have bought from lose. Exports and imports are directly related; if one goes up, the other goes up, and the other way around. Just as we stopped buying their products, they stopped buying ours, which not only exacerbated unemployment, but continued directing our capital and labor to uses less efficient than if we had open trade. That alone makes Hoover an interventionist, but he did more

2. Subsidy programs. In just a year, he increased federal government spending as a % of GNP by a whopping 5.1% (and ran a $2.2 billion deficit. $31.36 billion in today's dollars). The Agricultural Marketing Act established subsidies to stabilize crop prices, the Reconstruction Finance Corporation gave billions more in subsidies. When these subsidy programs were not working, he doubled, redoubled, and expanded them; see Emergency Relief and Construction Act

Subsidies, by their very nature, take money from what people value more and put it toward what people value less (excluding positive externality subsidies). When people do not buy from somewhere, they are sending a message: you're wasting resources. Sell us what we want, or get out and someone else will. To subsidize the company wasting resources is to prevent capital and labor from going to more efficient uses.

Rex Tugwell, one of the New Deal's architects said practically the whole New Deal was

extrapolated from programs that Hoover started

Other source for 2: A History of the American People (pages 740-1)

3. Revenue Act of 1932: A huge tax increase, increased the top bracket from 25% to 63%. The estate tax was doubled. A 13.75 tax was put on corporations' net income.

Much is talked about taxes reducing productivity, and in counter, much is said about no one refusing extra money because of the tax bracket they will enter. They are both true. If, saying the top rate was 65% for simplicity, I was given a $1,000 raise when in the top bracket, I'd accept it, because I'd still have $350 more. That only applies to situations when the money is guaranteed. An example that applies less: would I be willing to work longer to get $1,000 more but only keep $350 of it. Is the extra sweat that produces $1,000 more worth it if I only get $350? That is hard to decide

Then the next degree, we have the question of risk. If I wanted to start up a new company, or invest in a company and help create jobs in it, would I be willing to risk my time, money, and energy, if I have to bear 100% of the losses, but only get 35% of the return? In those cases, the money is uncertain, and I likely would not make that investment when I would have if I got to keep more of the return. When reducing returns without reducing risk, we end up with less investment.

Hoover was not a free marketeer. He was an interventionist, he caused the economic disaster with much of what he DID.

Recently I've been pondering whether practicality helps determine ideology. I've always considered myself a Democrat because my disagreements with the Republicans are much more insurmountable (choice, marriage equality, guns, sex education, victimless crimes and most social issues). With Democrats, in spite of our disagreements (mostly economic issues), my disagreements are often because I believe if something has been shown to work counter to the goal, that has to be taken into account. That reason is one reason people think I'm less liberal than I am, but does that really make me less liberal?

For a hypothetical example, if someone supports the death penalty out of belief in deterrence (both in its proper usage and its effectiveness), and the death penalty was shown to increase murders, so the person now opposes the death penalty. Does that make the person less conservative? I will talk about various examples with Democrats and liberalism that I have pondered.

For today, I will talk about workers in third world countries. Specifically, the opposition to sweatshop labor. When I say sweatshop, I am referring to many things we think of when we hear that word (by our standards: low wages, poor conditions, etc...). I am certainly excluding any sweatshop that employees are literally coerced or deceived into working at.

I used to be the mainstream liberal on this issue, arguing exploitation, unfair competition against our workers, etc... but then I was prompted to think more about it. If sweatshops are so terrible, why are people working there? Because it's their current best option. We have people in 3rd world countries who dream of making $2 a day, working only 6 days a week, indoors, and we demean or even boycott the companies who offer that. I share the goal of improving the workers' situation more, and we don't do that by ending their current best option. We are making the situation worse by boycotting.

How? What are the upper and lower limits of an employee's compensation? What is the most an employer is willing to pay an employee, and what is the least an employee is willing to accept? The employee's total contribution to the company, and the employee's next best alternative, respectively. Between those limits lies the agreed upon amount, and within that amount lies the mix of compensation. The mix's ingredients (cash, health care, breaks, working conditions, etc...) make no difference to the employer when it's the same amount off the bottom line, but they make a big difference to the worker. The employer has an incentive to offer the mix workers prefer.

When we buy their products, the workers are doing nothing different, but they're making the company more money. Their upper limit just increased. When we boycott, the workers are doing nothing different, but they make the company less money. Their upper limit just decreased. Boycotting therefore hurts the workers' well-being (either requiring a cut in compensation or laying off some workers). You may argue that the employer will just make more exorbitant profits if we buy their products. If that is true, we're providing an incentive for another company to come in and offer the workers higher compensation within that same range. Even with that aside, reducing the worker's total contribution to the company will still hurt the worker.

The question then is about their employing of children. Well, again, people aren't working there because they are coerced into; they are working there because they prefer it to the alternatives, children included. Children still need money, and when they are laid off, they often starve or turn to prostitution.

Another question is about allowing those labor standards to compete with ours, and driving certain companies and manufacturing jobs out. That is part of the picture, but it misses a key part: By spending less on the same goods, we are now able to spend more on other goods, making up for those jobs. For example, let's say I buy something for $6 when I used to for $10. Whatever I am now buying with that extra $4 is going to see an increase in their sales and be able to hire more workers. You may argue $4 is nothing, and that is true, but when we go beyond just me, we're talking about real money. The money is still circulating making jobs available in other areas. The main change is we're now able to get more what we want, with the same amount of money.

