Kill or Be Killed

I’ve long thought that the death penalty as implemented here in the U.S. is expensive, unpopular, ineffective, inaccurate, and ought to, itself, be put down. It’s popped up in the news again lately, and parts of the recent flurry of comments are interesting to note.

It looks like I may have to revise my opinion of ‘ineffective’. Naci Mocan and R. Kaj Gittings have a few papers investigating links between executions carried out vs. future homicides committed. They finds that executions cause fewer homicides, while commutations of sentences cause increases. Their second paper finds that crime may be preventable with the proper conditions that produce incentives to work for gain legally.

From the AP:

“Science does really draw a conclusion. It did. There is no question about it. “The conclusion is there is a deterrent effect. The results are robust, they don’t really go away. I oppose the death penalty. But my results show that the death penalty [deters] — what am I going to do, hide them?”

I have to applaud Prof. Mocan for sticking to his observations when they fly in the face of his personal views. Parts of both papers show the echoes of reviewers and emotionalists attempting to chastise him for publishing findings that are inconvenient to their pet causes:

“Although these results demonstrate the existence of the deterrent effect of capital punishment, it should be noted that there remain a number of significant issues surrounding the imposition of the death penalty. For example, although the Supreme Court of the United States remains unconvinced that there exists racial discrimination in the imposition of the death penalty, recent research points to the possibility of such discrimination. Along the same lines, there is evidence indicating that there is discrimination regarding who gets executed and whose sentence gets commuted once the death penalty is received. Given these concerns, a stand for or against capital punishment should be taken with caution.”

The fact that Prof. Mocan has to add that to his papers is a sad demonstration that his colleagues are no longer scientists (even when loosely applying that term to a science as soft as economics), but activists — determined to further their cause regardless of the actual empirical data. Nearly a full page of his second paper is spent explaining that ‘just because his findings show a deterrent effect, that doesn’t mean that everyone should drop what their doing and kill a death-row inmate.’ This shows that his colleagues, newcomers to the world of moral reasoning, are still adjusting to how to deal with research that conflicts with what they decided the result “must be”.

So capital punishment is apparently slightly effective. It’s still expensive, unpopular, and ridiculously inaccurate. (Way to Go, Illinois! You’re #2!) It will be interesting to watch the lawyers-cum-researchers stretch their pundit wings and opine back and forth about this for a few years before deciding to sue each other into silence. The flurry of comments this year are significant because the author is stating the unfashionable opinion (but still distancing himself personally from it). The real state of the practice in this country will likely go untouched by these numbers, as most people approach this question emotionally and morally; they are usually immune to statistics-based arguments from either camp.

So for those of you scoring at home, that’s +1 for Prof. Mocan — he gets his little attention-boost like a good news-seeking lawyer/researcher. ‘Law and Economics’ reviewers get a -1 for demanding all results be fashionable. But overall, capital punishment in the US still gets a really really low score.

-AI

 

Your Tax Dollars At Work

I presume that most of our beloved readers have day jobs—the kind where you show up, do some work, and get some money in exchange. I presume further that for most of you, if you were paying the invoice for important products for work, and sent the payment to the wrong company, consistently, you’d probably be in trouble. Well, that’s a euphemism…you’d almost certainly be out of a job.

And if your bank or employer routed your direct-deposit paycheck to the wrong account, certainly that would be a major issue. And if they did it for dozens or hundreds of customers, that would, you’d think, lead to local, state, or federal investigations, class action suits, etc.

So why does the IRS get a free pass?

Recently, the IRS has announced, pretty nonchalantly, that they’ve mailed stimulus checks to the wrong addresses—well, the envelopes are addressed correctly, but the checks inside are for someone else:

http://ozarksfirst.com/content/fulltext/?cid=21064
 

Well, at least that’s only for physical checks, at least direct-deposit is fine. Or not:

http://www.newsday.com/services/newspaper/printedition/thursday/longisland/ny-listim155686297may15,0,159403.story
 

Well, mistakes happen, and I’m sure they’ll get it straightened out. Then you’ll get the right amount, finally. Unless you don’t:

http://www.wsmv.com/money/16272616/detail.html
 

But, at least, unless you’re one of the unlucky few who had their checks misrouted, their money deposited in some stranger’s account, or the wrong amount credited them, well, then you’ll get your money according to a clear schedule. Unless you are among the 20 million who won’t:

http://www.freep.com/apps/pbcs.dll/article?AID=/20080515/COL07/805150434/1002/BUSINESS
 

Yes, anyone who took a refund-anticipation loan from their provider, or deducted money from a refund to pay for tax preparation, or split a tax refund across more than one bank account, or did anything else the IRS decides to come up with, those unlucky folks will get their checks sometime, maybe, if they’re lucky.

Well, they call them stimulus checks, and I’m stimulated alright…to get rid of the IRS! Or at least make taxes simple, straightforward, and clear.

What about you?

