Author: George Noga

A Half Century of Liberal Governance 

George Noga
By: George Noga – September 17, 2013
       Suppose, just suppose, there was a place in America where we could test and showcase liberal ideas for over a half century of continuous governance according to strict progressive shibboleths. Surely such a place, if it existed, would prove beyond doubt that liberalism works. Surely its economy would thrive and  hordes of people would move there. Surely it would bring about a veritable Xanadu and demonstrate once and for all the bankruptcy and depravity of capitalism, free markets and conservatism.
       Suppose such a place had no right to work law, strict gun control and a living wage far above the federal minimum wage. Suppose its schools spent far above the national average per pupil and both its government and private sector workers were heavily unionized with truly exceptional pay, benefits and job security. Suppose its tax system aggressively redistributed income from business and the wealthy to the poor. Suppose continuously since 1962 it had been governed at all levels by liberal Democrats. Such a place actually does exist; it is called Detroit.
       What has happened to this liberal paragon under a half century of progressive stewardship? Its population dropped 62%; over 1.1 million people have fled this leftist Xanadu, preferring instead putative free market hell holes. It has massive corruption, 16% unemployment and only 7% of students are proficient in reading. It has 80,000 abandoned  buildings, resembling Tokyo after the fire bombing. It has $20 billion in official debt and billions more in unfunded liabilities. It had the highest per capita income of any large American city in 1950; today it is the second poorest. It has the second highest murder rate of any American city. It repels people possessing skill, ambition, talent and entrepreneurial instinct. And it is bankrupt.
       Of course, liberals don’t accept any responsibility; the best they can do is blame corporations; how utterly lame is that? Does this mean businesses therefore are responsbile for successful cities? And it isn’t just Detroit; the 10 poorest large cities in the USA according to the Census Bureau all have been under liberal Democratic rule for decades, many for over a half century – the same is largely true of states and, for that matter, countries.
      Liberalism is shown to be a complete and abject failure wherever it is tried; Detroit is merely the latest poster city. Liberals won’t accept blame because to do so would expose progressivism for what it truly is – an engine for corruption, unemployment, economic disaster, crime, blight, failed schools and untold human misery. Over 1.1 million people have voted with their feet to get the heck out. Most fundamentally, liberalism failed because liberalism is a lie!

Fix Detroit Overnight: Declare it a Free City

      When I write about a problem, I usually include a solution. What Detroit needs is the dead opposite of what has made it a veritable hell-on-earth. Serendipitously, this would serve as a further, albeit unnecessary, test of capitalist, free market principles such as those that have transformed Hong Kong, Singapore, South Korea and  all places they have been implemented. The solution is elegantly simple: first thing tomorrow morning declare Detroit a free city.
“Declare Detroit a free city tomorrow; it will become a beacon for
the rest of America  – showing the path to liberty and prosperity.”
      The free city declaration would include total economic freedom, secure property rights impartial courts and basic criminal justice. All federal and state taxes and regulations – along with federal and state aid – would be abolished. All existing public contracts, pensions and employment would be terminated. There would be no OSHA, EEOC, IRS, HHS, EPA, ObamaCare, immigration controls, minimum wage, zoning, inspections, licensing, gun control;  you get the picture. All government services would be privatized. Public education would be 100% voucherized and non union. To cap it off, everything would be guaranteed for 50 years!
      Success would not come overnight, but come it would and in much less than the 50 years it took to create the disaster that is today’s Detroit. Expect to be flabbergasted by the hard working, ambitious and talented entrepreneurs who flood into the new free city of Detroit. You will be equally amazed by the outpouring of energy and enthusiasm of ordinary people sensing  opportunity. It will become a showcase for the best America has to offer. The new free city of Detroit will become a beacon for the rest of America showing the way to liberty and prosperity.

