Entitlement Liabilities Are a Graver Threat to the Next Generation of Americans Than Climate Change

On January 31, 1940, Miss Ida Fuller received a check for $22.54. She was the first person to retire under the Old-Age, Survivors, and Disability Insurance (OASDI) scheme, better known as Social Security. At the time of her retirement in 1939, she had paid just $22 in Social Security taxes. Ms. Fuller lived to be 100, cashing over $20,000 worth of Social Security checks.

If she had only paid $22.54 in contributions, where did the $20,000 Ms. Fuller received in Social Security payouts come from? It came, as it does now, from the taxpayers of the day. As of 2019, your employer deducts 6.2 percent of your wages up to $132,900 a year, matches this amount, and sends it to the Social Security Administration (SSA). The SSA deposits this with the Treasury, which spends it and receives Treasury bonds in return. This is the fabled trust fund that guarantees Social Security.

But these Treasury bonds are simply IOUs redeemable against the income of tomorrow’s taxpayers. When one of the Treasury bonds held by the SSA falls due for payment, the Treasury can only get the funds to meet this liability by taxing, borrowing (taxing the taxpayers of tomorrow), or printing money (imposing an inflation tax). In each case, what really guarantees Social Security is not the money you paid in but the earnings of today’s or tomorrow’s taxpayers.

Such a pay-as-you-go scheme could chug along well enough as long as there were lots of workers relative to retirees. When the program began, every 100 workers were supporting three retirees.

This favorable ratio encouraged politicians to be more generous. Originally intended to cover only about 50 percent of all workers, Social Security was expanded even before Ida Fuller received her first check to provide benefits for dependents of retired workers and surviving dependents. In the post-war years, Social Security grew further. Disability benefits, payable as early as age 50, were added in 1956, and during the 1950s coverage was extended to other previously excluded workers, making it essentially universal. Congress passed across-the-board benefit increases of 7 percent (1965), 13 percent (1967), 15 percent (1969), 10 percent (1971), 20 percent (1972), and 11 percent (1974). In 1972, benefits were tied to the Consumer Price Index, yielding an annual “cost of living adjustment.”

In 1965, Medicare was signed into law, establishing a heavily subsidized federal health care program for the elderly. Former President Harry Truman and his wife received the first Medicare cards without paying a cent in Medicare taxes.

Like Social Security, Medicare is financed by a payroll tax of 2.9 percent split between employer and employee, up from 0.7 percent in 1966. Like Social Security, that money gets paid right out to meet current expenses, which were vastly expanded by passage of Medicare Part D in 2003. And like Social Security, such a pay-as-you-go scheme could chug along well enough as long as there were lots of workers relative to retirees.

Two things derailed that. US birth rates fell from births 3.65 births per woman in 1965 to 1.80 in 2016, and life expectancy rose from 68 in 1950 to 79 today. Together, this meant ever more retirees relative to the workers supporting them. By 2017, 100 workers were supporting 25 retirees.

These shifting demographics have shredded the solvency of the “trust funds.” Social Security is estimated to run out of reserves in 2034, after which benefits would have to be reduced by about 25 percent to keep spending within available annual revenue. Over 75 years, Social Security has an unfunded liability of $13.9 trillion.

The Medicare hospital insurance trust fund will run out of reserves in 2026. Medicare’s second trust fund, for physician and outpatient services and for prescription drugs, is permanently “solvent” because it has an unlimited call on the general fund of the Treasury—the incomes of future taxpayers. Premiums paid by the beneficiaries will cover only about 25 percent of program costs; the rest of the spending is unfinanced. Medicare’s overall unfunded liability over 75 years is more than $37 trillion.

The taxes levied to fund Social Security have already risen drastically. In 1937, the Social Security tax rate was one percent on earnings up to $3,000 ($53,449 in 2019 dollars) to be matched by the employer. By 1971 it was 4.6 percent on earnings up to $7,800 ($49,411 in 2019 dollars). It now stands at 6.2 percent up to $132,900.

This is only going to get worse. According to Census Bureau projections, by 2030 each 100 working-age Americans will be supporting 35 retirees, and this could rise to 42 by 2060. Another way to think of this is to calculate the number of retirees each worker must support. In 1946, the burden of one retiree was shared between 42 workers. Today, according to the SSA, roughly three workers cover each retiree’s Social Security and Medicare benefits. By 2030, however, there will be only two workers supporting each retiree.

In other words, a working couple will have to support not only themselves and their family but also someone outside the family thanks to Social Security and Medicare.

To make Social Security solvent again, the payroll tax rate would need to be hiked immediately from 12.4 percent to 15.2 percent, or Social Security benefits would need to be cut on a permanent basis by about 17 percent. According to economists Roger LeRoy Miller, Daniel K. Benjamin, and Douglass C. North:

[F]or Social Security and Medicare to stay as they are, the payroll tax rate may have to rise to 25 percent of wages over the next decade. And a payroll tax rate of 40 percent is not unlikely by the middle of the twenty-first century.

Teenage climate activist Greta Thunberg recently made international headlines with an impassioned speech to the United Nations in which she complained that her future had been stolen by inaction on climate change. An American Ms. Thunberg’s age could say the same about entitlement spending on Social Security and Medicare.

By the expanding eligibility for and hiking the benefits of a pay-as-you-go system while at the same time having fewer children to fund it, the generations preceding that child have left a fearsome financial obligation. Either taxes will go up sharply for the workers of tomorrow, lowering their standard of living, or benefits will go down for the retirees of tomorrow, lowering their standard of living. One group is going to feel pretty angry.

These problems were foreseen even as politicians were hiking payouts. In 1978, the economist Paul Samuelson wrote:

[O]ur Social Security system is also an actuarially unfunded system…there is no obligation for this generation to have children at the same rate as did previous generations. Therefore, when those born during the baby-boom period of the ‘50s reach retirement age in the next century, their stipends will be felt as more of a burden by the thinner ranks of the then working population

We are on the brink of inter-generational strife. We have the political shortsightedness of decades past to thank for that.

COLUMN BY

John Phelan

John Phelan is an economist at the Center of the American Experiment and fellow of The Cobden Centre.

RELATED VIDEO: The Living Wage Makes It Harder to Make a Living.

EDITORS NOTE: This FEE column is republished with permission. © All rights reserved.

President Trump is protecting Americans from Big Government

During the Obama Administration, it became common practice for Federal agencies to target and penalize American families and small businesses. They got away with it by hiding behind vague, often secret interpretations regarding how ordinary citizens should comply with the government’s own maze of bureaucratic regulations.

When President Donald J. Trump took office, he pledged to turn the page on Washington’s regulatory overreach, giving the American people a government that’s finally accountable to its citizens. Building on that promise, the President signed a pair of Executive Orders today to ensure that the abuses that took place under the last Administration can never happen again.

Americans will no longer be kept in the dark.

First, Agencies will have to place their guidance documents on easily searchable public websites, allowing any American access to them. The government will be required to permit citizens to give their input on these guidelines, and they will have the ability to ask agencies to withdraw guidance they believe is wrong. Second, agencies will be strictly prohibited from enforcing rules that have not been made publicly known.

These common-sense changes come alongside the President’s historic efforts to cut burdensome red tape. In his first week in office, he issued a challenge to his Administration: For every new regulation introduced, 2 old ones must be cut.

That goal has been met—to say the least. As of today, the tally is 14 regulations that have been cut for every significant new one implemented. That makes for the largest deregulatory push since Ronald Reagan was President.

Unlike Obama, President Trump is protecting Americans from Big Government.

Acting OMB Director: “Trump Keeps Promise to Tame Bureaucracy That Runs Roughshod Over Americans”


President Trump signs ‘game-changing’ trade deal with Japan

During the U.N. General Assembly last month, President Trump continued to fight for fairer trade deals for American workers. The results of that hard work came to light Monday, when the President signed a pair of groundbreaking deals at the White House.

“These two deals represent a tremendous victory for both of our nations,” President Trump said. “They will create countless jobs, expand investment and commerce, reduce our trade deficit very substantially, promote fairness and reciprocity, and unlock the vast opportunities for growth.”

President Trump: This is a groundbreaking achievement for the U.S. and Japan

America’s farming community is the big winner from the first of Monday’s agreements, which dramatically expands their market access. Before this deal, Japan was already America’s third largest agricultural export market—accounting for $14.1 billion in food and agricultural exports last year. The terms are even better now, as Japan will eliminate or reduce tariffs on approximately $7.2 billion in U.S. agricultural goods.

