Saturday, April 19, 2008

Inflation News

According to on April 15:

"Inflation at the wholesale level soared in March at nearly triple the rate that had been expected as the costs of energy and food both climbed rapidly.

"The Labor Department reported Tuesday that wholesale prices rose by 1.1 percent last month, the second largest increase in the past 33 years, exceeded only by a 2.6 percent rise last November. Analysts had been expecting a much more moderate 0.4 percent rise in wholesale prices for the month."

At the same time, Money News reports that there are fewer new millionaires because of the "economic slump". The classic tactic (that goes back to the late nineteenth century) of arguing for inflation, which increases profits and stock market values but hurts people on fixed incomes and the productive poor (i.e., inflation redistributes money from the working poor and pensioners to the wealthy) is to argue that inflation will reduce unemployment. Of course, pro-inflation progressives never mention that besides reducing unemployment inflation gets elderly people to eat cat food and the working poor to give up necessities.

Increasingly, the news media don't bother to lie or color the story as they have in the past. In the 1970s, if you can recall, the media and academia argued that oil prices caused inflation and in the 1960s they argued that unions caused inflation. Today, more or less says that millionaires are hurt because there's not enough inflation:

"The continuing global economic turmoil is taking its toll on the wealthy — as fewer new millionaires are being minted....

Is this the end of the American dream? Or just a bit of a nightmare? Probably the latter, economists are telling MoneyNews, as the problems in the stock market are limiting the growth of the portfolios of professionals and executives and entrepreneurs for now. "

Where is Jim Cramer now that we really need him? I want to break into the seven figures myself. We need more old people on cat food and evicted from their homes because they can't afford the property taxes; and we need more families depriving their children of milk so people like me can become millionaires. Absolutely.

Thursday, April 17, 2008

Chronicle of Higher Ed on Seidemann Case

I sent out a small press release concerning David Seidemann's victory in district court against the leadership of the Professional Staff Congress (PSC). Reporter David Glenn of the Chronicle of Higher Education called to thank me for the information and the story ran today (paid access). The article is accurate and even handed. David Glenn's reporting is excellent.

In addition to sending out the press release I had invited Barbara Bowen, Nancy Romer, Steve London, Stanley Aronowitz and several other members of PSC's administration office to comment on my last blog on the recent ruling, but none has responded.

The article points out that Dorothee Benz, a union employee, claims that

"the 'vast majority' of the disputed spending has been allocated to lobbying campaigns to encourage state and local governments to provide financial support to the university, not on political causes that have nothing to do with professors' wages or benefits."

However, this is misleading for two reasons. First, there have been considerable "soft money" activities by the union leadership involving Iraqi War protests, demonstrations and conferences. The leadership is paid salaries to participate in these activities. To be fair, agency dues payments should be reduced by the proportion that salaries for the union leadership's time spent on such political activites bears to the union's total budget. Second, lobbying typically involves political as well as wage and benefit concerns, as Professor Seidemann points out in the article.

An additional concern is that the union has used CUNY facilities to send e-mails and used CUNY facilities to conduct meetings of a political nature. Since CUNY is a section 501(c)(3) organization, the repeated use of CUNY facilities to further the Professional Staff Congress's political goals is inappropriate and likely a breach of the tax code's requirements for charitable and educational institutions (that is, that they not be used for political purposes).

The article quotes Christopher M. Callagy, a union attorney, as saying that the union's chief political efforts are in Albany. This is a lie. The union leadership has repeatedly notified faculty of Iraqi War protests, and used their time and union resources for such protests.

Moreover, the article points out that even Albany lobbying is not considered a collective bargaining expense:

"Mr. Seidemann pointed out in an interview on Wednesday. 'Lobbying for an increased budget for education—that is a political act,' Mr. Seidemann said. ['']There may be people who think education should be supported by property taxes or should be supported totally by tuition.' Mr. Seidemann said that...he distrusts the union's management and wants to give it as little financial support as possible. "

The article adds that Professor Seidemann is continuing with a further complaint. He is asking the judge to require that the union file its financial data online on a specific date. No more Enron-style financials for the Professional Staff Congress.

