FREER IS BETTER

BY JOHN STOSSEL

The exceptional economic prosperity of America was the result of exceptionally free market conditions. So why do some want the US to emulate the restrictive policies of far less successful nations?

The 2010 Index of Economic Freedom lowers the ranking of the United States to eighth out of 179 nations — behind Canada! A year ago, it ranked sixth, ahead of Canada.

Don’t say it’s Barack Obama’s fault. Half the data used in the index is from George W. Bush’s final six months in office. This is a bipartisan problem.

For the past 16 years, the index has ranked the world’s countries on the basis of their economic freedom — or lack thereof. Ten criteria are used: freedoms related to business, trade, fiscal matters, monetary matters, investment, finance, labor, government spending, property rights and freedom from corruption.

The top 10 countries are: Hong Kong, Singapore, Australia, New Zealand, Ireland, Switzerland, Canada, the United States, Denmark and Chile.

The bottom 10: Republic of Congo, Solomon Islands, Turkmenistan, Democratic Republic of Congo, Libya, Venezuela, Burma, Eritrea, Cuba, Zimbabwe and North Korea.

The index demonstrates what we libertarians have long said: Economic freedom leads to prosperity. Also, the best places to live and fastest-growing economies are among the freest, and vice versa. A society will be materially well off to the extent its people have the liberty to acquire property, start businesses, and trade in a secure legal and political environment.

Bill Beach, director of the Heritage Foundation’s Center for Data Analysis, which compiles the index with The Wall Street Journal, says the index defines “economic freedom” to mean: “You can follow your dreams, express yourself, create a business, do whatever job you want. Government doesn’t run labor markets, or plan what business you can open, or over-regulate you.”

We asked Beech about the U.S. ranking. “For first time in 16 years, the United States fell from the ‘totally free’ to ‘mostly free’ group. That’s a terrible development,” he said. He fears that if this continues, productive people will leave the United States for freer pastures.

“The United States has been this magnet for three centuries. But today money and people can move quickly, and in less than a lifetime a great country can go by the wayside.”

Why is the United States falling behind? “Our spending has been excessive. … We have the highest corporate tax rate in the world. (Government) takeovers of industries, subsidizing industries … these are the kinds of moves that happen in Third World countries. …”

Beach adds that the rule of law declined when the Obama administration declared some contracts to be null and void. For example, bondholders in the auto industry were forced to the back of the creditor line during bankruptcy. And there’s more regulation of business, such as the Dodd-Frank law for the financial industry and the new credit-card law. But how could the United States place behind Canada? Isn’t Canada practically a socialist country?

“Canada might do health care the wrong way,” Beach said, “but by and large they do things the right way.” Lately, Canada has lowered tax rates and reduced spending.

China is an interesting case. It ranks 140th out of 179, but its economy is on fire. How can this be?

“They have a complex economy,” Beach says. “Around the edges of the mainland are rapidly growing city-states, like Hong Kong, which are pockets of enormous prosperity (and) economic freedom. But within the mainland is a very different economy. It’s heavily controlled by the state. If you look at the growth rates of these two regions, you’ll see one hardly growing.”

And look at France. It ranks 64th, behind Mexico, Peru and Latvia! Yet France is a much wealthier country.

“France is doing their best to fall out of the index,” Beach explained. “That’s a country that says, ‘We’d rather not be economically free if we can be economically secure.'”

Which countries should we keep an eye on in the future? Beach says parts of Central and South America are awakening. “Brazil has pretty much broken through after years of doing the right thing and is on the verge of serious sustained economic growth.”

And Mexico is improving: “If Mexico could fix its drug war problem, we’d see the good things happening there.”

If we want to reverse America’s decline, we’d better get to work. There’s a lot of government to cut.


John Stossel is host of “Stossel” on the Fox Business Network. He’s the author of “Give Me a Break” and of “Myth, Lies, and Downright Stupidity.” To find out more about John Stossel, visit his site at johnstossel.com

RED HERRING POLITICS

BY THOMAS SOWELL

One useful thing to remember is that in politics, as in sports, it helps to keep your eye on the ball. Let’s see how politicians try to distract voters from the issues just before a close election.

In an election year, this is the time for an “October surprise”‒ some sensational, and usually irrelevant, revelation to distract the voters from serious issues. This year, there are October surprises from coast to coast. There are a lot of incumbents who don’t want to discuss serious issues ‒ especially their own track records.

This year’s October surprise that is getting the biggest play in the media is the revelation that California gubernatorial candidate Meg Whitman once employed a housekeeper ‒ at $23 an hour ‒ who turned out to be an illegal immigrant. It is great political theater, with activist lawyer Gloria Allred putting her arm protectively around the unhappy-looking woman.

But why anyone should be unhappy at getting $23 an hour for housekeeping is by no means clear. Maybe she is unhappy because Meg Whitman fired her when she learned that her housekeeper was an illegal immigrant, despite false documents that indicated she was legal when she was hired.

What is Meg Whitman supposed to be guilty of? Not being able to tell false documents from real ones? Is that what voters are supposed to use to determine who to vote for as governor of California? A far more important question is whether voters can tell false issues from real ones.

October surprises are especially phony when they are used on behalf of someone with a long track record in government, like Jerry Brown, who has held government jobs ranging from state attorney general to mayor of Oakland to governor of the state.

What did Jerry Brown do the last time he was governor? That ought to tell us a lot more than whether Meg Whitman is a document expert. She is not running for a job as a document expert.

One appointment by Governor Jerry Brown ought to tell us a lot about his ideology. His most famous ‒ or infamous ‒ appointment was making Rose Bird chief justice of the California supreme court.

She over-ruled 64 consecutive death penalty verdicts and upheld none. Apparently no judge or jury could ever give a murderer a trial perfect enough to suit Rose Bird.

To hear Rose Bird and her supporters tell it, she was just “upholding the law.” But, fortunately, the California voters saw right through that pretense, and realized that she was doing just the opposite ‒ imposing her own personal opposition to the death penalty in the guise of interpreting the law. No California chief justice appointee had ever been voted off the bench by the voters before Rose Bird, but she was roundly defeated when 67 percent of the voters voted against her in a confirmation election required by California law.

