The Liberal Order

One source of that increasing income inequality . . .

Not surpisingly, becoming a member of the U.S. Congress is very lucrative to your net wealth. 

What is clear is that members of Congress are getting richer compared not only with the average American worker, but also with other very rich Americans.

While the median net worth of members of Congress jumped 15 percent from 2004 to 2010, the net worth of the richest 10 percent of Americans remained essentially flat. For all Americans, median net worth dropped 8 percent during that period, based on inflation-adjusted data from Moody’s Analytics.

Going back further, the median wealth of House members grew some two and a half times between 1984 and 2009 in inflation-adjusted dollars, while the wealth of the average American family has actually declined slightly in that same time period, according to data cited by The Washington Post in an article published Monday on its Web site.

Some argue that there's too much money in politics, I would argue that it's just the opposite - there's too much politics in money. In other words, the more we collectivize the income and wealth of the country, the greater the returns to lobbyists of getting a bigger piece of that pie. If a company can invest $10 million to build a plant that provides them a net present value of, say, $20 million, or spend that same money lobbying for wealth transfers or special privileges that provide them a net present value of $50 million, it's a no-brainer to determine which road they take. And the consequence:

One likely cause of the rising wealth, political analysts say, is the growing cost of a political campaign. A successful Senate run cost on average nearly $10 million last year, and a successful House race was $1.4 million, significantly above past elections.

The prohibitive cost has inevitably drawn richer candidates who can help bankroll their own campaigns and attract donations from rich friends — while deterring less well-off candidates, political analysts say.

The data analyzed by The Times corroborated the idea that incoming members are in fact richer than those in the past. The freshman class of 106 members elected last year, including many Tea Party-backed Republicans, had a median net worth of $864,000 — an inflation-adjusted increase of 26 percent from the 2004 freshmen.

The returns are so great because the stakes are so high. What collectivizing more and more of the income and net wealth of this country does is weaken democracy and increase income and wealth inequalities, not strengthen democracy or make it or make it less unequal. 

What Caused the Housing Crisis

From Business Week is this great chart showing that correlation is not always causation.

Merry Christmas

Merry Christmas to all, and congratulations to those who graduated this semester.

Take This Quiz To Find Your Favorite Presidential Candidate

A lot of loaded questions, but fun nonetheless. 

Kim Jong Il Has Died

Here is an excellent tribute to him by the excellent Matt Stone and Trey Parker.

UPDATE: From the Wall Street Journal:

Mr. Kim died from fatigue during a train ride on Saturday, a weeping television announcer said.

I didn't know that riding in a train took that much out of you.

UPDATE II: Here is Kim Jong Il's legacy.

The number of prisoners held in the North Korean gulag is not known: one estimate is 200,000, held in 12 or more centres. Camp 22 is thought to hold 50,000.

Most are imprisoned because their relatives are believed to be critical of the regime. Many are Christians, a religion believed by Kim Jong-il to be one of the greatest threats to his power. According to the dictator, not only is a suspected dissident arrested but also three generations of his family are imprisoned, to root out the bad blood and seed of dissent.

 

 

There is not "Great Stagnation"

Another example.

Why "Race To The Top" Will Be Another Failed Government School Initiative

Suppose restaurants were owned and operated by state and local governments as I discussed here. The federal government also intervenes under the guise of "serving our nation's children."

First, as I noted in the post linked to above, there would be little incentive on the part of restaurant principals managers to provide quality food and service to their "customers," nor would they innovate and discover ways of better serving their customers. Unlike privately owned restaurants that must compete for customers by providing them more value per dollar than what competing restaurants offer, government restaurants would pay the suppliers (i.e., the government restaurants) regardless of their output and whether or not they actually provide their customers more value per dollar than that offered by any other restaurant.

Now, what if someone proposed that to improve the poor quality government restaurants in the U.S., cash grants would be awarded to states that came up with the best ideas to improve their crappy restaurant products and services, would you really expect substantial changes to come from it? I wouldn't.

It's why there will be nothing substantial coming from this outside of increased returns to the respective state's education bureaucracy. Student outcomes will not improve one iota, nor will the customer/students/parents and taxpayers realize any returns on the investment.

Nine states will share $500 million in grant money won in a high-profile competition intended to jump-start improvements in early childhood programs, the Obama administration announced Friday.

California, Delaware, Maryland, Massachusetts, Minnesota, North Carolina, Ohio, Rhode Island and Washington state will see funding for innovative efforts in often-overlooked pre-K schooling.

By subsidizing the supplier rather than the customer, government schooling serves the interests of the education bureaucracy and the teachers, not the customer/student/parents and the taxpayers. 

NEWS FLASH: Most Americans Believe In Santa Claus

All right, not quite. But they obviously believe that wrong becomes right if the majority agree.