 

End the Tax Nightmare: Red Herrings and True Reform

Well, once again the dreaded Tax Day has come again in the United States. As millions scramble to finish their returns at the last minute, and millions more are reminded for a moment about how painful, frustrating, and stupidly complicated this year’s taxes were, perhaps you will give me a moment to indulge a fantasy:

Imagine there’s no 1040
It’s easy if you try
No capital gains tax
Eating away our pie
Imagine all the people
Keeping all their pay…

Imagine there’s no AMT
It isn’t hard to do
Nothing to evade or cheat for
And no Schedule-C too
Imagine all the people
Earning cash in peace…

You may say I’m a dreamer
But we’re growing every day
I hope someday you’ll join us
And the world will keep its pay!

(With no apologies to Lennon, that socialist twit.)

While many taxpayers are lucky enough to use 1040-EZ (as long as they don’t mind missing out on half the deductions allowed), anyone who has ever: bought a house, received any money for contract work, sold any stock, earned any sizable amount of interest, earned any dividends, used a car or possession for business, or done any of a hundred other fairly common things knows the joy of the full 1040. And that’s a joy that they get to enjoy for a longer time each year, as the code grows in complexity.

This year, in fact, we were treated to the wonderful spectacle of a recursive function in the capital gains worksheet: Box 22 depended upon Box 10, Box 10 depended upon Box 37, and Box 37 (naturally) depended upon Box 22. A literal Catch-22 right there in the 1040! So what did the taxpayer do: why fill out boxes in order over and over again until the numbers stopped changing. Yes, this year’s tax form required iterating over a recursive function. It’s official: advanced mathematics is now required to accurately fill out an American tax form. I guess we should just be thankful the function converges…this time.

So, enough whining. What should we do?

Scrap the damn tax code!

No band-aids, no simple patches like the mid-80s reforms, no more kicking the problem out for another decade or so. Scrap the cobbled together, rickety, ideologically-driven, overly-intrusive, economically regressive thing, and start again.

But what to replace it with? The Flat Tax? The Fair Tax? The As Yet Unknown Tax? No Federal Tax? (That last one’s for states rights fanatics like Angry Midwesterner.) Before I try to lay out a positive, let me shoot down some perennial red herrings:

We can’t have a [flat/Fair/no] tax – it’s regressive!
Now this objection can have a reasonable meaning, which is: the very poor must use the vast bulk of their money for necessities, and the very rich use almost none, so a tax code should respect that each tax dollar is a greater burden on the poor than the rich. And that reasonable objection has a simple and reasonable answer: set a personal deduction large enough to ensure that the poor pay little or no tax.

Sadly, most fans of “progressive” taxes don’t give a damn about the poor—they’re besotted by the sin of envy and want to soak the rich and damn the cost! For these folks, the answer above is worthless because it only benefits the poor, it doesn’t punish those evil, evil rich. You’ll pardon me if I see no reason to respect the wishes of a bunch of folks eager to punish the deadly sin they hate (greed) by enshrining the one they love (envy) in law.

Any tax code we come up with will just get hijacked again—and be just as complicated soon!
This is actually very reasonable, and a useful cautionary warning. But as an objection to doing something it’s pretty wrongheaded. Just because every system can be abused doesn’t mean that some aren’t better than others. Given that the current code kills a sizable forest every time they need to print a hard copy of it, I find it very hard to believe that much simpler systems will somehow be easier to corrupt.

Now is not the time for radical reform—we have massive deficits and are in a recession!
No, now is exactly the time for change, especially if those things are true. Taxes are, almost always, regressive economically: the more taxes the less growth and the greater the chance of recession. Lower taxes, and you spur growth. Ah, but simplify taxes, and you reduce the burden of complying ($200-$500 billion dollars annually), which lowers the effective tax burden (taxes plus fees to file taxes). So a simpler system would spur growth even without lowering taxes. Anyone who’s run their own business, done contract work on the side realizes this. The current system burdens the self-employed with significant costs.

So, away with these objections, and on to the glorious future!

Well, actually, I don’t have a nicely laid out, detailed plan for tax reform any more than anyone else does. But, to avoid the label of coward, I’m willing to stick out my neck and recommend a general outline of one. First the general principles: the poor should not pay tax (they’re poor), those who work should not be punished (they’re industrious), those who invest should not be punished (they generate capital), those who start businesses should not be punished (they are the engine of growth).

So, the plan:

1. A flat income tax of 25% Easy to calculate, easy to file.
2. A standard personal deductible of $20,000 per adult and $5K per child. Make less than that? No tax for you. Creates these effective tax rates:
   

   Effective Rate by Income
   	$20K	$35K	$50K	$100K	$250K	$1 million
   Single	0%	11%	15%	20%	23%	24.5%
   Single Parent (2 children)	0%	3.5%	10%	17.5%	22%	24.25%
   Family (2 children)	0%	0%	0%	12.5%	20%	23.75%

   Progressive!

