David Friedman’s The Machinery of Freedom (buy / epub / pdf / audio) is probably one of my favorite books defending the market and suggesting how it might be superior to deliver products that we currently depend on government to provide. Usual caveat. Friedman is a libertarian and I am not. But the book is still great.

One of the wonderful things it does is show us that the US welfare state generally redistributes wealth from the rich to the poor is an illusion. What follows is from chapter, “Robin Hood Sells Out.”

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Suppose that one hundred years ago someone tried to persuade me that democratic institutions could be used to transfer money from the bulk of the population to the poor. I could have made the following reply: ‘The poor, whom you wish to help, are many times outnumbered by the rest of the population, from whom you intend to take the money to help them. If the non-poor are not generous enough to give money to the poor voluntarily through private charity, what makes you think they will be such fools as to vote to force themselves to give it?’

That would have been a crushing argument one hundred years ago. Today it is not. Why? Because people today believe that our present society is a living refutation of the argument, that our government is, and has been for many years, transferring considerable amounts of money from the not-poor to the poor.

This is an illusion. There are some government programs that give money to the poor — Aid to Families With Dependent Children, for instance. But such programs are vastly outweighed by those having the opposite effect — programs that injure the poor for the benefit of the not-poor. Almost surely, the poor would be better off if both the benefits that they now receive and the taxes, direct and indirect, that they now pay were abolished. Let us consider some examples.

Social Security is by all odds the largest welfare-type program in America; its annual payments are about four times those of all other welfare programs combined. It is financed by a regressive tax — about 10 percent on all income up to $7,800, nothing thereafter. Those who have incomes of less than $7,800, and consequently pay a lower amount per year, later receive lower payments, but the reduction in benefits is less than proportional. If the schedule of taxes and payments were the only relevant consideration, Social Security would redistribute slightly from higher-income to lower-income people.

But two additional factors almost certainly reverse the effect. Most Social Security payments take the form of an annuity — a certain amount per year, starting at a specified age (usually 65) and continuing until death. The total amount an individual receives depends on how long he lives beyond age sixty-five. A man who lives to age 71 receives 20 percent more, all other factors being equal, than a man who lives to age seventy. Further, the amount an individual pays for Social Security depends not only on how much he pays in taxes each year but on how many years he pays. A man who starts work at age 24 will pay Social Security taxes for 41 years; one who starts work at age 18 will pay for 47 years. The first, other factors being equal, will pay about 15 percent less than the second for

the same benefits. The missed payments come at the beginning of his career; since early payments have more time to accumulate interest than later ones, the effective saving is even greater.

Assuming an interest rate of 5 percent, the accumulated value of the first man’s payments, by age 65, would be about two-thirds as much as the accumulated value of the second man’s payments.

People with higher incomes have a longer life expectancy. The children of the middle and upper classes start work later, often substantially later, than the children of the lower classes. Both these facts tend to make Social Security a much better deal for the not-poor than for the poor. As far as I know, nobody has ever done a careful actuarial analysis of all such effects; thus one can only make approximate estimates.

Compare someone who goes to school for two years after graduating from college and lives to age 72 with someone who starts work at age 18 and dies at age 70. Adding the one-third savings on payments to the 30 percent gain in receipts (here the interest effect works in the opposite direction, since the extra payments for the longer life come at the end), I estimate that the first individual gets, from these effects, about twice as much for his money as the second. I do not know of any effects in the opposite direction large enough to cancel this.

Social Security is by no means the only large government program that takes from the poor to give to the not-poor. A second example is the farm program. Since it consists largely of government actions to hold up the price of crops, it is paid for partly by taxes and partly by higher food prices. Many years ago, when I did calculations on part of the Agriculture Department’s activities, I estimated, using Agriculture Department figures, that higher food prices then made up about two-thirds of the total cost of the part of the farm program I was studying. Higher food prices have the effect of a regressive tax, since poorer people spend a larger proportion of their income on food.

Higher prices benefit farmers in proportion to how much they sell; the large farmer gets a proportionately higher benefit than the small one. In addition, the large farmer can better afford the legal costs of getting the maximum benefit from other parts of the program. Notoriously, every year, a considerable number of farms or ‘farm corporations’ receive more than $100,000 apiece and a few receive more than $1 million in benefits from a program supposedly set up to help poor farmers.

So the farm program consists of a slightly progressive benefit (one which benefits those with higher incomes somewhat more than proportionately to those incomes) financed by a regressive tax (one which taxes those with higher incomes somewhat less than proportionately to those incomes). Presumably it has the net effect of transferring money from the more poor to the less poor—a curious way of helping the poor. Here again, I know of no precise calculations that have measured the overall effect.