I would never want to work in sweatshop conditions, but unless I'm suffering in a third world country, I have no credibility in telling anyone else not to, and we are making their situation worse in trying to impose our standards. These people have few awful options, and destroying their best one helps them? How? Reverting back to the introduction, would taking this into account make someone less liberal?

If you're interested, here are two articles by Paul Krugman on this topic: In Praise of Cheap Labor: Bad Jobs at Bad Wages Are Better than No Jobs at All (warning: PDF)

Reckonings: Hearts and Heads

Language confusion often gets in the way of communication. We speak English, withdrawing words from the same bank, but assign different meanings, sometimes depending on our own beliefs and sometimes because we don't understand that the same word can have two different meanings. I find this to be the case with the term "union."

Unions, both in private and public context, may share similar structure, and even function, but the circumstantial differences need to be mentioned.

Much comes down to a basic bargaining model. Imagine Bill, an employer, is looking to hire Bob, a potential worker. Together, they would produce $8/hour. Without entering into contract, Bill would get nothing. Bob has an alternative that for $7/hour. So $7 is the point where Bob would walk away. To enter into a contract, the agreed upon wage would be between $7 and $8.

The main role of unions is to help workers get a greater share of the surplus. In this case, the total surplus is $1 (total value is $8, subtract $7 [Bob's point of walking] and $0 [Bill's point of walking]). Alone, Bob may get $0.15 of the surplus (for a wage of $7.15), but with a union, the union rep is a better bargainer and may get the worker $0.50 or so ($7.50).

Circumstances are different in the public sector. Workers are not hired to produce revenue. Public sector employees are paid from a source irrelevant to their production: taxes. Employees may have a next best alternative (lower limit to their pay), but they have no upper limit. Therefore, no total surplus to allocate between the employee and the employer exists.

Public unions would be similar if a rep for government workers negotiated with a rep for taxpayers. Public employees would not "make money" for taxpayers, but provide services worth up to $x. That would be the total surplus, and negotiations could occur for how that surplus gets allocated.

Senator Moynihan said, "You're entitled to your own opinion, not your own facts." I am not saying whether public employee unions are good or bad, but they clearly are different from private unions.

I used to strongly oppose mandatory public financing for the usual libertarian reasons. I used to view it as a freedom of speech and freedom of association issue. Obviously then, we have the freedom to associate our money with any cause we like in any amount we desire to get those causes to work. I also strongly supported voluntary public financing, on the condition that the candidate would not accept contributions from anywhere else (If they opted out, they would have instant disclosure, and no contributions from anything that can't vote [i.e. no unions, corporations, or anything that's not a living, breathing voter], ... but unlimited contributions from anything that can)

I've come to believe that freedom of association is true for contributing to non-profits and political causes, but candidates are a different story. Government has a monopoly on force, and trying to advance your cause through the government involves using force against others. This negates the freedom of speech and freedom of association arguments. The use of force should not be bought and sold.

At the same time, I realize full well that your views should determine who contributes to you, not the other way around, and the problem isn't the mosquitoes (special interests), it's that elected officials are providing a swamp for them. If you can't take a contribution and vote against the contributor the next day, you don't belong in office. As much as I would love for politicians to no longer provide the mosquitoes a swamp, we cannot depend on that for many reasons. The best we can do is block the mosquitoes from getting to the swamp. Public financing is not the only thing that needs to be done, but it provides a great start.

I support mandatory public financing for elected office, but I do so knowing it's purely mitigation.

In light of the recent hate crime legislation passed, I thought I'd post on why I support hate crime laws.

American Heritage Dictionary defines “hate crime” as a crime motivated by prejudice against a social group. Laws against hate crimes punish not only the action against the person or people, but enhance the punishment due to the crime being committed based on what the victims are, such as race, ethnicity, sex, and soon, sexual orientation. For a long time, I was convinced hate crime laws were wrong. I figured if the action harms others, punish it, but why the person meant to harm others is irrelevant. I figured manslaughter and first degree murder should have different punishments because they differ in intent, or whether the person meant to commit the crime, not on why. I also figured hate crime laws create a protected class of citizens, putting some citizens above others. Ultimately, I have come around and I will explain why, and I owe my change in opinion to a man named Randy Blazak, the director of the Hate Crimes Research Network at hatecrime.net.

When I saw Randy speak, I thought I had all the answers to what hate crimes were, and a response to every argument in favor. He started talking about how we already take mental state into account with crimes when we distinguish murder and manslaughter. I responded, “You’re talking about intent, which the courts do and should consider. We distinguish murder and manslaughter based on intent, or whether the person meant to commit the crime. Hate crimes are about motive, or why the person meant to commit the crime. Big difference.” He then asked me something that made me think, “Do you consider 9/11 to be 3,000 murders? That’s essentially what your logic is saying” I hadn’t thought about that, but he had a point. I never would have thought 9/11 to be merely 3,000 murders, but a crime against all of us whether we were on the planes or in the buildings or not. Hate crimes are essentially terrorism on a micro level. The intent of those who commit hate crimes goes beyond the person or people they are harming, their intent is to terrify everyone who shares that characteristic.

