The philosophical and legal foundation of the U.S. government (and some other governments) is that government officials are the agents of the citizens—in the familiar phrase, those who govern have the “consent of the governed.” An agent, of course, is someone I authorize to act on my behalf. For a host of reasons, this doctrine has always been more or less absurd, but its absurdity has been placed in stark relief recently by the government’s mass spying, which violates the Constitution, various statutes, and many official declarations and promises.

Imagine that I have an agent—for example, I currently have a building contractor in Mexico to whom I have given a legal power of attorney to act in specified ways for a specified duration in carrying out various transactions related to the construction of my house there. Now suppose that my agent refuses to give me full information on his activities performed on my behalf and—outrageous as it might seem—undertakes to spy on me. Then, when I challenge his defective agency and his unauthorized actions in court, he has the impudence to defend himself on the grounds that I lack standing to sue him and that the secrets he keeps from me are legally unblemished because they are “state secrets.” Obviously no one would tolerate such an agent; nor would any court uphold such blatant highhandedness.

Unless, of course, my agent—my agent according to the alleged agent, that is, not according to me—happened to be a government, the U.S. government in particular. Indeed, this twisted, sophistical, legal mumbo jumbo has prevailed for more than half a century pretty much without objection. In the past year, Edward Snowden’s revelations about the NSA’s massive spying activities have provoked for the first time substantial public protest and legal challenges to the government’s outrageous conduct in relation to the “principals” (the public) on whose behalf government officials purport to act as agents. Never before has the U.S. government’s sheer imperiousness been placed so clearly on public display.

To repeat, the claim that the rulers act as our agents has always been nonsensical, as Lysander Spooner showed almost a century and a half ago, but its incoherence is now illuminated as never before. If the government acts as my agent, it does so entirely by accident, because no agent that acts without my knowledge, approval, or accountability to me can make a plausible claim to agency. Our rulers may or may not be accurately described as dictators, but in no event may they be accurately described as my agents or as acting with my consent.

The U.S. intelligence community has come under fire for its mass electronic surveillance programs designed to discover what Americans talk about privately. But would it surprise anyone to learn that the nation’s spymasters have also tried to shape what Americans read? And not only disinformation they feed to credulous journalists—such skullduggery has been known for ages—but also the kinds of poetry and fiction that we might read?

Eric Bennett, an assistant professor of English at Providence College in Rhode Island, attended the prestigious Iowa Writers’ Workshop from 1998 to 2000, hoping it would help him to become a literary giant. It didn’t do that, but it did help him to eventually discover surprising truths about American literary culture—as well as hidden facts about covert “perception management” and soft diplomacy during the Cold War.

Here, in my words, are some of the revelations in Bennett’s illuminating essay published this week in the Chronicle of Higher Education.

Revelation #1: One of the most influential writing programs in American academia was underwritten in part by the CIA.

The CBO now estimates that Obamacare will reduce the labor supply by the equivalent of 2.4 million jobs by 2024. The main reason: the implicit marginal tax rates created by the withdrawal of the Obamacare tax subsidies in the health insurance exchanges. Like unemployment insurance, food stamps, and other welfare benefits, government help gets smaller as incomes rise and this is an implicit tax on labor.

The CBO’s estimate is based on the work of University of Chicago labor economist Casey Mulligan, who estimates that the average marginal tax rate in the economy is 47% — meaning that workers get to keep a little more than half of what they earn. Mulligan says the real loss of labor due to Obamacare will probably be twice what the CBO is reporting. He also estimates that about half of the excess unemployment we have been experiencing in recent years is due to the combined effect of all entitlement programs.

Enter Paul Krugman, who week after week, month after month, in his New York Times columns has been telling us that there is no evidence that entitlement spending reduces work effort. He responds to the CBO report by endorsing it. He explains:

[T]he incentive to work will be somewhat reduced by health insurance subsidies that fall as your income rises.

Many patients groups and their allies understandably cheered a new regulation that just came about as a result of many years of advocacy: Nationwide, patients now have a “right” to access their lab results directly. The “right” to receive test results directly from labs now ranks equally with the “right” to get our medical records.

Clinical labs had been treated differently than healthcare providers because they have their own federal law: the Clinical Laboratory Improvements Amendments of 1988 (CLIA), which delegates regulatory power to the U.S. Department of Health & Human Services (HHS).

Previously, CLIA regulations had allowed only “authorized persons,” as defined by state law, to receive test results. Thirteen states had excluded patients themselves from the definition of authorized persons. Patients have long expressed concern that giving physicians monopoly control over lab results risks their being lost in the busyness of physicians’ practices.

