Big Brother

0:00Good morning and welcome to KWAM 990. This is One for the Money. I'm Mike Stein, Senior Vice President of Investments at Wells Fargo Advisors right here in town. The phone number to our studio, 260-5926. And this morning, my special guest is Mark Thornton, who's a senior fellow at the Ludwig von Mises Institute. He serves as a book review editor of the Quarterly Journal of Austrian Economics. He served as the editor of the Austrian Economics Newsletter and a member of the editorial board of the Journal of Libertarian Studies. He served is a member of the graduate faculty of Auburn University, Columbus State University, taught economics at Auburn and Trinity University as well. He was the Assistant Superintendent of Banking and Economic Advisor to Governor Bob James of Alabama and was awarded the University Research Award at Columbia State as well. He has written several publications and good morning Mark.

0:50Good morning Michael, good morning Memphis. It's great to be back on One for the Money. Thank you so much for joining us. We wanted to have you back on to talk about our good friend Mr. Snowden. So tell us a little bit about what happens when a government security apparatus is given unchecked powers in the case of, I imagine, a whistleblower would be a good term? Absolutely. You know Snowden is a hero to many people who believe in privacy and they believe in individual rights like the founding fathers and you know this overreach by NSA, the National Security Agency is just outrageous. It's unethical, it's immoral, it's unconstitutional and Mr. Snowden brought it to public attention and you know the overwhelming majority of Americans support him, believe he did what was right and only a minority oppose him and of course half of the people who oppose him are neocons and half of those, the other half are just people who are not very well informed.

1:58So I think Mr. Stodin was a patriot, you know patriotism is not just slavishly following whatever the government says and whatever the government dictates, patriotism is opposing your government when you think it's doing something wrong and I think in this case it's It's pretty clear that the NSA was spying on Americans. It was vacuuming up huge amounts of emails and phone calls and they actually had access. Unlike the president said, they weren't listening to phone calls but they actually had the unchecked authority to listen to phone calls and to read emails. They didn't actually take in every 100%. They estimate that it's about 90% of all emails and phone calls were stored, basically, in NSA computers to give them the plausible done-eye ability that they weren't actually tracking everything that Americans did.

2:59So it's an outrageous policy on the part of the administration. And I think Mr. Stoden is a hero, he's a patriot. And this is something that we, you know, and the funny thing is even though the vast majority of American Support Snowden, a slight majority actually want to see a public trial. They don't think he should be sentenced or fined or killed, but they'd like to see all the facts come out before the public in an open hearing. So I think it's a good development. Here's a couple of questions for you. Number one, as we move through our interview with Mark Thornton of the Mises Institute and a noted economist talk a little bit about how this impacts the economy from on a short term and on a longer term basis.

3:49Let's talk a little bit about what exactly did Edward Snowden do that caused so much turmoil and tell our listeners about the PRISM program and what that means just to the average citizen. Well, basically, you know, the NSA, which is getting more than 10 billion dollars of our money to operate, was set up with the idea of intervening in foreign conversations and foreign emails and phone calls and things of that nature with other countries that might be our enemies. But the prison program and the related programs are designed to spy on domestic people, like ourselves where they're basically cataloging all of our phone calls or at least 90% of our phone calls and they're cataloging or have access to our email and so the idea was to to catalog these things and to run computer programs to identify patterns of who's calling who and how long of the duration and so and so forth and you know they have said in public recently that this has thwarted dozens of terrorist plots but when they had to testify in front of the US Senate committee on intelligence they admitted that they only had thwarted a few of these terrorist plots so in one case or the other they're lying basically and of course spies I mean by nature are liars

5:31and the secretaries. Their secrecy is their specialty and so they've been keeping this program or programs, I should say, basically secret from the public and from the government. In the recent testimonies before Congress where they had secret non-public meetings with congressmen and senators, where they had to reveal exactly what they were doing to Congress. One congresswoman came out of the hearings and said that she was flabbergasted and that what had been revealed to the public so far and what was in the media so far was only the tip of the iceberg, as she put it.

