News reports suggest that the Obama administration’s “Cash for Clunkers” program has been an unalloyed success. Eligible for a rebate of up to $4,500 if they trade in their old (but not too old) gas-guzzlers, it is not surprising that the owners of qualifying vehicles have rushed to their local auto dealers to claim the subsidy.

Automobile manufacturers apparently are hard-pressed to fill the resulting increase in demand for newer, more fuel-efficient cars, which exhausted by the end of the program’s first week the $1 billion in taxpayer money appropriated initially to fund it. Congress now is on the verge of authorizing another $2 billion in public financing.

Let’s look at the consequences, which mimic eerily the causes and consequences of the subprime mortgage crisis: Car owners are being paid to trade in vehicles they already have paid for (or on which they can at present afford their remaining monthly loan balances) for taking on new debt that results in very modest improvements in fuel efficiency.

Gullible buyers who take advantage of the “cash for clunkers” program will see their insurance premiums rise and, in many states, also will be faced with higher fees for registering their new cars, buying license plates for them, or both. Depending on the time horizon over which they plan to own their new vehicles, those additional costs may well offset the $3,500 or $4,500 taxpayer-financed “rebate” to which they are entitled. And “cash for clunkers” predictably will reduce the supply of used cars (and also that of the parts for repairing them), thus raising their prices and harming anyone who is not fixated on fuel efficiency but rationally makes purchase decisions based on the overall cost per mile driven of “new” versus “old” transportation options.

“A sucker is born every minute”, as P. T. Barnum once said.

But economists, who, like me, are very useful people, see a silver lining in every black cloud: Within the coming year, many low-mileage previously owned (aka “used”) cars will be on the market at clearance prices because their owners realize that they cannot afford them. Wait to buy. You can then exploit the Obama administration’s failure to comprehend the lessons taught in Economics 101.

As the race for the presidency began to get rolling in 1928, the editors of Life magazine (at that time an outlet for satirical writing) prevailed on my fellow Cherokee Oklahoman Will Rogers, arguably the best known and best loved man in the country, to run for the office as the candidate of the Anti-Bunk Party.

Rogers agreed to do so. Whereas Calvin Coolidge had responded to requests that he run again by saying “I do not choose to run,” Rogers made his slogan “He chews to run.”

In his acceptance speech, he said:

Life‘s offer has left me dazed—if I can stay dazed, I ought to make a perfect candidate. Now, let us be honest. We want the wet vote and we want the dry vote. Our plank hereby endorses wine for the rich, beer for the poor, and moonshine liquor for the prohibitionist.

Many famous persons, including Amelia Earhart, Babe Ruth, and Henry Ford, endorsed Rogers’s candidacy. In August, Rogers challenged Herbert Hoover to a joint debate, “in any joint you name,” but Hoover, who preferred a good cigar to a joint, did not meet the challenge (a fitting warm-up, no doubt, for a series of other challenges he would fail to meet from 1929 to 1933).

Although a number of voters wrote in Rogers’s name on their ballots in the November election, the political system was not ready for anyone running under the No Bunk banner, and, sad to say, Hoover was ultimately declared the winner. Said Rogers: “We went into this campaign to drive the Bunk out of politics. But our experiment, while noble in motive was a failure.” He concluded: “the thing that stopped our party is that we are a hundred years ahead of times.”

Who can deny that ever since 1928, without a doubt, political discourse in this country has consisted almost entirely of bunk? Where are the cowboy philosophers when we need them? Barack Obama, I understand, can’t even do a rope trick—but a growing number of Americans do seem to be concluding that he tricked them into voting for him last November by promising them “change.” If Rogers had been running in 2008, he might have promised the voters that he would change their flat tires.

My old friend John Chapman channels Bastiat in a new op-ed:

A lesson from the parable is that government spending cannot create wealth; it can at best redistribute it, often accompanied by waste. The clunkers program certainly helps auto manufacturers, sellers and participating buyers, today; this is what’s seen. But it hurts used-car buyers, who now face constricted supply, along with used-car dealers, repair shops, parts suppliers, mechanics and a myriad number of businesses in other industries who face lower sales revenues.

Practically every day, a new video is circulating on the internet showing severe examples of police misconduct. As the police become increasingly militarized and brazen in their violent attacks—for example, see this story on a Baptism party in a private backyard broken up for excessive noise, ended when cops tasered a grandfather and a pregnant mother (who has been perversely charged with “assaulting a police officer”)—cameras may be our best hope in preventing the emergence of a full-blown police state. The police killing of Oscar Grant at the Oakland BART station on New Years Day was made famous and prosecutable because it was caught on so many cellphone cameras. Even government cameras give a glimpse into police corruption and criminality, such as with this recent footage of multiple officers agreeing to frame a woman to cover up a car accident caused by one of their own.

