California’s Object Lessons for Democrats

If Democrats wanted to know some of the reasons they got skunked in the recent elections they could learn a lot by looking at what’s going on in California. The state of California is a distillation of fundamental flaws that are “hollowing out” the Democratic Party.

The politicians, activists, and contributors holding sway in the Democratic Party are far out of step with average voters. A majority of voters either don’t want or don’t care about the favorite issues of the party elites — climate change, Obamacare, fracking, plastic bags, diversity, sugary soft drinks, GMOs, “corporate personhood,” amnesty, late-term abortions and the Washington Redskin’s nickname. Democrats for some reason put a lot of energy into proposals that very few people care about and will have no measurable impact.

For example, a tax on sugary soft drinks was a ballot measure in San Francisco and Berkeley. The Berkeley measured passed, the San Francisco measure did not. Because of differences in how they were structured, the Berkeley measure needed only a majority, the one in SF needed two-thirds, but garnered only 55 percent of the vote. As noted by the San Francisco Chronicle, “San Francisco, always a city that loves being first, instead became the 31st municipality to opt not to adopt a soda tax.”

The tax in Oakland will be one cent per ounce on soda, Snapple, Gatorade, vanilla lattes and other beverages with added sugar. The unsuccessful SF measure would have imposed a two cent per ounce tax on sugary drinks.

According to the Chronicle, “Neighborhoods with more low-income and minority voters, including Chinatown, Bayview, Hunters Point and Visitacion Vallley, voted against the tax.” The fact that the tax on sugary soft drinks in San Francisco failed to pass because lower income neighborhoods voted against it illustrates the Democratic Party elites are at odds with the very groups they claim to care about.

Former New York City mayor Michael Bloomberg, a well-known true believer in the evils of sugar, contributed $657,000 to the Berkeley campaign but nothing for the one in SF. A Chronicle article on the Berkeley measure was headlined, “Town that barely sips it taxes soda.”

“The tax is expected to raise between $1 million and $2 million annually for school gardens, cooking classes for kids, and other public health programs.… But the hope, ultimately, is that Measure D will generate zero dollars because people will stop drinking soda, said Martin Bourque, director of the Ecology Center and spokesman for the Yes on D campaign.” If that happens does it mean the end for school gardens and cooking classes for kids?

Other examples of Democratic political hallucinations were ballot measures in Mendocino and Humboldt counties. Voters in Mendocino County passed a prohibition on fracking even though there are no oil or gas wells in the county and none planned, so far as anyone knows.

In Santa Barbara County a ballot measure to ban fracking received only 38 percent of the vote. Oil and gas wells do exist in Santa Barbara County. Opponents of the measure there successfully convinced voters that the fracking ban would destroy jobs and increase unemployment.

In Humboldt County a ballot measure passed that prohibits growing genetically modified crops, even though there are almost no commercial crops there that would be affected. The county is mostly forested (ninety percent of the world’s redwoods grow there). Dairy and beef cattle are about the only significant forms of agriculture other than weekly farmers’ markets. Just how the ban would be enforced is unclear.

In September Governor Jerry Brown signed into law a ban on “single use” plastic bags. He said at the time, “This bill is a step in the right direction — it reduces the torrent of plastic bags polluting our beaches, parks and even the vast ocean itself.… We’re the first to ban these bags, and we won’t be the last.” Grocery chains and pharmacies will be required to charge customers ten cents for paper bags. One exclusion from the charge will be customers using California’s “CalFresh” program (the trendy new name for California’s food stamp program). Democrats are always looking for a fresh way to help the downtrodden.

Claiming that there is “a torrent of plastic bags” is of course a gross exaggeration/bold-faced lie. A 2011 extensive study and analysis by the British Environmental Agency, “Life Cycle Assessment of Supermarket Carrier Bags,” concluded that plastic bags were, in fact, less environmentally impactful than either paper bags or reusable cotton bags.

Brown’s claim, “We’re the first to ban these bags, and we won’t be the last,” is a classic example of California inflated sense of self. The arrogance and self-importance of California progressives is almost beyond comprehension, akin to the recently discovered videos of Obamacare architect Jonathan Gruber. California politicians labor under the delusion that the whole world is just watching the state in order to know what to do next.

The dime charge for paper bags and the penny per ounce tax on sugary soft drinks are both examples of the how easy Democrats think it is to achieve their desired behavior modifications.

Beginning January 1 California drivers will see gasoline prices increase from 12 to 20 cents per gallon, possibly much more. The reason for the increase is that starting then tailpipe emissions from cars and trucks will come under California’s cap-and-trade program. The ostensible purpose for the program is, of course, to reduce greenhouse gases and thereby prevent climate change.

How the revenue generated from the program will be spent is yet to be determined. Governor Brown wants a third of the money to be used to finance his ill-conceived and over-priced high-speed rail from San Francisco to Los Angeles. The fact that California actually thinks it can make a difference in global temperatures is further evidence of the state’s exaggerated self-importance.

