If Iran Can Cut Subsidies, So Can We

A short Associated Press article in today's Washington Post print version (more detail online) reports that Iran's government is rolling back $30 billion of subsidies for food and energy starting today:

Iran's president on Saturday announced the start of a plan to slash energy and food subsidies as part of government efforts to boost the nation's ailing economy.

In an interview with state television, Mahmoud Ahmadinejad said the deep cuts to the subsidies "will start beginning Sunday" and vowed to fully cut all subsidies by the end of his term in 2013.

Economists say the unpopular plan could stoke inflation unofficially estimated to top 20 percent. The cuts also are widely seen as placing added burdens on Iranians, whose country is weighed down by international sanctions imposed on Tehran over its nuclear program.

Analysts say Iran pays about $30 billion in subsidies annually.

First, the suggestion that cuts in subsidies will lead to an increase in inflation is wrong. Inflation happens when the stock of money grows faster than the economy. Period. Food and energy prices are likely to go up, of course, but that will likely be offset by lower prices elsewhere in the economy.

Second, this was the right decision. It's painful to have life's necessities become more expensive, but subsidies and taxes obscure the true cost of the products, leading to resource misallocation and reducing economic efficiency. Although the article didn't address this, hopefully Tehran is pairing these measures with policies to increase economic freedom. An unambiguous lesson of history is that economic freedom leads to higher living standards, which makes adjusting to policy changes much easier.

Finally, America needs to cut subsidies too. The federal government spends about $30 billion a year in farm subsidies, $98 billion in food subsidies, $17 billion in various energy subsidies (as of 2007), among regulations that effectively subsidize various producers and consumers. Many would balk at eliminating these $145 billion in subsidies immediately, but phasing them out over a few years as the economy recovers is not unrealistic.

Five Years Later, Loss of Friend in Iraq Still Haunts

This past Tuesday marked five years since my friend Eric Slebodnik was killed in Iraq. We were good friends from college, drawn together by a number of mutual friends, but especially James Iman. We used to all eat lunch or dinner together several times a week (among lots of other things), and we'd have vigorous discussions about a whole range of topics, from evolution to politics to where the best food on campus was and to whether the social sciences or the arts was the best way to understand what it means to be human.

Eric had more integrity and sense of purpose than almost anyone else I've ever known. Even when we disagreed, I knew that his views were shaped by a sense of principle and righteousness that still resonates with me.

We didn't stay in touch very well after I graduated in 2004 and went to find my way in the world. But the news of his death hit me like a ton of bricks. Eric wasn't the first friend I had lost, but the others were accidents. The maliciousness of Eric's was entirely different.

I've gone back and forth on the wisdom of this conflict. In winter 2002/2003 I was part of the protests opposing the U.S. invasion (but was turned off by the socialist worldview of most of the others), and organized an interdisciplinary forum at my university to help students understand the context of the situation. It couldn't have been timed better--it was scheduled to and did take place on March 20, 2003.

While studying abroad in the subsequent months, criticism directed at the U.S. from my European friends stirred up stoked my patriotism in support of the efforts. I defended it as a just war (according to St. Thomas Aquinas' criteria) in a political philosophy final even though my excellent professor John Sitton had a different view, and I even expressed this to French reporters at a 2004 election party. And after Eric was killed, I wanted desperately to believe that his sacrifice wasn't in vain and because I wanted to honor his support for the mission, which he once expressed in a letter to the NY Times editor. The impulse remains but I can't do it.

This conflict doesn't make sense. It never did. So what if they had weapons of mass destruction (which they didn't)? We deter every other country with the threat of raining Hell down on them. Why was Iraq any different?

How about promoting democracy and freedom (which the Bush administration pivoted to when no WMDs were found)? Sure, they're free of a brutal dictator, but at what cost to them in lives, injuries, displacement, the tattered social fabric, and so on? Is Iraq anywhere close to being a functioning democratic state? Have other regimes in the region improved the treatment of their citizens?

What about us? What bounty has been won by the lives lost, the soldiers wounded and maimed, the vast expenditures, and the civil liberties encroachments? Has our geopolitical position improved as the result of Operation Iraqi Freedom or are we weaker as a result?

