Archive for January 2017

FREE continuing promotion right under your nose …   3 comments

Books: Publishing, Reading, Writing

READERS will also find this interesting (and they can *see below how they may help), but …

This post is mainly for all you angst-ridden authors out there who moan and groan about how little promotion and publicity you receive for the books you publish. Yes, it’s true, there are definitely fewer outlets reviewing books or interviewing authors. So what are we supposed to do to get the word out and attract new readers to our work?

I have a cunning plan!

When I ePublished my first novel, I received “some” attention (i.e. Not a lot …) for my efforts, but I carried on regardless and continued to promote other authors, as well as my own books, through my business Alberta Books Canada. Then I moved back to the Caribbean and become much more involved in the online writing community, especially with regards to indie authors around the world who…

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Posted January 28, 2017 by aurorawatcherak in Uncategorized

Evolution and Modern Racism   Leave a comment


Some people today, especially those of anti-Christian opinions, have the mistaken notion that the Bible prescribes permanent racial divisions among men and is, therefore, the cause of modern racial hatreds. As a matter of fact, the Bible says nothing whatever about race. Neither the word nor the concept of different “races” is found in the Bible at all. As far as one can learn from a study of Scripture, the writers of the Bible did not even know there were distinct races of men, in the sense of black and yellow and white races, or Caucasian and Mongol and Negroid races, or any other such divisions.

The Biblical divisions among men are those of “tongues, families, nations, and lands” (Genesis 10:5,20,31) rather than races. The vision of the redeemed saints in heaven (Revelation 7:9) is one of “all nations, and kindreds, and people, and tongues”, but…

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Posted January 28, 2017 by aurorawatcherak in Uncategorized

Saving X Industry   1 comment

The art of economics consists in looking not merely at the immediate, but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group, but for all groups.

This is an ongoing series of posts on Henry Hazlitt’s Economics in One Lesson. You can access the Table of Contents here. Although written in 1946, it still touches on many of the issues we face in 2017, particularly the fallacies government economic programs are built upon.


We all in 2017 remember “too big to fail”. Hazlitt had heard these arguments in 1946 and thought they were important enough to address.

The representatives of X industry lobbies Congress because X industry is sick and dying. It
must be saved, which requires a tariff or higher prices or a subsidy. If it is allowed to die, workers will be thrown on the streets. Their landlords, grocers, butchers, clothing stores, and local motion picture theaters will lose business. Economic depression will spread in ever-widening circles.

Image result for image of too big to failIf X industry is saved through prompt Congressional action it will buy equipment from other industries. More workers will be employed and they will give more business to the butchers, bakers, and electronic gadget makers. Prosperity will spread in ever-widening circles.

There are an endless number of X industries this argument could be made for. In Hazlitt’s day it was coal and silver. In our day it is farms and “renewable” energy. To “save silver” Congress did immense harm. One of the arguments for the rescue plan was that it would help “the East.” One of its actual results was to cause deflation in China, which had been on a silver basis, and to force China off that basis. The United States Treasury was compelled to acquire large amounts of unnecessary silver at prices far above market level, and to store it in US vaults. The essential political aims of the “silver Senators” could have been achieved, at a fraction of the harm and cost, by government subsidy to the mine owners or to their workers; but the public would never have approved of such a blatant transfer of money without dressing it up in propagand about “silver’s essential role in the national currency.”

To save the coal industry Congress passed the Guffey Act, which compelled coal mine owners to conspire together not to sell below certain minimum prices fixed by the government. Though Congress had started out to fix “the” price of coal, the government soon found itself (because of different sizes, thousands of mines, and shipments to thousands of different destinations by rail, truck, ship and barge) fixing 350,000 separate prices for coal. One effect of this attempt to keep coal prices above the competitive
market level was to accelerate the tendency toward the substitution by consumers of other sources of power or heat—such as oil, natural gas, and hydroelectric energy — which then required subsidies to flow to the coal industry to offset this lost revenue.

For Hazlitt’s argument, he asked readers to set aside consideration of defense contractors or public utilities and instead look only at industries that are shrinking or perishing due to free compeition in the general economy and who are making the argument that their demise will bring down the economy with it and that being artificially propped up will help everyone else.

Yes, this is the same argument made by farmers for parity pricing and manufacturers for tariff protections. The same arguments that stood against these also stand against “too big (or important) to fail.”

X industry may claim that their field is already overcrowded, so they need the government to prevent other firms or workers from entering it.

Hello, the medical field!

Or they may insist they need to be supported by a direct subsidy from the government.

Hello, renewable energy!

If X industry is really overcrowded as compared with other industries it will not need any coercive legislation to keep out new capital or new workers. New capital does not rush into industries that are obviously dying. Investors do not eagerly seek the industries that present the highest risks of loss combined with the lowest returns. Nor do workers, when they have any better alternative, go into industries where the wages are lowest and the prospects for steady employment least promising.

If new capital and new labor are forcibly kept out of the X industry, either by monopolies, cartels, union policy or legislation, it deprives this capital and labor of liberty of choice and forces investors to put their money where the returns seem less promising to them than in the X industry. It forces workers into industries with even lower wages and prospects than they could find in the allegedly sick X industry. It means, in short, that both capital and labor are less efficiently employed than they would be if they were permitted to make their own free choices.

This should be a familiar argument by now. It leads to lowering of production which results in a lower average living standard, caused by either lower average money wages or by higher average living costs, or by a combination of both. Restrictive
policies might force wages and capital returns higher than otherwise within X industry itself, but wages and capital returns in other industries would be forced lower than otherwise. The X industry would benefit only at the expense of the A, B, and C industries.