Professor Seidemann has performed an important social service, and he deserves an award. However, I would argue that his case does not go far enough. The case of Lehnert v. Ferris Faculty Association on which Judge Lois Bloom relies in the Seidemann case assumes that agency payers may be free riders because they receive union benefits but do not contribute to the costs of negotiation. But the PSC has won no benefits for its membership. Rather, because of the PSC's incompetent negotiation stance, silly demonstrations, and adverserial approach, the union has managed to diminish faculty wages and benefits. An equitable rendering of the Lehnert decision ought to be that where unions reduce wages, agency payers should be reimbursed for their losses because of the union's incompetence. Perhaps the next step ought to be to try this case under equity principles.

John W. Dean's Warren G. Harding

John W. Dean. Warren G. Harding. New York: Henry Holt and Co., 2004. 202 pages.

The reason that John W. Dean was interested enough in Warren G. Harding to write a biography becomes obvious at the end of the book. Just as Dean was involved in the Watergate scandal, Harding is (Dean argues unfairly) remembered for the "teapot dome scandal" that reached the public eye immediately following his death 2 1/2 years into his administration. Harding's death led to the appointment of Vice President Calvin Coolidge to the presidency in August 1923.

Warren G. Harding was certainly a supporter of progressivism. However, he split with Theodore Roosevelt because Roosevelt was disloyal to the Republican Party by running against Taft on the Progressive Party or Bull Moose Party (so-called because Roosevelt had said that he was "fit as a bull moose"). The conservatives and progressives within the Republican Party were at odds, but Harding was hardly a conservative. According to Dean:

"In late 1911 and early 1912 Harding and the Star* had railed at the progressive movement within the Republican Party, which Harding believed was based on personalities, not principles. Harding was not opposed to progressive ideas, such as voter initiatives, recall of elected officials, referendums on ballot issues, corporate trust busting and resource conservation. But he found the progressives' 'unreasonable antipathy to Taft' baseless, and TR's talk about fighting against special interests for the common man 'claptrap'...To Harding Roosevelt was a traitor..."

When Harding ran for Senator from Ohio in 1914 Taft endorsed him, but he was not ideologically committed to either the conservative or progressive ideology. Dean writes (p. 36) "the audience could hear what they wanted". As a junior US Senator Harding was asked to be keynote speaker at the 1916 Republican Presidential convention because "Republicans wanted to heal the division between the progressive and conservative factions of the party, and Harding held the respect of both elements, in spite of his earlier disapproval and chastisement of the progressives who had bolted to the Bull Moose Party in 1912."

The one area where Harding significantly differed from the Democrats was that he favored protectionism while the Democrats opposed it. Harding (p. 32) opposed free trade and believed that Woodrow Wilson's low tariff policy would result in a depression. The two chief differences between Harding and Wilson were that Harding was more statist in that he favored protectionism and that he was less supportive of the League of Nations than was Wilson. In a speech before the Senate (p. 49) which Dean argues was preliminary to his presidential campaign, Harding argued that he could not sign the League of Nations treaty unless an article were added relieving the US from defending other countries without the approval of Congress as required by the Constitution. Harding said to the Senate (p. 49):

"A Senator may be as jealous of his constitutional duty as the President is jealous of an international concoction, especially if we cling to the substance as wll as the form of representative democracy."

The New York media (p. 67) opposed Harding's candidacy because the Times, the Post, the World, the New Republic and the Nation perceived him as a second rate conservative. But Harding was not a Mugwump (he was too young) and was not at all influenced by the laissez faire ideas of the late 19th century, to include Sumner's and Godkin's. Nevertheless, the Nation wrote that Harding was an (quoted on p. 67):

"amiable, faithful, obedient errand boy for the Old Guard politicians and the business interests they serve...In truth he is a dummy, an animated automaton, a marionette that moves when the strings are pulled."

Thus, the pattern of the left wing progressives calling the right wing progressives "old guard" is established by the Harding candidacy (it was more likely a product of the Taft-Roosevelt fight). But Harding did NOT reflect the laissez faire views of Sumner and was less linked to east coast business interests than was Roosevelt. Thus, by 1920 the left had established a pattern of slandering right-wing progressives. But true advocates of small government were already virtually non-existent except as a fringe of the Republican Party.

Harding's campaign hired Albert D. Lasker of the Lord and Thomas advertising and public relations firm in Chicago. It may have been the first to introduce advertising and PR techniques that are commonly used today.

