I had the pleasure of appearing on Relevant Radio last Friday to talk to Sheila Liaugminas on her show, “A Closer Look.” I discussed the idea of “intergenerational justice,” a term favored by evangelicals (Roman Catholics tend to talk about “intergenerational solidarity”), and how that concept relates to much of today’s discussion about the federal budget.

One thing you hear from many is that we need a “both/and” solution: we need to both cut spending and raise revenue in order to close the annual deficits. I’m not really convinced of this, in part because the federal government has historically shown that increased revenue always results in increased spending. The government spends what it takes in, with a little bit more to boot. There has to be something structural and meaningful to stop this from continuing to happen, especially since we can’t count on the political culture to do so itself. Whether that structural obstacle is a balanced budget amendment or some other kind of binding agreement, something like that has to be put in place.

I don’t think it’s fair on the other side, though, to say that closing some tax loopholes, making tax avoidance more difficult, and simplifying the tax code is tantamount to “raising taxes” either. So in that sense there might be a case for raising revenues in this limited sense if it gets the tax system focused on what it is supposed to do (raise revenues) rather than using it as a tool for rent-seeking, social engineering, and pandering to special interests.

What’s more important than the question of revenues vs. cuts, however, is recognizing that the size of the federal government has stayed about roughly constant when you look at it in terms of tax receipts relative to GDP. Anthony Davies does a nice job illustrating this. He points out that the government basically takes in amounts roughly equal to 18% of GDP (+/- 2%). So that’s essentially what the government needs to learn to live on. By contrast, we’re spending about 24% of GDP this year, and that number only goes higher as entitlement promises come due.

So how about this for a both/and solution: we cut spending to get within a couple of percentage points of 18% of GDP and we focus on tax policies that will grow GDP in a sustainable way in the longer term.

Acton is delighted to announce that BIZ TV will be presenting The Call of the Entrepreneur, Today, July 22 at 5:00 pm EST and Sunday, July 24 at 7:00 pm EST in the following cities:

Los Angeles (KAZA, digital channel 47.3)
Dallas (KAZD, 55.3)
Houston (KYAZ, 51.3)
Atlanta (WANN, 32.1)
Wichita (51.3)
Salt Lake City (20.2)
Denver (28.5)

The Call of the Entrepreneur (2007) tells the story of three entrepreneurs: a failing dairy farmer in rural Evart, Michigan; a merchant banker in New York City; and a refugee from Communist China. One risked his savings, one risked his farm, and one risked his life.

For more information on The Call of the Entrepreneur, please visit the official website.
For information on BIZ TV, click here.

News broke yesterday of an audacious violation of Apple Computer’s intellectual property rights (IPR) in China. This expat blogger posted photos of three sham Apple Stores she discovered in the city of Kunming—the stores have been set up by some entrepreneurial chap hoping to capitalize on the company’s Chinese popularity.

The story was slightly amusing, especially in light of Apple’s recent earnings announcement. (“They totally did it again,” said one analyst. It was also revealed that Apple now sits on enough cash in hand to buy 100% of Goldman Sachs at its current market value.) It seems that the Apple brand is now so valuable that the Chinese are counterfeiting the company’s retail outlets to sell Apple’s own products at full price. As one employee of the fake store said when reached by the Wall Street Journal,

It doesn’t make much of a difference for us whether we’re authorized or not. I just care that what I sell every day are authentic Apple products, and that our customers don’t come back to me to complain about the quality of the products.

But that’s precisely why Apple’s IPR must be protected. The company is one of the most innovative ever—their graphical user interface, popularization of the computer mouse, iPod music player, and touch-screen devices have dragged the technology sector forward, to say nothing of their design contributions—and that innovation would not have been supported without protections for the company’s intellectual property.

The U.S. Constitution justifies the establishment of IPR in giving Congress the power

To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries.

As David H. Carey explains in his Acton monograph The Social Mortgage of Intellectual Property,

If allowing some techonology to be patented benefits society in the long run more than it costs society temporarily to forego unrestricted use of that technology, then such patents are morally defensible.

The Apple Store “experience” is tightly bound up with the company’s products (remember how miserably Dell stores failed?), and part of allowing Apple temporary exclusive use of its inventions is allowing it to sell them as it sees fit.

There is also the question of trademark, which exists primarily for the protection of consumers, so that when I buy a tube of Crest toothpaste from a CVS I know that I’m not getting a Chinese imitation accidentally laced with cyanide, stocked by a shyster posing as a reputable franchisee.

