How Government Turned Baltimore into Pottersville by James Bovard

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Baltimore’s recent riots are not surprising in a city that has long been plagued by both police brutality and one of the nation’s highest murder rates. Though numerous government policies and the rampaging looters deserve blame for the carnage, federal housing subsidies have long destabilized Baltimore neighborhoods and helped create a culture of violence with impunity.

Yet just last week, Baltimore officials were in Washington asking for more. Given the history, it defies understanding.

The U.S. Department of Housing and Urban Development was created in 1965, and Baltimore received massive subsidies to build housing projects in the following years. Baltimore’s projects, like those in many other cities, became cornucopias of crime.

One 202-unit sprawling Baltimore subsidized housing project (recently slated for razing) is known as “Murder Mall.” A 1979 HUD report noted that the robbery rate in one Baltimore public housing project was almost 20 times higher than the national average. The area in and around public housing often becomes “the territory of those who do not have to be afraid — the criminals,” the report said. Baltimore Mayor Kurt Schmoke in 1993 blamed maintenance problems at one public housing projects on drug dealers who refused to let city workers enter the buildings.

In the 1990s, the Baltimore Housing Authority began collecting lavish HUD subsidies to demolish public housing projects. But critics complained that HUD was merely replacing “vertical ghettos with horizontal ones.” Baltimore was among the first cities targeted for using Section 8 vouchers to disperse public housing residents.

HUD and the city housing agency presumed that simply moving people out of the projects was all that was necessary to end the criminal behavior of the residents. Baltimore was one of five cities chosen for a HUD demonstration project — Moving to Opportunity (MTO) — to show how Section 8 could solve the problems of the underclass.

But the relocations had “tripled the rate of arrests for property crimes” among boys who moved to new locales via Section 8. A study published last year in the Journal of the American Medical Association reported that boys in Section 8 households who moved to new neighborhoods were three times more likely to suffer post-traumatic stress disorder and behavioral problems than boys in the control group.

A 2009 research project on Section 8 published in Homicide Studies noted that in the one city studied, “Crime, specifically homicide, became displaced to where the low-income residents were relocated. Homicide was simply moved to a new location, not eliminated.”

Ed Rutkowski, head of a community development corporation in one marginal Baltimore neighborhood, labeled Section 8 “a catalyst in neighborhood deterioration and ghetto expansion” in 2003.

Regardless of its collateral damage, Section 8 defines Valhalla for many Baltimoreans. Receiving a Section 8 voucher can enable some recipients to live rent-free in perpetuity. Because recipients must pay up to a third of their income for rent under the program, collecting Section 8 sharply decreases work effort, according to numerous economic studies.

Last October, when the local housing agency briefly allowed people to register for the program, it was deluged with 73,509 applications. Most of the applications were from families — which means that a third of Baltimore’s 241,455 households sought housing welfare. (Almost 10% of Baltimoreans are already on the housing dole.) Section 8 is not an entitlement, so the city will select fewer than 10,000“winners” from the list.

HUD’s Federal Housing Administration also has a long history of destabilizing neighborhoods in Baltimore and other big cities. A HUD subsidized mortgage program for low-income borrowers launched in 1968 spurred so many defaults and devastation that Carl Levin, then Detroit City Council president and later a long-term U.S. senator, derided the program in 1976 as “Hurricane HUD.”

In the late 1990s, more than 20% of FHA mortgages in some Baltimore neighborhoods were in default — leading one activist to label Baltimore “the foreclosure capital of the world.” HUD Inspector General Susan Gaffney warned in 2000: “Vacant, boarded-up HUD-owned homes have a negative effect on neighborhoods, and the negative effect magnifies the longer the properties remain in HUD’s inventory.”

The feds continued massive negligent mortgage lending in Baltimore after that crisis, creating fresh havoc in recent years. In late 2013, more than 40% of homes in the low-income Carrollton Ridge neighborhood were underwater. Reckless subsidized lending in Baltimore and other low-income areas helped saddle Maryland with the highest foreclosure rate in the nation by the end of last year. One in every 435 housing units in Baltimore was in foreclosure last October, according to RealtyTrac.

President Obama said the Baltimore riots showed the need for new “massive investments in urban communities.” What Baltimore needs is an investment in new thinking. The highest property taxes in the state and oppressive local regulation often make investing in jobs and businesses in Baltimore unprofitable. Only fixing that will produce a stable community. Shoveling more federal money into the city is the triumph of hope over experience.

James Bovard

James Bovard is the author of Public Policy Hooligan. His work has appeared in USA Today, where this article was first published.

Rome: Money, Mischief, and Minted Crises by Marc Hyden & Lawrence W. Reed

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Ancient Rome wasn’t built in a day, the old adage goes. It wasn’t torn down in a day either, but a good measure of its long decline to oblivion was the government’s bad habit of chipping away at the value of its own currency.

In this essay we refer to “inflation,” but in its classical sense — an increase in the supply of money in excess of the demand for money. The modern-day subversion of the term to mean rising prices, which are one key effect of inflation but not the inflation itself, only confuses the matter and points away from the real culprit, the powers in charge of the money supply.

In Rome’s day, before the invention of the printing press, money was gold and silver coin. When Roman emperors needed revenue, they did more than just tax a lot; like most governments today, they also debased the money. Think of the major difference between Federal Reserve inflation and ancient Roman inflation this way: We print, they mint(ed). The long-term effects were the same—higher prices, erosion of savings and confidence, booms and busts, and more. Here’s the Roman story.

Augustus (reigned 27 BC – 14 AD), Rome’s first real emperor, worked to establish a standardized system of coinage for the empire, building off of the Roman Republic’s policies. The silver denarius became the “link coin” to which other baser and fractional coins could be exchanged and measured. Augustus set the weight of the denarius at 84 coins to the pound and around 98 percent silver. Coins, which had only been sporadically used to pay for state expenditures in the earlier Republic, became the currency for everyday citizens and accepted as payment for commerce and even taxation in the later Republic and into the imperial period.

