The Death of Federalism

Column for week of June 16, 2014

     The government in D.C. is commonly called "the federal
government."  We have federal laws, federal buildings and
federal courts.  What is federal about them, other than the
names?

     A federation is an association of independent entities.  In
the beginning this described "These United States."  And, in the
beginning the USA was referred to as "These United States."

     On separation from Britain each colony became an
independent nation.  These sovereign nations formed a federation
and assigned it certain tasks.  This federation was to serve its
sovereign member nation.  The 13 sovereign states were not
ruled by the federal government they created.

     The original federation proved unsatisfactory to some. 
The U. S. Constitution created a new federation.  Each of the 13
sovereign states voted to join the new federation.

     The constitution creating the new federation clearly stated
that the federal government had only the few powers named in
the Constitution.  All other powers were reserved to the
sovereign states and the people.  This was a true federation.  The
federal government was to serve the states, not rule them.

     Contrast this with state governments, such as Michigan. 
No one I know calls Michigan a federation of counties. 
Counties didn't get together and form the state.  State
government created the counties to serve the purposes of state
government.  Counties have only the powers and privileges
granted by the state.  The counties are essentially administrative
districts of the state.

     Today the states have lost their sovereignty and are now
mere administrative districts of the no longer federal government
in D.C.  We now have a national government ruling the states.

     Any powers and privileges retained by the states are no
more than gifts from the all powerful national government.  The
national government hasn't yet seized control of all functions
once reserved to the sovereign states.  The national government
has only seized the powers the D.C. politicians find most
beneficial to themselves.

     How and when were the sovereign states turned into mere
servants of the federal government they created?   The when part
is easy.  The last vestige of federalism died November 9, 1942. 
That was the day the Supreme Court issued its ruling in Wickard
v. Filburn, 317 U.S. 111.

     Federalism was under siege from its beginning.  The
politicians have always wanted more power.  Wars provide the
greatest opportunities to grab power.  Federalism suffered its
first great losses during the Civil War.  World War I further
expanded the power of the still federal government.  Federalism
was already on the endangered species list before November 9,
1942.

     The subject mater in the Wickard case was quite minor,
11.9 acres of wheat harvested by Ohio farmer Roscoe C. Filburn. 
The government in D.C. had taken unto itself the power to tell
farmers how many acres of wheat they could grow.  That power
supposedly sprang from the Constitutional power to regulate
commerce among the states.

     There was one small fly in the ointment.  Filburn's wheat
never left his farm.  Filburn claimed his wheat had nothing to do
with interstate commerce.  A unanimous Supreme Court ruled
otherwise.

     The court found that if farmer Filburn hadn't grown the
wheat he might have bought wheat to feed his chickens.  Thus,
Filburn's growing of the wheat might have affected interstate
commerce.  That was good enough for the court.

     Under this rational I defy anyone to name even one
action or inaction that might not affect interstate commerce and
thus be subject control by the national government.  Federalism
is dead.  The now national government (call it the nats, not the
feds) is free to usurp any power it wishes from the now
subservient states.

     Occasionally the Supreme Court issues an opinion
inconsistent with Wickard.  There is nothing unusual about the
court issuing inconsistent decisions.  The Court still recognizes
Wickard as the law of the land.  Federalism is still dead.

     Next time:  Why does federalism matter?

aldmccallum@gmail.com
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Copyright 2014
Albert D. McCallum

Why Is Government Inefficient?

Column for week of June 9, 2014

     Government is generally believed to be inefficient.  It
pays $600 for a screwdriver anyone else can buy for $10.  It
pays many employees far more than does the private sector. 
Also, those employees are rarely over worked.

     I had some personal experience with this a few decades
ago.  I fought boredom in my own ways.  I drew many house
plans.  The department where I worked didn't do houses.  Within
a year I resorted to the ultimate boredom fighter.  I quit.

     People are not inherently inefficient.  Most people seek to
achieve their goals in the  most efficient way possible.  In other
words, get what you want with as little effort as possible.  It has
been said "Laziness is the mother of invention."  There is
nothing wrong with finding an easier way to do something.

     Finding easier ways is the foundation of our prosperity. 
If we still did everything in the old inefficient ways of a mere
hundred years ago we would have but a small fraction of what
we have today.

     In the private sector people prosper by finding efficient
ways to serve others.  The more efficiently we serve others, the
more we get for the time spent serving them.  Making a pair of
shoes in one hour is more profitable than spending two hours
making the shoes.  When earning your living producing for
willing customers, efficiency is vital to your prosperity.

