Yes, Universal Government Snooping Is A Problem

I don't mean to brag, but on May 1 in a post entitled  "Things The Government Gets Wrong by 180 Degrees -- Privacy" I did write:

[Y]ou have no choice but to assume that the government is monitoring all your financial transactions and phone calls behind your back. 

And sure enough, the big news of the past week is that, yes, the government is indeed monitoring all of your financial transactions and telephone calls behind your back.   Oh, and add to that, all of your e-mails and other use of the internet.  I didn't mention those pieces only because they were so obvious as to go without saying.

The government's defense, articulated by the President on Friday June 7, is basically that this is necessary to guard you against terrorism and we have all kinds of oversight and protections in place, which, unfortunately, we can't tell you about.   You may be surprised to hear that I give that defense some credit.  Guarding the people against terrorism is actually one of the few constitutionally legitimate things that the Federal government does.  I take an extremely skeptical view of whether it is necessary or useful for the Federal government to monitor all of everyone's financial transactions, phone calls, and internet activity in order to guard against terrorism, but I don't have all the information needed to make an informed decision, nor any way to get the information to become informed.

But there are very serious problems with the government monitoring all the activities of everyone all the time.  The main one is, they are just not capable of resisting the temptation to misuse the information for political advantage.  And make no mistake, the information is highly valuable for political purposes, in two ways.  First, this detailed information is useful in providing those in power with particulars on who their voters are, to enable the more precise direction of advertising and more effective get-out-the-vote efforts.  Information advantages deriving from the vast trove of data could easily be worth 5 to 10% of the vote, plenty to swing close elections. 

More perniciously, the information can be used to target and destroy political adversaries.  It could easily be used to uncover such things as old extra-marital affairs, or visits to illicit internet sites, by political adversaries, to be leaked at a critical moment on the eve of an election.  Or for that matter, to commence an investigation or a prosecution against an adversary.  Professor Jacobson points out the linkage between the vast data mining exercise and the "everything is a crime" world view that motivates today's Federal criminal code, where felonies include hundreds of things you would never imagine, from installing a toilet with greater than 1.8 gallon flush to spreading a dump truck load of dirt on a wet spot on your property where mosquitoes are breeding.  The gun laws are enormously complex and almost impossible to comply with perfectly.  James Rosen of Fox News learned recently that his newsgathering was characterized as a Federal felony in a Justice Department affidavit seeking court approval for access to his personal information.  You may think that you are law-abiding, but you may be regularly committing multiple Federal felonies that you never imagined existed. 

Some supporters of the data mining program are surprisingly naive about its dangers.  Take for example, the Wall Street Journal editorial page, which today downplays the significance of the data mining with this response: 

[T]he paradox of data-mining is that the more such information the government collects the less of an intrusion it is.  These data sets are so large that only algorithms can understand them.  the search is for trends, patterns, associations, networks.  They are not in that sense invasions of individual privacy at all.

Well, what exactly keeps them from putting the words "Mitt Romney" or "Rand Paul" or "Ted Cruz" into their search algorithm and seeing what comes up?  The answer is, nothing.  Remember that J. Edgar Hoover famously gathered dirt on Martin Luther King for purposes of using it when it became politically advantageous.  Now the potential dirt is all pre-gathered.  But only those in power have access.

Meanwhile, just as this data mining scandal is getting some play, there are two vast expansions of Federal data gathering in the works, with few even paying attention.  One is the so-called "border security" provisions of the proposed immigration reform bill, containing provisions intended to make it impossible to work in the United States without data on employer and employee being entered in the vast Federal data trove.  The other is Obamacare, by which all medical records are to be added.  There's one with tremendous potential in political opposition research!  

Well, rollback of this stuff is not going to happen any time soon.  What you need is advice on how to foil it!   Here from Kit Lange of Victory Girls is the latest on how to use the telephone and the internet without reporting your every move to your FBI minder.  In the financial arena, the simple answer is to use cash.  I wonder when they are going to move to make that illegal.

The Early Returns Are Not Looking So Good For Obamacare

There's been a great back and forth in the blogs over the past couple of weeks over the early returns on Obamacare implementation.    It began when something called "Covered California" issued a press release on May 23 announcing the results of bidding for the cost of new compliant health insurance policies to be available next year to Californians in the individual market.  Covered California is the name for California's version of the Obamacare insurance exchange for those who don't have health insurance through their employer.

If you read the press release, the situation looks like a great triumph.  Many rates will actually go down!  

