Friday, September 22, 2017

ICOs Will Not Be Defeated

ICOs Will Not Be Defeated

Absolutely nothing–no amount of regulation, no number of belligerent articles, no plethora of hectoring denunciations by big shots–is going to stop ICOs from completely disrupting the way companies raise funding in the future.

The crypto market has been too wonderfully successful without the slightest help from government or the financial establishment. We already know. We’ve seen. The idea is out there. It’s already worked. The deed is done.

But now the counter-revolution is underway, with governments leaning in, establishment spokesmen trying to spook markets, and incumbent financial institutions decrying all disruption to their industry. It’s a coordinated attack.

So it’s about time that people know precisely what an ICO is. It stands for Initial Coin Offering, a token used to express investment interest in ideas that are turned to enterprises. The number of ICOs this year far outstrips Initial Public Offerings of public companies (those seem to be on their way toward extinction) and beats the market capitalization of convention venture capital funding.

A Goofy Explanation

But before we get to the full explanation, consider this brilliant, evocative, and ridiculously misleading description from Kevin Roose from the New York Times.
Imagine that a friend is building a casino and asks you to invest. In exchange, you get chips that can be used at the casino’s tables once it’s finished. Now imagine that the value of the chips isn’t fixed, and will instead fluctuate depending on the popularity of the casino, the number of other gamblers and the regulatory environment for casinos. Oh, and instead of a friend, imagine it’s a stranger on the internet who might be using a fake name, who might not actually know how to build a casino, and whom you probably can’t sue for fraud if he steals your money and uses it to buy a Porsche instead. That’s an I.C.O.
From reading that paragraph, you could suspect that an ICO is a small-time scam that ropes in highly vulnerable population groups (think: the lottery). But if you received Goldman-Sachs' newsletter from August this year, you would have discovered something slightly different. It turns out that in June of this year, ICOs raised $450 million, which surpasses the amount raised by early-stage venture capital funding. The same thing happened again in July. The total raised this year from ICOs is an astonishing $1.5 billion.

ICOs are poised to not only exceed conventional funding sources, consistently over time, but even completely displace them. This is what innovations do. They replace what came before, whether pundits like it or not.

Why It Works

Why is this strategy for raising money for new ventures working so well? There is the most obvious consideration of low barriers to entry. Anyone can float them and anyone can buy them–from and to anyone in the world regardless of geography. There is a larger pool of investors that can bypass the impossibly costly and complex national regulatory machines that have gummed up capital-raising methods in conventional finance.

That the market is mostly deregulated and decentralized, and thereby more active and effective, is itself interesting. No sector is more replete with the myths of “consumer protection” than this one. It seems hard to believe, but the whole basis of the SEC’s house of horrors is that it is all necessary to protect people from rapacious capitalists.

For all I know, the regulators actually believe it.

But the big players know otherwise. The purpose of the national machinery is to protect big shots against upstart competitors. From the point of view of establishment finance, only certain people should be allowed in, with others kept out, which is precisely why there are ever fewer companies that are in the privileged position of going to the public markets at all for funding.

Nothing provides as much connection between entrepreneurs and funding as a real free market. But it has been a long time since the financial markets have been free. ICOs represent an attempt to fix the problem.

New Technology

And the solution is absolutely ingenious. It relies on decentralized markets that live on the Internet, combined with the invention of new tokens that have all the qualities of traditional money, depending entirely on supply and demand for their value, and also serve as asset titles to the protocol of the company itself. These tokens permit companies to crowdfund early operations in the same way that GoFundme, Kickstarter or Indiegogo do, but without the high cost of those platforms and the risk that your funds will be frozen by regulatory intervention.

ICOs use blockchain technology, which is a ledger system of documenting ownership claims in the cloud, creating immutable records that are not kept by a centralized source but are rather shared among all interested parties. This creates the kind of trust that is necessary for commerce but does not require the kind of trust traditional financial intermediaries insist upon for doing any business at all.

Changes in ownership rights are confirmed coming and going, and are made possible by digital units that are called tokens. But these tokens behave both like money and asset shares in the company, or, more precisely, as an expression of ownership interest,  analogous to a digital stock certificate that floats in value. Even so, they don’t entirely conform to the way any existing financial asset works today. They really do amount to something new because, well, all of this is a new invention.

I get why people are a bit alarmed about it all, same as they were by internal combustion, electricity, flight, and, in its day, fire too. All wonderful new things seem implausible and vaguely dangerous at first. As new as the tech is, however, the need it meets–to more reliably establish and document ownership claims–dates to the earliest days of the human experience itself.