3. No capital gains tax. (That’s right: 0%! Don’t whine too much though, lefties, look on down the page.
4. No tax on interest or dividends. (That’s right: 0% But wait, progressives, you’ll get your day!)
5. No corporate taxes. (That’s right: 0% here too! Think about it: corporations don’t pay taxes, they just pass those taxes on to shareholders, customers, or employees. If they simply avoid taxes through clever bookkeeping. Breathe steadily, lefties, good news follows!)
6. Earned Income Tax Credit: reward the working poor who are stuck, for the moment, with low-paying jobs. Exact mechanic to be worked out, but we should be generous while always making it more profitable to take a better job!
7. Nothing else. No other deductions. No tax loopholes. No tax shelters. No tax-free trusts. No mortgage deductions. You get a personal deduction, you pay 25% on what’s above it. That’s it.

Now, before I’m hauled outside, doused in environmentally friendly fair-trade organic vegetable oil, and set alight, let me point out why this is a win for the soak the rich crowd:

Who pays taxes in America? Despite campaign rhetoric, it ain’t the poor. In fact, it’s the rich. The top 10% of income earners (those making $103K and up) control around 46% of the wealth but pay over 70% of the taxes! This means, of course, that most of those nice deductions, exclusions, etc. benefit the wealthy. A 25% rate might seem like a tax break, since the current top rates range from 28% ($77K-$160K) to 35% (above $350K), but those rates on on taxable income—after deductions have had their day. A 25% rate on all income above $20K should compare pretty favorably to 28% on income left over after well above $20K in deductions have been applied.

So why would the rich approve? Because a flat tax allows them to calculate their burden easily, estimate the economic costs of various options easily, avoid expensive tax preparation and record-keeping, and eliminate the expensive audits or penalties which arise from the inevitable mistakes in the current ridiculously complicated tax environment.

And, best of all, eliminating compliance costs and flattening rates will spur an economic boom. Wealth, individual income, and tax revenues will rise, and the tax base will grow as new workers enter the pool.

My numbers are rough, and doubtless need fine-tuning. We’ll need a bunch of work to get things right, and we’ll have to work across the political divide to get a tax code that rewards hard work and investment without unfairly hurting hard-working blue-collar folks. But we can do it! We can revolt against this bloated tax code shoved upon us by a political class of lawyers and lobbyists and return to something simple and sensible. Fourteen states have done it, seventeen nations have done it, and we can do it too!

You may say I’m a dreamer
But we’re growing every day
I hope someday you’ll join us
And the world will keep its pay!

 

Nancy Pelosi, Speaker of the House of Ill Repute

Speaker of the House Nancy Pelosi	Venezuelan President & Dictator Hugo Chavez

 

Yesterday, Nancy Pelosi, Speaker of the House, refused to allow an up-down vote on the passage of the Columbian Free-Trade Agreement (HR 5724) as authorized under the Presidential Fast Track Authority. Speaker Pelosi has instead modified House rules, ex post facto, so that the vote required by the fast-track provisions can be circumvented.

This despite the fact that the House Democrats have repeatedly, through more than 250 consultations with Columbia, insisted on and won additional language in the trade agreement forcing Columbia to provide more protection for trade unionists in the country — in the past it has been open season on organizers, though through no fault of Alvaro Uribe, the President of Columbia. Thank FARC. President Uribe has, in fact, worked to reduce this violence and has delivered impressive initial results, reducing violence by more than 80% since 2002. This is also an agreement which Charles Rangel, Chairman of the House Ways and Means, and Bill Clinton support, as does President Bush. It is good for the United States and good for Columbia. Even Hillary Clinton’s staffer Mark Penn is^H^H was working towards this bill’s passage.

The standard media drivel is that this is the work of the labor unions in the United States, but, as with all things political, the phrase ‘cui bono’ comes to mind. 90% of Columbian goods arriving in the United States are duty free and the balance are subjected to very minimum tariff. US goods in Columbia are assessed a 35% tariff, which would be eliminated as part of the Trade Agreement. This means that companies producing goods for Columbia would be more price competitive, be able to sell more goods (in what apparently is a pending recession), and would be able to hire more union labor to produce the goods. In other words, this trade agreement is a good thing for the labor unions. The unions do, however, make a good smoke screen. What is going on under the smoke should give any American a case of the chills.

Nancy Pelosi, acting in her persona as Secretary of State, visited Damascus last year and presented the House position on national policy. It was argued at the time that this was technically treason and in fact has been previously prosecuted as such under the Logan Act of 1798. Clearly, Speaker Pelosi feels that it is in the interest of the House to establish foreign policy.

In light of the evidence of other Democrats (Kennedy D-MA) making arrangements with Hugo Chavez, perhaps more is going on here than meets the eye. Could it be that the real reason for dumping the Columbia Trade Agreement is that Pelosi has made a deal with Chavez to attempt to weaken Columbian President Uribe. It’s no secret, since a suitcase full of money and computer files revealed that Chavez is bankrolling and providing strategic intelligence to FARC.