Randy also clarified some important points. Hate crime laws do not create protected classes of citizens. For example, it does not specify any races to be covered, it just says, "Attacks based on race," or something to that effect. As well, hate crime laws do not enhance punishments for attacking those who happen to be different. For example, you may know of the South Park example, when Eric Cartman threw a rock at a black student named Token, and was charged with a crime against black people, when he was really just targeting Token. That is not a hate crime in the real world. Furthermore, hate crimes are committed more often than they are prosecuted, as they are very hard to prove in court. Not only does the prosecution have to prove beyond a reasonable doubt that the defendant committed the crime, but that the defendant committed the crime with the intent of terrifying those with a certain characteristic. Or, if a criminal attacks someone because of a wrong perception, for example, the criminal thought the victim was black when he wasn’t, it’s still a hate crime.

For all these reasons and clarifications, I have come around on hate crime laws and now support them. Hate crimes are essentially terrorist acts on a micro level. I will defend anyone’s right to their own thoughts and their own expression, but physically harming other people is not free expression. When one physically harms people with the intent of terrorizing others, the intent of terrorizing others warrants a greater punishment.

You can also hear this in podcast form at www.thesilentconsensus.com

I have trouble figuring out how to start with this answer. I used to be a run-of-the-mill Democrat, but over time my views have evolved, as they should. As has been said, knowledge without experience is philosophy, but experience without knowledge is ignorance. Many people, have questioned whether I am really a Democrat, and to their credit, I have been wondering that myself recently. Many have seen a libertarian and capitalist streak from me, which seem to contradict being a Democrat. I’m fundamentally against rent control and single-payer health insurance, for example. I’m not like Zell (out) Miller, who simply considers being a Democrat a birthmark and will never change it. I have always fallen back on the idea that if I have to swallow the entire platform of one side, I’ll take the Democratic platform, and that still holds true today. But, I even began to wonder if that was true, as I have become more adamant about economic liberty than before. My social views, with a few exceptions, line up with the Democratic Party, but do my economic views? And if they don’t, do I still have a place in the Democratic Party? I was pondering both of these questions myself, and I have found an answer.

The answer for the first question is yes, making the second question moot. Many people wonder how, and I will explain since I don’t blame them. I ascribe to Obama’s philosophy, that government doesn’t exist to solve all your problems, but if you work hard, play by the rules, pay your taxes, etc...you should be able to support yourself. This philosophy has also led me to views that do not line up with the Democratic party on the surface; to be able to support yourself, you have to be able to keep the fruits of your own labor. Such is impossible if anyone has a claim to anyone else’s time, money, or energy. For someone to receive without working, someone has to work without receiving. I have never been one to argue for abolition of social programs, but you will never hear me refer to them as a “right,” for anybody. Our rights to life, liberty, and pursuit of happiness are rights to action and to the results of our actions, not a duty on others to feed, clothe, house, or entertain us. For example, while I’ve always believed everyone should have access to health care, I disagree with the notion that health care is a right. You have a right to receive any product and service you’ve paid for, no one disputes that (except insurance companies), and that imposes no duty on anyone else except what has been mutually agreed to. So far this sounds a lot like conservative philosophy, but not necessarily.

Equality has long been a principle of both liberalism and the Democratic party, and you will find me behind typical liberal causes such as marriage equality. Along with that, the Declaration of Independence says quite clearly that we are all created equal and endowed with certain inalienable rights, including life, liberty and pursuit of happiness. To put 2 and 2 together, this means that we all have equal rights, that cannot be taken away by anyone else, present always in all places. In other words, no one individual is “above,” or has rights to, anybody else. If you have a right to someone else, it means someone else is obligated to serve you, in other words, you are "above" him/her. Rich are not above the poor, poor are not above the rich, employers are not above employees, employees are not above employers, doctors are not above patients, patients are not above doctors, landlords are not above tenants, tenants are not above landlords, the list goes on (sounds counterintuitive with employee and employer, but in reality, they are simply two individuals who agreed to one producing results for the other in exchange for compensation). Equality is a main reason I am a capitalist. Socialism and redistribution of earnings imply that some people are above others. In other words, the notion that some people (the poor or corporations) are entitled to the earnings of someone else (the taxpayer). Or, the idea that people exist not for their own sake, but for society’s sake. Society is nothing more than a collection of individuals who deal with one another. The difference between society and individual is quantitative, not qualitative. Socialism’s premise that individuals exist for society therefore means that individuals belong to other individuals. As someone who believes we are all created equal, I cannot agree.

Going back to when I said that health care is not a right, I base that on the principle of equality: patients are not above doctors. Let’s think about what health care is. Health care is a service of prevention, treatment, and management of illness and preservation of well-being offered by medical and health professionals. If we are going to say that health care is a right, we are saying that we have a right to the services of medical and health professionals. If I have a right to another person’s service(s), it follows that I am above that person. To use another example, if I have a right to be fed, clothed, and housed by my neighbors, it follows that I am above my neighbors. For the same reasoning, I am against a military draft: we are all equal, and do not have a right to force others to sacrifice themselves for our benefit. In response, you may ask whether the right to bear arms implies we are above gun dealers and manufacturers. After all, isn’t that the same logic? If the right to bear arms was interpreted in the same way as the right to health care: that others are obligated to give you a gun, it would be the same logic. But, I’ve never heard the right to bear arms interpreted that way, nor should it be. I don’t question the motives of those who argue health care is a right, as I don’t believe they mean to extend it to its logical end.

