You are browsing the archive for 2014 January 09.

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Extortion!

January 9, 2014 in Economics

By Randall Holcombe

I’ve recently read Peter Schweizer’s book, Extortion: How Politicians Extract Your Money, Buy Votes, and Line Their Own Pockets.  The book offers a solid account of the way politicians use their political power to extract money from interest groups for the benefit of the Permanent Political Class.

Interest group activity is often viewed as bribery: interests offering campaign contributions and other benefits to legislators to get legislators to pass legislation those groups favor.  Schweizer argues that the reality is the opposite: legislators hold out on putting legislation up to a vote unless interest groups who support it pay up; or worse, legislators threatening to pass legislation that will harm those interests, unless they pay the legislators to kill the legislation.

Payment typically comes in the form of “contributions” to campaign coffers, and Schweizer explains in detail how legislators are able to convert funds for their personal benefit, using lots of real-world examples.  In addition to personal consumption, legislators can hire friends and relatives, and can extort firms to hire their friends and relatives.

The book explains how the legislative process really works.  It is the antidote to what is typically taught in public school civics classes.  The book offers numerous examples, and is well-documented and footnoted.  Every American should read this book.

…read more

Source: MISES INSTITUTE

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USA Today Op-Ed: Expand Jobs Not Jobless Benefits

January 9, 2014 in Politics & Elections

For the past few weeks, the country has been having a lively discussion about jobs and unemployment benefits. It’s an important discussion to have. The nation is enduring the weakest recovery since the Great Depression, 11 million people remain unemployed, and millions more have dropped out of the labor force.
For minorities, it’s even worse. The black unemployment rate is more than twice that of whites. And the weak job market means that even those who are employed are having a hard time climbing the economic ladder.

There’s a lot of talk about helping those down on their luck, but there’s a big divide on the best approach. Our view is that America needs a growth agenda based on reducing the burden of government. The unemployed need a strong job market, not endless handouts that create dependency.

Critics have said it is ‘insulting’ and ‘ridiculous’ to warn that there may be some adverse consequences to extending unemployment insurance beyond the typical 26 weeks – even if the debate is about doing so for the 12th time in the last five years.

We should be having a debate about whether extending long-term unemployment benefits has consequences for the unemployed, the employed, and America’s economy.

In 1990, economists Bruce Meyer and Lawrence Katz released a research paper emphasizing two important points regarding unemployment benefits. First, unemployment levels begin to drop around the time benefits are likely to lapse, suggesting a greater incentive for individuals to participate in the labor force when benefits are about to end. Secondly, they point out that unemployment benefits do impact worker’s willingness to start new jobs, thus prolonging the duration of unemployment.

More recently, a 2013 study by four economists from the National Bureau of Economic Research found that, ‘Because unemployment benefit extensions represent an implicit tax on market work, they subsidize unemployment and discourage labor supply.’

Furthermore, a number of studies reflect the opinion of Harvard economist Raj Chetty, who found that extending unemployment benefits has costs, including extending the duration of unemployment by reducing incentives for workers to find jobs or diminishing the intensity to join the workforce.

Some economists on the left have argued that the results of these studies are invalid when the job market is weak. But research by economist Stefan Bender found that extending benefits during a recession prolongs the duration of unemployment, even if less so than during an economic boom.
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Source: RAND PAUL

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The Economics Of Troubleshooting

January 9, 2014 in Economics

By Mises Updates

6633

Jason Maxham writes in today’s Mises Daily: 

If we look at the contents of any landfill we quickly realize troubleshooting is a stellar example of this “fundamental problem.” Broken machines vastly outnumber the resources to fix them! Given the disparity between the quantity of breakdowns and the means to mend them, the end result is: what gets fixed is subject to a harsh but necessary triage based on people’s most pressing needs. Only the most important systems will be worthy of being fixed.

