Friday, September 17, 2010

T. Coddington Vorhees VII Laments the Destruction of Traditional Republicanism

"Gentlemen, at long last it is time to draw a line in the sand," I announced. "For too long we have stood by idly while these insipid cretins - the Palins, the Limbaughs, the Becks - have run roughshod over our once proud party, making it a mockery and ruining our social standing, advancing the insane notion that years of Washington experience and good breeding are somehow trumped by idiotic pledges to dismantle the very government on which their very existence depends. Well, my friends, I say unto you, with this Delaware disaster they have gone a bridge too far. Today we begin the counterattack, and we will make it plain to the insurrectionists that they shan't see another dime of our inheritances."

The polite huzzahs and claps emanating from the speaker-phone indicated to me that my call to arms was striking a chord within the heart of traditional Republicanism. Heartened, I pressed on.

"If it is a fight the Jacobins want, then it is a fight they shall have," I added with a pugilistic flourish. "And let this be their warning - I once took 4th place in the East Hampton Silver Gloves boxing tournament."

My battle cry was greeted, as you might imagine, with a lusty cheer the likes of which had not been heard since the eve of Agincourt. And justly so; for in the course of human events, there comes a time when a well bred man must roll up his cashmere sleeves, grab the old family swagger stick, and remind the rabble of their proper place.

Friday, August 20, 2010

Mark Perry's Post Regarding Charity (I've been saying this for years)


Entrepreneurs Can Make a Greater Contribution to Society Through Business Than Charity

From today's WSJ editorial page "Gates and Buffett Take the Pledge" by Kimberly Dennis:

"Bill Gates and Warren Buffett announced this month that 40 of America's richest people have agreed to sign a "Giving Pledge" to donate at least half of their wealth to charity. With a collective net worth said to total $230 billion, that promise translates to at least $115 billion. It's an impressive number. Yet some—including Messrs. Gates and Buffett—say it isn't enough. Perhaps it's actually too much: the wealthy may help humanity more as businessmen and women than as philanthropists.

Successful entrepreneurs-turned-philanthropists typically say they feel a responsibility to "give back" to society. But "giving back" implies they have taken something. What, exactly, have they taken? Yes, they have amassed great sums of wealth. But that wealth is the reward they have earned for investing their time and talent in creating products and services that others value. They haven't taken from society, but rather enriched us in ways that were previously unimaginable.

Even if Mr. Gates makes progress in achieving his ambitious philanthropic objectives—eradicating disease, reducing global poverty, and improving educational quality—these accomplishments are unlikely to match what he achieved by giving us the amazing capability we literally have at our fingertips to access and spread information. The very doctors and scientists who may develop cures for diseases like malaria will rely on the tools Microsoft supplies to conduct their research. Had Mr. Gates decided to step down from his company and turn to philanthropy sooner than he did, they might have fewer such tools.

Let's hope the philanthropy of those who do sign the Giving Pledge achieves great things. But let's not fool ourselves into thinking that businessmen are likely to achieve more by giving their money away than they have by making it in the first place."

From the NBER paper "Schumpeterian Profits in the American Economy: Theory and Measurement" by William Norhaus:

"The present study examines the importance of Schumpeterian profits in the United States economy. Schumpeterian profits are defined as those profits that arise when firms are able to appropriate the returns from innovative activity. We first show the underlying equations for Schumpeterian profits and then estimate the value of these profits for the non-farm business economy.

We conclude that only a minuscule fraction of the social returns from technological advances over the 1948-2001 period was captured by producers, indicating that most of the benefits of technological change are passed on to consumers rather than captured by producers. For the entire postwar period and for the nonfarm business sector, innovators are able to capture about 2.2% of the total surplus from innovation."

MP: In other words, it’s very likely that the total value created for society by Bill Gates’ innovative activity by starting Microsoft far exceeds his own personal wealth, so he has already given back billions of dollars worth of value to society, and should feel no need to give anything more back. In fact, a stronger case could be made that consumers have taken something from Bill Gates, than the opposite. If the Nordhaus analysis accurately applies to Bill Gates, almost 98% of the social returns from the value of Microsoft products have already been captured by consumers around the world, which greatly exceeds the personal fortune of Bill Gates. And the contribution to society from Bill Gates’ capitalist activities will likely far exceed the contribution to society of his charitable giving.

