Monday, September 26, 2005

Property Rights and Our Pig Pens

Politicians finally stood up for property rights. Lawmakers killed a bill last week that would have increased the required distance between pigpens and any building used for human habitation from 50 to 100 feet. It’s just too bad that the only reason the House defeated the legislation was because many representatives themselves own piggeries. Every type of property out there should be afforded the same protection from government regulation.

But proponents, like Rep. Tagovailoa and Paopao, say that the public’s health is superior to "our love for our pigs." I say that if people were held personally responsible and liable for their actions, the government wouldn’t have to undermine our rights to our property to address health concerns.

If you build your pigpen too close and get sick, you pay more in personal medical costs. If you get anyone else sick, you can get sued for negligence and would have to pay for their medical costs. If you get your own kids sick, you can lose custody due to neglect and would have to pay for their medical costs. And if you get your tenants sick, they can sue you for medical costs and move out taking their rent money with them.

But the only problem with the above is that our socialized healthcare system takes the “medical costs” out of the equation. This is what you call a “moral hazard.” Because people believe the government would cover their medical costs, they take more risks to their and others’ safety than they would otherwise. Obesity and other health problems are also products of the moral hazard epidemic.

Since the government provides our healthcare, the ASG has authority over public health issues. Don’t be surprised when we see legislation to regulate, limit or tax the fast food industry because it’s supposedly their fault that people don’t have enough self-control to watch what they’re eating. Then, the politicians will patronize us by saying that we’re too weak-minded to muster up the will power to just say “no” to a Big Mac. All in the name of “public health” and “socialized medicine.”

A government big enough to give medical care is big enough to tell you how to eat and how far your pigpens should be from your home.

It’s just too bad that not enough politicians own gas stations, taxis, buses, banks, barber shops and beauty salons as well. Because if they did, we would have less licensing requirements, price controls/limits and other frivolous regulations that stagnate the growth of our economy and make us dependent on federal handouts and the canneries.

When politicians bring up another bright idea like this regulating your property, tell them, “This is my ‘pigpen.’ Leave me alone.”

Wednesday, September 21, 2005

Catastrophe in Big Easy Demonstrates Big Government's Failure by David Boaz

You've got to hand it to the advocates of big government. They're never embarrassed by the failures of government. On the contrary, the state's every malfunction is declared a reason to give government more money and more power.

Take Hurricane Katrina, a colossal failure of government at every level--federal, state, and local. Thirteen days after the hurricane, the Sunday Washington Post blared, "The Steady Buildup to a City's Chaos/Confusion Reigned at Every Level of Government."

And what's the response of the big-government crowd? "The era of small government is over." "It's libertarianism, more than anything else, that has transformed [New Orleans] into an immense morgue." "Americans living along the Gulf Coast have now reaped the consequences of that hostility . . . to the role of government as a force for good."

Let's look at the facts. Government failed to plan. Government spent $50 billion a year on homeland security without, apparently, preparing itself to deal with a widely predicted natural disaster. Government was sluggish in responding to the disaster. Government kept individuals, businesses, and charities from responding as quickly as they wanted. And at the deepest level, government so destroyed wealth and self-reliance in the people of New Orleans that they were unable to fend for themselves in a crisis.

And some people conclude that we have too little government?

Start with the failure to plan. As Paul Krugman wrote on September 2:

Before 9/11 the Federal Emergency Management Agency listed the three most likely catastrophic disasters facing America: a terrorist attack on New York, a major earthquake in San Francisco and a hurricane strike on New Orleans. "The New Orleans hurricane scenario," The Houston Chronicle wrote in December 2001, "may be the deadliest of all." It described a potential catastrophe very much like the one now happening.

The warning was there. And after 9/11, federal spending on homeland security skyrocketed, up to about $50 billion in the current fiscal year. A Department of Homeland Security was created, with FEMA folded into it. Meetings were held, memos were written, 190,000 employees went on the DHS payroll, billions were spent. If the FEMA memo and the Houston Chronicle article weren't enough, the New Orleans Times-Picayune published a five-part series in 2002 titled "Washing Away." So federal, state, and local governments were prepared for Katrina, right?

Wrong. During the Bush administration, Louisiana received far more money for Army Corps of Engineers civil projects than any other state, but it wasn't spent on levees or flood control. Surprisingly enough, it was spent for unrelated projects favored by Louisiana's congressional delegation.