Once the agreement goes into effect, more than 90 percent of American agricultural imports into Japan will be duty free or receive preferential tariff access.

“In the United States, these deals are a game-changer for our farmers and our ranchers . . . [they] will now be able to compete fairly in Japan against major competitors worldwide,” the President said.

The second deal signed on Monday focuses on digital trade, setting the same “gold standard” digital trade rules that are found in the President’s landmark United States–Mexico–Canada Agreement (USMCA). Vital online commerce will now be expanded, which brings a significant boost to the already roughly $40 billion worth of digital trade between America and Japan. It ensures America will remain a global leader in digital.

The President’s deal with Japan is a win for American farmers and businesses.

RELATED ARTICLE: ‘There can be no reward’: Beto O’Rourke supports punishing religious institutions for views on sexuality

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Hawaii’s Attempt to Raise Tobacco Age to 100 Reveals the Soft Tyranny of Neo-Moralists

No matter how noble a cause, efforts to legislate morality have a rather dubious track record.

The road to hell is paved with good intentions. And on that road, there is, perhaps, nothing more dangerous than legislators committed to making sure those intentions come to pass. However, no matter how noble a cause, efforts to legislate morality have a rather dubious track record.

Yet, no matter how true this may be, governments are always trying to regulate morality by banning behavior they deem wrong. From the prohibition of alcohol to the drug war to anti-dancing campaigns, we have seen this happen throughout US history. And the latest example comes from Hawaii, where buying cigarettes may become an illegal act for roughly 99 percent of the population.

Legislative season is upon us, and if one lawmaker from Hawaii gets his way, the state may become the first to effectively outlaw cigarettes. Though to be clear, the text of the proposed bill does not actually ban smoking—it just prohibits the sale of cigarettes to anyone under the age of 100.

Already, Hawaii is one of six states that has raised the legal smoking age to 21. The other states include California, New Jersey, Massachusetts, Oregon, and Maine. The proposed law takes this concept even further, incrementally raising the legal smoking age to 100. The legal age would rise to 30 in 2020, 40 in 2021, and 50 in 2022, finally reaching 100 in 2024. Vape devices and cigars would be exempt from the ban.

The bill’s sponsor, Rep. Richard Creagan, who is also a doctor, said, “We, as legislators, have a duty to do things to save people’s lives. If we don’t ban cigarettes, we are killing people.” As a doctor, Creagan is absolutely correct: It is his job to save lives, and he has sworn an oath to do so. As a legislator, however, he does not have the moral authority to tell his constituents which peaceful behaviors they can and cannot engage in, no matter how well-intentioned his motives may be.

Creagan commented:

We essentially have a group who are heavily addicted—in my view, enslaved by a ridiculously bad industry—which has enslaved them by designing a cigarette that is highly addictive, knowing that it [is] highly lethal…And, it is.

While he is clearly passionate about the topic, that does not make his attempts to outlaw smoking any less of an affront to individual liberty. To be sure, smoking is an unhealthy habit. And while I recommend avoiding it at all costs, that is a decision for the individual to make, not their state representative.

Supporters of the proposed legislation argue that the timing of the bill is right since the rise of tobaccoless vape products has resulted in a decrease in cigarette sales. Michael Siegel, a professor at Boston University’s School of Public Health said:

Because smoking rates are getting so low, we can actually start thinking about what I call end-game strategy, meaning we’re at the point where we can feasibly just make smoking history…We couldn’t even talk about it when there was a large percentage of people smoking because there were too many people affected.

It is important to reiterate that there is absolutely nothing wrong with wanting people to quit smoking and live healthier lives. There is, however, something very wrong with prohibiting buyers and sellers of cigarettes from engaging in a peaceful transaction under the threat of force, which is what laws of this nature effectively do.

Already, innovative market alternatives to traditional tobacco products, like vape pens, are directing tobacco users away from cigarettes and towards safer products. This shows that the market is working without the need for regulation. It would be silly, then, for the local government to get involved when things are already getting better on their own. If anything, it shows that government bans are not needed.

Adding to the hysteria, Creagan said:

We don’t allow people free access to opioids, for instance, or any prescription drugs…This is more lethal, more dangerous than any prescription drug, and it is more addicting. In my view, you are taking people who are enslaved from a horrific addiction, and freeing people from horrific enslavement.

You cannot force someone out of their own captivity; each individual is responsible for that. And as well-intentioned as Creagan is, he would be wise to heed the wisdom of Lysander Spooner (1808-1887), who reminded us that vices are not crimes.

In 1875, Lysander Spooner—an abolitionist and founder of America’s only private postal service—wrote an essay called “Vices Are Not Crimes,” in which he famously denounced the government’s proclivity for passing laws that attempt to regulate “unsavory” individual behavior. 

While Spooner does not praise “bad” behavior, he does assert that individuals, and to some extent their communities, are responsible for correcting their own actions. And by punishing and outlawing vices, like alcohol, drugs, and cigarettes, no real personal transformation or change can occur. By relying on the state to determine what is right or wrong, individuals completely relinquish personal responsibility.

Spooner argues that it is for this reason that vices, which he describes as “those acts by which a man harms himself or his property,” should not be outlawed by governments. Instead, individuals should be free to learn through trial and error, so long as they are not harming others.

“And, unless he can be permitted to try these experiments to his own satisfaction,” Spooner writes, “he is restrained from the acquisition of knowledge, and, consequently, from pursuing the great purpose and duty of his life.”

In fact, Spooner viewed the freedom to experiment with potential vices with such importance, he believed it was the foundation of individual freedom. He wrote that “unless this clear distinction between vices and crimes be made and recognized by the laws, there can be on earth no such thing as individual right, liberty, or property.” One can only imagine how he would view Hawaii’s new proposal.

In juxtaposition to his definition of “vices,” Spooner defined “crimes” as “those acts by which one man harms the person or property of another.” And unfortunately for Hawaii lawmakers, smoking cigarettes does not fit that definition. So long as smoking is done on private property where no one else’s liberties are being violated, there is no victim and thus, no crime.

He continues:

No one of us, therefore, can learn this indispensable lesson of happiness and unhappiness, of virtue and vice, for another. Each must learn it for himself. To learn it, he must be at liberty to try all experiments that commend themselves to his judgment.

Author C.S. Lewis also echoed this sentiment in his book God in the Dock: Essays on Theology when he wrote:

Of all tyrannies, a tyranny sincerely exercised for the good of its victims may be the most oppressive. It would be better to live under robber barons than under omnipotent moral busybodies. The robber baron’s cruelty may sometimes sleep, his cupidity may at some point be satiated, but those who torment us for our own good will torment us without end for they do so with the approval of their own conscience. They may be more likely to go to Heaven yet at the same time likelier to make a Hell of earth. This very kindness stings with intolerable insult. To be “cured” against one’s will and cured of states which we may not regard as disease is to be put on a level of those who have not yet reached the age of reason or those who never will; to be classed with infants, imbeciles, and domestic animals.

Rep. Creagan most certainly cares about his constituents, but that does not justify his proposed legislation. Local governments can absolutely encourage individuals to be healthy. But they should not, under any circumstances, ban products or activities it finds undesirable. In order for individual liberty to flourish, people must be free to make their own choices, even if we think they have made the wrong choices.

COLUMN BY

Brittany Hunter

Brittany Hunter

Brittany is a senior writer for the Foundation for Economic Education. Additionally, she is a co-host of Beltway Banthas, a podcast that combines Star Wars and politics. Brittany believes that the most effective way to promote individual liberty and free-market economics is by telling timely stories that highlight timeless principles.

EDITORS NOTE: This FEE column with images is republished with permission. Image credit: Pixabay.

Trump Cave: Short-term Deal — NO WALL MONEY!

Within minutes after President Trump made his Rose Garden announcement that a “deal” was made to reopen the government the Democratic National Campaign Committee (DNCC.org) sent out the below email:

Watch the video of President Trump’s announcement:

A good friend of mine noted that “compromise is the art of losing slowly.” It now appears that President Trump is more interested in making a deal than keeping America safe by building the wall. Now making a deal is the art of losing slowly.

