Reposted from Division of Labour:

Quoth a Facebook friend, in linking this piece about a proposed ban on salt in New York restaurants:

“Just when I thought people protesting the trans fat ban using a slippery slope argument were being ridiculous, some jackass goes & proves them right.

Art Carden, enjoy the sweet salty taste of vindication.”

I assume this was in reference to my last Forbes piece, which considered bans on trans fats. I think the people who are really vindicated here are Mario Rizzo and Glen Whitman, who have pointed out that the new paternalism leads us down a slippery slope. Here’s the last of Glen Whitman’s blog posts summarizing the points in the paper.

The form letter in the mail today from the Census Bureau—which I suppose everyone in the United States has received—urged me to participate in the upcoming census. “Your response is important,” it said, because “Results from the 2010 Census will be used to. . . .”

Can the reader guess how the sentence ends? In an earlier day, officials would have appealed to overarching principles. They would have pointed out that census figures are used to apportion seats in the House of Representatives, so by participating in the census, the citizen is helping to carry out the Constitution. Or they might have stressed the value of knowledge: the census gathers data useful in understanding social and economic processes.

Well, today government officials no longer focus on higher ideals. To their way of thinking, Americans aren’t interested in the Constitution or the search for truth. What motivates us is. . . greed! Here is how they explain why our help with the census is important: “Results from the 2010 Census will be used to help each community get its fair share of government funds for highways, schools, health facilities, and many other programs you and your neighbors need. Without a complete, accurate census, your community may not receive its fair share.” The appeal, you see, is to the entitlement mentality, to the idea that the federal government is a cash cow, a source of funds for everything our hearts desire.

Census officials may have miscalculated the mindset of citizens, however. Many Americans have not been conned by the “cash cow” picture of government benefits. They know that funds for “programs you and your neighbor need” come from taxes “you and your neighbors” pay, so that government benefits are a wasteful and rather corrupt system of robbing Peter to pay Paul—or (absurd as it may be) robbing Peter to pay Peter. To announce that the Census is the key to this grasping, irrational system of mutual plunder might prompt thoughtful, moral individuals to have nothing to do with it.

I’m on a plane now, halfway through a flight from San Francisco to Atlanta, accessing the internet via WiFi. This has been available on more and more planes, and I assume that soon it will be fairly standard. Indeed, soon it will be something we all take for granted. A few years ago, it was novel. A few years from now, it will just be one of the many blessings of the market that we take as a given in our daily lives.

This is a good reminder to me of all the wonders of the market we have come to rely on—what are technological luxuries one year soon become necessities in daily life. Businesses, too, rely on these technologies, and when they succeed in increasing their productivity we all benefit from a prosperous and growing market.

With government, of course, the opposite tends to be the case. We get used to onerous impositions that seem intolerable or ludicrous to one generation and are accepted as a fact of life by the next. The Income Tax, Social Security, immigration controls, the welfare state, federal meddling in schools, huge municipal police forces, warrantless wiretappings, the Patriot Act, the drug war, the TSA, and U.S. foreign wars—even many who generally trust the government might find many of these programs problematic, but are simply used to them. Some of these programs were not around for the first hundred years of the U.S. Some were not around until the last decade. We quickly become acclimated to the expensive and oppressive boondoggles of government, even as we take for granted the miracles we daily enjoy that come from the market.

Is there a point to this blog—other than the novelty of blogging from a plane? Simply put, try not to take the glories of the market for granted. The easy access to wonderful and diverse foods, the advances in medicine, the affordability and ubiquity of clothing and shoes, the amazing developments in computers, the internet, television, movies, magazines, books, automobiles, houses, airplanes, electronics, appliances, and the zillion other things that are now available to virtually everyone in our society. Don’t take it for granted, if for no other reason so as to stay vigilant in defending the institution of free enterprise that allows any of it to exist. For if we advance the cause of economic liberty, the material blessings will only multiply, and reach those remaining in relative poverty. If we fail and the state continues to advance in the market’s stead, what we will lose will be tragically unseen—developments and progress that we would one day have likely come to take for granted along with everything else, had the state not quashed the potential.