Then comes the corollary of Obama’s philosophy and of everybody being equal: equality of opportunity. I believe government has a role in ensuring equality of opportunity. We hear all the time from Republicans, that people who are rich have picked themselves up by the bootstraps, got educated, managed their money well, and became successful. The graduated income tax, according to them, seeks to punish and serve as a disincentive to that. Their point is not entirely without merit; some people have become successful doing just that. I have always been of the view that if people earn their money fairly, honestly, and legally, they should not be punished for doing so. The problem with the Republican notion, is that they are making a hasty generalization. In this case, implying that what’s true of some successful people is true of them all. Many people of the modern liberal view, argue that many of the rich were born with a silver spoon in their mouth (or are members of what I like to call the Lucky Sperm Club), have made their money at the public’s expense, and owe it to society to give back. That viewpoint has merit too, and I think the president of the LSC would be Paris Hilton. This premise is the heart of why I consider myself a Democrat, even economically.

Where I end up differing with the Democrats in practice (and shouldn’t), is that the proposal of a graduated income tax treats all rich people like they are privileged, rich at the public’s expense, Lucky Sperm Club members. I don’t like that idea anymore than I like the Republicans’ idea of treating all rich people like they are disciplined, educated, lifted up by the bootstraps type of people. I favor a tax system that distinguishes the two. No, not going person to person and determining, but a tax system which taxes people for wealth they didn’t create and letting people keep what they earned through their own efforts. A system that taxes privilege, not initiative. In other words, a tax on the value of land “owned.” And not just that, but a tax on the use of all natural resources. As well, some sort of tax on inheritance. Tax those who are blessed with privilege, not who earned their wealth. I consider this view to be consistent with the Democratic view of equality of opportunity, and why I consider myself a Democrat.

As well, the Federal Reserve presents another challenge for the principle of equality. The Federal Reserve allows banks to profit off money they did not earn. The money is given to the banks to lend, and the interest is for the banks to keep. That gives banks unfair privilege. If government wants to print money, it should spend the money directly into circulation, and any money the banks then collect interest on will be off of money they earned. The practicality of the Fed needs to be considered as well, and this ties into another reason why I have some differences with the Democratic party but still call myself a Democrat, and that is practicality. When an idea has been tested and does not produce the intended results, that has to be taken into account. Doing so is not Republican or Democratic, it’s common sense. The Austrian Business Cycle Theory, which is not perfect, has been shown to happen in practice, and is what is happening right now. In short, without a central bank, interest rates go down when savings go up, indicating people’s time preference has changed. Consumption goes down, while investment in the upper levels (mining, etc...) goes up, naturally. Investments are then able to make their way all the way to being consumed. But, when the central bank artificially lowers the interest rate and subsidizes it, it gives the appearance that people’s time preferences have shifted, when they haven’t. Consumption still continues as it always has, but investments in the upper levels go up. It stretches the line between the highest level of investment and consumption, breaking it. Investments that previously did not make economic sense now do, and malinvestments occur. Such is similar to why I argued against subsidies in Cash for Clunkers and corporate welfare. The recession serves as a time where capital moves into more economical uses. I differ when ABCT proponents say the existence of a central bank is the only way boom and busts occur, but it’s certainly one way. Hyman Minsky talks about other ways malinvestments occur, and he is right. Some people make it a dichotomy, but I think they both Minsky and the ABCT are accurate.

To a final point, I am a Democrat because believe that government can work. Republicans say government can’t work and they get elected and it becomes a self-fulfilling prophecy. Government can work, it just isn’t right now. The books Reinventing Government, The Price of Government, and Reinventor’s Fieldbook provide great innovative ideas to make government work again.

In short, the reasons I am a Democrat, in spite of my seeming contradictions, are the principles of equality in personhood and equality of opportunity. When I seem to agree with Republicans or Libertarians, even philosophically, underlying it is the liberal principle of equality. The disagreements I have with the Democrats are over specific solutions, not over recognizing existing problems. We might not agree on the appropriate amount of welfare for the poor, or the right amount and kind of taxation, or the right way to ensure equality of opportunity, but we can agree that the poor should have the same opportunities as the rest of us and that they currently don’t. In short, I may disagree with the proposed frosting to put on a cupcake, but we can both agree that no frosting is currently on it. The Republicans, on the other hand, will act as if frosting is currently on the cupcake when it isn’t.

Rewind back to before Obama took the Oval Office. I know it kills many, such as myself, to do that, but try it. Ask yourself, “Is this capitalism?” Some suggest that it is, and that it has failed. Bush’s economic policies did fail: from the tax cuts not paying for themselves, all the way to the no bid contracts. Bush and many other Republicans have tried trickle-down and equated it with capitalism. In response, people have suggested that capitalism has failed. I, on the other hand, believe that plays right into the Republicans’ language, and I am not willing to surrender the term “capitalism” to the Republicans when they have corrupted the term, inappropriately claimed it’s theirs, and have refused to admit their policies have failed, and that they are not capitalism.

This provides a good laugh and summary of how they are hardly the party of capitalism.