President Trump now has five options:

  1. Sign legislation passed by both houses of Congress that does not include the $5.7 billion to build the wall.
  2. Veto legislation passed by both houses of Congress that does not include the $5.7 billion to build the wall.
  3. Sign legislation passed by both houses of Congress that does include the $5.7 billion to build the wall.
  4. If Congress does not pass legislation that includes the $5.7 billion to build the wall then declare a national emergency and build the wall.
  5. Do nothing and let the current border situation continue to worsen.

The question is will President Trump, now that he has signed the temporary CR, demand that Pelosi keep her word and open up the House chambers for the State of the Union address?

As the DNCC.org email highlights, “Time for some accountability.” The House and Senate Democrats plan on holding Trump accountable. As they do and the legacy media parrot their propaganda the Republicans will cower in fear. For you see the opposite of peace isn’t war, it is fear. The Democrats and media strike fear in the hearts of Republicans.

Ayn Rand wrote:

“The uncontested absurdities of today are the accepted slogans of tomorrow. They come to be accepted by degrees, by dint of constant pressure on one side and constant retreat on the other – until one day when they are suddenly declared to be the country’s official ideology.”

President Trump and the Republican Party are in a state of constant retreat. The Democrats are in a constant state of applying pressure. Today may go down in political history as the end of the Trump presidency.

Trump’s signature slogan was, like George H.W. Bush’s read my lips, “build the wall.” The wall will not be built because the Democrats rightly understand that they have won. They aren’t tired of winning.

The presidential election cycle that is just beginning could turn out to become a rout. The Republicans could lose the Senate and the White House.

Today, January 25, 2019 is the beginning of the retreat and the decline and fall of MAGA. The end.

RELATED ARTICLE: Report: Trump Could Have DOD Build Wall Without State of Emergency, Congressional Approval

RELATED VIDEO: Senator Lindsey Graham’s take on the Trump initiative.

EDITORS NOTE: The featured photo is by Al x on Unsplash.

Slowing Productivity and Rising Inequality Have a Common Driver: Government Intervention

Mainstream economists are overlooking a key connection.

A growing chorus of alarmist voices decries the rising economic inequality in the Western world, especially in the United States. Surprisingly enough, the same mainstream analysts complain about the anemic growth of labor productivity without seeing the correct link between the two.

Data shows a strong correlation between labor productivity and economic inequality (the two charts below). From the end of the Second World War until the mid-1970s, labor productivity grew at a robust rate of almost 3 percent per annum (p.a.), while income inequality declined. Afterward, both trends reversed—labor productivity slowed to below 2 percent growth p.a. on average and has almost stagnated since the Great Recession, while both wealth and income inequality expanded steadily.

What common factor could explain the two divergent trends that the mainstream analysts seem to overlook? In the 1940s, Mises was impressed by the ”miraculous” rise in the standards of living of American wage earners, which had been going on for more than two centuries. For him, the answer was straightforward: capital accumulation is the driving force behind both labor productivity and standards of living convergence.

Building on Mises’s work, Rothbard explained in detail what capital accumulation requires: (i) new capital investment that lengthens the structure of production and (ii) technological progress that overcomes the diminishing returns accompanying the increase in the supply of capital goods. However, Mises also warned that depletion of the capital stock would hamper capital accumulation and labor productivity. Unfortunately, mainstream analysts and the United States seem to have forgotten this valuable lesson.

In terms of technological progress, the US has maintained its world leadership during past decades. It ranks second in the world to Switzerland in terms of both innovation and business sophistication, spends more for Research & Innovation than the OECD or EU on average relative to GDP, and makes up the majority of the top 25 universities in the world. Moreover, it has issued the same amount of patents over the last three decades compared with the previous 150 years.

In terms of capital stock, the picture is completely different. According to estimates of the Bureau of Economic Analysis (BEA), the stock of private non-residential assets per worker has increased in real terms at about 1 percent p.a. from 1947 to 2009 and stagnated since the Great Recession (left chart below). However, BEA’s alleged sustained pace of capital growth seems hard to reconcile with the falling private investment and savings since the mid-1970s (right chart below).

In addition, the BEA methodology presents some serious shortcomings. Except for cars, BEA uses the “perpetual inventory method” to estimate fixed assets. According to it, the value of the capital stock is indirectly estimated as the sum of past investment flows minus the estimated depreciation. It means that all past investments are considered sound by default, which is certainly not the case nowadays when recurrent booms and busts cause significant volumes of malinvestments. Other question marks relate to the accurate estimation of depreciation rates in the face of rapid technological progress and the use of GDP deflators as their accuracy is unreliable, especially with regard to real estate investment.

All these considerations have led not only us but also the Federal Reserve Board (FRB) to suspect that BEA’s estimates of the US capital stock are overvalued. It is intriguing that the FRB adjusts the BEA estimates downward, especially with regard to real estate assets— “structures” in BEA’s jargon when it uses them as input for the calculation of the capital stock in manufacturing. As a result, there is a substantial difference between BEA and FRB estimates of the evolution of the volume of manufacturing capital stock from 1952 to 2016, in particular for the real estate component (left chart below). Therefore, we tried to recalculate the BEA estimate of the total stock of private non-residential capital per employee by extrapolating the difference between the two manufacturing indexes coming from BEA and FRB (right chart below).

The new results suggest that the real stock of capital per worker grew in a clear and sustained manner only until the end of the 1970s and fell afterward until the trough of the Great Recession. The recalculated capital stock is more consistent with the observed declines in investment and productivity since the mid-1970s and also confirms Mises’s prediction that wrong policies would lead to capital consumption.

For the United States, the failed economic policy is the exponential growth of government intervention in the economy in the 20th century, which stifled entrepreneurship and capital accumulation. This is obvious in the rise of both government spending that redistributes away economic resources from their originators (left chart below) and the amount of regulatory burden (right chart below). Another key factor taking a toll on capital endowment is inflation, which gained traction following the de facto abolishment of the gold standard in 1971.

Most importantly, inflationary policies trigger boom-bust cycles via the artificial lowering of interest rates below their free-market level. In a recent article on the business cycle, Salerno emphasizes that “overconsumption” and “malinvestment” are the two salient marks of the boom—not “overinvestment,” as wrongly understood by some mainstream critics. It is no surprise that the capital stock per worker dropped during the business cycles that have occurred regularly since the 1970s and that culminated in the Great Recession. The illusion of the boom fuels not only capital consumption but also the polarization of wealth and incomes in the society. The fiduciary credit expansion fuels an increase in asset prices, most commonly on stock exchanges and in real estate (charts below).

Although starting from a limited number of transactions, all owners calculate their net worth with the newly inflated asset prices, boosting the value of household assets in excess of liabilities. As a result, the rich appear to get even richer in an economy on steroids. This explains why both the US national wealth has grown much faster than national income since the end of the 1970s (left chart below), and the number of wealthy people increased significantly (right chart below).

The rising inequality since the 1970s has been fueled by both the decline in labor productivity and monetary expansion inflating asset prices. Both are perverse effects of government interventionist policies, which led to a gradual erosion of the US capital stock per employee. This is the correct linkage between inequality and productivity as explained by Mises and other Austrian School economists.

People have different skills and preferences, so the free market does not lead to a complete equalization of incomes and wealth. Nevertheless, it does ensure the proper allocation of capital to increase labor productivity and satisfy the most urgent needs of consumers. As a result, the gap between the well-off and the poor is not only gradually diminishing but also gets less significant in terms of consumption. Eventually, the disadvantage of wealth inequality becomes mostly a psychological one. As long as the capitalist consumes only a fraction of his wealth and invests the rest into productive businesses, the real beneficiary of the increase in labor productivity is the poorer part of society.

This article was reprinted from the Mises Institute.

COLUMN BY

Mihai Macovei

Dr. Mihai Macovei is an associated researcher at the Ludwig von Mises Institute Romania and works for an international organization in Brussels, Belgium.

EDITORS NOTE: This column with images by FEE is republished with permission.

What Would Actually Be Affected in a Government Shutdown

“Government shutdown.” Probably no two words strike more fear in the hearts of Washington politicians.

The fact that another shutdown is imminent is a sign of how dysfunctional Washington’s budgeting process really is. What was once an orderly process where timelines were largely met has morphed into a political game plagued by brinkmanship and out-of-control spending.

Despite promises from Congress that the process would be different this year, here we are again.

This time the biggest issue holding up a deal is a confrontation between President Donald Trump and congressional Democrats over border security funding.