Two of her like-mind colleagues on the California supreme court were likewise voted off the bench. They, too, were appointed by Governor Jerry Brown.

The question is not whether you are for or against the death penalty. If you don’t like the death penalty, you can vote to repeal it. But it is not the job of judges to deprive the voters of their right to choose the laws they want to live under.

This is part of a much larger arrogant political ideology, in which anointed elites impose their own notions, in utter disregard of the laws passed by the people’s elected representatives.

At one time, Governor Jerry Brown was riding high in the Democratic Party, and was considered a rising prospect for that party’s nomination for President of the United States. Then something happened that told us all what kind of man he was.

There was an infestation of Mediterranean fruit flies out in California’s agricultural heartland in the interior valleys. Despite being urged to allow spraying of insecticide out in the valleys, to nip the infestation in the bud, Governor Brown pandered to the environmental extremists and refused.

The net result was that the “Med flies,” as they were called, spread from the valleys out into cities and towns as far west as the San Francisco Bay Area. Faced with a major political disaster, Jerry Brown finally authorized spraying ‒ over a vastly larger area than when he was first asked. That fiasco spared us a Jerry Brown administration in Washington.

No wonder his supporters have sprung an October surprise about Meg Whitman’s housekeeper. They need a distraction from his record.

Some of the longest-serving members of Congress, whose party has overwhelming majorities in both houses, are having far closer election races than they are used to. These include Senate Majority Leader Harry Reid and Speaker of the House Nancy Pelosi, not to mention 18-year veteran Senator Barbara Boxer.

Despite their long records, they seem to want to talk about everything except their records. They could tell us why they voted for ObamaCare and huge stimulus bills, without time enough to read them. Instead, they have come up with enough red herrings to stock an aquarium.

One of the big distracting talking points is that the Republicans in Congress have been “the party of No.” Given the overwhelming majorities of the Democrats in both houses, in addition to their control of the White House, whether the Republicans said “yes,” “no” or “maybe” could not stop the Democrats from doing anything they wanted to do.

It should also be noted that the Democrats were in power in Congress before President Obama got to the White House. So “the mess” that he constantly reminds us he “inherited” includes runaway spending by Congressional Democrats, of whom Senator Barack Obama was one of the more prominent big spenders.

Usually, the incumbents can talk about their “experience.” But experience at what? Deception? Earmarks? Reckless spending?

Senator Harry Reid is playing the race card, saying that he can’t see how any Hispanic can vote for Republicans. But this is the same Harry Reid who in 1993, rejected “those who ask us to wink at illegal immigration” and warned against having “the social and cultural makeup” of the country “radically altered” by these immigrants.

In 1993, Senator Reid introduced a bill ‒ the Immigration Stabilization Act ‒ to cut back on all immigration, both legal and illegal.

Senator Reid said: “Our federal wallet is stretched to the limit by illegal aliens getting welfare, food stamps, medical care and other benefits, often without paying taxes.” He said, “Safeguards like welfare and free medical care are in place to boost Americans in need of short-term assistance,” and added: “These programs were not meant to entice freeloaders and scam artists from around the world.”

Today, of course, Senator Reid is singing an entirely different tune. He has what Thorstein Veblen once called a “versatility of convictions.” So do a lot of “experienced” politicians.

Instead of talking about the track records of people who have been wielding power in Washington for years, much of the mainstream follows the scent of the red herrings that have been dragged across their trail and focuses on the personal lives of the candidates who are challenging the incumbents.

Whether it is Meg Whitman’s housekeeper or remarks that Christine O’Donnell made when she was a teenager, or how much money Carly Fiorina made when she was a corporate CEO, the media are right on it ‒ and right off the serious issues about what the incumbents have been doing to this country.

If everyone who made silly remarks when they were teenagers were prevented from being elected, at least half the elective offices in the country would be vacant. And since when is earning a high income in private industry a disqualification for holding public office?

The Obama administration has fewer people with real world experience in the private sector than any other administration in years. Maybe if they had more people with practical experience in the economy, we wouldn’t be in the mess that politicians created.

The big question for the election next month is whether the voters keep their eye on the ball and judge candidates by what policies they advocate or whether they can be thrown off the track by red herrings.

We have already seen in 2008 what can happen when voters fail to pay attention to a presidential candidate’s track record, and let themselves be dazzled by rhetoric, symbolism and media hype. We are losing not only our jobs but our country ‒ and this could be our last chance to stop the Obama-Pelosi-Reid juggernaut.


Thomas Sowell is a Senior Fellow at The Hoover Institution at Stanford University in California. He has published dozens of books on economics, education, race, and other topics. His most recent book is The Housing Boom and Bust, from April 2009.

POLITICIANS EXPLOIT ECONOMIC IGNORANCE

BY WALTER E WILLIAMS

Many politicians and ‘progressives’ often try to hide their true intentions or lack of knowledge by playing semantics games with the laws of economics.  Let’s see some examples.

One of President Obama’s campaign promises was not to raise taxes on middle-class Americans. So here’s my question: If there’s a corporate tax increase either in the form of “cap and trade” or income tax, does it turn out to be a middle-class tax increase? Most people would say no but let’s look at it.

There’s a whole subject area in economics known as tax incidence — namely, who bears the burden of a tax? The first thing that should be recognized is that the burden of a tax is not necessarily borne by the party upon whom it is levied. That is, for example, if a sales tax is levied on gasoline retailers, they don’t bear the full burden of the tax. Part of it is shifted to customers in the form of higher gasoline prices.

Suppose your local politician tells you, as a homeowner, “I’m not going to raise taxes on you! I’m going to raise taxes on your land.” You’d probably tell him that he’s an idiot because land does not pay taxes; only people pay taxes. That means a tax on your land is a tax on you. You say, “Williams, that’s pretty elementary, isn’t it?” Not quite.

What about the politician who tells us that he’s not going to raise taxes on the middle class; instead, he’s going to raise corporate income taxes as means to get rich corporations to pay their rightful share of government?

