TO END UNEMPLOYMENT, LOOK TO SOVIET EXAMPLE

The Soviet Union suffered from totalitarianism, low living standards, and economic inefficiency. But it had one redeeming feature: there was no unemployment. As we flail around trying to reduce unemployment, we should study how the Soviets eliminated it. But we need to look at what they did, not what they said.

Communist explanations of unemployment were nonsense. They claimed unemployment was due to selfish capitalists, who wanted an “army” of surplus workers they could threaten to substitute for current employees demanding raises. The Party line was that the U.S.S.R., having destroyed capitalism, therefore had no unemployment.

But when the price of something is less than the “market-clearing” price, the price at which demand for it equals supply, a shortage occurs. If capitalists really underpaid workers—as Communists claimed--- there would be a labor shortage, not an army of surplus workers.

The actual reason for Soviet full employment was that the state monopolized the right to employ labor and to set wage levels. Although claiming to represent workers, the Soviet state lacked free elections where its claims could be tested, and it set wages far below the market-clearing level. People joked “We pretend to work, and they pretend to pay us.” But the upside was that a fired worker could always find another job, since –thanks to the low wages---there was a labor shortage.

Meanwhile American and European economies have multiple obstacles, legal and social, to reducing wages, and pressures, legal and social, to raise wages: minimum wage laws, labor unions, a climate of opinion where low wages are considered a sign of inferiority and paying them a sign of unscrupulousness. No wonder we had 5% unemployment even in the good old days!

Unemployment would disappear if all wages fell to the level at which the supply of labor is equal to the demand for it. There is no need to go below this point like the Soviets did. But wages in general will have to be somewhat lower than they are now.

Reduced wages would be resented by workers. But since one person’s wage is another’s cost of getting something done, as average wages fall so will the cost of living. And the security each worker feels, knowing that if a current job disappears another will not be hard to find, will be invaluable. Today even people with jobs hesitate to spend money, let alone borrow, since they don’t know whether they will be employed tomorrow. This would not be a problem in a full-employment economy.

Best of all, with market-clearing wages unemployment will go away without any need for expensive “stimulus” programs or for “growth.”

Economically, then, ending unemployment would be easy. The Soviet Union proved that it can be done. Politically, however, it may be impossible in democracies whose electorates have limited understanding of economics and whose leaders must cater to public opinion or lose their offices. If it is necessary to eliminate minimum wage laws, critics will correctly argue that lower paying jobs will not support a decent standard of living while ignoring the fact that being unemployed won’t support any standard of living at all. We need to remember that it is better to be employed, even for low wages, than to be unemployed.

If funds currently spent to “stimulate” the economy could be redirected to subsidizing people working for low wages, eliminating minimum wage laws might become politically possible.

Full employment requires wage flexibility, wages that can fall when necessary as well as rise. It remains to be seen if this is possible in a democratic society.

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This article has run in the Daily Telegram, Adrian, Michigan, and in the Democrat-Herald (Albany-Corvallis, Oregon).

A good idea in the New York Times?! Amazing!

Once in a while the New York Times prints a letter to the editor that actually makes sense. Today is one of those unfortunately rare days! Consider well the following suggestion:

To the Editor:

The single most effective remedy for our deficit problem would be a tax that tracks the national debt. It would be levied as a surtax on all income. The revenue from this “debt tax” would be dedicated solely to paying interest and principal on the national debt. Those interest payments are fast approaching a whopping $500 billion per year.

This surtax would gradually reduce itself to zero as the debt was paid off, or increase as the debt rose. Such a tax — especially if itemized on pay stubs — would be a constant irritant to taxpayers and politicians alike, providing an effective means of inhibiting future deficits.

RON SHEPPE
Rochester, N.H., Aug. 7, 2011

Supreme Court Should Overturn State Establishment Clause Cases

Cross City Florida has the honor of being the latest victim of perverse judicial interpretations of the First Amendment’s establishment clause. A federal district court judge, responding to a lawsuit filed by the American Civil Liberties Union, ordered the city to remove a monument in front of the Dixie County courthouse. The monument’s offense? It recites the Ten Commandments.

Thomas Jefferson, in a letter, famously called for a “wall of separation between church and state.” But Jefferson’s colorful words are a grossly inadequate generalization about the establishment clause, which contains no such language.

The clause reads: “Congress shall make no law respecting an establishment of religion . . . .” The key words here are “Congress” and “respecting.” The establishment clause placed restriction only on what Congress (a federal body) could do, not on what state governments could do. And Congress could make no law “respecting,” which means “having to do with,” an establishment of religion. This awkward expression was used because the amendment’s drafters understood that it would do two things, not just one: 1) prevent Congress from establishing a religion, and 2) prevent Congress from interfering if state governments establish a religion. (Several states had established churches when the First Amendment was written; others had religious tests for public officials.)