I certainly applaud the outcome. Nevertheless, I question whether the means fully justify the end. I have three major concerns, in increasing order of importance.

In his New York Times column yesterday, Princeton economist Paul Krugman argues that unprecedented extended unemployment benefits can’t have been the cause of the unprecedented average duration of unemployment during the “Great Recession.” He reasons, “If unemployment is high because people are unwilling to work, reducing the supply of labor, why aren’t wages going up?” (Writing Off the Unemployed, Feb. 10, 2014.)

Krugman’s elementary error is that he fails to realize that market wages result from the interaction of both supply and demand for labor: If supply falls while demand remains constant (that is, if the supply schedule shifts to the left while the demand schedule remains unmoved), equilibrium wages will rise. However, if both schedules shift an equal distance to the left, the equilibrium wage will be unchanged, and if demand shifts by more than supply, equilibrium wages will actually fall.

Economic news is either good, bad, or indifferent. The bad news about recessions is that they embody bad news. The demand for output, and therefore the derived demand for labor, unexpectedly shifts to the left in most sectors. Unfortunately, this means that the equilibrium wages required for full employment fall below expectations. Workers who are laid off in a booming economy can often find even better jobs than they left, resulting in a surprise increase in the average wage rate. But workers who are laid off in a recession ordinarily have to settle for a less attractive job than they had, resulting in an unexpected decline in the average wage rate.

An extension of the duration of compensated unemployment effectively diverts part of the potential labor supply into prolonged unemployment. By itself, this reduction in the supply of labor would, as Krugman notes, increase equilibrium wages given a normal downward-sloping demand curve. However, if it comes at the same time as an even bigger decline in labor demand, the net result will be wages that fall, but not by as much as would have been required to maintain full employment.

Krugman’s elementary error would make a good exam question for any Econ 101 class: Given a downward-sloping demand curve for labor and an upward-sloping or vertical supply curve, a leftward shift in the demand curve and a smaller leftward shift in the supply curve will cause the equilibrium wage to: a) rise, b) fall, c) remain constant, d) rise or fall depending on the actual slopes of the two curves. Unfortunately, Krugman gets this one wrong.

In my earlier Beacon post, A Chance to End the Great Recession, I called attention to the very strong time-series correlation between the maximum duration of unemployment benefits and the average duration of unemployment. To be sure, the causality causing this correlation works both ways: High benefits cause higher unemployment, but at the same time, high unemployment causes higher benefits, either politically through ad hoc legislation, or automatically through state-wide “triggers” that typically must be met before the extensions take effect. As a result, it has been difficult to pin the disincentive effect down empirically, and studies have had mixed results. Nevertheless, the economic theory is quite clear.

With the expiration of the federal subsidy to extended benefits expiring at the end of 2013, we can expect to see even further declines in the national unemployment rate over the coming months.

I have written twice about the “risk corridors” in Obamacare’s health-insurance exchanges. The first post described how risk corridors will work in the exchanges. Risk corridors exist for three years and are designed to partially immunize insurers from losing money in the exchanges.

Recently, the risk corridors have been described as a “bailout,” especially by Republicans who seek to have them repealed. The political goal is to discourage insurers from continuing to participate in exchanges in 2015, thereby further weakening and crippling Obamacare.

The major difference between risk corridors and the two other methods of protecting insurers in the exchanges (“reinsurance” and “risk adjustment”) is that risk corridors have an unlimited claim on federal taxpayers for three years, whereas the other two are funded by insurers and capped.

Because the exchanges are enrolling more older and (likely) sicker people than originally anticipated, it has dawned on many observers that insurers, overall, will likely lose a lot of money in the exchanges this year. My second post examined the likelihood of any Congressional Republican attempt to repeal the risk corridors (or “bailout”).

Like any ideology that has attracted a substantial following, libertarianism has splintered into a variety of sects. Thus, there are hard-core and soft-core libertarians; plumb-line and big-tent libertarians; Rothbard-loving and Rothbard-hating libertarians; pro-political and anti-political libertarians; academic and movement libertarians; thick and thin libertarians; socially conventional and libertine libertarians; pro-war and anti-war libertarians; bleeding-heart and bleeding-ulcer libertarians; beltway and backwoods libertarians; uptight and party-animal libertarians; among others. Unfortunately, many libertarians devote substantial energy to quarreling with other libertarians. To some extent, such quarreling helps to refine people’s thinking, but for the most part it is a waste of time and does nothing to move us closer to the goal that all libertarians share—the shrinkage of the state as it now exists.

