Health Care: A KSCO Listener’s Comments and Questions

Below is a piece from a listener to my radio program, “Facts Matter,” aired on KSCO 1080 AM. Sundays 11AM-1PM. (Also on the Internet.) He is Peter G.

My own response  (JD’s)  on Peter G’s piece is in a comment appended to this piece.

Your position on the health care debate, which I know you are sick of, fascinates me, although I don’t fully understand it. I remember one day on your show many months ago you did address the fact that France has a reasonably effective form of universal health care, a “fact” that the World Health Organization seems to confirm. As a well-traveled American, I take the position that western European style socialized medicine, while not perfect, is the best system this sad planet has come up with to date.

But lately I only hear you rail against Obama and liberals who at least are holding the ugliness of American health care up to the mirror, and trying to address the “fact” that privatized medicine doesn’t seem to be working as well as socialized medicine.

So putting the petty peeves of American politics aside for a moment, and knowing what we know about health care on both sides of the Atlantic, the question is, how do we move forward? What would Jacques do?

Another Bush Victory; Torture and Torture.

Note: Few people seem interested in either installment of my essay on National Economic Systems…. I wonder if it’s because it’s boring or superfluous, or because of some other reason I have not thought of. I take feedback. Thank you.

Another Bush victory goes unheralded by the vapid, lazy media. The results of Afghanistan’s elections are coming in. Yes, there were many irregularities. That country is more like Illinois than like say, Switzerland. Afghans voted under threats of death by the Taliban. That included women forced to live under moving tents. On the average, they are braver than we are.

The two top candidates appear to be neck-in-neck. That’s unheard of in that part of the world, where “Presidents” win with 90%+ of the votes, normally. The Bush policies are bearing fruit in pretty much the way the neo-conservatives planned.

Silly liberals kept saying that you “can’t impose democracy.” Of course, you can: the Southern Confederacy, Italy, Germany, Japan, several others, Iraq, and now Afghanistan. Facts matter!

Le Figaro of 08/26/09, a moderate and centrist French newspaper reports the following, in a persuasive manner:

A cemetery employee outside Tehran tells of the burial of 40 deep-frozen bodies of young people. That would have been about one month after the June election and the demonstrations that followed.

Several young men and, possibly young women, arrested after the anti-regime demonstrations in Tehran, say they were raped by prison guards.

Virtuous Islamic Republic!

What makes the report of rapes especially convincing is that it includes the story of a serious investigation by higher (Islamic) authorities requesting clinical details about the degree of penetration involved and the outcome of the rape in terms of alleged the rapists’ satisfaction.

Dear President Obama: The regime responsible for this sort of actions is not our moral equal. There is no reason to treat it with any respect.

The Iranian thugs raped people to punish, to intimidate and to satisfy their own repressed sexuality. (The same rapists would kill you if you suggested they were homosexual. That’s what my Iranian source says.)

Several years ago, American public servants threatened with several kinds of atrocities terrorists they thought had information that could save many lives. None was carried out. The threats of having their knees drilled, or their old mother, or their children murdered was only effective because the terrorists come from barbaric societies. They were raised in countries where this kind of action is common. They believed the threats because they would carry them out without hesitation.

The same threats would have been ineffectual against an American, or even against someone well informed about American society. So, there is the gap, Mr President. Rein in your attack dog, the Attorney General.

I, for one, would like to see prosecuted any CIA supervisor who did not order such threats when American lives are at stake, as they were after 9/11. The after-9/11 extends to today. Incidentally, Mr president, 9/11 was not a hurricane, or an earthquake. It was a man-made massacre, very well-planned, faultlessly executed by rather talented people who hated us. Do you think hey have stopped hating us?

I am not losing track of who we are dealing with. I have a little neighbor girl, about fifteen, who likes to parade her naked belly button. There are thousands of ass-holes in another part of the world, near Tehran, and in the general neighborhood, who would like to cut off her head for this

.

If you lack career volunteers for interrogations, Mr President, call me. I will handle th elesctric drill in a way that will make terrorists crap their pants in one minute. Won’t even touch them. No, no water-boarding; I think it’s wimpy.

It would be easy to gather a corps of mean old geezer interrogators. I am taking the idea from Clint Eastwood’s great movie, “Gran Torino,” of course. Other things equal, I would rather die in jail, with other tough old guys, than in an impoverished hospital under Obamacare.

Speaking of which, Senator Ted Kennedy died today. He was a compassionate man who never thought twice about taking money from a nineteen-year old waitress to give it to the old drunk who has been living downtown Santa Cruz for twenty years. The Senator was a pretty good swimmer but a bad diver, unfortunately.

National Economic Systems: An Introduction for Intelligent Beginners-2.

Part Two: Taxing the Rich.

I argue in Part One of this essay that the stimulus package could not possibly stimulate the economy the way a stimulus package is supposed to do. That is, the present stimulus package cannot shorten or lessen the current recession by stemming the growth of unemployment and by jump-starting the national economy, the way Keynesian economics has it. I suggested there had to be another agenda for this massive spending of public money.

Recessions – two consecutive quarters when the national economy contracts instead of expanding – are common under capitalism, in market economies. They wane, whether or not anyone does anything about them. This fact makes if difficult to assign credit to government measures designed to lessen or shorten recessions when economic indicators do look good. Economic indicators don’t look good right now, although some of the press is announcing the beginning of the beginning of the end of the recession.

At any rate, the recession will end eventually. That is, economic growth will resume. I would bet on it but I don’t know when. When growth resumes, we will be left with the second economic crisis facing us. That second crisis is less routine, more extraordinary, and more worrisome than the first crisis, the recession itself. It’s massive public indebtedness. I have to go into the reasons why the Federal Government is even able to incur massive debt.

We are speaking of course of the public debt, of the debt that everyone in America owns to some extent. It’s the same debt on which we pay interest through a portion of our taxes. The higher the debt, the greater the amount you have to pay in interest, just to service the debt. It’s like a credit card balance. (But don’t confuse it with your own, personal credit card debt. Your share of the public debt is in addition to, on top of your credit card balance.)

First, contrary to a perception widespread among liberals, the government does not have any money. The money it spends comes from our taxes, or it’s borrowed, or the government just prints it.

