Other Than That, Mrs. Lincoln

Does anybody else find this study as obnoxious as I do?

The New America Foundation found that twice as many people have died in attacks by right-wing groups in America than by Muslim extremists since 9/11.

First off, it’s incredibly fatuous. When you drill down into the study itself you’re left with a somewhat different conclusion. If you exclude the largest terrorist attack not merely in U. S. history but in the history of the world, you’re left with fewer than a hundred deaths via terrorism in the U. S. over a period of 15 years. From that I draw two conclusions. First, that in a country of more than 300 million people a few nutcases will inevitably kill some people an claim political motives for it. No foreseeable law, enforcement, or anything else will stop that. It’s a combination of sheer numbers and personal empowerment.

Also by the logic of the red shoes it tells you that concern about mass terrorist attacks, particularly mass terrorist attacks with state backing, are a legitimate concern. Who are today’s candidates for such state sponsorship? Saudi Arabia, Iran, and Pakistan. It’s just not Russia’s style. And China’s anti-U. S. actions are targeted at gain rather than terror.


There Are No Presidential Candidates

I’m getting tired of writing about the security breach at at the Office of Personnel Management. I just finished reading the Wall Street Journal editors’ take:

While little noticed, the IRS admitted this spring it was also the subject of a Russian hack, in which thieves grabbed 100,000 tax returns and requested 15,000 fraudulent refunds. Officials have figured out that the hackers used names and Social Security data to pretend to be the taxpayers and break through weak IRS cyber-barriers. As Wisconsin Senator Ron Johnson has noted, the Health and Human Services Department and Social Security Administration use the same weak security wall to guard ObamaCare files and retirement information. Yet the Administration is hardly rushing to fix the problem.

Way back in March 2014, OPM knew that Chinese hackers had accessed its system without having downloaded files. So the agency was on notice as a target. It nonetheless failed to stop the two subsequent successful breaches. If this were a private federal contractor that had lost sensitive data, the Justice Department might be contemplating indictments.

Yet OPM director Katherine Archuleta and chief information officer Donna Seymour are still on the job. Mr. Obama has defended Ms. Archuleta, and the Administration is trying to change the subject by faulting Congress for not passing a cybersecurity bill. But that legislation concerns information sharing between business and government. It has nothing to do with OPM and the Administration’s failure to protect itself from cyber attack.

which illustrates not just rank incompetence but outright indifference to the nuts and bolts of running the government.

When Barack Obama first ran for the presidency in 2008, he was something of a cipher. At this point there are a few things we can say about him with some confidence. He’s got his eyes firmly on the history books. He has complete confidence in his own abilities and opinions. And he has almost complete indifference verging on disdain for either the process of managing the federal government or for ordinary politics.

Which brings us around to the field of those running for the presidency. We don’t need another Barack Obama at this point. Despite their large number there are few substantial candidates. I can only see three. First there’s Jeb Bush against whose candidacy I have grave reservations on republican grounds. Then there’s Rick Perry who strikes me as a charming, handsome numbskull. Finally, there’s Carly Fiorina who has an asterisk next to her name because of her ouster from HP.

On the Democratic side there’s bupkis. Hillary Clinton is neither an effective politician nor a manager. She’s basically Barack Obama in a pants suit. Bernie Sanders might be a politician but he’s no manager. Anybody else is hanging back.

Bring me giants!


Do the Math

Jonah Bennett wonders why the U. S. Navy is paying Microsoft $9 million to support its Windows XP systems:

The Navy plans to eventually transfer away from outdated software, but in the meantime, the service is willing to spend more than $9 million dollars to maintain Windows XP on 100,000 workstations.What do you think?

Transition efforts to a new operating system kicked off in 2013, but two years wasn’t long enough to complete the process, leading the Space and Naval Warfare Systems Command to sign a contract with Microsoft to the tune of $9,149,000 dollars to keep old operating systems alive, The Hill reports. Adm. Jonathan W. Greenert issued a directive called “Windows XP Eradication Efforts” last year, detailing best practices for weaning the Navy off the platform.What do you think?

Over time, the contract may expand to $30.8 million dollars, which would stretch the lifespan of the XP systems up until 2017, even though Microsoft considers the product obsolete. The contract also includes support for Office 2003, Exchange 2003 and Windows Server 2003.

