26 September 2007

President Bush: A Leftist Failure

The Objectivist
Dunkirk-Fredonia Observer
September 24, 2007

President George W. Bush has been a miserable failure. Bush failed because of his enthusiastic support for government spending and his tireless push to increase the federal juggernaut at the expense of the states and citizens. In fact, given Bush’s love of government power, Congressional Republicans should have openly opposed him years ago.

In general, Bush spent like a drunken sailor. According to Stephen Slivinski of the Cato Institute, Bush increased federal spending in his first term by 33% and during this period increased the federal budget as a share of the economy from 18.5% when he took office to 20.3%. The real increase in spending was second only to drunker sailor Lyndon Johnson and Bush increased spending more in non-defense areas. In fact, between 2001 and 2005 non-defense spending by Bush rose by 23% (inflation-adjusted), which is larger than the rise in the whole Clinton presidency. From 200-2005, he increased welfare spending (payments to individuals) by 26% (again inflation-adjusted). The parts of the government that are symbols of the governmental overreaching also got fat under Bush. For example, largely under his watch, the education department budget grew by a whopping 115% (2000-2005). This occurred despite the fact that education is largely a state function and that there is little correlation between spending and educational success.

Bush’s accomplishments almost all involve an explosion in the size and scope of government. Among his biggest domestic triumphs was getting the government to pay for drugs for the elderly (Medicare Prescription Drug, Improvement, and Modernization Act, 2003). Bush could have limited this program to the poor. Instead, the big spender generously included the middle class and wealthy. In 2003, the bill barely passed Congress. A month after it passed, the administration changed its ten-year cost estimate to $534 billion, which is more than $100 billion over what the administration claimed it would cost when Congress considered it. Had the administration not lied, the bill probably would not have passed. Eric Boehlert of Salon.com claimed that the administration covered up the higher cost and threatened to fire government analyst Richard Foster if he provided the real cost to Congress. By 2005, Washington Post reporters noted that the White House Budget had increased the estimate to $1.2 trillion. While Bush was running up the tab to take a Democratic issue off the table, he did little to solve the oncoming deficits in Social Security and Medicare, deficits that will wreak havoc in the near future.

Another of his accomplishments was to increase federal involvement in education and jacked up the size of the Education Department in the No Child Left Behind Act of 2001 (Public Law 107-110). This program increased federal spending and instituted a series of testing requirements in return for federal funding. Despite the fact that America’s schools are the most expensive in the world and have mediocre to poor results when compared to other advanced countries, Bush did little to remedy these failings. In particular, he took a pass on encouraging market mechanisms and removing mediocre teachers from the classrooms.

Bush also didn’t keep his promises to protect American liberty. Despite his earlier promise to veto the McCain-Feingold campaign finance bill, he signed it. Again, he did so to eliminate an issue that was thought to support Democrats. The bill regulated soft money (money given to national parties) and limited spending on issue ads that name a federal candidate and that run close to primaries and elections. In some areas, the bill went even further and banned such ads paid by the corporate or union funds. Apparently, Bush decided that they should just shut up.

In limiting the amount of money that citizens could donate toward a candidate’s campaign, it sharply limited free speech. To see this, imagine that the Bush and company had limited the amount of money that a newspaper (for example, the New York Times) could spend in putting out its paper and ask yourself whether that limit would restrict free speech. Of course it would and the same is true for limits on money sent to get out a message through the political parties. It also made it even more difficult to dislodge incumbents because it disarmed candidates who might challenge them. This protection of incumbents ensures that political hacks like Sen. Ted Kennedy (D-MA), Ted Stevens (R-AK), and Robert Byrd (D-WV) stay in office for decades.

Bush could have tried to achieve real reform by fighting for term limits. Instead, he chose the easy way and signed off on a plan to regulate and equalize speech. Luckily, the Supreme Court has recognized that the Constitution protects speech by private political groups (527 tax-exempt political organizations). This exception will probably make the bill ineffective.

As if McCain-Feingold weren’t enough, Bush declared war on the Constitution. As part of his drug-prohibition efforts, the Bush administration argued that the Supreme Court should interpret the Constitution as providing almost no limit on federal power. The Commerce Clause ("The Congress shall have Power ...To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes," Article I, Section 8, Clause 3 of the Constitution) is part of a list of specific powers that the founders intended to exhaust what powers the federal government has. They intended that all other powers would reside with the states and the people. A narrow reading of the clause is essential if the federal government is to be hemmed in the way that the Constitution requires. In 1996, California voters passed a referendum that legalized the medical use of Marijuana. The federal government prohibited marijuana in 1937 and challenged this law. The Supreme Court backed by the liberal justices and Justice Scalia backed the federal government, asserting that the federal ban on such marijuana was Constitutional despite the fact that it was grown, sold, and used in California and was not plausibly part of interstate business.

Persons might differ with regard to the justice and success of the Iraq war but the notion that this was a defensive war doesn’t pass the laugh test. Small-government proponents don’t support interventionist wars (whether in Vietnam, Serbia, or Iraq) because U.S. security is not at stake. Administration officials justified attacking Iraq because it allegedly had weapons of mass destruction, connections to Al-Qaeda, and was the lynchpin for promoting democracy throughout the Middle East. None of these claims have panned out. The war has also turned out to be prohibitively expensive. The Congressional Research Service estimated that the total expenditures have exceeded $500 billion and cost almost $2 billion spent per week. Joseph Stiglitz, a Nobel Prize winning economist, estimates that the war’s total costs will be greater than $1 trillion and stand a good chance of being greater than $2 trillion. The war has also resulted in roughly 3,800 American troops dying and 28,000 injured.

