A Pattern for Revolt is better than a revolting pattern

2016 has already given Americans a truly unique presidential campaign, with more almost assuredly to come. Many have claimed to be revolted by it, for reasons ranging from obvious absence of decorum to apparent policy dementia. Sadly, though, attention soon leaves why we should be revolted, and what might hold out the promise of real improvement, to the latest political dirt and horse-race questions.

Pattern of RevoltA very instructive means to turn back toward such more impactful questions is easily available, however. It can be found in Leonard Read’s 1948 Pattern for Revolt. In striking contrast to what we are now witnessing, in which, except for occasional boilerplate obeisance to freedom, no one now proposes anything remotely near it, it offers examples of campaign statements that a true lover of liberty might offer, following Thoreau’s advice to “Let every man make known what kind of government would command his respect…[as] one step toward attaining it.”

Pattern for Revolt has been described as “strong meat, probably too strong for stomachs that have long fed on government pap and can’t imagine how they can get along without it.” Yet while it would be panned by panderers who love power far better than liberty, it is well worth reading for anyone “who loves liberty better than power.”

The all-authoritarian state marches on…not only unhampered and unchecked, but aided and abetted by an ever-increasing number of gravy-trained citizens.

The people [have] no choice except between power-seeking personalities and groups, each offering a superior administration of government-as-master. Such a choice…is no choice at all.

Party leaders…are asking today “What must we say and do to win votes?”…a truly liberal party…would have been asking “How can we liberate the individual from the tyranny of the State?”

The mere changing of parties or personalities is not important. The transfer of power…is important only if the ascending party has principles which it is important to substitute for the principles of the party in power.

Not only will [an] office-seeker resort to expediency to attain office, but…A man who seeks and secures public office…will try to make it a bigger and more powerful office. Government should not be so expanded…Men in government, therefore, should be those who aim at making government as unnecessary as possible. Contraction, not expansion, should be the aim.

Freedom is an assertion of man’s God-given free will, a resurrection of man from deadening arbitrary authority…The principles which brought America to the greatest heights of freedom yet known on earth are easily forgotten…[but] what will our collectivistic opponents be able to do in extending their authority over the people if the people subscribe to the principle of liberty?

Our assignment is to cultivate an understanding of freedom—in ourselves and in others.

In every field where arbitrary authority is imposed we shall inquire how it may be removed and replaced by a reliance on the initiative and enterprise of individual citizens. We must give to the art of self-government its American renaissance… We need patriots who will stand against wrong even though they cannot see the time when right will triumph.

As liberals and individualists…we do not want to be led…we do not want to “lead” by force…The only way to guard freedom is to remove, to destroy, unwarranted restrictions and coercion.

There was [once] a general acceptance of the idea that governments should have only limited powers and functions…Today, however…Opponents of freedom… have pre-empted the language of freedom so extensively that we how attempt to speak on behalf of freedom now find it difficult to convey our meaning.

Our plunderstorm economy is a matter of common knowledge…The first reason is a deep-rooted conviction on the part of millions that they have, by reason of their existence on this earth, a right to share in the property of others. The idea that this is a wholly immoral notion has never occurred to most of them.

The result is this group-thirst for political plunder…there is no cure at all except to re-establish in the minds of people the normal boundaries of personal right. The present situation calls for an understanding of where personal rights end and infringement on the rights of others begins.

In the hope of plundering more from others than others succeed in plundering from us, we have voted away the inestimable benefits for which government and law were originally instituted.

We founded our government…on the premise that the individual citizen has certain inalienable rights and that government and law should protect those rights …While it is perfectly obvious that we should restore government and law to their proper functions, limit them as we originally intended they should be limited, it is equally obvious that this is not impossible until false ideas are removed…As long as people entertain these false ideas about rights and property, so long will they seek their fulfillment though government and the law…The choice is only one of going on with the filthy business or getting out of it entirely.

In a variety of ways this nation has legalized plunder…we seek prosperity by the fruitless process of picking each others’ pockets.

Coercion is my first objection…No man has ever lived who has been big enough or competent enough to apply it, justly and wisely, to any responsible adult person, arbitrarily…Tyranny is only arbitrary coercion carried to its logical consequence.

Using governmental coercion to protect your goods from a thief is proper. Using it to protect a thief in the taking of your goods is improper. It makes no difference whether the thief be a thug or a legally recognized pressure group, using the democratic process.

Given freedom of opportunity, protection from fraud, violence and predation and a dependence for our welfare on our own initiative, we can and will look out for ourselves better than will any other person or any government agency.

[Government’s] failure…was their guarantee to meet “human needs” and their inability to meet the ever-growing demands and impossible responsibilities to which they thus exposed themselves.

The real reasons for most of the…recent distress inhere in the suppressions of liberty, in the sabotaging, wittingly or unwittingly, of the free competitive economy, which alone produces general prosperity. Re-establishing a free economy is the only road to progress…Free enterprise can be re-established only by the repeal of those laws, rules and regulations which impede it. I stand for their destruction.

