You are browsing the archive for 2014 November 10.

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Lesson from the Election: People Want Less Government

November 10, 2014 in Economics

By Randall Holcombe

The lesson I draw from the Republican victories in the 2014 election is that people want less government. Since 2009 the number of Democratic Senators fell from 58 to 45, the number of democratic House members fell from 256 to 192, and the number of Democratic governors fell from 28 to 18. I’m not the first to observe that these big Democratic losses are directly related to the unpopularity of President Obama’s big government agenda.

But wait… didn’t he come in with a mandate? Both the House and Senate went Democratic in 2006, prior to Obama’s election, and he ran as a big government candidate, more or less. Actually, I’d say less. He ran on a platform of “hope and change,” an anti-Bush campaign. He was running against what he called “the eight failed Bush-McCain years,” rather than running on his own platform. Yes, he talked about health care reform, but mostly, he campaigned against Bush (who. at that point, wasn’t running for anything).

It appears that Bush’s waning popularity in his second term was also a sign of opposition to big government. Bush initiated two wars and a major Medicare expansion, turned a budget surplus when he took office into a substantial deficit when he left, and completely eroded any notion of fiscal conservatism. In 2000 he appeared to be a principled supporter of limited government. By 2006, when the Congress turned Democratic, he appeared to be a big-spending foreign interventionist.

Remember a few limited government promises Obama did make on the campaign trail: end the wars in Iraq and Afghanistan, and close the prison in Guantanamo. Those promises sounded good to American voters, but six years later, they haven’t materialized.

There is more here than just the idea that presidents grow unpopular after six years in office. Both Bush and Obama generated voter backlash because of their big government policies. The problem is that for both Republicans and Democrats, the people who run for office are people who believe the government can solve our problems. If people really do want to curb the power and influence of government, the best thing they can do is vote for divided government and hope for gridlock. That’s what voters did.

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Source: MISES INSTITUTE

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Military Socialism

November 10, 2014 in Economics

By Matt McCaffrey

There’s a long history of comparing market competition to warfare. Game theorists, for example, sometimes use metaphors borrowed from military strategy to talk about competitive decision making, and martial analogies are even more explicit in the popular business literature, where writers often interpret competition using classic strategic manuals like Machiavelli’s The Prince or Sun Tzu’s Art of War. However, while the prose of these writings has dramatic appeal, Mises, Rothbard, and others have clearly shown that entrepreneurial competition couldn’t be more different from military conflict. This point needs to be stressed repeatedly; if we lose sight of it, we run the risk of thinking of entrepreneurial competition as destructive, or worse, of military competition as benign.

In order to understand how military conflicts work, and the destruction they cause, we need to understand their economic organization. The fundamental difference between markets and militaries is that the latter, like socialist economies, have no rational method of allocating resources. Military decision making represents an enormous calculation problem that can’t be solved without recourse to the market. How do military leaders know, for instance, what munitions to produce, or the best methods of producing them? The answer is, they don’t. (Of course, if the process of entrepreneurial calculation were ever applied to the military, we’d quickly discover that the organization itself, and all its works, failed the market test.)

The lack of calculation is one reason the armed forces are bureaucratic and wasteful of both resources and lives: without entrepreneurs’ decisions to guide them, they must resort to management via an arbitrary system of rules. This also explains why, since ancient times, strategists have emphasized the need for a strict hierarchy within the military, along with clearly-defined incentives for all members—in the absence of the price system, motivation through rewards and punishments is basically the only available method of organization. It’s hard to overestimate the impact of the lack of calculation on the military. Instead of increasing consumer welfare (which war as such can never do), commanders try to achieve essentially arbitrary objectives that at best serve the political needs of the ruler.

Yet despite this vital economic difference, military thinkers have often talked about generalship in ways that make it sound like entrepreneurship. The analogy shouldn’t actually come as a surprise, as it’s been around for a long time; in fact, Renaissance military …read more

Source: MISES INSTITUTE

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Secession Update: Catalonia and Veneto

November 10, 2014 in Economics

By Ryan McMaken

Barcelona_Iglesia_Sagrada_Familia

On Sunday, the Catalonia region of Spain held an “informal” or “symbolic” referendum on Catalonian independence.  It was “symbolic” because Madrid politicians have declared it to be illegal, and  ”a sterile and useless sham.” The Guardian concludes that a legal one is now inevitable.

Catalonia is one of the most industrialized (and consequently) most lucrative areas of the country from which to extract tax revenue that can subsidize poorer and less-productive regions of Spain.  Naturally, those who benefit from such coerced largesse are enthusiastically opposed to Catalonian independence. (The centralists claim that Catalonia agitates for more government spending in Catalonia, and is thus living off the Spanish taxpayer, although it appears fairly clear that the region is simply attempting to get the central government to spend more of Catalonia’s money in Catalonia.)

As a political tactic, the Catalonian vote appears to have been at least moderately effective. More than 1.8 million people appear to have voted for independence (80 percent of those who voted) . Such numbers are hardly the last word (there are 5.4 million voters total), but if Madrid continues its current stance, it will become more and more difficult to describe as a position that amounts to anything other than “might makes right.”

According to Reuters, the Madrid government has now decided that maybe it should actually negotiate with the separatists, rather than merely dismiss them as sterile and useless.

Italy is currently using a similar tactic with the recent independence vote in Veneto. PressTV reported last week on the latest moves from the pro-independence movement in the region:

“The Veneto is self-governed as an independent state – it was called La Serenissima, an organization that has a distinguished history, and that had nothing to do with Italy for 1,100 years. Meanwhile our attachment to the Italian state is no more than 148 years. It’s absurd compared with our history,” [Alessio Morosin] added.