Direct subsidy to save X industry would merely transfer of wealth or income to the X industry. The taxpayers would lose precisely as much as the people in the X industry gained.

The only real advantage of a subsidy from the taxpayers’ point of view is that it is at least honest. There is far less opportunity for the intellectual obfuscation that accompanies arguments for tariffs, minimum-price fixing, or monopolistic exclusion.

It is obvious in the case of a subsidy that the taxpayers must lose precisely as much as the X industry gains. It should be equally clear that, as a consequence, other industries must lose what the X industry gains. They must pay part of the taxes that are used to support the X industry. And consumers, because they are taxed to support the X industry, will have that much less income left with which to buy other things. The result must be that other industries on the average must be smaller than otherwise in order that the X industry may be larger.

Subsidies result not only in a transfer of wealth or income, but also in the shrinkage of other industries. Capital and labor are driven out of industries in which they are more efficiently employed and are diverted to an industry where they are less efficiently employed.

Less wealth is created. The average standard of living is lowered compared with what it would have been.

If X industry is shrinking or dying why should it be kept alive by artificial respiration? It’s illogical to assert that all industries must be simultaneously expanding. In order that new industries may grow fast enough it is necessary that some old industries should be allowed to shrink or die. They must do this in order to release the necessary capital and labor for the new industries.

If we had tried to keep the horse-and-buggy trade artificially alive we should have slowed down the growth of the automobile industry and all the trades dependent on it. We should have lowered the production of wealth and retarded economic and scientific progress.

It is just as necessary to the health of a dynamic economy that dying industries be allowed to die as that growing industries be allowed to grow. The first process is essential to the second. It is as foolish to try to preserve obsolescent industries as to try to preserve obsolescent methods of production. Improved methods of production must constantly supplant obsolete methods, if both old needs and new wants are to be filled by better commodities and better means.

Posted January 28, 2017 by aurorawatcherak in economics

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Medicaid Is a Ticking Time Bomb | Daniel J. Mitchell   Leave a comment

The burden of government spending is already excessive. But the numbers will get worse with the passage of time if policy is left on autopilot.

The main culprits are the so-called mandatory programs. Entitlements such as Social Security, Medicare, Food Stamps, and Obamacare that automatically dispense money to various constituencies are consuming an ever-larger chunk of the economy’s output.

And if you want to be even more specific, the fastest-growing entitlement program is Medicaid, which was originally supposed to be a very small program to subsidize health care for poor people but has now metastasized into a budget-gobbling fiscal disaster. Arguably, it’s the entitlement program most in need of reform.

So how big is the problem? Enormous if you look at the numbers from the National Association of State Budget Officers.

States increased their spending in fiscal year 2015 by the biggest margin in more than 20 years, but most of the increase was thanks to huge leaps in Medicaid spending under the first full year of the Affordable Care Act (ACA). Spending increased last fiscal year, which ended on June 30 for most states, by 7.8 percent, according to new estimates from the National Association of State Budget Officers (NASBO). It’s the biggest boost since 1992 and was thanks to a 15.1 percent increase in Medicaid spending, much of that paid for via federal Medicaid funds. Illinois, Michigan, Kentucky, Nevada and Oregon saw more than 30 percent increases in federal funding because they expanded Medicaid under the ACA. But 2015 was also a year where states were putting up more of their own money again.

Here’s the chart showing which outlay categories grew the fastest.

The article points out that spending is outpacing revenue.

On average, state revenues aren’t keeping pace with spending; NASBO estimates General Fund revenues will increase by just 3.8 percent.

Though the real problem is that spending is expanding faster than the private sector, which is the opposite of what is called for by my Golden Rule.

One of the reasons Medicaid grows so fast is that the program is split between Washington and the states, with both picking up a share of the cost. This may sound reasonable, but it creates a very perverse incentive structure since politicians at both levels can vote to expand the spending burden while only having to provide part of the cost.

The National Center for Policy Analysis explains how this system produces bad decisions.

Medicaid has a horrible financing mechanism: Federal transfers to states are not based on the number of poor people, or any other reasonable calculation. Instead, they depend on the amount of its own taxpayers’ money a state spends. Traditionally, when California spent $1 on Medi-Cal, the federal government kicked in $1. …So, state politicians hike taxes and spending on their own citizens in order to get as much funding as possible from people in other states (via the feds). Hospitals and Medicaid MCOs maximize this by agreeing to a state tax on themselves, which the state uses to ratchet up the federal funding. After multiplication, the money goes right back to these providers. …Stopping this wild spending growth requires fundamental reform to Medicaid’s financing. Congressional Republicans have proposed “block grants,” whereby states would get federal Medicaid transfers based on their population of poor residents, not how much they gouge out of their own people.

But unless that kind of reform happens, the program will continue to grow and become an ever-larger fiscal burden.

Heritage Action has more details on the perverse incentives of the current system.

…the federal government promises to reimburse states for a majority of their Medicaid spending, most of which involves reimbursements to health care providers. Therefore, states collude with health care providers in the following manner: they tell providers that they will tax them (so-called “provider taxes”), bringing in more revenue to the state. The state then promises to filter that money back to those same providers in the form of higher Medicaid reimbursements. States then bill the federal government for this added cost. Because the federal government provides more than 50% of total Medicaid funding, both state governments and Medicaid providers are made better off by the arrangement, while the federal government is stuck footing a larger bill it had no part in creating.

