The Locker Room

November 10, 2009

Fannie and Freddie roam free

Posted by Joseph Coletti at 9:45 PM

The Federal Home Finance Agency has had free rein since September to disregard laws it sees as inconvenient, according to Huffington Post. That's when FHFA succeeded in getting its inspector general downgraded to an internal auditor. And FHFA isn't just any agglomeration of letters, either. It is the mortgage industry.

The FHFA is home to Fannie Mae, Freddie Mac, and the Federal Home Loan Banks, which are jointly responsible for purchasing or guaranteeing more than 80 percent of new mortgages issued since the middle of 2008, according to FHFA numbers.

Medicare fraud is a $60 billion criminal industry, the Centers for Medicare & Medicaid Services have been headless all year, and financing for 80 percent of the nation's mortgages has no adult supervision.

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Hannity misses an opportunity

Posted by Dr. Roy Cordato at 5:15 PM

Not listening to my own opinion--i.e., that Sean Hannity is not worth listening to--I just had the Hannity show on the radio while having some dinner before I go teach my class. A caller was complaining to Sean that insurance companies only pay 68 cents on the dollar for health care expenses. Hannity's answer? Medicare pays less than that.

Unfortunately, this was a teachable moment that Hannity was not equipped to take advantage of. Leaving aside exactly what the caller meant by "68 cents on the dollar," i.e., on the first dollar, on the 1000th dollar on the 50,000th dollar, the average dollar, the point that Hannity should have made was that for most dollars spent on health care by most people, we have insurance plans that pay too much, not too little. This is the whole point of moving toward high deductible plans supported by HSAs--an idea that Hannity says he supports, although it is not clear he knows why.

One of the reasons why health care costs are high is that for too many health care expenses, there is a disconnect between payment and consumption. The insurance company pays while the employee, whose employer is the policyholder, does the consuming of health care. Costs are driven up because patients are not cost-conscious consumers.

The reason why the widespread use of high deductible plans--where the insurance company pays 0 cents out of every dollar for the first $2000, $3000, or $5000 spent coupled with Health Savings Account--is a good idea is because it makes for cost conscious consumers. Unfortunately, Hannity just had the opportunity to explain this to millions of listeners and he blew it.

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Withholding food and water? Covered.

Posted by Dr. Roy Cordato at 3:28 PM

While the health "care" bill just passed by the House will not cover assisted suicide, it has no problem with withholding food and water. Here is what is being reported at CNSnews.com:

Under the heading, "Prohibition on the Promotion of Assisted Suicide," the bill says "information provided to meet the requirements of subsection (a)(2) shall not include advanced directives or other planning tools that list or describe as an option suicide, assisted suicide, euthanasia, or mercy killing, regardless of legality."

The next paragraph says: "Nothing in paragraph (1) shall be construed to apply to or affect any option to—(A) withhold or withdraw of medical treatment or medical care; (B) withhold or withdraw of nutrition or hydration; and (C) provide palliative or hospice care or use an item, good, benefit, or service furnished for the purpose of alleviating pain or discomfort, even if such use may increase the risk of death, so long as such item, good, benefit, or service is not also furnished for the purpose of causing, or the purpose of assisting in causing, death, for any reason.
 

Interesting language. You can cut off someone's food and water even if it increases the risk of death, but you can't if it is for the express purpose of killing them. I think this is the argument that the Soviets used in denying food and water to millions of Ukrainians.

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Life, liberty, and property linked together as fundamental rights

Posted by Mitch Kokai at 2:56 PM

Many of us consider life, liberty, and property as fundamental rights, but we consider each of them separately.

Kyle Scott believes all three need to be considered as interconnected. Scott, who teaches political theory and constitutional law at the University of Houston, addressed rights in the context of the Kelo case during a N.C. History Project presentation today at the Campbell University Law School.

Click the play button below to hear Scott address the "unity" of our basic rights.

