Paul Krugman’s space aliens won’t create jobs, repealing health control law will

This article was printed in the Boulder Daily Camera on September 10, 2011 in response to this question:

What do you think will help decrease unemployment and underemployment? What role do you think the government can, or should, play in encouraging job growth?

Space aliens attack!  Nobel laureate economist Paul Krugman says we need scientists to “fake an alien threat.”   ”A massive buildup to counter” the threat, real or not, would end the economic slump “in eighteen months,” he said. Dr. Krugman unwittingly shows how loony Keynesian economic “stimulus” schemes are.

As an EconStories rap explains: “If every worker was staffed in the army and fleet, we’d have full employment and nothing to eat. Jobs are a means, not the ends in themselves. People work to live better, to put food on the shelves. Real growth means production of what people demand. That’s entrepreneurship not your central plan.”

Repealing parts or all of last year’s health control law [HR 3590] would encourage real growth. One-third of small business owners sited the law’s requirements as the greatest or second greatest “obstacle to hiring more employees,” reports a recent U.S. Chamber of Commerce survey. Three of four business owners “somewhat agreed” that the law “makes it harder … to hire more employees.”

For example, the law compels employers to buy insurance for full-time employees.  In response, half of surveyed employers said they would “change their workforce strategy so that fewer employees work 30 hours or more a week,” reports Mercer consultants.

Is it merely coincidence that private-sector jobs growth stalled after health “reform” passed?  Economist James Sherk shows that in the fifteen months before “reform,” average monthly job growth exceeded 67,000 jobs. Since then, it has plummeted to around 6,500 jobs per month. Don’t blame alien abductions.

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Thanks to Grace-Marie Turner for her article: Repealing Health Care Legislation Will Create Jobs. That’s where I first read about a few of the health care bill references above.

 

Boulder & Denver bike-share: boon or boondoggle?

B-cycle is Boulder’s new bike share program. Denver’s B-cycle program is a year old. Does “B” stand for boon or boondoggle?  The Boulder program’s start-up costs included half a million dollars taken from taxpayers: half collected by the City of Boulder, half from federal “stimulus” funds.  Denver B-cycle received $210,000 from the “stimulus.”  Yes, B-cycle’s bikes and technologies do sound impressive. But if it’s a true boon, then it should have been able to raise sufficient start-up funds from investors, sponsors, and donors.

Some might argue that private funding could not have built B-cycle. But as economist Henry Hazlitt would say, B-Cycle “has in fact been built by private capital – the capital that was expropriated in taxes.”  We won’t see the goods, services, and non-profit ventures that never materialize because governments took money by force from people who would have spent it differently.

Potentially expensive bike maintenance may deter private investors from investing in bike-share ventures. As law professor Steve Clowney describes: “No individual bears a significant portion of the costs if they damage a bicycle … users have little incentive to take care of the bikes.”  The New York Times reports that sustaining Paris’s bike-share requires the repairing “some 1,500 bicycles a day,” or seven percent of its fleet.

Or maybe Montreal’s experience deterred investors. Because of high start-up costs, “the non-profit agency that runs the city’s bike-rental program … is running a $31.7 million deficit,” reported the CBC.

Voluntary donations, sponsorships, and investments should fund B-cycle. It should be a revenue source for Boulder and Denver, not an expenditure of taxpayers’ money. For example, they could charge B-cycle for placing “B-stations” on city-owned land.

A version of this article was published in the Boulder Daily Camera on May 21, 2011.

Thanks to Marc Scribner at the Competitive Enterprise Institute for his post on Washington DC’s bike-share program.

The Henry Hazlitt quote is from his excellent book, Economics in One Lesson, which the Foundation for Economics Education has put on-line.

Men’s suits at 1910 prices! … In gold, not U.S. dollars.

A man’s suit costs about the same today as it did 100 years ago. Not in dollars, but gold.  For at least a century, an ounce of gold could buy you a quality man’s suit. In 1910 the suit would cost around $25, according to the Morris County historical prices survey. Today an ounce of gold is around $1,400, or a nice suit at Nordstrom.

Why tolerate our government’s monopoly on money? Money is a medium of exchange and a store of value. But our government produces inflation-prone fiat money. The Federal Reserve devalues your earnings by effectively printing more bills. The Fed also manipulates interest rates, which promotes economic booms and busts fueled by malinvestment. A million YouTube viewers learned this from the hilarious rap video, “Fear the Boom and Bust.”

Money wasn’t always like this. My 1935 dollar bill says “silver certificate” across the top and “One dollar in silver payable to the bearer on demand” under George Washington’s portrait.  A dollar was a unit of measure — a specific weight of gold or silver. A dollar was a certificate of deposit for a real commodity with stable value over time – independent of its use as money.

