Scragged Articles

Tyranny, But No Tyrant

Tue, 18 Jun 2013 15:58:00 GMT

News of government cupidity, malfeasance and just plain evil is pouring across the interwebs faster than we can keep track of it. The scandals at the IRS, the Justice Department, the NSA and more are enough to give anyone a headache.

That's not so unusual these days. What is perplexing - to sound a bit like Donald Rumsfeld - is that we don't just not know exactly what went on, we do not know how we can know what went on, is probably still going on, and odds are will continue to go on no matter how much huffing and puffing We the People or our elected representatives bloviate.

Consider the IRS. We know that politically-motivated IRS auditors were putting Tea Party groups through the bureaucratic equivalent of a rectal exam while whisking liberal groups through with the speed of an onset of diarrhea. We also have every reason to suspect that both the White House and the IRS' representatives lied about the timeline: Obama said he only learned about the problems when he read it in the papers, and yet his chief lawyer, the General Counsel, was told weeks if not months before.

That does not mean that Obama told the IRS to put his political enemies under the microscope; he didn't have to. Ordering something unlawful and evil is potentially impeachable; not stopping someone from doing something bad on their own is mere bad management, or so the White House claims.

Do we have any reason to believe that the IRS is going to change their ways? A handful of IRS agents have been reassigned; the most notorious one, Lois Lerner, pled the Fifth Amendment rather than testify to Congress and was "punished" with paid administrative leave. How does a free paid vacation sound to you? If that's the worst that can happen, why wouldn't they keep merrily on with their Inquisition, given that they inherently dislike anyone who calls for less government spending?

Then there's the question of privacy and exactly how much government snooping is going on. The press has reported that the government has a direct tap into the massive archives of all your personal data stored by giant corporations such as Google and Facebook. Those companies are ferociously denying the accusations, but apparently aren't legally permitted to prove their innocence because whatever requests the NSA makes are under legal seal.

When The Truth Can't Out

Suppose they weren't kept from coming clean? Suppose Google and Facebook did a big press conference and revealed all the data they provided to the government. How do we know it's true? How can we trust them?

For that matter, how can they trust themselves? The Google Office of General Counsel isn't going to personally see all the NSA traffic; he and his team probably don't have the technical ability even to look into Google's databanks for themselves.

It's not merely plausible but probable that if any serious snooping was going on, it was at a much lower level by employees who can easily be intimidated by the mighty force of governmental power. That's exactly what Eric Snowden alleges - and once again, it is absolutely impossible for any of us to know whether he's a whistleblower or a fraud.

It doesn't help when government officials feel comfortable lying to Congress. Just a few days ago, the Director of National Intelligence James Clapper directly and baldly lied under oath when answering a question from a Congressman:

Back at an open congressional hearing on March 12, Sen. Ron Wyden (D-Ore.) asked Clapper, “Does the NSA collect any type of data at all on millions or hundreds of millions of Americans?” Clapper replied, “No sir … not wittingly.” As we all now know, he was lying.

In point of fact, the NSA is collecting "data on hundreds of millions of Americans" - records of everyone you've ever called, when, where, and how long. There are possible arguments as to why this is necessary and appropriate; Mr. Clapper didn't bother to make them. He didn't even decline to answer on the grounds that it was classified, as Attorney General Alberto Gonzalez did in 2006 when asked a similar question.

No, he just up and lied to Congress and the American people, daring them to call him on it. Now he's been called on it. Nothing's happened to him, not even administrative leave!

Stop Blaming Obama

Here is where you are probably expecting a screed about the evils of Barack Obama. No doubt the President doesn't particularly mind that the IRS was putting Tea Partiers through the wringer. He probably doesn't much care that the NSA wants to be the secret police; after all, his own group "Organizing for America" or whatever it's called this week has similar goals and technology.

But these scandals were not Obama's doing any more than the economic collapse was Bush's doing. These abuses go back many decades, long before anyone had heard of either those politicians. For instance, the IRS may have refused to target Nixon's liberal enemies when he asked it to - but it eagerly helped FDR and JFK kneecap their conservative enemies.

Getting rid of Barack Obama, as pleasurable as that would be, will not help this country in the long term. Replacing him with a Republican might keep things from getting worse, but there have been Republican presidents more recently than FDR and JFK and yet, as we see, IRS abuses only grow. George W. Bush might have been unwise to sign the Patriot Act, but the author of that act, Rep. Jim Sensenbrenner, says it authorizes nothing resembling what the NSA is doing now. He claims it was specifically written to forbid what NSA now admits doing, and who would know better than he?

It is increasingly clear that we are indeed living in a tyranny or something perilously close to it. What we don't have is a proper tyrant. We are not in a situation where a few days of protest and some help from the military will send the dictator off to posh exile in a banana republic and grant freedom to the masses.

We are in a far worse, vastly more difficult situation: Over the past half-century, we have permitted our entire Federal government as a whole to become decoupled from any form of political control, popular influence, or even a sense of ethics and decency. Much of the time this frightening independence is obscured because bureaucratic interests are aligned with the Democrats. Bureaucrats and Democrats both want to raise taxes, spend as much as humanly possible, and then a bit more.

When it comes down to actual control, however, elected Democrats have no more real influence than elected Republicans. The bureaucracy does as it pleases and that's that.

First, Kill The Bureaucrats?

When you have a massively overgrown, infinitely intrusive, well-organized but highly diffuse bureaucracy dedicated to a particular totalist political perspective but without any particular human leader of any kind, how can you stop it? Long ago we wrote laws preventing politicians from firing 99% of Federal employees. Our Constitution provides sufficient protection for the accused as to make sure that artful official evildoers can never be held to account, as when Ms. Lerner pled the Fifth. Assuming she wasn't stupid enough to write a memo ordering her minions to be biased according to the political beliefs she knew perfectly well they already had, there's no admissible evidence that could lead to proper punishment and never will be.

It might seem like the bureaucracy is absolutely immune to any checks of any kind, but history shows that isn't so; the trouble is that applying those checks is pretty horrific for ordinary people. There are entirely too many examples of countries whose bureaucracies became so large and intractable that they were conquered by enemies or collapsed in chaos and poverty, from China's everlasting Confucian Cycle to the Byzantines who had no money to maintain their military because corrupt bureaucrats stole it just as ours are beginning to do.

We talk about impossible bureaucratic red tape as "Byzantine." If we don't do something fast, we'll end up in Byzantine fashion, conquered by outsiders. Considering the way freedom has increased in China over the past 30 years, wouldn't it be ironic if in another 30 years being conquered by the Chinese would lead to an increase in freedom for us too?

The Financial Importance of Being A Democrat

Fri, 14 Jun 2013 12:52:00 GMT

It's been long known that the power to tax is the power to destroy. That's one of the reasons people are so upset that the awesome destructive power of the IRS was used for partisan political purposes in persecuting conservative organizations and leaking their donor lists to liberal groups.

Citizens are learning that regulatory agencies can destroy as effectively as the IRS. The 200-year-old New York Stock Exchange was damaged to the point that it could be bought by a 17-year-old startup that trades in less regulated markets. Government regulations are making it essentially impossible for ordinary citizens to invest in the most promising start-ups.

Now we find a highly profitable business being destroyed by the government's power to prosecute.

Prosecutorial Abuse

The New York Times reports that the power to prosecute is destroying a billion-dollar business that employees more than 1,000 people.

SAC Capital Advisers, the besieged hedge fund owned by the billionaire stock picker Steven A. Cohen, has told its employees that it will survive a wave of investor withdrawals during the government's intensifying investigation into insider trading at the firm.

Investors in SAC have asked to pull a significant amount of money from the fund by a quarterly deadline that expired on Monday, according to an internal e-mail sent by SAC's president, Thomas J. Conheeney. The amount was not disclosed, but it was said to be more than the $1.7 billion taken out earlier in the year, according to a person briefed on the matter. That would leave SAC with only a fraction of the $6 billion in outside capital with which it began 2013.

The Securities and Exchange Commission has convicted four of SAC's employees of insider trading. Four others, including Mr. Martoma, a former portfolio manager, have pled not guilty. The government claims that these employees obtained confidential information that would affect stock prices and made illegal profits by trading on that information.

Mr. Cohen divided his employees into 140 teams to which he allocates money investors give to him. These teams get to keep as much as 25% of the profits they make. This gives them incentives to make profitable trades.

