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Anyone who still thinks socialism can work

Should read this.

Random Reflections: 3/9

This post on my favorite blog takes a stab at the gloomy pessimism of the current environmental debate. A point Boudreaux hints at, but doesn't really emphasize, is that there is often confusion over what constitutes a "resource". Nobody cares if we run out of light bulbs; we care if we run out of sources of artificial light. One point about resources that many economists like to make is that we will never run out of resources like energy, not that we will never run out of "resources" like oil. Either we find more efficient methods of production, such as better oil extraction, or we find completely new ways to get the same resource, such as solar power. What matters is the light, not the light bulb, and since we have the profit incentive to spur innovation, resources aren't an issue.

There's not much I can add to this excellent post by Scott Lincicome. It’s a bit long, so I'll summarize:

• Cotton producers have gotten the Federal Government to give them big subsidies so that they can compete on world markets
• These subsidies violate WTO rules, so the US Government pays Brazilian cotton manufacturers $140 million a year to prevent the Brazilian government from imposing retaliatory tariffs
• This means that American consumers face higher cotton prices because of the subsidies AND pay Brazilian farmers $140 million a year to prevent damaging tariffs that wouldn't be a threat if the subsidies didn't exist in the first place
• The House, even most of the "fiscally conservative" Republic party, voted against ending these payments and have made no attempt to reform these ridiculous subsidies

A well-written article on government "investment". I think that the crucial takeaway is the reminder that public investment often comes at the expense of private investment, not in addition to private investment. This is obviously bad, since in the private sector investors care whether or not their investments are socially useful (i.e., make a profit), while in the public sector the politicians and bureaucrats who are responsible for investing care about maintaining their position. Since their positions are most effectively held by catering to special-interest groups and not by investing wisely, they act accordingly.

This phenomenon is costly and unfortunate, but can easily be explained. The bureaucrats who work in the FDA don't receive benefits from saving lives by allowing treatments to enter the market, but they do face punishment if a patient is harmed by a device that was allowed to go to market without extensive testing. This causes them to ignore the unseen costs of dollars and lives that are wasted because life-saving treatments were delayed before they went to market, only taking into account the lives and dollars that are cost by allowing a product to go to market too early. This biased cost-benefit calculation results in medical products and procedures being unnecessarily delayed.

Also worth reading: David Henderson's take on how unions affect the lower class

Random Reflections: 2/7

Russ Roberts has an interesting piece about the recent financial crisis. It’s a commentary on an essay by Robert Samuelson, who outlines the Left and Right's respective explanations for the financial crisis, and why they are both wrong. Samuelson argues that the Right's moral hazard explanation, in which they argue that the collapse was due in part to government bailouts artificially increasing risk-taking, is faulty because investors largely weren't shielded from losses in this financial collapse. Roberts points out that this is irrelevant, because creditors were protected. This caused banks and other bondholders to continue to lend to companies that were overly risky because they expected bailouts.

The Washington Post has a remarkable article about the pace of global poverty since 2005. They report that during this six-year period, over half of a billion people were lifted out of extreme poverty. This is a remarkable achievement on its own, and it seems that the trend will continue in coming decades. In my opinion, public discourse focuses far too much on charity and "solving" economic inequality. While charity and generosity are certainly commendable, this article reminds us that economic development is the best way to reduce poverty.

Jeff Jacoby has an excellent article about the current state of US manufacturing. He does a great job explaining why the mainstream idea that the US manufacturing sector is in decline is bogus. My favorite stat is that "Americans manufactured more goods in 2009 than the Japanese, Germans, British, and Italians — combined". The only sense in which American manufacturing is in decline is in the sense that there are fewer manufacturing jobs as a result of higher productivity. What this really means, however, is that more people are free to work in other sectors than ever before, while at the same time those who are in manufacturing are getting paid higher wages than ever* (remember that wages are derived from worker productivity). Unfortunately, Jacoby neglects the fact that US manufacturing superiority is economically irrelevant. What matters is our standard of living, and if other countries can sell us goods at lower prices than we can make them ourselves while we produce something else, then we're all the better for it. There is no reason to think a decline in US manufacturing output, as long as it is accompanied by an increase in output in some other sector, has a negative effect on our economy. Don Boudreaux makes a similar point here.