     It is hard to imagine that the inherent nature to be
efficient dies when the individual crosses the line into the
government sector.  So, why are those on the government side so
inefficient?  Not only do they produce inefficiently, much of
their effort is invested in producing things not worth making.

     People are motivated to efficiently produce the things that
benefit them.  Imagine a person who spends his entire day
making paper airplanes he doesn't want and no one will buy. 
What motivation does he have to be efficient?

     It doesn't matter whether he produces 100 great airplanes
or one really bad one.  His goal isn't to improve his efficiency of
production.  His goal is only to make his day as pleasant as
possible.

     Of course, everyone's goal is to make their days as
pleasant as possible.  The individual who is paid more for
producing more can gain satisfaction from efficient production. 
The individual who gains nothing from efficient production has
no reason to be efficient.

     It is the government environment that sucks the
efficiency out of its inhabitants.  Actually it doesn't suck out the
efficiency, it redirects it.  Instead of rewarding efficient
production, government rewards efficient manipulators.  Those
best at manipulating the bosses, the rules, and the voters are
rewarded with higher pay and more power.  As manipulators
their efficiency is second to none.

     Even if government employees want to be efficient, they
usually have no way to measure their efficiency.   Sure, they can
measure the number or new rules they produce or enforce, the
number of reports they write, and the number of accounts they
audit.

     The only way to measure the value of a product is to see
what a willing customer will pay for it.  Most of what
government produces isn't sold to willing customers.  It is paid
for by less than willing taxpayers who seldom even know what
they are paying for.

     It is inevitable that government will always be inefficient
at producing what taxpayers want because the taxpayers aren't in
control.  Taxpayers usually aren't in a position to reward
efficient behavior and punish inefficient behavior.  Government
will be efficient only at producing what politicians, bureaucrats,
and their powerful accomplices want.

     Government always has been and always will be a
conspiracy of the powerful exploiting the weak.  The only
defense the weak have is to keep government as small and weak
as possible.  Powerful government is the most destructive force
on earth.

aldmccallum@gmail.com
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Copyright 2014
Albert D. McCallum

Does Recycling Make Cents?

Column for week of June 2, 2014

     I hadn't thought much about recycling for some time. 
Then I saw a bag with a message.  "PLEASE REUSE OR
RETURN THIS BAG TO A PARTICIPATING STORE FOR
RECYCLING."  At least the bag wasn't threatening me with
great bodily harm if I didn't honor its request.  It was behaving
in a far more civil manner than former New York mayor
Blomberg.

     Should I heed the bag's plea?   Perhaps the bag was
merely homesick and wanted to hitch a ride home.  Plastic bags
aren't famous for their brilliance.  Is it even possible that
someone put those words in the bag's mouth?  I probably don't
even need to mention that the bag was green.

     Recycling isn't new.  It is older than any of us.  The new
part is coerced recycling.

     I remember paper drives from my early years in grade
school.  The students collected newspapers and magazines to sell
to raise money for various projects.  The junkyard paid about 50
cents for a hundred pounds of newspapers and a little more for
magazines.  Fifty cents then was worth more than five of today's
dollars.

     No one was coerced to participate in recycling.  Everyone
gained by doing it.  Recycling made sense because it made
cents.

     Then someone decided that recycling was virtuous, no
mater what it cost.  It didn't matter to them how much recycling
cost.  At least the cost didn't matter as long as someone else
paid.

     The recyclers might have paid others to bear the  burden
of recycling that didn't make cents.  The joy they gained from
recycling wasn't enough to motivate them to pay for it.  They
were perfectly willing to force others to pay with their time and
money.

     What are the benefits from that green bag returning
home?  That depends on what it does when it gets there.  If it is
reused it saves the making of another bag.  Considering the
potential for the bag to be damaged or contaminated, I doubt that
many stores are going to send the bags on a second mission.

     The remaining options include burn, bury and process
into new bags.  The key question is, How many resources does it
take to reprocess the bag?  If it takes more resources to
reprocess the old bag than it does to make a new one from
scratch, recycling doesn't make cents or sense.  It doesn't take
much scratch to make a bag.

     Resources used in reprocessing include the time, energy
and effort used by the consumer in returning the old bag. 
Considering the small cost of making a new bag from scratch, it
doesn't make cents or sense to invest much effort in recycling
bags.

