More Taxes or More Jobs: Pick One

Reason TV has a great video for Tax Day: “More taxes or more jobs? California shows we can’t have both“.

While on the subject of Tax Day, and the many Tea Parties planned for it, don’t miss this post on specious ‘raaaaacism’ accusations: “Don’t leave it to Cleaver, Part VII” And as Insty suggests: “SEE A TEA PARTY “CRASHER?” Report ‘em to PJTV.”

And finally, James Lileks: “No taxation without satirization“.

Compliance cost of the US Federal tax code: over $300billion/year

Things are hectic in realspace. Here, via Insty, is a video on the “compliance costs” resulting from the ever-more-Byzantine US Federal tax code.

This is quite separate from whether the tax burden itself is too high or low: Israel, for example, has much higher tax rates than the USA  but (at least for salaried employees) the compliance costs are quite low because the relevant tax code is very simple (in fact, so simple that most Israeli employees never file a tax return — let alone pay a tax consultant — as the automatic withholdings are almost invariably correct, and only very limited deduction opportunities exist). The country’s tax burden itself is arguably more onerous than that of the USA, but its compliance burden much lighter.

Anyway, we embed, you decide. And a flip side of a radically simplified tax code would of course be a death blow to an entire service industry — then again, the same would be true of inventing immortality treatments 😉

A tour through recession America

Victor Davis Hanson has a must-read article: A tour through recession America. I cannot do it justice by selective quoting: go read it all. A couple of teasers:

Are We Parasites?

This week I drove on I-5, the 99, and 101. Except for a few stretches through San Jose to Palo Alto, most of the freeways were unchanged in the last 40 years. The California Water Project of the 1960s hasn’t been improved—indeed, it has been curtailed. My local high school looks about the same as it did in 1971. The roads in rural California are in worse condition than forty years ago.

Private houses are, of course, larger and more opulent. But the state seems not to be investing in infrastructure as before, but more in consumption and redistribution. […]

The Lost Generation

A new cohort between 21 and 30 is becoming a lost generation—and with good reason. They don’t seem to be working full-time or have good jobs with secure futures. Instead, from construction to teaching, there are far fewer sustainable careers for young people. But given family ties, they can live at home, postpone marriage, find part-time work, and rely on essentials like rent and food from the old embryo, while using what little is made for discretionary spending—allowing the veneer of middle class opulence to continue.

That is, for a deep recession, there seems to be a lot of young people out on weekdays at about 10 AM at stores, with good clothes and appurtenances, and apparently no substantial incomes. Is this sustainable, this ability to have discretionary spending, while outsourcing housing and food to one’s parents? […]

Middle-Class Veneer

The combinations of cheap Chinese goods, easy access to credit cards, and generous entitlements—such as section 8 housing, unemployment insurance, food stamps, Medicaid health care, disability payments—that cover essentials and free up money for discretionary spending, have combined to give the proverbial lower middle class access to consumer purchases undreamed of twenty years ago.  As a graduate student in 1975-80, I bought a used 19-inch black and white TV for $40 and saved for weeks to purchase it. Today, 52-inch plasma televisions seem no longer the birthrights of the oligarchy.  We have created a new sort of impoverished.

In one way, dozens who shop at Home Depot and Costco and Save Mart are poor in the sense that they cannot go to Europe, or even to the aquarium in Monterey or Disneyland. But in terms of cell phones, DVD players, plasma TVs, or radios there is no difference from the upper echelons in this recession.

In the old days a poor house in rural Selma would have poor plumbing and no insulation; today’s apartment, in terms of hot water heater, oven, cook top, or air conditioner, is not much different than those found in the estates above Stanford.

I can’t quite see how imported granite countertops in a 8,000 square foot estate translate into better food preparation than does cheap tile  counters in a $500 a month apartment in Selma.

Note well that no politician ever gives the U.S. credit for extending the veneer of American consumer comfort to nearly all its 300 million residents. I say nearly all, since if someone can cross the border from Oaxaca, enter Selma, and have an I-phone that connects to the world wide internet, instant weather reports, and a GPS, then poverty as we knew is not really old-fashioned want—despite the John Edwards’ two nations rhetoric.

[…]

Where Does it All End?

I confess this week to have listened in on many conversations in Palo Alto and at Stanford, read local newspapers, and simply watched people. So I am as worried about the elite upscale yuppie as the poor illegal alien. The former have lost almost all connection with physical labor, the physical world, or the ordeal that civilization endures to elevate us from the savagery of nature.

While many were fit, and seem to work out, bike, ski, and hike, none understood the mechanics that lie beneath the veneer of the good life—the chain-sawing, hammering, drain-unplugging, tractor-driving, irrigating, and welding that allows a pleasant afternoon Greek salad and cappuccino on University Avenue—the disconnect between those Pennsylvania “clingers” and Obama’s arugula-eating crowd.

So much hinges on impressions. I listened to two young attractive women bemoan housing prices in Menlo Park—$1,000,000 for a modest 2 bath-3 bedroom older cottage in a “good” neighborhood. For that amount, each would be royalty in Fresno, perched on the bluffs over the San Joaquin River in a massive 5,000 sq. foot estate, with a half-acre yard.

A strange elite I supposed likes and pays for the ambience—that is, living among people like themselves—of upscale university centered communities. Why? I have a theory. It allows them to be liberal and progressive in the abstract, without having to live the logical consequences of their utopianism, or deal with the underbelly of American life. […]
As I watched this teeming recession-era energy—thousands leaving squalor in Mexico for the life raft of the U.S., thousands in the middle buying as birthright what a few decades would be considered the playthings of the aristocracy, and thousands living in a progressive bubble disconnected from the grime and mess that fuels it, I hope there are still enough around to keep all this going. I say that because a new Microsoft program, a better search engine, another recent arrival from Chiapas, someone out of work and still at Best Buy, simply are not going to get us out of this recession, find the energy to keep the country fueled, and create the money to pay off a soon-to-be $ 20 trillion deficit. In short, from this week’s observations, I think our so-called poor need to read a bit more, and our assumed elite to read a bit less.