In spite of rewarding employees so highly, the fund has returned nearly 30% per year on its investors' money since 1992. This year, SAC has returned only about 7%.

Cooperation Ended

Mr. Cohen vehemently denies being involved in insider trading and states that it will not be tolerated in his firm. His statement is backed up by his full cooperation with the S.E.C. in investigating wrongdoing by his employees. Mr. Cohen and SAC ceased cooperating, however, when the S.E.C. spoke of charging Mr. Cohen and / or SAC with criminal misbehavior.

... the S.E.C. is also weighing a civil action against Mr. Cohen for failure to supervise his employees, according to people briefed on the case.

... prosecutors are weighing a number of possibilities, including bringing charges against SAC related to the Martoma case based on a theory of corporate criminal liability, according to people briefed on the case. [emphasis added]

What Do We Know?

The S.E.C. brought charges of insider trading against 9 SAC employees, four of whom have admitted guilt. Instead of stopping after exacting a record $616 million in penalties, the S.E.C. is considering bringing charges against the boss for failure to supervise his employees and is threatening criminal charges against the business for profiting from the employees' illegal activity.

What does this tells us?

We know with absolute certainty that Mr. Cohen is not a a big-time Democrat. How do we know this?

Our "justice" department has been anything but even handed in choosing whom to prosecute for a long, long time. Back in 1989, Leona Helmsley had her husband's employees work on her house. She didn't declare the value of their work as income. That's tax evasion. She went to jail.

In 2008, Mr. Obama nominated Tom Daschle to be head of Health and Human Services. The newspapers found he had received a great many non-business rides in an automobile owned by a business whose chauffeur was paid by the business. He didn't declare the value of the rides as income. That's tax evasion.

Despite having done precisely what Leona Helmsley had done, nobody even said Boo! to him. Why not? Because he'd been Democratic Senate majority leader. Big-time Democrats aren't prosecuted for tax evasion, not even Rep. Rangel or Tim "Turbo Tax" Geithner.

If that isn't enough evidence of Mr. Cohen's political standing, the Justice Department's handling of the Corzine case gives proof that any jury in the land would accept.

The Corzine Caper

Jon S. Corzine was a US Senator from New Jersey and later won election as the state governor. He's been known to flout rules both small and great. When his leg was broken in a traffic accident while he was being chauffeured by a New Jersey state trooper, it was found that he hadn't been wearing a seat belt as required by law.

The Securities and Exchange Commission recently pointed out that New Jersey had lied to investors about its financial woes when selling bonds. The worst of the abuses happened while Mr. Corzine was governor. Instead of charging any of the people involved, the S.E.C. asked New Jersey to promise not to do it again.

After being defeated by Republican Chris Christie in 2010, Mr. Corzine was hired as the boss of trading firm MF Global in March, 2010.

Jon Corzine reverted to his skills as a top Goldman Sachs trader and bought bonds issued by the Italian and Spanish governments. Traders were bailing out because they believed that not even the Germans could afford to pay off the bonds.

As a well-connected Democrat, Mr. Corzine would have known that the Obama administration didn't want financial problems in Europe to hurt the American economy and damage Mr. Obama's chances for re-election. He knew that the US government would help out. So did we, for that matter, but alas, we had no money to put where our mouths were.

He bought $6.3 billion worth of distressed bonds, borrowing about 80% of the money. Even though those bonds seemed risky enough to set off alarm bells in all the regulatory agencies, he knew they'd pay off in full because the Obama administration stood behind them with our tax money.

The New York Times tells us how MF Global went bankrupt:

... for the first time it is now clear that ratings agencies knew the risks for months but, as they did with sub-prime mortgages, looked the other way until it was too late, underscoring how three years after the financial crisis, little has changed on Wall Street. [emphasis added]

Despite all the earlier criticism and despite the new powers given them by Dodd-Frank, the regulators "looked the other way." Need we ask why? An agency which isn't part of the government caught on:

When Finra [Financial Industry Regulatory Authority] realized what MF Global was doing, it grew concerned. The Wall Street self-regulator told MF Global to set aside enough money in case the trades went bad. But Finra didn't have the authority to force the firm to do so - that power was in the hands of the Securities and Exchange Commission, whose rule Finra was citing.

Finra couldn't force MF Global put put up money to cover their trades. The S.E.C. had the authority, but they weren't doing anything.

Finra finally got the S.E.C.'s attention even though Jon Corzine is the biggest possible sort of Democrat except for President Obama himself. After weeks of dithering, the S.E.C. grudgingly asked MF Global to put up an additional $200 million.

This was the beginning of the end. Everybody who traded with MF Global panicked. Those who'd lent money to buy all those bonds demanded more collateral. Other firms refused to trade. The stock price plunged. MF Global went bankrupt on Oct 31, All Hallow's Eve.

Along the way, MF Global used $1.2 billion worth of customers' money to try to satisfy creditors and avoid bankruptcy, knowing their bets would pay off in the long run. That's a criminal act. Having helped write Sorbanes-Olxey while he was a Senator, Mr. Corzine presumably knew he shouldn't have used customers' money to save his firm. As CEO, Jon Corzine is personally accountable for that action under the law he helped write.

The Final Act

The Sarbanes-Oxley law gives the government power to punish financial misdeeds of CEOs. The MF Global employee who initiated the wire transfers which moved customer money out of the firm pled the 5th Amendment to avoid incriminating herself. She said she'd testify against the higher-ups who ordered the transfers if someone would grant her immunity, but the Justice Department wasn't interested.

On April 24, 2013, the Wall Street Journal reported that the bankruptcy trustee who's trying to get the customer's money back has sued Mr. Corzine because of "acts and omissions" that were "grossly negligent" and led to the bankruptcy.

Meanwhile, a criminal case into why [customer] money was removed from MF Global hasn't shown much momentum...

More than a billion dollars worth of customer's money went missing, an employee offers to testify, yet the criminal case against MF Global isn't moving.

SAC Capital Advisers returned profits of 30% annually since 1992. One SAC employee pleads guilty to insider trading, four others plead not guilty. The firm cooperates. There's no evidence connecting the boss with the insider trades, yet the S.E.C. is considering criminal charges against the firm.

Give how the S.E.C. merely criticized the State of New Jersey for defrauding investors and didn't charge Mr. Corzine with misusing customers' money, yet is proceeding against Mr. Cohen's SAC, any jury in the land would conclude that Mr. Cohen simply isn't a big-time Democrat.

Being a big enough Democrat gives you a license to steal.

Blackmail by Bureaucrat

Wed, 12 Jun 2013 15:16:00 GMT

Your humble correspondent does not usually read gossip or society pages; they only promote several of the Seven Deadly Sins, starting with envy and lust and going on from there. Besides which, 99% of the time anything they say is totally irrelevant to life, the universe, and everything real.

Every now and again, though, even the beautiful people collide with the real world in a revealing way. That just happened to Facebook billionaire Sean Parker - at his wedding, no less. Fox News reports:

The California Coastal Commission and Parker said they have reached a $2.5 million settlement to pay for coastal conservation programs after the Napster co-founder built a large movie-set-like wedding site in an ecologically sensitive area of Big Sur without proper permits.

Now, for a celebrity-marrying billionaire like Mr. Parker, $2.5 million is chump change. Still, what on earth did he do to garner such an outlandish hit - bulldoze Old Faithful?

Not at all! For one thing, he held his wedding on private property - "a closed campground owned by Ventana Inn & Spa." In fact, his choice of venue seems to have spun up the bureaucrats even more:

"Despite the continued unauthorized closure of the campground to the public, earlier this year, the property owner entered into an agreement giving Sean Parker exclusive use of the campground for several months to construct a sizeable wedding venue," the commission's staff wrote in a report.

How the heck can it be "unauthorized" to close a private business? One assumes it was losing money or else it wouldn't be closed. It's bad enough that American entrepreneurs have to kiss the ring of the state in order to enter into business, now we have to get permission to leave it?

Speaking of business, the whole point of business is to sell your product for the highest price you can get from a willing buyer. The campground wasn't making money as a campground; Mr. Parker appears with an undisclosed but presumably hefty check. Of course the property owner entered into an agreement with him. Waaah! Waaah! Oh, the humanity!

