Peter De Baets
Minds & Free Markets
150,898 votes (1.5%)
you tired of Democrats and Republicans
Highlights: “The study finds that the total cost of regulation to the State of California is $493 billion [rounded] which is almost five times the State’s general fund budget, and… results in an employment loss of 3.8 million jobs… the regulatory cost is borne almost completely by small business... the indirect business taxes that would have been generated due to the output lost arising from the regulatory cost is $16 billion [rounded]…”
“The government is best which
“I think we have more machinery of government than is necessary, too many parasites living on the labor of the industrious.” --Thomas Jefferson
“It is by compromise that human
“Small Government is
“The naked truth is always better than the best dressed lie.” — Ann Landers, born 1918
“Facts do not cease to exist
“I would remind you that extremism
To contact the
“Let’s work to make
California the Great State it once was,
where people come to work, take care of their families,
and live the American Dream, not a place that businesses flee,
where deadbeats come for overpaid government jobs and welfare.”
Freedom Works, Government Doesn’t
Wayne Allyn Root, FOX News
Regular & Best-Selling Author,
2008 Libertarian Vice Presidential nominee, and
Chairman, Libertarian National Congressional Committee,
endorses Dale Ogden for Governor of California
(click here to read the endorsement)
“There is nothing that will help our children and our children’s children become happy and prosperous than freedom. Freedom to learn what they want to learn, however they wish to learn it. Freedom to work or start a business without government interference. Freedom to live their lives as they choose, not as politicians and bureaucrats choose. There is nothing I want for my son more than his being a happy, productive, and self-sufficient adult.
“Greed is the result of feeling ‘entitled’ to something. Government social welfare programs create entitlements. A helping hand is not a hand out. Politicians and bureaucrats believe they are entitled to their excessive paychecks and obscene pensions and benefits, and that they are exempt from following the rules under which they force the rest of us to live. Personal prosperity comes from earning what you have, such as through physical labor, invention, and investment, and is good; greed is wanting what someone else has earned, being a parasite on society, through taxes and transfer payments and is evil.” — Dale Ogden, October 12, 2010
“Each State, in ratifying the Constitution, is considered as a sovereign body, independent of all others, and only to be bound by its own voluntary act. In this relation, then, the new Constitution will, if established, be a FEDERAL, and not a NATIONAL constitution.” — James Madison, Federalist No. 39
“But as the plan of the convention aims only at a partial union or consolidation, the State governments would clearly retain all the rights of sovereignty which they before had, and which were not, by that act, EXCLUSIVELY delegated to the United States.” — Alexander Hamilton, Federalist No. 32
“Only when the state is restricted to the administration of justice, and economic creativity thus freed from arbitrary restraints, will conditions exist for making possible a lasting improvement in the welfare of the more miserable peoples of the world.” — Karen Kwiatkowski, “The Wolf You Feed” [August 31, 2010]
“Always vote for principle, though you may vote alone, and you may cherish the sweetest reflection that your vote is never lost.” — John Quincy Adams
The only way to create productive jobs is to get the government out of the way and let free people start businesses and work. The state government cannot create productive, wealth-enhancing jobs; all they can do is create bureaucratic, wealth-consuming jobs, by taxing the private, productive sector and giving it to the public, non-productive sector and the other parasites of society.
As Governor, I pledge to restore fiscal responsibility to the State of California and will use every tool at my disposal, including the line-item veto, the federal and state courts, and the Ballot Initiative Process, to restore California to the great state it once was. The line item veto is a very powerful tool with which the Governor can stop wasteful spending, eliminate harmful, useless, and duplicative regulatory agencies, downsize other state agencies, roll back out-of-control spending, and reduce bloated salaries, benefits and pensions for state employees. Accomplishing this will require the following and more:
1. First and most importantly, we need to permanently roll-back spending to or below the level of 1998 (adjusted for inflation and population) and absolutely limit future spending increases (excess revenue should be used to retire debt or returned to the people). Does any rational person believe that California did not have enough government in 1998? or in 1988? I will never sign a budget that does not reduce spending to those levels. There should be absolutely no borrowing for the State’s general fund. [see Daily Breeze April 1, 2010, editorial]
need to roll-back the excessive salaries and bloated pensions for state employees
“...approaching wave of pension debt is a lot bigger than it
looks...and [is] about to drown America’s taxpayers.”). One estimate
is that government pensions in California are underfunded by $500 billion,
half a trillion dollars. We may need to use the federal courts to accomplish
some of this. We need to eliminate all “double-dipping” and
increase the retirement age for current and future state employees to at
least 65 (from its current 50 or 55), like Social Security and the private
3. We need to stop collusion between politicians, bureaucrats and government employee unions. Far too often, public employee unions give money and free “volunteer” labor to politicians for their campaigns. The politicians return the favor by agreeing to excessive increases in salaries, pensions and other benefits. And far too often, those who actually negotiate the salaries and pensions also benefit from them. This must stop immediately. No elected or appointed official should ever get a pension or any other benefits after they leave office. [see Public-sector unions Bleed Taxpayers… by Michael Barone]
“Private-sector unionism is adversarial... Public-sector unionism... is not adversarial but collusive... The results are plain to see. States like New York, New Jersey and California, where public-sector unions are strong, now face enormous budget deficits and pension liabilities. In such states, the public sector has become a parasite sucking the life out of the private-sector economy... Americans have been steadily migrating out of such states and into states like Texas, where public-sector unions are weak and taxes are much lower... Public-sector unionism tends to be a self-perpetuating machine that extracts money from taxpayers and then puts it on a conveyor belt to the Democratic Party...”
