California Cracks Down On (Fill in the Blank)

I’ve been living in California for about four years now, and the political environment here is every bit as awful as I expected it would be. One of the most powerful lobbies in the state is the prison guards’ union. Combine this with the zeal of petty bureaucrats in Sacramento and every municipality in the state to micro-manage all aspects of Californians’ lives, and you get the most out-of-control nanny/police state in the country. Here’s a short list of the things California politicians have recently banned or otherwise “cracked down on.”

I just have to keep reminding myself that the weather is really nice.

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It’s News to CNN

Breaking news! CNN has just discovered that politicians sell access to lobbyists!

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Glenn Greenwald on Why Privacy Matters

From TEDTalks.

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McCain and Graham: No Matter the Question, the Answer Is Always War

In a recent opinion piece in The Wall Street Journal, Republican Senators John McCain and Lindsey Graham argue that President Obama should invade Syria and overthrow Bashar Assad in order to defeat the Islamic State in Iraq and Syria (ISIS). For Senators McCain and Graham, it seems that no matter the question, the answer is always war.

They open the piece by stating:

“The airstrikes and other actions President Obama is taking against Islamic State deserve bipartisan support. They are beginning to degrade the terrorist group, also known as ISIS, but will not destroy it, for one reason above all: The administration still has no effective policy to remove Bashar Assad from power and end the conflict in Syria. Administration officials have called their approach ‘ISIS first.’ As for Mr. Assad, in the words of Gen. Martin Dempsey, chairman of the Joint Chiefs, the administration will ‘defer that challenge into the future.’ This is not a luxury we get to choose. And Mr. Obama himself recently said he does ‘recognize the contradiction’ in his own policy—which is that by confronting Islamic State but not Assad, the U.S. may unintentionally benefit the ruler whose ouster he continues, rightly, to demand.”

Of course, a similar contradiction lies in the Senators’ own so-called plan: by confronting Assad, the U.S. would benefit the terrorist group known as ISIS, one of whose stated objectives is precisely to overthrow the Assad regime. Ignoring this obvious flaw in their own logic, they continue:

“Mr. Assad all but created Islamic State through his slaughter of nearly 200,000 Syrians, and he has knowingly allowed the group to grow and operate with impunity inside the country when it suits his purposes. Until we confront this reality, we can continue to degrade Islamic State in Syria, but Mr. Assad’s barbarism will continue to empower it.”

Again, one could argue that it was U.S. interventionism that all but created the Islamic State. Although President Obama famously backed down from his “red line” threat against Assad, the U.S. government continued to funnel weapons, money, and training to the so-called “moderate” rebels in Syria. Not surprisingly, McCain’s thoroughly-vetted “good” rebels turned out to be remarkably cozy with the “bad” rebels who formed ISIS, and many of those same weapons wound up in ISIS hands, enabling them to steamroll over two-thirds of the territory of Iraq, raping, looting, crucifying, and beheading people all along the way. Now McCain and Graham want to commit American forces to an even more profound intervention, in the vain hope that this time they will get it “right.”

They close their piece with the following paragraph:

“The reality is that defeating Islamic State also requires defeating Bashar Assad. Avoiding this reality, as Mr. Obama still tries to do, will only postpone the problem at growing risk to Syrian lives and American security. And when Syria deteriorates further, as it surely will, the U.S. will be compelled to respond once again, but our options will be fewer, worse and costlier.”

There are several problems, I believe, with their analysis (and this is by no means an exhaustive list).

To start, the Senators spend a great deal of time describing the danger Assad and ISIS pose to the Syrian people (and there should be no doubt in anyone’s mind that ISIS terrorists are unspeakably evil and that the world would be a much better place without them in it). But at no point do McCain and Graham explain how ISIS represents an existential threat to the United States, which should presumably factor somewhere into a decision by the U.S. government to invade yet another country. ISIS certainly poses a grave problem for the long-suffering people of the Middle East, but the direct threat posed to the people of, say, the American Midwest is much less clear. ISIS may boast about raising the black flag of jihad over the White House, but so far they haven’t even been able to knock Assad out of the box (although Senators McCain and Graham would like to lend them a hand).

And despite all of their handwringing, at no point do the dynamic neocon duo suggest drawing up a Declaration of War against Syria, as Congress (the branch of government in which they serve) is required by the Constitution to do. At no point do they explain how the United States government would manage a post-Assad Syria. Given the debacles of prior U.S. interventions in both Iraq and Libya (which contributed in no small part to the rise of ISIS in the first place), one might think this question would be foremost on even the most hawkish neocon mind, but McCain and Graham have shown themselves to be impervious to learning from past mistakes. Indeed, the last we heard from McCain on any post-invasion plans was an angry “I told you so moment” on the floor of the Senate, in which he blamed President Obama for pulling out of Iraq “too soon” (a mere eleven years after the initial invasion). But then again, John McCain is an expert at “truncating the antecedents,” and this latest episode is no exception. Non-interventionists can (and do) remind the neocons that they warned of the Pandora’s box that would be opened by invading Iraq in the first place (and by bombing Afghanistan, Iraq, Pakistan, Somalia, Yemen, Libya and Syria to boot). There is no reason to think another American military operation in the region would do anything to close that box.