6:18And so you really have to wonder exactly how big these programs are and how intrusive they and how unconstitutional they are. One senator came out of the hearing who was on the Senate Homeland Security Committee and he said that he knew nothing of this program beforehand and he was shocked at the extent of what had been revealed in that committee secret meeting. Here you have a senator on the Homeland Security Committee not knowing it because the information, some of the information about what the National Security Agency is up to is only revealed in the Intelligence Committee which is a small number of senators so apparently the White House was somewhat in the dark about this and the vast majority of the House of Representatives in the US Senate were in the dark as to what the NSA is going on.

7:17So when you ask the question, what are these programs, well, I have to be truthful. We really don't know yet at this point because we've only been exposed to what the Congresswoman said was the tip of the iceberg. So I think there's going to be a lot more revelations. Mr. Stoden has indicated that he has more revelations to come and Glenn Greenwald has extensive interviews, only some of which have been revealed to the public. So I think this is an ongoing story and it's something that's going to continue on in the media and in the general public discussion for quite some time. We're talking with Mark Thornton of the Von Mises Institute, a noted economist and published author. In your short-term view of the economy, what will this scandal do?

8:10And in the long term, what are the possible effects? Because we're talking not only about a 29-year-old whistleblower, you're talking about Microsoft, Yahoo, Google, Facebook, massive amounts of data that now is in some and a broad range is compromised. Well, that's a very good point. The media has been maligning Mr. Snowen, especially the neocon media as a 29-year-old without a high school diploma. Well the fact of it is he does have a GED diploma and he was so smart that he bypassed the traditional educational process and went on to become a high level intelligence officer in the private sector and has made as much as a quarter million dollars a year.

9:01So as much as the neocons want to malign this guy, he's not just a hero but he's a bright guy, he knows advanced security and spying techniques and computers and all the rest. Now as far as the economy goes, this is a bucket of ice water on the economy. You may not be able to tell it in the datum, but basically what this is, is a signal to companies, tech companies, some of which that you mentioned, but the broad stroke of technology

11:03Sector. So this is an important losing proposition for the U.S. is American taxpayers are paying the National Security Agency more than ten billion dollars a year and all those people are making you know like at least a hundred thousand dollars a year and they're spying on us and they're not really deterring terrorist plots and but the the fact that they're spying on Americans and they're cataloging all our emails and all our phone calls is just it's It's unconstitutional but it's just distasteful for people in the economy and if they have an opportunity to move overseas and you know I teach at Auburn University and I see an increasing proportion of students that when they graduate they look for jobs overseas and I've had students going out of the country, going to Taiwan, going to Singapore, going to Australia, going to New Zealand, there's been a couple that went to Spain and so you You know, Auburn University students never thought of the idea that they wouldn't be

12:04working in Alabama or working in the Southeast and able to go to Auburn University football games and so forth. Now the trend increasingly is to take foreign languages, to take courses in international business and international trade and be entrepreneurial and hope to catch on in a foreign country. So it's a very negative step in the US economy as far as job growth in the high tech areas and entrepreneurial areas. The world is a global place. You can operate from anywhere, email goes everywhere and so at one point America was You know the best economy, we had the strongest military, you know and everything was hunky-dory but you know this is another step in the wrong direction as far as I'm concerned.

13:02Mark, the regulation enthusiasts that are in Congress will tell you that regulation is usually a positive for the economy from an economist's standpoint. Is there any regulation that's a good idea for the economy? I really don't think so. Government regulation simply does not work. It is designed with the hopes of success, but with no mechanism to actually achieve that success. You know, we hope for efficiency, but what we get is bureaucracy. We hope for effectiveness, but what we actually get is nothing but rules and red tape that serve neither the producer nor the consumer. You know, we hope for safety, but what we eventually get his chaos and of course there have been many prominent examples of this regulatory failure in recent years where a vast regulatory bureaucracy is supposed to be overseeing some aspect of the economy and it ends up failing tremendously and when we investigate the problem after the fact we actually find find that regulation is part of the cause of these problems.