Historian Max Shapiro, in his 1980 book, The Penniless Billionaires, pieces various sources together to conclude that “the volume of money he (Augustus) issued in the two decades between 27 BC and 6 AD was more than ten times the amount issued by his predecessors in the twenty years before.” The easy money stimulated a temporary boom, leading inevitably to price hikes and eventual retrenchment. Wheat and pork prices doubled, real estate rose at first by more than 150 percent. When money creation was slowed (late in Augustus’s reign and even more for a time under that of his successor, Tiberius), the house of cards came tumbling down. Prices stabilized but at the cost of recession and unemployment.

The integrity of the monetary system would remain intact until the reign of Emperor Nero (54-68 AD). He is better known for murdering his mother, preferring the arts to civic administration, and persecuting the Christians, but he was also the first to debase the standard set by Augustus. By 64 AD, he drained the Roman reserves because of the Great Fire of Rome and his profligate spending (including a gaudy palace). He reduced the weight of the denarius to 96 coins per pound and its silver content to 93 percent, which was the first debasement of this magnitude in over 250 years. This led to inflation and temporarily shook the confidence of the Roman citizenry.

Many successive emperors incrementally lowered the denarius’s silver content until the philosopher-emperor, Marcus Aurelius (reigned 161-180 AD), further debased the denarius to 79 percent silver to pay for constant wars and increased expenses. This was the most impure standard set for the denarius up to this point in Roman history, but the trend would continue. Aurelius’ son Commodus(reigned 177-192 AD), a gladiatorial wannabe, was likewise a spendthrift. He followed the footsteps of his forebears and reduced the denarius to 104 coins to the pound and only 74 percent silver.

Every debasement pushed prices higher and gradually chipped away at the public faith in the Roman monetary system. The degradation of the money and increased minting of coins provided short-term relief for the state until merchants, legionaries, and market forces realized what had happened. Under Emperor Septimius Severus’ administration (reigned 193-211 AD), more soldiers began demanding bonuses to be paid in gold or in commodities to circumvent the increasingly diminished denarius. Severus’ son, Caracalla (reigned 198-217 AD), while remembered for his bloody massacres, killing his brother, and being assassinated while relieving himself, advanced the policy of debasement until he lowered the denarius to nearly 50 percent silver to pay for the Roman war machine and his grand building projects.

Other emperors, including Pertinax and Macrinus, attempted to put Rome back on solid footing by increasing the silver content or by reforming the system, but often when one emperor improved the denarius, a competitor would outbid them for the army’s loyalty, destroying any progress and often replacing the emperor. Eventually, the sun set on the silver denarius as Rome’s youngest sole emperor, Gordian III (238-244 AD), essentially replaced it with its competitor, the antoninianus.

However, by the reign of the barbarian-born Emperor Claudius II (reigned 268-270 AD), remembered for his military prowess and punching a horse’s teeth out, the antoninianus was reduced to a lighter coin that was less than two percent silver. The aurelianianus eventually replaced the antoninianus, and the nummus replaced the aurelianianus. By 341 AD, Emperor Constans I (reigned 337-350 AD) diminished the nummus to only 0.4 percent silver and 196 coins per pound. The Roman monetary system had long crashed and price inflation had been spiraling out of control for generations.

Attempts were made to create new coins similar to the Neronian standard in smaller quantities and to devise a new monetary system, but the public confidence was shattered. Emperor Diocletian (reigned 284-305 AD) is widely known for conducting the largest Roman persecution of Christians, but he also reformed the military, government, and monetary system. He expanded and standardized a program, the annona militaris, which essentially bypassed the state currency. Many Romans were now taxed and legionaries paid in-kind (with commodities).

Increasingly, Romans bartered in the marketplace instead of exchanging state coins. Some communities even created a “ghost currency,” a nonexistent medium to accurately describe the cost and worth of a product because of runaway inflation and the volatility of worthless money. Diocletian approved a policy which led to the gold standard replacing the silver standard. This process progressed into the reign of Rome’s first Christian emperor, Constantine (reigned 306-337 AD), until Roman currency began to temporarily resemble stability.

But Diocletian did something else, and it yielded widespread ruin from which the Empire never fully recovered. In the year 301 AD, to combat the soaring hyperinflation in prices, he issued his famous “Edict of 301,” which imposed comprehensive wage and price controls under penalty of death. The system of production, already assaulted by confiscatory taxes and harsh regulations as well as the derangement of the currency, collapsed. When a successor abandoned the controls a decade or so later, the Roman economy was in tatters.

The two largest expenditures in the Roman Empire were the army, which peaked at between 300,000-600,000 soldiers, and subsidized grain for around 1/3 of the city of Rome. The empire’s costs gradually increased over time as did the need for bribing political enemies, granting donatives to appease the army, purchasing allies through tributes, and the extravagance of Roman emperors. Revenues declined in part because many mines were exhausted, wars brought less booty into the empire, and farming decreased due to barbarian incursions, wars, and increased taxation. To meet these demands Roman leaders repeatedly debased the silver coins, increasingly minted more money, and raised taxes at the same time.

In a period of about 370 years, the denarius and its successors were debased incrementally from 98 percent to less than one percent silver. The massive spending of the welfare/warfare state exacted a terrible toll in the name of either “helping” Romans or making war on non-Romans. Financial and military crises mixed with poor leadership, expediency, and a clear misunderstanding of economic principles led to the destruction Rome’s monetary system.

Honest and transparent policies could have saved the Romans from centuries of economic hardships. The question future historians will answer when they look back on our period is, “What did the Americans learn from the Roman experience?”

(For more on lessons from ancient Rome, visit www.fee.org/rome).

Marc Hyden is a political activist and an amateur Roman historian. Lawrence W. Reed is President of the Foundation for Economic Education.

Marc Hyden

Marc Hyden is a conservative political activist and an amateur Roman historian.

Lawrence W. Reed

Lawrence W. (“Larry”) Reed became president of FEE in 2008 after serving as chairman of its board of trustees in the 1990s and both writing and speaking for FEE since the late 1970s.

Did the IRS Break the Law by Outsourcing an Audit to a High-Priced Law Firm?

