What Is Seen and What Is Not Seen

“Suppose you were an idiot, and suppose you were a member of Congress; but I repeat myself.” — Mark Twain

The great French economist Frederic Bastiat observed that “In the economic sphere an act, a habit, an institution, a law produces not only one effect, but a series of effects. Of these effects, the first alone is immediate; it appears simultaneously with its cause; it is seen. The other effects emerge only subsequently; they are not seen; we are fortunate if we foresee them.

“There is only one difference between a bad economist and a good one: the bad economist confines himself to the visible effect; the good economist takes into account both the effect that can be seen and those effects that must be foreseen.”

The same is true in the sphere of public policy. The bad economist or the thoughtless politician (but I repeat myself) sees only the direct effect of a law; he doesn’t foresee the indirect effects. In many cases the politician may consider only the short-term effects that might help him win the next election; he may not consider at all the long-term effects.

Bastiat noted that “it almost always happens that when the immediate consequence is favorable, the later consequences are disastrous, and vice versa.” So when a politician urges a great new solution to some problem – or typically, the same old ineffective solution to a problem – the long-term result very often is more harm than good.

One such example was alcohol Prohibition almost 100 years ago. The problem of alcohol may have been bad, but Prohibition made the problem much worse, to the point that Prohibition was later repealed. Another example was a luxury tax on yachts to “soak the rich”. Even a mediocre economist or a slightly thoughtful politician could have foreseen the disaster it turned out to be. The tax collected virtually nothing from the rich but did send many blue collar boat builders to the unemployment line. Two years later Congress repealed the law.

With the greatest intentions of reducing poverty, politicians have enacted policies that, in the short-term, help people survive one month until the next government check, but the unseen long-term effect is to trap people in poverty, sometimes for generations. If we truly care about helping people – and I think most of us do – then wouldn’t it be better to find long-term solutions that help people escape poverty?

As long ago as the 1980s, better economists and more thoughtful politicians saw the indirect effects of the welfare system – it “fostered a permanent underclass dependent on government handouts.” In 1996, a Republican Congress and Democrat President Clinton passed welfare reform with the goal of reducing the dependency trap and helping people escape poverty. Ten years later, The New Republic, a liberal magazine, looked back and editorialized that the reform “worked much as its designers had hoped [foreseen].” Since then, less thoughtful politicians seeing only the easily visible effects of welfare, and not seeing the long-term consequences, have undone most of the successful reform.

Our disability system likewise helps disabled people survive month-to-month but traps them in poverty. Wouldn’t it be better to find long-term solutions, using some amazing modern technology to help them overcome their disabilities, become productive, and no longer trapped in poverty?

Some short-sighted politicians want to extend the length of unemployment benefits beyond 26 months, but the long-term effect can be permanent unemployment. Studies have found that someone unemployed for more than six months has very little chance of ever getting a job.

Other bad economists and thoughtless politicians suggest raising the minimum wage. The immediate effect would be to slightly raise the pay for a small number of people – but cause others to lose their jobs. The long-term consequence would be to destroy many more entry-level jobs, making it harder and harder for teenagers to enter the work force.

When was the last time you saw a full-service gas station? That used to be a good first job for many young kids. Washing dishes was another good first job. Kids learned the self-discipline of showing up on time every time. While on the job they often picked up skills from the auto mechanics or cooks around them. But as the minimum wage rose, machines replaced those jobs. If it continues to rise, we will see machines taking orders for fast food, flipping burgers, and delivering the goods. The long-term effect of raising the minimum wage is disastrous for millions of young people.

Some politicians saw ObamaCare as a good idea; they did not foresee the terrible consequences. Today, some people think we will see good effects if we adopt the ObamaCare expansion of Medicaid. Not only do they fail to see the indirect, long-term terrible effects, they don’t even see the bad effects that have already occurred elsewhere. To put it simply, Medicaid is an inefficient, incredibly expensive program that provides even worse health outcomes than for people who are uninsured. Expanding it would cost even more than now predicted and would lead to much higher taxes.