Capitalism is supposed to be about entrepreneurship and self-interest. People who are profit-seeking find an unfulfilled need or desire, fulfill it, and make money doing so. They have every incentive to do so. Capitalism is the one system that has allowed people to profit by serving their fellow citizen. The extent they are able to profit is supposed to determine how well they are filling an unfulfilled need or desire. Then, if they are making high profits, that is a sign the need or desire has been greatly unfulfilled, and attracts other people to enter the industry to fill that need or desire, and the competition brings the price down. This also signals that the need or desire is now being better fulfilled. The same is true with profits going down but no new entries into the industry: it demonstrates that people have begun to value it less, so the need or desire is less unfulfilled. People will do something for one of two reasons: self-interest, and brute force. Capitalism is about people pursing their own self-interest, and self-interest is aligned with providing for others in such a system. A weird paradox: capitalism provides much but guarantees little.

Capitalism has many underpinnings and defining characteristics: incentives (prices, property, profit and loss), symmetrical information, rule of law, entrepreneurship, internalized costs, self-interest, and the big one known as competition. We have never had pure capitalism anywhere, and we’ve also never had pure monopoly anywhere. Capitalism is certainly not about giving some people artificial advantages over others. Republicans argue that social programs for the least affluent, the graduated income tax, consumer, worker and environmental protections are all an affront to capitalism. They haven’t stopped to look in the mirror and realize they are not ones to be calling others anti-capitalist. “Welfare” for the rich is good to them. I don't primarily mean the tax cuts, not taking someone's money isn't the same as welfare. Rather, their idea of trickle down is that if you give corporations and the wealthy all they want, all will be well for everyone, and they say that is capitalism. They say they don’t trust government meddling in the economy, then get elected and demonstrate why they can’t be trusted with the economy. They have done a good job messing capitalism up themselves, especially the big one, competition.

EDIT: A little bit about insurance companies. Insurance companies, in their current state, are an abuse of capitalism, mostly by taking advantage of asymmetrical information. Health insurance companies are supposed to make a profit by providing people health insurance they otherwise cannot afford. As we all know, it’s supposed to be financed by premiums paid over time, and more money is paid in through premiums over time (from everyone insured, collectively) than has to eventually be paid out in medical expenses (to everyone insured, collectively), and insurance companies profit while providing people insurance. Insurance companies, however, are making profits by signing people up to deals that contain many complexities they know the average Joe doesn’t understand, collecting their premiums, then dumping people when they are asking for what they’ve paid for. Fraud is defined as “a deception deliberately practiced to secure unfair or unlawful gain.” Would intentionally providing contracts the signatory will not understand, and asking questions that are easy to make an error on (and having such errors to be grounds for dropping), constitute as deception? I think so. To DEPEND on the other party not understanding the terms of the deal, that is deception. In other words, fraud, not capitalism. Their actions might not be technically illegal, doesn’t change that it meets the definition of fraud and should be illegal.

What does competition imply? Competition implies the race being fair (including internalized costs and benefits, many appropriate ways to internalize such things. Also symmetrical information), equal opportunity, and perhaps most importantly: proper enforcement. Inequality of outcome is acceptable in capitalism, as it should be. However, inequality of opportunity is not capitalism, that’s feudalism, at best. Republicans endorse what is currently feudal, and call it capitalism.

“Ok already, get to the point...how are they anti-capitalist?” Wait no longer. The Republicans have been instrumental when it comes to destroying capitalism: natural resource ownership, no-bid contracts, narrow-based tax loopholes and subsidies, and corporations. I will be clear, some Democrats are just as guilty, and some Republicans are not guilty when it comes to these. I will address each one of them individually:

Natural resource ownership: Capitalism operates under the premise that you own what you earn, or produce. Not a guarantee that you will earn, but that you will own if you earn. Natural resources existed far before people, let alone any of us right now. Nobody created them, no one can earn them, but somehow people are allowed to own them. I’m not against people owning natural resources; natural resources, especially land, are needed to produce wealth. We have a graduated income tax now, but government investments give that money back to those who pay the most, leaving the poor and middle class out in the cold. For example, taxes pay for schools, roads, police, etc...and that increases land value, without the owner doing a thing. Given that land owners tend to be upper-middle to upper class, they get the money they paid back in land value. This allows people to accrue wealth without action, pass it on to their next family generation, without compensating the community for increasing their wealth. Is this an affront to capitalism? You bet. Fred Harrison has a great video about it here.

We need a system to distinguish wealth earned from the sweat of your brow (both from working and from risking your money in investments), and wealth that was unearned. What you earn is yours and no one else has a claim to it, but what you did not earn cannot be considered yours without governmental sanction. We need what’s known as a land value tax, a tax on the land as if no improvements were made on it. In other words, land owners paying economic rent for the land they own. Among it being consistent with capitalism, a tax on land encourages building up instead of out, efficient use of land, individuals selling surplus land (making it easier to afford), and reduces the need for superficial command and control measures. The same is true with all other natural resources, such as oil.

No-bid contracts: Halliburton. Need I say more? When private companies provide services to the government (and therefore the people), and get our money, government has an obligation to see that money is spent efficiently. Republicans campaign on that, but when elected, they’ve resorted to no-bid contracts that didn’t need to be no-bid. When government does not obtain bidding, they are forcing winners and helping give companies more of a share, making them closer to a monopoly. No-bid contracts are the prime example of artificial advantages over others, and they are at the expense of our money and economy as a whole.

