Obama is Half Right About Katrina


The Salvation Army and other private responders were denied entry into New Orleans for days following Katrina.

Speaking in New Orleans on the tenth anniversary of Hurricane Katrina, President Obama declared:

What started out as a natural disaster became a man-made one—a failure of government to look out for its own citizens.

He then, typically, dissembled the argument, pointing to a mish-mash of “economic inequality ... a country that tolerated poverty.”

He should have stopped while he was ahead: Yes, Mr. President, the devastation of Hurricane Katrina was a failure of government—but it was the result of the active failure of government, not some vague, passive failure of omission.

As those of us with memories based in facts know, Hurricane Katrina itself left New Orleans relatively unscathed. Initially, everyone breathed a sigh of relief: Katrina had veered, had dissipated, the feared devastation had not occurred.

And then came the levee failures—more than 50 levees and flood walls built and maintained by the government failed:

The levee and flood wall failures caused flooding in 80% of New Orleans and all of St. Bernard Parish. Tens of billions of gallons of water spilled into vast areas of New Orleans, flooding over 100,000 homes and businesses. Responsibility for the design and construction of the levee system belongs to the United States Army Corps of Engineers; the responsibility of maintenance belongs to the local levee boards. [Emphasis added]

The disaster itself, then, was a direct result of government failure.

And then came the aftermath:

[T]he New Orleans mayor’s and Louisiana governor’s offices ... both expressed frustration and helplessness, caused by having no plans for an emergency of this magnitude. The mayor’s office set up operations in the privately owned and operated Hyatt hotel, judged the safest base. They were equipped with old field-type phones that couldn’t be recharged. Both the governor and mayor claimed they were paralyzed by lack of communication, and pointed the finger at the feds’ failure to come to the rescue. The entire governmental response, from top to bottom, was beset by lack of leadership, action, and absolutely no coordination or communication between any two agencies. It had been immediately pointed out following 9/11 that much of that rescue effort was hindered and many of the deaths of firefighters and police were due to the inability of rescue agencies to communicate among and between themselves. Yet four years later, and despite billions of dollars distributed to and by the new Dept. of Homeland Security, the exact same systems were in place.

When one mayor in Louisiana called FEMA to get supplies, he was put on hold for 45 minutes. Eventually a bureaucrat promised to write a memo to his supervisor. Evacuees on a boat could not receive permission to dock along the Mississippi river. A sheriff was told he could only get the help he was seeking if he emailed his request—of course, his parish was flooded and without electricity.

School buses sat idle in parking lots—contrary to the City of New Orleans’ emergency plan that called to use such buses to evacuate residents to safety—not to the Superdome, which lay within the threatened area. Furthermore, the Superdome had been used as emergency shelter before, and there had been violence and civil disorder within it on those occasions. Yet no provision had been made to prevent the recurrence of such violence that had occurred before and worsened under the “hell-like” conditions following Katrina. The people in the Superdome were essentially held under house arrest, not allowed to leave or even go outside for fresh air. No provision was made to provide them food, water, sanitation, counseling, or even communicate to them what was happening and what they could expect. It’s little wonder that such desperate “Lord of the Flies” conditions led to a breakdown in civil society. It could have been a laboratory study in what happens when you treat people like cattle—only worse, because cattle owners feed and water their stock.

A group of 500 guests in French Quarter hotels pooled their resources to come up with $25,000 to charter buses to come and rescue them, subsidizing those without the means to contribute. They waited 48 hours for the buses whose arrival was said to be “imminent,” only to learn that the military had commandeered them as soon as they arrived in the city. Once kicked out of the hotels, “by orders,” they learned they would not be allowed in either of the two city shelters—the Convention Center and the Superdome—which had descended into humanitarian and health hellholes. Yet neither could they leave the city—those trying to leave the city on foot were turned back by armed police, “protecting” neighboring cities from fleeing evacuees. Only those with transport could leave, yet, as we’ve seen, transport was denied them.

Companies wanting to send in planes and helicopters to rescue their people were prohibited from doing so. One company contacted Louisiana Congressman Bobby Jindal’s office for help identifying who could grant them permission to send in a helicopter to rescue their stranded employees. Unable to find anyone at FEMA, the FAA or the military who would accept responsibility to grant permission, the congressman advised the company to just go ahead.