Watch the full 43:54 recording by clicking the play button below.

You'll find other John Locke Foundation video presentations here.

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The NYT's disgusting spin on the fall of the Berlin Wall

Posted by George Leef at 12:37 AM

Naturally, the New York Times used the anniversary of the fall of the Berlin Wall as an excuse to run a clueless "but capitalism is really bad, too" sort of op-ed.

Cato Institute's Marian Tupy gives the piece a thorough roasting here.

I'd just add this point. The main reason why lots of Europeans profess not to like capitalism very much is that they only know its extremely distorted cousin, state capitalism. What they call capitalism bears very little resemblance to the real thing.

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Are there no limits to the "diversity" mania?

Posted by George Leef at 10:30 AM

Dorothy Rabinowitz has an excellent article in today's Wall Street Journal on the Ft. Hood murders, and particularly the dithering blather from those who refuse to face the obvious fact that the shooter was an Islamic terrorist.

Especially interesting is this quotation from Army chief of staff General George Casey: "This terrible event would be an even greater tragedy if our diversity becomes a casualty."

We expect to hear inane comments such as "diversity is our foremost goal" from college presidents, but to hear similar foolishness from a spokesman for the military is frightful.

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Beware of GDP

Posted by Dr. Roy Cordato at 10:25 AM

Doug French, writing over at Mises Daily, lays out exactly why GDP is mostly a meaningless statistic and certainly is not a real indicator of the health of an economy. He does it in the context of addressing, and in large part praising, an argument made by Megan McArdle at Atlantic Monthly magazine. Here's his argument in a nutshell.

First he approvingly notes McArdle's example:

a new home built during the boom...pumped up the GDP numbers during the boom, but now the "house sits empty while bankers, borrowers, and regulators squabble. One of the 2.4 million excess homes on the market, its only function right now is to bankrupt its owner.'"

Then he goes on to make the general point:

GDP does not, and cannot, reflect the waste of enormous effort, and precious natural resources, that went into building something that suddenly no one wants." Yes, all of the malinvestment made GDP soar, but ultimately just wasted capital..."The GDP framework cannot tell us whether final goods and services that were produced during a particular period of time are a reflection of real wealth expansion, or a reflection of capital consumption.

In other words all GDP numbers can tell us is that money is being spent. They can tell us nothing about whether it is being spent on anything worthwhile or that consumers want. The perfect example comes during the boom period of a business cycle. As the business cycle theory of Hayek and Mises shows, federal reserve policies create lots of spending, but the spending is called malinvestment, i.e., investment on projects and that will not be profitably valued by consumers. GDP during this period rises, but so what. It is investment in factories that will have to be closed down, in housing and office space projects that will have no buyers, etc. These handsome looking GDP numbers are in fact phony and misleading. 

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Pete Boettke, one night only

Posted by Joseph Coletti at 10:22 AM

George Mason University economist Peter Boettke will be at Duke University tonight at 7:00 to discuss if there is a relationship between Austrian economics and libertarian politics. The talk, in Old Chem room 101, is free and open to the public.

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Another conservative history

Posted by Mitch Kokai at 10:08 AM

There are two types of people in the world: those who assign everyone to one of two opposing categories, and those who don't.

That thought crossed my mind a number of times while reading Emory University history Professor Patrick Allitt's recent book, The Conservatives: Ideas & Personalities Throughout American History.

Allitt's work makes clear the futility of trying to define a "one true American conservatism" among the competing conservative tendencies that have flowed through the nation's political beliefs since the nation's founding. Conservative beliefs often have led people to vastly different conclusions. In fact, one of Allitt's more interesting arguments is the idea that the political beliefs motivating the actors in the Civil War represented competing forms of conservatism.

It's possible to quibble with Allitt's decisions about who should be considered conservative. For instance, he includes some classical liberals in his study but omits others (such as President Grover Cleveland) who clearly would fall into the conservative camp today. He calls Teddy Roosevelt conservative, though many would deny that description to the nation's first "progressive" chief executive.

