No Strippers, Please

I realize I’m not in China but just in case anybody was thinking of it when it comes time for my funeral, no stripper, please.

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Comcast to Abandon Time-Warner Deal?

Now that it looks as though Comcast will abandon its plans to merge with Time-Warner, this may be my last opportunity to count the ways in which the idea was a terrible one.

What was the worst aspect of the Comcast/Time-Warner merger:

A. It would create a horizontally integrated monopoly.
B. It would create a vertically integrated monopoly.
C. It would create a horizontally and vertically integrated monopoly.
D. One big, crappy cable company wanted to join with another big, crappy cable company to make an even bigger and crappier cable company.

I believe the last alternative was Al Franken’s immediate reaction to the idea. Do you have thoughts on the merger?

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The Impact of Professional Management

There’s an interesting post at RealClearPolicy on the potential for substantially improved earnings from assets owned by the federal government if they were placed under professional management:

In the U.S., for every 1 percentage point increase in yield from the federal government’s asset portfolio, general taxes could be lowered by 4 percent. Worldwide, professional management of public commercial wealth among central governments could easily raise returns by as much as 3.5 points, to generate an extra $2.7 trillion. This is more than the total current global spending on national infrastructure — for transport, power, water, and communications combined. This alone should make every individual citizen, taxpayer, investor, financial analyst, and stakeholder stand up and pay attention. And it should spur demand for action.

More than 25 percent of all land in the U.S. is owned by the federal government. Along with all this land, it holds buildings with a book value of $1.5 trillion. In addition, state and local government assets amount to $6 trillion. The U.S. Bureau of Economic Analysis calculates that the value of nonfinancial public assets in the U.S., as a whole, was equal to 74 percent of GDP in 2011.

The post continues to develop this idea in considerable detail.

The reasons this will never happen are obvious: professional management would present fewer opportunities for graft. According to Gallup today Americans consider the federal government the single largest problem facing the country and this illustrates why. We know what’s going on—that the politicians we elect are in it for themselves. They may not start off that way but by the time they’ve been in office for ten or twenty or forty years they have so conflated the public good with their personal benefit they can’t see the difference.

This would be a good opportunity to make an observation about Bill and Hillary Clinton but you can fill in the blanks for yourself.

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The Moral of the Story

As I read this post about the “spectacularly wrong” predictions made on the first Earth Day, it occurred to me that there is one country in the world in which those predictions or something like them is coming true: China. For examnple this:

In January 1970, Life reported, “Scientists have solid experimental and theoretical evidence to support…the following predictions: In a decade, urban dwellers will have to wear gas masks to survive air pollution…by 1985 air pollution will have reduced the amount of sunlight reaching earth by one half….”

is true or nearly true in China. The sunlight hasn’t been reduced by a half but it’s significant. And the pictures of China’s urban dwellers in face masks aren’t hard to find.

The moral of the story is that authoritarian government and industrialization make a very bad combination. There’s very little we can do about China now—that ship has sailed. I’ll only give the reminder I’ve given before: we can change our own behavior. Nobody is forcing us to purchase Chinese manufactured goods.

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The Way We Live Now

International relations scholar Henri Barkey foresees continuing collapse of the states of the Middle East:

The state as we know it is vanishing in the Middle East. Strife in Iraq, Syria, Libya and Yemen, foreign intrusion from states within the region and outside it, and dreadful rule by self-serving elites have all contributed to the destruction of societies, infrastructure and systems of governance. Nonstate actors of all kinds, most of them armed, are emerging to run their own shows. Generations of mistrust underlie it all.

It is difficult to see how Humpty Dumpty will ever be put back together again. To be sure, many Middle Eastern states were mostly illegitimate to begin with. They may have been recognized internationally, but their governments exercised authority mostly through repression and sometimes through terror. They relied on a political veneer or constructed narrative to justify the rule of ethnic or sectarian minorities, mafia-like family clans or power-hungry dictators. In most countries, the systems that were built were never intended to create national institutions, so they did not.

Let’s take a little tally. Somalia hasn’t been a state for decades. Sudan has split into two states, at least one of which is descending into chaos. Libya, abetted by the stupidity, recklessness, insanity, or malice (take your pick) of the United States, Britain, and France, is in chaos. As long as the two largest factions won’t accept the rule of the other over their territory, the country can never be put back together again.

