Monday, March 26, 2007

Is it unaffordable for all Americans to have paid sick leave? Well, yes

Leftist "economist" Julianne Malveaux had a bleeding-heart op-ed about how supposedly all workers should receive paid sick leave. It's full of emotion and lacking in substance, i.e. typical liberal rhetoric that advocates this and that but fails to ask (let alone answer), "But who will pay for it?"

How can someone receive a doctorate in economics yet posit such flagrant fallacies of economics and logic? She has a fellow socialist MIT alumnus who makes you wonder if something's in the water there, although MIT does produce real economists. First, it's true that an entire group's productivity goes down if a sick person can go to work and spread the illness to others, but if and only if the sick person is infectious. Not all illnesses are infectious. Today, actually since Saturday, I've been feverish off and on. Yet I toughed it out and went to work, alternating between cold sweats and hot flashes, but not contagious such that I passed my illness on to others.

Now, Malveaux claims there's a "high cost" to unpaid sick leave: "According to a Cornell University study, presenteeism — the phenomenon of a sick person coming to work — costs employers about $255 per employee per year, for a total of $180 billion." She forgets that everything has a cost, and ignores or does not understand that unpaid sick leave exists because it costs more to compel companies to provide paid sick leave for lower-end jobs. Who doubts that the drop in total productivity would be greater if all workers were suddenly able to take time off even if they merely "just didn't feel well," content with the knowledge they'd get paid anyway? It's not that the economy is running inefficiently, but that it is running more optimally because companies can choose the less expensive of two choices.

There's a damned good reason not everybody can be paid for calling in sick: we are the United States of America, and we don't want to turn into that shitty little France country. People respond to incentives, and whether they're honest job-seekers or lazy frogs, whether they're genuinely sick or just looking to sleep in, people will tend to seek the path of least resistance. It's the same problem with socialized medicine: people will take advantage of it whether they really need it or not.

Also, if payroll costs increase 3%, who -- besides leftist bleeding-heart types -- is idiotic enough to believe that businesses won't pass it on to consumers, or cut back on pay raises and other compensation, if not actual salaries? Prices are ultimately set by market forces, and not entirely by the costs put into production, but a business will "shut down" (stop producing) if marginal costs exceed marginal revenue. So if a business cannot cut costs and cannot pass on new expenses to its customers, then it will cease to provide the goods or services that consumers would have otherwise been able to buy.

So if we want high unemployment and economic stagnation a la France, let's go ahead and pass Chappaquiddick Ted's bill to force companies to provide paid sick leave. We'll have no right to be surprised when companies hire fewer and fewer people, paying them less and less. Just like with the minimum wage, the ones who are affected most by a government-induced shift are just above the very bottom. Their overall purchasing power is reduced when they receive cuts in compensation and/or have to pay higher prices, and they become the new bottom because those below them are artificially pushed up.

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Tuesday, March 20, 2007

For once, the Bush Administration is right about the Constitution

Sometimes the White House policymakers get it. Today, it said Bush will veto a bill that would give a voting House seat to D.C., with a compromise of a fourth seat for Utah, on the basis that it's unconstitutional.

Article I, Section 2 of the Constitution stipulates:
The House of Representatives shall be composed of members chosen every second year by the people of the several states, and the electors in each state shall have the qualifications requisite for electors of the most numerous branch of the state legislature.
Now, Article I, Section 8 says:
To exercise exclusive legislation in all cases whatsoever, over such District (not exceeding ten miles square) as may, by cession of particular states, and the acceptance of Congress, become the seat of the government of the United States, and to exercise like authority over all places purchased by the consent of the legislature of the state in which the same shall be, for the erection of forts, magazines, arsenals, dockyards, and other needful buildings;--And
Section 2 mentions nothing about federal territories, only states, and Section 8 clearly is carved out as an area of federal jurisdiction. Some claim that Section 8, granting Congress "exclusive legislation" over federal territories, means Congress can give a vote to the District. That is completely incorrect: the clause merely refers to the fact that Congress is the exclusive source of laws for the seat of the federal government, nothing more. Because federal law is subservient to the Constitution, the latter being the Supreme Law of the Land, Congress cannot pass laws that override Article I, which plainly speaks only of the House and Senate members coming from States. If DC. residents are to have any representation in the House, it will require a Constitutional Amendment similar to the Twenty-Third Amendment. However, as a matter of practical politics, why should Congress heed this? Almost since the beginning, it's ignored the Constitution anyway.

