Thanks to Jeff Tucker for calling my attention to this passage from Chairman Bernanke’s recent speech:

Another concern associated with additional securities purchases is that substantial further expansion of the balance sheet could reduce public confidence in the Fed’s ability to execute a smooth exit from its accommodative policies at the appropriate time. Even if unjustified, such a reduction in confidence might lead to an undesired increase in inflation expectations, to a level above the Committee’s inflation objective.

Emphasis added. The Greenspan-Bernanke Fed — perhaps the most accommodative central bank in human history — is not to blame for inflation. It is our failure to believe in the Fed that causes inflation. Wow.

News item: “California to Sell 24 Government Buildings for $2.3 Billion” (AP, October 12, 2010).

As a way of helping plug the State of California’s now-chronic budget deficit, this headline is welcome news. Among the state-owned properties on the auction block are LA’s Ronald Reagan State Building and San Francisco’s Civic Center. I have on several occasions during the past decade recommended such a “yard sale”, a period during which Sacramento has almost continuously overspent its tax revenue.

The “deal”, according to some of its supporters, will enable the legislature to retire about $1 billion in bonds still owed on the 24 properties, leaving another $1.2 billion to stanch the flow of red ink in the state’s general fund.

Critics allege, on the other hand, that the lease-back arrangement with private purchasers exposes the state’s taxpayers to somewhere between $1.5 billion and $5.2 billion over the next 20 or 30 years for renting space they previously “owned”.

Those numbers, it seems to me, are preposterous. Until now, California’s taxpayers have been on the hook, not only for the capital costs of those 24 buildings, but for the maintenance of the buildings and grounds plus security for the government employees who work there. It cannot be the case that the private costs of supplying those same services are equal to or anywhere close to those incurred by California’s Department of General Services. (The excess burden on the taxpayers of government employees’ salaries and fringe benefits, including health care and pensions, already are well-known.)

The point is that the selling of publicly owned properties to private interests is win-win. It gets California’s state government out of businesses it should never have been in the first place. The tragedy is that the state waited until real estate values had hit bottom, instead of taking action ten years ago, when I first suggested this solution to its looming budget problems.

The obvious question is, why stop at 24 government buildings? The State of California and its local government entities own and operate many more very valuable properties, including San Francisco’s Cow Palace and LA’s Coliseum. Sell baby, sell!

I was on the road a good deal last week, driving from my home in southeast Louisiana first through a long stretch of Mississippi to Tuscaloosa, Alabama, then to the outskirts of Birmingham and on to Auburn, Alabama, and finally from there back to my home by way of Montgomery and Mobile. Along the way, I was slowed from time to time as I passed by road and bridge repair sites, most of which were marked with a prominent sign indicating that funding for the work springs from the American Recovery and Reinvestment Act (ARRA), better known as President Obama’s “stimulus” bill.

Naturally I was thrilled to see my tax dollars at work, although honesty in reporting compels me to add that not much actual work seemed to be going on at the sites I witnessed. Most of the men visible there were just standing around. Of course, such standing is typical of public construction sites, so I do not suppose that what I saw was in any way owing to ARRA in particular.

This huge legislative enactment provides for a great variety of increased spending and some reduction in taxes over a period of ten years. The Congressional Budget Office computed that the net amount of money to be injected into or not removed from the economy as a result of the law’s provisions totals about $787 billion. At the time the bill was being debated and discussed, a common plea in its defense had to do with funding so-called shovel-ready projects to repair or replace public infrastructure — roads, bridges, and other structures — widely taken to be in a state of decay or disrepair. This plea made an appealing talking point, inasmuch as most Americans place at least some value of the services derived from such infrastructure.

Alas, only a tiny proportion of the funds expended so far has been directed to this well-advertised objective. According to the government’s website for tracking expenditures made from ARRA (Recovery.gov), as of October 1, 2010, $452.4 billion has been made available to a long list of government agencies, and $307.9 billion has been spent. Of the total amount disbursed, $88.3 billion has been expended by the Department of Health and Human Services, $63.0 billion by the Department of Education, and $62.5 billion by the Department of Labor. These three departments account for almost 70 percent of the total federal spending so far.  The Department of Transportation’s outlays come to $20.5, or 6.7 percent of the total.

