The Alternative Secret History of the World

Red Square of the People's Cube links to a blog by Oleg Atbashian of Pajamas Media that includes a social democrats' view of the world prior to July 4, 1776:

"Prior to July 4, 1776, not a single person in the world starved, got sick, worked hard for a living, or experienced any pain and anxiety. No one had ever been oppressed or unfairly exploited because the oppressive and unfair American system had not yet been created.

"Since the beginning of time employment had been equally guaranteed to anyone who cared to work, along with an equal pay of exactly $1,000 a week regardless of outcome, occupation, or the geographical area. All work was equally pleasant and enjoyable. Those who chose not to work also received $1,000 a week in unemployment compensation and Union benefits. Other guaranteed people's rights included the right to housing and free universal health care, as well as the right to 100% literacy through federally funded public education..."

Read it all here and here.

The Plot Thickens: Obama's Birth Certificate and HRS § 338-18

I have previously requested a copy of Barack Obama's birth certificate. Janice Okubo, Public Information Office of the Communications office of the State of Hawaii, responding on July 3, has chosen to refuse to provide a copy of the birth certificate. This blog consists of three parts. First, I quote Ms. Okubo's letter, dated July 3, 2008, verbatim. Her letter responds to my inquiry under the Freedom of Information Act. Although Ms. Okubo points out that the Freedom of Information applies to the federal government and not the states, most states, including Hawaii, have similar statutes. With respect to birth certificates, though, there is a separate section of the Hawaii Revised Statutes (HRS) that Ms. Okubo cites, HRS § 338-18. The link that Ms. Okubo provides in her hard copy snail mail letter respecting § 338-18 was dead when I tried to use it, but I obtained a copy of HRS § 338-18 from the Lexis-Nexis data base available from New York University's Bobst library. In addition, I obtained information on Hawaii's Uniform Information Practices Act from the State of Hawaii Website. In the second part of this blog, I respond to Ms. Okubo by drafting two letters, one a response to Chiyome Fukino, Director of Health, Ms. Okubo's superior, with a copy to Ms. Okubo and Governor Linda Lingle (R-HI), and also a letter to Barack Obama requesting that he send me a letter authorizing me to represent him in obtaining a copy of his birth certificate in the interest of avoiding accusations of political gamesmanship and manipulation. In the third section I copy the relevant sections from § 338-18 of the Hawaii Revised Statutes for your reference. I also quote from the State of Hawaii Website about its "Uniform Information Law" booklet.

It is evident that, Ms. Okubo's letter notwithstanding, § 338-18 DOES NOT PROHIBIT the State of Hawaii from making Mr. Obama's birth certificate public for three reasons. First, because he is a presidential candidate the public has a vital interest in Mr. Obama's birth certificate. The statute specifically permits divulging birth certificate information to anyone who has a vital interest in the information.

Second, the State of Hawaii Department of Health is granted the authority to fashion its own regulations about providing birth certificate information, and given the national importance of Mr. Obama's birth certificate, the question needs to be asked why the Hawaii Health Department has fashioned rules that contradict its own public law § 338-18 and its own Open Records Law.

Third, although the statute includes a list of persons who are entitled to obtain a copy of the birth certificate, it does not anywhere indicate that the list is exhaustive or exclusive. If the drafters of § 338-18 had meant the list to be exhaustive and exclusive they could have said so, but they did not. Therefore, Ms. Okubo misconstrues the law she claims to enforce.

Pamela Geller of Atlas Shrugs has had a forensic expert, Techdude or Adam, review posted birth certificates and he has found that the posted certificate is a forgery because "The security borders do not match. Literally." Previously several prominent conservative bloggers, have questioned the wisdom of pursuing the matter because the Obama campaign's obfuscations might amount to a strategic ploy to encourage media attention that ultimately embarrasses conservatives. When the certificate turns out to be OK the conservatives will have egg on their face. The forensic evidence intensifies the importance of the birth certificate. However, there is a different question involved that is almost as important as a falsified copy of a presidential candidate's birth certificate. The left claims that it is for openness in government. Mr. Obama claims to be for "change". But capriciously refusing to provide information in which the public has a vital interest and so keeping the information secret even though it is of national importance and has been falsified on supporters' Websites contradicts both of these postures.

I. Janice Okubo's Response to My Letter

"July 03, 2008

"Aloha Mitchell Langbert

"Re: FREEDOM OF INFORMATION ACT REQUEST

"This is in response to your letter request dated June 29, 2008. The Freedom of Information Act (FOMA), Title 5 of the United States Code, § 552, generally provides that any person has the right to request access to federal agency records or information. The FOIA Applies only to federal agencies and does not creat a right to access to records held by Congress, the courts, or by the state or local government agencies.

"Hawaii state law (HRS § 338-18) prevents the State of Hawaii from disclosing information contained in vital statistics except to those people who have a direct and tangible interest in the record as defined by statute. For information on requesting verification of birth records go to http://hawaii.gov/health/vital-records/vital-records/index.html.

"Sincerely,

"Janice Okubo
Public Information Officer
Communications Office

"Attachment

"c Communications Office Secretary


II. A. My Response to Ms. Okubo's Letter (to be mailed from New York City on July 14).

PO Box 130
West Shokan, NY 12494

Ms. Chiyome L. Fukino, MD
Director of Public Health
State of Hawaii Department of Health
Honolulu, Hawaii 98601-3378

Dear Ms. Fukino:

This is a second request for a copy of Mr. Barack Obama's birth certificate, this time under Hawaii's Uniform Information Practices Act and HRS § 338-18, the section of the Hawaii Revised Statutes that deals with revealing information in public health records. Ms. Janice Okubo timely responded to my earlier request for information but has misconstrued § 338-18 of the Hawaii Revised Statutes in three ways.

First, the statute states that the information can be divulged to someone who "has a direct and tangible interest in the record". It then goes on to list people who have such an interest. However, the statute DOES NOT LIMIT having "a direct and tangible interest in the record" to the individuals so listed. Rather, it simply states:

"The following persons shall be considered to have a direct and tangible interest in a public health statistics record:..."

If the authors of the statute had aimed to limit access to the list, they could have stated that the list is exhaustive and exclusive in the statute, but the statute DOES NOT so state. Hence, Ms. Okubo is incorrect in claiming that the people who have "direct and tangible interest" are defined in the statute. The statute merely states those who should be construed to have such an interest (a safe harbor list) but DOES NOT STATE that others may not also have "direct and tangible interest".

Since all Americans have a "direct and tangible interest" in knowing what Mr. Obama's birth certificate states, you and the Department of Health are violating § 338-18 by refusing to provide a certified copy of the birth certificate to any American.

Second, the statute clearly states (emphasis added):

"To protect the integrity of vital statistics records, to ensure their proper use, and to ensure the efficient and proper administration of the vital statistics system, it shall be unlawful for any person to permit inspection of, or to disclose information contained in vital statistics records, or to copy or issue a copy of all or part of any such record, except as authorized by this part or by rules adopted by the department of health."

The law permits your Department to adopt rules that conform to overriding public policy concerns. One of these concerns pertains to providing important information about a presidential candidate. To refuse to provide information about a presidential candidate on the pretext of inaccurately interpreted public law to a public with a direct and tangible interest in the information suggests disregard for the public interest as expressed in Hawaii's Open Records Law.

A booklet concerning Hawaii's Open Records Law or Uniform Information Practices Act (available at http://hawaii.gov/oip/UIPABooklet-Word.doc) states:

"Democracy exists only when government functions in the open and protects the rights of its citizens to participate in that government. In 1988, the Hawaii State Legislature enacted the Uniform Information Practices Act (Modified) (the “UIPA”) to preserve and ensure that open government and public participation...The Legislature recognized, however, that the “proper functioning of any public records law is very much dependent upon the attitude of those who implement the law[,]” requiring “strong and active agency implementation of the records laws.” The Legislature thus urged “all agencies to accept this new law as a challenge and a mandate to ensure public access to the public’s government.”

