Tag Archives: moral equivalence

Supports and Consequences

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Rep. Collin Peterson (D, MN) has proposed a Dairy Market Stabilization Program to replace existing Dairy Product Price Support and Milk Income Loss Contract Programs, but the debates surrounding the proposal misses a key point.

“The Dairy Market Stabilization Program [proposed by Peterson] is specifically designed to increase milk prices,” the Consumer Federation of America says.  “As milk and dairy prices increase, low-income consumers are hit especially hard.”  National Taxpayers Union, Americans for Tax Reform, and Citizens Against Government Waste warn of other results.  Artificially propping up milk prices “will ratchet up budgetary pressures on the government’s food and nutrition programs.”  Further, the DMSP, if passed, would empower government to limit how much milk is to be produced given falling profits; this is intended to strengthen a “safety net” for a government-favored group.

While these are valid arguments; they don’t go far enough.  The key point is the long list of unintended consequences of this sort of program and of subsidies in general.  One narrow consequence has to do with this: the CBO estimates that the DMSP would save us taxpayers $167 million over five years.  How much would we save if we didn’t have any of these three subsidies?

Another consequence comes from this effort to “help strengthen a vulnerable dairy sector.”  Dairy wouldn’t be a vulnerable sector except that government subsidies have protected it from the strengthening and hardening that competition produces.  The sector is soft and “vulnerable” as a direct result of its having become dependent on government for its “protected” profits and its protection from the risk of failure.

This stems from another unintended consequence.  The bailouts of 2008 and 2009 have simply fostered an environment wherein everyone feels entitled to a bailout; no one should have to suffer the consequences of their own decision-making, or even of plain bad luck (and note carefully that a hand up is not a bailout).  All of us are entitled, goes the new plaint, to having taxpayers indemnify us from life.  However, something that was a mistake the first time is not made correct by repeating it.  It remains a mistake.

Yet another consequence is that ratcheting up of budgetary pressures on the government’s food and nutrition programs that was warned of above.  The NTU, ATR, and CAGW are right as far as they go, but they miss the larger point, one hinted at by the CFA: the subsidies, including other subsidies that would be cascade victims of particular subsidies’ budget pressure, all drive up—by design—prices that consumers, including poor consumers, must pay.  (And so we have food stamp programs, and other food and nutrition programs, to help those poorer consumers pay those artificially inflated prices….)

There’s another unintended consequence.  Consumers—taxpayers—in return for our tax money being taken away from us to pay these supports, have even more of our money taken away from us by our having to pay those artificially high prices that are the goal of these supports.  We’re forced to pay twice for the same milk.

There’s the unintended consequence of the moral hazard involved.  Industries that are protected from failure, government-favored small businesses that are protected from failure, have no incentive to control their own costs, have no incentive actually to compete.  They get high prices (which we must pay, both through those high prices and through the epicycles of subsidies on top of subsidies to prop up those prices and then to help others pay those propped up prices), and they have high costs with which to “justify” those high prices.  This is related to those original mistakes of the 2008 and 2009 bailouts.  How can a businessman, or an investor in that business, or a lender to that business, assess his risk accurately when there is no downside from risk?  Another aspect of the moral hazard question is this: one justification for the supports is that dairy farmers would go out of business without them.  But if they can’t compete, why should they be in business?  Why does any particular business or industry have an inherent right to exist, regardless of market competition forces?  Who decides which business or industry should be artificially continued?

Finally, here is a consequence almost as bad as the moral hazard one, a consequence with more concrete and immediate impact on our pocketbooks.  Supporters of the DMSP worry that were there a repeat of 2009’s economic dislocation (we’re out of that one?), a repeat of the problem of falling milk prices coupled with abruptly rising input prices, “I fear we could lose half our dairies,” as Congressman Peterson puts it.  But why did those input prices rise?  One (but not the only) reason is ethanol subsidies.  These diverted food corn away from the dairy herds (and other cattle herds, and people): nearly 30% of corn went to fuel production in 2009; that expanded to 35% in 2010.  The effect from seemingly unrelated subsidies on those input prices for milk production is apparent.  This diversion, in cascading unintended consequence, reduced our supply of food, raised the price of that food that we must pay, and drove cost increases in those food stamp subsidies.