If a tax is levied on a corporation, and if it is to survive, it will have one of three responses, or some combination thereof. One response is to raise the price of its product, so who bears the burden? Another response is to lower dividends; again, who bears the burden? Yet another response is to lay off workers. In each case, it is people, not some legal fiction called a corporation, who bear the burden of the tax.

Because corporations have these responses to the imposition of a tax, they are merely government tax collectors. They collect money from people and send it to Washington. Therefore, you should tell that politician, who promises to tax corporations instead of you, that he’s an idiot because corporations, like land, do not pay taxes. Only people pay taxes.

Here’s another tax question, even though it doesn’t sound like it. Which workers receive higher pay: those on a road construction project moving dirt with shovels and wheelbarrows or those moving dirt atop a giant earthmover?

If you said the worker atop the earthmover, go to the head of the class. But why? It’s not because he’s unionized or that construction contractors have a fondness for earthmover operators. It’s because the worker atop the earthmover is working with more capital, thereby making him more productive. Higher productivity means higher wages.

It’s not rocket science to conclude that whatever lowers the cost of capital formation, such as lowering the cost of investing in earthmovers, enables contractors to purchase more of them. Workers will have more capital to work with and as a result enjoy higher wages.

Policies that raise the cost of capital formation such as capital gains taxes, low depreciation allowances and corporate taxes, thereby reduce capital formation, and serve neither the interests of workers, investors nor consumers. It does serve the interests of politicians who get more resources to be able to buy votes.

You might wonder how congressmen can get away with taxes and other measures that reduce our prosperity potential. Part of the answer is ignorance and the anti-business climate promoted in academia and the news media. The more important reason is that prosperity foregone is invisible.

In other words, we can never tell how much richer we would have been without today’s level of congressional interference in our lives and therefore don’t fight it as much as we should.


Walter E. Williams is a professor of economics at George Mason University in Fairfax, Virginia. He has authored more than 150 publications, including many in scholarly journals, and has frequently given expert testimony before Congressional committees on public policy issues ranging from labor policy to taxation and spending.

TAXING THE RICH

BY JOHN STOSSEL

Across time, place, and culture, higher tax rates have always driven society’s producers to leave or go underground.  Why, then, do politicians keep instituting this absurdly counterproductive measure?

Progressives want to raise taxes on individuals who make more than $200,000 a year because they say it’s wrong for the rich to be “given” more money. Sunday’s New York Times carries a cartoon showing Uncle Sam handing money to a fat cat. They just don’t get it.

As I’ve said before, a tax cut is not a handout. It simply means government steals less. What progressives want to do is take money from some — by force — and spend it on others. It sounds less noble when plainly stated.

That’s the moral side of the matter. There’s a practical side, too. Taxes discourage wealth creation. That hurts everyone, the lower end of the income scale most of all. An economy that, through freedom, encourages the production of wealth raises the living standards of lower-income people as well as everyone else.

A free society is not a zero-sum game in which every gain is offset by someone’s loss. As long as government keeps its thumb off the scales, the “makers” who get rich do so by making others better off. (When the government allocates capital or creates barriers to competition, all bets are off.)

Of course, this is not the prevailing view among the intelligentsia. Columbia University Professor Marc Lamont Hill tells me, “Those who have more should pay more.”

But is there a point where they stop producing wealth or leave altogether?

“The rich have always cried wolf like that,” Hill says.

But the wolf is here. Maryland created a special tax on rich people that was supposed to bring in $106 million. Instead, the state lost $257 million.

Former Gov. Robert Ehrlich, who is running again for his old job, says: “It reminds me of Charlie Brown. Charlie Brown was always surprised when Lucy pulled the football away. And they’re always surprised in Washington and state capitals when the dollars never come in.”

Some of Maryland’s rich left the state. “They’re out of here. These people aren’t stupid,” Ehrlich says.

New York billionaire Tom Golisano isn’t stupid, either. With $3,000 and one employee, he started a business that processes paychecks for companies. He created 13,000 jobs.

Then New York state hiked the income tax on millionaires.

“It was the straw that broke the camel’s back,” he says. “Not that I like to throw the number around, but my personal income tax last year would’ve been $13,800 a day. Would you like to write a check for $13,800 a day to a state government, as opposed to moving to another state where there’s no state income tax or very low state income tax?

He established residence in Florida, which has no personal income tax.

Now Gov. David Paterson may have even seen the light.

“We projected that we would get $4 billion, and we actually got well short of it,” he says.

Art Laffer, the economist who has a curve illustrating this point named after him, isn’t surprised.

“It’s just economics,” he says. “People don’t work to pay taxes. People work to get what they can after tax. They’ll change where they earn their income. They’ll change how they earn their income. They’ll change how much they earn, when they receive the income. They’ll change all of those things to minimize taxes.”

We can see it in the statistics. In 1960, federal revenues were 18.6 percent of total output. Over the next 50 years, that percentage has rarely exceeded 20 percent or fallen below 17 percent. As Laffer says, people adjust their activities to the tax burden.

Donald Trump, who knows something about making money, says of course the rich will leave when hit with higher taxes. “I know these people,” he told me. “They’re international people. Whether they live here or live in a place like Switzerland doesn’t really matter to them.”

You haven’t left, I told him.

“I haven’t left yet. … Look, the rich people are going to leave. And other people are going to leave. You’re going to end up with lots of people that don’t produce. And then that’s the spiral. That’s the end.”

And that’s another good reason for us to get on with reducing the size of government.


John Stossel is host of “Stossel” on the Fox Business Network. He’s the author of “Give Me a Break” and of “Myth, Lies, and Downright Stupidity.” To find out more about John Stossel, visit his site at johnstossel.com

FAKING THE PLEDGE

BY JACOB SULLUM

Republicans are now pledging to undo our tangled fiscal mess that they are blaming entirely on Democrats. Apparently, the GOP believes that Americans have the collective attention span of a gnat.

In the “Pledge to America” they unveiled last week, House Republicans promise they will “launch a sustained effort to stem the relentless growth in government that has occurred over the past decade.” Who better for the job than the folks who ran the government for most of that time?

If the GOP’s record of fiscal fecklessness were not enough reason to doubt its newfound commitment to curbing “Washington’s irresponsible spending habits,” the pledge’s failure to address entitlement and defense programs would be.