Whatever employees of these fake Apple Stores may say—and according to the blogger who broke the story, none of the stores’ sales force realized at the time that they weren’t working for Apple—it’s China! Would you buy an iPhone from one of the fake stores? The Chinese government has a responsibility to its citizens to enforce Apple’s trademarks and protect its citizens from fraud.

By pure coincidence, I can illustrate the importance of protecting IPR in China: Yesterday, about the time this story was hitting the internet, my father went to the Apple Store in Dallas (an authentic one) and purchased an iPad. While he is away for a week on a theology course, Apple’s device will give him access to email and other business tools, so that he can grow in virtue and keep his business running at the same time (and once they debut the iSpankings app, he’ll be able to keep his kids in line, too). He chose an iPad over any number of other devices because his IT guy—who doesn’t like Macs, as IT guys never do—told him it would do the job best.

Except for the U.S.’s protection of IPR, that market solution wouldn’t have been possible.

Blog author: nrolf
Friday, July 22, 2011
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In Allan Bloom’s translation of The Republic of Plato, Socrates sets out to define the meaning of justice, and if the just life can be seen as being more profitable than the unjust life.  Thrasymachus, an acquaintance of Socrates, in book I of the Republic of Plato, offers his reckless opinion on justice saying, “Justice is the advantage of the stronger” (338c), and that “injustice, when it comes into being on a sufficient scale, is mightier, freer, and more masterly than justice” (444c). Thrasymachus’ definition of justice should be an alarming one because it can be used to explain the economic crisis and situation today: The unjust man benefits in good and bad times, by the laws and contracts made by those in power, while the just man is punished in both good and bad times.

It is interesting to see that this example of injustice, that was discussed more than two thousand years ago, is still in effect today when considering the bailout of banks, government spending, and the national debt in the United States. Time and time again the government is sending us the same message Thrasymachus gave us: it pays to be unjust in today’s unjust society. Banks and government spending are being rewarded for reckless exhaustion of money through raising taxes across America to cover-up their own debt. The government is benefiting in both good and bad times by rewarding themselves for making their own mistakes, while citizens are being punished in good and bad times because of the advantage of those in power.

So, in a society that rewards injustice, why is the just life one that should be considered more profitable and desired? Why should will still push to create a more free and virtuous society? If we look at the interpretive essay of Allan Bloom we may begin to understand why the just life is worthwhile. According to Allan Bloom:

“Justice is human virtue, each gains his fulfillment in the prosperity of the whole”… and that “injustice is not a virtue, but a vice because it is contrary to wisdom, which is a virtue.”

It isn’t hard to believe that the practice of virtue in society can lead us to a more free and virtuous society; and, that the practice of virtue in economics and politics will permit justice in these areas. Explained again in his interpretive essay of The Republic, Allan Bloom states:

“Justice is to be desired (rewarded) because it is the health and perfection of the soul. It therefore follows that justice, as the virtue of the soul, is desirable in itself. Everyone wishes to have a healthy soul.”

If justice, not injustice, was rewarded in our society, with the practice of virtue, then economies, politics, and lives in general would reflect that of a healthy soul; and would, in turn, help society flourish.

We can find this same message in what is said through the prophet Isaiah, “Thus says the Lord: Observe what is right, do what is just; for my salvation is about to come, my justice, about to be revealed” (Isaiah 56:1). By doing what is right and practicing what is just, we are living-out virtue; but more importantly, we are seeking first the kingdom of God.

Blog author: kspence
Thursday, July 21, 2011
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Archbishop Charles J. Chaput was named the next archbishop of Philadelphia on Tuesday, and mainstream coverage of the story immediately turned to sex abuse scandals. Which makes a lot of sense because, you know, that has dominated his tenure in Denver. As John Allen pointed out, that’s not the case at all, but George Weigel reminds us not to expect anything else.

What Archbishop Chaput is justly notable for is his Christian contribution to public debate. In his books, including the influential best-seller Render Unto Caesar, his writings in periodicals, and even his testimony before Congress, the Archbishop has been a model of evangelization of the secular world. He sees the Christian vocation to preach the Gospel as inseparable from an engagement in the public square. As he told John Allen, evangelization “is about trying to see the best of the world around us and to show how the Gospel makes it better and richer, and how the Gospel at the same time corrects it and purifies it. There’s no way the Gospel can embrace and purify the world unless it knows the world.”

Now Archbishop Chaput has been considerably more engaged in public life than many bishops, but he insists that an engagement driven by the Gospel cannot be a passive one, that a cleric is “unavoidably a leader, not a facilitator or coordinator of dialogue. A priest can’t just be a man of dialogue and consensus, because at some point he also has to lead.”

