Capitalism starves babies (and other lies)

I’ve discussed labor unions and touched on how they’re not particularly helpful to America anymore. In this editorial, E. J. Dionne Jr. discusses the future of American industry and the wrongs labor unions tried to right. It’s an interesting read, although every time I thought he might finally be heading for truth, Mr. Dionne takes an undesirable intellectual detour. For instance:

Decades ago, Walter Reuther, the storied head of the United Auto Workers union, was taken on a tour of an automated factory by a Ford Motor Co. executive.

Somewhat gleefully, the Ford honcho told the legendary union leader: “You know, not one of these machines pays dues to the UAW.”

To which Reuther snapped: “And not one of them buys new Ford cars, either.”

It’s a semi-witty response and one that any company interested in technology should heed. However, Mr. Dionne draws the wrong conclusion from that exchange. Of course the machines don’t buy new cars, but the logic flow does not automatically lead back to “Machines Bad, Assembly Workers Good”. The purpose of a business is to maximize profit. If robotic assembly arms help reduce costs, they’re useful. Finding ways to make the displaced workers productive is the next exercise. However, those unions so determined to “help” workers don’t understand that those displaced workers may be more productive working elsewhere. It’s the “creative destruction” described by economist Joseph Schumpeter, referenced in the editorial.

Mr. Dionne then debates the manner in which the left liberals Democrats progressives should tell the story of unions and labor and looking out for the little guy. He promotes that as more compelling than the story of capitalism told by economic conservatives. Rather than stumble along, leaving the core of the debate to the other side, progressives should discuss how government shepherding of creative destruction can improve lives. Consider:

But this muddle reflects a default on parts of the left and, especially, within the Democratic Party. Because so many Democrats fear that they might sound like — God forbid! — socialists, they are unwilling to challenge the right’s core story. Capitalism, all by itself, would never have achieved the rising living standards that were the pride of the United States in O’Neill’s 1950s and still are today. The rules enforced by the National Labor Relations Board made it possible for Reuther’s union to organize by protecting workers’ rights. Cheap 30-year mortgages, which became the norm because of Federal Housing Administration guarantees, created a nation of homeowners.

As medical costs rise, more Americans will need government help. More employers will need to offload the costs of medical insurance to avoid bankruptcy. Yes, that’s “socialized medicine,” just like Medicare. But don’t tell anyone. The phrase plays terribly in focus groups.

For 60 years New Dealers and social democrats, liberals and progressives, turned Schumpeter on his head. They insisted that few would embrace capitalism’s innovations if the system’s tendency toward creative destruction was not balanced by public innovations to spread the bounty and protect millions from being injured by change. It’s a compelling story. Walter Reuther knew it well. Too bad it isn’t told very often anymore.

Mr. Dionne can argue that socialist redistribution and intentional economic stagnation are the best policies for America, but I need more proof than the National Labor Relations Board and mortgage guarantees, which don’t amount to proof that the private industry can’t handle those tasks. He can even argue that socialized medicine is necessary because businesses can’t provide it much longer. I’ve mentioned a better solution in the past, but the debate is worthwhile. He shouldn’t pretend that he’s promoting an improved, socialistic version of capitalism, though. Resisting change doesn’t stop it from happening. If it did, we’d still be using the horse-and-buggy and listening to vinyl records Gramophones.

Making pretend with capitalism

I mostly stayed away from The Internets over the Thanksgiving holiday, so I have little to say on whatever hot topics are in the news now until I have time to catch up. However, I did stumble on an thought-denying article by Dr. James Dobson title “Eleven Arguments Against Same-Sex Marriage”. I’m not going to run through the eleven arguments because I think one will suffice to discredit Dr. Dobson’s effort, unless one chooses not to think. Consider argument number six:

6. The health care system will stagger and perhaps collapse.

This could be the straw that breaks the back of the insurance industry in Western nations, as millions of new dependents become eligible for coverage. Every HIV-positive patient needs only to find a partner to receive the same coverage as offered to an employee. It is estimated by some analysts that an initial threefold increase in premiums can be anticipated; even with that, it may not be profitable for companies to stay in business.

And how about the cost to American businesses? Will they be able to provide health benefits? If not, can physicians, nurses, and technicians be expected to work for nothing or to provide their services in exchange for a vague promise of payments from indigent patients? Try selling that to a neurosurgeon or an orthopedist who has to pay increased premiums for malpractice insurance. The entire health care system could implode.

Is it possible? Yes. Will it happen? I don’t know.

