Archive for May, 2006

A Plan to Replace the Welfare State

Wednesday, May 31st, 2006

Many people have the false impression that conservatives and libertarians have no real solutions to solving poverty aside from simply turning the poor over to ‘unfettered capitalism’, and allowing what results to result, with no government assistance.

That is certainly not the case, and here to show a perfectly conservative/libertarian replacement of the welfare state is Charles Murray:

A Plan to Replace the Welfare State
March 22, 2006; Page A16

This much is certain: The welfare state as we know it cannot survive. No serious student of entitlements thinks that we can let federal spending on Social Security, Medicare and Medicaid rise from its current 9% of GDP to the 28% of GDP that it will consume in 2050 if past growth rates continue. The problems facing transfer programs for the poor are less dramatic but, in the long term, no less daunting; the falling value of a strong back and the rising value of brains will eventually create a class society making a mockery of America’s ideals unless we come up with something more creative than anything that the current welfare system has to offer.

So major change is inevitable — and Congress seems utterly unwilling to face up to it. Witness the Social Security debate of last year, a case study in political timidity. Like it or not, we have several years to think before Congress can no longer postpone action. Let’s use it to start thinking outside the narrow proposals for benefit cuts and tax increases that will be Congress’s path of least resistance.

The place to start is a blindingly obvious economic reality that no one seems to notice: This country is awash in money. America is so wealthy that enabling everyone to have a decent standard of living is easy. We cannot do it by fiddling with the entitlement and welfare systems — they constitute a Gordian Knot that cannot be untied. But we can cut the knot. We can scrap the structure of the welfare state.

Instead of sending taxes to Washington, straining them through bureaucracies and converting what remains into a muddle of services, subsidies, in-kind support and cash hedged with restrictions and exceptions, just collect the taxes, divide them up, and send the money back in cash grants to all American adults. Make the grant large enough so that the poor won’t be poor, everyone will have enough for a comfortable retirement, and everyone will be able to afford health care. We’re rich enough to do it.

Consider retirement. Let’s say that we have a 21-year-old man before us who, for whatever reasons, will be unable to accumulate his own retirement fund. We accumulate it for him through a yearly contribution for 45 years until he retires at age 66. We can afford to contribute $2,000 a year and invest it in an index-based stock fund. What is the least he can expect to have when he retires? We are ridiculously conservative, so we first identify the worst compound average growth rate, using constant dollars, for any 45-year period in the history of the stock market (4.3% from 1887-1932). We then assume our 21-year-old will be the unluckiest investor in American history and get just a 4.0% average return. At the end of the 45-year period, he will have about $253,000, with which he could purchase an annuity worth about $20,500 a year.

That’s with just a $2,000 annual contribution, equivalent to the Social Security taxes the government gets for a person making only $16,129 per year. The government gets more than twice that amount from someone earning the median income, and more than five times that amount from the millions of people who pay the maximum FICA tax. Giving everyone access to a comfortable retirement income is easy for a country as rich as the U.S. — if we don’t insist on doing it through the structure of the welfare state.

Health care is more complicated in its details, but not in its logic. We do not wait until our 21-year-old is 65 and then start paying for his health care. Instead, we go to a health insurance company and tell it that we’re prepared to start paying a constant premium now for the rest of the 21-year-old’s life. Given that kind of offer, the health insurance company can sell us a health care policy that covers the essentials for somewhere around $3,000. It can be so inexpensive for the same reason that life insurance companies can sell generous life insurance cheaply if people buy it when they’re young — the insurance company makes a lot of money from the annual payments before eventually having to write the big benefit checks. Providing access to basic medical care for everyone is easy for a country as rich as the U.S. — if we don’t insist on doing it through the structure of the welfare state.

There are many ways of turning these economic potentials into a working system. The one I have devised — I call it simply “the Plan” for want of a catchier label — makes a $10,000 annual grant to all American citizens who are not incarcerated, beginning at age 21, of which $3,000 a year must be used for health care. Everyone gets a monthly check, deposited electronically to a bank account. If we implemented the Plan tomorrow, it would cost about $355 billion more than the current system. The projected costs of the Plan cross the projected costs of the current system in 2011. By 2020, the Plan would cost about half a trillion dollars less per year than conservative projections of the cost of the current system. By 2028, that difference would be a trillion dollars per year.