Montana Moments: Vignettes From the Treasure State

George Noga
By: George Noga – September 10, 2013
       We just returned from our eighth summer in Whitefish, Montana (population 6,400) and I wanted to share some of my favorite Montana moments. Life in Montana is  quite different (in both a positive and refreshing way) from that to which we have become accustomed in Central Florida. In many ways it is reminiscent of life in America as I remember it growing up in the 1950s. However, the first thing that impresses you about Montana – other than the ubiquitous Ron Paul signs – is its size.
       A friend who knows we summer in Whitefish told me he bought a ranch east of Billings whereupon I promply interjected that we would have to get together over the summer. He retorted that it would be a 500 mile drive. Driving Montana east to west is over 700 miles and takes 12+ hours. I made the mistake visiting Europeans often make; they are used to a European scale. If they are in Glacier National Park (near Whitefish) they look at a map and conclude they can drive to Chicago the next day – actually it is 1,600 miles and over 24 hours of driving.
       During our first summer in Whitefish we were unable to find national newspapers like The Wall Street Journal or USA Today. One day we drove by a large general store and I asked my wife to run in to see if they carried any of the aforementioned papers. She asked the perky 16 year old young lady who waited on her if the store had USA Today. The teenage girl pondered the question for a few moments and replied: “We don’t consider ourselves part of the USA.”
“There is no crying in Montana.”
      Nearby Kalispell, a larger town of 20,000 souls, has its quota of big box stores – the kind that has alarms that go off should customers leave without having the anti-shoplifting tags removed. The alarms go off frequently and the explanation is nearly always the same. The customers are packing heat and simply forgot to leave their guns in the car.
       Once I was about to begin a round of golf with a group of my golf buddies (all from Montana) when the starter unexpectedly permitted a group of women to go ahead of us even though they did not have a tee time. When questioned about this by one of our group, the starter replied that one of the women had cried and he felt sorry for her. One of my Montana friends promptly asserted: “There is no crying in golf“. The words were scarcely out of his mouth when the other two Montanans exclaimed in unision: “There is no crying in Montana“!
“Welcome to Montana – Now go home.”
     Perhaps our favorite Montana moment is the local police blotter which is published faithfully and in its entirety by the local paper. Following is a selection of entries from just one week.
  • A man reported his rabbit ran away and has yet to return.
  • A lethargic alpaca was reported to be without food; the animal warden found him healthy.
  • A man was seen yelling and waving a shovel as he rode his bicycle.
  • Someone reported a suspicious person in a store; it turned out to be an employee.
  • A man claimed his brother stole his gun; he later found it under his blanket.
  • An angry man claimed that when he attempted to grab a dollar bill from the ground, it was jerked away by a boy who had attached it to his fishing pole.
       Perhaps you now can better understand the many charms of Montana and why most locals fervently seek to discourage others from moving here. They want to put up signs at all the state borders that read: Welcome to Montana – Now go home.

Reflections on the Boston Marathon Tragedy

George Noga
By: George Noga – July 31, 2013
      Sufficient time has passed to allow sober reflections on events surrounding the Boston Marathon tragedy. My impression at the time they were unfolding was that the police have undergone a transmogrification to become much more like the military while, at the same time, the military is being forced to act more like civilian police. These role reversals are disastrous for both institutions as well as the American people.
“Police have become like the military and the military like the police. This is disastrous for police, the military and the American people.”
        Ultimately, the problems with police stem from the fact government has a monoply on the use of legally sanctioned force. Absent strict civilian controls, the natural order of things is the same as in any other monoply, i.e. over time policing becomes more and more autocratic and forfeits the erstwhile support of many citizens. The situation is exacerbated by virtue of police work being a closed subculture that attracts recruits from only a narrow band of society. Once initiated into the police fraternity, there is a special bonding and little openness to civil society.
        That was the situation in Boston. Even before the marathon, Bostonians were under virtual siege. They were hectored about drinking and rowdiness during the marathon, prohibited from gathering on their own porches and roofs and warned there would be zero tolerance. In a true civil society, it should be the citizens who tell the police what conduct is to be permitted. The good people of Boston circa 1770-1776 never would have tolerated such police misconduct.
       It was no surprise therefore when, following the bombing, thousands of police arrived including SWAT teams in armored personnel carriers resembling Star Wars Imperial Troopers. It had the feel of martial law or a coup in a banana republic. They shut down transportation, confined citizens to homes and behaved like an occupying force and all just to find one terrorist. Although I found this garish display of force out of proportion, the people of Boston didn’t as evidenced by their enthusiastically applauding the police when the manhunt was over.
“Private cameras photographed Tsarnevs. Private citizens identified them. A private citizen found Dzhokhar. Government failed Boston.”