I used to think that police brutality was becoming much more commonplace, but maybe it’s only more visible now because of technology? I would guess it’s a combination of both factors at play.

Of course, government wants to monitor what we do, but keep everything it does secret. This is why Obama has gone so far as to push for an amendment to the Freedom of Information Act purely to prevent photos depicting torture of detainees, and has blocked the release of documents pertaining to the destruction of videos revealing torture in interrogation. But the technology is there, and the surveillance state isn’t going away, so as long as cameras advance and proliferate, I say: Turn them against the state. It may be one of our best checks on government power.

Attention High-school Students & College Undergrads:

Don’t let your intellect atrophy! Make summer vacation a time to delve into new subjects or to probe topics that have sounded intriguing to you. The Challenge of Liberty Summer Seminar explores economics, liberty, and society using lectures, discussion, directed reading, and multimedia presentations.

Students consistently give our summer seminar high marks. Here’s what one attendee wrote about the June 2009 session: “This seminar was so much fun. Each speaker was passionate and enthusiastic about economics and wanted to help students understand and appreciate economics so that they can make better choices and impact the future.” Another attendee wrote: “If you want to gain a deeper understanding of how markets and liberty work together, you need to check out the Independent Institute’s summer seminars!”

The preliminary schedule for the August session is below.

The Challenge of Liberty Summer Seminar, led by Brian Gothberg
The Independent Institute
100 Swan Way
Oakland, Calif.
510-632-1366
events@independent.org

August 10-14, 2009
9:00 AM to 4:00 PM

Tuition: $195. Includes books, snacks, and lunch.

Seminar Page

Map and Directions

Preliminary Schedule for August 10-14

Monday: Economics and Liberty

1. History of Economics

2. Adam Smith on the Role of Government (Dr. James Ahiakpor, CSU East Bay)

3. Liberty (Dr. José Yulo, Academy of Arts University and The Independent Institute)

4. Civil Liberties in the United States (Anthony Gregory, The Independent Institute)

Tuesday: Market Chaos or Hidden Order?

1. Price and the Environment (Gregory Rehmke, Economic Thinking)

2. Prices: Their Importance and Their Effects

3. Markets: How They Function and How They Are Hindered

4. Jobs: Their Creation and Destruction

Wednesday: Monopoly or Competition?

1. How Competition Operates

2. The Birth of Monopolies

3. Monopolies and Technology (Dr. Fred Foldvary, Santa Clara University)

4. Public Policy and Monopolies

Thursday: Market Failure or Government Failure?

1. Public Goods

2. Property Rights and the Environment (Mike Winther, Institute for Principle Studies)

3. Energy, Public Goods, and Commerce

4. Panel Discussion on Environmental Protection (Anthony Gregory and Mike Winther)

5. National Defense (Anthony Gregory)

Friday: Inflation, Recession, and Government

1. The Great Depression

2. Inflation (Carl Close, The Independent Institute)

3. Austrian Theory of the Business Cycle (Dr. Fred Foldvary)

4. Evaluations and Photos

The Onion News Network hilariously and insightfully satirizes the escalation of the gigantic spending, debt, and disregard for constitutional law by the U.S. government, “U.S. Government Stages Fake Coup to Wipe Out National Debt:”

U.S. Government Stages Fake Coup To Wipe Out National Debt

To understand the folly of Barack Obama’s New, New Deal, see the following book:

Depression, War, and Cold War: Challenging the Myths of Conflict and Prosperity, by Robert Higgs

HT: Robert Higgs

Here’s the story: The Securities and Exchange Commission (SEC) accused Bank of America of concealing information from investors regarding bonuses paid to Merrill Lynch execs prior to the Bank’s take-over of Merrill.  Bank of America has settled the issue by paying $33 million to the federal government, without admitting any wrongdoing.  SEC officials say this is the largest penalty ever imposed for a failure to disclose relevant information in connection with shareholder votes.  It’s almost too obvious to say, but I’m saying it anyway, because it is an important part of the story: The $33 million is paid by the owners of Bank of America, its stockholders.

So, as I read the story, the SEC says that Bank of America executives concealed information from its shareholders prior to the shareholder vote to merge, harming those shareholders.  Therefore, the same shareholders who were harmed by the concealment now have to pay another $33 million.  Is this justice?

Sustainability is a compelling concept these days, although it always seems to be applied to people’s private choices.  Meanwhile, everybody knows the federal government has committed to an unsustainable flow of future expenditures.  The promises the federal government already has made for Social Security and health care cannot possibly be met.  If our legislators took the concept of sustainability seriously, Congress would be looking for ways to cut back on government programs, not add more.

