Posts Tagged ‘statism’

for generations to come

Saturday, 4 July 2015

I believe that I last wrote here about what became the Affordable Care Act — aka Obamacare — in an entry posted on 28 July 2008. I've been meaning to write about it since, but I paused to await the outcome of NIFB v Seleblius, and then again to await the outcome of King v Burwell.


To understand what really drove the Democratic Party to pass the Affordable Care Act, one may look at the experience of the Social Security Act (1935).

The programme of old-age benefits — which is what most Americans have in mind when they refer to Social Security — is one that had been failing slowly over the many decades of its existence. Population growth has slowed strikingly, and life-spans have been extended significantly, so that the number of people paying into the system has declined dramatically relative to the number of people to whom payments have been made. At the same time, in various ways the typical payment per individual has been allowed to climb. The tax used to fund it has never collected enough revenue to do so indefinitely. At times, revenues have been much greater than benefits; but, none-the-less, there has never been a moment over the last 50 years or more when the demographics did not show that, within the expected lifetime of a young person, promised benefits would exceed revenues and exhaust whatever had been saved under the revised programme.

Congress did not plan for the old-age benefits programme to fail, slowly or otherwise. Congress simply didn't take a careful look at the future. The immediate concerns of Congress were to exploit the political gains to be had from promising a pension programme, and to short-circuit political support for the ruinous Townsend Plan.[1] But this slow failure has proved to be hugely rewarding to the party most responsible for effecting the programme.

Because the programme has failed slowly, there was sufficient time for a large share of Americans to become dependent upon it. It was even, for a while, said to be the third rail of American politics — analogous to the rail delivering current to an electrically powered train, in the sense that touching it would prove fatal. As failure has recurringly loomed, Republicans (having increasingly become the party of opposition to the New Deal Coälition) struggled with how to respond to the failure of a programme with such broad support, while the Democratic Party has been able to position itself as rescuer. The slow failure of their creature has been an important part of the success of their party.

Although supporters of the programme often speak and write as if opponents would simply and abruptly withdraw benefits from all recipients, a more common suggestion has been to phase-out the present programme in favor of an overt poverty-relief programme. Thus, for example, those born after some point in time would received reduced benefits — perhaps in some cases no benefits — if they had income or wealth measured above some levels. This idea meets resistance not only from those who would lose benefits, but from those who would then find themselves on welfare.

Younger people, looking at a future tax burden, and perhaps doubtful that the next major reforms will prove sufficient to maintain the programme through their own retirements, are most often open to suggestions of reform. But, as time passes and they age, they find themselves having paid much of the tax that they might earlier have hoped to avoid, so that the principal pecuniary result of a phasing-out would be either to deny them benefits or to place them on welfare. Additionally, as they age, so do their parents, who go from being perhaps middle-aged to being elderly.

A sense may often be retained that they would have been better-off had the programme been phased-out when they were younger,[2] and that those now young would be better-off if the programme were phased-out now. There is, thus, something of the flavor of a sub-optimal Cournot-Nash equilibrium to it all. A lot of people would admit that the programme ought not to have been instituted; but, since it was, and since they would personally be hurt by an attempt to end the programme, they will not assist in an unwinding, and may even actively oppose an unwinding.

And, so, they are increasingly inclined to support the Democratic Party, which continues to promise to do whatever is necessary to keep the programme going.


The Affordable Care Act was intended to creäte another slowly failing programme with a large number of people dependent upon it. There was no illusion on the part of most of those who voted for the Act that this programme would be the one exception in the history of large state programmes. They might not know the core reason that such programmes perform so badly, but they've had plenty of observations of failures. As with the Social Security old-age benefits, each time that failure loomed for Obamacare, the Democratic Party could position themselves as rescuers of the programme and thus of the people dependent upon it in order to receive medical treatment. And the Republican Party would again be forced to choose between protecting their brand and protecting their jobs. The public might perhaps conclude that they would have been better-off had the programme not been brought into existence in the first place, but they'd see themselves now being made still worse-off in any unwinding, however an unwinding might benefit later cohorts.

