My Free Speech Political Quotations and Commentaries Directory and Log
We must be willing to get rid of the life we've
planned, so as to have the life that is waiting for us.
If everyone is thinking alike, then somebody isn't
George S. Patton
It's better to walk alone than in a crowd going in
the wrong direction.
One segment of the population commits suicide more
than any other: Hispanics teens. In today’s Academic Minute, the University of
Texas at Austin's Luis Zayas shares some numbers and dissects the factors
contributing to this troubling trend. (especially females)
See You in New York
ISIS Leader Abu Bakr al-Baghdad
When Abu Bakr al-Baghdadi walked away from
a U.S. detention camp in 2009, the future leader of ISIS issued some
chilling final words to reservists from Long Island.
The Islamist extremist some are now
calling the most dangerous man in the world had a few parting words to his
captors as he was released from the biggest U.S. detention camp in Iraq in
(Excerpt) Read more at
Sgt. Bowe Bergdahl served with "honor and
National Security Adviser Susan Rice who seems to say
anything President Obama wants her to say.
The New York Times calls him a hero ---
That's totally different than reports from his military unit and soldiers who
served with him.
How lucky could the GOP get?
Sarah Palin Is 'Just About' Ready To Renounce Her
Republican Ties ---
Jon Stewart Perfectly Mocks Liberals Who Deny
USA intelligence agencies were caught by surprise by the ISIS offensive in
Iraq in June 2014
Iraqi Kurds Prepared For ISIS Offensive For A Year And
Expanded Their Territory By 40% In Hours
Former Defense Officials Blast Obama As Having A
'Complete Lack Of Strategy' For Iraq ---
Democracy is Wrong for the World and Belgium is a Test Case ---
He inherited a terrible mess: Give credit where it is due to Chicago's
"Rambo's Toughest Mission," The Economist, June 20, 2014, Page 25
. . .
Dirty mouth, clean government
That is unfair. Mr Emanuel has been tireless—he
gets up at 5.30am each day—and effective. He has tackled the old Chicago
system of patronage. This month, a judge may rule that City Hall’s hiring no
longer needs the federal oversight imposed on Mr Daley’s watch. Downtown is
booming: its population, unlike the city’s, grew 36% between 2000 and 2010.
Companies such as Motorola Mobility and United Airlines have decamped from
the suburbs to the city centre. The number of domestic tourists has jumped
from 38m in 2010 to 47m in 2013. Rubbish collection, previously controlled
by individual aldermen (city council members) in their respective wards, has
been put onto a more rational grid-based system and partly privatised.
Mr Emanuel is fond of data and receptive to new
ideas. Kimbal Musk, an entrepreneur, recalls showing the mayor his designs
for school “learning gardens” (places where pupils look at plants and learn
about biology, among other things). Mr Emanuel turned to him and said: “That
is better than what I was going to do. This is now my plan.” Since then 100
gardens have been installed in Chicago’s schools.
More broadly, Mr Emanuel has pepped up education.
He demanded merit pay for teachers and a longer school day (Chicago’s was
only 5 hours 45 minutes). Teachers duly went on strike in 2012. In the end,
Mr Emanuel got the longer day, adding 2.5 years to each child’s schooling
between kindergarten and high school, but the unions kept their
seniority-based pay system.
He closed 50 schools last year: largely bad,
half-empty ones in depopulated neighbourhoods. He ploughed more than $200m
of savings into other schools. He has also pushed for more charter
(publicly-funded but independently run) schools, more accountability for
teachers and more schooling for toddlers. Many parents were deeply upset
about the closures. In some poor, black neighbourhoods, teaching was one of
the few middle-class jobs.
Yet there are signs that, overall, the city’s
schools are on the right track (see chart 3). The graduation rate rose from
58% in 2011 to 65% in 2013. Moreover, Mr Emanuel has made a hefty investment
to improve the city’s awful community colleges. Before his arrival, only 7%
of first-time, full-time students graduated. After a reorganisation, they
now focus more on teaching skills that local businesses need, and the
graduation rate is expected to have hit 13% in 2013.
Mr Emanuel’s record on crime is weaker. In 2012
Chicago saw more than 500 murders, up from 435 in 2011. In 2013 the official
rate fell to 415, but some people think the figures were massaged.
Chicago magazine cited at least ten deaths that
looked like murder but had been classified as something else, including one
of a young woman whose body was found bound and gagged in an abandoned
After a slow start, the mayor is devoting more
attention to crime. New strategies include schemes for keeping kids in
school and increasing the number of summer jobs. A new programme called
“Becoming a Man” helps boys to develop social skills, such as how to resolve
disagreements without violence.
None of Mr Emanuel’s reforms will count for much if
he cannot get the city’s finances under control, however. Like Detroit,
Chicago has been losing people but spending as if they were still there
paying taxes. Its population is down from 3.6m in 1950 to 2.7m; some 200,000
people left in the first decade of the new millennium. The city ran a
structural budget deficit for each of the ten years before Mr Emanuel became
mayor, according to the Civic Federation, a watchdog, and plugged the gap
with one-off sources of cash, such as the $1 billion Mr Daley raised by
selling the right to collect parking fees until 2084. The deficit in 2011
was estimated as $655m—about 11% of the budget. Chicago’s credit ratings
have fallen to a few notches above junk.
And pensions for public workers are a time bomb,
says Laurence Msall of the Civic Federation. Only 35% of the necessary cash
has been set aside to pay for pensions already accrued, according to
actuaries. The total unfunded liability is about $20 billion, more than five
times the city’s operating budget. A state law passed before Mr Emanuel was
elected requires the city to stump up an extra $600m next year for police
and firefighters’ pensions. If the problem is not dealt with, the city faces
further credit downgrades and a savage cash crunch.
Let’s not be Detroit
Unions say the answer is for the city to borrow
more, raise taxes and slap a levy on financial transactions. This is not a
realistic cure. A 75% increase in property taxes would cover the police and
firefighters’ pensions and little else, says Mr Msall. The city will
probably do a bit of everything: raise taxes, trim services and curb pension
benefits. Asking citizens to pay more for less is risky, however; it didn’t
work out in Detroit. People and businesses are mobile.
Mr Emanuel described his first budget as “honest”—a
novelty in the Windy City. He found $417m from redundancies, spending cuts,
better debt collection and other reforms including consolidations of police
and fire departments. Cuts to libraries and mental-health services were
especially unpopular. He also raised fees, fines and rates but steered clear
of property- and sales-tax increases.
To finish what he started, Mr Emanuel must win
re-election. By rubbing Chicago’s nose in reality, he has created a lot of
enemies. The left calls him “Mayor 1%” for his supposed love of the rich and
disregard for everyone else. “I don’t really like him, he does not do much
for the city,” says Tralanda Carter, a shopper at Nordstrom. He is certainly
less affable than Mr Daley, who seemed to know everyone’s name (and sat atop
a machine that for decades doled out jobs, contracts and favours for
campaign contributions, loyalty and votes.)
Mr Emanuel’s most credible challenger is Toni
Preckwinkle, the president of Cook County’s board. If she runs, Mr Emanuel
will have a fight on his hands. However, he has $7m in his campaign chest
already, which may be enough to scare off serious rivals.
In one of the “Rambo” films, the muscle-bound hero
has to shoot down a Russian helicopter-gunship with only a bow and
explosive-tipped arrow. Mr Emanuel’s mission is less improbable than that;
but only somewhat.
Bob Jensen's threads on the sad states of governmental accounting and
USA intelligence agencies were caught by surprise by the ISIS offensive in
Iraq in June 2014
Iraqi Kurds Prepared For ISIS Offensive For A Year And
Expanded Their Territory By 40% In Hours
How to Mislead With Statistics
The Melting of Antarctic Glaciers is Correlated With the What Many Scientists
are Telling the Media is Climate Change Caused by Carbon Emissions
What most of those scientists and the media fail to mention is that
Antarctic glaciers is caused in large part by hidden volcanoes ---
It would not be politically correct to report this possibility of the rise in
sea levels around the world.
Liberal USA Supreme Court Justices, Unlike the Ninth Circuit Court Justices,
Are Not Puppets Controlled by Liberals
"The Biggest Judicial Losers: The liberal Ninth Circuit keeps
racking up losses at the Supreme court," The Wall Street Journal, June 12,
The Supreme Court is heading to the final days of
its term, and so far the biggest loser is once again the Ninth Circuit Court
of Appeals. The famously liberal appellate court has logged more reversals
than any other circuit, having lost 10 of 11 cases.
For liberals who want to believe this is merely a
case of conservative Justices overruling liberal rulings, look again.
In its 11 cases the Ninth Circuit managed to draw a
total of only 16 votes from the nine Justices. Eight of the 10 reversals
were unanimous, and the decision to overturn the circuit was joined seven
times by Justice Stephen Breyer, nine times by Justice Sonia Sotomayor and
10 times by Justices Elena Kagan and Ruth Bader Ginsburg.
The latest reversal came Thursday in Pom Wonderful
v. Coca Cola KO -0.33% , with an 8-0 ruling that the Ninth Circuit erred in
accepting Coca-Cola's argument that federal regulations precluded Pom's
claim it was harmed when Coke labelled a drink to highlight the presence of
pomegranate juice. The ruling was "incorrect," Justice Anthony Kennedy wrote
of the Ninth Circuit. "There is no statutory text or established
interpretive principle to support" the appellate court's contention. "Quite
to the contrary."
Two of this term's Ninth Circuit reversals were
jurisdiction cases, concerning the Constitution's Due Process Clause and the
restraints it puts on forum shopping by plaintiffs attorneys. In Daimler AG
DAI.XE -2.14% v. Bauman, Justice Ginsburg rebuked the Ninth Circuit's view
that California "is a place where Daimler may be sued on any and all claims
against it, wherever in the world the claims may arise." "That formulation,"
she added, "is unacceptably grasping."
