“Outsourcing” Makes Us Richer by Robert P. Murphy

This short video, put out by the Million Jobs Project, currently has more than 3.7 million views. It claims that US producers have been outsourcing jobs abroad in order to fatten their profits. It urges viewers to increase their purchases of American-made products by 5 percent, since this shift would ultimately create “a minimum” of a million new jobs for Americans. Unfortunately, everything about this video is wrong.

In the first place, the video takes for granted that it is a good thing if an American gets a job at the expense of a foreigner. After all, the whole point of urging viewers to spend more money on American products is that this will cause “insourcing.” Firms will lay off foreign workers and bring those jobs back home to the United States. But other things equal, why should we hold this ethical view? The question is even harder to answer once we consider that the foreign workers who, according to the video producers, will lose their jobs are probably extremely poor compared to the Americans who will get the jobs. Since when is it a noble thing to put a desperately poor person out of work?

This obvious (but unstated) national prejudice of the video provoked the following unintentionally ironic statement in the comments at YouTube: “I am Canadian but I always try to buy north american [sic] made when possible.” I wonder if this Canadian actually means all of North America, including Mexico? Or does he just mean Canada and the United States? If he feels kinship with the members of his continent, what about the entire Western Hemisphere? Should he “buy Western” to keep jobs for his buddies in Brazil, rather than shipping them to those parasites in Thailand? Going the other way, should Americans also try to increase their purchases of items made in state by 5 percent, so that Texans keep jobs in Texas, while Floridians keep jobs in Florida? Of course I’m kidding; I am trying to show the arbitrariness of adjusting one’s spending to “create jobs at home.”

Beyond the fuzziness of the value judgment involved, the fundamental error in the video is the notion that there are a fixed number of jobs in the world. This isn’t so. If an owner closes a factory in the United States and opens a factory in India, he has only “shipped jobs abroad” in the same way that a correspondent can “ship a pen pal abroad” by switching writing partners. Other employers can rush in to offer jobs to the newly laid-off workers, or the workers can start their own businesses and become self-employed.

Indeed, so long as the government (or a union threatening violence with impunity) doesn’t artificially prop up wages and salaries, there is really no problem of unemployment in the market economy. Wages and prices eventually adjust so that everybody who wants a job can get one. Some workers might complain that their income is too low, but that’s a different problem from truly being unable to get hired at all.

To see the relevance of this point, let’s consider exactly how the phenomenon of outsourcing occurs. As the video describes it, US employers realized “about 30 years ago” that they could hire foreign workers to do the same jobs at much lower wages, so they relocated their production facilities abroad. This assertion raises the question: Why didn’t employers just cut US wages down to what the foreigners were asking?

The answer is that US workers won’t take such low-paying jobs because they have better options. For example, suppose Americans are originally employed in a TV factory in Tennessee, making $16 an hour. The owner of the plant realizes he can relocate it to India, where he can hire workers who are half as productive (meaning they only make half as many TVs per hour) but who are willing to work for $4 an hour. He would never bother relocating if the American workers would simply accept a pay cut to $8 an hour. (The American workers make twice as many TVs per hour, remember.) Suppose they won’t do that, because their next-best job option is to work in a warehouse for $10 an hour. In this case, with the numbers I’ve invented, the original factory owner would “ship jobs to India,” not because of some horrible flaw in the labor market, but because American workers had better things to do than make TVs for $8 an hour. It was more efficient for those workers to go into the warehouse sector and for the Indian workers to make the TVs.

Notice also the point about government intervention. If we cut all of the numbers in half from my scenario about TVs, then all of a sudden the outsourcing would seem to cause US unemployment. Specifically, suppose the American workers originally made TVs in Tennessee and were paid $8 an hour. Then the owner of the factory realized the Indian workers were willing to make TVs for $2 an hour. In this case, the Americans (who are still twice as productive) would need to cut their asking wage to $4 an hour to stay competitive, and their other option is to work at a warehouse where they would generate $5 an hour in value for their boss. Alas, in this scenario, the factory owner still “ships jobs to India,” but the laid-off Americans are stuck: It is illegal for them to work at the warehouse for $5 an hour, because that would violate minimum wage laws. Thus, they really have been thrown out of work, but the true culprit was government intervention, not outsourcing per se.

“Outsourcing” is simply a manifestation of the more general phenomenon of trade between countries. As a general rule, giving individuals the freedom to trade with whomever they wish, around the globe, maximizes the “real income” of the groups involved.

Looking at the issue from the other direction, we can say that if the US government imposes a barrier to trade — such as restricting imports from a particular country — then it might make some American workers richer, but only by making the average US consumer poorer. Furthermore, the losses to the consumers outweigh the gains to the “protected” workers, meaning the country as a whole is poorer when the government enacts a trade barrier. There is an entire literature of commentary on the virtues of free trade, demonstrating these truths in various ways. For those who have never read it, I highly recommend Frédéric Bastiat’s famous satirical essay, “Petition of the Candlemakers.” For those readers who can invest more time, I refer them to chapters 8 and 19 of my textbook Lessons for the Young Economist (available online for free here), which explains the standard case for free trade in terms of what economists call “comparative advantage.”

The general logic of the benefits of free trade applies to outsourcing; a particular instance of outsourcing will (obviously) hurt the domestic workers involved, but it will shower on other Americans benefits that more than offset the loss. Immediately, the owners of the outsourcing firm benefit in the form of higher profits (because they’ve cut their wage bill). But the forces of competition will soon cause those cost savings to show up as lower prices for American consumers. Indeed, the video’s producers implicitly admit this when they acknowledge that their recommendation to buy 5 percent more American-made products would be more expensive for consumers.

The logic of free trade is irresistible once a person takes the first step on its path. By effectively paying foreign workers with US dollars when they send us TVs, clothes, and other goods, we give them the purchasing power to buy American exports such as wheat and aircraft components. The opposite holds as well: If American consumers reduce their purchases of foreign-made TVs and other goods, then those foreigners will cut back on their purchases of American wheat and so forth. Ultimately, the video’s suggestion to “buy American” won’t create more American jobs in total, but instead will merely rearrange employment among sectors, making Americans poorer in the process.

To be fair, the video’s narrator does try to defuse the standard economist response to his analysis, starting around the 1:05 point. The narrator says that Americans won’t simply find other, “thinking up” jobs to replace the manufacturing jobs that have been outsourced, because those “thinking up” jobs need to be outsourced as well, in order to stay close to the manufacturing process. Whether or not this is actually true — after all, there are plenty of “thinking up” jobs being created in Silicon Valley and elsewhere in the United States — it misses the more basic point: There is no reason that the United States should manufacture a certain product within its borders for the rest of time.

As foreign governments reduce their own institutional barriers to trade, and as communication and shipping costs fall, it only makes sense that production becomes more globally integrated. To insist that Americans favor products “made in the USA” is as arbitrary and impoverishing as people in Alaska insisting that they only eat oranges grown in Alaska (in greenhouses, presumably). There are serious obstacles to prosperity for the average American worker, but the problem isn’t “outsourcing.” The problem is government mandates and restrictions that hinder the operation of the market economy.

20141014_RobertMurphyABOUT ROBERT P. MURPHY

Robert P. Murphy has a PhD in economics from NYU. He is the author of The Politically Incorrect Guide to Capitalism and The Politically Incorrect Guide to The Great Depression and the New Deal. He is also the Senior Economist with the Institute for Energy Research and a Research Fellow at the Independent Institute.

UnFair the Movie – FairTax Hits Theaters on October 14, 2014!

“He that can have patience can have what he will.” – Benjamin Franklin

On Thursdays, Facebook fans have adopted a growing ritual affectionately known as “Throw Back Thursday.” Users post their favorite remembrances from the past – a childhood picture, a tattered piece of high school memorabilia, news clippings of a place where the locals once gathered.

For Facebook, taking a walk down memory lane has proven to be a popular activity for many users. For the FairTax® campaign, taking time to look at the past provides a possible window into understanding the journey that has gone before us and lies ahead.