4. We need to (a) abolish useless and harmful state licensing and regulatory agencies and repeal thousands of useless and often harmful regulations, creating a rational, business-friendly state and (b) abolish the state personal and corporate income taxes and capital gains taxes (they will no longer be needed). This will create millions of jobs as entrepreneurs, investors, and businesses (and, did I mention, millions of jobs) are attracted to California.
5. I support making the Legislature part-time, like it was prior to 1966. Texas has very similar demographics to California, but no state income tax and a part-time legislature; Texas also has a budget surplus and one-third lower unemployment: (according to the U. S. Department of Labor (BLS), as of February 2010, unemployment was 8.2% in Texas and 12.5% in California). As was stated in an 1866 New York court case, “No man’s life, liberty, or property is safe while the Legislature is in session.” (see Citizens for California Reform).
6. Repeal the global warming (i.e., carbon limits) laws that the idiots in the state legislature have already passed and that our idiot-in-chief Governor signed. Check out this article (11/20/2009) and this one (12/9/2009) [Climategate: Gore falsifies the record], about the “stolen” emails admitting that the climate “scientists” distort and hide data. The scandal grows each day as the self-anointed climate “scientists” and others (e.g., Al Gore) who have perpetrated this fraud try to ignore the evidence and continue their efforts to scam the citizens of the world. [More on Global Warming]
7. Education: Many people have asked me how I plan to “fix” education. One thing is certain; fixing education does not require more money. In fact, the more money we spend the worse it gets. As Governor, my first step to improving education would be to get the State out of education and let the cities and counties deal with it. Let parents have vouchers to spend at their school of choice. We waste phenomenal amounts of money at the state and federal levels educating no one, and we have duplicative agencies. Most government school systems have too many administrators. The more decentralized education becomes, the better it will be. Give people choices.
8. My governing philosophy is to have the government do only those few things that it must do and try to do them well. All else should be left to private individuals who are in the best position to decide what they need, what they want, and how to achieve personal fulfillment.
9. Immigration has
become a hot issue, but it is not a simple issue. America is a land of immigrants, e Pluribus Unum (out of many, one). Freedom should
not stop at the border; the Declaration of Independence states that “We
hold these truths to be self-evident, that all men are created equal, that they are endowed by their
Creator with certain unalienable Rights, that among these are Life, Liberty
and the pursuit of Happiness.” It does not limit these unalienable
rights to just those lucky enough to be born in the United States.
Mail Campaign Contributions to:
Dale Ogden for Governor 2010
Contributions to Dale Ogden for Governor 2010 are not deductible for income tax purposes. Currently, an individual, business entity, or any other organization or group of persons may not contribute more than $25,900 (including loans) to Dale Ogden’s primary election and $25,900 to his general election. This committee does not solicit and cannot accept contributions in excess of applicable limits or from prohibited sources. Lobbyists registered to lobby the Office of the Governor cannot contribute. Corporate and general PAC contributions are permissible. A contribution made with a corporate card will be considered a contribution from the corporation. Foreign nationals are prohibited from making contributions to this committee, unless they have permanent residency status in the United States of America (a Green Card).
The California Fair Political Practices Commission requires certain information about each contributor, so please download and use the linked form: Dale_Ogden_Contribution_Form.pdf
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10/18/2010: Check out the latest in Richard Rider’s California Breaking Bad
Cost Of State Regulations
On California Small Businesses Study
Sanjay B. Varshney, Ph.D., CFA
Professor of Finance and Dean - College of Business Administration
California State University, Sacramento
Dennis H. Tootelian, Ph.D.
Professor of Marketing – College of Business Administration
California State University, Sacramento
This study measures and reports the cost of regulation to small business in the State of California. It employs an original and unique approach using a general equilibrium framework to identify and measure the cost of regulation as measured by the loss of economic output to the State’s gross product, after controlling for variables known to influence output. It also measures second order costs resulting from regulatory activity by studying the total impact – direct, indirect, and induced. The study finds that the total cost of regulation to the State of California is $492.994 billion which is almost five times the State’s general fund budget, and almost a third of the State’s gross product. The total cost of regulation results in an employment loss of 3.8 million jobs which is a tenth of the State’s population. Since small business constitute 99.2% of all employer businesses in California, and all of non-employer business, the regulatory cost is borne almost completely by small business. The general equilibrium framework yields the following results:
• The total loss of gross state output for California each year due to direct, indirect, and induced impact of the regulatory cost is $492.994 billion.
• In terms of employment this total output loss is equivalent to the loss of 3.8 million jobs for the state each year. A loss of 3.8 million jobs represents 10% of the total population of California. In terms of labor income, the total loss to the state from the regulatory cost is $210.471 billion. Finally the indirect business taxes that would have been generated due to the output lost arising from the regulatory cost is $16.024 billion.
• The total regulatory cost of $492.994 billion is four to four and a half times the total budget for the state of California, and almost five to six times the general fund alone. Further, given the total gross state output of $1.6 trillion for California in 2007, the lost output from regulatory costs is almost a third of the gross state output.
• The indirect business taxes lost could have helped fund many of the state’s departmental budgets. As an example, the indirect business taxes lost are 60 times the budget of the Office of Emergency Services, and would have paid for almost half the budget of the Department of Education.
• The total cost of regulation was $134,122.48 per small business in California in 2007, labor income not created or lost was $57,260.15 per small business, indirect business taxes not generated or lost were $4,359.55 per small business, and finally roughly one job lost per small business.