*Two Centuries of Compensation for U.S. Production Workers in Manufacturing, Lawrence H. Officer, Professor of Economics at the University of Illinois at Chicago, 2009, Page 171, http://books.google.com/books?id=UHuW43F1i5QC&lpg=PA177&ots=Mraf7EHRBs&pg=PA171#v=onepage&q&f=false, through here

The Path to Universal Healthcare

To start with, I'd like to make clear that I'm not supporting or attacking Obamacare. I don't know nearly enough about the bill to do that in an intelligent way. Instead, I'd like to add my thoughts to the debate on the concept of universal healthcare.

I find it highly desirable that everybody have access to healthcare. However, I don't think that anyone has a "right" to healthcare. Saying that poor people have a right to healthcare means that other people have the obligation to provide it for them. In its extreme case, this obligation could mean that the government has the power to require people to become doctors, force doctors to work more hours than they would like, prevent doctors from retiring, and compel citizens to pay higher taxes, all in the name of providing universal healthcare. That doesn't seem right to me.

Further, it doesn't seem right to me that if society decides it wants to spend $X on helping poor people that we should force these poor people to buy healthcare. They may want food, or an apartment in a better neighborhood, or to send their children to a better school more than they want healthcare. I don't feel comfortable telling other people how to spend their money, and I therefore don't think tax dollars should be spent buying health insurance for the poor.

The way to help poor people get health insurance isn't by buying it for them, its by getting them out of poverty. While reasonable and intelligent people will disagree, I think that the clear way to do that is to enact market reforms that create a freer economy. This spurs economic growth and moves people out of the lower class, enabling them to buy health insurance.

As far as healthcare reform goes, our current system is clearly not working. It's obvious even to a casual observer like myself that the market is filled with inefficiencies and a lack of competition, and my basic economic intuition tells me that reforms which increase competition will improve quality while driving down prices. This makes everyone better off without forcing obligations on anyone.

Random Reflections: 1/5

• I was going to write a post about the "buy local" movement, but here is an article that makes the same points I would have made.
• The New York Times has a good comparison of Simon's and Malthus' thoughts on resource depletion.
• Greg Mankiw offers the President advice on how to work with Republicans.
• Professor Landsburg shares a libertarian economist's opinion of Dickens' Scrooge.
• The Economist has a comical projection of global politics in 2011.
• Here is a link I found on Greg Mankiw's blog that I find pretty amusing.

On "Compromise"

I'm a little late on this, but a week ago today President Obama signed into law a "compromise" on the Bush tax cuts. While both parties are playing at being righteously indignant, Republicans and Democrats will both reap political benefits without actually having to put in the work of finding a deal that is consistent with the policy goals of both parties.

Before I get into the details of what happened with this deal, I'll give a quick summary. Essentially, Obama got everything he wanted while sacrificing almost nothing, and Republicans got to win a completely meaningless symbolic victory before taking over the House, while they can still blame Democrats for the increasing spending.

Obama got the Bush tax cuts extended, making the tax system more progressive (no, that’s not a mistype; see here and here). He got the estate tax reinstated (a tax which is both unfair and inefficient, but more on that later). And he got a stimulus package passed that is even larger than the first one. I'll agree that unemployment benefits might be a good thing, but they also might not. And if we're not sure, I tend to think that we're morally obligated to err on the side of not taking money from some people and giving it to others.

The Republicans got to say that they "won" by getting the Bust Tax Cuts extended for the wealthiest Americans. This not only looks like a victory for them, but distracts everyone from noticing that they agreed to over $800 billion in increased government spending without any tax cuts, which is not exactly the platform they took the House with. This makes the whole Bush Tax Cut thing completely symbolic. Increased spending without increased taxes now means increased taxes later, no matter how you look at it. That's why this Republican "victory" is completely hollow.