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By outsourcing an audit to a high-priced law firm, the IRS might have broken the law, and the Senate Finance Committee Chairman wants to know why.

Sen. Orrin Hatch (R-Utah) wrote a scathing letter to IRS Commissioner John Koskinen asking why his agency hired the “law firm of Quinn Emanuel on a $2.2 million contract” to assist in auditing Microsoft. “This contract marks the first time, to the Committee’s knowledge, that the agency has hired a private contractor to take such an involved role in an examination.”

Hatch is also asking why the IRS “issued a temporary regulation, without a notice and comment period” allowing the firm to “take compulsory, sworn testimony” weeks after it hired the firm.

Sen. Hatch has three problems with what the IRS has done.

Action Defies Will of Congress

First by hiring the firm, Sen. Hatch believes the IRS has stepped outside the law. In writing the tax code, “the Congress intentionally chose to restrict the performance of certain revenue functions, such as examinations and the taking of sworn testimony, to the Secretary and limited delegates,” Sen. Hatch writes. This doesn’t include hiring a law firm for $1,000 per hour.

Doesn’t Protect Taxpayers

Second, letting an outside law firm investigate a tax case doesn’t protect taxpayers:

Unlike private contractors, Treasury Department officials are required to swear an oath to the Constitution and are subject to rules of conduct and federal law regulating their interactions with taxpayers. This is one of the core reasons Congress has sought to limit certain examination actions to these officials, who are accountable to the public and for whom there is a clear chain of command.

The IRS Has the Resources to Investigate

Third, Sen. Hatch questions if the IRS is using its resources properly:

The IRS has over 40,000 employees dedicated to enforcement efforts, including more than 36,000 tasked specifically with exams and collections. If none of these employees, nor IRS Office of Chief Counsel or Department of Justice tax attorneys, have sufficient expertise to undertake the examination at hand, we should have a broader conversation about your agency’s hiring practices and recruitment needs.

What Kind of Law Firm is Quinn Emanuel?

On the “About Us” page of its website, Quinn Emanuel crows, “Litigation is a zero sum game. There is a winner and a loser. We know how to win.” The page also features a quote about the firm from The American Lawyer: “Better. Faster. Tougher. Scarier.”

Sleep well, America, the IRS gave some pit bull plaintiff lawyers the power to “take compulsory, sworn testimony.”

In Fiscal Year 2014, Congress gave the IRS over $11 billion. If it thinks one particular investigation is that important, it should dedicate enough internal resources. What the IRS can’t do is act like it’s above the law.

Sen. Hatch is demanding that Quinn Emanuel stop its investigation and that the IRS answer his questions immediately.

EDITORS NOTE: The featured image of the Internal Revenue Service headquarters in Washington, D.C. Photo credit: Dennis Brack/Bloomberg.

Hawaii’s $205 Million Obamacare Exchange Implodes

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by Alexander Hendrie, Americans for Tax Reform.

Despite over $205 million in federal taxpayer funding, Hawaii’s Obamacare exchange website will soon shut down.  Since its implementation, the exchange has somehow failed to become financially viable because of lower than expected Obamacare enrollment figures. With the state legislature rejecting a $28 million bailout, the website will now be unable to operate past this year.

According to the Honolulu Star-Advertiser the Hawaii Health Connector will stop taking new enrollees on Friday and plans to begin migrating to the federally run Healthcare.gov. Outreach services will end by May 31, all technology will be transferred to the state by September 30, and its workforce will be eliminated by February 28.

While the exchange has struggled since its creation, it is not for lack of funding. Since 2011 Hawaii has received a total of $205,342,270 in federal grant money from the Department of Health and Human Services (HHS). In total, HHS provided nearly $4.5 billion to Hawaii and other state exchanges, with little federal oversight and virtually no strings attached.

Despite this generous funding, the exchange has under performed from day one. In its first year, Hawaii enrolled only 8,592 individuals – meaning it spent almost $23,899 on its website for each individual enrolled. Currently over 37,000 individuals are enrolled in Hawaii’s exchange – well below the estimated 70,000 enrollees that is required to make the website financially viable. Unfortunately, taxpayers will have to hand out an additional $30 million so that Hawaii can migrate to the federal system.

This is not the first time that a state exchange has failed, and taken millions of dollars in federal funds down with it. Earlier this year, Oregon’s state exchange was officially abolished at an estimated cost of $41 million. Cover Oregon, as it used to be known received $305 million in funds from HHS but failed to produce a workable website months after the 2013 November deadline. The debacle has promoted numerous federal agencies and organizations to investigate allegations of inappropriate political interference from then Governor Kitzhaber’s 2014 reelection campaign.

Hawaii now joins Oregon, Massachusetts, Maryland, Vermont, New Mexico, and Nevada as cautionary tales in government central planning. With so many failed state exchanges, questions need to be asked about the haphazard allocation of billions of dollars in taxpayer funds and the complete lack of oversight.

EDITORS NOTE: The featured image is courtesy of Shutterstock.

What Do the Tesla and the Model-T Have in Common? by George C. Leef

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Henry Ford did a lot for the automobile in America. What everyone knows is that he figured out how to improve manufacturing efficiency so much that the auto was transformed from a toy for the rich into an item that ordinary people could afford.

(Nothing really extraordinary in that, by the way. As Ludwig von Mises wrote in The Anti-Capitalist Mentality, “Under capitalism the common man enjoys amenities which in ages gone by were unknown and therefore inaccessible even to the richest people.”)

But very few people know that Ford had to fight against a cartel to be allowed to sell his vehicles. In this 2001 article published in The Freeman, “How Henry Ford Zapped a Licensing Monopoly,” Melvin Barger goes into the fascinating history of Ford’s legal battle against the Association of Licensed Automobile Manufacturers (ALAM).

In 1895, an inventor named George Selden had received a patent for a gasoline powered automobile. That patent was later acquired by ALAM, which then said to everyone who wanted to sell a gasoline powered car, “You must pay us royalties for the privilege of selling such vehicles and if you sell without our license, we’ll take you to court for patent infringement.”

