The Teacher Bailouts

I’ve been meaning to write a full piece on the Teacher’s Bailouts for awhile now, because of the clarity with which this scenario demonstrates the corruption of our democratic system. Unfortunately, I just haven’t had the time for it. On the other hand, I have found occasional time to debate the issue on the DeviantArt Politics forum, building up my full argument bit-by-bit in a discussion with one forum-goer who frequently finds reason to disagree with me. In the interest of preserving this content at minimum cost of time, I will reprint a transcript (edited for format only) of the debate here.

Tristan 1: I think you need to study systems of incentives a bit more. You complain about the profit motive of businesses, but what do you think the incentives are for career politicians? If you keep a constant flow of money going from your opponent’s constituency to your own constituency, reelection can be quite easy. This is why special interests are so prominent in our political system. Politicians are literally buying votes with taxpayer money. That’s what the “teacher bailout” was about. Teacher employment had barely dropped at all, but union support for the Democrats had been wavering after a number of failed deals at the beginning of the summer. So the Democrats pass a new bailout bill in a sector that’s seen little hurt in this Depression to bribe back the teacher’s union vote.

Doesn’t that sort of bribery offend you? I mean, with corporations, at least they’re only using their own money, acquired through voluntary exchanges, to promote their agendas. With the government, they’re prying that money out of your hands under the threat of violent force. That right there is the difference between legitimate business and organized crime.

JupiterWave 1: You mean…in a democratic system where voters elect someone who they think will support their interests, the elected official will make attempts to promote those interests? I am shocked! Seriously, this is kind of how democracy works, and here you are treating it as some sort of sinister conspiracy. I really don’t know what to tell you. You’re basically arguing that politicians shouldn’t represent the interests of their constituents, except if those interests are ones you find ideologically acceptable, then it’s a crime not to promote those interests. As far as I’m concerned, this is totalitarian thinking. Tell me-you’re always making these criticisms of democracy as leading to corruption. What sort of system do you have in mind that would prevent such “corruption”? I suspect that the answer is something that will elevate your views on public policy above those of others. That’s what I really hate about you libertarians, you know: you claim to be fighting for freedom, but you have no intentions other than seeing a set of very specific and hopefully immutable policy edicts put into place that coincide with your personal views.

An`d beyond that, I think it’s ridiculous to characterize education as a “special interest.” Special interests are things that benefit a small group of people, often at the expense of others. Educating the next generation of leaders to run the country in upcoming years is about as “public” an interest as I can think of. It serves a massive group of people, and it benefits a massive group of people. This is not to say that our education system never needs reform, even radical reform, but we’re talking about a situation where hundreds thousands of teachers could just be out of a job. It won’t help the cause of reform in any way if school districts go bankrupt. They need to be functioning before they can be reformed. But thanks to plutocrats like Charles Koch and his band of useful idiots like you, we’ve gotten to a point in this country where trying to prevent massive job loss in the middle of a recession is a “bailout”, and politicians looking out for the interests of people that elected them is a “bribe.” It’s depressing. I don’t even know why I’m telling you this, you’re so deep into right-wing propaganda. A fish never notices the water he swims in, I guess.

I mean, as far as I can tell, you just hate teachers. You sure bitch about them a lot. In this post, you’re positively angry at the fact that teacher employment hasn’t dropped much. Any rational person would be happy that a group of people isn’t losing their jobs, as that helps the efforts towards recovery, but you’re just resentful and spiteful. See, here’s the thing: public-sector employees aren’t really getting special treatment. Private sector employee are often getting worse treatment from their employers who have cut labor and benefit costs in pursuit of greater profits. The government hasn’t seen a need to do that, so its employees are treated more humanely. And there was a time when lots more jobs in this country were more similar to public sector jobs in terms of benefits, pensions, etc. But the idea of what a middle-class job should consist of has continually been defined down to the point where public jobs merely look better by comparison. Quite frankly, the way you talk, it’s like you’re mad that not everyone is suffering equally. It’s like you’re involved in a capsized ship, and instead of trying to swim to shore, you’re saying we should go around poking holes in people’s life preservers. Who is helped by this blustery nihilism? What are you trying to accomplish? Making people feel miserable about their job status for the sake of fairness? It’s funny how many of these traits are present in the stereotypical success-hating communist you accuse everyone else of being. I think you’re due for some self-reflection.

This “bribery” doesn’t offend me because it’s not bribery, and you’re stupid to characterize it as such. And it’s not “prying” anything, but you’ve proven yourself too stupid to understand what a social contract is and how it operates, so unless you can show me otherwise I don’t have the patience to start that discussion again.

Tristan 2: I suppose I should provide evidence for my suggestion that this latest round of bailouts was completely unnecessary. This should do it. There is no incentive for this beyond bribery.

JupiterWave 2: I’m not going to look at a defense of an idea that I already consider wrongheaded. It’s not bribery, and you’re wrong to call it that.

