Lest We Forget

Never in American history has a national leader served under a darker cloud of suspicion than Barack Hussein Obama.  Was he born in Hawaii or in Kenya?  He has two completely unique birth certificates; which is legitimate and which is a forgery?  How many aliases and Social Security numbers has he used?  Is his draft registration card legitimate, or is it too a forgery?  How many people in the Democrat Party hierarchy were aware from the outset that he was ineligible to serve, and what steps did they take to legitimize his candidacy?

No man has ever done more irreparable damage to the United States.  Yet, more than six years after he occupied the White House, illegally, these are still open questions and the American people have no idea who or what he is and where he came from.  His origins are a mystery and his presidency is a blot on our nation’s history that time can never erase.

Nevertheless, his crimes cry out for justice, and although it appears unlikely that the Congress or the courts will ever find the courage to confront him, we simply cannot allow him to ride off into the sunset in January 2017, content in the knowledge that he has committed one of the greatest crime of all time and has paid no price for it.  Instead, lest we forget, we must insure that our children and grandchildren know as much about Barack Obama as we are able to impart to them.

First, the question of his birth certificate(s):  A Kenyan birth certificate, No. 32018, discovered in 2009, indicates that an infant named Barack Hussein Obama was born at the Coast Province General Hospital in Mombasa, Kenya, at 7:24 PM on August 4, 1961.  The birth certificate is signed by John Kwame Odongo, Supervisor of Obstetrics, and is date-stamped and signed by Helton Maganga, Chief Administrator of the hospital.  The birth was officially registered by Sir Edward. F. Lavendar, Registrar, on August 5, 1961.

Obama’s paternal grandmother has stated repeatedly that, on August 4, 1961, she and Obama’s parents attended a Muslim festival in Mombasa… his mother having been denied access to airplanes because she was nine months pregnant.  Leaving the festival, the Obamas went to the beach to cool off, and while there his mother began to experience labor pains.  She was rushed to the Coast Province General Hospital where she gave birth a few hours later, at 7:21 PM.  Then, four days later, the Obamas allegedly flew back to Hawaii where they registered his birth with the Department of Health, obtaining a certificate of live birth which insured his status as an American citizen.  His place of birth was registered as the Island of Oahu.

Recent attempts to verify whether or not the Obama family returned to U.S. soil on August 9th or 10th, 1961, have proven fruitless because all microfilm records of flights originating in Mombasa and entering the U.S. at Port of Entry (New York), contained in the National Archives and Records Administration Record Group A3573, Reels 184 and 185, covering the periods July 28, 1961 through August 7, 1961, and August 8, 1961 through August 12, 1961, respectively, are strangely missing.  All Immigration and Naturalization Service (INS) records prior to July 28, 1961, and subsequent to August 12, 1961, are still available.  None have been erased.

Images of Obama’s Kenyan birth certificate have circulated on the Internet and elsewhere for more than six years.  Yet, in all that time, neither Obama nor any of his many supporters have been able to disprove its authenticity.  Nor have they been able to establish the authenticity of his purported long form U.S. birth certificate, uploaded to the White House website by Obama, himself, on April 27, 2011.  That document has been examined and evaluated by some of the country’s top electronic document examiners, including the document examiner employed by Obama’s own Washington law firm.  All have found the document to be a complete forgery.

An authentic document, when scanned electronically using Adobe Illustrator software, will produce just one layer of data.  Barack Obama’s long form birth certificate produces nine layers of data, indicating that it is a computer-generated document with information “imported” from other existing documents to create what appears to be an authentic birth document.

One of the world’s foremost experts in probability theory, Lord Monkton of Brenchley, has examined only thirteen irregularities contained in Obama’s long form birth certificate and has concluded that the probability that the document is authentic, not a forgery, is approximately 1 in 75 quadrillion… roughly equal to the chances of winning the Powerball Lottery and being struck by lightning, all on the same day.  In other words, we can be relatively certain that the document Obama claims as his long form birth certificate is a forgery.  Obama and his supporters have been challenged on numerous occasions to disprove that conclusion, but have failed to do so.

The Obama’s most recent federal tax returns show that he uses Social Security Number 042-68-4425… the first three digits, 042, indicating that the number was assigned to a person who was a resident of Connecticut.  That same SSN, which was not assigned to him, has been associated with the names Barack Obama, Barack H. Obama, or Barack Hussein Obama at seven different addresses in Chicago, Somerville, MA, and Washington, DC.  One more SSN, 282-80-XXXX, an Ohio SSN, is associated with his name and former office address in the Hart Senate Office Building in Washington.  And although his Illinois Bar Association application indicates that he had no previous aliases, there is documentary evidence that he was known as Barry Soetoro when he lived in Indonesia until age ten with his mother and her second husband, Lolo Soetoro.

When he was eighteen years old, Obama was required to register for the draft; however, it appears he did not do so.  Yet, when he launched his campaign for the presidency in 2008, not having a valid U.S. birth certificate, he found it necessary to create a bogus draft registration card as proof of his identity.  The draft card that he produced was clearly a forgery.  Among the many anomalies in his draft card was the U.S. Postal Service postmark at the lower right hand corner of the card.  The postmark indicated that his draft registration card was officially accepted by the U.S. Postal Service on July 29, 80, six days before his nineteenth birthday.

However, there were no 1980 postmark hand stamps available in 2008, so it became necessary to “manufacture” such a stamp.  Accordingly, it appears that someone in the Obama organization obtained a United States Postal Service 2008 hand stamp, sliced the “20” off the front of the 2008 portion, turned the remaining “08” portion of the stamp upside down, and inserted it so that the date stamp read July 29, 80.  Investigators have found no draft registration cards from the 1970s and 1980s with the year of registration indicated by only a two-digit number.

Investigators have also found that the Document Location Number (DLN) in the upper right hand corner of all 2008 draft registration cards have only ten digits, with the first two digits being “08.”  However, computer images of Obama’s draft registration card have a DLN containing eleven digits, with the first three digits being “808.”  Clearly, someone has created a 2008 draft registration card, making it appear as if the registration took place in 1980.

Finally, we must never forget that high ranking members of the Democratic Party knew before he was nominated in 2008 that he was ineligible to serve as president.  Since the “natural born Citizen” requirement had not been a problem in more than 230 years of U.S. history, why did two Democratic congressmen, Rep. Vic Snyder (D-AR) and Rep. John Conyers (D-MI), find it necessary to introduce four constitutional amendments in Congress in 2003 and 2005… when Obama was being groomed… eliminating the “natural born” constitutional requirement?

At the close of the Democratic nominating convention in 2008, a certification was sent to all fifty states so that ballots could be printed.  The certification sent only to the State of Hawaii (Hawaii Revised Statutes §11-113 requires specific certification language) reads as follows:

THIS IS TO CERTIFY that at the National Convention of the Democrat Party of the United States of America, held in Denver, Colorado on August 25 though (sic) 28, 2008, the following were duly nominated candidates of said Party for President and Vice President of the United States respectively and that the following candidates for President and Vice President of the United States are legally qualified to serve under the provisions of the United States Constitution.” 

The remaining forty-nine states received the following certification:

“THIS IS TO CERTIFY that at the National Convention of the Democrat Party of the United States of America, held in Denver, Colorado on August 25 though (sic) 28, 2008, the following were duly nominated as candidates of said Party for President and Vice President of the United States respectively:”

Affixed were the names and home addresses of Barack Obama and Joe Biden.  The documents were signed by Nancy Pelosi and Alice Travis Germond, Chairman and Secretary, respectively, of the 2008 Democratic National Convention, and notarized by Shalifa A. Williamson.

The phrase, “… and that the following candidates for President and Vice President of the United States are legally qualified to serve under the provisions of the United States Constitution.” was purposely omitted.  Other than that, all of the certifications were absolutely identical… even to the misspelling of the word “through” in the second line of the certifications.

The Obama era has been a unique episode in American history… an episode characterized as nothing short of pure evil.  In attempting to “fundamentally transform” the United States into something unrecognizable among the community of nations, Barack Obama has done much irreparable harm.  So, lest we forget, let us take our children and our grandchildren on our knees and tell them the truth of how one evil man brought our great nation to the edge of extinction.  The evil that he has done cannot be allowed to simply disappear with the passage of time.

Here It Comes: Obama’s Final Assault on the Second Amendment

The Justice department is moving forward with a flurry of new rules. according to list of rules the agency has proposed to enact before the end of the Obama administration.

HERE IT COMES FOLKS!