What about the state and local governments? If you're going to have a city below sea level in hurricane country, you'd better have some disaster plans. And plans they had. But apparently those plans didn't include strengthening the levees or evacuating residents.

After Katrina left a path of destruction in Florida and picked up steam over the Gulf of Mexico, Governor Kathleen Babineaux Blanco conferred emergency powers upon herself. So she knew disaster was coming, not that that seemed to matter. Her Department of Homeland Security refused permission for the Red Cross and the Salvation Army to go into the city and deliver water, food, medicine, and other relief supplies to those suffering at the Superdome and convention center. Similarly, she took several days to sign a simple proclamation allowing doctors licensed out of state to help the sick and injured. Several doctors sat around for days waiting to go to work. As the storm hit New Orleans with full force, the local government effectively abdicated. Reports of looting began only hours after the assault.

FEMA issued a sternly worded release on August 29, the same day the hurricane made landfall along the Gulf Coast, titled "First Responders Urged Not to Respond to Hurricane Impact Areas." FEMA wanted all the responders to be coordinated and to come when they were called. And that was one plan they followed. As the New York Times reported September 5:

When Wal-Mart sent three trailer trucks loaded with water, FEMA officials turned them away, [Jefferson Parish president Aaron Broussard] said. Agency workers prevented the Coast Guard from delivering 1,000 gallons of diesel fuel, and on Saturday they cut the parish's emergency communications line, leading the sheriff to restore it and post armed guards to protect it from FEMA, Mr. Broussard said.

Those weren't the only examples. The city declined Amtrak's offer to carry evacuees out of the city before the storm. On September 2, the South Florida Sun-Sentinel reported, "Up to 500 Florida airboat pilots have volunteered to rescue Hurricane Katrina survivors, transport relief workers and ferry supplies. But they aren't being allowed in." Hundreds of firefighters responding to a call for help were held in Atlanta by FEMA for several days of training on community relations and sexual harassment.

Even President Bush acknowledged September 13 that "all levels of government" failed to respond adequately to the most-anticipated natural disaster in history. But the government failure in this instance runs deeper.

Who were the people who suffered most from Hurricane Katrina? The poorest residents of New Orleans, many of them on welfare--the very people the government has lured into decades of dependency. The welfare state has taught generations of poor people to look to government for everything--housing, food, money. Their sense of responsibility and self-reliance had atrophied. When government failed, they had few resources to fall back on.

Some journalists have suggested that the despair of poor New Orleanians undermines President Bush's case for the "ownership society." In fact, the suffering visible in the poorest parts of the city is a perfect example of the failure of the "non-ownership society." People had become trapped in dependency, with neither financial nor moral assets to rely on.

Meanwhile, despite FEMA's best efforts, immediately after the hurricane the private sector--businesses, churches, charities, and individuals--began to supply services to the victims. Within 10 days after the catastrophe, charities had raised $739 million, far ahead of the pace of donations after the 9/11 attacks or the Asian tsunami. Experts predict that donations might eventually exceed the $2.2 billion donated after 9/11.

Even though private companies have no obligation for disaster relief, they started planning for a Katrina response before the hurricane made landfall. Two Washington Post reporters wrote that it's "unsettling but inescapable" that commerce resumes quickly after natural disasters, that "Wal-Mart and Home Depot are in a class by themselves, going to extraordinary lengths to keep their customers supplied." Would they really prefer that Wal-Mart and Home Depot closed in honor of the victims? Surely it was better for the survivors that these companies planned for disaster and reopened their stores rapidly.

Wal-Mart's emergency preparedness division had ordered 10,000 seven-gallon water jugs for hurricane season. A full week before Katrina hit New Orleans, Wal-Mart ordered 40,000 more. Jefferson Parish president Broussard said that "if American government would have responded like Wal-Mart has responded, we wouldn't be in this crisis."

Drug companies created their own distribution systems to move medicines and medical devices into the storm-ravaged areas. Ten days after the storm the U.S. pharmaceutical industry had donated cash and products worth $42.5 million.