The Republicans say they want to “have a responsible, fact-based conversation with the American people about the scale of the fiscal challenges we face and the urgent action that is required to deal with them.” That’s hard to do when only a small share of the $3.8 trillion budget is open for discussion, and then only in the vaguest terms.

The Pledge to America, which seems to be based on the assumption that America has a short memory, castigates Democrats for “their out-of-control spending spree.” Republicans, you may recall, had a spending spree of their own during George W. Bush’s recently concluded administration, when both discretionary and total spending doubled — nearly 10 times the growth seen during Bill Clinton’s two terms.

In fact, says Veronique de Rugy, a senior research fellow at George Mason University’s Mercatus Center, “President Bush increased government spending more than any of the six presidents preceding him, including LBJ.”

Republicans controlled the House of Representatives for six of Bush’s eight years, and their fingerprints are all over Bush’s budget busters, including the trillion-dollar wars to replace dictators with democrats in Iraq and Afghanistan.

The Medicare prescription drug benefit, enacted in 2003, is expected to cost something like $800 billion during its first decade, further darkening Medicare’s already dire fiscal outlook. It passed the Senate with 42 Republican votes and the House with 207.

The Troubled Asset Relief Program, which the Republicans now promise to “cancel” because it exemplifies the “bailouts” that have “rightly outraged” the public by “forc(ing) responsible taxpayers to subsidize irresponsible behavior,” received 34 Republican votes in the Senate and 91 in the House. The yeas included House Minority Leader John Boehner, R-Ohio, Republican Whip Eric Cantor, R-Va., Rep. Paul Ryan, R-Wis., and Rep. Ileana Ros-Lehtinen, R-Fla. — all of whom are pictured in the Pledge to America as models of fiscal rectitude and all of whom also supported the reckless Medicare expansion.

As of last week, however, the Republicans pledge to “make the decisions that are necessary to protect our entitlement programs for today’s seniors and future generations.” Such as? Sorry, that’s all you’re getting before the elections.

“Let’s not get to the potential solutions,” Boehner said in a Fox News interview on Sunday. “When you start down that path, you just invite all kinds of problems.” Aren’t solutions that invite problems what Congress is all about?

Boehner’s insistence that an “adult conversation” about entitlements need not include any discussion of what to do about them suggests a certain lack of seriousness. Likewise the Pledge to America’s complaints about Barack Obama’s “massive Medicare cuts” and its treatment of anything pertaining to “seniors” (one-third of the budget) as a sacred category.

The Republicans think expenditures related to “security” deserve the same exalted status, presumably because a government that is bumbling, wasteful and ineffective in every other endeavor could not possibly display those characteristics when protecting Americans from terrorists.

Yet defense is, among other things, a fiscal issue, consuming a fifth of the budget. The Republicans’ grandiose goal of “bringing certainty to an uncertain world” is inconsistent with their goal of “a smaller, less costly and more accountable government.”

Even if you trust the Republicans when they say “we have a plan” to cut $100 billion from the budget, that amounts to just 8 percent of the current $1.3 trillion deficit. And why trust them? As the Pledge to America warns, “It’s not enough” to “swap out one set of leaders for another.”


Jacob Sullum is a senior editor at Reason magazine, and his work appears in the new Reason anthology Choice (BenBella Books). Sullum is a graduate of Cornell University, where he majored in economics and psychology. He lives in Northern Virginia with his wife and daughter.

THE POLITICS OF RESENTMENT

BY THOMAS SOWELL

The theme of ‘class envy’ permeates Marxism. The recent mayoral election in Washington, D.C., however, illustrates that the best enforcer of arbitrary class divisions is not capitalism, but rather the state itself.

Few things have captured in microcosm what has gone so painfully wrong, where racial issues are concerned, like the recent election for mayor of Washington, D.C.

Mayor Adrian Fenty, under whom the murder rate has gone down and the school children’s test scores have gone up, was resoundingly defeated for re-election.

Nor was Mayor Fenty simply a passive beneficiary of the rising test scores and falling murder rates. He appointed Michelle Rhee as head of the school system and backed her as she fought the teachers’ union and fired large numbers of ineffective teachers ‒ something considered impossible in most cities across the country.

Mayor Fenty also appointed the city’s chief of police, Cathy Lanier, who has cracked down on hoodlumism, as well as crime.

Either one of these achievements would made mayors local heroes in most other cities. Why then was he clobbered in the election?

One key fact tells much of the story: Mayor Fenty received more than 70 percent of the white vote in Washington. His opponent received more than 80 percent of the black vote.

Both men are black. But the head of the school system that he appointed is Asian and the chief of police is a white woman. More than that, most of the teachers who were fired were black. There were also bitter complaints that black contractors did not get as many of the contracts for doing business with the city as they expected.

In short, the mayor appointed the best people he could find, instead of running a racial patronage system, as a black mayor of a city with a black majority is apparently expected to. He also didn’t spend as much time schmoozing with the folks as was expected.

So what if he gave their children a better education and gave everybody a lower likelihood of being murdered?

The mayor’s faults were political faults. He did his job, produced results and thought that this should be enough to get him re-elected. He refused to do polls and focus groups, and he ignored what his political advisers were warning him about.

No doubt Mayor Fenty is now a sadder and wiser man politically. While that may help him if he wants to pursue a political career, Adrian Fenty’s career is not nearly as important as what his story tells us about the racial atmosphere in this country.

How did we reach the point where a city is so polarized that an overwhelming majority of the white vote goes to one candidate and the overwhelming majority of the black vote goes to the opposing candidate?

How did we reach the point where black voters put racial patronage and racial symbolism above the education of their children and the safety of everyone?

There are many reasons but the trend is ominous. One key factor was the creation, back in the 1960s, of a whole government-supported industry of race hustling.

President Lyndon Johnson’s “war on poverty” ‒ a war that we have lost, by the way ‒ bankrolled all kinds of local “leaders” and organizations with the taxpayers’ money, in the name of community “participation” in shaping the policies of government.

These “leaders” and community activists have had every reason to hype racial resentments and to make issues “us” against “them.”