Poker Chips

I said that the poker chips analogy is ridiculous. Actually, it is not entirely. Let’s just say that you really could do that, pre-sell chips to your casino and establish a way in which the value of those chips floated against existing currencies. Let me just ask straight out: what would be wrong with that? It’s not allowed now, of course, so probably it sounds crazy. But actually, in a free market, this would be permitted.

What about some dude that runs off with the money and never builds the casino? Well, you are welcome to try to get your money back if you can. But mostly, you should probably learn a lesson: don’t throw good money after bad.

It’s the same with the crypto markets. Some tokens represent brilliant ideas, but many are pump-and-dumps, troll coins, or outright scams. There is a bit of a paradox here. Scammers are entrepreneurs too, and they are like heat-seeking missiles for the latest and greatest profitable ideas. That’s why they are hanging around the crypto space.

And guess what? 100% of everyone involved in these markets knows this. Some people lose their shirts. Better luck next time. Others have become much richer, betting on brilliant platforms that are using blockchain technology to bring new standards of clarity, truth, and efficiency to all the ways we do business.

Should government be involved in regulating them to protect the consumer? If there were the slightest chance that government could do this, it might be tempting to say yes. But no regulatory structures are more prone to capture by special interests than those governing financial markets. Every bit of intervention will be used on behalf of big shots to drive out regular consumers and smaller competitors.

Laissez-Faire Now 

For this reason, government should stay completely away (and I say that knowing that my proclamation will do nothing to stop government from meddling in any case).

There are many projects underway right now that are bringing due diligence to this sector. If any market has proven itself capable of self-regulation, it is this one. It emerged spontaneously with the first release of the Bitcoin blockchain in 2009 and has developed gradually in exactly the way markets are supposed to. So too will the capacity of the sector to police itself will grow as knowledge and sophistication grow.

It’s been an inspiration to watch this sector develop from the White Paper of November 2008 all the way to the latest peer-to-peer portfolio management systems using smart contracting. It’s all happened in nine years, after a time when credibility of conventional regulators, banks, and large financial institutions was shattered during paradigm-shifting crises.

No one knows for sure where it is all headed but this much we do know: there is no going back.


Jeffrey A. Tucker


Jeffrey Tucker is Director of Content for the Foundation for Economic Education. He is also Chief Liberty Officer and founder of Liberty.me, Distinguished Honorary Member of Mises Brazil, research fellow at the Acton Institute, policy adviser of the Heartland Institute, founder of the CryptoCurrency Conference, member of the editorial board of the Molinari Review, an advisor to the blockchain application builder Factom, and author of five books, most recently Right-Wing Collectivism: The Other Threat to Liberty, with a preface by Deirdre McCloskey (FEE 2017). He has written 150 introductions to books and many thousands of articles appearing in the scholarly and popular press.

This article was originally published on FEE.org. Read the original article.

Computer Play (February 1989)

Computer Play (February 1989)

Thursday, September 21, 2017

A Carbon Tax Won’t Stop Hurricanes

A Carbon Tax Won’t Stop Hurricanes

In the midst of a severe hurricane season and the destruction wrought by Hurricanes Harvey and Irma, many people are claiming that man-made global warming has intensified rainfall and hurricanes. However, comprehensive facts show that rainfall and hurricane activity are well within the bounds of natural variation, and there is no cogent evidence that they have increased over the past century.

Moreover, the United States contains only 1.9 percent of the world’s surface area, and the earth’s climate oscillates widely over time and place. Hence, focusing on US-area hurricanes that occur within a single year easily distorts the issue of climate change.

The Claims

While Hurricane Irma was razing the Caribbean and barreling toward Florida, climate scientist David Hastings told the Washington Post, “Hurricane Harvey and Irma should resolve any doubt that climate change is real.” Likewise:
  • CNN’s Ron Brownstein reported during Hurricane Harvey, “There is no doubt that climate change, particularly because of warming the ocean waters and the gulf waters, makes storms like this more common.”
  • Meteorologist Eric Holthaus wrote in Politico that “climate change is making rainstorms everywhere worse, but particularly on the Gulf Coast.”
  • The BBC’s Laura Trevelyan stated, “Of course we do have a changing climate we do have warming waters. With more warming waters, you get more moisture coming into the atmosphere, and what hurricanes absolutely love is moisture because that gives them rainfall. And that’s what’s happened in this situation with Hurricane Harvey.”
In the same vein, FactCheck.org science writer Vanessa Schipani asserted that global warming “makes intense storms like Harvey more likely to occur.” In support of this statement, she declared that:
  • “A warmer world leads to greater moisture in the atmosphere, which leads to greater precipitation, which leads to more intense storms.”
  • A 2013 Intergovernmental Panel on Climate Change (IPCC) report “found that scientists are ‘virtually certain’ (99 to 100 percent confident) that there has been an ‘increase in the frequency and intensity of the strongest tropical cyclones since the 1970s’ in the North Atlantic Ocean.”
  • One of the “key findings” of a draft report by the U.S. Global Change Research Program is that “human activities have ‘contributed to the observed increase in hurricane activity’ in the North Atlantic Ocean since the 1970s.”
  • The same report says that “studies that have looked at this question have come up with a ‘fairly broad’ range of contributions for humans, but ‘virtually all studies identify a measurable, and generally substantial, [human] influence,’ it adds.”
The claims above paint a distorted picture of reality by ignoring the most relevant and comprehensive facts about this issue.

