McCutcheon And The Danger Of Government Self-Promotion

Last week's McCutcheon decision from the Supreme Court illustrates as well as anything recently the sharp divide between the libertarian and progressive visions of the world; that is, the divide between the view that we are self-governing people with a limited government to set the ground rules, and the view that experts much smarter than ourselves should be given the power to run our lives.

The 5-4 decision broke down along the standard left-right lines.  All the Democrat-nominated justices would have upheld aggregate restrictions on campaign contributions as a permissible government restriction on freedom of speech.  Justice Breyer wrote the dissent.  Here is an excerpt from his introductory paragraph:

[The majority opinion] understates the importance of protecting the political integrity of our governmental institutions. It creates a loophole that will allow a single individual to contribute millions of dollars to a political party or to a candidate’s campaign. Taken together with Citizens United v. Federal Election Comm’n, 558 U. S. 310 (2010), today’s decision eviscerates our Nation’s campaign finance laws, leaving a remnant incapable of dealing with the grave problems of democratic legitimacy that those laws were intended to resolve.

Having had this guy as a professor in law school (the course was Antitrust, the year 1974), and read a few of his decisions since, I can assure you that he completely buys into the view that all-knowing experts with powers of government at their disposal can fix all of our problems and lead us to a just and fair world.  

And thus to Justice Breyer it is a huge problem that "a single individual" might "contribute millions of dollars to a political party or to a candidate's campaign."  But in the Breyer world view, it is not a problem at all the the federal government itself spends not millions, but billions -- and billions and billions and more billions -- promoting itself and its ongoing expansion.  In Breyer/progressive world, that doesn't count.  It's just the neutral, all-knowing experts seeking to implement the grand plan for fairness and justice.   That doesn't have any effect whatsoever on government legitimacy; they're just doing what they're supposed to do.  But if an individual seeks to contribute "millions," why, that leads to "grave problems of democratic legitimacy."

Well, Justice Breyer, with the federal government spending many, many billions to promote its own expansion and seeking to swamp the field with its own message so that no one else can be heard, and then enacting and enforcing a statute to limit how much individuals can spend to respond, how exactly can it remain possible for the opponents of government expansion to push back?  Or is opposition to government expansion, and to the consolidation of rule by the experts, just out of bounds in your view?

Let's have a little round-up of just a few of the many, many programs of the federal government's promotion of its own expansion going on now or recently.

• In his "Best of the Web" column on April 2, James Taranto reminds us that the Associated Press did a study last year on how much the federal government was planning to spend on the advertising campaign to get people to sign up for Obamacare, They came up with an annual figure of $684 million. 
• And how about throwing out tens of billions in new subsidies to get more people enrolled in Medicaid.  The New York Times reports on Saturday April 5 (may be behind pay wall) that Obamacare had led to 3 million new enrollments in that program.
• The there is the fact that the food stamp (SNAP) program has nearly doubled under Obama, even though these five years have supposedly been a time of economic recovery.  The reason is an aggressive promotion campaign to get people who previously declined onto the program.  Here is an article I wrote on the subject, linking to more reporting from the Washington Post.
• For a real doozy, here's one brought to my attention through an article presented at the meeting of the Shadow Open Market Committee that I attended on March 14.  The author of the article is Charles Calomiris (of Columbia University):  "The Fed was given [the role of arbiter of bank mergers] precisely because it could be counted upon to go along with ill-conceived government policy, which designed the merger approval process to be a source of rent creation for merging mega banks in the 1990s, so that those rents could be shared between merging banks and community activist groups, which were given power by legislation to influence the merger approval process. . . .  Fed bank merger hearings were mainly focused on the testimony of activist groups about whether the merging banks were 'good citizens,' a trait that was measured by the amount of loans and grants the merging banks had contractually promised to give the activists as the quid pro quo for their testimony.  Those contractual promises exceeded $850 billion from 1992 to 2006."  Yes, it's $850 billion. 
• Here's one I've written about many times:  the reporting of GDP to count government spending, no matter how wasteful, at 100 cents on the dollar.  Thus any shrinkage of the government, no matter how ill-conceived the slashed program may have been, results in apparent dollar-for-dollar reduction of GDP.  How is this other than sheer self-promotion by the government?  The fraudulent, self-promoting compilation of GDP is a multi-tens of millions of dollars per year effort.
• Or how about the reporting of the "poverty" rate in such a way that government anti-poverty spending does not count and does not reduce the number of people in "poverty," thus allowing the persistence of "poverty" to be used to advocate for yet more "anti-poverty" spending.  The government spends tens of millions of dollars annually compiling these data, in an effort that no private citizen, or group of private citizens, could hope to duplicate.