      What lessons are we to take away from all this? Following are the top five.

  1. Police should act like police not the army. There must be civilian control and oversight. Non political leaders of civil society must be appointed to exercise the oversight and must resist regulatory capture, i.e. when over time, they become apoligists for the police.
  2. We need to open up police work to a wide swath of society and encourage police not to be insular. Myths need to be dispelled; police are not among the top 10 most hazardous jobs. Citizens are nearly 10 times more likely to be killed by police than by a terrorist.
  3. Government failed to heed Russian warnings about  the Tsarnevs. Government failed to detect they had returned to Chechnya and Dagestan. Boston police lacked photos of the Tsarnevs despite ample reasons to have them. The cameras used to identify the Tsarvevs were private. Private citizens identified the Tsarnevs. It was a  private citizen who found Dzhokhar. The lockdown delayed his capture. Police misallocated resources, focusing more on sidewalk beer drinking than terrorism. Government failed the people of Boston.
  4. In the midst of the crisis, a vast majority of otherwise ultra-liberal Bostonians would gladly have supported enhanced measures to capture the terrorists and to prevent any further acts of terror. This looks for all intents like vindication of Bush’s policies.
  5. To the fullest extent possible, police should operate like a market rather than a monoply. If they were subject to market forces, they would have acted far differently both before and during the marathon bombing. Coercive relationships breed antagonism, defiance and victimhood; one does not coerce a customer – instead one promotes trust and goodwill.
 Note to readers: I am taking a break; the next posting will be September 10-15.

Travels in Blue States

George Noga
 By: George Noga – July 22, 2013
       Recently my wife and I took a vacation, driving from our home outside Orlando to Cape Cod and then back to the Washington, DC area from whence we took the auto train. We have driven extensively throughout the USA but not for decades in the deep dark blue northeastern states. Everything was copasetic while we drove from Florida through Virginia. Once we hit the blue states however, we began noticing abominations inflicted on motorists by government. Quickly sensing a pattern and understanding that these were not random atrocities, we began to make a list; this posting is the result.
“There was a pattern; these were not random acts of malevolence.”
     The most ubiquitious outrage was the doubling of fines for any reason and often for no apparent reason at all. In Florida speeding fines are doubled only when workers are present. Not so in blue states. All violations (not just speeding) are doubled whether or not workers are present – presumably even for non moving violations such as an expired tag. We encountered all the following signs. (1) “Intense enforcement zone – all fines doubled”; (2) “License suspended for two work area violations“; and (3) “Fines doubled when speed limit is 65 for speeding and other violations“. Fines were doubled for perhaps most of the miles we drove in blue states.
     The second most common ignominy pertained to rest stops, or the lack thereof – a matter of particular relevance to this septuagenarian. Blue state rest areas are few and far between and many (perhaps most) lack facilities. In Connecticut they (laudably) were renovating the rest areas; however, they closed consecutive ones instead of spacing them out. The real horror of the lack of public rest stops was having to exit the interstates to find commercial rest stops. This could require 30 minutes to get off and back on. Have I mentioned that blue state hospitality includes refusing rest rooms to those who don’t buy gas? Some blue states have designated certain rest areas only for vehicles over 5,000 pounds; I still haven’t figured that one out.
      Following are some of my other favorite blue state degradations.
  • You are forbidden to pump your own gas in New Jersey, Delaware and Oregon allegedly to create employment and for “safety“. I guess the other 47 states are dangerous.
  • In some places signs read “Up to $10,000 fine for littering“. Yes, folks, you read it right.
  • In many places there are street signs only for cross streets; good thing I had GPS.
  • There is a police presence in most work areas even for mowing alongside the highway.
  • In MA we encountered a 3-mile line behind a street sweeper, which (you guessed it) was escorted by a police cruiser. They were totally oblivious to the horror they had created.
  • Lanes were blocked off at rush hour for no apparent reason creating monstrous jams.
  • Exits are not numbered by mileage as in the rest of America.
  • Interstate 95 is a toll road in New Jersey.
  • There were numerous places where there was only 200 feet for double merges, i.e. for cars simultaneously entering and exiting limited access roads. This is uber dangerous.
      So, why this jeremiad about asinine blue state highway rules and practices? Granted, this subject is not on a par with the debt crisis or even documenting the similiarities between Barack Obama and King George III as in the last post. My reasons are straightforward.
“Government is a malevolent force in all matters both big and small.”
      This post illustrates the profound differences between red states and blue states even in relatively minor matters such as traffic rules. Second, it shows governments in blue states have run amok and are insensitive (one might say, hostile) to the comfort, safety and convenience of citizens. Finally, it proves yet again that government is fundamentally a malevolant force in all matters both big and small. The bigger the government, the more malevolent it becomes.