Should all this be suprising? No. The anti-war left did it to Cambodia, stiffing our Cambodian allies after we pulled out of Vietnam, at a cost of about 1.7 million deaths at the hands of the Khmer Rouge. They are seeking to do the same in Iraq when we know Iran is actively seeking to destabilize the Iraqi government. What consequence is Columbia against sad examples of this magnitude?

Not supporting Columbia, especially when President Uribe has compromised so much at the request of the Democrats in the House, is as shameful an act as been seen in a decade.

 

One Key to Find Them All – Is This Our Future?

First, review this fine cautionary tale available here, courtesy of the ACLU:

http://www.youtube.com/watch?v=RNJl9EEcsoE

Now, I am no great fan of the ACLU, but credit where credit is due, this piece sums up the dangers of all those clever national IDs, government administered programs, linked databases, and GPS-enabled devices nicely. In fact, just two short years later, much of what is portrayed already exists:

• businesses use caller-ID to recognize phones and link to customer information
• even if the government didn’t give it out, businesses would certainly use a national ID number as a key—just as they use the SSN currently
• your home address, birthday, name, etc. are all already keyed to the current equivalent of a national ID—your SSN
• where you work is almost certainly on file—didn’t they ask the last time you applied for credit or a loan?
• cell phones with GPS currently do broadcast your location to services that request that information—unless you configure them not to
• businesses already assign delivery areas or prices by risk of the neighborhood—as those living near shady areas know—and as crime stats become more instantly available, this can only increase
• as businesses partner to offer shared customer incentives, exchanging information about recent purchases and coupon offers is becoming commonplace
• certainly whether your cards are maxed out is easy—a quick query to each card could do that

And some things, which have not yet come to pass (as it were) are terrifyingly likely:

• currently legislation protects your health care information, but either government-run healthcare or single-payer schemes would require releasing it to the government at the least
• legislation to allow the government to regulate food and lifestyle choices for health is already proposed—once the government’s actually paying for health-care, what will happen
• currently the health-care industry and insurance industry would love to be notified about people’s purchases and force them to sign waivers—unlike them, government can actually enforce such desires
• in our climate of constant fear of terror attacks, does opening travel itineraries to public scrutiny seem farfetched?

Horrifyingly, the only thing which seemed utterly ridiculous was libraries ever voluntarily making your reading choices public. But amazon.com on the other hand…

Clearly some of what is portrayed is fine, even useful, but some is frighteningly Orwellian.

So where should the line be drawn? Where does the scenario presented cross the line from convenience to surveillance? As technology advances it seems increasingly impossible to effectively compartmentalize information, so should we assume that whatever the government knows about us will find its way into private hands? And just how much should the government know about us, anyway?

Discuss amongst yourselves!

 

Election Issues

Sometimes it takes somebody to step back from the tactical morass of the pending primaries and presidential elections and take a look at the significant issues. I am referring to actual decision trees that must be traversed to establish policies that affect the United States, as opposed to emotional and class-divisive issues that are used for political short-term electoral positions.

Now political pundits will say that there is nothing other than the tactical political position — after all, the goal is to get elected and you can’t resolve real issues if you aren’t in a position of power or authority. But candidates mired in the short term tactical issues — addressing irrelevancies for a point here or there against their opponents — can become intellectually bankrupt of vision. Then, even if elected, they cannot address the real issues, or perhaps have compromised their political capital to the extent they are totally ineffective.

By and large, I want to address issues that can be managed in some concrete fashion, not issues that parties believe should be managed. Party issues that are litmus test issues, such as abortion, cannot have a resolution in the current political system. 40% of people oppose abortion, 40% are “pro-choice”, and the rest either don’t care or have mixed positions. Given this distribution, any executive is not going to be able to generate a policy that has an immediate impact on the United States. One might be able to create an environment where one position or another might be enabled in a future act, but such environments are very fragile. The issue of stem cells is a case in point — for all the posturing, the issue became irrelevant when Japanese scientists persuaded ordinary skin cells to transform back into undifferentiated stem cells (and with the added benefit that they were donor specific.)

So enumerated below are some issues and my tags:

Abortion — (easy since I’ve already addressed it in brief) Doesn’t matter. Can’t be resolved in the current system. Trying to make this a plank is a waste of time. Yes, there are moral and ethical issues on both sides and the current treatment is inconsistent and there are deep feelings on both sides. Doesn’t matter. Irrelevant.

Immigration — The United States needs to get its act together here. We have two contradictory processes at work that need to be reconciled. Our food supply is dependent on manual labor imported from outside. To increase the pay scale to the point compatible with a job an American Union Worker would take will increase the cost of food. Economically we are chained to cheap imported labor. The presence of people in the country who exist outside the legal system creates massive economic costs, yet it still somewhat to our benefit to educate and care for a certain number of these people — the cost of not doing so may be greater still.