I could continue, but I think by this time you get the picture.  Is anyone to be allowed to amass enough resources to push back even a little?  For now, a 5-4 vote allows a little of it.  In Breyer world, only the government's own voice could be heard.  And the government really wants only one thing, which is to expand and increase its own power.

Nomination For The Biggest Single Fraud On The American Consumer: Vitamins

Government fraud on the American people is massively huger than anything anyone in the private sector could ever hope to achieve.  And thus, seeking to stick to the big issues, I tend to deal much more with the endless supply of government scams.  But let's not suggest that there aren't plenty of private scams as well, aimed toward getting lots of money from the American consumer on false pretenses.

What is the very biggest, most blatantly crooked, and most successful of all such scams?  I have a nomination: vitamins.  I am willing to accept any and all additional nominations.  But this nomination of vitamins is very hard to top.  It has all the key elements of the massive successful fraud.  It's not just the endless ridiculously false claims.  (Vitamins protect against cancer!  Vitamins will make you live longer!  Vitamins make you look better! ).  But then there is the very name itself -- "vitamin" suggests "vital" and "vitality."  And there's the not so subtle implicit government backing for the claims.  And the groupthink acceptance.  I'll bet you take a daily vitamin!

What is the total annual volume of the vitamin scam?  That's actually a little tricky to get a handle on, since there is substantial play in the definition of what constitutes a "vitamin" versus a mineral or a dietary supplement.  Estimates I find range from as little as about $5 billion on the narrowest definition to as much as $30 billion on the broadest.  

And is there any evidence whatsoever for positive health effects from taking these things?  Sorry, but no.  The December 2013 issue of Annals of Internal Medicine has reports on results of three major studies.  (www.annals.org).  Plus an editorial, pithily titled  "Enough is Enough: Stop Wasting Money On Vitamin and Mineral Supplements."  Here's the key quote from the largest of the studies:

"After reviewing 3 trials of multivitamin supplements and 24 trials of single or paired vitamins that randomly assigned more than 400 000 participants, the authors concluded that there was no clear evidence Of a beneficial effect of supplements on all-cause mortality, cardiovascular disease or cancer."

The results of the other studies are essentially the same.

My second nomination was going to be statins, a $30 billion annual market for which the evidence of benefit is exceedingly thin.  But "exceedingly thin" is not the same as non-existent, which is the sorry case for vitamins.  And hey, I take a statin!

(Sorry, but no success at adding links to this post, done on my iPad.)

Special Interests At Work In New York

News articles in New York frequently mention the dominance of so-called "special interests" in the affairs of the legislature and City Council, but it's unusual to see a lot of specifics.  So today I'll pull together a few of the rip-offs of the public currently going on. 

The general nature of the game is to lobby the legislature or other public agency for some kind of special give-away or perk that either hobbles the competition or directs money to your own coffers.  Sometimes the courts even get into the act.  Far and away the biggest practitioners of this art are labor unions, mostly of public employees but sometimes in the private sector.  Crony capitalism, aka giveaways to politically favored businesses, is actually less of a problem in New York than in some other places (New Jersey in particular is a champion of corporate subsidies); but there are plenty of dramatic examples of this as well.