Global Rainfall Trends

Contrary to the notion that global warming has caused more rain, the authors of a 2015 paper in the Journal of Hydrology studied rainfall measurements “made at nearly 1,000 stations located in 114 countries” and found “no significant global precipitation change from 1850 to present.”

The paper also notes that previous studies had analyzed shorter timeframes and found rainfall changes that some people had attributed to global warming, but those results were generally not statistically significant and “not entirely surprising given that precipitation varies considerably over time scales of decades.”

Beyond total rainfall, many climate models predict that global warming will cause the rain to fall in shorter periods, and thus, with more intensity. Yet, even according to the IPCC—which has engaged in deceitful actions to exaggerate global warming—evidence for such an outcome is highly questionable:
Since 1951 there have been statistically significant increases in the number of heavy precipitation events (e.g., above the 95th percentile) in more regions than there have been statistically significant decreases, but there are strong regional and sub-regional variations in the trends. In particular, many regions present statistically non-significant or negative trends, and, where seasonal changes have been assessed, there are also variations between seasons (e.g., more consistent trends in winter than in summer in Europe).
This issue becomes even murkier when looking at the bigger picture, because apparent changes in rainfall intensity sometimes vanish when examining longer timeframes that better account for natural variations. For example, the International Journal of Climatology published a paper in 2015 about extreme rainfall in England and Wales that revealed, “Contrary to previous results based on shorter periods, no significant trends of the most intense categories are found between 1931 and 2014.”

Global Storms and Hurricanes

A “tropical cyclone” is a circular wind and low-pressure system that develops over warm oceans in the tropics. Cyclones with winds ranging from 39 to 73 miles per hour are called “tropical storms,” and those with winds exceeding 73 miles per hour are called “hurricanes.” Technically, there are different names for cyclones with hurricane-force winds in different areas of the world, but for the sake of simplicity, this article refers to them as hurricanes.

The datasets below, which were originally published in the journal Geophysical Research Letters in 2011, show that the global number and intensity of tropical storms and hurricanes have not increased over the past four decades:




Corroborating this data, the IPCC reported in 2012, “There is low confidence in any observed long-term (i.e., 40 years or more) increases in tropical cyclone activity (i.e., intensity, frequency, duration), after accounting for past changes in observing capabilities.”

In spite of these facts, a national scientific poll commissioned by Just Facts shortly before the 2016 presidential election found that 44% of Trump voters and 77% of Clinton voters believed that the global number and intensity of hurricanes and tropical storms have generally increased over the past 30 years. This sharp disconnect between reality and perception accords with a flood of global warming-related misinformation spread by the media and environmental groups.

North Atlantic Storms and Hurricanes

In the North Atlantic region, where hurricanes Harvey and Irma formed, tropical storm and hurricane activity has  significantly increased over the past four decades. However, this trend fades in the wider context of variation over the past century. As explained by the National Oceanic and Atmospheric Administration (NOAA):
No robust trends in annual numbers of tropical storms, hurricanes and major hurricanes counts have been identified over the past 100 years in the North Atlantic basin.
NOAA states that North Atlantic tropical storms show a “pronounced upward trend” since 1878, but this is because these records are “relatively sparse” in their early decades. After NOAA adjusts for the “estimated number of missing storms,” the trend in storm activity is “not significantly distinguishable from zero.” Furthermore, NOAA notes that the upward trend in the unadjusted data,
Is almost entirely due to increases in short-duration (<2 day) storms alone. Such short-lived storms were particularly likely to have been overlooked in the earlier parts of the record, as they would have had less opportunity for chance encounters with ship traffic.
With regard to the most intense storms, NOAA reports that “the reported numbers of hurricanes were sufficiently high during the 1860s-1880s that again there is no significant positive trend in numbers beginning from that era…. This is without any adjustment for ‘missing hurricanes.’”

Even more relevant to the implications of Harvey and Irma, NOAA notes that the record of North Atlantic hurricanes that reach land are “more reliable” than for the entire North Atlantic, and they “show a slight negative trend beginning from 1900 or from the late 1800s.” In other words, the most reliable data shows the opposite of what many media outlets are reporting.