The most honest way for the government to obtain money, to raise revenue, is to tax people and businesses. Taxing is taking money by force, under threats of fines and eventually, of prison. Taxation is also the easiest way in America today to raise government revenue. That’s because almost half the population does not pay any federal income tax. It’s fairly easy to convince that half, plus a few romantically-inclined taxpayers, especially among the young. that the taxes on “the rich” can be increased without damage. In this view of the world, “the rich” is a subjective category encompassing everyone who earns significantly more money than I. For those pulling in $300,000 a year, the rich are those taking in a million dollars. For the coffee-shop waitress who clears $20,000 after taxes, the small merchant and his wife who earn $80,000 together are rich. That’s human nature I think. So, there seems to be an infinite supply of “rich” people to tax.

Governments however, including Left-leaning governments such as we have now in America, know better. Organizations and individuals and households respond to increased taxation. Responses range from concealing earnings to working less (producing less), to withdrawing from the world of production entirely.

Imagine a medical specialist in his fifties, in another country. He clears $200,000 per years and he has accumulated two million dollars in assets over his career. The doctor is taxed at the rate of 50%. After taxes, he has $100,000 to spend each year. That’s a good living everywhere except in a few major world cities. Now, his government, having deployed a large number of generous social programs to help the poor ans the struggling, finds itself in need of a lot of money. It raises the tax rate for the rich, including our doctor, to 80%. The doctor calculates that even if he manages to double what he clears from his practice, he will still not be able to come close to maintaining his previous lifestyle. (He will have only $80,000 instead of the previous $100,000.)

The doctor says, “Screw it. I will live off my savings.” He find an annuity that pays him 5% per year forever and moves to Tahiti. The economy has lost a high-value worker who may not be paying taxes ever again. Government revenues decline. All this is in addition to the fact that society at large has lost a valuable worker, someone who did something useful for others.

There is worse. The doctor who retires in his fifties would have worked many more years. He would have probably invested some of his relatively high earnings. Investment buys the tools for the production of tomorrow. This is not a slogan but a simple statement of fact. The poorer the tools, the less the earnings of the next generation, the less they are able to pay  taxes.

The political classes of all developed countries all know this scenario, more or less diffusely: Today’s taxation usually slows economic development tomorrow and it dries up taxation for the day after tomorrow. To make matters worse, today’s taxation fairly often results in a decrease in government revenue today. That’s because people are often very quick to respond to tax increases.

For all these reasons, contemporary governments tend to satisfy their need for money by borrowing instead of through immediate tax increases. Why they are able to borrow at all, and to borrow massive amounts, is an interesting story I will tell in a subsequent installment.

Technical note: Since I began posting this essay, I have heard several people – all young – tell me that they did not trust government figures, such as the unemployment rate, and GDP growth rates. I have to say the statement is the expression of a kind of naïve cynicism. Here is why: Common figures such as those two, are scrutinized daily, even by the hour, by thousands of pairs of trained eyes. The eyes belong to specialists located in the US and abroad, both. The fortunes, and even the daily bread, of many such specialists depends on their ability to get the numbers right. Training matters a great deal. If you look at GDP figures frequently, for instance, any anomaly jumps right into your face. (I can attest to this because I use to pore at such figures, in a previous life.) Even a number that merely fails to conform to expectations is thus perceived as an anomaly worth checking. The news of such anomalies travel instantly across the globe and questions are asked until the discrepancy is resolved.

When they wish to fudge, governments of all stripes do not cook well-known indicators. Instead, they rely on less well familiar, esoteric,measures hoping that the usual specialists will be too lazy to check the government’s interpretation. This ploy often works with the general media because they are lazy. It’s never successful with the likes of the Financial Time or the Wall Street Journal. But those have limited audiences and the news move fast.

Contrary to a popular saying, statistics do not “lie,” except to those who don’t know how to read them.

Thanks a Lot America!

My wife and I sit on the living room couch watching television while eating a simple lunch. She is an immigrant like me, born and reared in India. She is a woman of tremendous intelligence and of impressively bad taste. We are watching “Real Housewives of Atlanta.”

One white, white-trash woman is having a mean argument with her friend, a black white-trash woman. Both are spilling out of the top of their blouses. The air appears to me to be filled with the smell of acrid estrogen. (I can’t be sure; this is taking place on-screen.) The topic of the argument is who of the two is the greatest ho. It seems to me it’s a matter of fine gradations but I am not expert. It’s all quite wonderful.

The thought strikes me: If I had staid in France instead of emigrating, I would now be watching a replay of a visit of an obscure part of the the Louvre, about some obscure aspect of obscure Etruscan culture. The visit would be commented for French television by a retired lady professor at the Sorbonne, with very short hair plastered to her skull.

Another reason to love America!

And don’t go all supercilious on me, silly woman. I watch the History Channel too. I could give you a lit of its mistakes that would make your hair stand on end. I have read all the books you have read and many you haven’t. I have read books the titles of which you can’t even pronounce. I have even published a couple of books and a number of articles myself. That’s not even counting my short stories. I make established scholars at prestigious universities tear up. You can’t even begin to diss me. American television is great!

Thank you America!

Soon on this blog: Part two of “National Economic Systems: An Introduction for Intelligent Beginners.”

National Economic Systems: an Introduction for Intelligent Beginners.

Part One: Stimulation.

This essay does not require any specialized or advanced knowledge of economics. It does require an open mind and moderate alertness.

It’s must be difficult for the average working stiff with a job or school attendance, or both, a mortgage, and a family, to make sense of the daily economic news. It’s not because you are ill-informed, it’s because the media gives economic news in bits and pieces without tying them together, and usually without context. I suspect few of the big media commentators understand the context or try to link the fragments, anyway. Those who do understand tend to assume that everyone is aboard the same train they are riding. They don’t have much to say to those who are still at the station.

Major exceptions are the Financial Times, which has a strong pro-Obama bias, and the Wall Street Journal, which does not. Even with those, you have to read them every other day to get the big picture. So here, is the straight dope. (If you are concerned about my qualifications, a valid point, you will find a link to a fairly up-to-date version of my vita on the front of this blog.)

We are not facing one economic crisis but two. One is more or less routine, the other is almost unprecedented. The mildly re-assuring noises the media are currently making are about the first crisis, the almost-routine crisis only.

The first crisis is a conventional recession. Recessions are historically a normal part of capitalism. Healthy capitalist economies are on a growth path most of the time. There are several measures of economic growth and contraction. The easiest to understand is Gross Domestic Product, “GDP.” There are criticisms of this measure but we don’t care right now, for our narrow purpose.