     Another approach is to eliminate the disposable bags.  A
city in California tried that.  People reused durable bags for
hauling home their food.  One of the side effects was a
noticeable increase in the incidents of food poisoning.  The
reused bags became contaminated and poisoned the food put in
them.

     The resources consumed or destroyed by a single case of
food poisoning would be enough to make many disposable bags. 
Fans of forced recycling fail to consider the total cost and waste
from forced recycling.

     Recycling can make sense.  Free people will figure out
when recycling makes sense and do it.  They won't waste
resources on recycling that doesn't make cents.  Feel good
recycling that wastes resources isn't environmentally friendly.  It
is a senseless waste.  Recycling is one more thing "Do it my
way, or I will hurt you" government shouldn't touch.

aldmccallum@gmail.com
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Copyright 2014
Albert D. McCallum

Does Ethanol Benefit Farmers?

Column for week of May 26, 2014

     The diversion of 40 percent of US corn production into
ethanol greatly increased the demand for corn and the price of
corn.  It may seem obvious that this has made farming more
profitable.  A closer look is warranted.

     The sudden increase in corn prices and the ripple effect
increase in prices for other crops did substantially increase
farmers' profits.  Will this increase hold up?

     The value and price of resources used to produce any
product depend on the value and price of the product produced. 
Farm land in one of the main resources used to produce crops. 
With more money to spend farmers and farm land investors
quickly bid up the price of land.  This gave farm land owners a
big boost in net worth.

     It is important to distinguish between income from
farming and income from owning farm land.  The non farming
land owners gained as much from the increase in land prices as
did farmers who owned land.  For farmers who didn't own the
land they farmed the cost of renting or buying that land went up. 
All they gained was a brief boost in profits while the price of
farm land caught up with the higher crop prices.

     The initial crop price increase made it profitable to farm
land that was not being planted.  As this land comes into
production it moderates the initial crop price increases.  The
initial bubble in crop prices cannot be sustained without some
new factor pushing prices up.

     Once acres planted and the price of farm land fully
adjusts to the higher crop prices, profits from farm operations will
drop back to their former levels.  The only sustained gains will
be the increased land values.  The higher values of farm land
will benefit those who sell or rent their land for higher prices.

     Owners who farm their own land in effect rent their land
to themselves.  The benefit to them will come from owning the
land, not from farming it.  These farmers could capture the same
gains by selling their land.  All that they would lose by selling
would be the profits from operating the farm.

     Some may say the ethanol boost in crop prices is still a
good deal for farmers.  Some gained and the rest are no worse
off than before.  We still haven't seen the end to the story.

     Ethanol production is inefficient and wasteful.  It exists
only because government forces people to buy ethanol and
subsidizes production with tax dollars.  Ethanol production is an
artificial bubble.  Such bubbles are always in danger of bursting.

     When the ethanol bubble bursts crop prices will crash and
farm land values will crash with them.  Farmers and all farm land
owners will then pay for the profits gained during the inflation
of the ethanol bubble.

     Farming and farm land ownership will be disastrously
chaotic until a new equilibrium is established with lower crop
prices and lower farm land prices.  The economic pain from the
readjustment is likely to exceed the then nearly forgotten benefits
during the inflation of the bubble.

     The ethanol blessing to farmers will end as a curse for
most who fail to sell their land before the bust.  Those who
didn't increase their debt because of the higher land values may
ride the bubble up and down without great loss.  They won't
gain either.

     It is anybody's guess when the bubble will burst.  Some
may believe it never will.  I'm not betting that they will be right. 
History isn't on their side.

     Whatever happens the ethanol bubble will cast a dark
shadow over the entire agricultural economy until the bubble is
deflated.  It will be much like living on the side of a volcanic
mountain waiting for the eruption.  This seems like a high price
to pay for a few years of mostly false prosperity.

     In the end all higher crop prices accomplish is to increase
the price of farm land.  Once the adjustment period is over,
farming is no more profitable than before.

aldmccallum@gmail.com
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Copyright 2014
Albert D. McCallum

No Job Snow Job

Column for week of May 19, 2014

     Rarely does a day pass that I don't read about someone
fretting that new jobs aren't showing up fast enough.  This
lament may replace complaining about the weather as the
nation's number one pastime.

     Of course, the lack of new jobs is the President's fault. 
This is only fair.  If there were millions of new jobs, the
President would get the credit.  Never mind that the President
has about as much ability to create new jobs as a meteorologist
has to change the weather.