It does not appear that your department's "attitude" has been very focused on democracy or on the public interest in contrast to the Open Records Law's preamble. You have a law that says that birth certificate information should be divulged under rules adopted by your agency, but you then say that the rules are defined by statute. The statute says that anyone with a direct and tangible interest in the information should have access to the birth certificate information, and when a major-party presidential candidate's records are requested by a public with a direct and tangible interest, you erroneously claim that the statute includes an exhuastive list, which it does not.

I once again request, this time under Hawaii's Open Records Law and § 338-18 of the Hawaii Revised Statutes that you obey Hawaii's laws; stop your bureaucratic ballet; and provide me with a copy of Barack Obama's birth certificate.

Sincerely,


Mitchell Langbert, Ph.D.

Cc: Governor Linda Lingle, Janice Okubo

B. Letter to Barack Obama

PO Box 130
West Shokan, NY 12494

The Honorable Barack Obama
United States Senate
713 Hart Senate Office Building
Washingtn, DC 20510

Dear Senator Obama:

There have been accusations that you have refused to allow your birth certificate to be released to the public because you are interested in manipulating your opposition into thinking that there is a problem with it. I understand that you have campaigned on the premise of change and openness and therefore ought to have an interest in disproving this accusation of old-fashioned manipulation and deception.

Under the State of Hawaii's Disclosure of Records Rules (HRS 338-18(b)(7)the Department of Health may provide a birth certificate to:

7) A person or agency acting on behalf of the registrant

I hereby request that in the interest of "change" and openness in government that you authorize me in writing to obtain your birth certificate from the state of Hawaii.

Sincerely,


Mitchell Langbert, Ph.D.


III. Legal Text

A. Hawaii Revised Statutes (bold added)

§ 338-18. Disclosure of records.

(a) To protect the integrity of vital statistics records, to ensure their proper use, and to ensure the efficient and proper administration of the vital statistics system, it shall be unlawful for any person to permit inspection of, or to disclose information contained in vital statistics records, or to copy or issue a copy of all or part of any such record, except as authorized by this part or by rules adopted by the department of health.

(b) The department shall not permit inspection of public health statistics records, or issue a certified copy of any such record or part thereof, unless it is satisfied that the applicant has a direct and tangible interest in the record. The following persons shall be considered to have a direct and tangible interest in a public health statistics record:

(1) The registrant;

(2) The spouse of the registrant;

(3) A parent of the registrant;

(4) A descendant of the registrant;

(5) A person having a common ancestor with the registrant;

(6) A legal guardian of the registrant;

(7) A person or agency acting on behalf of the registrant;

(8) A personal representative of the registrant's estate;

(9) A person whose right to inspect or obtain a certified copy of the record is established by an order of a court of competent jurisdiction;

(10) Adoptive parents who have filed a petition for adoption and who need to determine the death of one or more of the prospective adopted child's natural or legal parents;

(11) A person who needs to determine the marital status of a former spouse in order to determine the payment of alimony;

(12) A person who needs to determine the death of a nonrelated co-owner of property purchased under a joint tenancy agreement; and

(13) A person who needs a death certificate for the determination of payments under a credit insurance policy.

(c) The department may permit the use the data contained in public health statistical records for research purposes only, but no identifying use thereof shall be made.

(d) Index data consisting of name and sex of the registrant, type of vital event, and such other data as the director may authorize shall be made available to the public.

(e) The department may permit persons working on genealogy projects access to microfilm or other copies of vital records of events that occurred more than seventy-five years prior to the current year.

(f) Subject to this section, the department may direct its local agents to make a return upon filing of birth, death, and fetal death certificates with them, of certain data shown to federal, state, territorial, county, or municipal agencies. Payment by these agencies for these services may be made as the department shall direct.

(g) The department shall not issue a verification in lieu of a certified copy of any such record, or any part thereof, unless it is satisfied that the applicant requesting a verification is:

(1) A person who has a direct and tangible interest in the record but requests a verification in lieu of a certified copy;

(2) A governmental agency or organization who for a legitimate government purpose maintains and needs to update official lists of persons in the ordinary course of the agency's or organization's activities;

(3) A governmental, private, social, or educational agency or organization who seeks confirmation of a certified copy of any such record submitted in support of or information provided about a vital event relating to any such record and contained in an official application made in the ordinary course of the agency's or organization's activities by an individual seeking employment with, entrance to, or the services or products of the agency or organization;

(4) A private or government attorney who seeks to confirm information about a vital event relating to any such record which was acquired during the course of or for purposes of legal proceedings; or

(5) An individual employed, endorsed, or sponsored by a governmental, private, social, or educational agency or organization who seeks to confirm information about a vital event relating to any such record in preparation of reports or publications by the agency or organization for research or educational purposes.

B. Hawaii's Uniform Information Practices Act(Open Records Law)

The Legislature pronounced that it is the policy of this State to conduct government business as openly as possible while protecting the right of privacy embodied in our State Constitution. Thus, Part I of the UIPA requires that the UIPA be applied and construed to promote its underlying purposes and policies, which are:

(1) To promote the public interest in disclosure;
(2) To provide for accurate, relevant, timely and complete records;
(3) To enhance government accountability;
(4) To make government accountable to individuals in the collection, use, and dissemination of information relating to them; and
(5) To balance the individual privacy interest and the public interest, allowing access unless disclosure would constitute a clearly unwarranted invasion of personal privacy.

Exception 1 – The Privacy Exception (§ 92F-13(1))

An agency may withhold access to a record if disclosure of the record would constitute a “clearly unwarranted invasion of personal privacy[.]” To withhold a record under this exception, an agency must be able to show that:

(1) An individual has a significant privacy interest in the information contained in the record; and
(2) The significant privacy interest is not outweighed by the public interest in disclosure.

OIP has further recognized that an individual has a significant privacy interest in his or her home contact information, date of birth, and ethnicity.

What is the public interest in disclosure?

The public interest to be considered is the public’s interest in the disclosure of official information that sheds light on an agency’s performance of its statutory purpose and the conduct of government officials, or which otherwise promotes governmental accountability.

Liberalism: The Ship that Does Not Sail

The Mugwumps and Progressives emphasized management issues and execution of programs. Herbert Croly, for instance, discussed scientific management and work restructuring in his 1912 Progressive Democracy. In the late nineteenth century EL Godkin discussed the role of incentives in managing railroads. The Muckrakers discussed management problems and Ida Tarbell, as much as she contemned John D. Rockefeller, favorably discussed his management abilities. In contrast, the post World War II liberals rarely discuss management or execution of programs. Their emphasis is on program advocacy not implementation. The reason may be that in implementing the New Deal, which in part relied on partnership between state and federal government, FDR overlaid federal programs like unemployment insurance on state governments that were often corrupt. The New Deal did not attempt to reform government as Progressivism had (and often failed to do) but rather added broad federal policies to an already corrupt system. This policy of see no evil, hear no evil, speak no evil seems to have been transmitted to subsequent generations of social democrats. Yet, the problem of execution and management is not independent of programs themselves. A social security program that is not well-designed is no better and may be worse than none at all. A welfare system that motivates beneficiaries to become dependent and that motivates despondency and drug addiction may be worse than no welfare program at all. An urban renewal program that creates ugly and alienating city projects that stimulate crime and roads that destroy neighborhoods may be worse than no urban renewal program at all. Government programs that generate high costs and few benefits, that drive out business because of high taxes and yet fail to accomplish their goals are worse than no programs. Management and execution are as much a component of programming as policy ideas. Yet, how often do proponents of new programs discuss management and execution issues? Very infrequently.

According to the French industrial Fayol, management is comprised of five tasks: planning, leading, organizing, coordinating, and controlling. This model was updated in the mid twentieth century by Edward I. Deming who argued that management is the reduction in variability of an output. The Deming interpretation of management is related to that of Taiichi Ohno, Toyota's production guru who created the ideas of lean manufacturing. Ohno argued that management is the elimination of waste. In any management system there needs to be a picture of what is going to be accomplished, a process that is required to achieve that goal, and a means of controlling the process so that it remains focused. The selection of the appropriate technique is not easy and it is not incidental. It cannot be accomplished by just anyone. A political appointee appointed along party or personal loyalty lines is not likely to be able to accomplish the managerial task as well as someone who has spent a lifetime thinking about production problems. An employee who has spent a lifetime focused on a certain process or kind of problem is likely to be best equipped to implement a quality program IF the employee understands the management techniques necessary to do a good job. Without taking such considerations into account, government programs are likely to be wasteful. Without controls, there is little likelihood that they will accomplish the objectives their advocates set out for them. If liberals build a ship that cannot sail, they cannot be said to have accomplished much. When the ship sinks, have they done more good than harm? Yet, social democrats advocate programs without thinking about process or about evaluation methods.