Many questions must be asked of a system that substitutes a direct cash grant for the current welfare state. Work disincentives, the comparative risks of market-based solutions versus government guarantees, transition costs, tradeoffs in health coverage, implications for the tax system, and effects on people too young to qualify for the grant, all require attention in deciding whether the Plan is feasible and desirable. I think all of the questions have answers, but they are not one-liners; I lay them out in my book.
* * *

For now, let me turn to a larger question: Assuming that the technical questions have answers, do we want a system in which the government divests itself of responsibility for the human needs that gave rise to the welfare state in the first place? I think the reasons for answering “yes” go far beyond the Plan’s effects on poverty, retirement and health care. Those issues affect comparatively small minorities of the population. The more profound problem facing the world’s most advanced societies is how their peoples are to live meaningful lives in an age of plenty and security.

Throughout history until a few decades ago, the meaning of life for almost everyone was linked to the challenge of simple survival. Staying alive required being a contributing part of a community. Staying alive required forming a family and having children to care for you in your old age. The knowledge that sudden death could happen at any moment required attention to spiritual issues. Doing all those things provided deep satisfactions that went beyond survival.

Life in an age of plenty and security requires none of those things. For the great majority of people living in advanced societies, it is easily possible to go through life accompanied by social companions and serial sex partners, having a good time, and dying in old age with no reason to think that one has done anything significant.

If you believe that’s all there is — that the purpose of life is to while away the time as pleasantly as possible — then it is reasonable to think that the purpose of government should be to enable people to do so with as little effort as possible. But if you agree with me that to live a human life can have transcendental meaning, then we need to think about how human existence acquires weight and consequence.

For many readers of The Wall Street Journal, the focus of that search for meaning is bound up with vocation — for some, the quest to be rich and famous; for others, the quest to excel in a vocation one loves. But it is an option open to only to a lucky minority. For most people — including many older people who in their youths focused on vocation — life acquires meaning through the stuff of life: the elemental events associated with birth, death, growing up, raising children, paying the rent, dealing with adversity, comforting the bereaved, celebrating success, applauding the good and condemning the bad; coping with life as it exists around us in all its richness. The chief defect of the welfare state from this perspective is not that it is ineffectual in making good on its promises (though it is), nor even that it often exacerbates the very problems it is supposed to solve (though it does). The welfare state is pernicious ultimately because it drains too much of the life from life.

The Plan returns the stuff of life to all of us in many ways, but chiefly through its effects on the core institutions of family and community. One key to thinking about how the Plan does so is the universality of the grant. What matters is not just that a lone individual has $10,000 a year, but that everyone has $10,000 a year and everyone knows that everyone else has that resource. Strategies that are not open to an individual are open to a couple; strategies that are not open to a couple are open to an extended family or, for that matter, to half a dozen friends who pool resources; strategies not open to a small group are open to a neighborhood. The aggregate shift in resources from government to people under the Plan is massive, and possibilities for dealing with human needs through family and community are multiplied exponentially.

The Plan confers personal accountability whether the recipient wants it or not, producing cascading secondary and tertiary effects. A person who asks for help because he has frittered away his monthly check will find people and organizations who will help (America has a history of producing such people and organizations in abundance), but that help can come with expectations and demands that are hard to make of a person who has no income stream. Or contemplate the effects of a known income stream on the young man who impregnates his girlfriend. The first-order effect is that he cannot evade child support — the judge knows where his bank account is. The second-order effect is to create expectations that formerly didn’t exist. I call it the Doolittle Effect, after Alfred Doolittle in “My Fair Lady.” Recall why he had to get to the church on time.

The Plan confers responsibility for dealing with human needs on all of us, whether we want it or not. Some will see this as a step backward, thinking that it is better to pay one’s taxes, give responsibility to the government and be done with it. I think an alternative outlook is wiser: The Plan does not require us all to become part-time social workers. The nation can afford lots of free riders. But Aristotle was right. Virtue is a habit. Virtue does not flourish in the next generation because we tell our children to be honest, compassionate and generous in the abstract. It flourishes because our children practice honesty, compassion and generosity in the same way that they practice a musical instrument or a sport. That happens best when children grow up in a society in which human needs are not consigned to bureaucracies downtown but are part of life around us, met by people around us.