Shovel-ready infrastructure projects have evidently proved difficult to find. Small wonder, then, that President Obama recently confessed to having “realized too late that ‘there’s no such thing as shovel-ready projects.’” Despite this realization, the president has not proposed that ARRA be repealed. Perhaps he had other objectives in mind from the start.

Among other leading spenders of “stimulus” money are the Department of Agriculture ($17.5 billion), the Social Security Administration ($13.7 billion), the Department of the Treasury ($7.6 billion), and the Environmental Protection Agency ($4.0 billion). A common element of these government departments and agencies is their shortage of shovels, not to mention shovel-ready projects. They also excel at dishing out subsidies to undeserving but politically potent private-sector recipients and at paying handsome salaries and benefits to drones and wreckers on the government payroll. The EPA also more than pulls its weight in impeding genuine economic progress, by adding costs and risks to all sorts of construction projects and many forms of ongoing production.

So far the National Aeronautics and Space Administration has spent $711.4 million of the more than $1 billion allocated to it. Is it possible to shovel outer space? No doubt the General Services Administration, the Department of Veterans Affairs, the National Science Foundation, the Railroad Retirement Board, and the National Endowment for the Arts are shoveling something. I leave it as an exercise for the reader to ascertain exactly what they are shoveling.

Yet, as I have affirmed, some work evidently is going on in Mississippi and Alabama to fix the roads and bridges. Honest. I saw it with my own eyes.

Left-wing critics in Sweden are incensed that the Swedish Academy has awarded the 2010 Nobel Prize in Literature to an ex-socialist. Jonah Norberg, a classical liberal writer from Sweden, explains in the online magazine spiked. Here’s an excerpt:

People who never voiced any concerns about the politics of other Nobel Prize winners – like Wisława Szymborska, who wrote poetic celebrations of Lenin and Stalin; Günter Grass, who praised Cuba’s dictatorship; Harold Pinter, who supported Slobodan Milošević; José Saramago, who purged anti-Stalinists from the revolutionary newspaper he edited – thought that the Swedish Academy had finally crossed a line. Mario Vargas Llosa’s politics apparently should have disqualified him from any prize considerations. He is after all a classical liberal in the tradition of John Locke and Adam Smith.

Norberg’s article is absorbing, incisive, and worth reading in its entirety.

Justice is among the oldest ideals in Western thought. Although philosophers have long debated its meaning and application, they have usually agreed that justice deals with individual merit or individual actions. The perennial question has been: by what standard should someone’s actions be praised or blamed, rewarded or punished? not: whom should society provide with unearned, undeserved gifts at the expense of others?

Yet recent decades have seen the rise of a new concept—”social justice”—that denies a necessary connection between what one does and what one is due. According to theories of “social justice,” someone may be entitled to income, opportunities, or power—and others may be compelled to provide those amenities—simply because some people possess them in relative abundance whereas others do not.

The development and validity of the idea of “social justice” are examined in a noteworthy article by Tulane University sociology professor Carl L. Bankston III in the fall issue of The Independent Review.

“The most troubling assumption in both the perspective and the theory of social justice involves power,” writes Bankston. It is troubling, he argues, because a redistribution of power in order to implement “social justice” would require ceaseless efforts to radically restructure society. “This goal,” Bankston continues, “is implicitly totalitarian, although it certainly does not necessarily lead to totalitarianism because of the many real-world barriers to translating moral goals into political action.”

“Social Justice: Cultural Origins of a Perspective and a Theory,” by Carl L. Bankston III (The Independent Review, Fall 2010)

Special offer for first-time subscribers: Subscribe online to The Independent Review and receive two complimentary issues—the next six issues for the price of four!

[This item first appeared in the October 12, 2010, issue of The Lighthouse, the Independent Institute’s weekly newsletter. For a free subscription, enter your email address here.]

Writing for CNBC’s “Behind the Money,” John Melloy describes the findings of a recent survey of investors:

Institutional investors fear a government policy mistake far more than inflation, terrorism, a housing double dip, a weak dollar, poor earnings or any other potential risk to the economy, according to a survey of 100 mutual fund, hedge fund and pension fund managers by Citigroup Global Markets.