California already has the second highest gasoline prices of all the states, second only to New York. At 49 cents per gallon it also has the second highest gasoline tax, two cents per gallon below first place New York. The new carbon tax will put California securely in the top spot.

One sign that even Californians are coming back from the political ozone is Oakland’s mayoral election where challenger Libby Schaaf beat incumbent Jean Quan. As Chronicle columnist Chip Johnson observed, “The differences between Schaaf and her rivals are like night and day: Schaaf takes a practical approach to public policies and project goals. Quan and [Rebecca] Kaplan are idealists whose big dreams quite often don’t come to fruition.” The two mayors who preceded Quan were Jerry Brown and former congressman Ron Dellums.

California is also a case study of the Democrats’ gerontocracy dilemma. Nancy Pelosi and Barbara Boxer are both 74, Jerry Brown 76 (who was just reelected for four more years), and Dianne Feinstein is 81. Former San Leandro Mayor Anthony Santos, a Democrat, recently observed, “There are too many Democrats who are well over 70 and have no idea what it is like to be young — and what the younger people are thinking and what their needs are.”

As a California resident it makes me sad to witness the immense damage done by Democrats and their “progressive” allies. According to the U.S. Census, California last year had a net out-migration of over 49,000 people, the most of any other state. The state has vast human and non-human assets. The climate and scenery are about as good as it gets. It’s too bad that the politicians exploit those attractions by overtaxing and abusing those of us who can’t bear the thought of leaving.

Among the many lessons shown in the recent election is that the rest of the country has chosen a very different path from the one blazed by California’s Democratic politicians. California is now an outlier rather than a trendsetter. That’s a good thing for the country. Following California is about the worst thing the country and the world could do.

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◼ California’s Object Lessons for Democrats November 19, 2014

Ron Ross Ph.D. is a former economics professor and author of The Unbeatable Market. Ron resides in Arcata, California and is a founder of Premier Financial Group, a wealth management firm located in Eureka, California. He is a native of Tulsa, Oklahoma and can be reached at rossecon@gmail.com.

Inequality Myopia

President Obama says that growing inequality is “the defining issue of our time.” Several Democrats have said that inequality will be their primary campaign theme for the 2014 election season.

If the president is correct, and if the inequality strategy spells success for Democrats, it will be because of a total distortion and over simplification of the meaning of inequality.

At least in their rhetoric, Democrats have made equality their number one priority. It has become more an obsession than a policy objective. Mother Jones contributor Kevin Drum writes, “The heart and soul of liberalism is economic egalitarianism.” According to Jon N. Hall, “For progressives, equality is an end in itself, and a higher value than freedom, happiness, or prosperity.”

Furthermore, liberals have a one-dimensional vision of equality. Virtually the only kind of inequality they ever address is income inequality. The human experience, however, is multi-faceted.

If it were possible to create conditions that would result in equal incomes for all Americans, there would still be wide differences in intelligence, athletic ability, health, ambition, and beauty, just to name a few. If we all had equal incomes, we would not all magically feel equal. Equality of incomes does not equal equality, and equality does not equal fairness.

For liberals it is an article of faith that income inequality is increasing in America. They cite statistics indicating as much. Nevertheless, those statistics are themselves over-simplifications. Such statistics usually hide at least as much as they reveal. Economist Walter Williams observes that “Most of what’s said about income inequality is stupid or, at best, ill-informed.”

For the sake of discussion, however, let’s grant that income inequality is increasing. One of several changes offsetting much of that kind of inequality is a countervailing decrease in consumption inequality.

Historian Victor Davis Hanson, for example, in a column titled “Every Man a King” notes that “Three-bedroom, two bath suburban houses of the 21st century are warmer in winter, cooler in summer, and with far more appliances and comforts than the vast mansions of the rich of the mid-20th century. In sum, Americans are richer, healthier, and have more options than at any time in their history — and in ways that do not register in our outdated metrics of what constitutes being wealthy or poor.”

Virtually every American who wants one has a smart phone. Smart phones open a vast array of alternatives to everyone who has one, especially access to information, an extremely important resource. That universe of choices is essentially the same for everyone regardless of income.

What’s true of smart phones is true to some degree with a large number of other consumer products that have generally increased in quality, variety, and decreased in price. Joseph Schumpeter pointed out that affordable, low-priced washing machines benefit low-income persons far more than upper-income persons.

In regard to impact, consumption is clearly more important than income. Consumption is closer to the ultimate objective — human comfort and satisfaction. Increasing consumption equality deserves a greater weight than decreasing income equality.

Another especially important non-income dimension of inequality is what’s been happening to life expectancies. In an paper titled “Mortality Inequality,” University of Chicago economist Sam Peltzman points out that “The typical income inequality measure leaves out an important dimension: the length of time over which an income or consumption stream is enjoyed.” Rather than focusing only on income inequality, Peltzman uses the term “social inequality.” He found that “Unequal longevity was once a major source of social inequality, perhaps even more important than income inequality, for a long time. But over the last century, this inequality has declined drastically in high-income countries and is now comparatively trivial.”