“These are the smart people? Oh please…”

Must-read the whole thing: just a taste:

Yes, we have a highly educated, Ivy League president.  Yes, we have a whole flock of back-patting, self-congratulating, fully credentialed staff.

But smart?

Oh, please.

So what will the campaign slogan of the other party be for 2012?

I’ll have a whack at it:

Obama lied; hope died.

The Iranians got the A-bomb, the Russians got their jive back, and the Chinese own everything.

Vote for the un-cool, work-experienced, good-without-a-teleprompter guy or gal who knows a friend from a foe and can add 2 + 2 and get 4 every single time.

Jonah Goldberg: If the USA becomes like Europe, Europe is in trouble

Jonah Goldberg:

By now you may have heard: America is on its way to becoming another European country.

Now, by that I do not mean that we’re moving our tectonic plate off the coast of France or anything, but rather that a century-long dream of American progressives is finally looking like it might become a reality. The recently passed health-care legislation is the cornerstone of the Europeanization of America. And to pay for it, the White House is now floating the idea of imposing a value-added tax (VAT) like the ones they have throughout most of Europe.

In the egghead-o-sphere, there’s been an ongoing debate about whether America should become more like Europe. The battle lines are split almost perfectly along left-right lines ideologically. Liberals like Europe’s welfare states, unionized workforces (in and out of government), generous benefits, long vacations, etc. Conservatives like America’s economic growth, its dynamism and innovation.

From what I can tell, everyone agrees that you can’t have Europeanization without European-size governments. Hence, America’s government outlays (pre-Obama) have tended to hover around 20 percent of GDP (the average of the last 50 years), while Europe’s are often more than twice that. In France, government outlays are nearly 55 percent of GDP. In 2009, the bailout and the Obama budget sent America’s government outlays to 28 percent of GDP, but that should decline a bit over the next decade, unless Democrats have something else in mind.

To be fair, liberals insist conservatives are wrong to think that Europeanizing America will necessarily come at any significant cost. New York Times columnist and Princeton economist Paul Krugman says that, in exchange for only a tiny bit less growth, Europeans buy a whole lot of security and comfort. [However, ]economists such as Stanford’s Michael Boskin say Europeans have a standard of living about 30 percent lower than ours and are stagnating. Others note that the structural unemployment rate in Europe, particularly for young people (it’s over 20 percent in many countries), is socially devastating.

Obviously, I’m in the conservative camp. But I think the debate misses something. We can’t become Europe unless someone else is willing to become America.

[…]

Europe is a free-rider. It can only afford to be Europe because we can afford to be America.

The most obvious and most cited illustration of this fact is national defense. Europe’s defense budgets have been miniscule because Europeans can count on Uncle Sam to protect them. Britain, which has the most credible military in NATO after ours, has funded its butter account with its gun account. As Mark Steyn recently noted in National Review, from 1951 to 1997 the share of British government expenditure devoted to defense fell from 24 percent to 7 percent, while the share spent on health and welfare increased from 22 percent to 53 percent. And that was before New Labour started rolling back Thatcherism. If America Europeanizes, who’s going to protect Europe? Who’s going to keep the sea lanes open? Who’s going to contain Iran — China? Okay, maybe. But then who’s going to contain China?

But that’s not the only way in which Europeans are free-riders. America invents a lot of stuff. When was the last time you used a Portuguese electronic device? How often does Europe come out with a breakthrough drug? Not often, and when they do, it’s usually because companies like Novartis and GlaxoSmithKline increasingly conduct their research here. Indeed, the top five U.S. hospitals conduct more clinical trials than all the hospitals in any other single country combined. We nearly monopolize the Nobel Prize in medicine, and we create stuff at a rate Europe hasn’t seen since da Vinci was in his workshop.

If America truly Europeanized, where would the innovations come from?

Europhiles hate this sort of talk. They say there’s no reason to expect America to lose its edge just because we have a more “compassionate” government. Americans are an innovative, economically driven people. That’s true. But so were the Europeans — once. Then they adopted the policies they have today and that liberals want us to have tomorrow.

CBO chief: US debt “unsustainable”

You don’t say. (H/t: JCM)

The nation’s fiscal path is “unsustainable,” and the problem “cannot be solved through minor tinkering,” the head of the Congressional Budget Office said Thursday morning.

Doug Elmendorf, best known for arbitrating the costs of various health care proposals, added his voice to a growing chorus of economic experts who predict dire consequences if political leaders don’t scale back spending, increase taxes or both — and soon.

Elmendorf noted a recent CBO report that pegged an increase in the public debt from $7.5 trillion at the end of 2009 to $20.3 trillion at the end of 2020 if President Barack Obama’s fiscal 2011 budget were to be implemented as written. As a percentage of gross domestic product, the debt would rise from 53 percent to 90 percent, CBO forecasted. The last time the percentage was that high was right after World War II.

Elmendorf’s remarks to reporters at a breakfast sponsored by the Christian Science Monitor echo the recent sentiments of a pair of Federal Reserve chiefs — the current head, Ben Bernanke, and former Chairman Paul Volcker.

Volcker said earlier this week that the U.S. should consider adopting a value-added tax, an idea he described as being less toxic than it has been in the past.