Churches and charities in the area and as far away as New Mexico and Maryland began sending trucks loaded with food and clothing and offering homes to evacuees. The Washington Post reported that "owing to stealthy acts of hospitality that are largely invisible to government"--and fortunately so, lest the government try to shut down these uncoordinated efforts --"hundreds of thousands of people displaced by Hurricane Katrina seem to be disappearing--into the embrace of their extended families."

That's nothing new. After Hurricane Andrew in 1992 the government set up tent cities, which went largely unused as people were taken in by family, friends, church members, and neighbors.
Faced with yet another failure of government to plan or respond adequately, a surprising number of people want to transfer more money and power from the private sector to government. After colossal disasters, politicians have two or three typical responses. They visit the stricken area; throw money at the problem--Congress has approved $62 billion in emergency aid so far for the ravaged areas; and usually add a new layer of bureaucracy to existing government agencies. After 9/11, Congress created the Department of Homeland Security. Could adding "and Natural Disasters" to the department's title be far behind?

Coincidentally, Congress passed a second, $51.8 billion relief bill on the same day the Associated Press released a study of where the $5 billion small-business relief money after 9/11 went. It found that the funds went to a South Dakota country radio station, a Virgin Islands perfume shop, a Utah drug boutique, and more than 100 Dunkin' Donuts and Subway shops--"companies far removed from the devastation." Fewer than 11 percent of the loans went to companies in New York and Washington.

But it's no accident that governments often fail at their tasks. The incentives are all wrong. Profit-seeking companies are constantly driven to innovate, improve, cut costs, and deliver better service for less money, lest they lose customers to their competitors or even go out of business. Churches and charities are motivated by love and commitment, as well as by the need to satisfy donors or run out of money. Governments can raise taxes or print money. If a government agency fails at its mission, the usual response is to give it more money next year--not a very good incentive for success. Politicians would rather cut a ribbon at a Cowgirl Hall of Fame than fix potholes or levees.

Before and after Hurricane Katrina, businesses and charities responded effectively. Government failed at even its most basic task of protecting lives and property from criminals. When massive and bloated governments at all levels disappoint, the solution is not to give them more money. Rather, the solution lies in a government limited in scope and ambition, and focused on its essential functions.

Monday, September 19, 2005

In Defense of Price Gouging by John R. Lott, Jr. and Sonya D. Jones

Understanding economics has never been a requirement to be a politician. With gas prices reaching $70 per barrel on Monday and hotels outside of the disaster area raising rates, "price-gouging" seems to be politicians' favorite phrase these days. In the coming weeks, as people living in the disaster area try to get everything from fallen trees removed to food, the outcry against higher prices will only get worse. Yet, if political threats of price controls and price-gouging lawsuits prevent prices from rising now, it is the consumers who will suffer in the long run.

In Illinois on Monday, Democratic Gov. Rod Blagojevich started pressing to prosecute gas companies that profit from the recent price hikes brought on by the hurricane, and he is concerned that some of these increases occurred even before the hurricane hit the oil fields in the Gulf. In Hawaii on Sept. 1, the state government is supposed to begin imposing price controls on wholesale gasoline. Michigan, Oregon, California, New York and Connecticut have also debated regulating gas prices.

Even the Bush administration has gotten in on the act by having the Justice Department and the Federal Trade Commission look for evidence of price-gouging and believes retail and wholesale gasoline prices are "too high." Congress is planning on holding hearings on oil company "price-gouging."

In Texas, Attorney General Greg Abbott is threatening legal action against what he called "unconscionable pricing" by hotels that took advantage of desperate people fleeing the chaos in nearby Louisiana. In Alabama, Attorney General Troy King promises to vigorously prosecute businesses that significantly increase prices during the state of emergency.

You would think that people had learned their lessons about price controls during the 1970s, though memories have surely faded. Price controls didn't stop the cost of gasoline from rising. They just changed how we paid for them. Instead of prices rising until the amount people wanted equaled the amount available, chronic shortages of gasoline had Americans waiting in lines for hours. Yet, the supposedly permanent shortages disappeared instantly as soon as price controls were removed.

The free advice being offered by politicians is that it was improper for prices to start rising before Hurricane Katrina disrupted production in the Gulf of Mexico. But waiting to raise prices means that consumers will end up paying even higher prices when the reduced oil flow out of the Gulf is finally felt.

Higher prices today reduce consumption and increase inventories and thus reduce how much prices will rise tomorrow. The overall increase in price will actually be less.

