Pocket Gofer 8

Pocket Gofer 8

Download the Pocket Gofer 8 here

ON GOVERNMENT REGULATION OF BUSINESS AND THE PHANTOM

• TWO INVISIBLE HANDS
• THE SYSTEM
• JUST A FEW OF THE MANY EXAMPLES
• CONCLUSIONS
• A DIFFERENT APPROACH TO REGULATING BUSINESS

The Economist (8/2005): “——– accounts, taxes, and health care in America have a lot in common.  They are nightmares defined by government regulators, and they horrify most Americans, who are in turn extremely open to new ideas.”  And that describes only three of many economic activities.

Our story begins with four players.  We introduce them immediately, as the government, the consumer, and two businesses.  The two businesses make similar products for the same consumers.

It is tough making stuff that keeps consumers satisfied, because the competition keeps grabbing them away and thus making it very hard to make any money.  The consumer suspects that the businesses are cutting corners, withholding useful information, giving misleading information, and not giving good value for his/her dollar.

The fifth player is a sneaky little devil.  In fact, it’s not even a person.  It is the phantom.

We will see how he can strike swiftly and be gone before we can catch him.  We will also see how the phantom strikes again in another unexpected place, and again, and again, and again.

Reporters, writers, analysts, economists, and other smart folks know him by another name: the law of unintended consequences.  But that handle doesn’t cut it, as it does not tell us how sneaky he is.  Furthermore, it suggests nothing about how clever he is at stealing our money.

The phantom can be caught.  We know how to smoke him out, and get his hands out of our pockets.  We have just bought a hunting license; in this pocket gofer we will load our musket and round up the hounds.

Some character once said “The invisible hand of politics works opposite to the invisible hand of the market.”  Another character named Adam Smith wrote about the market hand away back in 1775.

He argued that without the government poking its long snout into business activity the “invisible hand” would see that economic resources such as land, labor, equipment, knowledge, management, and money would be used most efficiently.  The result would be higher living standards for citizens.

The invisible hand of politics is the phantom.  Over the past 60 years or so his appetite has expanded tremendously, and it has slowed the increase in our living standards.

Just exactly who is this phantom, and how does he operate?  He looks to us like a bad character, and we want him swinging.  But we probably can’t catch him until we know something about how he rips us off.

As we explore the phantom’s motivation and actions we should bear in mind a truth about big government and how it acts.  To get things done it needs lots of money.

There are basically three ways to obtain money.  One is taxes and the second is borrowing.  Both are wide open to public view and officials know very well that taxpayers don’t like either.

The third way is thru regulation of the private sector.  Here the immediate benefits are obvious as the government appears to be doing something about the problem.  For example, during 2007 the Enron, Tyco and WorldCom scandals broke.

People raised hell, the news media jumped on these abuses, and politicians quickly cobbled together a huge regulation later called Sarbox.  Congress harvested millions of votes in the short term without spending anything.

Businesses must make some profit to survive, so they increased the costs of their products to cover the cost of complying with Sarbox.  We consumers pay more in the long run just as if congress had enacted a tax or borrowed to deal with the scandals.

The kicker in this particular instance lies in the lasting damage to American capital markets.  With the investment climate damaged many foreign investors placed their money elsewhere.

It is hard to estimate how many job-creating start-up companies did not start due to lack of capital at a reasonable price.  Today people and businesses find it hard to borrow and jobs are very scarce, but Sarbox remains on the books.

The cost to consumers is always underestimated, while the benefits are always overestimated.  These estimates should be independent, but congress would never go for this.

TWO INVISIBLE HANDS

Our nation was founded on the principle of individual freedoms, and this applied as well to markets.  But as for markets freedom didn’t last long, as the government intervened in the ocean shipping industry beginning in 1789.  Many old laws and regulations governing our ship transportation industry are still on the books.

Slowly during the intervening many years an important principle concerning individual freedom got shoved aside.  This principle states that whenever government interferes with the natural function of a free market through regulation, freedom of choice by citizens and companies is restricted.  Therefore the burden of proof that an action is right should rest with the regulator and not the citizens or companies who feel the force exerted by government.

During the 1930s under Roosevelt 42 major regulatory agencies were created.  During the 1960s 53 more were added.  During the 1970s another 130.  We will see why these developments caused thousands and thousands of lawyers, lobbyists, consultants, and various other looters to descend upon Washington DC.

The original idea was for consumers and therefore voters to benefit from all this regulation of presumed excesses on the part of businesses.  Officials in government had gradually lost faith in Adam Smith’s invisible hand to control these excesses.  They figured they could regulate the market better than can free and open competition among businesses for customers’ favor.

Or did they have something else in mind?  This trend caused businesses, unions, and other groups to organize in order to lobby government officials for favorable treatment.

Now, this action flies in the face of the Constitution, which specifies equality for all before the law.  But these blokes rightly figured the sleeping citizen would not notice.

This in turn quickly evolved into the flip side: interest group politics, a type of politics where money instead of ideas and citizen participation calls the shots (see Pocket Gofer 13).  We see that the phantom began feeding long ago.

Lobbyists go for special treatment anyplace in government where they can buy it.  This includes legislative law, passed by Congress and okayed by the president; administrative law, passed by bureaucrats and called regulation; and, indirectly, judge-made law.

Just as no one can legislate equal wealth among individuals and businesses, no one can legislate equal results for interest groups.  Human nature dictates that some individuals will always be more “equal” than will others, with or without interest groups.  But when interest group money outvotes citizens questions of fairness should be raised.

He who pays the piper calls the tune, and so those groups with the most money will win every time.  Equal opportunity can be cast into law (It’s in the Constitution), but not equal results.  We can’t change human nature.

On the one invisible hand the market spreads wealth far and wide, because there are millions of opportunities to make it out there and the locations of these opportunities cannot be predicted reliably.  On the other invisible hand, Washington’s regulation of business concentrates wealth in one predictable spot, where it can do the most damage to opportunities for those without it.

We are beginning to see why all those lawyers and lobbyists have piled into Washington (and many more coming).  They have come to plead their causes before the Palace Court, and they have brought big bucks with them.

Of course this concentrates even more wealth in Washington.  Lobbyists splash this around in order to make each new program of regulation into a permanent entitlement for the industry that pays them so well for the splashing.

Another big point here.  The Economist 7/27/1996: “Suppose that a government wants to reduce pollution.  It could do so by buying, say, $1 billion-worth of anti-pollution devices and giving one to every power plant, raising the money through taxes or borrowing.  Or it could simply decree that all power plants must be equipped with anti-pollution devices, forcing them — fork out the $1 billion —.

“Nothing wrong with that, you might think: pollution is, after all, a bad thing.  But there are differences between these two forms of spending.  A government that spends directly must go through the reasonably transparent exercise of taxing or borrowing.

A government that regulates passes these costs on to customers, employees, and owners of power plants, making the costs hard to track and measure.  ——.  Since this spending is invisible to consumers, officials need not care; you can call any sort of tune if someone else is paying the piper but doesn’t know it.

“Having accepted the wisdom of balancing the budget, Mr. Clinton — wanted to find a way of pursuing social goals without boosting federal spending.  Regulation — is the perfect means of doing this.”

This surely seems convenient, and it applies especially to opportunities for corruption, as we discuss in Pocket Gofer 7.  We need to add that these actions did not occur just during Clinton’s time in office.  The elder Bush administration cranked out regulations at a rate of nearly 74,000 pages per year.

The tradition of social engineering began around 1870 in Prussia.  The government regulation of society that followed explains why European Union countries are rated as less competitive than is America.  It was 60 years later when our government started throwing sea anchors overboard.

Clinton was apparently determined to level the playing field. It looks like he wanted to lower our competitiveness to a point that is even with the EU, rather than raise it as a stellar example to those folks.  Wins votes cheap, we admit, but is this leadership?

Thomas Hopkins of the Rochester Institute of Technology estimated that in 2004 the total cost of complying with government regulation was $877 billion.  This hit up the average US household for about $11,700, which is much more than it paid in income taxes.  We wonder if that sneaky phantom cloned himself a bunch of times when we were not looking.

In 1997 there were about 60 central government agencies putting out around 1,800 new rules a year.  The Code of Federal Regulations grew during that year to 130,000 pages!!  The Office of Management and Budget estimated annual costs at $289 billion, and annual benefits at $298 billion.

Hmm. Seems there is a discrepancy here.  Which figures are we to believe?  Maybe a report from (non-government) Waste Watch can shed some light.

“According to the GAO (General Accounting Office), Americans spent 6.9 billion hours in 1995 answering questions posed by the high priests and priestesses of bureaucracy.  —– government paperwork cost taxpayers $218 billion in 1995.”

And this is just the paperwork portion of compliance with regulations.  It covers only the reporting part of all the blood and sweat expended on the ground, costs of materials and supplies, etc.

In this way politicians win a few votes, and the lack of results is not publicized except by small-scale organizations like Waste Watch.  Few people read its output.

Government ought to confine itself, but self-discipline in the absence of accountability simply doesn’t exist.  See Pocket Gofer 7.

Therefore we must confine government.  No one else will.  If it is our government of the people, by the people and for the people we surely have the right.

Members of the congress would have us believe their intentions are good.  The real question is, good for whom?  All too frequently, they are good for the phantom, which helps congresspersons get re-elected in sneaky ways.

Naturally, they don’t want us to know how this is done.  But we know, and now the word is leaking out to those of us who keep picking up the tab and who have had enough of this krud.

We wondered why during the 1992 election campaign neither Bush nor Clinton said much about lobbyists and regulation, even though the results affect almost everything we do and how much we are paying the government to control our lives.

We wonder no more.  Politicians tell us only what we want to hear, and they keep the bad stuff under wraps.

Candidate Clinton did mention this issue.  Did President Clinton do anything constructive about it?  We could not find anything.

THE SYSTEM

Here’s how the system works.  First, as the plot thickens we must introduce additional players.

1. LOBBYISTS AND PACs Lobbyists are smart people who are hired by businesses and other special interest groups to do research into issues.  They propose laws or regulations that will affect how a business, industry or other group makes out in the marketplace.

PACs are political action committees.  They might represent the interests of labor unions, retired people, businesses or other groups.