“If at the end of the day we need to raise taxes, we should raise taxes,” Volcker said.

On Wednesday, Bernanke said in a speech in Dallas that the government must cut entitlements or raise taxes.

“These choices are difficult, and it always seems easier to put them off — until the day they cannot be put off anymore,” Bernanke said.

There’s little apparent political appetite to do either.

VAT, 2nd foreclosure wave, more employment

3wood of the JammieWearingFool team also hosts the “All about the Benjamins” economics section on Correspondence Committee (my other hangout). Some recent, depressing, “read the whole thing” entries:

Some of 0bama’s more overheated detractors claim that he and his acolytes are destroying the USA. The truth may be bad enough — that his policies may transform the USA into a ‘me too’ version of European Union countries, with high taxes, permanent 10%-range unemployment, permanent 20%-range youth unemployment, low economic growth, limited economic mobility, and unsustainable healthcare systems that eventually lead to rationing.

Except that the only people that make Euro government clerks looks like paragons of competence and mental agility are their US counterparts. (In most Euro countries, government service is considered a respected career path rather than ‘only for those too dumb and/or lazy to make it in the private sector’, and as a result attracts some people of real ability.)

Recovery? What recovery?

Ace admin “Purple Avenger” recently had to drive from Florida to NY State on account of a sudden death and funeral in the family. His, admittedly anecdotal, observations from the road trip make it seem like the “recovery” is still some distance away outside Washington DC:

– A lot of billboards are still empty. This was true on I95 as well as some of the alternate routes (like rt17 and various back roads through WV and VA I wandered off onto to avoid rolling into the D.C. vortex at 5pm rush hour. I guess out of business businesses aren’t buying advertising.

– Many still existing painted billboards are quite faded and haven’t seen fresh paint in a long time.

– At some exits, once thriving large truck stops doors are shuttered. This is usually when there’s another competing one at the same exit.

– Many rest stops are closed. It looks like some states have taken to closing rest stops to save money (all the FL rest stops on I95 were still open).

– Observed McLame bumper stickers outnumbered Ogabe by 3:2. In 3,000 miles and seeing many thousands of cars, I saw exactly 3 McLame stickers versus exactly 2 for Ogabe. Actually, political bumper stickers of any sort were uncommonly scarce. I take this an ominous sign of growing widespread discontent.

– The Birchers were out of the closet with a “Had Enough Change Yet?” billboard just outside York PA.

– One of my friends in NY has been an over the road trucker all his life. He hasn’t been able to get a load or run for over a year. This is a guy who’s qualified to haul anything from apples to any hazardous placarded load, including nuclear weapons. Times are tough in the trucking business. The “bigs” like J.B. Hunt have canceled major fleet upgrade orders they had planned. They’re hunkered down, hard.

– There seems to be an uptick in bogus “work zones” in some states to enhance the number of miles over which enhanced speeding fines apply. Toss out a few orange barrels, setup a work zone sign, even when there ain’t a lick of work going on for 20 miles, and let the troopers do the dirty work. Slick. Sneaky.

– There seemed to be an uncommonly large number of cars from NJ/PA/NY loaded with household goods headed south for this time of year that did NOT contain spring breakers. I wonder if all that global warming this past winter is prompting a bunch of people to flee the northern states for good?

The comments are also quite interesting. Even in Texas, which has weathered the storm better than most states, things are not well:

164 I know Texas closed a bunch of rest stops years ago because of an ADA lawsuit. Rather than spending the money to bring them up to compliance, they just closed down the non-compliant ones.

Lots of empty bill boards here too, which has gotta suck because Texas is very very strict on billboards. Almost impossible to get a permit for a new one, and costly to keep existing ones permitted.

What strikes me is all of the for sale signs on homes. There is not a neighborhood anywhere in the Austin metro area that doesn’t have multiple for sale signs up on every block. One street I drove down, it was literally every other house.

Texas has fared better than the rest of the country, but times are definitely tough. This is my second year of unemployment. House was foreclosed on in February, only reason we could afford to move is that the apartments are so desperate to rent that we got a $199 move in, $199 first months rent and $805 a month on a three bedroom apartment. (Cheaper than than the house payment was.)

Thinks it’s gonna be a long time before it gets better.

More “hope and change”

The “hope and change” keeps coming in:

  • half of all commercial real estate mortgages underwater by end of 2010?! Tech Ticker, Yahoo! Finance – http://shar.es/m2bCv
  • 3wood at Correspondence Committee – Churches struggling financially http://shar.es/m2bck
  • Unemployment stays flat at 9.7%, partly due to mass hiring of temporary government workers, particularly census workers http://bit.ly/9SDx4T
  • Underemployment, however, rises to 20.3% in March http://shar.es/m23EW

Meanwhile, a U. of Chicago law professor is quoted http://shar.es/mrUdO as saying 0bama was never on the regular or adjunct faculty because he was “unqualified, lazy, and never attended faculty meetings”. Despite the continued water-carrying of the media (here http://shar.es/m2by2 a journalist is quoted as saying the “White House wants [crude slang term for oral ministrations] in the media sense in exchange for access” [UPDATE: more here. “Access of evil”, heh), Gallup has the approval of BHOzo at an all-time low: http://bit.ly/cNku0d . As another politician from Illinois is often quoted as saying: “You can fool some of the people all the time; all of the people some of the time; but not all of the people all of the time.” Even Ed Koch, who went all-out in campaigning for Chairman Zero, turned his back on him: http://shar.es/m238K.

UPDATE: Don Surber: “The federal government now pays more to borrow money (3.93%) than I do on my mortgage (3.375%). I have better credit.” Res ipsa loquitur.