One of the largely untold stories of our time has been the story of how ACORN, Jesse Jackson and other community activists have been able to transfer billions of dollars from banks to their own organizations’ causes, with the aid of the federal government, exemplified by the Community Reinvestment Act and its sequels.

Racial anger and racial resentments are the fuel that keeps this lucrative racket going. How surprised should anyone be that community activist groups have used mau-mau disruptions in banks and harassed both business and government officials in their homes?

Lyndon Johnson once said that it is not hard to do the right thing. What is hard is knowing what is right. We can give him credit for good intentions, so long as we remember what road is paved with good intentions.


Thomas Sowell is a Senior Fellow at The Hoover Institution at Stanford University in California. He has published dozens of books on economics, education, race, and other topics. His most recent book is The Housing Boom and Bust, from April 2009.

PROFIT VS. NONPROFIT

BY WALTER E WILLIAMS

The idea of non-profits as noble, selfless entities vs. profit-driven enterprise as evil and corrupt has been a pervasive cultural meme for some time.  However, these ideas couldn’t be further from the truth.

“Philadelphia Scandal Underscores Pitiful State of Public Housing Oversight,” read Jonathan Berr’s Aug. 28 report in the Daily Finance. It was a story about Carl Greene, the embattled director of the Philadelphia Housing Authority (PHA). He was put on paid leave while the board investigates charges that he settled four sexual harassment claims against him without notifying the PHA, doled out work to politically connected law firms and pressured employees to donate to his favorite nonprofit.

Greene is also being investigated by the U.S. Attorney General Office for the Eastern District of Pennsylvania and HUD’s Office of Inspector General. They have yet to bring criminal charges against him.

People always act surprised by revelations of political corruption but the Philadelphia Housing Authority corruption is highly probably in nonprofit entities such as government. Because of ignorance and demagoguery, being profit-motivated has become suspicious and possibly a dirty word. Nonprofit is seen as more righteous.

Very often, people pompously stand before us and declare, “We’re a nonprofit organization.” They expect for us to believe that since they’re not in it for money, they are somehow above self-interest and have the public interest as their motivation. There’s little much further from the truth.

People are always self-interested. It’s just when they manage a nonprofit organization such as the Philadelphia Housing Authority, government entities in general, universities and charitable organizations, they face a different set of constraints on their behavior.

The fundamental difference between nonprofit organizations and their profit-making counterparts is that nonprofits tend to take a greater portion of their compensation from easier working conditions, more time off, favors and under-the-table payments. Profit-making organizations take a greater portion of their compensation in cash, except those that are highly regulated.

In the profit-making world, there is much greater monitoring of the behavior of people who act for the organization. Profit-making organizations have a financial bottom line they must meet, or sooner or later, heads will roll. Not so with nonprofits, who have no bottom line to meet. On top of that, incompetence for nonprofits means bigger budgets, higher pay and less oversight. That description aptly fits one the nation’s largest nonprofit organizations — the public education establishment.

Profit is vital to human well-being. Profit is the payment to entrepreneurs just as wages are payments to labor, interest to capital and rent to land. In order to earn profits in free markets, entrepreneurs must identify and satisfy human wants and do so in a way that economizes on society’s scarce resources.

Here’s a little test. Which entities produce greater customer satisfaction: for-profit enterprises such as supermarkets, computer makers and clothing stores, or nonprofit entities such as public schools, post offices and motor vehicle departments? I’m guessing you’ll answer the former. Their survival depends on pleasing customers. Nonprofits, such as public schools, post offices and motor vehicle departments, survival depends mostly on pleasing politicians.

When a firm fails to please its customers and thereby fails to earn a profit, it goes bankrupt, making those resources available to another who might do better. That’s unless government steps in to bail it out. Bailouts permit a business to continue doing a poor job of pleasing customers and husbanding resources.

Government-owned nonprofit entities are immune to the ruthless market discipline of being forced to please customers. The same can be said of businesses that receive government handouts.

It’s this ruthlessness of market discipline that forces firms to please customers, economize on resources and thereby earn profits or go out of business and goes a long way toward explaining hostility toward free market capitalism. And much of the hostility toward free market capitalism is held by businessmen. Adam Smith recognized this in his “Wealth of Nations” when he said, “People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.”

Their co-conspirator is always government.


Walter E. Williams is a professor of economics at George Mason University in Fairfax, Virginia. He has authored more than 150 publications, including many in scholarly journals, and has frequently given expert testimony before Congressional committees on public policy issues ranging from labor policy to taxation and spending.

MONEY IS NOT WHAT SCHOOLS NEED

BY JOHN STOSSEL

As expenditures for public education have gone up, educational standards have gone down drastically.  Let’s examine the ruinous effects of a government monopoly, and what we can do to fix it.

U.S. Education Secretary Arne Duncan recently claimed: “Districts around the country have literally been cutting for five, six, seven years in a row. And, many of them, you know, are through, you know, fat, through flesh and into bone …”

Really? They cut spending five to seven consecutive years?

Give me a break!

Andrew Coulson, director of the Cato Institute’s Center for Educational Freedom, writes that out of 14,000 school districts in the United States, just seven have cut their budgets seven years in a row. How about five years in a row? Just 87. That’s a fraction of 1 percent in each case.

Duncan may be pandering to his constituency, or he may actually be fooled by how school districts (and other government agencies) talk about budget cuts. When normal people hear about a budget cut, we assume the amount of money to be spent is less than the previous year’s allocation. But that’s not what bureaucrats mean.

“They are not comparing current year spending to the previous year’s spending,” Coulson writes. “What they’re doing is comparing the approved current year budget to the budget that they initially dreamed about having.”

So if a district got more money than last year but less than it asked for, the administrators consider it a cut. “Back in the real world, a K-12 public education costs four times as much as it did in 1970, adjusting for inflation: $150,000 versus the $38,000 it cost four decades ago (in constant 2009 dollars),” Coulson says.

Taxpayers need to understand this sort thing just to protect themselves from greedy government officials and teachers unions.

It was on the basis of this fear and ignorance that President Obama got Congress to pass a “stimulus” bill this summer that included $10 billion for school districts. The money is needed desperately to save teachers from layoffs, the bill’s advocates said. We must do it for the children!

