Monthly Archives: June 2016

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“Basic Income”: Sense or Nonsense?

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On June 5, Switzerland’s electorate voted 77% to 23% against a “basic income” proposal. The plan would have entitled each adult citizen to about US $2,500 per month from the Swiss government, with an additional payment per child, regardless of employment situation. Other polities, including Finland, the city of Utrecht in the Netherlands, and the province of Ontario in Canada, have trial runs of basic income schemes in the works.

Does the idea make sense? The identities of some who think it does — at least in principle — might surprise you. They include, among others, self-described libertarians such as Charles Murray of the American Enterprise Institute, professor Matt Zwolinski of the University of San Diego, and Tim Worstall, Senior Fellow at the UK’s Adam Smith Institute.

These supporters of the idea are, generally speaking, utilitarians or consequentialists. They accept the modern welfare state as a given and want to make it more efficient and humane. That is, they think it should cost less and accomplish more. Guaranteed income seems to fit the bill: Huge administrative cost savings from the elimination of a hodgepodge of welfare programs (for example, food stamps), more freedom for recipients to spend as they see fit (in the same example, the money could be used to purchase shoes rather than food).

Understatement of the Month alert:  Not all libertarians support government income guarantee schemes.  In fact, the vast majority of us vociferously oppose the idea.

In order for the state to redistribute wealth, it must first steal that wealth (the thieves call it “taxation”). And before the state can steal wealth, that wealth must first be created.

Morally speaking, why should the creators of wealth — a category that includes everyone who labors to produce valuable goods and services, from the lowliest fry cook to the CEO of the company that built your car — be forced to subsidize the incomes of those who produce less, perhaps even nothing?

Practically speaking, why WOULD those wealth creators do so? I don’t know about you, but if I can make $20,000 a year cleaning toilets or $19,000 a year sitting on my couch watching Storage Wars … well, if you need me, check the couch. Stretching those numbers in either direction will produce different outcomes, but any income guarantee will to some degree constitute a disincentive to work.

As is always the case, it turns out that the immoral and the impractical coincide. “Basic income” makes no sense.

Thomas L. Knapp (Twitter: @thomaslknapp) is director and senior news analyst at the William Lloyd Garrison Center for Libertarian Advocacy Journalism (thegarrisoncenter.org). He lives and works in north central Florida.

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Muhammad Ali: A Profile in Moral Courage

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WORLD HEAVYWEIGHT BOXING CHAMPION MUHAMMAD ALI...
WORLD HEAVYWEIGHT BOXING CHAMPION MUHAMMAD ALI, A BLACK MUSLIM, ATTENDS THE SECT’S SERVICE TO HEAR ELIJAH MUHAMMAD… – NARA – 556247 (Photo credit: Wikipedia)

 

“I ain’t got no quarrel with them Viet Cong — no Viet Cong ever called me nigger.”

With those pointed words, Muhammad Ali explained his opposition to the US war in Vietnam and justified his refusal to submit himself to the draft. He declared himself a conscientious objector. After declining three times to step forward for induction into the US Armed Forces in April of 1967 in Houston, Texas, the reigning world heavyweight boxing champion was arrested, stripped of his title and state boxing licenses, and thrown into a three-year legal battle ending with his exoneration (on technical grounds) by the US Supreme Court.

No one ever seriously doubted the physical courage of Muhammed Ali (born Cassius Marcellus Clay, Jr. in 1942 in Louisville, Kentucky). An Olympic gold medalist and winner of  eight Golden Gloves titles, he became the youngest man ever to unseat a reigning heavyweight boxing champion at 22.

Clay, named after a Kentucky planter who became a crusader for the abolition of slavery, converted to Islam and changed his name shortly after that 1964 technical knockout victory over Sonny Liston. He was fearless in the ring (perhaps forever “the greatest,” as he called himself and came to be called by others). He went on to become professional heavyweight boxing’s only three-time world champion, winning the title in 1964, 1974 and 1978.

But his singular act of MORAL courage — a prominent black American at the pinnacle of youthful fame, standing firm against an immoral war in the face of disapproval from World War 2’s “Greatest Generation,”  head unbowed to forced military service more than a century after his nation put an end to formal chattel slavery — remains by far his greatest legacy.

His stand rang the opening bell on a generation’s resistance to war and conscription and inspired Martin Luther King, Jr., who had hesitated to oppose civil rights supporter Lyndon Baines Johnson on the subject, to come out against the war in Vietnam.

Nor did Ali’s peace activism end with his draft resistance. In 1991, he traveled to Iraq to negotiate with Saddam Hussein for the release of American hostages, and in 2002 he visited Afghanistan as a “UN Messenger of Peace.” The Ali Center established the Muhammad Ali Humanitarian Awards in 2013 to honor those who make “significant contributions toward securing peace, social justice, human rights, and/or social capital in their communities and on a global basis.”

Muhammad Ali died on June 3, 2016, in Scottsdale, Arizona. He was 74.

Thomas L. Knapp (Twitter: @thomaslknapp) is director and senior news analyst at the William Lloyd Garrison Center for Libertarian Advocacy Journalism (thegarrisoncenter.org). He lives and works in north central Florida.

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Payday Loans and Unintended Consequences

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In 2010, Congress passed and president Barack Obama signed the Dodd-Frank Wall Street Reform and Consumer Protection Act. Dodd-Frank created the Consumer Financial Protection Bureau and authorized it, among other things, to regulate “payday lending.” Six years later, the CFPB has finally issued new rules proposals pursuant to that power. The proposals are bad news for both lenders and borrowers.

Unless you’re wealthy and isolated from the real world, you’ve probably seen “payday loan” or “cash advance” businesses in your city’s strip malls and storefront districts. A person in a pinch can walk in, prove that he or she receives a paycheck and has a bank account, and receive a short-term, usually unsecured (but not always — some lenders take car titles as collateral) loan.

Because the risks of non-repayment are high — people who need payday lenders probably have no savings and poor credit — the interest rates are high, too. It’s also not unknown for borrowers who INTEND to repay the loan to get on a merry-go-round of just keeping up with interest payments. Some detractors refer to payday lending as “legal loan sharking.” Hold that thought for a moment.

The new CFPB rules would require lenders to do extensive research into borrowers’ finances to make sure that they can repay. They would also limit the “rolling over” of loans to just keep interest charges running, and limit interest rates on longer-term loans.

These rules sound like they’re intended to protect vulnerable consumers, but the road to hell is paved with good intentions. Their real effect would be three-fold:

First, the rules would probably drive some lenders out of business. To the extent that there is competition in the lending market, that competition presumably reduces interest to nearly the minimum profitable rate based on risk. Adding to lenders’ costs and capping their rates could very well make the game not worth the candle.

Secondly, the rules would make it harder for poor people in distress to borrow money. It’s easy to sit in CFPB’s Washington offices and believe that one is imposing financial responsibility on the irresponsible . It’s a good deal harder to forego baby formula or prescription medications for lack of ready cash in an emergency crunch.

Thirdly, the rules would bring back the REAL loan sharks — the kind who charge even higher interest rates and who break bones when they don’t get their money on time — and push the most vulnerable among us into their arms.

Personally, I hope I never need a payday loan. But if I do, I hope the industry is still there to provide it. CFPB’s rules are custom tailored to make that very unlikely. The rules would leave us all poorer and less financially secure.

Thomas L. Knapp (Twitter: @thomaslknapp) is director and senior news analyst at the William Lloyd Garrison Center for Libertarian Advocacy Journalism (thegarrisoncenter.org). He lives and works in north central Florida.

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