Ford had developed his auto without any knowledge of Selden’s patent and saw no reason why he shouldn’t be free to make and sell cars without paying ALAM for the right to do so.

So Ford thumbed his nose at ALAM and sold his cars without paying royalties. ALAM naturally sued him in an effort to keep its cartel going. The legal battles lasted from 1903 to 1911, when a federal appeals court ruled that the Selden patent only applied to vehicles made to its exact specifications. (That had actually been tried, with dismal results.) Ford therefore did not owe ALAM anything. He was free to continue putting his capital into making cars the public wanted without diverting even a dollar to appeasing a group of rent-seekers.

Turn the clock ahead a century, and we find that an innovative car company faces similar obstacles.

Substitute Elon Musk for Henry Ford and Tesla for Model-T and state dealer regulation for an extortionate patent scheme, but the stories are largely the same. ALAM didn’t want competition that might break up its cartel and neither does the established auto dealer system want innovative marketing upsetting its business.

In their January 2015 Mercatus Center paper “State Franchise Law Carjacks Auto Buyers,” Jerry Ellig and Jesse Martinez discuss the way established dealers have used their lobbying clout to stifle competition.

This post first appeared on Forbes.com.

George C. Leef

George Leef is the former book review editor of The Freeman. He is director of research at the John W. Pope Center for Higher Education Policy.

The Welfare State Needs Abolition, Not “Reform” by DOUG BANDOW

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The United States is effectively bankrupt. Economist Laurence Kotlikoff figures the government faces unfunded liabilities in excess of $200 trillion. Making the programs run more efficiently would be helpful. But only transforming or eliminating such programs will save the republic.

The left likes to paint conservatives as radical destroyers of the welfare state. If only.

Instead, some on the right have made peace with expansive government. Particularly notable is the movement of “reform conservatism.” The so-called “reformicons,” notes Reason’s Shikha Dalmia, “have ended up with a mix of old and new liberal ideas that thoroughly scale back the right’s long-running commitment to free markets and limited government.”

The point is not that attempts to improve the functioning of bloated, inefficient programs are bad. But they are inadequate.

Yes, government costs too much. Government also does too much. And that cannot be remedied by lowering administrative costs, eliminating waste, improving delivery, or even reducing perverse incentives.

The worst “reform conservatism” idea is to manipulate the state to support a particular “conservative” vision. Dalmia points out that many reformicons want to use the welfare state to strengthen institutions which they favor.

For instance, “just as George W. Bush’s compassionate conservatism proffered a series of special tax incentives to prop up religious institutions, reformicons want targeted tax breaks to strengthen middle-class families. Some want to restrict immigration and trade, just like unions of yore.”

Utah Sen. Mike Lee, for instance, criticizes conservatives who “have abandoned words like ‘together,’ ‘compassion,’ and ‘community’.” Although he warned against overreliance on the state, he still wants to use it for his own ends, proposing greater flexibility in allowing workers to choose between comp time and overtime — by imposing such a provision on private collective bargaining agreements.

Reformicon intellectuals and politicians argue for an expanded Earned Income Tax Credit for singles and increased deductions for dependents and tax credits for parents who stay at home. Some want more taxes on the wealthy, new employee-oriented public transportation, a preference for borrowing over deficit reduction, subsidies for hiring the unemployed, and punishment for colleges whose students welsh on their educational loans.

Senators Lee and Marco Rubio and Lee have introduced the “Economic Growth and Family Fairness Tax Reform Plan.” It offers some corporate and individual tax reductions but raises the rates on most everyone by lowering tax thresholds. The bill also increases the child credit, even for the well-to-do.

Alas, this differs little from liberal social engineering.

As Dalmia puts it:  “Broad-based, neutral tax cuts to stimulate growth are out, markets are optional tools, the welfare state is cool, redistributive social engineering is the way forward, and class warfare is in.”

Reformicons don’t so much disagree as argue that they can do better than liberals. For instance, Yuval Levin of National Affairs contended that his movement relies on “experimentation and evaluation [and] will keep those programs that work and dump those that fail.”

What motivates this approach? After Barack Obama’s victory, Levin explained, he and other conservative thinkers “were trying to figure out what the hell this new world looked like.” They hoped to apply “the Judeo-Christian moral tradition to critical issues of public policy.”

Of course, the Judeo-Christian moral tradition didn’t arise with a focus on public policy. Jesus spoke at length on the relationship of men to God and each other, but largely avoided politics. He never advocated coercively applying his teachings — that the federal government should force men to love God and their neighbors, as long as the enforcement was efficient, for instance.

But politics drives reform conservatism. Bloomberg’s Ramesh Ponnuru contended that it’s a matter of necessity: “Times change and people need to change if they are going to remain relevant.”

Henry Olsen of the Ethics and Public Policy Center made a fulsome pitch for conservatives to embrace social benefits for “their” voters. After all, “Many of those working-class voters are located precisely in the two places a Republican presidential candidate needs to carry to win the White House.”

He concluded:  “American conservativism at its best embraces Reagan’s thought, combining a love of liberty with an overriding love of all people. In the present crisis, antigovernment fundamentalism threatens to place the two at odds with one another, to fatal effect for conservatism and for the country.”

Expressing interest in reformicon ideas are GOP presidential contenders Rubio, Jeb Bush, and former Texas Gov. Rick Perry. Indiana’s Mike Pence, another possible GOP candidate, recently expanded Medicaid, in a reform-oriented fashion.

Ohio’s Gov. John Kasich (yet another potential contender), grew Medicaid without reform — claiming God’s direction. However, there’s no evidence so far that technocratic “reform conservatism” is more politically attractive than simple conservatism.

Of course, no one should want policies that don’t work. But that doesn’t address the most important question: is the end itself justified? Efficient income redistribution doesn’t make the process morally right, only less wasteful on its way to being wrong.

And such measures can create new problems. For instance, author Amity Shlaes and Matthew Denhart of the Calvin Coolidge Presidential Foundation warn that the Rubio-Lee plan would generate resentment by pitting individuals against families.

It also would sacrifice opportunities to spur economic growth by emphasizing group privileges over rate reductions for all. The two worry: “If the self-styled party of enterprise does not emphasize the individual, no one will.”