Life expectancy for Americans born in 1900 was 47 years. It is now 78 years. How much is living an extra 31 years worth? Longevity has increased far more than at any previous time in history, and there is much less inequality of longevity.

According to Peltzman, “The largest contributor to this narrowed gap — and thereby to reduced mortality inequality — has been dramatically reduced infant and early childhood mortality.”

The probability that an infant born in a developed country today will survive to his or her fifth birthday exceeds .99. This is in sharp contrast with much of human history. For example, in the mid-19th century, 23 of every 100 U.S. infants born did not reach their first birthday. Another seven would die before reaching age five.

In other words, 160 years ago, 30 percent of newborns did not live past age five! There is probably no greater source of heartbreak and tragedy than the death of a child. The dramatic reduction of that event is an incalculable social benefit.

Peltzman also points out that, “Even in less developed countries, like Brazil or India, mortality is more evenly distributed today than income is distributed in an advanced welfare state. Inequality of lifetimes is well along in a historical transformation from a major source of social inequality into a minor one.”

The generally accepted summary statistic for inequality is the “Gini Coefficient.” For “lifetime inequality” the Gini Coefficient for the U.S. has dropped from roughly 50 in 1850 to about twelve in 2010. Proportional declines have occurred worldwide. In other words, the degree of mortality inequality is less than one quarter what it was 160 years ago. It would be hard to exaggerate the significance of that change.

Anyone who makes sweeping statements about increasing inequality is being deliberately blind to such enormously important countervailing factors. A longer lifespan correlates more closely with human happiness than higher incomes. Which would you rather have — a 40 percent increase in your income, or a 40 percent increase in your life expectancy? It’s not a close call.

Democrats and the left focus virtually all their attention and concern on inequality in America, not global inequality. If they expanded their focus, it would do further damage to their claim that inequality is increasing.

A World Bank report issued last year concluded that “Extreme poverty in the world has decreased considerably in the past three decades. In 1981, more than half of the citizens in the developing world lived on less than $1.25 a day. This rate has dropped dramatically to 21 percent in 2010.… Extreme poverty headcount rates have fallen in every developing region in the last three decades. And both Sub-Saharan Africa and Latin America and the Caribbean seem to have turned a corner entering the new millennium.”

Decreasing global poverty is at least partially the result of “globalization,” although you will rarely hear about any positive aspects of globalization from the left.

Exaggerating and over-emphasizing negative news while ignoring positive news is not a harmless endeavor. The Bill and Melinda Gates Foundation just released “The 2014 Gates Annual Letter.” They title it “3 Myths That Block Progress for the Poor.” Here is how they summarize their letter:

By almost any measure, the world is better than it has ever been. People are living longer, healthier lives. Many nations that were aid recipients are now self-sufficient. You might think that such striking progress would be widely celebrated, but in fact, Melinda and are I are struck by how many people think the world is getting worse. The belief that the world can’t solve extreme poverty and disease isn’t just mistaken. It is harmful. That’s why in this year’s letter we take apart some of the myths that slow down the work. The next time you hear these myths, we hope you will do the same.

That’s excellent advice. I wonder, however, if the Gates have asked themselves why there are so many people who think the world is getting worse? It’s in large part because creating the myth serves the purposes of liberal politicians.

Inequality is not totally a myth, but everyone is not equally concerned about it. The degree of concern is primarily a function of envy and resentment. Those are widespread and powerful human emotions. Demagogues throughout history have played on those emotions to gain power and achieve their objectives.

However, envy has never been considered a virtue and has been strongly condemned for thousands of years. It is one of the Seven Deadly Sins. The Tenth Commandment is “Thou shalt not covet.” Saint Thomas Aquinas described envy as “sorrow for another’s good.” In Dante’s Purgatory, the punishment for the envious was to have their eyes sewn shut with wire “for having gained sinful pleasure for seeing others brought low.”

In a number of speeches President Obama has referred to “millionaires and billionaires,” with contempt and resentment practically dripping from those words. The resentment toward “the one percent” is driven primarily by envy rather than actually wanting to do something for the poor. Envy is not a sound foundation for public policy. The left apparently is bothered more by the existence of rich people than by the existence of poor people. They subscribe to the absurd belief that wealth causes poverty.

The “War on Poverty” recently marked its 50th anniversary. It is more than coincidental that since 1965 the number of babies born to unmarried mothers has increased from 3.1 percent to 40.7 percent. The welfare state reduces the disincentive for having children outside marriage. Basic economics tells us that when you reduce the price of something, you’ll see more of it.

In a column titled “How to Fight Income Inequality: Get Married,” Ari Fleisher pointed out that “In families headed by married couples, the poverty level in 2012 was just 7.5%; those with a single mother: 33.9%.” Insofar as income inequality has increased over the past half century, a large portion of it could be explained by the increase in single motherhood.

