Northeast Governments to Freeze their Citizens

I often write in generalities about the lunacy of looking to the State to meet your needs, but today I think I’ll talk about some U.S. state governments in the northeast and what they are doing to their citizens. I think most of us are aware that California is driving industry out of the state and that there is a great flow of business towards Texas as it has much lower electric rates. California charges approximately double what Texas does for electricity. But let us look at the states in the northeast on the other side of the country which are about to enter a crisis trying to supply energy in the winter.

The governors of six New England states have recognized an impending crisis situation and so had a meeting to see how to deal with it. (see here) The governors even invited five premiers of Canadian provinces to join them since Canada can generate electricity while the northeast U.S. does not have that ability any more.

Last winter record low temperatures hit the northeastern region and utilities struggled to supply electricity to the region. Since the region has moved from generation by coal and oil to utilizing natural gas there was the problem that natural gas can not be stored up like coal can so there was not enough gas to heat homes and generate electricity. Now this may come as a total shock to some folks but in times of shortage the market will ration the product in short supply via higher prices. Sure enough, the price to the utilities went from $4 mBTU to $79 mBTU. That would be an almost 20 fold increase in price in one year. Naturally the price of electricity skyrocketed all over the region as the utilities had to buy expensive power from other regions at the same time as their own generation costs were skyrocketing.

But how in the world did we get to the state where the northeast United States can no longer reliably supply its own power? Glad you asked. It seems there has been a long campaign to rid the region of any form of “dirty” energy like coal or oil as well as nuclear power. The statistics are that only three percent of the region’s power comes from coal and only one percent comes from oil these days. New England’s power now comes mainly from natural gas, but the region does not have enough natural gas pipeline to meet its needs and there is great political resistance to building any more even though Pennsylvania has surplus natural gas and would love to sell it to the northeastern states.

The region has just barely the electrical generation capacity to meet its needs without the reserve that is needed for extreme usage times like a really cold winter. Even so, the region expects to shut down 10% of its capacity to please the extremist environmental pressure groups or EPA regulations. (but I repeat myself) First on the target list are the remaining coal plants. At least five will be shut down possibly before the coming winter. Along with that, we see that the remaining nuclear generation plants are targets to be closed as well.

So who is hurt the most by these idiot moves by the state governments? Why the elderly and the poor of course; along with blue collar workers. The well-to-do “liberal” activists and pressure groups look forward to sky high power rates as they hate the poor and hope to drive them out of the region. Does that seem harsh? Well, look at their actions and ask yourself if they give a flying fig about the lower classes.

The government at all levels is waging war on the productive section of the American economy. The over paid busybody regulators from Washington D.C. down to your local town hall are writing anti-business regulations that have been exporting jobs to places like China for decades.

Realistic weather prognosticators are forecasting another year like last year’s cold winter and that will bring ever higher prices and perhaps brownouts to the northeast region. New England residents pay about 50% more than the rest of the country already and it looks like they are in for more fleecing by their ever-so-green governments. The news out of Detroit should give you a taste of what New England is headed for in the near future unless they wake up and reign in their idiot regulators and legislators. However, I predict that it will take massive amounts of people freezing in the winter to wake up the people of the northeast — if even that will do it.

This is just another example of government working hard to make your life worse. That is what the criminal gang writ large does.

Marketa

 

LBJ, “The Great Society”, and Social Ruin

The president that followed the assassination of President Kennedy was Lyndon Baines Johnson, or LBJ as he was referred to. Johnson is remembered for two main things, the horror that was the Vietnam war and the abomination that was called “The Great Society”.

The Great Society program was to be the crowning glory of the modern-liberal nanny state. It was a descendant of other socialistic programs that came before it such as the Square Deal, the New Freedom, the New Era, the New Deal, the Fair Deal, and the New Frontier. All of these programs were shifts away from the traditional way Americans had lived; always going from the relatively free life towards the more controlled and structured life of ever more government control, collectivism, entitlements, and welfare. The shift in ideology that these programs brought about in the country was one that took America from a relatively laissez-faire free-market economy approach to ever more state control of the life of the citizens in all aspects. These programs heralded a slow march toward the total state.

