You are browsing the archive for 2014 September 10.

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US Spy Planes Monitoring China at Close Range: Legal, But Unwise

September 10, 2014 in Economics

By Ted Galen Carpenter

Ted Galen Carpenter

Recent incidents in which Chinese fighter aircraft challenged U.S. surveillance planes have added a new level of tension to an already frayed bilateral relationship. It is fairly certain that the encounters took place in international airspace, although they were in the vicinity of China’s Hainan Island. From a purely legal standpoint, Washington’s surveillance flights are justified, but from a policy standpoint, they are needlessly provocative.

There are contentious underlying issues to the latest aerial spat between Beijing and Washington. Because the United States sees itself as a global power with important interests throughout the Western Pacific and East Asia, U.S. officials are uneasy about China’s increased flexing of its geostrategic muscles. In particular, as a leading air and maritime power, Washington opposes Beijing’s attempts to establish special rights for itself in that region. Consequently, the Obama administration openly defied China’s announcement last year of an Air Defense Identification Zone in the airspace over the East China Sea.  Similarly, U.S. officials staunchly oppose Beijing’s ongoing territorial claims in the South China Sea, including an apparent bid to establish a vast exclusive economic zone. From Washington’s perspective, Beijing’s moves indicate a strategy to make regions that are now considered international airspace and international waters into de facto Chinese territory.  That ploy, the United States and its East Asian allies all agree, is utterly unacceptable.

Washington’s surveillance flights are justified, but from a policy standpoint, they are needlessly provocative.”

The recent incidents involving U.S. surveillance aircraft must be viewed within that larger context. U.S. officials are adamant that the United States has a legal right to conduct such flights in all international airspace—even in areas close to the Chinese coast. Harassment of those flights by PLA fighter planes is seen as more evidence of Beijing’s belligerent campaign to narrow the rights that other countries possess under international law.  The point is a valid one, and the United States understandably resists China’s attempts to refashion longstanding aspects of international law to its advantage.

Washington’s legal position on the matter of surveillance flights also is unassailable. But what is legal is not always prudent. It is probably not a coincidence that the latest confrontations have taken place in the airspace near Hainan Island. There is strong evidence that China maintains a vital submarine base in that area and, therefore, does not welcome U.S. snooping in the vicinity of such a sensitive installation. …read more

Source: OP-EDS

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“We” Are Doing Great Things

September 10, 2014 in Economics

By Robert Higgs

220px-We_first_ed_dust_jacket

I never went to the moon. I never even wanted to go there. So you can just stop talking about how “we went to the moon” or how “we sent men to the moon.”

If other people want to go to the moon or to send someone else there, I have no objection provided they do not force me to contribute any part of the funds needed to pay for the project.

Remember, however, that no matter how impressive an engineering feat someone’s going to the moon might be, it indicates absolutely nothing about “our” ability to solve pressing economic, social, or political problems. To suppose that it does shows that one has no real understanding of the nature of such problems.

…read more

Source: MISES INSTITUTE

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Long-Term Unemployment Benefits Expire; Long-Term Unemployment Falls

September 10, 2014 in Economics

By Randall Holcombe

250px-Unemployed_men_queued_outside_a_depression_soup_kitchen_opened_in_Chicago_by_Al_Capone,_02-1931_-_NARA_-_541927

The unemployment rate has fallen from 6.7% at the end of 2013 to 6.1% in August 2014. That decline is primarily the result of the expiration of long-term unemployment benefits.

Unemployment compensation usually expires at the end of 26 weeks of unemployment, but during the last recession Congress extended that period, and many states paid benefits for well over a year. If we pay people to be unemployed, we should expect more unemployment, and that’s what we got. The long-term unemployment rate skyrocketed during the recession because we paid people to be unemployed longer.

In August 2013, when people were eligible for extended unemployment benefits, people unemployed for 27 weeks or more made up 38% of total unemployment. In August 2014, after extended unemployment benefits had been eliminated, only 31.2% of the unemployed had been unemployed that long.