The Archbishop is a model for other Christian leaders whose congregations look to them for guidance when religion and public policy intersect. He combines Christian charity with absolute fidelity to Christian moral precepts and proper circumspection. His position on Health Care exemplifies this attitude:

Health care, of course, is one of the things the church has done in imitation of Jesus Christ, who came to heal the sick and to drive out evil in the world. It’s very important for us to be involved, but in a way that Jesus is involved, and not to do anything at all that would contravene the teachings of the Gospel.

As St.Paul said, “We may never do evil that good may come about” (Romans 3:8). Chaput is one of those bishops who understands that while Christians may have prudential disagreements about how to realize a good end, there are certain accommodations that a Christian may never make. The distinction is missed by many Christians and non-Christians.

Archbishop Chaput’s approach to public discourse may best be summed up by his answer to Allen’s Benedict-or-John Paul question at the end of their interview: “I hope that I have the evangelical energy of John Paul II, and the clarity of preaching of Benedict XVI.” That is quite an aspiration, but it is one which all Christians, and especially clergy, ought to share.

Urban prairie Detroit 2I wrote a bit about my short essay describing some of the principles and concepts at play concerning intergenerational ethics and economics. There are also important intergenerational cultural consequences following the Great Recession. A decade ago there was much concern about the rootlessness of current generations and the transience of the workforce. But that ability for workers to move quickly to new jobs in other cities and states has been undermined by the housing crash. Most anyone who bought a home in the last decade will not be moving anywhere anytime soon.

As Robert Bridges contends in a WSJ op-ed, “Coming generations need to realize that while houses are possessions and part of a good life, they are not always good investments on the road to financial independence.” The “ownership society” means something far different today than it did even a decade ago.

In her book How the West was Lost, Dambisa Moyo describes well some of the background leading up to the housing crash. One of the contributing factors was this cultural ideal of a “homeownership” society and resulting government policy to promote homeownership. She contends,

The direct consequence of the subsidized homeownership culture was the emergence of a society of leverage, one where citizen and country were mortgaged up to the hilt; promoting a way of life where people grew comfortable with the idea of living beyond one’s means.

She also judges that there are significant intergenerational implications:

Under the government guarantee system which propels the rapid appreciation of house prices, the only winners are those who can downsize (downgrade) their housing, or move to a different area, and buy a smaller (cheaper) place. Everyone else loses…. This ‘escalator’ effect continues until the time that the kids go to college. It’s a wealth transfer from the younger generation to the older generation as house prices become more expensive.

One of the effects of what Moyo calls “government guarantee system” is that resources (capital) was increasingly invested in homes that might have been invested in other, more productive, sectors.

An incisive piece by Roben Farzad explores why the aftereffects of the housing bubble are not likely to go away anytime soon. He quotes Doug Ramsey of Minneapolis investment firm Leuthold Group, “a student of asset bubbles,” who says, “The housing decline will be a long, multiyear process, and the multiplier effect across the economy will be enormous.”

Jonathan Smoke, head of research for Hanley Wood, a housing data company, argues, “We’ve gone through a period when we should have been tearing down houses. The supply of total housing stock is beyond what is necessary.”

Why then are we still celebrating “new housing starts” as signs of a rebounding economy rather than a continuation of misplaced investment and cultural priorities?

As Japan basks in the success of its World Cup champion women’s soccer team, the impact of the recent tsunami on the country is still very real. Although it has been over four months since the tsunami struck Japan, and one may assume clean-up efforts are going smoothly, restoration progress has actually been greatly hindered. Not one organization or person is to blame for this slowing of progress, but one theme that stands out is the strict regulation the Japanese government has put on relief efforts.

Ishinomaki, in northeast Japan, was one of the cities hardest hit by the earthquake and tsunami. According to the city’s mayor, Hiroshi Kameyama, “On a recovery scale of zero to 10, some parts of Ishinomaki are at zero and some are at one.”

The government has actually made moves to prevent receiving assistance. In order to prevent jam-packed roads in the days following the disaster, citizen volunteers were discouraged from delivering aid themselves. Aid packages from the U.S. military have been accepted by the Japanese government, but some international organizations have been told they’re not needed.

When the government does accept financial or humanitarian assistance, the process of actually getting this aid to the people is very slow. In Hannah Beech’s Time article titled “Is Japan’s Bureaucracy Strangling Humanitarian Aid,” an international NGO representative in Tokyo explains, “Everything has to go through government emergency centers.” “But they’re very slow to respond and can’t keep up with the flow of aid.”

