More of the “Green New Deal”

Column 2019-9 (3/4/19)

Last time I considered a part of one version of the green new deal (GND) they called “The economic bill of rights.” Today I will dig into a bit of the rest. I’ll try to cover a few of the highlights, more accurately called low lights.

The lead in to the second part is as follows; “The second priority of the Green New Deal is a Green Transition Program that will convert the old, gray economy into a new, sustainable economy that is environmentally sound, economically viable and socially responsible.” Read the details and you will find that this translates into; “Tear everything we have apart and start over again.”

One version of the GND calls for replacement or major renovation of every building in the USA by 2030. Chew on the magnitude of that for a bit, but don’t swallow it. The GNDers want to destroy our present energy production system. Their only offer of a replacement is a system never tried. In addition some of the necessary components haven’t even been invented.

If that isn’t scary enough, keep in mind that Michigan’s two largest electric and gas utilities, Consumers Energy Company and DTE have bought into the GND hook, line and sinker. We won’t need that bill board asking the last person out of Michigan to turn off the lights. The lights will flicker out on their own.

The GNDers don’t stop with green energy. They also want to change the ways we travel, the houses we live in, the food we eat, and just about everything else. It took centuries to build what we have today. The GNDers want to do a total remake in a decade or two. And, they couldn’t care less whether you want the remake or not.

The scope of the GNDers dreams make the the original New Deal look like a punctuation mark. The GNDers don’t even have a plan or a cost estimate, just an outline of what they want. You can be certain they haven't even acknowledged that their dream could turn into a nightmare.

In the real world the GND will end on the rocks, one way or another. A project of such magnitude is impossible, at least at the present time. The danger isn’t that the GND will ever come close to full completion. The danger is the damage that could be caused by an attempt to start down the GND path.

It would be easy to destroy the prosperity we enjoy. The map is littered with once prosperous nations destroyed by bad government. Argentina, Cuba, and Venezuela are prime examples.

The GND may contain a few ideas worthy of consideration. Digging them out would be like trying to rescue a candy bar from the bottom of a dumpster. The GND is little more than a wish list. It reminds me of an a caution I first heard as a child. If wishes were horses, beggars would ride.

The GND may not be criminal, but it is certainly immoral for GNDers to try to impose their experiment on a nation with one-third billion people. At a minimum they should do a test run involving far fewer people. Ideally the test subjects should all be volunteers. In the real world that is probably impossible.

I will offer the best option that comes to mind. The GNDers already have California in their pocket. People who want a decent life are fleeing the Golden state. The other 49 states can grant asylum to the refugees fleeing California. The GNDers can do their experiment in California. This plan isn’t perfect. It beats flushing the entire country down the GND sewer.

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Copyright 2019

Albert D. McCallum

What Is the “Green New Deal?”

Column 2019-8 (2/25/19)

There are many versions of the green new deal (GND). Some of them contain similar ideas. If I tried to describe all of them it would be a contest. Would it drive me crazy before you quit reading?

I chose one example to review. It reads like a four year olds’ letter to Santa. (I probably should apologize for insulting the four year old.) Four year olds don’t worry about how Santa will do it. They just know he can. Such thinking by adults can be dangerous.

The GND is a wish list that ignores reality and gives almost no consideration to where the wealth to implement it would come from. It also gives no consideration to the impact of diverting wealth from its current uses.

It starts with what it calls “The economic bill of rights.” It proceeds with a list of entitlements that somebody would have to pay for. The first entitlement reads as follows: “The right to employment through a Full Employment Program that will create 25 million jobs by implementing a nationally funded, but locally controlled direct employment initiative replacing unemployment offices with local employment offices offering public sector jobs which are ‘stored’ in job banks in order to take up any slack in private sector employment.”

Government generally fails when it tries to create 25 real jobs. Twenty-five million might be a bit of a stretch. Jobs in themselves aren’t important. It is the wealth created by the jobs that counts. With a real job the employee produces enough wealth to cover his pay check and the other costs of employing him. A job that fails to do this is merely an excuse for issuing a welfare check.