I can only come to the conclusion that Dr. Dobson is either lying or ignorant. Although the Dr. associated with a PhD is no guarantee of intelligence, I’m betting on lying. Perhaps millions of new dependents would become eligible for coverage, but I suspect the insurance industry is capable of handling the extra load. From paying attention in my Finance classes during my undergraduate education, I remember something about risk. Insurance companies provide customers with risk management. If a customer wants health insurance, an insurance company will accept some of that risk. But here’s the key: they expect compensation from the insured for managing that risk, appropriate for the level of risk.

Dr. Dobson’s concern regarding HIV-positive patients customers is particularly misguided. Ignore Dr. Dobson’s ridiculous implication that HIV infection correlates to same-sex marriage specifically, and homosexuality in general. Also, assume for a moment that estimates by some analysts predicting a threefold increase in premiums are accurate. Isn’t it obvious that the insurance companies are demanding more compensation to manage more risk? And if the threefold increase in premiums isn’t sufficient and insurance companies can’t stay in business, the fault will rest with the insurance companies unable to manage risk, not HIV-positive patients customers seeking coverage. We should expect them to go out of business, understanding that competent businesses will soon replace them. It’s called capitalism.

Just as amusing is Dr. Dobson’s assertion about the cost to American businesses. Forget everything after his initial “concern” for American businesses. Maybe this is perfect time to get American businesses out of the health care business and let it be a transaction between individuals and health care insurers/providers. But that’s just a suggestion. Given Dr. Dobson’s apparent misrepresentation of business, I don’t expect much.

Dr. Dobson’s remaining arguments are equally absurd. Read them if you’ve finished reading everything else on The Internets.

Update: Fixed a few grammatical mistakes and added text about the HIV+/homosexuality correlation. Kip explained this perfectly in the comments.

Freedom costs twelve bucks ninety-five

My complaining about the FCC and free speech infringement does not mean I don’t realize how much free speech we really have. Here’s why our First Amendment is spectacular.

… Sirius Canada, which plans to start beaming to your car and home before the end of this year, has no plans to include Stern and his no-holds-barred morning show that includes the likes of Stuttering John [ed. note: my strike-through], Baba Booey and butt-bongo stunts.

So, Sirius Canada, isn’t this like acquiring the Pittsburgh Penguins and deciding you don’t need Sidney Crosby?

“Well, what if Sidney Crosby was going to be arrested and put in jail within two weeks?” said Gary Slaight, the CEO of Standard Broadcasting, which co-owns Sirius Canada along with the CBC.

“The CRTC, who we are licensed to, would eventually force us to take Stern down, because we have standards we have to abide by in this country when you own a broadcasting licence.”

“When we applied for a licence, the CRTC pushed us about this,” he said. “(Stern) was definitely a topic of conversation. We (Standard) are a big broadcaster and have to deal with the CRTC on other issues. And the CBC obviously has a cultural mandate to be concerned with.”

Read that again. Arrested and put in jail. For words. Our system of fines is arbitrary and political, but there are no jail threats, aside from those from random idiot Congressmen who want to change our rules. This doesn’t mean we should be complacent in fighting First Amendment infringements, but we have it pretty good, eh?

Post Script: For what it’s worth, I’ve used my Sirius car kit when driving into Canada. I could see Toronto in the distance and my receiver still had a clear signal from the satellites serving the United States. Hint, hint.

(Source: Get Sirius Info)

Would repetition be bad and awful and dreadful?

Enjoy this article in The Washington Post, which could’ve ended much earlier than the writers ended it.

An 18-year-old student was arrested at a D.C. school yesterday for allegedly robbing a Metro passenger of an iPod, an expensive music-playing device that has become a pop-culture icon, a Metro spokesman said.

That should be enough to tell readers that Metro riders should keep their belongings close or whatever lesson one wants to take from that. Since it needs to fill more newspaper space, we’re treated to other iPod descriptions. Consider:

The electronic devices, which let people carry thousands of songs with them and listen to them through earphones, are about the size of a pack of cigarettes and have rapidly replaced the older portable Walkman-style stereos as the entertainment device of choice. Many people use them to alleviate the boredom of trips on crowded subway trains and the perceived tedium of many other activities.

…the rectangular metallic device…

I appreciate that the writers can form multi-syllabic groupings of symbols uniformly accepted to represent phonetic pronunciation, which, when grouped in a recognized manner, imply meanings to the otherwise arbitrary sounds. I prefer to call them words. And any decent editor should’ve crossed all that crap out, replacing it with something more familiar, like maybe “iPod.” But I could just have an exceptional understanding of what an iPod is and why people use it. I’m not jealous that both of the writers involved got paid like times infinity more than I did for these multi-syllabic groupings of symbols uniformly accepted to represent phonetic pronunciation, which, when grouped in a recognized manner, imply meanings to the otherwise arbitrary sounds words.