“Government Policy Missteps” garnered more than a third of the participants’ votes as their biggest fears in the quarterly survey, ahead of the more than 15 percent who cited “Protectionism,” which is also strongly-tied to the actions of the Administration and Congress.

Last week, I had occasion to speak to several wealthy investors, each of whom attested to the apprehensions associated with regime uncertainty. Most of them seem convinced that the Fed is in the process of destroying the dollar, but none of them has a firm expectation about what will replace it as an international reserve currency. Many see no good prospects for domestic investment at present, except in certain commodities. Needless to say, perhaps, such an outlook by investors does not portend a robust recovery from the current recession, if indeed it is compatible with any recovery at all.

We live, as the saying goes, in interesting times—indeed, much too interesting.

Over at the New York Times Robb Mandelbaum notes how the Small Business Administration has caved to political pressures and once again made the definition of “small” business so broad as to include virtually every firm in the economy. This was a key theme of two books I wrote in 1996 and 2001, including one cited by Mandelbaum:

Political pressures inexorably push up small-business size definitions. That, at least, is the theory of Jonathan Bean, author of a history of the S.B.A. provocatively titled Big Government and Affirmative Action. As the name suggests, this is not exactly a work of scholarship; it’s a polemic offered by an ideologue staunchly opposed to any S.B.A.-style intervention in supposedly free markets. Nonetheless, the events of the last several weeks suggest Mr. Bean has a point. . . In other words, we are all small businesses now.

There is a pattern I’ve observed over the years: I’m right but . . . the inevitable “but” to persuade the reader not to take seriously the work of classical liberal scholars. They may be right here but they are not “scholars.” Note the phrasing: “As the name suggests” [Big Government and Affirmative Action] “this is not exactly a work of scholarship; it’s a polemic offered by an ideologue staunchly opposed to any S.B.A.-style intervention in supposedly free markets.”

Shades of Rush Limbaugh or Glenn Beck! This guy is right but don’t take him seriously. That’s how the MSM marginalizes the scholarship of classical liberals.

In fact, as I wrote back:

Big Government and Affirmative Action received many scholarly reviews – not one negative. And it was based on research in numerous archives, including every presidential library for the time covered: Eisenhower, Kennedy, Johnson, Nixon, Ford, Carter, Reagan. Plus interviews and agency records. Staying at youth hostels from Abilene and Austin to DC (and in between) was the price of scholarship. Even those who disagree don’t question the depth of research. . . . I could have saved all those road trips if I was truly an “ideologue”!

Serious scholarship is a drag in the research phase. Moreover, my conclusions were that markets were never free during this entire period (and earlier).  Based on the evidence, I argued that the corporate welfare funneled through the SBA would never end because it involves attacking an agency wrapped in images of “Mom and Pop” and aid to “disadvantaged” minorities.

Reviews:

“Bean is a master of administrative history, not just of the SBA but of the tremendous expansion of American government, especially beginning with and then flowing from the New Deal.”—American Historical Review

“His careful analysis, his all-encompassing bibliography, and his inclusive endnotes make this the definitive monograph.”—Journal of American History

“The first full-length academic assessment of the agency. At once a powerful argument for killing off the agency and a shrewd analysis for the political impulses that make its termination nearly impossible.”—Wall Street Journal

“[Bean] has a love/hate relationship with the SBA, and this tension is visible throughout his meticulously researched monograph.”—Business History

“Bean has done a model job in producing a smoothly written and often amusing policy history.”—The Independent Review

“This is a controversial interpretation of the history of the Small Business Administration and particularly of Affirmative Action. While some scholars may disagree with Jonathan Bean’s conclusions, none can ignore the deep research and forthright argument that he presents.”—Thomas K. McCraw

“With surgeon-like precision, Jonathan Bean peels away the layers of good-intentions, over-heated rhetoric, and racial politics of the Small Business Administration’s minority enterprise programs to reveal a history of corruption, fraud, and incompetence. . . . A courageous book.”—Donald T. Critchlow, Editor, Journal of Policy History

“Provides a critical analysis of the history of the SBA, which sheds light on the growth of government in the United States.”—Journal of Economic History