I am a spokesman for the philosophy of government which is an American heritage… Nowhere else have men so successfully escaped from arbitrary authority…This American philosophy of government is premised on our countrymen being free men. This is what our birth as human beings gives us a right to be; that is what we ought to be; it is the object to which our Constitution commits us—all of us.

I do not desire to reorganize the lives of other people under the pretext of doing them good…It is now time to turn your hopes from this place on the Potomac as a source of livelihood. It is the most unproductive spot in these United States…May your federal government no longer be condemned for what it plunders from some. And may it never have applause because of the loot it bestows on others.

In a day-and–night contrast with our modern political cacophony of promises to violate moral principles and other people’s property on an indescribable scale, Leonard Read recognized that “Nothing is in our nation’s capital except that which is taken from individuals.” His Pattern for Revolt, though written long ago, offers both a bracing reminder of what has been lost and motivation to reclaim it. It merits attention from anyone who, “If given the opportunity…would revolt against all of those political devices and ideas incidental to government in the role of master.”

Gary M. Galles is a professor of economics at Pepperdine University and research fellow with the Independent Institute. His books include Lines of Liberty (2016), Faulty Premises, Faulty Policies (2014), and Apostle of Peace (2013).

Helping The Poor By Hurting Them

Minimum WageIt appears that a $15 minimum wage will become law in California. Almost invariably, the rationale offered by proponents includes the assertion that it will help “the poor.” But, as labor economist Mark Wilson put it, “evidence from a large number of academic studies suggests that minimum wage increases don’t reduce poverty levels.
Beyond the host of logical and empirical issues involved in deciding whether a minimum wage bump will provide more income to “the poor” as a group, there is another ethical issue that never seems to get discussed. Even if low-income households did gain current income as a group in statistical studies, only individuals bear actual benefits or costs, and such wage mandates redistribute wealth away from many low-income individuals in the name of helping “the poor.” As a consequence, much of the desired help for the poor will actually come from others who are poor.
How can a requirement to pay low-skilled workers more harm low-income individuals? Some lose jobs. Others lose work hours. Further, for those who keep their jobs and hours, on-the-job training and fringe benefits will fall, and required effort will rise, to offset hiked wages. And higher current wages are often less valuable than what is given up, particularly on-the-job training that enables people to learn, and therefore earn, their way out of poverty. That is why labor force participation rates fall and quit rates rise when the minimum wage rises (an effect that will be heightened by the large magnitude of the current proposed hike), which is the opposite of what would happen if all workers who kept their jobs benefitted from higher mandated wages.Higher minimum wages will not only disadvantage the least skilled compared to automation and outsourcing possibilities, their increased cost will also force them to compete with more skilled labor. That explains why unions are the biggest backers of such measures — their members will gain from an increased demand for their services regardless of whether the poor gain or lose. But those with more limited skills will suffer from the undermining of their one big competitive advantage — a lower price. And those with the fewest skills, least education, and job experience will face the greatest employment losses now, as well as having rungs to advancement removed from their potential career ladders. These effects will be further magnified by the fact that employers pay far more than the minimum wage to those workers, through added costs for the employer half of Social Security and Medicare taxes, unemployment insurance taxes, worker’s compensation premiums, etc.

With a higher minimum wage, some of those low-income workers lucky enough to already have job experience and a work history will keep their jobs. Many others will simply find themselves to be unemployable. The main consequence will not be that the poor gain, but that some low-income households benefit at the expense of other low-income households.

Minimum wage hikes thus illustrate a very serious, though all-but-ignored issue. Even if poor people in the aggregate end up with higher incomes (a position far from established), it only means that one subset’s increased earnings will be at least somewhat greater that another likely to be even poorer subset’s decreased earnings, greatly harming many of them. And such government-imposed harm cannot be justified by the intent to help the poor.

Gary M. Galles is a professor of economics at Pepperdine University and research fellow with the Independent Institute. His books include Lines of Liberty (2016), Faulty Premises, Faulty Policies (2014), and Apostle of Peace (2013).

Mainstream Misdirection in SCOTUS Search

 

Photo courtesy Envios, flickr

Photo courtesy Envios, flickr

Antonin Scalia’s death has begun a new Supreme Court battle. And much of it will be expressed in terms of whether nominees are “mainstream” or not.

Senator Charles Schumer already demonstrated this pattern. In 2007, he said any Bush nominee “must prove … that they are in the mainstream rather than we have to prove that they are not,” but has now doubled down in the opposite direction, saying, “many of the mainstream Republicans, when the president nominates a mainstream nominee, will not want to follow Mitch McConnell over the cliff.”

Why so much mainstream rhetoric? To be in it sounds good; to be out of it sounds bad. But it rests on a distorting analogy.