What is probably most inexcusable and has been kept relatively quiet is that the Red Cross and the Salvation Army were staged and ready to enter New Orleans with food, water and other emergency supplies. The roads to the Superdome and the Convention Center were open, and other areas of the city remained similarly accessible. But the Louisiana Dept. of Homeland Security denied them permission to go in, saying their presence would “prevent people from leaving.”

In the ultimate, horrible example of a bureaucratic Catch-22, the government kept people from leaving New Orleans, and the Dept. of Homeland Security would not let aid agencies in, saying having aid available in the city would create a magnet to keep people from leaving.

Never forget. Government failed. “Society” didn’t.

Safe, Legal, and Rare, Part 2: Legal?

Choice40 years following Roe v. Wade, we have been taking a look at how reality accords with the promised outcome of the ruling that abortion would become “safe, legal, and rare.”

Last time, we looked at “Safe.” Today, let’s look at “Legal.”

First, definitions. Legal can mean either, “according to the laws of man,” or “according with the natural, moral law.” As we all know, “the law” as written by man only rarely coincides with what we term the “natural, moral law”—that is, a strict adherence to inalienable rights. The standard example given of the two diverging badly is slavery, which was certainly “legal,” but also certainly an egregious violation of the natural, moral law. Examples of laws currently on the books that violate our inalienable rights are too numerous to list.

So let’s start with the question of whether abortion as practiced today is “legal” as in “according to the law.”

Virtually all arguments around abortion involve consideration of when life begins. The Roe v. Wade ruling attempted to balance a right to abortion against the protection of potential human life, by affirming the state’s right to regulate abortion in the third trimester. Subsequent medical advances and evidence that a fetus is human earlier than the third trimester resulted in the Supreme Court replacing the “third trimester” guideline with “viability” in its Planned Parenthood of Southeastern Pennsylvania v. Casey ruling. Ironically, the result in many states has been that the previous prohibition against third trimester abortion has been dropped, with “viability” left to interpretation by abortion providers.

We know from the Gosnell and numerous other examples that this has resulted in the active killing of babies born alive during abortions. And while Gosnell himself was ultimately convicted of murder, his abortion crimes were discovered only because of a drug investigation.

The current Planned Parenthood/Stem Express undercover videos being released document Planned Parenthood’s altering abortion procedures—illegal under the law—in order to more successfully harvest baby parts, including organs, for sale to organizations such as Stem Express—illegal under the law. Planned Parenthood’s defense concentrates on its claims that the money collected for the baby parts is reimbursement for expenses, not a “sale.”

Now, many of us would argue that selling human organs better accords with natural moral law than its prohibition; that, in fact, a market in human organs would save lives and provide numerous benefits.

However, a “market” implies voluntary participation, and in no case can the babies whose bodies are being exchanged be said to be participating voluntarily. One could then argue that it is a case as with harvesting organs from the deceased: it is a question of the family’s consenting.

This then raises the question—related to that of a potential mother’s rights over her unborn child—of whether she has the absolute right to “consent” to the sale of her baby’s body parts.

Short of that question is the very real question as to whether these potential mothers really are consenting. There are at least three scenarios coming out that call this into question: 1) The women, frequently stressed in the face of an abortion, are asked to consent to their babies being used for research that will help cure Alzheimer’s and other terrible diseases—presented with a noble cause to which they should contribute; 2) The women are provided the consent form as part of a stack of papers and they don’t know what they’re signing; and 3) According to an employee of Stem Express, LLC, who worked full time onsite at a Planned Parenthood clinic procuring baby parts for her employer, “If there was a higher gestation and the technicians needed it, they would just take what they needed. And the mothers wouldn’t know.”

As far as abortion itself according with the natural moral law, again, the argument is usually framed in terms of whether or not a fetus is a human, or, at what stage it is deemed as endowed with inalienable rights.

Thanks to advances in medicine, we know that very, very young fetuses have very, very human characteristics. If you have the stomach for it, the videos show very clearly the product of abortions as including tiny human arms, legs, etc. (In this video, the CEO of Stem Express says of the labs receiving the body parts, “It’s almost as if they don’t want to know where it comes from. Where they’re like ‘We need limbs, but no hands or feet need to be attached. ...Make it so we don’t know what it is.’” Elsewhere she jokes that when shipping “intact cases,” i.e., entire bodies, you must warn the lab in advance, or else a lab tech will open the package and scream “Oh my god!”)