“This is a home run for consumers in every region of California,” said Peter V. Lee, Executive Director of Covered California.  “Californians should be proud of how not only health plans in this state, but doctors, medical groups and hospitals have stepped up – and creating a market that will allow millions of consumers to enroll in affordably priced products. Because of that, we will be able to deliver exceptional value, low rates, access to health care in every region of the state, and a solid platform to achieve the dream of providing quality health care for all Californians,” Lee said.

Statist commentators like Paul Krugman of the New York Times and Ezra Klein of the Washington Post promptly joined in claiming great success.

Well, not so fast.  Next to join the discussion was Forbes columnist Avik Roy on May 30.  He took the actual numbers put out by Covered California and compared them to policies available today in the individual market from the internet site eHealthInsurance.com.  Result:  rates for the young and healthy on the individual market will increase by 64 - 146%.   

Klein's response was that Roy's numbers did not include about 25% of applicants through eHealthInsurance.com who are not qualified for its low rates due to various existing health issues.  In today's market, they either can't buy insurance at all, or else must pay dramatically higher rates.  True enough.  But that leaves about 75% who will be subject to, on average, a doubling of their rates.  

The problem here is that the people whose rates are about to double are not all just going to go along with it and buy the new Obamacare insurance with all the required coverages (free birth control!).  Since Obamacare outlaws all non-compliant health insurance, the available option is to decline to buy insurance, pay the tax penalty, and wait until you get sick.  Supposedly the whole idea of Obamacare was to solve the "problem" of 50 million +/- of people without health insurance.   The solution was a mandate to buy insurance, the cost of which, our President promised, would go down.  But if the cost goes up, and if the only teeth of the "mandate" are a tax penalty that is far less than the cost of the insurance, and if insurers are required to sell you "insurance" after you get sick, why would any sane person do this?  Isn't it just about a sure thing that the number of uninsured is about to soar?  

Time to place your bets.   

One Approach To Economic Policy Is Right, And The Other Is Wrong

The neo-Keynesian sees two fundamental alternatives in fiscal policy, known by the misleading terms of "austerity" and "stimulus."  Austerity is some combination of spending cuts and tax increases; stimulus is some combination of spending increases and tax cuts.  Both are a muddle.​

I of course have a completely different way of looking at it.  On one side there is shrinking the government, meaning some combination of spending cuts and tax cuts; and on the other side there is growing the government, meaning some combination of spending increases and tax increases.  ​ One works and the other makes things worse.  Of course, our government is aggressively pursuing the one that makes things worse.

Those looking for some real information on which sort of economic policy works would do well to join me in reading the recent excellent biography of Calvin Coolidge by Amity Shlaes.   At least as regards domestic economic policy, Coolidge was literally the anti-Obama -- he did the exact opposite of everything Obama has done, or would have done had he been president in the 1920s.  While Obama has presided over an explosion of Federal spending, particularly handouts of various sorts, and endlessly advocates for higher income tax rates on high earners, Coolidge's entire focus on the domestic front as president was on cutting spending and cutting taxes.

A few examples to give some flavor of Coolidge's approach:​

• On June 30, 1924, at a speech to assembled government bureaucrats, many of whom were pushing for bigger budgets for their agencies, Coolidge instructed them that they were not allowed to advocate before Congressional committees for funds other than those approved by the President:   "I regret that there are still some officials who apparently feel that the estimates transmitted to the bureau of the budget are the estimates which they are authorized to advocate before the committees." ​  He then made this statement of his own position:  "I am for economy.  After that I am for more economy.  At this time, and under present circumstances, that is my conception of serving the people."
• Coolidge's top legislative priority was getting tax rates lowered.  In 1924 he succeeded in getting the top Federal income tax rate lowered from 46% to 25%.​  According to Shlaes (p. 320) the resulting decline in Federal income tax revenue was only 5% in the first year.
• ​Coolidge's top priority for allocating his own time was to meet with his budget director, Herbert Lord, to figure out ways of cutting spending.  An example was instituting various incentives and rewards to departments that submitted reduced budgets, such as creation of the "Two Percent Club" for departments that trimmed their budgets by that much.  Federal spending was actually lower in nominal dollars when Coolidge left office than when he entered.
• During Coolidge's presidency, Congress came up with endless plans to spend lots more money.  The biggest items of the times were various "bonus" schemes for World War I veterans and plans for subsidies and price supports for farmers.  Coolidge engaged in every sort of obstruction, including numerous vetoes, to keep these spending plans from getting through, and largely succeeded.​