Robert J. Samuelson: The looming US budget crisis

Robert J. Samuelson, a journalist who takes his duty to objectivity so seriously that he refuses to vote  in any elections, has a must-read piece on the looming US budget crisis. Some gleanings:

When historians recount the momentous events of recent weeks, they will note a curious coincidence. On March 15, Moody’s Investors Service — the bond rating agency — published a paper warning that the exploding U.S. government debt could cause a downgrade of Treasury bonds. Just six days later, the House of Representatives passed President Obama’s health-care legislation costing $900 billion or so over a decade and worsening an already-bleak budget outlook.[…]

Let’s be clear. A “budget crisis” is not some minor accounting exercise. It’s a wrenching political, social and economic upheaval. Large deficits and rising debt — the accumulation of past deficits — spook investors, leading to higher interest rates on government loans. The higher rates expand the budget deficit and further unnerve investors. To reverse this calamitous cycle, the government has to cut spending deeply or raise taxes sharply. Lower spending and higher taxes in turn depress the economy and lead to higher unemployment. Not pretty.

Greece is experiencing such a crisis. Until recently, conventional wisdom held that only developing countries — managed ineptly — were candidates for true budget crises. No more. Most wealthy societies with aging populations, including the United States, face big gaps between their spending promises and their tax bases. No one in Congress could be unaware of this.

Two weeks before the House vote, the Congressional Budget Office released its estimate of Obama’s budget, including its health-care program. From 2011 to 2020, the cumulative deficit is almost $10 trillion. Adding 2009 and 2010, the total rises to $12.7 trillion. In 2020, the projected annual deficit is $1.25 trillion, equal to 5.6 percent of the economy (gross domestic product). That assumes economic recovery, with unemployment at 5 percent. Spending is almost 30 percent higher than taxes. Total debt held by the public rises from 40 percent of GDP in 2008 to 90 percent in 2020, close to its post-World War II peak.

To criticisms, Obama supporters make two arguments. First, the CBO says the plan reduces the deficit by $143 billion over a decade. Second, the legislation contains measures (an expert panel to curb Medicare spending, emphasis on “comparative effectiveness research”) to control health spending. These rejoinders are self-serving and unconvincing.

Suppose the CBO estimate is correct. So? The $143 billion saving is about 1 percent of the projected $12.7 trillion deficit from 2009 to 2020. If the administration has $1 trillion or so of spending cuts and tax increases over a decade, all these monies should first cover existing deficits — not finance new spending. Obama’s behavior resembles a highly indebted family’s taking an expensive round-the-world trip because it claims to have found ways to pay for it. It’s self-indulgent and reckless.

But the CBO estimate is misleading, because it must embody the law’s many unrealistic assumptions and gimmicks. Benefits are phased in “so that the first 10 years of [higher] revenue would be used to pay for only six years of spending” increases, a former CBO director, Douglas Holtz-Eakin, wrote in the New York Times on March 20. Holtz-Eakin also noted the $70 billion of premiums for a new program of long-term care that reduce present deficits but will be paid out in benefits later. Then there’s the “doc fix” — higher Medicare reimbursements under separate legislation that would cost about $200 billion over a decade.[…]

So Obama is flirting with a future budget crisis. Moody’s emphasizes two warning signs: rising debt and loss of confidence that government will deal with it. Obama fulfills both. The parallels with the recent financial crisis are striking. Bankers and rating agencies engaged in wishful thinking to rationalize self-interest. Obama does the same. No one can tell when or whether a crisis will come. There is no magic tipping point. But Obama is raising the chances.

Apropos video: Pink Floyd, “Sorrow”

This mournful Pink Floyd tune is very much apropos current events. I’ve always had a soft spot for David Gilmour’s lead guitar playing — while he would never win a shredding contest with the likes of Malmsteen or Steve Vai, his silvery sound simply oozes emotion without ever becoming sentimental. 9Now of you want both the shredding and the feeling, Dream Theater’s John Petrucci is your man.)

Studio version with some psychedelic  imagery:

Live version from “Pulse”: David’s vocals sound tired, but his lead playing on the outro has some neat twists

… awakes to a morning, with no reason for waking…

… and silence that speaks so much louder than words, of promises broken…

Krauthammer: VAT is coming

Charles Krauthammer: The VAT is coming  [Read the whole thing]

OBAMA KNOWS that the debt bomb is looming, that Moody’s is warning that the Treasury’s AAA rating is in jeopardy, that we are headed for a run on the dollar and/or hyperinflation if nothing is done.

Hence his deficit reduction commission. It will report (surprise!) after the November elections.

What will it recommend? What can it recommend?

Sure, Social Security can be trimmed by raising the retirement age, introducing means testing and changing the indexing formula from wage growth to price inflation.

But this won’t be nearly enough. As Obama has repeatedly insisted, the real money is in health care costs – which are now locked in place by the new Obamacare mandates.

That’s where the value-added tax comes in. For the politician, it has the virtue of expediency: People are used to sales taxes, and this one produces a river of revenue. Every 1 percent of VAT would yield up to $1 trillion a decade (depending on what you exclude – if you exempt food, for example, the yield would be more like $900b.).

It’s the ultimate cash cow. Obama will need it. By introducing universal health care, he has pulled off the largest expansion of the welfare state in four decades. And the most expensive. Which is why all of the European Union has the VAT. Huge VATs. Germany: 19 percent. France and Italy: 20%. Most of Scandinavia: 25%. [Israel’s is somewhat lower, at 16% — Ed.]

American liberals have long complained that ours is the only advanced industrial country without universal health care. Well, now we shall have it. And as we approach European levels of entitlements, we will need European levels of taxation.