The Democrats achieved a policy victory by getting a more progressive tax system and a lot of stimulus spending (in this case, I don't agree with either), and the Republicans won a meaningless symbolic victory. What did American citizens get? An increased deficit, a small loan from our future selves, and a government that has even more of other people's money to spend. Doesn't look like much of a compromise to me.

Much of this post was inspired by an excellent post by Professor Landsburg. I recommend that everyone reading this post read his comments here.

Spending Other People's Money

Now that I'm on my break, I hope to be posting more frequently in the next few weeks than I have recently. I want to start off by quickly sharing my thoughts on the morality of taxes and government spending.

Whenever policymakers create new laws that require funding, they must keep in mind that they are spending other people's money. Since taxation is not voluntary, people aren't paying the government for services, and taxes cannot simply be thought of as the "price" for a government provision of goods. Since government programs can only be funded through coercive measures, it is a moral imperative that governments demonstrate that they are justified in raising such taxes.

I don't think that anything I've said so far is controversial. The debate lies in what counts as "justified", and I will devote many posts in the future to examining that thought.

The Truth about "Sweat-Shops"

I have often suspected that there was something amiss about the argument in favor of imposing minimum wages and standards for working conditions on sweat-shops in poor countries. If people are willing to work in them, shouldn't they be allowed the opportunity? I'd love for everyone to make $100 an hour and work in comfort, but I suspect that the way to get there is through economic development and not through government regulation. Paul Krugman makes this argument more elaborately and intelligently than I can here and here. Let me know what you think.

Random Reflections: 11/15

Here are my thoughts on a few major recent events:

• I'm elated at the release of Aung San Suu Kyi, but as The Economist is wise to note, her release probably has strings attached.

• Obviously, I'm glad that the Republicans took control of the House, but I'm disappointed that it largely came at the expense of fiscally conservative Democrats. The Blue Dogs are probably my favorite main-stream coalition.
• In response to public obsession over the deficit, an obsession I find misplaced, the New York Times has published an interesting tool for examining how best to eliminate the deficit. Check out a blank one here and my version here (note that the only tax increases I support are a carbon tax and a measure that will close loopholes).

• The New York Times finds it unlikely that Don't Ask, Don't Tell will be repealed in light of the elections. I think that it would be a disappointment if we didn't get such an absurd policy removed. My hope is that the Democrats will trade spending cuts for the policy's repeal. I doubt it will happen, but I think it would appease both liberal Democrats and help new Republicans keep Tea Party favor.

• I think that the most important thing for the new Congress to remember is that cutting spending is far better fiscal policy than raising taxes, especially in an economy filled with wasteful and inefficient subsidies and earmarks.
• My prediction: There will be a lot of partisan grandstanding during the lame duck session, and then real compromise will happen.

A Defense of Fiscal Conservatism

Today's post is a response to what I think is a common misconception. I think people sometimes make the assumption that wanting to limit government involvement in the economy is equivalent to selfishly placing the interests of oneself (or business or unions or whatever) over the interests of others. While I am certain that this assumption is true in some cases, I know that it is not true all of the time and suspect that it is true very rarely.

There are certain goods that many people think should be available to everyone. A few commonly cited examples are a clean environment and healthcare. I agree that these are two things that society should provide for its members. However, that is not equivalent to saying that government should provide a clean environment and healthcare. Government is once mechanism for providing goods to society. Another is the free market. The fiscally conservatives view is not that these things should not be provided, but that they should be provided by market forces and not by government.

Arguing in favor of that point is one of the points of this blog, so I won't try to justify that position in one post (instead, I'll attempt to do it in many). I just want to make sure I'm being clear about what I believe, namely that in most circumstances the free market is a far more effective mechanism for increasing social welfare than government.

My Hope for the Future

The midterm elections are fast approaching, and in the time between now and November 2nd I will be doing a series of posts about which individual candidates I support. Most or all of these posts will be about New York elections in which I can vote. I wish to wait until the primaries are finished before I begin that series of posts, however, so today's entry will outline the direction in which I hope the midterms take our nation.