If you like fiat money like today’s U.S. dollar, fine. But that’s no reason to support its having a government-granted monopoly on money. Let dollars compete with other monies, such as those backed by previous metals, in a competitive market, as 2009′s Free Competition in Currency Act would allow.

The Boulder Daily Camera published this article on December 18, 2010.

Further reading:

• What Has Government Done to Our Money? by Murray N. Rothbard. Full text and excellent audio version (you can download the mp3s) on-line at Mises.org.
• “Is the Gold Standard Still the Gold Standard among Monetary Systems?” by Lawrence H. White, Cato Institute Briefing Paper, 2008.

Hollywood hates free-markets: Wall Street: Money Never Sleeps edition

From Reason.tv:

Oliver Stone’s uber-villain Gordon Gekko is back in the new film, Wall Street: Money Never Sleeps, which (surprise!) features greedy capitalists behaving badly. It might remind you of Avatar, Mission Impossible 2 or roughly a zillion other films in which capitalists destroy the environment, concoct killer viruses, harvest organs, and cover up murder in order to feed their lust of profit. Even when capitalism isn’t the primary target, the representatives of commerce are often flat-out repulsive (think Jabba the Hutt).

Perhaps it’s ironic that Hollywood filmmakers practice what they preach against. Sure he palls around with socialist dictators Fidel Castro and Hugo Chavez, but there’s no doubt Oliver Stone hopes to rake in obscene profits with his new flick.

See also Alex Tabarrok’s Wall Street Journal op-ed:  Capitalism: Hollywood’s Miscast Villain – Why the film industry is so good at getting business wrong.

(via Christian Toto at Pajamas Media)

Tax breaks are not tax subsidies

Too often I’ve heard people refer to tax breaks or tax exemptions as “subsidies.” Freeman Editor  Sheldon Richman does a great job explaining the difference.  Some excerpts:

A subsidy is a cash grant from the government. … government intervention enables people to obtain money they were not entitled to; the flip side is that someone else is deprived of money he is entitled to, or that he would have had legitimate access to.

In contrast, when someone is given any kind of “tax break,” he keeps money he is entitled to. … if a person retains some of his own money because of a government action, we should not condemn this as a subsidy.

Subsidies should be opposed. Opportunities to keep one’s own money should not.

Needless to say, government can create great mischief by determining who can and cannot keep his own money. If mortgage interest is tax-deductible but rent is not, government encourages home buying. It is not the government’s function to decide the best way to live and then to use the tax system to manipulate people into living that way. …

No one should be begrudged the opportunity to keep his own money. In the face of a discriminatory tax cut, we should point out that it ought to apply to everyone (who pays taxes), and not just a narrow group of taxpayers. Efforts to widen exceptions may not succeed, since that would defeat the politicians’ purpose, which after all is to manipulate private behavior. But at least we can pound home the point that it’s better for people to spend their own money for their own objectives.

Read the whole article: Tax “Breaks” Aren’t Subsidies in The Freeman, published by  The Foundation for Economic Education

Proposed Boulder plastic bag ban: authoritarian environmentalism that suffocates freedom & creativity

Background from Daily Camera:

Shopping in Boulder could get greener if some local students have their way. Inspired in part by a ban that passed in San Francisco in 2007, New Vista High and University of Colorado students are drafting an ordinance that would prohibit businesses — such as grocery stores — from using petroleum-based plastic bags. What do you think of the students’ idea?

My response, published in the January 16 edition:

If plastic bags are banned, would stores provide paper bags instead? This wouldn’t be “green.”  The Washington Post reports that compared to plastic bags, paper bags require “more than four times as much energy to manufacture,” generate “70 percent more air and 50 times more water pollutants,” and require 85 times more energy per pound to recycle.  In landfills, “plastic bags … take up so much less volume than paper bags,” says archeologist and landfill excavator William Rathje.

Or how about reusable canvas bags?  I use one from Vitamin Cottage, but should I?  Canada’s National Post reported that “two independent laboratories found unacceptably high levels of bacterial, yeast, mold and coliform counts in the reusable bags.” A nice “environment” for groceries. In addition to food poisoning, “significant risks include skin infections such as bacterial boils.”  Don’t forget, washing these bags consumes energy and resources.

And what about poor people?  No more free trash bags. Their grocery bills will go up, as stores will raise prices to cover costs of buying pricey paper bags. Those who use fabric bags would also spend more on laundry to keep them sanitary.

Most fundamentally, banning plastic bags is an intolerant strain of authoritarian environmentalism. It violates the rights of consumers and business owners to live as they please.