The FairTax legislation, first introduced in Congress 15 years ago, represents the greatest transfer of power from the Congress to the people since the Founding Fathers began drafting the Constitution in 1787. Some people say they love the FairTax but don’t think it will ever become law. Others believe that we have to repeal the 16th Amendment, and because repealing an amendment takes a long time, there is no reason to push the FairTax now.

It is important that doubters consider these historical facts:

  • While the 13th Amendment, which abolished slavery, may have taken less than a year to be ratified, the decades leading up to its passage divided the nation and engulfed it in a bitter and costly civil war, but its supporters persisted and it was enacted.
  • The 27th Amendment, which prohibited increasing or decreasing the salary of Members of Congress until the next term of office begins for the House of Representatives, was introduced in 1798 and even though it took 202 years, 7 months and 12 days to ratify, its supporters persisted and it was enacted.
  • The 19th Amendment, which gave women the right to vote, began as a serious movement in the mid-19th century. Congress passed the legislation in July 1919, and ratified it in August 1920. As noted by the National Archives, “Few early supporters lived to see final victory in 1920,” but it was enacted.
  • The 26th Amendment, which lowered the voting age to 18 years of age, was debated for thirty years, but took three months and eight days to ratify after being passed by Congress.

Fulton Sheen said, “Patience is power. Patience is not an absence of action; rather it is “timing” it waits on the right time to act, for the right principles and in the right way.”

Those who seek to protect the control, power and abuse they have carved out with the current income tax system believe that if they just keep throwing up roadblocks and ignore the FairTax movement, we will eventually join the doubters and give up and go away.

We have a message for them.

Never underestimate our patience as being a lack of action. Never doubt our unwavering principles in our quest for simple and fair taxation for all. Never question that we understand the concept of timing, and we are confident our time will come.

What our opponents fear the most is that the FairTax is the right and the best thing to do for America. Many of them instinctively know the truth of what Victor Hugo said so long ago,  “All the forces in the world are not so powerful as an idea whose time has come.”

To further help educate people on the FairTax, in just four days; one of the biggest FairTax events in 15 years will take place in theaters across the nation. The 90-minute movie, “UnFair: Exposing the IRS,” will be showing for one night only on October 14 at 7:00 p.m. across all time zones.

UnFair The Movie: Trailer from Unfair Movie on Vimeo.

This groundbreaking documentary promises to do what no other movie has done before – tell the stories of betrayal, corruption, intimidation and the harsh personal, economic and political realities of America’s income tax system and the IRS. More importantly, it presents the FairTax Plan as the only real solution!

Don’t delay. Buy your ticket today. And call your friends, family and neighbors and invite them to join you at the movies. Go to http://www.unfairmovie.com/tickets/ to locate theaters near you and to buy advance tickets. And if you are interested, click here to check on Theatre Captain opportunities in your hometown.

See you at movies!

The Minimum Wage Poison Pill

As we approach the 2014 General Election, with president Barack Obama set to occupy the White House for two more years, the stakes are higher than ever. As usual, Democrats across the country focus on phony issues, such as a Republican “War on Women,” the widening income gap between the rich and the non-rich, and bogus claims of being champions of the middle class.

In terms of domestic policy, they express support for the “middle class,” while doing everything in their power to turn America into a two-class society: the very rich… whose wealth they only wish to plunder… and the very poor, who, in return for an endless array of government handouts, will be expected to do nothing more than to pull the Democrat lever on Election Day.

In foreign affairs, they express outrage over the gruesome crimes of radical Islam… such as the recent beheading of an Oklahoma City woman by a radical Muslim co-worker… yet they oppose any and all effort at what they see as “racial profiling.” They find moral equivalency between the anti-Christian genocide of radical Islam throughout the Middle East, and the bombing of a Birmingham, Alabama abortion clinic in years past.

They express support for high quality public education, but the teachers unions… who own a controlling interest in the Democrat Party… dictate that Democrats oppose any and all voucher proposals, causing the greatest damage to the hopes of minority parents who want to see their children receive a quality education. They ignore the fact that throwing more money at public schools does nothing to increase the quality of a public school education. Instead, at the behest of the teachers unions, they demand that class sizes be reduced, that new school buildings be constructed, and that teacher salaries be increased… all the while regaling their low-information voter base with the cynical lie that Republicans want to “cut benefits to kids.”

They express a desire for the budget discipline of the 1990s… a direct result of Ronald Reagan’s “trickle down” economic policies and the election of a Republican Congress… and they support the notion of cutting the deficit in half, while supporting every new spending scheme hatched by liberal social planners. (In their 2000 platform, they announced that Democrats would entirely eliminate the public debt by the year 2012. Clearly, they had not heard of Barack Obama.)

While expressing a desire to curb the influence of lobbyists, they attempt to convince low-information voters that Republican administrations are dominated by lobbyists for business interests. Yet, no previous administration has been as heavily staffed and influenced by special interests as is the Obama administration. And while they express strong support for an electoral system that is “accessible, auditable, and accurate,” they insist that every attempt to curb vote fraud is nothing more than a Republican scheme to oppress the black vote.

On the healthcare front, they express a desire to provide healthcare insurance for 30-40 million uninsured, to improve the access to and quality of healthcare for all Americans, to substantially reduce the cost of healthcare for everyone, and to do it all without increasing the number of doctors, nurses, and hospitals. Like president Barack Obama, they see no contradictions in any of this. These are obviously people who would promise, with a straight face, that they could stuff 10 lb. of (excrement) into a 5 lb. Bag. All we need to do to make these magical things happen is to elect more Democrats to public office.

Democrats want to use the tax code to discourage the outflow of jobs overseas. Yet they have no problem with the fact that the United States has the highest corporate tax rate of any developed nation. They express a desire to cut taxes for every working family, including those who pay no federal or state income tax, but they exclude tax relief for the “millionaires” who are expected to provide good-paying jobs for the poor and the middle class.

And finally, while fast food workers go on strike demanding a $15.00 per hour minimum wage, a 107 percent increase, Democrats prescribe a poison pill for the U.S. economy with a proposed increase in the federal minimum wage standard from $7.25 cents per hour to $10.10 per hour a 39.3 percent increase. In doing so, they scoff at studies which show that, for each 10 percent increase in the minimum wage, 1-2 percent of jobs in the nation simply go away. For unskilled entry-lever workers, each 10 percent increase in the minimum wage results in a decrease of 4-5 percent in the number of entry-level jobs available… the jobs most often held by teens, the poor, and the unskilled.

According to a recent report by the Bureau of Labor Statistics, a majority of those who worked at minimum wage jobs in 2013 were 24 years old, or younger, while only 0.8 percent, less than one in a hundred, of those 24 years old, or older, work for a minimum wage.

Minimum wage increases are major job-killers. According to a 2014 report by the non-partisan Congressional Budget Office, an increase in the minimum wage from the current $7.25 per hour to $10.10 per hour would reduce the total number of jobs available by approximately 500,000. For the most part, these are the jobs currently held by all those fast food workers who fill the streets, demanding a $15 per hour minimum wage. And if those who clamor for a $15 per hour minimum wage are anxious to learn what happens to a job market with a minimum wage of that magnitude, they won’t have to wait long. In early June 2014, the Seattle city council voted to increase the minimum wage in that city to $15 per hour, the highest in the nation.

A report by the National Restaurant Association (NRA) tells us that, of every dollar of revenue coming into restaurant cash registers, approximately 33 percent goes to salaries and wages. The remainder of that dollar of revenue goes to cover the cost of food and beverages, other costs of doing business, and a small net profit for the owner. According to NRA statistics, the profit margin of restaurants varies, depending on the size of the average check per patron. Those with average checks under $15 per person… e.g., McDonalds, Burger King, Taco Bell, etc… produce average profit margins of 3 percent, while those with checks of $15 to $24.99… e.g., The Olive Garden, Red Lobster, The Cheesecake Factory, etc… produce profit margins of roughly 3.5 percent, the highest in the industry.

