Since Democrats have realized November’s election isn’t going to end well for them, Democrats are now arguing it is because of shadowy, corrupt money flowing in to support Republican candidates as a result of the Citizens United case:

The yawning gap in independent interest group spending is alarming some Democratic officials, who argue that it amounts to an effort on the part of wealthy Republican donors, as well as corporate interests, newly emboldened by regulatory changes, to buy the election.

“While each of our campaigns has the resources they need to be competitive, we now face shadow groups putting their thumbs on the scale with undisclosed, unlimited and unregulated donations,” said Senator Robert Menendez of New Jersey, chairman of the Democratic Senatorial Campaign Committee.

I’m getting scared! Shadowy groups, foreigners, and corporations, oh my!

One problem: there’s no evidence Citizens United has led to an increase in corporate donations, as the NYT reluctantly notes:

It is not clear, however, whether it is actually an influx of new corporate money unleashed by the Citizens United decision that is driving the spending chasm, or other factors, notably, a political environment that favors Republicans.
…
Corporations have so far mostly chosen not to take advantage of the Citizens United ruling to directly sponsor campaign ads themselves.

Some, however, are most likely funneling more money into campaigns through some of these independent groups, said Lawrence M. Noble, a lawyer at Skadden, Arps, Slate, Meagher & Flom and a former general counsel for the Federal Election Commission. They had the right to make such contributions before the ruling, he said, but Citizens United made it more straightforward.

Well, but Republicans are outspending Democrats, so they’re just buying the election even if Citizens United had nothing to do with it. Right?

No. In an article last week, David Brooks argued having more money isn’t much of an advantage in elections, and pointed out that

Over the past year, the Democrats, most of whom are incumbents, have been raising and spending far more than the Republicans.

According to the Center for Responsive Politics, Democrats in the most competitive House races have raised an average of 47 percent more than Republicans. They have spent 66 percent more, and have about 53 percent more in their war chests. According to the Wesleyan Media Project, between Sept. 1 and Oct. 7, Democrats running for the House and the Senate spent $1.50 on advertising for every $1 spent by Republicans.

Oh, well, the DNC and candidates might be spending more money, but those shadowy independent groups are supporting Republicans more and that money is what’s really buying this election.

…No. Again. Brooks continues

But independent spending is about only a tenth of spending by candidates and parties. Democrats have a healthy fear of Karl Rove, born out of experience, but there is no way the $13 million he influences through the group American Crossroads is going to reshape an election in which the two parties are spending something like $1.4 billion collectively.

So, what are we left with? The Democrats, over the past month, have appealed to xenophobia by accusing groups of using foreign donations in the election, used fears of corporate influence in elections to scare people about Republicans, and have tried to disingenuously invalidate the GOP’s victory (if it occurs, of course) by arguing it was only because they had more, dirty money than the angelic Democrats did.

This is the party of hope and change?

Democrats are supporting conservative third-parties to try to siphon off votes from their Republican challengers:

In California, Republicans have received recorded phone calls from a professed but unidentified “registered Republican” who says she is voting for the American Independent Party’s candidate for a House seat, Bill Lussenheide, not for the incumbent Republican, Mary Bono Mack.

The caller says she is voting that way because “it’s time we show Washington what a true conservative looks like.”

The recording was openly paid for by the Democratic candidate for the seat, Mayor Steve Pougnet of Palm Springs.

When the DNC was asked whether they are coordinating it, they said,

In response to questions about whether the efforts were being coordinated on a national level, the Democratic National Committee said in a statement, “Republicans have no one to blame but their own ideological intolerance for the bloody civil war on their side.”

So that’s a nice non-denial, and that’s especially amusing, because if I recall correctly, I don’t think Democrats appreciated Republicans helping get Ralph Nader on the ballot in a number of states in 2004.

So much for the new politics, draining the swamp, etc.

University of Munich professor Hans-Werner Sinn nicely explains how Chinese capital allowed us to enjoy not saving any of our income:

Despite its withdrawal from financing the US government, China remains the world’s largest net capital exporter, a position that it has held since 2006. In 2007 and 2008, China exported on average about $400 billion of capital annually. The US, which at the time needed annual capital imports of $800 billion in order to offset the near total cessation of private savings, received the lion’s share of this capital. The unwillingness of the Chinese to consume enabled Americans to build new houses for many years on borrowed money and to maintain a level of consumption that the US economy was unable to finance on its own.

