NJ's Budget Crisis Deeper than an "Activist" Court

Steven Malanga has a very good article in City Journal about New Jersey's budget woes and its link to state Supreme Court rulings. In The Court That Broke Jersey, Malanga cites the New Jersey Supreme Court as an "institution that bears much of the responsibility for the state’s fiscal woes." Malanga writes:

For half a century now, New Jersey has been home to the most activist state appellate court in America. Lauded by proponents of “living” constitutions who urge courts to make policy instead of interpret the law as written, the New Jersey Supreme Court has profoundly transformed the Garden State by seizing control of school funding, hijacking zoning powers from towns and cities to increase subsidized housing, and nullifying taxpayer protections in the state constitution. Its undemocratic actions have blown apart the state’s finances and led to ill-conceived and ineffective policies. If you want to understand what rule by liberal judges looks like on the state level, you need only look at New Jersey, which is teetering on bankruptcy though it remains one of America’s wealthiest states.

Malanga goes on to discuss these three areas of court intrusion that he argues it doesn't belong. But as I have argued before, one must drill down deeper to understand reasons for the court's actions. I've left the following comments:

Mike LaFerrara February 15, 2012 at 10:45 PM

The “living constitution” doctrine has long been a tool of statists for making an end run around the Founding principles that center on individual rights. But there is more to it than that.

Mr. Malanga states that “In short, the Supreme Court seized power in education policy.”

No, it didn’t. I argue that the NJ State constitution’s “thorough and efficient” clause, enacted through the “democratic” process, empowered the court. All it took was a savvy former governor to recognize and exercise it.

That clause dates back to 1873. Hughes understood its meaning and discovered how to use it. Article VIII, section 4 empowers the courts, which must uphold the constitution. As I understand it, that clause gives the court the reigns over the legislature in one way or another.

In fact, in its educational rulings, the court actually did “interpret the law as written.” The state constitution reads: “The legislature shall provide for the maintenance and support of a thorough and efficient system of free public schools…” What if it doesn’t, according to the justices’ interpretation of that vague clause? The state is then in violation of constitutional law. The court is now faced with an impossible dilemma. It must either neglect its duty to uphold the constitution, or usurp the proper function of another branch of government.

The elephant in the room that few seem to want to confront is that the only solution to the court’s “massive redistribution of wealth” is to get rid of the constitutional mandate for state provision of the schools. It’s a daunting task, to be sure. But to find the philosophical unpinning for repeal, look no further than America’s Founding principles. The proper purpose of government is not to provide an education (or any material product or service, which by definition requires the redistribution of wealth). It is to protect individual rights, which includes the rights of parents to educate their children with their own resources as they see fit. Government-run schools violate everyone’s rights in two ways: They force people to pay for the education of other people’s children, and they put government in charge of what is taught, how it is taught, and who should pay for it.

The courts affordable housing mandates are also rooted in the violation of individual rights; the extraordinary powers of local zoning boards over private land use. For decades, town zoning boards routinely practiced “exclusionary” zoning, violating the rights of property owners, developers, and housing consumers to contract freely and voluntarily.

In 1970, Mount Laurel zoning ordinances forbade the African Methodist Episcopalian church from building a 36 unit apartment complex in the town. The state Supreme Court saw exclusionary zoning (which it was), and issued the decision that led to COAH. In doing so, it correctly identified the problem – local zoning regulations – but then proceeded to compound rather than solve the problem. The question that should have been asked and answered was: Why should any central planning authority have the power to stop the African Methodist Episcopalian congregation, or any property owner, from building what they please on their own land? The issue is not who should impose housing quotas, but the legitimacy of zoning powers as such.

If the court had used individual rights rather than the vague “general welfare of the Jersey population” as the standard, it could have arrived at the correct decision; to reign in the zoning boards, and restrict them to protecting everyone’s individual rights, including mediating legitimate disputes between developers and local residents, rather than dictate private property usage. Instead, the court granted override powers to the state to correct what it considered local zoning abuses. This simply shifted central planning abuses to the state level. Instead, it should have overturned those powers at the local level, thus liberating the housing market.