NOAA emphasizes that one cannot logically assess hurricane trends based only on those that reach land because they are “much less common” than the full number of hurricanes that form at sea. This highlights the absurdity of drawing conclusions based on hurricanes that make landfall, much less hurricanes that make landfall in one region in a single year

After reviewing the data above, NOAA states, “In short, the historical Atlantic hurricane record does not provide compelling evidence for a substantial greenhouse warming-induced long-term increase.”

Similarly, the very same 2013 IPCC report cherry-picked by FactCheck.org states, “No robust trends in annual numbers of tropical storms, hurricanes and major hurricanes counts have been identified over the past 100 years in the North Atlantic basin.” This is word-for-word the same as stated by NOAA.

“Scientists Say”

Three times in her FactCheck.org article, Schipani used the phrase “scientists say” as if she were citing the universal opinion of scientists. Given the contents of her article, a longer but honest rewording of this phrase would be that “some scientists who have previously misled the public about global warming say so, but some scientists disagree.”

For example, Schipani quoted climate scientist Michael Mann—creator of the notorious hockey stick chart and inventor of a “trick” to “hide the decline“ in temperatures—as though he were an unquestionable authority. Mann claimed that global warming may have caused Hurricane Harvey to stall over Houston and drop a devastating amount of rain in this location. However, Schipani failed to inform her readers that some other climate scientists, like Roy Spencer, disagree with Mann and write:
I don’t know of any portion of global warming theory that would explain why Harvey stalled over southeast Texas. Michael Mann’s claim in The Guardian that it’s due to the jet stream being pushed farther north from global warming makes me think he doesn’t actually follow weather like those of us who have actual schooling in meteorology (my degree is a Ph.D. in Meteorology). We didn’t have a warm August in the U.S. pushing the jet stream farther north.
Similarly, Schipani uncritically cited:
  • The IPCC, whose scientists wrote an array of incriminating emails in which they said things like, “I tried hard to balance the needs of the science and the IPCC, which were not always the same.”
  • Kevin Trenberth, an IPCC lead author who participated in a press conference where he misrepresented the facts about global warming and hurricanes. As a result, Chris Landsea, a scientist who Trenberth had tasked to draft a chapter on Atlantic hurricanes for the IPCC, quit the IPCC and stated, “I personally cannot in good faith continue to contribute to a process that I view as both being motivated by pre-conceived agendas and being scientifically unsound.”
  • The U.S. Global Change Research Program, which cited a certain paper as evidence that climate change is causing more floods, while in reality the paper states, “In none of the four regions defined in this study is there strong statistical evidence for flood magnitudes increasing with increasing” greenhouse gas levels.
In Conclusion

Certain media outlets have linked Hurricanes Harvey and Irma to global warming by ignoring wide-ranging facts and cherry-picking timeframes, geographical locations, report contents, and the opinions of scientists. As explained in an academic book about analyzing data, “One of the worst abuses of analytics is to cherry pick results. Cherry pickers tout analysis findings when the results serve the purpose at hand. But, they ignore the findings when the results conflict with the original plan.”

Webster’s College Dictionary defines science as the “systematic knowledge of the physical or material world gained through observation and experimentation.” By this standard, there are no grounds to claim that global warming has increased rainfall or hurricane activity.


James Agresti


James D. Agresti is the president of Just Facts, a nonprofit institute dedicated to publishing verifiable facts about public policy.

This article was originally published on FEE.org. Read the original article.


Internet Raises $80K for Hot Dog Vendor Mugged by Government

Internet Raises $80K for Hot Dog Vendor Mugged by Government

Like all entrepreneurs, Beto Matias saw an opportunity to support his family while simultaneously creating value for his community.

Finding a prime spot right outside UC Berkeley’s football stadium, Matias began selling his craft hot dogs to willing consumers. No one complained about the quality of Matias’ hot dogs, nor did anyone have any objections to his presence outside of the stadium. But that didn’t stop the state from intervening.

Street Theft

Officer Sean Aranas approached Matias as he was going about his business and asked to see identification. Matias, in complete compliance with the officer’s demands, began sifting through his wallet in search of his identification. But this is where the story took a devastating turn.

Before Matias was given the opportunity to hand Aranas his ID, the wallet was ripped from his hands. And instead of merely examining his identification, Officer Aranas proceeded to confiscate the $60 Matias had in his wallet at the time. It was not until after this strong-arm mugging that the officer finally explained to Matias that he was being cited for failing to obtain a business permit.

Luckily, one of Matias’ customers filmed the entire encounter on his smartphone and the video has since gone viral.  