Morosin said Venetian officials are concerned that Italy’s paralyzing economic crisis would also affect Veneto, adding that the region’s independence from Rome will improve its economic situation.

We’ve noted some of the details of the Veneto referendum here at Mises.org.

I reported on the Catalonia situation this last week, and for a fun time, check out the discussion on the topic at the Mises Institute Facebook page. The Spanish centralists are out in full force, and they’re angry.

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Source: MISES INSTITUTE

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The Hocus-Pocus of CPI Calculation

November 10, 2014 in Economics

By Joseph Salerno

Zero Hedge explains the scam that is Hedonic Quality Adjustments wherein the Bureau of Labor Statistics manipulates price data so that  large increases in the actual prices of certain products can be transformed into decreasing prices when calculating the Consumer Price Index.

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Source: MISES INSTITUTE

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How Macroeconomic Data Encourages Government Intervention

November 10, 2014 in Economics

By Ryan McMaken

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Mises Daily Monday by Frank Shostak:

Entrepreneurs need very specific information about their products, markets, customers, and profits. Government macroeconomic data, however, does nothing to assist entrepreneurs to obtain this important information, but only helps justify economic intervention.

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Source: MISES INSTITUTE

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Seven Myths about King v. Burwell

November 10, 2014 in Economics

By Michael F. Cannon

Michael F. Cannon

The Supreme Court has granted cert. in King v. Burwell, one of four cases challenging the IRS’s ongoing expansion of the Patient Protection and Affordable Care Act’s main taxing and spending provisions beyond the clear and unambiguous limits imposed by Congress. Here I will attempt to dispel common myths surrounding these “Obamacare” cases.

Myth #1: King v. Burwell is a challenge to the ACA.

It is legally and factually incorrect to describe these cases as “challenges to the ACA.” This is particularly important because the actual legal posture of these cases is far more troubling.

The plaintiffs in King are not asking the Supreme Court to block any part of the ACA. They are asking the Court to uphold the Act by blocking the IRS’s unilateral attempt to strike down the Act’s clear language. Here’s how.

Section 1311 directs states to establish exchanges, and Section 1321 directs the federal government to establish exchanges “within” any state that fails to do so.

Section 1401 authorizes subsidies (nominally, “tax credits”) for exchange enrollees whose household income falls between 100 and 400% of the federal poverty level, who are not eligible for qualified employer coverage or other government programs, and who enroll in coverage “through an Exchange established by the State.” Each of these eligibility restrictions is as clear as the next.

It is legally and factually incorrect to describe this case as ‘a challenge to the ACA.’”

The statute makes no provision for subsidies in federally established exchanges.

The mere availability of exchange subsidies triggers penalties under the ACA’s employer and individual mandates. Under the statute, then, if a state does not establish an exchange: (1) those subsidies are not available; (2) a state’s employers are exempt from the employer mandate; and (3) the lion’s share of its residents are exempt from the individual mandate.

This appears to have been the IRS’s initial interpretation of the statute, at least until something went terribly wrong.

Early drafts of the IRS’s implementing regulations reflected the statutory requirement that exchange subsidies are available only through “an Exchange established by the State.” Following sweeping Republican gains in state governments in 2010 and discussions with the White House and Treasury Department, however, the IRS changed its draft regulations in March 2011.

In August 2011, the IRS issued a proposed rule announcing it would provide tax credits (and implement the resulting penalties) in states with federal exchanges too. Treasury and IRS officials later admitted to congressional investigators they …read more

Source: OP-EDS

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Daily Beast Op-Ed: Obama’s ISIS War Is Illegal

November 10, 2014 in Politics & Elections

For a generation, Democrats stood up against Republican presidents who they deemed to be too eager to go to war-or too ready to put troops in harm’s way without the full consent of the American people through their elected representatives in Congress.

Where have those Democratic protectors of the constitutional authority of Congress gone? Was it always just a partisan attack on Republican presidents?

If not, when will Democrats-who so vociferously opposed a Republican president’s extraconstitutional war-making powers-stand up and oppose President Obama’s unconstitutional usurpation of war-making powers?

Yale Professor Bruce Ackerman puts it succinctly: ‘The war against the Islamic State is now illegal. The War Powers Resolution of 1973 gave President Obama 60 days to gain consent from Congress and required him to end ‘hostilities’ within 30 days if he failed to do so. This 90-day clock expired this week.’ And yet, there’s been no consent, and no end to the fighting.

I believe the president must come to Congress to begin a war. I also believe the War Powers Act is misunderstood; President Obama acted without true constitutional authority even before the 90 days expired, since we were not under attack at that time.

But in either case, this war is now illegal. It must be declared and made valid, or it must be ended.

Congress has a duty to act, one way or the other.

But it’s not the only area where action is needed. This is, of course, not the only way in which this president is acting like a king.

Conservatives have rightly decried President Obama’s unconstitutional executive action on Obamacare-and his promises to do the same with immigration. With both branches of Congress now under Republican control, we should act to halt those power grabs, too.

But conservatives can’t simply be angry at the president’s lawlessness when they disagree with his policies. They should end their conspicuous silence about the president’s usurpation of Congress’ sole authority to declare war-even if (especially if) they support going after ISIS, as I do.

This is important. We can’t be for the rule of law at our own convenience. It matters how we act both when we agree and when we disagree with the president.

Conservatives who blast the president for ignoring the separation of powers on immigration display a fatal inconsistency by embracing unlimited war-making powers.

Secretary of State Kerry became famous as an anti-war liberal decades …read more

Source: RAND PAUL