As Congress barrels toward a Friday spending showdown, the potential of a partial government shutdown is very real. But what would it actually mean?

A shutdown wouldn’t be good, of course, but it’s not as scary as you think. There wouldn’t be lawlessness in the streets. You’d still get your Social Security check.

Here’s what a shutdown and an alternative might look like:

Government Shutdown

If Congress and the president are unable to reach an agreement by Friday, then the federal government will enter into a partial shutdown. Five of 12 annual spending bills became law in September. That includes the military, so there is no threat to national defense.

It also includes the departments of Labor, Health and Human Services, Interior, and Veterans Affairs. In fact, 75 percent of the discretionary budget has already been funded through September 2019.

Still, a partial shutdown would mean that major federal agencies such as the departments of Agriculture, Commerce, Justice, Homeland Security, State, and Transportation would be left without funding.

Many of the services they provide, however, would not be interrupted. Four hundred and twenty thousand “essential” federal employees would continue to work, including 41,000 law enforcement and correctional officers and up to 88 percent of DHS employees. America’s safety would not be sacrificed.

You shouldn’t worry about your benefit payments being impacted either. Social Security, Medicare, and Medicaid payments, as well as veterans benefits, would continue uninterrupted. These programs don’t rely on Congress taking action for annual funding to continue, or their appropriations were already passed into law.

Mail service would also continue as scheduled since the Postal Service has its own revenue stream. National parks would remain open, though with reduced staff.

About 380,000 federal employees would be furloughed for the duration of a shutdown, meaning that they wouldn’t be paid nor expected to work. Agencies that would be most affected include the Department of Commerce, NASA, the IRS, and the Department of Housing and Urban Development. Based on past government shutdowns, all furloughed employees would likely be paid when the shutdown ends.

A Continuing Resolution

Another possible outcome to get around the current funding impasse is for Congress to pursue a continuing resolution to keep the government open. That scenario played out as the last funding deadline approached on Dec. 7.

Under this situation, agencies would operate at their 2018 budget levels for the duration of the continuing resolution. Congress could choose to extend funding for a short period of time (likely into early 2019) or could opt for a full-year continuing resolution.

If Congress passes a short-term continuing resolution, then it would be back in the same mess in just a few short weeks.

Passing a full-year continuing resolution would put an end to the budget drama for this year. However, it would also leave both Republicans and Democrats unsatisfied, with Trump not getting additional border security money and Democrats unable to enact some of their priorities.

But it would save taxpayers money. If unfunded agencies simply continued to receive money at the 2018 level, it would cut spending by $11 billion.

It’s not a lot, but with the national debt soon expected to cross $22 trillion, every penny counts.

Regardless of what happens, one thing is clear: The budget process is broken, and taxpayers are the real losers. When Congress is constantly budgeting by crisis, it erodes oversight and leads to wasteful spending. Citizens should demand that Congress not only make the budget process better, but also ensure a sustainable budget future.

The cost of failing to do that is much scarier than a government shutdown.

Originally Distributed by Tribune News Service

COMMENTARY BY


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EDITORS NOTE: This column with images by The Daily Signal is republished with permission. The featured photo is by Vadim Sherbakov on Unsplash.

One U.S. Senate Candidate’s Plan to Drain the Swamp: Term Limit Congress

Since 1973 Gallop has asked Americans the following survey question:

Now I am going to read you a list of institutions in American society. Please tell me how much confidence you, yourself, have in each one — a great deal, quite a lot, some or very little?

Of those surveyed here are the results in 2017:

Congress

Great deal Quite a lot Some Very little None (vol.) No opinion Great deal/Quite a lot
% % % % % % %
2017 6 6 39 44 3 1 12

Current Florida Governor Rick Scott is running for the U.S. Senate. He is running against Democrat Senator Bill Nelson, who was elected to the Congress in 2001. Candidate Scott’s platform is simple, term limit members of Congress.

Watch this short video to understand Scott’s idea on how to drain the swamp:

In 1994 the Heritage Foundation produce a reported titled “Term Limits: The Only Way to Clean Up Congress.” According to the Heritage Foundation:

It is difficult to overstate the extent to which term limits would change Congress. They are supported by large majorities of most American demographic groups; they are opposed primarily by incumbent politicians and the special interest groups which depend on them.

Term limits would ameliorate many of America’s most serious political problems by counterbalancing incumbent advantages, ensuring congressional turnover, securing independent congressional judgment, and reducing election-related incentives for wasteful government spending.

Perhaps most important, Congress would acquire a sense of its own fragility and temporariness, possibly even coming to learn that it would acquire more legitimacy as an institution by doing better work on fewer tasks.

The key takeaways of the report are:

  1. Legislative resistance to term limits is in sharp contrast with private citizens’ strong support for them.
  2. The only serious opponents of term limits are incumbent politicians and the special interests — particularly labor unions — that support them.
  3. Congressional term limits are a necessary corrective to inequalities which inevitably hinder challengers and aid incumbents.

Maybe term limited Governor Rick Scott is on to something.

Read the Heritage Foundation report on the benefits of Congressional term limits.

Your House Does Not Need a New Roof at My Expense

The moral and economic issues raised by government flood insurance ought to be obvious.

Lawrence W. Reed

by  Lawrence W. Reed

Pardon the pun, but I would like to discuss the subject of “sunk costs” in the context of hurricane-induced flooding.  Here’s the background, from a page one Wall Street Journal article on September 15, “Repeated Claims Flood Insurance Program”:

Brian Harmon had just finished spending over $300,000 to fix his home in Kingwood, Texas, when Hurricane Harvey sent floodwaters “completely over the roof.”

The six-bedroom house, which has an indoor swimming pool, sits along the San Jacinto River. It has flooded 22 times since 1979, making it one of the most flood-damaged properties in the country.

Government records show that between 1979 and 2015 the federal flood insurance program paid out more than $1.8 million to rebuild the house—a property that Mr Harmon figured was worth $600,000 to $800,000 before Harvey hit late last month.

“It’s my investment,” the 49-year old said this summer, before the hurricane. “I can’t just throw it away.”

On a house worth maybe $800,000, the government expended a total of $1.8 million—spread over as many as 22 occasions. What Mr. Harmon has personally spent (to build or buy, and later to improve or fix the house) is not stated, other than the $300,000 for recent hurricane repairs. It’s conceivable that this one single-family structure has sucked up a sum equivalent to five times its value, or more. And since it’s flooded 22 times in 36 years, it’s probably not done sucking.

Mr. Harmon says he “can’t just throw it away” but I as a taxpayer sure wish he would.

Loss Aversion

The moral and economic issues raised by government flood insurance ought to be obvious. Since its creation by Congress in 1968, the National Flood Insurance Program (NFIP) has lost money every year—about $25 billion to date, with this year’s deficit in excess of a billion.

Mr. Harmon’s reluctance to give up on his house seems motivated by what economists call “loss aversion,” the uneasy feeling people often have about wasting something they’ve invested in.

You buy a ticket to a movie but at the last minute a friend invites you to a sumptuous dinner at your favorite restaurant. That would be an easy decision if you hadn’t already bought the theater ticket; you could always see the film next week. But darn it, you paid for it and if you don’t go, it’ll be wasted. You may still accept your friend’s invitation, but with a tinge of regret. (To lessen that regret, you might pass the ticket on to someone else).

Nonetheless, economists caution us to recognize that a cost you’ve incurred in the past and which is unrecoverable is, in a word, “sunk.” The sooner you can put a sunk cost behind you—perhaps learn from it but otherwise forget about it—the better your future decisions will be.

Many times I’ve caught myself allowing a sense of loss aversion to overwhelm my knowledge of sunk costs. Here’s an example I shared often with students when I taught at Northwood University: I once bought a half gallon of butter pecan ice cream on sale for a mere 99 cents. “Such a deal!” I thought. When I opened it at home, scoop in hand, I discovered it was almost all ice cream (lousy to the taste, no less) and virtually no pecans! I suppose I could have angrily returned it to the store for a refund (minus the two dollars in gasoline it would have taken to get there), but I’m an easygoing chap. I just stuck the whole thing in my tiny freezer. For weeks thereafter as I tried to make room for other things, I would jam that half gallon of bad ice cream into a different corner.

Fixating on sunk costs is a major reason why a lot of small investors stay small.