     It is embedded in our folklore that the President controls
the economy.  It would take far more than a single column to
even begin to explore why the President is credited with these
shaman like powers.  Perhaps a bit of understanding about jobs
would help to demystify the President.

     Hours worked and productivity per worker are all but
certain to shrink during a recession.  New workers aren't needed
to increase productivity.  In the early stages of a recovery the
existing work force works harder and more efficiently.  There is
no need for new employees until the old employees are
producing at full capacity.  Huge fringe benefits and other costs
of adding new employees encourage employers to work existing
employees to the limit before hiring new employees.

     The work force is dynamic, not static.  Even during years
when there isn't any net change in the number of jobs, millions
lose their jobs and millions find new jobs.  Increases in the
number of jobs don't mean that layoffs have ended.  Millions file
unemployment claims during the most prosperous of years.

     One reason productivity grew in recent years is the
increased efficiency that technology brought to manufacturing. 
The trend of downsizing the manufacturing work force has been
with us for decades.  It isn't over yet.  Some people see this loss
of manufacturing jobs as a bad thing.  For those who lose their
jobs, it definitely has a downside, in the short term at least. 
Usually workers who lose their jobs to innovation eventually get
a more productive, better paying job.

     The increased productivity of manufacturing jobs lowers
prices.  It benefits everyone.  It makes no sense to preserve
inefficient and costly manufacturing jobs just to reduce job loss. 
New jobs producing things which we don't now have is the
answer.

     Until imaginative, creative people with access to
investment capital find the ways to create new production,
employment growth will remain small.   Neither the President
nor all of the President's men can create those jobs.

     All government can do is create welfare jobs.  A welfare
job is one where the "employee" doesn't produce enough to pay
his wages.  The government forces others to make donations to
the "employee."  Disguising these welfare payments as wages
only thinly conceals that the "employee" is on the dole.

     The government may pay for welfare jobs with tax
dollars.  Or, it may force private employers to keep employees
that aren't needed for production.  Either way the results are the
same -- higher costs and a lower standard of living for everyone.

     Government interference with the economy and
employers serves mainly to stifle the creativity and initiative
essential to create new jobs.  The only way to create the millions
of new jobs to replace the old ones is for government to get out
of the way and unleash the creativity of entrepreneurs in the
marketplace.

     Those who claim that government action is essential to
create new jobs are giving us a snow job that won't create the
new jobs the unemployed workers need.  This is one more case
of government being the problem, not the solution.

aldmccallum@gmail.com
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Copyright 2014
Albert D. McCallum

Leaders or Drivers?

Column for week of May 12, 2014                              

     Often I hear the lament that we don't have leaders today. 
What is a leader?  What distinguishes a leader from the herd?

     Those who follow a leader do so because they want to. 
They believe they will benefit from following and supporting the
leader.

     When a rancher wants to move a herd of cattle he doesn't
hire leaders, he hires drivers.  The drivers will coerce the cattle
to go where the cattle may not want to go.  The cattle go where
the drivers want to avoid the unpleasantness threatened by the
drivers.

     Sometimes drivers resort to another tactic.  They might
string a trail of food to where they want the herd.  The cattle
may go for the short term benefit of following the food, even
though they end up in pens at the slaughter house.

     We don't have leaders in government for one simple
reason.  Government doesn't lead, it drives.  Government tries to
herd people to where it wants them.  An honest leader must
consider what the would be followers want and make a credible
offer to get them where they want to go.  Leadership is possible
only where the would be followers are free to reject the goals of
the wannabe leader.

     Those in government today have accumulated so much
power  they feel no need to lead.  The first response is to drive. 
"There ought to be a law" is the cry of the driver.  Translated it
means "I don't care where you want to go, I'll hurt you if you
don't go where I want you."

     The drivers also often string a trail of crumbs to the
holding pens.  Many voters with their noses to the ground
lapping up the crumbs don't see, or even seem to care, where
they will end up.  All they want is more crumbs.

     Big, all powerful government will never produce real
leaders, only drivers.  Leadership is possible only when people
are free to refuse to follow.  Those who resort to the government
tactic of  "Do it my way, or I will hurt you," will never be
leaders.  They tell people what they should want and attempt to
drive them to it.

     They may at times claim to be concerned about what
people want.  As soon as the pretend leaders grasp the power to
drive, they drop all pretense of leadership and crack the whip.

     If this country is to survive, we must quit looking to "Do
it my way, or I will hurt you" government for our salvation. 
Instead we must look to the private sector and voluntary
cooperation.  Leaders earn their stripes and stars.  They don't
take them by force.