Further, much of America’s growth is due to legal immigration, its innovation due to contributions from immigrants. From the technological and innovative point of view, why would be want to train and educate students from other countries, and rather than employ them here with a H1B, send them back to India, or China, or Pakistan where they can use what we have taught them to develop competing businesses.

The current set of immigration policies are horrible with no consistent underlying vision or plan. We need to restore the United States to that land of opportunity that calls people from all walks of life to participate in achieving their dreams, and makes them want to be legal participating citizens in the American democratic process.

The Plank: Recognize that America is built on immigration and adjust policies to reflect this fact. Increase or eliminate H1B visa limitations. Devise a guest worker program as a means to satisfy our current economic dependency while at the same time requiring such workers to exist within our legal framework (i.e., valid driver licenses, auto insurance, immunizations, etc.). Finally, enforce the subsequent laws.

Business Investment — The current governmental bureaucracies (both State and Federal) have created an environment where investment is going elsewhere: London, China, Russia. Our policies and laws like Sarbanes-Oxley have made the hurdle of listing in the United States financially onerous. The FDA has made developing new drugs near-impossible with the result that corporations are being fined millions of dollars for reporting their research protocols to doctors (off-label touting is a crime); deciding drugs need not be approved because existing drugs are already available (competition anyone?); and generally making the process so complex and lengthy that the evil pharmaceutical companies have to charge an arm and a leg to break even of the research and development. The Justice department obtains some of its own budget from the fines levied in actions. (oops)

These, and many more government bureaucracies have to be checked, reduced or eliminated. The government can and should regulate commerce so that the playing field is level, but by and large, issues such as who can compete should be left to the market to decide.

The sub-prime/securitization/derivatives financial liquidity crisis is providing another opening for government to over-regulate. The market is already sorting out (in the British SAS sense of the phrase) the people who were stupid. Banks are moving assets back to their balance sheets. Hedge funds are unwinding and assets are being marked to real market value. Government interference here is what created the mess. Let’s not multiply the problems.

The plank: The Government’s role should be to provide transparency. Hold hearings, investigate processes and systems but without moralizing and demonizing the industries. And then do nothing while the system, now aware of the problems, corrects itself.

In general, any law passed by Congress establishing a regulatory or oversight mission (and its associated bureaucracy) needs a sunset provision and a requirement for periodic review to determine whether its still needed. Establish a goal to cut by 10% annually both the budget and employee count of every major department. (The Jack Walsh method.)

A Rational Tax Policy — The current situation is not sustainable. The class-based tax warfare must stop. Now we have the situation where the top 1% of the country’s earners pay 39% of the Federal income tax; and that 60% of the people pay less than 1%, if any. And what do we hear from Congress: “Taxes need to be more progressive.” and “We can’t have executives making $30 million dollars.” and (of course) “We have to ensure that the rich pay their fair share.” So what occurs when 0.1% of the earning population pays 99% of the income tax? What happens if they get pissed off and leave? (oops!)

Also, it is unconscionable that a PhD in accounting and mathematics, let alone a typical citizen can’t read their tax return instructions. The entire system (and the IRS) needs to be abolished and replaced with a simplified taxation system that requires no more than one page to fill out. And keep Congress out of it. Their attempts to “fix” things got us into this mess. Remember the AMT, supposedly legislated to insure that 140 people who paid no tax forty years ago, never ever got a free pass again? And now 30 million Americans have to figure their taxes twice and pay because they are now “rich”!

The Plank: Set up a commission to oversee the collection of taxes — ten members max — like the Fed. Make any revision to the code require a supermajority of 80% Congress. Make it flat or at most two tiered with no exclusions. Most people would pay a higher rate just to not fill out the forms ( or pay their tax accountants to do it for them — they would save money.) Dump the AMT, eliminate capital gains tax or any reinvestment double taxation. Simplify — forbid social reform and manipulation via taxation.

The War in Iraq — Doesn’t matter. We are there, we can’t leave until its stable. Why beat a dead horse. We kill more teenagers on the highways than in the armed forces. Fix foreign policy and this will go away. Irrelevant

Foreign Policy — Which one? The White House, The State Department, The Trade Office, the CIA?

The Plank: Downsize the bureaucracies and reduce the competing agendas. Let’s get some consistency in the message America sends to the rest of the world. Like Patrick Swayce in Roadhouse: Be nice, be nice, be nice until it’s time to stop being nice. Let’s treat Russia and China and other countries with respect and some understanding that they have legitimate concerns. America, for better or worse, is a superpower and is likely to remain so.

Nuclear Proliferation — Doesn’t matter. The first world knows this through detente. The third world has to learn. And it’s not as if we can really do anything about it — any physics grad with some practical engineering experience can do it.

Few alive today have an understanding of the effects of these weapons. If a state uses one against another state, that state is toast. Self-correcting problem. Irrelevant.