The Iraq mission was a mistake of historic proportions. Our politicians wasted Eric's life and the lives of many others with their incompetence over foreign policy and national security.

I miss Eric. He should be teaching history or doing military intel and thinking about starting a family. It sickens me that his fate was otherwise. It always will.

R.I.P. Eric Slebodnik, August 3, 1984-September 28, 2005.

An Agenda for State Governments

In "Let's reform state government" in yesterday's Politico, GOPAC chairman Frank Donatelli laid out his proposed agenda for state government reform (read the whole thing). His four suggestions are right at the top of my list too:

Public pension reform. State liabilities for pension funds have reached an astounding $5.2 trillion, with an additional $3 trillion shortfall. Many states provide inflation-protected, guaranteed benefits to government workers who retire as early as age 55. However, private-sector workers, who pay for this, have not done so well. Millions have lost jobs, and virtually all have seen their 401(k)’s shrink.

We need some tough reforms to control public pension costs, including changing the defined-benefit plans into defined-contribution plans, barring part-time government workers from receiving full benefits and ensuring that all enrollees contribute to their own retirement and health care plans. Republicans should follow the courageous example of New Jersey Gov. Chris Christie, who is seeking to bring these soaring costs under control.

Growth-oriented economic policies. While federal policies delay job growth, states can create more business-friendly environments to encourage private-sector job creation and economic growth. The quickest and most effective way for governors to boost their economies would be to reduce state income and investment income tax rates and to provide state tax credits so employers and small businesses can hire workers and expand. These governors could also provide more certainty for business on regulations and fees.

In addition, states must limit the destructive effects of Obamacare. Increased federal mandates have already caused premium hikes, averaging 9 percent for small businesses and individuals. States should look to scale back their own health care mandates to help moderate these costs to business.

Zero-based budgeting. States should conduct top-down assessments of every taxpayer dollar spent, to identify areas of waste, duplication and inefficiency. Just this year, Gov. Bob McDonnell of Virginia avoided a tax increase and balanced the budget by subjecting every state department and agency to strict scrutiny and performance reviews.

Many government departments and structures are badly outdated, incapable of delivering essential services efficiently. Each governor should consider setting up blue-ribbon commissions to conduct top-down reviews of state and local government programs and expenditures and then recommend solutions. States must be creative in delivering health care services through Medicaid, a program whose costs are scheduled to explode in the wake of Obamacare. Mandating the use of generic drugs, whenever possible, and creating health savings accounts, as proposed by Gov. Mitch Daniels of Indiana, could help moderate state health care costs.

Educational excellence. Even as state spending on education increases, student and teacher performance lags. States need to regain control from the U.S. Department of Education and demand better performance at the local level. School curricula should be redesigned to create a stronger connection between education and the skills needed for employment. States must also create an environment that allows parents to choose among competing educational opportunities. Charter schools, vouchers and other competition-focused programs are among the best ways to guarantee greater accountability and better-performing students.

Here's what I'd add:

De-unionize the public sector. The traditional rationales for unions--unsafe working conditions, exploitation of surplus unskilled labor, and so forth--don't apply to the public sector. On the other hand, the collective force of big labor special interests is pushing state budgets to the brink of insolvency. In addition to the unfunded liabilities of public pensions noted above, union heft pushes up government worker compensation and benefits, advocates for more workers than needed, and blocks cost savers like privatization and contracting.

Tort reform for civil litigation. Not the Texas variety with arbitrary caps on punative damages. I'm talking about limiting jurisdiction shopping to either the location of the alleged injury or the residence of the plaintiff, Daubert rules for the admissability of expert testimony, and "loser-pays" rules. "Loser pays" simply means that whoever loses pays the court costs and the other side's attorney's fees in addition to whatever damages might be awarded. Pretty much all other developed countries do this, but we don't have a good example here in the U.S., although some states dabble in it. One of the keys to making it work abroad is tort insurance, so if you have a good case but lose, you're only out the risk-rated premium. The plaintiff's attorney often pays for the tort insurance anyway abroad.

Education reform. Increasing choices for students can take many forms. Many states do not allow private or home schooled kids to participate in extracurricular activities at public schools even though their parents pay property taxes just like everyone else. That should change. Education tax credits are a great way to leverage additional private investment in education, taking the burden off taxpayers for expanding and running expensive public school systems, while also increasing choices for parents. Even letting families easily choose among public schools instead of being assigned to them could do some good.