And, as the Supreme Court’s Casey ruling acknowledged, unborn babies are “viable” life far earlier than previously believed.

So when is a human not a human and thus not protected under the natural, moral law? Peter Singer, for example, says human life requires “rationality, autonomy, and self-consciousness”—but how does this not open the floodgates for killing small children, the disabled, the infirm and elderly, the mentally ill, the unconscious, and the just plain dependent?

Defining the unborn as “potential” life—and thus somehow having not yet attained inalienable rights—thus seems a distinction lacking a difference.

If we want to live in free societies grounded in a commitment to human worth and dignity, we need to get out of denial and honestly face the reality of abortion.

And the wonderful reality of such free societies is that they well produce a rich array of social services and alternative solutions for those in need.

That’s the kind of choice I can really get behind.

Follow the Silk Road

9106979_SStretching some 4,000 miles, the “Silk Road” was a trade network connecting the continent of Asia. From around 200 B.C., the route, running from China to India, to the Mediterranean Sea, the horn of Africa, and beyond, is largely credited for opening up trade in much of the world, leading to the development and exchange of everything from spices and cloth, to religions and political philosophies.

In 2011, a new Silk Road sought to once again bridge the gap between buyers and sellers. Instead of exchanging cloth, however, this Silk Road was best known for allowing individuals to buy and sell illegal drugs.

Known as part of the “dark web,” the Silk Road website allowed users to anonymously buy and sell goods and services without government intrusion. Using the anonymizing software, TOR, the site effectively obscured the online identities of both buyers and sellers, meaning that even the authorities would be unable to identify Silk Road users. The site accepted no electronic forms of payment other than Bitcoin, meaning users could not be traced via their credit card information. By March 2013, the site had some 10,000 products available for purchase and oversaw more than $1.7 million in transactions a month. Approximately 70 percent of these sales were for illicit drugs.


In Memoriam: Nathan Rosenberg (1928-2015)

NathanRosenbergI have just received the sad news that Nathan Rosenberg has died. Nate was an outstanding economic historian, and in my early years in the profession I viewed him as the very model of the kind of economic historian I wanted to become. He reviewed many of my early papers before their publication, and when the publisher was looking for a reviewer of the manuscript that became my first book (published in 1971), I suggested Nate as the reviewer, and he did excellent work in advising me about revisions of my manuscript.

In later years I kept in touch with Nate, though less frequently as the years went by and our career paths diverged. When David J. Theroux and I were creating The Independent Review in 1995, I asked Nate to serve on the journal’s board of advisers, and he did so from then on. Nate had many lovely stories to tell in addition to the scholarly information he shared with so many of us. I recall his telling me once about how as a boy he delivered a Yiddish newspaper in Brooklyn.

James Poterba has written the following notice of Nate’s passing.

I write with the sad news that Nathan Rosenberg, a pioneer in the study of the economics of technological change who also served as Stanford University’s representative on the NBER Board of Directors from 1980 until 2010, passed away on Monday at the age of 87.

Nate received his undergraduate degree from Rutgers, and his Ph.D. from the University of Wisconsin. He began his academic career at Indiana University, and served as a faculty member at the University of Pennsylvania, Purdue, Harvard, and the University of Wisconsin before moving to Stanford in 1974. Nate was the Fairleigh S. Dickinson, Jr. Professor of Public Policy, Emeritus, at Stanford, and an NBER board member emeritus, at the time of his death.

Nate’s research was primarily concerned with the economics of innovation, and he drew on historical as well as contemporary evidence to illuminate the economic forces that influence the rate of technical progress. His work had a powerful impact on both the micro-economic and macro-economic understanding of the role of innovation in economic growth, as well as on the recognition of the impact of institutions and policy in shaping the innovation process. His contributions were widely celebrated. When the Society of the History of Technology awarded him the Leonardo da Vinci Medal, the citation described him as having ‘almost single-handedly changed the way economists and economic historians think about technology and the nature of economic change.

We have lost a great scholar and friend; he will be deeply missed.

