Friday, November 21, 2014

Confusing the Mission

The Rolling Stones article, that appeared this week focused on allegations of criminal violence at the University of Virginia, shows what can happen when institutions depart from their main mission.

At the first hint of criminal activities occurring in the University environment, the police should have been alerted.  Had this happened on each occasion that criminal allegations were alleged, it is very likely that the types of things described in the Rolling Stones article would, by now, be a thing of the past.  Nothing gets the point across better than seeing the perpetrators draw long jail terms for their criminal activity.  No amount of moralizing can make up for simply turning the problem over to the proper authorities.

The publicity that would result from police investigations of criminal activity -- perp walks and all -- would provide solid and useful information for undergraduates about the real dangers that may exist for them in raucous party environments.  Every parent of every college student and every college student should read the Rolling Stones article.  This information should not be suppressed or ignored.

Imagine that the young people involved in the events described in the RS article had not been students, but instead been working members of the community.  No doubt, the likelihood of police involvement at an early stage would have been much more likely.  Would University staff dealing with the situation respond in the same way, if the assailants were non-students? 

Universities don't belong in the criminal justice system.  That's what we have police and courts for.  If it's an allegation of a crime, turn the information over to the police.  Period.

The prime mission of a university is education -- not criminal justice.  

Monday, November 17, 2014

What Japan's Problems Foretell

The Japanese economy continued its downward path according to data released yesterday.  This surprised pundits who believe in QEs -- central bank purchases of government debt.  The QE's seem to have had no impact in the US other than balooning the Federal Reserve balance sheet.  Looks like a similar outcome has emerged in Japan.

What is important in the Japanese story is the enormous level of Japanese government debt, moving toward 2 1/2 times GDP at a rapid rate.  Japan is running out of room.  So is the rest of the developed world.

At some point, enormous debt levels proscribe policy alternatives and that is precisely what has happened in Japan.  Higher and higher debt levels eventually will reach a tipping point and further sustained economic progress becomes impossible. Europe is probably there already.  Japan is showing, with the recent data, that it is there as well.

So, what about the US?  We seem to purring along while the rest of the developed world stagnates. Can this continue?  Our national debt has doubled in the last six years while GDP has moved sluggishly forward.  We can't be far behind Japan and Europe.

Saturday, November 15, 2014

Bending the Cost Curve

As the New York Times notes in today's edition, health insurance costs under Obamacare-approved plans are set to rise more than 20 percent in the new year.  At that rate, health costs will, in time, consume the entire household budget of the average American family.  So much for "bending the cost curve."

Meanwhile, More Americans are without health insurance today than on the day before Obama signed the "Affordable Health Care Act' into law.  And that trend will continue.

So, what do we have:  higher costs, more uninsured, fewer doctors, fewer hospitals, and decreasing quality of health care.  The Veterans Administration has already shown where the US system is headed.  The main function of many health care officials in the VA is to fudge the numbers so that the plight of veterans never makes the light of day.  Expect more of that from Obamacare.

From the finest health care system in the world to one of the worst.  It won't take long.  Our health care system is simply following the same route that has already been pursued by our public education system.

To the wealthy elites, like Jonathan Gruber, this is all okay. They don't get their education or health care in the same way or place that they are forcing upon the average American family.  They live comfortably in their private schools and cloistered universities, while deliberately misleading the American public, who they openly refer to as "stupid."

Friday, November 14, 2014

The Jonathan Gruber Flap

Sadly, the revelations that surfaced this past week concerning MIT Professor Jonathan Gruber came as no surprise to many of us in academe.  Numerous videos of Gruber, the architect of both RomneyCare and ObamaCare, laid bare the duplicity and hypocricy of the machinations that led to Congressional passage of both RomneyCare and ObamaCare.  While Gruber has made it clear he wishes that these videos had never seen the light of day, he has yet to dispute the central theme of the videos-- that Gruber and others deliberately mislead the "stupid" American people regarding almost every aspect of ObamaCare.

It is clear that Gruber would prefer not to have to deal with messy things like democracy and transparency.  Gruber, like Krugman, are so convinced that they are right and that the average American is stupid, that there is really no need for Americans to be properly informed.  Indeed, Gruber's admissions of duplicity were put forward with pride.  Gruber thought that his views would never become public because his contempt for the average American was displayed in talks to fellow academics, most of whom share his contempt for the average American and for democracy itself.

This is what happens in the world of the elite, that Tom Sowell has so eloquently described on many occasions.  Debate and process are irrelevant when you have all the answers. No need for transparency or honesty, when your view of the greater good is at stake.

This attitude explains why most academics are opposed to letting Americans choose for themselves -- whether in education, health care, or in the workplace.  They know best.  Gruber deserves thanks for exposing his view of the world for all of us to see.

Sunday, November 2, 2014

What Should BeThe Republican Agenda?

It seems increasingly likely that the Republicans will control both the House and the Senate after the voting is over on November 4th (though likely runoffs could take place in Georgia and Louisiana).  If the Republicans win, what should they do?

There are basically two directions they can pursue: 1) The gimmickry approach; 2) The free market approach. 