Harding was not a particularly ideological candidate. William McAdoo described a typical Harding campaign speech as (quoted on p. 73):

"an army of pompous phrases moving over the landscape in search of an idea. Sometimes these meandering words actually capture a straggling thought and bear it, triumphantly, a prisoner in their midst, until it died of servitude and over work."

Dean observes (p. 77) that Harding's victory over Democratic candidate Jim Cox in 1920 may have been as much a rejection of Wilson as a vote for Harding. As well (p. 77):

"Harding biographer Andrew Sinclair attributes the victory to Harding's ability to give voice to the dream of the rural past by the promise of returning to normal times..."

There was no ideology or rejection of Progressivism. Just a mood change.

After election, Harding appointed Henry C. Wallace secretary of agriculture (p.85):

"Harding knew he would have to take political flack for selecting Wallace, because his liberal leanings were offensive to the right wing of the party, but the president-elect understood that the party's progessives would support Wallace."

Dean adds (p. 86):

"Harding was impressed with young Hoover and wanted him in his cabinet, but Republican elders and conservatives objected...Harding experienced more internal party squabbling and opposition to Hoover than any of his choices. Notwithstanding old guard opposition that he was too liberal, too ambitious, too international in his views, not to mention too publicly popular, Harding offered Hoover the Deoartment of Commerce or the Department of the Interior."

Wilson did not leave the country in good shape (p. 94). In his inaugural address (p. 96) he stated that the U.S. would not join the League of Nations but would have an activist and interventionist foreign policy. He criticized businesses that profited from the war. He said (p. 96):

"Our most dangerous tendency is to expect too much of government and at the same time do for it too little."

That is hardly the view of an advocate of small government or laissez faire.

On April 12, 1921 Harding (p. 100):

"addressed a joint session of Congress concerning the policies, plans and matters he believed the Congress should undertake...Harding's normalcy was not a call to turn back the clock but rather...he was calling for onward, normal way...He called on Congress to cut government expenditures by creating a Bureau of teh Budget, he urged revising the federal tax laws including the abolition of the excess profits tax, and he requested that Congress enact emergency tariffs followed in six months with more comprehensive revisions...he called for a new immigration law; he raised the need to deal with emerging transportation problems (railroads, highways as well as the new civil and military aviation); he asked Congress to regulate the new technology of radio and transcontinental cable communications; and he called for establishing a merchant marine. No request surprised and confounded his conservative colleagues more than his recommendation that they create a department of public welfare that would be responsible for 'education, public health, sanitation, conditions of workers in industry, child welfare, proper amusement and recreation, the elimination of social vices.'"

On May 27, 1921 Harding signed an emergency tariff measure and in July 1921 the House passed a bill that increased tariffs across the board. In September 1922 Harding signed the Fordney McComber Act which reflected a hodgepodge of special interests. The result, though, was that other countries responded with high tariffs, hurting American agriculture (p. 105).

In 1921 Harding's Budget Accounting Act created the Bureau of the Budget and the General Accounting Office. Harding did favor tax cuts (P. 106). However, he also supported (p. 112) a host of government interventions concerning agriculture such as the Grain Futures Act which regulated speculation on commodities and the Packers and Stockyard Act insuring fair practices on the part of the meat packing industry.

Dean quotes Schapsmeier's and Schapsmeier's "Disharmony in the Harding Cabinet" on p. 113:

"[t]he amount of progressive-type legislation during [Harding's brief presidency] was not duplicated until the New Deal."

Harding also advocated an activist fiscal policy more than a decade before the election of Franklin D. Roosevelt. Dean writes (p. 115):

"[he prodded] state and local governments to commence public works projects that would provide employment. The president took similar action at the federal level, ordering all his cabinet secretaries to look for federal projects that could be started sooner rather than later...Harding's pump priming was contrary to hi philosophy of using federal funds to solve the unemployment problem..."

Harding also tried to unravel the racism that was prevalent during and characteristic of Woodrow Wilson's administration (p. 124). "Wilson had removed Republicans and blacks from appointed positions, replaced them with white Democrats and then locked them into the system by extending civil service protections.