Since D.C. is not a state, the White House is correct, and Rep. Tom Davis and Ilir Zherka are goddamn ignoramuses about what's really in the Constitution. "I hope the president's legacy isn't vetoing democracy in the District of Columbia," Davis said, and Zherka also used "democracy" in her unfounded appeal. Strangely enough, the word "democracy" never appears once in the Constitution, even in regard to the seat of the federal government. On the other hand, Article IV, Section 4, specifies that "The United States shall guarantee to every State in this Union a Republican Form of Government." Republican form.

Davis also said, "The Senate represents states, the House represents people." No, this is only partially true, and in fact being only partially true makes it effectively completely incorrect. The Senate represents the several States' interests in the federal government, and the House represents the interests of the people of the several States.

It's critical to note that even in the highly questionable Fourteenth Amendment, "United States" means strictly the federal government, not the nation as a whole. That's why the Constitution can talk about "the United States" and "each State" in the same breath, or as in Article 1, Sections 1 and 2, the "Congress of the United States" and how the House of Representatives shall be elected by "the People of the several States." Not "the People of the United States," because those people are by definition the residents of areas under federal jurisdiction, such as the District of Columbia.

A lot of people, including those supposedly expert in the Constitution, and virtually every elected federal official and bureaucrat, don't understand that the U.S. Constitution is an agreement between the several States, not the people of the several States, despite how the Constitution's preamble begins. Pay close attention to the phrasing throughout the Constitution, and you'll see it's all about interactions between the several States and the federal government, not individual people.

This idiotic Christian Science Monitor article tries to make it look like "conservatives" support the bill as constitutional, but let's remember that both conservatives and liberals, as evidenced by court decisions for decades, are often wrong about what the Constitution really says. Despite his supposed "originalist" or "textualist" mindset, Scalia isn't infallible, for example.

Contrary to their claims, the residents of the District of Columbia do have representation in Congress: it's through the assembly of both the House and Senate, which as we've seen are made responsible by the Constitution for the District's legislation. For the same reason, whether you agree with it or not, that's why voting rights used to be limited to men. It was not to disenfranchise anyone, but because a man's vote was not just for himself, but on behalf of his household: wife, children and property, which at one point included slaves.

"Taxation without representation," or the better phrasing "For imposing Taxes on us without our Consent" that's found in the Declaration of Independence, was onerous to the colonists for reasons beyond the fact of no representation. The taxes were directed specifically at the colonists, imposed by a government thousands of miles away. They were also redistributive in nature, whether brought back to the treasury in London at the Exchequer's direction, or used directly to fund the British troops that the colonists didn't want.

On the other hand, while D.C. residents do pay federal income taxes, it's the same as the rest of us. Also, any redistribution happens in reverse: when I remember that any budget shortfalls are just about automatically covered by Congressional appropriation, I'm not crying for them.

As a final thought, are you sure you want these people to be able to elect someone to the House? Things are already bad enough without functional illiterates voting for whichever schmuck promises them the most.

Thursday, March 15, 2007

When government can't protect you, it still won't let you protect yourself

Chiquita has agreed to pay a $25 million fine for the crime of paying protection money to Colombian paramilitary groups. It is a tragedy.

When government can't keep your people safe, when government's "War on Drugs" is the very reason cocaine yields such high profits, what else are you going to do? Chiquita determined that it could still make a profit by paying off the would-be kidnappers, ultimately paying much more money than a security system which couldn't protect everyone. And for trying to protect its employees, Chiquita is being punished. All it takes is the U.S. federal government to call them a "terrorist group." At times I feel like such a fool for not having foresight about what all the post-9/11 legislation could doa .

Some might argue that giving in to extortion schemes by Colombian paramilitary groups, local mobsters, etc., only funds the groups to do more. Certainly, and what difference is there when we pay taxes to government so it can further terrorize the people?

Ironically, the kidnappers seem to keep their word once paid off, which is something we can never expect from government. More ironically, all we American taxpayers are ourselves guilty of paying money to a terrorist group, namely the federal government. After all, what happens if we don't pay our taxes? We'll be kidnapped from our loved ones, who will have to pay hefty ransoms for our release, which still may not come for a very long time.

Thou shalt not measure an economy by consumer spending alone

Most importantly, thou shalt not fear economic bullshit.

It's been all over the news that consumer spending rose only 0.1% in February. You'd think it was the end of the world.

"Tuesday's sluggish retail sales numbers may be the first ominous sign that the American consumers' remarkable propensity to keep spending is beginning to wane." - CNN Money

"Sales at the nation's retailers barely budged in February as severe winter weather kept already cautious shoppers away from the malls." - L.A. Times

Of course, liberal media outlets would just love a recession that they can blame on Republicans, particularly Bush's tax cuts.