My view is that libertarianism is best regarded as an ideology focused on moving from the current state toward a smaller state—for some of us, a state so much smaller that it ultimately disappears completely and gives way to governance via individual, explicit, voluntary contracting between protection agencies and every adult subject to an agency’s protection of its subscribers’ natural rights. Some libertarians want their ideology to be much more encompassing, but the more encompassing one insists that it be, the more margins there are on which libertarians will disagree and hence will fight one another.

In favoring a narrow view of libertarianism, I am not saying that protection of one’s natural rights to life, liberty, and property is the only valuable thing in life—far from it. But many aspects of how one conducts one’s life outside the realm, if any, in which the state plays a role ought to remain open to each individual’s choice and free of any governing agency’s involvement. People and their values are almost infinitely diverse, and people will never agree on many elements of social arrangements that might be subjected to uniform rules of governance. Hence, the greater the scope of strictly individual self-determination, the lesser the scope of governance, and the greater the tolerance with which people live and let live among their fellows, the more peaceful and flourishing society will be. The current social and political worlds are rife with conflict of all sorts about which one-size-fits-all rule the rulers ought to impose on us. This situation is bad enough without the libertarians adding to it their own intramural conflicts.

Costa Mesa Mayor Jim Righeimer

Mayor Jim Righeimer of Costa Mesa, California, is taking the city’s police union to court saying he was the target of police intimidation for trying to curb pension costs associated with the city’s police officers and other employees.

Costa Mesa has $200 million of unfunded pension liabilities for its government workers. The city has set aside less than 65 percent of the money it needs to pay its pensions. The city also has $36 million in unfunded retirement healthcare liabilities.

To get its fiscal house in order, Mayor Righeimer led the battle to outsource some city services and cut the city’s police force by 60 officers. These actions will reduce future pension costs. But the actions also brought the wrath of local police, its union, and investigators hired by the police union’s lawyers.

Watch Mayor Righeimer describe a retaliatory sobriety test, undercover investigators, and a tracking device on a city councilman’s car all because of pension reform.

The Affordable Care Act makes health insurance more expensive for young adults while simultaneously making it far less risky to go without insurance, according to a study by Conor Ryan, a health care analyst, and Chris Holt, the director of health care policy, at the American Action Forum. They find that opting out of coverage and paying their own costs out-of-pocket would be the most financially advantageous decision for most young adults.

• In 2014, 86 percent of young people would be better off opting out. As the penalty rises, that number will drop, down to 66 percent in 2019.

• By reducing the sample down to only those households who had medical expenditures in 2011, the study determined that 72 percent of those young adult households would be better off opting out of health coverage, with that number dropping to 59 percent in 2019.

• In a third scenario, which accounted for the inherent value of health insurance, 63 percent of young adults would see a financial advantage from opting out of health insurance, that number dropping to 41 percent in 2019.By reducing the risks of forgoing insurance while at the same time increasing the cost of health coverage, the Affordable Care Act incentivizes young adults to cover their own health expenses and opt out of insurance.

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For the pivotal alternative to Obamacare, please see the Independent Institute’s widely acclaimed book: Priceless: Curing the Healthcare Crisis, by John C. Goodman.

[Cross-posted at Psychology Today and John Goodman’s Health Policy Blog]

I have already written twice about three Republican Senators’ health-reform bill (here and here). Nevertheless, it continues to attract attention, and its likely most curious impact has not yet been described. The Patient CARE Act, put forward by Senators Hatch, Burr, and Coburn, would institute changes to marginal-income tax rates that would increase disincentives to work for some, especially those in prime earning years.

One problem with the American welfare state is that it imposes high effective marginal income-tax rates on people at low incomes. Economists describe these as “notches” or “cliffs,” and Obamacare is stuffed with them.

Casey Mulligan of the University of Chicago recently produced an analysis showing how Obamacare increases marginal income taxes across the income spectrum. Mulligan’s analysis is technically complex. A more accessible analysis was written by Michael Cannon of the Cato Institute before the bill was passed.

Obamacare is a nasty tangle of tax hikes, as well as subsidies for premiums, co-pays, and deductibles. Cannon showed that it imposes marginal-income tax rates ranging from about 70 percent to 80 percent on families of four that earn between about $30,000 and $90,000. This means that if a family gets a raise of $1,000, it will lose $700 or $800 of Obamacare benefits. For some individuals, Cannon showed that Obamacare imposes marginal income-tax rates of over 100 percent. (A more recent paper by Ed Haislmaier of the Heritage Foundation details how Obamacare benefits phase out as household income rises.)