According to a recent report by Gingrich Productions, a good measure of the impact of minimum wage laws can be found in the European experience. Among those countries with no minimum wage… Austria, Germany, Sweden, and Switzerland… the median unemployment rate is just 5.2 percent, while the median jobless rate stands at 11.1 percent in countries with minimum wage laws… more than twice that of those without minimum wage laws.

But there is a much larger issue than the question of whether we should have a statutory minimum wage of $10.10 or $15 per hour… an issue that Barack Obama and congressional Democrats are not anxious to talk about. I refer to the question that more and more minimum wage workers are asking themselves, which is, “Why should I work 40 hours a week at $10.10 per hour, when I can earn more by staying at home and living off the public dole?”

A 2013 Cato Institute study tells us that, in 33 states and the District of Columbia, welfare benefits pay more than the current $7.25 per hour, while in 13 states, welfare benefits pay more than $15 per hour. In Hawaii, for example, the pre-tax “salary” of stay-at-home welfare recipients is $60,590 per year, or $29.13 per hour when compared to a 40-hour work week, while in Washington, DC, the hourly rate for just staying at home is $24.43 per hour. At the lower end of the spectrum among states where sloth is more lucrative than honest toil, the hourly rate for stay-at-home welfare recipients in South Carolina is $10.53 per hour… 43 cents more than the $10.10 minimum wage proposed by Democrtats.

So what do we do to fix the problem?

Instead of catering cynically to the poorest of the poor as a political constituency, as Democrats do, we should be asking exactly how an individual in this, the land of opportunity and economic freedom, can still be working at a minimum wage job when he/she is 24 years old, or older. That circumstance can only be explained by pointing out that a great many people simply make very bad choices in their lives.

But Democrats are clearly more interested in purchasing a “nanny state” constituency than they are in doing what is necessary to really help people lift themselves out of poverty. As one writer, Charles M. Blow, has said, “Much of what happens in Washington occurs at the intersection of political advantage and earnest intentions.”

What is clear is that we cannot perpetuate a system in which it is more lucrative to take a welfare check than it is to earn an honest living. In order to throw off the bonds of that insanity our options are only two. First, one might ask, why not raise the minimum wage to $25 or $30 per hour so that those who work can earn more than those who don’t, or won’t? The answer is, a $25 or $30 minimum wage would literally wreck whatever is left of our fragile economy and price us completely out of world markets.

The one remaining option is to do what we did in the mid-90s when a Republican-controlled Congress forced a Democrat president, Bill Clinton, to sign what was called “welfare-to-work” legislation, requiring those on public assistance to also find honest employment. The country experienced real economic growth, balanced budgets, and a pay-down in the national debt.

The choice is ours. What was done in the 1990s can be done again. But in order to do that we must first have a president who understands at least a “smidgen” about the intricacies of the U.S. economy. That means that our first priority must be to rid ourselves of Barack Obama, sending him back to his Kenyan roots where he can actually learn a thing or two about micro-economics.


Wages and the Free Market, Part 1 — Dispelling labor market myths with theory and data

Wages and the Free Market, Part 2 — Innovation Is the Lifeblood of a Healthy Economy

Raise the Minimum Wage? A Socratic Dialogue

Florida Power & Light’s crazy definition of “Fair”

A response to the letter in the Palm Beach Post by Rob Gould, Vice President and Chief Communications Officer for Florida Power & Light (FPL), on costly non-standard smart meters.

Just an examination of one portion of FPL’s non-standard meter fees gives you a glimpse of FPL’s version of “fair”. When a customer goes into collection and gets disconnected for non-payment there is a charge of $17.66. That same amount can be traced back to 2002, so it tells you it is “cross-subsidized”. The actual costs per FPL’s rate case filing for its test year 2013 is $46.13, so the cross subsidy is $28.47. FPL assumed 490K transactions, so $14 million in annual cross-subsidies are baked into the rates that all customers pay. They don’t come out until the next rate case in 2017.

FPL claims their deployment is over and the cost of doing collection disconnect/reconnects is now lower as they can do these remotely with smart meters. They want to charge all customers enrolling in their non-standard meter program $.45/month or $5.40 a year to pay incremental costs regardless of whether you go into collection or not. They developed a new cross-subsidy. They calculate that cross subsidy by taking a new cost of service of $59.27 and subtracting the existing $17.66 tariff, conveniently forgetting they already received $28.47 for these services in rates awarded in the 2012 rate case. They also asked the FPSC and everyone to ignore that the new cost of service for the smart meter customer is about $7.12 and they want to continue charging them $17.66, collecting approximately $5 million more per year than it actually costs.

Bottom line: FPL keeps cross-subsidies no longer needed for $14 million a year and overcharges smart meter customer $5 million a year until next rate case in 2017 – and that’s called “regulatory lag”. In addition, they want $65K more from non-standard meter customers because they are “cost-causers”. You could repeat this example with other parts of the “NSMR” tariff just approved.

Only in the corrupt halls of the Florida Public Service Commission, could a Company such as FPL, get awarded in January 2013 a rate increase and not share one penny of the $42 million in annual operational savings promised on a very expensive project for over 3 years and then come back in August 2013 and get another $2 million in revenue from customers based on “lost savings”.

To conclude, it is not fair for FPL to request $2 million in additional revenues from some customers without refunding to ALL ratepayers the $45 million in net operational savings that they are now realizing and are not reflected in our current rates..Regulatory lag works both ways.

School Board member Zucker hates voucher program that saves the district money, helps low income, homeless and minority families

At a recent meeting Sarasota County School Board member Caroline Zucker, District 2, came out against the Florida Tax Credit Scholarships program. Zucker, a Republican, is joining with the teachers unions, NAACP, Democrats and Charlie Crist to stop this tax credit program, which benefits low income and minority students in Florida. Currently 461 Sarasota County students are receiving Tax Credit Scholarships.

According to Step Up For Students, “With the income-based scholarship, families can choose between two options: (1) A scholarship to help cover private school tuition and fees, worth up to $5,272 or (2) A  scholarship to assist with transportation costs to attend a public school in a different county, worth up to $500.” If a child is entering kindergarten through 12th grade and meets one of the following, he/she may qualify for a Florida Tax Credit scholarship:


Chart courtesy of Step Up For Students.

To learn more read the Step Up For Students annual reports on the Florida Tax Credit Scholarship Program.

The Friedman Foundation did an audit of 10 school voucher programs. The key Friedman Foundation finding was:

If the average voucher amount is less than the average per-student educational cost, a savings is realized for those students that use a voucher to leave a public school to enroll in a private school. It’s that simple!

According to the Florida Department of Education the purpose of the Tax Credit Scholarship is:

To encourage private, voluntary contributions, to expand educational opportunities for children of families that have limited financial resources and to enable children in this state to achieve a greater level of excellence in their education, the 2001 Florida Legislature created s. 220.187, Florida Statutes, establishing the Florida Tax Credit Scholarship Program. In 2010, the FTC Scholarship Program was expanded and renumbered as Section 1002.395, Florida Statutes.

The law provides for state tax credits for contributions to nonprofit scholarship funding organizations, called SFOs. The SFO’s then award scholarships to eligible children of families that have limited financial resources. The tax credit cap for the current year is $357,812,500. The tax credit cap amount will increase to $447,265,625 for the 2015-2016 state fiscal year.

[Emphasis added]

This tax credit program has primarily attracted the poorest and lowest performing students. The Florida Official Revenue Estimating Conference projected the program saved taxpayers $57.9 million in school year 2012-2013. Scholarship participation has tripled in the past seven years with an expected 67,000 families participating in 2014-2015. Additionally, since 2006 with mandatory standardized testing in Florida, scholarship students have been achieving the same gains in reading and math as students of all income levels nationally.

 So why is board member Zucker adamantly against a program that helps low income and minority students get a better education?

The false notion that school choice and voucher programs take money away from public schools. Hillary Clinton, during the 2000 U.S. Senate debate against Rick Lazo, was asked if she supported school vouchers. Clinton stated, “I do not support vouchers. And the reason I don’t is because I don’t think we can afford to siphon dollars away from our underfunded public schools.” Research has proven Clinton wrong.