Narrow-based tax loopholes and subsidies: Usually known under the narrow definition of corporate welfare. The words “corporate welfare” don’t tend to resonate with Republicans, as they don’t view it as “welfare.” They would argue that unlike the least affluent, these are successful and disciplined people that deserve to be rewarded. Corporate welfare, the narrow meaning, is an artificial advantage given to some over others. For every dollar not taxed, we need to raise taxes on dollars we do tax. For all the loopholes we give, that’s offset either by raising tax rates for everyone else, or raising the “baby tax” (debt). Both cases provide an artificial advantage to the recipients and disadvantage to everyone else. Subsidies are not too different. Subsidies are like steroids that are paid for by extorting money from everyone else. Give steroids to certain teams, they will outperform the others when they otherwise would not have. If they would have otherwise, they wouldn’t need steroids. Then it gets worse; once steroids are being used by one team, it becomes in the interests of the other teams to participate, and they are at a disadvantage if they don’t. Then it gets even worse; steroids take their toll on the players, money was invested in them that would have been better invested on other players, the team is a mess, investments that would have been worthy have gone by the wayside, and money went down the drain. Just like the economy, give subsidies to a business, they invest more in labor and capital than they otherwise would have, preventing labor and capital from going to more economical uses, they end up in a worse situation once reality sets in. At the expense of capitalism and the economy, the Republicans get behind corporate welfare.

Finally everyone’s favorite, corporations: Particularly limited liability. First, corporations are obviously not people. They are not living, breathing, thinking entities. Even if they were people, the privileges granted to corporations would be unjustified. Imagine suing someone, collecting fair damages, then the government redistributing part of it back to the defendant. I am sure you would cry foul, and that’s what limited liability is. Such is inappropriate to give to a person, let alone a corporation. Medical malpractice caps would also apply here, and anything that allows anyone to get away with paying less than proper damages. If they want to call corporations “people,” they should start by ending privileges unique to corporations.

The Republicans complain about Democrats and "their social programs, the graduated income tax, consumer, worker, and environmental protections," and say they are an affront to capitalism and the free market. The pot makes a pathetic attempt to call the kettle black. As much or as little as these things are an affront to capitalism, they are nothing compared to what the Republicans have done. To use an analogy, the Republicans take the meat, put chemicals, antibiotics, and hormones in it, throw it at the Democrats, the Democrats try mitigating the effects of those substances, and the Republicans say the Democrats attacked the meat. An example from way back is the legal sanctioning of unions to counter the effects of regulatory capture by big business. To be fair, the Democrats don’t always properly reverse or mitigate the Republican effects, but it is the Republicans who have put the Democrats in that position and called them out for trying to fix it, all the while the meat was “poisoned” by the Republicans. I am not willing to surrender the term “capitalism” to a party that has poisoned everything about it, and I hope you won’t either.

Cash for Clunkers was certainly a popular program and was certainly more "stimulating" than the bailouts. The question is, was it really worth it? From an environmental and/or an economic standpoint?

I was always persuaded by the environmental reasons. After all, it got clunkers off the road a few years earlier than they would have been otherwise, and meant less emissions of carbon and other pollutants. Upon further analysis, even leaving out the emissions it takes to destroy the clunker and the very real possibility that an environmental friendly car will be driven more often than a clunker would be, I would conclude that it was not worth it.

Cash for Clunkers is hardly the most cost-effective way to reduce carbon emissions. The average change is from 16 mpg to 27 mpg. Assuming the new car is driven just as much as the clunker (and that's a generous assumption), the average driver drives 12,000 miles a year.

That brings us from 750 gallons of gasoline per year (12,000/16) to 444.44 (12,000/27), or saving about 305 gallons of gasoline. A gallon of gasoline emits about 20 pounds of CO2, so we're releasing about 6,100 pounds less of CO2 for each year the clunker would have been on the road. A ton is 2,000 pounds, so we're talking about 3.06 tons of carbon each year the clunker is off the road. If the clunker is taken off the road 4 years earlier, that's 12.22 tons of CO2 saved. If 5, 15.28. If 3, 9.17

Then we need to take the average rebate, $4,215, but let's do $4,200 for simplicity, to see how much we are spending per ton of carbon. If we are taking the clunker off the road 5 years earlier, saving about 15.28 tons, we are spending $274.87 per ton (4200/15.28). If 4 years earlier, we are spending $343.70 per ton (4200/12.22). If 3, $458.02 per ton (4200/9.17).

To put this into perspective, Waxman-Markey would be $28 per ton according to the CBO. To get that kind of bang for our buck assuming $4,200, the new cars would need to save 150 tons of CO2. In other words, the clunker would need to have been on the road for about 50 more years otherwise. Again, at best. You can access this Excel file to input the numbers yourself

Furthermore, I fail to see why we should be paying people to stop polluting. We don't pay people not to murder or steal, we make it illegal and punish people who do. It's not like education, where positive externalities exist so we subsidize it. People who drive fuel-efficient cars are not causing a positive externality, they just are causing less of a negative externality. Not taking is not the same thing as giving, and not causing a negative externality is not the same thing as causing a positive externality. I've always been a supporter of pigovian taxes and other ways to internalize the costs. We should make people pay the true cost for negative externalities, not pay people not to do them.

But we are told, the environmental benefits are secondary. The real benefits are economical. Not really.