Though I partially disagree with the assertion that the feds are blameless. After all, it was politicians in Washington who created this wretched system, including the reimbursement rules that states manipulate.

This info-graphic illustrates how the “provider fee” scam operates.

The net result of all this is a nightmare for federal taxpayers, but states also are losing out when you consider the long-run consequences. And that’s even true with the Medicaid expansions contained in Obamacare, which supposedly were going to be financed almost entirely by Uncle Sam. The Wall Street Journal reports.

…the Affordable Care Act was designed to essentially bribe states to expand their Medicaid programs: The feds offered to pay 100% of additional costs through 2016, dropping to 90% by 2020. This “free money” prompted 30 states and the District of Columbia to take the deal. Democratic activists have joined with state hospital lobbies to pressure lawmakers in the remaining 20 state capitals to follow.

But free money can be very expensive.

Consider the experience of the states that did expand Medicaid. “At least 14 states have seen new enrollments exceed their original projections, causing at least seven to increase their cost estimates for 2017,” the Associated Press reported in July. The AP says that California expected 800,000 new enrollees after the state’s 2013 Medicaid expansion, but wound up with 2.3 million. Enrollment outstripped estimates in New Mexico by 44%, Oregon by 73%, and Washington state by more than 100%. This has blown holes in state budgets. Illinois once projected that its Medicaid expansion would cost the state $573 million for 2017 through 2020. Yet 200,000 more people have enrolled than were expected, and the state has increased its estimated cost for covering each. The new price tag? About $2 billion… Enrollment overruns in Kentucky forced officials to more than double the anticipated cost of the state’s Medicaid expansion for 2017, the AP reports, to $74 million from $33 million. That figure could rise to $363 million a year by 2021. In Rhode Island, where one-quarter of the state’s population is now on Medicaid, the program consumes roughly 30% of all state spending, the Providence Journal reports. To plug this growing hole, Rhode Island has levied a 3.5% tax on insurance policies sold through the state’s ObamaCare exchange.

Interestingly, Obamacare is causing pro-big government states to dig even deeper fiscal holes.

The National Center for Policy Analysis has some remarkable data on this development.

States that expanded Medicaid tend to have per capita state spending that’s about 17 percent higher than non-expansion states. …In 2004, expansion states had median per capita tax collections (both state and local) of 19 percent more than non-expansion states. By 2012, this gap had widened with expansion states collecting 28 percent more taxes per capita than non-expansion states. Moreover, since 2008 expansion states have moved to increase taxes, while non-expansion states have reduced taxes slightly.

Unsurprisingly, the states that are making government bigger are experiencing slower growth.

In 2001 expansion states had real median income that was nearly 13 percent higher than non-expansion states. However, by 2013 this gap had narrowed to just over 9 percent. Expansion states have historically had slightly lower poverty rates, but the difference was only 1 percentage point by 2012 (12.9 percent vs. 13.9 percent). Non-expansion states, although slightly poorer, have lower unemployment than expansion states (6.7 percent versus 7.2 percent).

By the way, the decision by some states to reject Medicaid expansion is a huge – and underappreciated – victory over Obamacare.

Another point worth mentioning is that the program isn’t even a good deal for the poor according to Scott Atlas at the Hoover Institution. Here’s some of what he wrote for the Wall Street Journal.

Americans should be more worried than ever about Medicaid… The cost of the $500 billion program is expected to rise to $890 billion by 2024… Yet more spending doesn’t necessarily mean better care for beneficiaries… The expansion of Medicaid is one of the most misguided parts of ObamaCare… Some 55% of doctors in major metropolitan areas refuse to take new Medicaid patients… Medicaid enrollees who manage to see a doctor typically experience outcomes worse than those under private insurance. That means more in-hospital deaths, more complications from surgery, worse posttreatment survival rates, and longer hospital stays than similar patients with private insurance. A randomized study by the Oregon Health Study Group showed that having Medicaid did not significantly improve patients’ physical health compared with those without insurance.

The proverbial icing on this foul-tasting cake is the way the program enables staggering amounts of fraud and theft.

I’ve written about this before (including how foreigners are bilking the system). But here are some fresh details from the Wall Street Journal.

…one of our favorite political euphemisms is “improper payments.” That’s how Washington airbrushes away the taxpayer money that flows each year to someone who is not eligible, or to the right beneficiary in the wrong amount, or that disappears to fraud or federal accounting ineptitude. Now thanks to ObamaCare, improper payments are soaring. Last week the Health and Human Services Department published an “alert” warning that the improper payment rate for Medicaid in 2016 will likely hit 11.5%. That’s nearly double the 5.8% rate as recently as 2013… The 11.5% for 2016 is likely an underestimate given that HHS’s goal last year was 6.7% and instead scored 9.8%, which amounts to $29.1 billion. The dollar amount of improper payments in Medicaid was bound to rise because ObamaCare vastly opened eligibility. In 2015 enrollment climbed by 13.8% and one of five Americans are now covered by the program. …In recent audits of Medicaid in Arizona, Florida, Michigan and New Jersey, the GAO uncovered 50 dead people who recouped at least $9.6 million in benefits after they died; 47 providers who registered foreign addresses as their location of service in places such as Saudi Arabia; and $448 million bestowed on 199,000 beneficiaries with fake Social Security numbers—12,500 of which had never been issued by the Social Security Administration.

But as bad as all this sounds, it can get worse.