One of the results they claim will be achieved is: “We will end unemployment in America once and for all by guaranteeing a job at a living wage for every American willing and able to work.“ I guess it is left to Santa to create the paying jobs. The concept of storing jobs in a job bank completely baffles me. Do the jobs have to be freeze dried for storage?

The wish list continues with, among other things: 1) the right to a living wage, 2) Medicare for all, 3) tuition-free, quality, federally funded, local controlled public education system from pre-school through college, 4) The right to decent affordable housing, including an immediate halt to all foreclosures and evictions, 5) The right to accessible and affordable utilities – heat, electricity, phone, Internet, and public transportation – through democratically run, publicly owned utilities that operate at cost, not for profit.

One thing they didn’t touch is, Who will be enslaved to pay the bills? Also, “federal funding and local control” is the impossible dream. The golden rule still applies. He who has the gold makes the rules, even if he stole the gold. And, all wealth is created locally somewhere before government takes it.

Of course, the GND draws its name from Roosevelt's New Deal of the 1930s. Many still believe the New Deal ended the great depression. Close analysis of events of the 1930s and 1940s show that the New Deal prolonged the depression by more than a decade.

How dangerous is the GND? The answer depends on whether it is implemented, or not. If it is a passing fad that dies on the vine, it will be relatively harmless. If it is even partially put into practice it would be an unmitigated disaster that would achieve almost none of it advocates’ objectives. Some of the goals may be desirable. The means for implementation are pure fantasy.

So far I have covered only the lead in to the main agenda item “green energy.” They want to destroy the energy supply system that powers our survival and prosperity. They promise to replace it with something never tried. More about that next time.

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Copyright 2019

Albert D. McCallum

The Wall

Column 2019-7 (2/18/19)

To wall or not to wall, that is the question. The controversy over the wall has consumed far more ink and megabytes than did the debates about invading Afghanistan and Iraq. I’m not sure that rantings about the wall have changed a single mind.

It might be well to clarify a few points. Building the wall won’t come close to securing the border, even if it blocks all land traffic to and from Mexico. Are we going to extend the wall up 1he Pacific, Gulf, and Atlantic coasts? How about the Canadian border?

Drug traffickers have evaded every obstacle the US government has thrown in their way. Can anyone believe the wall will significantly affect the drug trade? Most illegals in this country enter through legal ports of entry. They merely forget to leave. The wall won’t change that.

The wall isn’t going to save civilization. Not building the wall won’t send us crashing into a new dark age. The one question remaining is, Will the wall be a small net benefit, or a small net detriment? Whether the wall is built, or not, I doubt that the question will ever be answered. History won’t reveal what might have happened along the road not traveled.

Declaring a national emergency to build the wall is insane. Just because it is insane doesn’t mean it can’t be done. Building the wall certainly won’t be as insane as was the invasion of Iraq.

I see one benefit from the wall controversy. The benefit is serendipitous rather than intended. President Trump’s claim that he can build the wall by declaring a national emergency has focused attention on what his emergency powers might be.

Various reporters have dug up emergency power laws passed by Congress. What they have found resemble a very scary Halloween movie. If the grants of power are taken at face value, the president can essentially rule as a dictator.

Congress made little attempt to define “emergency.” This little detail seems to be left up to the president. Does anyone believe President Trump, or any other president, will have a narrow view of his own powers?

I saw a cartoon of Trump sitting at a table with burgers on it. He was saying, “I ordered three packets of ketchup. It is a national emergency.” Perhaps emergencies, like beauty, are in the eye of the beholder.

For ages Congress has passed vague laws allowing bureaucrats in the executive branch to write most of the law, prosecute violators, and decide if the individuals prosecuted are guilty. Is it possible that Congress might have second thoughts on writing these blank checks to the White House? Of course, before Congress can have a second thought, it must have a first thought.