14:14And so we're paying for the regulators and they're unable to actually serve the consumer or serve the producer. They end up actually contributing to these very negative outcomes in several prominent examples in recent years. Now, there are major Internet providers and as we mentioned, you know, beside the whole mobile industry, you know, T-Mobile, etc., AT&T and Apple, when you put all that together, the flow of information is almost impossible to really regulate and it's no matter how How good the NSA is or isn't, it would be impossible to monitor all that information.

15:06You would have to regulate your way. When you can't do it, when you can't monitor it, you'd have to prevent people from getting goods and services that they may have been able to get it before. So the companies come out and they issue statements on privacy and we're not going to give any Money, Information Away, etc. But then the amount of, and I'm putting this in a really simplistic way, the amount of phone calls that you'll get from telemarketers increases. It doesn't decrease. It seems that the technology is so overwhelming that the companies themselves have a hard time keeping up with the pace of technology. So clearly that has an effect on the Economy. But does it have an effect on the economy in a negative or in a positive way? Or are there going to be more jobs created because of this massive amount of information?

16:05Well you're right. There's no way that regulators or spies can get their hands around all of this information. It has to be the marketplace where everybody is looking out, where everybody is concerned about their next purchase or their next hire. It's only the marketplace that can accurately regulate markets and regulate firms and things of that nature. So I don't really blame the bureaucrats and the regulators for failing. I think it's just in the nature of the job and the regulation of these complex phenomenon and these huge markets with vast amounts of data and the problem is that when we put regulators in charge, we have the feeling that somehow everything is all right and that the regulators will take it, take care of us and so it's a moral hazard to put regulators in charge of information, in charge of marketplaces because they can't do the job but they give have the impression that somebody is doing the job and as a result, we've all put our

17:20guards down and we're not attuned to the things that we should be attuned to. So for example, the Bertie Madoff scandal and his Ponzi scheme, there's all sorts of regulators as you know over the financial services industry. I imagine it would be hard to tick off all of the various regulatory bodies that are are supposed to be monitoring a financial firm like Madoff's Ponzi scheme and yet the regulators never did anything to properly regulate Bernie Madoff's scheme and investors in the scheme just went merrily along the way thinking that somebody was actually overseeing what he was up to, making these outrageous profits year after year even when the market was down, was somehow up and in the end, the SEC failed to act. They failed to heed the warnings of many people that something was amiss with Bernie Madoff's firm and he was only actually caught when his own sons turned him in. In general, the whole financial crisis that we The idea that banking and finance are unregulated and need new layers of regulation is just

18:47plain laughable. There are various regulatory agencies at the state, federal and even the international level and there's over 12,000 bureaucrats devoted to financial regulation in Washington, D.C. alone and there are at least 115 agencies that regulate the financial industry at the State and Federal Levels alone. So, you know, there were all sorts of regulations and regulators and they never were able to stop the problem. And so we have to look beyond regulation. Regulation is not the cure. Regulation is actually a cause. It's a moral hazard. It makes us put our guards down and not be weary and leery The theory of what we're investing in, who we're buying from, who we're hiring, what firms we're dealing with, and so forth.

19:41This is something that only the marketplace can accurately regulate. Now, of course, if you have a free and unfettered marketplace, there's still going to be bad things happening. But they're not going to be systemic things happening. They're not going to go on for very long. Mark and just before we come on the bottom of the hour here, take our break, a quick Another question on the Health Care Act and what the impact is on the economy.

20:27It's just now getting cranked up. In your overall view on the short term, what is the impact of the Affordable Health Care Act on the economy? Well, it's in effect imposed taxes as the Supreme Court said. So it's going to be taxing consumers, it's going to be taxing the health care industry and it's going to be making it in some sense harder to get health care as more people have free access to health care and we need to go in the other direction because Obamacare, which was actually created by the Congress, is something that's going to make health care a messier sector of the economy. Mark Thornton, a senior economist at the Von Mises Institute, the author of several publications Studies, and a terrific economist. We thank you very much for joining us.