Is it better to advocate welfare for corporations via loose Fed policy and inflationary interest rates, or is it better to advocate welfare for individuals who are otherwise in poverty? The concept of the marginal utility of money suggests that it makes more sense to advocate welfare for the poor than welfare for the rich. The poor value an incremental dollar more than the rich do, therefore society's welfare is increased to a greater degree by assisting the poor than by assisting the rich.
Given just these two points of view, (1) that government ought to act to support the wealthy, or (2) that government ought to act to support the poor, the latter view is preferable. As I have previously blogged, Fed policy tends to support the wealthy. This has been true historically, and it especially has been true today. As the Carlyle Group's chief investment officer William E. Conway has pointed out in a private internal memo:
>"As you all know (I hope), the fabulous profits that we have been able to generate for our limited partners are not solely a function of our investment genius, but have resulted in large part from a great market and the availability of enormous amounts of cheap debt. This cheap debt has been available for almost all maturities, most industries, infrastructure, real estate, and at all levels of the capital structure. Frankly, there is so much liquidity in the world financial system, that lenders (even “our” lenders) are making very risky credit decisions. This debt has enabled us to do transactions that were previously unimaginable (e.g., Hertz, Kinder Morgan, Nielsen, Freescale), and has resulted in (generally) higher exit multiples than entry multiples."
Mr. Conway is not alone in benefiting from cheap debt, which is due to Fed policy and amounts to a form of welfare. Rather, almost the entire board of directors of the American Enterprise Institute benefits from cheap debt. The AEI's board is entirely composed of executives of major corporations who benefit from cheap debt because they enjoy increased compensation from inflated stock values.
Doug French of the Ludwig von Mises Institute has an excellent blog today about Tulipmania in Holland in the 1630s. Much like today's stock market, hedge fund and real estate bubbles, applauded by AEI and Weekly Standard's Irwin Stelzer, French traces the history of the monetary inflation in Holland due to discoveries of silver and gold in the New World and Holland's policy of free coinage of money, which drew bullion from Japan, the New World and elsewhere in Europe. He shows that monetary inflation caused Tulipmania, one of the earliest speculative bubbles.
French points out that:
"Total balances more than doubled from less than four million florins in 1634 to just over eight million in 1640. More specifically from January 31st 1636 to January 31st 1637 — the height of the tulipmania — Bank of Amsterdam's deposits increased 42 percent...free coinage, the Bank of Amsterdam, and the heightened trade and commerce in Holland served to attract coin and bullion from throughout the world...In 1648, when the Peace of Westphalia acknowledged the independence of the Dutch republic, the latter stopped the "free" coinage of silver florins and only permitted it for gold ducats, which in Holland had no legal value. This legislation discouraged the imports of silver bullion, checked the rise of prices, and put an end to the tulip mania."
Unlike the Bank of Amsterdam, it is unlikely that the Fed will signficantly reduce its counterfeiting any time soon. The AEI need need not fear.
I opened with the wrong question: "Which is preferable, welfare for the rich, i.e., cheap debt, or welfare for the poor?" I would suggest neither. It is difficult to arrive at a political position in today's world, which is driven by two species of ideologues: Republicans who favor monetary expansion, low marginal taxes, crony capitalism and welfare for the rich; and Democrats who favor monetary expansion, crony capitalism higher marginal taxes, and welfare for the very, very rich in the name of the poor. I suppose the Republicans are somewhat better and somewhat more honest, but only barely so.
Friday, May 25, 2007
Adam Clayton Powell IV, Harlem's Hero in the NY Assembly
Jacob Gershman, in today's New York Sun, notes that while some New York Assembly members such as Joseph Lentol have sponsored over 100 legislative bills and others, such as Richard Brodsky, have sponsored over 200 in this session alone, Adam Clayton Powell, IV, has sponsored no, zero, bills in the past three years.
Mr. Powell's performance contrasts sharply with that of his grandfather, Adam Clayton Powell, Jr. (I assume grandfather not only because of the name but also because the photo attached to the article suggests that the acorn didn't fall far from the grandfatherly tree--I've never seen a grandson look more like a grandfather). Wikidpedia notes that Adam Clayton Powell, Jr., the first black Congressman from New York, was head of the powerful Education and Labor Committee and a supporter of JFK's "New Freedom" and LBJ's "Great Society" legislation. Wikipedia also notes:
"Powell Jr.'s committee passed a record number of bills for a single session. That record still remains unbroken. As one of the great modern legislators, Powell Jr. would steer some 50 bills through Congress."