The possibility of higher prices when disasters strike also gives oil companies an incentive to put aside more gas to cover those emergencies. Storing gas is costly, and if you want them to bear those costs, you had better compensate them. The irony is that letting the companies charge higher prices actually reduces customers total costs when you include such things as having to wait in long lines because there will be more gas available when the disaster strikes.

The American oil industry is no more concentrated when prices started rising immediately before Hurricane Katrina hit than it was two weeks earlier, and oil companies possess no sudden increase in monopoly power. Neither have they suddenly become greedier.

Stamping out "price-gouging" by hotels merely means that more of those fleeing the storm will be homeless. No one wants people to pay more for a hotel, but we all also want people to have some place to stay. As the price of hotel rooms rises, some may decide that they will share a room with others. Instead of a family getting one room for the kids and another for the parents, some will make do with having everyone in the same room. At high enough prices, friends or neighbors who can stay with each other will do so.

There is another downside to price regulations. Companies in states all across the country, hoping to make a few dollars, are thinking of loading up their trucks with food, water and generators and heading down to Louisiana, Mississippi and Alabama. The higher the prices, the faster these "greedy" companies and individuals will get their products down to desperate customers. But their greed means less suffering. The more products delivered, the less prices will rise. Political grandstanding today means future disasters will turn out even worse.
What about the poor?

Making the companies pay for others' altruism not only creates the wrong incentives, it is also unfair. If we need to help out, make everyone pay.

Bashing companies may be profitable short-term political behavior, but the discomfort will be over far sooner and less severe if markets are left to their own devices.
September 1, 2005

John Lott, a resident scholar at the American Enterprise Institute, is the author of The Bias Against Guns (Regnery 2003). Sonya D. Jones is a law student at Texas Tech University.

Monday, September 12, 2005

Taxes: An Old Way of Doing Business

Feeding people is more important than most of the services government provides. Yet, even a government official, Melvin Joseph, Tax Office Manager, warned the House Commerce and Retirement Committee that seizing any enterprise would be overwhelming for the ASG to handle. If we paid the ASG taxes to provide equal distribution of food, we would have been starving a long time ago.

The mere fact that government provides services makes it a business. Like private enterprises, government employees work for a profit because they expect their daily income to be more than their daily expenses. Unlike private enterprises, government’s revenue depends on an up or down vote in the Fono and majority opinion, not individual customer satisfaction.

The government provides services Samoans, as entrepreneurs, can make a business. But with government providing these services, our people have little incentive to even try, and if they do, they face competition from the ASG. And then the ASG turns around and uses our taxes and its political muscle to drown out its competitors. Rep. Paopao J. Fiaui said during hearings on whether ASTCA can pay back the $10 million loan from the government employees’ retirement fund, "My advice, go buy ASTCA phones and don't buy any Blue Sky phones."

The reasoning for government to provide services is the fallacy that the market can’t provide such services on its own. But if the ASG provided our food, clothes or shoes since its beginning a 105 years ago, we would today think that any other way of obtaining those goods would be impossible.

And if a guy like me came along and told the people that we could make an economy out of food, clothes or shoes, entrenched government employees whose wealth and glory depended on monopolizing the food, clothes and shoe industries would come out to oppose my recommendation. Such government employees would have titles like Head of Food Department or Department of Shoes Director.

David B. Musick of KVZK-TV, came out to bash Common Cause for rightfully demanding privatization of our industries and services. He ends his letter to the editor with “Remember; government is not ALL bad, and private companies are not ALL good!”

It’s not a matter of who is good or who is bad. It’s a matter of what incentives are involved. Because the ASG can always raise taxes or bum off more money from the Fed or the Retirement Fund, it has no need to innovate and overcome such costs and obstacles that stand in the way of benefiting the most number of people. Remember that broadcasting used to be widely regulated in America and the federal government created PBS to ensure that supposedly unprofitable programs would see the light of day. But only after deregulatory moves of the 80’s to allow licensees to “profit” do we now have too many channels to choose from. Yet PBS is still with us, leeching off our hard-earned taxes.

Innovation in education, security services, hotels, medical care, insurance, telecommunications, and alternative fuels for electricity await us. But it will take the ASG to stop using our taxes, federal grants and political grandstanding against entrepreneurs who are willing to make a for-profit business in those areas to make that happen.