Focus on core functions. State governments do many things that could be done at least as well in the private sector or that ought not be done at all. State and local policymakers should scour their budgets and lawbooks for things to put on the old chopping block. If there isn't a compelling reason why the relevant level of government must do something, then it probably shouldn't.

Much more could and should be done, of course, including in health care, transportation, taxes and spending policy, government transparency, privacy, criminal justice, and on and on. This is a historic moment, one that is ripe with the possibility of reform. It would be a shame to waste it.

Cutting Politicians' Pay Over Deficits May Backfire

Yesterday at Cato@Liberty Marian Tupy blogged:

Having inherited an 8 percent budget deficit from the previous socialist government, the new conservative-liberal government of Slovakia has come up with a novel way of keeping budget deficits under control in the future. Starting in 2011, salaries of government ministers will rise and fall depending on the evolution of the fiscus. Thus, a budget deficit of 5 percent will translate to a 10 percent decrease in salaries, while an (unlikely) budget surplus of 5 percent will translate into a 10 percent rise in salaries, etc. It will be interesting to see if this new measure will truly result in a more responsible fiscal policy in the years to come.

Maybe, but it might backfire. Here's how:

Politicans who favor deficits--for whatever reason--may be able to claim the moral high ground by playing the martyr. The financial harm they do themselves by deficit-induced salary cuts could allow them signal their commitment to the public good.

Rather than making hard choices about whose political favors to reduce or eliminate, they could effectively be off the hook as long as the pay cuts are less important to them than maintaining and expanding their political power (especially rich, big government types). Deficits could get worse if this dynamic further weakens the remaining constraints on politicians to run deficits.

I could be wrong. It depends on the combination of formal institutions, informal rules of conduct, culture, etc, in Slovakia. Which I know nothing about. So we'll watch and learn.

Still, it wouldn't be near the top of my list of effective ways to constrain government budgets.

Surprise! A Political Cheap Shot from "Think Progress"

Matt Yglesias opines:

Conservative Senators are currently saying that they will filibuster a middle class tax cut unless that tax cut is paired with tax cuts that exclusively benefit rich people. That’s because they care—a lot—about reducing taxes on rich people. If they cared about reducing the deficit they could threaten to filibuster tax cuts unless paired with spending cuts. But they’re not doing that because they don’t care about the deficit.

What’s more, conservative columnists could urge them to do this. So could Fox News hosts and conservative talk radio stars. So could the Heritage Foundation, the American Action Network, the American Enterprise Institute, or the Cato Institute. But none of them are doing so. It’s true, again, that they separately say they favor cutting spending but none of them are urging members of congress to make tax cuts contingent on offsetting spending reductions.

It’s a question of scope. Tax policy is a huge issue in itself, as is EACH of the big spending cuts favored by supporters of limited government. Policymakers can only grapple with so much at a time, and since the tax debate is occurring now, they’re focused on taxes.

Improving incentives for savings and investment is key to long-term growth. High-earners (i.e., high-producers) tend to save more and be more sensitive to tax rate changes than others (not to mention bearing the greatest direct burden of taxes). It is therefore good tax policy to reduce rates especially at the top, not for whatever goes to the rich, but because of the benefits to the rest of us from greater investment and productivity.

When this tax debate has passed, I expect free-market people will be happy to discuss spending cuts. But one thing at a time.

Why the Spending Fetish?

A headline on Bloomberg.com today blares, "Rich Americans Save Tax Cuts Instead of Spending, Moody's Says."

Timothy Homan reports:

Hand the wealthiest Americans a tax cut and history suggests they will save the money rather than spend it.

Tax cuts in 2001 and 2003 under President George W. Bush were followed by increases in the saving rate among the rich, according to data from Moody’s Analytics Inc. When taxes were raised under Bill Clinton, the saving rate fell.

The findings may weaken arguments by Republicans and some Democrats in Congress who say allowing the Bush-era tax cuts for the wealthiest Americans to lapse will prompt them to reduce their spending, harming the economy.

Later in the article, economist Chris Cornell is quoted, "Spending by the top 5 percent of households seems much more closely tied to business- cycle issues than it does to tax-cut issues."

