Monday, March 31, 2008

Would You Want This Person Running Our Country?

She fails to manage a relatively small campaign budget, how can she possibly manage a trillion dollar Federal budget?

Clinton Campaign Fails to Pay Bills

Saturday, March 29, 2008

Ethanol Hoax Part 3 of Many To Come

Even Time Magazine agrees ethanol is a hoax now.

The Clean Energy Scam

With the price of rice doubling, the world is about to get a lot more violent as people struggle to feed themselves while Greenies in the US fill up their flexfuel vehicles. Just one tank of corn-based ethanol uses enough grain to feed one person for an entire year (about 400 Bu).

This might be the only time in the last 45 years that Fidel Castro was right. Ethanol is the prime example of concentrated benefits (farmers) and diluted costs (consumers). The US Government will spend $8 Billion on the ethanol subsidy alone. That is about $110 per family in taxes, but tens of thousands to each farmer in the corn belt.

Farm and Home

There is nothing better than an article that combines elements of farm policy and the recent housing problems into one argument.

Here are a couple elements of a very insightful column:

In case you hadn't noticed, this last year has been a banner one for farmers, thanks to bountiful harvests and record commodity prices. The average farm household income in 2006 was $77,654, or about 17 percent higher than the average for nonfarm households. And next year, that's expected to rise to $90,000.

But for Max and Chuck, that's no reason to cut back on farm socialism. No siree. Farmers are expected to pull in $13 billion in federal subsidies this year. And there will be plenty more once Congress gets around to passing a new five-year farm bill later this spring.



Contrary to what you might be hearing, the goal here shouldn't be to prevent housing prices from falling. In fact, the aim ought to be to get them to fall as quickly as possible to a level consistent with the incomes of the people who live in them, or could potentially buy them. For it is only at that point that sellers, buyers and lenders will regain the confidence necessary to start selling, buying and lending again.


I agree with Mr. Pearlstein when he says "Hypocicy that's hard to Bear."

Do Politicians Really Know What Is Best For Me?

Politicians are always talking about how they will take care of average Americans. But what is the average American any way?

What income does the average America have? According to government figures from 2006, the median household income was about $48,ooo. That means half of household had income more and half had less income in 2006. Now the "average" Congressman makes $169,300 per year. That kind of compensation puts them in the top 1% of all wage earners. So then you have to ask how someone in the top 1% of wage earners knows what is best for families that make less than 1/3 of what the typical member of congress earns? I use the term "earn" loosely in the case of Congress. It sounds terribly arrogant to me that some "rich" person in Congress knows what is best for "average" Americans.

Families are different as well. Some families have many children, others have none. Some families have medical problems, others have none. Some families live in urban areas, others in rural areas. Some families are well educated, others are not. Some families have strong family structures, others do not. The list goes goes on forever in ways that people and families differ. There is no average family or average person, only families and people with vastly different needs and wants.

Congress tries to put us all in a box and classify us in some form or fashion. They do this so they can tell us what is best for our families. However, there is no way they can possibly know what is best for each of us because we are all different. We all value things differently and we are all at different stages in life. The only person that knows what is best for you is you. Frankly, I am tired of hearing how our elected officials know what is best for us and passing legislation telling us how to live our lives according to their perceived notion about what is best.

Congressmen do not know how to spend my money better than I do (i.e. taking over 33% of my earned income and spending it in "my" best interest). Congressmen do not know what is best for my children when it relates to health care, education, or social policy. Everyone knows what is best for them and we should all be allowed to make those choices. We all will fail to make good decisions at times, but we get to learn from those mistakes and improve, quickly. When congress makes mistakes it turns into finger pointing and blame, not learning.

As we enter into the final stretches of the Presidential election, we should all be asking ourselves who will try to run my life and take away my personal liberties? What candidate thinks they know what is best for me and limit my choices?