Most Americans want Congress to vote to continue the payroll tax reduction, according to a new Associated Press-GfK poll that comes as Democrats and Republicans wrestle over whether to extend the cut through 2012.

Yes, and they also want free health care, their retirements paid for, no tuition for college, and if possible, and iPad for Christmas.

It is not a decrease in taxes unless spending is cut by an equal amount. Outside of that, it's simply a deferral in taxes to some later date.

But then again, maybe I'm too harsh and people don't really want free goods.

As for how to balance the federal budget, more now favor cutting government services as the best means to bring federal spending into balance. Sixty percent think lawmakers should focus on budget cuts over tax increases. That figure had been as low as 53 percent in August, during the showdown over raising the country's debt limit.

The biggest shift on that question has come from independents. In the August poll, 37 percent said lawmakers should focus on increasing taxes and 42 percent said cutting services. Now, that divide stands at 28 percent for raising taxes and 59 percent for cutting services.

It's easy to say I want more cuts in government spending, but when push comes to shove, am I really all for it? How likely am I to support cuts in spending if proposed spending cuts include my favorite program? The Republican candidates have been canvasing Iowa for over a year now, blasting government spending and each promoting him or herself as the true fiscal conservative. As far as I know, not one has made a single reference to cutting farm subsidies as essential to reining in the deficit and reducing the debt.

 

Finding Common Ground Between Tea Party and OWS

An excellent critique of Occupy Wall Street protestors by U. Chicago law professor M. Todd Henderson. Of note:

For example, in education policy, teachers are the one percent, while students and parents are the 99 percent. But it is generally the power of the concentrated teachers’ unions that drives decisions about education spending and policy. The fact that teachers unions support Occupy undermines its power. A true movement of the 99 percents would be on the side of students, not teachers.

Diane Sawyer and ABC News "Making America Poorer"

ABC News and Diane Sawyer are on a mission to make America poorer.

The average American will spend $700 on holiday gifts and goodies this year, totaling more than $465 billion, the National Retail Federation estimates. If that money was spent entirely on US made products it would create 4.6 million jobs. But it doesn't even have to be that big. If each of us spent just $64 on American made goods during our holiday shopping, the result would be 200,000 new jobs.

Let's forget for a moment that by "buying America" you forego buying goods and services that will provide you more value per dollar, like not buying a Toyota or Honda that you prefer over a Chevy or Chrysler. (If you did not expect that buying a Toyota rather than a Chevy would provide you more value per dollar, then you wouldn't have even considered purchasing a Toyta anyway.) The real problem with this plan is that it does not create jobs - it protects some jobs (typically union jobs, hence the media attention) at the expense of other jobs.

A dollar is a claim on goods and services produced in the United States. If I send $1,000 US to China in exchange for a television set produced by a Chinese firm (and it doesn't have to be a Chinese firm, it could be an American firm operating overseas and they enjoy the profits), then the Chinese company with which I did business has three options for using those $1,000: 1) buy something from someone in the U.S. worth $1,000; 2) buy something worth $1,000 from someone somewhere else in the world who wants the money so she can purchase something produced in the U.S.; or 3) invest the $1,000 in the US so that others can purchase goods and services produced in the U.S. (Yes, the Chinese company could do any combination of these three, but that's irrelevant. And yes, the Chinese company could burn these green pieces of paper, but we'll ignore this option since it's not likely to happen and we'd be much better off anyway.)

Not sending dollars overseas to obtain goods and services (mostly goods) produced by foreigners in other countries means that these foreigners don't have dollars to purchase goods and services produced in the US, goods and services that provide more value per dollar to them relative to any other choice they may have had. That makes us, and them, poorer, not richer! 

Yes, by "buying America" some jobs are saved in the domestic import industry, but other jobs are lost in the domestic export industry. Why ABC News can generate a positive response with this fallacious gimmick is due to the fact that the jobs lost in the domestic import industries, which operate at a comparative disadvantage relative to their foreign competitors, are visible. I buy a Toyota and someone at Ford loses a job. On the other hand, the jobs that are created in the domestic export industries, jobs in which we have a comparative advantage, are not so visible because without trade they never materialize.  

I don't quite understand the logic of ABC News with its "Buy America" advocacy campaign. If "Buy America" makes us better off, then why stop at promoting America as if it's some individual? Why not improve the wealth of every state in the union by advocating that North Carolinians buy only from people and firms located in North Carolina and people from New York buy only from people and firms located in New York? If this improves our states' economies, why not take it one step further to the county level? Or better yet, let's take it even further and advocate buying only from family members. Because it's obvious now that doing so is a sure road to poverty. This same road to poverty argument scales upward to the "Buy America" level as well.