To be sure, the Chinese always restrained themselves from private real-estate financing in the US. They bought only government paper and securitized real-estate instruments that were issued by the semi-public bodies Fannie Mae and Freddie Mac. Direct real-estate finance via private channels came mainly from other countries – Germany, for example. Nevertheless, China helped the US to achieve a higher standard of living by making money available to government authorities that would otherwise have had to come from American taxpayers.

Given this history, it is a bit shabby to reproach China now for its exchange-rate policy – a policy that enabled the US to live beyond its means for so long. Rather than coming at the expense of the US, as is constantly claimed, it was the renminbi’s low valuation that allowed Americans to dream their American dream of universal homeownership. Imports of inexpensive Chinese products freed up capital and labor in the US for a dramatic expansion of the housing stock – which led to a sharp rise in the American standard of living.

Actually, I think he weakens his argument unnecessarily. Not only did China provide funding for the GSEs, but since the GSEs owned four trillion dollars of an eleven trillion dollar mortgage market, they helped fund our housing bubble, too.

But he’s right that China’s central economic policy since the 1990s—develop infrastructure and focus on exports—made China flush with cash that it needed to invest somewhere. China’s policy to keep their currency cheap relative to the dollar was integral for their economic policy. Their cheap currency, which reduced the price of their exports to make them more competitive, led to large dollar reserves which funded our lack of saving and housing boom, but it also provided affordable Chinese products for Americans, which effectively increased our standard of living.

China didn’t somehow screw us, we screwed ourselves. They provided the funds for us to live extravagantly, to take from our future so we could enjoy ourselves now, and we did.

China didn’t invest their dollar reserves in Fannie Mae and Freddie Mac because they wanted to inflate our housing market; rather, they invested in it because they provided a steady, guaranteed return. The GSEs provided a nice return without any risk, because they had the implicit backing of the U.S. government. Our housing policy created that opportunity for them to invest in—our policy that homeownership should be cheaper, and that people who can’t afford to own a home, should. We decided that rather than investing in new industries and innovation, in our futures, we plowed private and public capital into funding a housing boom.

That’s the choice we made, to invest in what amounts to a ponzi scheme, and now we are suffering as a result. This isn’t China’s fault, and it isn’t their responsibility to bail us out. It is our responsibility, and we must fix it. Blaming them isn’t going to help.

Jonathan Cohn thinks there is a moral case for increasing taxes on the rich, and this is his argument:

The other, albeit related, flaw in the conservative argument is that it fails to acknowledge the debt wealthy people owe to society. As Gar Alperovitz and Lew Daly argue in their 2008 book, Unjust Desserts, the proverbial self-made man is not exactly self-made. He (or she) is benefiting from the accomplishments of past generations, not to mention the support of public institutions (like the National Science Foundation) and services (like schools) that foster innovation and lead to greater productivity.

You can take this argument too far, obviously. Then again, nobody is suggesting the rich to give up all the extra money they make. All anybody is asking is that the rich pay more in taxes–in effect, that they reinvest in society by a little more than they do now.

Let me first point out, before refuting his argument, that it’s interesting Cohn says this argument can be taken “too far”—meaning that it can be used to justify immoral actions against the rich. This is so because if we take Cohn’s argument to its conclusion, then most rich people don’t deserve any of their wealth, and a very high tax rate would be justified. Cohn finds this objectionable, apparently, and thus doesn’t push it that far, but he acts like he’s being charitable. (“no one is asking the rich to give up all the extra money they make,” he says; you can almost here the muttered words under his breath, I’m so kind and forgiving.) But that is his argument, and that’s what it justifies; if he believed in his argument, he would push for taking all but a very slim margin of their wealth.

In fact, this argument applies just as well to the poor and middle class as well. The poor and middle class benefit very much from society—their jobs are the result of demand from some consumers desiring goods or services, and they can only have those jobs because some other people before them created the infrastructure to allow it. If you’re working at a car manufacturing plant, you really owe your job to the people who created the car, who created the factory, who figured out how to mine iron ore and make steel, who designed the car, who designed the manufacturing equipment, and who provided the capital for all of this to be done.

All they are contributing is their labor and, in light of all the work people in the past did to allow them to have that job, that’s a very small contribution. Cohn’s argument, whether he likes it or not, also justifies taking most of the poor and middle class’s income as well. Not only does it justify it, but it says it is morally right—it isn’t really their income, and so we are being immoral if we do not return it to its rightful owners.