The Cash for Clunkers program is an interesting example of the government’s ability to manage its finances.  Originally established with a $1 billion budget, the program ran through that money in its first week, and Congress is now working on providing it with an additional $2 billion.  So, the program will cost three times its original budget.  Add to this the program’s bureaucratic problems and delays in registering cars, and it’s hard to hold this up as an example to demonstrate government competence.  Meanwhile, Congress is struggling with health care reform, and President Obama is offering the claim that this reform will lower government’s expenditures.  If the federal government can’t do any better on a simple program like giving out cash when people trade in their used cars, what hope is there that they can control cost on something as complex as reforming the health care system?

When Medicare was established in 1966 the program was projected to cost $12 billion in 1990, including an allowance for inflation.  The program’s actual cost in 1990 was $107 billion, or nine times higher than its original estimate.  Is there any reason to think that the optimistic projections of today’s health care reform have a better chance of being realized than the original projections for Medicare, or the budgeted cost for Cash for Clunkers?

Sustainability means little when applied to people’s personal consumption choices, because if some options become scarcer and more expensive, people substitute out of them into other options.  If prices rise for some goods, the market mechanism provides incentives for entrepreneurs to produce substitutes.  Sustainability is very applicable to government, because politics makes government promises difficult to undo, and the government’s force of taxation enables it to extract resources from productive individuals to meet those promises until it destroys their productivity.  With government, it appears that the only self-correcting mechanism is a complete collapse of the government.

President Obama was very effective at generating support among America’s young voters, who cast their votes for change.  A few decades from now, it will be very interesting to see how those voters in their 40s will face up to the unsustainable change they supported in their 20s.

According to the entry for me at Wikipedia, which I hope is reliable, I am a libertarian anarchist. Why would any person who fits that description work for the government at all, not to speak of working without pay? Well, my story is straightforward.

Some time ago I received in the mail from the U.S. Census Bureau a form to be filled out, to wit, the 2007 Survey of Business Owners and Self-Employed Persons questionnaire. I naturally threw it in the trash.

A few weeks later, I received another questionnaire whose cover letter read in part as follows:

We have not received your response to the 2007 Survey of Business Owners and Self-Employed Persons (SBO) questionnaire, Form SBO-1, which was mailed to you several weeks ago. These data are essential to business and government decision making. We need information about your business to provide reliable data for your industry and geographic area.

We remind you again that your response to this survey is mandatory under Title 13 of the United States Code. Applicable provisions of the law are shown on the back of this letter.

I hastened to read the back of the letter, where I found the following:

Mandatory Provisions of Law Pertaining to Economic Censuses — Section 224 as amended by Section 3571 of Title 18 United States Code.

Whoever, being the owner, official, agent, person in charge, or assistant to the person in charge, of any company, business, institution, establishment, religious body, or organization of any nature whatsoever, neglects or refuses, when requested by the Secretary or other authorized officer or employee of the Department of Commerce or bureau or agency thereof, to answer completely and correctly to the best of his knowledge all questions relating to his company, business, institution, establishment, religious body, or other orgnization, or to records or statistics in his official custody, contained on any census or other schedule, or questionnaire prepared and submitted to him under the authority of this title, shall be fined not more than $5,000; and if he willfully gives a false answer to any such questions, he shall be fined not more than $10,000.

I thought about throwing the second form in the trash, as I had thrown the first one. Then I thought about telling the U.S. Bureau of the Census to go to hell. Then I thought about the large, threatened fines, and I filled out the form. I spent about 15 minutes doing so. My rate of pay for having done so works out to exactly zero dollars per hour, which is somewhat less than I usually charge for my services.

Well, big deal, you may be thinking. But I invite you to pause and consider afresh what this little episode in my life illustrates.

First, so far as I can tell from reading the U.S. Constitution, the government has no Constitutional authority to demand that I answer these questions about my business. Perhaps, if I am mistaken, someone can direct me to the relevant clause of the document.

Second, the government’s stated rationale for collecting the information is lame. No great purpose is to be served. On a FAQ sheet included with the questionnaire, one finds a section headed “Why does the government take this survey?” But this section’s text merely states that the Census Bureau is required by law to take the survey every five years and describes the variables that are surveyed and the way in which these data will be combined with other data the government collects. The section does not give a substantive reason for collecting the data in the first place, seemingly assuming that if a certain kind of information might be of interest to the government or someone else, that interest suffices to justify the information’s forced collection at the expense of those who possess the information.

Another section of the FAQ sheet tells us “Who uses the survey data.” Users are said to include the Small Business Administration, local government commissions, government agencies at all levels, “a national women-owned business trade association” not identified by name, consultants and researchers, and individual businesses. In truth, however, information about my business is in all cases, literally as well as figuratively, none of their business. If these people want information about my business, why can’t they make me an offer for it? After all, it’s my property.