The Hill Reports:

The regulations range from new restrictions on high-powered pistols to gun storage requirements. Chief among them is a renewed effort to keep guns out of the hands of people who are mentally unstable or have been convicted of domestic abuse.

Gun safety advocates have been calling for such reforms since the Sandy Hook school shooting nearly three years ago in Newtown, Conn. They say keeping guns away from dangerous people is of primary importance.

FULL STORY HERE:

Administration preps new gun regulations | TheHill

Anthrax Released: Should we be concerned?

US Army Dugway Proving Ground Main GateThe abrupt news that live anthrax samples  had been shipped from the U.S. Army Dugway proving ground to laboratories in the U.S., an air base in South Korea and possibly Australia came as a reminder to Americans and the world that biological warfare  training exercises might lead to troubling inadvertent releases. Fortunately, 22 military personnel exposed at the south Korean  airbase are being treated with the antibiotic Cipro. However, this latest release of a BW agent has caused both the U.S. Army bio-warfare directorate and the CDC to review safety precautions, packaging and procedures for the transmission of possible live anthrax spores and why samples had not been made inert?

The BBC reported that the U.S. military has ordered a review of how it handles anthrax after discovering more cases of live samples being accidentally sent to labs:

Live anthrax samples were believed to have been sent to a total of 24 labs, in 11 U.S. states as well as South Korea and Australia, the Pentagon said.

The Pentagon says that there is no known risk to the general public.

Experts in bio-safety have heavily criticized the lapse and called for improved precautions.

Symptoms of anthrax exposure include skin ulcers, nausea, vomiting and fever, and can cause death if untreated.

News of the live shipments first emerged on Wednesday, as the U.S. said it had accidentally shipped live anthrax spores from Utah to labs in Texas, Maryland, Wisconsin, Delaware, New Jersey, Tennessee, New York, California and Virginia, as well as an air base in South Korea.

Those shipments took place between March 2014 and April 2015, a U.S. official said, according to Reuters.

On Friday, the Department of Defense said it had identified “additional inadvertent live anthrax shipments”, including a suspect sample sent to Australia from a batch of anthrax from 2008.

It is not clear when that sample was shipped to Australia.

The military has ordered all of its labs that have previously received inactive anthrax samples to test them. In addition it is advising all labs to cease working with these samples until told otherwise.

Shortly after 9/11, the American public concern over bio-terrorism was raised  by the release of Anthrax in powdered form in letters sent to members of Congress and randomly to private persons. 22 persons were sickened, 5 died, the U.S. Senate building was shut down and inspected.  Anthrax exists naturally, but more powerful variants have been developed synthetically by dual use laboratories in rogue states like Iran, North Korea and Assad’s Syria.  Bio-warfare laboratories have been established by Al Qaeda and ISIS has been rumored to have obtained access to materials in Syria, as well. Remember the arrest in Afghanistan, prosecution and conviction in the U.S. of Brandeis University and MIT trained scientist, “Lady Al Qaeda”, Aafia Siddiqui .  There is also evidence that Iran’s terrorist proxy, Hezbollah may have been transferred BW capabilities and agents  by Syria that could be deployed against America’s ally , Israel and globally through major transportation nodes in Europe.

Jill Bellamy van Aalst(3)

Dr. Jill Bellamy

We asked Dr. Jill Bellamy, noted expert on biological warfare and threat reduction about this latest incident.  We have published articles by Dr. Bellamy on Syrian, Hezbollah, Al Qaeda and Iranian BW programs in both the NER and our blog the Iconoclast.

She commented:

Clearly from a bio-safety perspective this is a very serious breach of protocol and demands a full and transparent investigation. As anyone who works with inactivated anthrax would be routinely vaccinated with AVA, exposure from a clinical perspective is probably not as much of a concern as the general public may believe. Of course if anyone outside military labs the live anthrax was sent to and persons who have not been routinely vaccinated were exposed, this would be concerning. I would worry about the time frame from exposure. It appears from the reports that we are talking about several weeks or months during which the anthrax was shipped. It is probably a good sign that none of the labs has reported a laboratory acquired disease or LAD. If exposure is known Cipro (ciprofloxacin hydrochloride) is given for inhalation anthrax and usually a 60 day course is advised. The lab workers in these labs  would surely  have all been vaccinated, so how much of a health risk it poses is debatable.

The bio-safety side is more worrying. CDC and a number of other labs have previously had exposures from the accidental handling of live anthrax. There are very stringent regulations in place for the shipping and transport of live agents. It is doubtful there was any risk to public health during the transport as this would be handled by the military. What is more problematic is that the research done  at US Army labs and Dugway proving ground  are critical to national security.  Incidents like this feed an uninformed section in non-proliferation circles who then call for the closing of these labs or hype the danger they pose to the general public. It makes it more difficult to assure the public that such labs are a vital aspect to protecting citizens from BW attacks and ensuring vaccines and therapeutic countermeasures are available and stockpiled in the event of a deliberate attack. Hopefully this is an incident we will learn a great deal from in terms of bio-safety training, protocols and bio-security.

EDITORS NOTE: This column originally appeared in the New English Review. The featured image is of  microscopic anthrax spores. Source: Reuters.

Group Seeks To Stop Pornography and Religious Indoctrination in Florida Public Schools

The Florida Citizens’ Alliance (FLCA) is a coalition of citizens and grassroots groups working together through education, outreach and community involvement to advance the ideals and principles of liberty.  FLCA “believes these include but are not limited to individual rights, free markets, and limited government.”

On its website the FLCA asks:

Do you know what your children are reading this summer? And are you aware of the Islamic religious indoctrination that is being infused into our students’ textbooks?

On May 27th, the Collier County Public School (CCPS) district was caught AGAIN recommending pornographic material to K-12 students on their summer reading lists. These lists have been on the CCPS trusted website for several weeks. There have been numerous examples of the district using similar age-inappropriate materials, which have been called to their attention over the past months by citizen watchdog initiatives.

Here are examples from the recommended summer reading lists for students as young as 6th grade!

Beautiful Bastard” by Christina Lauren

This book contains graphically descriptive text, including a rape on a conference room table.

EDITORS NOTE: To avoid offending anyone with the actual text, the FLCA has put an excerpt from this book in a separate post so that readers may choose whether to view it or not.  The Editorial Staff suggests you do, because this is what one of our school boards was recommending that Florida children should read!

The Truth about Alice” by Jennifer Mathieu

Click on image for a larger view.

From page 1 of the book:

Textbooks

“My World History – 6th grade”
Authors: Krull and Karpeil
Published by Pearson, PLC

The following is a recent book review from Lee County’s Citizen Action Committee:

This book comes from a British company, Pearson PLC, with a record of failed performance and law suits that is pages long.  The company’s major stockholders include the Arabic Banking Corporation, and the Government of Libya.  This book contains 31 pages, Chapter 18, on Islam.  Never mentioned is Jihad, marriage of up to 4 women, female mutilation, the Jizyah, death penalty for gays, or growing their religion by bloody conquest.  The fact that Muhammed personally murdered and led murdering troops to convert other religions to Islam or face death was not mentioned, nor was the fact that the youngest of his many wives, Aisha, was 9 years old.  Instead, the entire chapter portrays Islam as just another nice religion like Christianity or Judaism, and in fact, superior to them. … [full review]

The critical question:  Does your school District have in place an aggressive, transparent process required by statute to thoroughly vet all text books and online materials?

Florida State Statute 1003.42 provides the legal requirements for factual instructional materials, and the recently passed SB 864 bill requires a transparent parent-oriented process for reviewing and removing inappropriate materials.  The school boards ultimately are accountable! Create a watchdog citizen action group in your county.

For more information on FLCA Contact them and they will connect you with a mentor to help.

RELATED ARTICLE: How schools and libraries across the country bring in hardcore pornography through commercial databases. Under the radar of parents!

Venezuela Hits 510% Inflation by Steve Hanke

Venezuela’s bolivar is collapsing. And as night follows day, Venezuela’s annual implied inflation rate is soaring. Last week, the annual inflation rate broke through the 500% level. It now stands at 510%.

With free market exchange-rate data (usually black-market data), the real inflation rate can be calculated. The principle of purchasing power parity (PPP), which links changes in exchange rates and changes in prices, allows for a reliable inflation estimate.

Using black-market exchange rate data that The Johns Hopkins-Cato Institute Troubled Currencies Project has collected over the past year, I estimate Venezuela’s current annual implied inflation rate to be 510%. This is the highest rate in the world. It’s well above the second-highest rate: Syria’s, which stands at 84%.