The Judiciary — At first I was going to assign this a ‘doesn’t matter’ but I rapidly came to the conclusion that it does in the long term. Two things:

Any president should have the right to select and should have the expectation that his selection be confirmed unless there are really significant problems with the choice. By problems, I mean competency, legal and qualification problems, not fundamental philosophical differences. When the people select a president through an election, they are (hopefully) voting for a vision and a philosophy and they expect that that vision will have its day in the sun. Selecting like-minded people is an executive’s prerogative. This includes judges and attorneys-general. This is part of the implementation of the vision (and philosophy). Using the confirmation process as a weapon deprives the People of the United States of their choice of a vision. Conflicting visions each deserve a chance so confirmation should be competency-driven instead of philosophically-driven.

Since certain judicial positions are life positions, judicial appointments establish long-term trends and enable conditions for follow-on legislation by establishing the interpretative environment for that legislation. When the judicial system is strictly constructionalist, this does not matter, but whenever judges use their authority to bypass legislative strictures, and have become ‘activists’, different concerns arise. For those who believe that certain positions are warranted and have an intrinsic value independent of that determined by the will of the people (as expressed by a majority of the legislative body), judical activism is a key component in achieving these positions. Consequently, judicial appointments become critical in preserving this channel of change, and this is reflected in the acrimonious confirmation process of today.

I note in passing that a conservative position of strict construction with regard the the US Constitution is not inherently an adverse position. At most it is a neutral position with respect to ‘active change’. At most, supporters of changes currently enabled via judicial activism have only to assure that their laws pass Constitutional muster. Of course, the entire reason for judicial activism is not for reviewing laws, but for circumventing the legislative process in the first place. If they could get their laws passed, there would be no need for judicial activism. This activism is also not the exclusive province of the left. In the early 20th century, laissez-faire courts blocked Federal regulation of interstate commerce on the basis of the ‘santity of private commerce’, an appeal beyond any reasonable Constitutional interpretation.

The Plank: Confirm presidential appointments on the basis of competency and not philosophy. Develop policy to prevent and avoid judicial activism. Let the process work by confirming presidential selections, and let Democracy work by reducing judicial activism.

[Many thanks to AOC for his erudite analysis and review.]

 

Meet the States (Part II): Florida

This article is the second in a 52 part weekly series on the United States of America. It’s a chance to celebrate the diversity of our nation, and to educate ourselves about the members of our union, both the States and the Territories. We encourage you to comment and share you thoughts on the States, and hope you learn something new about each of the valuable members of our wonderful Union.
– The Staff of The 12 Angry Men

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Last time, we covered Indiana, a state that does just about everything right, but doesn’t quite clean up enough for a fancy party. This week my cross hairs are lined up on Florida a state that does just about everything wrong that is imaginable, but the weather.

Quick Facts about Florida
Name	Florida
Admission to Union	Mar 3rd, 1845
Population	18,089,888(4th)
Population Density	309/sq mi (8th)
Area	65,795 sq mi (22nd)
Gross State Product	$713 billion (4th)
Tax Burden	+0.02

Florida, a nice place to visit, but like so many nice places to visit, you wouldn’t want to live there. First visited by the Spanish in 1513 who, in a well thought out plan, decided it would be just peachy to build some settlements in the path of every major hurricane. Florida was ceded to the United States by the Spanish in 1819 for $5 million dollars, and the promise that the US would renounce all claims to Texas (yeah… like that was going to happen). Unfortunately we accepted, and from that day forward Florida was known as “America’s Wang”.

Throughout most of its history (until the middle of the 1900’s), Florida was the least populous state in The South. Following the advent of air conditioning, Florida experienced a massive population boom, peaking in the 60’s with growth rates of nearly 80%. Now you would certainly think that such massive population growth, and the influx of all of the tourist dollars would result in a healthy sustainable economy. Yep, you would certainly think that, but no, you’d be dead wrong. Despite having a GDP on par with Australia’s, Florida manages the horrible sin of being a tax burden on the rest of the country (for every $1.00 Floridians pay in taxes, the Government hands them back their whole dollar, and then chips in an extra $0.02 of the rest of our money). Hey Florida, maybe you should start collecting an income tax, before you start asking the rest of us for handouts!

What Florida does right: Well… um… they have nice weather! Except when Hurricanes are obliterating their major cities, that is. Well they do have Disney World, and everybody likes going to Disney World! Yeah, sadly, that’s all I’ve got. Florida has a decent education system, but it’s nothing to write home about. They don’t have an income tax, which is nice if you’re greedy and want the rest of us to foot the bill (and if you don’t mind the fact that the state rolls your estate for money when you die). You would think, as one of the most populous state they’d have more going for them than just being “The Pretty One”, but as we’re about to see, this “Pretty One” has been riding the short bus for a long, long time…

What Florida does wrong: Just about everything. Let’s face it. The state has it’s own Fark tag. For those of you who don’t know, Fark.com is a website which lists various interesting, amusing, and downright stupid news stories everyday. They have tags like “Interesting”, “Cool”, and “Hero” for stories which are impressive and good. For those which outline human stupidity they have tags like “Asinine”, “Stupid”, and “Dumbass”. The site founder, however, noticed that most of the really and truly bizarre news, usually involving people acting dumber than bricks, came from Florida. Thus, there is also a tag on Fark called “Florida”. That’s right, Florida is the only state which is so dumb, that news stories about it need special labeling.