Then it hit me. I’m never going to eat that stuff! It’s just taking up room I could use for something better. That 99 cents ain’t comin’ back. What am I keeping this junk for? Pleased that I was finally allowing my economics knowledge to inform me, I tossed that bad investment into the garbage can.

Opportunity Cost

As the author of this article explains, another example of this “sunk cost fallacy” would be to assume, “I might as well continue dating someone bad for me because I’ve already invested so much in them.”

Fixating on sunk costs is a major reason why a lot of small investors stay small. They can’t bring themselves to admit a mistake when the market moves against them. Rather than cut their losses short and move on, they hang on. Loss aversion then becomes loss accumulation.

Obviously, some people are quicker than others to learn from the errors arising from their loss aversion and the sunk cost fallacy. But one general lesson proves itself time and again—if it’s your own investment you’re playing with, and losses associated with it are all internalized (that is, it’s you who pays them), you tend to learn sooner rather than later. Your behavior changes as a result, so that you act less to “avoid” past losses and more to avoid future ones—the ones that are actually avoidable.

In the case of Mr. Harmon and his flood-prone home, his endless commitment seems akin to forgoing the better invitation to go instead to an inferior movie, or stuffing the lousy ice cream back in the freezer, or getting engaged to a bad fit because of all the gifts and dinners he previously bought her. So why does he do it? Because his sunk costs are only partially internalized; most of them are paid by other parties (taxpayers). From his vantage point, his decision to throw your good money after his bad money doesn’t seem nearly as irrational as it might to you and me.

There’s another concept of cost that’s being overlooked in the Harmon example—opportunity cost. If the federal flood insurance program hadn’t given Mr. Harmon $1.8 million for his house, what might those from whom it was taken spend that money on? Perhaps three or four houses. Or a whole lot of things, big and small, according to the personal choices of those very people who earned the money in the first place. That unrealized cornucopia is what Frederic Bastiat referred to as “that which is not seen.”

Lots of lessons here, some very obvious and others more hidden or implied: Don’t cry over spilt milk. Don’t let a past, unrecoverable cost hobble your future decision-making or forgo a better opportunity.

Failure to internalize sunk costs results in a waste of resources by short-circuiting market signals and creating the wrong incentives. (Unless you live in an infinitely bountiful Garden of Eden, this latter point should concern you.)

So now that we’ve learned these lessons, tell me which of the following proposals makes the most sense:

  1. Keep the federal flood insurance program in place. We’ve invested in it and can’t afford to kiss off those billions we’ve already spent.
  2. Kill the federal flood insurance program (or at least price it so that those who build in flood-prone areas pay the full costs of it). Anything less is just a welfare program, not insurance.

I think you know my druthers.

Lawrence W. Reed

Lawrence W. Reed

Lawrence W. Reed is president of the Foundation for Economic Education and author of Real Heroes: Incredible True Stories of Courage, Character, and Conviction and Excuse Me, Professor: Challenging the Myths of ProgressivismFollow on Twitter and Like on Facebook.

Geert Wilders: ‘We want a Europe without the EU’

Dutch Member of Parliament Geert Wilders was invited to speak at the Ambrosetti Conference in Italy. The purpose of the conference titled “Intelligence on the World, Europe, and Italy” was to “to discuss current issues of major impact for the world economy and society as a whole.”

If anything MP Wilders is an outlier and his remarks show him to be a truth teller among those who wish to ignore the truth about what is truly happening across Europe. As MP Wilders put it:

I appreciate inviting someone who does not share your enthusiasm for the European Union. Whether your European dream, like Euro Commissioner Frans Timmermans, just mentioned it. To be honest: His dream is my nightmare.

MP Wilders made it clear that the biggest issues facing the European Union are:

  • The European elite in our midst.
  • The mistake of European nations transferring more and more power to the EU.
  • [L]egislation has been outsourced to Brussels.
  • The lack of a “clear European identity.”
  • A EU that “is characterized by cultural relativism and hostility to patriotism.”
  • The “bitter fruits” of the EU immigration policy.
  • The EU resembling “a cartel of governments dominated by Germany and France.”
  • [T]he EU does not care for the preservation of Jewish Christian culture.

MP Wilders warned, “The problems facing Europe are existential. Non-economics, but Islamization, terrorism and mass immigration are our main problems. Existential, indeed, because it determines who we are, what we are and whether we will still exist as a free people in the future.”

Please read MP Wilder’s entire speech. His words are prophetic and sound familiar. His words are much like those of President Trump in that MP Wilders wants to make Holland Great Again.

National sovereignty, secured borders, controlled immigration, draining the swamp in Brussels and dealing with the growing threats to his culture and Judeo/Christian world view.

MP Wilders is one of a handful of leaders willing to speak out in order to save his country. The forces arrayed against him are like the forces arrayed against President Trump. But MP Wilders knows that we shall overcome those obstacles and restore our virtue and dignity as unique Western cultures and societies.

RELATED ARTICLE: Towards A Definition Of Islam And Islamism

Transcript of Speech by Geert Wilders
Ambrosetti Conference, Italy, Villa d’Este, September 2, 2017

Ladies and gentlemen,

Thank you for being here today. I appreciate inviting someone who does not share your enthusiasm for the European Union. Whether your European dream, like Euro Commissioner Frans Timmermans, just mentioned it. To be honest: His dream is my nightmare.

I realize that my opinion differs from that of many members of the European elite in our midst, but I am an optimist.

I believe in a positive future for Europe as a community of independent, sovereign and democratic countries – collaborating without a supranational political union – a Europe without the European Union.

I believe that true democracy can only exist and flourish within a nation state. The national sovereignty combined with the domestic culture gives us our identity. As well as control over our own limits and budget and the right to decide how we use it ourselves as a nation.

Unfortunately, most of our governments have transferred more powers to the EU, which undermines many important things we have achieved over the past centuries.

Our ancestors fought for a democratic Netherlands. That is a Netherlands where Dutch voters and nobody else decide on Dutch matters. Democracy means that a people can decide on his own legislation.

Democracy is equal to self-government. But by the transfer of our powers to Brussels, the EU institutions and other countries decide on matters that are essential to our nation: our immigration policy, our monetary policy, our trade policy and many other issues.

A large part of our legislation has been outsourced to Brussels. Our national parliaments have become EU executive agencies. Many people object to this.

In the 2005 referendum, the Dutch voted against the European constitution, but a few years later, a slightly modified version was pushed under a new name.

Last year, a large majority of the Dutch voted in a referendum against the EU Association Treaty with Ukraine, but the treaty was still pushed. Very few people can still take the EU as a democratic institution after they have seen this happen.

Another very important thing that the Dutch have acquired over the past centuries were clear and demarcated boundaries. Boundaries are important. Because they protect us and determine who and what we are. Due to our governments that have transferred sovereignty, we are now no longer responsible for our immigration policy and even our own borders.
And the result is terrible.

If you give away the keys of your own home to someone who does not lock the doors, do not be surprised when unwelcome guests find their way in. I believe every nation is in charge of its own boundaries and must be able to decide who is welcome and who not. The Netherlands is the home of the Dutch. It’s the only house we have. And we should have control over our borders and our own immigration policy.

One of these things we also attach Dutch is our national identity. The Dutch have their own identity. And so also the other nations of Europe.

But there is no clear European identity.

The EU is characterized by cultural relativism and hostility to patriotism. But patriotism is not a dangerous threat, it’s something to be proud of.

It means defending the sovereignty and independence of the nation states, and not selling these values ​​in slight compromises to the EU and its bureaucrats.

As the Hungarian Prime Minister Viktor Orban said – I quote – “Europe is a community of Christian, free and independent nations. The greatest danger to Europe’s future is the fanatics of internationalism in Brussels. We will not allow them to bitter the fruits of to invoke our cosmopolitan immigration policy. ” End quote.

I totally agree with that.

The European Commission has recently initiated proceedings against Poland, Hungary and the Czech Republic because they refuse to include immigrants. Two years ago, Mrs Merkel invited millions of immigrants to come to Germany.

An historical error. She not only released millions, her policy encouraged them.

Her “Wir buck tie – we can call it” call was one of the biggest suction factors in the European migrant crisis. It is impossible to maintain your identity if you are flooded by millions of newcomers with a completely different culture. A culture that – as is the case with Islamic culture – aims to dominate and refuse[s] to assimilate.

The EU resembles a cartel of governments dominated by Germany and France. These two mighty nations decide almost everything.