The analogy equates mainstream to “normal,” or majority, views. They are then further equated to “correct” views. But while majorities choose representatives, our Constitution was far from majority rule (“mob rule,” to many founders). It put many choices off-limits to political determination, and subjected others to very stringent standards. In short, it defended liberty against government encroachment. This is especially critical in evaluating justices, whose primary role is preserving the Constitution against majority abuses.

The analogy presumes a speaker’s mainstream evaluation is accurate. But where the mainstream is and how far from its supposed center is acceptable are indefinable.

The core issue is not, then, about being in the current mainstream, but where that mainstream should be. Advocating respecting the Constitution as written, as Scalia was famous for, focused on that.

That is, the mainstream may be in the wrong place. It has clearly changed in our country, but only because some were out of the previous mainstream. Men being created equal, with inalienable rights against government abuse, is far from the once mainstream belief in the divine right of kings. And our Bill of Rights freedoms to speak, write and worship as we choose, and to have our property protected from government predation, were not always mainstream.

Federalist 78, America’s most famous statement of the judiciary’s role, reveals that the political mainstream has indeed jumped its constitutionally enumerated banks, arguing for re-routing it toward its original course: “A limited Constitution…can be preserved in practice no other way than through…courts of justice, whose duty it must be to declare all acts contrary to the manifest tenor of the Constitution void. Without this, all the reservations of particular rights or privileges would amount to nothing.”  Further, “whenever a particular statute contravenes the Constitution, it will be the duty of the judicial tribunals to adhere to the latter…to guard the Constitution and the rights of individuals.”

If the mainstream has moved from its original American course, only those now out of it can shift it back. For example, the now-common view that using government to rob Peter to pay Paul is acceptable means anyone acting to undo such policies would be outside today’s mainstream, though not that of our founders. As Jefferson said, “The majority, oppressing an individual, is guilty of a crime, abuses its strength, and…breaks up the foundations of society.”

In fact, “out of the mainstream” nominees are the only ones who might resist further expanding government encroachment or even reclaim eviscerated freedoms once taken for granted. In contrast, those recently advocated as mainstream have enabled “new and improved” encroachments.

Expanding the divide between the Constitution and current interpretation increasingly threatens our founders’ mainstream belief in liberty and the Constitution they designed to defend it. Consequently, advocates for the modern mainstream are opposing the mainstream that made America great. That is why Antonin Scalia fought vigorously for our founders’ understanding. It is also why Americans don’t need more justices from the modern mainstream, but more from its original channel.

Gary M. Galles is a Research Fellow at the Independent Institute and a Professor of Economics at Pepperdine University. His books include Lines of Liberty (2015), Faulty Premises, Faulty Policies (2014) and Apostle of Peace (2013).

They Do Not Own Us As Property

Lysander-SpoonerIn recent years, Americans have been burdened with historic expansions in government control, with a proliferation of fees, regulations, czars and bureaucracies, along with profligate spending that guarantees higher future taxes. Such dictates violate Americans’ inalienable self-ownership.

That is why Lysander Spooner, born January 19, deserves renewed attention. Spooner laid out why our natural right of self-ownership, combined with its implied right to enter voluntary arrangements, made government coercion of peaceful people illegitimate. Since we are rapidly accelerating away from that moral standard, we need to rediscover Spooner’s vision. In particular, his 1870 No Treason illuminates our current situation:

That men may rightfully be compelled to submit to, and support, a government that they do not want … [is] self-evidently false … a man, thus subjected to a government that he does not want, is a slave. And there is no difference, in principle … between political and chattel slavery. [Each] denies a man’s ownership of himself and the products of his labor; and asserts that other men may own him, and dispose of him and his property, for their uses, and at their pleasure.

A man’s natural rights are his own … any infringement of them is equally a crime … whether committed by one man, calling himself a robber or by millions, calling themselves a government.

To say that majorities, as such, have a right to rule minorities, is equivalent to saying that minorities have, and ought to have, no rights, except such as majorities please to allow them.

The principle that the majority have a right to rule the minority, practically resolves all government into a mere contest between two bodies of men, as to which of them shall be masters, and which of them slaves.

How does [a man] become subjected to the control of men like himself, who, by nature, had no authority over him … as if their wills and their interests were the only standards of his duties and his rights … force, or fraud, or both.

A man finds himself environed by a government that … forces him to pay money, render service, and forego the exercise of many of his natural rights, under peril of weighty punishments.

Governments … [are] tyrannies to that portion of the people … compelled to support them against their will.

Getting the actual consent of only so many as may be necessary to keep the rest in subjection by force…is a mere conspiracy of the strong against the weak … a presumption that the weaker party consent to be slaves.

Government, like a highwayman, says to a man: “Your money, or your life.” [But] The highwayman … does not pretend that he has any rightful claim to your money, or that he intends to use it for your own benefit.

No government … can reasonably be trusted for a moment, or reasonably be supposed to have honest purposes in view, any longer than it depends wholly upon voluntary support.