Simply put, the Plan gives us back the action. Institutions and individuals alike thrive to the extent that they have important jobs to do and know that the responsibility to do them is on their heads. For decades, the welfare state has said to us, “We’ll take care of that.” As a result, we have watched some of our sources of life’s most important satisfactions lose vitality. At the same time, we have learned how incompetent — how helpless — government is when “taking care of that” means dealing with complex human needs. The solution is not to tinker with the welfare state. The solution is to put responsibility for our lives back in our hands — ours as individuals, ours as families, and ours as communities.

Mr. Murray, the W.H. Brady Scholar at the American Enterprise Institute, is the author of “In Our Hands: A Plan to Replace the Welfare State,” published this week by AEI Press.

The full article can be found here.

Quote Of The Day

Wednesday, May 31st, 2006

Greed: Professors often say that they didn’t become teachers out of a desire to get rich, but it’s hard to believe that most professors chose their careers solely out of a desire to foster “social justice” or some other fashionable form of ostentatious altruism. More often, I think people become professors out of a lack of options: What can one do, after all, with an undergraduate degree in medieval studies or art history? Most entry-level jobs seem unsatisfactory to people who think of themselves as exceptionally gifted. Unlike doctors and lawyers, most professors forgo big money, but, as a group, they are even more ravenously hungry for status. Humanities faculty members, for example, are less concerned about the higher salaries earned by their counterparts in science (who do have other career options) than they are about what the humanist in the next office is getting paid. This is where greed shades off into pride, but more on that later”. —Thomas H. Benton, pseudonym of a soon-to-be associate professor of English at a Midwestern liberal-arts college, writing in the Chronicle of Higher Education in an article titled, The 7 Deadly Sins of Professors

The Economics Of A Public School System

Tuesday, May 30th, 2006

Don Boudreaux, chairman of the Department of Economics at George Mason University, writes in the Pittsburgh Tribune-Review:

Government K-12 schools, as now run everywhere in the U.S., will never excel at educating students. The reason is that each school gets its students and its budget without having to compete for them.

Imagine if, say, supermarkets were run the same way we run schools. Everyone in my county would pay taxes to fund the county supermarket system; each one of us would then be assigned one specific county supermarket at which we are allowed to shop.

Of course, once in our assigned store, all the groceries that each of us gets are “free” — meaning, we don’t have to pay for them on the spot. If the products and services supplied by the supermarket are of poor quality, we’re not allowed to switch to other county markets; we must, instead, complain to politicians.

The managers of the supermarkets will agree that their stores offer abysmal service and undesirable products; they will assert that this sad fact is caused by underfunding. We will be warned that only by paying higher taxes will we have any possibility of getting better supermarkets.

So our taxes will rise and funding for supermarkets will increase. But quality will remain poor — and the excuses offered by the government-employed managers of the supermarkets will remain that they need yet more funding.

Quote Of The Day

Tuesday, May 30th, 2006

“Krugman and Wells note repeatedly that 20 percent of the population is responsible for 80 percent of health-care costs. But that doesn’t explain why health insurance should be different from other kinds. The small fraction of people involved in auto accidents in any year is responsible for almost all the cost of auto insurance. You insure against the risk of being in that group. What’s different about health insurance is the opposite: Much of it isn’t insurance at all but a subsidy. The value of the subsidy is the difference between what the individual pays and what the insurance would cost in the free market. If people were buying health care or insurance with their own money, they might or might not spend too much—whatever “too much” is—but no one else would need to care if they did. A subsidy has to take from someone and give to someone else. Everybody can’t subsidize everybody. Or, to put it another way, society cannot give the average citizen better health care than the average citizen would choose to buy on his or her own. And this is what people want”. —Michael Kinsley, writing in Slate

Memorial Day

Monday, May 29th, 2006

A great post by Christopher Hitchens on this Memorial Day:

Memorial Day
Reflections on those who made the ultimate sacrifice.