But the Poland, the Hungarians, the Dutch, the Italians did not choose Mr Merkel or Mr Macron.

They did not choose Mr Juncker, and we, Dutch, have decimated in the last parliamentary elections of last March, the most pro-EU and pro-ice party in the Netherlands: the social democratic party of my countryman, Mr Timmermans, next to this tomorrow I sit, lost 75% of her seats. My party, the EU’s most anti-EU and anti-icing party, won 33% more seats.

In the 13-party parliament in the Netherlands we are for the first time ever the second party, and next time we will be the biggest.

Another important issue that the Dutch is at heart is our safety. In our streets today, as in many other European cities, we can see daily that the EU and the pro-EU leaders of the national states have saddled us. In our inner cities we are faced with whole neighborhoods that no longer seem to be Dutch, and where Dutch are no longer safe. We have people in our country who are born in our country but who do not share our basic values ​​and it’s even worse.

Parts of Europe even seem to be in war zones. The EU has no war. There have been terrible murderous attacks in Barcelona, ​​London, Manchester, Berlin, Brussels, Nice, Paris, Stockholm, Copenhagen, Madrid, Amsterdam.

Terrorists have entered Europe between immigrant flows that have allowed the EU and national governments. While home grown terrorists are already one of the biggest problems facing our countries today. Thousands of them, throughout Europe, are able to travel freely and wherever they want.

This morning, European anti-terrorism coordinator Gilles de Kerckhove said in a Belgian newspaper that there are now 50,000 radical Muslims in Europe. They can commit a terrorist attack any time, as has happened so often lately.

Brussels, together with the pro-EU leaders in the national capitals, created the conditions that allowed these horrendous events and attacks by allowing millions of immigrants to enter Europe – often uncontrolled, by not requiring assimilation by refusing a ” search culture ‘, a dominant culture, through political correctness and total lack of leadership.

At my office in The Hague is a huge portrait of Sir Winston Churchill. In 1946 he held a speech in which he pleaded for what he called – I quote – “a kind of United States of Europe.” But he did not mean what the Eurofiles mean. He called the British Commonwealth as an example: a loose federation of nations, economically cooperative and bound to a number of principles.

But when he became prime minister in the 50’s, Churchill did not ask for membership of the EU’s forerunner. He found the idea of ​​giving up national sovereignty horrendously. Because he knew that this would lead to the end of democracy, identity and security for his people.

And the EU does not care for the preservation of Jewish Christian culture.

On the contrary, it facilitates Islamization.

Our European civilization, based on the cultural legacy of Jerusalem, Athens and Rome, is the best civilization on earth. It gave us democracy, freedom, equality before the law, the separation of church and state, and the view that sovereign states are there to protect all this. The remedy against all misery and terror is clear: we need to re-emphasize what we are. Only then can we ensure our children a future in a safe, strong and free Europe.

The problems facing Europe are existential. Non-economics, but Islamization, terrorism and mass immigration are our main problems. Existential, indeed, because it determines who we are, what we are and whether we will still exist as a free people in the future.

Ladies and gentlemen,

I believe in freedom of expression. I pay a heavy price for that. I’m on killing lists of Al Qaeda, the Pakistani Taliban and other Islamic groups. I live in a safehouse of the Dutch state and I have been under the 24/7 police protection for 13 years. Everyone is entitled to his or her opinion. I have that too.

And I think Islamization is the biggest threat to our European future. I’m not talking about all Muslims, many of whom are moderate, but I am talking about Islamic ideology that is incompatible with freedom and democracy and we import massively.

The European Commission expresses its concern about the so-called threat to democracy in countries like Poland and Hungary, but it ignores the destructive effect that Islam has on security and freedom of Europe.

For all these reasons – protecting our democracy, our borders, our identity, our security and our freedom – we want a Europe without the EU. Sovereign democratic countries are perfectly able to work together where there are common interests – without the need for a supranational political institution like the EU.

But despite all the bad news, I’m, as I said at the beginning, an optimist. Everywhere in Europe, more and more people become proud patriots.

And know that the patriots will win. And also the nation state.

Nations who are naturally willing to work together where they see a common interest. There is nothing wrong with economic cooperation, on the contrary. We can also work together to fight terrorism. But everything on a voluntary basis, as sovereign nations.

And without a political union. Without the EU.

The future belongs to the Europe of sovereign nations.

Thank you.

Iran is following the North Korea play-book

It is no secret that North Korea and Iran are joined at the hip. Iran’s advances on the way to developing nuclear weapons and long range missiles (in violation of UN provisions) are largely attributed to the relationship of these two evil empires. In addition Iran’s new found wealth as a result of Obama’s nuclear deal has allowed it to advance its nuclear program and state of the art missile defense systems purchased from Russia.

Obama’s colossal nuclear deal miscalculation has allowed Iran to expand its aggression and Iran’s Revolutionary Guard’s budget by 40%. Iran seeks to encircle and destroy Israel  which Israel will not permit. Thus the nuclear deal which empowered Iran’s increased aggression will eventually lead to war which may include Iran, Israel, Russia and the U.S. among others.

Nominee for the post of defense minister for new cabinet of Iranian President Hassan Rouhani, Gen. Amir Hatami arrives at the podium to defend himself in a session of parliament in Tehran, Iran, Thursday, Aug. 17, 2017. (AP Photo/Vahid Salemi)

AFP/Tehran in a column titled “Iran’s new defense minister says priority is to boost missile program” reports:

Iran’s new defense minister said Saturday the priority was to boost the country’s missile program and export weapons to shore up neighboring allies.

“In combat fields, especially in missiles, we have a specific plan to boost Iran’s missile power,” said General Amir Hatami, who was appointed defense minister earlier this month, in a speech carried by the ISNA news agency.

“God willing, the combat capabilities of Iran’s ballistic and cruise missiles will increase in this term,” he added. Hatami also said Iran would look to export weapons “to prevent war and conflict”. [Emphasis added]

Read more.

Please read the article below by Melanie Phillips. While North Korea has garnered our attention Iran is far more dangerous. It is Iran who has killed many Americans and whose proxies have killed thousands and made millions homeless.

The Iranian Symptom of the West’s Auto-Immune Disease

By Melanie Phillips

People are understandably preoccupied with the threat from North Korea and what to do about it. But with the polyvalent perversity that characterises our modern age – afflicted as it is by the political equivalent of auto-immune disease in which it seeks to destroy its allies while embracing its mortal enemies – many in the west continue to downplay or ignore the far greater threat to the world from North Korea’s partner in crime, the Islamic Republic of Iran.

It’s not just that, as with North Korea today so with Iran tomorrow; just as “negotiation” [under President Bill Clinton] was supposed to persuade Pyongyang to park its nuclear weapons programme only for us to find to our apparent surprise that it has now tested yet another nuclear device, so the “negotiated” [under President Barack Obama] Iran deal will result before long in our finding to our apparent surprise that it has moved from being the world’s number one terrorist threat to being the world’s number one nuclear terrorist threat.

It’s also not just that Iran and North Korea are working hand in glove in their infernal joint enterprise (although with very different philosophies) to develop the nuclear weapons by which they can either blackmail, attack or destroy the west or commit a further genocide against the Jews; that Iranian scientists and military brass have been reliably tracked to North Korea inspecting or witnessing its nuclear weapons programme development; and that almost certainly Tehran has outsourced some if not much of that programme to Pyongyang.

[ … ]

The Spectator has run a piece by John R Bradley arguing that Iran is the west’s “natural ally” and that the gravest threat to western security and values comes from Saudi Arabia. But this is an example of the “zero sum game” fallacy. Yes, Saudi Arabia is indeed the epicentre of the Sunni Wahhabi ideology which has fuelled the Islamist extremism that now poses such a threat to the west. But it absolutely does not follow that Saudi Arabia’s mortal foe, Shi’ite Iran, is therefore the west’s friend, let alone its greatest ally.

It’s not either/or. Both Saudi Arabia and Iran pose a threat to the west. My enemy, in the case of Saudi Arabia, is currently my tactical friend as well as my enemy; and that’s because my enemy’s enemy, Iran, is my own far more dangerous enemy. [Emphasis added]

Read more.

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Netanyahu: Iran influence in Syria threat to Israel

Financing terrorism drains Iran’s economy

New York Child Molester Approved by Hawaii DHS as Foster Parent

When the state approved a foster parenting license for Zack and Krystina Morris in 2008, the child-rearing record of the young couple, who had just moved from New York, already had a major black mark.