If [Congress] own us as property, they are our masters, and their will is our law. If they do not own us as property, they are not our masters, and their will, as such, is of no authority over us.

On what ground can those who pretend to administer [The Constitution] claim the right to seize men’s property, to restrain them of their natural liberty of action, industry, and trade … at their pleasure or discretion?

A tacit understanding between A, B, and C, that they will, by ballot, depute D as their agent, to deprive me of my property, liberty, or life, cannot at all authorize D to do so. He is none the less a robber.

In an era where what remains of our self-ownership is threatened with further evisceration, rediscovering Spooner’s vision, which Murray Rothbard called “a great bulwark against the State’s eternal invasion of rights,” is crucial. Coerced obedience cannot be derived from our natural rights or our Constitution. The individual, rather than the ever-more-powerful State, must be re-established as the basis of our society.

Gary M. Galles  is a professor of cconomics at Pepperdine University.

Government Hypocrisy: “Save More”

Photo courtesy of kenteegardin, flickr

Photo courtesy of kenteegardin, flickr

American government is so ubiquitous it even offers advice about New Year’s resolutions. However, its guidance to citizens mainly illustrates ideas government violates. Consider one example from the About USA.gov site: “Save more.”

That is not a very controversial resolution for an uncertain world. But the massive and still growing government debt and its far larger unfunded liabilities makes it the largest violator of its own resolution. Talk about “do as I say, not as I do.” Further, the main reason people save too little is that government does so much that discourages saving and investment, making the Hippocratic oath –“First, do no harm” — a better means to increase savings.

One huge illustration is Social Security. People have been led to substitute its “contributions” and retirement benefits for funds they would have saved to finance their “golden years.” Its promises also dramatically exceed what funds will be available, making people anticipate richer retirements than they will actually have, reducing savings more. Those who save enough to provide well for retirement also face income taxes on most of their Social Security benefits as well.

Social Security exacerbates the adverse effects of budget deficits, which divert funds that would have added investment into government spending.

Taxes on capital reduce the after-tax return on saving and investment, also reducing saving. These include property taxes that, while relatively small percentages of the capital value, represent sizable fractions of annual income generated. Then state and federal (and sometimes local) corporate taxes take further bites from after-tax returns. The implicit “tax” imposed by regulatory burdens must also be borne before earnings can reach investors.

Personal income taxes at up to three levels of government reduce saving further. Investment income left after other taxes is taxed again if paid out as dividends.  Earnings from saving and investment can also trigger additional tax burdens by triggering phase-outs of income tax deductions and exemptions.

If investment earnings are retained and reinvested, increasing asset values, they are taxed as capital gains. And even increases in asset values from inflation are taxed as real increases in wealth.

Medicare, whose unfunded liabilities are far greater than Social Security’s, reduces incentives to save for future medical costs. Current earners, forced to cover three quarters of the cost, are left with less to save. Medicaid coverage of nursing home costs only after other assets are virtually exhausted undermines another savings motive.

Unemployment benefits, along with food stamps and other poverty programs, also reduce the need for a nest egg, “just in case.” And as illustrated by so many disasters and crises, government steps in to assist those who “need” it, reducing the incentives for financial self-responsibility.

Estate taxes also reduce successful savers’ ability to pass on assets as bequests, eroding another savings motive. And monetary policy that has long kept interest rates near zero have undermined incentives to save as well.

Together, these government policies punish savings heavily, resulting in large numbers without appreciable savings. But fixing that saving problem doesn’t require government to tell us to resolve to save more. It doesn’t require ever more government intervention to “solve” a problem its existing interventions have created. It only requires a government resolution to stop aggressively undermining incentives to save as it does now.

Gary M. Galles is a research fellow with the Independent Institute in Oakland, and a professor of economics at Pepperdine University. His books include Lines of Liberty (2015), Faulty Premises, Faulty Policies (2014), and Apostle of Peace (2013).

Where is the further conversation?

“Check your privilege” has become a mainstay of social justice rhetoric. Assumed privilege is also a presumption behind microaggression accusations now seeming to sprout by the second. Those employing the terms frequently describe them as reminders to be empathetic and sensitive, elevating social relations. But they are often little more than assertions that others are members of an oppressor class, fundamentally mistaken in their views and responsible for a cornucopia of complaints.

The “kinder, gentler” version offers a sometimes-useful reminder that you might be including some inappropriate assumptions in your understanding, because something that may be sensible for you, given your characteristics and circumstances — i.e., your privilege — may not be sensible for others, leading to insufficient consideration of others and therefore erroneous evaluations.

Max Borders has described the latter meaning (or demeaning) as:

Your rights and opinions are invalid and you have no real complaints or suffering because you belong to X group. Or … you are obligated to pay because people who look like you in some ways did bad things at some point.

In other words, others need not listen to, much less respect, your arguments. Further, your inherent “wrongness” sacrifices your rights and property to satisfy those claiming to be oppressed, an aggression justified as undoing your alleged privilege or responding to your microaggression.