In 1922 (p. 137) Harding:

"called for the end of child labor, by consitutional amendment if necessary. His message...pleaed Congress, the New York Times and even such progressive journals as the Literary Digest."

It is evident that Harding was hardly a conservative. Following on the heels of William H. Taft, he was probably slightly to Taft's left and to Theodore Roosevelt's right. He was a blend of conservatism and progressivism, hardly to the right of Woodrow Wilson. Following the left wing presidency of Roosevelt and the mildly conservative but progressive presidency of Taft, Harding was very much in the tradition of Republican progressivism and was certainly no advocate of laissez faire or free market ideas. He was a low-tax progressive.

*Harding's business was that he was owner and editor of the Marion Star.

Bushkill Creek--My Backyard--April 10, 2008

Home Sweet Home April 10, 2008

Town of Olive, Ulster County, NY, April 10, 2008

Ashokan Reservoir in the Land of the Sky

Ashokan Reservoir in the Land of the Sky

Wednesday, April 16, 2008

Bravo Hillary!

Larwyn just forwarded a Hugh Hewitt post about the Hotline's Blogometer's coverage of the ongoing fight between Obama and Clinton. The Blogometer notes that Ariana Huffington complains that "John McCain should go on vacation, Hillary Clinton is doing his job for him."


David Seidemann Slam Dunks Barbara Bowen in Law Suit

David Seidemann just e-mailed me that he has defeated the Professional Staff Congress's (PSC), CUNY's faculty union, in a federal court law suit, Seidemann v. Bowen, in federal district court. This case is of national importance because it establishes standards of disclosure for agency fee bargaining units. An agency fee arrangement occurs where the union agreement compels non-members to pay dues even though they elect not to belong to the union. Agency arrangements differ from union shops in that under agency arrangements members are permitted to refuse membership in the union (unlike union shops), but they are compelled to pay dues nevertheless. CUNY has an agency shop. A number of faculty, myself included, do not belong to the union but are compelled to pay dues. Professor Seidemann's law suit concerned the PSC's failure to accurately disclose the portion of dues that the PSC devotes to political contributions unrelated to the PSC's collective bargaining and higher education activities.

The PSC is an unusually ineffectual union that has failed to win wage increases one half of what New York City's modestly paid teachers (in comparison with teachers in neighboring municipalities and suburbs) have won. The teachers won 16 percent over three years and the PSC won six percent over three years for CUNY's faculty. The PSC has repeatedly refused to represent faculty in grievances. At the same time, the PSC has served as a conduit for political contributions to various extremist causes. Before Sharad Karkhanis's and David Seidemann's protests, the PSC was sending Iraqi War literature to the CUNY faculty almost daily, even as it failed to represent faculty in collective bargaining and grievances.

According to Professor Seidemann, the federal court ruled by summary judgment* that:

1) the PSC violates the First Amendment rights of agency fee payers because it fails to provide them with sufficient information to gauge the propriety of the union's agency fee expenditures;

2) the PSC unlawfully charged objecting non-members for some of the union's political activities by inaccurately characterizing them as contract-related activities. Among the activities that the PSC improperly claimed were contract-related was a forum on an anti-war resolution. The PSC also improperly charged fee payers for public rallies, picket lines, concerts, letter-writing campaigns - all political activities - under the category "office supplies". (How does one confuse a paper clip with a picket line?)

3) Further, the District Court enforced a ruling in Professor Seidemann's case made by the Second Circuit in August 2007 that held as unconstitutional the PSC's requirement that non-members annually renew their objections to political expenditures. (The Second Circuit ruling applies to all public unions in New York, Vermont, and Connecticut.)

*The Court finds that plaintiff is entitled to a declaratory judgment that defendants' notice to fee payers for the years at issue violated plaintiff's rights under the First Amendment. Plaintiff is entitled to injunctive relief and defendants are enjoined and prohibited from requiring nonmembers to file an annual objection or to identify the percentage of the agency fees in dispute in order to file an objection. Defendants shall send plaintiff and all nonmembers a notice that complies with Hudson and the Second Circuit's Mandate as set forth herein. Defendants shall provide the financial [*37] information necessary for fee payers to gauge the propriety of the agency fees, either by mail or by posting on the union's website, at least thirty days prior to the start of the fee payer objection period. The financial information PSC provides to fee payers shall set forth the basis for the allocation of both the chargeable and non-chargeable expenses.