When you look at the facts, the scam is clear.

“Over the past 40 years,” Coulson writes, “public school employment has risen 10 times faster than enrollment. There are 9 percent more students today, but nearly twice as many public school employees.”

But isn’t it just common sense that schools would be better if they had more money? As a wise man said, it’s not what we don’t know that gets us into trouble; it’s what we know that isn’t so.

Consider the American Indian Public Charter School in Oakland, Calif. It was once a failing school, but now it’s one of the best in California. Ben Chavis turned it around without any additional money. His book, “Crazy Like a Fox,” tells how.

Chavis’ experience exposes the school establishment’s lies for what they are. Nearly all of Chavis’ students are considered economically disadvantaged (98 percent qualify for free lunches), yet they have the fourth-highest test scores of any school in the state.

“In Oakland this year, on the AP (advanced placement) exam, we had 100 percent of all the blacks and Mexicans in the city of Oakland who passed AP calculus,” Chavis said. “There are four high schools, and we’re the only ones who had anyone pass AP calc.”

Yet Chavis accomplishes this without the “certified” teachers so revered by the educational establishment. His classes are as big as, and sometimes bigger than, public school classes, but only a quarter of his teachers are certified by the state.

Money, he insists, is not the answer. “My buildings are shacks compared to their schools, but my schools are clean, and we’ll kick all their asses.”

He scoffs at the establishment’s solutions to the education problem, such as teacher evaluations.

“I don’t do no teacher evaluations. All I do is go into a class, and if the kids ain’t working, your ass is fired. (Most principals) sit for hours and say, ‘Is he meeting this goal, is he meeting’ — I just go to class, and if the kids are not working …”

It’s time we threw out the “experts” and exposed the schools to real competition by people with common sense.


John Stossel is host of “Stossel” on the Fox Business Network. He’s the author of “Give Me a Break” and of “Myth, Lies, and Downright Stupidity.” To find out more about John Stossel, visit his site at johnstossel.com

THE MONEY OF FOOLS

BY THOMAS SOWELL

In this four-part series, the phenomena of empty rhetoric and thoughtless, feel-good catch phrases employed by demagogues and ideologues are explored, dissected, and debunked.

Seventeenth century philosopher Thomas Hobbes said that words are wise men’s counters, but they are the money of fools.

That is as painfully true today as it was four centuries ago. Using words as vehicles to try to convey your meaning is very different from taking words so literally that the words use you and confuse you.

Take the simple phrase “rent control.” If you take these words literally — as if they were money in the bank — you get a complete distortion of reality.

New York is the city with the oldest and strongest rent control laws in the nation. San Francisco is second. But if you look at cities with the highest average rents, New York is first and San Francisco is second. Obviously, “rent control” laws do not control rent.

If you check out the facts, instead of relying on words, you will discover that “gun control” laws do not control guns, the government’s “stimulus” spending does not stimulate the economy and that many “compassionate” policies inflict cruel results, such as the destruction of the black family.

Do you know how many millions of people died in the war “to make the world safe for democracy” — a war that led to autocratic dynasties being replaced by totalitarian dictatorships that slaughtered far more of their own people than the dynasties had?

Warm, fuzzy words and phrases have an enormous advantage in politics. None has had such a long run of political success as “social justice.”

The idea cannot be refuted because it has no specific meaning. Fighting it would be like trying to punch the fog. No wonder “social justice” has been such a political success for more than a century — and counting.

While the term has no defined meaning, it has emotionally powerful connotations. There is a strong sense that it is simply not right — that it is unjust — that some people are so much better off than others.

Justification, even as the term is used in printing and carpentry, means aligning one thing with another. But what is the standard to which we think incomes or other benefits should be aligned?

Is the person who has spent years in school goofing off, acting up or fighting — squandering the tens of thousands of dollars that the taxpayers have spent on his education — supposed to end up with his income aligned with that of the person who spent those same years studying to acquire knowledge and skills that would later be valuable to himself and to society at large?

Some advocates of “social justice” would argue that what is fundamentally unjust is that one person is born into circumstances that make that person’s chances in life radically different from the chances that others have — through no fault of one and through no merit of the others.

Maybe the person who wasted educational opportunities and developed self-destructive behavior would have turned out differently if born into a different home or a different community.

That would of course be more just. But now we are no longer talking about “social” justice, unless we believe that it is all society’s fault that different families and communities have different values and priorities — and that society can “solve” that “problem.”

Nor can poverty or poor education explain such differences. There are individuals who were raised by parents who were both poor and poorly educated, but who pushed their children to get the education that the parents themselves never had. Many individuals and groups would not be where they are today without that.

All kinds of chance encounters — with particular people, information or circumstances — have marked turning points in many individual’s lives, whether toward fulfillment or ruin.

None of these things is equal or can be made equal. If this is an injustice, it is not a “social” injustice because it is beyond the power of society.

You can talk or act as if society is both omniscient and omnipotent. But, to do so would be to let words become what Thomas Hobbes called them, “the money of fools.”

 

Words are supposed to convey thoughts, but they can also obliterate thoughts and shut down thinking. As Justice Oliver Wendell Holmes said, a catchword can “delay further analysis for fifty years.” Holmes also said, “think things, not words.”

When you are satisfied to accept words, without thinking beyond those words to the things — the tangible realities of the world — you are confirming what philosopher Thomas Hobbes said in the 17th century, that words are wise men’s counters but they are the money of fools.

Even in matters of life and death, too many people accept words instead of thinking, leaving themselves wide open to people who are clever at spinning words. The whole controversy about “health care reform” is a classic example.

“Health care” and medical care are not the same thing. The confusion between the two spreads more confusion, when advocates of government-run medical care point to longer life expectancies in some other countries where government runs the medical system.

Health care affects longevity, but health care includes far more than medical care. Health care includes such things as diet, exercise and avoiding things that can shorten your life, such as drug addiction, reckless driving and homicide.

If you stop and think — which catchwords can deflect us from doing — it is clear that homicide and car crashes are not things that doctors can prevent. Moreover, if you compare longevity among countries, leaving out homicide and car crashes, Americans have the longest lifespan in the western world.