Venezuela has not always experienced punishing inflation rates. From 1950 through 1979, Venezuela’s average annual inflation rate remained in the single digits.

It was not until the 1980s that Venezuela witnessed a double-digit average, and it was not until the 1990s that Venezuela’s average inflation rate exceeded that of the Latin American region.

Today, Venezuela’s inflation rate is over the top.

A version of this post first appeared at Cato.org.

More on the Venezuelan Collapse


Steve H. Hanke

Steve H. Hanke is a Professor of Applied Economics and Co-Director of the Institute for Applied Economics, Global Health, and the Study of Business Enterprise at The Johns Hopkins University in Baltimore.

Israel’s Gas Pains Relieved

Great business news from Israel this week. Israel has become a veritable cyber ware super power.  According to Ha’aretz, sales of computer and network security technology reached more than $6 billion in 2014, accounting for 10% of the global $60 billion market place. The other great news was the resignation on Monday, May 25th of Dr. David Gilo, head of the independent Israel Antitrust Authority.  In his statement Gilo said:

My decision is a result of a number of considerations, most importantly the report that the cabinet, particularly the Prime Minister’s Office, the Ministry of Finance, and the Ministry of National Infrastructure, Energy, and Water Resources, will do everything they can to push forward the currently emerging structure in the natural gas sector. I am convinced that such a structure will not lead to competition in this important market, and could possibly detract from the independence of the Antitrust Authority, a matter of public importance, and harm its ability to carry out unilateral measures

 He had single handedly  brought to a halt the development of Israel’s important off shore gas fields by the Israel-US partnership, Delek Group Ltd. (TASE: DLEKG) and Houston based Noble Energy , Inc. (NBL-NYSE) . The partnership had put up $6 billion in risk capital to develop the country’s offshore gas fields, achieving energy security, creating a potential wealth producing export market.   Gilo stopped development of the giant Leviathan field in December 2014 when he reneged on a compromise deal reached earlier last year involving selling two existing smaller fields developed by the partners offshore in the country’s Exclusive Economic Zone (EEZ).      While he resigned on Monday, May 25th, he won’t be departing until the end of August, 2015.  Allegedly that would give him time to clean up his other consumerist initiatives.  However, many believe based on his statement his real agenda was to take pot shots at the compromise plan being floated by the Ministries of Finance, Energy and Infrastructure, backed by Prime Minister Netanyahu for good and sound national security reasons.   A legal opinion from the State’s attorney General provided authority for the government to develop and conclude the proposed agreement with the development partners.    According to Globes, Israel Business, the compromise plan:

Requires Delek Group, Ltd. to sell all of its holdings in the Tamar natural gas reservoir within six years. Noble Energy, Delek Group’s partner will be required to reduce its holdings in Tamar from 36% to 25%, and will be barred from marketing gas from the Leviathan reservoir to Israel. At the same time, the agreement leaves Noble Energy with control of both reservoirs as the company operating them.

As we have written in both NER articles and Iconoclast posts Gilo was seeking to do the impossible. To create competition by forcing the sale of one of the two major fields, the Tamar, hoping to induce foreign competitors to make investments for the completion of the giant Leviathan gas field and thereby lowering energy prices through competition. Problem with that misguided view was there were few if any takers. Further, it put into jeopardy signed agreements for delivery of gas from the existing Tamar field with the Palestinian Authority, Egypt and Jordan. Moreover the government killed a potential minority investment by Australian energy development firm, Woodside, PTY for development of LNG from the Leviathan field and delivery to the Asian market. As a result, Nobel is presently working with the Republic of Cyprus to develop an LNG processing and distribution complex to link up with the Republic’s Aphrodite offshore gas field adjacent to that of Israel’s Leviathan.

In the run up to the March 17th, Knesset elections, it was apparent that Gilo was grandstanding perhaps hoping that the Zionist Union opposition might win. If that occurred he could pursue his consent decree proposal accusing the partners of being a monopoly in violation of Israeli basic law. Instead, Gilo and entourage took off for a junket to Holland to see how the Netherlands handled their off shore gas fields development.

It quickly became apparent that the Netanyahu government was not going to abide by this high handed patently political move by Gilo.  At stake is more than $76 billion in potential tax revenues that might be used to offset burdensome national and other social program expenditures .

Prior to Gilo’s resignation, the Netanyahu government  reached out to Professor Eitan Sheshinski at Hebrew University who had developed the original tax plan in 2010 to produce revenues from oil and gas developments both onshore and offshore. Sheshinski was appointed as adviser to Energy Minister Yuval Steinitz, who he had worked with in the development of the original tax plan. He suggested in a Globes Israel Business interview that liquidation of the Tamar field ownership would not lower prices.  Additionally he said that Gilo’s original intent of controlling prices was unproductive.  Sheshinski was cited by Globes saying:

All in all, today’s price is reasonable by the standards of Europe, and certainly at the level of the Far East.  The price of gas in Europe is $8-10 per energy unit, and is about $15 in the Far East. Delek Drilling Limited Partnership (TASE: DEDR.L) and Avner Oil and Gas LP (TASE: AVNR.L) today reported that the average gas price in Israel in the first quarter of 2015 was $5.45 per energy unit.

Sheshinski also asserted that controls over natural gas prices might do more harm than good. “Controls give a lot of authority to a bureaucratic system, and experience does not justify optimism,” he said, adding, “I don’t see how the regulator in Israel can adapt himself to the many changes occurring worldwide in gas prices. You have to keep this as far as possible from the bureaucratic and political system.”

Globes noted the Finance Ministry’s compromise proposal for ‘soft pricing’:

The state proposed that the price of gas in future contracts be a weighted average of gas prices in the contracts that have already been signed in Israel.

Sheshinski’s assessment of the Gilo’s objective , liquidating the monopoly, that a duopoly would enhance price competition was wrongheaded:

Both global experience and economic theory explicitly state that anyone who thinks that a duopoly will cause perfect competition is wrong. In this matter, you also can rely on our experience in Israel. In a duopoly, the controlling shareholders have a common interest… some claim that a duopoly’s prices are even worse than those of a monopoly.

He went on to address the current international markets impacted by a spike in US oil and gas fracking production:

In my opinion, the goal is to ensure that gas prices in Israel are not different from those prevailing in similar countries around the world. A revolution is now taking place in global energy prices. The US is becoming the world’s biggest oil producer, and both oil and gas prices are on a downtrend. In my opinion, this trend will continue, and our goal should be not to pay more than the reasonable prices of countries in a similar situation with respect to gas reservoirs.

Another expert who happened to be in Eilat,  Israel  at an international conference  this week was a law partner from the Washington, DC firm of Greenberg Traurig, Global Energy & Infrastructure Practice co-chairman, Kenneth Minesinger,  “legal advisor of the Alaska state government in its negotiations with the oil and gas companies.”   Minesinger had these comments in a Globes interview:

I’ve been advising the Alaskan government how to negotiate with the gas companies for decades. Like in Israel, two major reservoirs were discovered in Alaska: Prudhoe Bay and Point Thomson. The population there is small, and the gas industry is controlled by three companies.

Both Alaska and Israel are now trying to find out how to negotiate with the gas companies in a way that will safeguard the interests of the state and its residents, together with the gas companies’ interests.

I think that it’s necessary to act quickly in order to ensure development of the Leviathan reservoir, but hasty action motivated by panic isn’t the right way. What’s involved is an agreement that will ensure Israel hundreds of billions of shekels in revenue over the years, and serious consideration and the necessary time must therefore be devoted to this matter. In contrast to Alaska, the development project for the Leviathan reservoir is simple, but it is still difficult for an inexperienced country like Israel.

Minesinger pointed out that long term contracts must include development of a network   of adequately sized pipelines connecting fields that are developed.  Further, he suggested that pricing in such agreements should be formulaic and not based on a fixed single point basis. To overcome suspicions that developing companies might earn excessive profits Minesinger suggested distribution of profit sharing checks to Israel’s citizens akin to what Alaska presently does. He has also proposed to Alaska possible consideration of a state owned gas company.

The final comment on this week’s developments in the wake of the resignation of IAA head, Gilo, came in a Globes op ed from Norman Bailey, former Reagan national security aide and Haifa University policy expert, citing lessons learned:

The resignation of Prof. Gilo as head of the Antitrust Authority is undoubtedly good news. His reneging last December on the agreement he had made with the natural gas companies Noble, Delek and Ratio the preceding March had thrown the whole development of Israel’s offshore natural gas resources into confusion. The matter had already been badly handled by the government, which had driven out the Australian company Woodside, and Gilo’s retraction had put at risk the economic, financial and geo-political benefits of the gas discoveries. The government, after an unacceptable earlier draft, finally crafted a new, acceptable proposal over Gilo’s objections, which prompted his resignation. The lessons to be learned here are twofold: regulation is necessary but should not dominate at the expense of other relevant considerations; and agreements made should be honored, unless circumstances change fundamentally, which was not the case. Israel as a magnet for investment has been preserved.