The Supreme Court tends to take cases it feels may
have been wrongly decided, and other circuits have also had decisions
reversed. There are also times when the Justices overrule an appeals court
and get it wrong— William Rehnquist's 1988 opinion in Morrison v. Olson
upholding the independent counsel statute comes to mind.
But the frequency and breadth of the Ninth's
Circuit's defeats suggest that many of its 29 active judges are willfully
ignoring precedent and law to do as they please. Maybe they should all have
to do refresher terms as Supreme Court clerks.
New IRS Commissioner John Koskinen promised to
cooperate with Congress. But either he is being undermined by his staff, or he's
aiding the agency's stonewalling. And now that we know that Justice was
canoodling with Ms. Lerner, its own dilatory investigation becomes easier to
understand. Or maybe that was a computer crash too.
"The IRS Loses Lerner's Emails And other news that the Beltway press corps
won't cover," The Wall Street Journal, June 13, 2014 ---
The IRS—remember those jaunty folks?—announced
Friday that it can't find two years of emails from Lois Lerner to the
Departments of Justice or Treasury. And none to the White House or Democrats
on Capitol Hill. An agency spokesman blames a computer crash.
Never underestimate government incompetence, but
how convenient. The former IRS Director of Exempt Organizations was at the
center of the IRS targeting of conservative groups and still won't testify
before Congress. Now we'll never know whose orders she was following, or
what directions she was giving. If the Reagan White House had ever offered
up this excuse, John Dingell would have held the entire government in
The suspicion that this is willful obstruction of
Congress is all the more warranted because this week we also learned that
the IRS, days before the 2010 election, shipped a 1.1 million page database
about tax-exempt groups to the FBI. Why? New emails turned up by Darrell
Issa's House Oversight Committee show Department of Justice officials worked
with Ms. Lerner to investigate groups critical of President Obama.
How out of bounds was this data dump? Consider the
usual procedure. The IRS is charged with granting tax-exempt status to
social-welfare organizations that spend less than 50% of their resources on
politics. If the IRS believes a group has violated those rules, it can
assign an agent to investigate and revoke its tax-exempt status. This
routinely happens and isn't a criminal offense.
Ms. Lerner, by contrast, shipped a database of
12,000 nonprofit tax returns to the FBI, the investigating agency for
Justice's Criminal Division. The IRS, in other words, was inviting Justice
to engage in a fishing expedition, and inviting people not even licensed to
fish in that pond. The Criminal Division (rather than the Tax Division)
investigates and prosecutes under the Internal Revenue Code only when the
crimes involve IRS personnel.
The Criminal Division knows this, which explains
why the emails show that Ms. Lerner was meeting to discuss the possibility
of using different statutes, specifically campaign-finance laws, to
prosecute nonprofits. A separate email from September 2010 shows Jack Smith,
the head of Justice's Public Integrity Unit (part of the Criminal Division)
musing over whether Justice might instead "ever charge a 371" against
nonprofits. A "371" refers to a section of the U.S. Code that allows
prosecutors to broadly claim a conspiracy to defraud the U.S. You know,
conspiracies like exercising the right to free political speech.
The IRS has admitted that this database included
confidential taxpayer information—including donor details—for at least 33
nonprofits. The IRS claims this was inadvertent, and Justice says neither it
nor the FBI used any information for any "investigative purpose." This blasé
attitude is astonishing given the law on confidential taxpayer information
was created to prevent federal agencies from misusing the information. News
of this release alone ought to cause IRS heads to roll.
The latest revelations are a further refutation of
Ms. Lerner's claim that the IRS targeting trickled up from underlings in the
Cincinnati office. And they strongly add to the evidence that the IRS and
Justice were motivated to target by the frequent calls for action by the
Obama Administration and Congressional Democrats.
One email from September 21, 2010 shows Sarah Hall
Ingram, a senior IRS official, thanking the IRS media team for their work
with a New York Times NYT -2.44% reporter on an article about nonprofits in
elections. "I do think it came out pretty well," she writes, in an email
that was also sent to Ms. Lerner. "The 'secret donor' theme will
continue—see Obama salvo and today's [radio interview with House Democratic
Rep. Chris Van Hollen ]."
Several nonprofit groups have recently filed
complaints with the Senate Ethics Committee against nine Democratic Senators
for improperly interfering with the IRS. It's one thing for Senators to ask
an agency about the status of a rule or investigation. But it is
extraordinary for Illinois's Dick Durbin to demand that tax authorities
punish specific conservative organizations, or for Michigan's Carl Levin to
order the IRS to hand over confidential nonprofit tax information.
And it's no surprise to learn that Justice's
renewed interest in investigating nonprofits in early 2013 immediately
followed a hearing by Rhode Island Sen. Sheldon Whitehouse in which he
dragged in officials from Justice and the IRS and demanded action. ***
It somehow took a year for the IRS to locate these
Lerner exchanges with Justice, though they were clearly subject to Mr.
Issa's original subpoenas. The Oversight Committee had to subpoena Justice
to obtain them, and it only knew to do that after it was tipped to the
correspondence by discoveries from the watchdog group Judicial Watch.
Justice continues to drag its feet in offering up witnesses and documents.
And now we have the two years of emails that have simply vanished into the
New IRS Commissioner John Koskinen promised to
cooperate with Congress. But either he is being undermined by his staff, or
he's aiding the agency's stonewalling. And now that we know that Justice was
canoodling with Ms. Lerner, its own dilatory investigation becomes easier to
understand. Or maybe that was a computer crash too.
Continued in article
"The IRS Scandal --- Day 401," by Paul Caron, TaxProf Blog,
June 14, 2014 ---
Lois Lerner could straighten out all this confusion if she would only testify
under oath that she was not politically pressured by the legislative and
executive branches to target conservative groups and donors more than liberal
groups and donors.
"The VA Conspiracy The latest Veterans audit shows that the abuses are
endemic," The Wall Street Journal, June 9, 2014 ---
Washington would like nothing better than for the
Veteran Affairs fuss to evaporate, but the department's fraud and
access-to-care scandals continue to effloresce. A new audit reveals that
57,000 new VA patients, or 90% of incoming veterans, stood by for three
months or more on their first appointment—and worse, 13% of administrative
schedulers were instructed by their supervisors to falsify wait-time
The preliminary internal VA investigation disclosed
on Monday surveyed 731 facilities, including all the major hospitals and
outpatient clinics serving at least 10,000 veterans, and interviewed 3,772
staffers. Some 76% of facilities showed at least one instance when the date
of the appointment was doctored, and 70% of facilities kept at least one set
of dummy books. These departures from policy were not always intended to
game the system but all too often were.
"Findings indicate that in some cases, pressures
were placed on schedulers to utilize inappropriate practices in order to
make waiting times (based on desired date, and the waiting lists) appear
more favorable," the 54-page report observes. "Such practices are
sufficiently pervasive to require VA re-examine its entire performance
management system and, in particular, whether current measures and targets
for access are realistic or sufficient" (their emphasis).
The VA tries to wish away these problems by
claiming the hospitals lack doctors and that schedulers were poorly trained,
but to the contrary many staffers seemed to have been trained all too well
to deceive central VA command. In two clinics, higher-ups were even changing
the records ex post facto "in order to improve performance measures," and at
24 others "respondents felt threatened or coerced to enter specific desired
What is becoming ever more clear is that the VA's
abuses were not merely a one-off or a rogue hospital in Phoenix. This
conspiracy was perpetrated across the VA system and coordinated among
hundreds of workers including everyone from clerks to senior management. The
bureaucratic rot at the VA is endemic, and at this point criminal
investigations seem richly deserved.
Court Rules in Favor of Firing Bad and Often Absentee Teachers in California
(who until now were protected by teacher union rules on tenure)
This ruling may catch on in other states of the USA
This decision is one for the history books, says the
National Council on Teacher Quality
"End of the age of dinosaurs," The Economist, June 10, 2014 Jun
10th 2014 ---
DESPITE the earthquakes of reform that have rattled
public education in recent years, there are parts of the system that still
resemble “The Lost World”, where prehistoric creatures still roam. A
long-standing demand of education reformers has been that it should be
easier for schools to fire bad teachers. The terms in many teacher contracts
forbid this. Most schools when making cuts are forced to fire the newest
teachers rather than the worst ones—a policy is better known as "last in,
first out". The result is that a lot of bad (and often expensive) teachers
linger in the system.
Having lousy teachers is terrible for children and
their future prospects. Pupils assigned to better teachers are more likely
to go to college and earn decent salaries, and are less likely to be teenage
mothers, according to work published in 2011. If teachers in grades 4 to 8
are ranked according to ability, and the bottom 5% are replaced with
teachers of average quality, a class’s cumulative lifetime income is raised
by $250,000. Bill Gates once pointed out that if every child had mathematics
teachers as good as those in the top quartile, the achievement gap between
America and Asia would vanish in two years.
Owing to the glut of studies showing that teacher
quality is more important than a classroom’s size, income level or access to
high-tech wizardry, 18 states and Washington, DC, now require tenure
decisions to be “informed” by measures of whether a teacher is any good.
Fifteen states and DC are using teacher efficacy as a factor in deciding
whom to lay off. And in 23 states teachers can now be sacked if their
evaluations are unsatisfactory.