​And how did the economy do?  Shlaes summarizes the state of the economy in 1925, after four years of Harding and Coolidge spending and tax cuts, at page 331:

Coal prices were stable and employment was so high that workers were scarce.  Wages rose, even though union membership and certainly union strikes were down.  The Dow Jones Industrial Average was now inching above [a record] 130.​

​Well, now we have exactly the opposite in economic policy:  a spending explosion, aggressive advertising by the government for its own expansion, persecution of those who advocate spending restraint, higher taxes and the push for still higher taxes.  Just compare Coolidge's praise for budget cutting to the Obama administration's reaction to the recent sequester, where the whole idea was to make a minuscule 3% spending cut as difficult and hurtful as possible.  And of course we have an endlessly sluggish economy.  What is the thinking?  Perhaps we should look to Larry Summers (former President of Harvard, Secretary of the Treasury under Clinton, head of the National Economic Council under Obama - now there are some credentials!) writing in the Financial Times on June 2:

[T]he US and other countries will not benefit from further fiscal contraction directed at rapid deficit reduction. Not only will output and jobs suffer. A weaker economy means that our children may inherit an economy with more debt and less capacity to bear the burden it imposes.

Got that?  If the government cuts spending, the result will be a weaker economy that means "our children may inherit an economy with more debt."  The reason you can't understand that brilliant logic is that you have not been President of Harvard and have not been head of the National Economic Council!  Our supposedly intelligent leaders literally don't know what they are talking about and say the most preposterous things.  And yet they have control of the large majority of the outlets of the media and spread this ridiculous nonsense endlessly.​

​Well, it can't be that both increasing spending and cutting spending are beneficial policies for the economy.  If one is right, the other is wrong.  I know which it is.  Barack Obama and Larry Summers do not.

 

Any Immigration Reform Passed By Congress Will Make Things Worse

If there's one thing that everyone can agree on in this country, it's that our immigration laws are a mess.  Even I agree!  But does that mean the immigration laws should be changed?  Remember, there's only one way to change the laws, and that's to get a new law through the Congress, and (absent two-thirds majorities) signed by the President.  What is the chance that any new immigration law that could get through the Congress and be signed by the President would be an improvement on the current situation?  Certainly if we are talking about some kind of "comprehensive" reform, the chance of it being an improvement over the current situation is zero.  Far better to stick with what we have.

​As much as the current situation is a mess, it has beneficial aspects that are rarely perceived.  Most notably, because most immigrants into the U.S are illegal, they are substantially deterred from obtaining welfare benefits and other state handouts.  To the extent these immigrants become legalized,  the vast legions of handout promoters would immediately be sicced upon them, and many immigrants would find themselves heeding the sirens' song.   The result of that in places that have tried it, namely much of Europe, is a huge alienated underclass seething with resentment and ready to explode in riots and/or terror attacks.  For example, consider Sweden, currently engulfed in about a week of riots with no end in sight.  The rioters are predominantly muslim immigrants, who make up about 6% of the population, while receiving some 70 - 80% of welfare payments.  Or consider the extensive rioting in the poor suburbs around Paris in 2005, again largely by unemployed immigrants subsisting on various forms of state handouts.  France just had another round of such riots in Amiens in 2012.  Relevant to this issue is the now eighteen-part series by Mickey Kaus of the Daily Caller titled "Does Welfare Cause Terrorism?"  Recent subjects of the series have included the Tsarnaev brothers of Boston marathon fame - yes, they had been on welfare.  In the latest installment, Kaus asks whether English terrorist Michael Adebolajo, famous for recently beheading an army man on the street in Woolwich, had been receiving welfare.  The answer is not yet in.  I know where I place my bet.​  Kaus has this to say about the underlying dynamic:

[R]elatively generous welfare benefits enable those in the ethnic ghetto to stay there, stay unemployed, and seethe. Without government subsidies, they would have to overcome the prejudice against them and integrate into the mainstream working culture. Work, in this sense, is anti-terrorist medicine. (And if you work all day, there's less time to dream up ways and reasons to kill infidels.)

​Then there is the issue of how any actual immigration reform would make things even worse.  At the top of every immigration reformer's agenda is what they call "border security."  Of course, this has little to do with the border.  Sure, we can build a fence, and that may help a little, but really "border security" is mostly not about the border but rather is about how to identify the people who have gotten in here legally but can't stay legally, so we can throw them out.  And the universal proposed "solution" is to track everybody all the time.  For example, here is Republican Senator Marco Rubio a few days ago on the Fox News Hannity program, saying (at about 1:44) "E Verify must by fully completed" as part of his "gang of 8" comprehensive immigration reform bill.  In other words, no working for anybody in the U.S. any more without the Federal government knowing about it and tracking it in a data base.  In case you thought this might apply just to immigrants, it does not. 