We await announcement of an acceptable compromise plan to the parties involved to end this episode once again illustrating that  rule of law must reflect economic market realities.

EDITORS NOTE: This column originally appeared in the New English Review.

Who Ignores the Principle of Scarcity? Progressives and Politicians by Sandy Ikeda

Everyone has a theory of the way the world works, a way of connecting cause and effect. Without it, we wouldn’t know how to start the day: “If I wake up at 7:00 a.m. tomorrow, I should make it to work on time. And then…”

Our theories, the rules and principles by which we interpret the world, help us to think and plan, but they also constrain our thinking and planning to some degree. That can be a good thing, as long as our theories conform reasonably well to the real world. We understand, for example, that the best way to exit the 10th floor of a building is not necessarily to step out of the nearest window.

For economists who study human action in the real world, one of the principles we cannot ignore is that scarcity exists — to get more of one valuable thing, you will have to give up some of another valuable thing. In fact, you could say that not understanding the nature and significance of scarcity is the hallmark of someone who isn’t an economist, or is a very bad one.

In everyday life, it’s usually impossible to ignore the existence of scarcity. For most of us, it’s pretty obvious that time and money aren’t unlimited, and that if we want a bigger house we’ll probably need to earn more by giving up some leisure time and working more. In a free market, one without arbitrary political power and aggression, the economic reality of scarcity is a “hard constraint” that’s always good to keep firmly in mind when making plans.

Economics versus politics

But tracing out the more subtle and far-reaching implications of scarcity in a given set of circumstances is a skill that takes a lot of training and practice, which of course not everyone has done or, really, needs to do.

As Murray Rothbard puts it,

It is no crime to be ignorant of economics, which is, after all, a specialized discipline and one that most people consider to be a “dismal science.” But it is totally irresponsible to have a loud and vociferous opinion on economic subjects while remaining in the state of ignorance.

Unfortunately, politics sorely tempts us to act irresponsibly. Politics is essentially about acquiring and using political power  — the initiation of physical violence. If the first principle of economics is that “scarcity exists,” then far too often the first principle of politics is, “ignore the first principle of economics!”

In the absence of legal privilege or persecution, people in a free market have to deal with scarcity’s hard budget constraint. But in the world of politics, people can try to immunize themselves against scarcity by making others pay for the things they want for themselves or for their cronies. Politics is the realm of the “soft budget constraint,” which may have prompted Margaret Thatcher to say, “The problem with socialism is that you eventually run out of other people’s money.”

Unfortunately, the same could easily be said for garden-variety politics almost everywhere today.

Principles versus consequences

This suggests perhaps another way of differentiating libertarians from the progressives of the left. For libertarians, economic principles constrain ourthinking. For progressives, economic reality constrains their outcomes.

What I mean is that when progressives, for instance, demand that people pay ever-higher minimum wages to those who work for them, they ignore the hard reality that someone, often unseen, must bear the cost of their “compassion,” and that those others are mostly young and unskilled workers that employers will now find too costly to employ. Or, an employer may cut back on nonwage payments they previously used to compensate their employees, making the employees worse off.

But because libertarians from the outset tend to be more mindful of economic principles, they are better able to shape their proposals, at a minimum, so as not to harm the very people that progressives aim to help. Libertarians are less likely to be disappointed when their policies confront economic reality. As someone once said, “Economics is the art of putting parameters on our utopias.” Scarcity is one of those parameters.

(Some may be reminded of Thomas Sowell’s distinction between “constrained vision” and “unconstrained vision,” which, however, I believe focuses more on one’s view of human nature: whether it is perfectible or not perfectible.)

Innovating within constraints

Faced with poverty, unhealthy working conditions, criminal violence, and a host of other persistent socioeconomic problems, we’re often admonished by the left to think beyond capitalism, to think creatively “outside the box.” Why not try to change those parameters or remove some of them altogether?

Well, even musical geniuses from traditions as different as classical, jazz, and rock must learn the rules of their genre before they can break through and go beyond them. Before he pioneered bebop, Charlie Parker had first to master the saxophone and the musical conventions of his day. Only then could he push outside mainstream jazz. To color outside the lines, you need to know where the lines are.

Moreover, scarcity is not a man-made thing that can be unmade purely by human willpower or by wishing it away. We have to account for it when we confront the real world. Otherwise, we risk personal failure or perhaps much worse. None of this means, though, that we can’t dramatically reduce scarcity and address those problems.

Sometimes there are free lunches. It’s possible to push that constraint outward and reduce scarcity through efficiency (getting more out of less) or, more importantly, through innovation (creating something of value that didn’t exist before). Henry Ford, Estee Lauder, and Norman Borlag significantly reduced the scarcity of cars, cosmetics, and food — to a world of ordinary people within the constraints of physics, chemistry, and economics.

We can get to where we want to go faster when we can see the road.


Sandy Ikeda

Sandy Ikeda is a professor of economics at Purchase College, SUNY, and the author of The Dynamics of the Mixed Economy: Toward a Theory of Interventionism.

LA Unions Demand Exemption from $15 Minimum Wage They Created by Daniel Bier

If there was ever any doubt that LA’s minimum wage hike was meant to help the labor unions at the expense of everyone else, I hope we can now put that idea to bed.

The LA Times reports,

Labor leaders, who were among the strongest supporters of the citywide minimum wage increase approved last week by the Los Angeles City Council, are advocating last-minute changes to the law that could create an exemption for companies with unionized workforces. . . .

Rusty Hicks, who heads the county Federation of Labor and helps lead the Raise the Wage coalition, said Tuesday night that companies with workers represented by unions should have leeway to negotiate a wage below that mandated by the law.

“With a collective bargaining agreement, a business owner and the employees negotiate an agreement that works for them both. The agreement allows each party to prioritize what is important to them,” Hicks said in a statement. “This provision gives the parties the option, the freedom, to negotiate that agreement. And that is a good thing.”

Unions want to give workers and business the option — the freedom! — to prioritize what’s important to them and negotiate their own pay! Isn’t that nice. But only if those workers are paying union dues, and only if those businesses are using union labor.

The minimum wage hike was always meant to make independent workers more expensive and make unions look better by comparison. But it’s a bold move for the unions to simply say, in one breath, “Everyone deserves a living wage! It’ll be good for everyone! Except us, thank you. We’ll set our own pay — and also, give a break to any businesses who agree to go back to union labor.”

More on this transparently corrupt policy of the minimum wage by FEE’s Jeffrey Tucker.


Daniel Bier

Daniel Bier is the editor of Anything Peaceful. He writes on issues relating to science, civil liberties, and economic freedom.

Full Stream Ahead: Why EPA’s Water Rule Goes Too Far

The Obama administration didn’t listen. Instead, it went ahead with its regulatory overreach over America’s waters. This worries farmers, ranchers, and other businesses.

EPA and the Army Corps of Engineers released their final Waters of the United States (WOTUS) rule–known as the “Clean Water Rule” in EPA lingo–that claims jurisdiction over vast swaths of the country.

In a statement EPA Administrator Gina McCarthy claimed, “This rule will make it easier to identify protected waters.” In reality, the rule does this by claiming federal jurisdiction over a huge number of waters.

Inside the 299 pages of regulations, definitions, explanations, and justifications for the rule, “adjacent” waters now under federal regulatory authority “include wetlands, ponds, lakes, oxbows, impoundments, and similar water features” that are “in the 100-year floodplain and that are within 1,500 feet” (five football fields) of a navigable water. The entire body of water is “adjacent” even if only a portion of it falls within the 100-year floodplain or within 1,500 feet of a navigable water.

While EPA and the Army Corps claim that WOTUS clarifies what waters are under federal jurisdiction, in agriculture’s case, nothing is clarified. The rule states [emphasis mine]:

Waters in which normal farming, ranching, and silviculture activities occur instead will continue to be subject to case-specific review, as they are today.

In fact, under this new definition bodies of water or wetlands over three-quarters of a mile from an navigable water could fall under federal jurisdiction if the federal government decides that it significantly affects another body of water [emphasis mine]:

[W]aters within 4,000 feet of the high tide line or the ordinary high water mark of a traditional navigable water, interstate water, the territorial seas, impoundments, or covered tributary are subject to case-specific significant nexus determinations.

