Too High? Why so Low?

Bob Capozzi correctly warns us against being too ready to condemn the "gamblers" of the market from charging us prices which are "too high."

Why is it that we think one price is "too high" while another is appropriate? Certainly, $3 a gallon for gasoline is more than we were paying a few months ago, but on what grounds is it "too high?" Who determines what is a good price and what is a bad price?

To those of us who appreciate the beauty of the market -- that prices are determined by the buyers' demand curves and the sellers' supply curves -- not by some omnipotent ruler, we recognize that "too high" is a purely subjective determination. It can only be "too high" on the individual level, if an individual would rather not buy an extra unit of gas at a given price, but rather use the money for some other purpose.

Perhaps, we should be asking why prices are "so low." Afterall, can we say why prices aren't higher? Why not $10 a gallon? The same market in which plenty abounds, where most every American family has a TV, two cars, and a trip to Applebee's every Friday night, also contains the possibility for fluctuating prices. It is this dynamic system which gives us prices which are "too high." But, the only reason we think they are "too high" is that they are typically "so low."

-- Kevin D. Rollins

The Price of Gas, Again

Here come the regulators, once again. With regular gas topping $3 per gallon, the notion that "something must be done" about this "gouging" is in the headlines.

Last time this happened, it was due to Hurricane Katrina. That one was more easily explained away, as supply was temporarily curtailed due to Gulf ports being shut down.

This time, it's not so easy. For this time, it's more about FUTURE supply concerns, driven by geo-political risk. Review the "news" of the last month, and we begin to see why. Bush has said US forces will be in Iraq through 2008. And now the saber-rattling has intensified regarding the Iranian's desire for nuclear power and, potentially, weapons.

Radio pundit Bill O'Reilly likes to describe people as "pinheads." His call, of course, but I sometimes wonder where he gets the audacity. Yesterday, he correctly cited the commodities and futures markets as the "culprit" for higher gas prices. He called them "gamblers." Gas prices shouldn't be going up, he says, for current supply is bountiful.

Bill, I humbly submit, is confused. He doesn't seem to understand that "supply" and "demand" aren't simply calculated in freeze frames. Let's take a simpler example. When a big snow storm is predicted, say, a week out, grocery stores tend to "stock up" on ice-melting crystals. The snow may or may not hit, and customers may or may not buy the inventory, but all this is done IN ANTICIPATION of a storm. It is, to use O'Reilly's term, a "gamble" of sorts.

In a sense, that's what commodities traders are doing. They correctly see that geopolitical risks have increased in the oil-rich Middle East, and they have bid up the price of oil and gas. This mechanism, while not always correct, does tend to smooth out supply and demand, and in the long run is integral to the operation of the marketplace. It does so voluntarily, I might add, rather than through goverment force. Government is largely outside of the market, and intervening in the market almost always leads to unintended consequences, negative ones.

Demogoguing on the price of gas may win temporary points with the electorate, but it serves no one except the demogogue. Let's give peace in the marketplace a chance.

Environmentalists should view this all as a positive development. If such a basic stuff of life like gas is supplied in such a fickle way, consumers will start to demand more energy-efficient vehicles, or alternative means of power, like hydrogen-powered cars. Sometimes, change like this isn't pretty or orderly, but it does tend to work.

-Robert Capozzi

More on Government Accounting

Thanks to Norm Singleton on his blog Uncle Sam: worse than Enron

With the feds using cash accounting, there is the temptation to run up accounts payable in the current year and pay them in the next. Accrual accounting -- which publicly traded companies use and sometimes abuse -- would capture that particular game.

However, let's be careful here. Back in the Reagan years, Don Regan -- when he was Treasury Secretary -- wanted the government to "capitalize" major expenditures, as corporations do. Big potential downside here. Imagine government accountants capitalizing, say, a battleship over a 20 year "useful life." These big ticket items wouldn't fully hit the books for many years to come.

Hawks and the military-industrial complex would LOVE that accounting change.

-Robert Capozzi

Go see Sophie Scholl-The Final Days

V is great, but for a truly moving and inspiring tale of resistance to the state, don't miss Sophie Scholl-The Final Days the true story of the arrest, integration, show trial, and execution of Sophie Scholl, a leader of The White Rose. The White Rose was a group of students in 1940's Germany who distributed anti-Nazi pamphlets. Sophie, and several of her colleagues, where executed for committing the ultimate crime against the state: telling the truth.