Last Wednesday March 26 we had the argument before the Court of Appeals (New York's highest court, located in Albany) of a rather important case involving public access to information about public employee pensions.   Here is a report from the Albany Times Union. The case is between the Manhattan Institute think tank, seeking access under public records disclosure laws, and the Teachers Retirement System, seeking to prevent disclosure of the amount of anyone's individual pension.  The argument of TRS is basically that privacy should be protected; also that disclosure of names and amounts could lead to identity theft.  Are you sympathetic?  Or, does it seem like kind of an unimportant issue to you?  Actually, this issue is critical to the taxpayers.  Until a few years ago, access to this information was open, and that led to the discovery by the curious (e.g., New York Post) of such things as the fact that 97% of Long Island Rail Road workers retire on "disability" pensions, enhancing their pensions by an average of around $1 million (lifetime) per head; or that three quarters of New York City firemen have retired on similar "disability" pensions to similar effect; or that de Blasio's new school chancellor Carmen Farina gets a pension of $199,579 in addition to her salary of $212,614 (Isn't a pension only after you retire?).  The unions long ago figured out that the best place to get paid is by pension, because that is the easiest way to hide abusive practices and massive wealth transfers from public view.  Yet in the case before the Court of Appeals, the lower courts have upheld changes by the pension plans to prevent disclosure of the information.  The good news is that the judges of the Court of Appeals appeared skeptical at the oral argument.  Decision expected in a few months.

From a wholly-owned politician's perspective, the best public sector union entrenchment is the one that can be cynically sold as "for the children."  And thus we have Mayor de Blasio's signature pre-K initiative.  The sales pitch to the public is that this will somehow fix income inequality, although how a pre-K program will have any measurable effect on income inequality in less than about 20 - 30 years, if then, is a mystery.  But how a pre-K program will benefit the teachers' union is not a mystery.   The pre-K program means adding another 5% or so to the ranks of teachers.  But will they be unionized?  The teachers' union in recent years has come under serious threat from (largely non-union) charter schools, many of which way outperform the public schools, and which have gone from nothing to about 6% of students over the last 10 years or so, and could go to as much as 10% by 2017 according to the New York Times here.  And thus you will not be surprised to learn that current state law prohibits charters from participating in publicly funded pre-K, and moreover that Mayor de Blasio's proposed program would continue that restriction.  So you can decide if de Blasio's program is really "for the children" or for his paymasters at the teachers' union.  Meanwhile, in a fascinating development, charter advocates have been putting on an advertising blitz that seems to be having some effect.  The recently announced state budget deal contains several protections for charters from de Blasio's threatened depredations, but I can't find anything in various descriptions of the deal as to whether the state-funded pre-K program will continue previous restrictions on charter participation.  I guess we'll know in a few days.  Meanwhile, even in a worst case de Blasio gets several thousand more teachers union members.

Moving to a situation involving private sector unions, consider the case of union versus non-union hotels in New York.  When I first came to New York in the 70s, the hotel industry was more or less 100% unionized.  Almost all hotels were either in mid-town or at the airports, much of the rest of the City then being considered too dangerous for tourists.  Since then the City isn't so dangerous any more, and the unionized hotels are way overpriced, giving a big opening to non-union competitors.  How much of a difference does it make to a hotel operator whether it is union or non-union?  There undoubtedly is a wage differential, but that actually turns out not to be the most important factor.   According to a Complaint in a case by a hotel owner against Marriott filed early last year (follow this link) the bigger problem of getting unionized was being subject to a Work Rules Agreement with the following effects:

As a result of the Work Rules Agreement, the number of permanent employees at the Hotel increased by more than forty seven percent (47%); operating costs skyrocketed by more than $2 million annually; and the Hotel's net operating income dropped by approximately fifty percent (50%) to $4 million per year. . . .  Ultimately, due to the Hotel's abysmal financial performance over several years as a result of the forced unionization of its workers by Defendants, Madison was driven into bankruptcy, where the Hotel was sold for a fraction of its true value.