Obama set out to be a consequential president, on the order of Ronald Reagan. With the VAT, Obama’s triumph will be complete. He will have succeeded in reversing Reaganism. Liberals have long complained that Reagan’s strategy was to starve the (governmental) beast to shrink it: First, cut taxes – then ultimately you have to reduce government spending.

Obama’s strategy is exactly the opposite: Expand the beast, and then feed it. Spend first – which then forces taxation. Now that, with the institution of universal health care, we are becoming the full entitlement state, the beast will have to be fed.

And the VAT is the only trough in creation large enough.

As a substitute for the income tax, the VAT would be a splendid idea.

Taxing consumption makes infinitely more sense than taxing work. But to feed the liberal social-democratic project, the VAT must be added on top of the income tax.

Ultimately, even that won’t be enough. As the population ages and health care becomes increasingly expensive, the only way to avoid fiscal ruin (as Britain, for example, has discovered) is health care rationing.

It will take a while to break the American populace to that idea. In the meantime, get ready for the VAT. Or start fighting it.

People of a classical-liberal bent in Western countries who see things going pear-shaped look to the USA as an alternative to immigrate to. At this rate, why should they bother?

Related news item:

The college tuition bubble

Insty has a bizarre juxtaposition of two news items.

The first is about colleges encouraging students to apply for food stamps.

The second is about the latest manifestation of college tuition spinning out of control: the increasing number of colleges in the “50,000 club” (those which charge over $50K/yr for tuition).

A trip to space on Virgin Galactic. A Dior couture wedding gown. A Bentley Continental GT. These luxe indulgences each cost $200,000.

Add another item to the list: four years at a growing number of private colleges and universities.

Next year, the number of schools in the region that charge upwards of $50,000 annually for tuition, room and board, and mandatory fees is expected to more than double, according to a Globe survey of 20 colleges and universities. Just two years ago, less than a handful of schools cost that much (though many hovered just below the threshold.)

Among the latest members of the $50K Club: Harvard, MIT, Wellesley, Brandeis, Brown, Dartmouth, and Holy Cross. They join Tufts, Boston University, Boston College, Smith, Mount Holyoke, and Babson, which all broke the barrier this year.

College costs have been creeping up for decades, rising faster than inflation and average family incomes. But hitting $50,000 is a significant psychological milestone, education analysts say, and a tipping point that could scare families away from applying to private colleges.

Some perspective here: a middle-aged woman colleague went to Smith in 1972, and her tuition then was about $4,000, give or take. According to this handy little inflation calculator, that’s about $20,285 in 2009 dollars. In other words, inflation-adjusted tuition at Smith went up by a factor of about two and a half (2.5). Googling “tuition bubble” turns up this article at scienceblogs, according to which inflation-adjusted tuition has approximately tripled in the past three decades at both public and private universities.

For parents already reeling from the effects of the recession, it is causing sticker shock.

“It’s the most overpriced product you could possibly buy,’’ said Jim Scannell, a laid-off financial analyst whose son, a Natick High School senior, is applying only to public colleges because of their lower cost. “It’s frustrating because you encourage your kids to do their best to get into one of the best schools, but when it comes time to go to these good schools, we can’t afford it.’’

Even worse: many graduates can never hope to earn enough money to repay student loans that big in a reasonable amount of time. Especially if the majors are generic liberal arts, lit-crit, various “studies” majors, and the like. Meanwhile, science and engineering classes are increasingly filling up with first-generation immigrants (many of them scholarship students or working their way through college) because they are too much hard work for too little future salary — expect medicine to go the same route soon.

Michael Barone: California vs. Texas

Michael Barone compares the current state (ahem) of California with that of Texas. Both are large and populous states, both on territory that used to belong to Mexico, both have large Hispanic minorities, both had large oil reserves,…

Yet otherwise they could not be more different. California chose the road of high taxes financing big government; Texas that of low taxes and limited government. Barone quotes the census bureau as estimating that California saw 1.5 million residents move away between 2000 and 2009, while 848,000 people moved in to Texas. In just the years 2008-9, the numbers are 143,000 out of California and 98,000 into Texas.

Two depressing reads

Two recent “read the whole thing” essays give a lot of pause to the reader.

1. The Atlantic Online has an article on how prolonged joblessness will transform America. It is a long and depressing, but very worthwhile read, chock full of relevant information.

2. Related, Victor Davis Hanson some days ago wrote “Why did Rome fall — and why does it matter now?”, in which he sketches disheartening parallels between present-day American society (but it could be any Western European country) and the waning days of the Roman Empire.

Poverty, as I saw it as a boy in Selma in 1960, might be defined by occasional homes with outhouses in the back yard, gravel rural roads, no TVs and rampant illiteracy among those over 30.

Today, the “poor” as I see them daily at Wal-Mart and Food-4-Less in Selma (a poor town in a poor county in poor central California) buy blue-ray DVD players, have to buy food-stamp subsidized sirloin rather than rib-eye (as I can attest watching 5 carts ahead of me in line tonight), and drive used 2000 Tahoes and 2001 Yukons rather 2010 Honda Accords. Government subsidies for housing, food, transportation, etc., coupled with cheap Chinese and Indian imported consumer goods, have for a time been substituted for the old manufacturing jobs or resource-based work (e.g., we don’t make steel, we increasingly curtail farming, we don’t drill, etc.). In other words, we are enjoying a lifestyle undreamed of by our grandparents who had values quite different from our own — a result of globalization, advances in technology, and massive borrowing and debt.[…]

But as in the case of Rome, there is a price for all these sudden riches. Just as the Iberians, and Libyans, and Thracians were hungrier and more enterprising than Italians back in the bay of Naples, so too we, the beneficiaries of this wealth, lost the values that were at its heart, in a way that the Indians, Chinese, and others have not — yet. Our youth in schools are not so excited by the notion of creating 100 new nuclear power plants, creating new mountain reservoirs, building new railroads and highways, or eager to rebuild the steel industry, or dreaming of increasing food production or eager to mine more ores. Instead, the emphasis in our schools is more on race/class/gender engineering, regulation, redistribution, etc, all of which in classical terms is not necessarily wealth creation.