There are few problems that can’t be solved by returning to America’s Founding principles of individual rights and limited, rights-protecting government.

For more on this topic, see my previous posts:

Christie's "War on the Court"

New Jersey's Constitutional Roadblock to Reform


COAH, Mt. Laurel, and Fines For Disaster Victims in New Jersey

NJ's "Affordable Housing Crisis" - It's the Zoning, Stupid!

An Unconscionable Assault on the Sick

What would you call a man who would block a dieing person from receiving a life-giving medical treatment because a healthy person might profit from being that sick person's benefactor? You would call that man President Barack Obama.

Learn the dispicable truth in my latest post at The Objective Standard Blog: Obama’s “Cruel Disregard” for the Sick—and the Well

Time to Minimize "Macroeconomics"

I remember when, in 1981, the stock market fell sharply immediately following passage of President Ronald Reagan’s tax cut package. When asked what he thought about Wall Street’s plunge, Reagan quipped, "I have never found Wall Street to be a source of good economic advice." I’d say the same thing about many of today’s economists. Why? In part because too many rely on a form of pseudo-economics, which we call "macroeconomics".

Macroeconomics is defined by Investopedia as follows:

The field of economics that studies the behavior of the aggregate economy.
Macroeconomics examines economy-wide phenomena such as changes in unemployment,
national income, rate of growth, gross domestic product, inflation and price
levels.

Macroeconomics is focused on the movement and trends in the economy
as a whole, while in microeconomics the focus is placed on factors that affect
the decisions made by firms and individuals. The factors that are studied by
macro and micro will often influence each other, such as the current level of
unemployment in the economy as a whole will affect the supply of workers which
an oil company can hire from, for example. [Investopedia]

"Put … simply, the whole idea of macroeconomics is a fraud." – Steve Forbes

Amen! But it’s worse than a fraud. As Forbes points out, macroeconomics "has been a critical enabler for the obese growth of Big Government"; in other words, statism. It has served as a rationalization for government central planners to "do something" to correct real or imagined problems – imposed on us with our wealth through taxing and government spending, and at the expense of our freedom.

The economics profession has been corrupted by the absurdity called macroeconomics – the study of the economy "as a whole"; i.e., without focussing on actual human beings. In the definition cited above, notice the statement: "The factors that are studied by macro and micro will often influence each other." Often? When does the micro – "decisions made by firms and individuals" - not "influence" the "the economy as a whole?" When you cut through all of the political rhetoric and rationalizations, it all boils down to a very simple answer; whenever the policymakers feel like it. The "not" is the opening wedge of the fraud. The separation of the macro from the micro – i.e., the forest from the trees, meaning of the economy from the people – leads to the disconnect of economic policy from economic reality. With no connection to reality – i.e., any rational, objective standard – politicians are free to offer up any rationalization for their economic policies their whims – and their power-lust - dictate.

Just what is the "whole" as apart from individual firms and people?

The economy is not some disembodied entity that can be studied in an abstract statistical vacuum. Statistics may give you a lead, but they are rarely definitive, and should never be the primary basis for government policy.

Fundamentally, the economy is the production and trade engaged in by single, autonomous individuals thinking, acting, and interacting with each other, each in pursuit of some goal of his own. Consumption is the final result of this process. The economy begins with production. The fundamental source of production is thinking; human reason. Productive work, the next step, is the application of reason to physical labor, which leads to the creation of valuable products that can be traded for the products produced in the same manner by other human beings. Underneath all of the complexities of a modern economy is this basic process. All of it is long-term oriented; i.e., a process of planning ahead. The more complex the productive process, the more long-term the thinking is and must be. Money doesn’t alter this process. It merely facilitates it – and, unfortunately, serves to camouflage its nature. Without the productive process, there can be no money.

