The Market is Innocent, Part II

"The free market failed."

"Greedy businessmen have ruined us all."

"The age of capitalism is over."

Such are the explanations that surround the collapse of the financial and real estate markets from 2007 to 2008, shortly followed by a nationwide recession. Big banks and speculators had made too many risky investments, we are told, and lost their fortunes, putting at risk the entire economy. At the surface this is indeed what took place to set up the crisis. The whole truth, however, requires far more than a surface-level understanding of the boom and bust of the 2000's. To gain an understanding of what happened during the economic bust, one must first understand what took place beforehand--the economic boom

This is the second of a three-part series detailing the complete failure of government intervention and the innocence of the free market in the buildup to the current economic crisis. Part I can be found here.

The Next Big Thing

Beginning in the 1990's, the Federal Government embarked on a campaign to make housing more affordable for low-income families and individuals via increased regulation to enforce lower lending standards. Loads of politicians and activists, eager to leave their mark during their time in D.C., hopped on board the affordable-housing train and enacted (or re-enacted) a host of regulation in the financial and housing sectors.

The Community Reinvestment Act

Chief among these new regulations was the Community Reinvestment Act (CRA). Born in the Carter administration to force banks to give more loans to potential homebuyers who otherwise would not be able to afford a home, it was resurrected during the Clinton administration and strengthened so it had even more authority over real estate and lending. The act exposed banks to lawsuits if they did not meet high quotas of minority and lower-class customers, lawsuits with hefty fines and fees.

Fannie and Freddie...Again

In conjunction with the Community Reinvestment Act, Fannie Mae and Freddie Mac began in September 1999 to lower its standards for creditworthiness in the homebuyers that banks gave loans to. As a result, banks began giving more and more loans to people whose credit was not normally up to par, and Fannie and Freddie got more loans to buy, repackage, and sell as mortgage-backed securities to investors. Banks then had even more money to use in even more subprime loans.

Executive Lenience

Andrew Cuomo and Henry Cisneros, who were secretaries of President Clinton's Department of Housing and Urban Development, both lowered mandatory restrictions on loans from private lending institutions; Cuomo even went so far as to bring vicious legal charges on banks that didn't meet his standards for what even he admitted was "affirmative action."

Political pressure ultimately led to lowered standards in the banking industry; suddenly, anyone could get a mortgage, and "anyone" included those who simply could not afford to buy a house, with or without a loan. Demand for housing skyrocketed, suppliers surged into the real estate sector, and prices shot upward. This upward turn, however, would have been merely a blip on the economic radar of history if not for the misguided, unscrupulous, and sometimes downright sinister actions of the Federal Reserve, the central bank of the United States. While the housing bubble would indeed have taken place without the Federal Reserve, the intensity of the boom and subsequent bust were created by this institution's actions, which will be detailed in part III.

The Market is Innocent, Part I

"The free market failed."

"Greedy businessmen have ruined us all."

"The age of capitalism is over."

Such are the explanations that surround the collapse of the financial and real estate markets from 2007 to 2008, shortly followed by a nationwide recession. Big banks and speculators had made too many risky investments, we are told, and lost their fortunes, putting at risk the entire economy. At the surface this is indeed what took place to set up the crisis. The whole truth, however, requires far more than a surface-level understanding of the boom and bust of the 2000's. To gain an understanding of what happened during the economic bust, one must first understand what took place beforehand--the economic boom

This is the first of a three-part series detailing the complete failure of government intervention and the innocence of the free market in the buildup to the current economic crisis.

Boom and Bust

Normally, there are two parties principally involved in the process of purchasing a house: the buyer and a lending institution of some sort. The buyer, unless he is filthy rich, needs to get a loan with which to buy the house, and the lending institution is more than willing to provide him with that loan, with interest. The buyer takes the loan, buys a house, and spends several years slowly paying the mortgage.

The times from 1998 to 2006, however, were not "normal." Housing prices increased dramatically. Houses became the "best investment," because "they never lose value." Speculators and house-flippers bought low and sold high, riding the waves of the economy. Precious few suspected the boom was merely a bubble, prone to popping at one point or another. Yet, despite the doubts of the vast majority, the minority was proven correct. In 2006, home prices and stocks began to decline, then freefall. By 2009, multiple bailouts of failing industries, "stimulus packages" for the groaning economy, and increased regulation of the financial industry were deemed necessary to "save capitalism."

Fannie and Freddie

Most everyone assumed that the collapse was due to the wild swings of a normal, free-market economy. Yet, as I stated before, nothing was normal in the usual sense of the word during the housing bubble. Government intervention ran rampant during this time period, and two key pieces to the government puzzle are the corporations known as Fannie Mae and Freddie Mac. These corporations, known as "government sponsored enterprises", were technically private but were given governmental powers over the housing market.

Their primary function was to purchase mortgages from lending institutions. Lending institutions would then receive a large sum of money up front, while Fannie and Freddie would receive the steady income from the debtor and hold responsibility for that loan and the possibility of default. Once Fannie and Freddie had accumulated a large number of loans, they would repackage them as "mortgage-backed securities." These were essentially several loans bundled together and sold on the market to investors. Critical to these securities was the diversity of the loans packaged inside them; there had to be a wide variety of loans, some safe, others much riskier.

Absolute Power

Despite the fact that the risky loans were packaged together with the good loans, the security as a whole was considered to be safe, or "AAA", by investors and advisers. Why? Political pressure from various government branches pushed independent rating agencies to certify those risky investments in order to stimulate more homebuying; the more mortgage-backed securities sold on the market, the more money banks got from Fannie and Freddie, the more loans those banks could make to potential homeowners.

As will be detailed in Parts II-III of this series, this pressure placed on private rating agencies is just the beginning; political power in its various forms, from Fannie and Freddie to regulation to monetary policy, formed the bedrock of the boom and subsequent bust, and will likely shape the global economy for decades to come.

Spending and Slavery

Starting in December 2007, the United States entered a recession that soon affected the entire industrialized world. Fierce debate has surrounded the Federal Government's response to this downturn. In addition to adjusting financial regulations and monetary policy, the Bush Administration proposed a bill called the Emergency Economic Stabilization Act allowing for $700 billion of assets to be bought from failing banks; the legislation easily passed through Congress. Later, the Obama administration passed the American Recovery and Reinvestment Act through Congress, a $787 billion "stimulus" package, in addition to extending credit to failing automakers even to the point of nationalizing General Motors.

While the Obama administration predicted that the unemployment rate from the recession would never get higher than 8.1% thanks to his and his predecessor's spending(1), the official unemployment rate had leaped up to 9.7% by August 2009, and unofficial studies said the rate was actually 16.8%, over twice as high as the original estimates(2). What happened? Why did the government spending fail to improve economic conditions?

First, proponents of Keynesian spending (such as Bush's and Obama's) fail to realize that government spending to "create or save" jobs only creates temporary employment. Unemployed people who are put to work thanks to government projects such as highways and other infrastructure will work for a few months, then suddenly be back out of a job again after the spending on that project stops. As a result, jobs created thanks to the government are never permanent unless the spending is also permanent.

Second, any government's spending is vulnerable to corruption and abuse. In November 2009, a massive scandal erupted regarding the locations where the Federal government had put the stimulus money from the ARRA. At the White House's own website, recovery.gov, reports could be found of stimulus money going to congressional districts that didn't even exist. Billions went to places such as the "0th District of New Hampshire" and the "15th District of Arizona", which are completely nonexistent(3). This is to be expected when a group of individuals with special interests, such as politicans, are given the authority to deal with large amounts of money.

Lastly, Keynesianism ignores the fact that private investment is much more effective than government investment. Because the government is rarely subjected to a price mechanism as often as the private sector and does not necessarily need to balance its budget, the government can spend and spend and spend without having the slightest impact on the economy. Private individuals, who have a bottom line to meet and a budget to follow, are more likely to target the places they spend and invest in with care, doing business with ventures that provide superior products and services or are most likely to succeed and therefore deserve investment most, while leaving badly-run businesses to fail.