Well, the bureaucrats don't care two hoots about humanity, its propagation, or wedding ceremonies which at least traditionally made that possible. They certainly don't seem to feel that the concept of "private" property even exists. The pretext for this shakedown was that the campground was in an "ecologically sensitive area" and Mr. Parker didn't get permits for his wedding digs - which, to be fair, were somewhat more extensive than the usual wooden lattice arches and buffet tents used in our circles.

The parties reached the agreement after officials were tipped that Parker had built a cottage, fake ruins, waterfalls, staircases and a huge dance floor near iconic redwoods and a stream with threatened steelhead trout.

Let's assume for a moment that there is some plausible moral justification for bureaucrats to be concerned with temporary construction on private property and its effects on the flora and fauna thereon - though we don't really see one. So the Green Police show up and find Mr. Parker's hardhats tromping all over the trees and flowers and chirping birds, and immediately haul them off in chains? Not exactly:

When staff inspected, they found the temporary structures had already been built, but they allowed the wedding to proceed anyway.

The commission started negotiating a settlement with Parker and his representatives instead of shutting the event down.

"Mr. Parker has been extremely cooperative and actively involved in working with Coastal Commission staff to reach this resolution which both addresses our Coastal Act concerns and will result in greater coastal access and conservation in the Big Sur and Monterey Peninsula areas," Charles Lester, the commission's executive director, said in a statement.

Now let's think this through for a moment. Consider the fire marshal inspecting, say, a nightclub. He finds that there's no emergency lighting and that the exit doors are all chained shut, except for the front door that the big bouncer stands in. Oh, and he sees the band rigging up pyrotechnics on the stage for their performance that night. What is he going to do?

You'd think he'd shut the nightclub down on the spot as being an unsafe firetrap. It's possible that he doesn't have the legal authority to do it on his own so he can't, but he'll certainly scurry around to a judge who can.

What the fire marshal is most definitely not going to do is tell the media that the nightclub owner has been a longtime contributor to the Fireman's Widow's Support Fund and that they'll be working with him over the next few months.

There's only two possibilities for the fire marshal: either the nightclub is unsafe to the point that they must Do Something Now, or it's OK. Logically, the Green Police have the same two possibilities: either irreparable harm is being done to protected endangered species and Something Must Be Done Now - or not.

How can it be that Mr. Parker's wedding wasn't doing any harm worth stopping, but was worth shaking him down for $2.5 million?

We find the answer a little further on, and it's a truly frightening one if you're not a billionaire - or even if you are:

"So as soon as he was made aware of the Coastal Commission's concerns, he immediately stepped forward to discuss how he could protect the coastal area and resolve these issues," Zbur said in an email.

Parker also asked his guests, many of them extremely wealthy entrepreneurs and celebrities, to donate to Save the Redwoods or the California League of Conservation Voters in lieu of giving gifts, according to a program.

Since Parker did not get permits for the construction, commission staff will oversee the breakdown of the vast set so no damage is done to the environment. The commission said no major damage had yet been done, but it wanted to reach a deal quickly so the violating structures could be removed safely. [emphasis added]

Get this: no major damage had been done, and everything was already set up by the time the Green Police showed up with lights flashing. Mr. Parker hadn't in fact hurt anything at all! No bulldozed Old Faithful, no chopped-down thousand-year-old redwoods, not even any dead fish. The whole thing was a crock.

But it was a profitable crock - because some high-up bureaucrat realized that Mr. Parker and his guests are "extremely wealthy entrepreneurs and celebrities" who can be hit up for big bucks.

What happened here is exactly what Al Capone used to do to businesses in Chicago: "Nice place you got here - shame if something happened to it." And Mr. Parker sighs and says, "How much?" The answer: $2.5 million and all your wedding presents.

If a fire marshal operated this way, we'd put him in jail for corruption at least, if not accessory to murder when the nightclub burned down and incinerated all the trapped patrons. When environmentalist bureaucrats do this, well, that's just business as usual. We put up with it because what they are supposedly "protecting" does not in fact actually matter.

The actions of the commission, as publicly reported, proves that their whole operation is a lie and a fraud. If the regulations really mattered, they'd be enforced no matter how rich the guy was and how much dosh he offered. The fact that Mr. Parker was able to write a check and make the problem go away proves that the "environmental regulations" did not address a real problem at all - they are just another opportunity created by Big Government to steal from the public.

That's fine if you're a billionaire to whom the odd few million means nothing. That's not fine if you're an ordinary person or an ordinary business - like the Ventana Inn & Spa that rented him their venue.

They thought they'd found a happy customer who'd pay them good money to use their loss-making abandoned campground for a wedding. Instead, whatever money they made was stolen by a thieving bureaucrat:

The Ventana is negotiating a separate settlement for allowing the construction to occur.

Mr. Parker is now happily married and still has more money than most of us. As for the Ventana Inn & Spa, one wonders, but clearly nobody cares.

More Fascism in the Stock Market

Fri, 07 Jun 2013 16:09:00 GMT

The Economist recently published an article about JPMorganChase's recent annual meeting which looks on the surface like an ordinary business-practice report with some added spice from shareholder conflict. In reality, it's revealed something much more profound and much more hazardous to our economic future.

When A Dictator Is A Good Idea

JPMorganChase (JPMC) is one of the world's largest, richest, and usually most profitable banks. It is run by one Jamie Dimon who is such an extraordinarily successful leader that we wrote a whole series featuring him as an example about how dangerous it is to have a massive business depend on one single genius.

One reason Mr. Dimon is able to be so successful is because he is both CEO of JPMC and also chairman of the board; he is thus his own boss and cannot be fired barring a shareholder revolt. He doesn't have to answer to anybody and can do as he thinks best without needing any more justification than profits, which he churns out in abundance.

It also means there's no doubt about who's in charge - it's Mr. Dimon. One of the deadliest problem in running large organizations is division of command - the troops won't know the direction to go if they aren't sure whom to follow. With Mr. Dimon being king, mayor, and both houses of Congress, there's no possibility of any such confusion. You do as he says or you're gone.

Having the CEO and chairman of the board being the same person is usually bad corporate governance, however, precisely because it allows the leader unchecked power. It's like the business equivalent of a dictator - if you happen to get a really good dictator you'll be far more effective than suffering with the shambles of a democracy, but since most dictators turn out to be awful it's a poor risk. JPMC just happened to get lucky.

So, to sum up: In general, it's a bad idea to have one guy be both CEO and chairman. In the specific case of JPMC, it's worked extremely well for the shareholders who are, after all, the ultimate owners of the company.

By the Book or By the Numbers?

The question under debate at JPMC's annual meeting was, should the CEO and chairman jobs be split despite the fact that Mr. Dimon has proven himself eminently worthy?

Although advocates of the motion to split Mr Dimon’s roles insisted that they were not out to get him, he was clearly the main focus of the debate. A strong and decisive manager, Mr Dimon has shaped JPMorgan’s strategy and thus its remarkable success. But his willingness to criticise the chaotic regulatory structure imposed on banks after the financial crisis has exposed him to political retribution. [emphasis added]

Wait a minute, political retribution? Aren't investors, particularly institutional ones, supposed to care about financial returns above all else?

They are required to do so by law, but not all of them follow the law, as it happens. The Economist explained the reason why:

Mutual funds and shareholders with interests closely tied to returns overwhelmingly supported Mr Dimon, fearful that a vote in favour of the split would weaken his authority or, worse, precipitate his departure... The motion was sponsored mostly by entities with a more political bent: two municipal pension funds, New York City’s and Connecticut’s, and the American Federation of State, County and Municipal Employees, a union of public-services employees.

What's the difference between these two groups? Ordinary mutual funds live and die by returns, that is, the money they earn on whatever trades their managers make. There are thousands of mutual funds out there, all very much the same from the point of view of the normal non-Wall-Street person. The only way to pick from them is by the size of their fees and their record of returns. Mutual funds with a history of good returns grow and make their founders rich.

Municipal pension funds are an entirely different beast. In theory, they're also supposed to be about maximizing returns because they pay out money each month to retirees and it has to come from somewhere.

In practice, though, there's little incentive for municipal pension funds to care much about making high returns. The retirees have no choice about being in the fund since it's part of their union contract and usually run by the union, which in turn they're required to join under the terms of their employment.

Technically, though, neither the union nor the the retirees share in any risk of the fund not having enough money: the pension is an obligation of the underlying government organization (city, state, etc.) and has to be paid regardless of what happens to the fund. The retirees will always be paid unless the city declares bankruptcy, but that's only happened a handful of times up to now and isn't treated as a serious possibility by union officials.