Many members of these groups have given up believing in individual rights.  Never mind that that was the basis on which this country was founded some 230 years ago.  Now they believe in group rights, and their representatives get paid very well to place their interests above those of other groups and of individuals like us.

Lobbyists therefore plod up and down “Gucci Gulch,” or the halls of congress and the executive branch of government, in their Gucci shoes.  They go to see “our” lawmakers and bureaucrats, and they bring with them barrels of money.

They seek favors through rigging laws and regulations in their sponsors’ favor.  These unearned favors provide benefits to companies and other groups that far exceed their cost in dirty money.

Many industries are in our country are huge.  This means that the smallest change in a tax, a regulation or a subsidy means hundreds of millions in benefits for the group putting up the money.

The objective is to purchase influence.  In other places people who think about the subject call this corruption.

In Washington politicians call it lobbying, as that doesn’t sound nearly as bad.  We live in another place and we work with reality, so we prefer to say it like it is.

Politicians love money.  So they welcome the lobbyists and PACs with open arms (and pockets).

We see nothing wrong with love of money, except that we believe a person should do productive work for it.  If a person in a position to influence the laws and regulations of the land accepts pots of money for his/her re-election campaign or other lavish gifts and acts according to the wishes of the group who greases his palm that is corruption (Pocket Gofer 7).

We pay this clown’s salary, those of his/her bloated staff, and for his expensive perks and privileges.  Therefore we don’t like this one damn bit.

In Spring of 1986 the American dollar was strong against European money.  This meant cheap prices in Europe for American tourists with dollars.

Europeans braced for a crushing tourist load the following summer.  A German woman was quoted as follows: “Why can’t they just stay home and send the money?”

Friends, that is precisely what we have been doing: staying home and sending our money to Washington.  Suckers we are, but we need not stay that way.

The pocket gofers will help us to see how to chop off this menace at the pockets.  But it won’t happen unless we build a mountain of pocket gofers that compares in size with the mountain of money that has swamped Big Government’s morality.

2. LAWYERS: These cats draft regulations.  Because the politicians (who are very often lawyers also) are so busy receiving lobbyists, the occasional concerned citizen from East Overshoe, and attending fund-raising functions, they lack the time to draft regulations.

These lawyers are no fools.  They know who is paying them.  They are also prolific.  Each year they and others churn out around 75,000 pages of new regulations.

Even this was not enough for young President Bush and his minions.  In 2002 they set a new record.

These actions create chaos in the marketplace.  Businesses cannot plan effectively, and so investment is reduced.  They also affect profits and jobs.

In 2002 the government preached economic stimulus, while it piled on more tons of regulation.  Pity the poor economy.  It could not decide whether to move forward or backward.

Nearly all new laws, regulations, and programs get cast in stone.  Now we see why so many lawyers are needed.

They are hired by lobbyists.  The government has an additional 14,000 full-time lawyers at up to $600 per hour.  At our expense, of course.

This is all the more interesting in that no one can make any sense of this mishmash even if we paid him/her $10,000 an hour.  But that’s show bizz in Washington today.

Lawyers’ prosecutions based on regulations of asbestos have bankrupted dozens of companies and hence obliterated hundreds of jobs.  But the sharks were not satisfied with this (Economist 9/2002).

“According to the RAND Institute for Civil Justice, ——–, about two-thirds of the claims are now filed by the unimpaired, while in the past they were filed by only the manifestly ill.  And with most manufacturers of asbestos already bankrupt, the companies now taken to court are those that played a peripheral role, such as transporting the stuff or using minimal amounts in their products.

“Insurers are lobbying to end consolidated claims (trying thousands of cases at once) ———.  Only West Virginia and Mississippi allow litigation by very large numbers of claimants, ———.  One county in MI has 21,000 asbestos cases but only 9,700 inhabitants.”

All this is for healthy folks who might get sick, and even if they do the cause may not be related to asbestos.  “But until now reform has repeatedly been blocked by the ATLA (American Trial Lawyers Association), a powerful lobby that is one of the biggest donors to the Democratic Party and to law schools — deans of American law schools are hence no great fans of tort reform.”

3. CONGRESSIONAL AND ADMINISTRATION CAMPAIGN RE-ELECTION WAR CHESTS: These often need refilling, especially for congressmen who must run for re-election every other year.

Keeping these chests filled takes more than 40 percent of each congressman’s time.  Add campaigning time to this, and small wonder there is gridlock on Capitol Hill.

This means they spend relatively little of their time serving citizens’ needs.  And for a more complete picture we ought to patch in all the cocktail parties, other social functions, speeches, receptions, overseas junkets at taxpayer expense, etc.  Make that almost none of their time with us in mind, ———– until the next election campaign.

4. REGULATION: This activity distorts markets, thus making them inefficient.  After thinking about this for a while, we see the obvious.  If Adam Smith’s invisible hand were to replace that of the phantom, elder President Bush’s trickle-down economics would have trickled in spite of candidate Clinton’s remarks during the 1992 election campaign.

This means those of us who struggle at the lower end of the economic ladder would have benefited.  And Ron Reagan’s rising tide would have lifted nearly all boats.

The kicker lies in the phantom, which sneaks in there and rips off the bucks before they can trickle down very far or float many boats.  The politicians love it, as the system practically always gets them re-elected.  We can bet our bippy they are not about to risk derailing the gravy train.

Recently bail-outs were in.  But providing just one major bail-out has incompetent managers of hundreds of companies lining up for their place at table.

This applies especially to big banks, whose managers have learned that they can take high risks with depositors and investors money in order to make rich clients richer.  But whenever they overdo and things turn sour they can rely on the taxpayer to fix the situation.  All they need to do is grow “too big to fail” and government will step in.

The Economist (4/2010) hit a home run.  “When banks are deemed too big to fail, they can borrow abnormally cheaply.  This —— at the root of many evils.

“It is why bankers’ fat bonuses, paid from profits boosted by cheap funding are unfair.”  A recent report predictably recommended still more regulation.  Please, no!

In late 2009 the treasury department invented yet another gimmick, called Home Affordable Housing Program.  It was designed to twist bankers’ arms to get them to lighten up on 760,000 strapped home owners.

Little has been done since, due primarily to bureaucrats fighting over turf. Congressman Jeb Hensarling was on the review panel.  He said the administration’s efforts “—— have assisted only a small number of homeowners while drawing billions of involuntary taxpayer dollars into a black hole.”  (He quit the panel.)

The SEC (Securities and exchange Commission) regulates stock and bond markets.  But, we wonder.  Markopolos in his book No One Would Listen: A True Financial Thriller identifies bureaucratic airheads who are apparently similar to those in the CIA and FBI who allowed 9/11 to happen.

“As Mr. Markopolos and a small, informal team began to dig, it became clear that billions of dollars were being channeled to Mr. Madoff, yet there was no trace of his transactions in the market.

“On five separate occasions starting in 2000, Mr. Markopolos made submissions to the SEC about Mr. Madoff.  ———- simple explanation for this failure: incompetence and arrogance.”  Ponzi schemes will thrive as long as people refuse to believe that an offer that sounds too good to be true probably is.

5. INDUSTRIES WHICH ARE DISCRIMINATED AGAINST BY LAWS AND REGULATIONS: Their lobbyists didn’t get the job done, probably because they didn’t wave a wad that was fat enough.

Therefore they hire lawyers to find ways to evade the impact of the new regulations.  Because old regulations are seldom removed from the books the situation gets so complicated that lawyers are needed to attempt to sort it out.

The theory here is if lawyers made this mess the same are needed to unravel it and try to make some sense of it.  So a lot of high-priced lawyers find lucrative if nonproductive work, often at public expense.  Albert Einstein did not buy this theory.  “Never trust the same folks who created a problem to fix it.”

This last batch of lawyers may not sound like public expense.  But they are, indirectly.  The companies who hire these people must make money, so this expense shows up indirectly in prices of products and services.  Ditto that of lobbyists hired by the same companies or industry groups.

Another theory suggests that all these expenses are more than made up for in increased profits, as we observed above.  Otherwise they would not be engineering all this cloak-and-dagger stuff.

In practice, with so many hands in the cookie jar, today there is often little or no additional profit in the game.  In fact, the impact may be negative for each company.

However, if everyone else is doing it each company’s management dares not quit.  And so the whole rotten mess continues to snowball.

No doubt many managers would like out, but the system has them locked in.  Naturally, politicians offer little encouragement.

Seems like it is rapidly getting to the point where they are the only citizens who are truly free to do as they please.  We just wish they wouldn’t do it with our money.  We also wish they would stick to the Constitution, which was established to make us free to do as we please (provided no injury to the basic rights of the next citizen or group).

We frequently find situations where lawyers are working both sides of the street.  That is, in item 2 above they assist in drafting the rules.  Therefore they are thoroly familiar with their complex details.  They may purposely write a regulation so that it is impossible to enforce.

This knowledge creates value for companies being regulated as they struggle to evade these same regulations.  Therefore these lawyers can and do command premium fees for assistance in evasion of the very rules that they helped to draft.

Ivins (6/2003 column): “The FCC (Federal Communications Commission) is what is known in government circles as a ‘creative agency.’  It has been captured by the industry it is supposed to regulate.

“Those who work at captive agencies ——- believe their function is to service it not regulate it.”  Today’s career politicians seldom meet with ordinary blokes like us. 

None of the money involved goes into productive investment in the private sector.  And by now they have piled up a mountain of money.

We have developed a theory of accumulation of money.  It says that anytime a huge pot of money accumulates in one place and is programmed to stay there for as little as a few months, dubious characters will be attracted to it.  They figure with that much foldarooney piled up accountability must be thin, and they can bite off a chunk unnoticed.

Human nature then takes over.  The character grabs a little, gets away with it, grabs more the next time, etc.  For the curious, any convicted embezzler can provide details.

This may roughly summarize the past 60+ years of history in Washington.  This mountain of money is not earned through productive effort in the marketplace.  This means it takes wealth away from us working stiffs and enriches the rich.

6. ADDITIONAL RULES: Because the phantom inevitably works his magic, there quickly develops a need for more rules to correct for the distortions and perceived discriminations caused by the previous layer of rules.  So the lobbyists and PACs again pound the floors of “Gucci Gulch,” bringing more loot, and in this way generate the next layer of rules.

Of course this makes the whole huge bucket of worms all the more complex, so still more lawyers find work.  And still more money down the drain.