Why then are people talking about gross statistics on longevity, as a reason to change our medical care system? Since this is a life and death issue, we need to think about the realities of the world, not the clever words of spinmeisters trying to justify a government takeover of medical care.

American medical care leads the world in things like cancer survival rates, which medical care affects far more than it affects people’s behavior that leads to obesity and narcotics addiction, as well as such other things as homicide and reckless driving.

But none of this is even thought about, when people simply go with the flow of catchwords, accepting those words as the money of fools.

Among the many other catchwords that shut down thinking are “the rich” and “the poor.” When is somebody rich? When they have a lot of wealth. But, when politicians talk about taxing “the rich,” they are not even talking about people’s wealth, and what they are planning to tax are people’s incomes, not their wealth.

If we stop and think, instead of going with the flow of catchwords, it is clear than income and wealth are different things. A billionaire can have zero income. Bill Gates lost $18 billion dollars in 2008 and Warren Buffett lost $25 billion. Their income might have been negative, for all I know. But, no matter how low their income was, they were not poor.

By the same token, people who have worked their way up, to the point where they have a substantial income in their later years, are not rich. In most cases, they never earned high incomes in their younger years and they will not be earning high incomes when they retire. A middle-aged or elderly couple making $125,000 each are not rich, even though politicians will tax away what they have earned at the end of decades of working their way up.

Similarly, most of the people who are called “the poor” are not poor. Their low incomes are as transient as the higher incomes of “the rich.” Most of the people in the bottom 20 percent in income end up in the top half of the income distribution in later years. Far more of them reach the top 20 percent than remain in the bottom 20 percent over the years.

The grand fallacy in most discussions of income statistics is the assumption that the various income brackets represent enduring classes of people, rather than transients who start at the bottom in entry-level jobs and move up as they acquire more experience and skills.

But if we are going to base major government policies on confusions between medical care and health care, or on calling people “rich” and “poor” who are neither, then we have truly accepted words as the money of fools.

 

Among the many words that don’t mean what they say, but which too many of us accept as if they did, are those staples of political discussion, “liberals” and “conservatives.”

Most liberals are not liberal and most conservatives are not conservative. We might be better off just calling them X and Y, instead of imagining that we are really describing their philosophies. Moreover, like most confusion, it has consequences.

The late liberal Professor Tony Judt of New York University gave this definition of liberals: “A liberal is someone who opposes interference in the affairs of others: who is tolerant of dissenting attitudes and unconventional behavior.”

According to Professor Judt, liberals favor “keeping other people out of our lives, leaving individuals the maximum space in which to live and flourish as they choose.”

That is certainly in keeping with the dictionary definition of liberalism and with most contemporary liberals’ vision of themselves. But, if we follow Justice Oliver Wendell Holmes’ admonition to “think things, not words” and look beyond the label to the tangible realities of the world, we find almost the exact opposite of what the word “liberal” is supposed to mean.

Most of us would probably regard the current administration in Washington — both the White House and the Congress — as “liberal,” even though the word “progressive” may be more in vogue.

Does the sweeping legislation empowering federal officials to tell doctors, patients, hospitals, and insurance companies what to do, when it comes to medical care, sound like leaving individuals the maximum space to live their lives as they choose?

Communities that have had overwhelmingly liberal elected officials for decades abound in nanny state regulations, micro-managing everything from home-building to garbage collection. San Francisco is a classic example. Among its innumerable micro-managing laws is one recently passed requiring that gas stations must remove the little levers that allow motorists to pump gas into their cars without having to hold the nozzle.

Liberals are usually willing to let people violate the traditional standards of the larger society but crack down on those who dare to violate liberals’ own notions and fetishes.

Our academic institutions are overwhelmingly dominated by liberals. They feature speech codes that punish politically incorrect statements. Even to apply to many colleges and universities, students must have spent time as “volunteers” for activities arbitrarily defined by admissions committees as “community service.”

As for conservatism, it has no specific political meaning, because everything depends on what you are trying to conserve. In the last days of the Soviet Union, those who were trying to maintain the Communist system were widely — and correctly — described as “conservatives,” though they had nothing in common with such conservatives as William F. Buckley or Milton Friedman.

Professor Friedman for years fought a losing battle against being labeled a conservative. He considered himself a liberal in the original sense of the word and wrote a book titled “The Tyranny of the Status Quo.” Friedman proposed radical changes in things ranging from the public schools to the Federal Reserve System.

But he is remembered today as one of the great conservatives of our time. Great, yes. But conservative? It depends on what you mean by conservative.

Conservatism, in its original meaning, would require preserving the welfare state and widespread government intervention in the economy. Neither Milton Friedman nor most of the other people designated as conservatives today want that.

Liberals often flatter themselves with having the generosity that the word implies. Many of them might be shocked to discover that Ronald Reagan donated a higher percentage of his income to charity than either Ted Kennedy or Franklin D. Roosevelt. Nor was this unusual. Conservatives in general donate more of their income and their time to charitable endeavors and donate far more blood.

We are probably stuck with having to use words like liberal and conservative. But we can at least recognize them as nothing more than political flags of convenience. We need not accept these words literally, as the money of fools.

 

One of the many words that sound so attractive, to people who do not think beyond the word, is “disarmament.”

Wouldn’t it be better to live in a world where countries were not armed to the teeth, especially when they are armed with nuclear weapons? Of course it would.

But the only country we can disarm is our own. The only countries we might be able to persuade to disarm are countries that intend no harm in the first place. Those countries that do intend to harm others — and we know all too well that they exist — would be delighted to have all their victims disarmed.

What if we can just get nuclear disarmament?

Again, we need to think beyond the word to the realities of the world, so that we do not simply accept words as what Thomas Hobbes called the money of fools.

Had there been no nuclear weapons created during World War II, that would have given an overwhelming military advantage in the postwar world to countries with large and well equipped armies. Especially after the U.S. Army withdrew from Europe, following the end of World War II, there was nothing to stop Stalin’s army from marching right across the continent to the Atlantic Ocean.

The American troops that remained in Western Europe were not enough to stop the Soviet army. But they were enough that their slaughter by the Russians would have risked nuclear war with the United States.