Still, Allitt always offers a case for his assessments, and he explains his reasoning at the outset:

Here I argue that conservatism is, first of all, an attitude to social and political change that looks for support to the ideas, beliefs, and habits of the past and puts more faith in the lessons of history than in the abstractions of political philosophy. The attitude long predated the movement. Conservatives were skeptical and anti-utopian. They doubted the possibility of human, social, or political perfection. The attitude toward politics was comparable to the religious idea of original sin: people are unable to act entirely rationally or selflessly, human plans will go awry, well-meant actions will have unintended bad consequences. Planned societies are therefore impossible, and the attempt to create them will probably lead to chaos or tyranny.

Those interested in the topic will find other interesting volumes on conservative history here, here, and here.

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June Arunga to Speak in NC!

Posted by Jenna Ashley Robinson at 09:42 AM

June Arunga

June Arunga will be speaking at four NC campuses this week. Her talk, entitled "Economic Development in Africa: Challenges and Opportunities" will take place on Wednesday and Thursday at NC A&T, St. Augustine's, NC Central, and NCSU.

Akinyi June Arunga is the founder of Open Quest Media LLC, a New York-based film production company. Before founding Open Quest, she was an independent film writer and producer in the United Kingdom. She has written and produced four documentaries, including The Devil’s Footpath, based on her 5,000-mile trip through Africa in 2003.

Born in Kenya, Arunga is a law-school graduate of the University of Buckingham. An advocate of freer markets and international trade, Arunga was named one of the "100 Most Creative People in Business" by Fast Company magazine.

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The real cost of government-run health care

Posted by Mitch Kokai at 09:35 AM

Dan Mitchell of the Cato Institute uses his latest video to debunk the myth that increased government involvement in the health-care sector will cut costs.

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Another blow to Keynes' reputation as a scholar

Posted by George Leef at 08:14 AM

Keynes is one of the most overrated scholars of all time -- merely a dabbler with a great talent for self-promotion. I had not previously known about the event related below in Don Boudreaux's letter to The Wall Street Journal. Keynes dismissed von Mises' great work The Theory of Money and Credit as "unoriginal" (which, even if true, wouldn't demonstrate that Mises was mistaken in his analysis) even though, as he later admitted, his command of German was not good enough to allow him to comprehend Mises' argument. Do serious scholars dismiss the work of others without first making sure they understand it? No.

Here is Don's letter:


Editor, The Wall Street Journal
200 Liberty Street
New York, NY 10281

To the Editor:

Kudos to Mark Spitznagel for drawing attention to the important but neglected work of the late Ludwig von Mises ("The Man Who Predicted the Depression," Nov. 7).

But while Mr. Spitznagel is correct that Keynesians ignored Mises 1912 book Theorie des Geldes und der Umlaufsmittel (and its 1934 English-language translation, The Theory of Money and Credit), Keynes himself did not ignore it - and therein lays a revealing tale. When Mises's German-language book first appeared in 1912, Keynes reviewed it in the prestigious Economic Journal, dismissing it as being unoriginal.

Seems pretty damning, until we learn that Keynes himself, in his 1930 book Treatise on Money, confessed that "in German, I can only clearly understand what I already know - so that new ideas are apt to be veiled from me by the difficulties of the language."

Keynes's influential dismissal of Mises's work was based not on anything as lofty as informed disagreement; it was based instead on incomprehension.

Sincerely,
Donald J. Boudreaux
Professor of Economics
George Mason University

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New Carolina Journal Online features

Posted by Mitch Kokai at 06:39 AM

The latest Carolina Journal Online exclusive features Karen McMahan's report on FreedomWorks' "March on Raleigh" scheduled for Saturday.

John Hood's Daily Journal explores the possible state budget impact of health-care reform proposals that expand Medicaid burdens.

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