Friday, March 28, 2008

Public vs Private

While I am not a big fan of Wal-Mart as a place to shop (I prefer to avoid large crowds), I really do appreciate what they do for the economy. Many studies suggest that Wal-Mart has really been responsible for the low inflation rates we have experienced in the US for the last 10 years.

A recent Op-Ed in the National Post reviews a just published paper by Steven Horwitz that describes how much more effective Wal-Mart was as delivery aid during Katrina than the Feds. Here are a couple of parts I thought were insightful.

"A lot of you are going to have to make decisions above your level," was
Scott's message to his people. "Make the best decision that you can with the
information that's available to you at the time, and above all, do the right
thing."-Lee Scott, CEO of Wal-Mart

A company that alienates a community will soon be forced to retreat from
it, but the government is always there. Companies must, to survive, create
economic value one way or another; government employees can increase their
budgets and their personal power by destroying or wasting wealth, and most may
do little else. Companies have price signals to guide their productive efforts;
governments obfuscate those signals.

It was really not necessary to produce more information about how much more productive the private sector is than government, but it nice to get such firm evidence now and then.

Thursday, March 27, 2008

Just What We Need....More Regulation

I tend to agree with Professor Meltzer in this WSJ Op-Ed today. There is no way the government can possibly regulate every situation that presents itself. This part of the article is very true:

The first principle of regulation is: Lawyers and politicians write rules; and markets develop ways to circumvent these rules without violating them.


The markets ultimately dictate where investors put money. Regulation only makes the process more intensive and less efficient.

Wednesday, March 26, 2008

The Glass Is Half Full Approach to Housing


At least now more people can afford homes and this is certainly a benefit from the correction in the housing market. According to the National Association of Crooks, I mean Realtors, the affording ability index is up 27 points.

Tuesday, March 25, 2008

Sunday, March 23, 2008

Big Oil

After reading this Op-Ed in the New York Times, it amazes me just how little people know about Big Oil.

For one, it is very debatable whether the break up of Standard Oil by Teddy Roosevelt was actually good for consumers. At the time, the price of kerosene was actually dropping even though Rockefeller was consolidating the industry. His consolidation was driving efficiency and thus lowering the cost of petroleum products for everyone.

As for contributions to society, ExxonMobil alone pays more in corporate income tax than the bottom 65% of taxpayers combined. The $15B in incentives the oil companies enjoy are a pittance compared to the payments to the renewable energy crowd (i.e. ADM, Farmers, the solar and wind energy proponents). As for the 700% increase in payouts to shareholders, this is great news. These shareholders are primarily mutual funds and pension funds that hold the retirement savings of most Americans.

There will always be stories about people not being able to heat their homes. It is very unfortunate that it happens. However, price is the most efficient way to ration scare resources like heating oil and natural gas. Price is a much better mechanism than some politician telling you what you can set your thermostat to in the Winter. Oops, too late as the politicians are already trying to do this very thing in California.

Government to the Rescue Again?

With all the problems on Wall Street these days, it was only a matter of time before big government advocates (AKA Democrats) started clamoring for more and better oversight. After all, the 4 agencies the Feds have already created to manage mortgages were not enough to prevent all the problems. So more agencies and more regulation will make it better?

No matter how much regulation you put over the financial system, the government can never stop all market fluctuation and downturns. The Soviets could not even do that with a communist government. More regulation and government bureaucracy will just make doing business more expensive.

The truly wonderful thing about capitalism free of government interference is that it kills off the wasteful producers. Companies like Bear Stearns should not be allowed to survive as are all the other business that can not be profitable. Profit is what shows society your firm is benefiting people. It means that businesses are taking inputs (raw materials, labor, etc.) and turning those inputs into consumable products that people value more. On the other hand, firms losing money show they are really wasting resource by taking inputs and turning them into products that are less valuable to society.

More government will not make things better, just more expensive and time consuming. We have to understand that there will be turmoil some times as markets correct. The patience to wait this turmoil out is imperative. But as usual, politicians show no propensity for patience.

