LESSONS LEARNED #84: “The bigger and more complex government gets the more unintended the consequences.” -Old Pithy

Posted by PITHOCRATES - September 22nd, 2011

Prohibition had Popular Support from Wives, Progressives and Organized Crime

The Progressive movement began changing our lives in the beginning of the 20th century.  Thanks in large part to the American Civil War.  After a generation of American fathers were killed by the ravishes of war a lot of sons grew up without a manly role model in their lives.  They had no father to learn manly chores from.  To go hunting with.  To beat the crap out of them when they misbehaved.  To toughen them up for the real world.  Instead all they got was the loving and nurturing stuff from their mothers.  And when they grew up they wanted to be mothers, too.  And nurture the American people.  For mother knows best.

When these children grew up they changed government.  Instead of it being the limited government of their fathers they wanted an activist one.  To make our lives better.  More fair.  And safer.  Which is why they supported the temperance movement.  And took it to Prohibition.  To save the American family.  To stop drunken husbands from beating their wives.  To prevent poverty by keeping the money in the family.  And out of the saloons.   To stop the epidemic of venereal disease.  Spread by prostitutes who frequented saloons.  Trying to get some of that family paycheck.  Before the saloon owner got it all.  So Prohibition had popular support.  From wives.  Progressives.  And organized crime.

This was an unintended consequence of Prohibition.  For the law prohibited “the manufacture, sale, or transportation” of booze.  But not the drinking of it.  And when there’s a will there’s a way.  There were people who still wanted to drink.  And could without facing any consequences for it if caught by the law.  So they kept drinking.  And there was a booming demand.  And a willing albeit illegal supply network to meet that demand.  So life was good.  For those who liked to indulge in inebriating beverages.  And for those who provided those inebriating beverages.  Especially the providers.  Because when you make anything illegal that is in high demand means only one thing.  High profits.

There’s a Profit Incentive for Criminals because Illegal Stuff Costs More than Legal Stuff

At first everyone laughed as they flaunted the law.  It was, after all, a victimless crime.  People wanted to buy.  And the underworld wanted to sell.  No harm.  No foul.  For awhile.  Until the gang violence spilled over into the public streets.  When innocents saw this violence up close and personal.  Some even dying in the crossfire.  Like in Chicago.  Owned for a time by Al Capone.  King of the bootleggers.  Who killed off the competition.  The Valentine’s Day Massacre being the tipping point.  When the cops started fighting back.

The FBI eventually got Capone.  On tax evasion.  But it didn’t end the violence.  You know what did?  The repeal of the 18th Amendment.  And letting the people drink again.  Which they really needed during the depressing New Deal programs of FDR.

By decriminalizing alcohol they removed the profit incentive for criminals.  Because illegal stuff costs more than legal stuff.  So there’s no market for bootlegged liquor anymore.  So the gangs turned to another illegal substance.  Drugs.  Whose criminalization has far worse unintended consequences than Prohibition ever had.  We can trace most violent crime in the U.S. to drugs.  From theft to support a drug habit.  To Capone style gang warfare to protect turf.  To the unspeakable horrors on and south of the US-Mexican border.

The Decriminalization of Drugs:  Damned if We Do.  And Damned if We Don’t.

So what is one to do?  Decriminalize drugs?  Not quite the same thing as ending prohibition.  Drugs are a little more potent than alcohol.  Especially methamphetamine.  Crystal meth addiction destroys lives.  Which is why it’s such a lucrative drug.  You can manufacture it anywhere from chemicals.  And it’s addictive.  Addiction provides a steady demand.  And its chemistry provides a readily available supply.  That you can hide.  Unlike Coca fieldsPoppy fields.  Or marijuana fields.

Meth has a strong foothold in the drug-taking community.  Despite it being illegal.  One shudders what would happen if we decriminalized drugs.  Like meth.  It’s potent.  Addictive.  And popular with the kids.  It takes a fake ID to buy alcohol when underage.  Because there are few pushers selling cases of beer and wine coolers on the street.  But if an adult can buy it legally it could be hard for a drug dealer to pass up the underage market.  I mean, there are no empty bottles or cans to trace back to a store.  And if you’re caught carrying, hey, it isn’t illegal.

So we’re damned if we do.  And damned if we don’t.  The war on drugs has a devastating cost on society.  But the drugs are so harmful.  And helping users break their addiction also costs society.  Broken families.  Lost jobs and careers.  Children addicts can no longer provide for.  Infectious disease.  Overdose.  Violence.  Criminal activity.  And decriminalizing drugs won’t make any of that better.