• The total regulatory cost of $492.994 billion translates into a total cost per household of $38,446.76 per household, or $13,052.05 per resident. The total cost per household comes close to the median household income for California.
This study provides the most comprehensive and complete analysis of the total regulatory burden in California. The study and findings have implications for policymakers and those in charge of the regulatory environment. The results also suggest that future research should attempt to understand how to minimize the intended and unintended costs of regulation. Since small businesses are the lifeblood of California’s economy constituting 99.2% of all employer businesses, efforts to make the regulatory environment more attractive will make California a more attractive state for doing business. This in turn will improve the state’s output, employment, labor income, indirect business taxes, economic climate, quality of life, living standards, and growth prospects…
The Trouble with
Public Sector Unions by Daniel Disalvo
When Chris Christie became New Jersey's governor in January, he wasted no time in identifying the chief perpetrators of his state's fiscal catastrophe. Facing a nearly $11 billion budget gap — as well as voters fed up with the sky-high taxes imposed on them to finance the state government's profligacy — Christie moved swiftly to take on the unions representing New Jersey's roughly 400,000 public employees.
On his first day in office, the governor signed an executive order preventing state-workers' unions from making political contributions — subjecting them to the same limits that had long applied to corporations. More recently, he has waged a protracted battle against state teachers' unions, which are seeking pay increases and free lifetime health care for their members. Recognizing the burden that such benefits would place on New Jersey's long-term finances, Christie has sought instead to impose a one-year wage freeze, to change pension rules to limit future benefits, and to require that teachers contribute a tiny fraction of their salaries to cover the costs of their health insurance — measures that, for private-sector workers, would be mostly uncontroversial.
The firestorm that these proposals have sparked demonstrates the political clout of state-workers' unions. Christie's executive order met with vicious condemnation from union leaders and the politicians aligned with them; his fight with the public-school teachers prompted the New Jersey Education Association to spend $6 million (drawn from members' dues) on anti-Christie attack ads over a two-month period. Clearly, the lesson for reform-minded politicians has been: Confront public-sector unions at your peril.
Yet confront them policymakers must. As Christie said about the duel with the NJEA, "If we don't win this fight, there's no other fight left." Melodramatic as this may sound, for many states, it is simply reality. The cost of public-sector pay and benefits (which in many cases far exceed what comparable workers earn in the private sector), combined with hundreds of billions of dollars in unfunded pension liabilities for retired government workers, are weighing down state and city budgets. And staggering as these burdens seem now, they are actually poised to grow exponentially in the years ahead. If policymakers fail to rein in this growth, a fiscal crack-up will be the inevitable result.
New Jersey has drawn national attention as a case study, but the same scenario is playing out in state capitals from coast to coast. New York, Michigan, California, Washington, and many other states also find themselves heavily indebted, with public-sector unions at the root of their problems. In exchange, taxpayers in these states are rewarded with larger and more expensive, yet less effective, government, and with elected officials who are afraid to cross the politically powerful unions. As the Wall Street Journal put it recently, public-sector unions "may be the single biggest problem...for the U.S. economy and small-d democratic governance." They may also be the biggest challenge facing state and local officials — a challenge that, unless economic conditions dramatically improve, will dominate the politics of the decade to come...
In 1943, a New York Supreme Court judge held:
"To tolerate or recognize any combination of civil service employees of the government as a labor organization or union is not only incompatible with the spirit of democracy, but inconsistent with every principle upon which our government is founded. Nothing is more dangerous to public welfare than to admit that hired servants of the State can dictate to the government the hours, the wages and conditions under which they will carry on essential services vital to the welfare, safety, and security of the citizen. To admit as true that government employees have power to halt or check the functions of government unless their demands are satisfied, is to transfer to them all legislative, executive and judicial power. Nothing would be more ridiculous."
...When it comes to advancing their interests, public-sector unions have significant advantages over traditional unions. For one thing, using the political process, they can exert far greater influence over their members' employers — that is, government — than private-sector unions can. Through their extensive political activity, these government-workers' unions help elect the very politicians who will act as "management" in their contract negotiations — in effect handpicking those who will sit across the bargaining table from them, in a way that workers in a private corporation (like, say, American Airlines or the Washington Post Company) cannot. Such power led Victor Gotbaum, the leader of District Council 37 of the AFSCME in New York City, to brag in 1975: "We have the ability, in a sense, to elect our own boss."
…Public-sector unions thus distort the labor market, weaken public finances, and diminish the responsiveness of government and the quality of public services. Many of the concerns that initially led policymakers to oppose collective bargaining by government employees have, over the years, been vindicated…
8/21/2010: Check out the latest in Richard Rider’s California Breaking Bad
More about Anthropogenic Global Warming
Even if one believes there has been Global Warming, consider the common sense that comes from Vaclav Klaus, who introduces Four Questions for the thinking person (not to be confused with Barack Obama, Al Gore or George W. Bush). He states: “Let us focus on science and cost-benefit rather than silly emotional appeal. I ask myself several questions. Let’s put them in the proper sequence:
“Is global warming a reality?
“If it is a reality, is it man-made?
“If it is a reality, is it a problem? Will the people in the world, and now I have to say ‘globally’ be better-off or worse-off due to small increases of global temperature?
“If it is a reality, and if it is a problem, can men prevent it or stop it? Can any reasonable cost-benefit analysis justify anything within the range of current proposals to be done just now?