But somehow I doubt Cohn would make that argument, but he is, and he needs to deal with those implications if he wants to use it.

Robert Nozick, though, provided the best refutation of this line of argument in Anarchy, State, and Utopia. He wrote:

You may not decide to give me something, for example a book, and then grab money from me to pay for it, even if I have nothing better to spend the money on. You have, if anything, even less reason to demand payment if your activity that gives me the book also benefits you; suppose that your best way of getting exercise is by throwing books into people’s houses, or that some other activity of yours thrusts books into people’s houses as an unavoidable side effect. One cannot, whatever one’s purposes, just act so as to give people benefits and then demand (or seize) payment. Nor can a group of persons do this. If you may not charge and collect for benefits you bestow without prior agreement, you certainly may not do so for benefits whose bestowal costs you nothing, and most certainly people need not repay you for costless-to-provide benefits which yet others provided them.

So the fact that we partially are “social products” in that we benefit from current patterns and forms created by the multitudinous actions of a long string of long-forgotten people, forms which include institutions, ways of doings things, and language (whose social nature may involve our current use depending on Wittgensteinian matching of the speech of others), does not create in us a general floating debt which the current society can collect and use at will.

Nozick is arguing that when people before us did these things that gave us these benefits (note that people, individuals, created these benefits, not “society”), they did so for their own reasons, not for us or because they were expecting payment from us. They did not enter into a contract with us, saying “we will do this if you pay us x dollars,” and so no one has a right to now demand payment on a debt that never existed.

Perhaps we do owe something back to society—that’s perfectly justified to say—but that doesn’t mean that the government has a right to forcibly take wealth from people because of it. That is a personal decision to be made freely by the individual, not an existing debt that must be paid. Cohn is wading into dangerous waters with this argument, because almost any taking of wealth by government can be justified by his argument. But it’s so convenient to make in justifying something he wants to do—increase taxes, spend more—that he can’t help but make it.

Liu Xiaobo, a Chinese literary critic and activist for individual rights and democracy, won the Nobel Prize last week for his work. He has been imprisoned by the People’s Republic of China for two years for his activism.

Sunday, his wife was allowed to meet with him and relay the news to him. He said, before breaking down in tears, that his prize is for the people who died in Tiananmen Square in 1989.

Soon after, his wife was put under house arrest, and she is unable to call or otherwise communicate with anyone else.

This is hard to stomach. In 2008, Liu helped write what’s called the “Charter 08,” which is a manifesto signed by Liu and hundreds of other intellectuals in China that supports individual rights and constitutional democracy for the Chinese people. I suggest you read it; the charter is one of the finest pieces I have ever read detailing what government is and ought to be. They argued that the individual’s rights exist first, and government’s only reason for existing is to protect them. That is exactly right, and that principle is the fundamental underpinning of all free societies.

Liu is a good man, an intelligent, forthright supporter of individual rights and limited government in a country where doing so is a crime. As such, the PRC designated Liu a criminal and the Charter 08 “blasphemy,” and imprisoned him. Friday night, they arrested twenty bloggers, lawyers and academics who met for dinner to celebrate the Nobel Prize. There is nothing absolute in China but the state’s will.

These people deserve better than this. They, like all human beings, deserve the right to live freely, without fear of repression from their own government. I’m glad Liu’s victory is shining a light on the PRC’s repression, and forcing them to run scared, but it’s also sickening to watch it play out. They are imprisoning people for merely saying that each individual has rights and they should be respected.

He deserves our support, and much more than just a prize. He deserves to see a day when his people can live freely.

…The entire Obama administration. Come on down for your prize, guys!

The Obama administration is alleging that the U.S. Chamber of Commerce is using foreign donations to “influence” November’s election:

“You don’t know,” he said here. “It could be the oil industry, it could be the insurance industry, it could even be foreign-owned corporations. You don’t know because they don’t have to disclose. Now that’s not just a threat to Democrats, that’s a threat to our democracy.”

So that’s a pretty big charge. What’s your evidence, Obama?

David Axelrod, the president’s senior adviser, was asked Sunday by Bob Schieffer on “Face the Nation” on CBS if he had any evidence that the chamber was using secret foreign funds to influence the election.

“Well, do you have any evidence that it’s not, Bob?” Mr. Axelrod replied. “The fact is that the chamber has asserted that, but they won’t release any information about where their campaign money is coming from. And that’s at the core of the problem here.”

…Oh. You don’t have any evidence? You mean all you’re saying is they “could” be violating the law? Oh.