How to Hurt Everyone with Good Intentions

Via A Stitch in Haste, this story is enough to frustrate anyone remotely interested in economic freedom.

[Massachusetts] has warned the upscale Whole Foods supermarket chain that it will risk criminal charges under the state’s centuries-old “blue laws” if it goes ahead with plans to open on the holiday.

Is it so complicated to think that maybe Whole Foods, along with every other business, has a reasonable expectation that it can open its doors to customers whenever it wants? Yet, the reasoning behind this is what’s most ridiculous.

Shaw’s [Supermarkets], which has 200 stores in New England, complained to Reilly after some of its employees spotted a banner advertising a Thanksgiving Day opening at a Whole Foods in Bellingham.

“Besides disadvantaging competitors, a Whole Foods opening would harm consumers, due to lack of choice in the marketplace for consumers to shop and compare prices for the best deal,” Shaw’s legal department wrote to [Attorney General Thomas] Reilly on Nov. 4.

Ummm, if Whole Foods opens on Thanksgiving, consumers will be forced to buy at Whole Foods prices since they can’t compare prices for the best deal. I know that whenever I go grocery shopping, I visit three, sometimes four, different supermarkets before I contemplate making any purchases. Granted, consumers still retain the option to not buy anything, but why bother with that. Here’s the question, though. Won’t enforcing blue laws to Whole Foods’s detriment reduce the choice for consumers from groceries at one price to no groceries? That’s better? Granted, customers could go to 7-Eleven, since they’re allowed to open. Since we know they offer a wide selection at competitive prices, consumers are protected.

At least the Attorney General is looking out for the little guy.

Nick Messuri, chief of Reilly’s business and labor protection bureau, said that while the blue laws sound archaic, they protect workers from pressure to give up their holidays.

We don’t want the evil corporation taking advantage of the poor workers, which is what Whole Foods would no doubt do with such slave labor tactics.

[President of Whole Foods Market’s North Atlantic Region David] Lannon said working on Thanksgiving was voluntary and workers would have received double pay.

How dare they be such heartless capitalists. As a new college graduate, I worked a temp job that paid me $7.50 per hour. Even a decade ago, that didn’t go very far. And I didn’t get paid holidays. January 1, 1996, I worked four hours while everyone else sat at home, enjoying hangovers, leftovers, and college football. My paycheck reflected a full day’s pay because of the double time. My electricity stayed on thanks to those uncompromising bastards who pressured allowed me to work that day. Virginia’s Attorney General didn’t step in to save me.

For anyone who thinks I only hate Republicans

I’ve written about our need for tax reform, but I realize I haven’t catered to everyone who might be interested in the subject. I’ve argued from a pro-individual, pro-business, pro-responsibility foundation. If you don’t like that, and prefer your tax reform to include tax increases, anti-investment incentives, and heightened class warfare, advocating poverty for all, I’ve found the plan for you, courtesy of Oregon Sen. Ron Wyden. Behold:

Wyden’s plan, the Fair Flat Tax Act of 2005, would replace the six current personal income tax rates with three – 15 percent, 25 percent and 35 percent. Corporate income would be taxed at a single flat rate of 35 percent. The proposal would eliminate many of the personal and corporate tax breaks that encrust the existing tax code, and would allow all taxpayers, not just those who itemize, to deduct state and local taxes from their federal income tax forms.

Most significantly, Wyden calls for taxing all income equally, regardless of its source. Interest and dividends would be taxed at the same rate as wages and salaries, eliminating the preferential treatment for investors over workers.

That’s brilliant. Instead of ending extra punishment for wage income, Sen. Wyden wants to punish investing. Not a moment too soon, of course, because we know only the wealthiest, greediest individuals invest their money in financial instruments generating interest and dividends. The bastards deserve to be punished for their capitalism hatred of poor people.

Simplicity is a virtue of any tax system; fairness is another. Wyden’s idea of equalizing the tax treatment of all income – whether it comes in the form of a paycheck or a stock dividend – has powerful appeal. The preferential tax treatment of investment income clearly favors the richest taxpayers. In Oregon, according to the state Department of Revenue, the richest 5 percent of taxpayers received 40 percent of all income from interest and dividends, and 79 percent of all income from capital gains.

Here’s an angle these editorial writers might like to pursue: what percentage of Oregon’s tax payments come from the richest 5 percent? Might that reveal a useful understanding, as well? But it’s about helping the poor, not punishing the rich. The use of “clearly favors the richest taxpayers” is all the analysis I need, so never mind.