It’s not hard to see why either. Despite having been given one of the largest government installations (Kennedy Space Center), theme parks out the wazoo, and the lion’s share of the citrus industry, it still manages to draw more coins out of the Federal purse than it puts in. Are you seriously telling me that with the fourth largest population in the Union, and the fourth largest economy in the Union, you still need the rest of us to help you pay the bills?!?! BAD FLORIDA!, no cookie for you! The people of Florida need to go sit in the corner, in timeout, and think about how the rest of the top five states manage to pay their bills. Florida gets a D for economy, and that’s being generous! You guys are lucky that I’m saving the F for Arkansas and Mississippi!

Look Florida, you need to realize that you didn’t mature as fast as your population boom would seem to indicate. You’ve got the population, and the income, but like a teenager with her first credit card, you’re living beyond your means, and not properly investing in your future. It’s time to grow up, get a better education, and stop living in our basement.

-Angry Midwesterner

 

Subprime & Homeless: Part 2

Home ownership has been elevated to an American right. This belief, directed at mortgage companies and lenders, has fueled the Alt-A and sub-prime mortgage explosion. The results were predictable. The unpredictable part was that the securitization of debt, its aggregation into trading instruments, and the resultant distribution of risk penetrated so deeply into the world financial markets. Unfortunately, distribution of risk is not elimination of risk, as we are now seeing.

The US Census Bureau establishes current home ownership at 68.9%, up from the level sustained from 1980 to 1995. (current US Census data and sustained level.)

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Looking at these data, we note that up to Bill Clinton’s effort to provide housing to all in the late 90’s, the percentage of ownership was 64.5%. After Clinton, Bush, the Federal Housing Authority, Fanny Mae and Freddie Mac got into the picture, the US Census numbers (2006) showed 68.9% ownership, a whopping increase of 4.4%. Let’s pull some quick facts from the census. Round off the population to 300,000,000. Of these people, there are approximately 105,000,000 housholds (or potential homeowners). Figure the median value of a home, again approximating the census data, as $120,000. Do the math and you can see that 4.4% increase in home ownership resulted in about 4.62 million new homes or about $554.4 billion in new loans.

Now while this is more pocket change than I’ll ever carry around, it doesn’t quite add up. The 2007 estimate of the US GDP was $13,790 billion. The newly originated loans constituted only 4% GDP. This is approximately the same cost as the annual defense budget as a percent GDP — hardly something that could tank the world financial market.

Yet we see the numbers in the papers all the time. Banks have liquidity problems. Credit default swap derivatives exposure is estimated at $26 trillion.

• 2/28/2008 Fannie Mae posts $3.56 billion loss
• 1/25/2008 Societe General posts $7.2 billion loss
• 2/27/2008 Bond Insurer MBIA default loss estimate $13.7 billion
• 2/25/2008 Bond insurer AMBAC looking to raise $3 billion in capital
• 2/18/2008 National Rock bank London nationalized to secure $107 billion
• 2/22/2008 Credit default swaps loss is $2 trillion

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The answer to this is clear. The current mess has very little to do with homeownership per se and everything to do with investing. If we only had an increase in 4.4% ownership, then the additional debt must have been acquired by people purchasing real estate for investment purposes and homes to flip, also for investment purchases. Add to that the clever derivatives instruments, where a lot of financial engineers and derivatives traders boasted of their multi-million dollar salaries, and you can see that the core of the “irrational exuberence” is based on making very risky bets on an upside market.

When the bubble bursts, and the risk becomes apparent, and bites you in the ass, the taxpayers of the United States are once again called upon to bail out Wall street and stupid, greedy investors. So now we are engaged in assuading the market through rate cuts to resolve liquidity problems, forcing the dollar lower and inflating the cost of essentials like food and energy. All because of the dictum:

 

What affects Wall Street eventually affects Main Street

 

Thanks to the Angry Virginian for comments and suggestions as to breaking this rant into digestible chunks.

 

Because immigrants never walk over manicured lawns… A Dialogue with the 12 Angry Men

The AM highlighted this article for discussion.

Angry Midwesterner:
Ah….Republicans.
Doesn’t it make you feel all warm and fuzzy inside when they stick it
to the poor and help out their rich buddies?

Angry Immigrant:
Yeah, those dang “Republicans” who took 6,000 acres of her land without any payment in the 1930s… And that $0 of repayment was worth more back then…

Angry Midwesterner:
At least they weren’t skipping over the nearby resort and the local Bush friend.