Particularly powerful is the final interrogation scene where Sophie refuses to compromise with the Nazis, even though she knows her refusal to "confess" her errors in opposing the state will result in her death. Christian libertarians will appreciate the portrayal of Sophie's Christianity and the integrator's atheism. Given the increasing tendency of the right to label all criticism of the war as "treason" it is interesting that one of the main charges brought against the White Rose pamphleteers was "demoralizing the troops," as if the troops could not tell the war was not going as well as their leaders claimed until they heard about the White Rose pamphlets.

A brilliant portrayal of a hero who truly spoke truth to power.

Cross-posted at lewrockwell.com.

Uncle Sam: worse than Enron

Thanks to David Broder for exposing how the federal government is running up billions in future obligations but not reporting them on its official financial statements. Instead, one has to look at the government's obscure "Financial Report" in order to learn that the true deficit for Fiscal Year 2005 is not the widely reported figure of $319 billion but $760 billion.

The Feds get away with this by using cash, instead of accrual accounting, in the most widely-distributed financial statements. As Broder explains,"If you go to Target and buy an item for cash, it's felt in your wallet immediately. If you buy the same item on a credit card, unless you are using accrual accounting, it is disguised until the bill arrives."

Failure to use accrual accounting is a violation of the infamous Sarbanes-Oxley Act, fortunately, the federal government does not have to obey the standards it imposes on the rest of us.

Cross-posted at lewrockwell.com

Does Bush have a heart of gold?

Not according to rock great Neil Young, whose next album calls for Bush's impeachment. Young, a master of country, hard rock and everything in between, is no stranger to protest. One of his best known songs is "Ohio," about the shooting of anti-war protesters at Kent State, and his masterful concept album "Greendale" attacked the PATRIOT Act and the corporate media which acts as a shrill for the warfare state.

Unlike most rock stars,. who unthinkingly embrace left-wing cliches, Young has always been an independent thinker and a rocker even a paleolibertarian could love. You have to love an artist who writes lyrics like "even Richard Nixon has got soul."

Cross-posted at lewrockwell.com.

Five excuses cover all government errors

From the wonderful "brit-com" Yes,Minister. Thanks to my buddy Jim Boulet for letting me know this was on Andrew Sullivan's blog. For those unaware of the show, it dealt with a reform-minded minster who was constantly thwarted by career bureaucrat Sir Humphrey. The exchange between the minister (Jim) and Sir Humphrey on the five standard excuses gives you a taste of what made this show so great:

"Jim: Five standard excuses?

Sir Humphrey: Yes. First there's the excuse we used for instance in the Anthony Blunt case.

Jim: Which was?

Sir Humphrey: That there is a perfectly satisfactory explanation for everything, but security forbids its disclosure. Second, there is the excuse we used for comprehensive schools, that it has only gone wrong because of heavy cuts in staff and budget which have stretched supervisory resources beyond the limits.

Jim: But that's not true is it?

Sir Humphrey: No, but it's a good excuse. Then there's the excuse we used for Concorde, it was a worthwhile experiment, now abandoned, but not before it had provided much valuable data and considerable employment.

Jim: But that is true isn't it? Oh no, of course it isn't.

Sir Humphrey: The fourth, there's the excuse we used for the Munich agreement. It occurred before certain important facts were known, and couldn't happen again.

Jim: What important facts?

Sir Humphrey: Well, that Hitler wanted to conquer Europe.

Jim: I thought everybody knew that.

Sir Humphrey: Not the Foreign Office.

Jim: Five?

Sir Humphrey: Five, there's the Charge of the Light Brigade excuse. It was an unfortunate lapse by an individual which has now been dealt with under internal disciplinary procedures."

Cross-posted at lewrockwell.com.

Taxaphobia?

Every year my fear and loathing of the IRS and the whole tax system results in a massive panic attack right before I do my taxes. Otherwise, my life is panic free. This is why I am one of those who waits until a week or two before the dreaded day to even think about looking at a 10-40. I am wondering if any other libertarians also suffer from "Taxaphobia" and if, so, if anyone wants to join me in a class-action lawsuit against the IRS since forcing taxaphobes to pay taxes clearly violates the Americans with Disabilities Act?

Cross-posted at lewrockwell.com.