“Surprisingly, we can say yes, with some degree of probability, only to the first question. To the remaining three, my answer is no. And I am not alone in saying that. We are, however, still more or less the silent or silenced majority.”
Pick Up Where Communists Left Off
8/16/2010: about the War on Drugs from DownsizeDC.org
The Mexican government reports that its War on Drugs has killed 28,000 people over the past four years. This ongoing tragedy is undermining Mexico’s stability, which is bad news for the United States.
But that’s not the only way drug prohibition is hurting us. I urge you to watch this interview with Neill Franklin, the Executive Director of Law Enforcement Against Prohibition (under 9 minutes) http://www.youtube.com/watch?v=DzOHQdKRANA
The video reveals that the Mexican drug cartels have expanded into 230 U.S. cities. Unsurprisingly, the overwhelming majority of police 911 calls are related to this illegal drug trade. And yet, as our police go from one drug-related 911 call to the next, most violent crimes go unsolved, including . . .
* 60% of rapes,
* 73% of robberies,
* 88% of auto thefts, and
* 37% of murders
Whereas, in 1963, before the War on Drugs, only 9% of murders went unsolved!
Repealing drug prohibition would put an end to narcotics units and place more cops on the street to “do the work that is supposed to be done.”
But unsolved crime is not the only danger caused by the Drug War. Our children are particularly at risk...
* Criminals don’t ask for ID’s to verify the age of their customers.
* This means that powerful drugs are more available to kids than cigarettes and alcohol.
* Criminals don’t care about quality control, so the black market substances that lure our kids are more dangerous than they would be if prohibition didn’t exist
* And urban, African-American children are at special risk. They are heavily recruited to the drug trade because juvenile offenders get lesser sentences.
Whereas in Portugal, which legalized personal drug possession ten years ago...
* There was a double-digit drop in drug use by school-age children
* As well as a double-digit drop in AIDS cases
* The stigma has been removed for people seeking treatment
* And there is MORE MONEY for treatment
Even so, President Obama still wants to increase funding for the War on Drugs!
But the facts are clear. Drug prohibition doesn’t work. Repeal the federal drug laws. Our communities will be safer and our children will be better off.
Three months before the November election, there appear to be three major beneficiaries of Meg Whitman’s over-the-top spending in her campaign for governor. Unfortunately for the Republican nominee, none of them is her.
With new campaign finance statements scheduled to be filed this week, eMeg is expected to report somewhere north of $100 million in boodle disbursed to date, as the big winners in her extravagant spree are:
1-The vast legions of consultants, strategists, pollsters, flacks, purse carriers and other geniuses who have raked in tens of millions in fees, commissions, salaries and investments, in the greatest political bonanza since Bill Clinton auctioned off one-night stands in the Lincoln Bedroom..
2-The TV stations of California, which have been on the receiving end of Whitman’s own special economic stimulus program for nearly a year now. How’s this for a stat: Dan Morain noted in his Sunday SacBee column that she’s run 25,727 broadcast and cable ads since the primary alone. That’s not to mention Google and other online ad venues, where it’s all but impossible to miss that ubiquitous picture of Young Meg looking oddly forlorn for someone with that much loot in her future.
3-Carlos Alvarez and Dale Ogden, the Peace and Freedom and Libertarian candidates for governor, respectively, who each soared into the low single digits in the most recent PPIC poll, as Whitman drooped to her lowest level of support among likely voters in 2010.
In an interview the other day, her Democratic rival Jerry Brown said that eMeg has “wasted most of her money on unwise and ‘lavish’ spending,” according to our old friend Jim Boren at the Fresno Bee.
That’s easy for Krusty to say, even though his own poll numbers haven’t exactly taken flight; given that he’s spent a total of about 12 cents, it’s hard to argue with his point, if you overlay Whitman’s spending with some of her trend lines in the PPIC survey.
1-Among likely voters back in January, eMeg was backed by 36%, to Brown’s 41%; after inundating the airwaves for six months with the equivalent of the Duchy of Grand Fenwick’s GDP, the bottom line is that she lost two points of support, and now trails Brown 34-37%.
2-Among independent voters, Whitman’s investment has netted little. In January, she trailed Brown among the crucial group of decline-to-state voters, who hold the balance of power in a statewide race, 28-36%; two months later, she’d surged, largely on the strength of a 14-point swing among independents, who then favored her over Brown, 43-37%. But after dominating the airwaves in the months since, she again trails among independents, 28-30%, according to the PPIC survey released last week.
3-Among female voters, who should represent a big opportunity for Whitman, the first Republican woman ever nominated for governor, there’s a stubborn gender gap. In January, she trailed Brown, 30-44%, among women; today, after going to the purse for $2 million a week, week after week, she’s behind 28-40%.
By far, Whitman’s strongest showing came in PPIC’s poll in March – before she unleashed the bulk of her advertising in her successful primary race against Steve Poizner. At that point, she led Brown 44-39% overall and, as noted above, ran ahead among independents; among women, she was within the margin of error.
But after that, all that bashing Poizner on the airwaves through the primary (while getting bashed by him to the tune of about $20 million) yielded was a 10-point shift in Brown’s favor; she trailed the AG shortly before the June 8 election by 37-42%. Now, after six weeks of incessant attacks against Brown, her level of support has eroded by another three points, though she’s also knocked him down by five.
