Month: September 2014

On September 1, 1939, Nazi Germany began World War II when it
invaded Poland. Two days later – exactly 75 years ago today –
Britain and France responded, honoring their commitment to protect
Poland’s border, by declaring war on Germany.

U.K. Prime Minister Neville Chamberlain, who had attempted
appeasement to avoid war, stated:

This is a sad day for all of us, and to none is it sadder than
to me. Everything that I have worked for, everything that I have
believed in during my public life, has crashed into ruins. There is
only one thing left for me to do: That is, to devote what strength
and powers I have to forwarding the victory of the cause for which
we have to sacrifice so much… I trust I may live to see the day
when Hitlerism has been destroyed and a liberated Europe has been
re-established.

Watch his declaration of war:

At this point, Germany had already incorporated Austria and
seized key military defense positions from Czechoslovakia.
 

Two weeks after Britain’s and France’s declarations, the Soviet
Union, which had made secret agreements with Germany, invaded
Poland.

The United States was very hesitant to join the Britain.
Congress passed legislation to
ensure neutrality, and even in 1940, as many as
80 percent of Americans polled opposed intervention. Not until
December 8, 1941, the day after the Pearl Harbor attack did
President Franklin Roosevelt declare war on Japan. Three days
later, Roosevelt declared war on Germany and Italy. The latter two
received unanimous approval from the House and Senate. The
declaration against Japan was opposed only by pacifist Republican
Jeannette Rankin, the first woman elected to Congress.
Not since has the United States formally declared war before
engaging in military action.

Heads up, everybody. I’ll be talking about the sorry state of
public employee pensions in states like California and Illinois on
KABC, Talk Radio 790 at 11:30 a.m. Pacific time on The Bryan
Suits Show. His show’s site
is here.

Prime yourself with recent news about the failing efforts to
reform pensions before they completely consume state and municipal
budgets
here and
here.

At a

Republican Liberty Caucus event in Dallas last Friday, Rand
Paul argued that the GOP can expand its appeal without forsaking
conservative principles by supporting criminal justice reform,
including a less punitive approach to drugs:

How do we grow a movement big enough to win nationally? It’s
some of the libertarian ideas that bring the right and left
together. Our way is eventually to get a bigger party, because we
need to become a bigger party if we want any chance of winning
nationally….

There is a third [of voters] that is hardened on either side,
and there’s the third in the middle. I think, frankly, some of the
third in the middle would like to see more criminal justice reform
and a less harsh war on drugs. They acknowledge that the war on
drugs has had a racial outcome.

The Kentucky senator, who has introduced
legislation that would effectively abolish federal mandatory
minimum sentences (by letting judges ignore them in the interest of
justice), said he is trying to “make the penalties for mostly
nonviolent drug [offenses] less severe”: 

Basically, don’t put people into jail for 10, 15 years. Let them
get back to work, let them expunge their records if they’ve served
their time, because if you don’t let people get back to work and
voting and all of the normal things you can do when you’re out of
prison, what is the likelihood that they go back to prison for the
same thing again? Some will say that’s a liberal idea. Well,
actually it’s a very conservative idea also. Prisons are very, very
expensive….You want prisons that separate out people who are a
danger to others. People who use drugs are a danger to themselves,
and we can argue what the penalty should be, but it shouldn’t be 10
or 15 years in jail….A lot of us are Christians, and we believe
in redemption and second chances.

Paul is fudging a bit when he makes it sound as if people
commonly serve 10 or 15 years merely for using drugs, although his
rhetoric on the subject is more sophisticated than it was a couple
of years ago, when he
referred to people “in jail for 20 years” for “smoking pot.” In
any case, it is clear from his passionate
criticism of mandatory minimums that his concerns about
excessive penalties extend to drug suppliers as well as drug users.
 