Big issues are at stake. The current economic system isn’t working for all. Rubio asked the right question: “How can we get to the point where we’re creating more middle-income and higher-income jobs, and how do we help people acquire the skills they need?”

Social engineering, even conservative social engineering, is not the answer.

The starting point for job creation remains what it always has been, making it easier and less costly to create businesses and jobs. Children need alternatives to the public school monopoly. Yes, the family is under pressure, but the best Washington can do is to do no harm.

For most issues the principal answer will come outside of politics, as Lee recognized: “Collective action doesn’t only — or even usually — mean government action.”

Some reformicon ideas might make some conservatives appear more presentable to the public, but this approach will win few converts from committed statists. But reform conservatism fails to provide a coherent answer to the most important problems facing America.

Government is not just inefficient: it is doing the wrong things.

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.

Savages with Cell Phones, and Women Making Waves

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Once again, the extraordinary Daniel Greenfield nails it fabulously with his insightful article, “Savages with Cell Phones“, deconstructing the Baltimore riots.

I highlight some of Daniel’s (Sultan Knish) indicting words reaching from the top of society to the bottom, showing that both groups are aliens to the REAL America we all love and defend.

Second up Arie Egozi providing some insight to the percolating tensions on all the borders of Israel. Yes, war is inevitable. Next up is a breath of fresh air with two lovely ladies discussing a relatively new no-profit organization, “Women Making Waves” dedicated to helping young women during their academic formative years of life.

Finally, Brother Ganoe stops by from Tel Aviv to say hello and show some of this amazing experiences in the Land he loves, Israel.

Should Taxes Fund Philosophy? The cost of subsidizing state philosophy departments is hard to justify JASON BRENNAN

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In the past few days, philosophy bloggers have been writing with concern about how more philosophy departments around the country are closing, and how various Republican state legislators are trying to pass bills that cut many philosophy faculty. Most of the bloggers I’ve read seem to assume, unreflectively, that such cuts are a bad thing.

To my surprise, philosophers rarely seem to reflect on the opportunity cost of funding philosophy departments.

Let’s say East Podunk State spends $2 million a year funding a small philosophy program, which graduates 10 majors per year. Suppose (contrary to fact) that this was funded entirely through taxes on corporate profits, with free tuition, room, and board for all philosophy majors.

Is this a good deal? To know, we’d need to do some cost-benefit analysis. The problem here is $2 million spent on philosophy is not $2 million spent on all the other things worth spending money on.

Daily Nous recently had a thread on this, and I made a similar point:

I’m not convinced studying philosophy teaches people how to think. Educational psychologists have been studying “transfer of learning,” and there’s now a lot of evidence that the assumptions upon which liberal arts education is based are false. Most students don’t apply what they learn in class outside of class. We don’t actually succeed in teaching student soft-skills. They don’t use the tools we give them for anything outside of writing essays. Etc.

Richard’s answer, that philosophy has intrinsic value, is more plausible. But then this still leaves open cost-benefit analysis questions: There are lots of intrinsically valuable things out there worth doing. Why spend tax money on this thing (philosophy) rather than on some other intrinsically valuable thing (e.g., public death metal concerts open to all)?

Further, even some things are intrinsically valuable (such as philosophy and death metal concerts), we have to ask why these things should be funded through taxes rather than left to individual choice. You don’t have to be a libertarian to think that not everything worth having or doing is permissibly done/best done by government.

I love philosophy, and I believe most people would benefit greatly from understanding it and applying it outside of its domain. But that doesn’t mean that it’s worth funding many or most philosophy departments in public universities.

After all, the evidence about transfer of learning seems to show that students usually don’t get the value out of it that we hope they would. And even if you’re a resolute statist, you’ve got to ask why it’s worth spending hundreds of millions on philosophy in public universities, when that money could have gone to funding children’s hospitals, repairing infrastructure, or Opeth in the Park.

Jason Brennan is Assistant Professor of Strategy, Economics, Ethics, and Public Policy at Georgetown University where he teaches ethics, political economy, moral psychology, entrepreneurship, and public policy. As well as writing many books, Brennan also blogs at Bleeding Heart Libertarians, where this post first appeared.

Jason Brennan
Jason Brennan is Assistant Professor of Strategy, Economics, Ethics, and Public Policy at Georgetown University. He blogs regularly at Bleeding Heart Libertarians.

Tax “Refunds”: Your Interest-Free Loan to the Government

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What that check really means by DANIEL BIER.

It’s April, which means that most people will soon be getting checks from the government for overpaying on their taxes. It feels good to get a big chunk of money — especially since it was yours to begin with — but that tax “refund” cost you more than you realize.

Getting a refund means that, throughout the year, the IRS took more of your income than the law allows, and after you file your tax return, they have to give it back. But losing that money for months and months cost you something — goods and services you were not able to buy (and hence benefit from), investments you didn’t make, debt you didn’t pay down, savings you did not accumulate, etc.

A tax refund is, in essence, an interest-free loan from you to the government. Over at FiveThirtyEight, Ben Casselman and Reuben Fischer-Baum show you just how much that loan cost you.

More than three in four taxpayers get refunds, and the average amount they get back is close to $3,000, according to IRS data. That means that for many Americans, their annual refund is the biggest single check they’ll get all year.

What could you have done with that $3,000? Interest rates are very low for savings accounts right now, so that wouldn’t get you much, but if you had invested it in stocks (say, an index fund for the S&P 500), it would have earned you an extra $239.

The stock market can be risky, but the great thing about money is that you can do lots of things with it. Casselman and Fischer-Baum calculate:

Nearly 40 percent of American households carry a credit card balance, and those loans carry high interest rates. . . If instead of getting a $3,000 refund come April, you’d been able to pay off $250 in credit card debt each month (or put $250 a month less on your card), you would have avoided more than $300 in interest expenses by Tax Day.

And then there’s the cost of just not being able to buy things you need when you need them: a car, appliances, or whatever else you had to delay purchasing because the government “borrowed” your income. You missed out on the benefits those goods would have provided. Even if you have zero net tax liability at the end of the year and get all your money back, you’ll still be paying this cost.