Perhaps there was simply not enough space in the pages of The Wall Street Journal for the Senators to make a more convincing case, but after more than a decade of disastrous elective wars cheered by the likes of John McCain and Lindsey Graham, I’m afraid I’ll need a bit more justification to support yet another strategic blunder of dubious legality.

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Karma

The New York Times reports former Fed Chairman Ben Bernanke can’t get a loan from his bank to refinance his house. They claim it’s because he recently transitioned from a salaried position at the Fed to a new career as an author and freelance speaker with variable income.

I think it’s just karma.

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One Benefit of Tax Avoidance

I’ve been mildly amused by The Guardian’s recent hyperventilating over tax avoidance in Great Britain. It has been revealed that many wealthy Brits use offshore banks in Jersey to reduce their taxable income, and The Guardian has gone to great lengths to publicly excoriate these people for taking advantage of the perfectly legal arrangement.

Legal has nothing to do with it, of course. For the professional statists at The Guardian, the government always has first dibs on your money, and any effort to keep more of what you’ve earned will get you branded with a scarlet letter “A” for “avoidance.” A quick scan of their headlines on the subject will provide a sense of what The Guardian considers to be “moral” with regard to taxation:

This farcical tax system is costing us billions, by Polly Toynbee
These tax scams are all legal – that’s morally repugnant, by Simon Jenkins
Be it Gary Barlow or Amazon, let’s stop making excuses for tax avoiders, by Alex Andreou

And my personal favorite:

The joy of tax: why payment should be a pleasure, by Josh Bornstein

Ick.

The same attitude is prevalent in the United States, too, as I have discussed several times before (see Inversion and Ex Post Facto Laws and Whose Money Is It, Anyway?). But The Guardian seems to be taking it to a whole new level. In A Who’s Who of Britain’s Legal Offshore Tax Avoidance, they list the names of several successful businesspeople (and Bernie Madoff) who have structured their finances so as to reduce their tax burdens in accordance with the rules established by HMRC. They’ve also lambasted entertainers such as Jimmy Carr and David Barlow in other articles for doing much the same thing. Both entertainers, duly castigated by The Guardian’s public shaming campaign, apologized profusely on Twitter and other outlets for their “errors in judgment.” Most of the businesspeople called out either defended the legality of their accounts or declined to comment altogether.

I’m not looking to change the hive mind of the editorial staff at The Guardian. The degree of Stockholm syndrome exhibited in their opinion pages cries out for professional help, and I’m sure there are better resources than A Beginner’s Guide to Freedom for that. I will, however, point out one small but very important benefit that arose from tax avoidance efforts long ago but continues to make our lives better to this very day:

Guinness.

That’s right; the recipe for Guinness beer (and Irish stouts in general) came about because brewers wanted to reduce their tax burdens. From Chapter Nine of Tasting Beer: An Insider’s Guide to the World’s Greatest Drink, by Randy Mosher:

Exemplified by Guinness and others, Irish stout is characterized by the use of roasted barley rather than black roasted malt. Originally a tax dodge (unmalted barley was not taxed like malt), this gives the beer a unique, sharp, coffeelike roastiness. Raw, unmalted barley is also used in the modern recipe, which gives the beer a rich, creamy texture even in its low-gravity incarnations.

Yes, indeed – and we have tax avoiders to thank for it. Sláinte!

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Venezuela: Proving Mises Right

In A Critique of Interventionism, Ludwig von Mises laid out the case that government attempts to “improve” this or that market outcome wind up creating additional problems that the government then attempts to solve with additional market restrictions. If the bureaucrats are allowed to persist in their interventionist approach ad infinitum, the result is pure socialism with its corresponding basket-case economy.

Government or any organization of coercion can at first achieve what it sets out to achieve through intervention. But whether it can achieve the remoter objectives sought indirectly by the intervention is a different question. And it must further be determined whether the result is worth the cost, that is, whether the intervening authority would embark upon the intervention if it were fully aware of the costs. An import duty, for instance, is surely practical, and its immediate effect may correspond to the government’s objective. But it does not follow at all that the import duty can realize the government’s ultimate objective. At this point the economist’s work commences. The purpose of the theorists of free trade was not to demonstrate that tariffs are impractical or harmful, but that they have unforeseen consequences and do not, nor can they, achieve what their advocates expect of them. What is even more significant, as they observed, protective tariffs as well as all other production restrictions reduce the productivity of human labor. The result is always the same: a given expenditure of capital and labor yields less with the restriction than without it, or from the beginning less capital and labor is invested in production.