The entire article is based on a false premise. Why is it that we should care only what the wealthy spend?

What they save, after all, can become business investment, which is what has been hammered during this recession and especially by the extreme regime uncertainty that has characterized the past two years. The images below from this recent post by Cato scholar Mark Calabria reveals that consumption is back to normal, while fixed private investment is down by 20%. The fixation on spending reflects flawed neo-Keynesian reliance on over-aggregation and mythical "multipliers."

On the empirical point about the wealthy saving much of tax cuts, that seems consistent with the permanent income hypothesis, which postulates that we try to smooth consumption over our lives. Something that changes expectations of lifetime wealth tends to affect consumption patterns.

Tax cuts that are expected to be temporary, therefore, would mostly be saved, while those expected to be permanent would be mostly spent. If the wealthy save tax cuts, it's a clear sign they expect them to be raised again when the bills come due for the current government spending binge.

Debt and Deficits: Only the Tip of the Angry Iceberg

Barely had I published my last entry, when the Washington Post came out with a story about how many Democrats are adding fiscal austerity pledges to their campaign platform. I'm unimpressed.

On one hand, it's good that politicians of both parties have finally come to understand that Americans are fed up with deficits and debt. On the other, Democrats in general and many Republicans are missing the bigger picture: the American people want a reevaluation of the proper role of government and how that role should be distributed among the levels of government.

It's not just about the money; it's about being accountability. And if private enterprise cannot successfully undertake some collective action and government can do better, it should be the most local government that can address it, which also happens to be the level most accountable to the people. Suggesting that a congressman from Ohio can be held accountable for education quality in Florida, or a senator from New York for road congestion in California, is simply preposterous.

It's also about being left alone. The decennial census is supposed to count inhabitants for the purpose of apportioning members of the House of Representatives, nothing more. Yet it has morphed into a vast treasure trove for social science researchers. It sounds benign, but besides the privacy issues, the conclusions of that research provide justification for any number of wasteful and often counterproductive interventions.

Americans want more than cheap talk about the federal budget. They want their national political representatives to fundamentally reconsider the role of the federal government, eliminating, privatizing, or transferring to the states those activities that are not within its proper scope.

Gerry Connolly (D-VA-11) is Fiscally Reckless

Over the past few weeks, I've received a number of snazzy glossy flyers--booklets, really--from the office of Congressman Gerry Connolly (D-Fairfax, VA) touting his fiscally conservative bonafides. His campaign site make similar claims with issues section including headings of "Fighting Wasteful Spending and Budget Deficits" and "Holding the Line on Taxes."

[Begin tangent: The flyers, by the way, apparently meet the guidelines of the House Franking Commission, the congressional body that oversees mailings from representatives to the people they represent to make sure they're constituent service rather than campaign materials. They're obviously campaign materials--I've only received them this summer, despite being "represented" by Mr. Connolly since January 3, 2009. Just another example of the incumbent protection scheme our leaders have established. For our own good, of course. End tangent]

So I wondered, just how fiscally responsible is Mr. Connolly? Let's look at his votes on the big issues. Did he come down on the side of taxpayers? ("No" means he voted "yes," that is, not fiscally responsible.)
- The failed "stimulus" bill: no and no.
- The spendthrift Fiscal Year 2010 Budget Resolution: no, no, and no.
- Cap-and-tax: no.
- A toothless pay-go (touted in his mailers): sure. A decent pay-go: no.
- EFCA, the union payback: no vote, but Connolly is a cosponsor.
- Obamacare: no, no, no.
- The "Homestar Energy Retrofit Act" boondoggle: no.
- "Deeming" the Fiscal Year 2011 budget passed instead of actually passing a budget: no.
- The teacher union bailout: no.
- A resolution to prevent Congress from passing major legislation during a post-election lame duck session, once the voters have rejected the Obama-Reid-Pelosi radical agenda: well, it wasn't a recorded vote, but no.

Want something more rigorous and systematic? Fine. In the first session of the 111th Congress, Gerry Connolly scored a grade of "F" on the National Taxpayers Union congressional report card with a whopping 6%.

Let's face it: glossy flyers notwithstanding, Gerry Connolly is not being responsible with taxpayer dollars. To my fellow residents of Virginia's 11th congressional district, let's encourage him to make a career change after November 2nd.