So if the union-hired fund managers don't care much about the returns, they can use their financial power to play political games. Sometimes they'll try to force out executives who are opposed to unionization of the underlying company, even though they know perfectly well that unionization will reduce profits. A large multisector union can expect to gain more money in newly forced union dues than it loses in lost investment returns. In the case of government pensions, losses will be made up by the taxpayer!

In effect, union-operated pension funds are, like most modern union activity, just another way to force taxpayers to pay for political activity they probably oppose.

The Wolf in the Henhouse

Shareholder activism has become much more common in recent years, and when it's exercised to get rid of incompetent management, that's all to the good.

The problem arises when one group of shareholders activists have goals that are opposed to the interests of the rest of the shareholders. The union pension funds would rather get rid of a prominent opponent of more (unionized) government regulations than make money, but the whole point of the rest of the shareholders is to make money.

We're seeing more and more of this all across leftism. Environmentalists buy a few shares in oil companies and try to use this "ownership" to hamstring the whole reason the oil companies exist. College students try to force universities to end profitable investments in Israel, weapons firms, or tobacco companies that subsidize their tuition, because they figure the money is coming from the Bank of Mom and Dad or Uncle Obama anyway. We saw the ultimate example a few years back when Barack Obama took over GM and abused the bankruptcy laws to gift large chunks of value to his union allies. The taxpayers lost over $9 billion on that "investment", but for Mr. Obama and his allies, it worked out gloriously.

Capitalism is the most powerful force for enabling a better life for the common man that's been discovered in all of history, but it has a few basic requirements. One of the most fundamental is that the people involved in a business want better lives, as represented by making more money. If you have a company owned by people who do not care about making money, or worse, who actively oppose what the company does, it isn't going to be very successful.

Unfortunately, we now have a government that cares nothing about letting people make money when it isn't actively opposing it, and a horde of leftist activists who feel the same way. More and more, our economic system is not capitalism but fascism.

The Purpose of Education 4 - Passing the Torch

Tue, 04 Jun 2013 13:18:00 GMT

It's become a commonplace to bemoan the biased, blinkered, value-free "education" being churned out by modern public schools and large liberal-arts universities. Students put in their time, but graduate unable to critically examine anything outside the party line and can't get jobs anywhere but in government. In this series, we've talked about why this is, how it came to be, and how the Internet offers students a chance to bypass the established system and learn on their own.

Education wasn't always like that. There was a time when teachers and administrator understood the obvious goal of education and felt it their duty to mold young minds, not into politically-correct unthinking boxes, but into free and independent citizens.

Passing the Torch

Regardless of what we may think of our education industry, it's the major mechanism by which we pass our civilization on to the next generation. A culture can die in one generation if it isn't taught.

Acquiring skills and cultural norms is hard work, regardless of whether those skills are academic knowledge or the more practical sort. It takes lots of study to climb a pole and fix problems with the electrical system. It takes much practice to be an effective plumber or builder. It takes both study and practice to become a doctor who cures patients rather than killing them, and even more of both to get a research scientist who'll invent or discover new wonders. It takes a great deal of study to pick up the norms of any complex culture or working environment requiring specialized knowledge, which most of them do these days.

If we don't have enough tiger moms pushing their kids to practice enough to play piano in a symphony orchestra, there won't be any symphonies. If teachers don't inspire kids to read the great works of literature, how could we expect those kids ever to write great works themselves?

When everyone from the President on down knocks factories and energy production as dirty, smelly, and bad for the planet, why are we surprised when kids choose not to enter those fields and our factories move overseas where society welcomes job creation? Unfortunately, the stuff that runs modern economies has to come from somewhere, or we won't have it anymore.

Very few teachers recognize their responsibilities as the custodians of civilization, but that's what they are.

Some teachers get it. This is from a Principal's speech at a graduation.

A doctor wants his child to become a doctor.........
An engineer wants his child to become engineer......
A businessman wants his child to become CEO.....
A teacher also wants his child to be one of them.....
Very few become teachers by choice.

That's very sad but that's the truth. Most of our teachers do that because they couldn't find anything better to do.

The dinner guests were sitting around the table discussing life. A CEO decided to explain the problem with education. He argued, "What's a kid going to learn from someone who decided his best option in life was to become a teacher?"

To stress his point he said,

"You're a teacher, Bonnie. Be honest. What do you make?"

Teacher Bonnie, who had a reputation for honesty and frankness, replied, "You want to know what I make? She paused for a second.

"I make kids work harder than they ever thought they could. I make a C+ feel like the Congressional Medal of Honor winner. I make kids sit through 40 minutes of class time when their parents can't make them sit for 5 min. without an IPod, Game Cube or movie rental."

"You want to know what I make?" She paused and looked at each and every person at the table.

"I make kids wonder. I make them question. I make them apologize and mean it. I make them have respect and take responsibility for their actions. I teach them how to write and then I make them write, and write, and write. Keyboarding isn't everything. I make them read, read, read. I make them show all their work in math. They use their God given brain, not the man-made calculator."

"I make my students from other countries learn everything they need to know about English while preserving their unique cultural identity. I make my classroom a place where my students feel safe. Finally, I make them understand that if they use the gifts they were given, work hard, and follow their hearts, they can succeed in life."

Bonnie continued, "When people try to judge me by what I make, with me knowing money isn't everything, I pay no attention because they're ignorant. You want to know what I make?"

"I make a difference in all your lives, educating kids and preparing them to become CEO's, and doctors, and engineers."

"What do you make, Mr. CEO? Quarterly numbers?"

He went silent.

It's too bad that so few parents or teachers have the same concept of duty these days. I was blessed to have three teachers from that school of thought. For most of my education, I was homeschooled and my teaching came from my mother.

She, too, saw herself as the custodian of civilization. She wasn't interested in finding the "real me" because she knew that kids are born as selfish barbarians. She looked for the "best possible me" she could find and insisted on it.

She passed the torch. Thanks, mom.

Days Gone By

There was a day when our schools recognized their common duty to pass the torch. Generations of Italians, Germans, and others came to America. The schools taught their kids American values in English and turned them into Americans.

Modern educrats pander to race-baiting politicians and teach kids in languages other than English. This traps kids in substandard "bonehead" classes where they never learn what they need to know to fulfill their potential. This went on for so long that California voters passed an initiative forbidding teaching in languages other than English. As one father put it, "You want my kids taught in Spanish so they'll grow up to be waitresses and busboys. I want them taught in English so they'll grow up to be doctors and lawyers and engineers."

The goal of teaching in Spanish wasn't to keep the kids down, that was a side effect. The goal was to cut them off from mainstream American culture so they'd be dependent on ethnic politicans who stay in office by getting more and more benefits from society at large.

As we're debating our immigration policies, people keep pointing out that we're all immigrants, except for native Americans, of course. We know how well unrestricted immigration worked out for the original Americans. Immigration worked well for America in the past, but that's because it was restricted. Our laws were choosy about who could enter the country.

Until recently, the tidal wave of unlimited illegal immigration we're seeing today simply wasn't permitted. Without really meaning to, the New York Times documented the stark, unbridgeable chasm between how the successful immigration of the past worked and the de facto open borders policy we have today. They described the contents of Marion Meanwell’s alligator bag which was salvaged from the Titanic:

First chartered to sail on the liner Majestic, Mrs. Meanwell rebooked on the Titanic after that vessel was removed from regular service. Tucked into her handbag were a number of documents, among them a letter from the London landlords Wheeler Sons & Co.

This innocuous note, stating blandly that “we have always found Meanwell a good tenant and prompt in payment of her rent,” carried an extra freight of meaning for an immigrant hoping to build a new life.

“If you were coming over without credentials or with no prospect of work,” Mr. Davenport-Hines [author of “Voyagers of the Titanic: Passengers, Sailors, Shipbuilders, Aristocrats, and the Worlds They Came From,”] said, it was not uncommon for examiners at Ellis Island to refuse entry to new arrivals and to send them home as “vagrants or tramps.” [emphasis added]

Ms. Meanwell's letter of good character would help persuade the Ellis Island examiners that she was a responsible worker who paid her debts, provided for herself and contributed to society, rather than a mooching freeloader or criminal sort that American didn't want.

Assuming they weren't vagrants or tramps, the educational system quickly taught new arrivals what was expected of them. They were supposed to abandon their former ways of life and sign up to the American dream.