GDPs grow at varying rate at different times and in different countries. A US GDP growth of 3.5 % per year makes nearly everyone happy. Countries that are at an early stage of development, such as India, and have a long way to go, often experience annual growth of 6% or 7%. China’s GDP growth has often topped 10% .Western European countries have been pleased with annual rates of growth of 2% for many years. There is a lesson here; don’t lose track of it.

National economies don’t always expand, sometimes, they contract. That’s a lot like the income of someone on an hourly wage instead of a straight salary. The prodigious economic growth of western countries under capitalism in the past 150 years is made up of series of expansions followed by contractions. We had overall growth because the contractions were both less in magnitude and shorter in duration than the periods of expansion.

The word “recession” means either two consecutive quarters of contraction of the national economy or it means any damn thing you want. Serious people only use the term in connection with the definition above. That’s what I do because I try to be a serious person.

Recessions are tricky because you only know about them after the fact, when the national statistics come out. Anyone who says, “We are in a recession” is either speculating or making propaganda. Economic commentators try to read the existence of a recession, and the waning of a recession, by studying other economic events. Those are events believed to be associated with recessions and to which numbers are attached that are collected frequently.

Here are two main ones: Unemployment figures and stock market indexes. There are others you can learn about if you become interested. When national unemployment goes down and the main stock market indexes go up for a while, commentators tend to announce the end of a recession. I think that liberal commentators give those a lot of weight under Democrat administrations, and conservative commentators under Republican administrations.

The reading of these signals is not an exact science, by a long shot. I just believe those readings are better than nothing if you take care to follow several. That’s a big “if,” of course.

Incidentally, there are very good scholarly, academic studies regarding the connections between various indicators and economic growth/contraction. I suspect few commentators keep abreast of those. I wouldn’t be surprised if it were none. I would be pleasantly surprised if some did.

Now, on to the current situation. When President Obama took office, it’s pretty clear the US was in a recession, or entering one. The President had nothing to do with it. There was much discussion everywhere about whether his buddies in Congress caused it. Fact is that there have been recessions with Republican as well as with Democratic administrations, and with Congressional domination of one or of the other major party.

The political elites of most countries, including many American Republicans believe in something called “Keynesian economics.” You don’t need to read Keynes to know as much as they do. Here is the gist: In modern developed societies, the government is such a large economic actor that it can influence decisively the path of the national economy. Thus, Keynesians believe that government has the power to stop or to improve on recessions. Governments may do this by engaging in spending, public spending, spending tax money, or borrowed money. (Keep I mind that, with the interesting exception of a few oil rich countries, governments have no money except what they can take in taxes and what they can borrow.)

Real conservatives, and libertarians who are not especially conservative, think that Keynesian economics is a dangerous hoax. They argue that government spending aggravated and deepened past recessions including the one associated with the Great Depression of the nineteen thirties. Fortunately, we don’t have to consider here who is right. (Full disclosure: I am one of them.)

A point that’s not in dispute is that government spending usually entails bigger government debt. More on this later.

Keynesian public spending is forthrightly intended to stem the spread of unemployment. The reasoning is simple: When people lose their job, or fear losing their job, they, and often, their neighbors, spend less. This lowered spending in turn slows down the national economy. This induces more unemployment: If I stop buying my daily latte because I am unemployed, or I fear I might soon be, and if others do the same, the barrista at my local coffee shop will lose her job. And so forth.

The fewer people earn a living, the smaller the national economy. If I merely forgo buying a car for the time being, the indirect effects on the national economy are even worse.

Hence, good Keynesian government spending should have very quick effects. It should stem the spread of unemployment rapidly and durably. It used to be the case that government had the ability to spend money quickly through public works. Hitler, for example, reduced quickly very high German unemployment by hiring the unemployed, and many underemployed, essentially to dig holes.:Go to work in the morning; get a government check in the evening; spend the next day.

This approach has become difficult to employ for a variety of reasons, including permitting processes related to safety and to environmentalist zeal. Thus, if my city of Santa Cruz decides to build another breakwater for its harbor today, it’s unlikely anyone will get a paycheck for handling a tool for eighteen months, or more. Most past recessions lasted less than eighteen months.

As I write, only 10% or 15 % of the stimulus package money decreed by the President has been spent. Either, that’s not enough to stem the spread of unemployment, or, it’s not really a spending spree intended to stimulate. If the latter, what’s the purpose?

There is a beginning of an answer if you look at parts of the package that have a well-known name attached. One such is financing for a train from Disneyland to Las Vegas. It was put in by Harry Reid, the Senate Democratic Leader. There is no way the bulk of the corresponding money will be spent until five or even six years from now, except for studies employing a handful of specialists. Those specialists are not suffering from high unemployment, by the way. This part of the package does nothing to put to work Tom, Dick and Harry. The money won’t be spent for a long time because such a project needs a lot of planning, including for permitting to satisfy environmentalists.

What is the real purpose of this part of the stimulus package, then? At least, it makes Harry Reid look good with his voters. At worst, Harry Reed is using his muscle in Congress to satisfy special interests. I don’t know if the latter is true. I have not researched it. It’s plausible.

My conclusion: Even if you subscribe to Keynesian views on how to jump-start a national economy in recession, the measures taken by the administration six months ago do not work and cannot work.

Those who say, “Give it time” don’t know what they are talking about. The essence of government spending for stimulus purposes is speed. If you don’t stop and reverse unemployment quickly, the recessionary spiral worsens. If you did nothing at all, it would stop on its own, in good time, anyway.

Why do I care about the stimulus package’s lack of effectiveness?

Two reasons. First its part of a mass of unprecedented government spending. I mean unprecedented in the absence of a major war, like WWII. It increases public, government indebtedness to a worrying extent. Public debt has consequences, in the long run and in the not- so-long-run. More on this in the next episode of this posting.

The second reason, I care is that I detect a social and political project markedly different from the one announced by the administration in the current oversize government spending. I have not become a conspiracy theorist. I am relying on public information, including the President’s own past statements, those of his close advisers and, above all, my knowledge of what went on in Western Europe between about 1980 and 2000. I will address this alternative project in a subsequent posting also.

You have been good but there will be a quiz!