Martin Flores knew something wasn’t right when he saw the officer reach for Matias’ wallet. Thankfully, as so many of us are trained to do in the digital age, he pulled out his smartphone and immediately began documenting the encounter. And he did so just in the nick of time.

In Flores’ footage, viewers see the wallet physically taken from Matias as his hard-earned money is stolen right before his eyes. In the background, Flores can be heard saying, “That’s not right.”

Flores even took his role in the matter one step further and while filming, inquires why the officer deemed it necessary to target this innocent vendor over the loud display of public intoxication that was occurring directly across the street. The only response Aranas supplied Flores with was, “Yeah, well he doesn't have a permit. He doesn't have a permit.”

Penalized for Hard Work

To be sure, Matias never denied his lack of a business permit. But he was shocked and taken aback by Aranas’ actions. To be handed an arbitrary citation is one thing, but to have your cash simply snatched by an officer of the law is especially egregious.

Matias later told Telemundo 48:
“I had already shown him my ID. They saw that I was not doing anything wrong, neither stealing nor anything, I was just working to support my family.”
Unfortunately, this kind of thing happens every day.

The most innocuous activities now require state permission: from selling hot dogs to playing tennis. No one can economically survive without a job. And yet, for many, our government makes it impossible to do so without first running an obstacle course of red tape. For a country founded on freedom of opportunity, something has gone horribly wrong. 

In the American workforce, over 30 percent of jobs require an occupational license before an individual can legally earn a living. To make matters worse, many of these permits and licenses target those in the most vulnerable socioeconomic brackets. Not only are these licenses often expensive and require a great deal of paperwork, they are completely arbitrary.

As often as “public health and safety” is cited as justification, licensing does very little to ensure this. It doesn’t matter how well-intentioned the state may be, a permit cannot prevent food poisoning. Occupational licensing has, however, been extremely successful in limiting the number of individuals entering a given work sector. It has also helped protect established industries from unwanted competition, for example, shutting down a “rogue” hot dog vendor operating without a license.

But of the many things licensing does, protecting the consumer is most certainly, not among them.

The market has its own means of protecting consumers through feedback. Even before platforms like Yelp and Google allowed for a free flow of review culture, word of mouth has always served to help keep business owners accountable.

Additionally, consumer loyalty says a lot about a product or service. This is not the first time Matias has sold hot dogs from his cart, and his consumers keep coming back. And “shockingly” enough, no one has died or even reported any instances of foodborne illnesses.

The quality of a service speaks for itself, and this is something that cannot be obtained through a government license.

Outsourcing Justice

Stories like Matias’ occur every day in this country. Unfortunately, many victims of state abuse are never vindicated. But our digital age is changing all this.

Not only is video footage like Flores’ helping to keep law enforcement accountable for their actions, but crowdsourcing is helping to right the wrong done to Matias, something the state is unlikely to do anytime soon — or ever.

After the footage went viral, social media activists started a GoFundMe page to mitigate the financial losses felt by Matias and his family. The original fundraising goal was set at $10,000. But since the campaign’s launch on Monday morning and the continuous sharing of the footage of the encounter with the officer, over $80,000 has been raised to help cover Matias’ pay for legal fees and recoup his losses. And the donations keep pouring in.  

As for the officer involved, an online petition calling for his immediate termination has already garnered 20,000 signatures. However, the university seems apathetic to the entire incident, claiming that the officer was conducting business as usual.

A representative did make a statement saying:
We are aware of the incident. The officer was tasked with enforcing violations related to vending without a permit on campus. UCPD is looking into the matter.”
In other words, Officer Aranas was “just doing his job.” And unfortunately, the promise of the UCPD “looking into the matter,” does little to calm the fears of many Americans who are tired of having to read about these stories on a weekly basis. Even worse, are the many Americans forced to become part of this narrative as a result of bureaucratic licensing.

But fortunately, social media has acted as the arbiter of justice. And while Officer Aranas’ future in law enforcement is probably just as secure as it was before the incident occurred, at least voluntary crowdsourcing has provided the means to keep the Matias family afloat and perhaps, help him expand his venture and add even more value to his community.


Brittany Hunter


Brittany Hunter is an associate editor at FEE. Brittany studied political science at Utah Valley University with a minor in Constitutional studies.

This article was originally published on FEE.org. Read the original article.

Wednesday, September 20, 2017

Constitutional Ignorance Led to a Tyranny of the Majority

Constitutional Ignorance Led to a Tyranny of the Majority

Constitution Day—September 17—marks the anniversary of its 1787 signing. Students will be taught about it...but not because of its importance. It is now a mandatory topic for every educational institution receiving federal aid. However, what won’t be taught is the irony of that requirement, which originated from the man then-described as the Senate’s leading Constitutional scholar, while clearly conflicting with the Constitution.