There are four issues which I think will be important after the midterms: the economy, climate control, immigration, and healthcare (if the Republics win one or both houses). While both parties will attempt to solve these problems, they will likely have very different approaches. I expect the Democrats to take fiscally liberal approaches to fixing the economy and climate control, with measures such as increasing unemployment benefits, tax cuts for the middle class, further stimulus measures (although I'm sure they won't call it that), and subsidies for green technology. I think the Democrats will attempt to solve immigration issues by making borders more open and by creating an easy path to citizenship for illegal immigrants already in America. I expect the Republics to take more fiscally conservative measures to fix the economy, such as more extensive tax and spending cuts and attempts to reduce the budget deficit. I expect them to resolve the immigration issue by increasing border security and attempting to root out illegal immigrants. I am uncertain of the path they will likely pursue on climate control.

While my opinions are scattered between the two parties, the majority of them align with the Republican position. I think the fiscally conservative approach to solving the economy is more responsible and will be more effective in the long run. I think spending needs to be cut and that the deficit needs to be reduced, and I simply don't trust Democrats to do that. As I have previously written, however, I support a very open immigration system. I think that with a Democratic president and a Republican congress (which certainly won't have a 2/3 majority), this is still achievable. I am wary of the Republican response to healthcare, however. I in no way support the current Democratic solution, but I feel that a Republican congress frantically removing whatever pieces of the legislation they can could complicate the system further. Fortunately, Obama won't allow that to happen. Instead, I think that a full overhaul of the healthcare system is needed. Unfortunately, Obama won't allow that to happen either.

I think that smart environmental reform comes in the form of correcting market failures, not through expensive subsidies. For example, a gas tax would go a long way towards reducing emissions and would make that market far more efficient. I don't believe that Democrats will follow that approach. However, I fear that Republicans will simply try to protect the interests of big business instead of finding smart market-based solutions (oil companies obviously won't want a gas tax, for instance). My hope is that a Republican congress bent on cutting spending and a Democratic president committed to improving the environment will construct a compromise that consists of market reforms.

Overall, I am hoping for Republicans to take control of both houses of congress, however unlikely that is. I am not universally endorsing the positions of the Republican party, but, lame duck issues aside, I think the combination of a Republican congress and a Democratic president is the most beneficial situation for our nation.

Religious Tolerance Improves Our Nation

I have been slow to blog on this subject because I hoped that it would fall to the background quickly enough so that there would be no need. Unfortunately, it appears that I overestimated the advancement of religious tolerance and the quality of American political discourse. I find it absolutely appalling that anyone could oppose the construction of the Cordoba House Mosque on Park Place in NYC. Opposition to its construction is an insult to all decent Americans. Not only does the opposition movement act with a mean-spirited sense of bigotry, they are opposing a project which is good for America. Here are 5 reasons that the country will be better off with the Cordoba House's Mosque:

1. The Cordoba House Mosque will increase America's national security

Allowing moderate Muslims to build a mosque near Ground Zero shows the world, especially Muslim extremists, that the American public understands who its enemy is. It will erode the extremist argument that America is intolerant of the Islamic faith. Building the Cordoba House Mosque will also allow domestic Muslims to assimilate more completely into American society, reducing the chances that they will be driven to extremism.

2. It will show the dedication of American citizens to the opposition of terrorism

It is crucial that the Islamic world understands that we are at war with terrorists, not Muslims. Al Qaeda and other extremists hate moderate Muslims as much as they hate Americans. It is therefore strategically necessary that we take every opportunity to unite with moderate Muslims to fight extremism. As they say, the enemy of my enemy is my friend. Supporting the Cordoba House Mosque will remind moderate Muslims that we are on the same side.

3. Tolerance of the project shows a respect of religious freedom

This point needs little elaboration. The freedom of religion is a basic constitutional right. I find it ironic that those who oppose the building of the Cordoba House the most fervently are often the most outspoken supporters of the Constitution. To me, the freedom of religion is the freedom to practice your religion without any form of persecution. Opposing the building of a mosque is clearly an act that violates the religious freedom of American Muslims.