Techer's unions have turned out public K-12 education system into a machine for funneling taxpayer funds into union-backed campaigns to help elect Democrats. Progressive politicians have subverted the torch-passing role of our educational system and made it nearly impossible for parents to have any influence on what schools teach. Parents who want their children to learn useful skills must either send them to private schools or teach them at home.

All colleges try to crank out wealthy graduates who'll contribute to the alumni fund. STEM universities encourage graduates to found new businesses which create jobs for classmates by selling new products and services to willing customers. The Ivies create wealthy alumni by teaching graduates to seek government power where they can raise taxes and write regulations to create jobs for their government-oriented friends.

The regulations and taxes which are the lifeblood of creating government jobs make it harder for STEM graduates to boost the economy. The Ivies have succeeded in blocking STEM efforts to create wealth all during the Obama administration. It's not clear how this conflict will work out over the long term.

The Internet revolution will break or severely weaken the current educational monopolies by making it a lot easier for any motivated student to get knowledge, particularly if the student is fortunate enough to have a parent who's enthusiastic about helping and encouraging. One reason most of the new wealth-creating start-ups are Internet-based is that the government hasn't been able to regulate Internet businesses into oblivion. They're trying, though.

Where Will It Lead?

As with all revolutions, on-line learning will create winners and losers. Those who seek knowledge and are willing to work hard to get it will win because the cost of self-driven education has fallen so far. The more citizens learn to earn their own way, the fewer votes for welfare-oriented politicians. Businesses who have to train their own workers will save a lot of money - McDonalds uses on-line games and web-based courses to teach employees how to deal with difficult customers.

Society will gain in that fewer geniuses will be overlooked for lack of access to existing knowledge. We may be able to pass the torch if enough students can find the motivation to bypass failing public schools and learn for themselves.

The Economist pointed out that in both Britain and the United States, many people with expensive liberal arts degrees are finding it impossible to find decent jobs. Residential colleges whose degrees don't map to increased income will have to cut costs or go out of business. STEM universities will be more likely to prosper, but they, too, will have to become more efficient to compete with free on-line training and with competition from overseas universities.

We aren't even close to figuring out how to bridge the gap between competency and certification. Nobody wants to be cut open by a surgeon who got a degree from an on-line diploma mill. Even a traditional degree from a STEM university didn't allow new graduates to build bridges or anything else without supervision. Businesses like construction and architecture and even auto repair and plumbing have always required young graduates to work under experienced practitioners before being allowed to work on their own.

On the other hand, traditional certification isn't perfect - we've all known people who were certified graduates but couldn't do anything useful. The issue of what to do about verifying competence gained through on-line education is even more open than the mismatch between certification and competence in traditional education.

Better on-line resources will give more and more parents the courage to teach their own kids at home. The resulting drop in support for school taxes will slowly affect union power. Declining revenues will force public schools to improve and will also make them fight more and more bitterly over fewer and fewer dollars.

All in all, it's an exciting time to watch the process of education.

In Defense of the IRS

Thu, 30 May 2013 13:53:00 GMT

Now that the election is over and another four years of the Obama regime is assured, all of a sudden the pustulating scandals suppressed by his sycophants in the media for so long are finally forcing themselves into the public view. It's understandable that a frustrated, frightened, leaderless Republican party will grab onto them like a drowning man to a life preserver, dreaming wild dreams of impeachment, shame, and ignominy for their titular enemy in the White House.

As usual, they are making a mistake. First, there is not the slightest shred of evidence that Mr. Obama has committed any "high crimes and misdemeanors" in the course of any of these scandals. Not sending the military to rescue our besieged ambassador in Benghazi is pusillanimous and un-American, but it is not a crime nor even a misdemeanor, merely a bone-headed blunder. The multifarious scandals at the Department of Justice certainly call into question Mr. Obama's wisdom in appointing the odious Eric Holder to high office, but again, bad personnel decisions are not even close to grounds for impeachment.

News that the IRS abused it powers for partisan political ends, subjecting conservatives and conservative organizations to extra audits and endless delays while whisking liberals through their paperwork on a red carpet, sounds like something more. Was not using the IRS to attack political enemies one of the impeachment charges laid against Richard Nixon?

Why yes, it was - but Richard Nixon, arch-conspirator and micromanager he, had the stupidity to directly order unsavory things to be done and to hear reports about them, while recording those meetings on tape. The point is, there actually was an active conspiracy in which the President was personally involved, at least to some extent.

It beggars belief to suppose that Barack Obama summoned the head of the IRS to the Oval Office and said, "I need you to start auditing all these nasty Tea Partiers so I can get re-elected." It's preposterous to imagine that he recorded himself doing so, or wrote down such an order on a memo. It's unlikely that he ever even said anything to anyone from the IRS about it.

He had no need to call the IRS - his order to take down those evil conservatives was stated publicly and the media were happy to pass it on. At his press conferences, he spoke over and over about the evils committed by wealthy persons who opposed him. He exercised his own free-speech rights and the presidential bully pulpit, emphasis on "bully."

Without a truly astonishing discovery of secret tapes or documents, there is no impeachable crime, though it might still be interesting to look at the records of over 100 visits to the White House by IRS officials.

The reality is a far more serious problem. Rather than continue to pointlessly bash their heads against a president who, after all, will be leaving office in a few years, the Republicans would be much better off attacking the real decades-old enemy, one whom most Americans already see as the enemy: the IRS, the laws it enforces, and the unaccountable federal bureaucracy as a whole.

Perverse Laws = Perverse Outcomes

Nearly forgotten amidst the scandal is the fact that the IRS is not the Roman Empire's tax farm. It does not simply have the authority to go out and shake down money wherever it can be found. As unjust and tyrannical as IRS actions often are, they are supposed to have some sort of underlying legal basis and virtually always do.

Why did the IRS give extra scrutiny to conservative political organizations? Because it was required to - not by a directive of President Obama or one of his cronies, but in fact by the law as passed by Congress!

The reason the Tea Party groups were filing with the IRS in the first place is because the law requires them to do so if they want donations to be tax-deductible. However, not just anybody gets this privilege: our Congressmen in their infinite wisdom have decided that partisan political organizations aren't allowed to have tax-deductible charity status, but educational organizations are.

Obviously, saying "Vote for Joe Smith" is political partisanship. Equally obviously, teaching children to read is educational. But what about teaching people the history of the Constitution? How about exposing government corruption, also known as journalism? For that matter, what about performing and promoting academic research into the negative effect of a growing government on private-sector economic growth and job creation?

The problem is, our government has grown so large that virtually any discussion, education, or examination of it is automatically going to have a political effect, usually a partisan one.

What's more, the IRS had a point: as a rational human being, do you imagine that the "Tea Party Patriots" were intending to be a nonpartisan, unbiased group wanting to spread the pure, unfiltered light of education? Of course not; we all know that they very much had a partisan political intent. Any organization with "tea party" or "patriot" in its name had better have a political effect, or its donors are going to feel ripped off.

In short, Congress has given the IRS an impossible task: disallow groups that say "Vote for Sen. Joe Shmoe's opponent" but allow groups that restrict themselves to saying "Sen. Joe Schmoe is a crooked lying Communist!" What sense does that make?

There's No Such Thing As A Nonpartisan Government Agency

"Fine," you say. "So the IRS has to do an impossible job of doing something that is illogical, contradictory, and nonsensical. Of course they did it incompetently - but why didn't they do it evenly, fouling up liberal organizations just as badly as conservative ones? There's got to be a political bias motivation there!"

Indeed there is, but it isn't Mr. Obama giving orders from on high, for one simple reason: he doesn't have to. As the New York Times put it:

Even if Obama didn’t personally sign off, people always sense by osmosis what leaders are thinking and go in that direction.

As we've written many times, the ranks of government civil-service employees are supposed to be nonpartisan, but in reality they are heavily leftist. Government employees personally want big government: they want raises and promotions like we all do. The bigger government gets, the more money they can spend in the office and at home.

What's more, conservatives flee from taking Uncle Sam's shilling - what Tea Party Patriot would happily spend his days at the IRS, shaking down hardworking taxpayers for even more?

People want jobs doing things they think are generally good and right. The sort of people you find working for government are the sort of people who, despite all the evidence, sincerely think government should be doing everything, which means they vote Democrat and interpret their mandates toward helping liberals and trashing conservatives.