Most establishment clause cases challenge actions by state governments (including school districts) rather than by the federal government. If the clause were interpreted as written all these cases, including the current one from Florida, would be thrown out of court. Most of them, including the Cross City case, involve actions which it is a stretch to consider “establishments” of religion. But, assuming that they are indeed establishments, the right of the states and school districts to engage in them would be protected by the establishment clause, not prohibited!

But the Supreme Court has been striking down state government actions under the establishment clause for more than half a century. It has held that although the original Bill of Rights (amendments 1-10) placed limits only on the federal government, the Fourteenth Amendment, added after the Civil War, was intended to place many of these same limits on the state governments.

There is convincing evidence that this was indeed intended when Congress wrote the Fourteenth Amendment. And for the most part this “incorporation” of the Bill of Rights made sense. It did not undermine our protection against federal censorship, for example, to hold that the First Amendment also protects us from state government censorship.

But “incorporating” the first dimension of the establishment clause to prevent state establishments as well as federal establishments totally contradicts the clause’s second dimension, protecting the right of states to establish a religion. The Fourteenth Amendment’s drafters intended no such result. Their report when the Amendment was submitted to Congress conspicuously omitted the establishment clause as one of the long list of provisions that would be “incorporated” against the states.

No doubt it would be a bad idea for a state to establish a religion today. But letting nine unelected justices twist a key clause of the Constitution so that it means the opposite of what it originally meant is an even worse idea.

There can be no doubt that the Supreme Court has pulled a fast one here, quite possibly without realizing what they were doing. The proper thing for them to do now would be to recognize their error, overturn all of the cases based on that error, and leave issues of church-state relations to the political and legal process at the state level as our Founders intended.

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This article has run in the Gainesville (Florida) Sun.

Spotted Owls: Time to Amend the Endangered Species Act?

The Oregonian [“Shotgun conservation,” July 6, 2011] opines that “there’s no choice but to keep trying to save the spotted owl.” It notes that “The Endangered Species Act, thankfully, doesn’t allow Americans to get frustrated and walk away from trying to preserve a species.”

There is, however, no law prohibiting modification or repeal of legislation which turns out to have been unwise.

As the Oregonian itself notes, we have destroyed a major segment of the Oregon economy to save the owls, but they keep on disappearing. So now we’ll kill the barred owls (illegal immigrants who are displacing their spotted brethren), just as we are shooting salmon-eating sea lions in the Columbia.

Before spending scarce taxpayer dollars to shoot barred owls, officials should visit the Paleontology Center at the John Day Fossil Beds National Monument and consider its implications. It displays many animals that once lived in Oregon and now are extinct.

The climate and other characteristics of our planet are constantly changing. New species better suited to new conditions are evolving and old ones that can’t adapt are disappearing. We should not exaggerate our ability to stop nature from doing its thing.

Nor should we try to do so without taking the side effects and costs into account. No doubt survival of the spotted owl would be a good thing. But there are many other good things that these same tax dollars could be used for.

The most interesting argument in the “Shotgun conservation” editorial was in the next to last paragraph” “It is too soon to give up on the spotted owl. The Northwest has already sacrificed so much—thousands of jobs, entire rural communities---to create a survivable space in old growth forests for this species.” This sounds suspiciously like arguments that the U.S. should not pull out of Iraq or Afghanistan because it would render meaningless the thousands of American deaths incurred in these wars, no matter how badly the wars are going or the prospects for any kind of satisfactory outcome.

So perhaps we need to think again about the Endangered Species Act and at least amend it so we can give up on protecting species whose prospects are not good when the costs of doing so are excessive. A state whose people could tolerate policies destroying most jobs in logging should be able to handle disappearance of the spotted owls, if it comes to that.

Spotted owls or no spotted owls, there are excellent reasons why we might want to protect old growth forests. But regulations aimed directly at this goal could make more sense and be more efficient than the present approach.

Conditional offers of money do not coerce

I have sent the following letter to the editor to the Wall Street Journal, commenting on an article, ObamaCare's Next Constitutional Challenge, which can be read here.


To the editor:

Challenging the constitutionality of recent Medicaid legislation, Richard Epstein and Mario Loyola claim that it is coercive for “the federal government … [to] use its power to tax and spend to bludgeon all states into conformity.”

Their basic mistake is to lump together the very separate powers to tax and to spend and refer to them as a “power” in the singular. Taxes are always collected at the point of the sword; they are always based on coercion. If the coercive nature of the way the government gets it money is considered to render its expenditures coercive, all government expenditures would be coercive.