As a practical matter, the Whitman campaign has yet to give voters a strong, positive reason to be for her, or even told them much about her, except a) she used to be the CEO of eBay; b) she’s not Steve Poizner or Jerry Brown; c) she thinks jobs and schools are really important; d) she believes illegal immigration is a terrible thing, except when she doesn’t; e) did we mention she used to be the CEO of eBay? [emphasis added]
The Field Poll shows a trend line in the Whitman-Brown head-to-head matchup that’s more favorable to eMeg than the PPIC survey, but it nevertheless also suggests that the more people hear about her, the less they like her.
Back in January – when her image was still a relatively clean slate for voters – less than half of those surveyed had an opinion of her, but among those who did, it was positive 25-20%. Today, more than 80 percent have an opinion about her, but it’s negative – 42% unfavorable and 40% favorable.
Calbuzzards ain’t exactly masters of the universe when it comes to matters of high finance, but for such a smart businesswoman, that $100 million out the door seems to us, all in all, like kind of a mediocre investment.
Of course, the funds spent by Brown’s labor pals — especially California Working Families — may not have done much to boost Krusty’s favorables, but they seem to have helped prevent Meg from developing much of a favorable image among swing voters, either.
All this helps explain why Team Meg recently launched a new charm offensive, trying to cozy up to Latinos (a strategy undercut by widespread reporting about her prevarication on the issue, not to mention her own conflicting statements to news outlets) and with a new, positive 60-second radio ad (which once again focuses almost exclusively on her eBay experience).
Obviously, with three months to go, and uncounted millions to spend, there’s plenty of time and resources for Team eMeg to make some adjustments that offer a more effective criteria for her candidacy than they have to date.
But the closer it gets to Labor Day, when Brown intends to start putting his own ads on the air, the more difficult it becomes for her to exploit her greatest asset, the unprecedented edge she enjoys in money and, by likely extension, in campaign mechanics and organization as well.
The big piece that’s still missing from eMeg’s big-spending campaign is a compelling positive message, along with the answers to two, lingering key questions: Why, exactly, does she want to be elected governor so badly that she’s willing to spend $100 million+ to do it? And why, exactly, is that a good deal for voters?
Inquiring minds want to know.
Bob Mulholland: “Whitman is a scared billionaire candidate who has no business sense. Most of her consultants see her no different than a New York cab driver picking up a first time tourist at the Kennedy Airport with cash in their hands. They’re taking her to the cleaners.”
Brown’s Pension Punt
Why does California have
It’s time to admit that public education operates like a planned economy, a bureaucratic system in which everybody’s role is spelled out in advance and there are few incentives for innovation and productivity. It’s no surprise that our school system doesn’t improve: It more resembles the communist economy than our own market economy. — Albert Shanker, President of the American Federation of Teachers
“Do not consider Collectivists as sincere but deluded idealists. The proposal to enslave some men for the sake of others is not an ideal; brutality is not idealistic, no matter what its purpose. Do not ever say that the desire to do good by force is a good motive. Neither power-lust nor stupidity are good motives.” — Ayn Rand, The Vigil
“Let each citizen remember at the moment he is offering his vote that he is not making a present or a compliment to please an individual — or at least that he ought not so to do; but that he is executing one of the most solemn trusts in human society for which he is accountable to God and his country.” — Samuel Adams
“History affords us many instances of the ruin of states, by the prosecution of measures ill suited to the temper and genius of their people. The ordaining of laws in favor of one part of the nation, to the prejudice and oppression of another, is certainly the most erroneous and mistaken policy. An equal dispensation of protection, rights, privileges, and advantages, is what every part is entitled to, and ought to enjoy.” — Benjamin Franklin
The State can protect and promote the interests of its sick, or potentially sick, citizens in one of two ways only: either by coercing physicians, and other medical and paramedical personnel, to serve patients — as State-owned slaves in the last analysis, or by creating economic, moral, and political circumstances favorable to a plentiful supply of competent physicians and effective drugs. — Thomas Szasz, “The Right to Health” 
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“A man must be big enough to admit his mistakes, smart enough to profit from them, and strong enough to correct them.”
A Simple Governing Philosophy:
Policies are many,
The story of California has always been a great American tale of triumph over long odds. Since its entry into the Union, in the aftermath of war and the midst of gold fever, the state has seemed an improbable colossus. But again and again, California has made its way through hours of challenge – not only surviving intact, but emerging as a model for the rest of the nation.
...And through a series of social, political, and economic experiments, California has acted as America’s foremost laboratory of innovation, trying out ideas the country as a whole would go on to adopt. In the 1960s under Governor Pat Brown, the state offered a model of modernization, building the most advanced education and transportation infrastructures in the nation. Under Brown’s successor, Ronald Reagan, it offered a model of conservative governance that would go on to transform American politics. Hollywood has made California a crucial part of America’s cultural identity, and Silicon Valley has put it at the heart of our vision of the future. For many decades now, Americans have seen California as a harbinger of promising things to come.
Today, however, California has become a warning sign. Beset by economic disaster and political paralysis, the state is in the midst of a systemic crisis. And while the meltdown has certainly been accelerated by the recession of the past two years, its causes involve two decades of poor judgment, reckless mismanagement, and irresponsibility. How California got into this mess has a lot to teach the rest of the country; how it gets out will say a great deal about America’s prospects.
...Unemployment is over 11%, and a recent survey of corporate CEOs ranked California the worst state in the country in which to do business. It is losing native-born citizens faster than any other state.
To put the effects of these trends in perspective, from 2004 to 2007 more people left California for Texas and Oklahoma than came west from those states to escape the Dust Bowl in the 1930s. California is in the midst of a man-made disaster.