In 2004, Senator Robert Byrd (D.-WV) added this requirement to a pork-filled spending bill that was blatantly inconsistent with Americans’ general welfare. It also clearly overstepped the 10th Amendment’s restriction of the federal government to only its enumerated powers.

His “solution” aside, Byrd was correct about Americans’ inadequate Constitutional knowledge. As one National Constitution Center poll concluded, only one in six of us claimed detailed knowledge of the Constitution—despite the fact that two-thirds said it was “absolutely essential” to have.

Lack of Knowledge Is a Dangerous Thing

In other words, Americans know too little about our Constitution to maintain the freedoms it was designed to protect. Instead, our ignorance leads us to sacrificing rights out of undue deference to majority rule.

America’s Constitution did not endorse majority rule. Our founders did believe in voting to select who should be entrusted with the power of government, but the more important and prior question they addressed was: “What powers do the people delegate to the federal government to exercise on their behalf?” That is why so much of the Constitution, particularly the Bill of Rights, is devoted to what the government is not allowed to do, regardless of majority sentiment. As Jefferson said, our founders fought not for democracy, but for a government “tied down from mischief by the chains of the Constitution.”

In fact, our founders had a great distrust of majority rule. Alexander Hamilton asserted that “Real liberty is not found in the extremes of democracy.” James Madison said “democracies…have ever been found incompatible with personal security or the rights of property; and have in general been as short in their lives as they have been violent in their deaths.” Thomas Jefferson warned that “an elective despotism was not the government we fought for,” and that “The majority, oppressing an individual, is guilty of a crime, abuses its strength, and by acting on the law of the strongest breaks up the foundations of society.”

That is why the Constitution contains multiple non-majority rules to protect Americans against federal abuses, such as presidential veto power and the super-majorities required to change the Constitution. Its defense is the rationale for the Supreme Court’s power to strike down unconstitutional laws, regardless of how many congressional votes they received.

“Individual rights are not subject to a public vote."

Despite our founders’ antipathy toward pure majority rule, many today feel that our founders’ opposition to unlimited democracy can be squared with political determination of everything by adding the phrase, “also protecting the rights of the minority.” However, as Ayn Rand put it, “Individual rights are not subject to a public vote; a majority has no right to vote away the rights of a minority; the political function of rights is precisely to protect minorities from oppression by majorities (and the smallest minority on earth is the individual).” Consequently, our lack of Constitutional knowledge means that believing in protecting the rights of minorities does not actually protect them when they are outvoted.

Since Americans don’t clearly understand their Constitutional rights against government abuse, the unwise habit of deference to political majorities results in those rights being steamrollered whenever more than 50% vote to do so. Examples are plentiful because—despite the Constitution’s imposition of strictly limited, enumerated federal powers—there is no area it does not now reach, if not dominate. And with our protections eroding, majority voting controls more and more of what our founders thought they had made off-limits to political determination.

Sadly, as we can’t effectively defend what we are only vaguely aware of, American inattention to the highest law of the land puts our most essential rights and liberties at risk. We may think we have inalienable rights, as the Declaration of Independence asserts. But those rights are protected by the Constitution only if we know what they are and we remember that the federal government was not granted power to take them away based on any simple majority vote. Unless we once again take our rights as seriously as our founders and vigorously defend the Constitutional safeguards that maintain them—even against majority pressures—the system of self-government our founders left us will continue to erode. But when we don’t even recognize the irony of a federal mandate to promote understanding of the Constitution, especially when it is inconsistent with the Constitution, we are unprepared to do anything to effectively preserve its protections against government abuse.


Gary M. Galles


Gary M. Galles is a professor of economics at Pepperdine University. His recent books include Faulty Premises, Faulty Policies (2014) and Apostle of Peace (2013). He is a member of the FEE Faculty Network.

This article was originally published on FEE.org. Read the original article.

Trump’s Lumber Tariffs Hurt Hurricane Recovery

Trump’s Lumber Tariffs Hurt Hurricane Recovery

As the flood waters from Hurricane Harvey dry up, the residents of affected areas are turning to the task of rebuilding their storm-ravaged communities.

Early estimates of the damage suggest they have their work cut out for them. The Texas Division of Emergency Management reports that the storm destroyed 9,407 single family homes. Another 44,013 experienced major damage. Moody's Analytics estimates that the cost of the hurricane will be in the $51–$75 billion range.

President Donald Trump has pledged $1 million of his own money to Harvey relief efforts, along with a $15 billion aid package for areas affected by the storm. But he's also pushing protectionist policies that will raise the cost of the basic building materials, making recovery a longer, more difficult, and more expensive process.