One could list similar programs for many pages. State universities, for instance, subsidize the schooling of the upper classes with money much of which comes from relatively poor taxpayers. Urban renewal uses the power of the government to prevent slums from spreading, a process sometimes referred to as ‘preventing urban blight’. For middle-class people on the border of low-income areas, this is valuable protection. But ‘urban blight’ is precisely the process by which more housing becomes available to low-income people. The supporters of urban renewal claim that they are improving the housing of the poor. In the Hyde Park area of Chicago, where I have lived much of my life, they tore down old, low-rental apartment houses and replaced them with $30,000 and $40,000 town houses. A great improvement, for those poor with $30,000. And this is the rule, not the exception, as was shown years ago by Martin Anderson in The Federal Bulldozer.

This is not to deny that poor people get some benefit from some government programs. Everyone gets some benefit from some government programs. The political system is itself a sort of marketplace. Anyone with something to bid — votes, money, labor — can get a special favor, but the favor comes at the expense of someone else. Elsewhere I argue that, on net, very nearly everyone loses. Whether that is the case for everyone or not, it surely is the case for the poor, who bring less to the bidding than anyone else.

One cannot simply say, ‘Let government help the poor.’ ‘Reform the income tax so that rich people really pay’ Things are as they are for reasons. It would make as much sense for the defender of the free market to argue that when he sets up his free market it will produce equal wages for everyone.

All of the numbers in this chapter, including the description of the Society Security tax, refer to about 1970; both the tax rate and the maximum income subject to tax have increased substantially since then.

Now that Bradley Manning has started campaigning for clemency on the basis of his alleged identity as Chelsea, a lot of Christians who are resisting the call to oppose mass homicide and tyranny are going to use his sexual perversions as an excuse to continue to resist that call. Since one of the other major players in this saga is the Leftist and homosexual Glenn Greenwald, the morality play is set for Christians to play the Punch and Judy show.

But we should know better. If Tolkien can make Gollum indispensable to overcoming Frodo’s faithlessness and breaking the power of the Dark Lord, we should know that such associations are not reasoned arguments.

READ THE REST: Sometimes Smeagol is the reason the world gets saved, or Chelsea – Kuyperian Commentary.

The only reason I didn’t give Walter Williams fine book five stars, when I reviewed it at Amazon.com, is because it is decades-old now. Why doesn’t Williams get his students to do some up-to-date research and come up with an expanded edition?

But the book is excellent beyond measure–easily (apart from datedness) worth six stars out of five. And because it explains really well why the average person of color came from a poorer family in the eighties, one could even argue that it remains quite contemporary. More importantly, the principles articulated here are quite easily applied to a variety of other situations.

The basic thesis (I’m going by memory here) is that even though “Jim Crow” laws have been removed from the state governments, that the federal, state, and local governments have in fact passed laws and (especially!) regulations that disproportionately hurt blacks and promote their poverty rather than their prosperity. One reviewer has already mentioned the taxicab example. At one time, if one had a car, one could offer one’s services as a taxi cab driver. But now the City government has made it illegal for a person to offer that service. Walter Williams discusses the proffered rationales for this use of state violence (Williams’s tone is not nearly as severe as mine, but what can I say?—All laws are statements threatening people with violence who don’t comply). But these rationales for government intervention are easily shown as bogus. The existing cab drivers are lining their pockets with money from all other potential cab drivers. This is a colorblind system of robbery, but it is not economically blind. It hurts those who have a car and can drive but who don’t have other more lucrative opportunities. Due to past injustices that were not color-blind, this injustice ends up not being color-blind either. Because minorities are disproportionately poor, laws exploiting the poor are laws that especially target certain races.

READ THE REST: “The State Against Blacks” by Walter Williams is a book every American needs to read – Kuyperian Commentary.

1. God could conceivably have arranged the world so that human beings were each distributed equally on the earth so that each had just enough resources to meet his or her needs.
2. That would be an odd sort of world, however, because each area of land would have to be capable of producing the same amount, and each person would have the exact skills to produce from the land what he needed.
3. No one would ever travel, or invent new technology in such a world, since each would be too busy meeting his own needs and there would be no point in trade.
4. But the real world God made involves several different features: marriage and children, for instance.
5. So in the real world a man and woman join into a household and, in the majority of cases, produce some number of children.
6. So the family has different needs over time.
7. Furthermore, no one can be entirely certain of what his future needs might be.

READ THE REST: Suggestions about Christians and the political-economy – Kuyperian Commentary.

Authorities are investigating whether JPMorgan Chase’s Chinese offices hired young workers from prominent Chinese families that in turn offered the bank business.

The bank made a passing reference to a Securities and Exchange Commission investigation in its quarterly filing earlier this month, and The New York Times fanned the fire by reporting on a confidential U.S. government document that went into greater detail.