Washington Split Over More Regulation- NY Times

Exporting from Kansas

I have a question I would like to pose to Gov. Sebelius:

Since Kansans make more airplanes than we can use, should we stop making additional airplanes? After all, the extra airplanes we make do have an impact on the environment. The aircraft industry uses lots of solvents, chemicals, and not to mention energy to make all those extra planes. Wouldn't the State then be better off by making fewer of these toxic machines?


The above is absurd. Of course we would not be better off in Kansas. Now substitute power for airplanes above and see if it really changes anything. All Kansans would be better off we produced more power, especially if we were to export it to other states. Electricity is a great export product just like airplanes. Now we just need to get the Governor to see it the same way.

Things are not that bad....

It is hard to tell these days, but things really are not that bad. As much as B Hussein and Billary want you to think life has never been worse, it is actually the opposite. Things have never been better. Ignore the politicians and enjoy what you have.

WSJ Op-Ed

Friday, March 21, 2008

US Supreme Court and The 2nd Amendment

I think this quote by Jefferson clearly states the Founders intention of the 2nd Amendment.

"The beauty of the second amendment is that it will not be needed until they try to take it."
-Thomas Jefferson


If the Supreme Court does not reject the DC gun ban, it will be a sad day for all Americans. I am sure it will be a matter of time, should the Court decide to reject the Constitution before the Liberals start banning all firearms. Might be time to grab one of these before it is too late.


Ethanol Is A Hoax, Part 3 of infininty

Even a liberal Cornell professor believes ethanol is a very poor choice for fuel...

Corn Can't Save Us

Thursday, March 20, 2008

Maybe the Old Days Weren't So Bad

Check out what your taxes were in 1913. Notice the entire 1040 was only 4 pages long in 1913. Today, the 1040 Publication is 155 pages! Comparing 1913 to 2007, I paid over 8 times more in personal income taxes. Throw on the FICA taxes and the difference gets even more obscene.

So what benefit have we gotten as taxpayers with our higher income taxes? I am not sure, but I do know that government is much bigger. We certainly have a better military. We have better roads, but that is really a function of the gasoline tax (Oh yeah, another tax!), not the income tax. Have we got better education? In many cases I would say it is very debatable, but then that is a function of local property taxes (yet another tax).

What we have gotten is a bigger and more inefficient government. This is the ideal machine for taking (aka stealing) tax dollars and creating little to no value for society. I am sure John Adams would be appalled at what has become of the government he worked so hard to create.

Wednesday, March 19, 2008

John Adams and The Way Things Were

I have to say that I have really enjoyed watching the first two episodes of John Adams on HBO. Tom Hanks appears to have done a fabulous job of capturing the Spirit of 1776 on film. Perhaps the most satisfying thing for me is just observing how people lived 250 years ago and that is certainly reflected in the program.

Two centuries ago, even the rich people like John Adams did not have indoor plumbing. They had to go to the public hand pumps in the city or pull water from the well when they were at the farm. Today 99% of homes have running water in the US. Homes were also very sparse and they heated with wood or coal. This meant huddling around the fire to stay warm in the winter. On the flip side, the summers were brutal (not to mention they wore those hideous suits and wigs) and you could clearly see the uncomfortableness of even the rich in Philadelphia in July of 1776. Today most American homes have air conditioning, even the "poor."

Abigail Adams, maybe one of the most influential women in American history, yet she could be seen on her hands and knees scrubbing the floor. Personally, I would take the carpeted floor and the vacuum we enjoy today (as would my bride). Abigail also made the decision to infect her children with small pox in hopes that exposure would lessen the chance of the disease being fatal. Today, we have vaccines that have essentially eliminated small pox as opposed to what the disease could have done to entire populations 250 years ago.

Episode two ended with John Adams returning to Philadelphia from Boston, on horseback. There was no airplane, car or even a train to help him make the trip. John Adams had to send correspondence to his wife through courier, not email, not to mention there was no ability to call home on a phone, cell or otherwise.