Tristan 3: Maybe if you look at the evidence, you won’t consider the arguments based in that evidence wrongheaded…

JupiterWave 3: My opinion isn’t hinging on who gave money to who and when. It’s that this action, giving money to school districts in order to prevent mass layoffs, is fundamentally not a bribe, but a sensible economic action and part of what it means to be a democratically-governed society. It’s not a question of facts, but opinions, and my mind is made up.

Tristan 4: …except no mass layoffs were pending, as you’d know if you looked at the evidence I linked to.

JupiterWave 4: Goddamn dude, just do a search on “teacher layoffs”. You’ll find hundreds of stories. I don’t know how Hot Air tried to twist the facts, nor do I care, but teachers are getting laid off all over the place.

Tristan 5: Those “hundreds” apparently add up to very little, considering how little public school employment has changed. And once again, I ask, why are we even so interested in keeping public school employment so high? Does it help the children, or does it help the unions? The graphs here suggest only the latter.

JupiterWave 5: Source? [in reference to the first part of “Tristan 5”]

We as a society are interested in keeping general employment high because it helps the economy, especially during recessionary periods. I really shouldn’t have to explain this. It’s funny how when a billionaire businessman stubbornly stands his ground on what he considers to be his self-interest, you laud him for fighting the evil government, but when working-class Americans do it, you can’t wait to put them down and accuse them of wrongdoing. And don’t tell me it’s because you’re only paying for the second one. In some way, you’re probably paying for both. I think you just hate poor people.

Tristan 6: Source: Figure 3
The cumulative loss in local government education employment since the start of the recession is a stunning…0.5%.

High employment is useful if it creates value. Usually, we don’t have to consider that “if,” because private employment tends to create value. However, government employment is an entirely different story. As I’ve shown with those other charts, the increase in public education employment has failed to improve the efficiency of production of education. Any business would see this as an indication of the need to downsize, or split the company into separate entities. But not the government. Whereas private enterprise creates jobs where jobs will increase value, government just creates jobs. And the jobs that government creates are at the expense of tax-paying investors, meaning a net loss in value-creating investment.

You see, the mistake that demand-side economists (i.e. Keynesians) make in their models is assuming that high consumer spending creates the most economic growth. Nothing could be further from the truth. Consumer spending is usually an indicator of economic growth (in free-market economies), but the extent to which it causes economic growth is minuscule compared to the effects of the supply-side forces of capital investment. Right now, we have a strong demand market, and yet, the demand is being satisfied mostly through imports because our domestic production economy is still in shock over the new regulations and taxes that will go into effect over the next year. This is what happens when we have a national economic policy of “fuck the supply-side to feed the demand-side.” We will not see employment recover until our domestic production recovers- and don’t even try to suggest protectionist tariffs, because that’s just asking for a second Great Depression. If domestic producers aren’t making anything because of the uncertainty of upcoming regulations, and then we go and try to cut off consumers from imports, then all we’re doing is creating a situation with overwhelmingly high levels of unsatisfied demand. Instead, we need to fix the problems at the source, and undo those regulations if we want to get back on the track of economic recovery.

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Can You Spot the Racism?

Long story short, a middle school coach writes a song criticizing Obama and sends it out to parents of the students he coaches. Parents complain, some accusing the coach of racism, and the coach gets fired.

Now, I’m not going to make any judgment as to whether or not the firing was correct. I just want to see if anyone can spot the racism in this song. No, seriously, I can’t find any hint of anything which could even remotely be termed racism. At all.

I think we need to recognize a new kind of “Godwin’s Law.” The closer your political opponent is to losing, the more likely it is that they will accuse you of racism. Maybe we can call it “Dilorenzo’s Law.” How does that sound?

Barney Frank’s Confession

Remember my arguments about the cause of the recession?

Now compare what I wrote almost a year ago with Barney Frank’s confession in this video.

Word-for-word, he’s saying almost exactly what I wrote! He doesn’t specifically name the CRA, but talks extensively about the policies which Clinton’s 1995 expansion of the CRA created. I never thought I’d be saying this, but I completely agree with Barney Frank on the cause of the crisis.

On the other hand, we begin to differ again when it comes to the proposed solution. I say abolish Fannie and Freddie and end federal involvement in the housing market. He says abolish Fannie and Freddie and replace it with something entirely government-owned, and this time he’ll use policies that won’t fuck it up because he’s learned his lesson.

So there you have it: once the facts line up, it all comes down to a difference in faith in the government.

EDIT (8/5/11): But of course, Barney Frank’s faith is horribly misplaced.

Another Look at the Laffer Curve

Washington Post columnist Ezra Klein has posted the results of a rather interesting survey of economists and policy advocates regarding the “correct” place to be on the Laffer Curve.

I’ve heard the 70% figure quoted before, and I’ve heard the 20% figure quoted, but now I know why there’s a discrepancy. The 70% figure is the short-run revenue-maximizing tax rate, whereas the 20% figure is the growth-maximizing tax rate.