If you have a government inevitably full of partisan human beings, it is equally inevitable that they will behave in partisan, corrupt ways. The only way to prevent this is to keep the government small enough that they can't. All the laws in the world won't stop partisan government employees from pressing their hand on the scale - we already have all the laws in the world, and it's only made things progressively worse.

Is Enough Ever Going To Be Enough?

Which brings us to the lesson of the IRS scandal that Republicans ought to be hammering home every hour of every day, in every article and interview, on every talk-show appearance and radio show:

A government big enough to give you everything you want is a government big enough to take from you everything you have.

Alas, the quote comes from Gerald Ford, not the most memorable or successful of Republican presidents. But he was spot on with this one.

On some level, the American people already know this: the IRS has been hated and feared for decades. The only reason Americans put up with it is because they've generally believed that it is at least evenhandedly rough on everyone.

The current scandal proves this isn't so: the IRS is the very definition of an unaccountable, all-powerful, arbitrary and partisan tyranny that must be eradicated if there is to be any hope for freedom in the future. The worst fears of the tinfoil-hat brigade have been proved correct - so are we going to do anything about it, or not?

It's time for the Stupid Party to round up a handful of long-unused brain cells and point out to America what's staring it in the face. Thanks to the partisan stupidity of the hated IRS, all America has an opportunity to truly understand the deadly danger we are all in - if only Republicans will take the trouble to tell them.

Medical News You Can't Use

Tue, 28 May 2013 12:25:00 GMT

In spite of denials by charities who have a vested interest in making the tragedy of women dying during childbirth seem worse than it is, there has been substantial progress in reducing maternal deaths. Bangladesh has introduced low-cost innovations which have helped reduce death in childbirth from 322 per 100,000 births to 194 over the last decade. Much of the improvement involved better training for midwives who help with home births.

Midwives need help deciding when things are going wrong and it's time to call a hospital. Some blood loss during birth is normal, so how does a midwife deciding when the mother is hemorrhaging?

A doctor introduced a sterile birthing mat which absorbs just under a half-liter of blood. If the mat becomes saturated, the mother has lost too much blood and needs emergency treatment: the mat comes with a dose of misoprostol to make the uterus contract to slow the bleeding. The midwife injects the drug and calls for help.

The first batch of 77,000 mats resulted in 37 fewer maternal deaths than would have been expected without them. The midwives said they'd be willing to pay 50 cents for a mat during future deliveries because they know the value of cleanliness and they appreciate the clear instructions and useful medical help.

The Contrast with the US

Can anyone imagine any item of diagnostic equipment costing 50 cents in America? The mat kit not only warns the midwife when a mother has bled too much and provides first aid for the condition, it also reduces infections during normal births.

How much would it cost to get such an item approved in the US? What would the 50-cent item cost once each unit had to absorb its share of the cost of getting it approved?

Back before its archives went on-line, the Wall Street Journal reported that an oncologist started selling a low-cost rubber mat to help women examine their breasts for cancer. For some reason, feeling the breast through the mat made it easier to find lumps.

The FDA banned the device even though it had been approved in Canada. The inventor couldn't afford the cost of a clinical trial, so it remains banned to this day. So much for low-cost, affordable health care.

Public Payer, Private Supplier

The Economist reports that Sweden understands that just because the government pays for a service, there's no need for government employees to supply it. Although the government pays, private businesses provide 20% of public hospital care and 30% of public primary care. The government realizes that a high-cost country like Sweden can't afford health care unless it's delivered efficiently.

The average hospital stay in Sweden is 4.5 days compared with 5.2 days in France and 7.5 in Germany, yet Swedes live slightly longer.

This model will be hard to transfer to other countries because they're so suspicious of private businesses. In England, protesters wave signs showing greedy businesses carving up the national health service.

Obamacare combines the worst of both models. The government pays for a large fraction of medical care and regulates private hospitals and insurance companies as if they were government-owned. This makes it even more difficult to cut medical costs.

We've seen another step in the direction of increasing medical costs with the publication of Diagnostic and Statistical Manual of Mental Disorders, Fifth Edition. This $199 book, popularly known as DSM-5, will become a best-seller because almost any doctor who treats children or does primary-care practice will need one.

DSM-5 attempts to codify everything known about mental disorders so that medical practitioners can claim reimbursement from insurance companies. Many critics believe that it's become a "vehicle for misdiagnosis, overdiagnosis, the medicalisation of normal behaviour and the prescription of a large number of unnecessary drugs."

Children may now, for example, be diagnosed with "disruptive mood dysregulation disorder" - what used to be known as temper tantrums. Past versions of the DSM stipulated that those mourning a death should not be classified as depressed. DSM-5 scraps this "bereavement exclusion." It also includes a new binge-eating disorder, defined as eating to excess at least once a week over the previous three months. Such a diagnosis covers millions of Americans, roping in people who would not remotely consider that they were mentally ill.

Such diagnoses expand the scope for practitioners to bill for more and more services, of course. More than 1 American in child in 10 has been diagnosed as mentally abnormal based on the new definitions. Of those, about 2/3 are prescribed drugs, to the greater glory of Big Pharma.

Three Approaches

So we have three approaches to medicine.

Bangladesh pioneers the use of low-cost diagnostic equipment to help save mothers who would otherwise bleed to death during childbirth.
Sweden contracts with private companies to operate hospitals, encouraging them to innovate and cut costs by letting them keep most of the savings.
The US accepts more and more normal conditions as disorders needing expensive and ongoing medical treatment, generally involving patent-protected drugs.

Is it any surprise that the "Affordable Health Care" act has worked out to be anything but?

Over-Immigration and the Death of the Middle Class

Thu, 23 May 2013 13:04:00 GMT

As the "Gang of Eight" immigration reform wends its tortuous way through Congress, we're getting a distinct feeling of deja vu. Wasn't it just a few years ago that the massed forces of the elites on both sides of the aisle tried to ram an amnesty bill down America's throat, only to be defeated under an avalanche of furious voters? And the economy was immeasurably better in 2007 than it's been at any time under Mr. Obama.

Just like then, anyone who doesn't want full open borders is being pilloried as a racist, nativist, sexist, homophobic Neanderthal. Just like then, the usual suspects are promenading with scholarly studies showing that being awash in penniless illiterates will somehow make the rest of us as rich as Croesus. Just like then, the few voices arguing otherwise are being shouted down by pro-immigration advocates both Republican and Democrat.

But much more than in 2007, it is patently obvious to any observer that, overall, immigration is bad for America. Indeed, it cannot be otherwise, and for very good historical reasons.

Supply, Demand, and Labor Shortages

But... America was built on immigration! Without immigrants, there wouldn't even be an America!

True. However, has anything changed since the days of successful mass immigration, as opposed to our modern era of unassimilated division and destructive diversity? Indeed it has: there is no frontier, and thus we have no use for tired, poor, huddles masses as we did then.

Consider the America of the 1800s through World War 1. Our nation was growing, and most importantly, there were jobs and land for all.

Half the continent was basically empty. Our government offered a free homestead to anyone willing to settle way out West. What's more, it was perfectly practical for one man and his family to move onto an empty plot on Kansas or Dakota, and by dint of hard work, scratch out a living.

This is not to say that the early settlers had it easy; they didn't. Lots of them died; many failed and moved home. The saying was, "the cowards never started and the weak died along the way," but history records that there were hundreds of thousands of people who, while they never got rich, at least created a reasonably decent farming life out of nothing more than their bare hands and a few simple tools.

Do you need to know English in order to run a 19th century farm? No, you don't; plants and animals don't care. You don't even really need to know how to read in any language, as long as there's some sort of community you can communicate with and who will advise you as to what sort of seeds to plant and when.

To be blunt: historically, America offered a way for totally uneducated, untrained, unsophisticated people to make an independent life if they were willing to work very very hard.

That's why they came here from Europe: Europe was crowded. If you had no education or connections, there was no chance of finding anything better than the barest minimum of a life, if even that.

What could an uneducated person with no money do in Europe? They couldn't farm - all the farmland was long since owned by somebody else already. Maybe they could work 12 hour days 7 days a week in a factory for starvation wages, but at the slightest peep of protest they'd be out the door and replaced by someone starving on even less. Europe had more people than it could put to good use, so the value of each individual person was very small.