A simple start would be, limit declarations of national emergencies to 90 days unless Congress votes to continue the emergency. If the president can’t convince Congress that an emergency exists, it probably isn’t an emergency. If all a president need do to bypass Congress is say the magic words “National emergency,” the country is hard wired for dictatorship.

Granted, in theory Congress can always vote to take away emergency powers it granted. In reality, what are the chances Congress will be able override the almost inevitable veto? It would be far safer to limit the president’s powers in advance.

One unanswered question is, Does Congress have the right to grant dictatorial power to the president? We may have started the march to the answer.

In 1952 the Supreme Court did rule against President Truman’s seizure of the steel mills.

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Copyright 2019

Albert D. McCallum

Who Should Set Interest Rates?

Column 2019-6 (2/11/19) 

I have debated with myself about writing this column. It covers an important point that is generally ignored. My concern is, Will it put everyone to sleep? If it does, perhaps you should clip it out and put it in your medicine cabinet.

In free markets buyers and sellers interact to determine prices. When there is a surplus of hammers the price decreases. Producers make fewer hammers. Because of the lower price buyers purchase more hammers. The price moves toward the point where supply will equal demand. That “perfect price” is a moving target, not a fixed number. Nevertheless, supply and demand stay close to being balanced most of the time.

If government imposes price controls, shortages and surpluses are inevitable. Producers will only make things they can sell at a profit. Price controls caused the natural gas shortage during the 1960s and 1970s. The price was set so low that drillers stopped drilling. The waiting lines at gas stations in the 1970s were also caused by price controls. Gasoline prices could not rise to where supply equaled demand.

Half of most sales is money. Even if the buyer doesn’t pay with money, the prices are usually expressed in units of money. In the US most prices are expressed in US dollars. How can we have free markets when the quantity of money and the rental price (interest rate) are determined by the government?

Government doesn't set interest rates. The Federal Reserve (Fed) increases or decreases the amount of money until lenders and borrowers agree on the rate the Fed wants. It is like determining the price of hammers by manipulating the supply of hammers.

Almost all economists recognize that price controls for goods and services create shortages and surpluses which can cause serious problems. At the same time most economists accept and encourage price controls on the rental price for money.

Government can’t create hammers, natural gas, and gasoline out of thin air. So, when the shortages occur people are left on their own to deal with the problems as best they can. The Fed and fractional reserve banks can create an unlimited amount of money out of thin air. Thus, even with artificially low interest rates borrowers can still find money to borrow.

So, what is the problem? The problems occur when the borrowers start spending the new money. The supply of things to buy didn’t increase when the money supply increased. Prices rise, soon, even with the new money the borrowers can’t afford to buy. They cancel their buying plans that were based on more money and the same old prices.

The shock waves disrupt the entire economy. The recession that follows is the price we pay for government’s manipulation of the rental price of money.

If the money supply wasn't manipulated by government, only savers could lend. The saver would transfer his right to his savings to the borrower. The borrower spends the money the lender didn’t. The money supply remains unchanged. Borrowing has minimal affect on prices.

Interest rates will endlessly seek the point where the demand for loans equals the savings offered for borrowing. If borrowers want to borrow more they will have to offer to pay higher interest. This offer will encourage more savings.

No one will have to worry about finding the right interest rate. Interest rates will be determined by lenders and borrowers interacting in the marketplace. This will eliminate the problem of artificially low interest rates over heating the economy which then crashes into a recession.

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Copyright 2019

Albert D. McCallum

For Profit

Column 2019-5 (2/4/19)

For many the term “for profit” is an obscenity. I doubt that most people who hate profits understand the object of the hatred. Perhaps they have been conditioned by others to hate profits.

So, what are profits? A business sets out to produce and sell something. It secures resources and makes its product. If the product sells for more than the resources cost, the gain in value is profit. The business earned its profit by pleasing its customers.