When a machine breaks down, the entirety of the economic calculation that gave rise to its purchase will be thrown into stark relief. Questions arise. What need was it fulfilling? Is the need still present? If so, what resources will be diverted to fix the machine? Will you choose a cheap, quick fix or go with a more expensive, longer-lasting solution? Or, should the machine be replaced instead?

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Source: MISES INSTITUTE

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Audio: Robert Murphy discusses his new class ‘Introduction to the Free Market’

January 9, 2014 in Economics

By Mises Updates

This Mises Acdemy Course beings tonight!

Interviewed by host Alan Butler, Bob Murphy talks about a course he is teaching entitled “Introduction to the Free Market”

(Mp3, 26 minutes)

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Source: MISES INSTITUTE

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Sen. Rand Paul Appears on Fox's On the Record with Greta Van Susteren – January 8, 2014

January 9, 2014 in Politics & Elections

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Source: RAND PAUL

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Paul, McConnell Push Economic Freedom Zones as Amendment to UI Extension

January 9, 2014 in Politics & Elections

Washington, D.C. – U.S. Senate Republican Leader Mitch McConnell made the following remarks on the Senate floor today regarding their proposal to create economic freedom zones, which are designed to help some of the most impoverished areas in the nation:
‘For months, the Democrats who run Washington have been desperate to distract from the pain of Obamacare.
‘And now, if you listen to them, they think they’ve found something that might work.
‘The one thing they think can actually distract folks from the misery of this law is the misery of an economic malaise that they’ve presided over for five years.
‘I mean, you really have to hand it to them in one respect. It takes a lot of chutzpah to spend an entire presidential term pushing policies that are supposedly meant to help the little guy, and then turn around and blame everybody else when they flop.
‘But chutzpah won’t solve the problem. And the poll-tested talking points and failed ‘stimulus’ ideas we’ve seen Democrats trot out thus far, well, they won’t do much to improve the plight of millions of Americans struggling in today’s economy either.
‘To me, that’s the real tragedy. Because the discussion about how to help Americans who battle against the odds, day after day – that’s a conversation we should be having. In fact, it’s a debate Republicans are having. In recent days, we’ve seen several leading Republicans talk about how to tackle poverty in the 21st Century.
‘And unlike the Democrats’ outdated ideas from the 60s, Republicans are thinking about ways to update our nation’s approach with fresh proposals that speak to the situation Americans actually find themselves in today.
‘The Republican approach is to learn from past mistakes.
‘It’s about turning the Left’s good intentions into policies that can actually get the job done.
‘And it’s about moving beyond the treatment of symptoms, and getting at underlying problems.
‘That’s the thinking behind the Economic Freedom Zones Act, which Senator Paul and I recently introduced. It aims to shine a light into some of the most impoverished corners of our country … to raise up cities and families who’ve been left behind, and sometimes crushed, by outdated ideas from the 60s. And to do it in a way that lasts.
‘With this legislation, some of the most disadvantaged areas of our country would acquire the ability to apply for an Economic Freedom Zone status that would help lift the burden on some of the poorest …read more

Source: RAND PAUL

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North Korean Politics as Blood Sport: China May be a Target Too

January 9, 2014 in Economics

By Doug Bandow

Doug Bandow

North Korea has never been an easy ally for the People’s Republic of China. With the execution of Jang Song-taek, Kim Jong-un’s uncle and supposed mentor, Beijing’s uncertain clout in Pyongyang is at risk. The PRC could be the big loser as the Jang purge expands.

“Dear Leader” Kim Jong-il has been dead barely two years, but his son appears to have turned politics there into blood sport. A fall from grace in the Democratic People’s Republic of Korea never was pleasant, and three generations of a family were punished when anyone challenged or betrayed the regime. Public executions occurred whenever a fall guy was required.

The North is a geopolitical tragedy, with the latest purge in Pyongyang highlighting the regional uncertainty created by this small and impoverished state.”

Nevertheless, while family members, including Jang under both Kim Il-sung and Kim Jong-il, were commonly sidelined, they never were publicly executed. Even non-family members were typically said to have retired because of health when they were purged.