The agencies claim they “do not anticipate that there will be numerous circumstances in which this provision will be utilized,” but who is to say the ever-growing Regulatory State won’t make this its default tool in its water regulation toolbox. Regulators’ best wishes are no guarantee that an agency’s power will be limited.

With federal jurisdiction comes costly federal permitting. “Over $1.7 billion is spent each year by the private and public sectors obtaining wetlands permits,” wrote the U.S. Chamber and 375 other associations in a comment on WOTUS to EPA and the Army Corps.

William Kovacs, the U.S. Chamber’s Senior Vice President of Environment, Technology, & Regulatory Affairs, said the process the agencies used to write the rule was “fundamentally flawed.”

Since issuing the proposed rule for public comment in April 2014, the agencies have somehow maintained that the proposal will have no significant regulatory or economic impact, and in fact the agency is simply ‘clarifying’ the current state of federal jurisdiction over waters. Such statements fly in the face reality.

Despite appeals from constituents and lawmakers across the country; countless business owners, farmers and industry leaders; and the Small Business Administration, the EPA and the Army Corps of Engineers failed to conduct any meaningful regulatory or economic impact analyses prior to issuing a final rule.

The Chamber filed lengthy public comments identifying exactly how the proposal could affect businesses of all sizes, including local municipalities, and requested the agencies convene a small business review panel to study and evaluate those impacts. Numerous state, local and business stakeholders and the Small Business Administration (twice) echoed that request, to no avail.

In a blog post prior to WOTUS being released, Kovacs worried that the water rule “would put [EPA] effectively in charge of zoning the entire country.”

Kovacs isn’t alone in criticizing the rulemaking process. While explaining that WOTUS will expand federal authority, Charles Maresca, Director of Interagency Affairs for the Small Business Administration’s Office of Advocacy, told a Senate Committee it was “incorrect” for EPA and the Corps to claim that the regulation won’t have “a significant economic impact on a substantial number of small businesses.”

It was no holds barred in the administration’s defense of its controversial rule. President Obama’s top environmental advisor Brian Deese said, “The only people with reason to oppose the rule are polluters who threaten our clean water.”

Tell that to farmers, ranchers, home builders, and other businesses. They understand that clean water means everything to their customers and their businesses. Federal regulators going over the heads of local and state officials accomplishes little but adding more barriers to job creation and economic development.

With WOTUS businesses will be up a creek without a paddle.

A Simple Question for Minimum Wage Advocates by Donald J. Boudreaux

I will return in a later post to the topic of my previous post, namely, the validity or (as I see it) invalidity of the argument that proposes a tolerance of locally set minimum-wage rates if not of nationally or super-nationally set rates.

I state, however, here and again my conclusion: Legislating minimum wages – that is, enacting a policy of caging people who insist on entering voluntarily into employment contracts on terms that political elites find objectionable – is no more attractive or justified or likely to succeed at helping low-skilled workers if the particular caging policy in question is enacted locally than if it is enacted nationally or globally.

In this short post, I ask a simple question of all advocates of minimum wages:

If enforcement of minimum-wage policies were carried out in practice by policing low-skilled workers rather than employers – if these policies were enforced by police officers monitoring workers and fining those workers who agreed to work at hourly wages below the legislated minimum – would you still support minimum wages?

Would you be good with police officers arresting those workers who, preferring to remain employed at sub-minimum wages rather than risk losing their current jobs (or risking having do endure worsened employment conditions), refuse to abide by the wage terms dictated by the legislature?

Would you think it an acceptable price to pay for your minimum-wage policy that armed police officers confine in cages low-skilled workers whose only offense is their persistence at taking jobs at wages below those dictated by the government?

If a minimum-wage policy is both economically justified and morally acceptable, you should have no problem with this manner of enforcement.

(You might still prefer, for obviously aesthetic reasons, enforcement leveled mainly at employers. But if the policy is to unleash government force to raise wages above those that would be otherwise agreed to on the market voluntarily between employers and workers, then you should agree that, if for some reason enforcement aimed at employers were impossible or too costly, enforcement aimed at workers is morally and economically acceptable.)

If, however, you do have a problem with minimum-wage regulations being enforced by targeting workers who violate the legislature’s dictated wage terms, then you might wish to think a bit more realistically and deeply about just what it is you advocate in the name of economic improvement or “social justice.”

This post first appeared at Cafe Hayek, where Don Boudreaux blogs with Russ Roberts.

Donald Boudreaux

Donald Boudreaux is a professor of economics at George Mason University, a former FEE president, and the author of Hypocrites and Half-Wits.

Who Should Choose? Patients and Doctors or the FDA? by Doug Bandow

Good ideas in Congress rarely have a chance. Rep. Fred Upton (R-Mich.) is sponsoring legislation to speed drug approvals, but his initial plan was largely gutted before he introduced it last month.

Congress created the Food and Drug Administration in 1906, long before prescription drugs became such an important medical treatment. The agency became an omnibus regulatory agency, controlling everything from food to cosmetics to vitamins to pharmaceuticals. Birth defects caused by the drug Thalidomide led to the 1962 Kefauver-Harris Amendments which vastly expanded the FDA’s powers. The new controls did little to improve patient safety but dramatically slowed pharmaceutical approvals.

Those who benefit the most from drugs often complain about the cost since pills aren’t expensive to make. However, drug discovery is an uncertain process. Companies consider between 5,000 and 10,000 substances for every one that ends up in the pharmacy. Of those only one-fifth actually makes money—and must pay for the entire development, testing, and marketing processes.

As a result, the average per drug cost exceeds $1 billion, most often thought to be between $1.2 and $1.5 billion. Some estimates run more.

Naturally, the FDA insists that its expensive regulations are worth it. While the agency undoubtedly prevents some bad pharmaceuticals from getting to market, it delays or blocks far more good products.

Unfortunately, the political process encourages the agency to kill with kindness. Let a drug through which causes the slightest problem, and you can expect television special reports, awful newspaper headlines, and congressional hearings. Stop a good drug and virtually no one notices.

It took the onset of AIDS, then a death sentence, to force the FDA to speed up its glacial approval process. No one has generated equivalent pressure since. Admitted Richard Merrill, the agency’s former chief counsel:  “No FDA official has ever been publicly criticized for refusing to allow the marketing of a drug.”

By 1967 the average delay in winning approval of a new drug had risen from seven to 30 months after the passage of Kefauver-Harris. Approval time now is estimated to run as much as 20 years.

While economist Sam Peltzman figured that the number of new drugs approved dropped in half after Kefauver-Harris, there was no equivalent fall in the introduction of ineffective or unsafe pharmaceuticals. All the Congress managed to do was strain out potentially life-saving products.

After all, a company won’t make money selling a medicine that doesn’t work. And putting out something dangerous is a fiscal disaster. Observed Peltzman:  the “penalties imposed by the marketplace on sellers of ineffective drugs prior to 1962 seem to have been enough of a deterrent to have left little room for improvement by a regulatory agency.”

Alas, the FDA increases the cost of all medicines, delays the introduction of most pharmaceuticals, and prevents some from reaching the market. That means patients suffer and even die needlessly.

The bureaucracy’s unduly restrictive approach plays out in other bizarre ways. Once a drug is approved doctors may prescribe it for any purpose, but companies often refuse to go through the entire process again to win official okay for another use. Thus, it is common for AIDS, cancer, and pediatric patients to receive off-label prescriptions. However, companies cannot advertise these safe, effective, beneficial uses.

Congress has applied a few bandages over the years. One was to create a process of user fees through the Prescription Drug User Fee Act. Four economists, Tomas Philipson, Ernst Berndt, Adrian Gottschalk, and Matthew Strobeck, figured that drugmakers gained between $11 billion and $13 billion and consumers between $5 billion and $19 billion. Total life years saved ranged between 180,000 and 310,000. But lives continue to be lost because the approval process has not been accelerated further.

Criticism and pressure did lead to creation of a special FDA procedure for “Accelerated Approval” of drugs aimed at life-threatening conditions. This change, too, remains inadequate. Nature Biotechnology noted that few medicines qualified and “in recent years, FDA has been ratcheting up the requirements.”

The gravely ill seek “compassionate access” to experimental drugs. Some patients head overseas unapproved treatments are available. The Wall Street Journal reported on those suffering from Lou Gehrig’s disease who, “frustrated by the slow pace of clinical drug trials or unable to qualify, are trying to brew their own version of an experimental compound at home and testing it on themselves.”