10 Worst Government Programs

Human Events is by no means a "Free Liberal" publication, but recently they convened a panel that was assigned with the task of naming the 10 worst government programs. Panelists included such luminaries as Larry Kudlow of Kudlow and Cramer fame, Walter Williams, one of the best-known economists in the country, and former House Majority Leader Dick Armey (among others). The votes are now tallied and here is what we came up with. This was a weighted vote that included some 50 federal programs. I don't necessarily agree with all of the panel's choices, but it is a good listing and should provoke discussion.

-- Paul J. Gessing

GOP war on the Family

The Republican Party claims to be a party of family values but if their voting record shows anything it is that they for the most part have only contempt for the family. The Democrats are not off the hook but at present they are a powerless (and spineless) party that does not control the government.

What is my evidence for their alleged contempt?

The Republican spending spree only shows that they do not care for the family especially the next generation of children who are going to have to pay the dept which the Republicans have created with their wild spending orgy.

The Republicans also support the Federal Reserve System, which since its founding in 1913 ( a coup by the banking interests against the tax payers) has led to the devaluation of our money. The less that our money is worth, the more families have to work to make ends meet. That is another assault on the family.

More important than money though and much more damaging than the Republicans monetary policy is their war policy. The military industrial complex, (mostly a waste of hard earned tax payer’s money where the costs are socialized and the benefits privatized) has led to the disintegration of the family. When husbands, brothers, fathers and cousins go to fight and die in undeclared unconstitutional wars (abroad) they are not home with their families. Children need fathers, wives need husbands, parents need their children and communities need their men.

Domestically, the Republicans have also waged war but this time directly against the family. Compulsory schooling with centralized bureaucratic control from DC with a push toward universal pre-school is a frontal assault on the family. Medicare and Social Security destroyed the inter-generation bonds between children and their parents and universal compulsory schooling destroys the bonds of parents to their children. To add insult to injury the Republicans i.e. the Bush Administration through the Department of Health and Human Services are pushing for the transformation of the mental health delivery system in the United States. It is not enough that their policies help create the conditions for destruction of the family and communities but now they, the destroyers of the family, are working to help save the family via mental health interventions. That means turning our schools into psychiatric laborites and communities into dumping grounds for the latest fads from the psychiatric industrial complex.

Michael D. Ostrolenk

Ron Paul, Big-Government Believer?

Sadly, the answer to that question is "yes" when it comes to immigration. As Jacob Hornberger points out, backers of so-called get-tough immigration reforms are in denial of economic and political reality. Ron Paul, and so-called "conservatives" who are falling for the siren song of even more massive government intervention in our labor and immigration markets are trying to do the impossible and are once again violating their core values of smaller government to fight against and criminalize behavior that is by-and-large beneficial to the country (that is, coming here to work for a better life).

The "war" on illegal immigrants is similar in many ways to the "war" on drugs. Rather than making a broad swath of people (or drugs) illegal, what we need to do as a nation is concentrate our energy and resources on the harmful aspects of each of these problems. We should work to keep felons and terrorists out by de-criminalizing a majority of them, just as we should work to minimize the harms associated with drugs and drug use by taking drugs out of the underground economy.

-- Paul J. Gessing

Whims and Face Saving

Great comments from Kevin Rollins and TomZ on my blog on “flip flopping.” I feel slightly misunderstood, though.

I’m not making the case for whimsical, arbitrary, pandering public policy. Pols and wonks need to explore the facts and philosophical assumptions behind any meaningful shift in policy. This points toward, for example, Bush and McCain’s approach on the issue du jour: immigration. It points away from some elements in the GOP who are stoking the anger of some regarding immigrants, and who want to militarize the borders. They never quite say it, but one senses a “keep the wetbacks out” mentality among the know-nothing crowd. That “thinking,” frankly, disgusts me. This is not to say that illegal immigration is not a problem, for it is, in my view. Improving border integrity strikes me as an abundantly reasonable thing to pursue. A nation can and should protect itself from illegal immigrants who might, for instance, have communicable diseases, swell the schools, hospitals and welfare rolls, or might even be a terrorist. How that shakes out in specific actions is not the point of this blog; there’s a wide range of things that can and probably should be done, and probably a mix of them is sensible.

No, what I’m really getting at is more a cultural than political problem. There is a “gotcha” mentality that I believe we need to shake as a culture. Russert’s interview this past Sunday of McCain illustrates nicely why I find this mentality dysfunctional.

Russert went through a litany of reasons why the Iraq War was a mistake. I happen to agree with Russert, Iraq WAS a mistake. He basically badgered McCain, and was, IMO, trying to embarrass McCain and, by extension, Bush.