“Bean contends that this agency, scandal ridden and ineptly administered, was theoretically intended to open opportunities to all but has practically functioned as a leading wedge for racial preferences.”—Choice

“A well-written book about a troubled government agency. . . . Makes a significant contribution to our understanding of the postwar growth of the federal government.”—EH.net Reviews

“Provocative, meticulous, and engaging. . . . Reveals substantial common ground for political scientists and historians who share and interest in the political development of federal agencies.”—Political Science Quarterly

“Compact, yet extensively researched. . . . Bean’s work brings urgency to the central question: what can the U.S. government do to stimulate the development of black business”—Enterprise and Society

“A lucid account of how, having wrapped itself around ‘affirmative action,’ the Small Business Administration has managed to survive and prosper despite scandals and policy failures.”—Business Horizons

“A well-written, well-researched study.”—Wyatt Wells

But if the New York Times says these reviewers have it all wrong, well who is right?

As reported in the London Telegraph, the highly respected physicist Harold Lewis has sent a scathing letter of resignation to the American Physical Society (APS) protesting the corruption of science as a result of the politicization of climate research and as he states, “the (literally) trillions of dollars driving it, that has corrupted so many scientists, and has carried APS before it like a rogue wave. It is the greatest and most successful pseudoscientific fraud I have seen in my long life as a physicist.” Dr. Lewis was a student of J. Robert Oppenheimer, is Emeritus Professor of Physics at the University of California, Santa Barbara, and joins a growing number of prominent scientists such as William Happer (Princeton University) and Robert Austin (Princeton University) who are circulating a petition saying that:

By now everyone has heard of what has come to be known as ClimateGate, which was and is an international scientific fraud, the worst any of us have seen… We have asked the APS management to put the 2007 statement on ice until the extent to which it is tainted can be determined, but that has not been done. We have also asked that the membership be consulted on this point, but that too has not been done.

In an article by Declan McCullagh at CBSNews.com, he notes that:

In the aftermath of the embarrassing data leaks, however, Princeton’s Happer says that about half of the APS members they’ve contacted now support the petition (which, after all, is only asking for an independent analysis of the science involved).

Of the signatories so far, Happer says, 77 are fellows of major scientific societies, 14 members of the National Academies, one is a Nobel laureate, and there is a large number of authors of major scientific books and recipients of prizes and awards for scientific research. He adds: “Some have accepted a career risk by signing the petition. The 230 odd signatories can hardly be dismissed as lightweights compared to those who spread the message of impending climate disaster.”

Here also is the full letter from Dr. Lewis:

Sent: Friday, 08 October 2010 17:19 Hal Lewis

From: Hal Lewis, University of California, Santa Barbara
To: Curtis G. Callan, Jr., Princeton University, President of the American Physical Society

6 October 2010

Dear Curt:

When I first joined the American Physical Society sixty-seven years ago it was much smaller, much gentler, and as yet uncorrupted by the money flood (a threat against which Dwight Eisenhower warned a half-century ago).

Indeed, the choice of physics as a profession was then a guarantor of a life of poverty and abstinence—it was World War II that changed all that. The prospect of worldly gain drove few physicists. As recently as thirty-five years ago, when I chaired the first APS study of a contentious social/scientific issue, The Reactor Safety Study, though there were zealots aplenty on the outside there was no hint of inordinate pressure on us as physicists. We were therefore able to produce what I believe was and is an honest appraisal of the situation at that time. We were further enabled by the presence of an oversight committee consisting of Pief Panofsky, Vicki Weisskopf, and Hans Bethe, all towering physicists beyond reproach. I was proud of what we did in a charged atmosphere. In the end the oversight committee, in its report to the APS President, noted the complete independence in which we did the job, and predicted that the report would be attacked from both sides. What greater tribute could there be?

How different it is now. The giants no longer walk the earth, and the money flood has become the raison d’être of much physics research, the vital sustenance of much more, and it provides the support for untold numbers of professional jobs. For reasons that will soon become clear my former pride at being an APS Fellow all these years has been turned into shame, and I am forced, with no pleasure at all, to offer you my resignation from the Society.