In contrast to his grandfather's performance in Congress in passing the most bills, Powell, IV has apparently set a kind of record for the New York State Assembly in proposing the fewest bills.
Between Powell, Jr. and and Powell, IV I think I'd prefer Powell, IV. Bartleby.com attributes the quote "No man's life, liberty and property are safe while the legislature is in session" to New York Surrogate Judge Gideon J. Tucker in an 1866 decision. Others, such as Phil Maymin of Mayminforcongress.com , John Jerrett of Memorial University of Newfoundland,George Mason's Walter E. Williams, and Jefferson Review attribute the quote to Mark Twain. In any case, perhaps we owe a vote of thanks to Adam Clayton Powell, IV for reminding us that the government is best that governs least. Was it Socrates who said that?
Mr. Powell's performance contrasts sharply with that of his grandfather, Adam Clayton Powell, Jr. (I assume grandfather not only because of the name but also because the photo attached to the article suggests that the acorn didn't fall far from the grandfatherly tree--I've never seen a grandson look more like a grandfather). Wikidpedia notes that Adam Clayton Powell, Jr., the first black Congressman from New York, was head of the powerful Education and Labor Committee and a supporter of JFK's "New Freedom" and LBJ's "Great Society" legislation. Wikipedia also notes:
"Powell Jr.'s committee passed a record number of bills for a single session. That record still remains unbroken. As one of the great modern legislators, Powell Jr. would steer some 50 bills through Congress."
In contrast to his grandfather's performance in Congress in passing the most bills, Powell, IV has apparently set a kind of record for the New York State Assembly in proposing the fewest bills.
Between Powell, Jr. and and Powell, IV I think I'd prefer Powell, IV. Bartleby.com attributes the quote "No man's life, liberty and property are safe while the legislature is in session" to New York Surrogate Judge Gideon J. Tucker in an 1866 decision. Others, such as Phil Maymin of Mayminforcongress.com , John Jerrett of Memorial University of Newfoundland,George Mason's Walter E. Williams, and Jefferson Review attribute the quote to Mark Twain. In any case, perhaps we owe a vote of thanks to Adam Clayton Powell, IV for reminding us that the government is best that governs least. Was it Socrates who said that?
Thursday, May 24, 2007
The Immigration Paradox
Libertarians believe in unfettered liberty, which means that borders should not be restricted. But immigration has anti-libertarian consequences, such as increases in social security costs and lawlessness.
The first reason is that unfettered immigration lets in large numbers of potential terrorists. If tight immigration laws are enforced, there will be fewer terrorists admitted. In reducing New York City's crime rate to one of the lowest in the country Rudy Giuliani proved that if you police small offenses, larger ones become rarer. If you carefully vet immigrants, and take action against those who come here illegally, terrorists are less likely to slip through the cracks. Heather MacDonald has constructively argued that giving amnesty to illegal immigrants encourages disrespect for the law.
According to Hugh Hewitt:
"federal counterterrorism authorities say they have connected some border jumpers to terrorism. Among them was a South African woman of Middle Eastern descent whose July 2004 arrest at the McAllen airport with wet clothes, thousands in cash and a mutilated passport made international headlines."
Hewitt adds with respect to the immigration bill that:
Many terrorists and terrorist sympathizers have certainly entered the country illegally across our borders-- is an issue ignored by the bill's proponents, and when confronted with it, they attempt to argue that it would be better to get their fingerprints and legalize their work and travel around the country --and back and forth from abroad to the U.S.-- than to keep them in the position of a lawbreaker.
Lawlessness and terrorism would likely be reduced by a coherent law systematically enforced.
The second reason to be concerned about immigration is that it is likely to depress wages of those with lower incomes. Economists used to be skeptical of this kind of effect, but studies by George Borjas and others confirm that this has occurred. Markets are flexible. When immigrants came here in the 1930s and found the Great Depression, many returned to their homelands. But welfare benefits impede market flexibility. Special interest group pressure on political leaders encourages them to extend public benefits to immigrants who cannot find work. This inhibits the functioning of markets, enhancing downward pressure on low-income wages.