You know what you “could” be doing, Mr. President? You could be beating your wife. I mean, just beating the hell out of her. Or you could be a Justin Bieber fan. You could be a Justin Bieber-listening wife-beater, and I sure as hell don’t want someone like that trying to influence our election. Man, that’s scary. I’ve really scared myself now. A Bieber fan in the White House…

See how fun that is? Using this President’s logic, I can just make anything up and pin it on him, because it could be true. Obama might be a cross-dresser, the horror! But here’s one thing it isn’t: honest, nor honorable. It’s what a scoundrel does, someone who doesn’t deserve to be in charge of a fantasy football league, much less the President of the United States.

But that’s where we are. The Democrats won Congress in 2006 claiming they would “empty the swamp” of corruption, and Obama won the 2008 election promising the beginning of post-partisan politics. Instead, we have perhaps the most hyper-partisan president we’ve seen, who doesn’t see anything as below his office provided he thinks it might help his party win a few seats. That’s who we’ve elected to represent us.

Too little education spending isn’t the problem:

Cato has another chart showing the percent change in public school employment versus enrollment.

The President comments on extending Bush tax cuts:

Now, I’m not a math teacher. (Laughter.)  But I know a little bit about math.  They’re proposing about $4 trillion worth of tax cuts.  About $700 billion of those tax cuts are for people who typically are millionaires and billionaires, and on average would get $100,000 in tax relief — $700 billion that we don’t have, we’d have to borrow in order to provide these tax cuts.  And 98 percent of Americans wouldn’t see any benefit from it.  
 
And keep in mind that because we don’t have it, it would actually end up costing more than $700 billion, because we’d end up having — since we’re borrowing it, we’d have to pay interest on it.

Well that just sounds terrible, doesn’t it? Republicans want to extend $3.8 trillion of tax cuts (over a ten-year period), $700 billion of which results from income over $250,000. We can’t afford it, etc.

Funny thing, though: the President has proposed extending Bush’s tax cuts for income levels below $250,000. Extending those tax cuts costs—you guessed it—$3.1 trillion. So, the President is chastising Republicans for supporting the extension of $700 billion of tax cuts, all the while supporting $3.1 trillion worth over the same period.

So I suppose, Mr. President, we “can’t afford” $700 billion of tax cuts, but we can $3.1 trillion?

I guess a little class warfare and hypocrisy is fair game when you’re trying to win an election.

Boston University economist Laurence Kotlikoff estimates the net present value of the gap between government spending and revenues is $202 trillion. Yes, trillion:

How can the fiscal gap be so enormous?

Simple. We have 78 million baby boomers who, when fully retired, will collect benefits from Social Security, Medicare, and Medicaid that, on average, exceed per-capita GDP. The annual costs of these entitlements will total about $4 trillion in today’s dollars. Yes, our economy will be bigger in 20 years, but not big enough to handle this size load year after year.

This is what happens when you run a massive Ponzi scheme for six decades straight, taking ever larger resources from the young and giving them to the old while promising the young their eventual turn at passing the generational buck.

The IMF estimates that closing this gap requires fourteen percent of GDP per year. For comparison, tax revenue hovers around fifteen percent of GDP each year.

I haven’t seen Kotlikoff’s calculation, so I won’t comment on it specifically, but what’s clear is our current level of spending is wholly unsustainable.

We must get control of our finances. Our future depends on it. Unfortunately, most people in Washington, D.C. couldn’t care less. They’d rather get reelected.

Eliminating Bush’s tax cuts won’t solve this, and neither will cutting discretionary spending here and there. This requires reforming our entitlement programs (Social Security, Medicare, Medicaid), discretionary spending (defense spending primarily), healthcare (real healthcare reform, aimed at reducing costs for individuals and families) and our tax system, and serious economic development.

This is a primary reason why I opposed Obama’s healthcare “reform.” It doesn’t tackle healthcare’s real problem, cost, and tacks on another $400 billion of entitlement spending over the next decade, along with half a trillion dollars of new taxes, all while we’re staring true disaster in the face. The cynicism of this all boils my blood. Democrats used legitimate fears of our budget-deficit and debt to pass this bill, claiming that it reduces the deficit, when in fact it makes an impossibly heavy burden even heavier.