James Otteson speaks at the 2010 FEE Homeschool Debate Tournament on Karl Marx v. Adam Smith (HT: James Otteson).

The Classical Liberal Tradition: Marx v. Smith from FEE on Vimeo.

In an article published in the Wall Street Journal on March 8, 2010, Louise Radnofsky reports that the U.S. Conference of Mayors claims it “can put thousands to work on infrastructure projects, as was done in the 1930s.”

The mayors expressed a collective willingness to hire people on jobs that benefit their communities—provided, of course, that the costs of such projects are financed principally by taxpayers residing (and voting) in jurisdictions beyond city limits.

Mayor Robert Duffy of Rochester, NY, for example, opines that he will ba able to hire large numbers of his constituents to, in Ms. Radnofsky’s words, “repair roads, clean up graffiti and enhance sewers” – “much like”, according to Mr. Duffy, “the CCC [Civilian Conservation Corps] programs”. Other mayors justified their requests for more federal “stimulus” monies by drawing analogies to the New Deal’s Works Program Administration (WPA), which indeed employed hundreds of thousands of people forced out of work by the Great Depression.

Attentive students of the 1930s know better than to expect taxpayer-financed jobs to be anything more than a palliative for today’s “Great Recession”, which currently has stranded about 14 million Americans on the unemployment rolls.

First, contra Mayor Duffy, the CCC was a program that moved unemployed young men (but not women) from inner cities into camps located in the fresh-air environments of the Southeast and the Far West to blaze trails and plant trees on federally owned land. Among other things, the CCC’s built the Appalachian Trail, but it did not clean up graffiti or repair sewers.

Second, and what is more important, the WPA was known at the time both for its inefficiency (the word “boondoggle” was coined to describe it) and for the heavy-handed political influence brought to bear on its beneficiaries. To keep their jobs, many recipients of WPA largesse were required to contribute some of their wages to the Democratic Party or to campaign for local Democratic Party candidates.

Modern scholarship on the New Deal points to the conclusion that the policy initiatives of FDR’s administration prolonged the Great Depression and deepened its economic consequences far more so than if free-market forces had been allowed to run their course. America’s mayors and its president should pay heed to those lessons.

Government cannot “create” jobs except by taxing or borrowing from the private sector and, hence, destroying wealth and reducing employment opportunities there. If federal, state and local policy-makers do not soon wake up to that simple fact of economic life, the American experiment with liberty is at an end.

Rachel Hoffman was a 23-year-old graduate of Florida State University who was arrested for possession of marijuana in 2007, and then while under court supervision was arrested again in 2008.  Police tried to get her to identify other marijuana users in exchange for reduced charges, but Rachel wouldn’t rat out her friends.  So the police gave her the opportunity to participate in a  sting operation instead, to get some bigger targets.  She was given $13,000 to buy drugs and a gun from Deneilo Bradshaw and Bradshaw’s brother-in-law Andrea Green on May 7, 2008.

During the sting police lost track of Rachel, and her dead body was discovered 50 miles away two days later.  In separate trials both Bradshaw and Green have been convicted of murder.

In one sense the sting worked better than the police anticipated.  They had hoped to be able to get Bradshaw and Green on drug charges, but actually got them on the bigger charge of murder.  That success came at the cost of Rachel Hoffman’s life.

The murder convictions behind them, Hoffman’s family is now suing the City of Tallahassee, seeking damages in a civil suit.  Should the city be liable for Rachel’s death?

There is no question the Tallahassee Police Department made many mistakes by putting an inexperienced girl who had already demonstrated a penchant for irresponsible and risk-taking behavior in a position of dealing by herself with two individuals the Department knew were dangerous.  Indeed, the Department admitted this, disciplined several policemen, and gave its severest penalty to the officer who recruited and was handling Rachel, Ryan Pender, by firing him.