The students should promote creative voluntary ways to reuse plastic bags.  For example, as a college freshman in 2001, Tom Szaky founded TerraCycle, Inc. Its slogan: “Send us your trash! We’ll make it into cool products!”

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Not included in the article:

TerraCycle’s totebag made from Target shopping bags.

Should we be forced to fund the “bag police” to stake out grocery stores to make sure they are not (gasp) giving away plastic bags? It would OK to sell them, though.

Other resources:

Government debt: the state lives at the expense of everybody

The Daily Camera (Boulder) published my response its  question about the biggest news story of 2009:

Government debt. In June Fortune reported that “chronic deficits are putting the country on a path to fiscal collapse.” The United States Government debt exceeds $12 trillion, or almost $40,000 per U.S. citizen. By 2019 it will exceed $17 trillion, according to the Congressional Budget Office. Just the interest on the national debt gobbles up more than 40 cents of every dollar you pay in income tax, reports the Wall Street Journal.

We`ll be poorer. To pay off the debt and interest, politicians will probably raise your taxes, encourage inflation, or both. Those tax dollars could have been used to innovate and create new jobs. They won`t exist. In addition to be being a hidden tax, inflation drives up interest rates, and hence the cost of financing new business ventures with loans.

Last week 11 Senators co-sponsored a “Bipartisan Fiscal Task Force” to “address the nation’s long-term budget crisis.” But earlier this week nine of these Senators (including Michael Bennet and Mark Udall) voted for a pork-laden $1.1 trillion spending bill. Hold on to your wallet — politicians cannot resist buying political favors with your tax dollars.

As economist Frederic Bastiat observed long ago: “Everybody wishes to live at the expense of the state, but they forget that the state lives at the expense of everybody.“

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Thanks to Russ Roberts at Cafe Hayek for the linking to the Bastiat quote.

On a related topic, Paul Hsieh of Freedom and Individual Rights in Medicine had a “to the point” published in Sunday’s Denver Post in response to the Democrats’ proposed debt-limit hike:

Congress’ plan to cut the deficit by raising the debt limit now, then reducing spending later, is like trying to lose weight by eating a box of chocolate chip cookies now, then promising to exercise next week.

So if you have an opinion that you can express in 40 words or fewer, send it to the Post!

Paul Krugman’s partisan economics

Don Boudreaux submitted a great letter to the editor about Krugman’s partisan economics. Good stuff.   My posts about Krugman and health care illustrate why I lack respect for the guy, but Boudreaux’s letter does this quite efficiently.

(Thanks to Justin Longo for the pointer.)

Don’t just “do something,” stand there

From Russ Roberts‘ op-ed in the Wall Street Journal^*:

Back in March, Henry Paulson, Ben Bernanke and the experts assured us that Bear Stearns had to be propped up. If not, the whole system could come crashing down. It is crashing down anyway. Just as in the 1930s, there is no evidence that the policy makers have any understanding of what they are doing. They need to make way for the natural forces of repair.

They need to let housing prices fall. They need to let firms go bankrupt. They need to let firms that are healthy thrive. They need to let healthy firms buy the sick firms. It is time to let the imprudent fail and the prudent pick up the bargains.

A recession is coming (or has already arrived) no matter what happens in Washington. The question is whether the attempt to forestall it is going to make it worse and turn it into another Great Depression.

By acting without rhyme or reason, politicians have destroyed the rules of the game. There is no reason to invest, no reason to take risk, no reason to be prudent, no reason to look for buyers if your firm is failing. Everything is up in the air and as a result, the only prudent policy is to wait and see what the government will do next. The frenetic efforts of FDR had the same impact: Net investment was negative through much of the 1930s.

(via Ari Armstrong)

^*From last October…somehow I missed it.

Paul Krugman: got a problem, pass a law!

Economist David Henderson articulates one of my frustrations with Paul Krugman:

Paul Krugman seems never to take account of the findings of public choice. Even a basic understanding of public choice would make him question his views about how effective government can be in achieving good things. This comes across clearly to those who, as I do, read over 30 percent of his columns in the New York Times. He seems to believe that if one can conceive of a government solution to a problem, then all that has to happen is that the legislative bodies pass a law to spend money on the problem and the problem will be fixed.

Read the whole post here.  Henderson is the editor or the Concise Encyclopedia of Economics, available on-line here.

Speaking of public choice, here’s a succinct summary from a Medicare reform report:

Like for-profit firms, politicians must compete to survive. But the nature of that competition forces them to weigh political costs against political benefits – where “costs” and “benefits” are measured in terms of impact on the next election. Private firms competing in a marketplace, by contrast, must compare economic costs with economic benefits.

For more, see here.