Are we up to an annual $660 billion yet?  Perhaps more to the point: Are we having fun yet?

We have recycled: item 1 again.  The only logical conclusion is that regulation creates a vicious cycle.  And we know who is paying, and through what organ of the body.

Friends, we are hurting.  We wonder if someone (we?) could force the government to return to the Constitution, repair the damage to it, and allow its provision for free markets to flourish.  This action would obliterate a huge bucket of worms and give the market a chance.  We would not permit politicians and all those other looters to rip us off.  Issues would crop up, but give the market — businesses and individuals — time to fix the problem.  That would be far cheaper and more efficient.

JUST A FEW OF THE MANY EXAMPLES 

Let’s prove our point.  The phantom frequently acts like a pimp, helping regulators and regulatees into bed together.  This arrangement suited all three perfectly until recently, when the bed became overcrowded.  Note below how the political law of unintended consequences works on the ground.

MIGRANTS: We will begin with some history: rules requiring farmers to provide better housing for migrant workers.  Now, who is going to complain about this one?  Their workers live in very primitive conditions, farmers have money (some of it ours), and they should bloody well do some good with it.

Well, the migrant workers might complain, but they weren’t consulted.  The farmers did simple economic analyses and determined that if the government forced them to build all that housing they could save money if they mechanized more of their operations.

If Farmer A went along with the rules and spent extra money to build housing and mechanizing Farmers B, C, and D did not, Farmer A’s profits would evaporate and he could no longer afford to hire workers to live in all that nice housing.  This is because competition from the other farmers would keep prices down to where there is no profit in Farmer A’s operation.

We might argue that the rules apply to all four farmers.  But when their costs go up to provide housing as specified by Big Brother more foreign products can enter the American market, taking away the markets and profits of all of them.

In this way the phantom strikes, and many migrant workers are out of jobs.  Meanwhile, the do-gooders who bugged the politicians into making the rules feel good, and the politicians sound off about their part in this wonderful accomplishment and get themselves re-elected.

So who is unhappy?  If someone had checked in with the workers he/she might have found that they thought their accommodations were quite adequate and somewhat better than they had back home in Mexico.  That someone might also have discovered that they liked having jobs better than being unemployed.

But the sneaky phantom counts on no one checking.  This is why he is going to be really bent out of shape when we smoke him out.  (We address the current red hot issue of migrants in a different pocket gofer.)

THE WEED: Our government helped tobacco farmers, and therefore it indirectly caused lung cancer and other diseases.  But it also had a campaign going to try to get people to stop smoking cigarettes or avoid starting.

Thousands of cancer victims lack private health insurance, so they rely on Medicare and Medicaid.  These are huge government health programs paid for by us.

Therefore our tax dollars get spread among both tobacco farmers and cancer victims.  Isn’t this just like driving a car with one foot on the gas pedal and the other on the brake?

Why on earth is this nonsense allowed to go on?  First of all, it’s not on earth: only in the USA.

Second, tobacco company lobbyists always bring big wads along whenever they come calling on their ever-welcoming congresspersons.  And they come calling often.

Some authorities argue that smokers largely pay for their own folly and taxpayers are held relatively harmless.  We think this is inaccurate.

Kids emulate adults, start to smoke at an age when mature judgment is lacking, and get hooked.  The frequent long-term result is that their productive lives are cut short.

We recall when we were kids.  Our peers began smoking during the 1950s.  When questioned about their health they replied that by the time they might get cancer the disease will have been cured.  Well, in 1964 the surgeon general’s report on smoking and disease was published, but many smokers persisted while keeping the faith about a cure.  Today, 56 years later, a very few are still around, while most died a premature death.

Widespread disease and disability suffered by smokers mean they cannot make the contribution to the economy (and pay taxes) which we nonsmoking taxpayers helped them to be able to do.  See Pocket Gofer 10, where we suggest that kids being educated at taxpayer expense are in effect taking out long-term loans.  They will pay these back throughout their working lives as they pay taxes in their turn.

Cut this working life span short, and the nonsmoking public gets a lower return on its investment in these people.  They must therefore make up the deficit.  (These points have received no press as far as we can determine.)

We wonder if the government likes this arrangement because bad health among some of us helps out the Social Security trust funds.  That is, if most of the smokers die before they can collect retirement benefits there will be more left for us nonsmokers, old and to become old down the road.

Most of us know that Social Security retirement today is a tax, not a trust fund like it was when established back in 1935.  Therefore smokers dying early also help the young.  That is, future young taxpayers will be taxed less to support fewer future geezers.

Did the phantom figure this one out too?  He is one smart cookie, but we doubt that his thinking went this far.

That’s not all.  We know how he figured this one:

The central government has until recently supported the price of leaf tobacco, so if the price drops the taxpayer makes up the difference.  The flip side here lies in a thriving black market that has sprung up.  The slick system works in this way.

If prices are kept artificially high by government, everybody and his/her cousin jumps into the business and we quickly get up to our arses in tobacco leaf.  The law of supply and demand then kicks in to put prices into free fall.  So in order to correct the government’s distortion of the market the see-all know-all Big Government clamps a quota on each tobacco farmer.

Enter the phantom.  He causes farmers to see wads of extra money in producing over quota and selling the pricey excess on the black market.

Numbers?  An investigation turned up around $50 million in illegal leaf sales between 1990-92.  Authorities agree that this was but a small portion of the total.

Quota holders today are often not farmers, and many of them are just plain rich.  But this does not bother the government as it prepares to splash out billions of our dollars to pay holders off as the tobacco market declines.

The lesson for us?  When you are feeding at the public trough you don’t need to plan ahead.

We all know about the health hazards connected with smoking cigarettes.  The  Department of Agriculture also acts to promote good health among citizens.  If this makes sense to any reader there is a job waiting for him/her in that outfit.

FAMILY LEAVE: President Clinton meant well, sometimes.  We might wonder how he got along with the phantom.

To get some idea let’s look at the first piece of legislation that he got passed through Congress after he moved into the White House.  It’s called the Family Leave Law.

Among other things, it requires businesses to give pregnant women 12 weeks’ unpaid leave from the job.  This was hailed by women’s rights folks as a major triumph for women in the workplace.

Who can object to a law to help women and babies?  Clinton got off to a rip-roaring start as a mass manufacturer of votes.

Well, the phantom saw this one coming a half-mile away.  Small businesses, which create most of the new jobs and wealth in our economy, avoid hiring young women without children.  Strange: the news media said nothing about this outcome.

How did companies get away with this?  The government provided a convenient way several years ago, when it again muscled in on business activity by passing a law prohibiting discrimination based on age.  So companies who hire women frequently hired the older variety.

Better to leave it to the individual company in a labor market free of government intervention.  If a young woman is good, management will bend over backward to accommodate her desire to be a good Mom.  If it does not, she will leave and go to work for a company that does.

The first company must then make do with second-rate employees, and this will make it less competitive in the marketplace.  The point here is that a good young female employee would have a choice of which of two types of company for whom to work, rather than no company as it often is now.

An intriguing thought just occurred to us around 2012.  We wondered if we could talk the phantom into sneaking a copy of this pocket gofer into President Obama’s back pocket?  Naw; he probably wouldn’t accept it unless we paid him many times what we are worth.

CHILDREN: We all want day care centers for our kids that are safe, kind, and educational.  Who would not?  So Big Government clamps on regulation after regulation in order to please us (and harvest votes).

Soon it got so bad that few people wanted to enter the business.  At rates customers are willing to pay they couldn’t make any money.  Managers spent so much time filling out reports that they lacked time to effectively supervise tots.

The government responded by creating its own string of day care centers.  And here comes yet another bureaucracy at us, soon to grow as big as the hundreds that already burden taxpayers.  Of course, managers of these centers also have little time for the children.

ALWAYS THE RENT: The phantom casts his net wide.  Let’s have a look at rent control in big cities.  Surely this is a good idea; give the poor a break on their rental payments.

But with fixed rental income and increasing expenses landlords could not make any money on their properties.  So most of them left and went where they could.

Those who remained failed to maintain their properties.  When the city came after them in response to tenant complaints, they simply walked away from a money-losing proposition.  Many of these properties then turned into crack houses.

These flights reduced the amount of rental housing available in cities.  People must live somewhere, and so rent control increased the demand for rental housing that was not subject to control.

And here again came the good ol’ law of supply and demand.  This migration increased the rent on such properties, which were mostly owned by the rich.  They welcomed this windfall, and the phantom struck again.

In NY City rent control began right after WWII.  The market got bent double, but the idea was politically attractive and so it may still be in effect today.

Provide public housing for the poor, and a lot of them try mightily to destroy it.  Why?

In 1970 there were many more housing units available to the poor than there were poor folks to occupy them.  During the 1970s the Department of HUD (housing and urban development) helped to build 400,000 apartments a year for these folks.

Let’s see; did we get that right?  It turns out that during that time period many low-quality inner-city housing units occupied by the poor were declared bad by the government, and so it trashed them and built new ones.

Then the poor trashed them.  We imagine all this was good for the construction business.

What went on here?  Why did the phantom chow down on this one?

Well, apparently no one checked in with the poor before destroying their homes.  An inquiry might have revealed that, even though those rat-infested dwellings were surely not very good, the folks living there were paying their way.  They could hold their heads high, as they were pulling their weight in our society.

If a welfare government takes away a poor person’s dignity (Pocket Gofer 2), he/she gets frustrated and takes it out on the handiest symbol of so-called government generosity.  The phantom simply eggs him on.

We need to understand where these people were coming from.  A handout is not a hand upward.

We wonder if public housing officials might be getting their cues from the Department of “Defense,” which often goes around the world destroying things and killing people in the name of peace.  But that is another story (Pocket Gofer 11).

WAGES: By now we have probably figured out how the phantom twisted the presumably (?) good intentions of politicians who years ago passed a minimum wage law.  If a company has a broom-pushing job which the market indicates should pay around $4.50 an hour but the minimum wage is $5.50, the company will get along without hiring someone. 

The owner of the little firm will just let the place get dirty and sweep up him/herself after hours.  Or, employees will combine to fill in.

Thus the law pushes up unemployment among unskilled teenagers.  We see on the tube and read in the newspapers about what they do with all that free time.