Well, as Al Capone is supposed to have said, you can get a lot more done with a kind word and a gun, than with a kind word alone. And everything the government gets done — including its extraction from me of information about my business — it gets done by threatening  people with violence.

Oh, Higgs, you might be saying, you’re just overwrought and hyperventilating. But am I really? Suppose that I had very strong feelings about the privacy of my personal affairs, so I simply refused to provide the information requested. Eventually, subject to the vagaries of the government’s escalating enforcement actions, I might be issued a summons, which of course, I, having the strong feelings that I have about the matter, would ignore. Hence, in due course, police officers would be sent to arrest me for having ignored the summons. And I, having the strong feelings that I have about the matter, would naturally resist the arrest. Wherupon the police officers might shoot me dead if they felt inclined to do so, rather than simply beating me savagely and hauling my broken body off to jail.

And for what would the police have battered or killed me in this case? Precisely for having refused to fill out a bullshit form to provide information about my business that no one had a just right to demand of me in the first place. Obviously there’s no real justice at work here, but where’s the logic in the use of such brutally dispropotionate sanctions in response to such a petty act of noncompliance?

The logic — the same logic that leads the government to attach similar criminal sanctions to a indefinitely great number of petty infractions of its idiotic rules — is that the government wants you and me to obey its dictates slavishly regardless of their importance. It seeks not simple compliance where compliance might be required to accomplish an important public purpose. Instead it seeks immediate, unquestioning, universal compliance — including compliance with dictates so trivial that they ought never to have been the subject of government action in the first place — in order to put us in our place.

And that place is with our faces constantly under the government’s boot.

We live in a police state, a tyranny of genuinely grotesque dimensions, but because it has developed gradually over more than a century, we have gradually grown accustomed to its outrages and to its moronic and insulting requirements, each accompanied by criminal sanctions that amount to death threats, should we continue to resist. It is not a pleasant feeling to live immersed in a sea of death threats, surrounded by a variety of armed government thugs prepared to dish out beatings, tasings, and death whenever anyone, for whatever reason, resists the government’s orders. That we Americans have resigned ourselves to living in such an environment and, in many cases, continue to refer to this police state as a free country speaks volumes about our ability to follow Winston Smith’s example, in George Orwell’s Nineteen Eighty-Four, of loving Big Brother.

When Honduras’s president Manuel Zalaya attempted recently to unconstitutionally extend his powers, in this case to thwart his term limit, Honduras’s Congress—controlled by the president’s own party—and Supreme Court acted quickly and decisively to remove him from office, and utilized the military to enforce their rulings.

In contrast, as a series of U.S. presidents has unconstitutionally extended the powers held by the executive branch (see our Recarving Rushmore: Ranking the Presidents on Peace, Prosperity, and Liberty), the U.S. Congress and Supreme Court have either stood by and done nothing, or actively aided and abetted the power grab. They have in the process also turned full discretion over the use of military power to the president, further gutting any “checks and balances”.

Which is the more Constitutional republic?

The U.S. has allied itself with the governments of Cuba, Venezuela, and other bastions of “freedom” in condemning the removal of a would-be despot from power, and has frozen its foreign aid to Honduras—a staggering $43.2 million for the year ending September 30, 2009, budgeted to increase to $68.2 million for the fiscal year starting October 1.

Honduras’s government ought to view this liberation from American patronage as an immense opportunity to become a truly free country. Freed 16 years ago from 50 years of Soviet rule that had utterly impoverished its people, Estonia chose as its Prime Minister a 32-year-old history teacher whose only knowledge of economics consisted of reading Free to Choose. He thereupon proceeded to eliminate all tariffs, implement a low, single, flat tax, and eliminate almost all government economic regulations. The results have been dramatically positive, with 10%+ compound annual growth rates. As Alvaro Vargas Llosa noted:

Thanks to bold reform, [Estonia and other] ex-communist countries have taken some 40 million people out of poverty in the last seven years. It is easy to forget that only one generation ago these republics were in the hands of regimes that had obliterated the institutional foundations of the free society.

How wonderful if Honduras were to be emboldened by its current pariah status to seize the opportunity to implement absolute economic freedom. By eliminating barriers to the productive deployment of land, labor and capital, and allowing its inhabitants to retain the fruits of their labor, Honduras could become the Hong Kong of Central America. In the process, untold numbers of investors and entrepreneurs put off by the increasing infringement of their rights in the U.S. and elsewhere, and seeking a safe haven for the deployment of their talents and treasure would likely beat a path to its borders. If Honduras put out the Welcome mat, it might just usher in the “Honduran century.”