It is of course, the global warming scam, with the (literally) trillions of dollars driving it, that has corrupted so many scientists, and has carried APS before it like a rogue wave. It is the greatest and most successful pseudoscientific fraud I have seen in my long life as a physicist. Anyone who has the faintest doubt that this is so should force himself to read the ClimateGate documents, which lay it bare. (Montford’s book organizes the facts very well.) I don’t believe that any real physicist, nay scientist, can read that stuff without revulsion. I would almost make that revulsion a definition of the word scientist.

So what has the APS, as an organization, done in the face of this challenge? It has accepted the corruption as the norm, and gone along with it. For example:

1. About a year ago a few of us sent an e-mail on the subject to a fraction of the membership. APS ignored the issues, but the then President immediately launched a hostile investigation of where we got the e-mail addresses. In its better days, APS used to encourage discussion of important issues, and indeed the Constitution cites that as its principal purpose. No more. Everything that has been done in the last year has been designed to silence debate

2. The appallingly tendentious APS statement on Climate Change was apparently written in a hurry by a few people over lunch, and is certainly not representative of the talents of APS members as I have long known them. So a few of us petitioned the Council to reconsider it. One of the outstanding marks of (in)distinction in the Statement was the poison word incontrovertible, which describes few items in physics, certainly not this one. In response APS appointed a secret committee that never met, never troubled to speak to any skeptics, yet endorsed the Statement in its entirety. (They did admit that the tone was a bit strong, but amazingly kept the poison word incontrovertible to describe the evidence, a position supported by no one.) In the end, the Council kept the original statement, word for word, but approved a far longer “explanatory” screed, admitting that there were uncertainties, but brushing them aside to give blanket approval to the original. The original Statement, which still stands as the APS position, also contains what I consider pompous and asinine advice to all world governments, as if the APS were master of the universe. It is not, and I am embarrassed that our leaders seem to think it is. This is not fun and games, these are serious matters involving vast fractions of our national substance, and the reputation of the Society as a scientific society is at stake.

3. In the interim the ClimateGate scandal broke into the news, and the machinations of the principal alarmists were revealed to the world. It was a fraud on a scale I have never seen, and I lack the words to describe its enormity. Effect on the APS position: none. None at all. This is not science; other forces are at work.

4. So a few of us tried to bring science into the act (that is, after all, the alleged and historic purpose of APS), and collected the necessary 200+ signatures to bring to the Council a proposal for a Topical Group on Climate Science, thinking that open discussion of the scientific issues, in the best tradition of physics, would be beneficial to all, and also a contribution to the nation. I might note that it was not easy to collect the signatures, since you denied us the use of the APS membership list. We conformed in every way with the requirements of the APS Constitution, and described in great detail what we had in mind—simply to bring the subject into the open.

5. To our amazement, Constitution be damned, you declined to accept our petition, but instead used your own control of the mailing list to run a poll on the members’ interest in a TG on Climate and the Environment. You did ask the members if they would sign a petition to form a TG on your yet-to-be-defined subject, but provided no petition, and got lots of affirmative responses. (If you had asked about sex you would have gotten more expressions of interest.) There was of course no such petition or proposal, and you have now dropped the Environment part, so the whole matter is moot. (Any lawyer will tell you that you cannot collect signatures on a vague petition, and then fill in whatever you like.) The entire purpose of this exercise was to avoid your constitutional responsibility to take our petition to the Council.

6. As of now you have formed still another secret and stacked committee to organize your own TG, simply ignoring our lawful petition.

APS management has gamed the problem from the beginning, to suppress serious conversation about the merits of the climate change claims. Do you wonder that I have lost confidence in the organization?

I do feel the need to add one note, and this is conjecture, since it is always risky to discuss other people’s motives. This scheming at APS HQ is so bizarre that there cannot be a simple explanation for it. Some have held that the physicists of today are not as smart as they used to be, but I don’t think that is an issue. I think it is the money, exactly what Eisenhower warned about a half-century ago. There are indeed trillions of dollars involved, to say nothing of the fame and glory (and frequent trips to exotic islands) that go with being a member of the club. Your own Physics Department (of which you are chairman) would lose millions a year if the global warming bubble burst. When Penn State absolved Mike Mann of wrongdoing, and the University of East Anglia did the same for Phil Jones, they cannot have been unaware of the financial penalty for doing otherwise. As the old saying goes, you don’t have to be a weatherman to know which way the wind is blowing. Since I am no philosopher, I’m not going to explore at just which point enlightened self-interest crosses the line into corruption, but a careful reading of the ClimateGate releases makes it clear that this is not an academic question.