When it comes to addressing the issue, Democrat policies increase the amount of inequality rather than reduce it. Inequality is a problem liberals would rather hype than solve.

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◼ Inequality Myopia February 6, 2014

Ron Ross Ph.D. is a former economics professor and author of The Unbeatable Market. Ron resides in Arcata, California and is a founder of Premier Financial Group, a wealth management firm located in Eureka, California. He is a native of Tulsa, Oklahoma and can be reached at rossecon@gmail.com.

Media Dereliction

How important is the media? How much damage can result when they don't fulfill their responsibilities? The press is the only private institution the founding fathers included in the Constitution. Obviously they recognized its importance.

If the media had fulfilled its critically important duties, Barack Obama would not have been elected or reelected president. The media is not motivated by professionalism and integrity but rather by fear, prejudice, guilt, and bias.

The mainstream media has a kind of inverted colorblindness. Their form of colorblindness causes them to see nothing but color. More specifically, it means they cannot see anything but a person's skin color.

The foremost beneficiary of their malady is Barack Obama. He is president today because the media and many voters could not see anything but the color of his skin.

They are the polar opposite of Martin Luther King's character-not-skin-color dream. Making race such a huge issue is itself a kind of racism. Overreaction to a problem often does far more damage than the problem itself. The amount of racial guilt in America is way out of proportion with the amount of racism that actually exists.

The media were so taken with the historical significance of "the first black president" that nothing else mattered to them. Obama became the most unexamined presidential candidate in history. We have paid, and will continue to pay a huge price for their blindness.

Just days before Obama was elected in 2008, Tom Brokaw was the guest on the Charlie Rose show. Their conversation included the following exchange:

Rose: I don't know what Barack Obama's world view is.

Brokaw: No, I don't either.

Rose: I don't know where he really sees where China is.

Brokaw: We don't know a lot about Barack Obama and the universe of his thinking about foreign policy.

Rose: I don't really know. And do we know anything about the people who are advising him?

Brokaw: Yeah, it's an interesting question.

Rose: What do we know about the heroes of Barack Obama?

Brokaw: There's a lot about him we don't know.

This admission by two prominent representatives of the media is stunning for at least two reasons. The first stunner is how anyone at their level could be so atrociously derelict in their professional responsibilities. The second is that they were so casual and nonchalant in admitting what they hadn't done. Obviously their attitude was so common among the crowd they run with that they were totally oblivious as to how bad they sounded. They sounded like innocent bystanders watching one of the most disastrous media breakdowns in the history of the country.

Why are so many in and out of the media still in deep denial about how grossly incompetent Obama is? The media is totally invested in the outcome of the Obama presidency. Their identification with his success destroys their objectivity and judgment. They have melded their identities with Obama's and that has resulted in their becoming pathetic sycophants. They got Obama elected and now they have prostituted themselves by covering for his incompetence.

Current events are evaluated by the media not by how they will affect the country, but rather by how they will affect Obama. His importance has been raised above all else. Nothing else matters. That's sick.

Liberals live in fear of anyone thinking they're racists. That fear makes those in the media unable to do their jobs. It paralyzes them. When we have a liberal black president they become frozen in place. Consequently, we no longer have a free press, but rather a paralyzed press.

The Hollywood left was one of the most vocal and vociferous opponents of the Iraq war. They have said almost nothing about Obama's military threats against Syria. When asked about that difference the Hollywood left makes lame excuses such as their organized protests wouldn't have any effect anyway.

According to the Hollywood Reporter, "Another reason some Hollywood progressives have been reticent to speak out against the war in Syria, according to Ed Asner, is fear of being called a racist. 'A lot of people don't want to feel anti-black by being opposed to Obama,' he said." So it's okay to sell out your principles if standing up for them would make you feel uncomfortable? Pathetic.

The race obsession raises the question, why is race so overwhelmingly important to liberals? I've never heard any of them explain why Obama's skin color is so important. Electing a black person as president was supposed to reduce and ameliorate racism. Has it? Why, exactly, did they think it would? When they decided to make their big investment in Obama they apparently did not think through what they were doing.

For whatever reason liberals have intense racial guilt. How do you spell guilt relief? Support and vote for a black candidate for president. It was a get-out-of-guilt-jail-free card.

America is not the most racist nation in the world, but it seems to be the most race-conscious and race-obsessed nation. Is it healthy to make race so monumentally important? Is that how we get past judging a person by the color of his skin?

Barack Obama is the ultimate and most disastrous application of "affirmative action." Just as affirmative action in college admissions results in tragic mismatches for minority students, Obama is a colossal mismatch for the White House.

Affirmative action is institutionalized racism, just as much as Jim Crow laws and South African apartheid were racist. In regard to the amount of damage done there is no measurable difference among these variations of institutionalized racism. The main difference is that affirmative action is clothed in the garb of pious good intentions. Once again, for liberals it's feelings that matter most.