So when people talk about a return to the good 'ole days, I have to respectfully decline. There was not less stress 250 years ago, just different stresses, like survival. I would bet that there would not be one person 250 years ago that would not trade their position in life then for that of the "poor" person of today. Medical breakthroughs, mechanization, communication and overall standard of living improvement make today's society superior in every way. It was made possible by the Liberty the Founders were able to gain in the summer of 1776.

Tuesday, March 18, 2008

Things that make you go hummmm...

ReasonTV and Drew Carey do another informative quick program. It really makes you wonder. I think I am now in favor of organ donation and compensation. The only questions I ponder now are what is my kidney worth and how much would I pay for one?

Pay For a Kidney?

We Need to Do More!

Sen. Chuck Schumer (N-NY) was on CNBC this morning claiming that the Federal Government needs to do more to stabilize housing. He offered a 5-point plan that was very short on specifics. But the fact that Schumer thinks the Federal Government can actually stabilize housing is a pipe dream. The market is simply too big for the Feds to control. Over-priced homes have to correct as Dan Mitchell explains:
“It doesn't matter how low rates go, if you are a financial institution, if
you think the home is worth less than the mortgage or if you're worried
the homeowner is going to pay back the mortgage,” says Dan Mitchell, a
senior fellow at the Cato Institute.


In addition, Schumer wants to drop another $180B in"stimulus" on the economy. This, of course, will do very little good. The sad fact is we have to let housing prices correct to reflect their true value. This will be very hard on many people. However, it is the only way out of this malaise.

The real problems will begin when the Feds get more involved. Now House Financial Services Committee Chairman Barney Frank wants the government to do more. This is not the answer. Markets have to correct and federal involvement will just prolong the problem. Furthermore, they will create reactionary policy that will undoubtedly make life more difficult for everyone.

The Federal Government is a hammer and consequently every problem they see looks like a nail. Our elected officials need to stop panicking and let this situation correct itself. The Federal Reserve is ensuring there is plenty of money in the market (at the risk of inflation), so the chance of another depression is unlikely. Housing prices will eventually get cheap enough that people will pile in (housing sales were actually up in MI last month). Equities will get cheap enough that investors with piles of cash will begin buying again.

Bear Stearns going nearly bankrupt is a good thing. They took more risk than they should have and they are now being penalized for the mistake. This is the beauty of capitalism (brutally punishing the inferior) and why we are the most prosperous nation the world has ever known.

Sunday, March 16, 2008

Bush Is Hard to Listen To...

Just watch the video. Very compelling evidence of decline.

Saturday, March 15, 2008

New Blog for Me to Read

I really like the writing of Megan McArdle with The Atlantic. She has been following the Spitzer saga and one part of a blog entry was very intriging to me. Here it is...
On the other hand, I'm not distressed to hear that the Feds were spying on Eliot Spitzer. No, not because I don't like the man, but because I think maybe we should spy on our politicians, all the time. No probable cause, you say? I fling back at you Mark Twain's observation that America only has one distinct criminal class: Congress. Perhaps every member of Congress should be subject to warrantless wiretaps--except that the spies should be the American public, streaming over the web. If they need a national security exemption, of course, I think they should be able to get it one from an appropriate judicial authority. I'll even agree to a generous 24-hour delay to allow them to make their case.

On a more serious note, I think it's entirely appropriate that the anti-corruption police watch politicians like hawks. They've chosen public office; that conveys a lot of responsibility to the public, including assuring them that your votes aren't being bought outright. I also think that politicians, when caught in a crime, should automatically get the maximum penalty; if they think the law is such a good idea, they ought to suffer heartily when they disregard it.


Her blog is here. You should put it on your RSS feed today.

Too Bad More People Will Never Read (and Understand) This Column

This might be one of the best, if not the best, column I have ever read.

Cheap Labor is Very Expensive, Expensive Labor Very Cheap

It is tough to understand, but unfortunately necessary.

