Big Government

I Learn Something New Every Day

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I say “I learn something new every day” all the time. Because I do.

With skyrocketing fuel costs, I have begun to do research on more fuel efficient ways to deliver product to my customers. I live in a rural area, so we are forced to reach out and get the business. I work about a sixty mile radius.

I came upon the Ford Transit Connect. This is an interesting vehicle because of the relatively low initial cost and the 27 mpg on the highway. I did a bit of cocktail napkin math and this vehicle would pay for itself in fuel savings alone in about two years when comparing it against some of my gas guzzling diesel trucks.

While doing research on this vehicle, I discovered what the Chicken Tax was. I read about it on wiki.

To circumvent the 25% tariff on imported light trucks, Ford imports all Transit Connects as passenger vehicles with rear windows, rear seats and rear seatbelts.[9] The vehicles are exported from Turkey on cargo ships owned by Wallenius Wilhelmsen Logistics, arrive in Baltimore, and are converted into commercial vehicles at WWL Vehicle Services Americas Inc. facility: rear windows are replaced with metal panels and rear seats removed (except on wagons).[9] The removed parts are then recycled.[9] The process exploits a loophole in the customs definition of a commercial vehicle. As cargo does not need seats with seat belts or rear windows, presence of those items exempts the vehicle from commercial vehicle status. The conversion process costs Ford hundreds of dollars per van, but saves thousands over having to pay the chicken tax.[9] Partly because of this, only the long-wheelbase, high roof configuration is exported to North America. In most places, the high-roof Transit Connect, like most Ford Econoline vans, is unable to access multi-story parking because of its height (6′-6″).

I understand what was written, but was baffled as to why on earth a tariff on light trucks would be called a Chicken Tax.

I got curious, so I ran the wiki on the Chicken Tax.

The Chicken tax was a 25% tariff on potato starch, dextrin, brandy, and light trucks imposed in 1963 by the United States under President Lyndon B. Johnson as a response to tariffs placed by France and West Germany on importation of U.S. chicken.[1] The period from 19611964[2] of tensions and negotiations surrounding the issue, which took place at the height of Cold War politics, was known as the “Chicken War”.[3]
 
Eventually, the tariffs on potato starch, dextrin, and brandy were lifted,[4] but over the next 48 years the light truck tax ossified, remaining in place to protect U.S. domestic automakers from foreign light truck production (e.g., from Japan and Thailand).[5] Though concern remains about its repeal,[6][7] a 2003 Cato Institute study called the tariff “a policy in search of a rationale.”[4]
 
As an unintended consequence, several importers of light trucks have circumvented the tariff via loopholes—including Ford (ostensibly a company the tax was designed to protect), which currently imports the Transit Connect light trucks as “passenger vehicles” to the U.S. from Turkey and immediately shreds portions of their interiors in a warehouse outside Baltimore.[1]

I guess there is no real point of this post, other than to point out that yesterday’s thing that I learned was an interesting one. I now know what the Chicken War is, and also know what the Chicken Tax is.

Putting Alternative Energy and Government Workers First… Before Medical Care for the Poor

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California faces intense budget challenges. The budget gap is approximately $10 billion, and instead of “fixing” them, their budget has optimistic assumptions such as extra revenue due to an improving economy and many other sleight-of-hand items. The California executive and legislative branches are all solidly in the hands of Democrats, who control the agenda but must at least negotiate with the Republicans on the topic of tax increases (because a super-majority is needed to raise taxes).

I wrote here about how the State of California has a super-aggressive (and expensive) plan to move to “alternative energy” even though the cost / unit is much higher than traditional forms of energy, especially when transmission is taken into account.

In contrast with other states where the government is attempting to make their union workforce pay more for insurance and pensions, the completely captured Democratic officials don’t even attempt to reduce compensation, benefits or pensions.

Thus how does California intend to balance their budget, when they 1) won’t reduce government union worker pay or benefits 2) won’t back off their alternative energy zealotry?
By reducing medical care to the poorest citizens in their state. This article in today’s Chicago Tribune is titled “Health Law Model State Eyes Drastic Surgery” describes the situation in California’s medicare system which covers 6 million children and poorer residents.

California spends less per beneficiary than any state. It is now seeking waivers from the federal government to impose copays of $5 for office visits and prescriptions, $50 for emergency room visits and $100 for hospital stays.. (they) would drop reimbursement for a standard physician visit to less than $12.

It actually is a bit worse than that. The co-pays would have to be collected by the doctors, and if they can’t collect the money, then their reimbursement will fall further.

And what would the likely impact be of these cuts? Per the article:

Many doctors have already closed their doors to Medicaid patients. Other providers are following suit.