Profits can be measured only in free market transactions. If the business is subsidized by government or the customers are coerced to buy, we can’t know the real cost of the product or what customers free to choose would have paid for it. There is no way to measure the earned real profits. At least part of the business's gain was forcibly taken.

Measuring profits and losses is a way to calculate whether the business created or destroyed wealth. If a business creates substantial wealth, others will try to duplicate the success. Increased competition will pull down profits. In free markets profits are self limiting.

A legislator has submitted a resolution to amend the Michigan Constitution. The amendment would make it unconstitutional to hire a for profit business to manage a charter school. The Mackinac Center for Public Policy has analyzed the ratings for Michigan schools. It found that some of the best schools are charter schools managed by for profit businesses. Should the successes be wiped out by a constitutional amendment?

For profit businesses provide our food, vehicles, clothing, furniture, etc. Why is it a special evil for them to provide education services? If it is evil to profit from providing education services. How dare we pay school teachers and administrators? “Wages” is just a different name for profits earned by an employee.

This does not mean all wages are earned. Some employees are paid more than the value they produce. For profit businesses try to identify and eliminate such wasteful jobs. Government doesn’t have to worry about keeping employees who cost more than they produce. At least it doesn’t have to worry until it reaches the limits of taxation and borrowing.

Government “sells” to taxpayers who don’t have the choice of saying “no.” Thus, we will never be able determine the value, if any, of what government produces.

I don’t doubt that those who want to eliminate “for profit” from charter schools despise profits. I strongly suspect that they hate charter schools even more than they hate profits.

The hatred of charter schools is fueled by the schools’ successes rather than their failures. No one is forced to patronize charter schools. Charter schools can survive only if they convince parents and students that the charters provide better service than district schools provide.

For the most part those who attack charter schools do so to preserve district schools for the benefit of the schools’ employees and the unions. To achieve this goal they are willing sacrifice the students.

The Detroit district schools are generally recognized as the worst in the country. Anyone who is pro education should seek to aid children in escaping those schools, not force children back in to them.

Consumer choice kills businesses that fail to please customers. Government subsidizes its failed schools so they can continue torturing children. The Detroit district schools have been headline grabbing failures for decades. There is still no improvements in sight. Why should we sink the charter school life boats in which some children have escaped?

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Copyright 2019

Albert D. McCallum

California Crazy

Column 2019-4 (1/28/19)

I try to ignore California. Apparently this irritates California. It keeps upping its game until it does something so outrageous I can’t ignore it. This time California hit me with a trifecta. The three contestants are competing for both the most outrageous and the silliest. You can pick the winners.

The first two entries spring from the shortage of housing in the Golden state. Several cities have an idea. They turned it in to an ordinance. I don’t understand how the ordinance eases the housing shortage. Maybe you will.

These ordinances require the owners of rented housing to pay the tenant a moving expense charge to get the tenant to move. Payment of the charge is required even when the rental period has ended. The charge may be as much as $8,000.

A couple serving in the military rented out their house while stationed outside California. When they returned they had to pay thousands of dollars of ransom to liberate their house. The ordinance didn’t even exist when they rented their house to the tenant. Surprise! The legality of the moving charge is now the subject of a lawsuit.

The national government has a program that aids the building of “affordable” housing. A developer used this program to get the government to provide most of the financing to build some apartments. The apartments cost over $700,000 each.

I guess affordable doesn’t mean much until you know “affordable by who.” Or, perhaps no one can afford to live in California.

Having just saved humanity from destruction by plastic straws, California seeks new dragons to slay. Without villains there would be no heroes. Berkeley found a monster lurking in the same jungle as plastic straws. The newly discovered menace is the straws companion, disposable cups.

How might a hero slay the disposable cups? Berkeley’s dragon slayer is the quarter. Be very careful when you reach for your change. It may include one of those killer quarters.