Looking at this table from the Bureau of Labor Statistics, we see that the number of people unemployed for less than five weeks has actually risen from August 2013 to August 2014, while the number unemployed 27 weeks or more has declined by more than 30%.

The decline in the unemployment rate isn’t due to fewer people who are newly-unemployed, it is due to the shorter duration of unemployment for those who are unemployed. And people have shorter durations of unemployment now because we are no longer paying them to be unemployed for longer periods.

Many government policies have prolonged the recovery from the 2008 recession, and one was the extension of unemployment benefits. In hindsight, it is easy to look at the data and see that once long-term unemployment benefits were eliminated, long-term unemployment fell, and because of the shorter duration of average unemployment, the unemployment rate has fallen.

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Source: MISES INSTITUTE

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The Economics of American Pickers

September 10, 2014 in Economics

By Ryan McMaken

6874

Mises Daily Wednesday by Joel Poindexter:

The television show American Pickers shows many economic concepts in action, such as comparative advantage and specialization and trade, and it also illustrates numerous Austrian insights such as subjective value and the role of the entrepreneur.

…read more

Source: MISES INSTITUTE

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U2 Gives Away New Album, Makes Money by Serving Customers

September 10, 2014 in Economics

By Ryan McMaken

200px-EdisonPhonograph

Sometimes being an entrepreneur means just seeing the writing on the wall. Amazingly, there are still Intellectual Property dogmatists out there who think it’s fine that the FBI runs around arresting the band’s own fans for making copies of digital files, but U2 has apparently figured out that ship sailed long ago, and is giving away the band’s latest album.   While some artists are trapped in a mid 20th-century time warp – and think that musicians should be able to make money for selling a recording of a song recorded decades before – U2 accepts that in order to make money, they might have to do actual work, such as touring and giving their fans what they want.

Anyone who has followed popular music over time knows that changes in technology (e.g., the 12-inch single) constantly change the nature of the business and the kind of music that gets recorded. The proliferation of infinitely-copyable digital files is no different, and the artists who have figured this out and serve their customers, will make much more money (ceteris paribus)  that those artists who think the fans exist to do what the artist wants. In other words, those entrepreneurs who better serve society will be more handsomely rewarded.  Those who have contempt for their customers will disappear.  This is the basic equation of entrepreneurial activity.

U2′s latest move also adds an additional nail to the coffin of the old system of charts and RIAA certifications such as certified “gold” records. “The charts” have been meaningless for years in the face of new technology, and U2 knows this. Anything that inceases the irrelevance of the RIAA, BFF of SOPA, can’t be bad.

…read more

Source: MISES INSTITUTE

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Nation Building Isn’t Needed to Fight ISIS

September 10, 2014 in Economics

By Christopher A. Preble

Christopher A. Preble

In his speech to the American people tonight, President Obama aims to build support for a protracted military campaign against the Islamic State in Iraq and Syria (ISIS). 

It doesn’t have to be a hard sell. A majority of Americans support a military response—though not U.S. troops on the ground. Very few are content with allowing ISIS to spread its influence with impunity, especially after the brutal killing of the American journalists James Foley and Steven Sotloff. The group has effectively declared itself an enemy of the United States, and there is growing support for action against the group before it even attempts an attack on the U.S. homeland (something that it appears only to be aspiring to, as opposed to actively planning for).

The president should focus upon a narrow mission, and resist calls for yet another quixotic crusade in the Middle East.”

But taking the fight to ISIS means going back into Iraq, a country in which now four successive U.S. presidents have taken the nation to war, and the American people are understandably anxious about being sucked backed into a seemingly open-ended conflict. Thus, two questions are particularly relevant: First, how large a response is justified? And, second, what end state is acceptable?

The bipartisan Beltway consensus offers up predictable answers to these questions: the response should be massive, and we should be seeking the complete eradication of ISIS as a military and political movement. Indeed, the harshest criticism comes from those who argue that the president isn’t doing nearly enough.