It is telling that the Democratic-controlled executive and legislative branches have decided that protecting the salaries and benefits of their union workers has a higher priority than providing basic medical care for the poorest residents in their state. They also believe that an incremental (and insignificant) move towards alternative power, which costs billions, rises above the needs of the poor for medicine.

This is analogous to the teachers’ unions that put their needs and benefits ahead of the children, who suffer through some of the worst schools in the country here in Chicago.

I can only imagine the smug outpouring of punditry that would occur if the Republicans abandoned a core principle to the same degree that the Democrats in California are abandoning the poor in this instance. Like this article in the Chicago Tribune and LA Times, the fact that the Democrats are abandoning the poor and instead focusing on their own direct needs isn’t even mentioned, since it apparently isn’t a fact that they believe their readers need to know. The situation is presented as a sad part of the budget sideshow rather than as a calculating prioritization decision made on the part of California’s Democrats, which it actually is.

Cross posted at LITGM

A New Doctrine?

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Carter Doctrine:”The Carter Doctrine was a policy proclaimed by President of the United States Jimmy Carter in his State of the Union Address on January 23, 1980, which stated that the United States would use military force if necessary to defend its national interests in the Persian Gulf region. The doctrine was a response to the 1979 invasion of Afghanistan by the Soviet Union, and was intended to deter the Soviet Union—the Cold War adversary of the United States—from seeking hegemony in the Gulf. After stating that Soviet troops in Afghanistan posed “a grave threat to the free movement of Middle East oil,” Carter proclaimed:….”

On the tenth anniversary of 9/11, as we remember the fallen and the many members of the armed services of the United States who have served for ten years of war, heroically, at great sacrifice and seldom with complaint, we also need to recall that we should not move through history as sleepwalkers. We owe it to our veterans and to ourselves not to continue to blindly walk the path of the trajectory of 9/11, but to pause and reflect on what changes in the last ten years have been for the good and which require reassessment. Or repeal. To reassert ourselves, as Americans, as masters of our own destiny rather than reacting blindly to events while carelessly ceding more and more control over our lives and our livelihoods to the whims of others and a theatric quest for perfect security. America needs to regain the initiative, remember our strengths and do a much better job of minding the store at home.

– Zenpundit, The Nine-Eleven Century

1. Canada and oil sands: “Bituminous sands, colloquially known as oil sands or tar sands, are a type of unconventional petroleum deposit. The sands contain naturally occurring mixtures of sand, clay, water, and a dense and extremely viscous form of petroleum technically referred to as bitumen (or colloquially “tar” due to its similar appearance, odour, and colour). Oil sands are found in large amounts in many countries throughout the world, but are found in extremely large quantities in Canada and Venezuela.[1]”

2. Israel and Natural Gas: “In recent years, Israel has found and begun developing massive natural gas deposits in the Mediterranean Sea. There is much more wealth underwater– the U.S. Geological Survey estimates that the Levant Basin contains as much as 122 trillion cubic meters of recoverable gas — and all countries around the basin want a piece of the action.”

3. Russian state oil and American oil companies: “America’s largest oil company last week reached an historic agreement with Russia’s state oil company, Rosneft. ExxonMobil now will take the place of BP (British Petroleum), whose dealings with Rosneft collapsed earlier this year.”

4. Dakotas and oil reserves: “America is sitting on top of a super massive 200 billion barrel Oil Field that could potentially make America Energy Independent and until now has largely gone unnoticed. Thanks to new technology the Bakken Formation in North Dakota could boost America’s Oil reserves by an incredible 10 times, giving western economies the trump card against OPEC’s short squeeze on oil supply and making Iranian and Venezuelan threats of disrupted supply irrelevant.”

5. Bloom boxes: “One example to illustrate why the future is proving elusive in the USA: There is a stand-alone electricity providing unit called the Bloom Energy Server or “Bloom Box” — small, simple to use — which can power any home or commercial building. The wondrous box has already been test-driven; Google, eBay and a number of other Fortune 500 companies have a few Bloom Boxes and they’re saving fortunes in electrical bills.

In other words, the Bloom Box can make America’s electricity grid obsolete. There are only two things holding the box back from being installed in every residential, commercial and government space in the USA:

a) Bloom Energy, the company that makes the box, doesn’t have large manufacturing capacity.

b) The U.S. energy industry doesn’t want to be shoved around by a box. (The same for much of the ‘Green Jobs’ sector that the federal government has been pushing hard. The Bloom Box technology makes windmill and solar panel technologies obsolete.”