Rick Lazo’s reply to the voucher question was, “I believe that it’s immoral to ask a child to go to a school where they can’t learn or where they’re not safe. Eighty percent of African-American and Hispanic parents feel that they need it. Why should we trap poor kids in failing schools simply because the teachers unions won’t agree with it?” Research has proven Lazo right.

We now know on who’s side Zucker stands – Hillary, Crist, the NAACP and teacher unions.

RELATED ARTICLE: They Are Coming for Your Children

Obama’s Climate Legacy DOA?

We are told that Barack Obama hopes to leave a legacy of stopping global warming/climate change/climate disruption as his major accomplishment in his last term. If so, even Obama must be discouraged by his latest failure, along with the many others that have occupied the media in the last two weeks. The People’s Climate March (September 21st, 2014) was a dismal failure, the Climate Summit at the United Nations (September 23, 2014) was even worse.

The fiasco began with a lengthy article in Saturday’s Wall Street Journal by Dr. Steven Koonin, a former Undersecretary for Science in Obama’s Energy Department, titled “Climate Science is Not Settled.”

In the article Dr. Koonin was refreshingly honest in admitting that decades of computer modeling (and $150 billion) have brought us no further in understanding or predicting the climate. Climate models simply don’t match actual climate data. There has been no global warming – measured by ground thermometers and by satellites and balloons – for 18 years. Antarctic sea ice is at a record high; Arctic sea ice is coming back to normal levels (in spite of official forecasts of an ice-free Arctic in 2013). Major hurricanes hitting the US are at a record low (since 2005’s Wilma); tornadoes are far below average for three years in a row. Increasing CO2 demonstrably doesn’t cause warmer temperatures.

Below is a plot of atmospheric temperature differences from average as a function of CO2 content. Temperature goes up, goes down, and, on the whole, stays the same as CO2 increases. Do you see a correlation here? The correlation (R2) coefficient is 0.002; this is laughably irrelevant. Thursday’s WSJ contains a rebuttal letter from Ben Santer of Lawrence Livermore Labs, insisting that terrible climatic events are obvious. Dr. Santer’s insistence is not a substitute for data.


For a larger view click on the chart.


The People’s Climate March in New York City. For a larger view click on the image.

On Sunday 100,000 socialists showed up for the People’s Climate March in New York City. The picture on the right demonstrates their understanding of climate science:

“Capitalism is the Disease; Climate Change is the Symptom; Socialism is the Cure.”

Good luck with that one, kids; socialism has never helped the world’s biggest problem – poverty. Ask the Indians, ask the Chinese. I watched the People’s March on television where several of the marchers proudly identified themselves as illegals who came from some third world country to tell you and me how to improve America.

On Tuesday (September 22, 2014) the U.S. Secretary of State John Kerry lectured Foreign Ministers from 120 countries on the importance of stopping Climate Change, which is more dangerous than the Islamic State (ISIS). According to Kerry the Islamic State is only a local problem, but “climate change affects the whole world.”


United Nations climate summit.

You may rightly wonder why the diplomats came back on Wednesday to hear Barack, but there’s a good reason – money.

Remember the Climate Conference in 2009 at Copenhagen, that President Obama had to flee hurriedly to get back to the White House ahead of a blizzard? Before he left, he promised to contribute to a Green Climate Fund; wealthy countries (you know who that is, right?) promised $100 Billion. So far, the Green Climate Fund has $2.3 Billion, of which $1.3 Billion was raised last week. Did I mention that the deal is for an annual $100 Billion to help developing countries? Even with global warming, Hell will freeze first. But the UN marches on. The next meeting is in November, in Lima; the goal is to raise $10 Billion for the Climate Fund.

In the meantime, China has stated it has no intention of reducing its CO2 emissions (now 28% of the world’s total). India has made the same declaration. To quote Prime Minister Narendra Modi:

“The world had agreed on a beautiful balance of collective action – common but differentiated responsibilities. That should form the basis of continued action. This also means that the developed countries must fulfill their commitments for funding and technology transfer”.

Mr. Modi is quoting from the Kyoto Protocol, which died because of China and India’s refusal to limit their emissions. But it’s still our obligation to send money and technology. Sure!

In short, I think Mr. Obama’s “Climate Legacy” is dead, especially if the Polar Vortex returns this Winter.

But diminishing America’s technological and commercial leadership – by shutting down our fossil fuel energy advantages – fits well in the Obama ideology of trashing America. He’ll keep trying.

And speaking of the Polar Vortex, New England utility National Grid has announced that household natural gas prices will go up by 37%, about $33 per month over last year. This sounds like a cruel joke; natural gas prices are going down, because of fracking, right? Yes, but because of the low price, everyone wants all the natural gas they can get – i.e., demand is way up. But the region’s two major natural gas pipelines are already practically filled to the brim, constricting supply and sending already-elevated rates ever higher.“We’re a stranded region,” says Gilbert Metcalf, an economics professor at Tufts University. “We have a major bottleneck for getting natural gas into New England.” The EPA’s efforts to shut down coal-fired generators adds to New England’s problem.

Elsewhere, the Bardarbunga volcanic vent in Iceland continues pouring out molten lava, throwing it 130 meters into the air. Yes, that’s the report – 130 meters. For comparison, the Statue of Liberty, from ground to torch, is 93 meters; the Brooklyn Bridge is 84 meters above the water. The smell of sulfur in the air is evident as far away as Paris. How long will this continue? The Laki eruption in 1783-1784 went on for eight months, and caused extremely cold weather around the world. It also caused thousands of deaths.

And, in Japan, a volcano erupted without warning, killing a number of Summer mountain climbers. Suspicion is growing that this increased volcanic activity is caused by, yes, you guessed it, global warming. According to the National Post:

19,000 years ago the glaciers of the most recent Glacial Age (i.e., the Wisconsin Glaciation) began to melt, lifting billions of tons of ice off Earth’s crust and weakening the ability of the crust to resist the flow of magma from below. The magma from the mantle then was able to surge up and out. This is demonstrated by the numerous volcanoes in the British Isles and Scandinavia, which were heavily glaciated in…oh, wait!

However, in spite of the disappointments at the People’s Climate March and the UN Climate Conference, the Administration is bringing out the heavy guns – yes, Vice-President Joe Biden has added his voice to the scientists warning us of the dangers of anthropogenic climate disruption.

The VP recently reminded us of “the 161,000…fathers, mothers, brothers, grandparents….lost” in the tornadoes in Joplin, Missouri in 2011. Not to mention the “thousands of cars tossed around like leaves.” Incidentally, Joplin’s population is about 50,000. That, friends, is the man who’s a heartbeat away from the presidency.

Not to be outdone, the Brits have a rival to Biden. Ebola may be more dramatic, but climate change is a bigger threat to public health. That’s the conclusion of the British Medical Journal (BMJ), a weekly peer-reviewed medical journal, publishing since 1840. This week it ran an editorial calling on the UN’s World Health Organization (WHO) to declare climate change a public health emergency.

“Deaths from Ebola infection, tragic and frightening though they are, will pale into insignificance when compared with the mayhem we can expect for our children and grandchildren if the world does nothing to check its carbon emissions,” said the editorial, written by the magazine’s editor in chief, Fiona Godlee.

I don’t make this stuff up, folks, I just report it. But I figure quoting these people – occasionally – is as good as trying to argue with them.

Text and Analysis of Florida Amendment 1: “The Water and Land Conservation Initiative”

Dan Peterson, Executive Director of the Coalition for Property Rights, provides the following detailed analysis of Florida Amendment 1:


Water and Land Conservation – Dedicates funds to acquire and restore Florida conservation and recreation lands.


Funds the Land Acquisition Trust Fund to acquire, restore, improve, and manage conservation lands including wetlands and forests; fish and wildlife habitat; lands protecting water resources and drinking water sources, including the Everglades, and the water quality of rivers, lakes, and streams; beaches and shores; outdoor recreational lands; working farms and ranches; and historic or geologic sites, by dedicating 33 percent of net revenues from the existing excise tax on documents for 20 years.