Overall, far more people die from no drugs than from bad drugs. Most pharmaceutical problems involve doctors misprescribing or patients misusing medicines. The deadliest pre-1962 episode involved Elixir Sulfanilamide and killed 107 people. (Thalidomide caused some 10,000 birth defects, but no deaths.) Around 3500 users died from Isoproterenol, an asthmatic inhaler. Vioxx was blamed for a similar number of deaths, though the claim was disputed. Most of the more recent incidents would not have been prevented from a stricter approval process.

The death toll from agency delays is much greater. Drug analyst Dale Gieringer explained:  “The benefits of FDA regulation relative to that in foreign countries could reasonably be put at some 5,000 casualties per decade or 10,000 per decade for worst-case scenarios.  In comparison … the cost of FDA delay can be estimated at anywhere from 21,000 to 120,000 lives per decade.”

According to the Competitive Enterprise Institute, among the important medicines delayed were ancrod, beta-blockers, citicoline, ethyol, femara, glucophage, interleukin-2, navelbine, lamictal, omnicath, panorex, photofrin, prostar, rilutek, taxotere, transform, and vasoseal.

Fundamental reform is necessary. The FDA should be limited to assessing safety, with the judgment as to efficacy left to the marketplace. Moreover, the agency should be stripped of its approval monopoly. As a start drugs approved by other industrialized states should be available in America.

The FDA’s opinion also should be made advisory. Patients and their health care providers could look to private certification organizations, which today are involved in everything from building codes to electrical products to kosher food. Medical organizations already maintain pharmaceutical databases and set standards for treatments with drugs. They could move into drug testing and assessment.

No doubt, some people would make mistakes. But they do so today. With more options more people’s needs would be better met. Often there is no single correct treatment decision. Ultimately the patient’s preference should control.

Congress is arguing over regulatory minutiae when it should be debating the much more basic question: Who should decide who gets treated how? Today the answer is Uncle Sam. Tomorrow the answer should be all of us.

Doug Bandow

Doug Bandow is a senior fellow at the Cato Institute and the author of a number of books on economics and politics. He writes regularly on military non-interventionism.

Should We Respect the Law? by B.K. Marcus

Which is the greater threat to freedom, too little respect for the law — or too much?

With ever more laws on the books serving to curtail individual rights, suppress human flourishing, and cripple the process of wealth creation, it would seem that the healthy attitude for advocates of liberty would be one of unequivocal disrespect.

That’s precisely what Reason.com’s managing editor, J.D. Tuccille, advocates in a recent Hit & Run post:

The key to rendering stupid laws irrelevant … [is] an overall attitude of defiance.… And the enemy of that defiance isn’t tough cops or clever politicians; it’s respect for the law.

Tuccille is responding to Charles Murray’s new By the People: Rebuilding Liberty Without Permission and to what Tuccille describes as Salon.com’s “incoherently rabid” reaction to Murray’s book.

By the People, Tuccille tells us, “describes how civil disobedience backstopped by legal defense funds can make large portions of the 180,000-page Federal Code of Regulations unenforceable.”

But Tuccille claims that Murray’s strategy skips a step. In fact, he claims, any strategy by itself will fall short of the mark if our goal is to roll back intrusive government. Because civil disobedience, strategically speaking, depends on a cultural prerequisite: “widespread skepticism toward intrusive laws, the political system that creates those laws, and the people who enforce them.”

In other words, the real enemy of freedom is respect for the law — and the first item on any libertarian agenda must therefore be to promote instead a “healthy contempt.”

Here we run into a semantic issue that has bedeviled classical liberals throughout our history: What does the word law mean?

If we’re talking about legislation, then Tuccille is certainly right. It’s hard to ask if a particular law is justified when you conflate what’s illegal with what’s immoral. A knee-jerk respect for whatever law happens to be on the books at the moment is an abdication of moral responsibility.

But if the idea of society-wide disrespect for the law leaves you feeling uneasy — if you picture rampant crime, and not just the victimless variety — that’s because the word law doesn’t always refer to the latest ink in the legislators’ library of rules and regulations. It also connotes order, balance, the recognition of rights and reciprocity. At its best, the term law simply means justice.

When Frédéric Bastiat opened his manifesto with the line “The law perverted!”he acknowledges both that the purpose of on-the-books law is to promote justice and that the actual legislation has been “made to follow an entirely contrary purpose.”

Bastiat was, in essence, using his readers’ respect for justice to promote a healthy contempt, not for the law, but for its perversion by the state.

Tuccille may simply be taking it for granted that Reason’s readers support individual rights and a societal pursuit of justice, but a newcomer could be forgiven for thinking that, like Murray, Tuccille himself has skipped a step. Respect for justice is what makes contempt for the “law” into a tool for liberty instead of chaos.

So should we drop the word law and talk instead of legislation versus justice?

It is true that the heroes of liberty have chosen justice over legislation for centuries, from America’s smuggling and tax-dodging Founders, to conductors and station owners on the Underground Railroad, to the digital innovators who help ever more of us to bypass the cartelized economy and avoid the prying eyes of the security state.

Tuccille, too, offers the example of the heroic lawbreakers of America’s slavery era: “the underground railroad that helped slaves escape the antebellum South for new lives in Canada and the North.”

“The network of safe houses and volunteers,” he points out, “was fueled by an overriding disdain for laws that treated human beings as property and required the public to cooperate in their enforcement.”

But significantly, many of the 19th-century abolitionists were pietist Christians, who believed in a natural law above and often in conflict with the man-made sort.

Libertarian legal theorist Lysander Spooner was a nonbeliever: he rejected the theology behind the natural-law theory of many of his fellow abolitionists. But Spooner argued nevertheless that a “science of justice” was possible. And like his Christian comrades, he referred to the subject of that science as “natural law.”

Even if you can’t buy into the idea of “natural” rights and natural laws to protect those rights, it remains straightforward to distinguish between those laws that protect peaceful, voluntary actions and those that punish them. What we want is a healthy respect for the former and a widespread disdain for anything else that calls itself law.

But defiance is not enough. It has existed in illiberal societies more often than in liberal ones. The culture that promotes freedom and well-being must have as its starting point an understanding of law independent of the state.

B.K. Marcus

B.K. Marcus is managing editor of the Freeman.

In Defense of Private Property: Mises and Aristotle by Jeffrey A. Tucker

I’ve just reacquainted myself with two seminal texts: Aristotle’s Politics and Ludwig von Mises’s Socialism. Though written nearly two and a half millennia apart, it’s remarkable how these two gigantically important treatises parallel each other.

They both come to the defense of property and realistic forms of political order in the face of all kinds of dreamers, fanatics, and would-be dictators. A central contribution of each book is to defend the institution of private property against its enemies, who, both Aristotle and Mises knew, would smash all that is wonderful about life.

They took different pathways toward the same goal. Aristotle focused on what makes people happy and permits the realization of the virtuous life. But he had very little conception of economics, and his theory of property was problematic, to say the least. Mises, on the other hand, focused on economic science, and presented a far more coherent vision of property, freedom, and economic growth.

Even so, they cover the same basic territory. What kind of social and political order is most conducive to human flourishing, and what is the role of private property and private life in this order?

Aristotle spoke of the impossibility of the realization of self under common ownership.

“In a state having women and children common, love will be watery; and the father will certainly not say ‘my son,’ or the son ‘my father.’ As a little sweet wine mingled with a great deal of water is imperceptible in the mixture, so, in this sort of community, the idea of relationship which is based upon these names will be lost; there is no reason why the so-called father should care about the son, or the son about the father, or brothers about one another. ”

The absence of ownership, then, leads to the disregard of one’s own life and the life of others. “How immeasurably greater is the pleasure, when a man feels a thing to be his own,” Aristotle writes, “for the love of self is a feeling implanted by nature and not given in vain…”

Everything is at stake: benevolence, gifting, appreciation, and even love. “There is the greatest pleasure in doing a kindness or service to friends or guests or companions, which can only be rendered when a man has private property,” writes Aristotle. “The advantage is lost by the excessive unification of the state.”

These are hugely profound insights. To be sure, Aristotle’s conception of private property is seriously marred by his defense of slavery, and he is reluctant to admit women into the realm of citizens who deserve what we call rights today. To read this material, one must always keep in mind how lost the contributions of the Enlightenment truly were on the ancient philosophers. They knew nothing of universal rights, freedom of speech, and freedom of religion. Still, given that proviso, we can see Aristotle working his way toward a coherent theory of the social order.