The Decline in R&D Efficiency in the Drug Industry

25149632_MPanel “a” in the graphic below shows that the number of new drugs approved by the U.S. Food and Drug Administration (FDA) per billion U.S. dollars spent on research and development (R&D) in the drug industry has halved about every nine years since 1950, in inflation-adjusted terms. This represents a decline in drug R&D efficiency of around 80-fold, which should concern everyone.



Aspirations and Policies

beyondpolitics_updated_nf_180x270Political rhetoric tends to obscure the difference between aspirations and policies. Aspirations are goals people would like to achieve, whereas policies are the means for achieving them. For example, the Obama administration has mandated automobile fuel efficiency standards that require a fleet average of 54.5 miles per gallon by 2025. This is an aspiration, not a policy.

An example of a policy would be a requirement that passenger cars have engines with displacements no greater than 1.6 liters, or an increase of $2 per gallon in federal motor fuel taxes to encourage conservation. Policies state what will actually be done to try to further a goal, perhaps in addition to stating of what the policies hope to accomplish.

You will notice, as campaign season is upon us, that political rhetoric is mostly about aspirations, and rarely about policies. Political candidates talk about problems with the status quo, and their aspirations for improving things. They talk about what they want to accomplish, but not what policies they favor for accomplishing their aspirations.

The reason is that everyone can agree the status quo is not ideal, so calls to improve the status quo receive widespread support. Hope and change. Just don’t be specific about what policies will drive that change. Lots of people will agree that things can be improved, but fewer people will agree that any specific policy will actually lead to improvement. So, politicians talk in terms of aspirations rather than policies.

It is OK to be against current policies. Political candidates can oppose Obamacare, for example. But it is politically dangerous to offer specific policies to enhance or replace it.

Libertarian policies have trouble gaining widespread support because they are policies rather than aspirations. Privatize the roads? Do away with occupational licensure? Those are policies that many people will oppose. Reduce traffic congestion? Give consumers the freedom to choose who they hire? Those are aspirations that people will support.

Even less controversial policies, like giving families the freedom to choose which schools their children can attend, will meet with heated opposition. But improving the quality of education is an aspiration that will find support.

Ultimately, political leaders need policies to implement their ideas, but to get elected in the first place, political candidates do better to campaign on aspirations rather than policies.

Libertarian aspirations should be political winners. Most people are in favor of having more freedom, and when asked whether people would rather make their own choices, or have someone in government make their choices for them, how many people will choose the latter? When asked whether people would prefer a less intrusive government or a more intrusive one, how many people will choose the latter?

One problem with advancing libertarian ideas in a democratic society is that libertarians focus their messages more on policies than on aspirations. Rather than campaigning on “It’s morning in America” or “Hope and change,” they’re saying “Abolish the Fed.” Politics is one area in which vague aspirations win out over concrete ideas.

Bernie Sanders and the Leaky Bucket of Income Redistribution

BernieSandersVermont Senator and presidential hopeful Bernie Sanders has pushed the American left to make income inequality a focal point of the 2016 elections. Echoing Thomas Piketty, the recently debunked economic pop star, Sanders has stated: “In America we now have more income and wealth inequality than any other major country on earth.” While not technically accurate, this rhetoric has inspired calls for redistributive tax policies.

Advocates for reducing income inequality may have the best of intentions or merely be indulging in political grandstanding. But if they wish to be taken seriously, they should first determine whether or not redistributive policies are truly effective at fixing the purported problem.

It’s commonly believed that taxation can combat inequality through progressive redistribution. Numerous studies, however, have shown that the economic and societal outcomes of income redistribution policies are inefficient. In other words, they destroy wealth in the process of transferring it.

Two of the most comprehensive empirical studies in this area are Public Spending in the 20th Century, by Vito Tanzi and Ludger Schuknecht, and Filip Palda’s paper “Fiscal Churning and Political Efficiency” (Kyklos 50:2, May 1997). Both studies use a metric called ‘churning’ that measures the degree to which taxes levied on citizens to support new social programs actually transfer capital right back to the original taxpayer.