And in the midst of this struggle came another curveball, the recent resignation of Japanese government minister of reconstruction, Ryu Matsumoto. Matsumoto’s resignation came after a chain of controversial comments not well received by Japanese citizens and victims of the disaster. He arrived in Iwate, Japan in early July and according to Gavin Blair’s Christian Science Monitor article, “Japan’s Kan feels pressure after disaster reconstruction minister quits,” told the prefecture’s governor, Takuya Tasso, that the government would, “give aid to those areas that come up with ideas for reconstruction, but not to those that don’t have any.”

Although Matsumoto was seen by many to lack sympathy towards the Japanese people, he actually brings up a very good point, that the government should only contribute to those areas of Japan that want to actively contribute to the restoration process, if not manually, at least through ideas. And in addition, many non-governmental organizations (NGOs), if not strictly regulated by the government, can step up to fill this void.

Christian volunteer organizations are some of the NGOs that have been most successful in recent disasters in the United States. In his Spring 2011 Religion and Liberty article, “The Church and Disaster Relief: Shelter from the Stormy Blast,” Ray Nothstine affirms the importance of Christian volunteer organizations, saying, “With government assistance often bureaucratic and slow to respond, Christian charity and church organizations are a vital source of relief and comfort.” Nothstine’s article outlines three major recent natural disasters that have struck within U.S. borders. One of these was the tornado which caused great damage in Tuscaloosa, Alabama this past spring. However, relief and restoration efforts have proven very successful.

In Nothstine’s article, University of Alabama professor David T. Beito called the relief efforts in Tuscaloosa “extremely decentralized” and added “I don’t know if a more secular city would fare nearly as well.”

Although much of Japan is not Christian, there are many international Christian charities on the ground in Japan. Caritas International is one such organization. As of the beginning of May, they have provided food and other aid to 10,000 survivors following the earthquake and tsunami. Now their aim is to provide trauma care services and help restore small communities, like fishing communities in the coastal areas.

As long as the Japanese government continues to exercise considerable control over restoration efforts, the organizations that do wish to help will be less effective than they otherwise could be. Government deregulation allows NGOs to play a bigger role in disaster relief, and overall, hopefully offers people a more stable footing so they can move forward to restore their local communities.

Blog author: jmeszaros
Wednesday, July 20, 2011
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John Boehner recently stated, in the debt-ceiling talks, that “We’re going to continue and renew our efforts for a smaller, less costly and more accountable government,” which most Americans agree with in principle.  However, citizens say that keeping benefits the same for the three big programs, Social Security, Medicare, and Medicaid, is more important than taking steps to reduce the budget deficit by a margin of 60 percent compared to 32 percent for Social Security, 61 compared to 31 percent for Medicare, and 58 compared to 37 percent for Medicaid.

So Americans purportedly want thriftier government, but still want benefits? What gives?  Part of the problem, according to James Kwak, is “the idea that there is one thing called ‘government’–and that you can measure it by looking at total spending–makes no sense.”

What Kwak means is that total expenditure is a misleading measure of the “size” of government. He presents this example:

The number of dollars collected and spent by the government doesn’t tell you how big the government is in any meaningful sense. Most government policies can be accomplished at least three different ways: spending, tax credits, and regulation. For example, let’s say we want to help low-income people afford rental housing. We can pay for housing vouchers; we can provide tax credits to developers to build affordable housing; or we can have a regulation saying that some percentage of new units must be affordably priced. The first increases the amount of cash flowing in and out of the government; the second decreases it; and the third leaves it the same. Yet all increase government’s impact on society.”

So increased spending (or decreasing it) does not necessarily mean the “size” of government has grown (or shrunk). Think how regulation is synonymous with big government, but it does not involve a tax or direct spending of any kind.

In fact, “big” government is often viewed through the lens of regulation, rather than cost. For instance, Kwak explains:

When people say government is too big, they often have in mind something like the Consumer Financial Protection Bureau–a regulatory agency that tells businesses what they can and can’t do…the CFPA’s budget is about $300 million, or less than one-hundredth of one percent of federal government spending.”

Again the divergence between cost and “bigness” is seen.  The CFPA may be viewed as “big,” intrusive, and unnecessary but it is not large in terms of cost like Social Security and Defense spending.

Kwak states, “popular antipathy toward the regulatory state has been translated into an attack on popular entitlement programs.”  Many people dislike certain government regulations and, due to the budget debate, dislike of regulation, the amount of government spending, and specific government programs may have become accidentally intertwined.

As mentioned before, Americans view Social Security, Medicare, and Medicaid as important and worth preserving.  Kwak elaborates: “Rationally speaking, your opinion about Social Security or about Medicare should be based on how much you put in and how much you get out–not on the gross size of the program, and not on how big the rest of the federal budget is. Yet instead the total size of the budget has become the driving force behind potential structural changes in Social Security and Medicare.”