Now the game has changed. Maybe Kim Jong-un decided it was time to dispense with his regent, and do so in a manner which left no doubt about who was in charge. Perhaps Jang open challenged Kim, learning that lese majeste was a death offense. Or Kim might have been pushed by another faction—in this case Jang rival Choe Ryong-hae and the military, which Jang is thought to have challenged—to eliminate its most dangerous rival.

Although Kim appears to be in firm control, the circumstances are extraordinary, meaning the system may more fragile than it appears. A quick execution is as much a sign of weakness as strength, suggesting the need to dispatch a dangerous rival who might gather support. Undertaking a broad and deadly purge—already hundreds of Jang family members and allies are said to have been arrested or recalled from overseas—creates not only uncertainty but desperation, which might spark unexpected resistance.

The most obvious concern over the DPRK concerns a foreign policy which has gotten more erratic and confrontational since Kim Jong-il’s death. Kim regularly employed brinkmanship as policy, but always seemed to know just when to stop. Kim fils has demonstrated no such limits. His latest threat of war against South Korea went by fax to Seoul. The possibility of mistake or miscalculation seems much higher.

There also is rising doubt as to the PRC’s ability to offer a moderating influence …read more

Source: OP-EDS

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Why Is the Federal Government So Wasteful?

January 9, 2014 in Economics

By Chris Edwards

Chris Edwards

I’ve followed federal budget issues for two decades, and there has been a never-ending stream of scandals regarding wasteful spending. Programs do not work, officials get caught frittering away taxpayer money, and many unscrupulous people are ripping off federal benefits. The Obamacare website disaster and the recent (and huge) disability fraud bust in New York City are just the latest scandals.

Federal waste is not a modern phenomenon. As far back as the 19th century, the Bureau of Indian Affairs was rife with corruption and the Army Corps of Engineers was already known for pork-barrel spending and chronic cost overruns on projects.

The only real solution to the ongoing waste in the federal government is to downsize it.”

Wasteful spending is a fundamental problem with the way the government works. Private businesses can also make bad decisions, have cost overruns, and misallocate investments. But private markets have built-in mechanisms to minimize those problems, whereas the government does not.

Here are 15 reasons for federal government wastefulness:

1.  The government has become so huge that federal auditors, private watchdogs, and congressional oversight committees cannot even begin to review all the spending. The federal government funds more than 2,200 subsidy and benefit programs, and they are all susceptible to waste, fraud, and abuse.

2.  People tend not to spend other people’s money as carefully as they spend their own. For federal decision makers, the source of funding for their favored programs can seem to be distant or abstract, but private-sector decision makers must weigh the costs and benefits of spending their own money.

3.  Unlike in the private sector, poorly performing federal agencies are not subject to takeover bids, nor do they go bankrupt, and thus there is no built-in system to eliminate failed activities. In the private sector, roughly 10 percent of U.S. companies go out of business each year, and corporate executives get ousted all the time. In the private sector, poor performance gets punished.

4.  There are more political rewards for federal policymakers to add new programs and expand existing ones than to weed out low-priority programs and waste. By contrast, private-sector decision makers are forced by bottom-line pressures to make tough decisions.

5.  Federal managers face no profit incentive, giving them little reason to proactively reduce waste and cut costs. Indeed, without profits to worry about, federal managers often favor budget increases without any idea about whether expansion will …read more

Source: OP-EDS

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The Great U.K. Immigration Scare

January 9, 2014 in Economics

By Dalibor Rohac

Dalibor Rohac

Romanians and Bulgarians have not spent the first 10 days of the new year flooding into the U.K., as many Britons had feared. Regardless, Britain’s elimination on January 1 of immigration restrictions for citizens of new EU countries has triggered an intense public debate. Unfortunately, many supposed defenders of free markets have picked the wrong side.