California, though, was one of these Jurassic Lost
Worlds where the dinosaurs of the teaching world still roared. Its mighty
teachers’ unions helped it block change. But thanks to a lawsuit brought by
Students Matter, an advocacy group formed by David Welch, a rich
entrepreneur from Silicon Valley, all this may now change. Mr Welch (with
the help of some extremely expensive lawyers) has just won a case
challenging teacher tenure, and a Los Angeles court has now ruled that job
protections are unconstitutional. The court struck down five teacher-tenure
The lawsuit, brought on behalf of nine
schoolchildren, concentrated on three areas: teacher tenure, dismissal
procedures and seniority rules. The plaintiffs had argued that the rules
resulted in grossly ineffective teachers obtaining and retaining permanent
employment, and these teachers were disproportionately in schools serving
low-income and minority students. The judge said this violated fundamental
rights to equal education. "There is also no dispute that there are a
significant number of grossly ineffective teachers currently active in
California classrooms," he said, adding that “the evidence is compelling.
Indeed it shocks the conscience.”
Implementation of the ruling has been stayed
pending appeals. The California Teachers Association has promised a fight.
Teachers complain that they can now be fired on unreasonable grounds, and
they have criticised the circumvention of the legislative process. But Mr
Welch has said he felt obliged to go through the courts after watching
union-backed Democrats repeatedly thwart reform. From the start he and his
allies were keen to frame the case as a defence of children’s civil rights,
not an attack on teachers. John Deasy, the superintendent of the Los Angeles
school district, compared the denial of adequate education to
ethnic-minority children to the refusal of café owners to serve coffee to
black students over 50 years ago.
This decision is one for the history books, says
the National Council on Teacher Quality, a reformist research group. Even Mr
Welch’s legal team sounded surprised at the scale of their victory. The
ruling will affect one in eight public-school children in America, thanks to
the size of California’s education system, and could resonate well beyond
the Golden State. As the NCTQ announced, “this landmark case should put
states across the country on notice: policies that are not in the best
interest of students cannot stand.” Roars of approval all round.
June 13, 2014 reply from Glen Gray
The strange thing about K-12 is the rubber room.
LAUSD and whatever the NYC calls their school district have rubber rooms.
The rubber room is where they send teachers they can't fire but can't allow
into the classroom. Teachers can be assigned to these rooms for months
(years). Teachers have to show up each day--they can't just stay home. These
rooms have their own culture. Heaven forbid if you sit someone else's chair.
I'm curious if any colleges have rubber rooms.
I wonder if and when the courts will consider eliminating tenure in the state
college and university system.
Bob Jensen's threads on tenure controversies ---
"Extreme (Global) Poverty Has Dropped in Half Since 1990,"
Priceconomics, June 4, 2014 ---
Since 1990, the percentage of the world’s
population living in extreme poverty, defined as living on less than $1.25
per day, has dropped from 36% in 1990 to 18% in 2010. This achieved the
United Nations millennium development goal of halving extreme poverty 5
years before its target date of 2015; the reduction has been drastic enough
that despite rapid growth in the global population, the number of people
living in extreme poverty has declined in absolute terms as well.
Monetary indicators do not necessarily capture
quality of life, the development goal of halving the undernourished
population by 2015 has not yet been met, and a dollar can go farther in some
places than others. But income is highly correlated with positive things
like better health and well-being, a fact that seems particularly obvious
when looking at extreme poverty. So why aren’t we celebrating the good news?
Well, for starters, it depends on who is included
as “we.” For Americans, huge achievements in poverty reduction seem at odds
with trends in the United States. In a sense, this is a misperception.
Columbia University researchers found that poverty has decreased from 26% to
16% since 1967, when the policies of Lyndon Johnson’s “war on poverty” began
to take effect.
On the other hand, that reduction relied solely on
the introduction of a safety net. Official metrics, which do not account for
benefits like nutritional assistance, find that the incidence of poverty in
the U.S. has not budged since 1967. In addition, the average wage of the
American worker has stagnated, and the share of income earned by the top one
percent of earners doubled over the same time frame. This has almost nothing
to do with extreme poverty, but to an American audience, a context in which
the rich seem to be getting richer and the poor poorer is at odds with this
optimistic global narrative. One paradox of recent economic trends is that
inequality has increased nationally in the West, but decreased globally as
poor countries like China, India, and Indonesia catch up with the wealth of
the U.S. and Europe.
There is also the fact that while the United
Nations set the millenium development goals, reports on their progress and
formulations of plans to meet them are mainly written by Westerners for a
western audience. And while the reduction in global poverty is a success
story, the development community does not have ownership over the trend. By
far the main driver of progress has been the economic engines of a few
countries; China’s economic growth alone accounted for half of the reduction
in extreme poverty over the last two decades. And those countries did it by
ignoring the West’s advice.
Some of the policies that development organizations
like the World Bank have recommended -- particularly to Latin America after
its debt crisis in the early 1980s, Russia after the Cold War, and much of
East Asia after the 1997 financial crisis -- are known by the moniker of the
Washington Consensus. Many of the countries with strong economic growth that
powered recent poverty reduction completely ignored its tenets. China, for
example, favored state-owned enterprises over privatization, heavily
manipulated its exchange rate, and often required foreign companies to sign
partnerships with Chinese companies to enter the market. And, of course,
like the admired model of Singapore, China is not a democracy.
This is not to say that Asia’s experience
discredited the power of markets or proved that autocrats would deliver
growth better than democrats -- although many have made that conclusion.
Rather, it prevents western organizations from trumpeting the outcomes in
poverty reduction as a roadmap for the days ahead.
A more substantial reason that no one is
celebrating, however, is that the easiest gains may have already been made
against extreme poverty. In a recent report, the World Bank targets a 3%
rate of extreme poverty by 2030. The bank calls this achievable -- but
difficult and not inevitable.
One reason why is that the reduction against
extreme poverty has been extremely uneven. In broad strokes, Asia has made
great strides, while Africa has made little progress by the numbers.
Continued in article
The election polls and famous statistician Nate Silver bombed on
anticipating the defeat of Eric Cantor ---
"America's Sunniest State Has Become The Battleground For The Country's
Biggest Fight Over Solar Power," by Rob Wiley, Business Insider, June 2,
You'd think expanding solar energy in Arizona, the
with the country's highest level of solar insolation,
would be a breeze.
last year, the state's Department of Revenue ruled that existing statutes
suggest homeowners who install solar panels on their roofs are subject to
a $140 surcharge on their property taxes.
Last month, the department further clarified that
only homeowners who lease panels would face the tax — little comfort to
those taking part in the fastest-growing segment of residential solar
What prompted that first ruling remains unclear to
this day. Whatever its origins, it is still in place.
Today, TUSK, a pro-renewables conservative group
whose members include SolarCity and SunRun, launched its latest salvo in a
campaign to reverse the department's interpretation, releasing an ad that
calls on Arizona Gov. Jan Brewer to override the department's ruling. The
coalition also announced last week that there will be a rally at the state
capitol to protest the interpretation.
a terrible tax for Arizona and a political gift for the Democrats," Barry
Goldwater Jr., the head of TUSK, says in the ad. A
recent TUSK-sponsored poll
found 77% of Arizonans would be less likely to vote
for an election candidate if they proposed ending support for solar.
The utility industry's opposition to solar
has been well documented,
but it seems to have grown most intense in Arizona, where the solar industry
has accused the
chairman of the state's electric utility,
Don Brandt, of personally lobbying in favor of a
bill that would codify the department's interpretation into law. The group
that owns the utility
spent more than $3 million last year on a campaign
to peel back solar subsidies. The utility argues non-solar customers are
hurt by the incentives.
We just wrote about how Barclays believes it's
already too late for solar companies to achieve anything more than
short-term speedbumps to solar adoption.
"While they may slow the penetration of solar, any
relief they offer utilities is likely to be short lived," lead author YC Koh
wrote in the firm's note. "In Arizona, the fee increases the cost of a
rooftop solar installation about 5%. With the costs of solar installations
falling about 10% per year, we expect the pace of installations to recover
before the end of 2014."
Apparently, utilities are trying anyway.
"Controversial MLA Resolution on Israel Fails to Get Enough Votes to Pass,"
by Beth McMurtrie, Chronicle of Higher Education, June 4, 2014 ---
2014 Commencement Speech at Harvard: No doubt a lot of Harvard
professors hated the speech
"Two Cheers for Bloomberg A liberal politician denounces leftist
"McCarthyism." by James Taranto, The Wall Street Journal, May 30,
Michael Bloomberg has never been this columnist's
favorite politician, but he gave a speech yesterday at Harvard's
commencement that we can't help but applaud. The generally left-liberal
three-term former New York mayor forcefully defended the old-fashioned
liberal values of free expression and inquiry against the postmodern left's
relentless attacks. An excerpt:
There is an idea floating around college
campuses--including here at Harvard--that scholars should be funded only
if their work conforms to a particular view of justice. There's a word
for that idea: censorship. And it is just a modern-day form of
Think about the irony: In the 1950s, the right
wing was attempting to repress left wing ideas. Today, on many college
campuses, it is liberals trying to repress conservative ideas, even as
conservative faculty members are at risk of becoming an endangered
species. And perhaps nowhere is that more true than here in the Ivy
In the 2012 presidential race, according to
Federal Election Commission data, 96% of all campaign contributions from
Ivy League faculty and employees went to Barack Obama.
Ninety-six percent. There was more disagreement
among the old Soviet Politburo than there is among Ivy League donors.
Reuters headlined its dispatch on the speech
"Bloomberg Bashes Liberal McCarthyism at Harvard Commencement." The
absence of quote marks around "McCarthyism" is a curiosity, given the
wire service's notorious post-9/11 policy of using scare quotes around
"terrorism," and given that "McCarthyism" is in this instance a direct
"Great universities must not become predictably
partisan," Bloomberg said--though it's a little late for that.
Widespread leftist campus censorship has been going on at least since
the mid-1980s, when Bloomberg, now 72, was but a quadragenarian.