Holidays and Insensitivity, Follow-up

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A bit ago, I wrote about the apparent holiday insensitivity of a politically correct treatment of the fall holidays in a Massachusetts school.  In that post, I posed some questions to Dr Foley and Dr Pierantozzi concerning certain remarks they were quoted as having been made, in particular concerning Christopher Columbus, Thanksgiving, and Hallowe’en.  Dr Foley’s remarks were contained in an internal email to her school staff which had been obtained by Boston Herald columnist Jessica Heslam; Dr Pierantozzi’s remarks were made publicly in support of Dr Foley.   Separately, I emailed Ms Heslam, requesting access to that internal email from which she quotes.

Dr Foley’s original email is available here, courtesy of the SomervillePatch, and I’m providing it below.

From: Foley, Anne
Sent: Wednesday, October 05, 2011 7:44 AM
To: Kennedy School
Subject: our next holiday

When we were young we might have been able to claim ignorance of the atrocities that Christopher Columbus committed against the indigenous peoples of the “new” world.  We can no longer do so.  For many of us and our students celebrating this particular person is an insult and a slight to the people he annihilated.

On the same lines – we need to be careful around the Thanksgiving Day time as well.  For many people this was just one big happy meal.  We can talk about this more during grade level meetings today if you choose.

Anne

From this email, it’s plain that there was no ban on holidays at the school; there was only an intent to “spark discussion.”

Since then (the following Monday, in fact) Dr Foley has delivered an explanation via email and autocalling an explanation of her remarks in that internal email.  That message is provided below, also courtesy of the SomervillePatch.

This message is to address the Herald article and its aftermath that occurred this past Friday. As we all know anything posted on the internet has the potential to become public. The email I sent was addressed to Kennedy School staff with the intent of sparking an educational discussion on how we can address the multi-cultural perspectives on our upcoming holidays. If this message had been intended for a broader audience, I would have chosen less inflammatory words and provided more of a context for the message. I apologize if my words offended anyone – that was not my intent.

Please know that nothing has changed regarding the instruction and events planned at the Kennedy School this year. As always, teachers and classrooms address holidays as part of their curriculum. I support the outstanding staff at the Kennedy School who will continue to provide the best education for our students. I want to thank all of those who have offered me kind words.

Thank you.

It’s plain that errors occurred in this affair.  Dr Foley has already addressed hers.  Ms Heslam, however, seems to have taken remarks out of context and created a story where none, in fact, existed.  The rest of us, yours truly included, were too quick to jump on the anti-PC bandwagon and start screaming bloody murder.

Taxes, or Whose Money Is It? III

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This is the third of a short series of posts that explores the nature of taxes.  In the first post, I looked at the property nature of taxes: whose money it was, both before and after, the taxation process.  In the second post, I looked at a second set of questions: the nature and purpose of government and the purpose of government spending.  In this post, I answer a question concerning the utility of revenue neutrality for tax program changes.

We established in those earlier posts that money continues to belong to us and not our government after it has been allocated to government in the form of taxes.  We  established subsequently that what our government is permitted to spend our money on is quite limited.  From these, we can now answer that third question: is revenue neutrality in changing (by a little or with a wholesale replacement, in the manner of a Cainian 9-9-9 replacement, for instance) our tax system useful or necessary?

The answer to this turns out to be quite straightforward; although, it depends on a couple of circumstances.  Even though the money is ours and not government’s, and even though permitted government spending is quite limited, enclosed by those bounds are these simple facts.   Government has a purpose clearly defined by us in our social compact, and within that purpose, government must spend in order to achieve that purpose.  There is a minimum level of government spending, defined by that purpose, which our government must do.