How could things get so bad? The story of California’s decline is a tragedy of political dysfunction, misguided ideology, interest-group politics, and willful blindness.
...As Californians contemplate next year’s gubernatorial race, it is increasingly clear that the state is at a crossroads. One path before it, essentially an extension of the status quo, would mean continued decline in the fashion of states like New Jersey or Michigan. The other path would be to pursue a bold reformist agenda, along the lines of what Rudy Giuliani accomplished during his time as mayor of New York City. Without a sharp turn toward freer markets, a smaller public sector, and more responsive and responsible government, California may not be able to save itself from catastrophe. But whether that charge will be led — and by whom — remains an open question.
Made to Be Broken
ECONOMISTS AND POLITICAL scientists identify a big problem with government regulation of business. They call it “regulatory capture,” meaning that regulators often do not enforce their own rules because they have close relationships with those they regulate.
It’s often told as the economic version of the Patty Hearst syndrome, in which a weak victim is overwhelmed by powerful captors and comes to cooperate with the oppressors. In regulatory economics, weak public servants are said to be overwhelmed by the rich and powerful economic interests they are supposed to control.
The doctrine of regulatory capture covers behavior as simple as bribing the tax collector or the customs agent and as complex as a national political campaign. It applies to city councils issuing streetcar franchises, to state public utilities commissioners, to tax-writing committees of Congress and to the myriad federal agencies regulating every aspect of commerce.
Anyone who spends a few months in Washington, D.C. — or even a few months reading about politics — will see many inadvertent references to the theory of regulatory capture. If, for current example, the Senate Finance Committee puts forth a health-care reform bill without a public option, many say it’s the result of the health-insurance industry’s campaign contributions.
In such common use, however, the doctrine leaves out the possibility of effective persuasion. A lobbyist visits a congressman or a commissioner, then the commissioner adopts a policy supporting the lobbyists’ clients. This is not proof. Indeed, with a government of, by and for the people, it is hardly improper to petition the government for a redress of grievances. It is a right guaranteed by that pesky old First Amendment, even if it is regulatory capture.
Where’s the Public Interest?
George Stigler of the University of Chicago was one of the first to coin the idea of regulatory capture. In his speech on winning the 1982 Nobel Memorial Prize in Economic Sciences he recalled his earlier work and asked, “Why does the state engage in its regulatory activities?
The answer, he said, “seemed to lie much less in the theorems of welfare economics or the prescriptions of traditional political science, than in the systematic examination of the self-interest of the various participants.”
Another Chicagoan, Richard Posner, summed up the theory more bluntly: “Regulation is not about the public interest at all, but is a process, by which interest groups seek to promote their private interest....Over time, regulatory agencies come to be dominated by the industries regulated.”
And regulated industries come to be more reliably profitable than those in which marginal cost and marginal price are driven together by market forces. Regulation raises profits by raising barriers to competition, especially barriers to new competitors. With supply thus made scarce, the regulators then ignore consumers, raising prices beyond what the market would dictate.
Railroads used the Interstate Commerce Commission to organize and prevent rate wars; airlines did the same with the Civil Aeronautics Board. Abolishing those agencies did more for consumers’ interests than creating them ever could.
You Break It, You Buy It
In practice, regulatory capture works all too well. A government that takes responsibility for the operation of an industry must sustain the industry. Ordinary monopolies achieved the old-fashioned competitive way, with high quality or low prices, remain vulnerable to new technology or better marketing. Government price controls and service limits go hand in hand forever — or at least until the revolution comes.
Consider the U.S. Food and Drug Administration. Although it does not (yet) directly administer prices of pharmaceuticals, medical devices and food additives, it does subject them to a long process of testing for safety and efficacy, and it regulates manufacturing in the industries under it. Done in the name of public safety, the testing regime also raises a formidable barrier to new entrants. The FDA finances its activities with fees on those it regulates. The benefits and costs are clearer if we note that the drug industry begged for higher fees to finance faster review of new drugs and devices.
Interesting charges about the review process emerged from the FDA recently. The former administrator allegedly knuckled under to congressional pressure last year and approved a medical device despite serious reservations among the agency’s scientific staff. The congressmen, all from New Jersey, had received campaign contributions from the device manufacturer, based in Hackensack, N.J.
Making fun of New Jersey corruption is a national pastime, but its ways are not so mysterious or unusual. A form of regulatory capture may have been at work.
The congressmen were doing what too many of our elected tribunes think is their main job — cutting paths through red tape on behalf of their constituents. Anyone who would call a congressman for help with a missing Social Security check should not be dismayed if Hackensack entrepreneurs call on their senators and representatives for help with a missing license to make profits.
One of this year’s winners of the Nobel Prize in economics has also contributed to our uncomfortable understanding of government power and the rule of regulation.
Reacting to the economic notion of state and market as alternatives, Elinor Ostrom observed that people often provide a third way. She is a political scientist at Indiana University, and she observed the general success of such voluntary associations as churches and charities in performing welfare functions, parent associations governing schools behind the scenes and trade associations imposing professional standards.
In a variant of regulatory capture, such groups produce public goods without government management, despite a presumption among many economists that markets fail to produce public goods.
A lesson from the new laureate is that it’s usually not necessary or desirable to have governments substitute for markets. The spontaneous order of markets reflects people acting rationally; government regulators add nothing to the process.
States Need to Act More Like Brands?
Do you appreciate your state? Feel like you get a decent return on your tax dollar? Would you recommend your state to friends as a place to live or, conversely, as a place to avoid? Is your state ascending or descending as a brand?