If HHS tries hard enough, maybe the department can match the failure rate for school lunches (15.7%) or the Earned Income Tax Credit (23.8%).

And Kevin Williamson of National Review adds some acidic observations.

…the criminal — and I do not use the word figuratively — administration of Medicaid by the Obama administration. …improper payments under Medicaid have become so common that they will account this year for almost 12 percent of total Medicaid spending — just shy of $140 billion. …That rate has doubled in only a few years…12 percent in improper payments isn’t an error rate — it’s a malfeasance rate. …If improper and illegal federal payments were an economy of their own, that economy would be bigger than Hungary’s… The Obama administration is not lifting a pinky to do anything about this, even though analysts such as John Hood have — for years — been arguing that it is necessary and possible to reform this mess. As the Wall Street Journal has reported, we don’t even verify that doctors billing Medicaid for services rendered are actually doctors. In many cases, we do not do much to verify that their patients actually, you know, exist. We’ve paid untold billions of dollars to “clinics” that turn out to be little more — or nothing more — than post-office boxes and prepaid cell phones. And as bad as that 12 percent rate is, some policy scholars believe that it is in fact probably worse.

Kevin observes that this system is good for the Poverty Pimps.

…the real problem with the welfare state is not the poor people receiving checks — it’s everybody in the middle, the vast array of government employees, their union allies, contractors, and third parties who earn six-, seven-, eight-, or nine-figure paydays taking their cuts of money we think we’re spending on the poor. This is an enormous criminal conspiracy against the American people and the public fisc.

You might think that fixing this fraud would be an area for bipartisan cooperation.

But the sad reality is that fraud is a feature, not a bug. Politicians like the fact that scam artists in their states and district are stealing healthcare money from taxpayers. After all, recipients of the loot can be registered voters and campaign contributors.

So what’s the best way of fixing this mess?

Will big tax hikes solve the problems? If the problem is that America isn’t enough like France, then the answer is yes.

But if the problem is that government already is too much of a burden and that it would be a good idea to at least slow down the rate at which America becomes France, then the answer is genuine entitlement reform.

And this video shows how the Medicaid program should be “block-granted” (just as welfare was reformed in the 1990s).

P.S. For all intents and purposes, block granting Medicaid is a partial repeal of Obamacare. Just in case you wanted an additional reason to support reform.

A version of this article was published on Dan Mitchell’s blog.

Source: Medicaid Is a Ticking Time Bomb | Daniel J. Mitchell

Posted January 27, 2017 by aurorawatcherak in economics

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“Parity” Prices   1 comment

The art of economics consists in looking not merely at the immediate, but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group, but for all groups.

This is an ongoing series of posts on Henry Hazlitt’s Economics in One Lesson. You can access the Table of Contents here. Although written in 1946, it still touches on many of the issues we face in 2017, particularly the fallacies government economic programs are built upon.


The history of tariffs reminds us that special interests can think of the most ingenious reasons why they should be the objects of special protection. Their lobbyists present a plan in their favor that may not survive the first cut, but the special interests keep at it. They hire public relations experts and economists who will promote it on their behalf. The public may not be sold on it initially, but they hear it repeated so often, accompanied by statistics and impressing looking charts and graphs, that soon they are taken in. Often, those who would oppose it don’t realize the danger of these arguments until it is already too late. They’re coming late to the  party, so that they are accused of being misinformed, disputing “settled science.”

Image result for image of farm subsidiesHazlitt wrote 20 years before the environmental movement became a force to be reckoned with and 50 years before global warming would even be mentioned, but he foresaw the power of special interests in 1946. For him, the principle examples was “parity” pricing for agricultural products, which started quietly a long time before the New Deal in 1933 when it had already become an established principle, enacted into law with absurd corollaries that grew from it.

The argument for parity pricing went like this:

Agriculture is the most basic and important of all industries. It must be preserved at all costs. The prosperity of the whole nation depends on the prosperity of the farmer. If his purchasing power languishes, industry languages. This caused the collapse of 1929 … or at least the prolonged recovery from it. The price of farm products dropped violently while the price of industrial products hardly budged. City workers were laid off and couldn’t afford to buy farm products and the Depression spread from there.

The only cure?

Restore the prices of farmers’ products to a parity with the prices of things the farmers buy and then preserve that balance perpetually.

It was an absurd idea because how do we know that any one year’s prices were “normal” and therefore should be the prices preserved for eternity.

If there had been any sincerity or logic in the idea, it would have been universally extended. If the price relationships between agricultural and industrial products that prevailed from August, 1909 to July, 1914 ought to be preserved perpetually, why not preserve perpetually the price relationship of every commodity at that time to every other? A Chevrolet six-cylinder touring car cost $2,150 in 1912; an incomparably improved six-cylinder Chevrolet sedan cost $907 in 1942: adjusted for “parity” on the same basis as farm products, however, it would have cost $3,270 in 1942. A pound of aluminum from 1909 to 1913 inclusive averaged 221¼2 cents; its price early in 1946 was 14 cents; but at “parity” it would then have cost, instead, 41 cents.

Of course, cars had improved a lot from 1912 to 1946, but the cost of production had fallen substantially. In the five-year period 1939 to 1943 an average of 260 pounds of cotton was raised per acre in the United States as compared with an average of 188 pounds in the five-year period 1909 to 1913. Costs of production have been substantially lowered for farm products by better applications of chemical fertilizer, improved strains of seed, and increasing mechanization— by the gasoline tractor, the corn husker, the cotton picker. Some large farms had been completely mechanized to operate along mass production lines, requiring only one-third to one-fifth of the labor it had cost to produce the same yields a few years before.
The “apostles of parity prices” didn’t call for such universalization, nor did they call for Congress to reduce farm prices to the “parity” when they rose above this mythical level.  Parity pricing was and remains a rule that works only one way.