Current events update  on 8/21/09.

The Wall Street Journal has a good discussion of the Maine public health plan in today’s issue. It’s on p. A12, in the editorial section. It’s a fiasco. We care because it has important features in common with what we know of Obamacare.

Cool people tend to dismiss Rush Limbaugh, even conservatives. Limbaugh is bombastic and he exaggerates. That’s vulgar. However, he must have an army of good researchers because he comes up within a short time with hard evidence of allegations against his political adversaries. One of the wildest allegations from the right is that Obamacare entails “death boards.” Well, what do you know: Today, on-air, he reads excerpts from a Veterans Administration practitioner guidebook that sounds for all the world to me like a “death book.”

The convicted mass murderer of 270 people  in the airover Lockerbie, Scotland receives a hero’s welcome in his home-country of Libya. He had been freed on compassionate grounds by the gutless Scottish Minister of Justice. (Yes, there is such a thing.) I saw it on television. This is not hearsay.

I think the enthusiasm greeting him in Libya should be written in the accounts book. It should enter into any calculus, side-by-side with collateral damage, next time this country has reason to consider bombing anything in Libya. It should not be long.

It’s unreasonable to treat in exactly the same way those who hate us and those who harbor sheer evil in their hearts, and our old friends. The stupid  Scots should get a pass. The evil  Libyans shouldn’t. There is no ethical system in the world that requires that this country do otherwise, not even Christianity. You are supposed to forgive your enemies after they have stopped harming you, not while they are cutting your throat, not even when they are impotently clamoring  their wish to do it.

By the way, I am told by those who should know that Arabs respect this kind of thinking.

SOON ON THIS BLOG:

NATIONAL ECONOMIC SYSTEMS: AN INTRODUCTION FOR INTELLIGENT BEGINNERS.

The De-Industrialization of the US: A String of Enlightening Fallacies. Essay on International Economics, in Plain English.

About ten days ago, I began a lively exchange with a stranger, G., on the Facebook of the President of the Independent Institute, of all places. The I.I. is my favorite think-tank. It’s located in Oakland California. It’s my favorite because it regularly performs intelligently and usefully the function of bringing libertarian thought, broadly defined ,to all who are interested. It has been doing this for years and on a shoe-string budget. Full disclosure: I have had two co-authored articles in The Independent Review, one of the journals associated with the Independent Institute.

            You can easily Google the Independent Institute’s website.

My interchange with G. begun when I noticed one of the most common fallacies on one of his Facebook messages: He expressed himself in a way that led me to believe that he thought the US had been de-industrializing for years, chiefly to the benefit of China. We were both referring only to manufacturing industries.

       G.’s impression is correct only in the most trivial way. It’s wrong on the whole, very wrong.

        What is true is that American manufacturing employment has declined steadily for the past forty years. That’s true in an absolute sense. Fewer Americans work in manufacturing than used to.

This would have happened if there had not been any China, Red or otherwise. I gave G, the following historical precedent to which he did not respond:

Around 1860, about 60% of the American workforce was in agriculture. Today, it’s around 3%. (Note: Don’t go on a television game show with those figures. They are close enough for my purpose; that’s all.)

Nevertheless. American agriculture produces more than it ever has, in every sense of the word, whatever measure you want to use.

American agriculture used so much of the country’s labor power because it had low productivity then. (That’s value of production per worker.) As productivity improves, farmers can produce as much with fewer workers. What happened in the American case (and in Canada, and in Australia, and in Western Europe) is that farmers produced more with fewer workers. This virtuous trend has not stopped. It’s going on as I write. Some reforms may slow it or even reverse it; so-called “organic agriculture” may be one.

What happened early in agriculture happened later in manufacturing. Here are the simple, hard to believe, but nevertheless real facts:

Productivity in American manufacturing had never stopped growing, except for lags of a year or two. So has total American manufacturing production.

The simplest, most general rule-of-thumb is :

The year in which American manufacturing output was the largest in value, was last year, or the year before.

This is true although American manufacturing employment is declining and declining fast. Remember the 1860, 60% precedent.

I suspect G. did not get this point, in part because I did not explain it so well on Facebook. In part it’s because he appears transfixed by his own experience. G. is an experienced executive with manufacturing responsibilities. He says he is in China often. G. argued with me that the evidence of his own eyes was that a lot of manufacturing that used to take place in the US is now done in China.

I have no doubt that he is right, well, sort of right. Thirty years ago, when I bought an ordinary gardening tool, it was invariably made in the US. Nowadays, it’s invariably made in China, or at least, not in America.

My garden tool is also cheaper, much cheaper than it used to be. I mean in constant dollars, I mean relative to everything, including the minimum wage and including the median wage. It’s true practically any measure you want to use. My money goes a longer way. That’s what it means to be richer: Whatever money you have buys more. As a consumer, I have only gained by the fact that the production of garden tools is now very largely done in China.

That’s speaking as a consumer. If I had been employed in the American garden tool manufacturing industry say, twenty years ago, I might easily have lost my job. That would in fact have been a consequence of outsourcing.

This is not the whole story. The reality is more complicated. In brief, for every job lost to outsourcing, one or more are created by the after-effects of outsourcing. This is a factual but counter-intuitive observation I don’t want to discuss in this essay. Here is a brief way to deal with it: If you lost your job to outsourcing, nothing I will say will console you. I can only hope that the American economy is growing and flexible enough to provide another job soon. I hope it will be as a good as the one your lost. Looking at the past thirty years, there is a very good chance it will be a better job.

If the American economy does not offer an abundance of good new jobs, ask yourself why.

If you did not lose your job to outsourcing: see above; you are now richer than you were twenty or even ten years ago, the current crisis (2009) notwithstanding. If you want to know the net effect on American employment, a crude but legitimate approach is simply to look at evolving unemployment figures: In spite of massive outsourcing, American employment was very high until less than a year ago, (Note: Net effect= jobs added-jobs subtracted.) As long as unemployment is low or going down, it’s not likely that limiting outsourcing would do you any good.

Training exercise: The 57% of the work force who were in agriculture and who lost their jobs since 1860 evidently found something to do. The many manufacturing workers who lost their jobs in the past forty or fifty years ______ (Complete the sentence in your mind.)

G seems to refuse to consider any of this because he thinks his own experience an appropriate substitute for the kind of stuff I am writing now.