Douglas Carswell, a back-bench Conservative MP reputed for his strong libertarian leanings, explained in December that “migrants who contribute should be welcomed. But opening the doors to Bulgarians and Romanians could create real issues.” According to Nigel Farage, a European parliamentarian and leader of the U.K. Independence Party, the single most important criterion for letting immigrants into the U.K., from Europe or anywhere else, is whether they are going to be net contributors to the U.K. economy. That means, per Mr. Farage, that they be able to earn at least £27,500 a year.

Brits should stop worrying and learn to love the free movement of people.”

There is nothing wrong with having a debate about the generosity of the British welfare state towards immigrants. The Conservative-led coalition government’s proposal—to restrict EU migrants’ access to benefits—is not by itself unreasonable. But self-described libertarians are making a grave mistake when they suggest that immigration itself ought to be subjected to stricter controls or quotas.

Most economists would agree that there are enormous economic gains from freeing the movement of people—much larger than from further liberalization of trade or capital movements. Removing all barriers to immigration could easily double world GDP, according to sober estimates. No one is advocating open borders for the U.K., but making immigration freer than it is would almost certainly make Britain and the world better off.

There is remarkably little evidence to support the idea that the inflow of workers into the U.K. since the first wave of EU enlargement in 2004 has exercised any significant downward pressure on wages or increased unemployment among the British. Even economist Paul Collier of Oxford University, who has called for tighter immigration restrictions, acknowledged in his book “Exodus” last year that “the effects of migration on the wages of indigenous workers are trivial relative to the fuss that has been made about them.” Immigrants do not simply compete against the natives for a fixed number of jobs; they make it possible for jobs to be created that would not exist at all without …read more

Source: OP-EDS

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The Complex Calculus of a North Korean Collapse

January 9, 2014 in Economics

By Doug Bandow

Doug Bandow

The Democratic People’s Republic of Korea remains a sui generis communist monarchywrapped in mystery, prone to sporadic brinkmanship and violent spasms. The young leader’s surprise execution of his uncle suggests regime instability, which might spark new international provocations for domestic political purposes.

The latest events have rekindled predictions of a possible North Korean collapse. The greatest danger is that the US would get drawn into the resulting chaos and conflict. Warned the Rand Corporation’s Bruce W. Bennett: “Inadequately prepared, the ROK and the United States could suffer many serious consequences, including a failed or aborted intervention, a destabilization of the region, and possibly broader warfare.”

The Korean peninsula became a U.S. security concern when the US and Soviet Union divided the former Japanese colony after Tokyo’s World War II surrender. Two competing and hostile states emerged, leading to the Korean War. The Truman administration intervened to prevent the DPRK from conquering the South; U.S. troops remained.

Today, however, the Republic of Korea possesses roughly 80 times the North’s GDP and more than twice the latter’s population. Seoul could do whatever it takes to defend itself. The DPRK retains sizeable armed forces but lacks advanced weaponry, combined arms training, adequate human capital, and quality industrial infrastructure. Neither the People’s Republic of China nor Russia would back a North Korean attack. Even Kim probably recognizes that the North would lose.

More likely is a North Korean collapse. Bennett has argued that “There is a reasonable probability that North Korean totalitarianism will end in the foreseeable future.” Columnist Steven Metz recently contended: “The question is not whether the Kim dynasty will fail but when.” Three years ago analyst John Guardiano said the North would “inevitably” implode.

Of course, the Kim dynasty has outlived the Soviet Union by more than two decades. The DPRK may continue to surprise the West with its resilience.

Nevertheless, the system is under increasing stress. Metz observed: “The execution could be a sign that the cohesion of the North Korean elite is crumbling. If so, it is the beginning of the end for the parasitic Kim dynasty.” Jang’s elimination suggests weakness, not strength. Jang’s relatives are being imprisoned at home and recalled from abroad; his wife, Kim’s aunt by blood, has disappeared from public view.

Any future political battle could turn even more violent. A breakdown of one-man rule in what Bennett called a “failing state” risks a political free-for-all. The …read more

Source: OP-EDS