"Retail sales in the U.S. rose less than forecast as the coldest February in more than a decade kept shoppers home and added to concerns the economic slowdown will deepen." - Bloomberg

That's strange, I thought we were supposed to be in the middle of global warming. In any case, did that many people really stay home because of the weather, and did anyone ever consider that if they did, perhaps they bought things online instead? The CIO of a $30 billion fund recently predicted that "Weakness in the equity markets of housing and autos will be offset by strength in consumer spending and exports this spring." Is he right? He could be wrong, but if he's right, I won't be surprised a bit. If anything, people could easily spend in spring what they had not spent in winter. And as we'll see later on, consumer spending isn't everything, because what people don't spend, they save.

Furthermore, what economic slowdown? GDP growth is not as robust as it has been, but it's still very moderate, with moderate inflation and historically low unemployment. That's an economic slowdown? France should be so lucky to have such a one.

"The Deloitte Research Leading Index of Consumer Spending fell this month, due to continued weakness in the housing market." - PR Newswire

If you examine the components of the index, you'll realize that it's meaningless. Tax burden and real wages are important, but factoring in only home prices is nonsensical when it's such a small portion of consumer spending. (Even then, money spent on housing is typically mistaken for consumer spending, when most of the time it's actually investment spending.) Now, the real stupidity is using unemployment claims, which is merely multiplying by 1. Unemployment benefits are an increase to someone's income but are also an equal decrease to another's, because of taxation. Finally, what does the final result mean? A drop in housing prices is related only very, very indirectly to consumer spending, yet one downturned housing market in the U.S. can make D&T's index fall. Why don't I create a index based on sunspot activity combined with my bamboo plant's growth and the cloud cover percentage at 2 p.m.? That would be as significant to the economy as John Kerry's nonsensical "misery index" of the 2004 presidential race.

"Sales at the nation's retailers barely budged in February as bad winter weather kept already cautious shoppers away from the malls. The Commerce Department's report, released Tuesday, raised fresh concerns that consumers could tighten the belt further, causing economic growth to slow even more than anticipated.... On Wall Street, stocks tumbled as the weak retail sales report and troubles with risky mortgages added to investors' fears about the country's economic health. The Dow Jones industrial average plunged 242.66 points, its second-biggest drop of the year." - Associated Press

Martin Crutsinger and Jeanine Aversa are so reliably prophets of economic doom that I can never seriously consider anything they put out. "Tumbled"? With the DJIA still over 12000, Tuesday's drop was nothing. One day is nothing. It can easily be erased with a day's rally, or a week's steady gains. The important thing about investing is to think long term, and not tear your hair out because stocks overall (because not all stocks were losers) took a hit one day.

"Analysts at ING Financial Markets say that US consumers have started to control their spending, which is likely to result in a slowdown in growth in 1H07." -

There's no problem here, none whatsoever, so long as the economy grows. While the first half of 2007 may experience slightly slower growth, such growth and quite possibly a little more will be spread out through the future. That's because whatever money today is not spent is therefore saved, which eventually becomes investment spending. Consumer spending is two-thirds of the U.S. economy, but don't let pseudo-economists and Chicken Little journalists fool you into forgetting this: people may spend less today, allowing businesses to borrow more money today, which creates more jobs in the future.

If I still earn $X per year, it doesn't matter if I spend 60% on consumption spending and save 40%, or spend 80%/20%. What matters is that total economic growth remains the same: if consumer spending falls because of a recession, that of course is bad, but we're not in a recession. GDP and personal income continue to grow. What also is important is that interest rates are left free to adjust so that economic participants can, on our own, find the optimal level of savings. We don't need a central bank that by definition skews our choices, most notably the incentives behind producing scarce goods and services.

So the lesson tonight: don't be so focused on only one economic indicator. I don't even look at inflation-adjusted GDP growth so much as unemployment, which right now at 4.5% indicates a strong job market. Mildly positive GDP growth, like in France and Germany, cannot overcome the bad news of high unemployment that is structural in nature.


Friday, March 09, 2007

Return of the Daily Star Trek Quote Challenge

At least for tonight. I remembered this after thinking about what a friend reminded me that I said. "She's perfect."

In case anyone's forgotten the rules, name the characters involved in this dialogue, and the episode.

- ____, have you found that defocused area yet?

- I'm looking.

- Yeah, I see the way you're looking.

- What?

- Sorry, I've got my mind on something.

- I can see that.

- It's this girl they beamed up. She's perfect. Absolutely perfect.

- Now I know why you can't concentrate.

- I'll do better.

- OK.