Separate from this, but no less important, is the simple fact that people and our markets adapt to a government spending régime.  We always seek the optimal allocation of our money within the bounds of the economic environment within which we must operate, and we tend to stabilize there and form habits of spending and acquisition appropriate to those parameters.  Free markets adapt very quickly to changing conditions, but they do not adapt instantaneously: habits are hard to change, and changes take time to ripple through an economy.

Thus, the straightforwardly dependent answer to our question is this.  Plainly, since the money is, and always will be, ours regardless of whether it sits in the coffers of free market participants or those of our government, revenue neutrality from tax system change is not necessary, per se, and so it has no inherent appropriateness.  However.  Were our government’s spending already at that minimum level needed for government to achieve our purposes for it, then revenue neutrality would be necessary to maintain that minimum level.

On the other hand, were our government’s spending significantly above that threshold level, then a degree of revenue neutrality would be needed in order to avoid unnecessary market disruption while the new tax system is put into place.  Neutrality should not be absolute, here, however; with government spending exceeding its necessary amounts, some degree of revenue reduction in the year of enactment, is not merely acceptable, but necessary—as a first step in a separately needed sequence for getting that spending back down to where it belongs.

Our current government’s spending is wholly out of control: it vastly exceeds revenues, it is allocated to wholly inappropriate matters (vis., loans to government-favored enterprises), its allocation to welfare far exceeds what is appropriate or necessary (vis., paying people for two (or more) years for not working), and its allocation to entitlement programs which are bankrupt, or nearly so, is inherently wasteful.  Thus, we find ourselves meeting the second criterion above: too much spending.  A degree of revenue reduction in the year of enactment of a tax system overhaul or replacement is entirely appropriate.  Revenue neutrality is not at all necessary or appropriate today.

Some Miscellany

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Telling the truth at inconvenient times: The EU is considering banning rating agencies from publishing ratings on a member country’s sovereign debt whenever that country is in negotiation for a bailout.  After all, worries European Internal Market Commissioner Michel Barnier, who has made the proposal, a rating might be released at an “inopportune moment” and have “negative consequences for the financial stability of a country and a possible destabilizing effect on the global economy.”  M Barnier says that the ratings agencies don’t always publish accurate data.  Of course, the fact that the EU already has negligence (and fraud) laws that can be applied to this situation is unimportant.  It’s better simply to keep investors in the dark than to let them have a few unpleasant truths about European sovereign debt—especially when that debt is at its riskiest: the nation has only just recognized its debt to be worthless or approaching worthlessness, which is why it’s begging for bailouts in the first place.

Can’t trust those cops: They’re too anxious to Tase you, bro.  The New York Civil Liberties Union has their knickers in a twist because “[i]n 60% of cases, the circumstances did not meet standards recommended by experts.”  In their report (“Taking Tasers Seriously: The Need for Better Regulation of Stun Guns in New York”), they claim that “40% of the Taser incidents involved at-risk subjects” and that “people of color are overwhelmingly represented in Taser incidents,” yet the report contains no substantiating data for these claims.  Other beefs: 7% of those Tasered were handcuffed, and another 4% were fleeing. Hmm….  All handcuffed suspects are completely docile, are not kicking or biting risks, cooperatively enter the police car.  And, apparently, if a suspect is lucky enough to break free momentarily, he’s to be allowed to continue—potentially to pursue his misdeeds later.  And the obligatory tear-jerker: a poor 13-year-old boy was Tasered.  Never mind that he was fighting in a mall.  Never mind that the officer who Tasered the boy considered it necessary to “gain compliance.”  Apparently controlling a suspect isn’t allowed.  Of course there are bad apples in every police department, and they need to be weeded out.  And, of course, a few bad apples means we can’t trust the lot of them.

We got him?  The Daily Caller has this (follow the “Full Story” link) Reuters article indicating that in the process of finally gaining control over Sirte, Libya, Libyan fighters killed Muammar Gaddafi.  While the article itself seems clear about Gaddafi’s death (while acknowledging a lack of independent confirmation), the article does raise questions (at least in my grasshopper brain) about the timing of his wounds and of his killing relative to his capture, as well as the actual circumstances of his capture.  And I wonder at the Intelligence value that was lost with his death.