We are now borrowing nearly $2 trillion a year […] — nearly half of it from the Chinese where 400 million have never been to a Westernized doctor. We spend $45,000 to incarcerate the felon in California, to meet utopian court-ordered mandates. As imperial Romans, we are felt to be owed a standard of living, even as our own daily habits would no longer necessarily translate into such largess, even as those on the periphery have learned what made America so wealthy from 1950 to 1990.

Where does it all end? I have no idea, but offer only competing scenarios: 1) as our debt becomes unsustainable, we react and increase the retirement age, cut spending and entitlements radically, and renew our work ethic (impossible by choice, made possible by necessity), and enjoy a renaissance; 2) we become a UK-like museum, with witty cynical observers, as the new giants in Asia produce the next Microsoft, Exxon, and Ford, and we fade; 3) India and China discover that they too have a rendezvous with suburban blues, environmentalism, consumer regulation, and a pampered citizenry, and there is some sort of shared global postmodernism.

We inherited a wonderful infrastructure from our parents. A superb system of politics and economics was likewise given to us at birth. Many of us try to copy our grandparents and parents whose values and work ethic we increasingly eulogize. But against all that is that Roman notion of luxus, untold wealth and leisure that we see juxtaposed with shrill cries and accusations that we are too poor, exploited, and in need of someone else’s income. The wealthier we become, the louder and angrier we become that we are not even more wealthy.

In short, what ruined Rome in the West? [He means the West Roman Empire, as distinct from the Byzantine Empire — NCT] Lots of things. But clearly the pernicious effects of affluence and laxity warped Roman sensibility and created a culture of entitlement that was not justified by revenues or the creation of actual commensurate wealth — and the resulting debits, inflation, debased currency, and gradual state impoverishment gave the far more vulnerable Western Empire far less margin of error when barbarians arrived, or rival generals marched on Rome. For a while the Romanization of the wider Mediterranean subsidized this ennui, but eventually the old western and southern provinces neither could protect what they had created nor could continue to be as productive as in the past nor believed that being Roman was any better than the alternative.

A State of Mind

The strange thing is that these wild swings in civilization are at their bases psychological: decline is one of choice rather than necessity. Plague or lead poisoning or famine did not destroy Rome. We could balance our budget tomorrow without a great deal of sacrifice; we could eliminate 10% worth of government spending that is not essential; we could create our own energy with massive nuclear power investment, and more extraction of gas, oil, and coal. We could instill a tragic rather than therapeutic world view that would mean more responsibilities rather than endlessly more rights. We could do this all right — but too many feel such medicine is worse than the malady, and so we probably won’t and can’t. An enjoyable slow decline is apparently preferable to a short, but painful rethinking and rebirth.

Fostering dependency

This tale from the Weekly Standard deserves highlighting:

In a story from the New York Times headlined, “Once Stigmatized, Food Stamps Find Acceptance,” we learn that the government has been using your tax dollars to market the giving away of your tax dollars in the form of food stamps to more and more people of higher and higher incomes.

As with any social program, there are many people on it who are indeed needy, but the article makes clear that the revival of food stamp popularity has more to do with state and local officials who are glad to curry favor with local constituents using federal dollars.

Since they’re not paying for it, local officials and a network of aid organizations happily aid the federal government in recruiting more food-stamp recipients, regardless of how much they actually need the assistance. Meet Juan Diego Castro, who demonstrates how the system works:

Juan Diego Castro, 24, is a college graduate and Americorps volunteer whose immigrant parents warned him “not to be a burden on this country.” He has a monthly stipend of about $2,500 and initially thought food stamps should go to needier people, like the tenants he organizes. “My concern was if I’m taking food stamps and I have a job, is it morally correct?” he said.

But federal law eases eligibility for Americorps members, and a food bank worker urged him and fellow volunteers to apply, arguing that there was enough aid to go around and that use would demonstrate continuing need. “That meeting definitely turned us around,” Mr. Castro said.

Read the rest. And weep. But it’s just Pournelle’s Iron Law in action.

Unsu-Steyn-able

Mark Steyn, in “Unsustainable“:

Testifying to the House Budget Committee, Director Elmendorf attempted to pull back from the wilder shores of “unsustainable”: “I think most observers expect that the government will act, that the unsustainability will be resolved through action, not through witnessing some collapse down the road,” he said. “If literally nothing is done, then eventually something very, very bad happens. But I think the widespread view is that you and your colleagues will take action.”

Dream on, you kinky fantasist. The one thing that can be guaranteed is that a political class led by Harry Reid, Nancy Pelosi, Barney Frank, a handful of reach-across-the-aisle Republican accomodationists and an economically illiterate narcissist in the Oval Office is never going to rein in unsustainable spending in any meaningful sense. That leaves Director Elmendorf’s alternative scenario. What was it again? Oh, yeah: “Some collapse down the road.”

[…]

Did you get your pay raise this year? What’s that, you don’t work for the government? Yes, you do, one way or another. Good luck relying on Obama, Pelosi, Frank, and the other Emirs of Kleptocristan “taking action” to “resolve” that. In the last month, the cost of insuring Greece’s sovereign debt against default has doubled. Spain and Portugal are headed the same way. When you binge-spend at the Greek level in a democratic state, there aren’t many easy roads back. The government has introduced an austerity package to rein in spending. In response, Greek tax collectors have walked off the job.