His experience is called, “anecdotal evidence.” It’s usually worse than no evidence at all to demonstrate anything. (It’s often useful to formulate hypotheses though.) Here is why it’s worse:

My wife beats me frequently. I deduce from this personal experience that wives originate much or most of conjugal violence. Furthermore, I know for a fact that my wife does not drink alcohol. So, I am pretty sure drunkenness does not play much of a role in domestic violence.  (OK, I am messing with your minds; my wife does not beat me, ever. She would like too though, and often.)

What happened with the transfer to China of American garden tool production is complex and factually well-supported, both. Fortunately, if you are busy, or impatient, or simply if you have a life, there are valid short-cuts to help you get a grip.

China, now India, and many other countries that could barely keep alive in the fifties are now producing. They are now finally contributing. This is good for me, for two reasons: One, the more goods there are worldwide, the cheaper they are, in real terms. Second, rich neighbors may sometimes be rivals politically, and even militarily, economically, they are all potential customers. The richer they are, the more I can sell them and, the richer I become.

As compared to 1955 today, the world produces all the garden tools it used to produce, many garden tools it did not produce then, more food than it did, more of everything than ever plus, it produces things that no one had ever heard of in 1955. That would include the low-end but amazingly sophisticated computer I am using to type and to disseminate this essay. Incidentally, there were television sets in 1955. Everything about them was awful and they were more expensive than the sets we have now. (That’s by any measure you want to use.)

Remains the genuinely important question of what industries are going to be in what countries. That’s an important issue because acts of production are not born equal: Making concrete, or steel, generates less in earnings, including wages, than producing software.

The short-cuts to this important issue are these:

1 Government seldom does anything right economically;

2 The issue of production allocation among countries is well explained by the Doctrine of Comparative advantage. It’s almost 150 years old. It’s well tested. It’s not unfashionable just because it’s old. Old explanations should only be buried when they have been demonstrated dead.

My correspondent, G., is obviously worried about America’s place in the world and he seems impressed by solar technology. In support, I suppose, of what he would like our government to do, he sends me an article about China’s policies in this respect. It’s at:

(http://www.facebook.com/l/;digg.com/u19LMi )

A sentence in the article caught my eye both because of its bad grammar and because it’s such a shining example of bad policy:

“China is telling their (sic) banks to invest in [solar energy industries].”

Two comments: 1 What reason is there to expect any national government, Chinese Communist, or otherwise, to make good choices regarding what industries should be developed? The Communist Chinese are the same gang responsible for keeping China an underdeveloped country for forty years. We now know it did not have to be that way. Yes, they are reformed but we don’t know how thoroughly nor for how long. Thoroughly democratic Western European governments have a long record of failures in deciding national industrial priorities.

“How about the Airbus?” Two responses: To this day, the invoice for this multinational government venture has never been presented in a transparent fashion. Airbus looks like an economically viable venture but we don’t know fore sure.  If you invest $10,000 to earn ten dollars ten times and you have to spend eleven dollars each time, your venture may sell a lot but it’s not successful.

Second: The Airbus project benefited by the Concord experience, an extraordinarily costly apprenticeship and a rank economic failure from its fist to its last day.

To my knowledge, the only large instance of a commercially successful government-prompted industrial venture is the Internet. It was done strictly on a cost-plus basis, as a defense project (another story), with hands-off by the federal government. (I would appreciate being corrected if there are other instances. Details and verifiable sources required.)

Examples in the negative abound. I will refer to what I know best. French governments have been sticking their noses into nearly all sectors of French industry since 1945. They had wide latitude to do so, because there were no intellectual defense of real, free-market capitalism in France until about ten years ago. French governments even intervene vigorously in the motion picture industry. (Read my wonderful article on this: Delacroix and Bornon; “Can protectionism ever be respectable? A skeptic’s case for the cultural exception, with special referenceto French movies.” The Independent Review 9-3:353-374. 2005.) French governments however never reached much into several industries, because they were too fragmented, or because industrial actors opposed a spirited defense against government intervention. Notable among those are the food transformation industry and the wine an spirits industry. Guess which French industries are more than holding their own, on the national market and internationally? (To begin, think Danon and think Gray Goose Vodka.)

G. also calls Chinese solar industry policies in a Facebook message developing “comparative advantage.”

It’s not comparative advantage. Like most college graduates and most MBAs, (and deplorably, most university professors, I suspect), G. misunderstands the concept. His mistake is not small, it’s huge. I think you don’t understand the logic of international trade and investment if you don’t get comparative advantage. Let me try because my readers are, by definition, an elite group.

My comparative advantage is what I do best. Period. It’s not what I do better then the other guy. If I suck at everything I do, I still have a comparative advantage because I don’t do everything equally badly. That’s always true in the real world.

The doctrine of Comparative Advantage is the single most important rational underpinning of international trade, and indirectly of international investment.

It says clearly and absolutely that if every actor focuses his effort in what he does least badly, all the actors jointly produce more than would otherwise be the case. Period!

Logic test: Is there a difference between: “What I do least badly, “ and, “What I do best” ?

Instant reminder: Once you know what I do least badly, in itself does this tell you anything about what I do better, or worse, than my neighbor Tom? This is a “yes, “ no” question. Don’t wimp out!

Below is a different approach to the same concept of Comparative Advantage. Select the approach that suits best your particular genius and stick with it.

My buddy John is an excellent, Mercedes-trained car mechanic. He is also an indifferent floor sweeper. Every time I catch him broom in hands, sweeping his shop floor, I bitch at him, “Stop, man; every time you sweep, you are impoverishing me.”

Am I right? I insist you already have all the information you need to answer this question. Again, don’t wimp out on me.

Facts matter but thinking things through slowly is also important.

There is a Muslim saying attributed to the Prophet Muhammad:

“Ignorance is a sin.”

A Real Town Meeting in the People’s Green Republic of Santa Cruz.

Tuesday night, I took in, in person, two and a half hours of town hall meeting with the same congressman, Sam Farr, in my own town of Santa Cruz, this time. Now, it’s important to understand that Santa Cruz is, overall, a seventies throwback, left-liberal to communist anti-American. To give you an idea, on my long street, downtown, there are only three American flags, two of which belong to me. When I make conservative noises in public, in spite of my considerable expressive talents, people think I am kidding.