Monday, May 29, 2006 12:01 a.m. EDT

LONDON–In the Cotswold hills, in deep England, there is a pair of villages named Upper Slaughter and Lower Slaughter. In addition to its rather gruesome name, Lower Slaughter possesses a unique distinction. It is the only village in all of England that does not possess a First World War memorial. In the remainder of the country, even the smallest hamlet will have–I almost said “will boast”–a stone marker with an arresting number of names on it. In bigger towns, it wouldn’t be possible to incise all the names in stone, though at the Menin Gate in the Belgian town of Ypres a whole arch is inscribed with the names of those who fell along the Somme. Every year on Nov. 11–anniversary of the 1918 “Armistice”–the rest of the English-speaking world gathers, with Flanders poppies worn in the lapel, to commemorate the dead of all wars but in particular to feel again the still-aching wounds of the “war to end all wars”: the barbaric conflict that shook peoples’ faith in civilization itself.

Though the carnage of that war was felt much less in the United States, it was only after the doughboys returned in 1918 that the former Confederate states dropped their boycott of America’s original “Memorial Day,” proclaimed by Union commander Gen. John Logan in May 1868. And here one can note the bizarre manner in which war–which is division by definition–exerts its paradoxically unifying effect. If it is “the health of the state,” as was sardonically said by that great foe of “Mr. Wilson’s war,” Randolph Bourne, then it can also be an agent of emancipation and nation-building and even (as was proved after 1945) of democracy. But even this reflection can never abolish the insoluble problem: how to estimate the value of those whose lives were cruelly cut off before victory was in sight. It is sometimes rather lazily said that these soldiers “gave” their lives. It would be equally apt, if more blunt, to say that they had their lives taken. Humanity has been grappling with this conundrum ever since Pericles gave his funeral oration, and there would have been many Spartan and Melian widows and orphans who would have been heartily sickened by those Athenian-centered remarks.

The soil of the United States is almost spoiled for choice when it comes to commemorative sites. They range from Gettysburg itself–still one of the most staggering places of memory in the world–to the Confederate statue of Gen. Nathan Bedford Forrest, one of the founders of the Ku Klux Klan, and extend from the Polar Bear monument in Detroit (honoring those Michiganders who helped invade Russia in 1919: a forgotten war if ever there was one) to Maya Lin’s masterpiece of Vietnam understatement on the National Mall. But Memorial Day transcends the specific, and collectivizes all disparate recollections into one single reflection upon the losses inflicted by war itself. The summa of this style, and one that transcends Pericles, is of course the Gettysburg Address, in which one cannot distinguish which side’s graves are actually being honored. It was always Mr. Lincoln’s way to insist that he was the elected president of every state, not just the “Northern” ones, and this speech still has the power to stir us because it was the most strenuous possible test of that essential proposition.

A memorial to, and for, all is certainly an improvement on the Arc de Triomphe/Brandenburg Gate style, which was regnant until 1918 and which asserted national exclusivity. Kemal Ataturk did a noble thing when he raised a monument to all those who fell at Gallipoli, and informed the British and Australian peoples that their “Tommies and Johnnies” would lie with his “Alis and Mehmets.” But there are also disadvantages to a memorial that is too “inclusive.” Not even President Reagan’s fine speech at the cliffs of Pointe du Hoc has erased his crass equation of the “victims” at Bitburg cemetery with their victims. Bitburg is not Gettysburg: Some wounds cannot and perhaps should not be healed. The opposite danger also exists: Our “Memorial Day” is now the occasion of a three-day holiday weekend (over the protest of the Veterans of Foreign Wars) and has become somewhat banal precisely because it seems to honor nobody in particular.

The stark concept of “The Unknown Soldier” was the best expression of awe and respect that the century of total war managed to produce. Rudyard Kipling, whose only son, John, was posted as “missing” in 1915 (and whose remains were not found until 15 years ago) was the designer of the official headstone for those soldiers who lay in mass graves and could not even be identified. No pacifist, he nonetheless wrote with scorn of the “jelly-bellied flag-flappers” who lectured schoolboys on the glories of combat. Over time, it is the bleak poetry of Wilfred Owen, and not the inspirational verse of Julian Grenfell and Rupert Brooke, that has come to express the more profound experiences of warfare. Some thoughts must always lie too deep for tears.