Read that again slowly: To protest government cuts, striking tax collectors are refusing to collect taxes. In a sane world, this would be a hilarious TV comedy sketch. But most of the Western world is no longer sane. It’s tough enough to persuade the town drunk to sober up, but when everyone’s face down in the moonshine, maybe it’s best just to head for the hills. But where to flee? America is choosing to embrace Greece’s future when even the Greeks have figured out you can’t make it add up.

Read the rest.

Elsewhere at NRO, Steyn comments on Euro antisemitism: “Seems like old times“. A.k.a.: “We’re gonna party like it’s 1939” 😉

Economics of being a fiction writer

Sometimes life doesn’t seem to be fair. Usually we feel like that when we’re the ones who see others flourish that we think are less deserving than ourselves. Less often (such is human nature), it occurs when we see others struggle that we believe are more deserving than ourselves.

I am not talking about “liberal guilt”, but about something else. Being a lifelong bibliovore, I’ve always had a lot of respect for skilled professional writers, including those who write fiction for mass audiences. It is often sobering to find out that people whose books have transported my mind to other worlds and held me in thrall have some trouble making ends meet, while I am lucky to make a very good living at what I do. (I won’t reveal here what.)

Via the blog of fellow Lizard refugee Yma o Hyd, I found this essay on the economics of being a writer at The Shadow of the Olive Tree. He links to a piece by award-winning SciFi author Elizabeth Bear describing how she has to write, basically, three full-length novels and about a dozen short stories a year just to make a (very modest) living wage.

Somebody like Michael Crichton (RIP) got really rich off his pen, and I would imagine Lois McMaster Bujold, Orson Scott Card, and perhaps David Weber live really well, but your typical mid-list author apparently needs either a day job or a well-earning and understanding spouse. Imagine being paid $10K in advances on a full-length novel, earning $1.50 in royalties on a single hardcover and much less than that on a paperback.

I had a lengthy discussion with somebody in Israel (a comparatively small market) and there the situation is even worse. Out of a book that sells for NIS 65 (roughly $18) at a Steimatzky or Tzomet Sfarim bookstore, the author may take home a lousy NIS 1 or 2 — the rest goes to copy editor, printer, distributor, book store, and various “unproductive middlemen”. Even Israel’s literary legend Amos Oz would not be able to live off the proceeds of his booksales in Israel — although in the aggregate he makes a very good living from two other sources: foreign publication rights of his work and (hefty) lecturing fees in Israel. (The latter brings to mind certain musicians who basically don’t care how much or little they make off record sales because their main income is from live concerts — and they see the records basically as advertising for the  concerts.)

Jim Baen (RIP) — who had a reputation for being generous to his authors — explains in the Baen Books FAQ that, for a typical print run, setup costs are about $4500 plus another $0.50 per copy. This  means in practice that any print run under 10,000 copies is an economic loss.

Of course, the coming shift towards electronic books may change the economics fundamentally. Print-on-demand technology allowed many an independent author to publish their own books with minimal setup costs, but per-copy prices were still prohibitive. As an aside: in publishing fields where unit cost is a secondary consideration — such as STM (science, technology, and medicine) scholarly works — print-on-demand allows publishers to keep their back catalog alive and exploit the “long tail”. However, STM is a field where authors generally don’t expect to earn money — their “pay” is in reputation, which translates into climbing the academic career ladder, easier access to grant money, etc.

In contrast, a self-publishing author can sell an e-book online for a much more reasonable price and keep essentially all of it as profit — at which points (s)he needs a publisher (other than a big name that may generate sales) like a fish needs a bike. [UPDATE: E-reader owners are still a small segment of readers, but there is evidence that they buy many more books on average, although this may be due to self-selection.]

The major fly in the ointment is of course that e-Books are even easier to bootleg than digital music. While somebody wishing to rip or download a full-length DVD movie may easily decide he’d rather buy the darn thing than waste hours downloading and ripping the movie, an e-book file is 4-5 orders of magnitude smaller and easily downloaded, Emailed between friends,… Unless, of course, the file is encoded/protected via DRM (digital rights management), which is its own bag of hurt.

Other models do exist. Sponsorship is one of them: an independent classical recording label such as Hyperion would be unable to operate without it. Another approach would be variants on the “threshold pledge” or “fund and release” system, which I personally regard as a form of “distributed commissioning”. If, say, David Weber were to say tomorrow he’d only start writing another Honor Harrington novel if, say, 10,000 people each ponied up $25 (in return for which they’d get advance copies of the eventual novel, autographed release copies, or whatever), he’d be assured of a tidy amount of money before even putting fingers to the keyboard (or, in his case, turning on the mic of his speech-to-text software). The trouble with such approaches is, of course, that they only work for authors with name recognition: a beginning author would have to basically release a couple of books for free until (s)he could get enough people looking forward enough to their next book that they’d pay in advance.

Baen (pretty much the first publisher ever to make real money off e-books) has been trying various creative approaches. For example, unedited “advance reader copies” of an e-book are available 6-9 months before the scheduled release date, at three times the regular price — cashing in on the small number of people who absolutely have to read the next John Ringo novel ahead of the rest. Furthermore, monthly “WebScription bundles” sell you 5-6 books — usually a mix of new, hot titles, back catalog titles, and first-time or second-time authors. After a book has gone out of print in hardcopy, Baen may put it in the “Baen Free Library“: they may generate an interest in the author and lead people to buy his/her other books. Especially if the book is the promising first installment of a good series (Weber’s Honor Harrington, Bujold’s Vorkosigan Saga, John Ringo’s Legacy of the Aldenata series,…) — especially with some well-calculated “cliffhangers” — it may lead people to pony up for all the remaining installments.