Profiles in Cowardice: Trayvon Martin Debacle

George Noga

Government Failure at Every Level and in Every Branch

By: George Noga – July 15, 2013

     Since I live in Seminole County, I couldn’t escape the media frenzy over the Trayvon Martin case. Mercifully, it ended this weekend but not before it became the poster child for government malfunction in all three branches and at each and every level from the City of Sanford all the way up to the the President of the United States of America.

   The Sanford police initially investigated and concluded not to charge George Zimmerman with a crime – in hindsight clearly the correct decision. For this act of competence the Sanford police chief was unceremoniously sacked. Government failure at the city level – check!

“The media bought into a counterfactual fantasia.”

   Then came the massive media paroxysm. The media bought into a counterfactual fantasia sans independent checking. The media malpractice, combined with outside agitators with prior agendas, caused Governor Scott to appoint a special prosecutor, Angela Corey. I feel certain that, whether implicit or explicit (wink, wink, nod, nod), Scott and Corey understood what was to happen. This was not Rick Scott’s finest hour. Government failure at the state level- check!

   Dante has a special place reserved for Angela Corey. The fix was in from the outset. Corey skipped taking the case to a grand jury because she knew she couldn’t get an indictment. She then charged Zimmerman with a crime that couldn’t be proven, all for political expediency and correctness. Moreover, she and the prosecutorial team withheld evidence from the defense. She deserves severe sanctions for her lese majeste conduct. State level government failure – check!

   Next congress got into the act. The Congressional Black Caucus insisted this should be a civil rights case and demanded the Justice Department (“DOJ”) open an investigation. Government failure at the federal legislative level – check! The DOJ then sent its “community affairs” team to Sanford to stir up the pot and foment trouble. They initiated a civil rights investigation which remains open today. Government failure at the federal executive level – check! Not to be outdone, Barack Obama gratuitously opined that if he had a son, he probably would look a lot like Trayvon Martin. Government failure at the highest level in the land – check!

“All levels and branches of government failed – city, state and federal as well as the executive, legislative and judicial branches.”

   Nor does Judge Nelson come out of this smelling like a rose. It was apparent to any scient person the state could not prove second degree murder. Judge Nelson should have dismissed that charge – although that would have required a heavy dose of courage. No one from any government involved in the case qualified for a profile in courage; instead, they could fill many chapters in a book titled Profiles in Cowardice. Government failure at the judicial level – check! Note: The book Profiles in Courage was not written by John Kennedy even though he received the Pulitzer Prize; the real author was Ted Sorensen. How’s that for a profile in courage?

   Government failure was massive and endemic throughout the Trayvon Martin debacle; indeed, it is difficult to find one instance of a government official who acted properly. There was failure at the city, state and federal levels as well as in the executive, legislative and judicial branches. This case should become the poster child for government run amok. As I point out time and again, government is inherently a malevolent force; this is just one more example.