The Price of Protectionism

In April, the Trump administration imposed countervailing trade duties averaging 20 percent on imported softwood Canadian lumber, a common material in home construction. In June, he hit them again with anti-dumping duties of 6 percent.

The initial application of these tariffs aggravated consumers of Canadian lumber, says Kevin Mason, managing director of ERA Forest Products Research (a timber market analyst firm), and the damage done by the storm has only made those consumers' situation worse.

"Some people who've just gone through this devastation—they've had their house flooded or it's been destroyed," Mason says. "To the degree that they've got to go out and get lumber to do some repairs, they're going to be paying close to record high prices. And part of the reason prices are as high as they are is because of these duties."

Tariffs Are Hurting Importers

The U.S. has imposed tariffs on Canadian lumber imports periodically since the mid-1980s. What makes the latest round of tariffs unusual, Macon says, is the degree to which U.S. consumers have eaten the costs of those trade barriers.

"Historically the Canadians have had to absorb half if not the bulk of the duties," says Mason. "This time the U.S. consumer has borne the entire brunt."

According to a pricing index put out by the timber market publication Random Lengths, lumber prices hit a peak of $430 per thousand feet of board in April, the month countervailing duties were first imposed. That's 20 percent over where lumber prices were in January, and nearly 25 percent higher than where prices were in April 2016.

The increase has not gone unnoticed by builders, including those in areas affected by Hurricane Harvey.

"A lot of our distributors, and lumber companies that we deal with, were buying a lot of that imported lumber because they got a much better price, and that rolls over into the prices that we pay," says Patrick Mayhan, vice president of purchasing for the Houston-area company Westin Homes.

That dependence on cheaper Canadian lumber meant that Mayhan's company was particularly vulnerable to Trump's tariffs.

"It was a significant hike at the time. It was a 20 percent increase," he tells Reason, adding that "we had no choice but to pass that along to our retail pricing for the home. And that's a significant amount, because lumber is a big part of the cost of building a home."

Adding Insult to Injury

Increased demand from the storm would push up prices regardless. But thanks to the tariffs, that price increase is starting from an artificially inflated baseline. For some, that could be the difference between a new home and no home at all.

"Currently for each $1,000 that you tack on to the price of a new home, about 150,000 people nationwide can no longer afford homeownership," says David Logan, director of tax policy analysis for the National Association of Home Builders (NAHB). Logan says the tariffs have increased the costs of lumber for NAHB members by 15 to 20 percent, increasing the cost of a new home by some $1,700.

Zoltan van Heyningen, executive director of the pro-tariff U.S. Lumber Coalition, disputes the numbers coming from the NAHB, saying the impact of tariffs on home prices and homeownership has been overhyped.

"The impact on consumers is negligible to none. The impact on producers is life or death," he tells Reason.

But builders like Mayhan are quickly approaching the point where they cannot pass added costs onto the purchasers of homes. Though it's still too early to tell, the expected price increases coming in the wake of Hurricanes Harvey and Irma might push them past that point.

For some builders, that pressure to contain retail prices will lead them to compensate for higher lumber prices with lower profit margins. For others, particularly those operating at lower margins, reduced returns might mean forgoing new construction projects.

That's particularly true for people planning to rebuild in the aftermath of Harvey and Irma. In addition to near-record-high lumber prices, the costs of other materials—drywall, sheetrock, siding—have gone up as well.

Trump told reporters recently that the response to the recent storms is "gonna cost a lot of money." Without his tariffs on imported lumber, the cost could be considerably less.

Reprinted from Reason


Christian Britschgi


Christian Britschgi is a reporter for Arizona Watchdog.

This article was originally published on FEE.org. Read the original article.

Tuesday, September 19, 2017

Government Run Amok at the Bureau of Alcohol, Tobacco, and Firearms

Government Run Amok at the Bureau of Alcohol, Tobacco, and Firearms

 

The Bureau of Alcohol, Tobacco, and Firearms (BATF) must be anxious to get on my list of government bureaucracies that shouldn’t exist.

The bureaucrats have engaged in some really silly and petty behavior (such as confiscating Airsoft toy guns because they might be machine guns), and they’ve engaged in some behavior that is criminally stupid and dangerous (running guns to Mexican drug gangs as part of the “Fast and Furious” fiasco).

If It's Not One Thing, It's Another

Now we have another example. Though it’s so bizarre that I’m not sure how to classify it. Basically, the bureaucrats created an illegal slush fund, and then used the money illegally.