Since all efforts at commemoration are bound to fall short, one must be on guard against any attempt at overstatement. In particular, one must resist efforts to ventriloquize the dead. To me, Cindy Sheehan’s posthumous conscription of her son is as objectionable as Billy Graham’s claim, at the National Cathedral, that all the dead of Sept. 11, 2001 were now in paradise. In the first instance, we have no reason to believe that young Casey Sheehan would ever have supported, and in the second instance we cannot be expected to believe that almost 3,000 New Yorkers all died in a state of grace. Nothing is more tasteless, when set against the reality of death, than the hollow note of demagogy and false sentiment. These things are also subject to unintended consequences. When Dalton Trumbo wrote his leftist antiwar classic “Johnnie Got His Gun,” he little expected that it would be used as a propaganda tool by pro-fascist isolationists in the late 1930s, and that he would be protesting in vain that this was not what he had really meant.

“Always think of it: never speak of it.” That was the stoic French injunction during the time when the provinces of Alsace and Lorraine had been lost. This resolution might serve us well at the present time, when we are in midconflict with a hideous foe, and when it is too soon to be thinking of memorials to a war not yet won. This Memorial Day, one might think particularly of those of our fallen who also guarded polling-places, opened schools and clinics, and excavated mass graves. They represent the highest form of the citizen, and every man and woman among them was a volunteer. This plain statement requires no further rhetoric.

Mr. Hitchens, a columnist for Vanity Fair, is author, most recently, of “Thomas Jefferson: Author of America” (HarperCollins, 2005).

Quote Of The Day

Saturday, May 27th, 2006

“The biggest enemy of real equality is make-believe equality. Some peoples, such as the Scots and the Japanese, lagged far behind for centuries before moving to the forefront of achievement. Pretending that they were equal during the centuries when they were not might have prevented the changes that developed their ability”. —Thomas Sowell, listing his “Random Thoughts”

Quote Of The Day

Friday, May 26th, 2006

“There are four ways in which you can spend money. You can spend your own money on yourself. When you do that, why then you really watch out what you’re doing, and you try to get the most for your money.

Then you can spend your own money on somebody else. For example, I buy a birthday present for someone. Well, then I’m not so careful about the content of the present, but I’m very careful about the cost.

Then, I can spend somebody else’s money on myself. And if I spend somebody else’s money on myself, then I’m sure going to have a good lunch!

Finally, I can spend somebody else’s money on somebody else. And if I spend somebody else’s money on somebody else, I’m not concerned about how much it is, and I’m not concerned about what I get. And that’s government. And that’s close to 40% of our national income”. — Economist Milton Friedman

It Is 1938 Again

Thursday, May 25th, 2006

Charles Krauthammer writes a thought provoking article on the dangers of Iran:

Never Again?

By Charles Krauthammer
Friday, May 5, 2006; Page A19

When something happens for the first time in 1,871 years, it is worth noting. In A.D. 70, and again in 135, the Roman Empire brutally put down Jewish revolts in Judea, destroying Jerusalem, killing hundreds of thousands of Jews and sending hundreds of thousands more into slavery and exile. For nearly two millennia, the Jews wandered the world. And now, in 2006, for the first time since then, there are once again more Jews living in Israel — the successor state to Judea — than in any other place on Earth.

Israel’s Jewish population has just passed 5.6 million. America’s Jewish population was about 5.5 million in 1990, dropped to about 5.2 million 10 years later and is in a precipitous decline that, because of low fertility rates and high levels of assimilation, will cut that number in half by mid-century.

When 6 million European Jews were killed in the Holocaust, only two main centers of Jewish life remained: America and Israel. That binary star system remains today, but a tipping point has just been reached. With every year, as the Jewish population continues to rise in Israel and decline in America (and in the rest of the Diaspora), Israel increasingly becomes, as it was at the time of Jesus, the center of the Jewish world.

An epic restoration, and one of the most improbable. To take just one of the remarkable achievements of the return: Hebrew is the only “dead” language in recorded history to have been brought back to daily use as the living language of a nation. But there is a price and a danger to this transformation. It radically alters the prospects for Jewish survival.