Any problem with that?  Well, to start with, is there any possibility that the government would mis-use such information for political purposes against its perceived enemies?  That's like asking whether the sun will rise in the east.  In fact, an employment tracking system will really be useful only against people of higher economic status who have regular employment, and likely of no use whatsoever on the immigration front.  Why not?  Consider things here in Greenwich Village.  In this neighborhood we have hundreds of small older buildings and a small army of casually-employed people who assist in maintaining those buildings.  There are people who will sweep the sidewalk in front of your house, or take out your garbage at the appointed time for pickup, or water your tree garden, or do handyman jobs around the house, or touch up the paint, or dust and vacuum, or fix a leak, or any one of a thousand other small jobs.  These people only work for a few hours at a time for any one building owner.  Many are of course immigrants.  They are not "employed" by anyone in any sense that I am aware of.    I don't see "full implementation" of e-verify having the slightest effect on this situation.  Are they really proposing to make it illegal to pay someone $20 to sweep a sidewalk?  But "full implementation" of e-verify would have a huge and intrusive effect on the relation between regularly-employed people and their government.​

The only beneficial reform of immigration law that might actually happen would be to allow a larger number of skilled workers to enter for employment particularly in the high tech field.  But that I don't really see happening, because most politicians interested in the area have as their primary goal getting big new blocs of votes to swing elections in their direction.  So be it.  We'll stick with what we have.​

The New York Times Covers The de Blasio Mayoral Campaign

Gearing up its coverage of the mayoral race, yesterday the New York Times in its New York section (page A21 in the print edition) ran a long article by Michael Barbaro on the campaign of Bill de Blasio.  de Blasio is currently Public Advocate, a city-wide elective office of no identifiable duties or purpose, serving only to give its occupant a platform to keep his name before the public and thereby try to make himself a candidate for mayor when the opportunity arises.

The Times article, like nearly everything that issues from that source, serves mostly to illustrate the New York conventional ignorance and what is wrong with it.   ​First, a short review of my own views of what is important in this race for mayor.  New York City government is ridiculously expensive, for reasons that have nothing to do with delivering a superior level of service to the people, and everything to do with paying back the employee unions for their support.  In a post late last year entitled Why New York City Is A High Tax Jurisdiction, I laid out the three main areas where we vastly overpay to get nothing of value:  public employee pensions (currently running a stunning $8 billion per year, 12% of the budget, and likely to double over the next ten years based on formulas already agreed to and desperately in need of reform); public schools (we spend about $20,000 per year per student, which is almost double the national average, the differential representing over $8 billion, which is 12% of the budget - and our student performance is worse than the national average); and Medicaid (we spend close to triple per beneficiary what is spent in California and Texas, for no better health results, although we are partially saved by the Feds and State picking up most of the tab; still, it is about a $2.5 billion issue in the City budget).  These three items together represent more than $15 billion in overspending for no value, about 22% of the budget down the rat hole, before getting to other large items.  This overspending is basically giveaways to favored constituencies, mainly the public employee unions, who contribute lavishly to their chosen mayoral candidates and are expert at bringing their voters out to the polls.  Every candidate for mayor needs to address this overspending issue as priority number 1.

With that in mind, let us look at the Times coverage of de Blasio's candidacy.  First of all, in an article spread over most of two full pages, there is not one word ​about the level of City spending, whether we are getting value for our taxes, or anything specific about worker pensions, school spending, or Medicaid spending.  Indeed, the article is almost completely devoid of substance on matters of policy.  So how can they even fill what amounts to a full page of text in the print edition without getting to any such subject?  Easy.  Here's how it starts:

​Bill de Blasio drives a gas-sipping Ford hybrid and cultivates tomatoes and peppers from his backyard in brownstone Brooklyn.  He works out at the socially responsible Y.M.C.A. and opted for the all-hands-on-deck rigors of the Park Slope Childcare Collective.  His wedding was a multicultural billboard for the borough: under a pin oak tree in Prospect Park, he married an African-American writer who previously identified as a lesbian.  In the race for New York mayor, this is the new face of borough agitation.