The Poorer You are and the More Children You Have the More Money You Get on Your EBT

America has been fighting another war.  A war on poverty.  Which probably has been more destructive than the war on drugs.  Economist Thomas Sowell blames the welfare state for the destruction of the black family.  By subsidizing failure.  Providing incentives not to succeed.  A disincentive to be responsible.  The very programs to help the poor have destroyed the poor.  With unintended consequences that have destroyed generations.

This video was from 1980.  Fast forward to today and you can see this put in another way.  Perhaps a little less elegantly.  But it reinforces Dr. Sowell’s argument.  There’s a video on YouTube that praises the EBT card in California.  A program to help poor single people with children.  Depending on the number of children and your circumstances, the government loads a dollar amount on the EBT card.  You then use it like a debit card.  At any store that accepts EBT.  The government then reimburses the store owners.

So the poorer you are and the more children you have the more money you get on your EBT card.  As Dr. Sowell pointed out, this may be a disincentive to be responsible.  And the YouTube video shows this.  We should note, though, that the rapper who made this video said that “it was meant to be satirical and poke fun at a real issue.”  Some have called it inappropriate.  You can judge for yourself after you watch the video.  (NOTE:  If you’re at work or are in a public place you probably should wait until you get home to watch this video.  It contains very graphic language (as in the ‘f’ word).  And may be racially insensitive.  Please exercise due discretion when viewing It’s Free, Swipe Yo EBT.)

Government may have Meant Well but the Road to Hell is Paved with Good Intentions

Prohibition made it harder to manufacture and distribute alcohol.  But people still drank.  Because it wasn’t illegal to drink.  At first it was just a game.  Imbibing at the speakeasy.  Then buildings exploded.  And bodies littered the street.  Much like they are in Mexico today.  And along the US-Mexican border.  Because well organized enterprises are trying to meet a lucrative demand north of the border.  That our drug policies made lucrative.  Just like Prohibition made bootlegging a lucrative business.

Unintended consequences are a bitch.  And whenever government tries to fix something we often get something worse.  Prohibition and our war on drugs have given us organized crime to deal with.  And our war on poverty has destroyed poor families.  By incentivizing irresponsible behavior.   And making generations dependent on government.

At every time, though, government meant well.  They always say that they had nothing but good intentions.  But we should remember what they say about good intentions.  That the road to hell is paved with good intentions.

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LESSONS LEARNED #34: “Sure, until you win the lotto you’re all for sticking it to the rich.” -Old Pithy

Posted by PITHOCRATES - October 7th, 2010

Buddy Can You Spare a Dime

In the old days, we used to jail people who didn’t pay their debts.  Even in the United States.  A couple of signers of the Declaration of Independence even served time in a debtors’ prison.  We took it seriously.  Honoring your debts.  For those who didn’t, they found themselves inside a jail until they did.  Or until they died.

We jailed some people over small sums.  The severity of the punishment (broken families, disease, starvation, privation, physical abuse, etc.) was often extreme in comparison to the size of the debt owed.  In time we would move away from such barbaric justice.  No, in the modern, caring world, we don’t torment those who are down on their luck and find themselves penniless.  You see, the modern world is a caring world.  We abhor the sufferings of our fellow man.  So we show them kindness.  Charity.  We forgive them their debts and help them rebuild their lives.  Well, most of us do.

If you find yourself owing the IRS, you better pay up.  For they will send you to prison.  And take whatever you have.  They will destroy your life.  And your family.  Because they want to make something perfectly clear.  You don’t f*ck with the IRS.  They play to keep.  All the time.

The War on Alcohol

The 18th Amendment prohibited “the manufacture, sale, or transportation of intoxicating liquors within, the importation thereof into, or the exportation thereof from the United States and all territory subject to the jurisdiction thereof for beverage purposes.”  The government may have shut down supply, but the market remained.  Enter criminal gangs.  Who furnished the supply to meet the demand.

None did it better than Al Capone.  His gang ruled Chicago.  People admired him.  After all, he wasn’t hurting anyone.  He was just giving the people what they wanted.  A way to relax and blow off steam.  Like we do today when we enjoy an alcoholic beverage with our friends.  But the gang violence grew.  The pictures following the Saint Valentine’s Day Massacre were just too gruesome.  Soon thereafter the FBI branded Scarface as public enemy #1.