- Warning. Resonant field applied.

- What is it? What happened?

- Nothing. I had it on the wrong setting.

- I suppose it had to happen. It usually does at this age.

- What usually does?

- Glands erupting with hormones. It happens to all of us.

- Just because I said I think she's interesting--

- You said, she was perfect. Come down. You're no use here for now. Come on down from there. to her. Use the ladder.

Monday, March 05, 2007

It's not the specific case, but how it can be applied subsequently to future cases

A major problem with today's legal system, particularly what's handed down by the Supreme Court's would-be gods, is that one case launches a precedent that's applied generally.

A certain Connecticut lawyer destroyed a client's computer containing child pornography; that much is not being denied. When there is genuine criminal intent to destroy evidence during a criminal investigation, such an act can be "obstruction of justice" and hence prosecutable. However, the defendant destroyed the computer before the criminal investigation commenced. Therefore, until a few years ago, he couldn't be prosecuted for just that: it's not a crime to lack foresight, or be stupid. (Were that so, we'd have to jail just about every politician who passes laws and every bureaucrat who administers them.)

Federal prosecutors were not satiated with the client's conviction and sought another notch in their belt, so they're using Sarbanes-Oxley to go after the lawyer:
Russell was charged under the Sarbanes-Oxley Act, which Congress passed in 2002 after a wave of corporate accounting scandals to make it easier to prosecute such cases. He faces up to 40 years in prison if convicted.

"The case will test the meaning of those new provisions," Gillers said.

The law, which was aimed at cases involving corporate document shredding, made it easier to prosecute obstruction of justice by requiring only that an investigation was foreseeable rather than already pending. Prosecutors also no longer have to show the defendant acted with corrupt intent to keep evidence from investigators, experts say.

While legal experts agree that lawyers can't destroy evidence, they are concerned that prosecutors' use of Sarbanes-Oxley will pressure defense attorneys to betray their clients' confidences and report potential evidence to authorities or risk prosecution themselves.

"The most troubling aspect is it tries to make lawyers shills or hand maidens for police and government investigators," said Jon Schoenhorn, president of the Connecticut Criminal Defense Lawyers Association.

Future cases could be murkier than child pornography, involving bank records or other documents and items that might incriminate a client in a future investigation, experts say.

"Lawyers will have to be soothsayers," said Martin Pinales, president of the National Association of Criminal Defense Lawyers. "They will have to figure out what some prosecutor in the future may or may not be charging."

Russell, whose wife is a member of the church, does not dispute that he destroyed the computer, said his attorney, Robert Casale. But denies he broke the law.

"He didn't do it to interfere or compromise any government investigation," Casale said.

The case dates back to Oct. 7, when an employee at Christ Church discovered images of naked boys while using Tate's computer, according to the indictment. A day later, church officials sealed and wrapped Tate's laptop, treating it as evidence, authorities said.

Russell destroyed Tate's computer after learning it contained images of naked boys, according to the indictment.
The article is confusing here in the timeline and terminology. I wondered if the reporter made the common and erroneous distinction of a laptop and "a computer," meaning the latter as a desktop. However, this article from a local newspaper makes it clear: church officials took the laptop (the only computer involved) on October 7, and Russell obtained the laptop on October 9. This article states that the FBI began investigating the client on October 6th, but that begets some questions. What prompted the investigation to commence on October 6, before the church worker's discovery on October 7? Was Russell formally advised by police that his client was under investigation, or had he otherwise become aware? (For example, church officials may have told him they turned this over to police.) Now, Russell could be prosecuted for "obstruction of justice" under existing laws if he had in any way become cognizant of law enforcement's involvement. But if that's so, why are prosecutors resorting to a legal trick so they can convict him under lesser intent? And why the distinction of charging him with "obstruction of an FBI investigation" rather than "obstruction of justice"? Would the FBI would care to admit that its investigations are not necessary the pursuit of justice?

Russell's judgment was certainly questionable. Prudence dictates that he not affect any possible evidence and instead limit his actions to advising his client. But stupidity is not a crime, even for a defense lawyer who probably should have known better. It is also not a crime to lack "foresight" or clairvoyance about whether your client is being or will be investigated -- presuming that Russell was unaware, because under that circumstance prosecutors wouldn't need to use SarbOx to convict him. And all that notwithstanding, in the end it's actual criminal intent that constitutes genuine "obstruction of justice," and it doesn't appear that he acted with any ("had any" is a different matter and cannot be proven, because thoughts cannot be proven, only actions). After all, if there was a case for criminal intent to destroy evidence, then prosecutors wouldn't be resorting to SarbOx, would they?