Thursday, August 5, 2010

THE WEAK HORSE



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Steyn on the World
Thursday, 08 July 2010

In 1939, Capt. Peter Sanders, serving with the Tochi scouts on the Afghan-Indian border, was blown up by a Waziri booby trap and lost his right arm. Shortly afterwards, he accepted an invitation to lunch from the tribesman who’d planted the bomb. Awfully decent of the chap, and not a bad spread, all things considered.

Not everyone cares for the old stiff upper lip: “I spit on your British phlegm!” as the Khazi of Kalabar remarked in what remains the seminal work on Afghanistan, Carry on up the Khyber. But imperialism requires a certain dotty élan. Without it, it’s no fun. You’re just a guy holed up in a Third World dump occasionally venturing out in the full RoboCop to pretend to implement some half-assed multilateral “nation-building” strategy that NATO defence ministers all agreed to at some black-tie banquet in Brussels and then promptly forgot about. Instead of the Tochi scouts—Pathan irregulars commanded by British officers—we now have Afghan units “trained,” or at any rate funded, by Western governments. A headline in the Washington Post captures the general malaise: “Afghan forces’ apathy starts to wear on U.S. platoon in Kandahar.” On a recent patrol through the city, 1st Lieut. James Rathmann stopped at a police checkpoint and found them all asleep in a nearby field.

It’s not just the natives who are dozing. In London recently, Robert Gates, the U.S. defence secretary, complained that the allies’ promised 450 “trainers” for the expanded Afghan National Army had failed to materialize. These are not combat roles, so in theory even the less gung-ho NATO members should have no objection. Supposedly, 46 nations are contributing to the allied effort in Afghanistan, so that would work out at 10 “trainers” per country. Yet even that modest commitment is too much. So the Afghan army will fill up with time-servers and Taliban sympathizers.

Colonial administration was always a cynic’s field. In Lisbon last week, I was admiring the beauty of the jacarandas when David Pryce-Jones, the scholar and novelist, reminded me of the words of Lord Lloyd, British high commissioner in Egypt in the twenties: “The jacarandas are in bloom,” he observed. “We shall soon be sending for the gunboats.” When the weather heats up, so do the natives. In Lloyd’s day, we were cynical about the locals. Now we’re starry-eyed about the locals—marvellous chaps, few more trainers and they’ll do splendidly—while they’re utterly cynical about us. Hamid Karzai has just fired his two most pro-American cabinet ministers and is making more and more pro-Taliban noises. This is a man who for the last nine years has been kept alive only by U.S. military protection. A throne in Kabul may not be much, but, such as it is, he owes it entirely to his patrons in Washington. Why would Putin, Ahmadinejad or the ChiComs take Barack Obama seriously when even a footling client such as Hamid Karzai can flip him the finger?

“When people see a strong horse and a weak horse,” said Osama bin Laden many years ago, “by nature they will like the strong horse.” The world does not see President Obama as the strong horse. He has announced that U.S. troop withdrawals will begin in 12 months’ time. Karzai takes him at his word, and is obliged to prepare for a post-American order in Afghanistan, which means reaching his accommodations with those who’ll still be around when the Yanks are over over there. The new government in London takes him at his word, too. Liam Fox, the defence secretary, wants as rapid a British pullout as possible. When Obama announced an Afghan “surge” dependent on such elements as mythical NATO trainers and then added that, however it went, U.S. forces would begin checking out in July 2011, he in effect ruled out the possibility of victory. Over 1,000 American troops have died in Afghanistan, 300 British soldiers, 148 Canadians. What will our soldiers be dying for in the sunset of the West’s Afghan expedition? What is Obama’s characteristically postmodern “surge” intended to achieve? More Afghan police sleeping in fields? Greater opportunities for women? Take Your Child Bride to Work Day in Kandahar? British troops, said Liam Fox, are not in Afghanistan “for the sake of the education policy in a broken 13th-century country.” And, even if they were, in certain provinces “education policy” seems to be returning to something all but indistinguishable from Mullah Omar’s days. The New York Post carried a picture of women registering to vote in Herat, all in identical top-to-toe bright blue burkas, just as they would have looked on Sept. 10, 2001.

Osama bin Laden’s strong horse/weak horse shtick is a matter of perception as much as anything else. On Sept. 12, 2001, the United States of America had just as many cruise missiles and aircraft carriers as it had 48 hours earlier. The only difference is that the world understood that, for once, America was prepared to use them. That’s why Moscow acceded to Washington’s “request” to use its old bases in Central Asia for northern access to Afghanistan. That’s why General Musharraf took seriously the Bush administration’s “shockingly barefaced” threat to bomb Pakistan “back to the Stone Age” if it didn’t get everything it wanted out of Islamabad. By contrast, a couple of days before, Mullah Omar and the Taliban appear to have agreed to let their al-Qaeda tenants strike America with nary a thought for the consequences to their own country.