He goes further to condemn looting of property through the political system. “If the poor, for example, because they are more in number, divide among themselves the property of the rich, is not this unjust? … if this is not injustice, pray what is?” The reverse is also true, he wrote. It would be unjust for the rich to use their power and wealth to pillage the poor.

Aristotle repeats his injunction and summarizes: “I do not think that property ought to be common, as some maintain, but only that by friendly consent there should be a common use of it; and that no citizen should be in want of subsistence.”

Mises took this whole analysis much further. The first third of Socialism presents a complete theory of social order and the place of property within it. He treats property not as an ethic or plan from the top but as a technology, something created out of social consensus and made necessary by the existing of material privation.

The extension of the division of labor provides more opportunities for growing wealth, and, eventually the creation of money, which is the key to rational economic calculation in a modern economy. Without private property in capital goods, writes Mises, there is no hope for making sense of the main material challenges society faces.

We know about the opponents of Mises’s views. He was surrounded by an academic class of philosophers and economists who were generally sympathetic to the ideals of socialism. “Socialism is the watchword and catchword of our day,” he wrote. “The socialist idea dominates the modern spirit. The masses approve it. It expresses the thoughts and feelings of all; it has set its seal upon our time.”

Later in the book, Mises addresses prevailing religious ideas at the time, which had turned decisively to favor the socialist idea. He took them apart, one by one, showing that most of the religious thinkers of his day had no conception of the practical need for a thriving society to have modern economic institutions rooted in private property ownership.

Mises takes his argument further to point out that the end of property really is the end of freedom. Every would-be tyrant excoriates private property, not because communism would be great for the people but because private ownership is a barrier to the tyrant’s power and control. In its absence, power rules and there is nothing like freedom. Without private property, there can be no free press, freedom of religion, or freedom of association.

The parallels with Aristotle’s book are uncanny. I’m trying to think of the problems Aristotle faced in the 4th century, BC. There was the epic influence of Plato and his many pupils. Plato wrote, whether ironically or not, in favor of a communist utopia with no property, no families, no ownership, no private life, and he found this to be the only society that is consistent with justice and social harmony.

Aristotle took on Plato, who was representative of the first group of enemies of property in all times: the highly educated philosophy elite. So it ever was and ever shall be.

In addition, in Aristotle’s time, there was an official religion that was stable and reliable and he urged people to be faithful to it. It served the ruling class but it was not utterly insane. But the world must have been populated with self-proclaimed prophets everywhere, people serious about jazzing up the population with some frenzied dream. Always and everywhere this seems to have included the socialist idea. If we could just throw all things into the commons, all human division would disappear and utopia would appear!

This group, the mystics and spiritual dreamers, then, was the second group of enemies of property. Then and now.

But there was still another dangerous force in the land: would-be tyrants. They lie to people. They come to power through promises of democracy. They use the destabilization of revolution to displace one government and push a much worse one. Despots resent the private life of the people that ownership makes possible. They proclaim the wonders of common ownership, but the result of their visions is always the same: more power to the dictators.

We really do face a choice. We suffer under the tyrant’s boot or we uphold the sanctity of private ownership. Aristotle discerned this in the 4th century, BC. Mises drove the point home with his marvelous book of 1922. They lived in radically different times and spoke from a different perspective. But their concern was the same. Ownership and freedom are inseparable ideals, both in their times and in ours.

Jeffrey A. Tucker

Jeffrey Tucker is Director of Digital Development at FEE, CLO of the startup Liberty.me, and editor at Laissez Faire Books. Author of five books, he speaks at FEE summer seminars and other events. His latest book is Bit by Bit: How P2P Is Freeing the World.

REPORT: Housing Market at Risk

April’s results continue to show that first-time buyer volume and share remain strong, showing little variance beyond seasonal trends.  However, the first-time buyer Mortgage Risk Index hit a series high of 15.28 percent in April, moving deeper into the high risk loan category. This growing leverage puts the housing market at risk given interest rates are at historically low levels and American households are facing increasingly sharp swings in income and expenses.

AEI housing risk centerAEI’s International Center on Housing Risk announces release of First-Time Buyer Mortgage Share and Mortgage Risk Indexes (FBMSI and FBMRI) for April 2015

  • First-time buyers accounted for 57.9 percent of primary owner-occupied home purchase mortgages with a government guarantee, up from 56.8 percent and 57.4 percent respectively in April 2014 and 2013
  • The Combined FBMSI (which measures the share of first-time buyers for both government-guaranteed and private-sector mortgages) stood at an estimated 52.2 percent, up from 51.2 percent and 51.8 percent respectively in April 2014 and 2013
  • The number of primary owner-occupied purchase mortgages going to first-time buyers over the 6-month period of November 2014-April 2015 totaled an estimated 577,000, up 8½ percent from the 532,000 mortgages over the same 6-month period in 2013-2014
  • The Agency FBMRI stood at a series record of 15.28 percent, up 0.2 percentage point from the average over the prior three months and up 0.9 percentage point from a year earlier. The Agency FBMRI is nearly 6½ percentage points higher than the mortgage risk index for repeat homebuyers

The First-Time Buyer Mortgage Share and Mortgage Risk Indexes (FBMSI and FBMRI) are key housing market indicators based on monthly data for nearly all government-guaranteed home purchase loans, which greatly reduces the risk of sample error. By relying on millions of loans, this approach stands in contrast to traditional first-time buyer surveys based on small samples of homebuyers or real estate agents.

In April 2015, first-time buyers accounted for 57.9 percent of primary owner-occupied home purchase mortgages with a government guarantee, according to the Agency First-Time Buyer Mortgage Share Index (FBMSI).  As shown in the chart below, the April share was roughly 1 percentage point above both the revised share of 57.0 percent for March and the April 2014 share of 56.8 percent.  Although the first-time buyer share last month reached the highest level in its 25-month history, the series has displayed no clear trend apart from seasonal variation.  Additional data will be needed to determine if the April increase represents the beginning of a sustained rise in the share.

image001 (3)

The chart below displays the monthly first-time homebuyer percentage by agency.  As shown, the share varies widely across agencies.  FHA is at the high end with a share at or above 80 percent, while Freddie Mac is at the low end with a share of about 40 percent.  Fannie Mae’s share has consistently tracked somewhat above Freddie’s and stood at 47 percent in April. Fannie’s share is higher mainly because of its much greater volume of 97 percent LTV loans for first-time buyers relative to Freddie.  These loans carry substantial risk and account for roughly half of the gap between Fannie’s MRI for first-time buyers (8.30 percent in April) and Freddie’s (6.61 percent).

image002 (2)

The Combined FBMSI (which measures the share of first-time buyers for both government-guaranteed and private-sector mortgages) stood at an estimated 52.2 percent in April 2015.  Consistent with the agency series, the broader combined share has varied seasonally but has displayed no trend over its 25-month history (see chart below).

image003 (3)

The monthly count of agency first-time buyer mortgages (the Agency FTB Loan Count) is presented in the chart below.  The number of primary owner-occupied purchase mortgages going to first-time buyers over the 6-month period of November 2014-April 2015 totaled an estimated 577,000, up 8½ percent from the 532,000 mortgages over the same 6-month period in 2013-2014.  This increase in the Agency FTB Loan Count outpaced the 6¾ percent rise in total agency purchase loan volume over the same period.

image004 (2)

The Agency FBMSI is calculated, as noted above, from a nearly complete dataset of government-guaranteed home purchase loans, which greatly reduces the risk of sample error. The near-universe of included loans stands in contrast to the 2014 survey of homebuyers and sellers conducted by the National Association of Realtors (NAR), which was based on responses constituting only 0.2 percent of all purchase loans originated during the 12-month survey period and was voluntary, with responses received from only 9 percent of those mailed the 127-question survey.[i]  Data on the importance of first-time homebuyers for non-agency loans are not available to our knowledge from any source.  The Combined FBMSI is calculated from the loan-level data in the Agency FBMSI, along with assumptions for the non-agency loans that we believe to be reasonable.

The Combined FBMSI percentage of first-time buyers is much higher than that estimated by the NAR.  For the July 2013-June 2014 period covered by the NAR’s 2014 survey of homebuyers and sellers, the Combined FBMSI showed an average share of 50 percent, substantially higher than the NAR’s survey result that first-time homebuyers took out 36 percent of the mortgages used to buy a primary residence.  This gap largely appears to reflect a difference in the definition of first-time buyers.[ii]

However, even after accounting for the gap, the Combined FBMSI tells a very different story about the recent role of first-time buyers than does the NAR survey.  As noted above, the Combined FBMSI shows that the first-time buyer share has changed little over the past two years apart from seasonal variation.  In contrast, the NAR survey shows a sharp drop in the first-time buyer share for the July 2013-June 2014 period relative to the prior year.  This drop appears inconsistent with the loosening of credit standards across those two periods and with the continued improvement in economic conditions.