In 1996 along came yet another “gotcha.”  We’ll let William Safire handle this one (9/1996 column): “Only a couple of months ago, it seemed to be such a political masterstroke.  First, move left to repay heavy-spending union labor by raising the minimum wage.  —–.  Simultaneously, move rightward to embrace welfare reform, —–.  That stole the GOP’s  (Republican) big issue.

“The one-two of raising entry level wages and requiring the welfare recipient to go to work was a combo of political genius, everybody said.  Clinton’s popularity soared.

“But nobody stopped to think (our emphasis) what would happen in the real world when you pushed people into the labor force and —- at the same time —- made it more expensive for employers to hire them.”

We must agree: sheer genius.  We checked in with the phantom and, sure enough, he also agreed.

Politicians tell us a higher minimum wage will help low-income households in making ends meet.  But we must ask once again, are they telling us the truth?

“Mr. Obama wanted the government to provide workers with wage insurance.  If a worker blamelessly loses her job and takes a new one which pays less — and less than $50,000 the government would make up the shortfall for two years, up to a total of $10,000.”  The law of large numbers surely makes this an insurable risk, so if a worker wants such insurance he/she could buy it on the open market. 

BANKING: This pocket gofer would not be complete if we omitted banks.  Our poor ears could be bent and tied in knots on this one, so let’s spare ourselves some of the grim details and settle for a rough summary.

Actually the whole fiasco goes back to just before the Great Depression of the 1930s.  At that time two or three horribly bad decisions by bank regulators and the congress acted to plunge the US and the world into a decade of suffering.

Since then it has been a mishmash of bad regulation followed by bad deregulation (under Reagan and elder Bush) followed by bad reregulation.  In fact, it has got to be such a mess that any two people can argue for more regulation or less deregulation and both will sound like they are right.

Here is one instance.  When the FED lowered interest rates bank credit card rates were slow to follow.  Consumers raised a stink, and so congress clamped a lid on those rates.

But banks were already weakened by past bad regulation and deregulation.  Therefore this new intervention caused those who were too weak to adjust to the above action to fail.

They were then bailed out by the public, including the same taxpayers who bitched about those high credit card interest rates.  By this time the phantom was slobbering.

Bankers generally agree that their worst problem is regulators meddling in their business.  Carr in an Economist Special Report 1/24/2009: “Yet the same financiers who preached the necessity of free markets on the way up have since depended on taxpayers to save the industry at a cost of trillions of dollars.”

Capitalism dictates that those who profit from good times bear the pain in bad.  No wonder taxpayers were bent.

And then the Obama administration created a new bureaucracy called the Consumer Financial Protection Bureau.  Those who follow government closely agree that here is yet another bureaucratic monster in the making.

Banks will surely be caught in the middle as the CFPB gets involved in turf battles with the many other power-seeking bureaucracies that infest today’s government.

Arthur Brooks wrote a book called The Battle.  He argued that we are 70-30 in favor of capitalism and free enterprise, but the 30% are firmly in charge.  We think this sad situation is the legacy of decades of bad management.

Economist 6/2010: “Mr. Brooks offers two explanations.  The first is that the 30% coalition is led by people with undue influence: rich intellectuals, Hollywood types ——.”  We think most of these characters gained their wealth courtesy of capitalism.

So let’s clarify.  Capitalism means freedom from government intervention, thus enabling citizens to freely seek their fortunes in any way short of bringing harm to others.  Any government involvement is limited to keeping others from undermining its potential, such as a law providing for sanctity of contract.

People are free to voluntarily trade, enter into contracts, start businesses, raise money, hire people, outdo competitors and sell at whatever price the free market will bear.  There must be court-supported trust between businesspeople, and assurance that all that mentioned above will stay around for the long term.

However, the absence of a free market opens possibilities for abuse.  Ultracapitalism is an economic condition where a few big companies lobby career politicians for unconstitutional and unearned breaks, to the point where they wield such power as to distort the market.  The Economist exposed this condition during the 2016 presidential election campaign.

Today’s economic environment discourages entrepreneurship.  See Ray Carey’s book Democratic Capitalism for very capable elaboration.  “—– two thirds of Americans believe the economy is rigged in favor of vested interests.  And optimism has turned to anger.  Voters’ fury fuels the insurgencies of Donald Trump and Bernie Sanders and weakens insiders like Hillary Clinton.”  Here is a whole lot of truth.  It is great to see citizens finally doing some thinking.

“But if they are not reinvested, or spent by shareholders, high profits can dampen demand.  The excess cash generated domestically by American firms beyond their investment budgets is running at $800 billion a year, or 4% of GDP.  The tax system encourages them to park foreign profits abroad.  —————–.  If steep earnings are not luring new entrants, that may mean that firms are abusing monopoly positions, or using lobbying to stifle competition.  The game may indeed be rigged.” 

We freely admit that finance is complicated.  The Economist again: ““A new book by Stephen Davis, Jon Lukomnik and David Pitt-Watson lists four main roles for the industry: providing safe custody for assets, a payments system, intermediation between savers and borrows, and risk reduction (insurance).  Its performance should be judged by its success or failure in providing those services.” Title is What They do with Your Money: How the Financial System Fails Us and How to Fix It

“— the economic calamity in 2008 helped the minority fool the majority into thinking that the crisis was caused by the private sector and that the state knew how to solve it.”

What good is majority rule if the majority can be flimflammed?  As for the state knowing how to solve it: this and other pocket gofers prove beyond doubt that this is false.

It’s not just the phantom, politicians, and bureaucrats who love this.  Think about all those lawyers immersed in a gigantic feeding frenzy.

Estimating risk is a very important activity in banking.  Bankers try to keep it spread widely, but the 2008 housing bubble caused it to concentrate heavily in one area.  If the banking industry were to collapse we would all be in deep doodoo.

As their risks grew banks could increase their short-term profits and give humongous bonuses to top executives.  If this increased the danger of a systemic collapse that was not their problem.

During the housing boom that went from 2007 to 2009 demand for McMansions exploded.  House prices could only increase.

But in 2009 the bubble burst.  Overextended home owners discovered that their houses were worth less than what they owed.  Unable to borrow more, they could not pay on their mortgage loans.

Banks were hurting; hardly any money coming in.  So most big banks began furiously foreclosing over 20 million homes.

The pace was so rapid that sloppy paperwork caused widespread panic and outrage.  All financial hell broke loose by 2010 as career politicians watched mid-term elections coming at them.

Banks will be sued.  They will be forced to buy back tons of poorly underwritten loans.

A media-hyped probe was launched.  But unraveling this gargantuan mess will cause yet more delays in getting the housing market properly percolating once again.

It gets worse; the Economist 3/2011: “—- the value of homes near foreclosed properties falls faster than the market as a whole, until so many homes are foreclosed that average property prices fall to the level of foreclosures.  That, in turn, leaves more homeowners deeper in negative equity, —.”  Smacks of a vicious cycle.

“Local authorities also end up picking up the pieces when developers go bust or homes are abandoned, leaving fees unpaid, infrastructure to be completed and property to maintain.”

Then there are those who lost jobs and hence homes.  They get depressed, which leads to drug and alcohol abuse, domestic violence, kids in trouble, etc.  What a mess!

The Economist (8/2010) pointed out that “Financial markets do not operate in the same way as those for other goods —-.  When the price of a television ——– goes up, demand for it generally falls.  “When the price of a financial asset rises, demand generally increases.

“When goods prices are rising, manufacturers make more of them.  The same is true of financial assets and it does not take long or cost much to create new shares.  But if the underlying value of the business has not changed, then the creation of new shares simply dilutes the wealth of existing investors.

The only reliable method of determining that underlying value is the market.  When government meddling distorts it and financial folks get hold of megabucks without knowing where the risk is, they get greedy.

Christopher Whalen wrote a book called Inflated: How Money and Debt Built the American Dream, reviewed by the Economist in 12/2010).  The “Fed” refers to the Federal Reserve Board, which acts to avoid inflation and regulate the supply of money.

“For much of its century-long life, writes Mr. Whalen, the Fed has served the White House and the big banks before serving the people — for instance, by repeatedly providing liquidity (money) to stabilize financial markets under the guise of protecting the real economy.

“Under Alan Greenspan (1987-2001) the central bank encouraged and facilitated greater use of debt thruout the economy.  (Whalen) —– worries that Americans, long used to instant financial gratification, have borrowed so heavily from the future that the necessary belt-tightening will prove to be beyond them.”

Rough seas ahead, friends.  Without a huge change in our lifestyle the economy and the country around it will decline towards a banana republic.

The point where efficient allocation of financial resources leaves off and unethical siphoning of funds (read “thievery”) begins is extremely fuzzy.  Wall Street superbrains know this, and they know when they are in the right place at the right time.

Based on previous experiences they knew taxpayers would ride in on their white horses if push came to shove.  The savings-and-loan crisis of 1988 springs to mind.

Fannie Mae and Freddie Mac were part private and part public organizations set up years ago to provide mortgage loans at a lower interest rate than in the private sector.  This meant they could outdo the competition, due in part to an implicit commitment that if they got into trouble the taxpayer would help out.

Fannie and Freddie were created to enable ordinary people to buy houses where they could not qualify in the private market.  But this distorts the housing market by reducing the mobility of labor.  If a worker learns of a better job far away he/she could terminate a rental agreement almost instantly, but if he owns his dwelling he might not go after that job.

Soon they got into the business of taking loans from banks and bundling them into securities, thus freeing banks to make more loans.  With that implicit guarantee and lobbyists bringing big bucks to congressmen they grew into huge bureaucracies.

Well, the housing bubble burst and, guess what?  Yep, the white horse routine again.  At first we were gouged for $111 billion to keep these monsters alive.

Including helping the Federal Housing Administration an independent consultant named Edward Pinto figures the total grab will come to $330-440 billion (Economist 1/2010).  (The Congressional Budget Office estimated $389 billion.)

Another article: “As any capitalist knows, firms with subsidized funding and no risk of failure usually misallocate capital and can be dysfunctional, as the mortgage agencies Fannie Mae and Freddie Mac ———-.”

Unless we go to socialist government support of the housing market this must end sometime.  This will put great pressure on the housing market.  Prices may fall again, in which case the current recession is likely to deepen rather than end. 

As sub-prime (owner paid less than the market interest rate) defaults piled up they drove home prices downward.  Therefore we saw millions of prime borrowers also underwater; they were seriously bent.  This is a mess that will take years to unravel.