Angry Immigrant:
Well, for now they’re skipping over everyone and not building anything. But as for making the case for skipping Republicans, argue about the Hunt plantation/trade corridor — that one’s easier. The golf course doesn’t seem to have direct connections up the chain anywhere, and could just be avoiding rich people.

What pisses me off even more than regular government bureaucracy (apart from the ridiculous spelling of the word) is partisan bureaucracy (admittedly, these fence shenanigans seem applicable at the moment). The last thing I want is a CIA more loyal to Clinton than the U.S. and a DHS more loyal to Bush. With that policy we’ll eventually end up with the INS kicking down the door of some Indian family with the “same name as” and finding a CIA wet team waiting for them instead. And how is HillaryCare going to reimburse the widows after that mess?

I want anyone appointed to their job to be loyal to the country, not to the DNC or the RNC (GNC, P&FNC, BIRPNC…). You get your Obama dude to fix that by 2012, and I’ll consider voting to re-elect him.

Plus, this isn’t the right response of a poor-or-brown-people hating Republican. This is hosing our own people — that’s the Democrats’ job. A good evil Republican looks at this as says, “The problem comes from Mexico, so the solution goes inside Mexico.” We want to build the fence outside the flood plain, but there’s no reason to build it on our side of the river… If Mexico doesn’t enforce their own border, we’ll do it for them, with a 2 mile deep occupational fence zone. Any fence will piss them off, so why not go all the way? Plus, if they want to push us back from building the fence, they’ll have to send their military to the border; which will fix the original problem of them not policing the para-military groups running border incursions… Q.E.D. Where’s my consulting fee?

-AI

 

Homeless by Choice

Home ownership has been elevated to a quintessential American right. Having a home (and a mortgage) is proof of your worthiness as a person and as a citizen of the United States. This belief is driving much of the legislation directed at mortgage companies and lenders, and in fact has fueled the Alt-A and sub-prime mortgage explosion. But how reasonable are these expectations?

The National Association of Realtors puts the current ownership (without factoring in foreclosures) at 68.9%. This is confirmed by US Census data. An earlier report of the US Census Bureau data established the home ownership rate at between 64 and 65% up to 1995. Some economists have suggested that the sustainable level of home ownership is around 60%. This means that 40% of the population of the United States should not own a home. At least some local governments appear to understand this. It is illustrative to consider the composition of this 40%.

There are valid life choices that mitigate against home ownership. A young and very mobile population are not good candidates for the commitment that owning a house requires. The real-estate taxes I pay on my house alone would rent a nice apartment for a year. Then there is maintenance, lawn care, etc. Your mobility is restricted if you own a home by the market conditions. Many homeowners are saddled with dual homes and payments when they relocate to change employment until the market improves or the price is reduced to sell. For highly mobile members of the workforce, homeownership is not warranted.

There are also what I classify as two types of mental deficiency: functional and dysfunctional. The functional type includes people who are otherwise normal appearing who can participate in society yet are incapable of planning and making the long term strategies and commitments required to own a home. (Britney Spears comes to mind). They have no awareness of the consequences of their actions in the long term. These people are better served by the rental market.

As for for those with dysfunctional mental deficiencies, state institutions existed in the United States up through the 1950’s to house people with behaviors which were deemed problematic in a free society. These problems could be related to alcoholism, pharmacological dependency, or pathological conditions such as Downs. A lot of these facilities were of the “out of sight, out of mind” class and were bastions of repression and intolerance. (Nursing homes enjoy the same status today.) Coinciding with new liberal thought and an era of enlightened psychological analysis, many of these facilities were shuttered and razed. The result, as should be unsurprising, is that many of the former occupants reverted to their inclinations and live on the streets of our cities — the homeless.

Since they are no longer out of sight, and indeed far too visible, many well-intentioned efforts to provide for them have been initiated. Care for the homeless has been a hue and cry of the liberal left for the last twenty years, interesting in that the ‘problem’ was created by their meddling in the state institutions in the first place. The cynic in me questions why they even bothered since the majority don’t vote anyway. Nonetheless, they are homeless, and well-intentioned people are tasking our legislatures to provide for them. Providing a means for these people to obtain a mortgage is idiocy.

Seattle near Pike’s Place Market, August 30th 2007

Finally there are the homeless by choice. These are the people who would prefer not to appear on the tax rolls and registries of governmental units for whatever reason. To some, it is enduring freedom to do whatever they want, and to do it whenever they please. These have been around for a long time probably commencing with the Revolutionary War — certainly since the Civil War and demonstratively so after the Great Depression. They constitute the tramps, hobos, and sadly, even the bindlestiffs (hobos who robbed the bindles of other hobos).

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From these observations, it should be apparent that many citizens are homeless by choice and that no government policy is going to change this. Trying to increase home ownership over a demonstratively sustainable level has accomplished nothing except contributing to the current subprime mess.