Let’s suppose that the evacuation of the twin towers had not been quite as efficient and that the death toll was way up over 10,000. Let’s also suppose that Flight 93 had not been stymied by the vagaries of scheduling and the bravery of its passengers and had succeeded in hitting the White House and decapitating the regime. America was the most powerful nation on the planet, yet Mullah Omar evidently was unperturbed by the possibility of total, devastating retaliation against his toxic backwater.

The toppling of the Taliban was an operation conducted with extraordinary improvised ingenuity and a very light U.S. footprint. Special forces on horseback rode with the Northern Alliance and used GPS to call in air strikes: they’ll be teaching it in staff colleges for decades to come. But then the Taliban scuttled out of town, and a daring victory settled into a thankless semi-colonial policing operation, and then corroded further under the pressure of the usual transnational poseurs. After 2003, Afghanistan became the good war, the one everyone claimed to have supported all along, if mostly retrospectively and for the purposes of justifying their “principled moral opposition” to Bush’s illegal adventuring against Saddam. Afghanistan was everything Iraq wasn’t: UN-approved, NATO-backed, EU-compliant. It’d be tough for even the easiest nickel ’n’ dime military incursion to survive that big an overdose of multilateral hogwash, and the Afghan campaign didn’t. Instead of being an operation to kill one of the planet’s most concentrated populations of jihadist terrorists, it decayed into half-hearted nation-building in which a handful of real allies took the casualties while the rest showed up for the group photo. The 2004 NATO summit was hailed as a landmark success after the alliance’s 26 members agreed to put up an extra 600 troops and three helicopters for Afghanistan. That averages out at 23.08 troops per country, plus almost a ninth of a helicopter apiece. As it transpired, the three Black Hawks all came from one country—Turkey—and within a year they’d all gone back. Those 600 troops and three helicopters made no practical difference, but the effort expended on that transnational fig leaf certainly contributed to America’s disastrous reframing of its interests in Afghanistan.

And so here we are, nine years, billions of dollars and many dead soldiers later, watching the guy we’ve propped up with Western blood and treasure make peace overtures to the Taliban’s most virulently anti-American and pro-al-Qaeda faction in hopes of bringing them back within the government. Being perceived as the weak horse is contagious: today, were Washington to call Moscow for use of those Central Asian bases, Putin would tell Obama to get lost, and then make sneering jokes about it afterwards. Were Washington to call Islamabad as it did on Sept. 12, the Pakistanis would thank them politely and say they’d think it over and get back in 30 days. The leaders of Turkey and Brazil, two supposed American allies assiduously courted and flattered by Obama this past year, flew in to high-five Mahmoud Ahmadinejad. The new President wished to reposition his nation by forswearing American power: he thought that made him the nice horse; everyone else looked on it as a self-gelding operation—or, as last week’s U.S. News & World Report headlined it, “World sees Obama as incompetent and amateur.”

If the Taliban return to even partial power in Afghanistan, the unctuous State Department spokesmen will make the best of it. But the symbolism will be profound, and devastating in what it says about American will.

from Maclean's, June 2010


Wednesday, June 30, 2010

Road to Serfdom?

Means vs. Ends [Victor Davis Hanson]

The Climategate emails, the Interior Department’s misrepresentation of the scientific analysis of the Gulf spill, the supposed Kagan touch-up of a bothersome medical opinion, the fraudulent Kos poll — there have been a number of news stories lately about fraudulent means being used to further noble liberal ends.

What all these diverse incidents have in common is a general feeling that exalted progressive aims — stop global warming, gulf drilling, restrictions on abortion, and the Right — sometimes necessitate a “by any means necessary” approach.

This impression is enhanced by the Obama administration’s similarly Jacobin approach to the law — reversing the order of Chrysler’s contractual creditors, declaring by edict what BP must set forth, trial balloons about enacting elements of amnesty and cap-and-trade by fiat rather than legislation when the votes are absent, Secretary Solis deciding that federal immigration law will not be enforced by her agency…

I guess we are in an age when morality is defined by the realization of certain social goals rather than the means by which one obtains them, however reprehensible.

Tuesday, June 15, 2010

I Sincerely Hope this is Incorrect

Tax Hikes and the 2011 Economic Collapse

Today's corporate profits reflect an income shift into 2010. These profits will tumble next year, preceded most likely by the stock market.