Tim Geithner was deeply in high government finance until very recently, serving in the NY Branch of the Fed and secretary of the treasury.  We read his recent book, titled Stress Test.  Here we will attempt to offer comments.  (The whole mess stressed him.)

Chapter 10 – “In fact, as we started to debate reform inside the administration and Capitol Hill, many if our thorniest questions involved which regulators would do what in the future.  Just about everyone agreed that the current regulatory system was a ludicrously balkanized mess, but the same tribal warfare that hobbled the regulatory system would hobble our efforts to rationalize it.”  Reagan – “The scariest nine words in the English language are ‘I’m from the government and I’m here to help.’”

Epilogue – “This is the central paradox of financial crises: what seems just and fair is often the opposite of what is required for a just and fair outcome.   It is why policymakers tend to make things worse, and why the politics of crisis management are always untenable.”

“Regulators ———– even tho they will always lag behind the markets.”  We heartily agree, and will share a thought below.  (Keep the faith.)

Here Geithner reinforces our thinking that pervades much of our writing.  “I despaired at the back-biting and political gaming and posturing in Washington.  It put all kinds of unnecessary obstacles in the way of good policy.”  We have discussed the notion of career politician elsewhere (PG3).  Geithner repeatedly affirms that financial crises are built into finance, no matter how organized and regulated.  He predicts that there will be financial crises in the future. 

We recommend a mechanism that can predict bubbles and financial crises in advance thru the use of machine learning, which is a part of artificial intelligence.  God knows there are plenty of data available, both in the cloud and elsewhere.  We don’t know how far in advance such predictions can be compiled and published, but in a millisecond society that should not be a problem. 

Government should not be permitted to interfere in the financial sector.  “Too-big-to-fail” would never happen; the taxpayer will be held harmless.  The machine will be able to identify nearly all risks, where and how serious, and forecast changes in location and seriousness. 

Top bank and other finance firm managers will be keenly aware of the reality: that they alone will be responsible for any failure.  In some instances they will be punished, thru heavy fines and perhaps jail time.  The result will be a sweeping change in their policies.  (Note that our proposed constitution allows banks to create their  own currencies.)

If the economy continues dragging its arse big government will not want to withdraw the economic stimulus.  But these clowns who claim to be our leaders are caught between a rock and a hard spot.

If they keep the stimulus the budget deficit will grow even faster.  This will cause lenders to demand higher interest rates, which will cause the deficit to grow still faster as the economy gets locked into a vicious cycle.

But if they stop the taxpayer assistance continuing high unemployment will bring on millions more mortgage foreclosures and further reductions in prices.  Lenders will also be hogtied and look to Uncle to bail them out again.

It looks to us like a classic rock-and-a-hard-place situation.  In June 2010 our government began debate on a financial reform bill.  The Economist: “The Center for Public Integrity ——- reckons the financial services industry alone hired more than 3,000 lobbyists to influence ——.

“In June came news that the Office of Congressional Ethics has launched a probe into the fund raising activities of eight lawmakers who sit on the house financial services or ways and means committees.  They are thought to have held fund raisers days before they voted on financial reform.”

So this megamoney comes out of the superbrains’ petty cash boxes.  But that does not erase the stink of corruption, nor does it avoid once again distorting the market.

Government may splash out another multi-billion-dollar dollop of our money.  But will we just go on taking this treatment and rolling with the punches?  If our grandchildren had a voice we know what they would say.

Here is what Ron Paul, a maverick congressman who ran for president in 2008, has to say (broken into separate paragraphs for ease of reading).  “Without the Federal Reserve’s massive expansion of credit thruout the 1990s and early 2000s, there could have been no excessive borrowing or explosion of subprime lending.

“Thru easy credit, the Fed initiated the economic boom that created the dot-com bubble.  When that bubble burst the Fed pumped additional liquidity (money) into the system, which led to a new boom that created the housing bubble.

“And now the Fed’s additional trillions of dollars in monetary pumping is creating yet another bubble.  This is the exact opposite of stability in the marketplace and has nothing to do with free markets.  It is central economic planning at its worst.”

Paul is a deep believer in limited government, individual liberty and free markets.  A thinking citizen can readily see from the above why businesses are today sitting on tons of money but hesitate to invest and create jobs in a horribly distorted market.

We have mentioned the Covid-19 crisis elsewhere.  We have as little foreknowledge as the next guy/gal; only to say that our recommendation will probably generate some serious discussion and debate (which is the democratic process).

AND OIL: We should not overlook Big Oil.  The Oil Pollution Act of 1990 was obviously a political reaction to the 1989 wreck of the Exxon Valdez in Prince William Sound, Alaska.

This time the lawmakers really socked it to the oil industry.  The law demanded strict and unlimited liability for oil spills, regardless of whether the tanker or the company was proved to be at fault.

Think about it: no-fault situation, but companies can be sued for their shirts.  Tough, cheap shot that one, but because the news media hyped our emotions on this issue it grabbed a huge batch of votes for politicians.

Drum roll, and enter the phantom.  Now financially strong oil transport companies are avoiding the US like a plague.  Often old, unsafe tankers are hauling oil into American ports now.  Their overseas owners are usually comfortably out of reach of the long arm of American law.

They justify a higher price for their service in addition to using old buckets for hauling: gotta have a lot of insurance now, in case of a spill.  (Actually they probably don’t have any, as due to the new law any insurer would charge an arm and a leg in premium costs.)  Also, if the US government should seize an antique tanker to settle a damage suit the loss is minimal.

AND FARMERS: We cannot neglect farmers while discussing bad regulation.  Farm aid costs us many billions a year, while farmers continue to produce far more food than we can possibly eat.  (Seems different due to Covid-19.  But this difficulty is more a matter of transportation than any food shortage.)

“The father of Major Major, a character in Catch 22, a novel by Joseph Heller, makes a good living not growing alfalfa.  ‘The more alfalfa he did not grow, the more money the government gave him, and he spent every penny he did not earn on new land to increase the amount of alfalfa he did not produce.'” 

In this pocket gofer we look at just one part of it: dairy farmers.  (See also Pocket Gofer 7.)

Decades ago milk prices dropped and farmers were having a rough go, so Uncle stepped in to guarantee minimum prices.  That is, if the price dropped below a specified level we taxpayers would make up the difference.

This essentially took the risk of failure out of dairy farming, so thousands of good folks jumped into the business.  (In a free market every business has risk of failure.)

Now, we all know that low prices mean there is a surplus of milk in the marketplace, not a shortage (yeah, that same ol’ law again).  So, why in hell did the government prop up the price and thus encourage existing farmers to increase their dairy herds and thousands more to enter the business?

The invisible hand of politics was responsible.  We recall that it operates opposite to the invisible hand of the market.

Politicians saw votes, first in helping hurting farmers.  Later, with high prices farmers would make multibucks and politicians could tap into this pile in order to buy votes.

They would simply threaten to remove the price supports if farmers didn’t cross their open palms with silver.  Comes to billions a year.  Some would call this extortion.

No prize for guessing who egged the government on to this illogical splurge of folly.  And who is paying for it with every carton of milk and half pound of cheese.

We get the shaft from both directions.  Our taxes help prop up dairy prices, and we pay more in the supermarket than we would if the invisible hand of the market were available to help us.  In a free market competition would drive down prices and therefore force less efficient producers out of business.

By the mid-1980s even the government had to admit there was too damn much milk around.  There were thousands of tons of dried milk in storage, and no prize for guessing who was paying the storage costs.  So the government bought and slaughtered 1.6 million dairy cows (That’s right; with our money).

We remember PJ O’Rourke, who wrote a book called Parliament of Whores.  He said “How come the government never does anything like this with lawyers?”

Most of these billions go to rich farmers, who are each worth around $2 million or more.  These fat cats don’t farm the ground.  They farm the hallways of the Congress and executive bureaucracies.

Profit in the marketplace has little meaning for these characters.  Rather, they “farm” to maximize the take from us.

Years ago a bunch of rich farmers received $379 million of government money to limit production, and got another $66 million in irrigation subsidies to produce more crops.

Ah, would you run that one past us again?

Total acreage was often limited, so farmers piled on the pesticides, herbicides, and chemical fertilizers to increase production on those acres that Big Brother permitted them to plant.  But the water run-off in these areas was then polluted.  Some of it seeped into town water supplies.

No problem for the bureaucrat.  The government simply spent another $3 billion of our money in 1993 to purify this water.

Sometimes the more a farmer doesn’t do the more our government pays him/her.  For example, they are paid to let land lie fallow in order to reduce food surpluses.

We are thinking of starting a company.  Its purpose will be to knock over liquor stores.  No, we won’t actually rob any stores.

Rather, we will collect government payments for not robbing them.  We figure that farmers are okay folks, but they are no better than we are.

Stephen Budiansky (US News 2/19/1996) titled an article “Subsidies are Dead, Long Live Subsidies.”  He referred to the Freedom To Farm Act under consideration then by the congress.  It was hyped as eliminating those farm subsidies that cost us so much.

But Budiansky saw clearly through the bill and revealed that the actual cuts would be practically nil.  Let’s get real here.  Career politicians aren’t about to chop themselves off at the pockets.

The Economic Recovery Act of 1981 was supposed to help stop losses in property values.  Megabucks flooded into property.  But the 1986 Tax Reform Act stopped all this dead in its tracks, causing a depression in the housing industry, fouling the farm property market and contributing to the 1991-2 recession.

It also raised hell with the financial system.  Piece of cake for the phantom as he carved another notch in his cane.

Congress knows very little about banking, still less about property management.  But the phantom knows the congress, so one gourmet feast follows another.

In Communist China under Chairman Mao Zedong party cadres who knew nothing about farming told farmers what to plant where and how to care for the crops.  The Great Leap Forward of 1958 collapsed and millions starved.

Jefferson: “Were we directed from Washington when to plant and when to reap we should soon want for bread.”

We wonder how any business can do an effective job under these chaotic political conditions.  Probably the only way is to hire lobbyists, pray a lot, and do business like two porcupines make love: very carefully and plan for the short term only.

WHEELS: Voters in California got peeved about car insurance rates, so they made up and got passed Proposition 113, which forced reductions in premiums.  Then it was the insurance industry’s turn to get peeved.  It got a court to invalidate the reductions.