B Hussein Obama and His Friends

There is a Japanese Proverb that says:

When the character of a man is not clear to you, look at his friends.

In the case of B Hussein Obama this proverb could not be any more true.  If B Hussein is representative of most men, his wife would be his best friend.   This is the woman that said  "for the first time in my adult lifetime I am really proud of my country."  Michelle Obama has lived in this country for over 44 years and she is just now proud to be an American?  Most powerful people would say their Pastor is a good friend.  In B Hussein's case this would be the Rev. Jeremiah Wright Jr.

 

There is is very good op-ed in the New York Times today about B Hussein and the company he keeps.


His company tells us all we need to know about his character.  Based on his friends (and thus his character), he has no place leading the most powerful nation in the world.

Too Big To Fail

The New York Fed and JP Morgan have teamed up to keep Bear Stearns from failing.  This is the same Bear Stearns that made Billions repacking subprime mortages.

To understand the subprime mess click here< /a>.

The Fed believed that Bear Stearns (BS) was too big to fail. What does that mean exactly?  Does it mean the equity investors in BS will lose too much money?  Does it mean management at BS took too many risks but did not understand those risks?  Does it mean once companies get to a certain size the government will always give them a free insurance policy at tax payer expense?

If the Fed believed that BS was too big to fail, then they should have let BS go bankrupt and then stepped in to stabilize the business and sell it.  Bailing out the shareholders of the company is just encouraging managers to take too much risk.  I really doubt many of these managers will have to sell their Hamptons home.  If the government is going to create a moral hazard with banks, what is to keep this entire process from repeating itself.  Oh wait, it has repeated.  The same type of thing happened with the S&L crisis over a decade ago.

The current situation is a little different than the S&L crisis.  In fact, it is much bigger and less controllable.  No matter what the government does, it cannot prop up the value of homes.  This is a function of the market.  The government would have to buy all of these homes, at inflated prices, at a tremendous cost to the tax payer.  Again, all this would do is encourage banks and home owners to take more risk than they should and prolong the market correction that homes need to endure.

It is critical that the government allow banks to fail.  Depositors are protected with the FDIC so they will not be hurt.  Instead, investors in the banks will be the ones that take the financial hit.  This is exactly as it should be.  When you buy an equity you take a risk.  You risk losing all of your money should the company fail to create value.  BS has certainly failed to create value and must be allowed to fail.  

It is not like subprime mortgage homes disappear when BS goes under.  They are still sitting exactly where the were before this mess.  The difference now is more people can afford these homes with traditional mortgages with 10-20% down payments and fixed interest rates.

Harry Reid (D-NV) says government needs to act now to head off a melt down.  He could not be more wrong.  The melt down will occur when government gets involved.  It is just a matter of how long it will be.  I prefer my cough medicine in quick doses.  Not drip by drip.

Nothing is Certain But Death and Taxes, Literally.

One of this tax cuts that Bush made was the elimination of the estate tax that will be effective in 2010. However, in 2011 the estate tax (or death tax) will then revert to rates that were in place in 2001 that are as high as 50%. The Op-Ed in today's NY Times makes the case that we need the estate tax. This person is wrong.

NY Times Op-Ed


The estate tax is one that those taxes that seems so good on the surface. It takes money from people that are dead. Afterall, they do not need the money any longer. But what happens is family businesses (where most of the wealth resides) get sold off and years of hard work are divided up.  These businesses can then not be passed on to family. Instead the government takes the money and redistributes this wealth to society.

When these businesses get sold off, so the family can pay 50% in taxes, there is a good chance people will lose jobs.  The capital the government takes out of the business in the form of taxes is then employed in programs, not the value creation activities of business.   

The estate tax is just another example of how something that sounds so good to politicians, has very negative consequences.   The estate tax is bad for society and the poor are impacted even though many may receive some benefit from programs (usually welfare since they are no longer employed).  Congress needs to stop the rhetoric about the estate tax and just kill it.   This is not about stopping aristocratic dynasties like the Du Ponts or the Rockefellers.  Killing the death tax is about making America economically stronger.