Compare this to America. There were factories and sweatshops in the United States, but there was a limit to how stingy and oppressive the owners could be. If the workers got too ticked off, they could always walk out the door and off to some other employer who'd value them more, or off to the wild frontier to start over.

Of course life was hard in early America, but it truly was a land of opportunity - for all, not just the educated and rich. The early unions were able to gain a foothold precisely because America didn't have starving masses that could easily take the place of angry workers. The voting franchise was extended over time to people that owned no property, to blacks, and even to women, precisely because in a giant, mostly empty continent, every person really did matter.

In short: demand for labor in America far outstripped supply. This led to higher wages and other rewards for workers, thus the famous American Dream.

Going the Wrong Way

For some while now, left-leaning writers have bemoaned the fact that the average American wage today is the same as in the 1980s. Usually, this is blamed on weak labor unions and not enough taxes on the top 1%. But that can't be the cause: the top 1% already pay around a third of all Federal tax collections while the bottom half pays nothing on net.

As far as labor unions, yes, some once-unionized manufacturing has moved to states in the South which don't allow union closed-shops. A whole lot more of it has moved out of the country entirely. How would stronger unions help? They'd just drive jobs to China even faster than they are moving now.

No, there's a far more fundamentally obvious and deeply politically-incorrect explanation for American wage stagnation: We have vastly increased the supply of labor without increasing the demand for it, so of course the price of labor has plummeted.

First, starting in the 1970s, women entered into the workforce in droves. Whether or not this was a good idea is a separate issue; the simple fact is that suddenly there were twice as many willing workers but the same number of people spending money. Supply increased, demand stayed the same, wages dropped. The modern American middle class family needs two incomes to provide what one worker was able to do in their grandparents' generation simply because there's more labor available.

Second, and more fixably, we made a policy decision to allow millions of uneducated immigrants. From the point of view of labor supply, it doesn't matter whether these immigrants are legal or illegal. All that matters is that they need to eat and want to work.

If there are millions of penniless Mexican peasants willing to work for next to nothing, of course every employer is going to pay them exactly that. This can't help but drag down wages for the next level up of semi-skilled workers because there's always the threat of giving just a wee bit of training to the unskilled illegal that lets him take his boss' job.

Same for the relationship between the next two levels, and the next, and the next... all the way up until you reach people with unique and difficult-to-duplicate skills, who are much harder to replace and who've not been nearly so harmed by the modern economy.

For any ordinary person in an ordinary job, though, tolerance of mass immigration has turned modern American into something like the Europe our forefathers sought to escape. For every job there are ten hungry workers willing to do it for less.

There is no frontier where anyone can go to make a life for themselves; from sea to shining sea, our businesses are trapped in a tight web of overregulation and overtaxation making it almost impossible for anyone not well-heeled to make a go.

Right Where They Want Us

So we see that four decades of generally liberal governance, and four+ years of extreme far-leftist governance, have put Americans right where our rulers want us: mired in desperation and insecurity. Very few people can be assured of having a job tomorrow or of finding a new one, because unlike throughout most of American history, there are many people just as qualified and far more desperate who want your job. And the foundation of this high demand for jobs is the vast over-immigration - not just illegal immigration, but mass immigration at all when we no longer have a frontier to absorb them.

Now, this isn't to say that all immigration is bad. We can use all the millionaires and foreign entrepreneurs we can get, and many other countries wiser than us are offering incentives to the well-heeled to come start a business.

But we absolutely do not need any more illiterate peasants; we have plenty of unemployed illiterate peasants of our own, thank you very much, and the only way to let them earn enough money to become more than illiterate peasants is to reduce the supply. Until we take this simple first step, neither our economy, nor inequality, nor America's unemployment problem are going to get any better.

The Purpose of Education 3 - Big Government and Big Money

Tue, 21 May 2013 14:03:00 GMT

In the first two articles in this series, we explored how STEM universities want to spread knowledge of their disciplines as widely as possible, whereas liberal arts institutions tend to be much more elitist and reserve their teaching only for that happy handful that can afford to go there.

We also showed that the value of education in the real world is not always obvious: McDonald's finds that standard high-school degrees produced at vast taxpayer expense don't produce people who can run hamurger joints, so the company educates its own employees at its own expense. Engineering graduates have no trouble finding gainful employment, but many liberal arts graduates have a hard time even finding work at McDonalds. Such profit-oriented educational systems make heavy use of the Internet to cut their costs. As Internet-based learning spreads, it's going to be more and more disruptive.

Clearly, the STEM universities have an educational goal that is more aligned with what's actually needed in the real world than the liberal arts institutions. If the goal of liberal arts colleges isn't to help their students find a job, and doesn't seem to be imparting wisdom anymore, what might it be?

Increasing Government Power

Ivy-league colleges like Harvard, Princeton, and Yale have supplied a disproportionate number of American Presidents as well as many lesser politicians. Many if not most of the professors at these colleges act as if the purpose of education is to roundly discourage any student from thinking that there's anything good about private business, and that only enlightened government can lead to prosperity of any kind. The faculties are overwhelmingly liberal in political outlook - US Senator Ted Cruz noted in a speech that when he attended Harvard Law School,

There were fewer declared Republicans in the faculty when we were there than Communists. There was one Republican. But there were 12 who would say they were Marxists who believed in the Communists overthrowing the United States government.

The best defense Harvard could come up with was a professor who claimed that they weren't really Communists, just social democrats, and that there were actually four Republicans on the faculty of around 150.

The Ivies are sincere in their hostility to business. Bill Gates, the founder of Microsoft, and Mike Zuckerberg, who founded Facebook, dropped out of Harvard. The Google Guys have maintained close connections to Stanford and MIT carefully cultivates connections to its graduates as they found businesses.

Getting Along by Going Along

It's not surprising that colleges tend to become intellectually and politically monolithic; the way one becomes a tenured professor is by being voted into that role by the professors who already have tenure. Tenure committees select people like themselves for permanent positions on the faculty, so this won't change any time soon.

Getting into the Ivies is so competitive that successful entrants have to have never, ever made a mistake - being less than perfect at any point in your life all the way back to kindergarten disqualifies you. Never having failed, Ivy graduates can't imagine themselves failing at anything. They're convinced that they're smarter than earlier politicians and leaders of any stripe and won't repeat their mistakes.

In contrast, by their very nature, business and engineering experience and education forces students to recognize and acknowledge their weaknesses. There has never been a budding engineer whose tower of blocks never fell down; there has never been a businessman who never had a product rollout fall flat. Part of the goal of business or engineering education is to rub students' noses firmly in the fact that they can very easily fail to force them to learn from those inevitable failures and do better next time.

Our ruling elites seem to be convinced that the failed politics of the past based on government control of the economy are just what we need. Why won't they fail again? Because our elites are that much smarter than all earlier leaders. If you don't believe they're that smart, just ask them.

This speaks to another aspect of the importance of humanities and history education: every single leader in all of history has failed, usually catastrophically. Napoleon was one of the greatest generals of all time until he invaded Russia and got wiped out. Alexander the Great conquered pretty much the entire known world - then died. Without an effective succession plan, his empire broke apart into several often-warring fiefdoms. Julius Caesar actually started an empire of remarkable strength and staying power, but it didn't benefit him that much personally.

If we could hammer this message home to our elites, they might start to have a more realistic view of their own potential and limits thereof. With history having been almost entirely abandoned as the record of "dead white guys" and thus not worth bothering with, how can they learn about reality?

Maximizing Power and Wealth

One reason the Chinese economy can expand so fast is that Chinese parents expect the educational system to prepare their children to accumulate as much power and wealth as possible. Chinese parents pour resources into their kids' education because they don't trust the government to fund their pensions.

The "One Child" policy has been in effect for generations. Its common for four grandparents to have had two children who have one grandchild. As people live longer, that one grandchild must support 6 ancestors. No matter how elder care is funded, Chinese kids better produce a lot - supporting all those retired ancestors will cost a fortune.

For many decades now, the U.S. government has offered subsidized student loans to anyone going to college. As seems typical for our government, it makes no attempt to distinguish between useful degrees like engineering, economically-useless degressions like Art History, and disciplines like Diversity Studies that make society poorer. Part of the reason so many modern college graduates are unemployed is because they unwisely chose to study things that no rational person cares about or is willing to pay for. Part of the reason our government elites are so determined to grow government is because that's the only way their friends can find cushy jobs with their useless or counterproductive degrees.