Over to the activists.  They got another proposition together which would have created a nonprofit agency to offer insurance at a reasonable price.

The next question is how this one would make the phantom a happy camper.  What would probably happen is that high-risk drivers who must pay very high premiums will flock in droves to the nonprofit agency.  Their higher and more often fatal accident claims will quickly send the agency into deep debt.

It must then ask for subsidies courtesy of the taxpayer in order to stay in business.  We should then ask if this result constitutes a victory over presumed greedy companies who are ripping off customers.

So, let’s ask.  Managers of the companies see this development, of course, as they understand how the market works (they live, succeed, and fail in it).  With high-risk drivers removed from their customer lists, they will have lower claim costs and hence can increase their profits substantially.

Over time of course, competition will lower their premium rates (unless the nonprofit agency goes out of business).  However, the total amount of money from whatever source that goes for auto insurance premiums will remain largely unchanged.

Someone has to pay.  The market cannot be denied, although government frequently gives it a helluva try.  This is why the phantom looks to the future as just one feeding frenzy after another.

FLOODS: Folks who live on river flood plains seldom buy flood insurance.  They figure no problem, as Joe/Jane Taxpayer will always be happy to pick up the tab whenever they get flooded out.

President Bush recommended $200 billion in 2005 to rebuild after Hurricanes Katrina and Rita.  The Red Cross collected record amounts in donations.

The government knows a big flood will generate lots of press.  If they spend bunches of our money to help victims they will probably win our votes come next election.

Well, once or twice we are happy to help.  Poor souls; flooded out.  Glad it’s not us.

Forty years ago the government established the National Flood Insurance Program (NFIP) to make affordable insurance available in endangered towns.  The idea was to help victims rebuild in less flood-prone areas.

But the victims have been rebuilding in the same places.  Those claiming multiple losses are two percent of the homes insured, but they account for 40 percent of NFIP payments.  Thousands of homes had total claims that exceeded the value of their houses.

One home in Houston, Texas was valued at $144,500.  Owners claimed 16 floods in 18 years and collected $806,590 in taxpayer money.

Maybe those folks like to redecorate often.  Not to worry, say the bureaucrats.  It’s not their money.

We smell the sneaky phantom and we’re no longer happy to help out.  But when government keeps spending our money, do we have a choice?

THE ENVIRONMENT: The thunderous hype and arousal of emotions on this one means that it has become a political issue.  Therefore the phantom’s antennae have sprung erect.  The annual budget for the Environmental Protection Agency (EPA) was $384 million in 1970, and it ballooned to about $6.7 billion for fiscal year 1998.

Air quality restrictions endorsed by Clinton in 1997 cost about $60 billion for every $1 billion of value.  “I approved some very strong new regulations today that will be somewhat controversial, but I think kids should be healthy.”  We learned in 1993 to reach for our wallets whenever Bill mentions children.

Many of the children Clinton presumably wants to help have parents in the inner city who will be done out of jobs as businesses cut back on employment in attempting to find money to comply with the new regulations.  And so the phantom bags another one.

EPA administrator Carol Browner claimed a cause-and-effect between air particles and human health, but she refused to release some survey data for review by impartial experts.  Like many bureaucrats, she apparently didn’t want scientific truth to interfere with politics.

George Will in a 5/1999 column: “Last week a federal appeals court ruled, 2-1, that some air quality standards promulgated by the EPA were so ill-defined and unprincipled that the EPA must have exceeded its powers in setting them.  It must have because ——– congress would have acted unconstitutionally if it had delegated such unfettered authority under the Clean Air Act.”

Bjorn Lomborg is a former “green” who wrote a book called The Skeptical Environmentalist, in which he cited a long line of scientifically determined statistics to counterbalance the emotional and political hype that has for decades misled the public.  The Economist favorably reviewed the book.  The entire environmentalist community promptly threw a tumultuous tizzy.

Along came a formal attack on Mr. Lomborg, and the same newspaper (1/2003) felt called upon to comment.  “This week, to the delight of greens everywhere, Denmark’s Committees on Scientific Dishonesty ruled on the book as follows: ‘Objectively speaking, —— deemed to fall within the concept of scientific dishonesty.’

“How odd.  Why, in the first place, is a panel with a name such as this investigating complaints against a book which makes no claim to be a scientific treatise?  ——–.

“One might expect to find the answer to this question in the arguments and data supporting the ruling —– but there aren’t any.  ——–.  The panel’s ruling — objectively speaking — is incompetent and shameful.”

Congress frequently puts only the roughest guidelines into law, thus giving the bureaucrats vast powers to pass regulations to implement the legislation (and harass us poor citizens).  The Federal Registry now includes 130,000 pages of administrative law.  This is in addition to what Congress has put on the books during the past 220 years.

And Al Gore?  He couldn’t pass this one up, so he persuaded his boss to approve the regulations.

All he needed to do is muzzle the scientists, and maybe he could ride this one into the White House in January 2001.  (As far as we could make out, he missed by only 18 pregnant chads.) 

Lewin in his book The Unfreedom of the Press wrote that he knew of groups of climate scientists who do not support activists’ claims about global warming.  But we don’t hear about these people because the “democratic progressive” (Lewin’s term) people don’t want media coverage of these renowned experts.  So another taxpayer-financed bureaucracy lives on.

David Bergland ran for president in 1984.  In his book on Libertarianism: “If the courts would recognize the right of private citizens to bring actions against air polluters on the basis of trespass against their bodies and other property, the air would be much cleaner than it is today.

“First, people typically assume that polluters can only be stopped by regulatory officials working for the EPA or similar state agencies.  Second, many assume that private owners of property have some perverse motivation to destroy its value in the pursuit of short-range profits alone.

“Third, many people think that only public spirited bureaucrats can manage forests, grazing lands or wilderness in a manner that does not destroy their long term value.  Each of these assumptions is false, —–.”

He showed that government ownership of waterways caused pollution.  A private owner has a much greater incentive to protect his/her resource, by legal action if necessary.

If the private owner of timberland cuts everything and then leaves the property, is he/she enriched at the expense of later stream pollution, destruction of wildlife habitat, and forest fire danger?  Thinking this one through (as every owner would do) we find that there is no incentive to behave in this way.

His land is taxed based on its value in producing commercial timber.  If he irresponsibly cuts all, taxes are still due the next year, and the next and indefinitely in the future.

Simple solution, we might say.  Just sell and cut out.  But where would he find a buyer who is willing to pay taxes on bare land and protect stream purity for at least 50 years or until new seedlings grow to commercial value?

The Great California Brownout of Summer 2000 was caused by regulators who screwed up the de-regulation process.  Prices for electric power increased by 270 percent over the previous year.

But what got them into trouble in the first place was neglect of a boom in demand that occurred over the previous ten years.  Or, was it really neglect?

Over those years California had the toughest environmental laws in the nation.  Therefore no new power plants were built during that time in order to meet the anticipated surge in demand.

The law of supply and demand says whenever demand exceeds supply of anything the price will increase.  So it did, as soon as deregulation freed the price to do this.

The predictable reaction among those who favor government regulation of business was to raise hell.  The phantom felt no particular need to react.

It has been proven over and over again that government is the nation’s worst polluter by far.  Officials know this, and so they have covered their arses with what is called the principle of “sovereign immunity.”

Simply put, this means the government cannot be sued unless it consents to a lawsuit.  MAMA MIA!!

TECHNOLOGY VS GOVERNMENT: New technologies are often developed with the market in mind.  It always works better than regulation.

A good example is food poisoning.  Irradiation technology was new 60+ years ago, and during the years since then it could have prevented hundreds of thousands of people from getting seriously ill and thousands of deaths.  (The 2010 egg salmonella panic springs to mind.)

Every innovation needs time to adjust and find its most efficient use in the marketplace.  But politicians need to get re-elected every other year, and so they need to be seen as responding to the concerns of that tiny but vocal minority of citizens who get stung during the adjustment period.  The news media cooperate.

Irradiation does not make food radioactive, nor does it change the taste, texture or appearance.  It slows down spoilage, kills every germ and may preserve food indefinitely without refrigeration.

But the Department of Agriculture employs thousands of bureaucrats.  Irradiation is a clear and present threat to many of those jobs, especially meat inspectors.

Actually, nothing new here.  Similar resistance slowed the introduction of vaccination, water chlorination, pasteurization, and fluoridation.

Once they forced their way past political barriers, these technologies reduced disease and saved millions of lives.  True to form, today irradiation just sits there.  (It would help tremendously during the Covid-19 plague.)

While we are on food we might mention that the United States Surgeon General’s Report on Nutrition and Health commissions many surveys on these subjects.  The Economist reviewed a book by Marion Nestle, titled Food Politics: How the Food Industry Influences Nutrition and Health.

Ms. Nestle joined the surgeon general’s office in 1986.  “—– she was told that the report could not recommend that people eat less meat —– indeed it should avoid warning people against any type of food for reason of health.

The task force did not want a second row of the kind that had greeted —– a 1977 publication of the National Institutes of Health, which urged Americans to ‘decrease consumption of meat’ and ‘eat more fruit and vegetables.’”

After that report got out all hell broke loose.  “An angry president of the National Cattlemen’s Association, —– told the senate’s agriculture committee that such dietary goals could jeopardize the health of this industry, —–.”

Apparently it is okay to jeopardize citizens’ health, but not that of cows?  Maybe we did not get that one right.  (Maybe the animal rights folks ……….. NAH!)

How about Big Tech?  The Economist Sept. 2017: “—– question of how to regulate the Silicon Valley ‘platform’ firms, such as Alphabet, Amazon and Facebook.

“In America and in Europe, consensus ——- must be tamed.”  Hold it.  This reaction has become so knee-jerk that no one in charge gives the matter any thought.  We suggest that authorities do what they will not do: Give the market a chance.  Instead, career politicians will meddle first, then probably forget about thinking later.

“Big Tech, Big Trouble,” Economist 9/23/2017:“—– question of how to regulate the Silicon Valley ‘platform’ firms, such as Alphabet, Amazon and Facebook.

HEALTH AND MEDICARE: Economist 6/2007: “——- health care is one of America’s most heavily regulated industries.  Indeed, its muddied approach to health-care regulation may act as a massive drag on the American economy — what one expert has called ‘A $169 billion hidden tax.’