How are we to judge between such dramatically opposed interpretations?

The key is that, where confusion reigns, better evaluation requires clearer, more accurate understanding. That demands a real, ongoing conversation. So ask what would be entailed if “check your privilege” or its microaggression progeny was intended to advance such a conversation.

When such terms are used to preemptively cut off communication by stopping those who disagree from being heard or taken seriously, neither clarity nor empathy will be improved. So they must not end discussions; they must facilitate more complete conversations.

By themselves, the terms say you are wrong in your understanding and views, and too self-absorbed to notice. However, they leave how and why unspecified, beyond somehow relating to membership in an allegedly privileged group defined by accusers. Progress toward better understanding requires several additional steps.

Such progress would require specifying precisely what faulty premises, assumptions or arguments a person holds to, as well as why they are inappropriate for the issues considered. The appropriate premises to replace them would then need articulation.
How the “new and improved” premises would alter one’s conclusions would need to be demonstrated, followed by considering the appropriate remedies based on the alternative analysis. It would have to explain how proposed remedies were not merely “more for me” gambits, connected to the rationales offered only by self-interest. It would have to justify any special privileges to be created now for those claiming victimhood status, including any coercive impositions on members of supposedly dominant or victimizer classes who had nothing to do with the “sins of their fathers.”

When “check your privilege” and microaggression claims communicate that we should think carefully about others’ circumstances, which may be far different than ours, and be empathetic, it can be a useful reminder in advancing mutual understanding. But it can bear good fruit only as the beginning of a far deeper discussion.

In contrast, when they are used to peremptorily declare victory in social justice disputes, they assert special privileges for speakers to define themselves as morally superior and disqualify those who disagree from any consideration, without any coherent argument. And when that social demonization is leveraged into coercive imposition of “solutions” at the expense of those they decide must make it up to them, it undermines social cooperation, by undermining the rights upon which it is built, without advancing understanding or empathy.

Gary Galles is a professor of economics at Pepperdine University and a research fellow at the Independent Institute. His books include Lines of Liberty (2015), Faulty Premises, Faulty Policies (2014), and Apostle of Peace (2013).

Government is hardly the solution to short-term bias

Hillary Clinton’s latest campaign salvo attacked “quarterly capitalism,” the supposedly irresponsible corporate focus on short-term results at the expense of long-term growth. She promised government fixes. But she is short on logic and history.

Is there too much short-termism in business firms? Look at participants’ incentives.

Shareholders own the present value of their pro-rata share of net earnings, not just present earnings. They do not discard good investments which raise that expected present value. Good short-term results raise stock prices not because of short-termism, but because of their implications for the likely future course of net earnings.

Share prices are a primary metric for managerial success and basis for their rewards. That makes their time horizons reflect those of shareholders, far beyond the present. Bondholders, who want to be paid back, incorporate future repayment risks into their choices. Worker and supplier relationships also reflect firms’ future prospects.

Beyond misinterpreting share price responses to short-term results, Clinton’s main evidence was increased stock buybacks, supposedly sacrificing worthwhile investments by returning funds to shareholders. She ignores that those funds will largely be invested elsewhere. But she also ignores that the buyback binge reflects the Fed’s long-term artificial cheapening of borrowed money, leading firms to shift toward debt financing. But a firm substituting debt financing for equity controls no fewer funds for investments.

Confusing business responses to Fed interventions as business short-termism only begins the list of such government-created biases. For example, constant proposals to raise corporate tax rates and worsen capital gains treatment reduce the after-tax profitability of investments. Regulatory mandates and impositions pile up, with more coming, doing the same. Energy policy threatens cost hikes, reducing investment returns. And so on.

That government will put more emphasis on the future than the private sector is also contradicted by political incentives. Owners bear predictable future consequences in current share prices, but politicians’ incentives are far more short-sighted.

An election loser will be out of office, and capture no appreciable benefit from efforts invested. So when an upcoming election is in doubt, everything goes on the auction block to buy short-term political advantage. And politicians’ incentives drive those facing the D.C. patronage machine. That is why so much “reform” meets Ambrose Bierce’s definition of “A thing that mostly satisfies reformers opposed to reformation.” The mere passage of bills in the political nick of time, even largely unread ones, can be declared victorious legacies, with harmful consequences never effectively brought to bear on decision-makers.
There is also a cornucopia of examples of government short-termism at the expense of the future, whose magnitude dwarfs anything it promises to reform.

Unwinding Social Security and Medicare’s 14-digit unfunded liabilities will punish future generations, caused by massive government overpromising to buy earlier elections. Other underfunded trust and pension funds threaten similar future atonement for earlier short-term “sins.” Expanding government debt similarly represents future punishment for short-term political payoffs. Foreign and military policy have similarly turned away from dealing with long-term issues. But serious long-run issues like immigration escape serious attention because “public servants” are afraid of short-run interest group punishment.