Iraq (see Libya, above) has split into a Sunni stronghold, a Shi’ite stronghold, and a Kurdish stronghold. Will those territories become distinct states? Not as long as civil war continues in Syria and the Turks have a say over the fate of the Kurdish region. The Syrian government is unlikely to regain control over the country’s territory without more force than the “international community” (such as it is) will allow it.

Yemen appears to be headed in the same direction as Iraq. The shotgun marriage of North Yemen and South Yemen has ended in a violent divorce.

Leapfrogging over Iran, Pakistan has ongoing rebellions in the north, the south, and the west. Its control over its territory has always been notional and now it’s even less than that.

Can anyone really doubt that if U. S. forces completely depart Afghanistan the country will fall into a condition a condition similar to Pakistan’s with some governmental control in Kabul and its environs and little anywhere else? The state there is only being maintained by foreign troops.

That leaves Iran, Saudi Arabia, the various tiny Gulf sheikdoms, Israel, Egypt, Tunisia, Lebanon, Jordan, and Turkey. Jordan is being challenged by the chaos surrounding it. Saudi Arabia is bombing (and blockading) Yemen, presumably in the hope that if the Yemeni people are made miserable enough it will achieve some imagined objective. Iran is playing hob in various countries in the region. Egypt, through main force, is holding on to its statehood. Tunisia is holding on by the skin of its teeth. Lebanon is what is has been for the last thirty years (whatever that is). Turkey has been making occasional forays into the Kurdish areas of Iraq and Syria in an attempt to maintain its own territorial integrity.

Does that about sum it up? Across a broad swathe of West Asia, the Middle East, and North Africa the Westphalian state which had never been robust in those areas is evaporating completely, not just changes of regime but changes in concept and there is no ready replacement. The United Nations? It is to laugh.

The next step is recognition of the reality. People or regions don’t hold seats in the UN General Assembly. States do. There is a huge area in which the rules just don’t apply and we need to start thinking about the implications of that.

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Negotiating the Terms of Managed Trade

I believe that in a regime of free trade between two countries both of the countries benefit due to the workings of comparative advantage, just as David Ricardo pointed out two centuries ago. I believe that when one or both of the countries erects barriers to free trade the country with the most barriers is hurt the most as economists demonstrated long ago.

I also agree with what Adam Smith wrote nearly three centuries ago:

People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.

You can write a free trade agreement on the back of a cocktail napkin. It could hardly be simpler. What’s being negotiated in the Trans-Pacific Partnership agreement

The great Seraphic Lords and Cherubim
In close recess and secret conclave sat
A thousand Demy-Gods on golden seats,
Frequent and full. After short silence then
And summons read, the great consult began.

is not free trade but the terms of managed trade. It’s impossible to determine the effects of the agreement, who will benefit or lose, without seeing the agreement but I think we can reasonably speculate that it falls well within Adam Smith’s old warning.

Many of the countries negotiating the agreement, in full recognition of David Ricardo’s observation, have found a clever way of ensuring that the benefits of trade accrue more to their own countries than would otherwise be the case, by buying U. S. government securities rather than using the dollars they obtain in trade to purchase goods made here and services performed here. They are, in effect, exporting goods to the U. S. and importing employment and Treasury notes from the U. S.

The editors of the Wall Street Journal comment on the TPP:

A bipartisan coalition in Congress is moving a trade bill that would help American economic growth and strategic interests. But this is Congress, so naturally a rump protectionist caucus is trying to prevent it. The big surprise is that the ambushers include Ohio Republican and former U.S. Trade Representative Rob Portman.

On Wednesday the Senate Finance Committee plans to begin marking up Trade Promotion Authority (TPA) legislation, also known as fast-track, that is necessary for the Administration to complete trade accords with the European Union and 11 Pacific Rim countries. The bill outlines U.S. negotiating objectives on trade agreements and guarantees an up-or-down vote without amendments. Nearly every President since Franklin Roosevelt has had this power.