Modern macroeconomics ignores this whole process, and zeros in on statistics. For example, it measures economic activity not in terms of wealth production but in terms of money changing hands, which are not synonymous. Then you get such idiocy as the accepted "wisdom" that consumer spending is 70% of the economy, as if you can consume twice as much as you produce. You get nonsense like the idea that destruction – war, natural disaster, etc – "spurs" economic growth because of the rebuilding that follows, evading the fact that the rebuilding entails resources diverted from the production of new wealth toward the replacing of the previously existing. Plenty of money changed hands, but on balance no new wealth was added. But based only upon statistics, the GDP would have grown.

Under macroeconomic premises, you get meaningless phrases like "aggregate demand" and "deficiency of demand" and simplistic plans to "stimulate" that demand, ignoring the only true source of "consumer demand" – the consumer’s own productive work. You get quick fixes like temporary tax credits to entice a businessman - who thinks years ahead - to hire someone now. You get "to add or keep 275,000 jobs" for $447 billion, according to projections for Obama’s latest stimulus proposal; $1,625,455 per job, paid for by a fortune sucked out of the real private economy. That's a big bump in GDP, but a drag on the real economy. You get nonsensical ideas such as that the government can "jump-start the economy" by forcibly transferring money from some people to others. These policies may appear to "work" because of the vast amounts of money changing hands, evading the fact that wealth has merely been transferred from more productive activities to less productive political favorites, hurting the economy - and violating the rights of those whose wealth was taken, to boot.

There is an old saying: Never lose sight of the forest for the trees. There is nothing wrong with incorporating a macro view of the economy, as a part of economic study. But the corollary - never lose sight of the trees for the forest – is the more crucial flip side of the economics coin. The economy doesn’t exist independent of the productive interactions of actual people. Otherwise, we might as well program the Mars rovers to study the Martian economy. Absurd as that sounds, the essential premise of modern macroeconomics, which originated with the theories of John Meynard Keynes and others, is just that; an economy floating above the reality of actual people.

Washington’s most recent stimulus package - President Obama’s second and the fourth since the arrival of the Great Recession in 2007 – has stalled in congress. Counting such smaller idiocies as Cash-for-Clunkers and temporary subsidies for homebuyers, we’ve lost count. The idea was to increase consumer demand, and thus create jobs. Create jobs? We’ve been reduced to hearing our president brag – with a straight face - about how many jobs were saved! I’ve coined the term "OBushonomics" to describe the policies of the past four-plus years. (Although the modern concept behind the Bush and Obama administrations’ policies goes back to the 1930s, the basic theory of consumption-based economics dates back to 17th century mercantilism. See George Reisman at Mises Daily.

To understand why OBushonomics stimulus # 4 won’t "work" any more than the other 3, the fog of two false premises must be cleared away; the primitive collectivist notion that all wealth belongs to the tribe (society), to be doled out by the tribal chiefs (the government), and the fraudulent obscenity of "macroeconomics", which encompasses the first. Both premises ignore the real source of economic vitality - actual, individual human beings.

Want to know if a particular idea will "work"? Relate it to actual individual people.

If I robbed a convenience store, and used the cash to buy a car, I have created autoworkers’ jobs – on the government stimulus premise. Obama’s latest "jobs" bill is that on a national scale, and nothing more. Only the foggy mind of a collectivist or a macroeconomist can evade its nature. But, as a famous philosopher once said, "You can avoid reality, but you cannot avoid the consequences of avoiding reality." The consequences of robbing some people to employ someone else is immoral and non-productive, and thus spiritually and economically destructive.