Putting the "Auto" in Automobile

"Civilization advances by extending the number of important operations which we can perform without thinking about them."
- A. N. Whitehead (in F.A. Hayek, The Constitution of Liberty)

A little more than a year ago, my friend and colleague Randal O'Toole sent me a draft of a paper he was working on with a section on driverless cars. Although it didn't make the final cut of that paper, it got a full chapter in his excellent new book, Gridlock: Why We're Stuck in Traffic and What to Do About It. Initially skeptical, I've since become mildly obsessed.

In summary, it is now possible for cars to drive themselves under certain conditions. Adaptive cruise control, lane keep, and self-parking options already exist in a variety of higher end cars. As the technology improves, hardware and software become cheaper, and the public becomes more aware of the possibilities, it's becoming hard to envision a future without autos on autopilot.

Why should I care, you ask?

Lower pollution. Less congestion. Less of a need to increase expensive lane miles of roads, which means less construction. Less time on the road; more time for everything else. Using the commute or other driving to do something fun or productive. Less stress. Less road rage.

Increased mobility for the elderly, the young, and the handicapped. Getting drunks home safely (for themselves and everyone else on the road). No more teen-texting-crash tragedies. An end to driver error from distraction or fatigue. The list goes on.

Even as technical demonstrations proceed, the concept seems to be getting more attention in the press. Erik Morris over at the NYT Freakonomics blog has twice waxed enthusiastic (with promises of more to come), and it's been picked up in a variety of news articles throughout the country.

In addition to the links above, check out this Capitol Hill briefing we did with Volkswagen's Director of Research, Randal's WSJ piece "Taking the Driver Out of the Car," or just Google it.

"Anyone who fights for the future, lives in it today."
- Ayn Rand (The Romantic Manifesto)

If only.

Constitutional Reform Needed Soon

It's been almost four months since I last blogged, courtesy of a rather heavy reading list for the final lap of grad school.

Twenty books and many discussions later, my grasp of constitutional economics has never been better. In a nutshell, constitutional economics has to do with how the basic rules of governance lead to different political and economic outcomes. The basic challenge is to escape anarchy or despotism by establishing the protective (military, police, courts) and productive (basic infrastructure, environmental protection, monetary policy) functions while constraining the ability of political actors to use the power of the state to redistribute. As it turns out, no advanced country seems to have figured out how to constrain redistribution very well.

In thinking about these issues, I've come to a few tentative conclusions. Politics as usual hasn't been very successful at limiting government. It looks like we need to think about constitutional reforms, such as
- Term limits (5 terms House, 2 terms Senate)
- Spending limits (inflation + population growth)
- Balanced budget requirements (spending = revenue two years before)
- Prohibition on new debt issue
- Two-year budgeting (budget odd years, oversight even years)
- Zero-base budgeting (all programs reconsidered each time)
- Periodic automatic program sunsets (without congressional reapproval, they go away)
- Putting all implicit debts (unfunded Social Security, Medicare, Medicaid, and pension liabilities) on the official annual budget

All of these are aimed at limiting the discretion of politicians. They're our employees, after all, so why do we let them get away with acting like our masters? Government doesn't give us meaning, it's just an instrument to accomplish those necessary things that cannot by provided by voluntary action.

Forcing government to live within its means would stop the intergenerational theft that has run rampant for the last eighty years and force politicians to make choices about priorities. It would also make it easier to say 'no' to the special interests.

How these reforms could be implemented is unclear. But unless Greece's situation looks like fun, we better figure it out soon.

What Kind of Labor Market Do You Support?

If you live in the DC area and ever wondered whether the businesses you patronize have unionized workforces, here's the link for you. It lists the "companies represented by UFCW [United Food and Commercial Workers] Local 400."

You can find the UCFW affiliate in your area at http://www.ufcw.org/.

The phrase "companies represented by UFCW Local X" strikes me as pretty misleading. They may represent some workers, but certainly not customers, suppliers, management, or shareholders (as Ben Stein calls them, "widows and orphans").

Anyway, I was interested to find out that several places I shop are unionized--CVS, Macy's, and Safeway--and others--Walmart, Whole Foods, Target, Wegman's, among many more--presumably are not.