There are a number of natural blockages to the management of government programs. First, the cost of losses is not born by any concentrated interest. Because the costs are diffused, there is limited motivation by managers to reveal losses. Managers who reveal losses risk losing their jobs, but the public is not likely to feel the costs of the losses because they are spread over the entire tax paying population. Second, there are incentives for suppliers to cheat, to exaggerate the need for their products or to overcharge. Third, the customer base is captive. Because government enjoys a monopoly, those who use its services have nowhere else to go. Fourth, there is ideological resistance to criticism of government failure and waste by social democrats. Therefore, critics are likely to be humiliated. Fifth, even if public managers do radically improve programs, they are not necessarily rewarded for doing so. Sixth, waste may create patronage opportunities for politicians who in turn are likely to harass or fire government employees who resist it. Seventh, experts and specialists in government may be self-seeking and so not be motivated to improve programs.

Politics in America became largely a debate between two groups that advocate expansion of government: the Progressives, who are Republican in party and who advocate efficiency and effectiveness in government, and the social democrats (who also call themselves liberals and progressives) who do not. But it is not clear that Americans favor expansion of the state, whether it be the social democratic welfare state or the managerial state of progressivism. Moreover, the ideas that progressivism offers with respect to rationalization of the state do not, and likely cannot, reflect the state of the art with respect to management. Hence, Americans are given the choice between the second-rate services that the Progressives have on offer and the incompetence and chaos that the social democrats and their friends in the media gleefully advocate.

Factionalism and the Two-Party System

Americans may stick to the two-party system as an artifact of the founding fathers' fear of faction. By limiting the number of parties to two Americans limit the number of explicit political divisions.

In Elkins and McKitrick's Age of Federalism* the authors emphasize the universal fear and dislike of faction among the public and the founding fathers in the 1790s and earlier. This came in part from the belief that competition among factions had divided and harmed democracies in antiquity. Madison and Hamilton wrote about this in the Federalist, but the discomfort with factions or private associations of any kind (other than religious ones) was widespread. One exception was the Sons of Liberty during the revolutionary period and another, which Elkins and McKitrick don't mention in their masterful work, was the Freemasons. Also, there were incipient labor unions in the 1790s. Labor courses don't typically discuss the dislike of labor unions evidenced in the famous Philadelphia Cordwainers case as associated with a broader distrust of associations of any kind, but that may have been the case. In the Cordwainers (shoemakers) case a Philadelphia court held the union to be a criminal conspiracy. The criminal conspiracy doctrine was changed in the 1830s under the means-end doctrine enunciated in the Commonwealth of Massachusetts v. Hunt. The point is, though, that the shift in attitudes toward unions coincided with a shift in attitudes toward associations more generally. Usually the shift is described as responding to greater power of workingmen in the 1830s associated with Jacksonian presidency.

But the point is that in general private associations of any kind were viewed with suspicion, and minor political parties may be sensed in this way.

During the 1790s, Elkins and McKitrick point out, there was the rise of an early association called the Democratic Societies. The purpose of these clubs was mild, basically to discuss political issues and oppose corruption in government. President Washington viewed these clubs with suspicion, calling them "self-created societies" as did many leading politicians. Two Democratic Societies in Washington Town and Mingo Creek, Pennsylvania were involved in the Whiskey Insurrection in western Pennsylvania in 1791-4 in which tax collectors were tarred and feathered; Inspector of the Excise John Neville's house was burned after an open battle; and as many as 6,000 armed Pennsylvania militia massed on August 1, 1794. President Washington handled the situation masterfully and ultimately sent militia to quell the revolt, but there was no violence beyond scattered incidents.

Elkins and McKitrick point out that Washington blamed the Democratic Societies for the insurrection (p. 484):

"If Washington ever had a fixed obsession, it was these societies, "self-created in the sense of having no sanction in popular authority, societies which had been up to nothing but mischief since the first ones were formed...He had felt very early that if they were not counteracted they would 'shake the government to its foundations'; and 'now if this uprising were not subdued, we could bid adieu to all government in this Country except Mob and Club Govt.'"

Washington wrote that (quoted on p.494, Elkins and McKitrick)

"all combinations and associations under whatever plausible character, with the real design to direct, control, counteract or awe the regular deliberation and action of the constituted authorities are destructive of this fundamental principle (of the duty of every individual to obey the established government)...They serve to organize faction; to give it an artificial and extraordinary force; to put in the place of the delegated will of the nation the will of a party, often a small but artful enterprising minority of the community, and, according to the alternate triumphs of different parties, to make the public administration the mirror of ill-concerted and incongruous projects of faction rather than the organ of consistent and wholesome plans, digested by common counsels and modified by mutual interests."

Elkins and McKitrick quote a Senate resolution recorded in the Annals of Congress:

"Our anxiety arising from the licentious and open resistance to the laws in the Western counties of Pennsylvania has been increased by the proceedings of certain self-created societies...proceedings in our apprehension founded in political error, calculated if not intended to disorganize our Government, and which...have been influential in misleading our fellow citizens in the scene of insurrection."

Might this early distrust of associations, which had disappeared by the time De Tocqueville published Democracy in America in 1835, be the source of the American commitment to the two-party system? While the conflict between the Republicans and the Federalists in the 1790s amounted to a battle between centralizers and decentralizers; proponents of government subsidy to business and proponents of Whiggish suspicion of centralized authority, and so was unavoidable, might the fear of more factionalization than the Federalist-Republican or later Democratic-Republican division be the distant remnant of this early American fear of faction?





*Stanley Elkins and Eric McKitrick, The Age of Federalism: The Early American Republic, 1788-1800. New York: Oxford University Press, 1993.

The Federalist Number 24 and the Scope of Government

In the Federalist Number 24 Hamilton makes the following statement about the powers that the Constitution confers upon the federal government:

"The powers are not too extensive for the OBJECTS of federal administration, or, in other words, for the management of our NATIONAL INTERESTS; nor can any satisfactory argument be framed to show that they are chargeable with such an excess."

Are the powers that we have granted the federal administration today impractical for the management of national interests? I refer to the myriad of large-scale administrative tasks that the President and Congress are asked to review: Social Security, the Federal Reserve monetary system, Housing and Urban Development and the Department of Education. These are broad, comprehensive programs of such scope and extent that no group of people, much less a single person, could competently oversee all of them.

Compare the problems of the federal government to the problems of General Motors. The president of General Motors is beset with complex details and administrative challenges concerning a handful of products: automobiles, parts, financing and some additional products. Yet, the management of this handful of products has proven too difficult for the management of General Motors to handle all that well, and the firm seems to be drifting to bankruptcy.

Are the politicians who serve in Congress or the President that much more capable than the executives of General Motors? Are the people whom the president appoints to his cabinet and to senior posts in the federal agencies that much more competent than the management of General Motors? In the case of Hurricane Katrina, it seemed that the government agencies are not competent at all. Yet, the public has burdened the federal government with such extensive powers that the management problems, ranging from control to budgeting to personnel selection are orders of magnitude more complex than the problems that confront the executives of an automobile company.

When Hamilton, Madison and Jay wrote the newspaper articles that form the Federalist Papers, the United States of America had a population of three million. Today, the average state has a population of six million. Yet, the powers of government have been federalized to a much greater extent than Hamilton anticipated. This enormous concentration of managerial demands resulted from the perceived threat that industrial concentration posed to the economy. Yet, the concentration resulted in enhancing such concentration. The New Deal intensified the extent of concentration by establishing federal programs that replaced state discretion in fields like social security. The concentration was also enhanced by the civil rights struggles of the 1950s and 1960s, which required a degree of federal intervention to end Jim Crow laws and discrimination.