In light of this last observation on private investment, tax cuts provide an excellent mechanism for the private sector to invest more money during an economic downturn. Tax cuts also provide benefits aside from leading to more efficient investments. First, tax cuts provide a 100% assurance that people will be able to spend on things that they want. If the ultimate purpose of growing an economy is to improve the quality of life of a large portion of the populace, tax cuts are the most definite way of doing so.

Finally, tax cuts give back to the people what is already theirs. Stealing is considered morally reprehensible in nearly every culture, yet it is somehow excused when it is done by government and approved by at least 51% of the people. Yet the presence of a government changes nothing; taking someone's hard-earned private property is stealing regardless of whether the thief wears a mask and lives on the streets or wears a suit and works for the IRS. There are indeed benefits to government such as public services and the defense of justice that can only take place with taxation, but they are still funded by wholesale robbery that should be kept to a minimum. The morality and economic practicality of tax cuts simply go to show, once again, that a hands-off approach to the economy and indeed to society as a whole is both the most practical in terms of improving quality of life and the most moral in that it recognizes private property. Liberty is, and always will be, the best policy for a government to follow.

1. http://www.whitehouse.gov/omb/assets/fy2010_new_era/Summary_Tables2.pdf
2. http://voices.washingtonpost.com/economy-watch/2009/09/actual_unemployment_rate_hits.html
3. http://abcnews.go.com/Politics/jobs-saved-created-congressional-districts-exist/story?id=9097853

Guns and Butter, Round Two

In the tumultuous presidency of Lyndon Baines Johnson, politicos typically referred to Johnson's twin policies of increased intervention in Vietnam and expanded social programs as "guns and butter." While the financial toll of these two fronts separately may have been steep, but bearable, both of them put together brought the American economy to its knees, putting the entire country through a steep slump.

A mere 10 months into his administration, President Barack Obama faces a similar decision: he fights a war allegedly critical to national security in the wilderness of Afghanistan while pushing for health care reform in the even wilder Washington, D.C.. Obama recently called for 30,000 additional troops to be sent into Afghanistan, bringing the total troop level in that country to approximately 98,000, while the level of private contractors is roughly 104,000. On top of it all, official estimates of the $30 billion cost of the buildup is cause for major concern.

Lost in all these big numbers is the little fact that there may very well be fewer than 100 members of Al Qaeda in all of Afghanistan. Add the $30 billion for the troop surge plus the $65 billion already being spent annually on the war in Afghanistan, and do the math: the United States is spending--wait for it-- $950 million per Al Qaeda operative in Afghanistan, per year.

On the home front, the Congressional Budget Office has warned Senate and House Democrats that their proposed health care overhaul will raise costs, not reduce them, and add to the already heavy financial burden. The estimated cost of $1.5 trillion over a decade can only be paid for by raising taxes, borrowing money, or inflating the currency, all three of which are bad options for a president overseeing an economy badly in need of a boost.

All these costs will add to the record $1.8 trillion deficit forecast for the year 2010. Add on to all this gloom and doom the $12 trillion-and-counting national debt and our untold trillions in unfunded liabilities from programs like Medicare and Social Security, and suddenly Obama's war in Afghanistan and health care proposal don't seem like such good ideas even separately, much less combined.

Johnson tried too hard to force his statist agenda on America, and it very nearly broke the country's back. Obama must escape his fantasyland which history can be ignored, and stop to consider the consequences of enacting not one, but two massively expensive programs which, depending on who you ask, are probably not worth the cost even if enacted in better circumstances.

Why Your Packages May Soon Cost Twice As Much

For the past several months, FedEx and United Parcel Service (UPS) have been in an intense legal battle that could shake the entire shipping industry. FedEx, because it ships the majority of its packages via air, is governed under different unionization rules than UPS, which ships the majority of its packages via trucking. As a result, FedEx's labor must have a majority of all its employees voting in favor of organizing in order to unionize, while UPS' labor need only get a majority of the employees who actually vote.

UPS' costs in worker compensation are now over twice those of FedEx.

UPS and the Teamsters are now lobbying Congress to reorganize federal labor laws in a way that will bring more of FedEx's workers into the same designation as UPS' workers and therefore, bring all of FedEx under new labor regulations.

The exorbitant costs that the unionization in UPS has brought are no surprise; for decades unions have exerted enormous power over business and government, lobbying for power, more power. Yet some misunderstand the unions' problems as problems of existence. "If we could just get rid of the unions," they reason, "we could get back down to business again." This, however, ignores the basic reason of why the unions have gained so much power in recent years. In the Industrial Revolution, when unions were just starting to pick up steam, businesses used their political clout to gain benefits from the Federal Government in the area of labor management (case in point: when President Hayes sent federal troops in to put the kibosh on the workers participating in the Great Railroad Strike of 1877). The situation between labor, government, and business was like this:

LABOR --- GOVERNMENT == BUSINESS

In response to the overwhelming power of the alliance between business and government, labor unions began to realize the power of lobbying for themselves and soon, various groups of both labor and big business were vying for government handouts and favorable regulations.

LABOR == GOVERNMENT == BUSINESS

In time, particularly as the Progressive Era of Teddy Roosevelt, Woodrow Wilson, and later FDR gained power, business still received favorable government action such as subsidies and competition-squashing regulations, but lost much of its power in the area of organized labor. Meanwhile, unions gained more and more political power as the Great Depression provided a pretext for the increasing of labor power. This situation has continued to the present day, with this relationship between labor, government, and business:

LABOR == GOVERNMENT --- BUSINESS

Unions can now use the coercive authority of government to force employers into deals that hurt business, consumers, and indeed, non-union workers. As a result, products and services cost far more than they should and these costs are either passed on to consumers or kept within the company until the company fails. Now the economy is in no better a situation than it was when employers held the power to take away workers' rights by using the government as a weapon.

The appropriate solution is one in which government stays out of the dealings between businesses and their workers. Freedom of association is the ideal situation, in which workers can stay in their job if they wish, but also have the liberty to leave if their employer is giving them unfavorable conditions.

LABOR == BUSINESS

Simply abolishing unions and other forms of organized labor will not solve the problems currently faced by employees and their workers. Doing so would simply be a return to the old days in which businesses held complete control over their employees and the working class suffered. Instead, one should look to the root of the problems in modern industry, which is an overbearing, intervening government that has given itself the role of mediator between business and workers, a mediator that nobody wants.

Things to be thankful for...

It's all too easy to be caught up in the gloom and doom of the state of American politics--and indeed world politics--these days. Stories of wars, corruption, economic turmoil, and party divisions dominate the news media today, but often we ignore the bright spots that appear in the cloudy sky. Here are just a few thanks-worthy bits of recent (and not-so-recent) news, info, and thoughts:

• 222 years, 70 days ago, the Constitutional Convention in Philadelphia ratified the Constitution.
• On January 23, 2009, President Barack Obama signed an executive order for the closing of Guantanamo Bay Detention Camp.
• In 1841, thanks largely to the efforts of President Andrew Jackson, the Second Bank of the United States went bankrupt.
• On November 19, 2009, Congressmen Ron Paul (R-TX) and Alan Grayson (D-FL) successfully added amendments to House Resolution 3996 to allow for increased audit authority over the Federal Reserve.
• On December 2, 1823, the United States adopted the Monroe Doctrine
• In New York's special election for the 23rd congressional district, third-party candidate Doug Hoffman gained 45% of the vote, losing but gaining significant support.

I'm sure you, the reader, can come up with many other things to be thankful for as the year 2009 starts to wind down. Never lose hope, and never, ever give up!

Civilization and its Governments

Philosophers generally hold two clashing views of humanity: one optimistic, the other pessimistic. Each of these viewpoints is often held as an argument to increase the authority of government, whether in economic policies, personal lives, or civil liberties.