Amendment 1 alters SECTION 28. Land Acquisition Trust Fund to include:

a) Effective on July 1 of the year following passage of this amendment by the voters, and for a period of 20 years after that effective date, the Land Acquisition Trust Fund shall receive no less than 33 percent of net revenues derived from the existing excise tax on documents, as defined in the statutes in effect on January 1, 2012, as amended from time to time, or any successor or replacement tax, after the Department of Revenue first deducts a service charge to pay the costs of the collection and enforcement of the excise tax on documents. b) Funds in the Land Acquisition Trust Fund shall be expended only for the following purposes: 1) As provided by law, to finance or refinance: the acquisition and improvement of land, water areas, and related property interests, including conservation easements, and resources for conservation lands including wetlands, forests, and fish and wildlife habitat; wildlife management areas; lands that protect water resources and drinking water sources, including lands protecting the water quality and quantity of rivers, lakes, streams, springsheds, and lands providing recharge for groundwater and aquifer systems; lands in the Everglades Agricultural Area and the Everglades Protection Area, as defined in Article II, Section 7(b); beaches and shores; outdoor recreation lands, including recreational trails, parks, and urban open space; rural landscapes; working farms and ranches; historic or geologic sites; together with management, restoration of natural systems, and the enhancement of public access or recreational enjoyment of conservation lands. 2) To pay the debt service on bonds issued pursuant to Article VII, Section 11(e). c) The moneys deposited into the Land Acquisition Trust Fund, as defined by the statutes in effect on January 1, 2012, shall not be or become commingled with the General Revenue Fund of the state.


Amendment One departs From a Historical Philosophical Perspective of Private Property

In the first half of our nation’s history, it was the practice of the government to encourage private ownership through land grants and other such vehicles. This amendment reverses that tradition. It seems to embrace a philosophy found in this quote (a philosophy which is supported by many of the pro-conservation/sustainable development organizations):

“Land…cannot be treated as an ordinary asset, controlled by individuals and subject to the pressures and inefficiencies of the market.

Private land ownership is also a principal instrument of accumulation and concentration of wealth and therefore contributes to social injustice; if unchecked, it may become a major obstacle…

Public control of land use is therefore indispensable to its protection as an asset…”

From the Preamble, UN Conference, Vancouver, Canada, 1976

Amendment One Departs From Our Founding Fathers’ Intent For Private Property

Our Founding Fathers placed safeguards into our Constitution as a hedge or safeguard against government tyranny. As a result, America became an exceptional and unique place on earth by virtue of being founded upon the right of private citizens to own and use property.

Amendment One dangerously opens the door for government to own and control more land. That means less land is owned and control by private property owners. This amendment presents an alternative view to that intended by our founding fathers.

Today, more than 50% of the American west is owned by government. In the state of Utah, 87% of the land is owned and controlled by the federal government. Despite efforts by the state to reclaim their land, the federal government refuses to return it.

Giving government large sums of money to buy land puts Florida on a trajectory similar to Utah. The intent of this amendment is primarily land acquisition for the purpose of conservation.


As the amount of government owned lands increases, two things happen fiscally:

First, the amount of private lands on the tax rolls will be decreased. Therefore, tax revenues will decrease making less funding available for things like law enforcement, first responders, local services, infrastructure maintenance, and local education. Local governments will have to raise property taxes or take the rarely seen step of cutting their budgets.

Second, more taxpayer money will need to be diverted to pay for increased maintenance costs of ever increasing amounts of conservation lands. Currently, the state lacks money to maintain the properties owned by government.

Counties with the most land in government owned conservation lands, have the highest tax rates.


It is the Florida Legislature’s constitutional responsibility to work with the Governor to craft an annual balanced budget to meet the needs of our state. Through the Legislature, all the needs of the state are considered, debated, and approved by elected representatives. This is designed to address in a balanced way, the comprehensive state needs.

Amendment One restricts the Legislature’s ability and flexibility to budget or allocate funding for an array of state-wide critical needs such as transportation, education, affordable housing, and economic development, etc.

The purchase of land by government is a one-time expense. But, the maintenance of government property is a growing, on-going expense to also be remembered. As government ownership of land increases, so maintenance costs increase requiring more employees (and their pensions) , more facilities, and more equipment.


Nearly one-third of Florida land is used for agriculture. Agriculture, including farming and ranching, is the backbone of our state’s economy providing jobs and produce. Amendment One names both for acquisition. The majority of lands put into conservation make little to no contribution to the economy.

As private land, with its real or potential contribution to our state’s economy, is removed from production, it moves from being a producer of revenue to becoming a user of revenue. Thus, the state’s economy is weakened. Less land in production means our state is less productive and less competitive in the world.


Today, more than 27% of Florida is already in conservation according to The Florida Natural Areas Inventory. Add lands for government facilities and the amount of land owned by government is more than 30%.

Florida has more land per square mile under government ownership than any other state east of the Mississippi River. The amount of government owned land will be greatly increased if a projected $18 B were to become available for additional land purchases.

Environmentalist groups have plans to purchase millions of additional acres for additional parks, wildlife refuges, wildlife corridors, forests and conservation areas, just to name a few. Amendment One supplies the cash to do so.


Amendment One would be bad for Florida because it is an unneeded and harmful addition to the Florida Constitution. It will reduce the amount of privately owned property and negatively impact local revenues. It also intrudes on the legislature’s fiduciary responsibility to allocate our state’s revenues in the interests of our entire state.

Nearly one-third of our state is owned by government. Approximately another third is in agriculture. Documentary transaction stamps are already used to fund a number or environmental programs. The Florida Forever program continues to receive millions of dollars annually through the legislature to acquire conservation land. A growing economy already allows for more money to be allocated for government land purchases.

A more radical option should be considered. Doc stamps are expensive, adding significantly to the transaction costs of real estate. Why not reduce or eliminate the Doc Stamp tax altogether to help, in no small way, all Floridians to exercise their rights of property ownership?

The School Voucher Audit: Do Publicly Funded Private School Choice Programs Save Money?

One of the pillars of Dr. Milton Friedman’s school voucher idea was that it not only would expand personal freedom and improve student achievement but also save money.

To see if that is indeed the case, this paper presents a cautious, rational estimate of the overall fiscal effects of school voucher programs that have been established over the past 24 years. It is not to lay claim that this analysis is a definitive, to-the-penny calculation of the fiscal impact incurred by every state government and local public school district where those voucher programs are in effect. That arduous undertaking would take too long and add too little value to the broader public policy debate to justify the immense effort and cost. That’s a task best addressed at the individual state level.

The School Voucher Audit: Do Publicly Funded Private School Choice Programs Save Money? from The Friedman Foundation for Educational Choice

For the 10 school vouchers programs examined in this report, a cumulative total savings of at least $1.7 billion has been realized since 1990-91, the first year of the historic Milwaukee Parental Choice Program (MPCP), through 2010-11, the end of this paper’s review period. During that same timeframe, participation in school voucher programs grew from 300 students to nearly 70,000, an increase of over 230 times.

Beyond just calculating the cumulative savings realized from school vouchers, this report strives to substantially elevate the reader’s understanding of how school choice savings are measured. The most relevant relationship in calculating the fiscal impact of school choice is the difference between: (1) the amount of financial assistance (i.e., the voucher amount) provided to participants and (2) the current cost of educating those students in the public school system. If the average voucher amount is less than the average per-student educational cost, a savings is realized for those students that use a voucher to leave a public school to enroll in a private school. It’s that simple!

What can complicate the task of calculating potential voucher savings are other factors that can affect the results:

First and foremost, eligibility for a voucher program may include some students who would have enrolled in a private school even without the vouchers’ financial assistance. This “private school propensity” effect is an incremental public cost that must be taken into account.

Second, the voucher amount typically varies among students, requiring an average voucher amount be calculated to generate a reasonable savings estimate.