Real jobs are those that result from voluntary interactions of thinking productive people. An individual starts a business – he has created a job for himself. He draws customers who voluntarily buy his work product, he pays his suppliers and other costs, and he makes money in the only valid honorable sense: He created value. If he is successful, more and more people desire his product, and he reaches the point when his intellectual energy and ambition exceeds his physical capacity alone to meet his customers’ "demand." He then hires one or more people who voluntarily agree to help him, at mutually agreed-upon wages – he has created jobs for others, who become customers for other businesses created in the same manner. All through the process, voluntary agreement to mutual advantage, not force, is the foundation. All through the process, value is created for all involved, to no one’s detriment. The required social condition for this process is a free market – freedom from forcible interference by criminals or government officials. Force is the enemy of production. Prosperity is built on voluntary, win-win contractual agreements – people getting better together.

The issue is not jobs, but moral, productive jobs vs. immoral parasitical jobs – which means freedom vs. government force. In a free market, jobs abound with no one sacrificed to anyone. When the government supercedes the free market, jobs go to special interests paid for out of the financial hides of the sacrificial victims’ forcibly confiscated property – a lose-win proposition. Any slave state can create jobs. Only free individuals can create real jobs. Get the government out of the way, liberate individuals to think, work, trade, and contract freely, and prosperity follows. Unfortunately, we are a long way from a free economy, as the ongoing economic stagnation attests to. We’ll know we’re on the right track when politicians stop making phony promises about how they will create jobs, and real statesmen arise to, as Forbes columnist Wayne Crews points out, "get things undone" – to undo collectivism, macroeconomics, and hence government interference (Or, more precisely, to leave the doing to free private individuals).

Macroeconomics is not just a nonsensical fraud. By rationalizing consumption-based economics, it is a grave injustice. George Reisman writes:

The idea that by consuming his product, one benefits the producer, by giving him
the work to do of making possible one's consumption, is absurd... Only the use
of money lends it the least semblance of plausibility. If it were true, then
every slave who ever lived should have cherished his master's every whim, the
satisfaction of which required of him more work. A slave should have been
grateful if his master desired a larger house, an improved road, more food, more
parties, and so on; for the provision of the means of satisfying these desires
would have given him correspondingly more work to do.

The belief that the consumption of the government benefits and helps to support the economic system
is on precisely the same footing … as the belief that the consumption of the
master benefits and supports the slave. It is a belief the absurdity of which is
matched only by the injustice it makes possible. It is the means by which
parasitical pressure groups, employing the government as an agent of plunder,
seek to delude their victims into imagining that they are benefited and
supported by those who take their products and give them nothing in return.

Stimulus always fails, for this very reason. Private consumers work for the money they spend, thus producing their own demand. Stimulus politicians - from liberals like Obama to pseudo-conservatives like Bush - do not create demand. They simply steal it.

The source of consumer spending is productive work. The source of government demand-side stimulus policies is economic plunder.

The antidote to macroeconomics is real economics such as embodied in Say's Law of Markets. Say’s law, as Wayne Crews explains in Forbes, is...

…reverentially referred to by another unappreciated market economist, William H.
Hutt, as the "most fundamental economic law" in all economic theory. It
enunciates the principle that "demands in general" are "supplies in
general"--different aspects of one phenomenon."

Or, as Ayn Rand puts it:

But, in fact, consumers qua consumers are not part of anyone’s market; qua
consumers, they are irrelevant to economics. Nature does not grant anyone an
innate title of "consumer"; it is a title that has to be earned—by production.
Only producers constitute a market—only men who trade products or services for
products or services. In the role of producers, they represent a market’s
"supply"; in the role of consumers, they represent a market’s "demand." The law
of supply and demand has an implicit subclause: that it involves the same people
in both capacities.

Or, as Steve Forbes explains:

Adam Smith taught that economic activity is composed of transactions between two
or more parties. For example, I go to a restaurant: They give me food; in return
I give them money, which the eatery then uses to pay for such things as
salaries, utilities, raw food, etc. So, as Amity [Shlaes] asks, how in the world
can consumer spending make up 70% of the economy? We're all consumers, and we're
all suppliers.