The optimistic view of humanity holds that people are inherently good, and indeed are perfectible creatures. All that is needed for a utopian existence is more time for mankind to iron out its faults and get its act together. This view is commonly held by modern liberals, who see government as the ideal "ironing board" to stretch people over and get rid of their problems. The only problem with this is that if people are inherently good, why do they need government to solve all of their problems? People could live in peace with each other without state regulations and taxes and other government functions; they wouldn't need any motivation to help out their fellow man on the street and they would most certainly not attack each other, either personally or militarily.

Clearly, however, this has not happened. Poverty still strikes many. Militaries and insurgents still clash. World peace has not been achieved, world hunger has not been solved. So this philosophy of humanity strikes out. This leaves the pessimistic view of humanity, which states that people are fallen, corrupt creatures with a near-infinite capacity for wrongdoing. This, of course, may be true, as it is the only logical conclusion remaining after the discarding of the optimistic view of humanity; however, this truth is often twisted to provide a false and fallacious view of government's role in society. If humanity is corrupted, one may reason, then it needs a master to keep it in line, right? This view is commonly held by conservatives, who say that mankind's original sin means that government needs to step in and make people do the right things, whatever "right" may be.

However, this view fails to realize that there is no distinction between the corrupt humans of the citizenry and the corrupt humans of the government. If humans are inherently wicked, and governments are comprised of humans, then governments also are wicked. It does not matter whether or not those at the head of the government were democratically elected or seized power in a violent coup; they are just as fallible and prone to mistakes as those they rule.

Both the views lead to an incorrect view of the people; they view people as clay to be molded by a government that is always correct and never falters in its careful control over the citizenry. They both ignore the fact that humans, regardless of election, birth, or status, are all equally prone to evil. The solution to this is to have each man in control of as little of another man's rights and property as possible. Private property must be protected, as must rights and civil liberties, for if any of these things becomes subject to the rule of a privileged few, the only thing that can result is tyranny, oppression, and civilization-wide collapse.

Physics and the Fry Guy

My house, though upwards of forty years old, is a sturdy old place. I could walk out back, do some stretching, maybe a quick warmup, then push with all my might against its walls, but it wouldn't do a thing, no matter how hard or how long I pushed. I could come back inside at the end of the day having pressed against the house's walls from sunup to sundown, but have nothing to show for it except blistered hands and a sore back.

But I don't do this pointless exercise. Why? Well, aside from the fact that I have no interest in demolishing my childhood home, I also happen to know a bit of elementary physics.

The equation Work = Force x Distance explains why all my blood, sweat, and tears won't budge make the slightest difference in my house's end position. Force can be broken down into two separate components, mass and acceleration. Therefore, force represents the mass of the object I am trying to move (my house--several thousand kilograms) multiplied by the amount I want the object to accelerate. Now, I can put as many Newtons (units of force) into the wall as I want, but if the distance doesn't change, no work has been done and the walls of my house thankfully stay put.

Now, let's apply this principle to labor and income.

"Why does my manager get paid so much more than I do? I work just as hard as he does but he gets paid ten times more than I do! And he just sits in an office all day!"

The entry-level employee may put just as much, or even more, work into his job every day, but what is the difference between the results he gets and the results his manager gets? Take a fast-food restaurant as an example. The fry guy probably works as hard or harder than the manager. He stands in a hot kitchen for several hours a day. He deals with irritable fellow employees and downright stupid customers. He probably has a few burns on his hands from handling grease. The manager, on the other hand, deals with paperwork, gets to talk with people who are actually polite, and rarely suffers anything more than a papercut. So the fry guy should get a higher salary, right?

Wrong.

If the fresh-out-of-high-school fry guy is removed from the scene, the restaurant can still function, and will only suffer a slight loss in performance. Training a new employee of his skill level will only take a short amount of time and a small amount of money. If the manager, however, with years of experience and expertise, is taken out of the picture, the restaurant will not be able to function coherently. In all likelihood, the place will not be able to compete with the opposition anymore and will therefore fold like a house of cards.

So who, in the end, achieved more work? The fry guy puts a lot of force into his job, but will likely never create greater profits for the company than the manager does. The manager has earned his position from having patiently gone through many of the same trials of the kitchen when he was just starting out on his new job. While increased effort will likely increase one's salary, results are what employees are paid for in the end.

Six Reasons Why Conservatives Should Support Non-Intervention

While liberals are doing more than their fair share at intervening in other country's affairs, conservatives have generally been the ones promoting a foreign policy of aggression and abrasiveness, all in the name of "national security". Conservatives tend to smear non-interventionism as "isolationism" that amounts to nothing more than "appeasement" and a "Neville Chamberlain"-style foreign policy. But why? As the following points show, foreign intervention is antithetical to everything conservatives claim to stand for.

Let's get started:

1. Non-intervention is good for national defense. Millions of Americans have finally started figuring out what more than a few Saudis and Afghans have been putting into practice for quite some time: you reap what you sow. The actions of terrorists against the United States did not come from nothing; instead they are the inevitable result of constant meddling by the United States in Middle Eastern affairs, such as...

1. Inadvertently spurring on the creation of a fundamentalist Islamic regime in Iran
2. Provoking a Soviet attack on Afghanistan
3. Supporting Israel in its invasion of Lebanon
4. Dealing arms with Iraq in the Iraq-Iran war
5. Dealing arms with Iran in the Iraq-Iran war
6. Invading Iraq
7. Creating no-fly zones over Iraq
8. Slapping down massive, deadly sanctions on Iraq
9. Establishing ties with the oppressive Saudi regime
10. Invading and occupying Afghanistan
11. Invading and occupying Iraq again
12. Supporting an oppressive fundamentalist regime in Pakistan,
13. Launching drone strikes in Pakistan
14. Constantly threatening action as drastic as nuclear attack on nations that have committed no aggressive action against us.

And that's just in the last 30 years.

While this intervention in the outside world by no means absolves foreign aggressors of their actions, if policymakers are serious about protecting the lives of Americans, both military and civilian, they must strongly consider implementing non-interventionism.

2. Non-intervention keeps government small. "Never waste a good crisis," the saying goes, and it's a saying the government has taken to heart quite well. Whenever there is some great crisis that threatens to kill us all, such as global warming, swine flu, or war, government jumps at the opportunity to save the day, as long as you just give it a little bit more power in return.

If you don't believe this, just look at the aforementioned swine flu. People are panicking all around from the swine flu, despite the fact that it only kills just as many people as the regular flu. Yet despite this, the feds are seizing more power to stop the infection. "It'll only be temporary," they tell us. But there is truly nothing more permanent than a temporary government program.

War, of course, is the crisis of crises. Nothing mobilizes a citizenry toward support for its government like military action. Regardless of whether or not the war is actually in self-defense, it always provides both an excuse for the government to increase its authority, and a means for the people to accept it.

3. Non-intervention is pro-life. As seen from point number one, non-intervention does a good job of keeping American lives out of an early grave. But consider that if America stopped pushing its weight around the world, fewer foreigners would die as well. Take a look at the sanctions placed on Iraq from 1990 to 2003 as an example. The purpose of those sanctions was ostensibly good, both for the U.S. and the people of Iraq; they were supposed to dislodge the power structure of Saddam Hussein's brutal Ba'ath government and prevent him from gaining more authority. But something went very, very wrong. Depending on which source you look at, civilian casualties directly resulting from those sanctions range from 170,000 to 227,000, to half a million (please note that these are not even the complete count of civilian casualties--these are the number of casualties of children under five alone). Want to call yourself truly pro-life? Ask your government to discontinue its aggressive foreign policy.

4. Non-intervention is Constitutional. This argument applies in two different contexts. The first is under the idea that it is America's responsibility to defend other nations from attack (see Kuwait) or brutal dictators/genocides (see Darfur). The opening lines of Article I, Section 8 of the United States constitution reads as follows: "The Congress shall have power to lay and collect taxes, duties, imposts and excises, to pay the debts and provide for the common defense and general welfare of the United States." That last part means "it's none of our business what other countries do."

The second context is that of national security, and the defense against it comes from the same part of the Constitution. It must be absolutely clear that an action, military or otherwise, is for the defense of the American people. While this concept may seem simple, for centuries it has been tossed aside by leaders who essentially say "whatever--we'll find the proof later". However, according to the very Constitution that conservatives say they hold in such high regard, this is completely illegal.