Finally, the many nuances and complexities of the K-12 federal-aid allocation formulas and each state’s school finance laws and policies often cause confusion about school choice savings. But they really shouldn’t. Although this complex web of formulas, laws, and policies determine whether the savings are captured or reallocated and precisely how the finances of the federal government, state government, and local public schools are affected by school choice, it does not change the total amount saved by school vouchers.

Frequently, a state’s school finance laws are written in a way that results in much of the savings from a school voucher program being passively reallocated back to the public schools. A common example is provisions that protect public schools’ revenues amid declining enrollment. In other words, a public school’s funding remains constant, or nearly so, even as their cost burden for educating students is reduced. Opponents of school choice, then, often claim that no savings ever occurred. That is simply not true. The financial fact is that the savings were automatically distributed back to the public school that the voucher recipient left. That is, the public schools are still paid for students they no longer serve. So, instead of taxpayers receiving those savings, or the government spending them to improve, say, roads or parks, the public school system keeps the savings.

It was Dr. Friedman’s view that, by expanding school choice, the basic economic principle of competition would work to temper cost growth over time. Today, private school tuition is typically much less than the amount spent to educate a student in public school. Granted, that is true, in part, because of private schools’ extensive fundraising efforts. It’s also hard to predict how broader private school choice, facilitated by taxpayer funding, would impact both giving to private schools and tuition levels in the future. But what is certain is that, with more parental choice, spending for all schooling will move more quickly toward its proper level. Whether that level is more or less than what the current system generates is unknown. However, what is known is that the current government-sanctioned monopoly tends to drive up overall spending while under-rewarding excellence.

Hayek: The Knowledge Problem by Jeffrey A. Tucker

We must stand humble before complexity and order without planning.

F.A. Hayek is an epic figure in the history of human freedom. He stood for liberty at a time when most intellectuals in the world embraced ideologies of command and control. His literary legacy continues to provide some of the most powerful arguments ever made for the depoliticization of the social order, including its commercial life.

But, in my personal experience, he can also be one of the most difficult thinkers to grasp.

After F.A. Hayek died in 1992, for example, a magazine commissioned me to do a final tribute to his life and work, summing up his main contributions. It was supposed to be for a popular audience. There’s nothing like such a writing assignment to reveal how much you actually know — or do not know — about a subject.

I thought it was going to be a snap. I covered his biography and politics just fine; I mentioned his business-cycle studies and his work on capital theory. But of course his main contribution to the world of social science is summed up in the phrase “the knowledge problem.” Even though I read most of his major work, and read his seminal articles on the problem of knowledge, I was stunned to find myself with writer’s block.

What I came to realize is that I didn’t understand, much less appreciate, his writing on this topic. So I covered the basics (the knowledge needed to run the social order is distributed in individual minds and inaccessible to planners), but my heart wasn’t in it. That’s where matters stood for me for about twenty years.

I tried to make an effort to get how it was that Hayek was able to write vast literature on this one subject, why his seminal article “The Use of Knowledge in Society” was the most cited article in the second half of the twentieth century, why innumerable dissertations have been written on Hayek’s insight, and why he has influenced countless scholars in so many disciplines for so long.

Part of the problem is that Hayek did not always write with his logic and conclusions on his sleeve. His rhetorical style is not so much hortatory or doctrinaire as it is searching and exploratory. You get the sense that he is thinking through an issue as he writes, struggling to find the right combination of words, the right phrasing, the right examples, to capture his insight — which always seems to be unfolding in real time rather than stated like a final product for consumption.

For someone who is looking for final answers and pure theory, this type of writing can be frustrating. There was the additional problem that Hayek can just be downright annoying in places, contradicting himself by endorsing political programs at odds with his own theory. He also has a habit of backing away from the hardest conclusions of his own narrative. If you seek a clear definition of ideas like freedom or property rights in Hayek’s work, you will come away disappointed. He often seemed so consumed by the complexity of the world that he shied away from clarity for fear that he had missed something. For readers looking for ironclad deductions and arguments, his approach can give the impression of being an elaborate display of obscurantism.

In order to understand Hayek and to learn from him, you have to be prepared to think alongside him as he writes. His work presumes an open mind that is ready to think about complex topics, most often from the inside out. He is asking and seeking to answer a completely different set of questions than most people are even willing to consider. Most readers are not prepared to consider them. This is a point it took me many years to understand.

What changed for me? I needed a visual application of the knowledge problem, something that connected the theory with reality. This happened to me at a bar atop one of the highest spots in São Paulo, Brazil, a spot where you could make a complete turn and see the lights of the city as far as you looked. It was a world without end, in all directions.

I was overwhelmed at its utter incomprehensibility. It was too much for my mind because it is too much for any mind. The revelation hit me like a truck: this is an order that no one can possibly comprehend in either its totality or its parts, and, as such, an order that no one can possibly control. It cannot be built by anyone in particular; it is built only by an extended and hyper-complex process that is driven by individual minds that takes many generations to unfold.

It can only be harmed by those who would presume to control it — and the bureaucrats and politicians in this city surely do. The regulators can pass regulations. The planners can order buildings built and torn down. They can loot those who are willing to comply. But, in the end, in this city of more than 11 million people, even in the presence of overweening government, society somehow takes its own course. How this happens and why cries out for explanation.

“The knowledge of the circumstances of which we must make use never exists in concentrated or integrated form,” explains Hayek, “but solely as the dispersed bits of incomplete and frequently contradictory knowledge which all the separate individuals possess.”

I came to realize, right there, that this is not just about São Paulo. It’s about any city in the world. In fact, it’s about every social setting, large or small. It’s about the whole world. Only individuals possess the knowledge that nearly all social scientists — and bureaucracies — imagine that they can, must, and do possess. Anyone who seeks to control the social order is presuming that the unanswerable questions are already answered and proceeds from that point. Hayek is digging deeper to observe that we cannot possibly know what we must know if we seek to design much less rule the world. The knowledge is dispersed and, by its nature, uncollectible.

Is Hayek describing a world of disconnected chaos and uncoordinated randomness, a nihilistic social order of swirling unpredictability? That is not the world in which we live. Why not? Because of the existence of institutions like prices, mores, habits, signaling systems of culture and learning — of knowledge that we all possess, not always consciously but mostly inchoately. They are institutions that we ourselves have not created, but they assist us in making the most of our lives.

“We make constant use of formulas, symbols, and rules whose meaning we do not understand,” writes Hayek, “and through the use of which we avail ourselves of the assistance of knowledge which individually we do not possess. We have developed these practices and institutions by building upon habits and institutions which have proved successful in their own sphere and which have in turn become the foundation of the civilization we have built up.”

As I stood at the same bar in São Paulo looking all around me, my vision changed from macrocosm to microcosm. I observed two people standing close by. They were embracing, kissing intimately. I wondered whether this was a first date or if they had been together for many years. I had no access to that information, and nothing they did gave me the answer. They seemed to be courting each other but at what level and in what way I could not know. And yet this information was foundational to everything both of them were thinking at the time. To truly understand this relationship, I would have to know not just something but countless bits of information I could not really know.

What’s more, even this two-person society was not comprehensible to the two people themselves. Part of the spark of their relationship was the emotional dance they were engaged in right there on the spot. Their intimacy was their means of accessing, however incompletely and briefly, the true spirit of the other’s intellectual and emotional state of mind. They can come close, through every means available, but never entirely achieve that oneness for which true love strives.

Even so, both people in this two-person society were seeking longingly and lovingly for the ideal, coordinating their actions through shared cues, language, and symbols. And in so doing, they created their own micro-order right there, as had everyone else in that bar, as has every one of the 11 million people in that city, as has every one of the 7 billion people on this planet.

We all seek some form of individuality but also a connection to others. We can create institutions to make this possible, but mostly we embed ourselves within them. The institutions emerge from within the structure of our shared experience, chosen and not imposed, and we gravitate toward those who work and eschew those who don’t, in an ever-evolving process of discovery.