The problems surrounding immigration are compounded by the decline of the American educational system. In previous generations, the public schools contributed to the homogenization of the public. In several 19th century cases, German immigrants were told that they had to teach children English in school. Today, the melting pot is nearly extinguished. The politically correct multiculturalists argue that students' ethnic backgrounds should be reinforced at the expense of education about American history and culture. The result is the lack of a shared community. This will result in alienation of recent immigrant groups. Liberals ensure that immigrants will remain impoverished through incompetent, left-wing educational theories. Special interest activists who earn their keep on the sores of the poor reinforce these impulses. The result is a multiplication of sub-cultures uninterested in taking part in American culture or able to take advantage of economic opportunities here.
Gold Bug Howard S. Katz argues that America's libertarian history is one of acceptance of immigration. The libertarian heritage has been sabotaged for many decades. The institution of the Federal Reserve Bank, favorite of left-wing Republican inflationists like Irwin Stelzer at Weekly Standard, was an important step toward state control, as were the imposition of social security benefits, unemployment insurance and Medicaid. These plans increase in costs with immigration.
I would therefore argue that there is a paradox: limitations on immigration reduce government spending, increase respect for the law, reduce the threat of terrorism, hence increase freedom. In this case, a little bit more government results in much more freedom.
The first reason is that unfettered immigration lets in large numbers of potential terrorists. If tight immigration laws are enforced, there will be fewer terrorists admitted. In reducing New York City's crime rate to one of the lowest in the country Rudy Giuliani proved that if you police small offenses, larger ones become rarer. If you carefully vet immigrants, and take action against those who come here illegally, terrorists are less likely to slip through the cracks. Heather MacDonald has constructively argued that giving amnesty to illegal immigrants encourages disrespect for the law.
According to Hugh Hewitt:
"federal counterterrorism authorities say they have connected some border jumpers to terrorism. Among them was a South African woman of Middle Eastern descent whose July 2004 arrest at the McAllen airport with wet clothes, thousands in cash and a mutilated passport made international headlines."
Hewitt adds with respect to the immigration bill that:
Many terrorists and terrorist sympathizers have certainly entered the country illegally across our borders-- is an issue ignored by the bill's proponents, and when confronted with it, they attempt to argue that it would be better to get their fingerprints and legalize their work and travel around the country --and back and forth from abroad to the U.S.-- than to keep them in the position of a lawbreaker.
Lawlessness and terrorism would likely be reduced by a coherent law systematically enforced.
The second reason to be concerned about immigration is that it is likely to depress wages of those with lower incomes. Economists used to be skeptical of this kind of effect, but studies by George Borjas and others confirm that this has occurred. Markets are flexible. When immigrants came here in the 1930s and found the Great Depression, many returned to their homelands. But welfare benefits impede market flexibility. Special interest group pressure on political leaders encourages them to extend public benefits to immigrants who cannot find work. This inhibits the functioning of markets, enhancing downward pressure on low-income wages.
The problems surrounding immigration are compounded by the decline of the American educational system. In previous generations, the public schools contributed to the homogenization of the public. In several 19th century cases, German immigrants were told that they had to teach children English in school. Today, the melting pot is nearly extinguished. The politically correct multiculturalists argue that students' ethnic backgrounds should be reinforced at the expense of education about American history and culture. The result is the lack of a shared community. This will result in alienation of recent immigrant groups. Liberals ensure that immigrants will remain impoverished through incompetent, left-wing educational theories. Special interest activists who earn their keep on the sores of the poor reinforce these impulses. The result is a multiplication of sub-cultures uninterested in taking part in American culture or able to take advantage of economic opportunities here.
Gold Bug Howard S. Katz argues that America's libertarian history is one of acceptance of immigration. The libertarian heritage has been sabotaged for many decades. The institution of the Federal Reserve Bank, favorite of left-wing Republican inflationists like Irwin Stelzer at Weekly Standard, was an important step toward state control, as were the imposition of social security benefits, unemployment insurance and Medicaid. These plans increase in costs with immigration.
I would therefore argue that there is a paradox: limitations on immigration reduce government spending, increase respect for the law, reduce the threat of terrorism, hence increase freedom. In this case, a little bit more government results in much more freedom.