Indeed, when the President acted to preserve the programme by ignoring the plain wording of the law, a large part of the defense of his action was that a substantial number of people had become dependent upon the programme. Even a great many people who had been insured, at lower cost, previous to the programme could have suddenly found themselves uninsured, and the programme was defended on the basis of a dependency that it had induced amongst those people. Meanwhile, the Republican Party, though returned to power largely because of voter discontent with the programme, has been widely criticized for not agreeing upon some view as to how health care ought to be allocated, and then presenting that view to the public. Many Republicans essentially propose adopting a position they are just stuck with Obamacare, since the Supreme Court has twice now refused to stop it.

However, Obamacare is not a slowly failing programme; it is a rapidly failing programme.

In my entry of 28 July 2008, I explained that the programme was effectively to tax the insurance policies of the healthy in order to subsidize the unhealthy; and that, in the absence of compulsion, the healthy would not insure, causing premia to spiral upward.

In order to make passage of the law politically palatable, the compulsion was relatively weak. The annual penalty for failure to buy insurance is well less than the cost of insurance, and the IRS is forbidden to attempt to collect the penalty (if not paid voluntarily) except by reducing the annual tax refunds of those against whom it is charged. I suspect that the Democratic leadership had some awareness that this penalty structure was going to be inadequate, but were thinking of this weak compulsion as the camel's nose — they planned to get the rest of the beast into the tent in some later session, with higher penalties and more freedom of action for the IRS. They didn't understand that they'd lose control of one chamber in the very next election.

So, indeed, many of the relatively healthy chose not to buy insurance, despite repeated extensions of the buying period. And, as a consequence, premia are going to rise by more than 10%. This increase makes insurance a bad buy for an even larger group of people, who will choose not to buy insurance next year. That will cause a further rise in premia. And so forth. Premia should be expected to increase by more than 10% every year, until the programme implodes as affordable insurance moves out of reach for a huge share of people. (With annual increases of more than 10%, premia would more than double over just eight years, but I do not expect the programme to survive to a doubling of premia!)

There was talk of how, if King v Burwell were decided against the President, Obamacare would go into a death spiral. In fact it was already in a death spiral. King v Burwell could have accelerated that sharply; if the spiral were faster, then the health-care system would have been less distorted by Obamacare, and the unwinding would thus be injurious to fewer people.

The sooner that it were admitted that Obamacare were in a death spiral, the sooner that a drum might be beaten for toughening penalties upon those who refuse to buy insurance. (Or for kicking the insurance companies to the curb, and establishing a more explicitly socialistic system.) But the President is not a man to admit to mistakes, nor do supporters want to admit to yet more deep problems in a programme that has already had many embarassments, as such an admission would increase skepticism. Further, the elected Republicans are unlikely to alienate their base by acting to pull Obamacare out of a death spiral any time soon, though most of them might do so from expediency were Obamacare to last-out a decade.


[1] The Townsend Plan, advanced by Francis Everett Townsend beginning in 1933, was that each person in the United States over the age of 60 years were to be given a monthly pension of $200, conditional upon a requirement that the entire $200 be spent within a month. The theory was that this spending would result in an increase in economic activity that would, in turn, effectively pay for the pensions.

I won't endorse simply claiming that, since the CPI is now about 30 times that in 1933, $200 then would be equivalent to about $6 000 to-day. (Comparisons of so-called price levels becomes increasingly problematic as time-spans become longer.) None-the-less, one should see that a $200 monthly pension would have been rather breath-taking.

The Townsend Plan was supported by a very large number of people, and was especially popular amongst those over or approaching the age of 60 years, and amongst those economically responsible for the support of older people.

[2] This sense will be especially acute amongst those who understand that the Social Security old-age benefits crowd-out investment-savings for retirement. With reduced investment, the economy grows at a diminished rate.

A Simple Tale

Wednesday, 19 January 2011

Some time within the last several weeks, I finally got around to reading The Secret Agent (1907), by Joseph Conrad. The novel is interesting for a number of reasons. One of those is that, as with Heller's later Catch-22, events are driven by the characters' unquestioned misunderstandings one of another, and by terrible narrowness of vision. (Unlike Catch-22, Conrad's book is not particularly humorous in its beginnings.) But what most struck me about The Secret Agent is that Conrad identified and unsparingly depicted the mental process that leads most who turn to state socialism to do so, and what essentially propels most of those who proceed on to left-wing anarchism to do that.