States are already “branded” by their histories, economies and populations. California has great weather, beautiful scenery and tons of diversity. It’s the land of the Gold Rush, Silicon Valley and Hollywood. Minnesota has icy winters, beautiful lakes and an educated work force. Florida and Arizona are havens for retirees, vacationers and snowbirds. You can look at a map and fill out the brands.
Several states are now at a crossroads because their historic positions no longer ring true and their futures are cloudy. If we think of citizens as consumers, the “benefits” provided by the brands may look quite different than they have in the past. “Acquiring” and “retaining” the folks who generate sales (i.e., taxes) may take major change. Growing a healthy customer base will require state governments to think more about what their customers need than about administering policy and adding or maintaining services. Like any brands facing a budget shortfall, states will need to make tradeoffs.
Let’s take my state, California. “The Golden State” is a hotbed for technology, entertainment and innovation. California attracts people from around the world, even though it may have put “the fun in dysfunction” (according to Sports Illustrated, writing about the Oakland Raiders, but if the shoe fits ... ). With a high rate of foreclosures, a large and inefficient bureaucracy, high and inequitable taxes, a broken education system and a monstrous budget shortfall, the California brand is in trouble. Fixing it is hard work, since good weather can only take you so far. If brand basics like reliable public education, the ability to attract and retain businesses, and some semblance of government efficiency don’t take hold, the tax base will continue to decrease, the budget will get worse and the problems will become more intractable. The beacon of opportunity will morph into a declining brand, coasting on former glories.
Like any brand, a state that can’t retain its most valuable customers will inevitably decline. Lose your business base, job generation engines and revenue growth, and you don’t have a good long-term outlook. For California, even the presence of Stanford University, Hollywood, Google (GOOG - news - people) and Sand Hill Road can’t stop that decline. Fifty years ago, Michigan was a hot brand. Look where it is now. Unlike brands, which can decline over a matter of years, states that don’t meet their citizens’ needs will decline over decades.
If a state’s brand promise becomes too overpriced and loses its competitive edge, consumers and businesses will inevitably move to states that have better offers. Once citizens start moving elsewhere, states — like brand managers — can either change and fight for customers, or dig in their heels and hold the line.
Don’t get me wrong, my family and I enjoy California and appreciate everything that it has to offer. But of all of the states we’ve lived in, California has the worst “consumer acquisition pain” of any of them. The forms, regulations, city, county and government bureaucracies and general lack of helpfulness combined with the high cost of living made the move more painful than earlier moves to Minnesota, Ohio and Connecticut. I can only imagine what it would be like to move a business.
States like California, which have been on top for a long time, need to go back to the basics of what made them great. They will need to innovate in order to acquire and retain customers like Michigan did in the 1950s and California and other Western states did in the 1990s. If they don’t, they run the risk of facing the problems that now plague Michigan. Leaders need to think about their states’ long-term brand health and hopefully, stay focused on the benefits that matter (such as job creation and education) rather than short-term fixes (like using across-the-board cuts to help balance the budget).
States can either acknowledge that the marketplace has changed and evolve accordingly, or keep on trucking with the old model and wonder why they are losing customers to other, more nimble states. Even those that have worse weather.
Mike Linton was most recently the chief marketing officer at eBay. Previously, he was the first CMO at Best Buy. He joined the electronics retailer in 1999 from James River, where he worked as a vice president and general manager. Linton started his career in brand management at Procter & Gamble.
Deregulate Labor Markets
On the economic front, the good news is that the Dow Jones industrial average is inching back toward 10,000 — only 30% off its all-time high. The bad news is that the unemployment rates are inching past 10% with no improvement in sight — unless, we are assured, government intervention can halt the downward spiral.
This point has not been lost on the Obama administration, whose de facto chief economic guru David Axelrod, assures us that “all additional potential strategies for accelerating job creation” are on the table. Axelrod may heed the advice of New York Times columnist Bob Herbert, who invokes Bill Clinton’s Secretary of Labor, Robert Reich’s fresh ideas for “igniting” job growth. The centerpiece of their program is the labor-market version of Cash for Clunkers: a $3,000 credit to small businesses to create jobs.
This Utopian proposal only makes matters worse. Everything turns on what kinds of jobs are created. Unfortunately, all labor-market subsidies run into two insuperable obstacles in both good times and bad. First, a wily employer could receive a subsidy for jobs that would be created in any event. The transfer payment to the lucky employer thus imposes an additional tax burden on everyone else, without any offsetting gain. Or, worse, the subsidy will create a shiny new job — albeit of little or no social value.
In line with today’s fashionable Keynesian babble, only force-fed government jobs are said to exhibit a vaunted “multiplier” effect, by spurring additional economic activity up and down the distribution chain. But any new private-sector job would have exactly the same effect, and the added virtue of producing something of value. Alas, all public subsidies crowd out good private jobs and create useless public ones. In the long term, they reduce the overall wealth base on the nation, which in turn contracts both public revenues and private economic activity. We cannot solve 10% unemployment by creating 12% unemployment!
There is a better course of action for labor market reform, just as there is for health care reform. David Hyman and I have recently argued that the current health care debate is marred by the fashionable insistence of piling new regulations on an already overheated regulatory system. As libertarians know, government sages should first direct their fire to reduce market drag by-shudder! — deregulation. Yet on a matter that intersects health and labor, Democratic health care reform proposals predictably protect collective bargaining rights in all health care markets, thereby perpetuating highly inefficient labor monopolies.