Wednesday, May 23, 2007
Review of Gary Tobin, Aryeh K. Weinberg and Jenna Ferer's, "The Uncivil University"
Gary A. Tobin, Aryeh K. Weinberg and Jenna Ferer
The Uncivil University
Institute for Jewish and Community Research, 2005
296 pages
Gary A. Tobin, Aryeh K. Weinberg and Jenna Ferer have written a useful and insightful book on anti-Semitism in universities. The book is actually more than that. It starts by discussing standards of academic competence and ethics. These standards have been increasingly neglected in recent years. Universities have become overly obsessed with money, with narrow fields of specialization and with protecting their prerogatives from external review, even as they require ever greater amounts of financial support from external sources.
Following their discussion of the decline of universities, the authors discuss fiduciary and ethical duties of academics and academic administrators. They follow this with a discussion of a history of anti-Semitism in academia, in America more broadly, and in the Arab world. The authors do a good job of discussing the blurring of the distinctions among anti-Semitism, anti-Israelism and criticism of Israel, three areas which overlap. They include an interesting quote by Tamir Sorek of the Cornell Daily Sun in this regard. As the authors point out,
"There are only fourteen million Jews in the world out of a population of more than five billion. If one listens to the rhetoric of the anti-Semites and the anti-Israelists (and now the anti-American voices as well), one can only assume that there are hundreds of millions of Jews in the world controlling government, controlling the banks, controlling the media, and who are poised to profit from everybody else's distress."
Sadly, as the authors point out, p. 72, "the university and the left now seem interchangeable" with Jim Piereson labeling "higher education 'the left university'". Universities have become fonts of anti-Semitic propaganda and (p. 105) "the university has failed, permitting a converging rise of anti-Semitism and anti-Israelism on college campuses that marginalizes Jewish students." Politicized research marginalizes honest research.
For instance, Yale Assistant Professor Mazin Qumsiyeh circulated a list of Jewish students whom he labeled a "pro-war cabal". As well, Jewish students at the University of California, Berkeley have been spit on and called "Zionist conservative bastards" and "f**king Jews" when campaigning for student office." These are not isolated occurrences, but rather are widespread. Jews are routinely harassed and called vicious names at college campuses around the country. For instance, in 1993 Khalid Abdul Muhammad, speaking at Kean College, called Jews "bloodsuckers". The authors assert that:
"Professor Norton Mezvinsky, of Central Connecticut State University, has been quoted stating that Jews believe 'the blood of non-Jews has no intrinsic value' and that this allows Jews to consider that the killing of non-Jews does 'not constitute murder according to the Jewish religion'."
Professor Emeritus Helen Cullen of the University of Massachusetts, known as "the Harvard of Marxism", wrote a letter that was published in U. Mass.'s student daily, Collegian, saying that:
"Judaism and the Jewish identity are offensive to most human beings and will always cause trouble between the Jews and the rest of the human race."
The University of Illinois student newspaper published a letter from Ariel Sinovsky stating that "the President should act immediately...First, separate Jews from all government advisory positions and give them one year full paid sabbatical...Then the Jews might face another Holocaust."
In 2002 Santa Rosa Junior College's student newspaper The Oak Leaf published an article by Kevin McGuire stating that "Israel is the largest and most dangerous terrorist organization in the world..."
A key example is the low-quality field of Middle Eastern Studies. Bernard Lewis is quoted as saying that the field is of low quality. Students complain of marginalization, ideological harassment and intimidation. The Middle Eastern Studies field is junk and does not deserve to be part of the university. Columbia Professors such as Samir Awad, Gil Anidjar, Janaki Bakhle, Marc Nichanian, Hamid Dbashi, Joseph Massad, Frances Protchett, George Saliba, Nader Sohrabi and Marc van de Mieroop, all of Colubmia's Middle Eastern Studies program, dominated the list of signatories on a petition for divestment from Israel. The scholarship of Middle Eastern Studies departments has been of such low quality that it is a standing joke in academia.
To remedy these problems, the authors suggest enhanced external control. In 2005, Congress passed House Resolution 3077, subsequently folded into House Resoultion 609, that establishes an independent higher education advisory board to provide advice, counsel and recommendations on international education issues.