The Declaration of Independence – Barack Obama Mimics King George III

George Noga
 By: George Noga – July 10, 2013
       Upon rereading the Declaration of Independence this July 4th, I was struck by the similarities of the complaints listed in the Declaration against King George III and the actions of our current president. George III’s acts were adjudged by our founders egregious enough to revolt against Great Britain and to fight a long, bloody war for independence; what of the actions of President Obama? Following are but five instances where Obama’s actions parallel those of King George. Note: Our founding documents list many “rights” of Americans but only one “duty”. Do you know what that duty is?

  1. The Declaration states: “He (King George) has forbidden his Governors to pass laws of immediate and pressing importance.” Obama has acted to prevent several states (Arizona) from enforcing laws to protect their citizens from imminent harm.

  2. The Declaration reads: “He has suspended laws in their operation until his assent should be obtained.” Obama just suspended parts of the Patient Protection and Affordable Care Act – unilaterally. Obama also has vowed not to enforce parts of our immigration laws and, in fact, to take actions directly contrary to such laws.

  3. Again the Declaration: “He has dissolved representative houses for opposing his invasions of the rights of the people.” His recess appointments while the Senate  clearly was NOT in recess are tantamount to dissolving a representative house solely because he knew the house (Senate) would not assent. Subsequently, even though federal courts have ruled the ersatz recess appointments illegal, the appointees continue in office and to oppose the rights of the people. This final action goes even beyond any horrors promulgated by King George III.

  4. The Declaration: “He has erected a multitude of new offices and sent hither swarms of officers to harass our people and to eat our their substance.” President Obama appointed a multitude of unaccountable czars. His administration directed the IRS to harass his political enemies. He is hiring tens of thousands more IRS agents to enforce his dysfunctional and hated health care law. His EPA, NLRB and HHS  have run amok with countless, mind numbing and prolix regulations.

  5. The Declaration: “He has combined with others to subject us to jurisdictions unacknowledged by our laws.” He advocates US law and US courts taking into consideration rulings by international and foreign courts. He has supported treaties and protocols (UN Law of the Sea Treaty) that subjugate Americans to the UN, to other international organizations and to foreign laws and governments.

Americans Have Many Rights But Only One Duty

      Our founding documents list many rights of Americans – but only one duty. The Declaration states the people have a duty: “to throw off such government and to provide new guards for their future security – when a long train of abuses or usurpations evinces a design to reduce them under despotism (autocratic government).”  As shown supra, there already is a long train of abuses under the present King err, President.
     However, the declaration also wisely states: “All experience hath shewn, that mankind are more disposed to suffer, while evils are sufferable, than to right themselves by abolishing the forms to which they have become accustomed“.
      Apparently, most Americans believe the evils still are sufferable or they eventually will be mitigated at the ballot box. Finally, as the Declaration also states: “Let facts be submitted to a candid world“. To this blogger the facts cited herein demonstrate President Obama is doing one heck of an impersonation of King George III – only he is an elected representative of the American people sworn to uphold the Constitution and not a hereditary sovereign monarch of a foreign occupying power.