Tanzi and Schuknect looked at large-scale growth in government spending since the middle of the twentieth century and found that the growth in government spending, specifically in transfer and welfare programs, coupled with the increases in taxes to finance the increased spending, has resulted in no measurable or real benefits for citizens. Citizens would be better off, their study suggests, if either: (1) government spending on social programs were made more efficient by reducing spending on transfers and welfare by the degree of fiscal churning or (2) transfer and welfare programs involved a decrease in the tax burden for those whom the programs are suppose to help. (The second alternative would allow the intended beneficiaries to have more capital and freedom to decide what services they view as most beneficial, compared to the current state, in which government officials decide what the poor and middle classes need without the knowledge or accountability to make an accurate assessment.)

In other words, Leviathan taxes with one hand and then with the other hand passes out transfers back to the taxpayer. Worse, taxed capital goes through multiple levels of bureaucracy before it’s returned, resulting in overall losses for taxpayers.

Keynesian economist Arthur Okun was on the mark with his witticism about the difficulty of efficient redistribution: “The money must be carried from the rich to the poor in a leaky bucket. Some of it will simply disappear in transit, so the poor will not receive all of the money that is taken from the rich.”

Bernie Sanders seems oblivious to all of this. He proposes turning the United States (which churns about 9 percent of its transfer payments) into a welfare state like Sweden (which Tanzi and Schuknecht found churns 34 percent of its transfers) or Canada (which lies at the average of the O.E.C.D. countries, which Tanzi and Schucknecht conservatively found to churn 11.7 percent and which Palda estimates the degree of churning to be between 15.2 percent and 49.2 percent). (Tanzi and Schuknecht reach the same general conclusion as Palda, but whereas their study made cross-country comparisons, Palda’s paper looked in greater detail just at Canada.)

Wasting resources and incurring large costs for no welfare gain is a zero-sum game that has had little to no effect on the equalization of incomes. Moreover, these transfer programs are wasted on social services which, even apart from the problem of churning, are inefficient and ineffective.

Robert Higgs, among others, has noted that these publicly provided services have crowded out voluntary institutions that make a vibrant free market. Social services could be provided through market-based private charity. This would give citizens the freedom to help the poor in ways that they think are the most beneficial.

If a moral case is to be made for government policies that help the poor and reduce inequality, then surely the best approach is through open borders, free trade, and capital mobility—not inefficient, wasteful government bureaucracy.

[Alexander Demitraszek is a 2015 summer intern at Independent Institute and a senior at Methodist University majoring in financial economics and math.]

Bobby Jindal’s Attack on Scott Walker’s Health Plan Is Off-Base

JindalWalkerYesterday, I wrote a column at Forbes addressed Governor Scott Walker’s health plan in largely positive terms. Governor Bobby Jindal, a competing Republican presidential contender, has launched a broadside against Walker’s plan, describing it as a “new federal entitlement.”

The charge is way off-base. Governor Jindal proposed a health reform back in 2014, via his America Next policy shop. The point of contention is that Governor Jindal’s proposal would not offer everyone a refundable tax credit. Instead, it would eliminate the exclusion of employer-based health benefits from taxable income and replace it with a standard deduction.

I discussed the proposal when it was issued. True, it is an easier switch than a refundable tax credit. On the other hand, a deduction does nothing for low-income households – which means the welfare state continues to exist. Governor Jindal himself proposed throwing $100 million more at states to fund their medical safety nets.

You can say (and I might agree with you) that the federal government should get out of the safety-net business. Nevertheless, the federal government is an income-tax devouring and debt-generating machine. As long as it remains so, states and citizens will call upon it fund welfare programs.

The tax treatment of health benefits must follow the tax code. It cannot lead it. Governor Jindal has not proposed a massive overhaul of federal taxation. Even Senator Rand Paul’s proposal to rip up the IRS and start again would give us a 14.5 percent flat tax on household incomes above $50,000 (for a family of four). The federal government would remain the dominant tax collector and still fund welfare programs.

My view is that the federal government should fund a tax credit for every household. For those who cannot or will not use it to pay for their own health care, the government can use it to fund Medicaid. (See John C. Goodman, A Better Choice, especially p. 58.)

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For the pivotal alternative to Obamacare, please see A Better Choice: Healthcare Solutions for America by John C. Goodman (Independent Institute, 2015).