It’s easy to understand if you do the math. The old XP workstations will almost undoubtedly not support Windows 7 let alone something more recent. Even if it’s possible upgrading them will probably cost about the same as a new system. 100,000 systems X an average of $400 per system is $40 million. Even if the eventual cost of the contract is $30 million they’re still saving money.


They’re Wrong

James Taranto quotes from South Carolina Gov. Nikki Haley’s plea to remove the Confederate battle flag from the state’s flag:

For many people in our state the flag stands for traditions that are noble. Traditions of history, of heritage and of ancestry.
The hate-filled murderer who massacred our brothers and sisters in Charleston has a sick and twisted view of the flag. In no way does he reflect the people of our state who respect, and in many ways, revere it.
Those South Carolinians view the flag as a symbol of respect, integrity and duty. They also see it as a memorial. A way to honor ancestors who came to the service of their state during time of conflict. That is not hate, nor is it racism.

If it’s not racism, it’s rebellion. The South rose in rebellion against the Republic to defend slavery. However you may twist it, that’s the bottom line.

The ancestors they’re revering were rebelling against the Republic which is ultimately to rebel against republican government itself. To see that as noble or a heritage worth preserving is mistaken.

Southerners are not the only ones who have ancestors. Today there are millions of Northerners who still bear the economic and social consequences of having lost fathers and brothers and, importantly, income or land as a consequence of the Civil War and many are not even aware of it. Honoring those who rose in rebellion means dishonoring those who defended the Republic. It is a zero-sum proposition.

Let the dead past bury its dead. The Confederate battle flag belongs in the past.


Which States Recovered?

I think I find Edward Lazear’s explanation of which states recovered and which didn’t a bit too simplistic:

There are a number of ways to categorize a state’s business climate. I focused on labor policies and average tax rates. On average, I found that employment growth is twice as high in states that have a right-to-work law and minimum wages that are below average across states, and the difference is “statistically significant”—meaning that it is unlikely to have occurred by chance. GDP grows about 11/2 times faster over this period in those states.

A state’s labor policies were gauged by its minimum wage relative to other states (or the federal minimum when binding) and whether it had a right-to-work law—which generally prohibits requiring employees to pay dues to a union. Throughout most of the period from 2000 to March 2015, there were 22 right-to-work states. The proportion of a state’s GDP that is taken through taxes varies across states from a high of 12% in New York to a low of 5% in Alaska. The relevant data are available from the Labor Department, the Commerce Department’s Census Bureau and from the Tax Foundation, a nonpartisan research group.

Nevada, Utah, Texas, Arizona and North Dakota enjoyed the highest growth. All have market-oriented labor policies and all but one (Utah) have tax rates that are below average. The poorest performers: Michigan, West Virginia, Mississippi, Illinois and Ohio. Only Mississippi has market-oriented labor policies and four out of five (again excepting Mississippi) have tax rates that are above average. These results do not diverge greatly from a 2014 report for the American Legislative Exchange Council by Arthur Laffer, Stephen Moore and Jonathan Williams, “Rich States, Poor States.”

Indiana, Michigan and Wisconsin changed their right-to-work status during the past three years, although Wisconsin did so too recently to have much of an effect. The before-after comparison is striking. Before the recession, without right-to-work laws, these states averaged slightly negative employment growth that was well below the national average. After right-to-work, growth in these states was 11/2 times the national average.

I don’t think that point to the deepness of the recession in some states or their adopting market-based policies or right-to-work laws quite does it. Would North Dakota have prospered in the absence of an oil boom? How about Texas?

I think it’s possible to come up with a model for individual states’ recoveries based on the states’ dependence on different sectors without any recourse to the tax, employment, etc. policies in those states at all. Does anyone really think that the income growth in Washington, DC has to do with anything but the federal government? Or that if the financial sector had been allowed to collapse (as I thought at the time and continue to think it should have been allowed to do) that New York would have done just fine, thank you?