I went to the meeting with my wife, under my own power. The only prompt I got is that one local radio station gave the time and place of the meeting on the air. It did so several times. It’s seen as a conservative station. (Full disclosure: I have a talk-show program on that station, KSCO 1080 AM, every Sunday 11AM-1PM.) Rush Limbaugh did not send me. The local Republican Party was pathetically absent in every respect. If there was any conservative or right-wing organization present, it escaped my attention and I was looking for one. There were no right-wing thugs in sight, with the possible exception of myself, and especially, my wife, Krishna. My wife is in very good shape indeed but, she is slight of built. She has never really divulged her age too me but her hair is all white. The only humans she has ever physically threatened were our children, when they were teen-agers, and me, of course. I can’t tell you why she threatened my because I don’t like to brag.

I insist on the unorganized nature of the event in a spirit of helpfulness. The main problem most Democrats, including Congressman Farr and including the President face, is that they cannot conceive of a genuine grass-root movement of revulsion. George Beck, the Fox News-appointed liberal, of all things, said on television that he does not believe that the opposition to Obamacare is “spontaneous.” He is not a dumb man. He is associated in some fashion with George Washington University. I have heard him before and never caught him even in a white lie. Those people can’t conceive of spontaneous political action because it seldom happens on their side. Instead, they rely on tax-subsidized ACORN, and on a variety of radical front organizations.

The Obama supporters seemed only a little more organized than the opponents. They had better signs and many seemed to know each other. They occupied most of the first three rows but I suspect there was no ploy involved. I could have sat in the second row if I had wanted to. One woman standing at the door was handing out three-page leaflets in support. She was careful to say she was not representing anything, that the document only expressed her own views. She tried to scrutinize my face before handing me a leaflet, no doubt to figure which side I am on. I gave her a big marble smile providing no information at all. I had also been careful to dress in a non-revelatory way. I don’t mean revelatory of my enviable physique, but of my political leanings. I was attempting stealth, the better to observe.

Naturally, I didn’t wear my brown shirt and I left my swastika at home. I did it to confuse Nancy Pelosi , a woman who becomes easily confused, it’s true.

The woman’s brochure had a lot of facts and it seemed carefully referenced. However, a number of the websites to which she referred the reader were clearly partisan. Overall, her argumentation was coherent. Yet it stood zero chance of persuading anyone not already in support of Obamacare. She made no effort to address the abundantly expressed concerns of opponents. (More on this later.) I think she was trying, ineffectually, to hand out ammunition to the weaklings on her side before the meeting. There were a variety of signs in the audience, fewer than fifty in all. The anti (conservative) signs were all hand-made. The pro signs were a mixture of hand-made and carefully printed slogans.

I estimated there were 500 people at the beginning of the meeting plus 200 in an overflow space. 700 is a large number in Santa Cruz for anything other than a movie. (There might be as many people at a religious service. I wouldn’t know. ) The main venue, in a church, was half-full an hour before the announced beginning of the meeting. It was packed when the Congressman arrived, pretty much on time.

He was introduced by one of the pastors, a woman with politically signaletic short hair. Then, the Mayor of Santa Cruz briefly took over. She is a leftie, of course, but rather well-liked by all. I felt that we were in mildly inimical territory. The Congressman is a jovial man with a sense of humor. He is also brave and hard-working.

Representative Farr began in Santa Cruz with the same rehearsed speech he had given the night before in Monterey. I felt he was on the wrong track from the beginning: not helpful to his side, the pro-Obamacare side, and startlingly incapable of addressing the views of the people opposed to Obama care.

Then people, about one hundred of them, lined up to deliver their two minute- speech and/or question. There is not much reason to repeat any of the audience’s addresses but I want to report on the tenor of the meeting. Only about 4/5 got to the mike. The queuing process was orderly and fair.

There was no intimidation on either side. There were catcalls and loud boos, from conservatives mostly. One, who was sitting next to me, was very loud indeed. I believe though not one sound was an attempt to drown out the Congressman, as we see regularly on college campuses, for example. It never even came close to that. There were also many rather effeminate hisses coming from pro partisans and directed at conservative speakers.

Conservatives, the con camp, and liberal/progressives, the pro Obamacare crowd, differ significantly both in appearance and in the content of their speech. Liberals are more flashy and they look better overall. The only speaker with a hat (a white straw hat) over his long hair, gave a little pro-Obamacare address and concluded that the overall solution to any health care crisis was to legalize and tax marijuana. (Disclosure: I agree that it’s a good idea. I don’t think it would make a dent, nationally.) Conservatives dress in a less interesting manner. Many are energetic sharp-spoken middle-aged women. The young among them tend to dress simply and soberly. More of the conservatives are seniors than are on the other side. This is interesting because you would assume Medicare beneficiaries did not have much of a dog in that fight. There were two black men in the audience. One did not get to speak; the other gave one of the best, most coherent anti-Obamacare arguments.

As usual, what did not happen matters most. Contrary to stupid, lazy press reports, the meeting did not look at all like a battle between well-dressed conservatives on the one side and the hard-working poor in work boots on the other side. Although Santa Cruz County is probably one third Hispanic, with Hispanics doing most of the ill-paid work, I observed no Hispanic presence at all. There were several large, white-on-white families I would classify, with my unusual sociological acumen, as “Oakies” here (“hillbillies” elsewhere in America). They were obviously there to a protest against Obama care. The town hall meeting in Santa Cruz was a solidly middle-class affair. All the people present could have mixed, matched, and possibly mated, at a neighborhood barbecue.

The spectacle rejoiced my heart because it was in the very best tradition of American democracy in action. Yet, I think the meeting was useless for its announced purpose. The two sides spent two hours speaking past each other. I don’t attribute the responsibility for this equally to both sides. (The truth is never in the middle.) The Congressman and supporters of Obamacare came wholly unprepared to address either the economic arguments of their opponents, nor even less, their constitutional concerns. The conservatives gave better speeches because they actually gave speeches while the liberals wasted a lot of time whining, as usual.

Striking ignorance of basic facts was evident on both sides. Ignorance has multiple causes. Mistrust is one of them. Congress could dissipate 90% of the mistrust on the conservative side with a single sentence: Members of Congress will have exactly the same access to health care as every other American.