Uncivil University is a very well written and readable book. It is well researched and balanced. The authors have treated an important subject with care. The book deserves a wide readership.
The Uncivil University
Institute for Jewish and Community Research, 2005
296 pages
Gary A. Tobin, Aryeh K. Weinberg and Jenna Ferer have written a useful and insightful book on anti-Semitism in universities. The book is actually more than that. It starts by discussing standards of academic competence and ethics. These standards have been increasingly neglected in recent years. Universities have become overly obsessed with money, with narrow fields of specialization and with protecting their prerogatives from external review, even as they require ever greater amounts of financial support from external sources.
Following their discussion of the decline of universities, the authors discuss fiduciary and ethical duties of academics and academic administrators. They follow this with a discussion of a history of anti-Semitism in academia, in America more broadly, and in the Arab world. The authors do a good job of discussing the blurring of the distinctions among anti-Semitism, anti-Israelism and criticism of Israel, three areas which overlap. They include an interesting quote by Tamir Sorek of the Cornell Daily Sun in this regard. As the authors point out,
"There are only fourteen million Jews in the world out of a population of more than five billion. If one listens to the rhetoric of the anti-Semites and the anti-Israelists (and now the anti-American voices as well), one can only assume that there are hundreds of millions of Jews in the world controlling government, controlling the banks, controlling the media, and who are poised to profit from everybody else's distress."
Sadly, as the authors point out, p. 72, "the university and the left now seem interchangeable" with Jim Piereson labeling "higher education 'the left university'". Universities have become fonts of anti-Semitic propaganda and (p. 105) "the university has failed, permitting a converging rise of anti-Semitism and anti-Israelism on college campuses that marginalizes Jewish students." Politicized research marginalizes honest research.
For instance, Yale Assistant Professor Mazin Qumsiyeh circulated a list of Jewish students whom he labeled a "pro-war cabal". As well, Jewish students at the University of California, Berkeley have been spit on and called "Zionist conservative bastards" and "f**king Jews" when campaigning for student office." These are not isolated occurrences, but rather are widespread. Jews are routinely harassed and called vicious names at college campuses around the country. For instance, in 1993 Khalid Abdul Muhammad, speaking at Kean College, called Jews "bloodsuckers". The authors assert that:
"Professor Norton Mezvinsky, of Central Connecticut State University, has been quoted stating that Jews believe 'the blood of non-Jews has no intrinsic value' and that this allows Jews to consider that the killing of non-Jews does 'not constitute murder according to the Jewish religion'."
Professor Emeritus Helen Cullen of the University of Massachusetts, known as "the Harvard of Marxism", wrote a letter that was published in U. Mass.'s student daily, Collegian, saying that:
"Judaism and the Jewish identity are offensive to most human beings and will always cause trouble between the Jews and the rest of the human race."
The University of Illinois student newspaper published a letter from Ariel Sinovsky stating that "the President should act immediately...First, separate Jews from all government advisory positions and give them one year full paid sabbatical...Then the Jews might face another Holocaust."
In 2002 Santa Rosa Junior College's student newspaper The Oak Leaf published an article by Kevin McGuire stating that "Israel is the largest and most dangerous terrorist organization in the world..."
A key example is the low-quality field of Middle Eastern Studies. Bernard Lewis is quoted as saying that the field is of low quality. Students complain of marginalization, ideological harassment and intimidation. The Middle Eastern Studies field is junk and does not deserve to be part of the university. Columbia Professors such as Samir Awad, Gil Anidjar, Janaki Bakhle, Marc Nichanian, Hamid Dbashi, Joseph Massad, Frances Protchett, George Saliba, Nader Sohrabi and Marc van de Mieroop, all of Colubmia's Middle Eastern Studies program, dominated the list of signatories on a petition for divestment from Israel. The scholarship of Middle Eastern Studies departments has been of such low quality that it is a standing joke in academia.
To remedy these problems, the authors suggest enhanced external control. In 2005, Congress passed House Resolution 3077, subsequently folded into House Resoultion 609, that establishes an independent higher education advisory board to provide advice, counsel and recommendations on international education issues.
Uncivil University is a very well written and readable book. It is well researched and balanced. The authors have treated an important subject with care. The book deserves a wide readership.
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