Of course, there’s a fallacy hiding in here. The argument goes that the farmer who gets higher prices for his products can buy more goods from industry, which makes industry more prosperous, bringing about “full employment”.

This ignores how these “parity prices” are brought about. If higher farm prices come about by a generally healthy economy, then there are increases in the prosperity of business with increased industrial production, which leads to increased non-inflationary purchasing power for city workers. Prosperity increases for everyone, not just the farmers.
But a rise in farm prices brought about by government intervention is not the same as that brought about by a naturally healthy economy. It’s brought about in one of several ways:

  • The higher price can be forced by mere edict, which is the least workable method. Roosevelt and Nixon both tried this. Remember Stagflation?
  • It can be brought about by the government’s standing ready to buy all the farm products offered to it at the “parity” price. This exists in the United States today.
  • It can be brought about by the government’s lending to farmers enough money on their crops to enable them to hold the crops off the market until “parity” or a higher price is realized. This exists in the United States today.
  • It can be brought about by the government’s enforcing restrictions in the size of crops. This exists in the United States today.
  • It can be brought about, as it often is in practice, by a combination of these methods. This is the prevalent practice in the United States today (2017)

Whatever method, the farmers get higher prices for their crops and their “purchasing power” is increased. They are for the time being more prosperous themselves, and they buy more of the products of industry. All this is what is seen by those who look merely at
the immediate consequences of policies to the groups directly involved.

But then there are the consequences that are harder to see. Suppose the wheat which would otherwise sell at $1 a bushel is pushed up by this policy to $1.50. The farmer gets 50 cents a bushel more for wheat. YAY! But …

The city worker, by precisely the same change, pays 50 cents a bushel more for wheat in an increased price of bread. It works the same for all farm produces. If the farmer gets paid more, the purchaser must pay more to buy whatever is made from those farm products, which means there is less money in that sector of the economy to spend on other things.

No doubt the agricultural-implement makers and the mail-order houses do a better business. But the city department stores do a smaller business.

But, as we’ve seen with all other examples, it doesn’t stop there. The policy results in a net loss, if followed to its logical conclusion. It isn’t just a transfer of purchasing power from city consumers or general taxpayers to farmers. It forces a cut in the production of farm commodities to bring up the price. That represents a destruction of wealth. There is now less food to be consumed.

In Hazlitt’s time, they were actually burning coffee crops in Brazil to force up the price of coffee. In the United States, we follow a subsidy system that pays farmers not to grow as much.

Image result for image of farm subsidiesWhen the farmer reduces the production of wheat to get “parity”, he might get a higher price per bushel, but it doesn’t result in a longer term increase in income because he produces and sells fewer bushels. So, then the government proposes a subsidy at the direct expense of the taxpayers, thereby reducing the purchasing power of the entire nation.

The farmer’s parity-price system is equivalent to the industrial tariff. Often such tariffs harm farmers because, by reducing industrial imports, it also reduces American farm exports as it provokes retaliatory tariffs in other countries. Some ardent supporters of parity pricing will insist that it’s needed for just this reason.

Of course, we need to recognize that there is no general tariff on all industrial products. Many imports are not subject to tariff protection. If a city worker must pay a higher price of blankets or overcoats because of a tariff, he isn’t compensated for having to pay higher prices. By compensating the farmer for this supposed disadvantage, we are basically robbing the factory worker twice.

There are those who say we should even it all out, give “equal” protection to everybody. That’s impossible, Hazlitt explained. The system would be far too complicated.

We should merely have added an army of needless bureaucrats to carry out the program, with all of them lost to production.

Remember. Government workers produce nothing. They merely use tax dollars extorted from the producing class to redistribute it somewhere else.

Hazlitt suggested a much simpler solution. End both the parity-price and protective-tariff systems.

The alleged benefits of still another scheme evaporate as soon  as we trace not only its immediate effects on a special group but its long-run effects on everyone.

Posted January 27, 2017 by aurorawatcherak in economics

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What’s Left of the Democratic Party?   Leave a comment

For the last 8 years, the Democrats have been insisting that the Republican Party was a rump party with no future, about to slide into the dustbin of history. Meanwhile, Republicans quietly took over state legislatures and governors’ offices, Congress and then the Senate and now the White House.

And this graphic shows this in big ways. Obama’s legacy may well be the end of the Democratic Party. Now, if Trump can destroy the Republican Party, maybe we can try some new ways of doing things.

Mag-Dovere Inauguration-Issue GRAPHIC-copy-1.jpg

Posted January 26, 2017 by aurorawatcherak in politics, Uncategorized

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Europe Is Facing a Fiscal Meltdown | Daniel J. Mitchell   Leave a comment

When I tell journalists and politicians that the European fiscal situation is worse today than it was immediately prior to the crisis, they don’t believe me. What about all the spending cuts, they ask? What about the draconian austerity? And the Troika-imposed fiscal restraint?

I tell them it’s mostly been a mirage. It turns out that “austerity” in Europe is simply another way of saying massive tax increases. National governments have boosted tax burdens substantially, but there hasn’t been much spending restraint.

This is a topic I spoke about earlier today at a conference in Prague, which was hosted by the European Conservatives and Reformers bloc of the European Parliament.