You can understand why a hotel owner might not think that inflating the staff by 47% is a good idea.  From the public's point of view, non-union hotels have numerous benefits: lower prices mean more tourists, more tourist spending on other things, more economic activity, and more and higher productivity jobs.  Anyway, non-union operators have swooped in.  The most active is a guy named Sam Chang of McSam Hotels.  According to a New York Times article in 2009, he had 37 hotels open and 22 more in development in the City.  Recent articles from The Real Deal indicate that Chang continues today to be as active as ever.  So this is not a small phenomenon.  If you're the union, how to stop him (and others like him)?  The answer is, by getting friendly politicians to hobble the competition.  The Wall Street Journal reports in this morning's edition that a City Councilman from Brooklyn, Jumaane Williams, has introduced a bill that would put any new hotel in the City through a process of review and special permitting by local community boards.  In other words, we can subject your proposed hotel to a two year delay if we feel like it, and then maybe we'll just kill it.  And all of this in a formally "public" process that in reality is controlled by a few insiders.  The WSJ is clear that the motivating force for this initiative is the hotel unions.

Mayor de Blasio has been making noises that he intends to be pro-development in his new administration.  Let's now see if he really means it when that goal comes into conflict with the entrenchment efforts of a key union ally.

And for crony capitalist of the day, we present Mr. Larry Silverstein.  You've probably heard the name -- He's the guy who effectively bought the World Trade Center (actually a 99 year lease) a couple of months before it was destroyed, and since then has gotten himself into the position of principal developer of the replacement.  Anyway, you have to hand it to this guy -- he is truly a master of the art of crony capitalism.  Although he's known to be a billionaire already, that doesn't stop him from trying every trick in the book to make his next billion at the public trough.  There are three buildings on the WTC site that are Silverstein's to develop, numbers 2, 3 and 4.  He has recently completed number 4, and next up is number 3.  For many months the story has been that he needed a big lease from a big company in order to get the financing to proceed.  Then in December 2013 he signed the big lease -- 516,000 square feet with media giant GroupM.  According to the Times here, Silverstein and GroupM squeezed City and New York State officials for a $15 million cash subsidy and $75 million in tax breaks in connection with that lease.  Still, upon signing of the lease the Post's Steve Cuozzo promptly reported that "3 WTC is finally on the rise."  But three months later nothing seems to be happening.  What's up?  According to the Times article, Silverstein is back at the well for more government goodies.  This time he is asking the Port Authority for a loan guarantee of no less than $1.2 billion to facilitate financing for number 3.  Yes, over a billion dollars.  The March 31 article in the Times by Michael Powell is appropriately critical, in my view.  Powell interviews Port Authority board member Kenneth Lipper, who is doing his best to stop the train before Silverstein gets the next billion.  Lipper describes the proposed loan guarantee deal as a one way benefit to the developer, where if the project succeeds "he gets the gain" and if it fails "we take the hit."  Try to oppose the deal and "you hear a lot of talk of patriotism."  Yikes.  Powell concludes:

Along the way, [Silverstein] has internalized a developer’s rule of thumb in New York: Only a rube puts much of his own money at risk.

Well, as long as they even seem to be considering the guarantee, that building will remain unbuilt.  If they could just say no convincingly, my bet is that the building would be under way within a month or two.  But probably they will say yes.  If so, Silverstein will get his loan guarantee; the loan will be a point or two cheaper than otherwise; and the interest differential will end up as hundreds of millions of dollars in Silverstein's (and his investors' and heirs') pockets over the next 20 years or so.  And our airports and bus terminal will remain wrecks.

How's That "Stimulus" Working Out For You? Puerto Rico Edition.

Advocates of ever-increasing economic "stimulus" never seem to look at the cases where their preferred economic policies are actually put into effect.  By the way, those advocates include essentially all of the cognoscenti as far as I can tell -- the entire governing class in Republican administrations (GW Bush) and Democratic (Obama), the IMF, the Fed, Krugman, all Krugman-wannabe economists, etc. 

So Kevin Williamson does a major service with his cover article in the current issue of National Review, titled Bankruptcy Boricua.  (Looks like it costs a quarter to buy the article.  Or you could subscribe to the print edition like I do.)