The problem has received a flurry of attention
of late because a series of commencement speeches have been canceled. As
Bloomberg observed: "This spring, it has been disturbing to see a number
of college commencement speakers withdraw--or have their invitations
rescinded--after protests from students and--to me, shockingly--from
senior faculty and administrators who should know better.
"It happened at Brandeis, Haverford, Rutgers,
and Smith," he noted. "Last year, it happened at Swarthmore and Johns
Hopkins." None of these are Ivy League schools, suggesting that National
Review's Kevin Williamson might have been on to something when he
observed: "Anybody else notice that the trend here is hysteria among
students at pretty good but not that good colleges? I suspect that there
is some intellectual overcompensation at work here."
Reuters headlined its dispatch on the speech
"Bloomberg Bashes Liberal McCarthyism at Harvard Commencement." The absence
of quote marks around "McCarthyism" is a curiosity, given the wire service's
notorious post-9/11 policy of using scare quotes around "terrorism," and
given that "McCarthyism" is in this instance a direct quote.
"Great universities must not become predictably
partisan," Bloomberg said--though it's a little late for that. Widespread
leftist campus censorship has been going on at least since the mid-1980s,
when Bloomberg, now 72, was but a quadragenarian.
The problem has received a flurry of attention of
late because a series of commencement speeches have been canceled. As
Bloomberg observed: "This spring, it has been disturbing to see a number of
college commencement speakers withdraw--or have their invitations
rescinded--after protests from students and--to me, shockingly--from senior
faculty and administrators who should know better.
"It happened at Brandeis, Haverford, Rutgers, and
Smith," he noted. "Last year, it happened at Swarthmore and Johns Hopkins."
None of these are Ivy League schools, suggesting that National Review's
Kevin Williamson might have been on to something
when he observed: "Anybody else notice that the trend here is hysteria among
students at pretty good but not that good colleges? I suspect that
there is some intellectual overcompensation at work here."
On the other hand, Bloomberg noted that his own
police commissioner, Ray Kelly, last fall "was invited to deliver a lecture
at another Ivy League institution"--he didn't name it, but it was
Brown--"but he was unable to do so because students shouted him down." And
at Harvard itself, students at the Education School demanded that Michael
Johnston, a Democratic Colorado state senator and school reformer, be
disinvited from commencement. "I'm glad to say, however, that Harvard has
not caved in," Bloomberg observed. "To their great credit, President [Drew]
Faust and Dean [James] Ryan stood firm."
Continued in article
Despite all the publicity over commencement speaker withdrawals in 2014 the list
of collegiate commencement speakers is not exactly dominated by the Michael
Moore's and other leftist radicals.
Exhibit A is former Microsoft CEO Steve Ballmer who is the commencement
speaker at the University of Washington.
Exhibit B is the General Motors CEO Mary Barra speaking at the University of
Exhibit C is 2012 GOP Presidential Candidate John Huntsman who is the
commencement of speaker at left-leaning University of Wisconsin
The list is dominated by actors, musicians, and other performers who are more
like Jay Leno and Wysnton Marseales than Sean Penn.
Peyton Manning is the commencement speaker at the University of Virginia
Early on I made the mistake of assuming that political correctness was
becoming the number one criterion for being a commencement speaker in collegiate
America. I apologize. There are still quite
a few media lefties speaking at commencements, but it would seem that
accomplishments above and beyond the competition are more important than
political leanings in the 2014 selection of commencement speakers.
2014 Commencement Graduation Speakers List Compiled by: Cristina
Liberal Bias in the Media and in Academe ---
From the CFO Journal's Morning Ledger on May 31, 2014
Michigan raises its minimum wage
Michigan became the seventh state this year, and the first
controlled by Republicans, to raise its minimum wage, the
WSJ’s Eric Morath reports.
The increase brings bottom-level earners up to $9.25
an hour by 2018, from $7.40 at present. The maneuver suggests Republicans at
the state level may be willing to accept smaller, more tailored minimum-wage
increases to blunt demand for the $10.10-an-hour level championed by the
A problem with minimum wages is that youths are now competing with their
grandparents for those minimum-wage jobs.
What little retirement savings that the grandparents accumulated now earn
virtually zero interest income thanks to the low interest rate policy of the
Federal Reserve. I read this morning that the five-year CD rates of banks are
now much less than one percent per year. No longer can retirees rely on interest
income in retirement unless they were like me and contracted for for a higher
lifetime fixed annuity when five-year CDs were paying over six percent per year.
A problem in Vermont is that the most generous welfare state found that too
many people were opting for welfare rather than work Vermont's increase to over
$10 per hour may not be enough to motivate many welfare recipients to find jobs.
It will, however, help grandma and grandpa working in restaurants to make up for
lost interest income.
As I recall the CBO estimates that in the USA about 400,000 jobs will be lost
if the federal government raises the minimum wage to $10 per hour.
I support raising the minimum wage to at least $10 per hour combined with
expanded youth employment and training programs.
One consideration is to raise the minimum wage to $12 per hour with a
stipulation that $5 per hour goes to needy grandparents or parents (who also pay
the taxes on the added $5 per hour). This way the younger folks get the jobs and
experience while the older folks get badly needed income. The older folks who do
not need the added income could put the money into savings accounts for their
grandchildren or children. Too bad those savings accounts will not earn interest
One major goal is to get the unemployed young people off the streets with
Another goal is to make more jobs available to college students so that their
student loans are lower on the dates of graduation.
French President Francois Hollande hiked income taxes, VAT and corporation
tax following his election two years ago. Hollande
estimated those tax hikes would raise €30 Billion in revenue.
The BBC reports France Faces
€14 Billion Budget Hole.
The French government faces a 14bn-euro black hole in
its public finances after overestimating tax income for the last financial
French President Francois Hollande has raised income tax, VAT and
corporation tax since he was elected two years ago.
The Court of Auditors said receipts from all
three taxes amounted to an extra 16bn euros in 2013.
That was a little more than half the government's forecast of 30bn euros of
extra tax income.
The Court of Auditors, which oversees the government's accounts, said the
Elysee Palace's forecasts of tax revenue in 2013 were so wildly inaccurate
that they cast doubt on its forecasts for this year.
It added the forecasts were overly optimistic and based on inaccurate
Meanwhile unemployment in France keeps going up and up and up.
"U.S. Funding for Hamas? State winks at the Palestinian merger with the
terror group," The Wall Street Journal, June 6, 2014 ---
The 1988 Hamas Charter explicitly commits the
Palestinian terror group to murdering Jews. Thanks to the formation this
week of an interim government uniting Hamas and the Palestinian Authority,
which the U.S. supports to the tune of more than $400 million a year, the
American taxpayer may soon become an indirect party to that enterprise
"Today we declare the end of the split and
regaining the unity of the homeland," PA President Mahmoud Abbas said in
televised remarks Monday. The split he was referring to is the bloody
conflict between Mr. Abbas's Fatah faction, which controls the West Bank,
and Hamas, which in 2007 forcibly expelled Fatah from the Gaza Strip.
Previous attempts at reconciliation had failed in
large part because Hamas had refused to subsume its armed wing to the PA.
This time Mr. Abbas acquiesced to a partnership with a heavily armed
terrorist group. The resulting relationship will likely resemble the one
next door between the Lebanese government, with its negligible regular army,
and the Shiite terror group Hezbollah, which like Hamas boasts an arsenal of
The question is whether the U.S. government will
continue to fund the PA now that Mr. Abbas has cast his lot with a State
Department-designated foreign terrorist organization. U.S. law prohibits
dispensing taxpayer money to any Palestinian entity over which Hamas
exercises "undue influence."
To hew as close as possible to the letter of U.S.
law, the architects of the Hamas-backed interim government have assembled a
cabinet of old PA holdovers and technocrats from Gaza with no obvious links
to Hamas. The maneuver was good enough for the Obama State Department. "At
this point, it appears that President Abbas has formed an interim
technocratic government that does not include ministers affiliated with
Hamas," spokeswoman Jen Psaki told reporters earlier this week. "Moving
forward, we will be judging this government by its actions."
But that still leaves open the question of the PA's
treaty obligations. The Oslo Accords and its progeny, including the 1998 Wye
Memorandum, set very clear limits on the extent and potency of the PA
arsenal. Under the Wye Memorandum, for example, the PA is required to
"establish and vigorously and continuously implement a systematic program
for the collection and appropriate handling" of illegal weapons.
Nobody should count on the aging and calculating
Mr. Abbas to exercise meaningful control over Hamas's arsenal, much less its
behavior. And nobody should count on the Obama Administration to apply
meaningful penalties to the PA for joining forces with Hamas and flouting
its obligations toward Israel. That leaves Congress, which can block funding
to the Palestinians until they prove capable of governing themselves as
something other than a terrorist enterprise.
"The 10 Worst Parts of Obama’s Horrible West Point Speech," by Mark
Davis, Townhall, May 30, 2014 ---
. . .
But rather than add to an already powerful body of
negative reviews, I thought I’d cue up actual excerpts that cried out for
immediate response. They are offered in the order delivered; I will leave it
to the reader to rank them in order of effrontery:
1. “When I first spoke at West Point in 2009, we
still had more than 100,000 troops in Iraq. We were preparing to surge in
Afghanistan. Our counterterrorism efforts were focused on Al Qaeda’s core
leadership — those who had carried out the 9/11 attacks. And our nation was
just beginning a long climb out of the worst economic crisis since the Great
Four and a half years later, as you graduate, the
landscape has changed. We have removed our troops from Iraq. We are winding
down our war in Afghanistan. Al Qaeda’s leadership on the border region
between Pakistan and Afghanistan has been decimated, and Osama bin Laden is
no more. And through it all, we’ve refocused our investments in what has
always been a key source of American strength: a growing economy that can
provide opportunity for everybody who’s willing to work hard and take
responsibility here at home.”