In the 19th century the citizen could pretty much ignore the government of the state safely. A man’s biggest concern was with what his local mayor or county commissioners were up to. The country, in the 19th century, was one were a man could for the most part make his own decisions about his life. By the 20th century the state held life-and-death power over the citizens. By the end of the 20th century the state controlled the individuals, the business groups, non-profits, and all institutions.

The nation was not at war when Johnson took over the presidency on November 22, 1963 and the economy was improving after a slight recession. The Great Society was a surge of federal economic interventions that occurred during Lyndon B. Johnson’s presidency. The centerpiece of the program was the “War on Poverty”.  The Great Society mainly represented a culmination of the collectivist ideas of the modern “liberals” in the economic, political, and social areas that had been fought for by the progressives (so-called “liberals”) since the 19th century.

With LBJ’s Great Society, along with his war on the peasants of Vietnam, the federal government’s intrusion into economic life swelled enormously. There were the enactments of the Civil Rights Act of 1964, the Economic Opportunity Act of 1964, the Food Stamp Act of 1964, the Elementary and Secondary Education Act of 1965, and the Social Security Amendments of 1965 which created Medicare and Medicaid.

The Great Society and the Democrats also brought the establishment of the Office of Economic Opportunity to oversee programs such as VISTA, Job Corps, the Community Action Program, and Head Start, Community Action Agencies, and a host of other bureaus and departments. The stated purpose of these new measures was to promote poor people’s health, education, and job training. The program also brought a  broad range of economic regulatory measures. There were regulations adopted in connection with traffic safety, workplace conditions, consumer-products safety, age discrimination in employment, lending by banks, and almost any other area you can think of. The total state had arrived and would grow in power for the rest of my lifetime.

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In writing about this era, Murray Rothbard told us:

The basic reason for this development is not difficult to fathom. It was best summed up by the great German sociologist Franz Oppenheimer; Oppenheimer wrote that there were fundamentally two, and only two, paths to the acquisition of wealth. One route is the production of a good or service and its voluntary exchange for the goods or services produced by others. This method – the method of the free market – Oppenheimer termed “the economic means” to wealth. The other path, which avoids the necessity for production and exchange, is for one or more persons to seize other people’s products by the use of physical force. This method of robbing the fruits of another man’s production was shrewdly named by Oppenheimer the “political means.” Throughout history, men have been tempted to employ the “political means” of seizing wealth rather than expend effort in production and exchange. It should be clear that while the market process multiplies production, the political, exploitative means is parasitic and, as with all parasitic action, discourages and drains off production and output in society. To regularize and order a permanent system of predatory exploitation, men have created the state, which Oppenheimer brilliantly defined as “the organization of the political means.”

Every act of the state is necessarily an occasion for inflicting burdens and assigning subsidies and privileges. By seizing revenue by means of coercion and assigning rewards as it disburses the funds, the state creates ruling and ruled “classes” or “castes”; for one example, classes of what Calhoun discerned as net “taxpayers” and “tax-consumers,” those who live off taxation. And since, by its nature, predation can only be supported out of the surplus of production above subsistence, the ruling class must constitute a minority of the citizenry. ~ M.N. Rothbard

The “Great Society” was supposed to usher in a practical utopia in our society but by now the myth that the Great Society functioned as a great boon and benefit to the poor has by now been exposed as the lie and deception it always was. We have more poverty, homelessness, joblessness, and hopelessness than we did the day the Great Society began. The difference between justice for the poor and the wealthy elites has grown ever wider over the ensuing decades.  The poor have not become wealthy nor have the jobless men disappeared, but rather we have far more unemployed now than we did then. Are the underclass happy and satisfied or has society become every more divided and violent? Are the poor raising well adjusted children or disaffected, amoral thugs who enjoy sucker punching unsuspecting innocents to see if they can knock them out with a single punch? After 50 plus years do we no longer hear about “racism” or has “racism” become an excuse for damn near everything? In reality the poor are the major victims of the welfare state. The government claims to be helping the poor when, in fact, they are doing them irreparable harm. The economist Thomas Sowell once observed that centuries of slavery could not break the back of the black family, but that welfare did it in just two generations. And it is not just the black family that gets torn asunder by the welfare system, but by this day and age we see dysfunctionality affecting all groups, races, and income strata.