In short, President George W. Bush has been very successful in expanding federal power. He has shot spending through the roof, carved out chunks from the Constitution, and poured money and lives into an interventionist war that that had a weak connection to U.S. interests. It’s just a shame that he didn’t campaign on his plan to pursue the policies of the American left.

12 September 2007

Serving Mankind: The Rich Do More

The Objectivist
Dunkirk-Fredonia Observer
September 11, 2007

In the world of politics, there are a lot of politicians and intellectuals who are convinced that they can pick out fair wages better than the market. Politicians and commentators constantly bemoan the high salaries of CEOs (S&P 500 CEOs averaged $14.78 million in 2006), baseball players (averaging $2.94 million in 2007), physicians (several types of cardiologists and orthopedic surgeons averaged over $400,000 even after expenses), and high-end attorneys (some law firms now charge clients more than $1,000 per hour for their best attorneys). At the low end of salaries, the AFL-CIO and other leftist organizations often criticize third-world sweatshops because they pay wages that are too low.

Even if these politicians and intellectuals could identify a fair wages, it doesn’t follow that employers should be made to pay them. In general, high prices for scarce things (whether labor or goods) usually bring about the best results by increasing supply and better distributing them. Economist John Lott in Freedomnomics uses the example of the rise in gas prices related to the Hurricane Katrina to illustrate this. Katrina disrupted oil production in the Gulf of Mexico. The restricted supply caused gas prices to rise. This rise gave companies the incentive to store gas in anticipation of the storm and then rush it to the area once the storm hit. It also reduced demand thereby making more gas available to those who really needed it. In contrast, government price control causes demand to outstrip supply, which inevitably produces shortages and waiting lines. An example of this was the obnoxious gas lines in the 1970’s that followed President Carter’s price controls.

As a general rule, free market wages are the height of fairness. A free-market wage is the wage that a person gets in a competitive sector of the economy. Generally, this reflects the degree to a worker contributes to lives of other people. This is because a worker’s salary reflects the degree to which others value his goods or services and the degree to which others value his goods and services reflects the degree to which these things make their lives go better. As Walter Williams has pointed out, such a system in effect rewards persons on the basis of what they’ve done for their fellow man.

For example, consider a day-care worker (median wage $7.90 per hour in 2003). There are lots of people willing to do this job and, at least according to consumers’ needs, the performance of one worker is not substantially better than her likely replacement. At least this is what consumers seem to think. Hence, any one day-care worker probably does not provide a service that is substantially better than her likely replacement. In contrast, other workers (e.g., Hollywood stars, CEOs, and sports stars) contribute far more to others’ lives than their likely replacement, which is why they get paid a lot more.

None of this applies to government employees because political considerations, rather than the market, set their wages. Thus in deciding whether veteran professors at state colleges contribute to their fellow man, their salaries are not a reliable guide (in 2003-2005, full professors at public colleges and universities averaged $88,500).

One objection to this claim about fairness is simple outrage. A critic might say that she hopes she didn’t just hear me say that some relatively low paid workers (e.g., day-care workers) really do less for humanity than highly paid but superfluous individuals like NFL running backs and well-known porn stars. But it’s hard to see why she thinks this. The reason the latter make so much more money is that while consumers value the latter’s services only a little bit, they serve millions of people. Oftentimes doing a little for millions of persons does more for the world than doing a lot for a few.

A second objection is that some low-paid workers (e.g., nurses) do far more for persons than others (e.g., Hollywood stars) because the former provide more important goods (health care versus entertainment). This, however, is to confuse what an industry provides versus what a particular worker provides. It is the latter that determines what an individual contributes to the world since she only can provide or withhold her own labor.

A third objection is that the low-paid workers often work from altruistic motives and care for their clients, whereas the highly paid CEOs and all-pro quarterbacks are in it for themselves. Even if true, this is irrelevant. Remember the issue here is the degree to which an individual makes others better off, not why he does it. Caring about others may be a good thing, but this doesn’t make others better off. Rather others are made better off when their wants and needs are satisfied and is what wages measure.

Other theories of fair wages are invariably confused or wrong. For example, various intellectuals think that wages should track the degree to which persons sacrifice themselves for a job or work hard at it. However, plenty of people work very hard at jobs that don’t contribute much to anyone’s benefit. For example, consider restaurant owners who work like dogs and put in incredibly long hours only to have no one show up. It doesn’t seem that fairness would dictate that they be well paid despite their efforts and sacrifices. Physicians often yell that they deserve high wages because they invested so much in their education, but again restaurant owners might have invested their whole life savings and it doesn’t follow from this that they deserve anything.

Other fair-wage intellectuals cite things like a living wage suggesting that persons who work full-time jobs should be able to escape poverty, afford medical care and decent housing, buy a house, etc. The problem is that such goals have nothing to do with whether the worker has served his fellow man. We might want to give all American workers such goods, perhaps in the form of various welfare benefits, but labeling these benefits fair wages hides what is being done.
In a reasonably competitive sector of the economy, wages are a pretty good indication of what workers contribute to others’ lives. Poor people do less for others; rich people do more. It’s a distasteful conclusion, but true nonetheless.