There are lots of statistics in the article.  The bottom line is that in Puerto Rico they have tried and tried for decades to buy a growing economy with more and more government spending, and the result is vast dependency and a per capita income level only about half that of the otherwise lowest state (Mississippi).  By 2008 Puerto Rico's government was running an official on-budget annual deficit of $3.3 billion, 44% of revenues.  A new governor elected at that time, Luis Fortuno, cut on-budget spending 20% and got the official deficit down to 7% of revenues.  He also cut taxes and to some degree went after the public sector unions.  Needless to say, he only lasted one term.  Under the new guy, the deficit and tax rates have resumed their increases.  Meanwhile, it turns out that Fortuno was only really dealing with the official part of the budget.  They also have a bunch of off-budget public agencies, like the University of Puerto Rico and the Government Development Bank.  When you combine the deficits of the agencies with the official budget, what's the real combined deficit?  Williamson says that a recent audit came up with the number $39 billion.  For comparison, that's approximately equal to the entire budget of the state of Connecticut ($37.6 billion), which has about the same population as Puerto Rico (both are around 3.6 million).  But Connecticut is a lot wealthier.

But surely all this deficit-spending "stimulus" has created lots of jobs through the famous "multiplier" effect?  Not really.  Williamson reports these discouraging numbers:  15.2% unemployment; 30% of employed people work for the government; and 51% of residents receive some form of welfare.  And did I mention that Puerto Rico's population has been declining since 2000?  It's off about 200,000, or almost 5%, from a peak over 3.8 million in the 2000 census.  Everybody who can is moving to the mainland.

You would think that there would be some level of empirical evidence that government spending cannot buy economic success that would eventually sink in to even the densest skulls.  Well, on that subject my memory is jogged by seeing the op-ed in this morning's Wall Street Journal by one Martin Feldstein, noted economist certainly not of the Krugman ilk, Harvard professor and one-time head of the Council of Economic Advisers under Reagan.  Certainly not a liberal shill, you would say.  The subject of Feldstein's op-ed is not fiscal stimulus, but rather how the Fed should give guidance on monetary policy.  However,  a couple of weeks ago I attended a monetary policy event put on by something called E21, and Feldstein was the featured speaker.  After his speech (the subject of which was much like his op-ed today) somebody asked him, OK, what do you think should be done about today's sluggish economy?  And his answer?  He said that the government should increase the amount of fiscal stimulus.  I'm not making this up.  This is the unbelievable power that fallacious Keynesian groupthink is holding over economic policy today.   It's actually worse.  Feldstein went on to say that the government should do what he called "real" stimulus, which he described to mean the purchase of goods and services, as in the building of infrastructure, as opposed to transfer payments like the last round of Obama stimulus.  The reason he gave was that transfer payments are not measured as such in GDP, whereas purchase of goods and services go into GDP at 100 cents on the dollar.  OH MY GOD he has been taken in by the single most obvious and blatant fraud practiced on the people by the government.   I have written about this many times, for example here.  Martin:  The inclusion of government purchases in GDP at 100 cents on the dollar is just a completely fraudulent measurement convention, and does not make the measured increase remotely real.  Help!!!!!

Should Everything That Is Bad Be Illegal?

Read (or re-read) the Declaration of Independence, and you will be reminded that the big complaint of the colonists was the arbitrariness of rule by a king who could just do to you whatever he wanted.  We replaced that, with remarkable success, with what we call "the rule of law."  In fact, maybe the rule of law has been too successful.

Faced with a situation where the laws are viewed as basically fair and well-applied, most people show a remarkable willingness to be law-abiding.  Thus arises the fallacy that the world can be perfected if only we can enact enough laws prohibiting everything bad.  And in this game, "bad" quickly morphs from something that most everyone would agree is wrong, to whatever got a bare majority in Congress or a state legislature on some particular day. 