One can taste his disdain for that horrible era
when we had 100,000 troops in Iraq, also known as the period when we at
least appeared serious about making Iraq safe for democracy. I’m sure the
cadets appreciated the reminder of their teenage years, when we were
beginning that “long climb” out of the economic crisis. It’s been long, all
right, and shows no sign of great progress. The progress the President
clearly embraces is getting past that nasty war spending and “refocusing our
investments” on domestic spending, always a riveting theme at military
2. …”[By] most measures America has rarely been
stronger relative to the rest of the world. Those who argue otherwise — who
suggest that America is in decline or has seen its global leadership slip
away — are either misreading history or engaged in partisan politics. Think
about it. Our military has no peer. The odds of a direct threat against us
by any nation are low, and do not come close to the dangers we faced during
the Cold War.”
Really? A suggestion that our global muscles have
atrophied is either flawed history or political hackery? That’s rich. And
pardon me if my confidence requires a higher bar than “low odds” of a direct
threat. Sadly, the odds are much higher for a litany of terrible things that
could threaten us directly in the short term— nuclear adventures by Iran and
North Korea, Libya and Syria in a rolling boil of dangerous discontent, al
Qaeda empowered all over the world by our retreats. Indeed, our military has
no peer. But our nation has rarely faced so many tyrants and terrorists
unafraid of inviting its attention.
3. “ It will be your generation’s task to respond
to this new world. The question we face, the question each of you will face,
is not whether America will lead but how we will lead, not just to secure
our peace and prosperity but also extend peace and prosperity around the
Pardon me, but there is already sad doubt as to
whether America will lead as current crises unfold. President Obama may
consider it “leadership” to lecture the world about mannerly interaction or
deploy John Kerry for the occasional stern finger-wagging, but it falls
short of the way allies used to respect us and enemies used to fear us.
4. “I believe we have a real stake — abiding
self-interest — in making sure our children and our grandchildren grow up in
a world where schoolgirls are not kidnapped; where individuals aren’t
slaughtered because of tribe or faith or political belief. I believe that a
world of greater freedom and tolerance is not only a moral imperative; it
also helps keep us safe.”
It’s not that this passage is so ill-placed; the
problem is what is missing. This administration is filled with indignation
about Nigerian kidnappings and selected persecutions, but has never shown
the spine to do battle against the enemy it will not even identify by name:
radical Islam. This cafeteria-style intermittent vexation makes it clear
what does and does not motivate this President to action. It most decidedly
is not the war that has been honorably fought for a dozen years by the
5. “Tough talk often draws headlines, but war
rarely conforms to slogans. As General Eisenhower, someone with hard-earned
knowledge on this subject, said at this ceremony in 1947, ‘War is mankind’s
most tragic and stupid folly; to seek or advise its deliberate provocation
is a black crime against all men.’”
This cries out for context, but even from
war-hardened Ike, it is deeply problematic. Of course the deliberate
provocation of war is wrong; but from the birth of our nation to the need
for its reassembly the next century, from the two World Wars to the ejection
of Saddam from Kuwait, war is sometimes necessary to stop an unconscionable
evil or right an unendurable wrong. Today’s starkest dangers come not from a
trigger-happy America eager to deploy anywhere, but from a reticent America
telling the world it wishes to deploy nowhere.
6. “A strategy that involves invading every country
that harbors terrorist networks is naïve and unsustainable.”
No one suggests such a strategy. It is surprising
that there was room on the stage for the cadets to walk across in view of
all the straw men the President had set up for this self-congratulatory
7. “In taking direct action, we must uphold
standards that reflect our values. That means taking strikes only when we
face a continuing, imminent threat, and only where there is near certainty
of no civilian casualties, for our actions should meet a simple test: We
must not create more enemies than we take off the battlefield.”
If the prevention of civilian casualties had guided
our strategy in World War II, the entire continent would speak German today.
Any fighting force with a conscience will always weigh risks to
non-combatants as a factor in evaluating its strategy. But the fighting
force placing civilian protection above victory will never have victory.
This is why we have not driven terrorists from Iraq and Afghanistan; we have
been too interested in building schools and laying water pipelines and not
interested enough in the stark necessity of war— killing enough of the enemy
to persuade its surrender.
If our cause is just and our methods measured, we
do not need to wring our hands over what the locals think of us. If we are
in the right and have the will to win, the rightness of our actions will be
appreciated over time. I’m sure we were not popular with the Japanese as we
dropped bombs on Hiroshima. If Harry Truman, who reminds us what Democrats
used to act like, had been paralyzed by Japanese opinion polls, the war
could have continued through his presidency and beyond. Instead, we chased
Hitler into his fetid bunker and bombed Imperial Japan into submission.
Within less than a generation, both vanquished nations were steadfast
8. “We reserve all options to prevent Iran from
obtaining a nuclear weapon. But for the first time in a decade, we have a
very real chance of achieving a breakthrough agreement, one that is more
effective and durable than what we could have achieved through the use of
force. And throughout these negotiations, it has been our willingness to
work through multilateral channels that kept the world on our side.”
Again, this fetish for “keeping the world on our
side.” I’m sure the Muslim world is delighted with the soft touch of Obama,
but the real world— measured best by the dangers sensed by neighboring
Israel— is best served by an America that makes clear it will not tolerate
Iranian nuclear weaponry adventures, even if it means taking out a facility
in Parchin or Isfahan, or helping Israel do so.
9. “I believe in American exceptionalism with every
fiber of my being. But what makes us exceptional is not our ability to flout
international norms and the rule of law; it is our willingness to affirm
them through our actions.”
The first sentence is laughable in view of the far
more honest Obama who famously said during his first trip abroad: “I believe
in American exceptionalism, just as I suspect that the Brits believe in
British exceptionalism and the Greeks believe in Greek exceptionalism.” This
was an insult to his nation and anyone who considers it unique in stature
and history. There is no evidence of any change in his nonchalance about
America’s place in the world.
And where exactly has America offended
“international norms” and the rule of law? Is there no bottom to the Obama
tactic of defining the nation he leads as some errant creature in need of
redemption at his mighty hand? But wait— the best evidence of America’s
offenses against the world’s fragile feelings may be contained in our final
quote, which is meaningless but repellent nonetheless.
10. “I will continue to push to close Gitmo,
because American values and legal traditions do not permit the indefinite
detention of people beyond our borders.”
I have walked with and among the honorable U.S.
troops who are fighting the War on Terror in our hemisphere at that
facility. Freed from their comfortable cells stocked with fresh Korans,
plenty of those detainees would kill as many of us as they could. As they
watch America grow weary and wobbly against them, they are surely energized
that their side is winning the waiting game.
As the days tick by, until we have given up on the
war in word and in deed, we are most assuredly entitled to detain enemy
combatants at a facility under our authority. Thank God it is beyond our
borders; only a worldview as twisted as the Barack Obama-Eric Holder axis
thinks it is preferable to house them on American soil. Obama will never
close that facility, knowing the resulting horrific relocation of its
population to U.S. soil will dash whatever remains of his reputation as he
The constant perversion of the term “American
values” to meet some Obama-esque utopian ideal has become a dangerous habit.
Even more dangerous is a presidential whim to close a facility that has
taught us much about the terrorists’ designs on us, and taught them much
about our resolve.
A president obsessed with shuttering Guantanamo
delivers a wholly different message. But that seems to be the message he
wishes to send— to the world and to a graduation ceremony filled with young
Americans who are prepared to protect and defend the things that make
America great. Let us hope that after two more years of feeble,
directionless speeches like this, they can serve under a new
commander-in-chief who shares that commitment.
Thomas Pekkety ---
Piketty’s second law regards the relationship
between capital (e.g., machines, software, buildings) and national income.
Piketty argues that the owners of capital will capture a growing share of
national income at the expense of labor. He says that will happen because
savings and investment will continue to grow, even as population growth and
technological progress slow, along with overall economic growth.
Piketty's 'Second Law
We simply do not at all agree with the macroeconomic
reasoning that undergirds his forecast . . . Robert Solow, a Nobel prize-winning
economist, was closer to the truth in 1956, when he said that as the economy’s
growth rate slows toward zero, so will the national savings rate. “Postwar U.S.
data, moreover, [are] consistent with this theory in that decades with low
growth have typically been associated with low (or even negative) net savings
rates,” . . .
Tony Smith, a Yale University
economist, and Per Krusell of Stockholm University’s Institute for
International Economic Studies
"Is Piketty's 'Second Law of Capitalism' Really a Law?" by Peter Coy,
Bloomberg Businessweek June 6, 2014 ---
The two economists agree with Piketty that wealth
inequality has grown, but they say the causes include “educational
institutions, skill-biased technical change, globalization, and changes in
the structure of capital markets.”
Update, June 6: In an email
Piketty wrote that he didn’t understand the
professors’ case. He said his book
argues that savings rates have been falling more slowly than growth rates,
not that the process will go on forever. Or, as he put it:
We’ve never written
that the capital income ratio beta=s/g should go to infinity if g goes to
zero: presumably people would stop saving (i.e. s would go to zero) much
before that! We’re just saying that the simplest way to explain the rise in
capital-income ratios that we observe in the data in recent decades is that
saving rates did not fall as much as growth rates, so that mechanically the
capital-income ratio tends to rise to relatively high levels, just like in
the 19th century. I don’t think they are disputing this. Also note that the
rise of capital-income ratio is certainly not bad per se, and does not
necessarily imply high inequality. Tell me if I missed something!