That interventionist mindset, writ large, is killing labor markets today. This past July, a third 70-cent increase has raised the minimum wage from $5.15 to $7.25 per hour in just over two-years. Why is anyone surprised that this 40%-plus increase caused a current sharp increase in teenage unemployment that hits minority males especially hard? The minimum wage only directly impacts the bottom tier of the economy. Strengthening the anti-discrimination law protection for women makes matters worse across the board, at a time when men in virtually every age group and occupation have taken a harder hit than women.
Far worse, just keeping the misguided Employee Free Choice Act (EFCA) on the legislative agenda sets up a massive disincentive for firms to hire new workers. Who wants to expand a workforce in the face of the potential double whammy of a card check and compulsory contract arbitration, capable of sending any firm into bankruptcy? Finally, the massive confusion over health care reform is yet another stealth job killer. The prospect of new employer mandates and special taxes make it prudent to trim workforces or to avoid creating new businesses at all.
Yet look as you may, none of the administration’s current champions of job creation will lift a finger to take the heavy foot of Uncle Sam off the throats off the private employers, who are the only persons who can sustain job growth. Perhaps our government wizards fear that deregulation cuts budgets and reduces their power. But their dubious motivations are not the core of this debate. The great curse of the current downturn is to delude well-intentioned people to cling to the miraculous idea that policies known to be dangerous in good times somehow become social necessities in bad times. Sorry, but there is no way to ease the pain of labor markets without a massive dose of deregulation. Shame on the Obama administration for missing the point.
Richard A. Epstein is the James Parker Hall distinguished service professor of law, the University of Chicago; the Peter and Kirsten Bedford senior fellow at the Hoover Institution; and a visiting law professor at New York University Law School. His recent book, The Case Against the Employee Free Choice Act, is available from the Hoover Press. He writes a weekly column for Forbes.
STOP THE GOVERNMENT INSANITY!
“Insanity is doing the same thing over and over again and expecting different results.” (1) In private hands, this insanity is a vice. In government hands, it is a crime.
Private insanity hurts those who do it and those who support it. It punishes those who are responsible. Government insanity injures everyone EXCEPT those who do it and enable it. It protects those who cause and condone it while punishing the innocent.
Private insanity causes private problems and pain. Government insanity causes widespread economic and social damage and destruction. It imposes the costs and consequences on those who did NOT cause them.
This insanity is not blindness, but the refusal to see. Not deafness, but the refusal to hear. This insanity is deliberately ignoring cause and effect, action and consequence.
The cure for most forms of government insanity was discovered in 1946. It’s a short, readable book called ‘Economics in One Lesson’ by Henry Hazlitt. (2) It’s what happens when today’s politicians refuse the cure.
Government economic insanity lets Congress give the first $1 trillion in bailouts to reckless and irresponsible lenders and borrowers. To over-priced, wasteful, and uncompetitive car companies. And probably to bloated and wasteful state governments.
Government economic insanity lets Congress print or borrow money to stimulate the economy. Government economic insanity lets Congress vote for government programs to “create jobs.” Government economic insanity lets state legislatures over-charge taxpayers for roads, bridges, and other infrastructure while pretending this creates jobs.
Politicians and government officials have developed ways of re-packaging and selling the government insanity. Announcing: New, Improved Government Insanity.
RE-NAME what doesn’t work, do it again and again, and tell us we’ll get different results.
PUT DIFFERENT PEOPLE IN CHARGE of doing what doesn’t work, do it again and again, and tell us to expect different results.
SPEND MORE TAX DOLLARS, ASSIGN MORE GOVERNMENT EMPLOYEES to do what doesn’t work, again and again, and expect different results.
RE-ORGANIZE AND REFORM THE DEPARTMENT that did what doesn’t work, do it again and again, and expect different results.
BELIEVE “YES, WE CAN,” do the same thing, again and again, and expect different results.
Stop the Government Insanity!
Email this issue of “Small Government News” to your family and friends. Share what you learn with your co-workers.
1. Tell them: “Insanity is doing the same thing over and over again and expecting different results.”
2. Give them examples of government insanity: trade protectionism, government works projects, “jobs” programs, “stimulus” programs, and more.
3. Link them to or buy them ‘Economics In One Lesson’ by Henry Hazlitt. Ask them to take 8 minutes to read a few key pages.
4. Ask them to speak out. To inform and influence their co-workers, friends, and families.
Stop the Government Insanity! (Footnotes)
(1) This quote has been attributed to John Dryden, Albert Einstein, Rita Mae Brown, and others.
(2) ‘Economics In One Lesson’ by Henry Hazlitt explodes and refutes these fallacies and most of the economic insanities Congress is trying to sell us. Read the preface, Chapter 1: ‘The Lesson’, and Chapter 2: ‘The Broken Window.’ About 8 minutes reading:
Buy a copy of the book. Highlight, underline, and make notes in your copy. It’s pure gold economic sanity.
“The right of a citizen to bear arms, in lawful defense of himself or the State, is absolute. He does not derive it from the State government. It is one of the “high powers” delegated directly to the citizen, and is excepted out of the general powers of government. A law cannot be passed to infringe upon or impair it, because it is above the law, and independent of the lawmaking power.” — Cockrum v. State 
A society of free and responsible individuals who are able to form voluntary associations will solve the social dilemmas they confront through various means of self-governance. — “Elinor Ostrom’s Nobel Prize in Economics“ [October 15, 2009]