Obama was a liberals' dream come true. Being black, however, was not his most important entry ticket. Liberals haven't the least bit of tolerance for conservative black politicians. They hate black conservatives more than they hate white conservatives, which is another manifestation of their focus on skin color.

If Obama had been a competent, successful president it conceivably would have reduced prejudice against blacks. To have a positive impact you not only need to be black (or female or gay), you also need to be competent. There is an abundance of competent blacks. Barack Obama just doesn't happen to be one of them.

If electing a black as president means that we can't criticize that president, will we ever want to do so again? Not necessarily. If a black conservative is elected president, the liberal media will not be the least reluctant to criticize him or her. In fact, they will do everything in their power to rip him or her apart.

Barack Obama is having a negative, not positive, impact on the U.S. and the world. He has no love lost for the country he leads. That's not good. He wants to see the country he leads decline, not progress. Sad to say, we're stuck with him and his administration for three and a third more years. It's going to be a test for America's fundamental strength. In the meantime don't expect the media to come to our rescue. _____________________

Ron Ross Ph.D. is an economist and author of The Unbeatable Market. He can be reached at rossecon@gmail.com.

The Larger Lessons of the IRS Scandal

The Larger Lessons of the IRS Scandal: Far from being merely a one-time error, the IRS scandal is the result of... http://t.co/hbBwzIPNMl

— American Thinker (@amthinker) June 6, 2013

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One of the truest and most profound observations ever made was Lord Acton's "Power tends to corrupt and absolute power corrupts absolutely." All the scandals now engulfing the Obama administration are applications of Acton's profundity.

From the standpoint of ongoing damage, a danger even greater than corruption is abuse. Power, especially concentrated power, almost inevitably gets abused. If our goal is to avoid or minimize the abuse of power, our challenge is to minimize the concentration of power.

We have basically only two available choices for organizing a society and economy -- socialism or the market. The difference between those two systems is primarily a matter of where power and control will be vested. Will control be centralized or decentralized?

The benefits of organizing an economy and society around a voluntary-exchange market system are numerous. The most obvious is that the market is the most powerful wealth-producing force that ever existed.

Besides the vast difference in terms of wealth creation, a market economy and socialism differ in regard to who has power and whether or not power is concentrated. A voluntary exchange economy is the greatest limiter of concentrated power ever conceived. Socialism concentrates power, the market disperses it.

When you disperse power, you defang it. When you divide power into millions of pieces you remove most of its ability to do major and lasting damage. The greater the concentration of power, the greater the abuse. North Korea, Zimbabwe, and Cuba are extreme examples of that relationship.

Private businesses have strict limitations on their power mainly for two reasons -- (1) they interact with people through voluntary exchange, and (2) they have competitors. The existence of competitors means that their customers have alternatives. When a privately-owned business abuses any of its customers it pays a price in terms of lost sales.

Unlike the government, there is almost nothing that a private company can actually force you to do. You interact with Exxon or Microsoft by way of voluntary exchange. Each of them must entice you away from the many ways you can spend your money by offering something that has value to you. That something has to be competitively priced.

The IRS's abuse of power is aggravated by the characteristics of the power it has. Of all the thousands of government agencies, the IRS is the most intrusive into the lives of the citizenry. Law-abiding citizens are more afraid of the IRS than they are of the FBI.

The Internal Revenue Code is massive, incredibly complex, and incomprehensible. The complexity also opens the door to abuse. One reason most people are afraid of the IRS is that there are so many rules no one can know for sure he's not in violation of at least one. The sheer number of rules and complex definitions opens the door to selective enforcement. The agency's targeting of conservative groups was a case of selective enforcement.

The complexity of the code is also largely to blame for the fact that the agency adds insult to injury by taking not only our money, but also significant chunks of our time. Complexity also makes true enforcement impossible.

The operation of public agencies is qualitatively different from how the private sector operates. Entities in the public sector tend to be organized for the benefit of the employees and not the customers. Tenure, for example, is far more common in the public sector than in private companies. Because of tenure it is almost impossible to fire incompetent public school teachers. That's good for the incompetent teachers, but bad for the students.

Government agencies almost never have to worry about survival, no matter how poorly the agency is doing its job or even if it's a job that still needs doing. No private company's survival is guaranteed, especially over the long run. Private companies must forever fight for survival. Public entities have virtual eternal life.

When you deal with the IRS, the EPA, or your local building-permit bureaucracy, they hold all the cards. Each of these agencies and others like them has you at a distinct disadvantage. They have you at a disadvantage because you have no other options. They have the power to stop you in your tracks -- "my way or the highway." There is only one IRS, only one EPA. Power and control are largely a function of having alternatives. When conservative groups got abused by the IRS, there was no competing agency for them to try.