New York officials five years earlier had found that the Morrises provided inadequate guardianship for their 4-month-old son after the infant stopped breathing; was rushed to the hospital with a fractured skull, bleeding in the brain and other injuries; and was diagnosed with shaken baby syndrome, according to New York documents. The parents failed to offer any explanation for the injuries, the records show.

New York’s child welfare agency subsequently determined that the baby would be at serious risk of harm if he stayed with his parents, and a judge ordered the infant to be placed in foster care, according to the records. The family eventually was reunited.

As serious as the 2003 incident was, it apparently did not appear on the state Department of Human Services’ radar when the agency certified the Morrises as Hawaii foster parents, raising new questions about the vetting process used to determine who gets approved to care for some of the state’s most vulnerable children.

Zack Morris eventually was convicted of sexually abusing three foster children, all boys, who were placed in his care by DHS from 2009 to 2011. The victims ranged in age from 11 to 16.

The Honolulu Star-Advertiser previously reported on documents from the criminal case and a 2014 negligence lawsuit filed on behalf of two victims, alleging the state didn’t heed numerous warning signs involving the Morrises before issuing them a license and renewing it several times.

But more recent court documents and other records reviewed by the newspaper have raised even more questions about the screening process, including whether DHS was even aware of the couple’s New York record when it approved the Morrises’ license.

The couple was the focus of two other New York abuse investigations, including one triggered when their son was hospitalized after a door supposedly fell on him, according to the rec­ords. The allegations were unconfirmed but still part of the couple’s New York file, which included the substantiated finding from 2003….

Less than three months after DHS placed the last foster child with the Morrises in July 2011, the agency issued a report describing Zack Morris as a “confirmed and untreated sex offender” and a threat to any child under his care, according to the court rec­ords. By then authorities had removed all the children, including his biological ones, from the home.

Morris was indicted a few weeks later, eventually pleaded no contest and is now serving a 20-year prison sentence.

Jacobs, the plaintiff attorney, said the Morris case revealed multiple problems with the state’s vetting process, leading to horrific outcomes for his clients. “It’s indicative of systemic failures of epic proportions,” Jacobs said….

SA: Increase vigilance over foster care

Read … Child Molester

Everything You Need to Know about Government, in One Story by Daniel J. Mitchell

Every so often, I run across a chart, cartoon, or story that captures the essence of an issue. And when that happens, I make it part of my “everything you need to know” series.

I don’t actually think those columns tell us everything we need to know, of course, but they do show something very important. At least I hope.

And now, from our (normally) semi-rational northern neighbor, I have a new example.

This story from Toronto truly is a powerful example of the difference between government action and private action.

A Toronto man who spent $550 building a set of stairs in his community park says he has no regrets, despite the city’s insistence that he should have waited for a $65,000 city project to handle the problem. 
Retired mechanic Adi Astl says he took it upon himself to build the stairs after several neighbours fell down the steep path to a community garden in Tom Riley Park, in Etobicoke, Ont. Astl says his neighbours chipped in on the project, which only ended up costing $550 – a far cry from the $65,000-$150,000 price tag the city had estimated for the job. …Astl says he hired a homeless person to help him and built the eight steps in a matter of hours. …Astl says members of his gardening group have been thanking him for taking care of the project, especially after one of them broke her wrist falling down the slope last year.

There are actually two profound lessons to learn from this story.

Since I’m a fiscal wonk, the part that grabbed my attention was the $550 cost of private action compared to $65,000 for government. Or maybe $150,000. Heck, probably more considering government cost overruns.

Though we’re not actually talking about government action. God only knows how long it would have taken the bureaucracy to complete this task. So this is a story of inexpensive private action vs. costly government inaction.

But there’s another part of this story that also caught my eye. The bureaucracy is responding with spite.

The city is now threatening to tear down the stairs because they were not built to regulation standards…City bylaw officers have taped off the stairs while officials make a decision on what to do with it. …Mayor John Tory…says that still doesn’t justify allowing private citizens to bypass city bylaws to build public structures themselves. …“We just can’t have people decide to go out to Home Depot and build a staircase in a park because that’s what they would like to have.”

But there is a silver lining. With infinite mercy, the government isn’t going to throw Mr. Astl in jail or make him pay a fine. At least not yet.

Astl has not been charged with any sort of violation.

Gee, how nice and thoughtful.

One woman has drawn the appropriate conclusion from this episode.

Area resident Dana Beamon told CTV Toronto she’s happy to have the stairs there, whether or not they are up to city standards. “We have far too much bureaucracy,” she said. “We don’t have enough self-initiative in our city, so I’m impressed.”

Which is the lesson I think everybody should take away. Private initiative works much faster and much cheaper than government.

P.S. Let’s also call this an example of super-federalism, or super-decentralization. Imagine how expensive it would have been for the national government in Ottawa to build the stairs? Or how long it would have taken? Probably millions of dollars and a couple of years.

Now imagine how costly and time-consuming it would have been if the Ontario provincial government was in charge? Perhaps not as bad, but still very expensive and time-consuming.

And we already know the cost (and inaction) of the city government. Reminds me of the $1 million bus stop in Arlington, VA.

But when actual users of the park take responsibility (both in terms of action and money), the stairs were built quickly and efficiently.

In other words, let’s have decentralization. But the most radical federalism is when private action replaces government.

Reprinted from International Liberty

Editors Note: Since this article was originally published, the local government tore down Astl’s $500 stairs, citing “safety standards,” and plans to replace it with a $10,000 set.

Daniel J. Mitchell

Daniel J. Mitchell

Daniel J. Mitchell is a senior fellow at the Cato Institute who specializes in fiscal policy, particularly tax reform, international tax competition, and the economic burden of government spending. He also serves on the editorial board of the Cayman Financial Review.

VIDEO: We Only Resent Inequality When It’s Rigged by Daniel J. Mitchell

In addition to his exemplary work as a Senior Fellow for the Cato Institute, Johan Norberg narrates some great videos for Free to Choose Media. Here are some that caught my eye.

But my favorite video, which I shared back in January, is his concise explanation of why policy makers should focus on fighting poverty rather than reducing inequality. I’m posting it again to set the stage for a discussion on inequality and fairness.

Now let’s dig into the main topic for today.

We Want What’s Fair

study by three academics from Yale’s Department of Psychology concludes that people want fairness rather than equality.

…there is no evidence that people are bothered by economic inequality itself. Rather, they are bothered by something that is often confounded with inequality: economic unfairness. Drawing upon laboratory studies, cross-cultural research, and experiments with babies and young children, we argue that humans naturally favour fair distributions, not equal ones, and that when fairness and equality clash, people prefer fair inequality over unfair equality.

My former grad school classmate Steve Horwitz wrote about the aforementioned study

…what we really care about is something other than inequality per se. We care about upward mobility, or average income overall, or how well the least well off do. …A recent study in Nature argued, with evidence, that what bothers people more than inequality per se is “unfairness.” People will accept inequality if they feel the process that produced it is fair. …when I give talks about inequality. I point out the number of Apple products visible in the room and ask them if they think the wealth Steve Jobs and other Apple founders accumulated over their lifetimes was objectionable. Is that the kind of inequality they object to? Students are usually hard-pressed to articulate why Jobs’ wealth is wrong… I also remind them that economic studies show that only about 4% of the total benefits of innovation accrue to the innovator. The rest goes to consumers.

Steve cites Nozick and Hayek to bolster his argument before then making the key point that markets produce material abundance based on genuine fairness.

As Robert Nozick argued in Anarchy, State, and Utopia: if each step in the evolution of the market is fair by itself, how can the pattern of income that emerges be unfair? …Hayek…observed in The Constitution of Liberty that if we want equality of outcomes, we will have to treat people unequally. If, however, we treat people equally, we will get unequal outcomes. Hayek’s argument was premised on the fact that human beings are not equal in our native intelligence, strength, skills, and abilities. …If people really care about fairness, then supporters of the market should be insisting on the importance of equality before the law. …Equality of outcomes requires that we treat people differently, and this will likely be perceived as unfair by many. Equality before the law corresponds better with notions of fairness even if the outcomes it produces are unequal. …If what appear to be concerns about inequality are, in fact, concerns about unfairness, we have ways of addressing them that demonstrate the power of exchange and competitive markets. Markets are more fair because they require that governments treat us all equally and that none of us have the ability to use political power to protect ourselves from the competition of the marketplace and the choices of consumers. In addition, market-based societies have been the best cure for poverty humans have ever known.