McCain, I think, handled it well. Bush, on the other hand, has been trying to save face these past few years.

In a sense, this particular dance is the jurisprudential model, played out. Two opposing sides attack one another, float calibrated half-truths to win the day for “their” side, and hope to win over the judge or jury. Perhaps that’s a good way to do civil and criminal justice, but it makes for lousy public dialog.

Wouldn’t it be refreshing if Bush could say, “You know what, if the intelligence had said Saddam didn’t have WMD, I wouldn’t have pushed for war. In retrospect, we made a mistake.”

The way politics is played, he basically can’t say that. Just as Clinton didn’t at first say to the grand jury, “My personal life is none of your damn business.” Only the most self-assured could, and pols as a group don’t seem particularly self-assured to me.

Candor, in short, is heavily penalized in a system built on “us and them” confrontation. To me, it’s getting old. There’s got to be another way.

-Robert Capozzi

Flip-flopping: The Measurement Problem

I agree with what Bob Capozzi says about flip-flopping – sometimes it is motivated not by political calculation, but by a true change of heart and/or the acknowledgement and integration of new information.

The trouble is that it is hard (impossible?) to measure why a politician acts, only that he does. We can see result of the thinking, but not the thinking itself. We might say, that from a policy standpoint, it doesn’t really matter, as long as we get the right outcome. Issue groups are interested in getting votes to go in their favor, they don’t care how the politicians get there.

On the other hand, we free liberals consider both method and outcome, because different methods have different effects. It is important consider the situation the individual legislator faces in terms of his own marketing and re-election, the conflict of accurately representing his views vs. those of his supporters, and the question of how he interacts with other legislators. Further, we should consider how these different methods play out in the aggregate, macro-political scene. What happens when large groups of legislators take on one method or the other? Do individual behaviors cause the aggregate result or does the aggregate cause the individual behaviors?

Heart-felt decision making doesn’t necessarily bring better outcomes than cold calculation. It is possible to honestly and truly believe a wrong idea. For instance, a congressperson might honestly believe that increasing the minimum wage to $20/hour would create more wealth by forcing businesses to pay more. A lobbying group for small business could be better informed, because it has an interest in the matter and it has specialized researchers analyzing real data about the problem.

Of course, self-interested calculations could also harm citizens by putting interested “good” ahead of the good of the public. The various interests may not cancel each other out, and we end up with solutions that are on the net bad for everyone. Political wrangling uses up resources; and voting systems and vote trading confuse preferences.

Either case could be bad for the public. It is not clear to me which system of thought is better. I expect that we will continue to discuss these matters on this blog. There is a great deal of knowledge that public choice can bring to the question, as well as group-psychology and game theory. I look forward to the debate.

-- Kevin D. Rollins

The GOP versus the First Amendment

This week the GOP House will consider legislation to regulate" 527s" such as moveon.org and the Swift Boat Veterans for Truth. Apparently, the Republican leadership has come to agree with John McCain that there's just to much political speech in this country. Fortunately, many conservatives are fighting against this latest attack on the First Amendment, among them Ramesh Ponnuru who blasted the GOP on the National Review blog:

"Republicans are leading a charge to subject "527 groups" to onerous regulations. A minority of them, again, have sincere and above-board reasons for doing this. Most of them just want to shut down groups that are trying to beat them in elections. For a majority to restrict the freedom of others to try to boot them out is pretty much a textbook definition of the abuse of power, isn't it?"

Cross-posted at the lewrockwell.com blog.

Charity: It's a crime

Donald Devine exposes how the federal government discourages doctors from providing charity care. If a doctor bills a patient less than the doctor would bill Medicare/Medicaid for the same treatment, the government will accuse the doctor of fraud. Thus, doctors are understandably reluctant to reduce their fees for lower-income patients.

Rubbing salt in the wound, doctors are forced to hire additional staff (and thus increase the amount they charge patients) solely to ensure they are in compliance with federal rules and regulations.

Cross-Posted at the lewrockwell.com l Blog.

(Some) Praise for Flip Flopping

While it’s very easy to be critical of politicians, sometimes it seems they deserve our sympathies. For some reason, people seem to want them to be consistent, to not change their position on anything, ever.

How silly! I don’t know about you, but I change my mind quite a bit. I used to like punk rock, for instance, but now the hardest I get is New Wave. I used to love candy, now I very occasionally eat a Reese’s cup. My tastes have evolved, I’d like to think.