In other words, if you set the rate on the top tax bracket to 70%, you will maximize your government’s revenue as a percentage of GDP. However, that does not take into account the effects on GDP growth. In the long term, the slower economic growth brought on by high tax rates will have the government collecting much less revenue than it could be, as an absolute figure, a decade later. On the other hand, if you set the rate on the top tax bracket (or indeed, all tax brackets) to 20%, then growth in absolute revenue is maximized, as the GDP rises. This latter strategy means the most productivity and prosperity in the long run.

Making this distinction effectively explains the results of the Australian experiment I’ve described in the past.

SPEECH Act

Thanks, Obama. For once, I mean that sincerely.

H.R. 2765, known as the SPEECH Act, was signed into legislation today. This act maintains that foreign libel laws shall have no jurisdiction in U.S. courts. In the eyes of the government, U.S. citizens shall enjoy the protections granted by the First Amendment, no matter where they- or their published works -are located. This ends the practice of “libel tourism,” where those who feel offended by works published in the U.S. sue American writers in countries where the courts do not recognize the freedom of speech, and then expect the foreign judgment to be upheld under the premise of “Comity.”

For the most part, prior to the passage of this law, domestic courts would not accept comity as a legitimate justification for bypassing First Amendment rights. Nevertheless, it’s good to have these things spelled out explicitly. It would have been even better if the Act were instead a constitutional amendment that applied to all freedoms contained within (since U.S. citizens are expected to pay U.S. taxes, no matter where they reside), but then the bill probably would not have passed, seeing as how some members of Congress aren’t so enthusiastic about one or two of those Amendments. That’s okay, one step at a time…

Paul Krugman

Nobel-prize winning economist Paul Krugman is popularly known for the New York Times columns he writes, using his economics knowledge to lambast spending cuts and attempts to decrease the government’s share in the economy. As such, his writings have become a favorite tool of authoritarians and statists.

However, as of late, Krugman hasn’t been making many friends in the economics community. The supply-side economists who dominate the field today have long-since abandoned the Keynesian theories that Krugman seeks to resurrect. And they don’t take too kindly to his less-than-intellectual dismissal of empirical arguments as “fraud.”

Perplexed by Krugman’s deviation from empirical economics, I decided to do a little research to try to figure out what, exactly, leads him to adhere so passionately to theoretical arguments that are so maligned by his opponents. Here is what I found:

Paul Krugman won his Nobel Prize in 2008 “for his analysis of trade patterns and location of economic activity,” particularly pertaining to the increasing returns to scale and its effect on trade. Basically, he [re]discovered the idea that countries specialize their industries (exporting one thing and importing everything else) primarily because one big entity can provide a product more efficiently than lots of independent small entities. Essentially, he likes monopolies, because they’re efficient.

Krugman has taken his economic theory and allowed it to shape his entire belief system, favoring the government-monopoly systems that are capable of greater efficiency of production than any free-market system. And he’s entirely correct- government monopolies are capable of far more efficiency than free, decentralized markets. But to say so is like saying a gas is “capable” of localizing all in one corner of the room without any force guiding it. Technically true- but it will never happen.

Like the physicist who disregards entropy, Paul Krugman’s entire belief system ignores the eternally disruptive force of human incentive. You see, monopolies have the potential to be efficient, but never are, because all incentive to do what’s good for the customer is lifted. In market economies, that generally means prices rise as customers cannot turn to competitors for a better deal. In government economies, that means costs rise and economies stagnate, as there is no incentive to improve services. Efficiency is thrown out the window, because, even though it’s achievable, there’s no reason to invest the time and effort into pursuing it on a fundamental level. In government, this means greater corruption, higher debts, and failed services resulting in extensive squalor.

In this context, it really makes sense why Krugman would toss out any empiricism that his opponents try to bring into discussions. The effects of human incentive are inherent in every economics experiment. This is why economists (and the governments that rely on them) are so bad at prediction- you need to know something about human psychology (and have a good feel for it) before you can understand how a market will react to an impulse. This is something which Krugman’s machine-like theories just don’t address.

And that is why Nobel Prize-winning economist Paul Krugman is wrong…again (and again, and again, and again…).

A Little Girl’s Lemonade Stand

A little girl’s lemonade stand was shut down because “she needed to obtain a temporary restaurant license.” The public goes crazy, the health inspectors receive death threats, and finally, the Oregon state officials apologize for shutting down the stand.

But why are they apologizing? The laws say that you can’t set up an establishment that prepares and sells food without a restaurant license. Taco stands and small food establishments get shut down all the time, without remorse, under those same laws. Do we only apply laws and regulations to people who aren’t cute?

More importantly, why are people angry? Are they upset this little girl is having the same standards applied to her that the entire state of Oregon (and most of the country) faces? I don’t think so.

I think the reason people are so upset is because they see someone trying to make an honest living in the only way they know how, and the big ole government is coming in and stomping it down in order to maintain control. The fact that she’s cute doesn’t change the morality of the situation- it just gets more people’s attention. What’s bad for that little girl is bad for anyone who’s trying to start a business.

So next time you favor any sort of regulation on any sort of business, try to picture that little girl as the owner of that business, and see if those regulations still seem fair to you.