The Chinese know better: the top Communist Party elite is packed with science and engineering graduates. These people may not have much hands-on understanding of technology; but they are well aware of systemic risk and the high probability of failure. China has no shortage of well-publicised failures, from high-speed train crashes to bird flus to collapsing buildings, but the Chinese government seems to be making a much better effort of learning how to deal with problems than ours has been. That could be because, unlike our elites, the Red Chinese fully recognize that they and everyone around them can and do make mistakes, and that they need to constantly be working hard to fix them.

Social Engineering

Thomas Dewey, the father of "progressive" education, believed that the purpose of education was social engineering. He placed his allies in teacher's colleges where they spread this mantra through the educational establishment. The early progressives passed laws to ensure that no one could get a teaching job without approval from a teaching college operated by Dewy acolytes, so his ideas entirely control American public education.

Social engineering is a lot less work than imparting knowledge, so his ideas found a ready reception. In principle, it's a good idea for a country to have a common culture. To the extent that public schools train everyone in what it means to be an American, that's helpful. For the first few decades of progressive ascendancy, that's what they did, and to good effect: as we've seen before, Italian and Irish immigrants are today fully integrated into the fabric of America.

Unfortunately, recent progressives have decided that Iran is right and America is the Great Satan. Today's immigrants are "socially engineered" to emphasize their own grievances rather than aligning themselves with the importance of getting along with everyone here. The Boston bomber's evil deeds can be directly traced back to this progressive teaching style:

English teacher Steve Matteo at Cambridge Rindge and Latin High School put his Chechen-born student in touch with a friend who happens to be one of the top experts on Chechnya, UMass Dartmouth's Dr. Brian Glyn Williams.

That was two years ago. The assignment was to have each student in the very diverse class research their own ethnicity and write about it. Dzhokhar Tsarnaev, whose family fled the horrors of the Russian occupation, was about to learn about some harrowing things he escaped at a very young age.

Neither Mr. Matteo nor Dr. Williams told Tsarnaev to murder innocents nor would do so themselves. But Chechnya has an awful, bloody history. Is it really a good idea for impressionable students to study the horrors of the past halfway around the world instead of learning the reasons for the greatness of the nation in which they now live?

In addition to accentuating the negative, progressives believe that ordinary citizens aren't smart enough to run their own lives. That's the origin of Mayor Bloomberg's anti-liberty efforts to ban large soft drinks in New York City and of the War on Drugs. We see the same effect in Michelle Obama's efforts to force schools to serve healthy school lunches that kids won't eat. What business is it of the government to tell what you and your kids may and may not eat? Doesn't the government have better things to do with your tax dollars?

The hostility to business that permeates progressive education is one of the reasons businesses have to import foreign workers for high-tech jobs and why foreigners account for such a large fraction of all start-ups. The Economist reports that 40% of the Fortune 500 were founded either by immigrants or by their children.

Why can't Americans do this? They can, but they choose not to. For their formative years, they've been taught that business is bad and that they should find government jobs instead of working for greedy private businesses.

Enriching Unions

Once school teachers were allowed to unionize, union leaders decided that tax dollars allocated for education should enrich teacher's unions. To that end, unions lobby for mandates that increase school staffing levels, add layers of administration, override parental control, and urge other measures that increase the number of dues-payers without teaching the kids anything much. Studies show that, contrary to popular belief, more and more employees are being added to public-school payrolls even as educational standards slip ever lower:

Between fiscal year (FY) 1950 and FY 2009, the number of K-12 public school students in the United States increased by 96 percent, while the number of full-time equivalent (FTE) school employees grew 386 percent. Public schools grew staffing at a rate four times faster than the increase in students over that time period. Of those personnel, teachers’ numbers increased 252 percent, while administrators and other non-teaching staff experienced growth of 702 percent, more than seven times the increase in students. [emphasis added]

From a union boss' point of view, the only thing better than more teachers paying dues is more administors paying dues while not teaching anybody. Albert Shanker, notorious teachers union president of the mid 20th century, put it bluntly:

When school children start paying union dues, that's when I'll start representing the interests of school children.

Teachers unions have been successful in teaching this attitude to many of their members by producing large taxpayer-funded salaries while protecting teachers from any sort of responsibility for results. This has led to teachers lying about being sick so they could demonstrate in favor of unions at state capitals and to teachers falsifying test results to make themselves look good when voters forced testing on them against their will.

Unions have sought to keep dues flowing by giving money and support to Democratic politicians who accept failing public schools. The fact that their failure to transfer knowledge to our students has left our economy unable to compete without importing well-educated foreigners is irrelevant; the only thing that matters is clinging to money and power.

It's becoming abundantly clear that the goals of all too many major liberal-arts institutions do not align with anything that's good for the economy, for society, for the country, or even for the students themselves. Countless graduates have been sold a bill of goods, which they discover only too late when they try to find a job and nobody will hire them. These students are saddled with undischargeable debt that will hamper the rest of their lives, unless political pressure results in a taxpayer-funded bailout which will darken everybody's financial future.

But for all that so many colleges refuse to acknowledge it, there is a purpose in education, even of the non-technical sort. In the last article in this series, we'll talk about what that used to be.

Justice and the Justices

Thu, 16 May 2013 13:39:00 GMT

The Reader's Digest recently published an article on the people Americans trust most. The authors didn't use a particularly scientific methodology and a lot of the results can be interpreted in several different ways, but there was one striking observation:

We trust TV judges more than Supreme Court Justices. Straight-talking dispute settler Judge Judy (51%) had the highest score of all the judges on our list – including all nine Supreme Court Justices, and was closely followed by Judge Joe Brown (48%).

Your first reaction might be, "Well, that figures. American couch-potatoes are more engrossed in the fictional world on the boob tube than in reality!"

Perhaps that's true, but we think there's something more going on here. Consider what takes place on the TV judge shows. Two ordinary people come to the "court" with an ordinary complaint that anyone can understand - someone who didn't pay a debt, who sold shoddy goods, or who didn't keep a promise of some kind.

Nobody brings a lawyer. Nobody cites Latin phrases or obscure technicalities. Nobody brings in expert witnesses or mentions legal precedents. The disputing parties simply present their stories, the judge perhaps asks a few questions and examines whatever documents may exist.

Then a ruling is issued pretty much on the spot. The judge says who needs to pay or do what. The judge explains why, in simple terms anyone can understand. Almost all the time, the justice, or at least the logic, of the ruling is apparent to an ordinary rational person. Justice is seen to be done.

The Justice of Unjust Judges

Compare that to what goes on in real courts. Of course there are at least a few honest judges and even honest lawyers if only by statistical accident. Most Americans, though, have a general expectation that courts will rule for whichever side has the fancier attorneys regardless of the underlying facts of the case. No Americans expect justice to be done anytime soon; it takes years for most cases to wind their way through multiple levels of appeals. Even when justice is finally done, if it is, the rewards of justice don't match the lawyer's bill. The wronged individual has still not been restored even by a ruling in their favor.

What about what goes on at the high court? For most Americans, the question of what rights to their behavior or to marry each other homosexuals ought to have is a legitimate question, but the idea that there is somehow a right to homosexual "marriage" hiding in the Constitution unnoticed for more than two centuries is ludicrous. Yet not only are our most learned judges, counselors, politicians, and pundits treating this as a serious matter of debate, there is every chance that the Supreme Court might somehow rule that there is such a right! After all, they did exactly that forty years ago with Roe v. Wade: James Madison would sooner believe in flying pigs than that somehow he'd written a right to abortion into his Constitution, yet the justices managed to find it there all the same.

To the ordinary, un-learned American, watching the legal machinations of our court system is a bit like reading about what Wall Street financiers do. Somehow it works very well for the people involved, but it has no beneficial relationship to anything that happens in the real world. When they get it right, there's no good visible result on Main Street. When they get it wrong, disastrous things happen without warning to the little folks down here on the ground who had nothing to do with it.

Judge Judy, on the other hand - the guy who sold a lady a lemon was forced to make it right. The woman who didn't keep her promise had to make it good. Justice was done, quickly, cheaply, impartially, fairly, and visibly.

Once upon a time, all our courts worked that way. The fact that Americans trust TV's phony judges more than real ones who hold real court isn't a warning of American stupidity. It's a warning that our justics system has long since fallen off the rails and needs to go back to the first principles of justice, and that our Congress needs to return to the concept of the rule of sane, understandable, predictable laws on which this country was founded.