Kwak suggests that “we should make decisions on a program-by-program basis, just like a business is supposed to do.”  His advice is: “If there’s a program that the American people, through our democratic system, agree will provide benefits greater than its costs, we should do it, independently of the existing spending level. And if there’s a program that isn’t covering its costs, we should kill it.”

Instead of focusing on a generality, “government size”, our elected officials should evaluate programs on a cost-benefit level.  Then government agencies that are viewed as too costly or intrusive (the CFPA) could be eliminated and government programs that are viewed as beneficial (SS, Medicare), but need reform, can be focused on in an unbiased way and not be harmed by the “too big” generality.

Jordan Ballor, in a blog post for Acton, wrote: “All government spending, including entitlements, defense, and other programs, must be subjected to rigorous and principled analysis.”  Indeed, although the American people think Social Security, Medicare, and Medicaid are beneficial, 52 percent think Social Security needs significant reform, 54 percent think Medicare needs reform, and 54 percent, likewise, for Medicaid.  However, without having a clear definition of what “too big” means, successful retooling will be difficult to achieve.

Ballor added: “This means that the fundamental role of government in the provision of various services must likewise be explored. This requires a return to basics, the first principles of good governance, that does justice to the varieties of governmental entities (local, regional, state, federal) and institutions of civil society (including families, churches, charities, and businesses).”  True reform requires not simply legal and budgetary change, but a reevaluation of what entities perform certain services, as Ballor suggested.

The Acton Institute is committed to real budget reform, and, to make sure that programs, like Social Security, are evaluated fairly and reformed properly, the United States should make sure it clearly defines the costs and benefits of individual programs before taking drastic action.

Blog author: ken.larson
Wednesday, July 20, 2011
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There were several comments and comments on comments following my recent “Comfy Faculty Lounges” contribution. In the Wall Street Journal, the author of the book I was reviewing makes her own case regarding tenure and teaching versus research.

“At a recent conference where I spoke on collective bargaining in higher education, one professor questioned (and others in the room also fussed about) my right to speak on the subject without—she was incredulous—a Ph.D.! I might ask why a degree in medieval literature or molecular biology would qualify one to discuss the growing unionization movement on college campuses.”

Naomi Riley’s full article “Academia’s Crisis of Irrelevance” is here. And the beat goes on.

Two weeks ago, President Obama ventured courageously into the debt crisis debate with soak-the-rich proposals aimed at the usual suspects—“oil companies,” “hedge fund managers,” “millionaires and billionaires,”—and a new enemy, “corporate jet owners.” That phrase may have tested well with focus groups, but economists and pundits weren’t duped. The imprudence of a new punitive tax on a segment of the country’s manufacturing industry was immediately mocked up and down the Twitterverse, and longer arguments have since been made.

There’s also the “small” problem of the size of the tax break for corporate jet owners: over a decade, the government could collect three-quarters of one-tenth of one percent of the portion of our debt that the President aims to eliminate. The proposal begins to smell like demagogic nonsense.

Then we have this towering irony: the President wishes to harm a segment of the economy (manufacturing) which he claims at the same time to support. His union base insists that he sign no new free trade agreements until Congress passes protections for workers whose jobs are outsourced. There is no talk, however, of protections for Gulfstream employees who will be laid off when the higher price of jets brings down demand. Focus groups can’t provide much in the way of economic analysis. Perhaps the President’s team should have talked to Steve Rooney, president of the International Association of Machinists and Aerospace Workers in Wichita, Kan., who told the AP:

I think it’s just insulting. He acts like it is just a luxury for somebody to own a business jet when they’re used as tools. And I don’t think he realizes how many people that this industry employs and how much revenue is brought in here from those types of aircraft.

Senate Majority Leader Harry Reid, who claims that lawmakers are fighting the President’s tax agenda “to protect the owners of yachts and corporate jets. To protect corporations that ship jobs overseas” misses this inherent contradiction.

The Heritage Foundation’s Mike Franc calls it an “off with their heads” mentality, and he’s right. That successful businessmen should be bled dry out of a “sense of shared sacrifice” is not the instinct of a free society. It is a Marxist sentiment, one based in a view of historical progress as class conflict.

The creation of wealth, from which the U.S. can pay down its national debt, is not a zero-sum enterprise.  It requires the cooperative striving of the whole business ladder. As Pope John Paul II pointed out in his 1981 encyclical Laborem Exercens, management and labor ought not to be separated at all. “Isolating … ‘capital’ in opposition to ‘labor,’” he says, “is contrary to the very nature” of wealth and its creation.

In concocting a solution to this country’s fiscal problems, our leaders would do well to remember that.