Established authors may also be able to sell or auction off “special packages”, such as autographed hardcovers, using somebody’s name for a minor character in the book, and the like. Again, novice authors have no such means at their resort. The one thing they can do in the digital age — rather than write the book and offer it to publishers until somebody will buy it — is circulate it online, or publish it online in installments, and thus generate interest at minimal cost. What it generally does mean is that making actual money off their craft will need to be deferred to future works.

One thing is certain: the publishing market will be subject to a process of ‘creative destruction’ no less brutal than what is playing out in the music industry right now.

UPDATE: Linked by… the great Lois McMaster Bujold herself on her Email list — I am not worthy, but thanks so much — this really made my day.

She says Zombie’s analysis (see comment #1 below) is painfully accurate. Good discussion in the responses on her Email list.

UPDATE 2: Lois McMaster Bujold herself weighs in. Some quotes:

Just for a standard of comparison, subscribers to World of Warcraft are said to number 40 million.

I, too, would be interested in some more scientifically acquired data than “a number I got off the internet”, but the [5 million regular book buyers] figure sounds intuitively right to me. The very best-selling of the best selling books maybe get up to 2 million copies sold, and those are outliers. I believe a new TV series with only 2 million viewers would be considered a flop? […] The average successful genre paperback sells maybe 30,000 copies. (That figure was 60,000 when I started my career, 200,000 a writer-generation before.) Most books sell even less. You only need about 35k hardcovers sold, over a sufficiently short period of time, to crack the NYTimes bestseller list.[…]

Tom D[oherty], founder of Tor Books, came up […] through the sales side. He’s been saying for years that what built book sales in the US was the casual market — drugstore and grocery store racks, airport bookstores, other places […] where people made impulse purchases. These used to be filled by some several hundred independent distributors, all making different choices and supporting a broad midlist of writers. In the mid-1990s, this distribution system underwent an implosion/consolidation, turning into just half a dozen big distributors, where a few people make the choices for the whole country. It was a huge blow to the paperback industry, and did a lot to bifurcate it into the “a few best sellers — everyone else nowhere” that we now see. Apparently very analogous to what’s happened to the music industry, [BTW], and for the same economic reasons; people trying to market art by the same efficient means they use for cereal.[…]

It’s unclear yet what the Net is going to do to the world of fiction and fiction writing. […] My private suspicion is that the Literature of the 21st Century is going to be fan fiction, but we’ll have to see. I’m kind of glad I got my writing career in while it was still possible to have one, though.

Read the whole thing.

UPDATE 3: Further observations by Lois here and here.

Thomas Sowell: “Intellectuals and Society”

Thomas Sowell has a new book out, “Intellectuals and Society“. Here is a quick introduction by Sowell himself:

Whether in war or peace, and whether in economics or religion, something as intangible as ideas can dominate the most concrete things in our lives. What Karl Marx called “the blaze of ideas” has set whole nations on fire and consumed whole generations.

Those whose careers are built on the creation and dissemination of ideas — the intellectuals — have played a role in many societies out of all proportion to their numbers. Whether that role has, on balance, made those around them better off or worse off is one of the key questions of our times.

The quick answer is that intellectuals have done both. But certainly, during the 20th century, it is hard to escape the conclusion that intellectuals have on balance made the world a worse and more dangerous place. Scarcely a mass-murdering dictator of the 20th century was without his supporters, admirers, or apologists among the leading intellectuals — not only within his own country, but in foreign democracies, where intellectuals were free to say whatever they wanted.

Given the enormous progress made during the 20th century, it may seem hard to believe that intellectuals did so little good as to have that good outweighed by their wrong-headed notions. But most of those who promoted the scientific, economic, and social advances of the 20th century were not really intellectuals in the sense in which that term is most often used.

The Wright brothers, who fulfilled the centuries-old dream of human beings flying, were by no means intellectuals. Nor were those who conquered the scourge of polio and other diseases, or who created the electronic marvels that we now take for granted.

All these people produced a tangible product or service and they were judged by whether those products and services worked. But intellectuals are people whose end products are intangible ideas, and they are usually judged by whether those ideas sound good to other intellectuals or resonate with the public. Whether their ideas turn out to work — whether they make life better or worse for others — is another question entirely.

The ideas that Karl Marx created in the 19th century dominated the course of events over wide portions of the world in the 20th century. Whole generations suffered, and millions were killed, as a result of those ideas. This was not Marx’s intention, nor the intentions of many supporters of Marxian ideas in countries around the world. But it is what happened.

Some of the most distinguished intellectuals in the Western world in the 1930s gave ringing praise to the Soviet Union, while millions of people there were literally starved to death and vast numbers of others were being shipped off to slave-labor camps.

Many of those same distinguished intellectuals of the 1930s were urging their own countries to disarm while Hitler was rapidly arming Germany for wars of conquest that would have, among other things, put many of those intellectuals in concentration camps — slated for extermination — if he had succeeded.

The 1930s were by no means unique. In too many other eras — including our own — intellectuals of unquestionable brilliance have advocated similarly childish and dangerous notions. How and why such patterns have existed among intellectuals is a challenging question, whose answer can determine the fate of millions.

National Review TV has a series of five video clips of a discussion between Peter Robinson and Thomas Sowell:

Sowell’s “Vision of the anointed” ranks among my favorite political books of all time. This one may well join it, once I receive my copy.