Today's problems are managerial as much as strategic or political: how to make social security work; how to best combine incentives for innovation with an equitable tax system; whether to extend or contract the scope of government; how to manage the nation's money supply to limit economic crisis and corruption. All of these are managerial problems that lend themselves to a range of strategic choices. The political arguments about them become more emotional and cantankerous as the various protagonists, Democratic and Republican, know less about each question. The expertise that fields like economics, sociology and business offer do not offer one or another optimal solution to any of these problems. In industry, trial and error has proven to work better than grand theory. Yet, subjects of considerable subtlety from the Iraqi War to the management of Social Security are pronounced upon with dogmatic rigidity in the pages of the daily newspapers and in the blogs.

Why can't a pragmatic delegation of complex managerial decision making to states, which are on average twice as large in population as the entire nation was in Hamilton's day, permit a multiplicity of solutions? Such a multiplicity would serve (a) to afford experimentation and learning about solutions; (b) to test alternative ideological approaches; (c) to resolve bitter conflict among Red and Blue proponents (d) to reduce and contain the risk of failure; and (e) to enhance democracy.

Howard S. Katz's Portflolio Performance versus Fund Managers'

Katz's performance in blue, fund managers' in red. The data can be viewed here. Katz's newsletter can be purchased at http://www.thegoldbug.net.

Stock Prices, the Fed and America's Win-Lose Economy

What is the role of the Fed in generating income inequality because low interest rates boost the stock market while the monetary expansion that causes low rates creates inflation and so reduces real wages? In a web page on stock market returns Jeremy J. Siegel in the Concise Encyclopedia of Economics notes:

"The average compound rate of return on stocks from 1802 through 1991 was 7.7 percent per year: 5.8 percent from 1802 to 1870, 7.2 percent from 1871 to 1925, and 10.0 percent from 1926 to 1991. The increase in the rate of return of stocks over time has fully compensated the equity holder for the increased inflation that has occurred since World War II. "

However, these numbers do not follow the contours of changing American policy concerning the Fed. Before 1913 there was no Fed. From 1913 to 1932 there was a Fed whose inflationary power was limited by a gold standard. From 1932 to 1971 Roosevelt had abolished the gold standard but the Bretton Woods monetary regime required that the US convert foreign dollar holders' dollars into gold. In 1971 Richard M. Nixon abolished the international gold standard.

To track the effects of Fed policy on real wages, inflation and stock market returns, I computed Dow Jones Industrial Average returns for four periods: the pre-Fed period from 1896 to 1913; the Fed/gold standard period from 1913 to 1932; the Fed/international gold standard only period from 1932 to 1971; and the gold standard-free period from 1971-2008. I also computed as best as I could with rough and ready Internet data (a) the inflation rate, (b) the Dow returns less inflation, (c) the compounded return on the Dow, (d) the change in real (inflation-adjusted) hourly wage, (e) the compounded real wage change and (f) the compounded inflation change for the four periods.

I was searching for income inequality data (the usual method of measuring income inequality is the "Ginni coefficient") but could not find a measure on the Web that goes back to 1896. I did find a partial measure in an article by Jared Bernstein and Laurence Mishel. To estimate the compound rates I relied on the 1040tools future value calculator here. Data on real hourly wage changes from 1896 to 1913 are available here. The Dow Jones website makes available its Dow Jones Industrial Average index from 1896. There are estimates available of stock returns from 1802, but what is gained in longitude is lost in comparability. Corporations prior to 1890 did not have the same legal attributes as they did after. Moreover, prior to 1880 stocks were limited as to their breadth of circulation, the nature of the firms for which they were traded and the risk involved because of changes in the corporate form of organization. Therefore, the 1896-1913 period will have to do as a pre-Fed measure to compare with subsequent periods.

The chart below (column A--see here for better view) shows that inflation was lower in the pre-Fed period than in any period since the establishment of the Fed in 1913. From 1896-1913 inflation averaged one percent (column H), while from 1913-1932, the Fed/gold standard period it averaged 1.7%. From 1932-1971, the international gold standard period it averaged 2.82% and during the gold standard- free period, thanks to Republican President Richard M. Nixon, it averaged 3.92%, the highest sustained inflation in American history. The media story that the Greenspan Fed achieved low inflation is but puffery by historical standards. The post-1980 era has a poor record with respect to inflation. At the same time, stock market returns have been boosted since the abolition of the gold standard in 1932 but not before. Column C shows that the Dow increased 108.1% from 1896 to 1913; it fell 23.32% from 1913 to 1932 because of the Great Depression and then it rose 1,143.7% from 1932 to 1971 and 1,266% from 1971 to 2008. Adjusting for inflation and compounding, stock market returns were 3.83% during the 1896-1913 period, -2.9% from 1913 to 1932, 5.93% from 1932 to 1971 and then 5.9% from 1971 to 2008. The key change seems to have been in 1932.



The establishment of the Fed and the abolition of the gold standard seem to have coincided with at first a dramatic increase in real wages and then a reduction from 1971 onward (see Columns F and G). From 1896 to 1913 real hourly wages increased 30.2% over 17 years or 1.6% compounded. From 1913 to 1932, the gold standard period of the Fed, real wages increased 45.5% or 2.12% compounded. This is in part due to reduced inflation during the Depression. However, and this contradicts my theory, from 1932 to 1971 real wages increased 171.8%, a compounded real wage change of 2.6%. Then, from 1971 to 2008, the gold standard-free period compounded real wages fell 27% or a compounded rate of -1.1%. This is a unique 37-year period, but it follows a period of very high wage growth from 1932 to 1971.

Despite the extensive discussion of income inequality, I could not find readily historical data available on Ginni coefficients or other income inequality measures going back to 1896. It is clear from the Bernstein and Mishel article that since 1972 income inequality as measured by the 90-10 cutoff has been increasing.

The data support the idea that changing the monetary regime boosted the stock market. The 5.9% real stock market returns post 1932 are 35% greater than the real, pre-Fed stock market returns from 1896-1913. If you factor in the Fed/gold standard period of 1913-1932 the boost is greater still. There seems to have been a correction in wages but not stock market returns from 1971 to 2008.

But there is conflicting evidence for the Fed/real wage connection. From 1932 to 1971 real wages increased by 2.6% per year, faster than in the 1896-1913 period, but then from 1971 to 2008 they fell by 1.1% per year. Arguably, the New Deal institutions such as labor unions sustained real wage growth for roughly forty years. Thereafter, there was a shift in employers' bargaining power. This may be because of the dramatic boost to monetary and credit expansion that the elimination of the gold standard permitted. Price inflation from 1971 to 2008 was 432% compared to 196.5% for the 1932 to 1971 period. The increasing price inflation may have enhanced firms' ability to substitute technology and equipment for labor and to finance overseas expansion sufficiently to counteract the wage gains made during the 1932-1971 period. As well, the effects of monetary expansion on real wages may be cumulative over many decades, and it is possible that 40 years of inflation resulted in a 40-year stimulus of demand for labor followed by adjustments due to even longer term inflationary effects. It may be that 40 years is the time required for inflation to influence real wages. However, it is also possible that labor unions were weakened during this period and so lacked the bargaining power to counteract employers' strategies. It is also possible that globalization has increased wage competition and has forced firms to be more competitive.

Rather than view stock returns as resulting from investor demand, as Professor Siegel does, it might be more logical to view them as ensuing directly from the Federal Reserve Bank's subsidization of the stock market. The Fed subsidizes the stock market by depressing real interest rates, which increases stock valuations and enables firms to borrow cheaply. Lower interest rates enable firms to substitute machinery and technology for workers to a greater degree than they otherwise would and to finance moves overseas. As well, workers may not be completely aware of inflation's effects on pay, and accept wages under illusory price stability. Thus, the Fed may have served as a wealth transferal device from workers to stockholders. The one fly in this story's ointment is the sharp increase in real wages during the 1932 to 1971 period.