Let’s say you set out to plan the world. “If we possess all the relevant information,” writes Hayek, “if we can start out from a given system of preferences, and if we command complete knowledge of available means, the problem which remains is purely one of logic.” We only need to plug in the right data into our calculus and issue orders. The problem is that this solution presumes that the unsolvable problem — gaining that information — has already been solved.

What is the significance of this revelation? It lays waste to a century — or many centuries — of intellectual pretense. The social order is built by the coordination of plans. If those plans are always individual plans, radically individuated and subjectivized, coordinated only through evolved institutions created by no one in particular, the dreams of every would-be master of the universe come crashing down.

The most obvious conclusion is also the most powerful one from a political point of view. The source of order is not the government, even though people continue to believe that despite all evidence. The bureaucratic class and the politicians who empower that class are no more or less smart than you and I are. They are just people with no special insight. Because of government’s legal right to plunder, the government is corrupt and exploitative. It takes stuff from people. That’s about the whole of it. It is not the source of anyone’s order.

What then is the source of social order? It is our individual minds, however imperfect they may be in making judgments about our world. Freedom is the only real option there is. Anything else is based on a lie — a “pretense of knowledge,” as Hayek would say. Anything that subverts that freedom, which means any state at all, amounts to an attack on the very source of social order.

“If we can agree that the economic problem of society is mainly one of rapid adaptation to changes in the particular circumstances of time and place,” Hayek concludes, “it would seem to follow that the ultimate decisions must be left to the people who are familiar with these circumstances, who know directly of the relevant changes and of the resources immediately available to meet them.

We cannot expect that this problem will be solved by first communicating all this knowledge to a central board which, after integrating all knowledge, issues its orders. We must solve it by some form of decentralization. But this answers only part of our problem. We need decentralization because only thus can we insure that the knowledge of the particular circumstances of time and place will be promptly used.

I’m drawn to Hayek’s use of the terms “immediately” and “promptly.” With these words he introduces the ultimate enemy of all those who would control the world: the passage of time. With the existence of time comes change, and with change comes new and different knowledge. Even if it were possible somehow to gain a complete snapshot of the world with all its existing knowledge, by the time it could be used for any purpose to bend the world from its course to another, that knowledge would be outdated and hence useless. Even under the best circumstances, the planners would only be planning the past.

Here, then, is the knowledge problem. It is about more than the ability to plan an economy. It is about the whole of our lives. It is about the ability to plan and direct the course of civilization. That capacity to manage the world, even the smallest part of it, will always and everywhere elude our grasp. That’s a beautiful insight, because it reveals the truth about human freedom.

Freedom is not just one way to organize society. It is the only way.

20121129_JeffreyTuckeravatarABOUT 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.

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

IRS: Spinning A Cover-Up?

“Some people think that the truth can be hidden with a little cover-up and decoration.  But as time goes by, what is true is revealed.”  – Ismail Haniyeh

In May of 2013, the IRS targeting scandal began to unfold after Lois Lerner leaked that the IRS targeted certain conservative groups and individuals for special treatment by the IRS. Congressional investigations were launched.

The Washington, D.C. spin machine went into overtime and eventually the IRS started admitting they were having one heck of a time with hard drives that were just magically wiping out key employee’s emails. Even the President felt a need to boldly declare on national TV that there “wasn’t even a smidgen of corruption” at the IRS.

It’s been said that the original scandal isn’t what gets most people in trouble, it’s the attempted cover-up. From lost hard drives to pleadings of the Fifth Amendment, to Committee members feigning outrage over investigation questions, the magnitude of perceived cover-up is astounding, and shows what we have sadly come to expect from the Washington elite who believe that nothing they do is wrong because it is “for own our good.”

And just last week, in a classic gotcha moment, U.S. Justice Department spokesperson Brian Fallon called House Oversight Committee staff stating, “the department wanted congressional staffers to get documents to selected reporters so that officials could comment on them before the majority did.”

There was just one problem.

Fallon thought he was calling the staff of the Ranking Minority Member of the House Oversight Committee, Rep. Elijah Cummings. He in fact called the staff of the Chairman of the Committee, Rep. Darrell Issa. Oops.

As The Hill reported, after Issa’s staff informed Fallon whom he was talking to, Fallon came back on the line and said there was a change in plans. Ya think!

Perhaps this is why the U.S. House just passed three resolutions limiting the authority of the IRS.  They are:

  • H.R. 5418: To prohibit officers and employees of the Internal Revenue Service from using personal email accounts to conduct official business.
  • H.R. 5419: To provide tax-exempt groups the right to an administrative appeal relating to adverse determinations of tax-exempt status.
  • H.R. 5420: To permit the release of certain information to victims regarding the status of investigations into leaks of their personal taxpayer information.

While we applaud the House’s actions, it is tantamount to plugging a hole in the Hoover Dam with a wad of chewing gum! Nice try but no cigar.

All the House did was to give the appearance of trying to solve a problem while secretly protecting the status quo. If Congress really wants to end the nightmare of IRS abuse – as the American people want them to – then they must demand the FairTax® Plan be immediately passed.

The FairTax replaces the income tax and defunds, disbands and eliminates the IRS. Now that’s a game changer!

Members of Congress only fear one thing – being thrown out of office by their constituents. They listen most to groups who have the largest number of paid members and who represent the largest voting blocks within their district or state. That’s why we’ve set a goal of 1 million new AFFT paid memberships. If you agree, go to our website and become a member today.

Time to fire John Boehner!

House Speaker John Boehner (R-Ohio) and House Minority Leader Nancy Pelosi (D-California) joined forces early Wednesday evening as the House passed a continuing resolution that will fund the government after the end of the fiscal year on Sept. 30th, and that will permit funding for Planned Parenthood (the nation’s largest abortion provider), the entirety of Obamacare, and an amendment requested by President Barack Obama “to train and equip appropriately vetted elements of the Syrian opposition.” 

These are the good terrorists.  They don’t videotape their be-headings.  Now tax payer money will be used to vacuum suck unborn children from pregnant moms and arm nice terrorists who will try and kill us later after they get rid of their opposition.

The bill passed 319 to 108 with four members not voting. But there were not enough Republican members to pass the bill without significant support from Democrats.

While Pelosi sided with the Republican leadership and voted for the bill, 53 Republicans joined with 55 Democrats in voting against it.


Senate votes 78-22 for Obama’s plan to arm jihadis against other jihadis

Senator blocks bill to seize passports from returning Islamic State fighters

Islamic State controls areas with 60 oil wells

FP&L’s Smart Meter Woes: Billing for Services Not Performed & Threatening Shut Offs to Disabled Veterans

Billing for Services Not Rendered

It was a busy time last week fielding phone calls from irate FP&L customers. In June 2014, FP&L began billing customers who did not want a smart meter installed on their home for what they call “NSMR” fees (Non-standard Meter Rider). The fees consist of an upfront one-time payment of $95 and monthly payment of $13.

Why the calls? Well part of that $13/month fee is the cost of FP&L sending a meter reader to actually read the meter so the customer can be billed properly. Several customers I spoke to are pretty irate because the bill they received was “estimated”. That means FP&L did not come out and read the meter. Upon calling FP&L customer service they were told that FP&L is within the Florida Public Service Commission rules to issue estimated bills up to 6 months. Despite cries of foul play, FP&L refused to issue them any credits.

The FPSC Order No. PSC-14-0036-TRF-EI clearly states on page 9, that of the $13.00 monthly fee, $6.81 is for a monthly manual meter reading and $.05 is the associated meter reading OSHA and V Accident costs. One would think that if FP&L does not roll that truck and employee to your home, they should be obliged to credit you the $6.86 since they did not perform the work, no? Apparently, not!

I guess that is something for me to take up at our protest hearing scheduled for September 30th in Tallahassee. Perhaps others will come with signs “No work, No Charge”.

I did check with this customer and there are no access issues for his property, that is, no locked gates or ferocious dogs. This customer also just got his second estimated bill. Twice billed for services NOT rendered.