Paul also has talked about
shifting drug policy toward the states, which he says
should be free to legalize marijuana, although he does not
endorse that policy. Consistent with that position, he has
backed legislation aimed at preventing federal interference
with state laws allowing medical use of marijuana. This federalist
approach may help conservatives reconcile themselves to the idea
that somebody, somewhere is smoking pot he bought at a
state-licensed store. But if fully applied, it is tantamount to
repealing national prohibition. That is what the 21st Amendment
did, leaving alcohol policy to the states.

The radical implications of Paul’s federalism extend far beyond
drug policy, as became apparent toward the end of the Q&A
session in Dallas, when he was asked, “How can a transformative
presidency restore federalism?” His reply:

Well, you could obey Article 1, Section 8, which gives the
powers to the Congress. There’s about, depending on how you count
them, 17 or 19. Everything else should go back to the states. There
shouldn’t be a Department of Education. It should all be done in
Texas, all done in Tennessee, in Kentucky. You don’t need most of
these federal departments….

Randy Barnett writes a lot about the Ninth and
10th amendments, where we’ve ignored both of them. The powers
that were given were specific and limited….The opposite side of
that is that the rights you have are numerous, infinite, and not
defined.

You could interpret the reference to Barnett, the Georgetown law
professor who wrote
Restoring the Lost Constitution: The Presumption of
Liberty, as a signal of reassurance to libertarians
disappointed by Paul’s ideological impurity. But to me it
seems like another example of the intellectual candor that
occasionally gets Paul into trouble (as it did when he expressed
reservations about the Civil Rights Act). It is one of his more
appealing qualities. Whether it amounts to anything in practice is
another question. 

The Federal Reserve Bank of St. Louis wants to
know where in hell all of the money injected into the system in
recent years by the Fed has gone. Common assumptions say it was
supposed to be a shot of Vitamin B in the nation’s ass—the
country’s Gross Domestic Product should be floating upwards on the
tidal wave of dollars, with inflation soaring along. But that’s not
happening. The reason,
conclude Yi Wen, Assistant Vice President and Economist, and Maria
A. Arias, Research Associate, “lies in the private sector’s
dramatic increase in their willingness to hoard money instead of
spend it.”

Could be. Maybe all of the money is sitting in duffel bags under
the bed. Or maybe other economists are right that money is
pouring into a vast shadow economy that runs parallel to the
official one, but out of reach of regulators and tax
collectors.

What has the Federal Reserve analysts fascinated is that dollars
just aren’t running through the system the way they used to.
“During the first and second quarters of 2014, the velocity of the
monetary base was at 4.4, its slowest pace on record. This means
that every dollar in the monetary base was spent only 4.4 times in
the economy during the past year, down from 17.2 just prior to the
recession.”

If old assumptions held for the circulation of money, “inflation
in the U.S. should have been about 31 percent per year between 2008
and 2013.” Instead, it was less than 2 percent by official
measures. Damned good thing, too, unless you really dig
wheelbarrows.

That’s because, say the authors, interest rates are so damned
low as a result of Fed policy, and the economy so sluggish, that
people are just sitting on cash instead of spending or investing
it.

Just sitting on money?

Maybe. But another explanation was put forward by the economist
Edward Feige, who
argued recently that a lot more cash than
traditionally assumed is circulating domestically. Where others
estimated that half or more of all U.S. currency flows overseas, he
said 75 percent or so is actually at home.

Again, is it just sitting there because of low interest rates
and economic doldrums?

Nope. Feige estimates
that, in 2009, “18-23% of total reportable income may not properly
be reported to the IRS.” That missing $2 trillion or so makes for a
rather lower income tax compliance rate than the official 83.1
percent
estimated by the IRS.

Which is to say, according to Feige, the money isn’t being
hoarded (although some is certainly stashed for a rainy day), but
it’s being channeled into the
shadow economy of otherwise legal goods and services to

escape taxes and regulations. Much of it probably flows to
outright illegal black market activities, too. But the huge
increase in cash in private hands suggests less in the way of
massively increased demand for hookers and blow than it does a
growing parallel economy.