Anthony de Jasay: Political Philosopher Par Excellence

tir_20_1_210Anthony de Jasay isn’t a household name, but he should be. The former Parisian banker is one of the most original thinkers in political philosophy today, and his insights on the nature of liberty, justice, and the state have major implications for how we might improve our governments, communities, and culture.

The Summer 2015 issue of The Independent Review features a symposium on Jasay’s work, with contributions by G. Patrick Lynch, Hartmut Kliemt, Pierre Lemiux, André Azevedo Alvez, Carlo Ludovico Cordasco and Sebastiano Bvetta, and David M. Hart. (Also in this issue, Michael Munger reviews Jasay’s latest book, Social Justice and the Indian Rope Trick.)

Jasay’s striking originality makes him hard to classify. His writings suggest an affinity for classical liberalism, but he has criticized that tradition for its “unrestricted wishful thinking.” He is admired by public-choice scholars, but he takes issue with the constitutionalism of James M. Buchanan. And although he advocates free markets, he has called Austrian School economist F. A. Hayek “startlingly naïve.”

Nevertheless, Jasay’s freshness and profundity have earned him high praise from serious, liberty-minded readers. About his 1985 treatise, The State, symposium editor G. Patrick Lynch writes: “In this work, Jasay provides as realistic and unromantic a vision of the foundations of government as one can image.”

To understand the state, Jasay says we must first view it as a single agent with self-interested goals. Then we must ask: What would you do if you were the state?

Jasay’s approach inspires our contributors to tackle a host of important questions: How might a government be designed to minimize any threats to liberty? Why does Jasay find fault with Buchanan’s and Rawls’s “contractarian” theories of government? And how might public goods be provided without the use of government coercion to deal with the free-rider problem?

Jasay made his reputation by illuminating timeless theoretical issues, but he has also written numerous popular columns on current affairs. The final article in our symposium compares this work to that of Frédéric Bastiat, the 19th-century French individualist whom Schumpeter called “the most brilliant economic journalist who ever lived.” The verdict? Jasay brille!

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The Independent Review, a journal devoted to political economy, public policy, and intellectual history, is published quarterly by Independent Institute. SPECIAL OFFER: If you’re not already a subscriber, sign up for the print version and receive a FREE book. eSubscriptions are available via an app for Apple iOS and Amazon Kindle.

CalSTRS Boss Jack Ehnes Deceives Californians About Funding

CalSTRS CEO Jack Ehnes

CalSTRS CEO Jack Ehnes

Jack Ehnes, CEO of the massive California State Teachers’ Retirement System (CalSTRS), deceived the public in a recent blog post opposing public pension reform in California:

CalSTRS has not taken any “pension holidays,”’ which means contributions have been made continuously, thus reinforcing the sustainability of the fund.

Ehnes fails to indicate whether: (A) $1 was contributed to the pension fund each year; (B) the full “annual required contribution” (ARC) was contributed to CalSTRS each year, ensuring enough money to pay all promised benefits; or (C) something in between was contributed. Only (B) would be prudent financial management.

So which was it? Let’s check the facts.

Former Federal Reserve Board Chairman Paul Volcker and former New York Lieutenant Governor Richard Ravitch, looked into the funding of several state public pension systems and found that over just a six-year period, CalSTRS’s ARC was underpaid by a staggering $11 billion (see p. 38 of the report).

Volcker and Ravitch reported that more than $27 billion should have been invested in CalSTRS from 2006 through 2011 to keep it on track, but only $16 billion was invested. In 2013, in fact, CalSTRS had the largest skipped ARC in the country, according to Stanford University researcher David Crane.

CalSTRS is the poster child for irresponsible and inefficient management of a public pension system, as evidenced by its $74 billion deficit (self-reported by CalSTRS). Because the ARC was massively underpaid, CalSTRS lost decades of compounded earnings, so now taxpayers are on the hook to pay ballooning “catch-up” contributions as mandated by Assembly Bill 1469.

CalSTRS mismanagement makes the case for meaningful pension reform in California. Jack Ehnes gives everyone good reason to distrust government pension bosses.

My new book California Dreaming: Lessons on How to Resolve America’s Public Pension Crisis explains which pension reforms should be adopted.

  • MyGovCost.org
  • FDAReview.org
  • OnPower.org
  • elindependent.org