All things considered I think we need to conclude that the varied conditions among the states tells us that one policy size does not fit all which in turn means that micromanagement from Washington is counter-productive. On the other hand if the federal government just dropped a big block grant on Illinois I strongly suspect it would just have disappeared beneath a tsunami of public payroll expansions, pay raises, and pension increases and a few years later the state would be in no better shape than it had been before the block grant. If I knew how to solve Illinois’s problems, I’d be telling you about my brilliant solution. I think the only path forward for Illinois is to do a lot of stuff that nobody really wants to do which is why they’re avoiding doing them. I’m pretty sure that Mayor Emanuel’s second mortgage plan for the city of Chicago isn’t going to do much other than kick the can down a road of which the end is already in sight.



Some interesting decisions today and I hope I’ll have time later on to comment on them. I wish I’d had money riding on when the Supreme Court would hand down their rulings in King v. Burwell and Obergefell v. Hodges. I’ve been right so far and I continue to think they won’t release either of those decisions until the very last minute.


Where Is the Growth?

As is typical for economists, Glenn Hubbard and Kevin Warsh do a much better job of stating the problem than in proposing solutions in their Wall Street Journal op-ed:

The recession was officially over in mid-2009, and toward the end of that year the economy showed signs of recovery. A massive fiscal spending stimulus had been signed into law. The Federal Reserve was embarking on an unprecedented monetary accommodation. Leading economists and forecasters predicted the economy would respond to this policy elixir with a great surge in performance.

On Dec. 9, 2009, for example, the Federal Reserve staff presented its “Long-Term Outlook” for economic growth to the Federal Open Market Committee. In the so-called Greenbook forecasts, Fed staff projected that real GDP would grow by 3.6% at an annual rate in 2010, increase to 4.5% in 2011, peak at 4.7% in 2012 and 2013, and then grow 3.2% in 2014. These kinds of growth rates were not without precedent, and the Fed’s forecasting record compares favorably with the Blue Chip forecasts of private forecasters.

But growth has been about one-half of the Fed’s projections. The country has experienced the weakest expansion since World War II. Participation in the labor force is near its lowest level since 1978. The country is in the midst of the worst five-year run for productivity ever measured outside of a recession. All the while, households and businesses with big balance sheets have been enriched by the superior performance of the stock market.

While I think the Obama Administration’s and the Democratic Party’s culpability in what we’re seeing is debatable, I think we should agree with Shakespeare that nothing will come of nothing and we need some solutions that target the problems. Here are Mssrs. Hubbard and Warsh’s proposals:

This means policies that bring more people into the workforce. It means encouraging real capital investment to drive higher levels of productivity growth. It means resetting long-run expectations of potential for every individual, household and business. It means making the United States the best place in the world in which to invest and work.

Examples? Fundamental tax reform that is directed at increasing the incentives for work and driving investment in productive assets. Real regulatory reform that firmly and consistently recognizes, measures and balances economic benefits and costs—and no longer protects incumbent firms from disruptive new competitors. Tax and regulatory reform can make the United States the preferred destination for work and investment.

Trade policies must continue to break down non-tariff barriers to open global markets. Education policy must be geared toward empowering schools to put students and the skills they need above entrenched interests. And support for training can foster investment in skills over time.

As the logicians might say, those may be necessary but will they be sufficient? I don’t think so and I’ll try to expand on that in a later post. Suffice it to say that I think that the Obama Administration and Democratic Party’s views are dominated by a zero-sum view of the economy and that they’re much more deeply committed to divvying up the economic pie than they are to increasing its size.


This Above All

There is one central point in Lawrence Summers’s Washington Post op-ed on an orderly Greek exit (“Grexit”) from the euro and is that nothing is ever the bankers’ fault:

Greek Prime Minister Alexis Tsipras needs to do what is necessary to make reaching an agreement politically feasible for his fellow Europeans. That means dropping ideological rhetoric about a new European approach and recognizing that Greece’s problems are significantly of its own making, and making clear that he is absolutely committed to doing what is necessary to stay in the euro zone. He needs to be clear that he will accept further value-added tax and pension reforms to achieve primary surplus targets this year and next but that he expects a clear recognition that if Greece does its part, debt will be written off on a large scale.

German Chancellor Angela Merkel and European authorities must do what is necessary to make policy adjustments politically tenable in Greece. That means acknowledging that the vast majority of the financial support given to Greece has gone to pay back banks rather than to support the Greek budget. They must agree on debt relief and recognize the degree of adjustment in Greek spending that has taken place: with nearly 30 percent of government workers laid off. It also means announcing their intention to accelerate economic growth throughout Europe.