There is a fundamental difference between a conscripted army and an all volunteer army. A drafted army recruits by applying coercion (threats of fine, imprisonment, or—in some countries—execution) to the individuals being recruited. An all volunteer army offers inducements to serve, and those who do not serve do not receive these inducements. The inducements are financed with tax money extracted coercively from everybody, but this does not mean that the volunteer soldiers were coerced into serving.

Epstein and Loyola correctly note that “it is fundamentally wrong to think of coercion as a matter of degree.” Later courts have correctly ignored the Supreme Court’s unwise suggestions to the contrary in South Dakota v. Dole (1987), and District Court Judge Roger Vinson was correct to uphold the Medicaid provisions of the recent legislation.

Paul F. deLespinasse, Ph.D.
Corvallis, Oregon

Presidential disaster visits overdone

A disadvantage of the American form of government is that it combines in one person the ceremonial role of head of state plus the decision-making role of the head of government. In constitutional monarchies like England the monarch and other members of the royal family handle the ceremonial-symbolic duties while the prime minister takes care of running the government.

There is a danger in the United States that a leader will overdo on ceremonial duties, which leaves less time and energy for studying policy issues, making important decisions, and negotiating with legislators and with foreign governments.

Oregon Governor John Kitzhaber has been catching a lot of flak because, unlike his predecessor, he has not been attending all the funerals for Oregon soldiers killed in Afghanistan and Iraq. But by staying away from funerals he may be serving Oregonians better than Ted Kulongoski did.

We have had many weather-related national disasters lately, and President Obama has been spending considerable time flying out to promise federal assistance, commiserate with victims, and generally represent the concerns of the nation about them. One wonders, however, if he should consider emulating Governor Kitzhaber instead.

The federal assistance the President promises would arrive anyhow, whether Obama came or not. Concerns could be expressed just as well from the White House as they could from Joplin, Missouri. Presidential visits present logistical problems wherever they occur, but these can be especially troublesome for areas where the problems of daily life have been exasperated by flooding, tornadoes, or earthquakes.

And then there is the matter of financial and ecological costs. The estimated costs of operating Air Force One vary all over the place, from a low of about $40,000 per hour of flight to a high of $180,000 per hour. At current aviation fuel prices of $5.47 per gallon of Jet-A, Air Force One costs about $23,000 per hour just for fuel , and burning this fuel puts a lot of carbon dioxide into the atmosphere.

It might be better for the government to donate this money to the Red Cross and let the President stay in the White House and concentrate on governing the country.

Or if this seems too cold-blooded, such ceremonial visits could at least be delegated to the Vice President, whose time is under less pressure and whose smaller airplane would burn less fuel, cost less money, and make a smaller contribution to global warming.

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This article has run in the Daily Telegram (Adrian, Michigan). A shortened version has appeared as a letter-to-the-editor in the (Corvallis, Oregon) Gazette-Times.

The curse of the golden egg

Some months ago I sent a letter to the editor of the Johns Hopkins Magazine, but apparently they have not published it, at least not in the most recent issue. So I thought I would post it here.

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To the editor:

Re Dale Krieger’s fascinating article “The Curse of the Golden Egg”:

The article quotes Thomas Friedman about how oil-backed regimes “do not have to listen to their people,” can “buy off potential opposition,” and “can afford repressive security measures for those who won’t be bought.”

None of this would be possible in a world where all natural resources, including oil, were considered to be owned by the public, not by any government. Indeed, government claims to own such resources are inherently illegitimate, as are private claims to ownership. Assuming that at one time all resources were unowned, there is no mechanism by which any particular individual, group, or government could originally acquire ownership aside from (shades of Proudhon!) . . . theft. And of course no one who does not have ownership could legitimately transfer ownership to someone else.

The only non-arbitrary way to determine the ownership of natural resources is to deem them owned by the public (again, not to be confused with any government), defined as every man, woman, and child subject to the jurisdiction of a given government. Government could then act as a trustee for the public, auctioning time-limited rights to exploit particular resources to the highest bidder, and distributing the resulting income to the public in periodic social dividends, with equal amounts paid to every man, woman, and child in that public.

Financing the government would then have to be arranged on the basis of taxes, exactly as is the case in countries which are not resource rich.

The Alaskan oil dividend to all state residents is an approximate example of how such a system could work.

Ideally, the public in question would not be a parochial, national, public, but the world public, everybody on the planet. But it would be a step forward for such systems to be instituted at the national level.

This is unlikely, since the establishments in curse-of-the-golden-egg countries have strong personal interests in keeping things the way they are, and if they are overthrown their successors would have equally strong interests to maintain the current kleptocracies.

I have no idea how to get from “here” to “there,” but in theory it is crystal clear that “there” is where we need to get to.

For further analysis see my on-line discussion, The Metaconstitutional Manifesto: A Bourgeois Vision of the Classless Society at http://www.deLespinasse.org .

Paul F. deLespinasse, Ph.D. 1966