Whatever your preferences, it's good to know.

P.S. Incidentally, a report from the Bureau of Labor Statistics last week noted that public employees made up a greater share of union membership than private sector workers in 2009--the first year that's ever happened. Federal, state, and local government workers were 37.4% unionized (7.9 million workers), while only 7.2% (7.4 million) private sector workers belonged to unions. Apparently union membership hasn't been this low since 1900.

P.P.S. Also, the new Cato Journal seeks to answer the question, "Are unions good for America?" I haven't had a chance to dig in yet, but it looks like an interesting read.

Checks and Balances Are Back

With the just-declared victory of Republican Scott Brown in Massachusetts, checks and balances have finally been restored after a year of Democratic dominance in Washington. And that means the pace of their big spending, big government agenda will slow down dramatically.

Not that unified Republican control several years ago was a picnic. Those years brought us massive federal encroachment into K-12 education, a major expansion of an already unsustainable entitlement program, corruption, continued government meddling in all variety of personal matters, a bloody and expensive war of choice, a spending explosion, and the abandonment of the limited government (aka freedom) agenda that was supposed to be the heart and soul of the conservative movement.

But Democratic control has--in only one year--brought an escalation of the war in Afghanistan, the continuation of Bush-era violations of civil liberties and opaque budget processes, even greater recklessness with our fiscal future, the attempted nationalization of our health care system, increasing the burden of taxes and regulations, and pushing a pork-laden energy bill that even greens have rejected.

This country is better served when checks and balances exist, as when Clinton was balanced by a Republican House from 1995 to 2001. Sure, the internal tensions within the Democrat caucus provided some impediments, but at the end of the day, leadership has an awful lot of clout and can force (and has forced) much down the throats of the rank and file.

This should serve as a wake up call. As Gerald Seib pointed out on WSJ today, Americans' political preferences have stayed remarkably constant over the years. A successful governing agenda is not one that tacks hard to the left or right, but one that is essentially a free market, socially tolerant agenda of "live and let live."

The Democrats still hold the White House, 256 of 435 House seats, and 59 seats in the Senate. But at least the filibuster is back.

If this is a harbinger of things to come, November will be very, very interesting. Stay tuned.

America Subsidizes European Welfare States

Late last week a hearty debate broke out in the blogosphere regarding whether Americans or Europeans have a higher standard of living. Paul Krugman started it, and Greg Mankiw, Dan Mitchell, and many others responded.

Krugman argued that European economies are no less dynamic than America's and standards of living are comparable even though social welfare spending is higher. Mitchell explodes the idea that Europeans and Americans are similarly wealthy--average American consumption is much higher--while Mankiw suggests a number of factors that may account for the differences in per capita consumption and unemployment.

My own humble contribution is merely to point out that the U.S. subsidizes Europe (and others) in at least two significant ways: defense spending and medical innovation.

In a recent paper on medical innovation published by the Cato Institute, Glen Whitman and Raymond Raad point out that America leads the world in three of four general categories of innovation--basic science, diagnostics, and therapeutics--while the fourth category of business model innovation lacks sufficient data to draw clear conclusions.

Politicians and pundits often argue that we'll fall behind if innovations don't take place here. Not so. Once an invention happens, those who have carried none of the burden of its development--the diversion of resources from production to research, the costs of many dead-ends, and the risks of failure--can take as much advantage of it as those who sacrificed for it. It's the classic free rider problem: most of the beneficiaries carry virtually none of the cost. Clearly, expanding the frontiers of knowledge and productivity is necessary for continued progress, but the costs and benefits are not evenly distributed.

And so it is with healthcare and other sectors where American innovation predominates. America's disturbing distorted health care system at least provides incentives for individuals and organizations to develop better ways of treating illnesses and promoting wellness. U.S. taxpayers and consumers foot the research bill, and Europeans and the rest of the world benefit from the disproportionately American advances.

U.S. subsidies to Europe (and Japan, South Korea, Australia, and many other places) also take the form of our picking up some of the tab for their defense. According to the CIA World Factbook, the U.S. significantly outspends most European nations in terms of percentage of GDP, and that's with a higher per capita GDP, as noted above.

For those that spend a greater share of domestic output--Macedonia, Turkey, Bosnia and Herzegovina, and Greece--I have three words by way of explanation: location, location, location.