Friday, March 14, 2008

The Kansas Senators Have Failed Us

Both of the Kansas Senators voted against the McCain-Demint Earmark Ban.  As a result, here is the letter I sent Pat Roberts.

Dear Senator, I am very disappointed in your vote on the McCain-Demint Earmark Spending Ban. This was your chance to prove you are serious about restraining the reckless Federal Spending that will bankrupt not only our children, but the nation. The Republican Party is supposed to be about smaller government, less taxation, and fiscal responsibility. Unfortunately, the Kansas Senate delegation has apparently forgotten the Republican creed. There was absolutely no excuse for not supporting this legislation. It is a sad day in Kansas politics indeed. Doug

 I am sure I will get another one of Pat's form letters in return expalining all kinds of excuses why this would be bad for Kansas.  In truth, there is no way this is good for anyone except those few people on the receiving end of the money.  This is not the Senators money, it is the American taxpayers' money.  Unfortunately these reckless spenders will not have to live with the painful results of their actions.  Our children will.

Recession is Inevitable

This is the first writing that I have seen that really makes since of the mess the economy is in today. Kind of a scary scenario.

Recession is Inevitable

Thursday, March 13, 2008

Wednesday, March 12, 2008

Lou Dobbs Does Not Understand Middle Class

I usually do NOT watch much CNN let alone pay attention to it. However, I had time while traveling to watch Mr. Dobbs tonight (at least for a couple minutes). He was commenting on testimony by Bill Gates given today before the U.S. House of Representatives Subcommittee on Science and Technology. During this testimony, Mr. Gates explained how the US education system is failing to produce enough software engineers to keep US companies competitive in a global economy.

The shortage of qualified engineers is forcing many companies, including Microsoft, to look at talent from other countries. This means they must seek H-1B visas from the State Department to bring these talented people to our country. The issue for Bill Gates is the US Government only allows 65,000 of these visas every year. In his testimony Gates argues this is not enough and he is right.

So Lou Dobbs took this testimony as a way to make another point in his crusade about the middle class in decline. His point is bringing in foreign talent is just a ploy to lower the wages of existing Americans. He could not be more wrong. If these "imports" are really good, other companies are going to try to attract them and pay them more. So even if they start out making lower wages, it won't last long. Wages are a function of productivity. The more productive a worker (even a programmer) the more money they will make. Competition for talent, especially in the software industry, will see to it.

So Lou, you are wrong again. This situation is an implication of the short comings of the US education system, not about the war on the middle class. We have to have more math and science education if we are going to continue being the world leader in technology. Until we fix the education system, it is critical to let more talented people become Americans.

Price Controls Are Bad Medicine

There is a very good article in Forbes Online today.

A Price Control By Any Other Name

What is a price? A price communicates so many market variables that it is impossible to explain all of the information. But let's give it a try. One, how much risk there was for the manufacturer to research and develop the medicine. Two, how much risk is there the manufacturer will be sued by overzealous trial attorneys. Three, how much money does the company have to give up to sell products in Canada and other countries. Four, how can the company recover all the development costs for medicines that do not work.

If the US Government puts price controls on medications, expect that to be the end of R&D and new drugs to fight disease. While we might be able to get existing drugs cheaper, we won't get many, if any, new ones. There is not enough incentive for companies to take the risk. As it is, US consumers are funding most of the R&D since companies are forced to sell below market prices to most other countries.

While lower priced drugs sound like a good idea, there will be consequences.

Tuesday, March 11, 2008

Spitzer Is Not the Anomaly

I am sure at one point in their careers, politicians really did believe they were in office to help people.  However, over time most begin to gorge themselves on the power they acquire.  This power then corrupts them to the point they begin to feel they are above the law.  Case in point, Elliot Spitzer.