People aren’t necessarily being stupid about their taxes, though. The tax code is so intricate and so complex that it can be impossible to predict what you’ll owe, and if you underpay, God help you, the IRS will charge you interest, as well as possible fines and fees.

The tax withholding system is designed to encourage taxpayers to overpay. It’s a sneaky, invisible tax levied on those without the financial savvy or expert advice to avoid it. And, as Don Boudreaux has pointed out in the past, it is a costly and regressive system that disproportionately hurts people who get income from wages versus those (mostly rich people) who get income from non-wage sources, like capital gains.

It’s nice to get your money back — but don’t forget, “refunds” aren’t free money.

Check out FiveThirtyEight’s calculator to see how much your interest-free loan to Uncle Sam cost you this year.

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

Withholdings Mask the Pain of Income Taxes

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As small business owners, my wife and I do not have income taxes withheld from the money we earn. As many small business owners do, we have to periodically write checks to the state and federal governments for taxes owed. I mailed these tax payments this past week and, while writing out the checks and observing the amounts, I couldn’t believe how much money I had to pay to finance this out-of-control government. I cannot be the only one writing these substantial checks who feels this way. I would feel better about writing these checks if I was reasonably confident that my tax money was being spent judiciously but I know otherwise, and so do many of you.

Here’s the hard truth; many of you worked about half of last calendar year to pay for a government that couldn’t give a hoot about efficiency or balanced budgets. As I sealed those envelopes – tax checks included – I began to wonder how long this can possibly continue. Now, to be clear, I am not making the case that tax payments to the government are categorically a net societal negative. American citizens should fund a constitutionally-limited, efficient, and citizen-centric government which provides quality services clearly defined by our Constitution, and I am not aware of any credible Republican, conservative, or libertarian candidate running on a platform of “no taxes, for anyone, at anytime.”

Our military, our court system and, at the state and local level, our police, fire and education infrastructures are all funded by the hard-earned tax dollars of American citizens. But, I am making the case that the exploding budgets of many local and state governments, along with our federal government, have diminished the credibility of these elected officials in the eyes of the millions of American citizens who are busting their hides to continue to pay for this free-for-all largesse.
Is this what government calls "fair share"?Further diminishing the credibility of the Washington D.C. “tax and spend” crowd, and their sophisticated “fair-share” messaging operation, is a recent Tax Policy Center report showing that the top 20% of income-earners (those making $134,300 per year and above) are already paying an astonishing 84% of ALL income taxes collected by the federal government.

Digest that statistic for a moment; just two out of ten Americans are paying nearly 85 cents of every dollar paid in income taxes to the federal government. If this isn’t a “fair share” of the hard-earned dollars of Americans then the liberal “tax and spend” crowd owes us a detailed explanation of what percentage constitutes their mythical “fair share.”

Having debated this issue many times, both while running for office and hosting shows on talk-radio, I can assure you that these people will never give you either a “fair share” amount or a reason why that specific amount is backed up by data because neither exists. The “fair share” amount doesn’t exist because the tax and spend crowd doesn’t want to give you a hard number that would limit them in the future from surpassing that number. Their attitude is that if they can take 50% of your income, why not take 51% or 52%? In addition, there are volumes of data showing that lowering marginal tax rates on productive American citizens to reasonable levels actually INCREASES the tax revenue generated from the wealthiest Americans. Sadly, the tax and spend crowd never lets facts get in the way of a good soundbite.

As the April 15th tax deadline approaches, I hope that those voters equivocating over which candidate they want to embrace in the 2016 election presidential cycle take a good look at their paychecks. Income tax withholding has softened us. Many of us no longer have to go through the motions of actually picking up a pen and writing out a check to the government to pay our individual tax bills. We all owe it to ourselves to look at the amounts we are paying and to ask ourselves why we aren’t demanding better. If you had to write those checks to a private company in exchange for an expectation of services provided, and they insisted on maintaining a status quo of inefficiency and unaccountability, you would take your money elsewhere. I love this country, as do you, and I’m not going “elsewhere,” but perhaps it’s time the D.C. insider crowd that sees your money as their personal slush fund does.

We are being fleeced and I’m tired of it. Something’s gotta give.

RELATED ARTICLES:

Obamacare’s $800 Billion Tax Hike Explained in One Chart

The IRS Loses a Big Procedural Battle in Its War With the Tea Party

Why Are So Many Employers Unable to Fill Jobs?

EDITORS NOTE: This column originally appeared in the Conservative Review.

Worst in Nation Hawaii Health Connector Looking for Another $28M by Andrew Walden

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Good money after bad?

Ranked last year as “worst in the nation,” with sign-up costs estimated at $56,819 per enrollee, the Hawaii Health Connector is begging Legislators for another $28 million.  The sales pitch?  A financial plan which openly states the Connector will lose money for another eight years.

The Connector is set up as a State-mandated non-profit organization with insurance company representatives on the Board of Directors.  The unique setup allows the Connector to evade Hawaii’s public records laws, but Hawaii’s lone Republican Senator Sam Slom argues the “$28 million in ‘debentures’ … are in reality General Obligation bonds.  Their issue by a private non-profit is unconstitutional….” On March 25 the House Consumer Protection and Health Committees agreed, yanking the funding mechanism from the bill and leaving the details for the House Finance Committee to work out in a hearing now set for Wednesday April 8 at 2pm in room 308. UPDATE: FIN passed SB1028 un-amended–it is headed for a referral to Conference Committee.

At the February 15 deadline, the Health Connector touted 13,356 sign-ups in the three-month enrollment period–but as many as 7,700 are Micronesian immigrants forced off Medicaid and into plans provided by the Health Exchange.  Estimated to save the State $20 million per year, the move alarms Dr. David Derauf of the Kokua Kalihi Valley clinic.  In a February 26 column in the Honolulu Star-Advertiser, Derauf points out:

“As a result of these changes, many will suffer serious consequences to their health. Some will die.