My panel’s topic was “Current Challenges to the Transatlantic Partnership” and I focused on economic stagnation and fiscal crisis.

Regarding economic stagnation, I pointed out that there’s very little growth in Europe and substandard growth in the United States.

By itself, that’s a problem but not a crisis.

The crisis (or at least what I argue is a looming crisis) is that Europe’s fiscal situation is worse today than it was when last decade’s fiscal chaos began.

To put this in concrete terms, I crunched the data for both the “eurozone” nations (those using the common currency) and for the overall European Union.

And here are the numbers showing how the burden of government spending has increased in Europe between 2007 and 2015.

At the risk of stating the obvious, there hasn’t been any overall spending restraint on the other side of the Atlantic. This is the chart I will now share with politicians and journalists (as well as anyone else) who is under the illusion that there have been big spending cuts in Europe.

But just as slow growth is a problem rather than a crisis, the same can be said about bigger government. Yes, a larger fiscal burden saps an economy’s vitality and weakens national competitiveness, but it presumably doesn’t by itself produce a crisis.

The crisis, at least if last decade is any indication, materializes when investors decide they don’t want to buy a nation’s government debt because they fear they won’t get repaid (i.e., a default). And that happens when a nation’s debt level is perceived to have reached an unsustainable level when compared to the ability of that country’s economy to generate enough output to support that debt.

And I suspect it’s just a matter of time before Europe experiences another such crisis. Here are the numbers, both for euro-using nations as well as the entire European Union, showing that government debt is substantially higher today than it was at the dawn of last decade’s meltdown.

I should point out that there’s no reason why a crisis need occur. If European governments copied Switzerland and put in place some sort of spending cap (a good one that ensures that the burden of government expanded slower than the private sector), then red ink quickly would fall and investors would be much less fearful of a default.

Unfortunately, all the pressure is in the other direction. Indeed, to the limited degree there was any spending restraint after the last crisis, it has largely evaporated.

A story in the New York Times from two years ago illustrates why the mess in Europe is so intractable.

The reporters who authored the story were correct that there was disagreement between Germany and other nations.

…many of the largest European countries are now rebelling against the German gospel of belt-tightening and demanding more radical steps to reverse their slumping fortunes.

But they naively reported that there were genuine cutbacks and they also believed the silly Keynesian argument that smaller government somehow reduces growth.

…eurozone nations buckled under to German demands to slash budget deficits and roll back public services, and then watched in dismay as unemployment rates shot into the double digits and growth collapsed.

In any event, Europe’s self-styled elite decided on a return to the types of bad policy that led to last decade’s fiscal crisis.

Now, France, Italy and the European Central Bank have coalesced into a bloc against Chancellor Angela Merkel of Germany, and they are insisting that Berlin change course. …France, which has in modern times been Germany’s indispensable partner in European crisis management, is now in near revolt, and President François Hollande has joined forces with Mr. Renzi, who has presented an expansionary 2015 budget that will cut taxes despite pressure from Brussels to meet deficit targets. Mario Draghi, the president of the European Central Bank, has pressed Germany to temper its insistence on budgetary discipline and to spend more on public works to stimulate the eurozone economy. The French have cheered him on.

For what it’s worth, I would have been on Merkel’s side if she was actually pushing for meaningful spending restraint.

But that was not the case. She myopically focused on fiscal balance rather than the size of government, which is bad enough since higher taxes are always the first (and second, and third, …) resort of politicians. But to make matters worse, her motives have always been suspect because of fears that she’s mostly concerned about protecting German banks that foolishly lent a lot of money to profligate governments.

All that really matters is that government in Europe is now bigger and more expensive, with lots of additional red ink.

Though that presumably shouldn’t be a major concern today since the European Central Bank is now buying lots of government bonds as part of 1) a foolish experiment in monetary Keynesianism, and 2) an indirect bailout of dodgy governments. Any banks with competent management will have used this opportunity to sell their holdings so the risk of sovereign defaults is borne by the general public.

But let’s set aside speculation on Merkel’s motives. All that really matters is that government in Europe is now bigger and more expensive, with lots of additional red ink. And the European Central Bank is helping to build the house of cards even higher.

This won’t end well, though I very much hope my fears are misplaced.

P.S. Anybody who wants to argue that Europe’s fiscal problems can be solved with higher taxes first needs to explain this set of charts.

Source: Europe Is Facing a Fiscal Meltdown | Daniel J. Mitchell

Posted January 26, 2017 by aurorawatcherak in economics

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Drive for Exports   1 comment

The art of economics consists in looking not merely at the immediate, but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group, but for all groups.

This is an ongoing series of posts on Henry Hazlitt’s Economics in One Lesson. You can access the Table of Contents here. Although written in 1946, it still touches on many of the issues we face in 2017, particularly the fallacies government economic programs are built upon.


Image result for image of trade imbalance

While we dread imports to a pathological degree, we yearn for exports also to a degree that isn’t healthy or sane.

There’s a definite relationship between them. Exports pay for imports and vice versa.

Back in the days of real currency exchange, an American exporters sold his goods to a British importer and was paid in British pounds. He couldn’t use British pounds to pay the wages of his workers, buy himself a nice suit or theater tickets, so he had to buy British goods in order to get rid of them. It worked the same way for foreign purchases, who could not use American dollars in their own country, so had to buy goods from America. That’s somewhat mitigated by electronic transactions today, something Hazlitt did not foresee.