For 2,000 years, Jews found protection in dispersion — protection not for individual communities, which were routinely persecuted and massacred, but protection for the Jewish people as a whole. Decimated here, they could survive there. They could be persecuted in Spain and find refuge in Constantinople. They could be massacred in the Rhineland during the Crusades or in the Ukraine during the Khmelnytsky Insurrection of 1648-49 and yet survive in the rest of Europe.

Hitler put an end to that illusion. He demonstrated that modern anti-Semitism married to modern technology — railroads, disciplined bureaucracies, gas chambers that kill with industrial efficiency — could take a scattered people and “concentrate” them for annihilation.

The establishment of Israel was a Jewish declaration to a world that had allowed the Holocaust to happen — after Hitler had made his intentions perfectly clear — that the Jews would henceforth resort to self-protection and self-reliance. And so they have, building a Jewish army, the first in 2,000 years, that prevailed in three great wars of survival (1948-49, 1967 and 1973).

But in a cruel historical irony, doing so required concentration — putting all the eggs back in one basket, a tiny territory hard by the Mediterranean, eight miles wide at its waist. A tempting target for those who would finish Hitler’s work.

His successors now reside in Tehran. The world has paid ample attention to President Mahmoud Ahmadinejad’s declaration that Israel must be destroyed. Less attention has been paid to Iranian leaders’ pronouncements on exactly how Israel would be “eliminated by one storm,” as Ahmadinejad has promised.

Former president Ali Akbar Hashemi Rafsanjani, the presumed moderate of this gang, has explained that “the use of a nuclear bomb in Israel will leave nothing on the ground, whereas it will only damage the world of Islam.” The logic is impeccable, the intention clear: A nuclear attack would effectively destroy tiny Israel, while any retaliation launched by a dying Israel would have no major effect on an Islamic civilization of a billion people stretching from Mauritania to Indonesia.

As it races to acquire nuclear weapons, Iran makes clear that if there is any trouble, the Jews will be the first to suffer. “We have announced that wherever [in Iran] America does make any mischief, the first place we target will be Israel,” said Gen. Mohammad Ebrahim Dehghani, a top Revolutionary Guards commander. Hitler was only slightly more direct when he announced seven months before invading Poland that, if there was another war, “the result will be . . . the annihilation of the Jewish race in Europe.”

Last week Bernard Lewis, America’s dean of Islamic studies, who just turned 90 and remembers the 20th century well, confessed that for the first time he feels it is 1938 again. He did not need to add that in 1938, in the face of the gathering storm — a fanatical, aggressive, openly declared enemy of the West, and most determinedly of the Jews — the world did nothing.

When Iran’s mullahs acquire their coveted nukes in the next few years, the number of Jews in Israel will just be reaching 6 million. Never again?

Quote Of The Day

Thursday, May 25th, 2006

“I understand the attraction of asking business — the perceived “deep pockets” — to shoulder more of the responsibility for social welfare. But there are plenty of businesses that don’t have deep pockets. And many large corporations operate with razor-thin profit margins as competitors, both foreign and domestic, strive to attract consumers by offering lower prices. The current frenzy over Wal-Mart is instructive. Its size is unprecedented. Yet for all its billions in profit, it still amounts to less than four cents on the dollar. Raise the cost of employing people, and the company will eliminate jobs. Its business model only works on low prices, which require low labor costs. Whether that is fair or not is a debate for another time. It is instructive, however, that consumers continue to enjoy these low prices and that thousands of applicants continue to apply for those jobs.”–George S. McGovern, former U.S. senator from South Dakota, and the Democratic nominee for president in 1972, writing in the Los Angeles Times

Universal Preschool And California Prop 82

Wednesday, May 24th, 2006

California is considering whether or not to approve Proposition 82, a bill that would provide three hours of voluntary daily preschool for every 4-year-old in the state. As predicted, the liberal media is reporting studies that attempt to show that Universal Preschool is good for everyone, neglecting of course, the counter arguments against the bill.

So to keep this debate balanced, I present to you some of the counter arguments against Universal Preschool. The National Bureau of Economic Research reports:

“Early education does increase reading and mathematics skills at school entry, but it also boosts children’s classroom behavioral problems and reduces their self-control. Further, for most children the positive effects of pre-kindergarten on skills largely dissipate by the spring of first grade, although the negative behavioral effects continue.”