5. Non-intervention is conservative. If you look for past supporters of non-intervention, you will find that they are almost overwhelmingly conservative. Who started the Vietnam War? John F. Kennedy, and his successor Lyndon B. Johnson escalated it. Who withdrew from Vietnam? Republican Richard Nixon. Let's go even further back. Who started the Korean War? Liberal Democrat Harry S. Truman. Who withdrew from Korea? Conservative Republican Dwight D. Eisenhower. Eisenhower was one of the last great Republicans, one who understood the dangers of an overbearing foreign policy. Yet he was no pot-smoking peacenik; he was the supreme commander of the Allied Forces, a decorated general, and a great hero in American history. Conservatism and non-intervention have a long story together, and it is a story I would rather keep alive.

6. Non-intervention is American.

"Observe good faith and justice toward all nations. Cultivate peace and harmony with all."

"Power always thinks it has a great soul and vast views beyond the comprehension of the weak; and that it is doing God's service."

"The means of defense against foreign danger historically have become the instruments of tyranny at home."

"Military glory--that attractive rainbow, that rises in showers of blood--that serpent's eye, that charms to destroy..."

These quotes do not come from hippie musicians a la John Lennon or communists a la Noam Chomsky; these came from George Washington, John Adams, James Madison, and Abraham Lincoln, respectively. The anti-war cause is not anti-American or unpatriotic, it is quite the opposite. Skepticism about the power of government abroad is truly in line with the intent of the founding fathers of American government.

These six qualities that I have just described are all ideas that resonate deeply with American conservatives. Unneeded war is the enemy of everything they believe in or think they believe in, yet they continually line up to give their support every time their government calls them to "duty" in the name of national defense or human rights. I can only hope this article persuades conservatives to rethink their ideas of the capabilities of government force and the military.

Resignation over Afghanistan

From the Washington Post:

When Matthew Hoh joined the Foreign Service early this year, he was exactly the kind of smart civil-military hybrid the administration was looking for to help expand its development efforts in Afghanistan.

A former Marine Corps captain with combat experience in Iraq, Hoh had also served in uniform at the Pentagon, and as a civilian in Iraq and at the State Department. By July, he was the senior U.S. civilian in Zabul province, a Taliban hotbed.

But last month, in a move that has sent ripples all the way to the White House, Hoh, 36, became the first U.S. official known to resign in protest over the Afghan war, which he had come to believe simply fueled the insurgency.

"I have lost understanding of and confidence in the strategic purposes of the United States' presence in Afghanistan," he wrote Sept. 10 in a four-page letter to the department's head of personnel. "I have doubts and reservations about our current strategy and planned future strategy, but my resignation is based not upon how we are pursuing this war, but why and to what end."

As more and more citizens of the United States grow dissatisfied with the war in Afghanistan, whether based on the strategy employed or the purpose of the occupation or some other reason, it seems as though the top officials of the federal government are blind and deaf to the reality of the situation in both the protests at home and the war overseas. Hoh is the first of his kind, the first to actually act on his conscience and his rational view on the Afghan occupation, not simply write later in his memoirs about his "deep reservations" but keep his position out of "loyalty to his commander-in-chief", as so many other have done after the damage is already done.

Hoh is also learning first-hand the devastating nature of blowback against U.S. forces. Continues the article:

But many Afghans, he wrote in his resignation letter, are fighting the United States largely because its troops are there -- a growing military presence in villages and valleys where outsiders, including other Afghans, are not welcome and where the corrupt, U.S.-backed national government is rejected. While the Taliban is a malign presence, and Pakistan-based al-Qaeda needs to be confronted, he said, the United States is asking its troops to die in Afghanistan for what is essentially a far-off civil war.

[later]

Hoh was assigned to research the response to a question asked by Adm. Mike Mullen, chairman of the Joint Chiefs of Staff, during an April visit. Mullen wanted to know why the U.S. military had been operating for years in the Korengal Valley, an isolated spot near Afghanistan's eastern border with Pakistan where a number of Americans had been killed. Hoh concluded that there was no good reason. The people of Korengal didn't want them; the insurgency appeared to have arrived in strength only after the Americans did, and the battle between the two forces had achieved only a bloody stalemate.

Korengal and other areas, he said, taught him "how localized the insurgency was. I didn't realize that a group in this valley here has no connection with an insurgent group two kilometers away." Hundreds, maybe thousands, of groups across Afghanistan, he decided, had few ideological ties to the Taliban but took its money to fight the foreign intruders and maintain their own local power bases.

"That's really what kind of shook me," he said. "I thought it was more nationalistic. But it's localism. I would call it valley-ism."

By the time Hoh arrived at the U.S. military-run provincial reconstruction team (PRT) in the Zabul capital of Qalat, he said, "I already had a lot of frustration. But I knew at that point, the new administration was . . . going to do things differently. So I thought I'd give it another chance." He read all the books he could get his hands on, from ancient Afghan history, to the Soviet occupation in the 1980s, through Taliban rule in the 1990s and the eight years of U.S. military involvement.

[Provincial Governor] Naseri told him that at least 190 local insurgent groups were fighting in the largely rural province, Hoh said. "It was probably exaggerated," he said, "but the truth is that the majority" are residents with "loyalties to their families, villages, valleys and to their financial supporters."

Hoh's doubts increased with Afghanistan's Aug. 20 presidential election, marked by low turnout and widespread fraud. He concluded, he said in his resignation letter, that the war "has violently and savagely pitted the urban, secular, educated and modern of Afghanistan against the rural, religious, illiterate and traditional. It is this latter group that composes and supports the Pashtun insurgency."

With "multiple, seemingly infinite, local groups," he wrote, the insurgency "is fed by what is perceived by the Pashtun people as a continued and sustained assault, going back centuries, on Pashtun land, culture, traditions and religion by internal and external enemies. The U.S. and Nato presence in Pashtun valleys and villages, as well as Afghan army and police units that are led and composed of non-Pashtun soldiers and police, provide an occupation force against which the insurgency is justified."

Hopefully Hoh will be the first of many. He has already become a figurehead of sorts for the anti-war movement, with his story appearing in news media all across the country. The article ends with an ultimatum of sorts for the occupation:

"We want to have some kind of governance there, and we have some obligation for it not to be a bloodbath," Hoh said. "But you have to draw the line somewhere, and say this is their problem to solve."

Equality. Fraternity. Crime.

While there are exceptions to every rule, the typical gun control advocate leans significantly to the left, supporting feminism, welfare, and the like, and generally pushing equality as the highest principle of a civilized society. This typical supporter of gun control does not realize it, but he or she is actually tearing down that central principle of equality in their support for the restriction of firearms.

Take feminism for an example. No matter the cries of the ardent feminists of today, men are physically stronger than women. If a man assaults a woman without a firearm, the terms are decidedly unequal in 9 out of 10 situations. Even if the woman does have a weaker weapon such as pepper spray or a knife, the physical superiority of the man will likely allow him to prevail. Now let firearms enter the picture. If the woman has a firearm and the basic knowledge of its use, no physical strength on the part of the attacker can allow him to somehow dodge the bullets or withstand a hit. Even if both the woman and the man have firearms, the terms are much more even in the situation. The man's advantage in strength will now play no role in the conflict, only shooting skill, and shooting skill is not naturally inclined to favor either sex.

As another example, think of the elderly. The elderly are often incapable of adequately defending themselves without some sort of advantage on their side; the possession of a firearm can clearly mean the difference between life and death. This argument works for the very young as well. While youth possession of firearms is often debated, no one can deny that a responsible young person who is trained in gun usage has a much greater advantage in a situation such as a home invasion than one who hasn't. Once again, guns become the great equalizer for those weaker individuals who are forced to defend themselves.