It is the children of the welfare class, the working poor, and middle class that join the military due to the “economic draft”. It is the poor who suffer most from zoning regulations and high property taxes that make buying or renting practically out of reach which leads to increased homelessness as government interventionism and all levels has wiped out affordable housing. The poor are also victimized by the government tenet of perpetual inflation caused by the FED and its horrific policies. Inflation is the enemy of the people, but especially the poor people.

The “Great Society” of LBJ and the progressives has led to growing poverty, loss of freedom, and societal degeneration even as the rhetoric, both then and now, promised the exact opposite. The state claims we are the “land of the free” when, in fact, this is the land of slaves and sheep. There is the ridiculous claim that we live in a land of capitalism with a free market! In fact we live in a fascist economy and have for decades on end. Our politicians and most of the people would not know a laissez-faire free-market if one bit them on the ass. The free economy is virtually gone, replaced by an imperial corporate-state Empire. The state is now in total control and it organizes, exploits, loots, and controls all aspects of the nation.

The Great Society failed to do what was promised and it led to the exact opposite. We have ruined the society as government control, intervention, and interference always does. It is time to kill the beast.

A food mission and the economy

I wrote last year about a tour of a local “food mission” that I took and I went again this year. The organization is in Daytona Beach, Florida and is a church supported mission that helps to feed the poor and homeless.  The mission is a totally volunteer operation run by mostly retired folks that can donate time to keep the little operation open. They are able to serve about 500 families each month giving them food, toiletry items, and some clothing. I was with a tour group of supporters last week and we had a look around.

One of the leaders of the mission volunteer group gave a presentation to the various people who were there to see the operation. The speaker asked a group of middle school kids a very hard question, one that he claimed no one ever gets right till they hear the answer. He said that in Daytona Beach, Florida there are a some annual events such as the Daytona 500 or “Bike Week” that causes the population to explode to many times its normal size for the duration of the event. These events cause the number of people who line up for free food and items to drop. The number goes down as the population of the town goes up. Why? Why is it that during Speed Week, Bike Week, or the 500 the number of people who will line up on the sidewalk to wait their turn at free food goes down?

The man gave the young people countless attempts to guess the reason until he finally answered that during these huge events there is more work to be had than normal in town. Work for the unskilled. Work for the homeless. Work for the down and out. Work that these people can get! And they would much rather work than be fed free. They want to find work.

It is heart breaking to know that the U.S. government at all its levels uses its minimum wage laws, health insurance requirements, countless regulations, and so on to make a large percentage of America chronically unemployed. Everyone knows that the unemployment situation is very bad even if the official figures lie and understate the problem. Ludwig von Mises pointed out that in a totally laissez faire market there would be nearly no unemployment. There would be some people between jobs or some who were unable to work for various reasons, but any who wanted to work and were physically and mentally fit would be able to find work.

Government spending cannot create additional jobs. If the government provides the funds required by taxing the citizens or by borrowing from the public, it abolishes on the one hand as many jobs as it creates on the other. If government spending is financed by borrowing from the commercial banks, it means credit expansion and inflation. If in the course of such an inflation the rise in commodity prices exceeds the rise in nominal wage rates, unemployment will drop. But what makes unemployment shrink is precisely the fact that real wage rates are falling. ~ von Mises

Government intervention into the market place can never help the overall economy, it can only help the favored at the expense of the rest of us. But government can certainly hurt the economy. It can destroy the economy.

Concerning unemployment itself, it is the minimum wage laws and unemployment benefits programs, both supposedly designed to help workers, which directly lead to higher costs of employment and hence to higher joblessness and misery. Economists have known for generations that embracing those policies implies embracing many additional people being without jobs even as the favored are aided in some ways. The infuriating thing is that it is not a lack of work to be done but that it becomes too expensive to pay for the work to be done.