4. It also shows a respect for the rights of private property

Respecting the rights of private property is another constitutionally guaranteed right. This is not only the freedom to have personal property protected from the government, but also the right to do what you wish with your own property, free of ridicule. These are two of the most fundamental democratic rights, and those who oppose them are damaging our democracy.

5. The Cordoba Project will help Americans understand the teachings of Islam and the motivations of the Muslim world more completely

This is part of the official mission of the Cordoba Project. It is a noble goal that would improve our nation culturally, as well as improving our relations with the Islamic world. The fact that 60% of Americans oppose the building of the Cordoba House Mosque shows that this message is sorely needed.

I have found some small measure of support among America's citizens who support this project. Featured on the Cordoba Initiative's homepage is a letter from Rabbi Burt Visotzky thanking President Obama for his support of the "Ground Zero Mosque". I find the letter to be an inspiring reminder that interfaith understanding is not gone from this country.

Nearly Open Borders

Immigration is the issue that won't go away, and I'd like to weigh in. I think that the current immigration system is fundamentally flawed, and that smart immigration reform will make life better for Americans as a whole.

Our current immigration system spends vast resources protecting the border against the entry of undocumented workers, detaining illegal immigrants, and auditing businesses so that the government can force them to fire illegals. This policy is bad for the country because, simply put, immigration is a good thing for America. Immigrants increase domestic demand (which is the goal of unemployment benefits and other stimulus spending), and they reduce the prices we pay for goods by increasing the labor supply. This also lowers the wages that are paid to workers in the short run, but in the longer run lower wages cause companies to expand, hire more workers, and bid wages at least partly back up. As with many economic policies, there are individuals who are made worse off by immigration (though not as worse off as it may seem, because even workers who get paid less enjoy the benefit of lower prices). Basic economic theory tells us, however, that in this case the gains to the rest of the country outweigh the costs to those individuals (see here and here for more complete arguments). Under current immigration policy, we are spending vast sums of taxpayer money to make ourselves worse off. Obviously, that's not good.

Good immigration reform therefore makes it as easy as possible for immigrants to enter the country. We should be careful to keep out those that pose a threat to national security, but otherwise immigrants should be allowed to enter unhindered. In addition to the gains outlined above, a more open immigration policy makes the country better off by reducing the amount of resources we spend combating illegal immigration. A policy of (nearly) open borders therefore causes us to spend less money and allows immigrants to improve our country. Instead of spending lots of money making ourselves worse off, we'd be spending less money making our country richer and more secure.

I also think that there should be a way for current illegals to become citizens (or at least legal immigrants). They should have to pay a fee that will cover the costs of naturalization and should have to settle unpaid taxes, but otherwise should be unpunished. They have already been here improving our country, and shouldn't be asked to cover the costs of past, flawed policies.

Party Time?

In this entry I wish to write about the Tea Party movement. Its grassroots nature makes it difficult to identify, so I am eager for reactions which might highlight any misinterpretations I may have.

The Tea Party is a movement that has formed in opposition to many recent government initiatives, especially the bailout of the financial system, the stimulus bill, and health care reform. A common Tea Party refrain is to "take back government", which I take to mean that the movement's members want to enforce strict constitutionality and reduce taxes as much as possible.

After some quick research, I came across a document called the "Contract for America". It is a list of ideals written and voted on by some members of the Tea Party. At risk of generalizing the whole movement, here are some of the document's points I'd like to comment on:

Identify constitutionality of every new law: Require each bill to identify the specific provision of the Constitution that gives Congress the power to do what the bill does.

Demand a balanced federal budget: Begin the Constitutional amendment process to require a balanced budget with a two-thirds majority needed for any tax modification.

Audit federal government agencies for constitutionality: Create a Blue Ribbon taskforce that engages in an audit of federal agencies and programs, assessing their Constitutionality, and identifying duplication, waste, ineffectiveness, and agencies and programs better left for the states or local authorities.

Limit annual growth in federal spending: Impose a statutory cap limiting the annual growth in total federal spending to the sum of the inflation rate plus the percentage of population growth.

Reduce Taxes: Permanently repeal all recent tax increases, and extend permanently the George W. Bush temporary reductions in income tax, capital gains tax and estate tax, currently scheduled to end in 2011.