For every borrower there must be a lender. If Greece’s borrowing is irresponsible than so was the lending by German banks. For every country whose economic policy depends primarily on the positive effects of a common currency on exports there must be others who will suffer from those effects.

For Greece’s problems to be solved Germans must come to the realization that German prosperity has grown from what they have viewed as Greek profligacy. The Germans didn’t pull themselves up by their bootstraps following World War II. They received massive assistance from the U. S. and Britain, particularly the U. S. Now it’s their turn to assist Greece.

I don’t believe the Germans will renounce their present political and economic beliefs and, consequently, I don’t believe there will be an orderly Grexit. It will be messy.


The Problem of Value

One of the very first things you’ll learn in an Introduction to Economics course is the problem of value. There is no such thing as a “true value” of a good or service. The closest approximation we can make is based on willingness to pay. The price of something is whatever people are willing to pay for it.

In his post in reaction to Francis’s papal encyclical, Tim Worstall makes another significant point about value:

The second problem here is a logical one. Stemming again from a definitional error. We do not assume that infinite or unlimited growth is possible because there’s that infinite supply of the earth’s goods. On the grounds, described above, that the first thing we do note is the scarcity of those resources. Rather, we note that economic growth is not dependent upon the supply of the earth’s goods. Economic growth is defined as an increase in the value created, that value being defined as whatever subjective and or arbitrary value human beings put on what is created.

As an example, human beings appear to value MP3 files. The creation of a new MP3 file, containing new information or sounds, is not notably constrained by the consumption or supply of the earth’s goods. Nor is the duplication of an extant MP3 file so constrained: but there is that increase in value as defined by human beings.

The supply of resources, of the earth’s goods, is indeed limited. But given that value itself is not a physical thing, the amount of value that can be created is not limited by the supply of physical inputs or goods.

Since value is not limited by the amount of physical inputs or goods, even in the face of scarcity we can continue to grow and prosper. For an example of this, simply look around you. A century ago most American were engaged in farming, mining, cutting lumber, fishing and the like—primary production. Today most American are employed in retail, hospitality, professional services, finance, and healthcare—secondary production.


Conspicuous Christianity

This week we have seen two conspicuous examples of genuine Christianity. The first was in Francis’s papal encyclical teaching our shared responsibility to preserve the environment in which we all live and to the poor:

The urgent challenge to protect our common home includes a concern to bring the whole human family together to seek a sustainable and integral development, for we know that things can change. The Creator does not abandon us; he never forsakes his loving plan or repents of having created us. Humanity still has the ability to work together in building our common home. Here I want to recognize, encourage and thank all those striving in countless ways to guarantee the protection of the home which we share. Particular appreciation is owed to those who tirelessly seek to resolve the tragic effects of environmental degradation on the lives of the world’s poorest. Young people demand change. They wonder how anyone can claim to be building a better future without thinking of the environmental crisis and the sufferings of the excluded.

Lost in the predictable kneejerk reactions and political posturing was the essential truth that unless our actions are informed by values other than mere acquisitiveness we are all in desperate trouble. We can and will disagree with the pope in his views on economics or in our decisions on what policies should be pursued but I hope we can agree with him on the values that should inform those policies.

The second example was the reactions of the families of the victims of Dylann Roof during initial court appearance in Charleston:

Relatives of the Charleston church shooting victims gave emotional statements during Dylann Roof’s initial court appearance Friday, some of them breaking into sobs as one after another they told the man suspected of killing their loved ones that they forgive him.

“You took something really precious from me. I will never talk to her again,” the daughter of 70-year-old Ethel Lance, one of nine people killed in Wednesday’s massacre, said. “But I forgive you and have mercy on your soul. You hurt me. You hurt a lot of people. But God forgives you. I forgive you.”

They didn’t respond that way because they were weak or indifferent but because they knew they couldn’t call themselves Christians unless they responded to even the most grievous injury with forgiveness because that’s what Christians are called to do.

Through the years we have been deluged with reports of the many hypocrisies and evil deeds performed by Christians in blatant contradiction of what they claim to profess. There’s an expression that’s at least half a millennium old—tell the truth and shame the devil. Those two examples of conspicuous Christianity are the truth about it and I hope we see much, much more of it.