The Federal Reserve economists don’t go there. But their
questions about where all that money has gone are very interesting.
And it makes more sense that it’s being put to some sort of so far
untracked use than that it’s all just gathering dust.

William Langewiesche is one of the most admired
and honored journalists at work today. He writes for Vanity
Fair and, as his Wikipedia
page notes, “he was the national correspondent for The
Atlantic Monthly magazine where he was nominated for
eight consecutive National Magazine Awards” (he won two).

Yet as Miami Herald scribe (and Reason
contributor)
Glenn Garvin notes, Langewiesche is not above pulling fast ones
on the people he writes about. Garvin makes a strong case that this
sort of thing seriously undermines the media’s credibility.

In 2007, Langewiesche produced
a feature story about the oil company Chevron and its dealings
in Ecuador. Eventually, a lawyer named Steven Donziger won a court
case against Chevron in Ecuador. The company sued in New York to
keep U.S. courts from enforcing the award and as part of the trial,
huge amounts of emails were submitted into the record. Garvin picks
up the story:

Four years into the lawsuit, Donziger scored a public-relations
coup when he convinced the magazine Vanity Fair to do a long story
about the case. (Department of Extraordinary Coincidences:
Donziger’s wife at the time worked in corporate communications at
Condé Nast, the magazine’s publisher.)

Vanity Fair assigned the story to one of its best writers, the
award-winning William Langewiesche. The piece he produced was
extraordinarily sympathetic to the lawsuit, so much so that
Donziger himself proclaimed it “the kind of paradigm-shifting,
breakthrough article that I think is going to change the entire
case from here until it ends in a way that is favorable to us.”

And no wonder! The emails between Donziger and Langewiesche in
early 2007, as the story was being prepared, show Langewiesche as
Donziger’s camp follower at the best of times, his sock-puppet at
the worst.

The reporter asks Donziger to prepare lists of dozens of
questions to be asked of Chevron. And he begs Donziger to help him
prepare arguments about why there’s no need for him to do
face-to-face interviews with Chevron officials, as they’ve
requested, even though he spent days meeting with Donziger and his
legal staff.

“I want to avoid a meeting, simply because I do NOT have the
time. But I don’t want to go on record refusing a meeting,” writes
Langewiesche. “Perhaps I could say that my travel schedule is
intense…” He not only submits his emails to Chevron for
Donziger’s approval (“What say, Steve. I gotta send this tonight”)
and even lets him rewrite them. “Let me know if this works,”
Donziger says in a note returning one of them. “I was a little
aggressive in the editing.”

Garvin continues:

Not surprisingly, Langewiesche‘s story included some errors,
most whoppingly the assertion that it would cost $6 billion to
clean up all the pollution around oil-drilling sites in the
Amazon.

That estimate originally came from one of Donziger’s hired
experts. But the man had repudiated it a full year before the
Vanity Fair story appeared, warning Donziger in a letter that the
estimate was based on faulty assumptions and was “a ticking time
bomb which will come back to bite you, and very badly, if anyone
attempts due diligence on it.”

Garvin writes that he emailed Langewiesche asking for a response
but didn’t get a reply.

Note that Garvin isn’t making the case for some sort of
namby-pamby, both-sides-should-get-equal-treatment sort of
journalism. He’s pointing out that advocacy journalism that
masquerades as something approaching objective accounting should be
outed as such. Anyone reading through Garvin’s published work will
note that he’s got a point of view (in spades) but that doesn’t
preclude him from presenting all sides fairly. Not as morally
equivalent, but fairly. If a journalist becomes a partisan, I don’t
see anything wrong with that per se, though it often kills the sort
of critical edge that makes for good writing. But if you go
partisan and don’t cop to it, that crosses a line that readers
should know about.

Read Garvin’s Reason archive
here.