     Individuals will work hard for a leader who holds out
hope of leading them to their goals.  They only stagger along
when driven.  Of course, when followers discover a leader is
deceiving them, they will abandon him.

     This freedom of choice gives rise to spontaneous order
where everyone seeks to serve others in order to get others to
serve them.  The successful leaders are the ones who lead people
to where they want to go.  The leader doesn't set the goals, he
only, executes a plan to achieve the goals.

     A leader may persuade individuals to change their goals.
The choice to change is freely made by the followers because
they believe the new goals serve them better, and will be more
satisfying than the old ones.

     The force of government drivers can only bring division,
strife and poverty.  What happened in the former Soviet Union is
the ultimate end that all government drivers will achieve.

     Only in the seemingly chaotic spontaneous order
produced in an environment of freedom and choice can we
achieve and maintain peace and prosperity.  Looking for
government and its drives to force us to peace and prosperity is
as hopeless and looking for orchids in a snowdrift.  We must
have leaders, not drivers.

aldmccallum@gmail.com
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Copyright 2014
Albert D. McCallum

Good Politics, Bad Government

Column for week of May 5, 2014

     The battle over increasing the minimum wage isn't going
away.  It is unlikely to even cool down before the November
election.

     When politicians consider which issues to support, their
first thought usually is, What will snare the most votes?  Poles
show overwhelming voter support for increasing the minimum
wage.  It would take principles and moral courage to oppose
increasing the minimum wage.  Both are in short supply in the
realm of politics.

     There is a down side to supporting the minimum wage
increase.   What if voters figure out that a higher minimum wage
hurts the poorest and least skilled workers?  What if voters
discover that increasing the minimum wage increases
unemployment and reduces average income?

     Studies of voters' attitudes suggest that voters who are
aware of the downside of minimum wage increases don't support
the increases.  Those politicians who bet their careers on
campaigning to increase the minimum wage are counting on
voters not seeing the down side to the increase.

     This isn't a high risk gamble.  Since the beginning of
elections, politicians have been betting on fooling the voters --
and winning most of those bets.  They can fool some of the
voters all of the time and all of the voters some of the time. 
Usually that is enough to win an election.

     Even the Congressional Budget Office (CBO) doesn't buy
the idea that a minimum wage increase is free manna from D.C. 
The CBO estimates that increasing the minimum wage from
$7.50 per hour to $10.10 an hour will cost 500,000 to 1,000,000
jobs.  This shouldn't surprise anyone.  Raise the price of nails or
bread and sales will decrease.  The same principle applies when
increasing the price of labor.

     Even 500,000 workers with zero earnings, instead of
$7.50 an hour, adds up to $3,750,000 per hour.  If those jobs
were all full time at 2,000 hours per year the total lost wages
would be $7.5 billion.  That almost qualifies for being real
money.

     Let's toss in something that even the dumbest and
shadiest of politicians might understand.  It means $7.5 billion
that won't be subject to income tax, sales tax, Social Security
tax, or any other tax.  I won't even try to guess how much it will
increase unemployment claims and welfare payments.

     Besides, the unemployed won't be gaining work
experience that would increase their productivity and pave their
way to higher paying jobs in the future.  Who knows how much
mischief those idle hands will find to occupy their time?

     Government can't legislate higher incomes.  Only
increased productivity can increase the average income.  The
most government can do is take from one pocket and put into
another.  While doing the "take and put" government gets its cut. 
And, usually a few dollars float away in the breeze.

     Government may increase the average wage while
decreasing the average income.  Consider a simple example.  
An employer has two employees earning $8.00 per hour.  He
planned to hire another at $8.00 an hour.  With the increase in
the minimum wage the employer provides only the two jobs for
his original employees at $10.10 per hour.

     Instead of having three employees with total pay of
$24.00 per hour, he has two with total pay of $20.20 per hour. 
Average pay for the two employees has increased from $8.00 per
hour to $10.10 per hour.  Include the unemployed worker and
average income drops to $6.73 per hour.

     Increasing the minimum wage may be good politics that
wins elections.  It is bad economics and bad government.  For
politicians the best of both worlds is to loudly support a
minimum wage increase and lose.  The voters will love the
politician for trying.  The politician won't have to face the
detrimental impact of actually increasing the minimum wage.

     So long as good politics makes bad government, we can
expect an over abundance of bad government.

aldmccallum@gmail.com
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Copyright 2014
Albert D. McCallum