In his appearance on NBC’s “Meet the Press” over the weekend, President Obama twice assured Americans that he was not contemplating U.S. boots on the ground. But some believe that the president should be preparing Americans for a major operation, one involving potentially many thousands of U.S. troops fighting in Iraq for an indeterminate period of time. Outspoken neoconservative Max Boot estimates that between 10,000 to 15,000 U.S. troops might ultimately be required in Iraq.

One should take such estimates with a large grain of salt. In 2003, Boot claimed that 60,000 to 75,000 U.S. troops could stabilize Iraq, disputing the higher number of 200,000 U.S. troops cited by military planners. A few years later, as Iraq descended into a brutal civil war that claimed over 400,000 lives, Boot was one of the most enthusiastic supporters of a larger U.S. presence there. …read more

Source: OP-EDS

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President Obama's Delayed Action on Immigration Is Part of a Long Pattern

September 10, 2014 in Economics

By Alex Nowrasteh

Alex Nowrasteh

President Obama’s much anticipated executive actions to reform immigration have been delayed, again. The president explained this by saying, “The truth of the matter is that the politics did shift midsummer because of that problem [unaccompanied children].” He further said he wants to “make sure that the public understands why we’re doing this, why it’s the right thing for the American people, why it’s the right thing for the American economy.” Regardless of his reasons, the president’s decision to delay executive action has angered many of his pro-immigration supporters.

However, those who support immigration reform should not be surprised by the president’s delay. President Obama has a long history of tightening immigration enforcement and only tepidly supporting reform.

Even when he was a senator, Obama voted for a poison-pill amendment that killed immigration reform in 2007. His vote for the Dorgan amendment, named after then-Sen. Byron Dorgan, D-N.D, gutted a portion of the bill and Republican support for the proposal along with it. The poison pill amendment passed 49 to 48 thanks to then-Senator Obama’s unexpected support.

President Obama has a long history of tightening immigration enforcement and only tepidly supporting reform.”

Obama’s actions as president are worse. Early in his administration he appointed noted immigration enforcer Janet Napolitano, the governor of Arizona who signed the strictest state level enforcement law up to that time, as head of the Department of Homeland Security (DHS). Under her watch, deportations skyrocketed as thousands of local communities were forced into a federal program called Secure Communities — a Bush era program to round up and deport unauthorized immigrants.

President Obama’s record deportations continued for years until early 2012. In that year, DHS shifted emphasis from deportations to border enforcement. Deportations remained high, but now more unlawful immigrants were removed with harsh consequences — spending long periods of time in detention facilities, going through immigration court, and being flown into the interior of Mexico.

This so-called “enforcement with consequences” policy packed immigration courts to the brim. Currently, almost 400,000 cases are waiting to be heard due to the prosecution of so many unlawful immigrants.

His administration also pursued regulatory rule changes that increased the barriers to legal migration. Rules for work visas in the tech sector, agricultural sector, and seasonal work were all toughened under his administration despite being loosened during the Bush administration.

To President Obama’s credit, in 2012 he pursued the Deferred Action …read more

Source: OP-EDS

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The Swept-Under-the-Rug costs of the Ex-Im Bank

September 10, 2014 in Economics

By Daniel J. Ikenson

Daniel J. Ikenson

Like all federal subsidy programs, the Export-Import Bank of the United States has cultivated a loyal following of corporate patrons who have grown accustomed to Washington flipping the bill for certain routine business costs. That is why the debate over congressional reauthorization of Ex-Im’s charter, which expires on Sept. 30, will reach a fever pitch this month. In the interests of fairness, free enterprise and economic growth, the Export-Import Bank should perish.

Ex-Im is a government-run export credit agency that arranges special financing to facilitate sales between U.S. companies and foreign customers. To many, that mission may seem benign, if not noble. Indeed, reauthorization supporters deploy the simple logic that since Ex-Im creates exports, and exports create growth and jobs, shuttering the bank will hurt the economy. But for those less easily seduced by such sleight of hand, there is more to the story. Ex-Im facilitates exports for some businesses, but at great cost to unsuspecting companies throughout the economy and across the 50 states.