Political attacks on short-termism, and reforms to fix it, are beyond confused. They ignore financial market participants’ clear incentives to take future effects into account. They are clueless about what provides evidence of short-termism. They treat private sector responses to government impositions as private sector failures. They ignore far worse political incentives facing “reformers.” And they act as if the most egregious examples of short-termism in America, all government progeny, didn’t exist.
There is little to Clinton’s criticism and alleged solutions beyond misunderstanding and misrepresentation. We should recognize, with Henry Hazlitt, that “today is already the tomorrow which the bad economist yesterday urged us to ignore,” and that expanding government’s power to do more of the same is not in Americans’ interests.

Gary M. Galles is Professor of Economics at Pepperdine University

Avoiding Alphabetical Microaggression

Whenever political correctness fades from the headlines, “new and improved” examples arise. Now the progressive language police want us to avoid microaggressions, to insulate everyone from potential mental distress, as when UC President Janet Napolitano’s website advised professors to avoid referring to America as a “land of opportunity,” opposing affirmative action as “inherently racist,” etc., to prevent aggressing on any hearers’ feelings. But at least teachers haven’t been threatened (yet) with an official “check your privilege” reprimand.

In the supercharged PC world ruled by fears of microaggression, nothing is allowed to be negative or twistable into conveying any negative connotation. Anything that could be construed as evaluative or judgmental must be avoided or expressed as positive. But because reality gets in the way of that requirement, clarity and analytical thinking are thereby often sacrificed to verbal contortions.

Even traditional children’s alphabet books violate microaggression protocol. “A is for Apple” could trigger thoughts of Eve’s role in the Garden of Eden story, which some might find sexist. “B is for Ball” has potential sexual overtones. “C is for Cat” and “D is for Dog” connect to verbal sniping (being catty) or being lazy (dogging it). We would have to abandon such books.

A microaggression-free alphabet book would have to mollify objections of potential psychic dents. Given the vast number of words and phrases people find ways to object to, it would be almost impossible. But perhaps the following almost alliterative approach — 3 As to match the 3 Rs — could work.

A can be for Attitudinal Antiquity, which can replace the potentially insulting “old fashioned.” B can be for Botanical Bankruptcy, a kinder, gentler way of saying that someone lacks a green thumb. Cranially Constrained can be substituted for stupid and Diplomatically Deprived for rude, so that stupid and rude people won’t think you noticed. Euphemistic Enhancements could replace accusations of lying.

We could use Follically Fortunate to avoid upsetting both the hirsutely over- and under-endowed. And being Gravitationally Gifted is certainly better than being fat. In the same vein, since no one likes being called egotistical, we could substitute Honorifically Habituated, and shy people could instead become Interactionally Impaired. Hurt feelings could also be avoided by substituting Judicially Juxtaposed for confused and Karmically Keen for superstitious. Similarly, criminals could be upgraded to Legally Lavish, schizophrenics to Mentally Mobile, and inattentive listeners to Neurologically Noncompliant.

We could turn slobs into people who are Organizationally Overburdened, and replace good-looking (a term which injures the psyches of those who don’t think it extends to them) with being Perceptionally Preferenced. Complainers can rise to being Quintessentially Querulous, bad dancers to being Rhythmically Repressed, and poor dressers to being Sartorially Stressed. Being old can be transformed into Temporally Troubled, a “lazy bum” into Ubiquitously Underutilized and someone who can’t hold a job into Vocationally Variable.

To fully dodge microaggression accusations, W-Z would best be left undecided, to avoid hurting anyone by implying that they couldn’t advance society with their own contributions.

This approach might allow us to pass microaggression muster (though that would end when people recognized the potential connotations of such substitute wording). Of course, few will know what others are saying anymore, hamstringing clarity and our ability to bring logic to bear in understanding or evaluating virtually anything. That would be particularly true of anything relating to social issues, given how many claim to be infringed upon by even the suggestion of disagreement with their understanding or their “solution” to be imposed. And it would not solve the problem, because nanoaggressions could then trigger outcries, and still more convoluted conversations will become necessary.

Gary M. Galles is a professor of economics at Pepperdine University.

Jones Act Ready for Retirement

 

Los Angeles PortNational defense needs have long been such an all-purpose excuse for protectionism that they may be the best illustration of Samuel Johnson’s aphorism that “Patriotism is the last refuge of a scoundrel.”

The products that have ridden defense coat-tails to special treatment make up a long, and long-standing, list. For example, in the U.S., they have included sugar, peanuts, candles, thumbtacks, gloves, umbrellas and many more common goods. One my particular favorites is mohair. After WWII, when our soldiers wore wool uniforms, assertions that we might be unable to supply enough mohair in future conflicts triggered subsidies beginning in 1954. Apparently we wouldn’t be able to fight effectively if uniforms weren’t itchy enough. Soon after, the military switched to synthetic fibers, displacing wool from the strategic materials list in 1960. But mohair production subsidies continued for thirty-five more years. And even when they were ended in 1995, lobbying brought the subsidies back a few years later.