Martin Feldstein ---
"Piketty's Numbers Don't Add Up: Ignoring dramatic changes in tax rules
since 1980 creates the false impression that income inequality is rising,"
by Harvard's Martin Feldstein, The Wall Street Journal, May 14, 2014 ---
Thomas Piketty has recently attracted widespread
attention for his claim that capitalism will now lead inexorably to an
increasing inequality of income and wealth unless there are radical changes
in taxation. Although his book, "Capital in the Twenty-First Century," has
been praised by those who advocate income redistribution, his thesis rests
on a false theory of how wealth evolves in a market economy, a flawed
interpretation of U.S. income-tax data, and a misunderstanding of the
current nature of household wealth.
Mr. Piketty's theoretical analysis starts with the
correct fact that the rate of return on capital—the extra income that
results from investing an additional dollar in plant and equipment—exceeds
the rate of growth of the economy. He then jumps to the false conclusion
that this difference between the rate of return and the rate of growth leads
through time to an ever-increasing inequality of wealth and of income unless
the process is interrupted by depression, war or confiscatory taxation. He
advocates a top tax rate above 80% on very high salaries, combined with a
global tax that increases with the amount of wealth to 2% or more.
His conclusion about ever-increasing inequality
could be correct if people lived forever. But they don't. Individuals save
during their working years and spend most of their accumulated assets during
retirement. They pass on some of their wealth to the next generation. But
the cumulative effect of such bequests is diluted by the combination of
existing estate taxes and the number of children and grandchildren who share
The result is that total wealth grows over time
roughly in proportion to total income. Since 1960, the Federal Reserve
flow-of-funds data report that real total household wealth in the U.S. has
grown at 3.2% a year while the real total personal income calculated by the
Department of Commerce grew at 3.3%.
The second problem with Mr. Piketty's conclusions
about increasing inequality is his use of income-tax returns without
recognizing the importance of the changes that have occurred in tax rules.
Internal Revenue Service data, he notes, show that the income reported on
tax returns by the top 10% of taxpayers was relatively constant as a share
of national income from the end of World War II to 1980, but the ratio has
risen significantly since then. Yet the income reported on tax returns is
not the same as individuals' real total income. The changes in tax rules
since 1980 create a false impression of rising inequality.
In 1981 the top tax rate on interest, dividends and
other investment income was reduced to 50% from 70%, nearly doubling the
after-tax share that owners of taxable capital income could keep. That rate
reduction thus provided a strong incentive to shift assets from
low-yielding, tax-exempt investments like municipal bonds to higher yielding
taxable investments. The tax data therefore signaled an increase in measured
income inequality even though there was no change in real inequality.
The Tax Reform Act of 1986 lowered the top rate on
all income to 28% from 50%. That reinforced the incentive to raise the
taxable yield on portfolio investments. It also increased other forms of
taxable income by encouraging more work, by causing more income to be paid
as taxable salaries rather than as fringe benefits and deferred
compensation, and by reducing the use of deductions and exclusions.
The 1986 tax reform also repealed the General
Utilities doctrine, a provision that had encouraged high-income individuals
to run their business and professional activities as Subchapter C
corporations, which were taxed at a lower rate than their personal income.
This corporate income of professionals and small businesses did not appear
in the income-tax data that Mr. Piketty studied.
The repeal of the General Utilities doctrine and
the decline in the top personal tax rate to less than the corporate rate
caused high-income taxpayers to shift their business income out of taxable
corporations and onto their personal tax returns. Some of this
transformation was achieved by paying themselves interest, rent or salaries
from their corporations. Alternatively, their entire corporation could be
converted to a Subchapter S corporation whose profits are included with
other personal taxable income.
These changes in taxpayer behavior substantially
increased the amount of income included on the returns of high-income
individuals. This creates the false impression of a sharp rise in the
incomes of high-income taxpayers even though there was only a change in the
legal form of that income. This transformation occurred gradually over many
years as taxpayers changed their behavior and their accounting practices to
reflect the new rules. The business income of Subchapter S corporations
alone rose from $500 billion in 1986 to $1.8 trillion by 1992.
Mr. Piketty's practice of comparing the incomes of
top earners with total national income has another flaw. National income
excludes the value of government transfer payments including Social
Security, health benefits and food stamps that are a large and growing part
of the personal incomes of low- and middle-income households. Comparing the
incomes of the top 10% of the population with the total personal incomes of
the rest of the population would show a much smaller rise in the relative
size of incomes at the top.
Finally, Mr. Piketty's use of estate-tax data to
explore what he sees as the increasing inequality of wealth is problematic.
In part, this is because of changes in estate and gift-tax rules, but more
fundamentally because bequeathable assets are only a small part of the
wealth that most individuals have for their retirement years. That wealth
includes the present actuarial value of Social Security and retiree health
benefits, and the income that will flow from employer-provided pensions. If
this wealth were taken into account, the measured concentration of wealth
would be much less than Mr. Piketty's numbers imply.
The problem with the distribution of income in this
country is not that some people earn high incomes because of skill, training
or luck. The problem is the persistence of poverty. To reduce that
persistent poverty we need stronger economic growth and a different approach
to education and training, not the confiscatory taxes on income and wealth
that Mr. Piketty recommends.
"A modern Marx: Thomas Piketty’s blockbuster book is a great piece of
scholarship, but a poor guide to policy," The Economist, May 3, 2014
"Thomas Piketty: Marx 2.0," by Rana Foroohar, Time Magazine,
May 19, 2014, pp. 46-49 ---
But "redistribute wealth" is a relative term. Paul Krugman's review ---
Especially note Krugman's point about how technology changed the structure of
wealth in America to a point where Piketty's European world is not quite the
same as the U.S. world of the wealthy in 2012. Piketty does not entirely
overlook that in his book.
Ten ways to fight inequality without Piketty's Wealth Tax ---
History does not repeat itself in the 21st Century replacement of labor with
capital. Never before in history has capital become so effective and efficient
in replacing labor with robotics and other technology. Soon we will have
driverless on the highways,
Amazon orders will be filled entirely by robots. The parcels will be
delivered by drones above the maddening unemployed crowds below. Soon our wars
will be fought with robots and drowns.
The only human thing left to dissidents will be terrorists blowing up the
power grid and innocent people. Thant and poisoning our food and water supplies.
From the CFO Journal's Morning Ledger on June 6, 2014
GM fires 15 workers over recall delays
General Motors Co. Chief
Executive Mary Barra vowed to upend the corporate culture responsible for
what she denounced as a “pattern of incompetence and neglect” in the auto
maker’s failure to recall cars equipped with a defective ignition switch,
the WSJ reports.
The strong words coincided with the release of a
company funded report that could deepen GM’s legal vulnerability and
scrutiny from regulators, prosecutors and lawmakers, but that exonerated the
CEO, executives who report directly to her and the company’s board of
As a rule the private sector is more inclined to fire workers charged with
alleged wrong doing in high publicity cases. In comparison, government
bureaucracy workers are usually just reassigned or suspended with pay. It's very
hard to fire a government bureaucrat until convicted in a court of law. Watch to
see if and when any government bureaucrats get fired for alleged “pattern of
incompetence and neglect" in the recent VA scandal. My guess is that nobody gets
fired until convicted in a court of law.
Of course some government bureaucrats like Lois Lerner grow weary of
seemingly endless media criticisms and resign. Some that were "friends" of the
private sector have no trouble finding higher paying jobs.
From the CFO Journal's Morning Ledger on June 6, 2014
Americans’ wealth hits record as rich get richer
Americans’ wealth hit a fresh record in the first quarter amid a
rise in home values and stock prices, a trajectory poised to continue as
U.S. markets push higher but one that doesn’t necessarily figure to rev up
the sluggish recovery, the
WSJ’s Neil Shah reports.
The net worth of U.S. households and nonprofit
organizations rose roughly 2%, or about $1.5 trillion, between January and
March to $81.8 trillion, the highest on record, according to the Federal
From the CFO Journal's Morning Ledger on June 6, 2014
SEC targets dark pools, high-speed trading. SEC Chairwoman Mary Jo
White unveiled a sweeping set of initiatives to address mounting concerns
about the impact of computer-driven trading on the stock market, the
WSJ’s Scott Patterson reports. Among the most
significant proposals, Ms. White said high-frequency traders should register
with regulators as broker dealers, which would pull them further under
Jensen Comment on High Frequency Trading
There are two types of "middlemen" that take some of investors money when they
buy and sell securities on the 11 or more securities exchanges in the USA (that
are no longer confined to Wall Street trading). Type 1 is one that earns a
contractual fee that is disclosed to investors who should be aware of what they
are paying to buy and sell securities. Type 2 are the hidden "skimmers" who make
profits that are not disclosed to investors. That does not make them necessarily
bad, but creates a moral hazard for them to secretly take advantage of
investors--- such as observing unfilled orders and racing to beat investors on
sell or buy orders so as to make them pay more or get less than would otherwise
be the case without high-frequency speed traders. On the other hand these HFT
traders also help create markets that can sometimes benefit investors even with
the high speed "skimming."
Michael Lewis: 'Wall Street Has Gone Insane' ---
"Everything You Need to Know About High-Frequency Trading: Why the
algobots that rule Wall Street are good—and why they're evil, too," by
Matthew O'Brien, The Atlantic, April 11, 2014 ---
The stock market isn't rigged, but it is taxed.
It always has been. As
Justin Fox points out, for as long as people have
been trading stocks, there have been middlemen taking a cut of the action.
Now, that cut has gotten smaller as markets have gotten bigger and more
technologically-advanced, but it's still there. It's the implicit fee that
intermediaries charge for making sure there's a buyer for every seller, and
a seller for every buyer—for "making markets."