Now try support for the poor. Leftists decry the possession of firearms as dangerous to the low-income, inner-city residents, but the opposite is actually true. Firearms are a means for the poor to defend themselves against the elite. While there may be varying degrees of quality of firearms, a bullet is a bullet, is a bullet. The damage a cheap, Saturday-special handgun does is just as real as the damage a military-grade weapon does. Making firearms unavailable to the poor by enacting stringent regulations or taxes on their production, sale, or possession means higher crime rates in low-income areas, yet again defiling the social liberal's dream of equality.

Firearms are not some exclusively dangerous hazard to society. Rather, they are a tool that when used unwisely can result in great harm, but when used responsibly can and will bring far greater benefit than cost. Getting rid of them would set society back from decades or even centuries of progress, and would destroy the very principles that their detractors hold so dear.

Rent Control/Life Control (Choose Any Two)

Officials often impose rent control in one form or another at the behest of cries against the "evil capitalists" or "idle, rich landlords". The ostensible purpose of these rent controls is to bring down rent prices, thereby making housing affordable for the working class. However, a close inspection of the issue reveals two main arguments against the imposition of rent control: practical and moral.

Practically speaking, rent control actually works to harm everyone involved in the business of housing, and that includes the low-income tenants it is supposed to help. If rent control is enacted, there are several unintended consequences that may result.

First, rent control may drive landlords out of the housing market. According to the laws of supply and demand, a price ceiling will drive supply down and demand up. This will mean an excess of demand within the housing market and therefore mean a larger proportion of the low-income population becoming homeless. In an attempt to help low-income people obtain places to live, the officials who impose rent control do away with the possibility of simply a slightly more expensive dwelling and end up with no possibilities at all.

In addition to this, the quality of apartments that are available is driven down because the amount of demand means that landlords are able to pick and choose tenants based on how bad of living conditions they are willing to endure. Because rent control destroys the landlord's ability to reap the benefits of a higher-yield investment, the landlord then has no incentive to maintain the property he rents out to as high a standard as he would without controls. What would have been higher-quality housing is now deteriorating and dilapidated, once again hurting those the rent control was intended to help. To add insult to injury, regulation on the quality of housing may be initiated in addition to the rent control once the above situation takes place, and that will mean higher costs of maintenance with lower results. These regulations, in conjunction with rent controls, drive out more suppliers and aggravate the problem.

In another possibility, the landlord may decide to sell his property instead of renting it. Rent control is often enacted under the assumption that landlords do not work for the rent they collect, which is the truth, but not the whole truth. The whole truth is that the landlord, by renting out his property, has chosen to forgo a low payoff now in favor of a much higher overall payoff down the road. If rent control is enacted, the landlord may decide that the payoff later on is enough to justify the wait. Then the property is sold instead of rented out, and because most low-income tenants rent specifically because they cannot afford to buy, they are either left without a place to live or with a place of much lower quality than they would originally be able to afford.

In addition to the practical concerns raised by rent control, there are also significant moral questions to ask when advocating rent control. The foundation of a free and just society is based on the security of one's life, liberty, and property; these being individual rights and not collective rights, no one, even by majority vote, has a right to take these away. However, that is exactly what rent control does. Rent control takes away a landlord's liberty to do what he pleases with his property, for if someone else can tell a property owner what he can or cannot do with that property, is it really his? Therefore, as rent control takes away the landlord's rights of liberty and property, it can within reason be considered slavery and theft. If a person changes his path in life because he does not want to be involved in slavery and theft in the housing market, then rent control further leads to control of one's life, completing the circle of the violation of rights.

Rent control is impractical and immoral. It harms everyone involved with the process of providing housing, including the people it is supposed to help. A true advocate of economic prosperity and freedom should therefore argue forcefully against the destructive and unethical burden of rent control.

Liberty Links, 10/16/09

Links from the past week.

10/9

Future of Freedom Foundation: Eight Years of Big Lies on Afghanistan
LewRockwell: Rich Uncle Pays your Mortgage
LewRockwell: Free the Clogged-Nose 25!
LewRockwell: A Demon in Need of Exorcism
LewRockwell: Are We the Martians of the 21st Century?
Reason: The Madness of the Mandate

10/10

Campaign for Liberty: Obama Deserved It
LewRockwell: Obamageddon
Reason: Why Ayn Rand is Hot Again

10/11

LewRockwell: Warmonger Wins Peace Prize

10/12

Future of Freedom Foundation: Obama's Tax on the Middle Class
LewRockwell: When War Becomes Peace, When the Lie Becomes the Truth
LewRockwell: Refuting Keynes
Mises: Tire Trade Tirade
Mises: You and the State

10/13

LewRockwell: Jim Rogers on the Next 10 Years
LewRockwell: Rush is Wrong
LewRockwell: The Empire is Going Down
Reason: Private Developers Have No Right to My Home

10/14

Campaign for Liberty: These Are Not Negotiable
Independent Institute: Partisan Politics--A Fool's Game for the Masses
LewRockwell: Warren Harding and the Forgotten Depression of 1920
LewRockwell: Perpetual War is Here
LewRockwell: Saving Face in Afghanistan
LewRockwell: Here Are Some Answers
Mises: Corporatist Pigs!
TakiMag: Israel's--and Only Israel's--Right to Self-Defense

10/15

Independent Institute: Diagnostics and Therapeutics in Political Economy
Campaign for Liberty: A Nobel Prize We Can Cheer
LewRockwell: What Happened to "Global Warming"?
Mises: The Illusion of Living Wage Laws

10/16

Campaign for Liberty: The Imperial Presidency Marches On
LewRockwell: Happy Days Are Here Again
LewRockwell: Tax Evaders Face Choice
Mises: The Death of Politics
TakiMag: Ignorance is Bliss

In Any Country

Gustave Gilbert was a German-speaking psychologist who was allowed to speak with Nazi war criminal Hermann Goering after the Allied victory. While the following comments were not recorded in the Nuremberg Trials, Gilbert kept a journal of them and released them as the book "Nuremberg Diary".

We got around to the subject of war again and I said that, contrary to his attitude, I did not think that the common people are very thankful for leaders who bring them war and destruction.

"Why, of course, the people don't want war," Goering shrugged. "Why would some poor slob on a farm want to risk his life in a war when the best that he can get out of it is to come back to his farm in one piece? Naturally, the common people don't want war; neither in Russia nor in England nor in America, nor for that matter in Germany. That is understood. But, after all, it is the leaders of the country who determine the policy and it is always a simple matter to drag the people along, whether it is a democracy or a fascist dictatorship or a parliament or a communist dictatorship."

"There is one difference," I pointed out. "In a democracy the people have some say in the matter through their elected representatives, and in the United States only Congress can declare wars."

"Oh, that is all well and good, but, voice or no voice, the people can always be brought to the bidding of the leaders. That is easy. All you have to do is tell them they are being attacked and denounce the pacifists for their lack of patriotism and exposing the country to danger. It works the same in any country."

The Paradox of Thrift

There is an apparent weakness within free-market economics that is often referred to by Keynesians, socialists, and the occasional Chicago-schooler as the Paradox of Thrift. The paradox is as follows: during a recession consumers naturally tighten their belts and start saving more money. Because consumers are not spending as much, producers cannot sell as much and start losing money. Because supply then goes down, prices go up, and consumers spend even less, sending the economy into a steep downward spiral.

The paradox of thrift appears convincing, but it ignores one key fact: before something can be consumed, it must be produced, and before something can be produced, it must be invested in. Before a house can be bought, someone must cut the lumber, manufacture the nails and drywall and other materials, and finally put it all together. And even before that, because that house is a large project, someone--a banker, investor, or entrepeneur--must invest a large amount of capital into it. How is that capital accumulated? By saving, plain and simple.

This is because saving, contrary to those who believe in the paradox of thrift, is not the choice to not spend. Rather, it is the choice to spend later on something that's worth that spending instead of spending now on something that's not. When consumer spending is encouraged rather than saving, money is spent on thing that are not necessarily beneficial to the economy; things that don't dramatically help productivity or increase the standard of living.

And what is the best way to encourage saving? The free market.