All emphasis is mine. The point must be driven home: Only producers are consumers, because only production makes consumption possible. I am not an economist. But one does not have to be an economist to know that ideas must be grounded in reality. Modern macroeconomics is not. It is a tool of state empowerment, and nothing else.

The destructive long-term course America is on can only be reversed when we challenge certain accepted conventional premises. Macroeconomics is one of them. In regard to this last, Steve Forbes believes the turn is at hand:

There's one big story this year [2011] that won't garner headlines but will have
a profound impact on our future: The edifice of post-Great Depression economics
is coming under an ultimately mortal intellectual assault. And a good thing,
too.

Is Forbes’ "Copernican Revolution" in economics really at hand? Let’s hope so. Only when we realize that we must never lose sight of the trees for the forest, and minimize macroeconomics to the status of a tool of economics whose theories must be validated by real-world facts will we begin to see rational economic policies coming out of Washington.

The Double Standard of the Catholic Church

The Obama Administration's contraversial birth control mandate has ignited a furor that has the Religious Right demanding that the consciences of religious believers be respected based upon the First Amendment. But this demand, however rightious, rings hollow in the face of the Catholic Church's own long-held ideals. I commented on this in my TOS Blog piece How the Catholic Church Paved the Way for the Birth Control Mandate. Here is the opening sentence:

Catholics angry at President Obama over the insurance mandate to cover birth control should blame one organization above all others: the Catholic Church.

Read the rest.

Related Reading:

Benedict XVI Condemns "Unregulated Capitalism", 1/1/13

On the Definition of the Concept "Marriage"

Following my recent TOS Blog post Message to Gov. Christie and His Critics: Gay Marriage is a Moral Right, a correspondent asked, "[W]ouldn't a better solution be to call homosexual contracts something else while not restricting their rights?" You can read my answer in my post, Should a “homosexual contract” be called something other than marriage?

Champion of His Own Victims: Obama's New HARP Rule

President Obama announced a new government-backed home refinance program. I commented on this at The Objective Standard. Here are the opening sentences:

President Obama recently announced an expansion of the Federal Government’s Home Affordable Refinance Program (HARP). This new initiative seeks to help homeowners who can not refinance their mortgages at today’s low rates because their homes’ values have dropped below their mortgage balances. Obama, who places the blame for the crisis squarely on lenders and banks, says this initiative helps “more than 10 million homeowners in this country who, because of a decline in home prices that is no fault of their own, owe more on their mortgages than their homes are worth.”

Read the rest of my essay, The Government Should Extend Freedom, not HARP

What About the Freedom of Non-Catholics, Mike Spina?

In a column in the 1/31/12 NJ Star-Ledger, “Health care ruling an attack on Catholicism,” Mike Spina urges President Obama to retract a January 20th, 2012 “Department of Health and Human Services … ruling that [would require that], under the Affordable Care Act, virtually all employers must offer sterilization and contraceptive services free of charge in their employees’ health insurance plans by Aug. 1, 2013. The ruling would also cover abortifacients, or drugs that induce abortion.” This would violate Catholic teaching, says Mr. Spina, therefor the ruling should be rescinded. Spina writes:

Why is this ruling so dangerous? The religious objection is obvious to Catholics. Providing these services would be tantamount to asking Catholic institutions to be complicit in the prevention of life or in the possible murder of a human being, albeit one still in the mother’s womb. That is the equivalent of asking Catholic institutions to renounce their religious beliefs. For Catholics and the Catholic church [sic], this is the line drawn in the sand, the line that cannot be crossed.

I am a Democrat who voted for Barack Obama and might do so again. But this ruling must be changed to allow exemptions for all religious institutions, not just houses of worship. Employees at Catholic institutions were not forced to take jobs with their employers, nor are they forced to stay in employment. They have a choice to seek employment elsewhere. Catholic institutions should not be forced to contradict their religious beliefs.

So what can be done?