Public Choice Economics Explains Government Failure

George Noga
 By: George Noga – July 1, 2013
       The science of economics, far from being dismal, can be truly exciting; it offers much more than arcane supply and demand curves. In recent years economists have captured the public imagination with books such as Freakonomics, Super Freakonomics, More Guns – Less Crime and More Sex is Safer Sex. They are popular because they use the tools of economics, including rigorous logic and analysis, to reach what often are counter intuitive, but valid, conclusions.
     So it is with public choice economics. In the private sector, theoretically correct economic solutions usually are positively correlated with real world decisions In the public sector however, there is a huge chasm between the correct theoretical (economic) solutions and the choices made by decision makers, i.e. politicians. Public choice economics explains this chasm.
      Many citizens, particularly young people and liberals, have an infatuation with government. They see elected officials as benevolent, dispassionate planners looking out for ideal social outcomes as contrasted with self-interested actors in the private sector. Yet we constantly are bumfuzzled by political decisions contrary to all logic and national self interest.
“We constantly are bumfuzzled by politicians acting illogically.”
     Why is private sector decision making far superior to government? Business ownership and governance do a much better job of aligning business and personal objectives and incentives so that decision makers choose the economically (theoretically) correct decision. In government there is a wide gulf between self interest and public interest.
      In both government and business, decision makers usually decide on the basis of personal risks, rewards and incentives; this is embedded in human nature and is immutable. The private sector understands this. The founders of our country understood this, hence our constitutional system of federalism, limited government and checks and balances. Public choice economics explains why government fails us; consider five tenets from public choice economics.

  1. This comes as no surprise but politicians are far more interested in winning the next election than in doing the right thing. Their desire to win elections far outstrips their duty to the country. Their personal incentives are grossly misaligned with the public interest.

  2. Politics is extremely shortsighted, favoring debt financing over taxes; that explains why we have had deficits in 47 of the last 52 years. Politicians love to make unfunded  promises such as unsustainable pensions and benefits. They want to provide immediate benefits while borrowing, hiding or deferring the costs as far into the future as possible.

  3. Special interest groups and rent seekers (those who extract value from government without giving value in return – such as public sector unions) dominate the process. Politicians always favor highly concentrated and organized groups (that return the favor in various ways) at the public expense and contrary to the public interest. A great example is sugar subsidies where a few growers share nearly $1 billion a year in added profits while all 310 million of us Americans pay $30 too much for sugar each year.

  4. There is a myth that central planning leads to good decisions. This ignores the real world preferences of real people, creates perverse incentives and disincentives and inevitably creates a myriad of unintended consequences. The real world is far more complex and dynamic than any central planner or computer model can ever simulate.

  5. Whereas in business the culture is to quickly recognize and to cut losses, the incentive in government is to deny anything is a blunder and continue to throw more money at it.
      Public choice economics can lead to better decisions if we give it heed. We must recognize  economic science is just as applicable to government as it is to business. We must understand  human nature has not changed since the dawn of time. People are people and they do not suddenly become benighted when they enter public service. We need to return to the system  envisioned by the founders where government is so limited as to minimize the harm it wreaks. Failing that, we must closely align the risks, rewards and incentives of public officials with the long-term public interest – just as the private sector has done so successfully.

Red Light Cameras Increase Death and Injury

George Noga
By: George Noga – June 24, 2013
        The US Department of Transportation – Federal Highway Administration (“DOT”) has a national study assessing safety of red light cameras (“RLCs”). The study, prepared years ago, was buried (hidden?) inside a misnamed (intentionally?) and prolix report. Having read it, I can see why DOT never wanted it to see the light of day.
      In the US there are 100,000 red light crashes each year with many thousands of injuries and 1,000 deaths. Per the DOT study, the presence of RLCs at intersections actually increased – that’s right, increased – deaths and injuries a whopping 24%!
“Red light cameras are all about money – not safety.”
       If there ever was doubt RLCs are about money and not safety as claimed, such doubt is dispelled by the DOT study. In particular, rear end crashes (but not right-angle crashes) spike as drivers develop dangerously hard braking patterns. Let’s follow the money. In Florida RLCs  generate an estimated $250 million (quarter-billion) annually in 70 jurisdictions.
      As drivers adjust to RLCs however, revenue falls off. In Tampa, state and local authorities responded by shortening the length of yellow lights by 1.5 seconds, lowering the time well below the state minimum. They took this action knowing full well it would increase death and injury – and, in fact, at least one death is attributable to the shortening of the yellow lights.
      It is proven that longer yellow lights make intersections safer although they also make RLCs unprofitable. When the Georgia legislature mandated an increase of 1 second for yellow lights, many jurisdictions in that state terminated their now unprofitable RLC programs. Moreover, most yellow lights are set based on the posted speed limit rather than on the actual driving speed. Simply adjusting the yellow lights to real driving conditions vastly increases safety.
“Governments choose tax money over safety of motorists.”
       In order disingenuously to circumvent numerous safeguards in the US and state constitutions, government jurisdictions treat RLC offenses as civil code violations – akin to not mowing your lawn often enough. This means even serious violations are not reported to insurance companies and don’t count against the driving record of the offender. Ask yourself: is this the behavior of organizations that claim the primary purpose of RLCs is public safety?
     As with many government programs, RLCs are based on lies and misinformation. It is all about the money, not public safety. In fact, as described supra, governments intentionally make driving more hazardous by shortening yellow lights. Governments’ cold calculus values tax dollars much more than the lives and safety of  its citizens. RLC programs are nothing more than unethical, questionably legal (for now) government racketeering. And now, thanks to the DOT study, we know they are dangerous as well.