As noted before, people and businesses alike naturally start saving more. If the government intervenes to increase consumer demand, the process is the reverse of what is necessary for a healthy economy. People will experience a short-term economic boom because they will simply be buying more things, but because there is no supply to feed the demand, the economy will run itself into the ground in short order and wind up in a state far worse than it was in originally.

Natural, market-driven saving is the only way for an economy to get on its feet. Once saving is up, production can increase again, and consumers will be able to both buy more and save even more, continually growing the economy. Attempts to shortcut this cycle can only lead to disaster.

A Libertarian Argument on Abortion

Libertarianism is based on the principle of non-aggression: no man or institution, including the government, may initiate force against another man or institution. This solid principle leads to a clear-cut set of positions for libertarians: no wars of aggression, no wealth redistribution, no substance control, and no trade restrictions, among other things.

This principle is applied to abortion by nearly every libertarian, but it is applied in different ways within the libertarian movement. One position believes that a fetus is either not alive or is committing an act of aggression against its mother, and thus that the mother is justified in using force against it. The other position believes that a fetus is alive and commits no aggression against the mother, and thus that the abortion of the fetus in the initiation of force against it. There are intermediate positions, mostly believing that abortion is largely immoral but allowing for it in extreme cases such as rape, incest, or medical emergency. However, for the purpose of this article, the two most extreme positions of allowing either for complete abortion rights (pro-choice) or the complete outlawing of abortion (pro-life) will be considered.

The pro-choice position commonly asserts that the fetus is not alive, and therefore its termination is not the same thing as killing. "Biology: Life on Earth, Sixth Edition", a high-school biology textbook from Prentice Hall, uses seven criteria to determine whether or not something is alive.

1. Living things have a complex, organized structure that consists largely of organic molecules.
2. Living things respond to stimuli from their environment.
3. Living things actively maintain their complex structure and their internal environment, a process called homeostasis.
4. Living things acquire and use materials and energy from their environment and convert them into different forms.
5. Living things grow.
6. Living things reproduce themselves, using a molecular blueprint called DNA.
7. Living things, as a whole, have the capacity to evolve.

These criteria will be addressed one-by-one to determine whether or not a fetus is alive.

1. The fetus is composed of the same cellular structure as an adult human. Even if the fetus is mere cells in size, those cells are complex enough and organized enough by themselves to meet the criteria of "organized and complex". Organic molecules make up the vast majority of the content of a fetus.
2. Fetuses are well-known to react to outside stimuli. Fetuses react to loud sounds played too near to the womb, to physical activity of the mother, and indeed from the saline solutions and cutting tools often used in abortion procedures.
3. As noted before, fetuses have the same cellular structure as adult humans and, if provided resources, will maintain that cellular structure without outside interference.
4. A fetus may not be able to actively take resources, but is most definitely able to acquire resources from its mother and use and adapt those resources.
5. The whole purpose of pregancy is to allow the fetus to grow.
6. The criterion of reproduction applies to the species as a whole, not to any one member of that species.
7. Once again, this criterion applies to the species as a whole. If one believes in evolution, then they will no doubt agree that humanity as a species evolves. In one does not believe in evolution, this criterion is irrelevant and can essentially be crossed off the list.

Clearly, the fetus is alive according to widespread scientific standards. But what if the fetus is not human? Then the killing of the fetus will have no greater significance than the killing of a plant or an animal. However, the question that must be asked is, "If the fetus is not human, what is it?" The fetus has human DNA, DNA that will allow it to reproduce later in life. The fetus is not a chimpanzee or a dog or any other animal, and it is most definitely not a plant.

So the question is settled then; a fetus is alive and human. But the fetus may simply be a piece of tissue in its mother's womb. This is not the case, however; a fetus has different genetic material than its mother and is only dependent on its mother for resources and protection, not for any other reason, showing that that the fetus is in fact an independent life form.

The fetus is therefore alive, human, and independent. Its termination would be the same as killing a human. What other defenses of abortion are there, then? The only other such defense is that the fetus somehow committed an act of aggression against its mother. But in no circumstance is this the case. Assuming consensual sex, the mother had sex with the full knowledge that pregnancy could result, sex being shorthand for sexual reproduction, after all. The principle of contract law, one of the foundations of libertarian justice, demands that because the mother has engaged in an act created, whether by nature or by God, she is obligated to follow through on the caretaking of a child.

Assuming non-consensual sex, the situation does become more confusing but not incomprehensible. Imagine a woman who becomes pregnant as a result of a rape. This woman is the victim of an unbelievably unjust, violent, and immoral act. Some would say that the woman has the right to abort the child because the pregnancy was created against her will, or the pregnancy will be a reminder of the terrible ordeal she has already endured. However, the baby has done nothing against the mother, the rapist has.

Consider this analogy: there are three countries: A, B, and C. A attacks B. B retaliates against A, but in the process must attack and completely destroy C. According to the principle of non-aggression, this is unjustifiable. C has done nothing against B, so B's treatment of C is the initiation of force and therefore immoral. Why, then, should a mother have the moral right to kill a child that has resulted from rape, especially since the act of abortion does nothing to punish or obtain payment from the criminal in the first place? At least in the analogy, B is able to say that the destruction of C is for the purpose of punishing A. But the pro-choice position has no such excuse. The fetus has committed no act of aggression against the mother, so the abortion is the initiation of force and therefore immoral.

Because the fetus is alive, human, independent, and innocent of any initiation of force, the use of abortion is tantamount to murder. This act of aggression should be immoral in the eyes of a libertarian, a member of a political ideology more driven by unshakable morals than any other.

So I have to ask: what's the holdup, libertarians?

Taxation or Spending?

Every day, thousands of conservatives think back on the man named Ronald Reagan, the one who brought back traditional values, toppled the evil empire, and above all, lowered taxes...and smile fondly at the memory. The first two points may be written on in later articles, but I have some serious issues with the third point. Let me explain.

Aside from the fact that Reagan didn't actually cut taxes, the main problem with this hero-worship is that it ignores Reagan's spending policies, a problem common among conservatives. Ronald Reagan left office having incurred the largest federal debt the United States had ever seen. Yet this clear clash with traditional "fiscal conservatism" is routinely ignored or downplayed by conservatives. Why?

The answer lies in the new breed of fiscal conservatism that has been growing for several decades. This new species of economic thought considers budget deficits trivial compared to tax levels. A government can, according to this philosophy, spend itself into debt as long as taxes are low and still consider itself a "small government", because the measure of a government's size is not what it gives out in the form of spending but what it takes in from taxation.

This view ignores one crucial fact, however. Every dollar a government spends must be paid for in some way, either in the present or in the future. If the government opts not to pay now through taxation, it must borrow the money and pay later. This debt can be handled in one of three ways: taxation, inflation, or inaction. If the government chooses to pay the debt through taxation, then the spending has consequences that included higher taxes anyway. What was the point of the deficit spending if not to simply push the payment for it back by several years? If the government chooses to pay the debt by inflation, no money is directly taken from any taxpayers, but the value of the money they possess is decreased, making inflation at least equivalent in cost to taxation for all practical purposes. If the government decides to not pay the debt at all, investors' willingness to invest in that country decreases, thereby leading to the same consequence as inflation: a devalued currency.

Add to these facts the issue of interest on the debt, and suddenly deficit spending does not appear so attractive. Every time a government attempt to spend without paying for it, the payment later on in the future will inevitably be greater. The simple solution is to either cut spending or raise taxes to meet that spending; the long-term economic pain will be much, much less.

P.S. Yes, I did use an article from Paul Krugman

Healthcare in the Constitution

Article I, Section 8 of the United States Constitution begins, "The Congress shall have power to lay and collect taxes, duties, imposts, and excises, to pay the debts and provide for the common defense and general welfare of the United States..." That small phrase "general welfare" is increasingly being used as a license to enact universal government-run healthcare. Because the provision of healthcare is ostensibly good for the general welfare, it falls under the authority of Congress to enact, at least according to those favoring it.