By ARTHUR LAFFER

People can change the volume, the location and the composition of their income, and they can do so in response to changes in government policies.

It shouldn't surprise anyone that the nine states without an income tax are growing far faster and attracting more people than are the nine states with the highest income tax rates. People and businesses change the location of income based on incentives.

Likewise, who is gobsmacked when they are told that the two wealthiest Americans—Bill Gates and Warren Buffett—hold the bulk of their wealth in the nontaxed form of unrealized capital gains? The composition of wealth also responds to incentives. And it's also simple enough for most people to understand that if the government taxes people who work and pays people not to work, fewer people will work. Incentives matter.

People can also change the timing of when they earn and receive their income in response to government policies. According to a 2004 U.S. Treasury report, "high income taxpayers accelerated the receipt of wages and year-end bonuses from 1993 to 1992—over $15 billion—in order to avoid the effects of the anticipated increase in the top rate from 31% to 39.6%. At the end of 1993, taxpayers shifted wages and bonuses yet again to avoid the increase in Medicare taxes that went into effect beginning 1994."

Just remember what happened to auto sales when the cash for clunkers program ended. Or how about new housing sales when the $8,000 tax credit ended? It isn't rocket surgery, as the Ivy League professor said.

On or about Jan. 1, 2011, federal, state and local tax rates are scheduled to rise quite sharply. President George W. Bush's tax cuts expire on that date, meaning that the highest federal personal income tax rate will go 39.6% from 35%, the highest federal dividend tax rate pops up to 39.6% from 15%, the capital gains tax rate to 20% from 15%, and the estate tax rate to 55% from zero. Lots and lots of other changes will also occur as a result of the sunset provision in the Bush tax cuts.

Tax rates have been and will be raised on income earned from off-shore investments. Payroll taxes are already scheduled to rise in 2013 and the Alternative Minimum Tax (AMT) will be digging deeper and deeper into middle-income taxpayers. And there's always the celebrated tax increase on Cadillac health care plans. State and local tax rates are also going up in 2011 as they did in 2010. Tax rate increases next year are everywhere.

[laffer]

Now, if people know tax rates will be higher next year than they are this year, what will those people do this year? They will shift production and income out of next year into this year to the extent possible. As a result, income this year has already been inflated above where it otherwise should be and next year, 2011, income will be lower than it otherwise should be.

Also, the prospect of rising prices, higher interest rates and more regulations next year will further entice demand and supply to be shifted from 2011 into 2010. In my view, this shift of income and demand is a major reason that the economy in 2010 has appeared as strong as it has. When we pass the tax boundary of Jan. 1, 2011, my best guess is that the train goes off the tracks and we get our worst nightmare of a severe "double dip" recession.

In 1981, Ronald Reagan—with bipartisan support—began the first phase in a series of tax cuts passed under the Economic Recovery Tax Act (ERTA), whereby the bulk of the tax cuts didn't take effect until Jan. 1, 1983. Reagan's delayed tax cuts were the mirror image of President Barack Obama's delayed tax rate increases. For 1981 and 1982 people deferred so much economic activity that real GDP was basically flat (i.e., no growth), and the unemployment rate rose to well over 10%.

But at the tax boundary of Jan. 1, 1983 the economy took off like a rocket, with average real growth reaching 7.5% in 1983 and 5.5% in 1984. It has always amazed me how tax cuts don't work until they take effect. Mr. Obama's experience with deferred tax rate increases will be the reverse. The economy will collapse in 2011.

Consider corporate profits as a share of GDP. Today, corporate profits as a share of GDP are way too high given the state of the U.S. economy. These high profits reflect the shift in income into 2010 from 2011. These profits will tumble in 2011, preceded most likely by the stock market.

In 2010, without any prepayment penalties, people can cash in their Individual Retirement Accounts (IRAs), Keough deferred income accounts and 401(k) deferred income accounts. After paying their taxes, these deferred income accounts can be rolled into Roth IRAs that provide after-tax income to their owners into the future. Given what's going to happen to tax rates, this conversion seems like a no-brainer.

The result will be a crash in tax receipts once the surge is past. If you thought deficits and unemployment have been bad lately, you ain't seen nothing yet.

Mr. Laffer is the chairman of Laffer Associates and co-author of "Return to Prosperity: How America Can Regain Its Economic Superpower Status" (Threshold, 2010).

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Obamas Cozy Relationship with Unions Continues to Harm US

CARPE DIEM: What Do Protectionism, Union Power and Jones Act Have to Do with the Cleanup in the Gulf? A LOT