Identify constitutionality of every new law

I think that strict constitutionality for the sake of strict constitutionality is pointless. The Constitution was remarkable for its time, but it also allowed slavery, declared African Americans 3/5ths of a white person, and banned the income tax. We now know that all of those are bad policies. I certainly wouldn't support any law that is constitutionally indefensible, but I think that we should be striving for good policy and not strict constitutionality.

Audit federal government agencies for constitutionality

What I said above, but add in my distaste for bureaucracy. However, I am a fan of the idea of eliminating "duplication, waste, ineffectiveness, and agencies and programs better left for the states or local authorities". Take out the part about strict constitutionality and I can get behind this. I think that such a "task force" could even be effective if its members are appointed by the President without Congressional approval. It can help make the President look good if it succeeds in reducing waste, so he'll be motivated to appoint members that will actually do something, and leaving Congress out of it removes a potential conflict of interest when it recommends removing Congressional programs.

Demand a balanced federal budget

I like to compare the federal budget to a personal budget. Having a balanced budget is generally responsible. But having some debt is not irresponsible. Most Americans have or have had a mortgage. That doesn't necessarily make them irresponsible. Just like individuals, governments need to have the flexibility to run a deficit. Large deficits are irresponsible (just as excessive personal debt is irresponsible), but small deficits help growth under the right circumstances.

Limit annual growth in federal spending

This is similar to my previous argument. While I think excessive federal spending hurts the economic prosperity of the country, I think that legally limiting the government's ability to spend money is foolish. Instead of this, we should strive to elect representatives who are fiscally responsible and will raise federal spending as little as possible.

Reduce Taxes

Do I think taxes are too high? Absolutely. However, tax cuts are tricky than I think Tea Partiers want to admit. Distinct types of taxes have distinct economic implications that are not always obvious. Perhaps the writers of the "Contract for America" did more research than I have, but I am certainly not prepared to say that income taxes, capital gains taxes, and estate taxes should be the first to be reduced. Further, I think that there should be certain strategic tax increases, such as a gasoline tax. There are externality problems which can be solved or eased by an increase in certain kinds of taxes. Identifying these areas would allow us to lower taxes in other areas without spending cuts (I think spending cuts should also occur, but that is besides the point). For example, I've read that every gallon of gasoline purchased does approximately 50 cents worth of environmental damage. Given this, a 50 cent gasoline tax would cause gas consumption to occur at the socially optimal level, while allowing the government to increase overall wealth by reducing taxes elsewhere. Therefore, I think that saying that the government should reduce taxes, while true, is an oversimplification of the course of action that needs to be taken. (It should be noted that taxes are not always the optimal solution to externality problems.)

Overall, I like the idea of a political movement that seeks to enact greater fiscal responsibility and smaller government. However, I think the Tea Party misses the mark. It spends too much energy trying to enforce strict constitutionality when their efforts would be better spent developing good policy. I also think that the Tea Party oversimplifies the issues that government faces when trying to cut spending and reduce taxes. The movement may end up pulling the nation in a direction I find favorable, but I disagree with many of the movement's objectives.

Here is an excellent article about the Tea Party and its effect on American politics.

On Obama

Today I want to share a few articles that highlight my bipolar opinions of our president. The first is a piece by "The Economist" outlining Obama's strategy in dealing with Iran:

http://www.economist.com/blogs/lexington/2010/08/america_and_iran

I think this article supports my belief that Obama's foreign policy skills have been spectacular. Warming relations with Russia and successfully navigating difficulties with North Korea and China are all significant accomplishments, as are the UN sanctions that Obama helped get through the Security Council. I still haven't decided how I feel about war in Afghanistan, but other than that I am very comfortable with Obama's ability to represent our country to the world.