How Much Equality Do We Want?

Writing for CapX, Oliver Wiseman analyzes other scholarly research on equality and fairness.

A 2012 study by behavioural economists Dan Ariely and Mike Norton generated some attention for demonstrating that Americans wanted to live in a more equal country. But more equal is not the same thing as fully equal. …if you let people choose between equal and unequal societies – and then tell them that they themselves will be assigned a level of wealth within it completely at random – most people choose inequality. And that preference is observable across the political spectrum, in different countries and at a range of ages.

But people don’t want undeserved inequality since that is the result of unfair interventions (i.e., cronyism).

This paper’s conclusions help explain much of the outcry over economic inequality in recent years. Occupy Wall Street and the very idea of the “one per cent” emerged just after the financial crisis plunged much of the world into recession, and US and British banks were handed billion-dollar bailouts to steady the ship. The anger didn’t come from the fact that bankers were so well paid. It came from the perception that they’d made that money by piling up risk rather than being particularly clever or hard-working – risk that was now being underwritten by the taxpayer. The wealth wasn’t just distributed unequally, but unfairly. The market mechanisms that most people accepted as the rules of the economic game suddenly seemed rigged. …Voters, in other words, don’t want equality – they want fairness. …As the Soviets found, true economic equality cannot be accommodated within a system that allows people tolerable levels of economic and political freedom. But fairness, by contrast, is something capitalism can – and should – deliver.

Professor Tyler Cowen of George Mason University cites some additional academic research buttressing the conclusion people don’t object to fair types of inequality.

…most Americans don’t mind inequality nearly as much as pundits and academics suggest. A recent research paper, by Graham Wright of Brandeis University, found that polled attitudes about economic inequality don’t correlate very well with the desire for government to address it. There is even partial evidence, once controls are introduced into the statistics, that talk of inequality reduces the support for doing something about it. …It’s not obvious why such counterintuitive results might be the case. One possibility is that…talk about economic inequality increases political polarization, which lowers the chance of effective action. Or that criticizing American society may cause us to feel less virtuous, which in turn may cause us to act with less virtue. …A variety of other research papers have been showing that inequality is not a major concern per se. One recent study by Matthew Weinzierl of Harvard Business School shows that most Americans are quite willing to accept economic inequality that stems from brute luck, and that they are inclined to assume that inequality is justified unless proved otherwise.

Living in an Unequal Society

Last but not least, Anne Bradley of the Institute for Humane Studies augments this analysis by explaining the difference between ethical market-driven inequality versus unfair cronyist-caused inequality.

The question of whether income inequality is bad hinges on the institutions within that society and whether they support entrepreneurship and creativity or thuggery and exploitation. Income inequality is good when people earn their money by discovering new and better ways of doing things and, through the profit mechanism, are encouraged to bring those discoveries to ordinary people. …Rising incomes across all income groups (even if at different rates) is most often the sign of a vibrant economy where strangers are encouraged to serve each other and solve problems. Stagnant incomes suggest something else: either a rigged economy where only insiders can play, or an economy where the government controls a large portion of social resources, stalling incomes, wealth, and wellbeing.

She includes a very powerful example of why it can be much better to live in a society with high levels of (fair) inequality.

Consider the following thought experiment: knowing nothing other than the Gini index scores, would you rather live in a world with a Gini of .296 (closer to equality) or .537 (farther from equality)? Many people when asked this question choose the world of .296. These are the real Gini scores of Pakistan (.296) and Hong Kong (.537). If given the choice, I would live in Hong Kong without thinking twice. Hong Kong has a thriving economy and high incomes, and it is the world leader in economic freedom. The difference between these two countries could not be more striking. In Pakistan, there might be more income equality, but everyone is poorer. It is difficult to emerge out of poverty in Pakistan. Hong Kong provides a much richer environment where people are encouraged to start businesses, and this is the best hope for rising incomes, or income mobility.

Her example of Hong Kong and Pakistan is probably the most important takeaway from today’s column.

Simply stated, it’s better to be poor in a jurisdiction such as Hong Kong where there is strong growth and high levels of upward mobility. Indeed, I often use a similar example when giving speeches, asking audiences whether poor people are better off in Hong Kong, which has only a tiny welfare state, or better off in nations such as France and Greece, which have bloated welfare states but very little economic dynamism.

The answer is obvious. Or should be obvious, at least to everyone who wants to help the poor more than they want to punish the rich.

(and there are plenty in the latter camp, as Margaret Thatcher explained).

And I’m now going to add my China example to my speeches since inequality dramatically increased at the same time that there was a stupendous reduction in poverty.

Once again, the moral of the story should be obvious. Focus on growth. Yes, some rich people will get richer, but the really great news is that the poor will get richer as well. And so long as everyone is earning money through voluntary exchange rather than government coercion, that also happens to be how a fair economy operates.

Reprinted from International Liberty.

Daniel J. Mitchell

Daniel J. Mitchell

Daniel J. Mitchell is a senior fellow at the Cato Institute who specializes in fiscal policy, particularly tax reform, international tax competition, and the economic burden of government spending. He also serves on the editorial board of the Cayman Financial Review.

Creepy Canadian App Gives Citizens Points for Making Government-Approved Choices by Josie Wales

Ontario announced earlier this month that it will become the fourth Canadian government to fund a behavioral modification application that rewards users for making “good choices” in regards to health, finance, and the environment. The Carrot Rewards smartphone app, which will receive $1.5 million from the Ontario government, credits users’ accounts with points toward the reward program of their choice in exchange for reaching step goals, taking quizzes and surveys, and engaging in government-approved messages.

The app, funded by the Canadian federal government and developed by Toronto-based company CARROT Insights in 2015, is sponsored by a number of companies offering reward points for their services as an incentive to “learn” how to improve wellness and budget finances. According to CARROT Insights,“All offers are designed by sources you can trust like the BC Ministry of Health, Newfoundland and Labrador Government, the Heart and Stroke Foundation, the Canadian Diabetes Association, and YMCA.”  Users can choose to receive rewards for companies including SCENEAeroplanPetro-Canada, or More Rewards, a loyalty program that partners with other businesses.

Carrot Rewards is free to download, and users receive 200 points just by downloading the app and answering a few questions (the answers don’t have to be correct). Sending an invitation code to friends will also gain users points, as the government is happy to track the daily activity of as many citizens as possible — which, by the way, the app can do even when it is not “active.” In order to use the app, users are giving Carrot Insights and the federal government permission to “access and collect information from your mobile device, including but not limited to, geo-location data, accelerometer/gyroscope data, your mobile device’s camera, microphone, contacts, calendar and Bluetooth connectivity in order to operate additional functionalities of the Services.”

Founder and CEO of CARROT Insights Andreas Souvaliotis launched the app in 2015 “with a focus on health but the company and its partner governments quickly realized it was effective at modifying behavior in other areas as well,” according to CTV News.

The Canadian government is asking citizens to track their activity and modify their behavior by dangling a carrot on a stick, and it’s working. While still voluntary, the Carrot app is eerily similar to social credit systems in China, which not only offer rewards for compliance but also punishments for “trust-breakers,” who may face “penalties on subsidies, career progression, asset ownership and the ability to receive honorary titles from the Chinese government.” Though current applications of the social credit systems are unconnected, there has been a push in the country to combine them into one government-run program.

As Creemers, a researcher specializing in Chinese law and governance at the Van Vollenhoven Institute at Leiden University told CNBC:

“China has huge problems with legal compliance so the regime conclusion was that since existing methods of generating compliance were not sufficient, they would step up their game with extra punishment. The system merely uses information the government already has on its citizens in a more coercive way.”

Currently, the Carrot Rewards app is limited to citizens in Ontario, Newfoundland, and Labrador, and British Columbia, but according to the website, it will soon be harvesting personal data and modifying the behavior of Canadians across the entire country.

Josie Wales

Josie Wales

Josie Wales, journalist for the Anti-Media, is a writer, public speaker, YouTube personality, and activist from Philadelphia. She is also a tech writer for d10e.co, and formerly worked as an editor and contributing writer at The Free Thought Project. Josie covers disruptive technology, artificial intelligence, innovation, tech solutions, and digital privacy issues for Anti-Media.