First, Obama must order his HHS secretary to retract this ruling in order to maintain the current exemption for not just houses of worship, but for all religiously affiliated institutions. Call or write the White House and ask the president to do this. Do the same thing with your congressman and senators.

Freedom must be fought for or it is easily lost.

This ruling is a good lesson in the fragile, interlocking nature of freedom: how rights violations in one area lead to rights violations in another. There are multiple lessons here.

First, the fact that some government bureaucrat can assault so basic a right as freedom of religion and conscience through a simple rule-making process illustrates that ObamaCare is totalitarian in essence.

Second, when we granted government the power to violate the rights of private citizens to make their own decisions on healthcare and health insurance, we granted the government the power to violate all rights.

Third, the mantra that under ObamaCare we could keep our current health insurance if we are satisfied with it is exposed as the lie that it always was. We are now under the dictatorial rule of HHS, which under ObamaCare can arbitrarily alter or abolish any health plan it doesn’t like.

Fourth, the denial that ObamaCare is a complete takeover of American medicine is exposed as the lie that it always was. In fact, those 2000+ pages are chock full of authorizations for federal bureaucratic regulatory powers over every aspect of medicine and, as can now be seen, beyond. ObamaCare is socialism through the back door. It is fascism.

Mr. Spina is right about the ruling. The government has no right to impose insurance mandates on unwilling Catholic Institutions. But neither does the government have the right to impose any mandates on any American, for the same reasons given here, and those Catholics now complaining about this ruling should ask themselves: Do you support other aspects of the bill? Other mandates such as the ban on pre-existing conditions, the individual mandate, or any other coercive rights-violating aspects of ObamaCare? If yes, then what right have you to complain.

But I would go further. Spina states that “Catholic institutions should not be forced to contradict their religious beliefs.” Fair enough. But I ask why should anyone be forced to contradict his or her fundamental beliefs, religious or secular? I believe that government-forced redistribution of wealth is immoral, that same-sex couples have a right to a marriage contract, that women have a right to end a pregnancy. Yet the Catholic Church supports rights-violating welfare state programs, legal bans on abortion and contraception, and denying gays basic legal marital rights.

Like the Catholic leadership, Spina apparently supports ObamaCare, as he says “The Affordable Care Act did many good things, primarily making health insurance affordable and available to those who might not otherwise be able to purchase it.” Except that now, it has turned around to bite him. Well, what has the HHS ruling done, if not make health insurance “available to those who might not otherwise be able to purchase it” – insurance for such healthcare services as “sterilization and contraceptive services, … abortifacients, or drugs that induce abortion?” Does Spina support expanded healthcare, or not? Yes, just not that healthcare. Employees at Catholic institutions “have a choice to seek employment elsewhere?” But the same can be said of employees anywhere, so why shouldn’t all employers be granted exemptions in their insurance plans based upon their beliefs regarding what should or should not be covered? Because only religious beliefs should be protected? Of course, that freedom to opt out would shatter the power that ObamaCare was designed to grant government bureaucrats; the same ObamaCare that Spina supported and the same bureaucrats that Catholic institutions are now a victim of. The hypocrisy is thick.

President Obama just announced a "tweaking" of the rule, to shift the financial cost of the mandate to the insurance companies. This "compromise" would still require birth control coverage for women employees at Catholic institutions, however. It remains to be seen if that will placate the Church. But the fundamental issue remains. For Catholics who advocate the violations of property or any other rights, or seek to impose their religious views on others, don’t ask for whom the bell tolls – it tolls for you. The chickens are now flocking home to roost in ways too numerous to recount.

Yes, Mr. Spina, “Freedom must be fought for or it is easily lost.” So true: So start fighting, Mike Spina. Start fighting for free market healthcare. That “line drawn in the sand, the line that cannot be crossed?” – that line between freedom and tyranny is not just for Catholics. It’s for everyone. And either everyone is protected, or no one is. That much is clear.