A closer look at the intentions of the founders shows that this is not the case at all. In a number of essays collectively known as "The Federalist" or "The Federalist Papers", Alexander Hamilton, James Madison, and John Jay explained their reasoning behind both the overall structure and purpose of the Constitution and numerous finer points within the document.

James Madison, commonly known as the Father of the Constitution, wrote on this exact topic of the general welfare in the Federalist No. 41, and he had no tolerance for those who would use the clause as authorization for greater government power. He wrote,

"But what color can the objection have, when a specification of the objects alluded to by these general terms immediately follows, and is not even separated by a longer pause than a semicolon? If the different parts of the same instrument ought to be so expounded, as to give meaning to every part which will bear it, shall one part of the same sentence be excluded altogether from a share in the meaning; and shall the more doubtful and indefinite terms be retained in their full extent, and the clear and precise expression be denied any signification whatsoever? For what purpose could the enumeration of particular powers be inserted, if these and all others were meant to be included in the preceding general power? Nothing is more natural nor common than first to use a general phrase, and then to explain and qualify it by a recital of particulars..."

"...But what would have been thought of that assembly, if, attaching themselves to these general expressions, and disregarding the specifications which ascertain and limit their import, they had exercised an unlimited power of providing for the common defense and general welfare?"

Madison's intent for the general welfare clause clearly did not exceed the powers already given to Congress by the remainder of Article 1, Section 8. The general welfare clause was merely a broad phrase describing shallowly the powers of Congress. Specific powers were detailed later; universal healthcare wasn't one of them.

The "Right" to Healthcare

Possibly the most common argument from those in favor of increased government intervention is that healthcare is a right for everyone. They see healthcare as a need just as necessary as food and water, reasoning, "If a person does not have healthcare, they will either die or have their quality of life severely diminished. Therefore it is necessary and must be provided." However, this view does not differentiate between rights and needs, two categories that may overlap but may also hold completely contradictory points.

Healthcare is a need. Everyone who has ever lived has needed medical care at some point in their life or will in the future. It is no different from air, shelter, or either of the other aforementioned needs, food and water. When healthcare is treated as a need and only a need, a person cannot be forced to give healthcare to someone who cannot or will not get it for themselves.

When healthcare is treated as more than a need, however, and is given the status of a right, matters change. If a person is not willing or able to exercise their right to healthcare independently, then, of course, someone must provide it for them, by force if necessary. This idea violates the rights of a person to be secure in their life, liberty, and property; if a person refuses to give their property against their will, they must give their liberty by going to jail, and if they refuse to give their liberty, their life is taken from them.

Thus the "right" to healthcare inherently conflicts with the idea of natural law-the right to life, liberty, and property. Life, liberty, and property are indeed needs, but they also go beyond that: they are rights. They are concepts so valuable that they are taken away, justice is inevitably violated. Defining healthcare as a right leads to a conflict of interest that can only result in theft, slavery, and murder: the violation of justice.

The Public "Option"

The idea of a "public option" is on the lips of millions of Americans. The thought of a government-run entity forcing competition out of business still scares the average man on the street, so we're no going to give the government an outright monopoly--just a piece of the pie.

Yeah, right.

President Obama states he is in favor of creating "a public option that will give people a broader range of choices and inject competition into the health care market so that [we can] force waste out of the system and keep the insurance companies honest."

When hell freezes over.

Don't get me wrong; insurance companies could definitely use a shot of competition, not to mention some to kick out the lobbyists in Washington. The problem is, there is nothing "optional" about taxation, the preferred method of payment for politicians everywhere: there is no choice to not pay taxes. An individual may choose whether or not to participate in the meager benefits of a public system, but no one -no one-can choose to not pay for it.

The government may not take a monopoly in the provision of a service, but that service will always take a monopoly in taxation.

Rationing and Universal Healthcare

If you read the title above and instantly thought to yourself, "There's no rationing in the healthcare bill right now. All you have to do is read it! Ha!", here is a rather important fact to keep in mind: rationing can and likely will take place regardless of whether or not it's mentioned in a bill. A government-run industry cannot function without either incurring rationing or extreme prices.

Confused? Flash back to Econ 101: supply and demand dictate price. When demand outweighs supply, prices rise. When supply outweighs demand, prices fall. Assuming a fixed demand, supply is inversely proportional to price (s=d/p). Now, assuming the number of sick people remains constant, apply these principles to healthcare. When there are too few doctors to provide care or too few pharmaceutical companies to provide medicine, prices rise. Because profits now rise, existing doctors and pharmas are able to provide better care and people may see these profits and enter the medical industry. If this creates the opposite problem of too many doctors and pharmas, increased competition results, prices are driven down, and quality is driven up.

Now flash forward to a government-run health system. Because prices are no longer a reliable indicator of supply and demand (they never are when funds are taken from and services are supplied to a collective; see the article "Healthcare: Understanding the Status Quo" for more), the correct supply to meet the demand is unknown. If supply is too high, exorbitant costs result and there is no price mechanism to show any way of lowering costs. Cuts will be taken across the board, and that means that some people will be unable to receive care. If supply is too low, well--you're already there.

"But we'll be able to calculate costs without prices. We'll just find that happy spot where supply is perfect to meet demand!" You mean just like the Post Office? Just like the public education system? Just like the government-run healthcare systems we already have, Medicare, Medicaid, and the VA? All of these entities give substandard service and are drowning in red ink. A national health care system will be no different.

Unemployment and Insurance

When healthcare debates began heating up in early June, President Obama said he was in favor of "making every American responsible for having health insurance coverage, and asking that employers share in the cost."

If this sounds good to you, ask yourself this: when you go to the candy store with ten dollars and the price of the candy you want has been raised from one dollar to two dollars, what do you do?

The principles of supply, demand, and pricing are no different in labor as they are in shopping. When something costs more but you have a fixed amount of money, you either buy less of it, buy something else, or save your money. Likewise, when an employer is required to pay his workers more, he will either hire fewer workers, hire part-time employees, or not hire anyone at all and decide the market isn't right. The Obama administration's plan to require employers to pay for their employee's health insurance is essentially raising the cost of labor and forcing the employer to hire fewer full-time workers as a result. Entrepeneurs who wish to start a business may now see that the cost of labor is too high for a specific industry and decide to save their money.

When unemployment rates are skyrocketing, the idea of letting employers and employees come to an independent agreement on wages and benefits should be everywhere.

Shouldn't it?

Healthcare: Understanding the Status Quo

The upcoming decision on healthcare reform is possibly the most important decision America has seen for decades. If "reform" as it is currently seen is continued, dramatic effects could be seen for all Americans. But is it the right reform? No one denies that the status quo in medical care is subpar; however, many believe the direction the Federal Government is taking in this issue will only make matters worse. In order to understand this direction of increased government control over healthcare, one must first understand the reasons why the industry is in its current state.

Two primary subjects are the focus of the modern healthcare debare: drugs and insurance. Both will be covered in short order.

The often enormous expenses of prescription and over-the-counter drugs means they are often out of reach for lower and middle-class individuals. There are three main reasons for these costs: first, the large investment necessary to research and manufacter those drugs; second, the overbearing regulations of the FDA; and thirdly, the groups of lobbyists pressuring public officials in Washington.

The first reason is simply a fact of the industry; no amount of reform, whether government-based or market-based, will be able to overcome it. Pharmaceutical companies invest millions or even billions, to research vaccines and medicines, then invest even more to manufacture them on a larger scale. When these companies are successful and make enormous profits, cries and complaint go out, claiming that the companies have extorted consumers. But why? Why shouldn't a company that has taken great risks to provide such a necessary product as medicine receive a hefty reward for its investment? The United States leads the world in pharmaceutical research; reducing the likelihood of high returns for investors and entrepeneurs would severely decrease research in the United States.