To achieve better results – better economy, more good jobs, higher pay, less poverty, lower cost health care – we need to see not just the immediate effects of a policy, but to foresee the long-term effects.

Is this where food stamps should go?

A woman called to check her food stamp balance. It was about $400 because she didn’t know she was still getting benefits. She tweeted that she “might let them build up and sell them.” After all, she has a cable bill of $140 to pay.

She has an iPhone (how much does that cost per month?), WiFi, and “needs to smoke me a joint” so she is going to call her “weed man.”

Her air conditioner is cranked up high “It’s soooo cold in my house. Everybody keep telling me to turn the AC off.”

She has money to spend at Hooters, IHOP, and TGIF Fridays. “I needed to take myself out. I had a rough week.” She is going to buy a new iPad for her mother.

All this we know via her Tweets. What more don’t we know about this food stamp recipient?

The Declaration of Dependence

We hold these truths to be self-evident, that all people should be made equal, that they are endowed by their government with certain unalienable Rights, that among these are jobs, healthcare and housing.–That to secure these rights, Governments must rule over the people, deriving their just powers from the consent of the elite, –That whenever the people becomes destructive of these ends, it is the Right of the Elite to alter or to abolish it, and to institute more Government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect the power and control of the elite. …We, therefore, the Representatives of the political elite, in faculty lounges, Assembled, appealing to the United Nations for the rectitude of our intentions, do, in the Name, and by Authority of government, solemnly publish and declare, That the American people ought to be governed by the United Nations; that they are Absolved from all Allegiance to the Constitution, and that all political connection between them and the Founding Fathers, is and ought to be totally dissolved; and that as highly-taxed and dependent States, they have full Power to levy taxes, disrupt Peace, contract new departments and agencies, regulate Commerce, and to do all other Acts and Things which the political elite may of right do. And for the support of this Declaration, with a firm reliance on the protection of the establishment media, we mutually demand your Lives, your Fortunes and your sacred Honor.

Via the great Dan Mitchell.

Life among the “less privileged”

A Cadillac-driving OUI suspect — charged with running a Boston Globe delivery truck off Interstate 93 and onto the Leverett Connector — was carrying three EBT cards, mocked a cop ‘for paying for food when she gets it for free’ and threatened to put a voodoo curse on him, according to a police report.

via Instapundit.com

Government Motors Is Alive And Detroit Is Dead

The fundamental transformation of Detroit is complete, as socialism’s theme park succumbs to government run amok, a reminder that government isn’t the solution to our problems but their cause.

Detroit’s response to a declining business climate was more taxes, fewer city services and bloated pensions for workers in the only growth area — government.

In the face of government incompetence, it was the people of Detroit who went on strike. More than a million people moved out.

Detroit is the rotten fruit of uncontested progressive socialism. In 1960, Detroit had the highest per capita income in the U.S.; today, it’s the poorest of our large cities.

— from Investor’s Business Daily

Who said this?

“Many European countries are witnessing a rise of [the] dependency mentality when not working is often much more beneficial than working. This type of mentality endangers not only the economy but also the moral basics of the society. It is not a secret that many citizens of less developed countries come to Europe intentionally to live on social welfare.”

Post your guesses in the comments. I won’t answer for a while.

Second question: Is U.S. headed to a similar condition?

Collapse of a mindset

The twilight of entitlement” is Robert Samuelson’s interesting piece about the collapse of an entitlement mindset. He suggests that we are seeing the demise of a set of expectations about our country:

We had a grand vision. We didn’t merely expect things to get better. We expected all social problems to be solved. We expected business cycles, economic insecurity, poverty, and racism to end. We expected almost limitless personal freedom and self-fulfillment.

Now he says, “65 percent of respondents said today’s middle class has less job and financial security than their parents’ generation. … Poverty is stubborn. Many schools seem inadequate.”

When even a liberal columnist finally understands that the entitlement society must eventually end, there is reason to believe that politicians will eventually realize the same. What cannot continue forever must eventually stop.