The disjunction between the two discourses became clear within the first half-hour. The pro camp argued for the human necessity of government-directed, and in some case of single-payer, health care, shored up by horror stories. Many liberal speakers only gave horror stories, often about their own needs and the injustice of their destiny. The old stereotype was confirmed to an astounding degree: Liberals think of Government as an infinitely wise milch cow with teats that never dry up. They resist discussing the cost of good things, of any good things. Many have a singular talent for irrelevancy: By the end of the meeting, there were catcalls offering “no war” as the best solution to the alleged health care crisis health. Liberals are overwhelmingly childish.

Liberals and progressives came ready to counter only the crudest conservative slogans, such as the accusation of “socialism.” They painted their opponents in primitive colors, again, like children. I think they only know slogans and their slogans are mostly boring.

Obamacare opponents included only a small number of anti-abortion speakers. There was no hysteria about government-ordered euthanasia though concerns were expressed about the possibility government rationing might lead there. Conservative arguments were comparatively sophisticated and free of heart-wrenching personal narratives. They focused on disbelief regarding the announced costs of Obamacare. (They were thus joining he Congressional Budget Office, currently directed by a Democrat), and on constitutionality. Libertarian sentiment dominated. The financial consequences of Obama care were the tying principle as you would expect from people worried about economics and equally from people who dislike government growth.

Congressman Farr – a man easy to like, as I said – inspired pity. He came equipped with simplistic bullet-points and was confronted by a barrage of sophisticated questions and arguments. I believe he did not honestly understand most of them. I think he is out of his depth defending health care reform Obama-style. In part it’s because he is ill-informed, superficial, and living in a liberal intellectual ghetto. In part it’s because he, his party, and the President, did not come close to expecting the strong opposition that emerged quickly. They seem to believe their own gross propaganda describing opponents of Obamacare as a handful of ignorant thugs paid by insurance companies and teleguided by Rush Limbaugh.

Missing in the congressman’s handling of his opposition:

The crucial distinction between health insurance and health care. (He pointed out repeatedly that obligatory health insurance would be just like obligatory car insurance. Of course, I am unlikely to have a car accident and I am a hundred per cent likely to become sick.)

A grasp on the real nature of the “40 million uninsured” he kept using a a final argument that should close the matter for good. (They are largely a myth, though the figure is real, in a superficial sense.)

Any mature comprehension at all of the constitutional and historical fears expressed by opponents of Obamacare. (Listening to him was like listening to a French politician who would not know who Thomas Jefferson was and who would have never read the Declaration of Independence.)

Practical, personal familiarity with conservative rank-and-file, with conservatives who are not politicians or figments of left-wing journalists imagination. (I suspect he would be astounded, in full disbelief, if I talked to him freely over a beer.)

Elementary comprehension of economic objections to Obamacare. (After the meeting, I would have bet he did not understand even the summary of the Congressional Budget Office’s report on the topic.)

The defining moment of the town meeting occurred when a conservative asked him a pointed but simple question about the projected final cost of the proposed national health program. Congressman Farr, always the honest man, replied:

“I don’t know.”

The local newspaper, the Santa Cruz Sentinel, gave a fair report of the event the next morning with a breath-takingly dishonest heading. Perhaps it was torn between fair and factual reporting and trying to align itself on the rest of the liberal press representation of such town meetings as being taking over by thugs.

For the record: I believe we need health care reform. This, for several reasons. Our costs are twice higher than those of the French and we don’t live as long. It’s intolerable that Americans should be forced to keep a job they hate because they cannot afford to lose the health care that’s tied to it. The propensity of insurance companies to turn down people with pre-existing conditions is a real problem so long as we are in an insurance regime.

I also think health insurance is a terrible idea. I place less confidence in our government to administer any complicated, national-level plan than I would in most West-European governments. I fear creeping, soft fascism, using nationalized health care as its main vehicle.

PS  Mr President: If you didn’t plant the alarming story about white extremist militia, don’t worry about them. They include only 37 middle-age guys spread over ten states. They have trouble finding their size in camouflage fatigues. They have to walk up hills in the forest because they smoke two packs a day.

Incidentally, tell your whiny Democrat Congressmen who complain about imaginary militias that its’ “supremacist,” no “supremist.”

Mr President: Worry instead about a massive tax revolt that will peacefully paralyze government. That’s the American way, didn’t you know?

The Struggle Over Health Care and Racism

Democrats are having bad luck with race these days. Secretary Clinton, in exile in the Congo, loses her cool and practically screams at an African person there (in the old days, “ a cheeky native”). On the same day, a Democrat Congresswomen at a health reform town hall meeting in Virginia gets a woman expelled by the police. Oop, the woman is an older black lady.!She must be another thug, in the liberal commentators’ terminology. I saw the episode on television, I don’t know what the lady did or said. It looked to me that she was being thrown out for something she said, but I might be wrong. Please, correct me. This comes after the beating last week of a slight black man by union goons supporting the President.

On Monday night, for an hour and a half, I listened on the radio to a town meeting held in Monterey, California, by liberal Representative Sam Farr. First, the Congressman is an all-around nice guy. He is brave, hard-working and intellectually honest, I think. He has really bad taste though. A couple of years ago, he tried to persuade voters that Fidel Castro is a nice, warm old guy. That was a bit much for many of the people he represents, even in foo-foo central California. Farr is also pretty much a straight- everything Democrat on everything. No blue dog in his backyard.

At the beginning, the meeting went well, in my opinion because someone stupid had packed it with stereotypical, whiny liberals who insisted on making speeches in favor of an undefined health plan proposed but not described by the President. Even, many thinking liberals must have been embarrassed by their performance. Then, the questions begun. Notably, there were almost no pro-Obamacare questions, only short rambling monologues. Nearly all the real question-questions came from opponents. There was no heckling but there were a few polite boos and some derisive laughter directed at the Congressman.

Congressman Farr, again, a nice guy, gave a pathetic performance. Far from trying to twist his audience’s minds around, as politicians often do, he seemed out of his depth answering nearly all the questions that could not suffer a canned response. I left off with the impression that he did not understand the questions or why they were being asked. It would be difficult to convince me that he had read many, or even, any of the relevant documents. I suspect all he carried in his head was the Obama plan’s salient points, bullet-points, many of which have become untenable in the past few days. His staff was either absent or no more knowledgeable than the Congressman. He seemed puzzled by the vehemence of opponents.

He may have been perplexed that there were no right-wing thugs in sight.

To be continued.