The second reason for high drug prices, on the other hand, is changeable and is not simply a reality that must be accepted. The Food and Drug Administration (hereafter the FDA) is the government agency responsible for the regulation and approval of drugs. To understand how this body restricts the availability of drugs, consider two examples. In the first example, imagine there is a drug fully tested by the pharmaceutical company that created it. However, the drug must undergo even more testing from the FDA, despite the fact that the company has already tested it under pressure from the fact that future sales will decrease sharply if the drug is ineffective or dangerous. This added testing means several more months or even years before the drug is available to the public. In the second example, imagine there is a new cancer treatment that is cheaper to use than chemotherapy or radiation and doesn't come with the common side effects of either. However, this treatment has a 1% chance that its use will result in fatal heart problems later on, and FDA bans it. Even if the drug had a mere 3% success rate it would have ultimately saved far more people than it killed. The FDA regulation saved one person, but killed three. In both cases government regulation kept effective drugs off the market for longer than necessary, if it even let them on the market at all, wasting time and effort and therefore increasing the cost of the drug.

The third reason for high drug prices is the presence of large groups of lobbyists from major pharmaceutical companies in Washington, D.C.. While the root of this problem may appear to be the enormous power and money possessed by corporations that allow them to influence policy decision, it is actually that there is too much power concentrated in Congress. The more power to regulate, tax, and subsidize vested in Congress, the more special interest groups are drawn to it so they can take advantage of it. As power is concentrated, so is corruption. If the power the government wields were severely diminished, the corruption that accompanies it would also subside.

So, in summary, three major reasons for the expense of drugs are large investments, overprotective regulations, and corrupted power.

The cost of insurance is the other main concern in the debate. While many lament lower coverage of health benefits, it seems as though the solution to higher costs and lower availability of insurance may actually be decreasing coverage.

John Stossel had an excellent analogy to the current American healthcare situation that may explain this apparent paradox. What if there was a company that offered grocery insurance? This grocery insurance program starts by simply providing coverage for rare, severe cases such as when there's a local famine of some sort (if shipping non-local food is not available) or the consumer loses their job. This works out fine because everyone is under almost-equal risk of having a famine or job loss (illness), and the system works by having those who are more fortunate pay for those who are less fortunate; everyone involved has decided to pay the moderate cost of insurance rather than risk paying a larger cost at some point or another.

But what if this grocery insurance policy expands so that all groceries are covered? The incentive to economize is lost. In the first situation, with limited coverage, people made do when they could, but let insurance take care of everything when they couldn't. In the second situation, with full coverage, people say, "Why should I buy chicken? I can buy filet mignon for dinner because my insurance takes care of it." The result of this is increased consumption on all fronts, and increased consumption must be accompanied by increased costs.

While one may say, "This is ludicrous! Why would anyone participate in this system?", this is the reality of modern health insurance. Because supply and demand are skewed, the value of any one treatment becomes unknown. When the collective is paying for a product or service, anyone can take advantage of that collective and those who do not abuse the system are left with the bill.

Now the reasons for the current healthcare situation in the U.S. should be clear. In the next few articles, the issues specifically accompanying universal government-run healthcare will hopefully be clarified as well.

Marijuana: Just the Facts

Here are the facts about marijuana, its use, and its criminalization. Make the decision for yourself.

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General Information on Marijuana

The illegal drug marijuana (also known as grass, weed, dope, pot, Mary Jane, bud, indo, and hydro) is made of the Cannabis savita plant. The leaves and stems of the Cannabis plant are ingested by smoking them in a joint or a bong. The primary active ingredient in marijuana is THC (delta-9-tetrahydrocannabinol), which works by binding to protein receptors in the brain. This binding sets off a series of chemical reactions resulting in a high that consists of distorted perception, slowed reaction times, lack of critical thinking skills and coordination, and an overall relaxed state of being with some anxiety and paranoia. (1)

Health Effects of Marijuana Use

Despite these negative short-term effects, no serious negative long-term health effects have been found to be associated with marijuana use. (2) Kaiser Permanente, a large Health Maintenance Organization (HMO), studied 65,177 men and women between the ages of 15 and 49. Over the course of ten years, there was no difference between the mortality rates of those who smoked marijuana and those who did not smoke marijuana. Similarly, a second study researched 45,450 soldiers in the Swedish Army who were 18-20 years old when they were asked about their marijuana use. Fifteen years later, the mortality rates of marijuana smokers and non-marijuana smokers were the same.

Marijuana is also alleged to have health benefits. Kaiser Permanente found that there is "reasonable evidence for the efficacy of tetrahydrocannabinol (THC) and marijuana as anti-emetic (nausea) and anti-glaucoma (seeing disorder) agents and the suggested evidence for their efficacy in the treatment of other medical conditions, including AIDS." (3)

External Effects of Marijuana Use (Crime)

Six different studies (4), published in respectable government and scientific journals, have found no connection between marijuana use and crime.

• Fagan, J., et al. "Delinquency and Substance Use Among Inner-City Students." Journal of Drug Issues 20 (1990): 351-402.
• Johnson, L.D., et al. "Drugs and Delinquency: A Search for Casual Connections." Ed. D.B. Kandel. Longitudinal Research on Drug Use: Empirical Findings and Methodological Issues. New York: John Wiley & Sons, 1978. 137-156.
• Goode, E. "Marijuana and Crime." Marihuana: A Signal of Misunderstanding: Appendix I. National Commission on Marihuana and Drug Abuse Washington, D.C.: U.S. Government Printing Office, 1972. 447-453.
• Abram, K.M. and L.A. Teplin. “Drug Disorder, Mental Illness, and Violence.” Drugs and Violence: Causes, Correlates, and Consequences. Rockville: National Institute on Drug Abuse, 1990. 222-238.
• Cherek, D.R., et al. “Acute Effects of Marijuana Smoking on Aggressive, Escape and Point-Maintained Responding of Male Drug Users.” Psychopharmacology 111 (1993): 163-168.
• Tinklenberg, J.R., et al. “Drugs and criminal assaults by adolescents: A Replication Study.” Journal of Psychoactive Drugs 13 (1981): 277-287.

Effects of Marijuana Criminalization

The criminalization of marijuana and the associated War on Drugs costs taxpayers. The Drug Enforcement Agency (DEA) uses $2.2 billion annually in taxpayer money, while the Organized Crime and Drug Enforcement Task Force (OCDETF) uses $532 million annually in taxpayer money (5), adding up to $2.732 billion used to fight the use and distribution of marijuana and other illegal drugs.

The criminalization of marijuana has also resulted in an increase in crime nationwide. The FBI Uniform Crime Reports (6) show dramatic increases in the murder rate across the U.S. (shown as homicides per 100,000 people) since the start of the drug war. There were approximately 7.5 homicides per 100,000 people in 1969 when the war on drugs was started. This rate rose dramatically, peaking at approximately 10 homicides per 100,000 people around 1980. Similarly, there were approximately 7 homicides per 100,000 people in 1919, when the Prohibition started. As the Prohibition continued, the homicide rate increased until peaking in 1930 at approximately 10 homicides per 100,000 people. This rate dropped dramatically after the repeal of the Prohibition later in 1933.

The criminalization of marijuana has crowded prisons. The federal government now incarcerates 1.7 million people, only 3 percent of which are violent criminals. 60 percent of these inmates are drug offenders. The FBI Uniform Crime Reports show that there were 704, 812 arrests for marijuana in the year 1999, 88 percent of which were for possession and use rather than sale or distribution. (7)

The criminalization of marijuana has increased violent paramilitary police tactics. The number of SWAT team deployments in 1981 was 3,000; this number increased to more than 40,000 per year in 2001. Due to this rate of increase, the number is probably even higher today. (8) These deployments raid homes and other alleged dealers' posts, often without knocking and without immediately identifying themselves as members of law enforcement. (8) These paramilitary deployments are often the results of bad intelligence from ignorant informants and target the wrong person. (9) Marijuana busts have been attempted at sites where the alleged marijuana was actually hibiscus, ragweed, tomato, sunflower, or elderberry. (9) Researcher Radley Balko documented over 300 cases in the span of one year in which a no-knock paramilitary raid resulted in one or more of the following: a raid on an innocent suspect, a raid on a doctor or a sick person, the death of an innocent, the death of a nonviolent offender, the death or injury of a police officer, or some other example of excessive force by law enforcement. (10)