But there's a new kind of middleman today. They
don't work at stock exchanges or banks. They work at hedge funds, and trade
at whiz-bang speeds. These "high-frequency traders" (HFT) use computer
algorithms—a.k.a., algobots—to arbitrage away the most infinitesimal price
discrepancies that only exist over the most infinitesimal time horizons. You
can see just how small and how fast we're talking about in the chart below
from a new paper by Eric Budish and John Shim of the University of Chicago
and Peter Cramton of the University of Maryland. It uses 2011 data to show
the price difference between futures (blue) and exchange-traded funds
(green) that both track the S&P 500. These should be perfectly correlated,
and they are—at minute intervals. But this correlation disappears at 250
millisecond intervals, a little more than half the time it takes to blink
your eyes. This is the "inefficiency" that HFT makes less so.
This rise of the robots certainly seems to have
helped ordinary investors. Bid-ask spreads—the difference between what
buyers want to pay and sellers want to be paid—have fallen dramatically the
past 20 years. Part of this is because, since 2001, stock prices have gone
from trading in fractions to pennies—which has allowed them to be
increasingly precise. Another part is that
electronic trading, though not super-fast, has
made markets more liquid. And the last part is that HFT has added even more
liquidity, eliminating bid-ask spreads that would have been too small to do
so before. Indeed, researchers found that Canadian bid-ask spreads
increased by 9 percent in 2012 after the
government introduced fees that effectively limited HFT.
That doesn't mean, though, that HFT is
unambiguously good. It's not. In fact, it might not even be ambiguously
Noah Smith points out, we just don't know enough
to do any kind of cost-benefit analysis. Now, we do know that smaller
bid-ask spreads, which cut the cost of trading, are one benefit. But how
much of one is it? Bid-ask spreads are down to around 3 basis points
today—from 90 basis points 20 years ago—so even if curbing HFT increases
them, say, 9 percent like it did in Canada, we're not talking about a big
effect. There might be diminishing returns to liquidity that we've already
hit, and then some.
Then there are the costs. Michael Lewis' new book,
Flash Boys, describes some of them. In it,
there's Lewis' requisite group of plucky outsiders—is there another
kind?—taking on a rotten status quo. Except this time, they're not really
outsiders; they're big bank traders. And they've figured out that the market
doesn't work like it should for big investors, like pension and mutual
funds, because of the algobots. But it's a little bit more complicated than
that. Here are the three biggest, though hard to quantify, costs of HFT.
1. Market-taking, not market-making.
Lewis' protagonist, a trader named Brad Katsuyama, had a problem. Every time
he tried to buy stock for a client, he could only get a little bit of what
was supposed to be there at the price he saw. Now, oddly enough, he could
get all the stock he saw at one particular exchange, but he had to pay more
at all the others. What was going on?
Well, he was being front-run. HFT firms pay public
and private exchanges to see their incoming orders. That's why Katsuyama was
getting all of his order filled at the exchange closest to him—that is, as
the fiber optic cable lies—but nowhere else. The HFTers were seeing his
order at the first exchange and then racing to buy all the rest of the stock
he wanted everywhere else, so they could sell it to him for more. This
happens all the time:
Nicholas Hirschey of the London Business School
found that HFT funds only tend to buy aggressively right before everybody
It's not too different from what HFTers do when
they buy early
access to public data. Again, they're paying for a
trading advantage that isn't really adding liquidity. It's what Barnard
Rajiv Sethi calls
"superfluous financial intermediation." HFT firms aren't connecting buyers
and sellers who might not find each other. They're jumping in between buyers
and sellers who would have found each other anyways in a few milliseconds.
It's not making markets more efficient.
2. Nobody wants to lose to a robot.
"When the market as displayed on his screens became illusory," Lewis writes,
"[Katsuyama] became less willing to take risk in that market—to provide
liquidity." It's what economists call "adverse
selection," and it's a simple idea: HFTers crowd
out other traders, because nobody wants to play against someone they know
they'll lose to.
That includes HFT funds themselves. As
Felix Salmon points out, HFT's share of all
trading has fallen from 61 percent in 2009 to 51 percent in 2012. Why? Well,
the algobots are fighting against each other now, and those fights don't end
in trades. They end in fakes quotes—or "spoofing"—that
the algobots send to try to draw each other out. Indeed,
Johannes Breckenfelder of the Institute for
Financial Research found that HFTs change their strategies when they're
competing against each other like this. They don't make markets as much, and
make directional bets on stocks instead—because those are the kind of things
they can actually beat each other on. The result is actually less
liquidity and more volatility, at least within each trading day. (HFTs don't
hold stock overnight, so interday volatility isn't affected).
3. A waste of money and talent.
Lots of HFT is personally profitable, but socially pointless—and that
pointlessness adds up. Take Spread Networks. Lewis describes in colorful
detail how it laid fiber optic cable in as straight a line as possible
between Chicago and New York all to shave three milliseconds off
the time it took to trade between the two. That meant spending $300 million
to drill through the Alleghenies, and try to avoid laying fiber on both
sides of the road, because each time they did, their CEO explained, it "cost
them one hundred nanoseconds."
Felix Salmon is right that there are some positive
spillovers from all this IT infrastructure spending. But this takes us back
to the question of diminishing returns. Is it really worth spending so much
money on what, to anyone other than HFT, are unnoticeable
improvements—especially compared to what it could have been spent on?
The problem, though, is that HFT has to
spend this money. It's an arms race, and there's no silver medal for
finishing second. That's because every HFT strategy depends on not only
being faster than ordinary investors, but being faster than each other
too. Anytime somebody comes up with a new way to cut a few
microseconds—that is, a millionth of a second—off of trading time, they have
to spend whatever it takes to do it. Otherwise, they'll lose out to their
competitors who do.
Continued in article
An article on HFT from the Knowledge@Wharton
blog on April 15, 2015 ---
This is pretty much a defense of HFT. It focuses mostly on theory and avoids
potentially fraudulent implementations that are now the focus of investigations
of the SEC and the Department of Justice.
Charles Schwab Seems to Agree With Michael Lewis
SCHWAB: High-Frequency Trading Is A Growing Cancer That Must Be Addressed
Brokerages Make Millions Selling Orders To
High Frequency Trading Firms ---
The Flash Boys book ---
The Kindle Edition is only $9.18
Many students admitted to college after help filling out the forms
Are reading skills the problem or are the forms too complicated?
"Clearing a Path to College Through the Fafsa Wilderness," by Ben Gose,
Chronicle of Higher Education, May 27, 2014 ---
K-12 schools should probably concentrate more on how to read forms.
"At-Risk Students Who Fall Behind Struggle to Catch Up, Study Finds,"
Chronicle of Higher Education, May 30, 2014 ---
Underachieving students in at-risk groups are less
likely than other underachieving students to meet college-readiness
standards four years later, according to a report released on Thursday by
report describes the percentage of “far off track”
students in at-risk categories (low-income, Hispanic, black, and
special-education students, as well as those for whom English is a second
language) who met college-readiness standards—based on their test scores in
mathematics, reading, and science—four years after taking the examinations
in Grades 4 and 8. The ACT researchers then compared the performance of
students in the at-risk groups to that of other “far off track”
students. (Students were deemed “far off track” by scoring more than a full
standard deviation below the “on track” target ACT test scores for their
respective grades in school.)
Fourth and eighth graders who qualified for free
and reduced-price lunches were less likely to meet ACT standards in all
three categories four years later than were students in both grades who did
not qualify for the lunch programs. But low-income fourth graders who lagged
behind were much more likely than low-income eighth graders to meet
standards four years later. This was especially true in math, where 5
percent of fourth graders caught up four years later, yet only 1 percent of
eighth graders did the same.
Black and Hispanic students who lagged behind their
peers in Grade 4 were also more likely to meet standards than were black and
Hispanic students in Grade 8. Nonetheless, other students (mostly white,
according to the researchers) who fell behind their peers in Grades 4 and 8
were more likely than black and Hispanic students to meet college-readiness
standards four years later in every subject, except for eighth-grade math.
In that subject, the percentage of “far off track” Hispanic and other
students who reached scores that indicated college readiness as high-school
seniors was tied at 2 percent.
Animal Farm: Watch the Animated Adaptation of Orwell’s Novel Funded by the
CIA (1954) ---
For statistical analysis illustrations for students, the parts that I did not
quote below are great classroom illustrations of the frustrations of statistical
"Immigration Does Matter in GOP Primaries, But It’s Not Clear Why," by
Harry Enten, Nate Silver's 5:38, June 12, 2014 ---
. . .
Ok, non-math readers: Please join us again.
We’re left with at least three possible
explanations for why immigration scores are tied to incumbent Republican’s
- Republicans do worse when embracing
immigration reform — the issue itself matters. That’s certainly what the
NumbersUSA want people to think, and that’s
been the general media narrative. The problem with that theory is
Republican Sen. Lindsey Graham, who won his South Carolina primary, has
been pro-reform. On the other hand, Graham only got 56 percent of the
- It could be, as
the Pew Research Center pointed out, that
immigration was “a symbol of a larger concern among some Republicans
about the direction of the nation.” Cantor’s opponent, David Brat,
said immigration was “the most symbolic issue
that captures the difference between myself and Eric Cantor.” Maybe
voters aren’t overly concerned about immigration but use it to divide
candidates they like from those they don’t. This would be an argument
for candidates spending more time in their district, explaining their
views to ensure that politicians don’t fall into the symbolic trap.
- The least sexy answer is that we’re dealing
with a confounding variable. Correlation does not equal causation,
and immigration reform may be a proxy for ideology in a way that DW-Nominate
scores cannot pick up . It would certainly explain why they are so
related to each other.
We can’t be sure exactly what role immigration
played in Cantor’s defeat, but Republican incumbents’ stance on immigration
has been predictive of their performance in primaries during the Obama
era. This goes beyond just being “conservative” in the traditional sense. In
GOP primaries, a Republican’s willingness to compromise on immigration
probably appears to do them more harm than good.