Obamacare will be an even more obnoxious intrusion into how we live our lives. A sad and dangerous detail of this further concentration of power is that the IRS will be the enforcer of Obamacare. We are about to embark on a substantial increase in the power and control of the IRS. The IRS is currently in the process of hiring an additional 16,000 agents to carry out its new Obamacare duties. The IRS will decide who will receive subsidies.

If Barack Obama achieves his ultimate objective of a "single-payer" health care system, there will be only one health care alternative. Single payer means single choice.

Being able to choose among alternatives is an essential element of freedom. Freedom doesn't mean much if you have only one option.

As a way for humans to interact, a decentralized market economy is vastly superior to the centralized, coercive, one-size-fits-all socialist model. This is true now and will be even truer in the future. The market offers consumers an ever-expanding menu of choices. If anything, the market's superiority is widening.

The popularity of socialism is a bubble. Admittedly it's a bubble with a long life span. Bubbles, however, eventually burst. Usually the demise of bubbles results in painful adjustments. The demise of socialism, however, would be a boon to mankind.

This particular scandal will eventually go away. We can replace individuals at the IRS but the structure will remain. It's the structure, not the individuals that is the problem. The only solution that will actually work in the long run is to stop and eventually reverse the growth of government. ______________________

Ron Ross Ph.D.A is an economist and author of The Unbeatable Market. He can be reached at rossecon@gmail.com.

The Democrats’ Rough Re-entry Into Reality

Is there a limit to self-delusion? And if there is, what happens when the limit is exceeded?

New York Times columnist Gail Collins began her column last week as follows, “When Democrats run into each other on elevators, they exchange glances and sigh. Or make little whimpering sounds.” She went on to observe that “Democrats are going bipolar. Democrats spend all their waking hours thinking about the swing states. If Wisconsin starts looking wobbly, their day is ruined.” It makes you wonder what their days are going to be like if Obama loses the actual election.

Liberals are angry and frustrated with Obama. He, however, is not the real object of their anger. Someone once observed, “Our strongest anger is reserved for ourselves.” (If you doubt that, just ask any golfer.) Liberals are angry and frustrated with themselves because they bought into the fantasy of Barack Obama.

For the past four years conservatives have been asking themselves, “Why can’t more people see what a fraud this guy is?” That may be an impossible question to answer, but the population of those who see him for who and what he is seems to be growing.

One of the things that makes Hans Christian Andersen’s “The Emperor’s New Clothes” such an enduring parable is how it is both absurd and painfully true. The emperor was naked, but no one wanted to be the first to admit it. A kind of mass hysteria affected the citizens. Once a child spoke the obvious truth, the delusion was shattered. If there were not a lot of truth about human nature reflected in the story, it wouldn’t be such a classic.

Obama’s nakedness is not physical but rather intellectual. Time magazine’s Joe Klein said recently, “Anyone who says Barack Obama is not intelligent is either crazy or bigoted.” What makes Klein so certain that Obama is intelligent? The evidence is all in the opposite direction. Forrest Gump famously said, “Stupid is as stupid does.” The corollary is also true. Smart is as smart does. Was choosing Joe Biden as someone to be a heartbeat away from the presidency a smart decision? If you think so, you need to watch the video of last week’s vice-presidential debate.

Another reality that may be penetrating the liberals’ self-delusion shield is the Benghazi debacle. It’s been said that a liberal is someone who will not take his own side in a fight. A perfect example of that perverse attitude is how Obama, Hillary Clinton, and Susan Rice were all so eager to take the terrorists’ side in the attacks on our embassies. They used the strongest possible words in condemning the obscure video and its creator. Ms. Clinton said the video was “disgusting and reprehensible” and “truly abhorrent.” By blaming the video so vehemently they effectively implied the attackers were justified. They took the terrorists’ side in the fight. They basically said, “We totally understand why you wanted to kill our ambassador. You don’t like America; neither do we.”

Democrats ridiculed Clint Eastwood for his empty chair speech at the Republican National Convention. In retrospect his metaphor appears to have been spot-on. Eastwood later observed that “Obama is the biggest hoax ever committed on the American people.”

Even if some Democrats are seeing the hollow reality of Barack Obama for the first time, it’s unlikely to affect their overall mind-set. When a liberal has a choice between fantasy and reality, he will choose fantasy every time. There’s no reason to think that will change anytime soon.

Beyond the specific reality of Barack Obama, the Democrats’ fundamental problem is their adherence to liberalism. Obama is a glaring manifestation of liberalism. If he fails to win reelection, Democrats will blame him. They will do everything in their power to deny where the real blame truly belongs.

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◼ The Democrats’ Rough Re-entry Into Reality October 19, 2012

Ron Ross Ph.D. is a former economics professor and author of The Unbeatable Market. Ron resides in Arcata, California and is a founder of Premier Financial Group, a wealth management firm located in Eureka, California. He is a native of Tulsa, Oklahoma and can be reached at rossecon@gmail.com.