The New York Times has been on top of this story. Here are excerpts from the latest report.
For seven years, agents at the Bureau of Alcohol, Tobacco, Firearms and Explosives followed an unwritten policy: If you needed to buy something for one of your cases, do not bother asking Washington. Talk to agents in Bristol, Va., who controlled a multimillion-dollar account unrestricted by Congress or the bureaucracy. …thousands of pages of newly unsealed records reveal a widespread scheme — a highly unorthodox merger of an undercover law enforcement operation and a legitimate business. What began as a way to catch black-market cigarette dealers quickly transformed into a nearly untraceable A.T.F. slush fund that agents from around the country could tap. …One agent steered hundreds of thousands of dollars in real estate, electronics and money to his church and his children’s sports teams, records show. …At least tens of millions of dollars moved through the account before it was shut down in 2013, but no one can say for sure how much. The government never tracked it.
Oh, by the way, the BATF was breaking the law.
Federal law prohibits mixing government and private money. The A.T.F. now acknowledges it can point to no legal justification for the scheme.
But you won’t be surprised to learn that there have been no consequences.
…no one was ever prosecuted, Congress was only recently notified, and the Justice Department tried for years to keep the records secret.
And it’s also worth noting that this is also a tax issue. As I’ve noted before, high tax rates encourage illegality.
Though cigarettes are available at any corner store, they are extraordinarily profitable to smuggle. That’s because taxes are high and every state sets its own rates. Virginia charges $3 per carton. New York charges $43.50. The simplest scheme — buying cigarettes in Virginia and selling them tax-free in New York — can generate tens of thousands of dollars in illicit cash. By some estimates, more than half of New York’s cigarettes come from the black market.
By the way, I can't help but wonder why the federal government is engaging in all sorts of dodgy behavior to help enforce bad state tax laws. Yes, I realize the cigarettes are crossing state lines, but so what? The illegal (but not immoral) behavior occurs when an untaxed cigarette is sold inside the borders of, say, New York. Why should Washington get involved?

In other words, I like the fact that borders limit the power of government. It’s why I don’t like global schemes to undermine tax competition (why should Swiss banks be required to enforce bad U.S. tax law?), and it’s why I don’t like the so-called Marketplace Fairness Act (why should merchants in one state be required to enforce the sales taxes of other states?).

But I’m digressing.

Let’s get back to the Bureau’s misbehavior. Here’s some additional reporting from the U.K.-based Times.
A US government crime-fighting agency ran a secret bank account that its employees used to buy luxury cars, property and trips to casinos. Officers for the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF), charged with investigating smuggling and gun crimes, built up a slush fund worth tens of millions of dollars through illicit cigarette sales, ostensibly as part of an operation to catch traffickers. The scandal is the latest controversy to hit the agency, which has been criticised in recent years for lack of accountability and allowing the flow of guns and drugs to go unchecked. …Cash from the slush fund generated at an ATF field office in Bristol, Virginia, …funded activities such as a trip to Las Vegas, donations to agents’ children and the booking of a $21,000 suite at a Nascar race.
But That's Not All

And what about the overall BATF bureaucracy? Well, it’s getting some unfavorable attention. Keep in mind that this scandal is on top of the “Fast and Furious” scandal of the Obama years.
The ATF has said that it has “implemented substantial enhancements to its policies, and has markedly improved leadership, training, communication, accountability and operational oversight”. Under the previous administration, it was widely derided for a botched weapons operation known as “Fast and Furious”. The agency allowed licensed firearms dealers to sell weapons to illegal buyers, hoping to track the guns to Mexican drug cartel kingpins. But out of the 2,000 firearms sold, only a fraction have been traced. The secret account scandal has renewed calls from across the political spectrum for the department of about 2,000 agents to be reformed or shut down.
Last but not least, I think we have a new member of the Bureaucrat Hall of Fame.
Thomas Lesnak, a senior ATF investigator, began the scheme. …Mr Lesnak retired with his pension and was not reprimanded.
Just like Lois Lerner and the IRS, engaging in corrupt and crooked behavior and then escaping any punishment.

Maybe the two of them should hook up? They’d make a great couple. I’m sure they could even figure out a way to make taxpayers finance their wedding and honeymoon.

P.S. The “Fast and Furious” scheme was just one of the scandals that occurred during the Obama years, but it may have been the most foolish. Didn’t anybody at the BATF realize that it wasn’t a good idea to funnel weapons to Mexican drug gangs?!?

P.P.S. The silver lining to that dark cloud is that we got a couple of good one-liners about the Obama Administration’s gun-running scandal from Jay Leno and Jimmy Fallon.

Reprinted from Intentional Liberty


Daniel J. Mitchell


Daniel J. Mitchell is a Washington-based economist who specializes in fiscal policy, particularly tax reform, international tax competition, and the economic burden of government spending. He also serves on the editorial board of the Cayman Financial Review.

This article was originally published on FEE.org. Read the original article.