“For this particular group of lawfully present immigrants, the state under Medicaid currently pays 100 percent of the costs of the program, which ensures that low-income people have access to medically necessary care at no cost.

“By transferring them to a Connector plan, much of the state’s cost will shift to the federal government, which provides significant insurance subsidies for people near the poverty line.

“However, even with those subsidies, an individual will still have to pay up to $2,250 in copays and co-insurance in a single year — an impossible amount for someone working 40 hours a week at minimum wage and earning only $1,343 a month. At these income levels, seemingly insignificant copays can prevent people from getting the medications and treatment they need.”

Kelii Akina, President of the Grassroot Institute explains: “Before the Affordable Care Act, Hawaii had a workable public-private partnership that ensured 93% healthcare coverage for the population.  It was a model that other states were studying and planning to implement in some form without a federal mandate.  Now consumers as well as the state government are facing skyrocketing costs.”

Other populations are being suggested as forcible Obamacare converts.  A bill offering benefits to “innocent” ex-convicts includes lifetime health care “…provided that the claimant enrolls in the Hawaii health insurance exchange….”  With labor negotiations ongoing,Governor David Ige is suggesting putting the State’s 40,000 employees into the Connector.

While reaping the benefits of Micronesian misfortune, Connector officials talk up the State’s60,000 new Medicaid enrollees–signed up not by the Connector but by the State Department of Human Services.  While the Connector managed to waste $205 million on its failed enrollment software, the State DHS blew another $144 million on balky Medicaid signup systems leading to the February ouster of the State’s Medicaid Director.  Both efforts ended up relying on human enrollment workers to complete applications.

Says Slom: “I serve on the Connector Oversight Committee. When I seek fiscal answers I get double talk. The enrollment figures are bogus. The business plan is flawed. The Connector depends on endless subsidies and has lost millions of taxpayer dollars in questionable contracts. The Connector must be dis-connected now.”

VIDEO: IRS Commissioner Admits the Tax Code Cannot Be Understood

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“The best thing [Congress] could do would be simplify the tax code,” Koskinen told the National Press Club on March 31. “I don’t know how anybody understands all the ramifications of it.”

The IRS Commissioner also quipped that, “the IRS code is longer than the Bible, with none of the good news.” Read more.

Time to Abolish the ‘Karl Marx inspired’ Florida Regional Planning Councils

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All Florida counties must be a member of a United Nations endorsed Regional Planning Councils (RPC) and they (we) are required to pay dues that come out of YOUR (OUR) TAXES

WHY ?

Capture-eflorida-FL-Regions-3_thumb[3]

Florida’s eight regions. For a larger view click on the image.

Regional Planning Councils are unconstitutional bodies of unelected people who disseminate (re-distribute) your wealth in the form of federal grants to the counties (and some cities). These federal grants are NOT “free” it is your tax money.

“Karl Marx created sustainability” measures onto the citizens at the expense of your property rights. The goal of the Communist Party is to get control of your private property. This mission started when they created the unconstitutional property taxes. Level 2 is the RPC’s.

The Communist march to enslave you is patient and as time passes these councils lead to the loss of representative government and tyranny

In January 2012 the Republican National Committee (RNC) unanimously passed a resolution against U.N. Agenda 21, and it was included in the 2012 Republican Party Platform. Why are RPC’s still operating in Florida and other states controlled by Republicans? Is the RNC full of lip service and not able to back up with action what they spew from their mouths?

Why are Florida counties forced into these unconstitutional United Nations originated RPC’s ?

You must start someplace and that someplace is the grass roots. Now!

If you want to be re elected Mr. Florida Politician, especially those in Florida’s conservative counties. I suggest you start planning for this contingency. We are done with this infringement and infiltration of United Nations ideology into our free state and Constitutional Republic.

Remember this. Sustainable development is really just a disguised form of Marxism, with its top-down control of economic decisions, violation of private property rights, and emphasis on Social Justice — a term, incidentally, coined by none other than Karl Marx.

The theory of Communism may be summed up in one sentence: Abolish all private property rights.

Oil Boom and Government Glut

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The government buys 5 million barrels of oil for its stockpile by JEFFREY A. TUCKER.

It’s a sweet thing when Uncle Sam becomes a mega-buyer of your product.

While the price of oil continues to plunge to record lows, drivers are celebrating, and oil executives are sweating it out. But never fear, the government is running to the rescue — of the oil industry. The Department of Energy is planning to enter the market with a purchase of 5 million barrels. It’s necessary for national security, don’t you know.

Oil prices have fallen 55 percent in the last year. The trend defied every expectation, and it’s been wonderful for drivers, businesses, and consumers. It’s an impressive illustration of how prices reveal information about underlying resource realities.

Technology has blasted away the last decade’s wild and misguided fears of a shortage. Production is at an all-time high in response to unprecedented demand. The stunning events have been a boon to consumers, as downward pressure keeps pushing on prices at the pump.

The market is giving us oil as never before. It is not failing. It is succeeding beyond belief.

“Experts” keep saying the trend is temporary, but no one knows for sure. We could see $20 per barrel before year’s end.

The new purchase is for the Strategic Petroleum Reserve, a hoary leftover from Gerald Ford’s presidency. It pays oil companies for their products, as the DoE says, “to protect the United States from severe petroleum supply interruptions through the acquisition, storage, distribution and management of emergency petroleum.”

But far from seeing “disruption,” we are seeing more and better distribution. You can tell from its language that this is the most thrown-back program imaginable. It illustrates a complete lack of understanding of the price system, which is the signaling mechanism that reveals shortages and surpluses in the market. Prices coordinate the interests of buyers and sellers with facts about underlying scarcity. Rising prices signal facts about supply and demand, incentivizing less consumption and more production. Falling prices encourage consumers to buy more and producers to make less.

The price system actually works, unlike these lame attempts at central planning. The proposed purchase by the government constitutes only half a day’s worth of production in the United States — as if an intervention so small would make the difference between prosperity and disaster.

If it is really necessary to have a “strategic reserve” for oil, wouldn’t we also have to have the same for carrots, beef, iPads, tennis shoes, wine, or raisins? Actually, we have one of those too: a National Raisin Reserve, an equally bizarre anachronism from the Great Depression that requires raisin farmers to give as much as half their crop to the government in order to keep raisin prices high.