One of the characters of The Secret Agent is Stevie. Stevie is a low-functioning young man; operationally a person of very limited intelligence. He is also someone who is concerned — often overwhelmed with concern — about the fate of people and of beasts who seem to be ill-treated. Stevie's concern is illustrated at various points in the story, but it is in Chapter VIII that they begin to take political form.

Stevie's mother, over the objections of her daughter, has had herself moved to an alms-house; Stevie and his sister, Winnie Verloc, see their mother to her new home. The cab-man drives a much-abused horse to pull his carriage, and responds to Stevie's imploring that the horse not be whipped as if it were nearly incomprehensible. But, after the move has been effected, the cabbie tells Stevie that, however hard life may seem to be for the horse, it is harder still for the cabbie, who is a poor man with a family. Stevie is moved by this information. The driver departs.

Stevie is rejoined by his sister; they begin the journey homeward.

Before the doors of the public-house at the corner, where the profusion of gas-light reached the height of positive wickedness, a four-wheeled cab standing by the curbstone with no one on the box, seemed cast out into the gutter on account of irremediable decay. Mrs Verloc recognised the conveyance.[1] Its aspect was so profoundly lamentable, with such a perfection of grotesque misery and weirdness of macabre detail, as if it were the Cab of Death itself, that Mrs Verloc, with that ready compassion of a woman for a horse (when she is not sitting behind him), exclaimed vaguely:

Poor brute!

Hanging back suddenly, Stevie inflicted an arresting jerk upon his sister.

Poor! Poor! he ejaculated appreciatively. Cabman poor too. He told me himself.

The contemplation of the infirm and lonely steed overcame him. Jostled, but obstinate, he would remain there, trying to express the view newly opened to his sympathies of the human and equine misery in close association. But it was very difficult. Poor brute, poor people! was all he could repeat. It did not seem forcible enough, and he came to a stop with an angry splutter: Shame! Stevie was no master of phrases, and perhaps for that very reason his thoughts lacked clearness and precision. But he felt with greater completeness and some profundity. That little word contained all his sense of indignation and horror at one sort of wretchedness having to feed upon the anguish of the other—at the poor cabman beating the poor horse in the name, as it were, of his poor kids at home. And Stevie knew what it was to be beaten. He knew it from experience. It was a bad world. Bad! Bad!

Mrs Verloc, his only sister, guardian, and protector, could not pretend to such depths of insight. Moreover, she had not experienced the magic of the cabman’s eloquence. She was in the dark as to the inwardness of the word Shame. And she said placidly:

Come along, Stevie. You can’t help that.

The docile Stevie went along; but now he went along without pride, shamblingly, and muttering half words, and even words that would have been whole if they had not been made up of halves that did not belong to each other. It was as though he had been trying to fit all the words he could remember to his sentiments in order to get some sort of corresponding idea. And, as a matter of fact, he got it at last. He hung back to utter it at once.

Bad world for poor people.

Directly he had expressed that thought he became aware that it was familiar to him already in all its consequences. This circumstance strengthened his conviction immensely, but also augmented his indignation. Somebody, he felt, ought to be punished for it—punished with great severity. Being no sceptic, but a moral creature, he was in a manner at the mercy of his righteous passions.

Beastly! he added concisely.

It was clear to Mrs Verloc that he was greatly excited.

Nobody can help that, she said. Do come along. Is that the way you’re taking care of me?

Stevie mended his pace obediently. He prided himself on being a good brother. His morality, which was very complete, demanded that from him. Yet he was pained at the information imparted by his sister Winnie who was good. Nobody could help that! He came along gloomily, but presently he brightened up. Like the rest of mankind, perplexed by the mystery of the universe, he had his moments of consoling trust in the organised powers of the earth.

Police, he suggested confidently.