Tuesday, April 15, 2008

John McCain on April 15th

The McCain campaign just sent around the following e-mail:

"Today, April 15th, marks the deadline when all Americans must file their income taxes. While many of us are aggravated and displeased when we see exactly how much of our hard-earned money goes to the federal government - if one of my Democratic opponents is elected in November, you can be certain your tax rate will increase across the board.

"When we elect our next president in November, we will make a clear statement about the direction we want to take our economy and our tax system. As I have said before, this election will present Americans with a clear choice between my vision for our country and that of my Democratic opponents.

"I believe today, as I have always believed, in small government, fiscal discipline and low taxes. I believe that tax cuts work best when accompanied by lower spending. And I make the promise to you that if elected president, I plan to make the present tax cuts permanent, lower corporate rates from 35% to 25% and end the Alternative Minimum Tax, which will affect millions of middle class families."


Monday, April 14, 2008

The Relative Returns to Higher Education

The value and importance of higher education depends on its returns relative to the investment market. The inflationary, low interest rate regime of the past quarter century has increased returns to investment in stock and real estate markets and diminished returns to education. Monetary policy has done so because inflation reduces the present value of future earnings from labor. Real wages have increased slowly while the stock market valuation has increased rapidly. That is, low interest rates increase the value of stock and real estate investments but reduce the present value of future earnings. A prospective student who invested in the stock market instead of education during the post World War II era probably would have made the right financial decision. (He or she would have made the right intellectual decision as well.) Because inflation reduces the present value of future earnings but increases returns on stock and real estate, financially smart families invest in stocks rather than in education. Intellectually smart families home school. But the mania for higher education exploded at the very time the financial (and intellectual) value of higher education was diminished. It is a case of "buying at the top".

The NewsMediaJournal and JB Williams Are Right

Larwyn just forwarded an excellent post from JB Williams of NewsMediaJournal.US about the importance of supporting John McCain this year. The table in Williams's article is excellent and says it all. See Williams's article here.

Obama and Clinton Vie to Impoverish America

There is little question of the comparative advantage of free trade. While specific jobs or professions may be lost or gained due to trade, the net advantage is necessarily positive. Were it not so, the trade would not occur. Two centuries ago the classical economists such as Ricardo and Smith showed that relative price differences among countries create opportunities. If every country focuses on the economic activities at which it is best, the world becomes more productive. Over the long term the higher productivity is translated into higher wages and wealth. In contrast, the arguments that oppose trade are nationalistic and emotional.

At the extreme, countries like North Korea or the communist countries of the immediate post-World War II era that have attempted economic self-sufficiency or autarky have become impoverished. Likewise, countries with substantial protectionism such as India experience high levels of starvation. India, with six decades of protectionism and a high level of income equality leads the world in child starvation. Similarly, the British Corn Laws in the 19th century led to mass starvation in Ireland (with over one million dead). The argument against free trade is the argument for public impoverishment.

It is not surprising that Barack Obama and Hillary Clinton, two economic illiterates, compete to proclaim their opposition to free trade. Yahoo! reports that Obama questions Clinton's anti-free trade credentials. With economic illiteracy among the public, shoddy education, an ignorant mass media and a corrupt Congress, our government aims to impoverish the average American:

PITTSBURGH - Democratic Sen. Barack Obama on Monday questioned rival Sen. Hillary Rodham Clinton's opposition to free trade agreements that some voters contend has eliminated thousands of U.S. jobs and mocked her weekend visit to an Indiana bar as pandering to the working class.

Repeal the Federal Income Tax

April 15 is nearly upon us. Those who pay taxes might consider the low quality of government services and the high amount of federal tax that they pay. On balance, the income tax destroys savings and personal independence, while the uses to which Congress has put the money are of scant value. The income tax should be repealed. I have written the follwing letter to my Congressman, Maurice Hinchey:

April 14, 2008

Dear Congressman Hinchey:

I urge Congress to repeal the federal income tax. Congress has not proven itself intellectually or morally fit to take possession of so large a share of the American purse. I urge you to return the money to the American people, except for a small amount that Congress might devote to its own education by taking basic economics and ethics courses.


Mitchell Langbert, Ph.D.