The second article is from the "New York Times" and discusses the bailouts of the auto industry:

http://www.nytimes.com/2010/08/06/us/politics/06obama.html?_r=1&ref=politics

While I'll leave formal evaluations of this policy to more skilled macroeconomists, I believe that it is generally bad policy to use taxpayer money to prop up a failing industry. If the demand for American-made cars isn't great enough to ensure the survival of these companies on their own, then the government has no place trying to keep them in business. While I think that the best government policy is generally to avoid any intervention in the private sector, I would at least have more support for spending this money on job retraining or some other venture help former autoworkers. In the end, however, Obama is doing nothing other than spending our money to delay the inevitable.

Cares Cafe

Today's post is inspired by an article in this week's Time Magazine. It discusses Cares Café, a non-profit branch of Panera Bread located in Clayton, Missouri. Cares Café serves the same food as all other Panera restaurants, but allows you to pay your own price. The idea is that affluent customers will pay at or above the "requested amount" (the price charged at other Panera restaurants), allowing those facing tough financial times to pay less. Customers can also volunteer at the café to cover the cost of their food. If Cares Café makes enough money to cover its costs, then I think that it is one of the best non-profits I've ever heard of. It has the potential to be a self-sustaining organization that provides a basic service to those in need.

If everyone were to pay the "requested amount", either in cash or in volunteer time, then it would require absolutely no charity on the part of anyone, including Panera. It would simply allow those in need to pay for their food by volunteering. This is effectively employing people who need extra money and paying them in food, increasing their incomes. Unlike traditional forms of charity, this model doesn't just help those poor enough to go to a soup kitchen. It also benefits those who are better off, but in need of some extra cash to make ends meet.

Even if everyone doesn't, or can't, pay the costs of the food they eat, this model still has great promise. Panera is a hugely successful restaurant, so we already know that people will choose to eat there. If some of the affluent customers pay above the "requested amount", then someone who cannot pay the requested amount is able to buy food at a discounted price without requiring charity from Panera.

I am eager to see the model succeed without needing charity on the part of Panera (admittedly an unlikely occurrence). This would mark the birth of an organization which is both profitable and charitable. I don't see any applications of this model outside of fast-food style restaurants (where volunteering would be effective because, I assume, minimal training is needed for most positions). However, if other establishments in this niche adopt this model, then food will be more affordable to those experiencing hard times without requiring corporate benevolence.

On Unemployment Benefits

With tomorrow's swearing in of Robert Byrd's replacement in the Senate, the Democrats will have enough votes to extend unemployment benefits to America's jobseekers. Republicans have held out on the measure, saying that they support the extension of unemployment benefits but that it must accompany a reduction in spending elsewhere. In this instance, I am fully on the side of the Republicans.

I support unemployment benefits because I think that they provide relief to those who need it most. According to The Economist, there are approximately 5 unemployed for every job opening. I think that statistic alone is pretty good support for the extension of unemployment benefits.

Unemployment benefits are not without cost, however. A traditional argument against unemployment benefits is that they create a disincentive for people to find jobs. While I am sure this occurs to some extent, I am not particularly convinced by this argument. I find it hard to believe that a substantial number of people would choose to live off of government unemployment when they have the option of working, both because of the psychological (dignity, self-worth, social stigma) and standard of living costs. In any case, I'd rather err on the side of trust in human decency.

However, there are other costs to consider. Whenever taxes are collected, a deadweight loss is incurred by the American public. Instead of incurring more (future) deadweight loss by increasing the deficit, I think spending should be cut elsewhere to pay for the program. This is not the only reason that the unemployment benefits should be offset by spending cuts. One of the primary justifications for the extension of unemployment benefits is that the unemployed are the most likely to spend their money and stimulate the economy. I agree that this is true. However, I argue that this effect will be dampened if the unemployment benefits are not offset by spending cuts.

If the unemployment benefits simply add to the growing federal deficit, then the benefits given to the unemployed are partly a loan that they will have to repay when their taxes go up in the future (the entire package that they receive isn't a loan because all taxpayers will have to pay it back, not just those with unemployment insurance). Knowing this, the only ones who will spend all of their unemployment benefits are those who would like to take out a loan on their own but cannot. The rest will simply save the part of their benefits for the inevitable future tax increase. I am admittedly making large assumptions about the economic and mathematical savvy of average people, but I believe I am right in principle and that what I've described will occur to some extent. Therefore, an offsetting spending cut will reduce the costs of unemployment benefits while making the program somewhat more effective. Unfortunately, it looks like the supermajority will stop me (and the Republicans) from getting my way.