And there one has it. A great many of us would agree that the world is economically harder on many people than it ought to be. A great many of us would agree that society ought to do something about it. But the typical state socialist just unthinkingly grabs for the first social institution that comes to mind, the State; or, as Stevie puts it, police. There's no real thought to what other institutions might be more appropriate. If the point that we are talking about an institution that is first-and-foremost about violence is considered at all, there is little reflection on the question of whether and when violence is appropriate, unless that consideration is to rationalize the conclusion that violence should be used after the conclusion was already implictly embraced. But Stevie isn't drawn to wrestle with the a theory of what ought to be the limits of the State or of the use of violence:

The police aren’t for that, observed Mrs Verloc cursorily, hurrying on her way.

Stevie’s face lengthened considerably. He was thinking. The more intense his thinking, the slacker was the droop of his lower jaw.[2]

And it was with an aspect of hopeless vacancy that he gave up his intellectual enterprise.

Not for that? he mumbled, resigned but surprised. Not for that? He had formed for himself an ideal conception of the metropolitan police as a sort of benevolent institution for the suppression of evil. The notion of benevolence especially was very closely associated with his sense of the power of the men in blue. He had liked all police constables tenderly, with a guileless trustfulness. And he was pained. He was irritated, too, by a suspicion of duplicity in the members of the force. For Stevie was frank and as open as the day himself. What did they mean by pretending then? Unlike his sister, who put her trust in face values, he wished to go to the bottom of the matter. He carried on his inquiry by means of an angry challenge.

What for are they then, Winn? What are they for? Tell me.

Winnie disliked controversy. But fearing most a fit of black depression consequent on Stevie missing his mother very much at first, she did not altogether decline the discussion. Guiltless of all irony, she answered yet in a form which was not perhaps unnatural in the wife of Mr Verloc, Delegate of the Central Red Committee, personal friend of certain anarchists, and a votary of social revolution.

Don’t you know what the police are for, Stevie? They are there so that them as have nothing shouldn’t take anything away from them who have.

She avoided using the verb to steal, because it always made her brother uncomfortable. For Stevie was delicately honest. Certain simple principles had been instilled into him so anxiously (on account of his queerness) that the mere names of certain transgressions filled him with horror. He had been always easily impressed by speeches. He was impressed and startled now, and his intelligence was very alert.

What? he asked at once anxiously. Not even if they were hungry? Mustn’t they?

The two had paused in their walk.

Not if they were ever so, said Mrs Verloc, with the equanimity of a person untroubled by the problem of the distribution of wealth, and exploring the perspective of the roadway for an omnibus of the right colour. Certainly not. But what’s the use of talking about all that? You aren’t ever hungry.

Although it is plainly explained that Winnie is not really out to express a Machiavellian theory of the state, she has done so. Actually, many people from many otherwise very different ideologies would embrace this theory of what the State actually does; many anarchists (and not just left-wing anarchists) would insist that the State is at best unnecessary to all but those who would use to effect or to sustain an unjust distribution of economic power. But, in Stevie's case, in a matter of minutes he's invented state socialism, and then had his statism but not his socialism contradicted, and so heads down a path to left-wing anarchism. Someone else will later help him further down that path.


[1] The poor driver has taken his meager pay not home to his family, but to a pub. Earlier, it is revealed that a scrub-woman frequently plays upon Stevie's desire to help her and her family, only to spend on alcohol the money that he gives to her. Perhaps Conrad was inclined to believe that Work is the curse of the drinking classes. or perhaps he meant no more than to emphasize Stevie's gullibility. In any case, the interpretation is separable from what I seek principally to note.

[2] Note that Conrad has written Stevie as quite literally a slack-jawed fool.

Quite Different

Thursday, 8 October 2009

Consider two propositions:

  • The first is that markets are smart, to the extent that they cannot be tricked into anything unless one carefully hides most or all of the contrary evidence.
  • The second is that, left unregulated, markets produce some best possible outcomes.
These aren't at all the same proposition. On the one hand, something can be hard to deceive, yet work at purposes contrary to those that one favors. On the other hand, a mechanism can be vulnerable to some sorts of disruption but, in the absence of that disruption, perform some task well. I'm not saying that the propositions are contrary; they could be simultaneously true; none-the-less, they're plainly not identical.