Lew Rockwell once gave a short list of barriers to employment:

  • The high minimum wage that knocks out the first several rungs from the bottom of the ladder;
  • The high payroll tax that robs employees and employers of resources;
  • The laws that threaten firms with lawsuits should the employee be fired;
  • The laws that established myriad conditions for hiring beyond the market-based condition that matters: can he or she get the job done?;
  • The unemployment subsidy in the form of phony insurance that pays people not to work;
  • The high cost of business start-ups in the form of taxes and mandates;
  • The mandated benefits that employers are forced to cough up for every new employee under certain conditions;
  • The withholding tax that prevents employers and employees from making their own deals;
  • The age restrictions that treat everyone under the age of 16 as useless;
  • The social security and income taxes that together devour nearly half of contract income;
  • The labor union laws that permit thugs to loot a firm and keep out workers who would love a chance to offer their wares for less.

That list by Rockwell is just a few of the government interventions that impoverish the people at the expense of the favored — the cronies of the powerful. If the government interventions on the above list were eliminated today we would see full employment. Not the fake “full employment” that government has claimed in times long past, but the situation where everyone who wanted a job could get a job.

It is time to end the welfare state and let people go to work. People naturally like to be useful and to voluntarily cooperate with others. It is time to again try the laissez fair system that built the Western world in the first place.

Do you like forced monopolies?

I can remember the days when one company had a monopoly in the United States to provide phone service to the nation. “Throughout most of the 20th century, AT&T held a monopoly on phone service in the United States through a network of companies called the Bell System. At this time, the company was nicknamed Ma Bell.” (Wikipedia)

Those of us who lived through those days recall the “party lines” and exorbitant fees to talk to someone “long distance”. The phones themselves remained the same for decades on end and service was everything a libertarian claims about the lack of service, price competition, and innovation inherent in monopolies. Thank the gods AT&T did not have an army back then!

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It is a violation of moral principles to give one individual or group the exclusive right to operate the commercial phone network as in doing so there must be force or threat of force employed against all the others who would like to compete in that area. Special privilege is so obviously unfair that even Kindergarten children know that one child should not be getting all the goodies from teacher in class. Every child in middle school knows that one student getting an answer sheet to use on the test from teacher while no one else has this advantage is morally wrong. Heck, even picking one child to “sharpen the pencils” all the time leads to questions of “what is so special about her”?

Look at it this way. What’s wrong with a monopoly on the manufacture and sales of automobiles? Suppose that my gang of ne’er-do-wells are the only ones that are legally allowed to manufacture and sell cars. It is obvious we are going to be rich no matter how bad we are at making cars. From a purely moral point of view, the question is: why us? What’s so special about my gang? We and no one else have the full force of the raw power of the government making everyone bow down to us and let only us make and sell cars. If you can’t see the evil in that arrangement you should probably not be reading this blog!

But aside from the moral aspect of monopolies, there is the pragmatic, consequentialist standpoint as well given that I have a monopoly granted to me by the raw force and brutality of government. The incentives inherent in the situation are completely in opposition to the welfare of everyone but the specially privileged monopoly holder — me and my gang of fat-cats. There is every incentive to make the product or provide the service as cheaply as possible while charging you as much as I chose to charge. There is no competition to force me to be competitive and so I will not take any real risks in innovating my product; after all, no one else can make and sell a better product since only I can sell it by law. Because I’ve got no competition, you have nowhere else to go for my product — say cars. You also probably shouldn’t expect the cars I make and sell to be of particularly high quality, but you’ll buy them rather than walk. The government monopoly in the old USSR made some of the worse cars in the history of car manufacturing for example. In addition to the likelihood that the my cars are going to be expensive and not very good, there’s also the fact that I have power over others since I can sell or not sell to an individual based on my biases. I might decide to never sell cars to Roman Catholics for example. To hell with them, I am still making tons of money guaranteed by my monopoly. Abuse of power seems to be a great temptation inherent in monopolies.

But even worse than the above, if I am the only one making and selling cars, how will I ever know if I am making the best cars that can be made even if I were to want to do the best job possible for humanity? There is no competition so there is no experimentation in the market. There is no real price competition and choice for the consumer — they can’t vote with their purchases on who is making better cars. Hence, progress suffers just like it did for decades in the telephone business under the AT&T monopoly.

So if you can agree with me that a forced monopoly is bad juju, why would you want a forced monopoly called the state?  Why have a monopoly in the provision of services of adjudicating disputes, and protecting rights, and making laws? We have the moral case against that we learned in Kindergarten: why them? But we have the pragmatic case that the incentives will lead to abuse of power, lack of progress, high costs, low quality, and so forth.