“That figure comes from a path-breaking study ———.  —— by Christopher Conover of Duke University.  It looked at the many ways in which the American legal and regulatory systems affect the provision of health services ——-.

His team concluded that the overall benefit to society of $170 billion per year delivered by this system of oversight was far outweighed by the $339 billion in annual costs that it imposed —–.  ———– net cost of America’s health regulations resulted in perhaps 4,000 extra deaths each year.  And yet again the phantom strikes.

Turning to Medicare we are indebted to Harry Browne’s book Why Government Doesn’t Work for this one.  “—– created in 1965 —– elderly to get health care —–.

“By reducing —– out-of-pocket costs, it increased the demand for doctors and hospitals.  And it reduced the supply —— requiring doctors —— handling paperwork and complying with regulations —— and looking for ways to circumvent these things.  So the price —– rise sharply —–.”

AH!  By now we quickly recognize the whiff of the phantom hovering nearby, ready to pounce.

“As a result, the elderly paid from their own pockets over twice as much for health care (after —– inflation) than they did before Medicare began.  And most —– harder to get adequate —– service.  Naturally, the government points to the higher costs — proof that the elderly would be lost without Medicare — and that government should be even more deeply involved.”

And now much of the press hype soberly warns of bankruptcy of Medicare a few years down the road.  But, old folks vote a lot …..

GOING GLOBAL: The Economist 10/12/1996 published a study: “Sometimes, however, the road to riches is so clearly marked that only the blind fail to see the signposts.  So it is with European regulation.

“The latest study —–.  —– ranked 11 EU (European Union) countries according to how heavily they are regulated.  ——–.  The authors then —– ranked the same 11 countries according to output growth during the period 1981-93 and looked for a correlation.

“—– Ireland and Britain boast Europe’s least fettered markets, as well as its highest growth rates.  But in Greece, where the kicking foot of government is everywhere, output growth trailed the rest.”  It looked like that venerable nation’s economy was about to fall into the Aegean Sea.

By the 1970s Britain was so loaded down with regulation and government ownership of industry that it was essentially a socialist society.  In 1980 Keith Joseph was Prime Minister Thatcher’s hatchet man, and he did it up well.

After British Telecom was privatized, customers started complaining about the service.  This made sense, because previously it did no good to bitch, and it took a while for this new private company notion to take root.

This got the ball rolling.  Then came British Gas, British Airways, British Steel, British Coal, Brit Rail, the water system, and finally a big one: electric power.  As quality of service improved, employment in these companies was reduced by 20-40 percent.

By 1992 around 2/3 of state-owned industries had been privatized.  The government’s/taxpayers’ saving was $30 billion in American money equivalents.

No longer a huge cash drain, these companies became a major source of tax revenue for government.  Small wonder that Britain and Ireland were setting the pace in Europe.

The phantom apparently collects frequent-flyer miles.  He crosses the Pacific Ocean too:

In 1973 the Japanese government decided to protect its oil industry, right after the first Arab oil shock.  So it dictated that the price of oil products to businesses had to be kept low.  To avoid hurting the oil firms it allowed them to charge tall prices for gasoline to consumers.

Well, someone saw an opportunity and started importing gasoline.  The government quickly squelched that one.

Then it deregulated.  Attracted by high prices, many people jumped into the business and quickly caused gasoline prices to crash while the world price of oil climbed.  To add to the mess, the exchange rate between Japanese yen and US dollars went the wrong way (all worldwide oil transactions are in US dollars).

Glug, glug!  But even this was not enough.  There were far too many gas stations, because the oil firms had built them to take advantage of the high price of gasoline.

If an American football team takes several losses of yardage back-to-back it can punt.  Does the phantom love this?  Does a bear like honey?

Beddoes in a 10/2008 Economist Special Report: “Provocative as it may sound in today’s febrile and dangerous climate, freer and more flexible markets will still do more for the world economy than the heavy hand of government.

“America’s housing market — the source of the greatest excesses — had the government’s fingerprints all over it.”  Ah! the urge to meddle. 

Last month we saw the phantom ordering three new Brooks Brothers suits.  Apparently he can easily afford to pay “government” prices.

But, can we?

CONCLUSIONS

Mitchel and Simmons in their book Beyond Politics: “There is a story —–, about a Polish economic adviser who sought direction from American policymakers about moving from a socialist to a market economy.

They reminded him that markets are chaotic and difficult to control and predict and that they produce inequitable distributional outcomes.  They cautioned him to maintain direct government control and regulate economic activities.

“The Polish adviser listened politely and finally said: ‘Oh, we know all about regulation and control, we call it socialism.  We want to try capitalism.’”  Well, now.

Free markets do not function without occasional glitches.  However, they are remarkably resilient.  Therefore when given an opportunity they can and will work through these imperfections.  Knee-jerk political regulation denies this opportunity.

Welfare economists are like politicians, in that they don’t believe in providing that opportunity.  Furthermore they don’t understand the theory of how government functions.

We could accept both of these difficulties, until we confront the grim fact that they have no interest in acquiring such knowledge.  Rather, they believe that people’s behavior needs to be regulated because they cannot govern it by themselves.

All this makes us wonder why people continue to support government intervention in business.  The answer is the beneficial effects are immediate and visible while the flip side ($$$$$$$$$) shows up only later and can be easily hidden from view.

So the politician gets his/her votes and we never know how much they are costing us.  At least in part the bloke buys our votes with our money.  Nasty break, but that’s show bizz in today’s politics.

The kicker here is that the price of elections keeps going up, up.  So the price of influence keeps going up, up.  See Pocket Gofers 7 and 19.

There is only one seller of influence: the government.  Economists call this a monopoly.  Without regulation a monopoly can raise its prices as high as the market will bear and make pots of money.

The government regulates every other monopoly so it can’t rip customers, but not this one.  We might put this in our pipe and puff on it a while.

In 1995 the so-called “Contract with America” promised regulatory reform among other things.  In March there was a little action that seemed to hold promise.

The corridors of congress immediately filled up with lobbyists.  One side represented trial lawyers and consumer groups who swore that republicans were trying to deny due process to victims.

The other side consisted of corporations, who argued that a litigation explosion was imposing huge costs on them.  This was a business expense that they had to pass on to much the same consumers who were screeching on the other side of the fence.

Looks like a typical situation in a democracy: battle lines drawn and justice will triumph in the end.  But we must remind ourselves that the phantom lurks in the shadows.

To a conclusion.  Regulation in any form is counterproductive for several reasons.  One is that any form of government intervention has been proven misguided over and over again.

Another is insiders working both sides of the street, with all the potential for conflicts of interest and outright corruption.  A third is that in most of the regulated industries conditions are changing so rapidly that regulators haven’t a prayer of keeping up.

A fourth is that many industries are going global.  Coordinating regulation across economic and cultural boundaries certainly cannot work when it cannot work domestically.

The financial services industry is a case in point.  For international flows of capital (money), the medium term has become about a week.  This is a conservative estimate, as billions flit from one country to another at the click of a mouse button.

No government bureaucracy, however speedy, can react faster than, say, about six months to any brief market distortion.  Therefore we can forget about any effective regulation of most financial services markets.

Moore’s Law says that computing power doubles every 18 months.  It has proved accurate over the past 20 or so years (until very recently).

Now we have Moron’s Law.  This one states that regulation will never provide what the customer wants, and what it does provide will arrive about five years too late and cost five times as much.

An insider estimate has an average of 20 government agencies doing every job.  This obviously means open season for turf battles.

Each bureaucracy over time gradually moves away from doing and toward being.  Therefore the reaction to hurricane Katrina was glacial, to state the case charitably (so to speak).

No bureaucracy wanted to provide answers to desperate questions about what was being done and how soon will the needed help arrive.  Each agency waits for the next one to take the risk of failure and act; inquiring citizens call this the runaround (in print, anyway).

Local folks grow frustrated and angry.  Finally they realize that the government they had paid taxes to would not help them.  So they rolled up their sleeves and dug in, with charities like the Red Cross helping.

The BP oil spill?  The same.

“One legacy of the Lewinsky era is sure to be a re-examination of the influence of lawyers on the country, said Ronald Cass, the dean of Boston University School of law (William Glaberson column 9/1998).  ‘The question, —– will be whether lawyers are serving any real purpose in life or whether lawyers are simply engaging in semantic arguments that don’t make sense to ordinary people.’”  We find this interesting, coming as it does from a law school dean.

Being in bed with regulators makes business managers’ jobs easier.  With help from Uncle they need not work so hard or smart, and their and their employees’ jobs are temporarily more secure.

And the consumer/taxpayer?  Well, for each company it’s only a few bucks per day.  No problem, except that there are thousands of hawgs being slopped at the public trough and more coming.

Because competition is kept at a distance the companies get fat and lazy.  We get bad products and services, along with being forced directly through inefficiency and indirectly through increased taxes to pay extra for them.

Finally, as these companies on government welfare get fatter, lazier, and less efficient they must return to the well for more handouts.  Eventually they get trapped, just like poor folks on welfare (Pocket Gofer 2).

Customers decide they are tired of paying high prices, so they either do without or go elsewhere.  So there go the saved jobs anyhow as the companies slide into the dust bin of history.

After World War II international trade was carried on mostly free of barriers.  Therefore the world economy roared ahead for 20 years or so.

Then consumer groups with good intentions caused a lot of regulation, and business managers responded with their lobbyists.  Today’s bucket of worms is the result.

This reminds us of the story about the old, old days, when all the men did was hunt and fish, there were no taxes, and the women did all the work.  Then along came the white man, who thought he could improve this system.

It is hard to avoid concluding that BIG GOVERNMENT meddles in almost every aspect of our lives.  Funny: when we talk with people who suffered for 40-70 years under communism we get the same story.

But then, when we think about it we find it is not so funny.  That is the whole idea behind this pocket gofer: to get us to do some hard thinking and then take some hard action.

If enough of us call out “Enough!” loud and long enough, these industries and special interest groups that are gorging themselves in Washington DC at our expense will get the message.  Then they will have to get real or get lost.

One logical way to do this is to put a gofer in every hip pocket or phone.  This will get us to talking seriously about this important issue.  It will get us to engage in debate and constructive criticism, which will lead to action which is right for us.  (Thus the vital advantage of print.  The tube has no staying power.)