The GOP debates have been intellectually vapid and the fault does not lie entirely with our lightweight media moderators. Ladies and gentlemen, you are “auditioning” for the toughest job in the world. Ladies and gentlemen, you are genuinely interesting and accomplished people. Be leaders. Hire some decent speech coaches, do a little background wonky reading and show us your vision for the future.

Update: I made a few edits for clarity. Thanks for the comments, everyone. I don’t know squat about this topic. Carl from Chicago is definitely the “go to” guy on energy topics around here but I’ve been bored with the debates and wanted to blog about that for some time now. Also, I don’t know what the whole “ladies and gentlemen” thing is about. It’s kinda affected. Incorrect, too. Only one lady has been involved in the formal debates….so far….

Palin v. Crony Capitalism

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I have long believed that the biggest problem we have in this country is that the government and the businesses that have captured the regulatory state have become one seamless monstrosity.

A lot of people have had a hard time getting their heads around this.

Lefties like to think that “business” is evil but that “government” regulates it to protect the people from pollution and defective products, etc.

Righties like to think that “business” = free enterprise, menaced by the evil “government” that is driving it to extinction.

Both are mostly wrong.

The government has turned into an amalgamation of iron triangles — regulators, legislators (or actually their staffs) and industries that are regulated. These work in tandem to their mutual advantage at the expense of the taxpayer and of truly entrepreneurial and innovative businesses. It is in the joint interest of this business/government crony capitalist complex to crush out potential rivals and created government sponsored, protected and subsidized monopolists.

This is precisely the hazard the USA was founded to fight against. The American Revolution was provoked by British monopolists authorized by the Crown — crony capitalism, 18th Century style. The founding generation was acutely aware of this problem. Further the major thinkers influencing 19th Century liberal thought in the USA, Canada and Britain were all focused on this problem: Jefferson, Edmund Burke and Adam Smith. (See the brilliant book The Transatlantic Persuasion: The Liberal-Democratic Mind in the Age of Gladstone by Robert Kelley, which explains this now-forgotten history.)

The greatest threat to our liberty is the uniting of government power and private greed, and that is exactly what we are facing now.

The creation of a regulatory state meant its inevitable capture by the industries it supposedly regulated. I remember having a life-changing intellectual moment when I read The Logic of Collective Action by Mancur Olson as an undergrad at the University of Chicago. (If you have not read this, you must do so. Really.) George Stigler’s analysis of the regulatory state was consistent with this picture. (See, e.g. The Citizen and the State: Essays on Regulation.) Once you see how this works, it is obvious that this process is inevitable.

The political class that services this machine has come to be known in Chicago as The Combine. Both parties service the machine, with no substantial difference between them. The Democrats tend to have more of what our co-blogger Carl from Chicago, in an excellent and prescient post, called stone-cold redistributionists, but neither party has any interest in making any basic changes in these arrangements. Mr. Bush, with the bank bailouts, then Mr. Obama, with Solyndra being just one of many egregious examples from him, has taken this process to a new level.

During the Cold War, people would argue that the United States and the Soviet Union were “converging.” The argument went that the Soviet Union would liberalize and become more humane, while the USA would become more socialistic, and we would all end up looking something like a utopian notion of Sweden. This did not happen. The Soviet Union fell apart. Mr. Fukuyama famously asserted that liberal democracy had “won” and that the ideological struggles of modernity were over, and history had ended.

But what if the final state is not democratic capitalism? What if convergence is right after all? What if Soviet communism fell apart and turned into a mafia state run by an alliance of government and favored businesses, which control the country by corruption and intimidation, a nomenklatura that strips out all the value in the country on behalf of a well-connected elite, immiserating everyone else. This amoral, vicious, greed-driven, undemocratic dystopia is what we are now converging toward. It is an Orwellian future, with an Inner Party of senior politicians and business executives, an Outer Party of government employees and business managers, and a vast, despoiled, proletariat with no opportunities, or assets or future. It sounds like the world Mr. Obama is brazenly pushing us toward. It also sounds like a future that no Republican has so far dared to point to, to name, to denounce and to oppose — because they would prefer to be in on the game than take the risks inherent in opposing it.

So, Fukuyama was right: We are approaching a single form of governance around the world. Unfortunately, it turns out, it’s fascism.

Until Gov. Palin’s speech on September 4, 2011, in Indianola, Iowa.

… there is a name for this: It’s called corporate crony capitalism. This is not the capitalism of free men and free markets, of innovation and hard work and ethics, of sacrifice and of risk. No, this is the capitalism of connections and government bailouts and handouts, of waste and influence peddling and corporate welfare. This is the crony capitalism that destroyed Europe’s economies. It’s the collusion of big government and big business and big finance to the detriment of all the rest to the little guys. It’s a slap in the face to our small business owners the true entrepreneurs, the job creators accounting for 70% of the jobs in America, it’s you who own these small businesses, you’re the economic engine, but you don’t grease the wheels of government power.