It may seem like most of the victimless crimes have been around forever, but look into it and you find out that this game only really got started well into the 20th century, and it only took off during your own lifetime.  Gambling, for example, was pretty much open season in the United States in the 19th century, and restrictions started proliferating in the 1920s and 30s.  Drugs were almost entirely legal at the federal level before the Marijuana Tax Act of 1937 tried to make marijuana illegal by back-door means.  Only when that was struck down by the Supreme Court in the Timothy Leary case in 1969 did we then get the Controlled Substances Act of 1970 and the launch of the "War on Drugs."  I was in college.  Also launched in the momentous year of 1970 was the war against the victimless crime that I regard as the most ridiculous and most futile of all to try to wipe out, namely "money laundering."  The law that started it was the so-called Bank Secrecy Act of 1970.  (A better name for it would be the Bank Non-Secrecy Act -- It requires your bank to rat you out to the government on request and not tell you that they are doing it.)  And then we have the explosion of increasingly preposterous "crimes" over the past few decades:  Installing a toilet of more than 1.6 gallon flush (Energy Policy and Conservation Act of 1992)!  Manufacturing a 100 watt incandescent light bulb (Energy Independence and Security Act of 2007)!  OK, make that a 75 watt incandescent light bulb!  I could go on (and on, and on).

Read the justification for any of this stuff, and you find out that freedom just isn't considered a value of any importance by many people.  And actually, it's far worse than that, because restrictions on human freedom come with untold unintended consequences as people act to evade the restrictions.  Yet it is very hard to get the unintended consequences heard as part of the debate.

Nowhere is this clearer than in the drug war.  Most of the debate is between drugs = bad and therefore should be illegal, versus drugs = good and therefore should be legal.  There actually is some to be said on the side of drugs = good, most notably medical uses of marijuana, and remarkably that is where most of the recent ground has been gained.   But I would not stand up for the drugs = good position for most people and in most circumstances.

Looking over the arguments put forth by the drugs = bad crowd, it's hard to find much if any discussion of the value of human freedom or of the unintended negative consequences of the drug war.  For example, Bill O'Reilly of Fox News has become a big advocate of continued illegality of drugs including marijuana.  Here is a 2013 column he wrote on he subject.  Excerpt:

If you have kids, you most likely prayed hard that they would avoid drugs and alcohol. Once a child becomes intoxicated, childhood is over. The young person will never be the same again.  Thus, a sane society discourages substance abuse if only to protect children. A sane society does not put a happy face on inebriation.

O'Reilly puts what he calls the "freedom issue" among the "usual excuses" put forth by the legalizers.  He completely equates "discouraging substance abuse" with necessary criminalization and putting millions of people in jail.  Or here is a relatively balanced discussion of the drug war from a high ranking official of the New York Police Department.  But at bottom he weighs freedom at zero and thinks that drugs turn the users into crazed maniacs who go on crime sprees.  Is there any actual evidence for that?

Or for that matter, is there any actual evidence that criminalization decreases the number of drug users?  A big recent study from the European Union concludes "Among the strongest and most consistent findings, eliminating punishments for possession for personal use is not associated with higher drug use."

And then there is the long list of negative consequences of the war.  Here is a roundup.  Examples:

• $51 billion annually spent on the drug war.  (I have seen higher numbers elsewhere.)
• 1.55 million arrests in the U.S. in 2012 on nonviolent drug charges.
• 658,000 arrests in the U.S. in 2012 for marijuana for possession only
• $46.7 billion foregone tax revenue (OK, that one is kind of made up, but doesn't seem wildly out of line to me.)
• 70,000 deaths in Mexico since 2006.

And they don't even mention hard-to-quantify (but also hard to deny) things like increased crime and corruption of the police.  It sure seems like a lot of the murders in places like Chicago and Detroit stem from drug turf wars, a consequence of prohibition.

And don't get me started on money laundering!

Argentina Is Joined In The Supreme Court By The Coalition Of Weasels

Another year, and the ever-entertaining country of Argentina finds itself back in the U.S. Supreme Court, trying to get the court to hear its appeal of injunctions that would force it to pay its debts.  A couple of days ago a group of friendly countries came in to support Argentina's position with amicus briefs.  These countries address the critically important question of the day: how many reasons can we think of why a country that gets tired of paying its debts should be able to walk away?  Call these countries the "Coalition of Weasels."  So far it's Brazil, Mexico (!) and France (!!!). 