Actually for statistical analysis illustrations for students, the parts that I
did not quote are great classroom illustrations of the frustrations of
"The Case of the Progressive Plagiarist," by Alexander Nazaryan,
Newsweek, June 13, 2014 ---
In a lengthy
article that was obviously thoroughly researched and was, just as
obviously, a long time in the making,
New Republic contributor Christopher Ketcham convincingly
argues that the firebrand left-wing journalist Chris Hedges has
routinely plagiarized in his work, liberally
borrowing from the likes of Ernest Hemingway and Naomi Klein, not to
mention Ketcham’s wife.
Once part of a New
York Times team that won a Pulitzer Prize, Hedges has recently
turned to political criticism that some have deemed strident;
he has even been accused of anti-Israeli
sentiment that appears to lapse at times into animosity for Jews
As bad as Hedges’s
journalistic crimes might have been, his condescension to those who
confronted him were even worse. As Ketcham writes:
In September 2003,
[University of Texas classics professor Thomas Palaima] published a
piece on the Hemingway plagiarism in the
Austin American-Statesman, in which he
noted that plagiarists “are not merely stunting their own
intellectual development or disappointing their professors. By
disguising the fact that they are not speaking in their own voices,
[they] diminish our belief that their voices are original and worth
listening to.” According to Palaima, when he and Hedges spoke on the
phone prior to publication of the American-Statesman piece, Hedges
suggested that Palaima was not competent to question his work.
Palaima, a MacArthur Fellow and veteran classicist, replied that he
was adhering to the basic rules of scholarship in which proper
citation is given.
Hedges’s assured downfall recalls
that of pop-sci writer Jonah Lehrer. Both men appeared to have
thought they were above basic journalistic propriety. Both were wrong.
Bob Jensen's threads on plagiarism are at
Celebrities who plagiarized or otherwise cheated ---
If one of your students asks about the phrase "carried interest," can you
explain the meaning of the phrase and its controversies?
"How Obama Can Increase Taxes on Carried Interest," by Victor
Fleischer, The New York Times, June 12, 2014 ---
"No World for Old People: Battle Hymn for Seniors," by
Accounting Professor Steven Mintz, Ethics Sage, June 10, 2014 ---
I recently returned from a trip to see my mom who
is 95 years old and living in an assisted living facility. Dad passed away
about 1 ½ years ago so an assisted living facility is the best place for my
mom who can barely see or hear and has advanced dementia. During my visit I
reflected on the treatment of seniors like my mom and the expectations of
society for valuing those who came before us and provided opportunities for
all of us to live a better life.
Some seniors are quite vigorous even into their
late 80s and early 90s. Others, like my mom, deal with challenges that would
make most of us not want to get out of bed in the morning. One problem is
the way society treats seniors. Unlike many Asian countries that honor and
respect seniors for their knowledge and years of influence, in the U.S. we
all too often see them as a burden. In East Asian cultures steeped in a
Confucian tradition that places a high value on filial piety, obedience and
respect, it is considered utterly despicable not to take care of your
In his 1994 book, "Beyond Peace," Richard Nixon
predicted that our nation’s biggest challenge would not be war with a
foreign enemy, but rather an internal “war” over how to allocate money
within our borders. With our national debt above $17 trillion, his
prediction is being realized.
Many current fiscal issues are actually decades
old, but a newer economic and cultural war targeting seniors has been
intensifying. The conflict will only worsen; demographers tell us that about
10,000 Americans will turn 65 each day for nearly the next two decades!
This war is being waged on two fronts. First, a
vicious cultural divide is festering among younger Americans toward seniors.
A Facebook study from March 2013 monitored 84 different groups of 20-29 year
olds, conducted by Cal Berkeley, Yale, Hunter College, and Hopkins School in
New Haven. The report's findings are alarming: “Seniors are a burden to
society;” “I hate everything about them;” “They don’t contribute to
society;” “Anyone over 69 should immediately be put in front of a firing
squad.” I thought, that could be me in two years.
Seniors already face a daunting challenge: savings
remain stagnant, but food and medical costs continue to rise. Last year, the
government decided to garnish seniors’ Social Security payments if they
co-signed on any student loans that became delinquent.
There is bipartisan support in Washington for
reducing Social Security cost of living increases by substituting products
in the calculation, forcing seniors to change eating and living habits,
reducing their ability to maintain a standard of living.
The war on seniors is not just an American
phenomenon. An article published in the April 2013 Generation America
magazine (GenerationAmerica.org), entitled “No World for Old People,”
details how seniors are being neglected, abused, and marginalized worldwide.
Increasingly the younger generation sees seniors as
a fiscal burden not only to the country but their own personal finances as
Medicare and Social Security increasingly consume more and more budget
dollars with no end in sight. In fact, the country may reach a point in the
future where retirees will not receive the Social Security and Medicare
benefits they are entitled to because they have paid into the system for
many years. This is no “freebie” for seniors.
Our society does not honor seniors for their
sacrifices that helped build our great nation. We almost never see a news
report that honors what they have done for our society unless it is Veterans
Day or Memorial Day. Let us never forget that many seniors fought in World
War II. They are part of the greatest generation, saved many lives in
Europe, and were trailblazers in their fields.
The lack of respect and caring for seniors just
reinforces the idea that we truly have a “throw away” society with respect
to our seniors. What is lacking in our society is respect, kindness, and
empathy for seniors. I found myself thinking about this during my trip to
see my mom. Do the children of seniors know where their parents and
grandparents are? Do they know what they are doing;? Do they understand the
challenges they are facing? Do they even care? Or, do these children turn a
blind eye toward the quality of life their parents and grandparents have in
their senior years?
Some people may think: Out of sight, out of mind,
so let’s put them in a nursing home or an assisted living facility. Let
someone else deal with the problems of elder care. This is a way to satisfy
our collective consciousness. Instead, we should reach out to our parents
and grandparents; call them on the phone and ask how they are doing; visit
them from time to time. But, above all else, love them unconditionally – the
way we want to be loved.
Nursing homes and assisted living facilities sound
like the perfect answer to the problem of aging and infirm parents and
grandparents. However, all too often they seem like depressing places to be
and oblivious to the needs of those they are entrusted to care for. Many of
the “care-givers” think of elder care as a burden and they lack the empathy
and patience to treat seniors the way they deserve to be treated – the way
the care-givers would like to be treated in their senior years.
We need to fast forward 20 or 30 or 40 or even 50
years and realize, if we’re lucky, we’ll be around and facing the inevitable
challenges of being in our senior years. Will our children be there for us,
or will they ignore us as do all too many young adults today?
After I ended my trip to see my mom, I looked deep
inside my soul and asked myself whether I am doing all that I should to show
my mom respect, kindness and love. Could I do more? What would that be? If
not now, then when?
"Why Freakonomics Freaks Me Out," by Mark Buchanan, Bloomberg
View, June 6, 2014 ---
The law of supply and demand offers a useful
insight: Typically, if you reduce the price of something, people will buy
more of it. Unfortunately, some economists can’t help but take the idea too
"Freakonomics" authors Steven Levitt and Stephen
Dubner tell a story in their new
book, "Think Like a Freak," about meeting David
Cameron before he became the U.K. prime minister. They tried to make him see
the folly of the taxpayer-funded National Health Service, through which
people get treatments free of charge. They explained that the market for
medical services is just like any other market, and it can't work right
unless patients have to pay.
As Levitt, a
professor of economics at the University of
Chicago, summed it up: “It doesn’t take a whole lot of smarts or a whole lot
of blind faith in markets to recognize that when you don’t charge people for
things (including health care), they will consume too much of it.”
Maybe Cameron lacks smarts, because he abruptly
ended the meeting. Far more likely, he's intelligent enough to know a
juvenile ideological argument when he sees one, even if it's made by someone
who ought to know better. Economists have
understood for years that medical services aren't
simple “goods” such as apples or automobiles, and that free markets for such
things don't work very well.
The trouble is an imbalance of knowledge. Most of
us don't know enough about medicine to diagnose our own problems. That
gnawing pain in your gut might be nothing, or it might be a sign of
something more serious. If it persists, you'll need medical experts, aided
by technology, to identify the problem, just as you would need an expert
mechanic to discover what's wrong with a car that won't start or a
refrigerator that won’t cool.
Experts know more than you do, so you're at their
mercy when purchasing their services. You can only hope the doctor will
prescribe the right tests and treatment. Did you really need that $3,000
magnetic resonance imaging scan? What about those super-expensive pills,
allegedly to protect your stomach lining? Even after you recover, you still
won't be sure what part of the treatment was really necessary.
Consumers cannot possibly buy something
intelligently if they don't know what they want or need, and they can't
properly judge whether what they bought was worth it. Hence, such “credence
goods” aren't subject to typical market forces.
Reaching the right amount of consumption at the right price requires lots of
extra things such as better knowledge on the part of consumers (which is
often impossible), ways to verify the quality of treatments (often difficult
or impossible), or ways to hold experts liable for mistreatment (either
impossible or impractical).
Levitt's and Dubner's vision has other flaws. Price
may well deter people from seeking treatments that we actually want to
encourage. What if, for example, we let vaccine manufacturers sell their
products in an open market, rather than requiring parents to vaccinate their
children against diseases such as polio or measles? Many would certainly
choose not to pay $200 for a series of shots. The market would find its
equilibrium, guaranteeing sporadic epidemics of easily preventable diseases.
No wonder many people are deeply suspicious of
economists. We hear way too much cheerleading for the notion that markets
can solve all our problems and way too little about the complexities we face
in trying to supply things such as credence goods to the people who need
them -- which is all of us. Too bad, because this is economics at its best.
The myth of easy solutions through free markets is
endlessly appealing. It makes the complicated seem simple and avoids facing
up to real trade-offs. This may be freaky thinking, but not in a good way.
Jensen's universal health care messaging ---