Bootlegging, prostitution, murder, extortion…Capone broke a lot of laws.  But he crossed the line.  He committed a crime that was so heinous that it would land him ultimately in Alcatraz, America’s most secured federal prison.  That crime?  Income tax evasion.

On the Road Again

Willie Nelson is a big time Democrat.  He’s into saving the environment.  Animal rights.  Legalizing marijuana.  Helping the farmers.  And he’s a regular peacenik.  So you’d think he’d be a big fan of Big Government.  Well, yes and no. 

He became very wealthy by the 1980s.  And like a good Democrat, he tried to shield some of that wealth from the IRS.  He parked some of it in some talk shelters.  Then came along Ronald Reagan.  He understood what Andrew Mellon understood (Secretary of the Treasury for Warren G. Harding).  High tax rates made rich people hide their money.  Lower tax rates encouraged rich people to invest their money.  When Mellon cut the tax rates wealthy people paid more taxes and less wealthy people paid fewer taxes.  The progressive tax system worked even better at lower tax rates.  Tax revenue increased as the wealthy invested their money instead of finding creative ways to hide it.  It worked for Reagan, too.  He even closed tax shelters as a further incentive for the wealthy to invest their money to grow the economy and create jobs.  That worked, too.  Savvy wealthy people everywhere were putting Americans back to work.  Only one small problem.  The not so savvy wealthy were caught unawares.

Willie Nelson didn’t move his money from his tax shelters.  When Reagan disallowed those shelters, his money sat there accruing federal taxes.  And interest and penalties.  He blamed and sued his accountants.  The accountants countered that they only did the accounting and taxes.  They were not investment advisors.  Anyway, the IRS seized his assets.  He went on the road again and often to pay off his tax bill.  His total bill came to about 16 million in back taxes, interest and penalties.  Which he paid.  As he no doubt would have from the get-go if he had sought appropriate counsel to help him negotiate the 1,000+ page U.S. tax code.

Easy Money – For the IRS

There are many stories like Willie Nelson’s.  Even Treasury Secretary Timothy Geithner, the smartest man in America, couldn’t figure out his own taxes.  (But we were to excuse him for this because no one else was as qualified as he was to write and administer the U.S. tax code).  But it’s not only the not-so-savvy celebrity rich and the intellectually challenged intellectuals who have trouble with the U.S. tax code.  The poorest of the poor who never had money can sometimes run afoul of the IRS.

Playing the lotto.  Millions do.  Most lose.  And they’re lucky that they do.  Many lotto winners have their lives take a turn for the worse.  Friends and relatives you don’t know are reacquainting themselves with you.  Well, not you so much as your new found wealth.  Con men target you.  Charities.  Neighbors.  Some spend the money fast.  Or recklessly.  Develop drug addictions.  Get robbed.  Even murdered.  There are a lot of stories out there.  Just search the Internet.

When you win the lotto, you can take a lump-sum payment.  Or you can take a series of payments.  Either way the IRS taxes this as income.  And the amount of these payouts will most probably push you in the highest income tax bracket during the period of these payouts.  So the IRS likes lotto winners.  Your odds of winning are slim to none but someone always wins.  And that’s a tax bonanza for the IRS.  Not-so-savvy people who become rich overnight.  The full force and power of the U.S. government falling on some poor schmuck who probably never had a tax liability in his or her life.  Money just doesn’t get any easier. 

Capital Gain or Income?

Some may sell the rights to their future payments.  It’s sort of like selling a rental property.  For example, take a house that rents for $1,000 per month and sells for $150,000.   The buyer gets those future rent payments.  The seller gets the money back that they paid for the house and, hopefully, a capital gain (i.e., they sell the house for more than they paid for it).  The seller pays a capital gains tax on their capital gain.  They do not pay any further income tax on the rental income that the buyer now collects.

Some lotto winners see selling their rights to future payments in the same light.  And that they should only pay a one-time capitals gain tax (at a lower capital gains tax rate) in lieu of the higher income tax rate.  The IRS begs to differ.  And they usually get their way.

Sadly, some buyers advised those selling their rights that they could pay the lower capital gains tax rate.  Which they did.  And faced heavy tax bills for back taxes, interest and penalties as a consequence.  Once again, easy money for the IRS.  You can search the Internet for stories like these, too.