In the interests of fairness, free enterprise and economic growth, the Export-Import Bank should perish.”

There are opportunity costs, representing the growth that would have occurred had Ex-Im’s resources been deployed optimally — or at least more efficiently — in the private sector. The “what-would-have-happened” counterfactual is difficult to estimate, however, as it requires a variety of assumptions about economic variables and their relationships. But it is a good bet that when government agencies make financing decisions based upon non-economic criteria, resources are not being used optimally.

There are also intra-industry costs — the relative disadvantages inflicted on direct competitors as a result of export subsidies flowing to a particular firm in the industry. If Ex-Im provides a $50 million loan to a foreign farm-equipment manufacturer to purchase steel from U.S. Steel Corporation, the transaction may benefit U.S. Steel, but it hurts firms like Nucor and the dozens of other domestic steel producers competing for the same customers at home and abroad. The $50 million “benefit” for U.S. Steel is a $50 million cost to the other steel firms. When government tilts the playing field in favor of a particular firm, it simultaneously penalizes the other firms in the industry and changes the competitive dynamics prospectively.

The downstream industry costs are borne by U.S. producers who compete with the subsidized foreign customer or who simply require the subsidized export for their own production. …read more

Source: OP-EDS

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Obamacare: Fewer Doctors, More Demand

September 10, 2014 in Economics

By Michael D. Tanner

Michael D. Tanner

Obamacare, as its advocates increasingly point out, has succeeded in expanding the number of Americans with insurance. Even though this achievement came at enormous cost, still leaves millions of Americans uninsured, and dumped millions more into Medicaid, this is still one of the few “successes” that the health-care law can claim.

However, health insurance and access to health care are not the same thing. And evidence is growing that Obamacare is likely to make it harder for us to see a doctor or otherwise obtain care.

The trends are not pretty if you’re a physician — or a person who needs medical care.”

Of course, we already know that the limited network of physicians available through most Obamacare exchange-based insurance plans is making it more difficult to see the doctor of your choice. Despite efforts by state regulators to mandate that insurers include more doctors and hospitals in their networks, most Obamacare plans, especially the comparatively low-cost bronze and silver plans, continue to have restricted networks. Nationwide, roughly 70 percent of Obamacare plans offer fewer doctors and hospitals than typical pre-Obamacare plans.

But there is an even bigger issue lurking below the surface.

Even without Obamacare, the Association of American Medical Colleges warns us that we face a shortfall of at least 130,000 doctors by 2025. While both enrollment in medical schools and graduation are up slightly, the increase is nowhere near enough to offset expected retirements. Roughly 40 percent of current doctors are age 55 or over. Moreover, the United States already trails many other countries in the number of physicians per capita, at just 2.5 per 1,000 people. This is compared to nearly 4 per 1,000 in Germany and Switzerland.

Medicine is simply no longer the profession that it once was. In 1970, the average income of general practitioners was $185,000 (in 2014 dollars). Today, even though doctors now see nearly twice as many patients as they did back then, average physician income has fallen to just $161,000. At the same time, the average medical-school graduate now begins his career with more than $170,000 in debt.

Obamacare will squeeze physician incomes still further.

Existing government programs already reimburse physicians at rates that are often less than the actual cost of treating a patient. Estimates suggest that on average physicians are reimbursed at roughly 78 percent of costs in Medicare, and just 70 percent of costs in Medicaid. Physicians generally shift some …read more

Source: OP-EDS

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Responsible Counterterrorism Policy

September 10, 2014 in Economics

Terrorism is a hazard to human life, and it should be dealt with in a manner similar to that applied to other hazards—albeit with an appreciation for the fact that terrorism often evokes extraordinary fear and anxiety. In a new study, John Mueller and Mark G. Stewart look at four issues central to risk analysis for terrorism — the cost per saved life, acceptable risk, cost–benefit analysis, and risk communication — and assess the degree to which risk analysis has been coherently applied to counterterrorism efforts by the U.S. government.

…read more

Source: CATO HEADLINES