The bill had been moving well since Finance Chairman Orrin Hatch and ranking Democrat Ron Wyden agreed last week on compromise language that the Obama Administration also supports. The compromise includes language directing the Administration to ensure that foreign partners “avoid manipulating exchange rates” via “cooperative mechanisms, enforceable rules, reporting, monitoring, transparency, or other means, as appropriate.”

But, lo, that isn’t good enough for labor unions and other protectionists, who want to use charges of currency manipulation to kill fast track. They’ve recruited the usual suspects—Democrats Debbie Stabenow (Michigan), Sherrod Brown (Ohio) and Bob Casey (Pennsylvania)—to offer an amendment that would make it easier to Congress to use the currency excuse to scuttle trade deals.

Enter Mr. Portman, who should know better. The Ohio Republican promoted trade agreements in the Bush Administration. But he is running for re-election next year, and now we hear he may co-sponsor an amendment that would establish “strong and enforceable rules against exchange rate manipulation, which are subject to the same dispute settlement and remedies as other enforceable obligations.” That means retaliatory tariffs, and if it passes the Senate it could kill the trade bill.

Whatever the editors’ views of organized labor, when negotiating the terms of managed trade it’s only sensible for us to try to secure the best deal we possibly can and, since “currency manipulation” of the sort I’ve described above is a major trade issue for us, it’s not unreasonable to include that in the agreement.

I probably should add that David Ricardo could not possibly have imagined the massive trade barriers we’ve erected in the form of intellectual property laws and professional licensing but that’s a subject for another post.

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What Sentence Should Tsarnaev Receive?

The sentencing phase of the trial of the surviving Boston Marathon bomber has begun. What sentence should he receive?

My view on the death penalty, generally, is that although proportionality demands that it should be available in some rare cases, it is far too frequently awarded. That is particularly true in Texas and Oklahoma which between account for about half of all of the executions that have taken place in the U. S. over the period of the last 20 years.

This particular case might be one of those rare cases. However, I’m leaning against the death penalty because of the required appeals it would entail resulting in a lengthy dog and pony show.

What do you think?

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Just How Bad Is Illinois’s Fiscal Situation?

This bad:

Illinois and California are the two worst states in the nation for fiscal shape, and Illinois and Louisiana are the two worst states for government corruption.

Illinois leads all states for the highest taxes paid per resident, at $7,700 per year. And Illinois has the second highest property taxes, behind only New Jersey.

To put that per capita tax figure into perspective, while Illinois has the highest taxes per resident it’s 16th in per capita income.

Chicago has the highest sales tax in the nation, doesn’t have the power to impose an income tax, and is nearing the end of its authority to increase property taxes. Illinois is at or near the bottom when it comes to the state’s share of education spending which means that our system is rigged against poor kids. Illinois also has the worst or near the worst return in federal spending to federal taxes paid.

There is something we do lead the nation in: the percentage of Illinoisans who leave every year for another state.

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Reparations

The other day on Richard Steele’s Barber Shop program on WBEZ I heard a discussion of Mayor Emanuel’s announced support for the victims of John Burge. If you’re not up on your Chicago atrocities, it is apparently the case that under John Burge Chicago police routinely tortured criminal suspects.

I couldn’t agree less with the participants in the discussion, all clearly adherents to the belief in the “roomful of money” hypothesis of government, that somewhere there’s a roomful of money that the city can just draw from whenever it cares to. The city would need to borrow to pay these reparations and at present interest rates that means the city would pay these reparations forever, many times the originally promised sum. Indeed, the city would be better off paying a modest stipend to each of the torture victims for life if it could do so from actual operating revenue than it would to promise lump sum payments it would be forced to borrow to pay.

My view of this is that such cases should not be heard by the courts under the doctrine of sovereign immunity, that the mayor should not have the power to make such promises, and the the mayor and the City Council together should not have the power to pay reparations. It is rife for abuse. Additionally, it punishes the innocent and allows the guilty to go scot free, the opposite of what you might wish. If the mayor wishes to pay reparations from his own pocket it would be magnanimous of him, otherwise no.

My view is that the city should not even defend city employees accused of breaking state law or city policy. That would at least provide some small incentive for city employees to do the right thing.

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That Old Style Religion

There’s a nice essay at City Journal on what we have lost or in peril of losing: true liberalism. There was a time in which liberalism meant “freedom” rather than protection from being offended.

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