The Federalist 14 and Decentralizaton

In the Federalist 14, Madison argues that while direct democracy is possible only in a small country, a republic can cover a larger geographic area. Based on the transportation available in the 1780s, he shows that a federal republican form of government is possible since the delegates can travel the distance required. He adds that:

"It is to be remembered that the federal government is not to be charged with the whole power of making and administering laws. Its jurisdiction is limited to certain enumerated objects, which concern all the members of the republic, but which are not to be attained by the separate provisions of any. The subordinate governments, which can extend their care to all those other objects which can be separately provided for, will retain their due authority and activity. Were it proposed by the plan of the convention to abolish the governments of the particular States, its adversaries would have some ground for their objection; though it would not be difficult to show that if they were abolished the general government would be compelled by the principle of self-preservation to reinstate them in their proposed jurisdiction."

Madison's recognition of the principle of decentralization anticipated the evolution of large scale corporate enterprise in the twentieth century. In his classic book Strategy and Structure, Alfred Chandler argues that big business evolved from the functional into the decentralized form in the twentieth century in response to strategic shifts, notably the concentration of industry and the formation of conglomerates. The reason the decentralized form was necessary was that the informational demands and transactions costs of a large organization inhibit intelligent processing. Madison anticipated this development in the 18th century.

The information demands of government are greater than the informational demands of private industry. The flexibility required is greater and the scope of the market is greater, which implies the need for greater diversity of strategy. Yet, the modernist or progressive approach to organizing government has been to centralize decision making authority. This runs counter to the insight not only of Madison but of practical business strategists who have learned that efficiency as well as responsive, flexible strategy depend on integration of small scale with large scale and the loose coupling of federal and local units.

Kennedy v. Louisiana and Limiting the Supreme Court's Power

The progressive movement that began in the early twentieth century has followed a gradualist approach to the erosion of liberty. Its left wing makes extreme demands, and then its center argues for moderation, which means less erosion than the left demands. The process repeats so that the extreme demands are achieved through several small steps. As well, the progressives, starting with John Dewey, have been deceitful. They argue that they they idealize democracy and public deliberation, but then they advocate increasing centralization and bureaucratization of power, for instance the accretion of the Supreme Court's power over state law, that stifles democracy. These steps have the effect of restricting the majority of people's freedom, as in the economic realm, or of increasing the power of the progressive elite to impose the cultural values of the wealthy and Ivy League-educated onto the general public.

In Kennedy v. Louisiana, the Court held that a Louisiana law that provided the death penalty for a child rapist is cruel and unusual punishment and so unconstitutional. The New York Sun summarizes the Court's reasoning about cruel and unusual punishment as follows:

'Cruel and unusual punishment,' which is prohibited by the Eighth Amendment, derives its meaning from 'the evolving standards of decency that mark the progress of a maturing society.' These evolved standards, according to Justice Kennedy, require a distinction, 'between intentional first-degree murder on the one hand and non homicide crimes against individual persons, even including child rape, on the other.' Citing precedents, Justice Kennedy claims this distinction shows that the "severity and irrevocability" of child rape cannot be compared to murder 'in terms of moral depravity and of the injury to the person and to the public.'

Kennedy v. Louisiana is a chord in the progressive symphony. In the nineteenth century the Court did not have the power to apply the Bill of Rights to the states. In 1925, near the end of the Progressive era, in the case of Gitlow v. New York the Court ruled that the Fourteenth Amendment extended its power to review state law.

In 1965, in Griswold v. Connecticut, the Supreme Court held that Estelle Griswold, director of planned parenthood of Connecticut and Dr. Buxton of the Yale Medical School could not be fined for giving advice to patients encouraging them to use contraceptives even though the legislature of Connecticut had passed such a law. In the decision Justice Douglas wrote:

"specific guarantees in the Bill of Rights have penumbras, formed by emanations from those guarantees that help give them life and substance. Various guarantees create zones of privacy. The right of association contained in the penumbra of the First Amendment is one, as we have seen."

Thus, the Court went from not reviewing constitutionality of state law in the nineteenth century to reviewing it in the pre-World War II period and then to creating new rules not in the Constitution ("penumbras") in the post-World War II period that the Court then dictatorially imposed on the states. Paradoxically, Herbert Croly and other progressives of the early twentieth century argued that the Court had too much power in the nineteenth century and that democracy ought to supplant Court authority. Instead, progressivism has seen a vast extension of Court power and restriction of democracy. Despite their deceptive claim to support democracy, progressives have hailed this process. Progressives' values have emphasized extension of the First Amendment to revolutionaries (the speech involved in Gitlow involved Gitlow's advocating overthrow of the government, which New York had illegalized) and birth control. Progressives have repeatedly emphasized results like these over democracy.

In Kennedy v. Louisiana the Court claims the authority to reinterpret the Constitution in light of the evolving standards of decency that mark the progress of a maturing society. Yet, there is nothing in the Constitution that gives the Supreme Court that authority any more than the Constitution suggests that its penumbras have Constitutional force. The Supreme Court has simply re-interpreted the Constitution in a way that arrogates power to itself and that is profoundly anti-democratic. The fact that the "progressive" movement has never complained about this pattern evidences its elitism.

The Supreme Court views itself as an arbiter of decency, yet the Supreme Court has no qualification to function as such an arbiter. In Roe v. Wade the Supreme Court held that states could not illegalize abortion. Yet, according to ABC News, 57 percent of Americans oppose abortion solely to end an unwanted pregnancy. In other words, the majority of Americans do not think that the Supreme Court's judgment is decent. Nor should the Supreme Court imagine that it somehow reflects the moral standards of the majority of Americans. Some justices, schooled in elite universities and indoctrinated in politically correct ideology, have values that deviate sharply from the majority of Americans. If so, then the Court has become an arbitrary possessor of power, a factional dictatorial force that represents the "Blue" half of the country, not an interpreter of the Constitution. Perhaps it is time to restrict this anti-democratic, factional force.

An amendment to the Constitution could limit the Court's power to apply the Constitution to the states. If progressives believe in democracy, then they should favor this proposal, because enhancement of the power of the states would significantly enhance democracy. Such an amendment might state that the Constitution, except where it states to the contrary specifically, does not apply to the states. Then, the states will be free to decide what "penumbras" they wish to adopt, and which Supreme Court penumbras they find morally reprehensible.

Freedom of Information Act Request for Barack Obama's Birth Certificate

I have written and will mail on Monday two Freedom of Information Act requests to the State of Hawaii for copies of Barack Obama's birth certificate as per Larwyn's suggestion. Pamela Geller of Atlas Shrugs argues that there may be no problem with Mr. Obama's birth certificate, but the State of Hawaii and Mr. Obama have an ethical obligation to come clean on this matter.

Mark Bennett, Attorney General
Department of the Attorney General
State of Hawaii
425 Queen Street
Honolulu, Hawaii 96813

Dear Mr. Bennett:

This is a freedom of information act request for the birth certificate of Barack Obama, born August 4, 1961. Because Mr. Obama is a public figure and because of the importance of this information to the public welfare the ordinary rules of confidentiality do not apply. I will be happy to pay your normal processing fee.

Sincerely,

Mitchell Langbert

Janice Okubo
Department of Health
State of Hawaii
1250 Punchbowl Street Room 326
Honolulu, Hawaii, 96813

Dear Ms. Okubo:

This is a freedom of information act request for the birth certificate of Barack Obama, born August 4, 1961. Because Mr. Obama is a public figure and because of the importance of this information to the public welfare the ordinary rules of confidentiality do not apply. I will be happy to pay your normal processing fee.

Sincerely,

Mitchell Langbert

Pamela Geller and the Obama Birth Certificate

Pamela Geller of Atlas Shrugged (hat tip Larwyn) cites Israel Insider about the missing Obama birth certificate. There is uncertainty about the authenticity of the copy of Barack Obama's birth certificate produced on Obama's fight the Smears site. Geller's correspondent Joe has analyzed the birth certificate and found a potential seal, though Israel Insider questions it. Geller concludes that the seal is really there and suggests:

"I believe the Obama campaign would deliberately keep such a question alive to diminish the veracity of the real scandals Obama is guilty of (Rezko, Auchi, Wright, Nation of Islam, Malley, Powers, Odinga, corruption, lies etc."

Perhaps Mr. Obama should make the birth certificate available and Republicans should emphasize a range of criticisms. There are many to choose from.