In other words, on purely academic standards alone, Universal Preschool would be a net loss for the students, not a net gain.

Furthermore, there are other strong arguments against the bill, one of them being the large tax burden the bill places on upper income residents. While it is tempting to just dismiss this as only affecting ‘the rich’, it is an economic reality that upper income residents have more options on where to live and where to operate their businesses, and when they do choose to live outside of California, not only do we get less tax income, but the economy as a whole suffers. In addition, since California is already one of the most heavily taxed states in the union, adding an almost 2% additional tax is more than reason enough to push many of these upper income residents out. When they leave, so do their previous tax income, job opportunities from businesses they run, and so forth. The higher tax bracket would also send a strong signal to other companies thinking of coming to California to operate their businesses, pushing them to look elsewhere. All in all, while the taxes would only be on upper income residents, the actual economic realities of the bill will have negative repercussions on all California residents.

Secondly, assuming for the moment that preschool is good, why should the government provide it free for middle and upper income residents as well? In other words, if you are going to tax California residents – a tax that has negative repercussions on all California residents – for preschool, why not just tax enough to pay for low income residents preschool education, instead of having it pay for all California residents, including those who don’t need it like upper income residents?

Thirdly, do we really think it is a good idea for the same public education system that has been failing California children for years, to start providing universal preschool for all? Giving the public school system more responsibility, when it is already failing in its current responsibilities, will only further strain the system and cause more failures all around.

Last but certainly not least, let us not forget that the Teachers Union and the public school system in general, are themselves very big political special interest groups. They are always trying to find new creative ways to get more tax money, even when that additional tax money has no record of actually improving our public school system. So when you see a democratic politician – democrats being the primary beneficiaries of the teachers union special interest political lobbying – promoting something that primarily benefits the teachers union and the public school system as a whole, you have to look at that with a certain amount of skepticism.

After all, as Thomas Sowell discussed in his book Applied Economics, politicians care more about their next election than they do about whether or not their programs cause long term damage to an economy. They know that by the time the long term damage has become evident, the general public will have long forgotten who was responsible for it (or won’t even be able to connect the dots) and the politician will have long been rewarded politically.

So please fellow California citizens, I urge you to VOTE NO on Prop 82, do it for your state, do it for your economic well being, and most importantly, do it for the children!

Quote Of The Day

Wednesday, May 24th, 2006

“I have always been a supporter of the labor movement…But lately I have seen developments that have me worried…Delphi Corp., the biggest auto parts supplier in the country and the employer of 34,000 hourly workers, is bankrupt. One big reason is that the company’s unionized workers earn $64 an hour in wages and benefits — more than twice what some of its competitors pay. General Motors and Ford — the companies that have epitomized high-paying unionized jobs over the last several decades — have stated that they will lay off 30,000 workers each. The United Auto Workers, General Motors and Delphi recently announced an agreement to offer voluntary buyouts to the UAW-represented employees at the companies. Wall Street thinks these are just the first steps. Airlines have come under similar pressure. The bankruptcy stories associated with legacy carriers are driven in large part by the compensation packages and work rules that unions have won for their members, which are too expensive compared to more recent entrants such as Southwest. “More” has, unfortunately, become “too much” in a global and far more competitive economy”. —George S. McGovern, former U.S. senator from South Dakota, and the Democratic nominee for president in 1972, writing in the Los Angeles Times

Why Economists Love Wal-Mart

Tuesday, May 23rd, 2006

The Pittsburgh Times-Review writes:

A larger complaint against Wal-Mart charges that the giant retailer comes in and wipes out main street, puts an end to all those mom-‘n-pops that are selling everything from hammers to salmon.

The other side of the story is that salmon is no longer a high-end delicacy, beyond the reach of the average household. With fresh fillets selling for $4.50 a pound in Wal-Mart’s display cases, the price for an 8-ounce dinner portion is 44 cents lower than the current price of a Cheeseburger Happy Meal at McDonald’s.

The end result is better nutrition in America, especially among lower-income households, and less poverty and unemployment in Wal-Mart’s primary supply regions in southern Chile.