FP&L Threatening Shut-Off to Disabled Veteran

Some people who refused to take the smart meter are also refusing to pay the extortion fees. They are paying for their electricity, but are not paying the opt-out fees. Well, collection notices and shut-off threats have started to go out causing more anguish.

One customer, Irving Friedman, an 88-year old disabled WWII veteran, who is also recovering from recent heart surgery, received his threatening shut off letter. When his daughter called FP&L on his behalf and explained his medical conditions and also stated that his electricity portion was paid in full she got nowhere. It was only a call to a reporter at the Palm Beach Post and that reporters’ phone inquiries to FP&L that made FP&L back off from their threats to shut off this veterans electric.

FP&L now states they will hold off any shut-offs for those withholding payment of opt-out fees until the FPSC makes a decision on the tariff case pending. That decision should come out some time in November.

Time to tell your lawmaker to let the Export-Import Bank expire!

Mac Zimmerman, Director of Policy Americans for Prosperity, in an email states:

Members of Congress have finally returned to Washington after a month-long vacation, and they’ll be deciding extremely soon whether or not to put an end to the wasteful, corrupt Export-Import Bank.

AFP activists have been leading the charge for months against the Export-Import Bank, and as our elected officials prepare to make their final decision, now’s the time to get all hands on deck to put an end to Ex-Im.

Video – “Break the Bank!”:

By paying foreign companies to buy American exports, the Export-Import Bank tilts the playing field away from mid-sized and small businesses in favor of large, politically connected corporations. Eliminating the Export-Import Bank would level the playing field and allow U.S. companies to compete for business on their merits rather than the strength of their political ties to the bank.

Not only does the Export-Import bank interfere with the free market, it also jeopardizes billions of taxpayer dollars. According to MIT, the bank is actually losing $200 million a year. These risky loans and poor accounting practices are harmful to taxpayers, who are left footing the bill. In fact, taxpayers have already bailed out this bank once before at a cost of $3 billion.

America deserves an international trade policy that is based on free-market mechanisms, not paying foreign companies to buy exports from large corporations with political connections.

EDITORS NOTE: To send a AFP prepared e-letter to your elected officials asking that they let the Export-Import Bank expire  you may go here.

Happy Capital Day? Why not? by Lawrence W. Reed

Any good economist will tell you that as complementary factors of production, labor and capital are not only indispensable but hugely dependent upon each other as well.

Capital without labor means machines with no operators, or financial resources without the manpower to invest in. Labor without capital looks like Haiti or North Korea: plenty of people working but doing it with sticks instead of bulldozers, or starting a small enterprise with pocket change instead of a bank loan.

Capital can refer to either the tools of production or the funds that finance them. There may be no place in the world where there’s a shortage of labor but every inch of the planet is short of capital. There is no worker who couldn’t become more productive and better himself and society in the process if he had a more powerful labor-saving machine or a little more venture funding behind him. It ought to be abundantly clear that the vast improvement in standards of living over the past century is not explained by physical labor (we actually do less of that), but rather to the application of capital.

Harmony of Interest

This is not class warfare. I’m not “taking sides” between labor and capital. I don’t see them as natural antagonists in spite of some people’s attempts to make them so. Don’t think of capital as something possessed and deployed only by bankers, the college-educated, the rich, or the elite. We workers of all income levels are “capital-ists” too—every time we save and invest, buy a share of stock, fix a machine, or start a business.

And yet, we have a “Labor Day” in America but not a “Capital Day.”

Perhaps subconsciously, Americans do understand to some extent that those who invest and deploy capital are important. After all, most people would surely have an easier time naming the “top ten capitalists” in our history than the “top ten workers.” We take pride in the kids in our neighborhoods when they put up a sidewalk lemonade stand. President Obama continues to be roundly excoriated for his demeaning remark, “You didn’t build that; somebody else made that happen.”

Bad Eggs

That’s not to say there aren’t bad eggs in the capitalist basket. Some use political connections to get special advantages from government. Others cut corners, cheat some customers or pollute a stream. But those are the exception, not the rule, in a society that values character. Workers are not all saints either—who among us doesn’t know of one who stole from his employer, called in sick when he wasn’t, or abused the disability or unemployment compensation rules? Those exceptions shouldn’t diminish the importance of work or the nobility of most workers.

Like most Americans, I’ve traditionally celebrated labor on Labor Day weekend—not organized labor or compulsory labor unions, mind you, but the noble act of physical labor to produce the things we want and need. Nothing at all wrong about that!

But this year on Labor Day weekend, I’ll also be thinking about the remarkable achievements of inventors of labor-saving devices, the risk-taking venture capitalists who put their own money (not your tax money) on the line and the fact that nobody in America has to dig a ditch with a spoon or cut his lawn with a knife. Indeed, what could possibly be wrong about having a “Capital Day” in odd numbered years and a “Labor Day” in the even-numbered ones?

Labor Day and Capital Day. I know of no good reason why we should have just one and not the other.

EDITORS NOTE: This article first ran on September 3, 2012.

larry reed new thumbABOUT 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. Prior to becoming FEE’s president, he served for 20 years as president of the Mackinac Center for Public Policy in Midland, Michigan. He also taught economics full-time from 1977 to 1984 at Northwood University in Michigan and chaired its department of economics from 1982 to 1984.

One Million Strong, Rocking DC!

“Individual commitment to a group effort – that is what makes a team work, a company work, a society work, a civilization work.” – Vince Lombardi

Leadership guru Ken Blanchard said, “The key to successful leadership is influence, not authority.” That’s an interesting concept when thinking about how best to advance the FairTax®.

Certainly, Congress has the upper hand on We the People when it comes to sheer authority. And for what authority they may lack, Members have perfected the art of using the IRS as a tidy little enforcement mechanism.

So that brings us back to influence. How can We the People really influence the Members of Congress who stand between the income tax and passage of the FairTax® Plan?

To answer that question, one must first ask, who actually has influence on Members of Congress?

Late last year Greenberg Quinlan Rosner Research conducted a poll and asked that question. Sadly, constituents ranked themselves at the bottom of the barrel (11 percent) feeling they had little to no influence on the very people they elected to represent them. Who came in first? Why K-street lobbyists of course, by a whopping 65 percent. And who came in second on the influence peddling quotient? Campaign contributors at 52 percent.

This makes sense because the only thing that Members of Congress fear is that the electorate may throw them out. Lobbyists and campaign contributors provide the money to help the Members overwhelm their opponents and be reelected.

However, since often only 40,000 people vote in Congressional primary elections, money is not enough. They love the money but they fear associations with paid members residing in their district. The most effective groups and lobbyists are the ones that have the advantage of pointing to paid members who are passionate about an issue and who will favor the candidate that supports their issue.

That’s why Americans For Fair Taxation® has recently launched a new paid membership drive with a goal of signing up one million paid FairTax members.

Imagine the voice that one million paid FairTax members will have in Congress! You are already putting the pressure on Members; with one million paid FairTaxers you will really turn up the heat. Now that’s exciting!

To make it as easy as possible for one million patriots to join the FairTax movement, we have created multiple membership plans to fit everyone’s budget – from a $5 student to a $500 Patron – and everything in between. And if you really want to magnify your impact, consider sponsoring a membership for friends and family, but first share the good news of the FairTax with them to ensure they want to become a member.

To become a FairTax member, simply go to FairTax.org and click on the gold “Become a Member” button in the upper left corner. Complete the form and take pride in helping the FairTax campaign do what no other tax reform movement has done in the history of tax reform advocacy.

Alan Watts said, “The only way to make sense out of change is to plunge into it, move with it and join the dance.” Paid membership is a major change for the FairTax campaign. It is a change that will reap incredible benefits as soon as we reach the critical mass needed to get all Members’ attention. I invite you to take the plunge and join the dance.

Together we will PASS THE FAIRTAX!

EDITORS NOTE: The featured photo is of protesters rallying against government tax and spending policies at the U.S. Capitol on September 12, 2009, in Washington, D.C. by Rena Schild/Shutterstock.