Recall, for instance, in the ’04 presidential campaign. The Bush forces pilloried Kerry for his “flip flopping.” Of course, Kerry walked into that punch, especially when he said that bit about voting against the $87 billion and then for it . . . or was it the other way around? . . . can’t recall . . . doesn’t matter.

Yesterday I posted a link to a story about the impending Weld:Spitzer campaign for NY governor. And the news story included this exchange:

"As with gay marriage, abortion, and eminent domain, Mr. Weld appears to have experienced yet another change of mind," said Blake Zeff, spokesman for the state Democratic party. "While he may now call for cutbacks in New York, during Mr. Weld's tenure as Massachusetts governor the rate of spending rose 2.5 times the rate of inflation."

"Getting lectured by Mr. Spitzer and his mean team on fiscal discipline is ridiculous," said Tantaros, the Weld spokeswoman. She said Massachusetts increased spending only over Weld's vetoes, and that Weld hasn't altered his positions on the other issues.

Actually, Weld has shifted on at least some of those issues, and not necessarily in ways I personally support, yet I remain a fan. I suppose his spokeswoman was just doing her job, but that denial didn’t win points with me.

Then, this morning, on Meet the Press, Tim Russert bore down on John McCain, attempting to “expose” that McCain is no longer a “maverick,” now a Bush loyalist. McCain handled himself well, acknowledged some shifts, denied others, and explained – without being defensive – the context, then and now. The man is gifted.

While I was being flip at the outset of this blog, the same idea applies to “serious” matters as it does to music and food. People change their minds. Fact sets change, too. I prefer to see some humility in politicians, an acknowledgement that they are human beings, imperfect, without prescience. I like to see that they’ve grown and matured over the years.

What I do care about is where they are “coming from.” What are their core principles? What moves them, emotionally and intellectually?

The specifics are really, to me, less important. Mostly, I want to know if this person is someone whose heart is in the “right” place. Nine times out of 10, that’s what counts.

-Robert Capozzi

That’s What I’m Talkin’ ‘Bout

Several months ago, I blogged about Bill Weld running for governor of NY. Weld has just thrown down the gauntlet in his race, proposing what could possibly be the most “Free Liberal” proposal to come along in a long time.

Weld -- a native NYer who went to MA for college, stayed, and became governor there -- proposes ending the state income tax for those making under $75,000 per year. He calls that a living wage, which seems a bit high. Still, we are talking about NY, where just subsisting is an expensive proposition.

Weld would “pay for” the tax cuts with offsetting cuts in Medicaid spending. While “progressives” may find this “heartless” on a knee-jerk basis, Weld notes that “New York could save $5 billion a year if it only reduced Medicaid spending to twice the national average. New York now spends more than $40 billion annually on Medicaid, more than any state in the nation.”

In one of the most refreshing political statements in decades, Weld said that "As one who thinks there's no such thing as government money, there's only taxpayers' money, I don't generally start out, when I see a tax cut, thinking how am I possibly going to pay for this," Weld said. "That's looking at it from the point of view of the government ... government doesn't own that money, taxpayers own that money until government takes it away from them in taxes."

Whether Weld gets elected remains a bit of a long shot. The GOP nomination remains contested, and the Dems are likely to nominate noted prosecutor Eliot Spitzer. Spitzer’s comment that upstate NY is like Appalachia exposes what may be the prosecutor’s Achilles Heel: A tin ear. Upstate NYers are leery of their urban, condescending downstate brethren. Whether Weld – a patrician Long Island native – can exploit Spitzer’s condescending manner remains to be seen.

This is no endorsement (we don’t do them), and Weld is not Thomas Jefferson, though he does have red hair. Still, it’s wonderful to see a mainstream candidate taking a free-market position that is – at the same time -- more “progressive” than anything we’ve seen from a Democrat in recent years. This is realpolitik “transpartisanship” at it finest.

-Robert Capozzi

The Truth Will get you in Trouble

The authors of the recent Harvard study that clearly illustrated Israel's incredibly strong influence on American foreign policy are already being punished for the "misdeed" of telling the truth.

While there is nothing inherently wrong with supporters of a specific country or point of view petitioning their government, the combination of repeated denials and inability of our nation's policymakers to even discuss the issue in an open and rational manner is rather indicative of the level of influence of the Israel lobby and its entrenced nature.

-- Paul J. Gessing