Pay or Else

Whether a gangster, a celebrity, a Democrat brainiac or a low-income lotto winner, we all share something in common.  Whatever our politics, when it comes to our money, we all try to avoid paying our ‘fair share’ of taxes.  We may demand that other rich people pay their taxes, but we will do everything we can to avoid paying our taxes.  But we play a dangerous game when we do.  For those who do and lose, they learn a painful lesson.

You don’t f*ck with the IRS.

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LESSONS LEARNED #29: “The problem with doing what is best for the common good is that few can agree on what the common good is.” -Old Pithy

Posted by PITHOCRATES - September 2nd, 2010

COYOTE UGLY

We’ve all heard the joke.  What’s coyote ugly?  That’s when you wake up with an extremely ugly person in bed lying on your arm.  After a night of heavy drinking.  You’re fairly certain you had sex.  You’re not 100% sure because you can’t remember anything.  But here the two of you are.  Naked.  The circumstantial evidence is pretty damning.  You want to get out.  Fast.  Instead of waking your lover, you chew your arm off so you can slip away quietly.  Like a coyote will do if caught in a steel-jaw trap.

The lesson here is, of course, to drink in moderation.  For when we drink to excess, we sometimes do things we wouldn’t normally do sober.  But we do.  Drink to excess.  And get drunk.  And, boy, when we do, some of us really do.  Make a real mess of their lives, too.  You see, drunken husbands do not make happy wives.  Or good fathers.  Especially when drunken husbands beat up their wives, spend their paychecks at the corner saloon, have sex with prostitutes and catch syphilis (which they then pass on to their wives and soon to be born children). 

For these reasons, wives have been behind various temperance movements throughout history.  And they have had modest success.  If you ever found yourself in a dry county thirsting for an adult beverage, you can thank these ladies.  But Prohibition?  That’s a different story.  That took Big Government.  The Progressives.  Who thought they knew best what was for the common good.

DO AS I SAY, NOT AS I DO

Wives have suffered unfairly from the affects of alcohol.  But during the 19th century, their power was limited.  They had to rely on grass-roots movements.  And their churches.  Which had moral authority as we were much more religious back then.  Most drunken husbands knew they were behaving poorly.  When sober.  But things changed in the 20th century.  The powers of the government grew.  This power and new sciences (like eugenics) made some believe they could make a better society by passing enlightened laws.  (And make better people in the case of eugenics).

We call it social engineering.  Using the power of the state to change human behavior.  Well, change it for those who are not apparatchiks of the state.  The elite Progressives, including the ladies of high society, still drank.  For it wasn’t illegal to drink adult beverages.  Only to manufacture, sell, or transport them.  So it was the poorer elements of society who felt the impact of Prohibition.  And the immigrants.  Who the social elites blamed for all the drinking woes.  For people in their strata of society didn’t have drinking problems.  So there was no reason to punish them.  The elites.  They weren’t the problem.  It was the poor.  And the immigrants.  They’re the ones government needed to keep from drinking themselves to ruin.

So while the elites still enjoyed their intoxicating beverages in the safety of their mansions and clubs, Al Capone and other bootleggers fought for turf.  For control of the illegal liquor trade.  Shooting each other with Thompson Machine Guns in our public streets.  That’s a .45 caliber round.  It makes big holes.  And shatters bone.  A lot of these rounds were flying through our public streets.  And they hit more than just gangsters.

Prohibition modified some behavior.  But at great cost.  Congress repealed it in 1933.  In part to stem the liquor violence.  And part because the Great Depression was too depressing sober.

JUST SAY NO

I once worked at a small office in a bad part of town.  One day a woman knocked on the door.  She asked if that ‘short guy’ that opens the gates in the morning was around.  I said no.  Then she asked me if I wanted to have a little fun.  I said, “Thank you, but no.”  My secretary had come to the door while I was talking to her.  After I closed the door, she told me that woman just lost a lot of weight.  And that she probably had AIDS.

Women like her were common in the neighborhood.  They sold sex for drug money.  When they weren’t with a John they were getting high.  Men, too.  One time, this 6-foot-plus behemoth in a skirt was walking in the street shouting something incoherent.  Our driver discovered he was a guy.  When he lunged through his open window while turning at the corner.  I don’t know what scared him more.  The assault.  Or the fact that she was a he. 

By the way, that short guy that opens the gates?  He was married.  And had a couple of daughters.  God only knows what he gave his wife.