The full Strategic Petroleum Reserve covers less than two months of US production, which is itself only 10 percent of world production. Why not make it six months? Why not a year? And what’s a half-day, more or less? There is no rational way to decide.

Let’s imagine there really were some weird catastrophe that caused all distribution to stop. Prices would surge through the roof and inspire a gigantic increase in oil production from all over the world.

But let’s also pretend, because of some foreign policy issue, that the United States also stopped all imports, and then tapped the “Reserve.” It’s not the consuming public that would benefit. It would be the government itself, making sure that the military and all the “essential” government agencies stayed running.

In other words, this program is not about you and me, even in theory. To understand why the Reserve exists, look who benefits most directly: the oil industry itself. It’s a guaranteed market, a kind of subsidy to big business, just as food stamps are for agriculture. Perhaps this is why this proposal is being made again right now, just as prices are falling so dramatically. It’s just thinly veiled corporate welfare.

The Reserve-subsidy came about during a period when oil prices were controlled by the government, and the oil industry was facing very serious financial pressure. The Reserve helped to alleviate that pressure — a classic case of how one intervention leads to others, until all special interests are satisfied with the new equilibrium. The SPR was a fix for a “market failure” created by government-failure.

Oil prices haven’t been controlled since the late 1970s, completely removing any objective conditions for why this needs to exist at all. The only time we ever had gas lines was when we had a “czar” telling people how much they could buy and what they were allowed pay for gas, and the lines disappeared when the controls were removed.

What harm does the Strategic Petroleum Reserve do? Most of the time, it’s simply an unconscionable waste of taxpayer money. When its supplies are actually deployed, dumping oil on the market from a government-mandated reserve, it puts downward pressure on the price and reduces the incentive to step up production right when it is needed most.

The Reserve is a perfect illustration of the dangers of any government program: once one starts, it is extremely difficult to get rid of it, no matter how irrelevant the original rationale has become. Here we are 40 years later, with astounding increases in supply and the technology for refinement and distribution, but we are still paying for this economically illiterate central plan for stockpiling oil.

It needs to be completely abolished, just as Ronald Reagan suggested in 1980 (before he later changed his mind to favor its expansion). The SPR is just like the Post Office in this sense: it exists solely due to that magic combination of economic ignorance and special-interest pleading.

ABOUT JEFFREY A. TUCKER

Jeffrey Tucker is a distinguished fellow 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.

EDITORS NOTE: The featured image is courtesy of FEE and Shutterstock.

Profits Are the Only Business of Business by D.W. MACKENZIE

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Forty-three years ago today Milton Friedman published his article “The Social Responsibility of Business Is to Increase its Profits.” It is to Friedman’s credit that most of this short article rings as true today as it did on September 13, 1970. It is at the same time disappointing that this piece remains timely precisely because too few Americans have understood and accepted Friedman’s arguments against corporate executives promoting social welfare over private profit.

How do the specifics of Friedman’s article look today? Does an executive who spends profits to promote “social ends,” to fund education, or to “fix the environment” impose what amounts to a tax? Yes, Friedman is correct.

Is the imposition of such a de-facto tax undemocratic? Perhaps it is. Friedman admits that the shareholders could fire a CEO for imposing a de-facto “social responsibility tax”- so the shareholders can vote against their CEO. Legally, the CEO is an agent of the stockholder, their employee. However, proposals to spend part of corporate profits on socially responsible ends aim at overriding the interests of shareholders; it undermines the democratic element of corporations.

Do arguments for redirecting corporate policies toward social responsibility erode personal liberty, aim at conformity, and promote socialism and collectivism? Yes. Stockholders invest in a corporation for profit, for personal gain. If the CEO starts aiming at social ends at the expense of private shareholder interests, then the corporations is effectively being run as if it were owned by society. This is, in effect, socialism. As Friedman put it, the social justice doctrine “would extend the scope of the political mechanism to every human activity.” The idea of aiming at social responsibility actually means directing corporate funds toward one person’s particular opinion about the interests of “society.” Social welfare and social justice are, at very best, vague concepts. As Ludwig von Mises put it in his 1949 treatise, “under socialism one will dominates.”

Friedman also claims that taxation by the state is the legitimate mechanism for collecting funds to promote socially responsible ends. We have constitutional, legislative, and judicial mechanisms to collect and spend legal tax dollars. Is this claim true? Are legal tax mechanisms better at promoting social responsibility than the illicit use of corporate funds for these purposes? Friedman notes, quite correctly, that people who push for socially responsible corporate policies are those who have failed to convince their fellow citizens to support their personal version of social responsibility. Having failed in an attempt to use the political mechanism, they resort to trying to politicize the market mechanism. Friedman is right, but this brings us back to my assessment of Friedman’s article: Friedman has himself failed to convince his fellow citizens that his view of profit is correct.

I agree that democracy can only work if public discourse works. The best ideas will rise to the top of an open and free debate among rational, reasonable people. I agree that people who press for corporate social responsibility are usually collectivists who press for conformity and disdain opposite points of view. However, the fact that political debate involves a high degree of intransigence and emotion means that the democratic process does not function very well.

Consequently, I must disagree with Friedman’s assertion that the public sector can work effectively to promote social responsibility. The fact that so many people continue to press for social responsibility and economic justice against Friedman’s advice shows that his support of government taxation for social responsibility is unfounded. Friedman is correct in noting that the great merit of private enterprise is that it makes people responsible for all their actions, either selfish or unselfish. However, lack of personal responsibility in the public sector does not promote responsibility in thinking about how to best use tax dollars in a socially responsible manner.

The main elements of Friedman’s article are correct. The sum of these elements is highly questionable when it comes to his confidence in political mechanisms. Profits are the only business of business. Social responsibility should be the business of government, but it is time to recognize that the modern tax and regulatory state has failed in this endeavor.

ABOUT D.W. MACKENZIE

D. W. MacKenzie is an assistant professor of economics at Carroll College in Helena, Montana.