Oddly, business people (like Donald Trump) who can understand domestic trade without a problem get a little weird when the discussion shifts to foreign trade. This leads to them seriously advocating things they would ordinarily consider insane in the domestic market – policies like foreign loans to stimulate exports, even to countries that have no means to repay the loans.

No one doubts this proposition when it is applied privately. If an automobile company lends a man $1,000 to buy a car priced at that amount, and the loan is not repaid, the automobile company is not better off because it has “sold” the car. It has simply lost the amount that it cost to make the car. If the car cost $900 to make, and only half the loan is repaid, then the company has lost $900 minus $500, or a net amount of $400. It has not made up in trade what it lost in bad loans.

And, yet we can’t seem to apply that same principle to a nation. Yes, it may help a special interest within the American economy, but at a net loss to the country as a whole. The long-term business and employment in America would be hurt, not helped, by foreign loans that were not repaid.

This is not a diatribe against foreign loans per se, but only against government guaranteed bad loans.

For the same reasons that it is stupid to give a false stimulation to export trade by making bad loans or outright gifts to foreign countries, it is stupid to give a false stimulation to export trade through export subsidies.

It is another case of trying to get rick by giving things away. It’s a short-term strategy for the benefit of a limited group that ignores the long-term universal consequences of a particular policy.

Alternatives   1 comment

I recently read about an assistant professor at St. Mary’s College outside South Bend, Indiana. He used to live in the Pilsen area of Chicago at the time University Village was undergoing development. Feeling a loss of history and community, he asked for old family photos and learned there weren’t many. Being an artist, he set about to recreate the community he wanted to remember.

Ian Weaver created Black Bottom, an imaginary Chicago neighborhood adjacent to Maxwell Street by drawing maps for its streets, documents for its residents and also creating quilts and other faux artifacts.

“I wanted to create this heroic history that might have been,” he said. “I think of it as a nostalgic wish fulfillment — one with a foot in reality.”

Alternate histories and parallel universes present us with familiar worlds where the details are unfamiliar.

It’s not a new idea. In 1931, a popular history book titled If It Had Happened Otherwise asked scores of historians to imagine the fictitious outcomes of actual events. Winston Churchill was a contributor. He pictured what would have happened if the Confederacy had won the Civil War. Science fiction writers do this all the time – envisioning what a different world we might have lived in if world events had played out differently. What if Hitler had been accepted to art school or Oswald missed JFK.

At its most benign, alternative histories are stories about roads not taken: The lovers in “La La Land” head off on a different path, their future happy and romantic. Then again, if you look at the 2016 presidential election, it sure looks like our everyday world consists of two alternate universes. We seem to live in two side-by-side universes that see things in very different ways.

I hear that classic alternative-universe fiction has made a revival since the election — books like The Man in the High Castle by Philip K. Dick and Sinclair Lewis’ It Can’t Happen Here are flying off the digital shelves over at Amazon. In Dick’s tale, the Nazis won the Second World War and America is an occupied nation, divided between the Japanese on the West and the Nazis on the East. There’s a current series being adapted with more up-to-date themes. It shows an America where people are willing to sell out their neighbors for a promise of security.

The thing that strikes me about this is that viewing who in the current scheme of thing plays what role really depends on which America you live in. We as a national community are more separated by basic ideas that we were in the past. We lack certain common beliefs. Some of us think it’s okay to kidnap and torture mentally disabled men, while others believe it’s okay to murder babies in the womb. On the other hand, there are those who think it’s okay to force other countries to live by our ideals or to force our neighbors to “do things our way” without even exploring what makes “our way” the right way for our neighbor.

Sinclair Lewis wrote It Can’t Happen Here in 1935 when many social commentators saw the New Deal as a mixed blessing for poor Americans. (What? You didn’t know that. Go read some history. No, seriously. This blog post will be here when you come back to continue this discussion.)

Lewis watched as fascism took over Europe and he worried that the United States might turn to dictatorship. His book features a crass, plain-spoken East Coast businessman who wraps totalitarianism in the flag, demonizes his enemies, and then defeats Roosevelt for the presidency. Congress, bashed by the president and the people alike, doesn’t respond quickly as the President declares war on Mexico. The hero, a complacent Vermont liberal, flees to Canada, but (inexplicably) attends a campaign rally for the erstwhile president-to-be. The violent, race-baiting rhetoric startles him.

Lewis always wrote about the uncomfortable truths of American society. He admired American ideals, but he didn’t like the people of America very much, considering them greedy and ignorant. He was a “blue zone” liberal living in his own bubble, certain that the unwashed masses would destroy the country if allowed to have a voice. You can find the alternative to his vision in The Hunger Games, where the educated elites of the Capital have silenced the unwashed masses to solidify their own power.

When history is a matter of opinion, your version of reality is as good as any other. There’s danger in that sort of belief. But there’s also freedom. Sometimes when we go back to look at history, we find that we’ve been sold a bill of goods by the teachers and the shapers of public opinion. George Washington never chopped down a cherry tree. The US didn’t need to get into the FDR was not as beloved as his biographers made him out to be. Hillary Clinton wasn’t the peace-nic she wanted us to believe. The economy did not heal under Barack Obama’s massive spending. And we don’t know that Donald Trump is a modern-day Hitler. Some of us may suspect it, but that’s not the same thing as having actual evidence.