As we know, the Cash for Clunkers program was meant to prop up demand for fuel-efficient cars and give an economic boost, creating more jobs. Similar to the typical economic model: government spending stimulates aggregate demand which gives businesses more money which helps them hire more workers to keep the supply up with the demand. However, we ignore the other half of the equation. Taking $4,200 out of the economy then putting $4,200 in amounts to awash. Take money from Peter and give it to Paul, Paul is now incentivized just as much as Peter is disincentivized. In other words, no net gain. We need to take into account the loss of economic activity from Peter, not just the gain from Paul.

Theoretically, it amounts to zero, but practically, it amounts to less than zero. For one, higher marginal tax rates reduce the incentive to work (marginal analysis). No, people don't refuse a pay raise because of the tax bracket they enter, but everyone has a breaking point to which he or she will no longer work (for example, if a breaking point was 50%, the person would not be willing to work extra if only half [or less] of everything earned gets to be taken home. Time would be better spent on leisure). Apart from that, the government has neither the information nor the incentive to spend money based on economic calculations. No individual, government included, can aggregate or calculate the subjective well-being of everybody. Only individuals can do that for themselves; individuals can spend their own money for their own subjective well-being. A pure cash transfer from Peter to Paul, therefore, is the closest thing you can get to zero, as Paul can now spend the money based purely on economic calculations.

Even if the government was able to aggregate everyone's subjective well-being, government has the incentive to spend money based on political calculations. Sometimes political calculations may coincide with economic calculations, but the key word is coincide. Government has the incentive to do what's necessary to stay in power, and sometimes that may be providing for the general welfare, other times not. Public choice theory explains a lot. Individuals, on the other hand, have every incentive to spend money economically, as mentioned above, and the information to do so. Government has a role in internalizing the externalities, so economic decisions are based on the true costs and benefits.

Subsidies, and anything else that reduces the costs to individuals, turn decisions that previously did not make economic sense to individuals into ones that do. Taxes, and anything else that increases the costs to individuals, turn decisions that previously made economic sense to individuals into ones that don't. The whole premise of externalities is that they are external, so decisions that externalize the costs the most are the most economic for individuals to choose, and pigovian taxes serve as a way to counter that. Beyond that, taxes prevent decisions that would have been beneficial to all parties involved.

Subsidies, on the other hand, beyond for positive externalities, are like steroids. A football player takes steroids, he previously did not make sense for a team to sign at $x, but now does. The team signs the player, and at first everything is great. The player is performing, the team is doing well, but then something happens. The player knows that if he stops, his performance will go down and he may be released or given a pay cut, especially if the team figures out they have been tricked. So the player keeps taking the steroids, but they finally take their toll on the player, he can no longer play, and his career is cut short. All parties involved are now only the worse for the player having taken steroids and the team having signed that player. The player is a mess. The team has made a malinvestment, investing money in that player that would have been better invested on someone who made sense without the steroids, and they are now hurt over the long haul.

Which brings us to Cash for Clunkers. Take the steroids analogy and apply it to a situation where the team has been investing much money into an underperforming player. The team would be better off either reducing that player's pay, or releasing him, and investing the money in another player or players. But instead of either of those, the player is given steroids, and the team and player are due for a bust later. Essentially, that's the situation with Cash for Clunkers. The auto industry over-expanded during the boom, investing more in capital and labor than was economical, and now is experiencing the natural consequences, otherwise known as a loss. We'd be better off if capital and labor moved to more economical uses, but instead, we are propping up demand in that industry, keeping the capital and labor there, or worse yet, causing the industry to buy even more capital and labor. As the Washington Post said, they are due for a hangover. At best, Cash for Clunkers was going to delay the inevitable movement of capital and labor, preventing it temporarily from going to more economical uses. But we now have a worse situation where the auto industry has acquired more capital and labor, so the inevitable movement and loss will now be even worse to the auto industry and the economy as a whole.

If we want to spur investment in the right direction and have it last, we should be internalizing the costs of going in the wrong direction. A carbon tax, more than Cap and Trade and certainly more than Cash for Clunkers, is the answer. No making winners and losers, just taxing the cost at the source, encouraging more efficient and less use of carbon. Make the use of carbon reflect its true cost, and investment in alternative fuels will be able to stand on its own two feet.

Let's cut right to it:
The Republicans are crying foul about a lack of bipartisanship while they are not ones to be complaining. If the shoe was on the other foot, no one can claim the Republicans would even attempt to be bipartisan. The Democrats are at least providing some opportunity for bipartisanship. Their recent suggestion that they might go it alone comes after months of trying to involve the Republicans. That may be the most feasible thing to do now, but leaving politics out of it, the following would be a truly bipartisan proposal:

Democratic ideas:
1. National health insurance exchange,
2. Public option on a level playing field with private insurance similar to the one laid out by Captin Sarcastic here
3. Guaranteed issue (no preexisting condition discrimination)
4. Individual mandate for catastrophic insurance
5. Allow Medicare to directly negotiate drug prices with the drug companies (if not consolidated below in #3 below)
6. Voucher for semiannual physicals to all citizens
7. Allow prescription drug importation from Canada

Republican ideas:
1. Allowing people to buy insurance for what they see fit by abolishing mandates (such as mandating alcohol treatment, in vitro fertilization, etc... be bought when buying insurance)
2. Allow insurance to be bought across state lines
3. Consolidate Medicaid, SCHIP, and possibly Medicare into a means-tested voucher that the recipients can use for either private insurance or the public option
4. Tax health benefits through employment as income
5. Streamline the process of putting a prescription drug on the market. Keep FDA tests for drug safety, but allow prescription drug to go on the market without an effectiveness test (the effectiveness tests would still remain for those who wish to have the FDA seal of approval)
6. Streamline the process of obtaining a medical license, keeping safety requirements
7. Enable community health clinics to be on a more level playing field

Other idea:
1. Disclosure, disclosure, disclosure. Both by insurance companies of their claim refusal rate, and by doctors, hospitals, medical services, and pharmacies of their pricing (including negotiated deals with insurance companies)
2. Require insurance companies to pay back the total of all premiums paid and interest to anyone they decide to drop, and only allow dropping if they can demonstrate that the person in question intentionally engaged in deception

I think this would be a bipartisan proposal that would solve many of our current problems. Any thoughts or suggested additions?