The Plot Thickens

What’s the only private business that gives the equivalent of an obscene gesture to forty percent of its potential customers? Hint: it’s also the only private institution mentioned in the Constitution. The answer, of course, is the press, or more specifically, that segment of the press known as the mainstream media or MSM. The MSM is a strange animal in more ways than one, an animal with puzzling behavior.

The MSM consists of ABC, CBS, NBC, and most big city newspapers. The supporting cast includes CNN, MSNBC, and NPR.

If you’re a conservative there have probably been countless times you’ve felt disgusted and infuriated at the bias, double standards, and lack of balance exhibited by the MSM. As a conservative I can’t count the times my mouth has dropped by what I’ve heard said and written in the mainstream media. The bias is dumbfounding.

According to the latest installment of a poll Gallop has conducted since 1992, 41 percent of the respondents self-identified as conservative, 36 percent moderate, and 21 percent liberal.

Another recent Gallup poll reported that “Americans’ confidence in television news is at a new low by one percentage point, with 21% of adults expressing a great deal or quite a lot of confidence in it. This marks a decline from 27% last year and from 46% when Gallup stared tracking confidence in television news in 1993…. Confidence in newspapers is now half of what it was at its peak of 51% in 1979.”

Obviously the MSM is paying a high price for its bias and lack of balance. Scoring only a 21% confidence level is quite an indictment. Obviously they have lost the trust of more than just conservatives. The MSM has squandered its credibility.

By all outward appearances it seems that their compensation is being provided by the Democratic Party. They behave as though their primary loyalty is to the Democratic Party rather than the news organization they ostensibly work for.

The MSM is the only private business that seems all but immune to the profit motive. If they simply treated all of their audience with respect it’s hard to tell how much how much of an increase they would see in their gross and net revenues.

It makes me wonder if they have any explicit or implicit mission statement. For example, is it, “My mission as a journalist is to choose a political candidate and then select and slant what I report so as to help him/her get into office.” Or possibly, “My mission as a journalist/reporter is to show my like-minded colleagues that I’m one of them.” I simply cannot conceive what they perceive their professional responsibilities to be. It apparently never enters their minds.

Economists hate to attribute behavior to irrationality. It’s essentially a cop out. It’s like saying, “I can’t explain the behavior, so I’ll just say it’s irrational.” Therefore, I won’t categorize the MSM behavior as irrational. Let’s just say it’s unusual. They have other priorities and values that are not obvious to the rest of us.

There is a stunning amount of conformity. Does that ever bother them? They behave like a flock of sheep. There seems to be no sense of originality, no desire to be different. They usually report stories with exactly the same slant and often with almost identical wording.

Recently, for example, when reporting on the beginning of the Republican National Convention, several reporters used almost exactly the same words in saying that Hurricane Isaac “was sure to revive memories of Hurricane Katrina.” Obviously, they sure hoped it would. (Hurricane Katrina was, in their minds, a perfect example of the incompetence and insensitivity of George W. Bush’s presidency.) At least the same number of reporters told us how terrible it would look to viewers when they saw a “split screen” with the devastation of the hurricane on one side and the convention festivities on the other.

You have to admire whoever orchestrates their performances. They definitely are all kept on the same sheet of music and sing the same lyrics.

When I write a column, I have absolutely no interest in making the same observations someone else has made or sounding like someone else. Saying what has been said by someone else is a waste of my time and the reader’s. I don’t think that’s an unusual attitude, but the MSM certainly don’t share it.

In most instances the perspective and analysis of the MSM is largely predictable. A central tenet of information theory is there is no information in a predictable statement.

The MSM loathed George W. Bush and adores Barack Obama. They have allowed both of these extreme attitudes to corrupt and distort their reporting.

From the standpoint of a functioning democracy, there is probably no other institution as important as a free press. Unfortunately, those at the highest echelons of the press are guilty of journalistic dereliction of duty. The MSM is grossly abusing the special freedoms, privileges, and responsibilities it’s been granted.

Whether or not you think Barack Obama has been a good president, he would probably not be president if the MSM had come within a country mile of its professional responsibilities. They effectively colluded with the Obama campaign to keep who he is and what he believes hidden from view.

There is no reason to expect the MSM to change its behavior. If anything the bias is increasing as they become more and more desperate. However, their bias is becoming more transparent and media consumers have more choices — Fox News, talk radio, and the Internet, for example. The price they pay for their malpractice is just going to increase.

On the first night of the RNC, Fox News had 44 percent more viewers than NBC, more than twice as many viewers as CBS or ABC, and more than four times as many viewers as either CNN or MSNBC.

The main reason for optimism is that, although powerful, the MSM is not omnipotent. It’s entirely possible that, despite their best efforts, Barack Obama will not be reelected.

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◼ The Plot Thickens September 12, 2012

Ron Ross Ph.D. is a former economics professor and author of The Unbeatable Market. Ron resides in Arcata, California and is a founder of Premier Financial Group, a wealth management firm located in Eureka, California. He is a native of Tulsa, Oklahoma and can be reached at rossecon@gmail.com.