Tax rates on interest, dividends and capital gains were cut during the Clinton administration, and again under President Bush, as a means of encouraging investment and savings. The resulting disparity in tax rates is manifestly unfair to those who rely on income from salaries and wages. A middle-class taxpayer who gets a $1,000 raise will forfeit 25 percent of it in federal income taxes, plus Social Security taxes. The same amount paid in dividends, interest or capital gains is taxed at a rate of no more than 15 percent, with no Social Security bite.

Once again, this plan just looks out for the poor(er) taxpayers. We wouldn’t want to bring that 25% tax hit on the $1,000 raise down as much as we want to hit the rich with an extra $100 tax for having the nerve to derive sources of income apart from direct labor. We shouldn’t care if they spent years building the wealth to invest. Hell, they should’ve donated the extra to the poor. Since they didn’t, we should take it from them.

If this is the best Democrats can do, they should just shut up and let Congressional Republicans continue to botch our nation’s economic well-being.

UPDATE: With a little research, I found this statistic from 1999. (I’ll look for a newer statistic, but I don’t think the result will change.)

For example, 38.1 percent of 1999 full-year taxpayers had an income of $20,000 or less but paid only 4.2 percent of all taxes. Conversely, those 1999 full-year taxpayers with income of at least $100,000 comprised only 6.8 percent of all taxpayers, yet they paid 42.8 percent of all taxes.

Spin that.

All politics is activist

In his most recent article for, Ben Shapiro offers a rebuttal to the “sky is falling” analysis pro-choice supporters foresee. Consider:

If Roe were overturned, the people in each state would decide abortion policy for themselves. Voters in California would decide abortion policy in California; voters in Alabama would decide abortion policy in Alabama. Some states would likely restrict abortion heavily; others would allow free access to abortion. Instead of a broad national answer dictated by the Supreme Court, we would have a plethora of answers dictated by the people.

I actually agree with Mr. Shapiro on this point. Federalism is an amazing experiment, producing a broad spectrum of data points on the issues facing our nation. However, perhaps a refresher of Mr. Shapiro’s words during last year’s presidential campaign could provide some insight.

With the judicial branch acting to usurp legislative power on this issue, a federal amendment is no longer optional but is a necessity in order to protect marriage.

I suspect Mr. Shapiro would defend the difference in his statement with a deeper analysis of judicial activism, but I’m not buying it. This is little more than federalism when it’s convenient and agreeable. Whose words to better refute Mr. Shapiro than Jonah Goldberg, who wrote this about the FMA when it first appeared.

You can’t favor federalism for only good ideas or ideas you like. Experimentation means allowing local communities to make mistakes.

Should I read anything into the obvious conundrum of Mr. Shapiro’s argument? He supports federalism for abortion, with the expectation that it would remain legal in most, if not all, states? But he thinks federalism isn’t sufficient for same-sex marriage? Either I’m reading it wrong and he’s only left his federalist pro-life argument at an early stage that would eventually lead to a constitutional amendment defining a fetus as a human being from conception, or he’s more worried about the negative impact of same-sex marriage than abortion. How is that logical? One caveat: convince me without resorting to the alleged judicial activist disparity, since the legislators in this are just as activist.

Some thinking required

Yesterday, I wrote about the Terrorism Risk Insurance Act. I discussed the economic stupidity of the scheme, making it clear how I thought it should work. In the comments to that post, I received the following from BrStarr:

So you don’t care if Boston, New York or LA gets blown up?

Who do you think pays enough taxes so that you farm belt people can have your huge subsidies?


I responded, though sadly only in comments, since BrStarr left no contact information.

Read through the archives and you’ll find that it’s no secret that I live in the Washington, DC metro area, which I do not believe is in the farm belt. I acknowledge that I face greater risk living here. As such, my cost to insure my life, health, and property will likely go up, if the private insurance market is paying attention. I accept that, as well as believing that the farm belt should not have to pay it since they don’t live here and didn’t force me to live here. And if I showed you my tax bill, you’d realize that I’ve “earned” the right to get a “favor” from Congress. I’d rather have lower taxes and a private insurance market, but that’s the crazy libertarian in me.

As to the other points, no, I don’t want to see Boston, New York, or LA blown up. I’ve been to all three cities and like them well enough that I’d like to be able to revisit them.

And I don’t like farm subsidies. I’d rather pay the price at the supermarket than at the Treasury. Either way, I’m paying. Crazy me, I think the market can do it better. Also, as a vegan, I benefit little from subsidies for beef, chicken, milk, etc. Again, my personal choices. And the private market could handle them.