Here are the big six: UK (2.40%), France (2.60%), Spain (1.20%), Italy (1.80%), Germany (1.50%), and Poland (1.71%). None of them are even close to the U.S.

If those are the levels that they think are appropriate given their threat environment, fine, but that seems unlikely. The United States are bordered by two gigantic oceans and two weak and friendly nations and haven't been invaded by a foreign power since the 19th century. Europe is proximate to the Middle East and Africa and has a history of continent-wide wars.

And one suspects that Europeans rightly view the 78,000 U.S troops stationed there and ongoing commitments to the NATO alliance as a signal that they don't need to fully fund their defense needs. The U.S. will be there to bail them out.

Needing to spend less on their defense permits them to spend more on social services. It's that simple.

Even if Krugman were correct about similar standards of living in Western Europe and the United States, the fact remains that the U.S. is massively subsidizing the European welfare state through our defense umbrella of that continent and by producing a disproportionately high share of the world's innovation (especially medical) here. Absent those subsidies, Europe's current 'generosity' would be unsustainable.

Dear NYT: Yes, Health Care Coverage Should Differ

"Should someone in Idaho or Nevada have significantly different health care coverage from someone in Massachusetts? That, essentially, is one of the biggest questions Congress will be wrestling with as it tries to meld House and Senate bills into a single law to revamp the nation's health care system," the New York Times reports.

Yes. And so should my neighbors, my friends, and my coworkers. Our health insurance coverage (or lack thereof) practices ought to be individual decisions consistent with our particular values and preferences.

There's no good reason for politicians, bureaucrats, or, for that matter, employers to make these decisions: none of them can adequately cater to individual wants and needs. The market isn't perfect either, but it's far better and keeps improving.

The Light at the End Nears

My final class of grad school--Constitutional Economics--is this term, so I'll walk in May.

Why this one? Utility maximizer that I am, it's simply my best available option. Of the evening classes offered this spring, this one seemed the most interesting and thought-provoking. I might have opted for Law & Economics if it were offered (depending on the syllabus), since I'm more policy oriented than philosophical.

The only thing between me and graduation is some assignments, a final, and a paper. Oh, and this gargantuan reading list. And yes, the 21 italicized items are books (and one of those is in three volumes). Apologies if you don't hear much from me for a while.

• James M. Buchanan, “Economics as a Public Science”
• Albert Hirschman, The Passions and the Interests
• Adam Smith, The Wealth of Nations, book 5
• Ludwig von Mises, Liberalism
• Milton Friedman, Capitalism and Freedom
• Milton and Rose Friedman, Free to Choose
• F.A. Hayek, The Road to Serfdom
• F.A. Hayek, The Constitution of Liberty
• F.A. Hayek, Law Legislation and Liberty (3 vols.)
• James M. Buchanan, The Logical Foundations of Constitutional Liberty (vol. 1 of Collected Works)
• James M. Buchanan & Gordon Tullock, The Calculus of Consent
• James M. Buchanan, The Limits of Liberty
• James M. Buchanan & Geoffrey Brennan, The Reason of Rules
• Vincent Ostrom, The Meaning of Democracy and the Vulnerabilities of Democracies
• Elinor Ostrom, Understanding Institutional Diversity
• Paul Aligica and Peter Boettke, Challenging Institutional Analysis and Development
• Daron Acemoglu and James Robinson, Economic Origins of Dictatorship and
Democracy
• Mancur Olson, “Dictatorship, Democracy and Development,” APSR, 1993
• Douglass North, John Wallis and Barry Weingast, Violence and Social Order
• Edward Stringham (ed.), Anarchy and the Law

Television

I've started to really dislike television. The whole concept, not just the programming. There are definitely shows I enjoy watching, and that's the problem.

It's just too easy to get sucked into episode after episode of "My Name is Earl" or "The Office" instead of doing more productive things, such as spending quality time with Liz and Beatrice, writing, working out, being involved with my community, or being in touch with family and friends.

After working all day and commuting back and forth from Fairfax to the District, I want the few hours that I have at home to count for something. When I look back on my week, I don't want to have to realize that I burned precious hours being a passive consumer of mass media.

There's just so much more to life.