- Interventionism, Chapter 3, “Restrictions of Production”

I seriously doubt that either Hugo Chávez or Nicolás Maduro ever read Mises (and if they did, it’s obvious they didn’t understand him), but their destructive experiment in “21st Century Socialism” might easily be viewed as a large-scale attempt to prove just how right the Austrian economist was. For example, on government attempts at price controls, Mises wrote:

Price intervention aims at setting goods prices that differ from those the unhampered market would set. When the unhampered market determines prices, or would determine prices if government had not interfered, the proceeds cover the cost of production. If government sets a lower price, proceeds fall below cost. Merchants and producers will now desist from selling – excepting perishable goods that quickly lose value – in order to save the goods for more favorable times when, hopefully, the control will be lifted. If government now endeavors to prevent a good’s disappearance from the market, a consequence of its own intervention, it cannot limit itself to setting its price, but must simultaneously order that all available supplies be sold at the regulated price. Even this is inadequate. At the ideal market price supply and demand would coincide. Since government has decreed a lower price the demand has risen while the supply has remained unchanged. The available supply now does not suffice to satisfy the demand at the fixed price. Part of the demand will remain unsatisfied. The market mechanism, which normally brings demand and supply together through changes in price, ceases to function. Customers who were willing to pay the official price turn away in disappointment because the early purchasers or those who personally knew the sellers had bought the whole supply. If government wishes to avoid the consequences of its own intervention, which after all are contrary to its own intention, it must resort to rationing as a supplement to price controls and selling orders. In this way government determines the quantity that may be sold to each buyer at the regulated price. A much more difficult problem arises when the supplies that were available at the moment of price intervention are used up. Since production is no longer profitable at the regulated price, it is curtailed or even halted.
- Interventionism, Chapter 4, “Interference with Prices”

The Venezuelan government has been slapping price controls on everything from toilet paper to televisions, and the result has been nothing but empty store shelves from Caracas to Maracaibo. Naturally, this has resulted in further interventions, such as nationalizing toilet paper producers and even fingerprinting grocery shoppers to enforce rationing.

An essential element of any interventionist government policy is to blame everyone else for the problems that inevitably result. This is easy enough to do, as Mises pointed out:

The fact that the system functions poorly is blamed exclusively on the law that does not go far enough, and on corruption that prevents its application. The very failure of interventionism reinforces the layman’s conviction that private property must be controlled severely. The corruption of ‘the regulatory bodies does not shake his blind confidence in the infallibility and perfection of the state; it merely fills him with moral aversion to entrepreneurs and capitalists.

- Intervention, Chapter 5, “Destruction Resulting from Intervention”

This approach is on full display in Venezuela. The government has rounded up the usual suspects, pinning the blame on anyone but itself. For example, The Guardian reports Maduro has blamed shortages on his domestic political opposition, claiming they are working with “the CIA to destabilise his government, sabotage the oil industry and trigger power cuts.”

Following diligently in his idiot predecessor’s footsteps, Maduro has resorted to the printing press in the vain hope that he can inflate away all of the problems his government has caused. The result is an official annual inflation rate of 63.4%, the highest in Latin America (and that’s just the official number published by the government – you can bet the real rate is much higher). Maduro blames the inflation he created on “hoarders” (naturally) and even political protests.

To anyone with a basic understanding of economics, the causes of Venezuela’s economic problems are clear. To writers at The Guardian and the BBC, however, they remain a mystery. Take a BBC article titled, “What’s Behind Venezuela’s Economic Woes?” In an attempt to get to the root cause of the economic problems plaguing the country, Irene Caselli occasionally manages to point out both cause and effect, but generally fails to connect the two in any meaningful way.

For example, she correctly points out that the Venezuelan government imposed foreign exchange controls in 2003, causing a black market for dollars. But then she quotes analysts who blame that black market for the creation of “a dual economy” which create unspecified “distortions.” The black market may be a symptom of Venezuela’s ills, but the disease is the government’s economic intervention.

On the issue of shortages, those same currency controls are mentioned (correctly) as a causal factor for reduced supplies of imports, but the last word on the matter is the Venezuelan government’s blame of “businessmen who are trying to boycott the system.” As if the business community’s inability to sell at a loss in perpetuity qualifies as a “boycott.” No mention is made of the government’s price controls on most staple goods, which is the real reason basic items have all but disappeared from Venezuelan shelves.

The BBC’s sad confusion over the state of affairs in Venezuela is summed up nicely in the section titled, “What Is the Government Doing?” The answer? Seizing a chain of electronics stores, granting President Maduro dictatorial powers, and imposing further price controls.

In short, the Venezuelan government is proving Mises right.

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