Drug addiction is not good.  No one’s life ever got better by being addicted to drugs.  None of these people ever planned on drug addiction.  It just happened.  Somehow.  One day you’re just partying with some friends.  Then the next thing you know you’re turning tricks or stealing to support your habit.  If you have money it’s a different story.  Then you can party until you kill yourself.  John Belushi overdosed from a heroin/cocaine cocktail called a speedball.  Chris Farley, too.  It’s unlikely that the speedball was their first high.  They probably started out with something less potent.  Like marijuana.  The entry drug of choice.  Only when that drug loses its charm do people step up to something a little more potent. 

Of course, if you don’t start, chances are you won’t move up to something more potent.  This was the idea behind Nancy Reagan’s anti-drug program.  Stop the kids from starting.  To resist peer pressure.  To just say no.  Her program did modify some behavior.  Kids did use fewer drugs.  But she was Ronald Reagan’s wife.  The Left didn’t like him.  Or her.  So they ridiculed her program as being simplistic.  Discontinued it.  And drug use by kids increased.

GANGSTA’S PARADISE

Like Capone and his fellow bootleggers, the illegal drug trade is controlled by gangs.  And they, too, fight over turf.  But those involved at the street level of the drug trade today are a lot younger.  During the days of Prohibition, kids played with toy guns.  Today, they’re playing with real guns.  Not so much playing but killing each other.  And innocent bystanders.  In drive-by shootings.  Why?  Because drugs get you money.  And money gets you power.  Put all that together and it’s very seductive to kids from broken homes in the hood.  Who have nothing.  And have nothing to lose.  It’s almost romantic.  Fighting.  And dying.  A regular gangster.  Living in a gangster paradise.

Once in, though, it’s hard to get out.  The song Gangsta’s Paradise (by Coolio featuring L.V. from the 1995 Movie Dangerous Minds) laments about that paradise.  “Tell me why are we so blind to see.  That the ones we hurt are you and me.”

You get higher up in the echelon and the violence gets worse.  You can see that on America’s southern border.  And further south.  Kidnappings.  Beheadings.  And other unspeakable things.  Because of the big money in illegal drugs.  Like there was in bootlegging.  Make something illegal that people still want and will buy, and that something becomes a very profitable commodity indeed.

DAMNED IF YOU DO, DAMNED IF YOU DON’T

So what’s the answer?  What is the best course of action for the common good?  We can keep drugs illegal.  And continue to fight the war on drugs.  And watch the violence escalate as people fight to control this illicit trade.  Or we can decriminalize drugs.  Make them easily accessible.  And cheap.  The drug gangs would go the way of the bootlegger gangs.  And the crack/meth whore in the street won’t have to perform as many sexual acts to support her habit.

Alcohol is legal today.  And there are a lot of social costs because of that.  But the majority of people who do drink are not driving under the influence or beating their wives.  Or getting syphilis from a prostitute hanging out at the corner saloon.  Wouldn’t it be the same for drugs?

Kids drink.  Even though they can’t legally buy alcohol.  But the worse thing they can do is kill someone while driving a car.  Or get killed in a car driven by another drunken kid.  Or kill themselves from binge drinking.  Or get pregnant because they got drunk at a party.  Or get infected with a venereal disease because they got drunk at a party and had sex.  These are very bad things.  But they’re not an addiction.  Sure, you can become an alcoholic, but a lot of kids don’t like the taste of the adult beverages they’re consuming.  They’re just doing it for the party buzz.  And vomiting after.  It takes awhile, for some, to get over that hump where those awful tasting beverages don’t taste so awful anymore.  But drugs?  They’re tasteless.  There isn’t a delivery system ‘hump’ to get over.  Which makes the addiction process that much easier.  And where there is only one kind of drunk, there are all sorts of highs.  New and different drugs to explore.  When you get bored with the drug du jour.  So, no.  It probably wouldn’t be the same with alcohol.  It would probably be worse.

THE LESSER OF EVILS

Often the choice comes down to a lesser of evils.  So, to do what is best for the common good, we just need to determine which is the lesser evil.  So which is worse?  The violence from trying to keep something illegal?  Or the social costs of decriminalizing something that is already causing a lot of harm while being illegal?  It comes down to what you, as an individual, think.  And that is, must be, a subjective decision.  And therein lays the problem of choosing what is best for the common good.  It’s an opinion.  Choices aren’t right or wrong.  There’re just different opinions.

And that’s why so few can agree on what is best for the common good.  Different people think different things are better.  And different things are worse.  And, at best, they can agree to disagree.

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