The run-up to the latest economic crisis seems to have been founded in no small part by a confusion of these two distinct propositions. The Bush Administration represented itself — and may well have considered itself — free market, in-so-far as it expected considerable resilience on the part of the market in the face of remarkable levels of state borrowing and considerable other interventions (compassionately conservative or kleptocratic). And Alan Greenspan, who surely considered himself a believer in laissez faire, is these days explaining his optimistic proclamations from before the crisis as stemming from a failure to reälize that investors would not recognize that a boom could not last forever, to which lack of recognition he also attributes the crisis, as if irrational exuberance were simply a Keynesian animal spirit, rather than a product of things such as lending regulations and Federal Reserve interest rate policy.

Meanwhile, many of the Keynesians, socialists, and pragmatic technocrats (long-standing or born-again) are arguing that the fact that the market could be fooled shows that markets aren't clever and that thus various sorts of interventions are needed, as if any defense of free markets must hang upon a belief that markets are simply too clever to be fooled. Left unaddressed is whether the confusion were endogenous or brought on by state intervention, whether those prior interventions that may have been the cause of the confusion produce actual benefits worth the costs of that confusion, and whether more intervention would produce a more clever system or a less clever system.

In fact, there are various long-established free-market schools of thought that attribute economic crises to a propensity of state intervention to fool economic participants. For example, it is difficult to distinguish to what extent interest rates reflect the supply and demand of private savings for future consumption, and to what extent they are an artefact of central bank intervention for other purposes. In the face of Federal Reserve manipulation of interest rates, the market will not be sufficiently smart to see what the price of loanable funds should be, and therefore will almost certainly build too much or too little for the future.

Uhm, No

Wednesday, 16 September 2009

I recently read someone defending socialism on the ground that socialism has the same root as does society. Well, I don't object to society. And I venture to guess that she doesn't object to fathers, yet I go further to guess that she does object to what's called patriarchy. One mustn't over-reach with etymology, with dear old dad, nor with society.

I've previous explained the economic calculation problem of socialism: Rational allocation of resources requires trade-off signals that reflect as much relevant information as practicable. Most of the relevant information is highly decentralized, and some of it (such as the expectations and preferences of participants) is intrinsically so. A market brings that information into play by way of prices (trade-off signals) developed by the give-and-take of would-be consumers and of would-be sellers. Socialists haven't developed an alternative; they correct the market only at the cost of over-all misallocations with their own costs in human welfare.

This point is as true in the delivery of health care as anywhere else. Almost everyone agrees that American health-care delivery is in appalling shape, but there are those who ignore that the problems have grown as state interventions have increased. Commentators frequently note that costs have exploded in the last fourteen years, but then most of these commentators are silent on the fact that the period followed upon the last round of reforms. Of course, the period before those reforms wasn't itself some sort of golden age; the reforms were effected because many things were seen to be worse than once they were, and getting worse still. But, again, due attention was not paid to the rôle of prior state intervention in effecting that worsening. This routine of blaming what remains of a market for the mounting problems of an increasingly state-controlled system began well before I was born.

Many people, even defenders of socialized medicine for the United States, admit that the socialized systems elsewhere have some dramatic flaws. The belief of the defenders is that the United States can develop a better system, perhaps in part by learning from the problems of other states. But the deep problem is, again, that of trade-off signals. And one of the seldom-recognized implications of that is that greater state control here has led and will lead to a worsening of systems elsewhere. A state-controlled system can somewhat compensate for its own inability to formulate rational trade-off signals by being guided (directly or indirectly) by prices generated elsewhere. (This solution is imperfect because the prices of one region cannot be expected to be ideal for another; and, if they were, using them fully would generate exactly the same out-comes as would be effected by a free market, rendering the socialism absurd.) Implicitly, production and distribution of health care in the industrialized nations with more socialized medicine has been significantly guided by the choices made in the United States. To the extent that our prices as well continue to become the guesses of bureaucrats rather that the outcomes of interaction between free consumers and free producers, socialized medicine everywhere will be shooting in an ever-growing darkness.