Two Ways To Organize a Society

Two ways to organize society are equity and achievement. Under the equity principle there can be economic inequality only if it is associated with equal opportunity and if the inequality optimally benefits the disadvantaged. Under an achievement theory, society is best off if it is organized so that the quantity and quality of achievement is optimized. Thus, a nation like Athens would certainly not qualify under the equity principle because there was slavery, but it would qualify under the achievement principle as one of the great societies in history.

Principles like these are not easily tested empirically. Only through history can we judge whether societies that operate under one optimizing rule or the other have worked best. One problem is execution. Few societies (ancient Sparta is one) have been able to establish equal opportunity. If they could, the result would likely be unsatisfactory. The poorest and the wealthiest people in society would possibly be much worse off precisely because of equality of opportunity. This is because achievement is the source of progress and achievement is possible only if there is inequality.

In his book Creativity: Beyond the Myth of Genius* Robert W. Weisberg of Temple University argues against the idea that creativity results from genius or luck. Rather, creativity results from focused application of ordinary thinking based on well-developed expertise. Creative works are not "set breaking" and do not constitute "revolutions", but rather build on prior inventions and pre-existing knowledge bases. Weisberg writes that to encourage creativity in the young "we should emphasize development of deep expertise in a particular domain"**. As well, motivation to create plays a role. To motivate people to be creative "exposure at an early age to subject matter in the arts and sciences, structured in such a way as to appeal to the young, can result in a child's naturally developing an interest in some area. At a later age exposure to mentors can play multiple roles." Even with respect to prodigies: "these skills will not express themselves without strong support from the environment, especially the family, as we saw...in the case of Mozart and Picasso. Thus, even the most talented must have the right environment if their talent is to bear fruit."

If Weisberg is right, then achievement depends in part on unique opportunities. It is impossible to provide the same nurturing to all, nor would it be desirable. To create a society where all have the opportunity to be Mozart, it would be necessary to exclude anyone's being a Picasso. To create a society where Mozart would not be entitled to the rewards of Mozart's work would likely de-motivate him. But even the worst-off member of society benefits to a large degree from Mozart's creative genius (or Puff Daddy's).

It is true that the achievement theory leads to distributional inequity. Some achieve more than others, and this in part is due to skills developed in the family at an early age. But does that mean that the achievement theory is inequitable? It may be that the worst off is best off in a society that stimulates achievement through the recognition of basic rights.

In addition, there is the question of pragmatic execution. What have been the outcomes of societies organized along the lines of equity and what have been the outcomes of societies organized along the lines of achievement? When the equity principle was first brought to public awareness in the eighteenth century there was considerable injustice. (It also is true that few societies had been organized along any lines but tribal at that time.) Throughout the nineteenth century, societies such as England and America that were organized on the achievement principle were attacked as inequitable. Yet, in the twentieth century, societies that were organized on the equity principle, such as the Soviet Union, Nazi German and Red China, committed far worse atrocities than any in the eighteenth and nineteenth centuries. Today, the United States and England have increasingly been organized along equity principles, but the two societies are less, not more, equitable than they were under the achievement principle.

Thus, there is a gulf between the theory of equity and the results of the equitable philosophy because human nature and human power needs do not coincide with the cool rationality of a philosopher's anticipating outcomes under a "veil of ignorance". Thus, the resolution of the dispute between equity and achievement needs to be reviewed empirically and experimentally, not through philosophical speculation.

Achievement may be defined as a creative act that merits social recognition. The social recognition evolves because the creative act is helpful to at least a portion of society. The best way to motivate socially useful action is through fair reward. Because there is no true way to determine the fairness of rewards, and because human reason is inevitably self-serving and biased, the fairest way is to let the marketplace determine them.


*Robert W. Weisberg, Creativity: Beyond the Myth of Genius. New York: W.H. Freeman and Company, 1993.

**As well, this contradicts the idea that basic skills are unimportant to creativity, a fundamental precept of progressive education.

The Federalist No. 13 and Economies of Scale in Government

In the Federalist Number 13 Hamilton argues that an advantage to adoption of the Constitution and establishment of a unified nation as opposed to 13 separate states or three regional confederacies is efficiency that results from economies of scale. Hamilton argues:

"No well-informed man will suppose that the affairs of such a confederacy can be properly regulated by a government less comprehensive in its origins or institutions than that which has been proposed by the convention. When the dimensions of a State attain to a certain magnitude, it requires the same energy of government and the same forms of administration which are requisite in one of much greater extent."

Hamilton was right about the costs of government. The cost of governing 3 million people is much less than twice the cost of governing 1.5 million people. But Hamilton could not have foreseen the increasingly strategic role that government plays in economic development. That is, a range of federal policies restrict and influence business decision making in ways that Hamilton could not have foreseen. These include the creation of money, the social security system, funding of urban renewal, health plans for the elderly. Hamilton did advocate central banking and federal involvement in the economy, such as the creation of a state manufacturing incubator, but he could not have imagined the degree to which government influences economic behavior in our world.

The choice between centralization and decentralization involves two considerations: the economies of scale that Hamilton identified, and the creativity and experimentation that decentralization permits. Thirteen states permit thirteen approaches to regulation. Two or three confederacies would permit two or three approaches. Diversity of strategies permit comparisons and learning. Hamilton was right with respect to the Constitution, but he overstates the value of economies of scale as they might apply to our world.

The Left As Teen-Age Rebellion

The programs that the left advocates have done little to help and instead have harmed the poor. American inner cities deteriorated in response to urban renewal and welfare programs. The socialist revolution in Russia resulted in the starvation of millions of peasants and a wide range of ethnic hatreds. The Chinese socialists have oppressed and murdered Tibetans and the religious as well as millions of politically incorrect businessmen and bourgeoisie. More people have been slaughtered by the left and by socialism than by the advocates of any other creed or belief system. There has not been a socialist economy that has produced economic progress, and the general result of socialism as in Cuba and North Korea have been violent suppression and impoverishment of the poor. Yet, sociopathically, the academic left continues to justify, rationalize and lie about the effects of its programs.

In America, the left advocates a Kafkaesque program of large institutions, big government and centralized control. Its program includes not only the bureaucratization of medicine but also of investment, self-defense, business and political speech. The failure of its programs do not deter its commitment to rigid, large scale enterprises. For instance, the left remains obsessively attached to social security and the Federal Reserve Bank despite dismal benefit/contribution ratios from the former and inflation and corruption from the latter.

The left's recidivist advocacy of failed ideas can be explained in three ways. One, the left might be depicted as religiously obsessed with its ideas, and riddled with power needs, and so habituated to its love of government and centralized power despite seventy years of repeated failure. Two, the left is cognitively limited. Although many on the left are not smart, many are smart enough to grasp the pragmatic implications of its program. So this is at best a partial explanation. Three, the left is economically motivated.

There is a recurrent theme that goes something like, "Oh, isn't it amazing that George Soros or this or that businessman is a billionaire and yet he favors our (left-wing) positions". Conversely, many Libertarians and conservatives conceive of businessmen as supportive of the free market position, and then are astounded when businessmen do not support that view. In reality, the left's views coincide fairly neatly with the views of big business. Big business believes in big government because without it it would not be so big. The political scientist Charles Lindblom in his book on market economies remarks on the "privileged" position of big business, and indeed, since the days of Hamilton big business has relied on centralized government. There is no evidence that government support of big business helps the public in any way. Rather, subsidization makes firms less efficient and less customer oriented. For instance, cable television, telephone, public utilities, health care, banking and insurance firms are subsidized and they are among the least customer-responsive firms. The reason is that government regulation reduces competition.

Chief among government subsidies to big business is first the Fed, which provides interest rate and loan subsidies to business, and second, higher education, which provides training to large firms, to a degree at public expense. Thus, professors' livelihoods are linked to the welfare of big business and they themselves enjoy subsidies just like the ones big business enjoys. Without big business demand for graduates, there would be no demand for universities. So why are academics so often critical of big business?