There’s no doubt that both parties not only created this mess, and thus far have refused to address it. The only person in Washington, D.C., though, with a plan on the table for doing what’s necessary to secure our future is Paul Ryan, a Congressman from Wisconsin. He wants to do all of the things listed above, none of which are politically beneficial, and he’s staked his career on it. As far as I am concerned, he’s the only honest man we have in Washington willing to do his job: push for what the country needs, not what will push forward his career.

Commenting on our economy’s evolution away from stable manufacturing and office jobs, Seth Godin writes:

Protectionism isn’t going to fix this problem. Neither is stimulus of old factories or yelling in frustration and anger. No, the only useful response is to view this as an opportunity. To poorly paraphrase Clay Shirky, every revolution destroys the last thing before it turns a profit on a new thing.

The networked revolution is creating huge profits, significant opportunities and a lot of change. What it’s not doing is providing millions of brain-dead, corner office, follow-the-manual middle class jobs. And it’s not going to.

The transition to an industrial economy was painful, but I don’t think most people would like to go back to an agricultural economy.

Finance Professor Rafghuram Rajan wrote in his book Fault Lines that the GSEs and the Fed’s low interest rates helped cause the housing bubble, so Paul Krugman “reviewed” it, trotting out his inaccurate analysis that the GSEs had little to do with it.

Rajan responsed to the review by showing why the GSEs and the Fed’s interest rates policy did contribute. Well written and well argued.

Arnold Kling discusses the use of experts by government to control certain sectors:

We live in an increasingly complex world. We depend on experts more than ever. Yet experts are prone to failure, and there are no perfect experts.

Given the complexity of the world, it is tempting to combine expertise with power, by having government delegate power to experts. However, concentration of power makes our society more brittle, because the mistakes made by government experts propagate widely and are difficult to correct.

It is unlikely that we will be able to greatly improve the quality of government experts.

Instead, if we wish to reduce the knowledgepower discrepancy, we need to be willing to allow private-sector experts to grope toward solutions to problems, rather than place unwarranted faith in experts backed by the power of the state.

This is a fascinating use to Hayek’s basic argument that markets are the spontaneous order created by the interconnection of knowledge distributed throughout many minds, and it is impossible for any one person or group to have all knowledge necessary to make the same decisions a market makes through these interconnections (e.g. the price of lead).

Kling’s addition is that this dispersion of knowledge is accelerating, so this is getting even more difficult than before, but there is a parallel trend of government putting experts in certain fields in charge of controlling some part of that field. Kling’s argument is that it is fallacious to assume they can make those judgments, and as time passes it only becomes less viable.

This trend troubles me, too, because the premise underlying it is that these experts (the ones chosen) know so much that they can make legally-binding decisions for everyone else. If we accept this, then we also accept that others should be making decisions for how we live our lives that we have no choice in. If we accept that, than why shouldn’t we also accept a planned society?

Arthur Brooks and Paul Ryan:

As we move into this election season, Americans are being asked to choose between candidates and political parties. But the true decision we will be making—now and in the years to come—is this: Do we still want our traditional American free enterprise system, or do we prefer a European-style social democracy? This is a choice between free markets and managed capitalism; between limited government and an ever-expanding state; between rewarding entrepreneurs and equalizing economic rewards.

A UK teen was banned for life from visiting the U.S. because he sent an email to the White House calling Obama a prick.

That’s our government.

Health insurers announced that they are raising rates due to Obama’s healthcare reform. Health and Human Services Secretary Kathleen Sebelius wrote a letter in response, in which she said:

I urge you to inform your members that there will be zero tolerance for this type of misinformation and unjustified rate increases.

And:

Later this fall, we will issue a regulation that will require state or federal review of all potentially unreasonable rate increases filed by health insurers, with the justification for increases posted publicly for consumers and employers. We will also keep track of insurers with a record of unjustified rate increases: those plans may be excluded from health insurance Exchanges in 2014. Simply stated, we will not stand idly by as insurers blame their premium hikes and increased profits on the requirement that they provide consumers with basic protections.

So: the Obama administration is (1) threatening uncooperative insurers with being shut out of a government-created and controlled market and (2) going to, in effect, set what rates insurers can charge.

Michael Barone comments:

The threat to use government regulation to destroy or harm someone’s business because they disagree with government officials is thuggery. Like the Obama administration’s transfer of money from Chrysler bondholders to its political allies in the United Auto Workers, it is a form of gangster government.

That’s exactly right. Sebelius is making herself our healthcare dictator, her little fiefdom to rule. And we are supposed to believe that this administration believes in free markets, rule of law and individual rights? It is quite clear they do not. They believe in power, for themselves.