Even assuming that morality can somehow ignore such practical problems, the morality of the claims for socialized medicine strikes me as utterly bogus. Many people declare health care to be a fundamental right, but that's plainly incoherent as one could exercise any fundamental right without the presence and assistance of other people. There have been very few attempts to build ground-up cases for a moral entitlement to health care — identifying some actual fundamental right from which a right to health care is derived in a social context — and every one with which I'm familiar has been exploded on logical grounds. Mostly people just confuse the appealing proposition that it would be a very fine thing if no one was denied health care for simple lack of resources with there being a right to health care. There are a great many hypotheticals that would be very fine things. I know people such that it would be a very fine thing if they had the companionship of someone of the desired sex, and such that they would like that even more than access to medical care; I hardly think that we should force someone else to provide that companionship though.

Some very fine things become very vile things when delivered by virtue of confiscations, regardless of whether we imagine that the confiscation is effected by society, or recognize that it is by a state or by a gang or by a mob.

Regnat populus?

Saturday, 5 September 2009
Fire chief shot by cop in Ark. court over tickets by John Gambrell of the AP

It was just too much, having to return to court twice on the same day to contest yet another traffic ticket, and Fire Chief Don Payne didn't hesitate to tell the judge what he thought of the police and their speed traps.

The response from cops? They shot him. Right there in court.

[…]

Now the police chief has disbanded his force until things calm down, a judge has voided all outstanding police-issued citations and sheriff's deputies are asking where all the money from the tickets went. With 174 residents, the city can keep seven police officers on its rolls but missed payments on police and fire department vehicles and saw its last business close its doors a few weeks ago.

While the State Was Otherwise Occupied…

Tuesday, 4 August 2009

The Woman of Interest draws my attention to

Telephone Terrorist: Outing an Online Outlaw from the Smoking Gun
At 4:15 AM on a recent Tuesday, on a quiet, darkened street in Windsor, Ontario, a man was wrapping up another long day tormenting and terrorizing strangers on the telephone.

[…]

Working from a sparsely furnished two-bedroom apartment in a ramshackle building a block from the Detroit River, the man, nicknamed Dex, heads a network of so-called pranksters who have spent more than a year engaged in an orgy of criminal activity — vandalism, threats, harassment, impersonation, hacking, and other assorted felonies and misdemeanors — targeting U.S. businesses and residents.

[…]

But a seven-week investigation by The Smoking Gun has begun to unravel Dex's organization and chronicle the sprawl of its criminality. The TSG probe has also stripped Pranknet's leader and some of his cohorts of their anonymity, which will likely come as welcome news to the numerous law enforcement agencies, including the FBI, probing the group's activities.

[…]

With the case now moving outside the country, [Manchester, NH, Detective Peter] Marr contacted federal prosecutors for guidance. However, as Marr wrote in a May 6 report, It was obvious to me that the US Attorney's didn't have much interest in the case when I told them that the IP address of the suspect was in Canada. In shutting the case, Marr noted, At this time I have exhausted all leads and am closing the case due to not having the jurisdiction to continue further.
That's right, folks. The US Federal government, which eats so much of the economy, wouldn't bother to expose this group; the state is too busy using its power to get more power. Instead, a relatively small private firm identified the perps in seven weeks.

Un-American Activity

Wednesday, 25 March 2009

This story

Agency apologizes for militia report on candidates by Chad Livengood in the News-Leader
Missouri's Department of Public Safety has apologized to 2008 presidential candidates Ron Paul, Bob Barr and Chuck Baldwin for a state-issued report linking their political causes to the modern militia movement.

[…]

The Missouri Information Analysis Center's controversial Feb. 20 report has created a nationwide firestorm among conservatives in the past 10 days because it indicates people who support small government, refuse to pay taxes, oppose abortion and illegal immigration and voted for Paul and third-party candidates like Barr and Baldwin for president in the November 2008 election have tendencies to join violent militias.

[…]

But the Democratic governor and former attorney general has stood behind the report and MIAC's work.

[…]

The report also contains what it purports to be militia symbols. Among them is the Gadsden Flag and its Don't Tread On Me message, which was a battle cry of sorts for the country's founding fathers in the American Revolution.
is not getting much attention from the main-stream media.

I will be working on a Gadsden-flag bumper-sticker for my car.