We first need to understand what pork-barrel spending is. We are talking about expenditures for a specific project that get around the normal budget review process. Members of Congress insert these into bills to win favor with voters and/or special interests. We have also heard the term earmarks, and they are expenditures for specific projects. We are only talking about earmarks that are inappropriately inserted, otherwise known as pork. We are going to get into why pork is bad on multiple levels.

Some argue that pork is a net gain for the country. They are forgetting that the federal government cannot give a single dollar to one area without first taking it away from another. For example, if I take a dollar from Area 1 and invest it in Area 2, yes, the people in Area 2 now have one more dollar invested in their quality of life and it will likely help. However, the people in Area 1 now have one less dollar invested in their quality of life. Mathematically speaking, that amounts to zero. Actually, it amounts to less than zero for three reasons. One, some bureaucrats in D.C. are getting paid to process that dollar’s trip though D.C. and two, spending decisions that would be made on the local level where the costs and benefits are both concentrated are now being made on the federal level where costs are dispersed. Whenever the costs are dispersed while the benefits are concentrated, we’re going to get inefficient expenditures. For example, let’s say I was going to take a trip from A to B. I’m deciding how to fly, whether it be first class or coach. I’m paying for it, I look at the price tags for each, and decide to fly coach. I figure the flight is less than one day of my life, no need to invest money in making the trip luxurious. But then I hear that everyone in the country will pay equally for my flight. In other words, the benefits of it are concentrated to me, but the costs are dispersed among the entire country. Now first class sounds appealing to me and I will jump at it. What previously did not make sense for me to buy now does because I’m footing much less of the bill. Pork results in this kind of spending behavior on a government level. The third reason pork barrel spending amounts to less than zero is because it involves spending public money on political calculations. Pork disproportionately goes to the areas of Congressmembers who have been in office a long time, that are on certain committees, in a certain party (typically 60-40 majority-minority), and that have a tough reelection fight coming up. Coincidence? I think not. In short, pork amounts to less than zero because of the bureaucrats getting paid in D.C., its dispersing of the costs for concentrated benefits, and the political calculations.

Furthermore, we elect our members of Congress to do many things, collecting pork is not one of them. We hear it all the time though, that they are called representatives for a reason; they are there on behalf of us so it follows that they try to bring home as much money as possible. Well, not exactly. We elect them to represent our views on national matters within their constitutional role. The constitution allows Congress to tax and spend to provide for the common defense and general welfare of the United States. The courts have ruled that the words “general welfare” are limited to matters of national welfare and not the welfare of any individual area or party. Pork barrel spending, inherently, is not for the national welfare. Pork barrel spending escapes the process of determining what is a national priority and is inserted into a bill regardless of its merit. We are spending transportation dollars on pork when we still have structurally deficient bridges to repair. We are spending health and human services dollars on pork when we still have uninsured children. We are spending homeland security dollars on pork when high-risk places such as nuclear plants remain unguarded. We are spending Defense dollars on pork when we aren’t even able to guarantee sufficient body armor for our troops. We are spending education dollars on pork when we still have underperforming schools. I could go on and on and on. Some will say that pork helps representatives get funding for such projects, and some pork may go to that, but that still misses the bigger picture. We should spend money on these things, but they should be competitively bid based on merit. The fact that members of Congress are bypassing competitive bidding to insert their pork demonstrates that they don’t think their project has much merit.

To be clear, Congressmembers have every right to argue for why a project in their area is a national priority, they have every right to put it on the table, and at the end of the day, Congress as a whole is supposed to spend money for the national welfare. To use the structurally deficient bridges example, if Congress was to determine that repairing structurally deficient bridges is a national priority, which it should be, it could allocate the money based on how structurally deficient the bridge is, and how many people drive on it regularly. Congressmembers could argue for funding repair of their bridge, propose it, but Congress as a whole is supposed to decide which bridges get funding based on the national welfare. When Congress stops spending money based on the national welfare, it has overstepped its constitutional role. Some say pork is only 1% of the Federal budget, or about $18 billion, and that is true, but that’s $18 billion we could be spending to repair structurally deficient bridges, get proper body armor for our troops, insure more children, help our underperforming schools, and properly secure more vulnerable terrorist targets.

A final argument we’ve heard is that pork helps preserve separation of powers. Without pork, spending for projects would be subject to a bureaucrat’s discretion. First, I ask how well separation of powers survived before the 1980s, when pork became prevalent. Second, I am not saying Congress should not appropriate money for specific projects. I am saying that Congress should only appropriate money for projects that have gone through public hearings, review, scrutiny, and that win out on a cost-benefit analysis. Taxpayers deserve no less.