But the problem goes beyond this case. If an attorney can be convicted of "obstruction" with no proof of "acting with corrupt intent," then as the legal experts said in the article, it drastically alters lawyer's responsibilities to their clients. It greatly destroys any trust that a person can place in legal counsel, because the latter may well feel compelled to avoid touching evidence, or advising the client on what to do with evidence, merely because the client might be investigated and charged. Such a forced presumption greatly hinders, if not destroys, the client-lawyer relationship. Note that Russell was retained by the church to advise them on what to do, and not as Tate's formal defense attorney.

As a layman, I doubt that lawyers will feel compelled to reveal (whether acknowledge or turn over) evidence to prosecutors, because that certainly violates a time-honored principle of the attorney-client relationship. Then again, if Russell is convicted, what is that doing but redefining the relationship? Will an attorney be hesitant to discuss with his client even the nature of any possible evidence, lest the former later be charged with "obstruction" for sincere, innocent advice? What about purging his own archived e-mails or other documents as a matter of course? Perhaps those are extremes, but what if attorneys start to feel compelled to archiving everything? At the least, attorneys would have to spend time worrying about not affecting evidence: instead of devoting their energies and resources to clients, they must expend them on what's effectively procedure.

It's once more the law of unintended consequences, the one unavoidable and irrevocable law of all government. I never liked SarbOx, or today's knee-jerk reaction of more regulations and more laws in response to crimes that could already be prosecuted under existing laws. It's one thing for the law to punish criminal performance, but libertarians believe that real law cannot compel performance.

Thursday, March 01, 2007

Two years later

It was two years ago tonight (earlier) that I launched the Eidelblog. It's been quite a ride: meeting Paul Krugman, being slimed by Brad DeLong, getting into arguments with liberals, but also meeting Don Luskin, Larry Kudlow and Alan Reynolds. I've also met Jackie and Eric.

A lot of you have stayed faithful readers even though I often lack the time and energy to put something out every day, and I cannot express how much I appreciate it. There's been a lot of news I've missed on which I wanted to offer not insignificant commentary. The latest thing keeping me busy is studying to get my Series 7 license, the general license for trading securities. Though I'm in compliance, not financial advising let alone trading, one of my compliance duties is scrutinizing trades. The education will certainly come in handy.

Sometimes I feel like we're just reliving the same nightmare of Big Government, over and over, and I wonder if there's anything really new to say in my blog. The details change, but the stories tend to stay the same: assaults on liberty. For example, several dozen members of Congress want to pass a law against oil and gasoline "price gouging." I've written at length on the myth of price gouging (lots of posts there). God help us, because the Democrats with Republican support could well plunge us into 1970s-style lines.

At times I get discouraged, but let's remember a great line from my favorite movie. In "Casablanca," Rick asked a wounded Victor Laszlo, "Don't you sometimes wonder if it's worth all this? I mean, what you're fighting for?" Laszlo replied, "We might as well question why we breathe. If we stop breathing, we'll die. If we stop fighting our enemies, we'll die." Our true enemies are not bad economics or bad policies, but those who lord themselves over us by enacting the policies. Our true enemies are not our own vices and shortcomings that harm no one but ourselves, but those busybodies who self-righteously deny us the freedom of conscience; they are not our brethren, but rather among the worst of our enemies.

Modern liberals crusade against ignorance, poverty and greed, while conservatives assail immorality and unpatriotic behavior. Those of us who know better are waging the ages-old battle against tyranny in all its forms. We struggle against those who assert their "superior" morals in caring for the poor, keeping our virtues intact, or making society and the economy run "smoothly" according to their dictates. Some harbor evil desires about wielding power over others, while others have "misguided" intentions with superficially noble purposes. We must never accept the latter kind's typical excuse that it at least was well-intentioned, and instead show it no mercy as we likewise show no mercy to the former. In this fight, we must never capitulate, nor can we retreat in our demand for freedom, and compromise is not an option. While waiting for appropriate times, it is permissible and certainly prudent that we can remain quiet in our actions, but we must never be so in our hearts, for the day continually grows nearer, I promise you, when the fight will exceed mere words and computers after shall declare:

We've made too many compromises already; too many retreats. They infringe upon our liberties, and we fall back. They take away countless specifics of our God-given rights, and we fall back. Not again. The line must be drawn here! This far, no further! And God will them repay for what they've done!

Beware of the politico, pundit and especially teacher who touts "compromise." Contrary to the myth taught to most of us in school, compromise does not allow us all to "get along." Compromise only allows one side with long-term resolve to trick the other into concession and complacency.