On Soda Taxes

In the past year many states and cities have proposed adding a tax on soda and other sugary drinks in order to raise revenue that would close their budget gaps. Despite backing from many public health groups, the measures have largely failed but will likely be put back on the table in the future. Contrary to my usual anti-tax opinions, I actually think that a soda tax is a good idea, at least to a certain extent.

Before I explain why, I want to make two important points. First, I think that states should seek to close their budget gaps primarily, if not exclusively, through spending reduction and not through tax increases. Second, I think that the government is never justified in passing laws with the intent of discouraging unhealthy behavior unless such behavior causes harm to those who do not participate (a situation economists refer to as an externality problem).

I support a level of taxing soda and other sugary drinks (though not necessarily the level of taxation being proposed) because it is such an externality problem. Soda consumption in the US is a major factor contributing to obesity. Obesity increases the incidence of obesity related diseases. When people get sick more often, demand for health care goes up. When demand for health care goes up, the price of health care goes up. Therefore, people who drink too much soda and become obese raise the cost of health care for those who drink soda in moderation and maintain a healthy weight.

While taxation is not always the best solution to an externality problem, I believe that it clearly is in this case. Therefore, I support a soda tax that will discourage people from drinking soda to the extent that the excess burden placed on the healthcare system is relieved, and no further. Despite my misgivings about raising taxes to cover budget deficits, however, I realize that some tax increases are inevitable. I therefore would also support a soda tax over other sales/excise tax increases. As I said earlier, I believe that it is wrong for the government to pass a tax for the purpose of discouraging unhealthy behavior, but I do feel that a tax that is intended to raise revenue that results in discouraging unhealthy behavior is better than a tax intended to raise revenue that doesn't discourage unhealthy behavior.

On Elena Kagan

With the confirmation of Elena Kagan to the Supreme Court seeming imminent, I thought I'd weigh in on the subject. Overall, I think she is a smart choice by the President. She is liberal enough to appease Democrats, but isn't liberal enough to give the Republicans just cause for complaint. She is competent and is without any controversy of real significance (she isn't the only liberal academic opposed to "Don't Ask, Don't Tell").

I do wish, however, that she would answer the questions posed to her by the Senators in a meaningful way. I know that it is modern practice for nominees to avoid giving an indication of how they would vote on an issue, but I find it unfortunate that they hide behind that guise for nearly every subject of significance. It is clearly a strategy motivated to prevent nominees from saying anything that will inhibit their chances at nomination. The President's party is expected to fall in line and the opposition party is expected to oppose, and such party cohesion makes the nomination process little more than a chance for error on the part of the nominee. This is particularly frustrating when taking into account the fact that Kagan is forced to backtrack on a previous stance to follow this strategy (she wrote previously that Supreme Court nominees should have to answer questions about their Constitutional opinions).

It also seems to me that the issue of her barring military recruiters from Harvard's campus while a dean is misrepresented by both sides. It seems completely acceptable to me (and I admittedly have no understanding of the legality of her actions) that Harvard should be able to bar any organization from its campus, especially with such a noble reason as protecting the institution's anti-discrimination policy. However, I find it hard to believe that Kagan felt that she was only following her institutional duty and not making some form of formal protest to "Don't Ask, Don't Tell". Ethically (again, I have no inclination as to the legality of her actions), I think that she was within her rights to do so. I find it unfortunate that she hides her former willingness to protest a policy she disagrees with so that she can be more "confirm-able".

In conclusion, I support her confirmation to the Supreme Court. She is too liberal for my taste, but she seems competent, lacks any obvious shortcomings or controversies, and genuinely doesn't seem the type to engage in judicial activism. Realistically, she is probably the most centrist appointment we could ask of Obama, and since she is replacing a consistent liberal vote in Justice John Paul Stevens, she may even mark an overall rightward shift in the court.