I want no part of it, so please accept my resignation. APS no longer represents me, but I hope we are still friends.

Hal

Harold Lewis is Emeritus Professor of Physics and former Chairman of the Department of Physics, University of California, Santa Barbara; former Member and Chairman of Technology Panel, Defense Science Board; Chairman, DSB Study on Nuclear Winter; former Member, Advisory Committee on Reactor Safeguards; former Member, President’s Nuclear Safety Oversight Committee; Chairman, APS Study on Nuclear Reactor Safety; Chairman, Risk Assessment Review Group; Co-founder and former Chairman of JASON; former Member, USAF Scientific Advisory Board; and author of the books, Technological Risk and Why Flip a Coin.

For further information on the science of climate change and the claims of global warming, please see the following:

Hot Talk, Cold Science: Global Warming’s Unfinished Debate, by S. Fred Singer, with a foreword by Frederick Seitz

New Perspectives in Climate Change: What the EPA Isn’t Telling Us, by John R. Christy, Robert E. Davis, David R. Legates, Wendy M. Novicoff, and S. Fred Singer

HT: David E. Shellenberger

The San Francisco Chronicle reports today that the California Air Resources Board overestimated pollution from off-road diesel vehicles by 340 percent.

The agency had used that estimate as the basis for tighter emission regulations, adopted in 2007, that applied to bulldozers, dump trucks, forklifts, and other heavy-duty diesel machinery. Those controls halted the use of many of the 150,000 off-road diesel vehicles in the state, and the construction industry estimated their cost to the construction business at $10 billion to $12 billion, according to the Chronicle.

The air board and construction industry officials announced yesterday a proposal, to be put to a board vote in December, that would delay the implementation of the 2007 regulations until 2014 and exempt more vehicles from the rule. But some in the industry still question the candor of the board. They believe the air board hoped to delay the announcement of the new proposal—and minimize press coverage of the overestimate—until after election day in November, when California voters will decide on Proposition 23, a measure that would suspend AB32 (the state’s landmark legislation to curb greenhouse gas emissions) until the state unemployment rate drops to 5.5 percent or less for a year.

The diesel pollution overestimate is hardly the only error of the air board that has come to light in recent years.

In December 2008, the board voted in favor of regulations that were based on an internal study that overestimated—by almost 100 percent—the number of premature deaths caused by particulate matter emitted by diesel engines. The board scientist who oversaw that study was discovered to have lied about having obtained a doctorate from U.C. Davis. Although air board chairwoman Mary Nichols knew of the deception, she did not share that information with the rest of board until after they voted on the regulations. Ms. Nichols, mirabile dictu, still chairs the air board.

Ron Roberts, a fifteen-year member of the air board, told the Chronicle, “I think somehow some very poor decisions have been made and politics have entered the picture too much.”

Ya think?

Re-Thinking Green, a book I co-edited a few years ago with Robert Higgs, criticized the bureaucratic approach to environmental problem-solving for what I called its three i‘s: inefficiency, ineffectiveness, and invasiveness. To that litany, this latest episode reminds us to add another i problem that plagues environmental bureaucracies: incompetence.

The 2010 Nobel Prize in Literature awarded to my father, Mario Vargas Llosa, is great news for those of us who value freedom.

His work, as the Swedish Academy recognized in its public statement, explores the oppressive structures of power and the plight of the individual who rebels against them. His novels examine this theme through the potent means of literary creation, of course. His journalism, public speaking and non-fiction writing do it in more direct form; their impact has given some comfort, for decades, to those who struggle against authoritarian regimes.

Among the moving messages he and the family have received since the announcement are hundreds of letters of hope from Cubans and Venezuelans who see in him a symbol of what they stand for.

The cause of liberty in the Western Hemisphere has good reason to rejoice.