Today’s lesson: don’t call me a hypocrite until you have facts. Have a day.

I should’ve added that the leap in assumptions to go from me saying that terrorism risk insurance should be private to believing I’d belittled the threat of destruction to three of our largest cities is gargantuan, but no matter. Criticism with no basis is easy to dismiss when I know I’m right. But I’d be a fool to think I’m always right. I know that I’m sometimes misguided due to imprecision or accusing too broadly. Sometimes, I’m sure I’m even wrong. That’s okay. I’m writing as much to figure out what I believe as I am to inform and convince.

If I just wanted to enjoy my writing without criticism, I wouldn’t have comments. They’re open on every post, and I welcome responses. If I’ve said something stupid, inaccurate or incomplete, I’m willing to listen to alternatives. I’ll respond if appropriate. As much as I want to influence opinion, I want to learn more. Read through the archives and I think you’ll notice the same progression in my thinking and expressing that I’ve noticed.

I know my opinions challenge some who read this site, and you express it from time to time. I don’t expect anyone to comment just to comment. But if you think you have a better way of looking at something, say so. The ideas and principles are more important to me than being right all the time.

Can we return the favor next November?

Because flood insurance and pension guarantee failure aren’t enough, Congress wants to extend the Terrorism Risk Insurance Act (TRIA).

The version approved by the House Financial Services Committee contains several provisions that the Treasury Department opposes, such as the addition of group life insurance and the kinds of coverage eligible for the backstop. The bill also calls for different triggers for different types of coverage — a provision dubbed siloing — that critics say would lower the damage level at which the federal program could be invoked.

The Treasury Department has not favored extension of TRIA, but agreed last summer to accept it if it were more restrictive than the original program and designed to be temporary, leaving coverage eventually to private insurers.

Treasury Secretary John W. Snow endorsed the version approved by the Senate Banking Committee. [ed. note: The Senate version is less expansive.] The panel’s actions “recognize the temporary nature of the program and place terrorism insurance on the right path to full private market participation,” he said.

The Treasury Department and other critics say the private market is now able to resume insuring against terrorism but will not do so as long as the federal government provides the coverage at little or no cost.

I’ve left out the details because they don’t matter in the discussion of principle. They’re in the article if you want them. What’s important here is that the government is once again circumventing the private market and the Treasury Department tried to explain this. It’s nice to have the assurance that someone will pay for the damage should another attack occur, but it’s not at little or no cost.

An attack could occur anywhere, but no one expects it to be in Peoria. Those people shouldn’t pay for the risk inherent in building a new skyscraper in New York City. We should’ve learned this lesson with every hurricane that comes along. The private market would’ve compensated for the extra risk to lives and property along the Gulf Coast by making it (prohibitively?) expensive to live and work there, but our helpful friends in Congress crushed that. Taxpayers get the $200 billion bill, yet the undesirable fallacy of socialized risk management denial marches on.

Post Script: Thankfully we have someone in Congress to put it all in perspective.

“I do not regard TRIA as a favor to the insurance industry,” said Rep. Barney Frank (D-Mass.). “It’s a favor to the insureds.”

I think that (D-Mass.) should read (S-Mass.) “favor to the insureds” shows me that Rep. Frank prefers his capitalism with a large dose of socialist stupidity.

Behold the Luddites

Everyone already knows about Sony’s recent self-inflicted troubles regarding its atrocious Digital Rights Management scheme for music CDs. Installing spyware on customer computers is stupid under every circumstance, but it’s particularly infuriating when used to prevent customers from a fair use of the product. As I understand “fair use”, I can make a copy of the music to play in a manner convenient to me. In the case of music, that means my iPod. I’ve seen varying reports, but at best, Sony’s spyware protection scheme makes the rip/import process through iTunes to the iPod burdensome. At worst, the process isn’t possible. It doesn’t take an MBA to figure out that Sony implemented an anti-customer method.

I didn’t insert an infected Sony CD into my PC, so I sympathize with Sony in its intent to protect its interests. Yet, I’m living in 2005. I like technology and how it makes my life more enjoyable. Who could’ve guessed fifteen years ago that I could carry my entire collection of music and audiobooks with me everywhere and it would require as much space as a deck of playing cards. That’s a great advance in lifestyle. Yet, Sony is for some reason stuck in 1993, with only a grudging, occasional nod to 1999. That’s dinosaur thinking. Dinosaurs are extinct. Figure out a way for me to use your product, with the assumption that I will use it reasonably and pay you for the privilege. Do not assume that I’m a thief. Treat me like that once and I won’t come back as a customer.