Please listen to this speech, or read it, if you have not done so already.

Today, Instapundit linked to a Facebook post entitled “Crony Capitalism on Steroids.”

She is pounding the same drum.

She is apparently going to make this theme the main focus of a Presidential campaign.

Say what you like about Mrs. Palin. She is the only person in public life who has successfully identified the threat, named it, shone a spotlight on it, denounced it, and begun to threaten it.

This is the first faint flicker of hope I have seen that our political order can be reformed democratically without a massive, system-wide failure happening first. Maybe the other candidates will be forced to respond to these denunciations, maybe there will be a populist response to this challenge raised by Gov. Palin. I hope so.

We do live in interesting times, and they just got a lot more interesting.

UPDATE: Paul Ryan had this excellent speech linked on Instapundit. Here’s an excerpt:

… if we surrender more control over our economy to the governing class then life in America will become defined by a new kind of class warfare: A class of bureaucrats and connected crony capitalists trying to rise above the rest of us, call the shots, rig the rules, and preserve their place atop society at the expense of working Americans, entrepreneurs, and the small businesswoman who has the gall to take on the corporate chieftain.

My highlighting. Sounds familiar.

More of this, please. Faster, please.

Permanent deficits are not Keynesian

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John Maynard Keynes, in addition to being the brother of the author of the first book on blood transfusion, was a famous economist whose policy recommendations have been widely abused by politicians for 50 years. His first widely known book was on “The Economic Consequences of the Peace.” It predicted that the harsh Versailles peace treaty would ruin Europe, a prediction that came true in 1929.

Reparations were set at a level that Keynes perceived would ruin Europe, Woodrow Wilson refused to countenance forgiveness of war debts and would not even let the US Treasury officials discuss the credit program. While Keynes’ proposals were far sighted, few others at the Versailles Conference understood their importance and Keynes’ proposals would have been controversial in nations such as France, Britain and the US.

Keynes’ book had a major effect on the US Congress’ refusal to ratify the League of Nations treaty.

Another critical insight was his prediction of the consequences of inflation.

Keynes outlined the causes of high inflation and economic stagnation in post-WWI Europe in The Economic Consequences of the Peace.
 
“Lenin is said to have declared that the best way to destroy the Capitalist System was to debauch the currency. By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method they not only confiscate, but they confiscate arbitrarily; and, while the process impoverishes many, it actually enriches some… Lenin was certainly right. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.”
 
Keynes explicitly pointed out the relationship between governments printing money and inflation.
 
“The inflationism of the currency systems of Europe has proceeded to extraordinary lengths. The various belligerent Governments, unable, or too timid or too short-sighted to secure from loans or taxes the resources they required, have printed notes for the balance.”

It is significant that the US has debased its currency the past 40 years far more than the average citizen realizes. The present dollar is worth about 40 cents in 1970 dollars. Using the methodology at this site, which uses US Department of Labor data, a $100. item in 1970 would cost $582.60 in 2011 dollars. That uses a cumulative inflation rate of 482.6%. Using that calculation, the present dollar is worth 20 cents in 1970 currency.

The most common attribution to Keynes is the “pump priming” role of running budget deficits. However, his theory was the “countercyclical” principle of government budgets. That supposes that the government runs surpluses in good economic times, then deficits in bad economic times. Keynes assumed that these two phases of government action would cancel each other out. His work was based on his theories of how the Great Depression occurred. His apologists have used the Second World War as an example of Keynesian economics. They do not mention that the high deficits that were run during WWII were funded by US citizens who bought war bonds. Inflation was limited by price controls and consumption was limited by rationing. The excess income that was generated in war industries was invested in the national debt. We were not borrowing from another country and, after the war, the budget rapidly paid off the war debt. The national debt was small before the war.

US National Debt

What we have today is very different. Here is a useful explanation of why Keynes is not the author of present national policy. There is more explanation here.

If Keynes were alive today, what would he think of President Obama’s fiscal policies?
 
He would roll over in his grave if he could see the things being done in his name. Keynes was opposed to large structural deficits. He thought that they chilled rather than stimulated the economy. It’s true that we’re stuck with large deficits now. The goal should be to reduce them, not to take on new spending that makes them worse.
 
Today, deficits are getting bigger and bigger with no plan to significantly lower them. Keynes understood what the current administration doesn’t understand that the proper policy in a democracy recognizes that today’s increase in debt must be paid in the future.

Read the rest.