“April’s results continue to show that first-time buyer volume and share remain strong, showing little variance beyond seasonal trends,” said Edward Pinto, codirector of the American Enterprise Institute’s (AEI’s) International Center on Housing Risk.

“A recent Urban Institute study of first-time buyers confirms the results we have been reporting for some time,” said Stephen Oliner, codirector of AEI’s International Center on Housing Risk.  “These results are contrary to the drop in the first-time buyer share shown by the NAR measure.”

AEI’s Agency First-Time Buyer Mortgage Risk Index (FBMRI) estimates the share of first-time buyer mortgages that would default in a stress event comparable to the 2007-08 financial crisis based on the actual performance of loans originated in 2007.  The Agency FBMRI stood at 15.28 percent in April, up 0.2 percentage point from the average over the prior three months and up 0.9 percentage point from a year earlier. As indicated in the chart below, the Agency FBMRI is nearly 6½ percentage points higher than the mortgage risk index for repeat homebuyers.

The higher risk for the mortgages taken out by first-time buyers is largely due to risk layering. As shown in the table below, in April 2015, 70 percent of first-time buyer mortgages had a combined loan-to-value ratio (CLTV) of 95 percent or higher, and 97 percent had a 30-year term. Given the combination of little money down and slow amortization, these buyers will have very little home equity for a number of years unless their house appreciates substantially. In addition, about one-fifth of first-time buyers taking out mortgages had a FICO score below 660, the traditional definition of subprime mortgages, and one-quarter had total debt-to-income ratios above 43 percent, the limit set by the Qualified Mortgage rule.  The mortgages taken out by repeat buyers are less risky along two dimensions in particular: a much smaller share had a CLTV of 95 percent or higher and a smaller share had a FICO score below 660.

Characteristics of Mortgages Taken Out by First-Time and Repeat Homebuyers

April 2015
CLTV ≥ 95% 30-year Term FICO < 660 DTI > 43%
First-time Buyers 70% 97% 21% 24%
Repeat Buyers 38% 91% 9% 23%
Source.  AEI International Center on Housing Risk, www.HousingRisk.org

This risk profile for first-time buyers implies that the supply of mortgage credit to this group is not tight.  In April 2015, the median first-time buyer with an agency mortgage made a downpayment of only 3 percent, or $7200 in dollar terms.  Moreover, the median FICO score in April for first-time buyers with agency mortgages was 705, slightly below the median of 713 for all individuals in the United States with a score.[iii] For first-time buyers with FHA-insured loans, the median FICO score in April was only 672, well below the middle of the distribution for the U.S. as a whole. These data are a strong counterpoint to the frequent claims that first-time buyers face difficulties in obtaining mortgages.

“The first-time buyer MRI hit a series high of 15.28 percent in April, moving deeper into the high risk loan category,” said Pinto.  “This growing leverage puts the housing market at risk given interest rates are at historically low levels and American households are facing increasingly sharp swings in income and expenses.”

“One hears all the time that first-time buyers have limited access to mortgage debt.  But this isn’t true,” said Oliner.  Many first-time buyers with low FICO scores and little money down are buying homes every month.

The FBMSI and FBMRI are objective and transparent measures of the first-time buyer share and the riskiness of first-time buyer mortgages, respectively, based on the millions of loans contained in the National Mortgage Risk Index (NMRI) database developed by AEI’s International Center on Housing Risk. The FBMSI, FBMRI, and NMRI are updated monthly.  For more information about these indexes and the work of the center, please visit HousingRisk.org or contact Edward.Pinto@AEI.org or Stephen.Oliner@AEI.org.

Health Insurance Is Illegal by Warren C. Gibson

Health insurance is a crime. No, I’m not using a metaphor. I’m not saying it’s a mess, though it certainly is that. I’m saying it’s illegal to offer real health insurance in America. To see why, we need to understand what real insurance is and differentiate that from what we currently have.

Real insurance

Life is risky. When we pool our risks with others through insurance policies, we reduce the financial impact of unforeseen accidents or illness or premature death in return for a premium we willingly pay. I don’t regret the money I’ve spent on auto insurance during my first 55 years of driving, even though I’ve yet to file a claim.

Insurance originated among affinity groups such as churches or labor unions, but now most insurance is provided by large firms with economies of scale, some organized for profit and some not. Through trial and error, these companies have learned to reduce the problems of adverse selection and moral hazard to manageable levels.

A key word above is unforeseen.

If some circumstance is known, it’s not a risk and therefore cannot be the subject of genuine risk-pooling insurance. That’s why, prior to Obamacare, some insurance companies insisted that applicants share information about their physical condition. Those with preexisting conditions were turned down, invited to high-risk pools, or offered policies with higher premiums and higher deductibles.

Insurers are now forbidden to reject applicants due to preexisting conditions or to charge them higher rates.

They are also forbidden from charging different rates due to different health conditions — and from offering plans that exclude certain coverage items, many of which are not “unforeseen.”

In other words, it’s illegal to offer real health insurance.

Word games

Is all this just semantics? Not at all. What currently passes for health insurance in America is really just prepaid health care — on a kind of all-you-can-consume buffet card. The system is a series of cost-shifting schemes stitched together by various special interests. There is no price transparency. The resulting overconsumption makes premiums skyrocket, and health resources get misallocated relative to genuine wants and needs.

Lessons

Some lessons here are that genuine health insurance would offer enormous cost savings to ordinary people — and genuine benefits to policyholders. These plans would encourage thrift and consumer wisdom in health care planning,  while discouraging the overconsumption that makes prepaid health care unaffordable.

At this point, critics will object that private health insurance is a market failure because the refusal of unregulated private companies to insure preexisting conditions is a serious problem that can only be remedied by government coercion. The trouble with such claims is that no one knows what a real health insurance market would generate, particularly as the pre-Obamacare regime wasn’t anything close to being free.

What might a real, free-market health plan look like?

  • People would be able to buy less expensive plans from anywhere, particularly across state lines.
  • People would be able to buy catastrophic plans (real insurance) and set aside much more in tax-deferred medical savings accounts to use on out-of-pocket care.
  • People would very likely be able to buy noncancelable, portable policies to cover all unforeseen illnesses over the policyholder’s lifetime.
  • People would be able to leave costly coverage items off their policies — such as chiropractic or mental health — so that they could enjoy more affordable premiums.
  • People would not be encouraged by the tax code to get insurance through their employer.

What about babies born with serious conditions? Parents could buy policies to cover such problems prior to conception. What about parents whose genes predispose them to produce disabled offspring? They might have to pay more.

Of course, there will always be those who cannot or do not, for one reason or another, take such precautions. There is still a huge reservoir of charitable impulses and institutions in this country that could offer assistance. And these civil society organizations would be far more robust in a freer health care market.

The enemy of the good

Are these perfect solutions? By no means. Perfection is not possible, but market solutions compare very favorably to government solutions, especially over longer periods. Obamacare will continue to bring us unaccountable bureaucracies, shortages, rationing, discouraged doctors, and more.

Some imagine that prior to Obamacare, we had a free-market health insurance system, but the system was already severely hobbled by restrictions.

To name a few:

  • It was illegal to offer policies across state lines, which suppressed choices and increased prices, essentially cartelizing health insurance by state.
  • Employers were (and still are) given a tax break for providing health insurance (but not auto insurance) to their employees, reducing the incentive for covered employees to economize on health care while driving up prices for individual buyers. People stayed locked in jobs out of fear of losing health policies.
  • State regulators forbade policies that excluded certain coverage items, even if policyholders were amenable to such plans.
  • Many states made it illegal to price discriminate based on health status.
  • The law forbade associated health plans, which would allow organizations like churches or civic groups to pool risk and offer alternatives.
  • Medicaid and Medicare made up half of the health care system.

Of course, Obamacare fixed none of these problems.

Many voices are calling for the repeal of Obamacare, but few of those voices are offering the only solution that will work in the long term: complete separation of state and health care. That means no insurance regulation, no medical licensing, and ultimately, the abolition of Medicare and Medicaid, which threaten to wash future federal budgets in a sea of red ink.

Meanwhile, anything resembling real health insurance is illegal. And if you tried to offer it, they might throw you in jail.

Warren C. Gibson

Warren Gibson teaches engineering at Santa Clara University and economics at San Jose State University.