While many such protectionism gambits are obvious jokes just waiting for economists to tell, there is one that would seem to merit special consideration. That is trying to build up a country’s fleet and its military capabilities by eliminating other countries’ ability to ship goods between domestic ports. One reason for giving that policy, imposed by the Merchant Marine Act of 1920, commonly called the Jones Act, more careful consideration, is that it has a pedigree of over three-and-a-half centuries. Perhaps more important is that its English predecessor had the endorsement of Adam Smith, usually known as a free trader, not a protectionist.

The Jones Act traces back to England’s 1660 navigation law “for the increase of shipping … wherein … the wealth, safety and strength of this kingdom is so much concerned.” It required that all shipping between British ports had to go in British-built ships with British owners. Parliament also required a three-quarters British crew. Those rules were a cornerstone of Britain’s mercantilist system whose burdens, along with those imposed by other restrictions, added impetus to the American Revolution.

Despite the policy’s role leading America toward independence, the U.S. Congress’ inaugural session enacted similar restrictions on coastal shipping even before adoption of the Bill of Rights. The restrictions are now codified by the Jones Act. Its rationale and terms — restricting trade between American ports to vessels built, owned and three-quarters manned by Americans — echo Britain’s navigation acts.

In Wealth of Nations, Adam Smith endorsed the British navigation acts, an endorsement that has been deployed since as inoculation against criticism of the Jones Act from backers of free trade and its strictly voluntary arrangements. Smith’s rationale for the exception was that “the defense of Great Britain depends very much upon the number of its sailors and shipping.” Consequently, “The act of navigation, therefore, very properly endeavors to give the sailors and shipping of Great Britain the monopoly of the trade of their own country.” Smith made it clear that it would restrict trade and the wealth it would create, but “As defense, however, is of much more importance than opulence, the act of navigation is, perhaps, the wisest of all the commercial regulations of England.”

Unfortunately, Smith’s high praise does not apply to the Jones Act. The circumstance that justified it does not apply to America now. And despite incredibly high costs, it does not add to American shipping, sailors or capabilities.

If the relevant choice was an all or nothing one between defense and opulence, there is no doubt that defense, when threatened by aggression, is more important than opulence. But it is a marginal choice, not an all-or-nothing choice. Given one’s current level of threats, readiness and consumption possibilities, added shipping restrictions could improve military readiness, but only by taking away from the goods and services citizens can exchange for their productive efforts in peaceful trade. The issue is how much value is added to readiness and how costly is it to achieve?

Smith’s endorsement of a policy to bolster naval defense is sensible only when that defense would be inadequate without such restrictions. If there were already sufficient defensive capability for the threats faced, the marginal value of expansion would be small. Smith argued that in England’s case, the threat faced from the Dutch (“the great carriers of Europe”), Britain’s main naval rival, justified more military strength. In fact, he noted that the navigation acts aimed to undermine the sea-power of the Dutch at least as much as to stimulate British sea-power. As Smith put it, “though England and Holland were not actually at war, the most violent animosity subsisted between the two nations.” In consequence, what justified the policy was warlike “diminution of the naval power of Holland, the only naval power which could endanger the security of England.”

In other words, Smith did not endorse the restrictions of the navigation acts as generally justified, but only justified by a serious, specific war threat. One might have made a case that America’s founding echoed such a situation, given its early weakness. But similar circumstances have not applied during most American’s lifetimes. They did not characterize America in the aftermath of WWII. They have not characterized America as the world’s dominant strongest naval superpower; particularly after Eisenhower’s warning that the military-industrial complex could be dictating far more defense production than can be justified. Yet, even without a plausible case for inadequate naval power, Jones Act restrictions have been retained.

One might consider burgeoning Chinese military sea-power to be a current analog. But restricting America’s coastal trade to American ships does not appreciably restrict Chinese sea-power, military or otherwise, given the tidal wave of goods their ships carry to America and other destinations around the world. Further, concern about potential naval military threats as a rationale for the Jones Act is inconsistent with the sharp drawdown taking place in the Navy fleet.

Beyond the question of a sufficient military threat, for the Jones Act to make any sense, it must produce benefits, increasing the number of American ships, sailors and construction capabilities. But it does not.

From 43 percent of global shipping in 1950, the Department of Transportation found in 2009 that “U.S.-flag ships carry only about 1.5 percent of the foreign trade of the United States.” The wider U.S. flag fleet lost half its tonnage capacity between 1975 and 2007.

Vessels meeting Jones Act requirements fell to 90 in 2014 from 193 in 2000. 110 tankers have become 43. Almost five times as many American ships now fly other flags to escape Jones Act burdens, even though it makes them ineligible for domestic shipping.

Even if the Jones Act had a positive effect on American shipping, it could do little for military production potential, as only one shipyard that builds the Navy’s primary vessels also builds commercial shipping vessels.