While I have much sympathy for Rachel’s family, it is unclear to me that the city should be liable.  The city is not a person and cannot make decisions — good or bad — and any monetary liability would come out of the pockets of the city’s taxpayers.  I live in Tallahassee, I am one of those taxpayers, and I was appalled when I learned the facts of this case.  Am I now responsible for paying civil damages to Rachel’s family?  The court will decide.

Meanwhile, in an interesting companion case, Ryan Pender, who is represented by a union that is appealing his firing, will be going to arbitration to see whether he is entitled to reclaim his job.  It would be ironic if Mr. Pender got his job back, essentially reversing the earlier judgment that he erred, but the city lost its lawsuit, essentially saying the citizens of Tallahassee are responsible for the loss of Rachel.

Although the president has made clear since May 2009 that he would hold many detainees in the war on terrorism indefinitely, and although the civilian trials of Khalid Sheikh Mohammed and others were bound to be show trials—the administration promised conviction and, failing that, continued detention nevertheless—I still am sad to see that Obama might use military commissions, caving to political pressure, in these high-profile cases. It means the politics of fearmongering can easily win out, and that even a tiny gesture toward a superficial fidelity to the rule of law is simply insufficient in Washington. It reminds me of when Bush wanted to allow a Dubai company to help run an American port, and, in the face of Democrats’ partisan attacks and hysteria among his own party, he backed down, caving to anti-Arab pressure. This has larger consequences for the rule of law, but, again, we must remember that even if Obama goes ahead with civil trials, it will be a sham of our legal traditions.

Former Democratic VP candidate Joe Lieberman and former GOP presidential candidate John McCain have introduced a new detention policy bill in response to the Christmas Day underwear bomber. From The Atlantic: “A close reading of the bill suggests it would allow the U.S. military to detain U.S. citizens without trial indefinitely in the U.S. based on suspected activity.”

This is another reminder of why, as horrible as Obama is on practically every issue, his competition was likely no better. Not that I expect Obama to veto this monstrosity. On detention policy, he has proven himself to be approximately as bad as his predecessor, if not worse.

Can we build a bipartisan police state, complete with the destruction of the last vestiges of due process, while we distract the public with political sideshows and debates over whether the government should control 60% or 61% of the economy? Yes we can.

Many commentators would have us believe that the economy hit bottom in the second quarter of 2009, and afterward commenced a recovery, albeit a “jobless” one, as employment continued to decline. The main reason for believing in this recovery seems to be that real gross domestic product (GDP) reached a trough in the second quarter of 2009 and increased somewhat in the following two quarters.

Although macroeconomists, especially in theoretical work, tend to equate the economy’s aggregate output and its aggregate income, this equation does not hold when output is measured by GDP. To arrive at the concept known as national income (or net national product at factor cost), one must deduct several items, the most important of which is the capital consumption (or depreciation) allowance on the fixed capital stock. In 2008, for example, GDP was $14,441 billion, and national income was $12,635 billion. Even then, one has not arrived at personal income, and getting there requires several additional deductions. In 2008, personal income was estimated to be $12,239 billion.

Personal income includes the various “factor returns”―wages, salaries, rents, interest, dividends, and proprietors’ income―plus transfer payments that individuals receive from the government. All of these items together constitute the income available to individuals for use in purchasing consumption goods, paying taxes, and saving. Personal income is much superior to GDP as a measure whose variations tell us something about changes in people’s economic well-being as the economy ebbs and flows.

In the fourth quarter of 2007, which the National Bureau of Economic Research has identified as the peak of the previous business expansion, personal income was running at an annual rate of $12,100 billion, but it did not reach its own peak until the second quarter of 2008, when it was $12,293 billion. After three quarters of decline, it reached a trough in the first quarter of 2009 at $11,953, having fallen by 2.8 percent. Its rise during the final three quarters of last year brought it back to 99.3 percent of its previous quarterly peak and placed it within hailing distance of what on its face might appear to be a complete recovery.