What did he know, and when did he know it?  Rep Jason Chaffetz (R, Utah) and Rep Trey Gowdy (R, South Carolina) are asking rude questions.  In a March interview with Univision, President Obama talked about “Fast and Furious,” and insisted that he “did not authorize it” and that “Eric Holder, the Attorney General, did not authorize it.”  This interview occurred a month prior to AG Holder’s Congressional testimony on the failed operation.  From this, Reps Chaffetz and Gowdy are wondering about things. “Would you inform us how you knew in March of 2011, 1 month prior to his testimony, that Attorney General Holder did not ‘authorize’ this investigation?  [I]f you knew the Attorney General did not authorize ‘Fast and Furious,’ how did you learn that and when did you learn that?  If you knew Attorney General Holder did not authorize it, inherent in that response is knowledge of who did authorize it. That information would be most helpful….”  Hmm….

Is the Group Guilty of the Misbehavior of the Few?

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Or, Where is the Logic?

In 2008, JPMorgan Chase was forced by the Federal government to accept bailout funds from TARP, even though the bank had no need of these funds.  The government’s reasoning for this was that they didn’t want to embarrass the banks that actually “needed” TARP bailout by having those banks be the only ones being funded by the government.  In the end, some 700 banks received TARP funds, which sounds like a lot, until that number is compared to the total number of banks in the US: nearly 9500 having assets of at least $100 million.  Yet, despite only 7% of the banks receiving bailout funds (and not all of them needing the funds), the entire banking industry is tarred by the failures of the few.  Flowing from this is the view that all banks contributed to the Panic of 2008 by overextending themselves with foolish investments, even though only a few of them actually were so engaged.

Throughout the Tea Party’s history over the last three years, there have been instances, as there are in all large and amorphous groupings, of individuals holding signs of a racist nature.  Whenever these signs, or other behaviors, are spotted by Tea Partiers at the gatherings, these individuals are isolated and removed from the gathering by those Tea Partiers.  Despite this, though, the entire collection of Tea Partiers is branded as racist.

In the current Occupy Wall Street protests, primarily in New York, there have been instances, again as there are in all large and amorphous groupings, of individuals holding offensive signs, this time of an anti-Semitic nature.  Following the logic applied to the Tea Partiers, should the OWS crowd be branded as bigoted?  To date, the NLMSM, which has applied this logic to the Tea Party movement, has not applied it to the OWS.

There are rare, but well-publicized, incidents of police brutality—Rodney King is one such.  Others, placed on YouTube, purport to show the same, but on full investigation, the “brutality” usually turns out to be non-existent.  Yet entire police forces are branded as corrupt on the basis of these rare incidents.

There are some Americans who objected to Barack Obama being elected President because of his race.  As a result of this, all Americans who disagree with Obama are racist, say too many on the Left.

And there are examples of a related “logic:” all who objected to the Patient Protection and Affordable Care Act while it was being developed were accused by Democrat Congressional leadership of being against all health care reform, even though many alternatives were proposed, both in the Congress and around the country.  Along the same lines, President Obama accuses all who object to his recently defeated Jobs Bill (defeated in the Democrat-controlled Senate, after Senate Majority Leader Harry Reid initially refused to allow it to come to a vote at all, even though Senate Minority Leader Mitch McConnell explicitly requested a vote in response to Obama’s demand for that vote) of wanting all teachers, police, firefighters, et al., to lose their jobs.

Where is the logic in these accusations?  Why is there such imbalance in applying this “logic?”  One answer might be in the outcome of applying such “thinking” consistently: it would contradict the predetermined outcome of those who make the logical leaps in some cases, but not others.

In the end, who benefits from this imbalance?

Update: Corrected a typo in the third paragraph: NLMSL should have been NLMSM, which it now is.