The gimmickry approach is to propose a variety of tax and spend "gimmicks" designed to boost economic growth.  This would simply replace Democratic gimickry with Republican gimickry.  The Democrats have been using the taxpayer to reward their friends; now it's our time, say Republicans.  If the gimmickry approach is taken, then you can forget about any real sustainable economic growth.  It won't happen.

The free market approach will be mostly about undoing the most damaging new regulations, new taxes, new government bureaucracies that have been put in place the last five decades.  Repeal of Dodd-Frank and Sarbanes-Oxley would be a good beginning.  Returning the Justice Department to the enforcement of law as opposed to the policies of extortion that dominate current Justice Department policy.

Passing a simple law that says that every citizen has the right to buy or not to buy whatever health insurance plan they want and that no law can restrict the right of insurance companies to sell insurance plans that people want.  There are other ways to deal with "pre-existing" conditions and lapses in coverage than destroying the rights of ordinary Americans to pursue health care services in whatever way they wish.

Eliminate the tort-crazy litigation that dominates American commerce.  The old "buyer beware" doesn't solve all problems, but it is time to rethink the current litigation overkill of modern day America.  Not just in health care, but in all areas of commerce.  The abuse of "class action" suits has simply served to further damage the economic standing of the average American, who owns the stocks that end up footing the bills for this madness.

A simple return to free markets should be the agenda of the Republicans.  Only such an agenda can further the economic interests of the average American.

Saturday, November 1, 2014

Japan's Monetary Stimulus -- Good News?

World stock markets surged last week on the news that Japan was putting in place it's own version of the Bernanke QE (quantitative easing) policy.  What is QE?

QE is a central banking policy that involves creating (out of nothing) currency and then using that (digitally created) currency to purchase bonds (usually, mostly government bonds or government-backed bonds).  On the face of it, this policy seems pointless, other than possibly reducing the value of one's currency and expanding the amount of government debt by providing the government itself as a buyer.

So, what is the point, according to those who believe in QE?  To true believers, QE provides needed liquidity to a weak economy and keeps interest rates much lower than they would be. In other words, QE is seen as a stimulus to the economy by QE supporters, through there is no empirical evidence whatsoever that QE does what it supporters claim.

Interest rates during the 10 years of the Great Depression (1929-1939) were rock bottom, with treasury rates never exceeding 1/4 of one percent for the entire decade.  Where was QE when this was going on?  The answer is that there was no QE at all during this period.  Rates were low for reasons unrelated to Fed policy, which is probably also the case today.

QE basically enables higher levels of government debt that sets the stage for massive inflation once private lending takes off, dramatically expanding the money supply.  It works like a toxic and fatal drug that, for a while, eases the pain.

So, what's the deal with Japan.  Japan is the world's third largest economy after China and the US with a per capita income of almost $ 50,000.  But Japan has two major problems: (i) too much sovereign (government) debt -- over $ 10 trillion and more than twice its GDP; (ii) moribund economic growth.

So, what to do?  QE simply expands the ability of Japan to raise its debt levels, while doing absolutely nothing about Japan's moribund economic growth.   In other words, the answer to the problem of too much debt is to increase the amount of debt.  That's the answer that the Eurozone has stumbled upon.

When the momentary euphoria fades, reality will set in.  QE policies only make things worse.

Wednesday, October 29, 2014

Riding the Stagecoach

Increasingly, the US is divided into two groups: those riding atop the stagecoach and those running along beside, trying desperately to climb aboard.  Government employees of all stripes, including public school teachers and university professors, are happily on top of the stagecoach driving the horses forward.  "Higher pay, more benefits," they cry as they look with contempt upon those trying to muscle their way on board. 

Listen to Elizabeth Warren, Harvard University's version of a "Native American," as she exhorts her followers to pour more and more money into the privileged folks that ride in the comfortable seats on top of the stagecoach. (Warren had noted early in life that a possible ticket to the top of the stagecoach was to pretend to be something that she was not -- a Native American.  With that pretense, she launched her Harvard and then, later, her political career.  She's not stupid.  At least Ms. Warren had the good grace, years later, to own up to the falsehood, but only after riding atop the stagecoach for a number of years).

Those in the private sector, running alongside the stagecoach, trying to provide for themselves and their families by competing in the what is left of the free market, are increasingly falling further and further behind.  This is the real inequality story.  Those on the stagecoach have the political muscle to extract rents from the rest of the population and they do so. Earning between two and five times as much as the average income in the US, government employees clamor for more -- and get it.

Meanwhile by promoting increases in minimum wage laws, which will never affect those riding atop the stagecoach, the elite effectively toss obstacles in the way of those running alongside.  Too bad if your skill set isn't sufficient to make the minimum that we, the elite, think you should be paid.  There is no place on this stagecoach for you.

As the free market plays a decreasing role in the US, more and more goods and services are allocated by government decree, often without any consideration by the Congress.  The executive branch increasing feels that it is its right to decide who gets what.  This is a far cry from a free and independent people.  Instead it becomes who you know and who you lobby.  Stand in line for your benefits.  Wait in line for your health care.  The government will take care of you.

In a free market, all would have the opportunity to climb aboard the stagecoach, but in the brave new world, it's who you know and how much political muscle you can bring to bear.