Examining how the components of personal income have changed, however, we see that the recovery so far has been somewhat ambiguous, even apart from its “joblessness.” For example, private wages and salaries, which peaked in the third quarter of 2008 at $5,419 billion and then fell during the next three quarters to $5,129 billion, or by 5.4 percent, regained only a small fraction of their loss and ended the year at an annual rate of $5,179 billion, still 4.4 percent below their previous quarterly peak. It seems unlikely that the current shortfall will be eliminated within the next two years, even if the economy continues to recover steadily. Absent a turnaround in private employment, the prospects for a return to the previous high rate of wage and salary payments seem even less encouraging.

While private wage and salary income was falling, the disbursement of government wages and salaries was ascending. Between the fourth quarter of 2007 and the fourth quarter of 2009, such government payments (at an annual rate) increased from $1,106 billion to $1,189 billion, or by 7.5 percent in just two years. This increase is a development that most private workers can only lament, considering that their taxes (present and future) must fund such enriched largess for government hirelings to enjoy at a time when private labor earnings have fallen substantially.

Several smaller components of personal income also remain well below  their levels in the fourth quarter of 2007. In the fourth quarter of 2009, proprietors’ income was still down by 3.3 percent, and interest-and-dividend income was down by almost 14 percent.

An exception to these patterns, however, pertains to personal rental income, which rose steadily after the first quarter of 2007 and ended up a whopping 137 percent higher in the fourth quarter of 2009. Most likely this oddity reflects many people’s shift from owner-occupied housing to rental housing as the ongoing real-estate bust caused them to lose the titles to their homes and, in most cases, required them to resort to rental housing―sometimes to rental of the same house they formerly owned. Although this incongruous occurrence may be good news for landlords, it cannot be taken as a good sign of recovery for the overall economy. On the contrary, it merely manifests a continuing adjustment to mistakes and foolish bets made during the housing boom, a process that still seems far from complete.

Another such troubling sign has to do with the flow of government transfer payments to individuals, which have increased greatly since the recession’s onset. In the fourth quarter of 2007, they were running at an annual rate of $1,721 billion; by the fourth quarter of 2009, they had reached $2,130, having risen by an astounding 24 percent in just two years. Of course, unemployment insurance payments (a subset of all government transfer payments to individuals) ballooned even faster, increasing from an annual rate of $34 billion in the fourth quarter of 2007 to $127 billion in the fourth quarter of 2009, or by 274 percent. In 2007 as a whole, total government transfers to individuals amounted to 14.2 percent of personal income; late in 2009, they constituted 17.5 percent. This rapidly growing dependence on the dole does not portend a healthy recovery. Indeed, it heralds the exacerbation of what was already a serious problem for the U.S. political economy.

In sum, when we disaggregate the recent increase in personal income, we find signs that the recovery has been weaker and less sustainable than many observers have taken it to be. Not all sources of personal income are created equal, and in the present circumstances, not even the rise in personal rental income counts as grounds for optimism. Because the recovery, such as it is, has begun only recently, it may acquire a healthier tone as it proceeds, if indeed it does. For the moment, however, we must recognize that recent changes give little warrant to the expectation of a full, sustainable recovery in the near term.

(Data discussed in this article come for the most part from Table B-29 of the statistical appendix to the 2010 Report of the President’s Council of Economic Advisers, pp. 365-366. A few items have been taken from other tables in this report. All dollar figures are given in nominal dollars. Between January 2008 and December 2009, the consumer price index increased by 2.3 percent, and between June and December 2009 it remained virtually unchanged, so correction for price inflation would have only a slight effect on the nominal dollar data for the period since the recession began.)