The Jones Act must also provide services that would be hard to acquire during hostilities and emergencies. But it does not.

The Department of Defense has stated that “Unfortunately, very few commercial ships with high military utility have been constructed in U.S. shipyards in the past 20 years. Consequently … nearly all of the [charter] offers are for foreign-built ships.” Similarly, in the aftermath of both Hurricanes Katrina and Sandy, Jones Act restrictions were suspended because they hindered emergency response capabilities.

Despite no evidence that the Jones Act provides any expansion in shipping or defense capabilities, the only reason Adam Smith found justified such restrictions, its costs are substantial.

Ships meeting Jones Act restrictions may cost triple or quadruple those built in Korean or Japanese yards. Crewing expenses can be a similar multiple. Maintenance and repair costs are also far greater. One illustration of the result is that foreign-flagged tankers can transport oil for one-third the cost of American-flagged tankers.

The Jones Act doesn’t add to America’s naval or defense capabilities, rendering Adam Smith’s endorsement void. It has been accompanied by plummeting numbers of American-flagged ships and the trade they carry. It hinders rather than helps in mounting emergency operations. The military services it is supposedly makes possible are already provided more efficiently by foreign ships. And the costs are very high. It is time to end its nothing-for-something trade that only impoverishes us.

Gary M. Galles is a professor of economics at Pepperdine University.

Who actually pays their “fair share” of taxes?

In recent years, claims that “the rich” don’t pay their “fair share” of taxes have been repeated countless times. But that excuse to tax them more to line others’ pockets is blown away whenever the highly disproportionate income tax burdens borne by higher earners are reported. As the Wall Street Journal titled a recent article,“Top 20% of Earners Pay 84% of Income Tax.” In fact, the top 1 percent of American earners earn about one-sixth of total income, but pay nearly as much in income taxes as everyone else combined.

Rather than abandon the electorally valuable false premise that such disproportionate burdens are justified, however, the political Left rallies to its cause. They try to rescue it by asserting that other taxes are regressive, so that taxes aren’t “really” so clearly unjustifiable as income tax burdens reveal. The featured players in that drama are state and local sales and excise taxes and Social Security taxes. Unfortunately, those taxes are also misrepresented to defend “fair share” misrepresentations.

Columnist Michael Hiltzik illustrated the state and local gambit in a tax-day column echoing charges that their sales and excise taxes “disproportionately hammer lower-income taxpayers,” with that alleged regressivity offsetting income tax unfairness.

That claim arises because those with lower current measured incomes spend a larger proportion of them on those taxes. However, as Edgar Browning has noted, “relative to lifetime income, there is very little difference in the percentage of income consumed among income classes.” As a result, apparent regressivity using current incomes is shown instead as “roughly proportional” to income in the more-appropriate lifetime context. Low current-income families also consume a multiple of their income, largely financed with government transfer payments excluded from income measures. That further exaggerates the share of their incomes going to such taxes.

The Social Security angle was illustrated in a Washington Post story a few days earlier. It argued that since Social Security taxes only apply to earned incomes up to $118,500, “the more money you make, the less your effective Social Security tax rate is, making this tax about as regressive as they come.” However, Social Security treats lower income workers far better than higher income workers.

Rather than being regressive, Social Security taxes are proportional to earned income up to the tax cap. So, for the vast majority of Americans who fall in that range, taxes rise apace with income. Beyond the cap, earnings are not subject to the tax. So for those earners, their average tax rates fall with further income. Only for them can one claim that despite paying more in total Social Security taxes, they pay a smaller percentage.

When one incorporates the fact that a great deal of income for low income households is government transfers that are not counted as official income nor subject to Social Security taxes, the picture changes. Years ago, the CBO found that incorporating such unmeasured income actually made Social Security taxes progressive for all but the top 20 percent of earners.

Even more important, Social Security’s supposed regressivity reflects only its taxes. But they generate retirement benefits, and evaluation must incorporate both. Doing so reveals Social Security as progressive.

For example, for a single earner retiring at 65 in 1993, Social Security replaced 59 percent of taxed income for low earners, 44 percent for average wage earners, but only 25 percent for an earner at the Social Security tax cutoff. Higher income earners received far smaller return on their contributions than average earners, and less than half that of lower earners. Taxation of benefits for higher income retirees now increases this difference. In terms of lifetime net benefits, in 1992 dollars, a single low earner retiring in 2000 would net $27,983 from the system, an average earner, $14,833, but a high income earner would lose $23,129.

Both approaches show Social Security does not benefit higher earners at the expense of lower earners. It actually redistributes income the other way.

Allegations that higher income earners don’t pay their “fair share” of taxes are a mainstay misrepresentation of the political left. And when facts such as income tax burdens get in the way, they double down with a defense that misrepresents state and local taxes and Social Security, as well. Unfortunately, that illustrates how important taking other peoples’ money is to their agenda and how unimportant the truth is in advancing it.

Gary M. Galles is a professor of economics at Pepperdine University