In fact, university professors are NOT critical of big business where it counts, and their criticisms are not adverse to big business's interests. Big business is not adverse to enhanced central control, socialism, regulation and the mixed economy because such control eliminates competition. Universities have, as well, been the chief advocate of central banking through economics and business programs. Big business would not be so big without the Fed, and without the regulation that historians and sociologists advocate. There are few economists who question central banking, and of all the issues this is the one that big business cares about most.

University professors depend on big business much as teen-agers depend on their parents. Without big business demand for graduates, there would be no demand for universities. Thus, like teen-agers, university professors rebel by criticizing big business's hypocrisy, its lack of "social responsibility", and its selfishness, even as the professors themselves are equally hypocritical, equally irresponsible socially and even more selfish than business executives. But, like teen-agers, the university professors return home to be fed at the end of the day, and find the possibility that they will be thrown out and sent to work unthinkable. Moreover, the upshot of their criticisms, like teen-agers', is a psychological replica of the institutions and habits that they criticize. In other words, they claim to criticize big business even as they advocate systems that are necessary to it. In the end, the university professors are the chief proponents of big business capitalism, helping it by diverting attention to shrill issues like diversity and global warming.

Letter to Senator Joe Lieberman Concerning Oil Speculators

Dear Senator Lieberman:

I contributed to your recent campaign fund because I respect your views on the Iraqi War and your courage to stand up to the left-wing ideologues who have increasingly dominated the Democratic Party. I DISAGREE with your recent proposal to limit commodity speculation by pension funds. While short term price fluctuations over 1-2 years may result from speculation, if there is no underlying demand to support the price increases then the increases will reverse. On the other hand, no one really knows whether the price increases in oil result from speculation or from demand ensuing from general inflation. As you are undoubtedly aware, the Federal Reserve Bank has inflated the number of dollars in circulation around the World by a significant percentage, approximately 8 percent, over the past 25 years. These dollars have reduced interest rates, stimulating economic activity that has not been all that productive. In other words, the Fed has caused the sub-prime crisis, the tech bubble and probably stimulated excessive investment in commodities in the early 1990s. The excessive commodity investment led to low commodity prices in the 1990s (my former employer's stock, INCO or International Nickel, was selling at $10 per share for almost two decades). In turn, commodities firms closed. As well, farm land was used to develop real estate projects. This has led to shortages now in a range of commodities, to include milk, bread, gold and oil. I note that in the recent period of high gasoline prices, the gold price increases of the past 5 years have abated and gold has been below $900 for the past few weeks. If speculation is causing a run-up in oil prices, why isn't it causing a run-up in gold prices?

The correct response to excessive monetary expansion is not to limit speculation but rather to change the institutional structure, which is corrupt, that has led to the creation of large dollar investments in hedge funds, investment banks, Enron, and Bear Stearns. In other words, the Fed is corrupt and it should be changed institutionally. I believe it should be abolished in favor of competitive money supplies. That is, the money supply should be privatized. Illegalizing speculation will not end the problem of increasing gas and other prices. You are attempting to stop water from breaking through the dyke by passing a law against the ocean tides. Your proposal is misguided.

Bowen's Boondoggle

According to Sarah Garland of the New York Sun, in 2006, the New York City schoolteachers negotiated a contract that will expire in 2009. The contract gave the teachers a 7.1% annual raise over 2008-2009.

The Sun quotes the United Federation of Teachers' President Randi Weingarten:

"Pointing to a total increase in teacher salaries of more than 40% since 2002, Ms. Weingarten said, "Finally we are making real progress."

In contrast to 40% gains in teacher salaries, the Professional Staff Congress (PSC), the union that represents the faculty of the City University of New York, in the last contract that ran from 2004 to 2007 negotiated a 6% increase over three years.

On June 23, 2008 Barbara Bowen, the PSC president, released a letter describing a new contract that runs from 2007 to 2010. It includes the following increases:

****3.15%, effective September 20, 2007
****4.00%, effective October 6, 2008
****3.00%, effective October 20, 2009

In other words, the Barbara Bowen and the PSC negotiated increases at about half of what New York City's schoolteachers received. And this on top of increases less than half of what the schoolteachers received in the last contract as well. In comparison to the 40% from 2002-9, the PSC has won 16% from 2004-10, about 40% of what the teachers have won.

Despite this dismal performance President Bowen writes in her letter:

"The tentative contract is a principled, creative settlement that combines increases throughout the salary scale with special increases at the top and the bottom. It includes a breakthrough on parental and family care, introduces a system for sharing sick days with those in need, adds a hundred new Lecturer lines reserved for experienced part-time faculty, and holds the line against management's agenda of corporatizing the University. The tentative settlement also includes new equity features, such as a salary differential for College Laboratory Technicians and Assistants to HEO with relevant masters or doctoral degrees, and an extra increase in each step of the Lecturer title. The tentative agreement comes with the strong support of the PSC negotiating committee."

Just a few days before the deal's announcement, the indomitable Sharad Karkhanis in his Patriot Returns newsletter expressed dismay at the union leadership's performance; its inept management; and governmental officials' indifference to the union leadership. He exhorts Bowen:

The PSC's propaganda paper (Clarion) boasts of your trips to Albany and your meetings with the mighty and powerful. But it seems to us that all this is baloney. Neither the New York media nor government authorities consider you relevant or powerful. You can be safely ignored, laughed at, forgotten. We wouldn't care, except that also forgotten, as a consequence, are the people you represent. No wonder you cannot get a good contract for CUNY faculty. Your tactics have deemed you irrelevant to the real media and those in decision making positions in the state. You are a failure in the eyes of the membership. They will not return you to that office again next year, Barbara.

For how long will the CUNY faculty be willing to tolerate the PSC leadership's incompetence?

Time Preference and Political Ideology

Government has a short time preference. Budgets are annual. Current political reality drives decisions. Neither history nor future projections determine choices. In this way the state is different from corporations. Stock prices reflect anticipated earnings. Corporate executives may think short term, but decisions that might impair long term performance will reduce current price if the market is able to grasp the long term effects. Citizens vary as to their time preferences. Some prefer to defer gratification and so earn greater rewards in the future, while others prefer instant gratification. In general, short time preferences are more common than long ones among the general population, but if you weight population by individual wealth, since wealthier individuals have longer time preferences than the average person, the economic return that the market demands for investment is well below the return the average person demands to save. Therefore, in a free society, wealth tends to concentrate in the hands of those who have longer time preference. However, the reaction of short time preference citizens to wealth disparity is often resentment or a sense that there is inequity because of the wealth disparity. In turn, there is demand for taxation of property, inheritance and capital gains.

Skeptics argue that there is no way to prove that one view is fair and another unfair. Is it right that someone who saves for many years and deprives themselves of luxuries should be taxed on gains from the savings? Is that more right than someone who borrows heavily to enjoy themselves should benefit from the saver's wealth through tax transfers? Should the minority that saves support the majority that does not save?

Perhaps the answer is yes, perhaps it is no. Why can't there be room for choice? Why not permit states to determine levels of property, inheritance and capital gains taxes rather than the federal government. Then, Americans could choose what state to live in based in part on preferences for taxation.

Stop Eminent Domain Abuse: Support the Institute for Justice on Kelo Day

The Institute for Justice is memorializing Kelo Day, the third anniversary of the decision that permitted rapacious politicians to seize private homes in the interest of sub-prime mortgage lenders and the inept real estate developers whom they finance. The Republicans, led by Bill Frist, the Duke of Bloat,dropped the ball in the Senate on passing legislation that would have limited federal subsidies to states that permit private-use eminent domain. Now, the Republicans cannot understand why they are not receiving much public support. According to Suzette Kelo on behalf of the Institute for Justice:

"On this, the third anniversary of the U.S. Supreme Court’s dreadful decision, I’m asking for 10,000 people to join me in donating to the non-profit legal foundation that stood by me all the way to the Supreme Court, and continues to stand by heroic individuals fighting to keep the homes that are rightfully theirs.

"Eminent domain abuse continues coast-to-coast! Despite tremendous gains in state courts and state legislatures since the Supreme Court’s ruling, eminent domain abuse is still rampant. Click on the links below to read more."

Barbecue 6-21

Pamela Hall took a number of beautiful pictures of our barbecue on 6-21 in West Shokan. Here are a few of her pictures.