Obama’s Labor Theory of Value

Beyond being infuriating and insulting, President Obama’s now notorious “you didn’t build that” speech probably left many people puzzled. It is so foreign to how most Americans think they might have wondered where such thinking comes from.

Whether or not you think it’s accurate to call Obama a Marxist, his perspective on how the economy works is Marxian through and through. More specifically, it is a reflection of what’s referred to as Marx’s “labor theory of value.”

That theory is defined in the Dictionary of Economics as “[t]he worth of a product or service is in proportion to the labor employed to generate it.”

Economists not under the spell of Marxism consider the labor theory of value to be a convoluted mess. Marx himself had great difficulty papering over the logical gaps and contradictions of the theory. One obvious problem is that “labor” is not a homogeneous resource. Furthermore, it is not the only scarce resource necessary for the production of practically every product or service.

The question of how relative prices are determined is still a central question in economics. “Price theory” is what comprises most of microeconomics.

Today the mainstream conclusion about what determines relative prices is that they result from the interaction of “supply and demand.” In the context of price theory, supply and demand are like file drawers where numerous factors can be organized and analyzed.

The price of any product is affected by the quantity of all the resources necessary to produce it — labor, energy, land, information, time, for example. Marx’s position was that only one of these resources mattered, i.e., labor. Furthermore, he devoted none of his attention to the demand side of price determination. It’s as though he tried to design a pair of scissors using a single blade and, in fact, only a small piece of a single blade. I don’t think that it’s an exaggeration to say that no economist, other than true-believer Marxists, thinks that the labor theory of value makes any economic sense or is useful in understanding how an economy actually works.

In his classic textbook on the history of economic thought, William Fellner poses the following question about the labor theory of value and offers an explanation:

What function does the theory perform in the Marxian system, and why do contemporary Marxists continue to cling to it? The answer, we suggest, is that a simple and sweeping doctrine of exploitation is the essence of Marxism as a creed, and that it is impossible to obtain a doctrine of exploitation as simple and sweeping as is the Marxian from premises other than the “worker’s right to the whole produce.” Marxism as a creed is founded on the idea that all income going to the owners of wealth results from exploitation. The Marxian creed requires the exploitation doctrine as its foundation. (Emphasis in original.) — William Fellner, Modern Economic Analysis

A belief in the labor theory of value is what explains the hostility toward profits that is so prevalent on the left. If labor is 100 percent responsible for the creation of value, profit is theft. Profits are only possible if labor is exploited and only if capitalists get what’s not rightfully theirs. Likewise, property is theft, as are various forms of capital. Marx is the inventor of the word “capitalism.” His turgid three volume magnum opus is titled Das Kapital.

In countless ways Marxism is an intellectual mess. Theoretically it makes no sense. In practice it has led not to utopia, but to dystopia. The most horrific and repressive regimes in the world today — North Korea, Cuba, and Zimbabwe, for example — are Marxian in theory and practice.

Nevertheless, a Marxian view of the world continues to be popular on the left. Obama’s speech reflects his deeply held belief that business owners do not deserve the share of income and wealth they receive. All value ought to go to the workers. Any other outcome is the result of “the exploitation of humans by humans.” According to Marx, that’s what happens under capitalism and will continue to happen until private property rights are abolished. Only then can true equality be achieved.

It’s important to remember that even bankrupt ideas can be popular over long periods of time. Two other leading examples are Malthusianism and Keynesianism. Their predictions and policy prescriptions have proven wrong countless times, yet as doctrines they still hold wide appeal. Malthus’s Essay on the Principle of Population was published in 1798 and Keynes’ General Theory of Employment, Interest, and Money was published in 1936. The failure of the Democrats’ massive stimulus spending ought to be enough to toss Keynesianism into the dumpster of ideas that sound good but turn out to be disasters when applied to the real world.

Marx fully expected capitalism to collapse within a few years after the publication of The Communist Manifesto in 1848. V. I. Lenin’s Imperialism: The Highest Stage of Capitalism, published in 1916, was essentially an attempt to explain why capitalism still existed. By then Marxists fully expected that capitalism would be long gone.

One thing that J.M. Keynes got right was his understanding of the power of ideology. In the final paragraph of The General Theory he wrote, “The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood.… Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back.”

Whether or not Barack Obama is a Marxist depends on how you define Marxist. Most everyone who acts like a Marxist reacts strongly if called a Marxist. There are probably a hundred Marxists for every one who admits to being one. The birth certificate I would like to see is one that would show where Obama’s ideology was born.

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◼ Obama’s Labor Theory of Value August 13, 2012

Ron Ross Ph.D. is a former economics professor and author of The Unbeatable Market. Ron resides in Arcata, California and is a founder of Premier Financial Group, a wealth management firm located in Eureka, California. He is a native of Tulsa, Oklahoma and can be reached at rossecon@gmail.com.