Altogether, Wal-Mart’s prices, according to a study by M.I.T. economist Jerry Hausman and USDA economist Ephraim Leibtag, are saving U.S. consumers more than $50 billion a year, money that’s spent elsewhere, boosting volume at other businesses and creating new enterprises, including mom-‘n-pops.

The net impact? The director of economic policy for the 2004 Kerry-Edwards campaign, New York University economist Jason Furman, contends that Wal-Mart is “a progressive success story.” With Wal-Mart’s prices ranging from 8 percent to 40 percent lower than people would pay elsewhere, states Furman, the increase in buying power that Wal-Mart delivers, disproportionately to lower-income families, more than offsets any impact that the company has allegedly produced in the earnings of retail workers.

Wal-Mart is good for all citizens, but especially good for the poorest members of society.

Link via Greg Mankiw who has more.

Quote Of The Day

Tuesday, May 23rd, 2006

“High gas prices aren’t easy on consumers. Most households could find a much better way to spend $1,000 than on filling up the tank. But if there’s a better way to restructure the energy market, expand supplies, and create a long-term source of stable and affording fuel, we haven’t found it yet. We’ve tried ethanol subsidies, “windfall profit” taxes and other market manipulation tricks. None of them have primed the gas pump for lower prices. Now it’s past time to drill. With a barrel of crude selling for more than $70, Congress could let the market work. There’s now plenty of incentive to give ANWR’s caribou a few derricks to look at”. —The Wall Street Journal

America’s Economic Hegemony Is Safe – Maybe

Monday, May 22nd, 2006

Is the United States economic superiority threatened in the coming years? That depends, says Gerard Baker, writing in the Times of London:

Given that the United States is a $12 trillion ($6,700 billion) economy, the new data mean that in the first quarter the US added to global output an amount that, if sustained at that pace for a year, would be about $600 billion — roughly the equivalent of adding one whole new Brazil or Australia to global economic activity every year, just from the incremental extra sweat and heave and click of 300 million Americans.

Think of it another way. In an era in which China embodies the hopes and fears of much of the developed world, the US, with a growth rate of half that of China’s, is adding roughly twice as much in absolute terms to global output as is the Middle Kingdom, with its GDP (depending on how you measure it) of between $2 trillion and $4 trillion and its growth of about 10 per cent.

Even when you account for the fact that US growth is not going to continue at 5 per cent, but will revert to its trend of more like 3.5 per cent per year, you are still talking about an economy adding more than $400 billion in inflation-adjusted terms every year (not quite Brazil or Australia, but significantly bigger than Switzerland or Belgium) .

So far so good, but he cautions:

What could undermine long-term US dominance? …

The only real threat to American economic hegemony, I suspect, is the willingness of its people to continue to tolerate the pains associated with its success. Income and wealth inequalities have grown rapidly in the past ten years — even as the long-term growth rate has accelerated — and, given the continuing direction associated with globalisation, they may get even worse over the next 20 years.

That could tempt Americans to turn their backs on the very free markets that have been the foundations of their continuing prosperity.

The full article can be found here.

Quote Of The Day

Monday, May 22nd, 2006

“Let us take a minute, then, to stick up for the big guys and ask, what’s wrong with large profits for large oil companies? If a healthy profit margin–about 10% for the oil giants–is a problem, it comes with a built-in solution. Large profits create large incentives to increase supplies, build more refining capacity, and create new technology to meet energy needs. Exxon Mobil’s profits alone in the first quarter of this year are four times as large as the $2 billion exploration tax credits stuffed into last year’s energy bill. It’s not a coincidence that more than 70% of the money spent researching new fuels comes from oil companies, not to mention the cost of drilling new wells, exploring new fields and developing technology and techniques to extract crude from fields previously considered exhausted”. —The Wall Street Journal

Quote Of The Day

Saturday, May 20th, 2006

“On the one side will be older baby boomers demanding all their federal retirement benefits. On the other will be an expanding population of younger and poorer Hispanics — immigrants, their children and grandchildren — increasingly resentful of their rising taxes that subsidize often-wealthier and unrelated baby boomers. Does this look like a harmonious future?” —Robert J. Samuelson, Washington Post columnist in an article titled, Still Dodging Immigration’s Truths