Western Europe has had one of its longest periods of peace under the protection of the American nuclear umbrella. Japan, one of the biggest and most cruel conquerors of the 20th century, has become a peaceful nation after Hiroshima and Nagasaki.

In the real world, the question of whether nuclear disarmament is desirable or undesirable is utterly irrelevant because it is simply not possible, except in words — and we would truly be fools to accept such words at the risk of our lives.

Even if every nuclear weapon on the planet were destroyed — and how could we be sure that that had happened? — this would still not destroy the knowledge of how to make nuclear weapons.

Those countries with aggressive intentions towards other countries need only choose the time when they would put their knowledge of nuclear weapons to use, and have the world at their mercy.

Once they had nuclear weapons, they could threaten annihilation to any other nation that started to produce offsetting nuclear weapons.

Why then is President Barack Obama pursuing an international nuclear disarmament agreement? It cannot be because he thinks it will work. Even if he were foolish enough to believe that, virtually anybody in the Pentagon can tell him why it won’t.

His political advisors, however, can tell him how great that can be for him personally — if he doesn’t already know that. It would be “historic” and an “achievement,” just like ObamaCare.

His political base — the young, the left and the thoughtless — would be thrilled and energized. That can translate into money donated to his campaign coffers and people willing to walk the precincts to get out the vote for him in the 2012 elections.

It is by no means an irrational thing to do, from Obama’s self-centered perspective.

But what does it say about those who take his words literally, who accept those words as, in Thomas Hobbes’ words, the money of fools?

First of all, there may be more of such people today than in the past, as a result of the dumbing down of education and the politicizing of education at all levels with anti-nuclear propaganda, along with other propaganda of the left.

International disarmament has long been a favorite crusade of the left, before as well as after the age of nuclear weapons. The period between the two World Wars were full of popular disarmament agreements and renunciations of war.

In fact, such pious agreements contributed to the outbreak of war. Because some nations adhered to these agreements and others did not, the military advantage swung to the latter, who started the war — in which tens of millions of human beings died.

What a price to pay for accepting words as the money of fools.


Thomas Sowell is a Senior Fellow at The Hoover Institution at Stanford University in California. He has published dozens of books on economics, education, race, and other topics. His most recent book is The Housing Boom and Bust, from April 2009.

IN DEFENSE OF WESTERN CIVILIZATION

BY MARSHA ENRIGHT

As September 11th approaches, it is a fitting time to consider the true nature of the societies that collided that day in 2001.  We must assert the moral superiority of Western civilization, or lose it entirely.

As September 11th approaches, Americans remember the morning in 2001 when the World Trade Center turned to rubble. It is a fitting time to consider the nature of the civilizations that collided that day — and how to defend ours.

In their quest to establish a worldwide caliphate, radical Islamists invoke morality, claiming they have God’s sanction for performing their barbarous acts.

To defend Western civilization, we, also, need to invoke morality. But although the world envies the wealth we’ve achieved, it is widely seen as the product of soulless materialism, of unbridled “greed,” of unscrupulous self-indulgence.

What moral claim, then, can we make for our way of life?

To understand the moral values of the West, let’s turn to its beginning. In her prescient 1943 work of political philosophy, The God of the Machine, Isabel Paterson chose as the symbol of Western man a figure from Ancient Greece: Pytheas. This enterprising merchant left his homeland to explore Britain and beyond, seeking tin to make bronze. Insatiably curious, Pytheas also discovered the relationship between the moon’s phases and the tides, and was the first to describe the aurora and other phenomena.

Pytheas epitomizes the Western spirit: a self-directed man whose free will determines his life’s course, a thinker who employs reason and science to understand the world around him, and a producer who seeks to sell goods in peaceful trade.

From its founding, America was intended to be the country where Pytheas could flourish — the first nation established to protect the life, liberty, and property of the individual. It did so by curbing government power over the peaceful activities of its citizens.

In this, the contrast between America and radical Islam could not be greater.

Whereas Thomas Jefferson exhorts us to “Question with boldness even the existence of a God,” militant Islam kills people for apostasy.

Whereas James Madison proclaims a man has “a right to his property” and equally “a property in [all of] his rights,” Palestinian Islamists strap suicide belts on five year-olds, seizing their young lives to fight ancient vendettas.

Whereas the Declaration of Independence affirms America’s devotion to life, Osama bin Laden declares: “We love death. The U.S. loves life. That is the difference between us two.”

“The excellence of the West” lies in its “respect for the human being, the recognition of his individuality, the liberty it has granted him,” observes Saudi Shura Council member and Muslim reformist Ibrahim Al-Buleihi.

“Humans are originally individuals,” he continues, “but cultures (including Arab culture) have dissolved the individual in the tribe, sect, or state.” It is only “with the diffusion of philosophical ideas from [Ancient] Greece” that “the human being became an individual of value for himself . . . and not merely a means for others.” (Profile of Al-Buleihi, The Aafaq Foundation, July 6, 2010)

Thus, in our civilization, a person is born free to live for his own sake and to pursue happiness. In radical Islam, a person must obey a central authority and sacrifice his life to its aims. Which society is better?

Granted the West’s superiority, why is radical Islam advancing? Author Ayaan Hirsi Ali, a former Muslim, cites “an active propaganda campaign” in which “the Saudis invested at least $2 billion a year over a 30-year period to spread their brand of fundamentalist Islam.” (Wall Street Journal, August 18, 2010)

Why aren’t we passionately defending our civilization? Certainly, money isn’t the obstacle. Is it because we don’t understand the nobility of our individualist foundation, including the virtue of private advancement and profit?

We must never forget that we carry the legacy of Pytheas: a people of free will, free minds, and free enterprise. Our spectacular prosperity is not our dishonor, but the glory of our liberty.

It is said that Ground Zero is “sacred ground.” In truth, all of America is sacred ground — because the individual is sacred here.

We must assert the moral superiority of our civilization — or lose it to our enemies.


Marsha Familaro Enright is president of the Reason, Individualism, Freedom Institute, the Foundation for the College of the United States. Gen LaGreca is author of Noble Vision, an award-winning novel about the struggle for liberty in health care today.