George Phillips on Maurice Hinchey

George Phillips has written an excellent article for Poughkeepsie Journal on Congressman Maurice Hinchey's crackpot proposal to establish price controls on gasoline. Phillips reminds us of:

"the long gas lines and fuel rationing of the 1970s, and has seen the disastrous artificial shortages price controls created. Many gas stations were forced to restrict gasoline purchases to a few gallons per customer or only to commercial vehicles. Others closed down entirely, unable to find gasoline for their customers."

Phillips astutely points out:

"supply and demand is a natural law of the land...The plan would effectively shut down oil companies that could lose far less money by simply not selling gasoline."

The bottom line is that America, and New York's 22nd Congressional district, would be better off with Phillips, not Hinchey, as Congressman.

Maurice Hinchey on the Road to Serfdom

Fox News's Special Report with Brit Hume played a clip of my Congressman, Maurice Hinchey, advocating nationalization of the American oil companies. I have been concerned about inflation for the past year or two, and Hinchey's remarks suggest one reason. The instability and wealth transfer due to inflation lead to increased demand for authoritarian solutions. Increasing government control of oil companies will increase the authority of politicians but it will not reduce gasoline prices or increase exploration. In 1911 the Supreme Court broke up Standard Oil, the most efficient oil company of its day. The reason was to enhance competition. (The decision was misguided.) Now, Congressman Hinchey wishes to eliminate competition and establish a government-controlled oil monopoly.

Part of Congressman Hinchey's willingness to vent uninformed views without inhibition is that he has run unopposed for the past several Congressional elections. Hopefully, that will not be the case this year. A high school teacher from Binghamton, NY, George Phillips, is going to run against Mr. Hinchey. Mr. Phillips is disadvantaged for several reasons. First, New York's 22nd Congressional district is absurdly gerrymandered. (Mr. Hinchey corruptly designs his election district while he claims that he can run oil companies honestly and effectively.) Due to the gerrymandering, New York's 22nd Congressional district includes Poughkeepsie, the only point it is east of the Hudson, the southern and eastern Catskills, and then a thin strip that stretches west through Binghamton and Ithaca. This has the effect of including Poughkeepsie, New Paltz, Kingston, Binghamton and Ithaca, all Democratic, in one district. A second disadvantage is that Mr. Phillips is a newcomer to politics and is organizing a campaign from scratch.

Mr. Phillips can use all of the help and advice that he can get. Any support would be welcome. A defeat of Congressman Hinchey would remove a festering, reactionary sore from Congress.

Is The Stock Market Discounting an Obama Victory?

The Fed Funds rate is now 2%, down from 5.25% a year ago. The Fed has cut interest rates as gasoline and food prices have been rising quickly. The stock market is usually stimulated by monetary expansion, but it has been slow to react this time. The reason might be psychological, that is, news media reports about recession may have spooked investors. But the stock market declines are continuing past the points where the mainstream media rumor mill ought to have an effect. The Dow Jones Industrial Average was down 131 points today.

One possible reason is the strength that Barack Obama is showing in the polls and the widespread media bias supporting him. This reminds me of the 1976 race when Jimmy Carter, relatively unknown, received a considerable degree of media propaganda in support of his candidacy, which spurred his victory. According to Real Clear Politics Obama currently leads McCain in the major polls by about 4-5%. These differences may not be statistically significant in any one poll, but the fact that all polls are showing similar findings suggests significance. At the same time, public opinion is volatile at this stage of a campaign so a difference at this point may not be meaningful even if statistically significant.

Barack Obama has repeatedly stated that he favors tax increases with respect to capital gains, inheritance and income. Capital gains tax increases would depress the stock market because they reduce the real returns to investors. It is not illogical to consider that the stock market may be depressed at this point in part in reaction to the increasing probability of an Obama victory.

Publius on Attorney Martin Carasso

"Sue" O'Malley's attorney Martin Carasso has apparently gotten into a snit with "Publius" and other advocates of free speech at the Free Speech at CUNY website. I have something in common with Attorney Carasso. My first name is Mitchell and Attorney Carasso attended the William Mitchell College of Law. Also, in 1984 an attorney punched me in the eye while I was driving and wearing glasses (he was a passenger in my car) and I had to get seven stitches. Ultimately, I settled for $3,000. Thus, I know something about low-cost legal advice. Therefore, I must comment.

Allegedly, Attorney Carasso wrote an article entitled "Joseph Martin Carasso on low-cost legal advice for independents" and now claims that he "never advertised for low cost legal services.” This is disturbing. Very disturbing. Attorney Carasso should come clean and tell Publius the fee he is receiving for representing Professor O'Malley in suing the awe-inspiring, exalted Professor Karkhanis.

Will Obama Butcher Health Care As the Democrats Have Butchered Education?

Larwyn just forwarded a Hugh Hewitt Town Hall post that quotes Barack Obama's expression of delight in "creative" education at a charter school in Colorado:

"When you start working with teachers, tapping into their creativity, then you start designing curriculums that tap into the childrens' creativity. I was at a wonderful charter school in Colorado, ah, that had designed the entire school year --each year was designed around a theme-- and this is a majority Hispanic school, but the theme that year, they called it "Passages." And it was all about the African American experience.And so they incorporated music, you know, ah tracing sort of the history of African music through blues through jazz to modern times, along with history, along with literature, and these kids last year, ah, the year before they started this charter school, about 50% of the kids had dropped out, and now a 100% of them are graduating, a 100% of them are going to college because they were engaged in a curriculum that was interesting to them and seemed relevant to them, ah, and they incorporated art and music to make school interesting."

Barack Obama's delight in failed "creative" or "progressive education" approaches is not surprising, because his associate, William Ayers, advocates them. In her landmark book Left Back: A History of Battles over School Reform Diane Ravitch outlines how the quack educationist establishment has rendered America an increasingly illiterate nation through its advocacy of the "progressive" approaches in which Mr. Obama takes delight. The Democratic Party, the chief ally of the educationist establishment, has butchered the education of American children.

Do the Democrats aim to similarly butcher the health care of American patients? Throughout the debate about the need for health reform, none of the advocates has questioned the ability of state-influenced health care to eliminate the need for rationing, and none has explained how the quality of care will be affected by reform. Michael Moore, in his film Sicko, uses Cuba as an example of the kind of care that Americans can expect from a public system. Cuba spends $250 per year per citizen on health care. In comparison, America currently spends better than $3,000 per year per citizen on health care.

Does Mr. Obama aim to butcher patients on a governmentally-dominated operating table much as the Democrats have butchered American childrens' education?

The Federalist Number 8 and the Second Amendment

The Federalist No. 8, attributed to Hamilton, sheds some light on the Second Amendment debate. As many have pointed out, the Second Amendment refers to the citizens' and the states' ability to resist a federal standing army. As such, it would seem that a robust interpretation as to the right to keep and bear arms is condign. In the Federalist Number 8 Hamilton argues that the threat of a standing army to liberty will not be great since the country, under the Constitution, would not ordinarily need to worry about military threats and so the federal army would not need to be large. He adds that because of the rarity of internal invasions:

"The smallness of the army renders the natural strength of the community an overmatch for it; and the citizens not habituated to look up to the military power for protection, or to submit to its oppressions, neither love nor fear the soldiery; they view them with a spirit of jealous acquiescence in a necessary evil and stand ready to resist a power which they suppose may be exerted to the prejudice of their rights.

"The army under such circumstances may usefully aid the magistrate to suppress a small faction, or an occasional mob, or insurrection; but it will be unable to enforce encroachments against the united efforts of the great body of people."

The Second Amendment reads:

"A well regulated militia, being necessary to the security of a free state, the right of the people to keep and bear arms shall not be infringed."

It seems evident that the Second Amendment, like Hamilton, refers to the public's and the states' ability to resist military incursions on liberty. Gun ownership in this light is not only an individual right, but an individual responsibility. Far from limiting the right to bear arms, the phrase "a well regulated militia" suggests that all Americans ought to bear arms as a defense against a standing army and suppression of the citizenry. Would that the European victims of nazism and communism had taken the advice of the Bill of Rights and formed a well-regulated militia.