Lessons From the Bangladesh Tragedy

George Noga

By: George Noga – June 17, 2013

    Our hearts go out to the victims of the building collapse in Bangladesh; they were hard workers striving simply to build a better future. The government building inspectors and all others who are complicit deserve severe punishment. However, it is crucial we learn the correct lessons from the workers’ terrible sacrifice. The media and their liberal camp followers have been quick to draw conclusions and to apportion blame; among the things they believe are:

  1. Greedy capitalists choose to pay subsistence wages for working in intolerable conditions;
  2. Capitalists’ ill-gotten gains can be used for higher wages and better working conditions;
  3. Desperate conditions in Bangladesh are due to an absence of government regulation;
  4. Globalization and free trade harm the poor and exploit child labor; and
  5. Boycotts of companies that sell products made in bad conditions help the poor.

    Each and every one of the above beliefs is wrong; they are voodoo economics and the consequences of acting on these beliefs is highly destructive. The masses in Bangladesh already are living at bare subsistence; anything that increases the cost of employing them – be it higher wages or better conditions – comes at their expense and results in unemployment. The higher the price of anything, the less will be bought; this applies universally including in Bangladesh.

“Economic Liberty – not government intervention – creates wealth.”

    Everyone desires higher wages and better working conditions for third-world workers. Ignoring the laws of economics (media and liberals) only worsens the situation. To actually bring about such results  requires the maximum degree of economic freedom and the dead minimum of government and outside interference. We have seen time and time again – in Hong Kong, South Korea, India, and now China that within one generation workers are much better off. New factories open with more advanced equipment and competition for labor intensifies leading to higher wages. As wages rise, workers are willing to trade off for better conditions.

Globalization – Free Trade – Child Labor – Boycotts

    Globalization and free trade benefit the poor in particular. To the chagrin of elitists, the poor grasp this viscerally; that’s why, inter alia, they embrace Wal-Mart. The greatest beneficiaries are those who live in poor countries (including Bangladesh) with whom we trade. Voluntary labor – yes including children – and even at low wages and less than ideal conditions – is not exploitative.  Workers choose to work because it is better than what they had before  and offers a path to a better life. This is how they work their way out of poverty.

    Workers (including children) in Dickensian England were better off in the factories than the life they voluntarily left. It was the same in the United States where child labor was common until the early part of the twentieth century. My uncle began working in the coal mines at age six because young children with their small, lithe bodies could crawl into small places.

“Who do you trust to look out for children: government or parents?”

    In England and the US, child labor had vanished well before the passage of child labor laws. As soon as humanly possible, parents remove their children from the labor force. It comes down to who do you trust to have the best interests of children at heart – their parents or government?

   Boycotts are primarily the province of economically illiterate movie stars with too much time on their hands. Even if a boycott could be effective, the greatest harm would befall the displaced workers trying desperately to lift their families out of poverty. Low income Americans also are harmed by having to pay more for many products just to pander to the falsetto angst of Hollywood types who feel but do not think.