Right-Wing Goons Assault Black Protester.

The Democratic Party leadership is going postal. It’s not just the Speaker of the House, Nancy Pelosi. I told you that about her long  ago. (Don’t play innocent; everyone has a batty older woman in his family.) I heard her say that some protesters went to town meetings wearing swastikas (plural). That would be convenient for the FBI and other law-enforcement organs of the state!

Of course, conservative bad boy Limbaugh could not resist. He immediately compared the Obama campaign logo to a swastika. Of course it does not matter whether it looks like one or not. Limbaugh’s facetiousness distracts us from the real issues, and we have some.

Harry Reed, chief of the Democrat majority in the Senate has accused demonstrators against the Obama health plan of an attempt to “sabotage democracy.” Puts me to mind of the last leader of the defunct Communist East Germany. As his country was emptying around him, as East Germans voted with their feet, he made noises as if if he could dissolve the whole people he same way a head of government or state can dissolve parliament in some democracies. Reed also reminds me in a small way of Chancellor Hitler, reported to have said before eating a bullet, that the German people did not deserve him after all.

The President himself has been threatening publicly his opponents, promising “push for push.” Get it right, my friends, when I threaten “push for push,” most people smile sardonically. If I were a President, with several large police forces, perhaps an army and, most of all, an IRS, they would not smile; they might blanch. (For those of you who read me from overseas, the IRS is the large, feared, hated federal tax bureaucracy.)

One of the President’s information underlings has threatened on television to take names of opponents. Even if her purpose were innocent, her intent would freeze the blood in my veins.

I keep telling you that, for all this, the President himself is probably not evil. He and his entourage are entirely guided by a narrow ideological vision of the world. Of course, that’s redundant. Ideological visions are always narrow, and obstinate, by the way.

Mr Obama cannot begin to contemplate the possibility of self-guided middle-class opponents to his well-meaning policies. In his mental world, exists first the underpaid and exploited masses, America’s “rightful owners. “ (I never use quote marks unless I am actually quoting; I despise those who do.) His is frankly a nineteenth century sociological scenario, right out of the 1848 Communist Manifesto (an interesting document everyone should read, by the way).

Second, in his mind, there are  the very rich, all of whom inherited, or more or less stole their money, Bernard Madoff-style. There are two subcategories of the very rich, the good ones who have seen the light and who support and finance his endeavors, and the rest, the bad ones. He can do anything he wishes to the latter because, it’s all for the good of the masses.

Third, there are the “corporations.” The President seems to have no notion that the owners of the corporations are the shareholders, small people like me and, yes, pension funds, including union pension funds. He is of two minds about corporations, on the one hand, his kind have been vaguely cursing them all their lives. On the other hand, now that he is in power, he realizes that many are relatively easy to take over, the way he did with GM, for example. He has not invented but rediscovered the fact that large publicly-held companies, corporations, provide a shortcut to nationalization.

With this narrow view, the President cannot begin to imagine that the anger ordinary citizens have expressed, in the very town meetings his supporters have called, is real. Either, he figures, the anger is orchestrated, or the citizens are not ordinary citizens. There has to be a conspiracy, somewhere, somehow, especially if there is not trace of one.

They imagine “town meetings” ought to be more or less like an orderly classroom: The students ask polite questions; the teacher answers and that’s that.  (After all, teachers are greatly over-represented among his supporters. ) Instead, those who attend town meetings often raised impolitely disturbing points and they booed their elected reps’ half-assed answers. Questions and answers were about the health plan no one has read, including those who were supposed to vote on it on an emergency basis.

President Obama sent missionaries to the heathen. Some of the heathen tuned out to be cannibals; they ate the missionaries. I am not talking about Kenya here, but about middle America. No more missions, no more town meetings. Count on it.

On 8/7/09, Fox News interviewed a man who said he had been beaten and stomped on at the site of one of the meetings while selling anti-health plan literature. The event took place in Missouri, the heartland. The victim says his assailants wore Service Employees International Union t-shirts. Two days ago, the SEIU website was calling opponents of Obamacare “extremist fringe” and “corporate front.” It was challenging anyone attending a town meeting to sign a pledge (that is, to give their names). The rest of the posting was equally Stalinist in words and in tone.

Oop, the victim is black! He says one of he attackers called him a “nigger.” It’s hard to control storm-troopers, sometimes. It’s true, I was messing with your minds in the title to this post. Ask yourselves: Why was it so easy?

I am not surprised, of course. In spite of desperate efforts by the administration to send back the ball, in American history, thuggery is associated with unions 9 times out of 10. (Remember the Marlon Brando classical movie, “The Waterfront.”?) Middle-age protesters in clean shirts who are shop-keepers or mid-level engineers and who attend with their wives are rarely goons. And no, Internet agitators are not responsible for the popular protest against Obamacare. I am a blogger. If I wanted to gather a protest crowd using the Internet, on a Saturday at 11 AM in front of the coffee shop, I would be lucky to attract six people. Two or three would be my relatives, another would be the guy who owes me money.

Americans are slow to see evil. Culturally, they have no stomach for badness. However, when a President with control of both houses tries to nationalize 15 0r 20 % of the economy in an inexplicable hurry, with no one having read the relevant text, not even those who are supposed to vote it, they wonder what’s going on. They even get annoyed. That’s not only Republicans. Democrats do to. Independents even more. They know that’s not what they voted for in the presidential election.

Most people have not even begin to discover the massive power grab that the Obama initiatives of the past six months constitute together. As I said, they are slow. That’s not the same as stupid, not by a long shot.

Going back to health care reform. I have written on this blog that something needs to be done about public health and that the Republicans dropped the ball. Yet, the President does not want to be a Soviet dictator, he wants to be French. It’s easy to guess sometimes-chic Michele Obama is nudging him in that direction. The problem is that, in terms of policy, he is trying to push on America what sort of works but that the French are giving up rather than what works well and the French never worry about. He wants French-style health care in the US and does not know how to get there. The French are concluding they cannot afford French-style health care, right as he is doing it. By contrast, he is ignoring the stellar French record with nuclear energy production, the surest, clearest path to carbon footprint reduction.

Note 1: There is a long article in the WSJ of today about the crisis in the French national health system.

Note 2 : For those who don’t know, I am an authority on some of this because I used to be French. I read a French newspaper everyday and I get many reports from France.