So, how will Berkley deploy its newly discovered weapon? It will require beverage sellers to charge a nonrefundable fee of $0.25 for each disposable cup. The merchant gets to keep the quarters. This may be the dragon slayer's Achilles heel. As one reporter pointed out, there appears to be nothing to prevent a merchant from lowering his price $0.25 to offset the cost of the cup.

One of the counsel members voting for the ordinance suggested it was to save the planet. Ah, yes, for the want of a quarter the planet was lost. The ordinance did include some other planet saving features, such as a ban on disposable table wear that wasn’t compostable.

Maybe going back to wooden spoons will save at least half of the planet. Do ice cream cups still come with wooden spoons? Or, is that something that only those of us from the age of dinosaurs remember?

In case three examples weren’t enough, I am including a bonus warning without any extra charge. California is considering baning paper receipts for purchases. Would this force everyone to switch to plastic?

Some may believe I want to stop the foolishness in California. I wouldn’t think of it. No idea is so bad some politician doesn’t want to road test it. Let California be the proving ground for bad ideas. California can serve as the bad example for the rest of us to learn from.

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Copyright 2019

Albert D. McCallum

What is ignorance?

Column 2019-3 (1/21/19)

The American Heritage Dictionary defines ignorance as; “The condition of being uneducated, unaware, or uninformed.” If this brief definition said it all about ignorance, this would be a very short column.

I don’t find the AHD definition satisfactory. It is too vague. So I tried Merriam-Webster. I was rewarded with; “the state or fact of being ignorant: lack of knowledge, education, or awareness .” It is a bit wordy, but it found the key.

Ignorance, like cold, isn’t any thing. Cold is absence of heat. Ignorance is simply lack of knowledge. It doesn’t need to be embellished with judgmental type words.

If mere ignorance is a fault, everyone is at fault. Everyone begins life totally ignorant. A life time later, even the most knowledgeable are still mostly ignorant. Imagine a test covering all the knowledge accumulated by humanity. How well do you believe you would score? For anyone to pass this test it would have to be graded on a curve, or else accept something well under 1 percent as a passing score.

Ignorance as an absolute is meaningless. It becomes meaningful only if tied to a body of knowledge. It is meaningful to refer to ignorance about nuclear physics, or college basket ball. Neither ignorance is a fault, except for those who need to know. For a college basketball coach to be totally ignorant about college basketball would, to say the least, be a problem.

To identify ignorance we must identify the type of ignorance. Ignorance about one’s own ignorance can be dangerous. Even more dangerous is being ignorant of the fact that some things one believes are not true. Another way to put it, ignorantly believing falsehoods is dangerous. This is especially true when the ignorant one tries to impose his beliefs on others.

Unfortunately many people don’t bother to verify their beliefs before being sure they are right. Such people can be dangerous when wrong about something important.

Of course, being allowed to vote doesn’t magically eliminate the voters ignorance. Even if a person tried to learn all about government and the consequences of what it does, he would be unable to come close to his goal.

In the real world the shrill voice of ignorant zealots drown out the quiet voice of reason. We need a baloney detector to identify the voices of the advocates of ignorance. There are a few badges of ignorance we can use to identify the advocates of ignorance.

Their response to “Why?” is often telling. If they can’t explain why they are right, they probably aren’t. Those who attack and vilify their opponent probably do so because they can’t defend their own ideas. Those who try to silence, or even imprison, opponents to their ideas should never be taken seriously. They are driven by emotions, not facts and reason.

There are few topics where ignorance and wrong ideas dominate more than in economics. In most elections economic concerns are the strongest force. If voters learn the truth about economics and vote accordingly, ignorance about the other issues may not be terribly important.

The poster boy and girl for economic ignorance are Bernie Sanders and Alexandria Ocasio-Cortez. If their version of ignorance prevails,the future won’t be bright. Donald Trump and Elizabeth Warren would make good replacements if Sanders and Ocasio-Cortez decline the honor. It would take a book to analyze the economic ignorance of any of the four.

If you are looking for sound economics, check out FEE.org or mises.org.

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Copyright 2019

Albert D. McCallum