In a democracy what is right for us should be the rule.  If we are paying for a service we should demand quality.

Do this and those talented and high-priced lobbyists, lawyers, politicians, consultants, bureaucrats, and other looters would have to find productive work to do.  That is, they would be required to contribute to the economy instead of sucking its lifeblood.

Who knows?  They might feel better about themselves, earning their salaries for a change.  We know we would feel much, much better while watching our tax bills drop along with lower prices for things we buy.

Finally, how about the phantom?  Obviously he has developed a serious weight problem.  We could help him too.

At the beginning of this pocket gofer we indicated we knew how to smoke him out.  Friends, now we have him.

He has struck again, and again, and again.  We are going to strike him out, because when enough of us get hot together our fastball will have one helluva hop on it.

Gordon Gekko’s “Greed is Good,” but obviously up to a point.  Our argument is that the market would fix that point if government were to butt out and stay out.

The market needs time to correct imperfections of its own doing.  It needs more time when the imperfections (read “distortions”) are created by government.

Officials continue to ignore famous 1940s economist Joseph Schumpeter.  His dictum: Every economy periodically needs a cold shower to divert resources away from weak firms and toward the stronger.

Our bankruptcy laws help to do this.  But they can’t work if BIG GOVERNMENT intervenes ahead of the laws.  Therefore politics keeps weak firms in business, we pay more, the economy suffers and society slides downward.

But, we MUST REMEMBER.  No matter how hot, we can and will get this tough job done without violence.  We have the numbers.  Even though we no longer have a democracy, large numbers well organized can still work wonders.  We are about to prove it.

Our final shot consists of a story about Noah and the ark.  No, not THAT Noah and ark, but rather a reincarnation (author unknown).

The Lord came to Noah in Florida in the year 2003.  Earth was wicked and over-populated.  The Lord instructed Noah to build another ark and save two of every living thing along with a few good humans.

Six months later the rain started.  The Lord looked down and saw Noah weeping in his flooded yard — and no ark.  “Noah!” He roared.  “Where is the ark?”

“Forgive me, Lord, begged Noah.  “Things have changed.  I needed a building permit.  I’ve been arguing with the inspector about the need for a sprinkler system.

“My neighbors claim that I have violated the neighborhood zoning laws by building the ark in my yard and the height limitation being exceeded.  Then Transport Florida and the Department of Highways and Hydro wanted a bond posted for the future costs of moving power, trolley, and other overhead obstructions for the ark’s move to the sea.  I argued the sea would be coming to us, but they would hear nothing of this.

“Getting the wood was another problem.  There’s a ban on cutting local trees in order to save the spotted owl.  I told the environmentalists I needed the wood to save the owls.  No go!

“I gathered the animals, but then I got sued by an animal rights group.  I was confining wild animals against their will.

“Environment Florida decided that I could not build the ark without filing an environmental impact statement on your proposed flood.  I’m still trying to resolve a complaint with the Human Rights Commission on how many minorities I’m supposed to hire for my building crew.  The union says I must hire members with ark-building experience.

“The Florida Customs and Revenue Agency seized all my assets, claiming I’m trying to leave the country illegally and with endangered species.  So forgive me, Lord, but it would take at least ten years to finish the ark.”

Suddenly the sky cleared and the sun shone.  A rainbow stretched across the sky.

Noah looked up in wonder.  “You mean you’re not going to destroy the world?” he asked.

“No,” sayeth the Lord.  “Your government beat me to it.”

Friends, this is a hypothetical analogy, and yet accurate.  Just how accurate can be demonstrated here, which properly emphasizes the impact of politics.

l——–letter to editors, Economist 10/28/17:

“The meaning of the term ‘market failure’ has come to lie in the eye of the beholder and it is now widely used to refer to more  or less anything that the relevant politician or regulator wants to change, very frequently at the behest of particular interest groups. 

The market ‘corrections’ that are made are empirically a big, if not the biggest, source of impediments to the functioning of competitive transactional processes.  Unfortunate it may be, but ‘fixing broken markets’ has become a useful slogan for those who would wish pretty much the opposite of what you seek.”  Looks like another paean for free markets.

Usually as a last resort a petitioner will look to the Supreme Court.  But then …..

The Economist: “The reason they worry about the Federalist Society, the legal organization whose annual bunfight Justice Gorsuch was addressing, is not because it is shadowy, but because its influence is vast, brazen and part of a wider politicizing of the last branch of American society to succumb to partisanship.”  Here is reinforcement to support our argument that everything in Washington has become politicized.

A DIFFERENT APPROACH TO REGULATING BUSINESS

In a democracy government officials have faith in citizens’ and firms’ abilities to do well for themselves.  Because markets are made up of citizens, it logically follows that government has faith in markets.  This means both groups believe in giving the market a chance.

During the 1930s Roosevelt’s New Deal installed tight regulation of financial services.  Today the thinking that lay behind these restrictions is being criticized.  Deregulation has contributed directly to today’s wealthy society, because now money is somewhat better able to find its most efficient uses.  (The job is far from completed.)

Until the 1970s regulation of electric power worked well.  At that time high inflation and high costs fractured the system.  By the 1980s deregulation permitted people to build small power plants and sell the output to utilities.

Today competition is changing the entire industry.  Folks are wondering why everyone thought for so long that generation and distribution of electric power had to be done by monopolies.

Telecommunications and transportation have also been deregulated.  Unfortunately these high-profile industries make up in total a minor part of the whole economy. 

Why high-profile industries?  Politicians know we citizens want deregulation, so they select a few visible places to deregulate.

Today the Internet seems to be everywhere, and 24 hours a day.  If it is illegal, chances are it is available on the ‘Net.

Should it be regulated?  Can it be?  Its instant ability to leap over national borders poses one big challenge.

While pornography and hate speech abound, the Internet also provides individuals with the ability to protect themselves against smut and violence.  This could replace a lot of government snooping into private lives.  The market may yet make a comeback.

Once Big Brother is peeled off our backs, the new freedom may eventually enable us citizens to finally mature into adulthood.  Great News!  So, gather round, all ye tired, ye poor, ye oppressed, and downtrodden children, yearning to breathe free …….

Lawyer Bryan Giemza (3/2000 column): “If I’m willing to risk eating uninspected country ham, I’m ready to accept the attendant risk of bellyache.  I would rather not live in a ‘safe’ society so sanitized that every effort is applied to removing the possibility of risk.”

Removal of risk compares to removal of free choice.  This removal makes it impractical for people to assume responsibility for their actions.  Rather, they tend to assume a victim stance and blame either the system or someone else for their own folly.

Citizen choice is part of democracy.  Hard to envision today, but just possibly a free press would provide information useful for making better choices in the marketplace.  They too exist to fill citizens’ needs for information (or, should).  See PG5.

The tenth Amendment to the US Constitution reads as follows: THE POWERS NOT DELEGATED TO THE UNITED STATES BY THE CONSTITUTION, NOR PROHIBITED BY IT TO THE STATES, ARE RESERVED TO THE STATES RESPECTIVELY, OR TO THE PEOPLE. 

There is nothing in the Constitution that by any stretch of the imagination delegates to the United States government the power to regulate the vast bulk of activities in the marketplace.  Now, Article I section 8 says congress has the power to regulate commerce “among the several states.”

This suggests interstate commerce, but the congress has stretched the meaning to where it and regulators are invading our private lives.  We don’t like it.

Before the Constitution was ratified the Articles of Confederation were the law of the land.  These worked very poorly, and states erected tariffs and other trade barriers between one another.

Giving the Congress the power described above was aimed at obliterating these barriers.  But current and recent past members have clearly twisted the original intent.

It is time we ate the phantom’s lunch.  God knows he has been eating ours for far too long.

The business of government is not the government of business.  The Economist elaborated (7/2003).

“Regulation costs American business on the order of $1 trillion a year.  A sum that big creates many opportunities for ——- politicians to market their rule-fixing skills to campaign donors.”

Business must pass along these extra costs to consumers.  The grand total of all taxes at all levels of government combined with regulatory costs today comes to roughly 55-57 percent of what the typical household earns in a year.

In 1900 this figure was 5-6 percent.  We should not wonder why in so many households today two incomes are needed to make ends meet.

This development generated a new kind of kid: the latchkey child.  Kids need parental love and discipline.

They cannot understand why parents are so often too busy and too tired to provide these in adequate amounts.  Many seek substitutes such as drugs, and crime follows.

Surely seems to us that folks should be thinking about this abuse.  If they seriously did this they would exit the house each day with gofer in pocket/purse/phone.

We pause for a tribute to Prof. Milton Friedman, a Nobel-Prize-winning economist who died in 11/2006 at age 94.  During a long and illustrious career he argued continuously in favor of free markets.

…………… PUBLIUS II

Treat your neighbor to a gofer.

TITLES OF OTHER POCKET GOFERS WHICH WE CAN DIG INTO, DISCUSS, CRITICIZE, AND ACT ON:

PG 1 – ON HEALTH AND FITNESS IN THE USA

PG 2 – ON VOLUNTEERISM

PG 3 – ON THE CAREER POLITICIAN IN A DEMOCRACY

PG 4 – ON THE BOTTOM-UP APPROACH TO GETTING THINGS DONE

PG 5 – ON THE COMING OPEN SOCIETY

PG 6 – ON MAKING A CONTRIBUTION

PG 7 – ON CORRUPTION AND ACCOUNTABILITY

PG 9 – IT’S ALL IN THE FAMILY

PG 10 – ON EDUCATION IN THE USA

PG 11 – ON THE US AS A WORLD CITIZEN

PG 12 – ON THE UN AND POTENTIAL CONFLICTS

PG 13 – ON PERSONAL POWER AND IDEAS

PG 14 – ON RESPECT FOR TAXPAYERS’ MONEY

PG 15 – ON BIG, SMALL, AND GOOD GOVERNMENT

PG 16 – ON DEMOCRACY AND OUR CENTRAL GOVERNMENT

PG 17 – ON LEADERSHIP IN A DEMOCRACY

PG 18 – ON WAR, WEAPONS, AND PEACE

PG 19 – ON THE GRAND DECEPTION

PG 20 – ON LIFE IN A DEMOCRATIC COMMUNITY

PG 21 – PRELIMINARY DRAFT OF A CONSTITUTION