The document showed that the SEC is looking into the hiring of several well-connected young JPMorgan (JPM, Fortune 500) employees, including the son of the former vice chairman of China’s top banking regulator and the daughter of a Chinese railway official, according to the Times.

While the document doesn’t accuse the bank of any wrongdoing and does not suggest that the employees weren’t qualified to hold the positions they were hired for, the Times said that it sheds light on hiring practices.

via SEC investigating JPMorgan hiring in China – Aug. 18, 2013.

Can someone explain to me how this is the SEC’s business?

It looks like make-work so that the SEC can avoid looking at JPM’s real crimes.

If you have about 45 minutes today, you could read or listen to this excellent pamphlet on what causes recessions and how they can be properly dealt with. It was written back in the Nixon era but it is amazingly relevant today (i.e. addressing the temptation to bail out banks and other businesses).  Highly recommended.

Some libertarians and others argue that the state is an inherently criminal organization–a protection racket at best.

The argument is that threatening people to obey your orders and to give you money “in exchange” for services at the price you set is intrinsically criminal activity. Mobsters have gone to jail for this kind of behavior. Libertarians suggest that such mobsters are being jailed for violating the state’s monopoly on criminal behavior. “Don’t steal the government hates competition” and all that.

As a secular ideology, I think refuting libertarianism in a consistently moral way is more difficult than most people ever want to acknowledge. But I’m not a secular person. I think Jesus is the King of the world by right of inheritance. So he can delegate authority.

But forget ideology! What about history?

Instead of pretending that, once the ideological question has been addressed (there is actually more to it, but I’ll deal with that in another post), there is nothing more to consider, maybe it would be wise to read a history book or two. I would suggest you start with The Money and the Power: The Making of Las Vegas and Its Hold on America – 1947-2000 by Roger Morris and Sally Denton.

Morris and Denton don’t have to do much digging to show the reader that a history of Las Vegas is both a history of American organized crime and a history of our political leadership in the twentieth -century. If you want an example of how easy it is to see the underworld/overworld hook-up, and how naive our so-called “news” media can get in not exposing it. I suggest you listen to this All Things Considered NPR story, “Prisoner and Politician: The Bulger Brothers Led Different Lives.”

William Bulger was President of the Massachusetts state Senate for many years. They had different titles but they obviously held onto one powerful empire.

I haven’t yet read Howie Carr’s book, The Brothers Bulger: How They Terrorized and Corrupted Boston for a Quarter of a Century, so I can’t speak to all the details. But simply listening to the NPR story, one can see how assiduously an institution like Public radio will work to try to keep listeners from considering how local and state government might be enmeshed with organized crime syndicates.

NPR pretends that the only possible scandal is the way William Bolger contacted his fugitive brother and didn’t inform authorities—and how he refused to cooperate with the investigation. We’re supposed to believe that the most powerful man in Massachusetts State politics and the most powerful gangster in the Boston area just happened to rule their respective kingdoms at the same time and happened to be brothers. Further, we are supposed to believe that, once the gangster was on the run, the politician happened to commit crimes (not reporting his location) out of loyalty to his brother—but that loyalty never touched his previous political career.

According to Wikipedia,

“Beginning in 1975, Bulger served as an informant for the Federal Bureau of Investigation (FBI). As a result, the Bureau largely ignored his organization in exchange for information about the inner workings of the Italian American Patriarca crime family. Beginning in 1997, the New England media exposed criminal actions by federal, state, and local law enforcement officials tied to Bulger. For the FBI especially, this has caused great embarrassment.”

The fact that his brother was the most powerful politician in the state had nothing to do with why the Boston Office of the FBI gave him this amazing deal? Would having a powerful local politician for a brother have nothing to do with your ability to get people in federal, state, or local law enforcement positions to commit crimes?

In the days of his youth and the beginning of his criminal career, Whitey was in Alcatraz for a string of bank robberies. According to NPR, he got out early due to “one of these strange happenstances” in Whitey’s life (one among many, it is admitted). Their local neighbor was about to become Speaker of the House in Washington DC, and was well connected to the Director of the Bureau of Prisons. So he used his influence to get Bulger released early so he could return to Boston and start building his underworld empire.

Is that the behavior you expect from a Speaker of the House?

Boer hints at the truth, saying that both brothers’ careers rose together and that the politician, William Bolger, would threaten opponents with the words, “You are not a friend of the Bulger family,” when everyone knew his brother was a killer.

The scandal here is not really local politics and criminality. The scandal here is how carefully our media works, even when the truth should be common knowledge, to hide the criminality and corruption of major cities and state governments. This is only coming out now that the brothers are old and no longer in power.