From that inauspicious beginning, the article goes on point out that de Blasio is proudly the candidate from Brooklyn, and to spin the main issue in the race as being the guy from long down-and-out but now up-and-coming Brooklyn against all the other guys from Manhattan.  Quinn is from Chelsea, Thompson from Harlem, and Weiner now lives on Park Avenue.  But de Blasio hails proudly from progressive, multicultural Park Slope!  Well, so what?  What does he have to say about any issue of substance?

In an article of several thousand words, the entire portion on the substantive issues of the race appears in two paragraphs near the end: (apparently omitted from the on-line version, so I'm typing them out):

Mr. de Blasio . . . has amassed a running tally of the indignities and inequities in four boroughs: a yawning income gap, a surge in fines for small businesses, slighted schools and inadequate early childhood education.  He envisions an activist city government that addresses those disparities head on.  Alone among the Democratic field, he calls for a tax increase on the rich, to bankroll universal prekindergarten.

​Typical of the New York Times, the reporter can conduct a lengthy interview with an apparently serious candidate for mayor, hear the candidate claim that the schools are "slighted," and not be able to ask the simplest question as to how the schools could possibly be "slighted" when we are already spending close to double the national average per student.  Even worse is de Blasio's call for "universal prekindergarten."  This proposal is of course the darling of the teachers' union, which sees in it a 10-15% increase in dues paying membership.  Meanwhile, expensive pre-K programs have never demonstrated any lasting educational benefit for the children.  For a mayoral candidate to sign on to this proposal is roughly the equivalent in competence for the job of mayor as for the CEO of Apple to agree to repatriate the $100 billion of overseas cash and gratuitously pay $35 billion in Federal taxes.  Indeed, at current wildly overgenerous pension formulas, the cost to New York City taxpayers of future pensions for the teachers in the universal pre-K program will be far more than $35 billion.  Frankly, I don't think either de Blasio or the New York Times reporter is remotely capable of doing this math.  But don't worry, he's going to pay for it with "a tax increase on the rich"!  Again, I don't think that de Blasio even knows that the entire City income tax only raises about $8 billion per year, so even a huge rate increase limited to "the rich" will only bring in maybe $1 billion, which will be extremely destructive to the economy and not remotely pay the cost of that universal pre-K program.

This is what we are dealing with here.​

Go to de Blasio's campaign web site to find out what his campaign is really about.​  It's one union endorsement after another, the biggest being 1199SEIU -- those are the hospital workers on the receiving end of the Medicaid spending.  The Times is just totally oblivious to this.

UPDATE:  In the online version of this article today, the Times ran a correction, noting that de Blasio is not the only candidate for mayor who has called for tax increases on "the rich," since Comptroller John Liu has also done so.​

An Issue Where I Can't Even Understand The Other Side Of The Argument

Since I'm a contrarian, there are many issues where I disagree with seemingly most other people.  But at least on a lot of those issues I have some understanding of the other side's argument, even if I disagree.  Then there are the many issues where I just can't understand what the argument is at all.

An example from the recent news comes from the Apple tax hearings.  Senator Carl Levin of Michigan, Chair of the Permanent Subcommittee on Investigations of the Senate, is shocked, shocked that Apple, after years of success at selling computers, iPhones and iPads, has accumulated some $100+ billion of cash overseas and declines to repatriate it to America.  Since the USA levies a tax of about 35% on corporate income, bringing this cash into the US would cost Apple's shareholders about $35 billion.​

To me it is completely obvious that any Apple executive who even thought for a second about bringing this money to the US and throwing away $35 billion of shareholder money would be totally incompetent and should be fired immediately.  It is ridiculous to suggest that any executive who knows anything about his job and his fiduciary duty to his shareholders would give this idea a moment's consideration.  So what in heaven's name is this hearing about?​

Granted, Levin is an idiot.  ​But how do you explain the likes of John McCain making statements like this (reported at cultofmac.com):

McCain concluded, “Apple has a negotiated tax rate of less than 2%. They have created loopholes to avoid paying $44 billion in taxes on income. $102 billion of $145 billion of Apple’s cash on hand is overseas. It’s time for Apple to reinvest in America.”

That man was the 2008 Republican candidate for President! Couldn't a high ranking former military officer like McCain give even a little deference to the fact that this man has a job and legal duties to his shareholders?  By the way, Senator Rand Paul did a fairly good job standing up for Apple, although in reading his remarks I can't find any mention of the idea that bringing this money to the US and paying a $35 billion voluntary tax bill would be total dereliction of duty by Cook. ​