OK, I shouldn't be so surprised about France.   They are well on the way to adopting the official Latin American model of economic success.  Government spending is well over 50% of GDP.  A socialist government pretends that infinite spending can be paid for by the tooth fairy.  Last year they lost their AAA rating.  Moody's rates them Aa1 "with negative outlook."  Yes, even France has reason to prepare the ground for the day it wants to default.

The overriding theme of the three briefs is how terribly important it is for a country in crisis to be able to walk away from debt.   Mexico:  "The injunctions will inevitably have a negative impact on future sovereign debt restructurings and risk destabilizing the international monetary system."  I like that one about "risks destabilizing the international monetary system."  How would that work, exactly?  Nobody knows, but it sounds really scary.  Then here we have France:

If upheld, the injunctive remedy affirmed by the Court of Appeals on the basis of this ill-founded interpretation threatens significant global harm to various public and private interests.  It also would disrupt the established practice of orderly sovereign debt restructurings, in which France has acquired extensive experience as an active participant in the Paris Club.  In particular, the injunctive remedy threatens to upset the complex balance of interests between sovereign debtors and their creditors, sovereign lenders, bank lenders and bondholders that is generally achieved in a voluntary and orderly restructuring.

Never mentioned is that the "crisis" in Argentina actually consists of nothing more than that the politicians would rather spend money on various forms of vote buying than on paying their debts.   They don't have to pay for any wars.  (The Falklands war was way back in 1982.)  They haven't had any natural disasters to speak of.  Whatever crisis they have is completely of their own making, born of incompetent economic policy and waste.  Argentina is famous for an economy dominated by crony capitalism and subsidies.  Inflation is rampant -- they admit to 10.9% for 2013, but everybody knows that's fake.  The real number is more like at least 50%, according to a February article in The Economist here.   That gives a great opportunity for the old official exchange rate game, where you let your friends buy or sell dollars at a fake rate, hiding massive payoffs.  And then you hand out subsidies for everything.  How about energy subsidies for everyone!  Argentina has been deep into that one, although just in the last few days it has had to start cutting the subsidies because it is running out of foreign exchange to buy the stuff.  But don't worry, the Economy Minister promises that they will continue with the destructive economic policies:

Economy Minister Axel Kicillof says the populist government is sticking with its model of transferring wealth to help the poor and stimulate the economy.

Of course, in an official exchange rate regime, the actual primary wealth transfer is not to the poor at all, but rather to the well-connected friends of the government.  But if they say often enough that they are "helping the poor," maybe someone will believe it.

What's remarkable is that the countries that actually bite the bullet and pay their debts are the ones that are successful.  The United States literally got its start by figuring out how to pay off the defaulted Revolutionary War debt at par, even though much of it had been bought up cheaply by speculators.  Alexander Hamilton's First Report on the Public Credit of 1790 - proposing to pay the debt at par - was his first big act as Treasury Secretary.  From Wikipedia's description:

Monied speculators, alerted that Congress, under the new Constitution, might provide for payment at face value for certificates, sought to buy up devalued securities for profit and investment.Concerns arose over the fact that many certificates – almost three-quarters of them - had been exchanged for well below par during periods of inflation, some as low as 10 cents on the dollar, but selling at 20-25% at the time the Report was debated.

Funny thing was, somehow paying off that debt didn't "destabilize the international monetary system."  Nor did it keep the United States economy from taking off.  In fact, if debt payments squeeze out the possibility of massive payments for crony capitalism, energy subsidies, and the like, they may be the best thing that can happen to an economy.  Don't tell Brazil, Mexico and France.

UPDATE March 28, 2014:  Many thanks to Instapundit for the link!

I should mention that the single worst thing about being a partner of a large international law firm is having to pay income taxes, not small in amount, to the government of France.  Sacre bleu!