I am officially a scoffer of multiverses. While I can easily see how a change in a certain point in history could make massive changes to the world as we know it now, I don’t believe that is reality. History is linear. A road not taken cannot be returned to. The concept that everything that ever happened — every chance taken, and avoided — exists somewhere, alongside every other possibility is science fiction and fiction isn’t real. Scientists don’t actually embrace the multiverse theory although some historians do. That might be reasonable.  You can’t read certain documents and not wonder … what would have happened if George Washington’s letter to Alexander Hamilton had been intercepted before the ratification of the US Constitution? How would the world or at least the United States be different?


Echoes of Liberty contains several authors’ ideas of how things might be different if one of those roads not taken had actually been taken. A libertarian-themed anthology, it includes “A Bridge at Adelphia” in which I explore what might have happened on the Ohio frontier if that letter had been intercepted. It’s pretty explosive stuff because Washington appears to agree to Hamilton’s desire to anoint him as king and, had that gotten out in the public, the Constitution, which barely won ratification, might never have passed. I suggest it might provide new hope for peace between the settlers and the Indians because … well, power corrupts and the Constitution provided a great deal more power to the government than had previously existed. What if that power had not been available? What might the settlers have done?
Check it out.

Interview with Eugene Uttley   4 comments

Today’s interview is with Eugene Uttley. Welcome to the blog. Tell us something about yourself. 

Thanks. Just flew in. Arms are tired. Haha. Hello. I am Eugene Uttley Esq. & I live in the Midwest of the USA, where I hold down a modest jobby job to pay the bills, which is not difficult considering I live alone and have no dependents.


boon-1At what point did you know you wanted to be a writer? (When did you write your first story, for example?)

I have always written creatively. My jokes, however, have whiskers on them.


Tell us about your writing process.

I have been writing the same comic novel for over fifteen years now, and it’s coming along grudgingly, I’ll tell you. It’s this character Roger who hasn’t left me alone over the years. So I’ve got him on a bus on the way to Albuquerque….


What is your favorite genre … to read … to write?

Humor. Postmodern humor. I mean, that’s not a genre, but… literary fiction?


Humor should be a genre, although I prefer it to infuse all genres. We need more laughter in the world. What are you passionate about?

I am passionate about one issue lately: demystification of mental illness towards more comprehensive mental health education and against the stigma of violent behavior or tendencies with schizophrenia in particular.


What is something you cannot live without?

The toxic byproduct of plant metabolism: O2. No. Um. For me, it’s aripiprazole. Without it I experience mental torture. It’s truly agonizing, and fatiguing beyond measure. I try just to sleep.


way-out-1I used to work as an administrator for a community mental health center, so I know what atripiprazole is. When you are not writing, what do you do?

When I am not writing, I am generally sleeping or working or both.


Have you written any books that made a transformative effect on you? If so, in what way?

Oh, yeah. Great question. Writing Way Out helped me put a lot behind me. Like, “This is something that happened to me,” as opposed to, “This is something that is happening to me.”


That is a great way of looking at it. I find writing to be very therapeutic myself. Where do you get the inspiration for your novels?


The three brothers with their own language in The Diamond Grenade have to be loosely based on the Beastie Boys, the way they minstrel show with instruments and all, but basically just rapping insults at the audience in their own language. So hiphop influences, certainly, pop culture of the turn of the millennium. But as far as inspiration goes, I feel like the really worthwhile writing kind of wants out. You’ll be like, “whoa, I only got so many hours in the day to be making stuff up with the word processor.” And your muse won’t listen and will keep pushing you for all you’re worth.


Yeah, you’re a writer for sure. I’ve definitely has similar experiences. What sort of research do you do for your novels?

Well one of my books, The Boon, isn’t a novel at all, but since you said research, I thought to mention that research is what The Boon is. Very ongoing and sometimes stream-of-consciousness loose progression of topics for momentary mention or investigation, in a narration like a reacher’s reading journal. But my novellas and such do not require research. They are tissues of fiction.


dg1-1If someone who hasn’t read any of your work asked you to describe your writing, what would you say?

Reading The Boon is a bit of a chore. But the good news is that very soon there will be an audiobook. Way Out is a more straightforward memoir, albeit not chronological and framed as a biography. The Diamond Grenade is revolutionary of course – good fun to read.


Do you find yourself returning to any recurring themes within your writing and, if so, are you any closer to finding an answer?

That’s interesting. They say in life we sometimes recycle the same interpersonal dynamics and run the same situation through different sets of friends. I find myself recreating a situation in which I just made a faux pas but nobody was paying attention to me, anyway.


Are you a plot driven or character driven writer? Why?

Oh, the characters take over. They’ll do what they’ll do, it seems, when you’re writing a few hours a day or more, you know… But I maintain a brisk course of events.


Making characters do what you want is a lot like herding cats, in my experience. Do you write from an outline or are you a discovery writer? Why?

You try to keep in mind that the notes are calling the shots, but eventually you’re just trying to keep up with what has to happen next.


Absolutely. What point of view do you prefer to write, and why?

I prefer to sketch caricature. Events practically overshadow character in The Diamond Grenade. If there’s depth of character, it stems more from the reader’s feelings about the perpetrations of the characters than from much lingering in the narration on how anybody actually feels about anything. Well, the POV is of a couple of the main characters. If that makes any sense.


It does. Do you head-hop?

I have heard of this head-hopping of which you speak, but have yet to really wrap my mind around it. I believe that, yes, in The Diamond Grenade I head-hop from one narrator’s into another’s POV.



Where can readers find you and your books?

Posted January 25, 2017 by aurorawatcherak in Uncategorized

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