   The media and liberals set up straw men, in this case greedy businessmen, and then rail against them. They don’t understand economics and they don’t know what they don’t know. They ignorantly call for boycotts that harm those they seek to help. Then, satisfied they have demonstrated their compassion and good intentions, they retreat back inside their plastic bubble where life is so much simpler than in the real world, where thinking rather than feeling counts.

When Debt Becomes Equal to GDP

George Noga

By: George Noga – June 10, 2013

     Having blogged extensively about the crisis of spending, debt and deficits, I am constantly alert for new perspectives to present the crisis in terms easier to understand. I have discovered one compelling new way to do this and it is presented herein.

       First however, the media have widely reported the  decline in the projected federal deficit which normally would be welcome news. Please note I referred to the projected deficit; the actual deficit continues its inexorable march to oblivion. The decline is due to two factors: (1) higher tax collections in late 2012 in advance of the Obama tax increases; and (2) payments from Fannie Mae. Both are one-time phenomena. So you may wonder, won’t the tax increases permanently shrink the deficit? If you believe thusly, you have forgotten Hauser’s Law which teaches tax rates may rise or fall, but the overall percent of revenue to GDP remains unchanged.

The Special Mathematics of a 100% Debt/GDP Ratio

    Now for the fresh perspective. As the Debt/GDP ratio approaches 100%, some simple but gripping mathematics come into play. First, a few numbers. GDP now is $16 trillion and the public debt is $12 trillion (75% ratio). At the end of Obama’s term GDP will be $17 trillion, assuming a perhaps optimistic 2.0% compound growth rate. The public debt also will be right at $17 trillion based on continued annual structural deficits of just under $1 trillion combined with the frightening demographics and high annual compound growth of Medicare, Medicaid, Social Security and ObamaCare. Please note I use public debt and not total debt; this is because we must pay interest only on the public portion – a key distinction to bear in mind as you read on.

    When the interest-bearing public debt equals GDP, the math gets interesting. Historically, the average maturity of US government debt is 5 years, while the average interest rate is 6%. When public debt equals GDP in 2016-2017, we can make the following observations.

“When debt and GDP are the same, the economy must grow at a rate  equal to the composite rate on the debt to prevent a death spiral.”

    First, the economy must grow at the same rate as the overall interest rate on government debt to keep from exploding interest costs and the deficit. If interest rates revert to the historic average of 6% while GDP grows at 2%, this will, ceteris paribus, result in a 4% larger deficit. At $17 trillion, the annual debt service (interest) will be over $1 trillion with 4%, or $680 billion, resulting from the gap between GDP growth and interest rates. Note: Interest now consumes less than 1% of GDP because of historically low interest rates – which will not last.

    Second, if (miracle of miracles) the interest rate becomes equal to GDP growth, the entire benefits of the expansion of the US economy are offset by and consumed by higher debt service. To put it straight: the US economy never can grow net of interest. One can only imagine the impact of this on unemployment and every other measure of economic well being.

“If both GDP growth and interest rates were at their historic averages, there would be a differential of -2.7% , adding $400 billion a year to the deficit.”

    Third, again using historic data, if the US economy grew at its average post WWII rate of 3.3%  (phat chance) and also experienced its average interest rate of 6%, that would result in a  differential of -2.7%, i.e. debt service would explode by nearly $400 billion more each year compounded. Even if economic growth was high at say 3+%, interest rates would be higher given the concomitant strong economy. Thus, even under such sanguine conditions, debt service would grow much faster than the economy resulting in a debt death spiral.

    I hope the above perspective helps readers better understand why countries whose Debt/GDP ratios blow past 90% of their economies rarely, if ever, recover. These United States of America are headed toward a 100% Debt/GDP ratio by the end of the current presidential term. The only alternatives are: (1) massive spending cuts on the order of 30% which will wreck the social contract; (2) Draconian tax increases which will tank the economy further; (3) runaway inflation; (4) repudiation of the debt; and (5) a lost generation much like Greece is experiencing today. In fact, we are likely to experience several of the aforementioned perils. Avoiding widespread civil unrest and maintaining the rule of law will be no small feat.