With a forced monopoly like government, we get war after war. Smoke a weed an go to jail for years: come out to a ruined life. We get stupid laws that seek to control every aspect of our lives down to what color we can paint our house. Want to fly to France? Beg permission. The non-productive sector given to us by government is sucking the vitality out of the economy and keeping millions unemployed or underemployed.

I have known “small government conservatives” that claim we need government. Why do we need any government? What does the government do other than enslave us?

Why do markets work to alleviate poverty and governments fail?

Walter Block once wrote of a politician holding hearings on the problem of poverty. He recommended that the politician instead of wasting money and coming to the wrong conclusion just take An Inquiry into the Nature and Causes of the Wealth of Nations by Adam Smith home and read it. Smith wrote in his book so long ago that those countries that rely mainly on the free enterprise system of private property rights and the rule of law prosper much more than those that do not. Much like the difference between North Korea and South Korea. Block conducted research (Gwartney, James; Lawson, Robert; and Block, Walter. 1996. Economic Freedom of the World, 1975—1995) which found a statistically significant relationship not only between the degree of economic freedom in a country and its per capita income but also between liberty and income equality. Little surprise there; but nice to see published research on the matter.

The main reason markets work and government fails is the profit and loss system of the market. The Austrian School has been telling us this truth for a long time now. There is a “feed back loop” where prices signal to all people information that helps us to make sure we are investing our efforts and our capital where we need to do that the most. Often we neglect to appreciate the entrepreneur whose job is to judge the future and to supply the wants and needs of the population before they even know what they want themselves. Success brings profit for the entrepreneur and failure brings ruin. On the other hand, a government functionary or a politician does not have to personally pay for their errors in judgment. Often they claim failure is a sure sign we need even more government!

In the private market, even with government interventions that are disruptive, we see that businesses have to serve their customers by giving the best product or service they can at the best price they can manage. Those that do the best job stay in business. But they also have to keep good employees to make the operation go and that takes making the job worth having for the qualified men and women that the firms need to function.

Government on the other hand just uses force to stay in business. The road system in the US could be much better and much safer but it is a government monopoly that does not need to compete with anyone else. In politics the government can raise vast sums of money by just stealing it (called taxes) rather than serving others as a large business must do to earn fortunes. When the government rakes in big bucks, the people get poorer. That is the nature of the game. Crumbs go out to the poor and downtrodden as government makes their lives even worse via the help they give them. I once read that slavery could not destroy the black family but government help (“welfare”) was able to turn the trick.

A lot of money goes to favored corporations in the form of subsidies, corrupt contracts, favorable laws, favorable regulations, and other crony graft and greed. The unfavored businesses then have to compete, or try to, with the “cool” corporations that have crony government connections.

We live in a world where people have differing intelligence levels and skills. We live in a world where changing market preferences will cause some industries to lay off people and other to look to hire more people. As a society we need government to stay out of the way so that that market can signal to the producers just where our efforts should be in the ever changing world we live in. As a society we want to ensure that everyone who wants to work has a chance to do so and help create the wealth and alleviate poverty.

Walter Block once wrote that by “repealing minimum-wage laws, comparable-worth rules, working-condition laws, compulsory union membership, employment protection, employment taxes, payroll taxes, government unemployment insurance, welfare, regulations, licensing, antipeddling laws, child-labor laws, and government money creation” we could unleash the market and give the unemployed and those in poverty the best chance of working and improving their lives.

Bill Bonner once wrote on how to achieve full employment:

Want to really fix the unemployment problem? Listen up. Eliminate all bailouts, subsidies, giveaways and support systems – both to business and to labor. Abolish all employment restrictions and employment paperwork. All free labor – undocumented non-citizens – to compete equally with native-born workers. Cut taxes to a flat 10% rate for everyone. Abolish every government agency that begins with a letter of the alphabet. Then abolish the rest of them.

We confidently guarantee that the nation would be back at full employment within 30 days.

The path to jobs that matter and are not government make-work jobs is the free market. It always has been. Government is the obstacle to peace, prosperity, and good jobs for those that want to work.