Now the Governor (or Love Governor) is/was no doubt at the top of his game.  He had prosecuted some of the biggest names on Wall Street and found his way to Albany and the Governor's office.  The future prospects were bright for Spitzer and there was even talk of a future in DC.  Then the quick 2-day fall from grace.

Now this sounds like an isolated, sad tragedy.  Unfortunately it is not.  It is all to common and has already affected at least one US President (Clinton #1) and maybe even more (JFK to name just one more).  Power corrupts to the point that people no longer act in the interest of their constituency, but rather their own self-interest.  They see themselves as all powerful and knowing.  So much so that they believe they are the ones to best choose how the rest of use get to live our lives even if that means hypocrisy.

This is why the Founders wanted to limit the power and influence of the Federal Government.  Those limits have been exceeded so many times that people have failed to realize just how much control the government has on everything we do.  In short Americans are losing their liberty bit by bit to people that cannot hold themselves to the moral character they are forcing on everyone else.

So the question that must be answered then are politicians really the people you want in charge of health care, education, public safety and all the other areas where government gets involved in our daily lives?  Remember there is a little bit of Elliot in all politicians.

If you believe the government can provide health care, you need brain surgery.

For all the people that think their government can provide decent health care for it citizens, here is more evidence to the contrary.




When the government has a monopoly on health care, the only method of rationing care is time.  In many cases that is exactly what people do not have.  Prices and the free markets are the best allocation mechanisms and the only ones that will work when you need the care that might save your life.

After all, do you really want someone like Elliot Spitzer in charge of your health care?

We need coal, period.

The fight is on in Kansas over two proposed power generators in Western Kansas. These two 700MW units will be driven by coal, the one energy source we have plenty of in the US.

Coal is not the cleanest fuel, and far from it. However, technology exists that makes is much less damaging to the environment than it used to be. It is expected that the useful life of these two generators will be 50 years. I am confident that within the next few years the technology for cleaner burning coals will be available and economically feasible. This is almost a certainty if the government moves forward with their plans to tax emissions (which is another bad idea that will just add about $1 Billion to Kansans' tax bill).

The Kansas Legislature had already voted once to deny the required building permits, but over turned that vote recently. Unfortunately Governor Sebelius plans on vetoing the bill. The Governor's claim to fame in Kansas is unemployment and job creation. However, Kansas would have had a net loss of jobs in 2006 and 2007 if it were not for the growth of jobs in the government, particularly State government. This is a chance for Kansas to add real jobs and the foundation for real value creation. It will create a better tax base for a very sparsely populated area. An area that can handle the environmental impact of these two generators. Yes there will be more mercury pollution per person than almost anywhere in the country, but that is because of the very low population, not because there is a lot of mercury. That is simply a scare tactic.

These plants offer real economic benefits to Kansas. The power will actually be an export, and that is a good thing. Power is a product and no different than airplanes or widgets. The Governor is just wrong on this issue and just one more example of how she is opposed to economic growth and a healthy Kansas economy.

Monday, March 10, 2008

I'm with the government and here to help.

Maybe the government is not such a good helper afterall....

How Government Makes Things Worse/

Friday, March 7, 2008

We Need More Legal Citizens

According to a November 2007 report from the Bureau of Labor Statistics, the US will have 167 million jobs to fill in 2016.  Today we currently employ about 151 million people.  So where are these 16 million new employees to come from exactly?

The civilian labor force is only expected to grow by 0.8% while the overall participation rate in the labor force is expected to drop from 66.2% to 65.5% through 2016.  These numbers are being driven by retiring baby boomers and a reproductive rate that is basically flat.  Therefore the only way we can meet the future demands of the labor market and produce economic growth is to encourage immigration.

The real problem with immigration is not immigrants but rather the government programs that provide financial aide to immigrants.  Financial aide is a real cost to the tax payers and should be a concern for all of us.  Whether it is medical care, education, food stamps, welfare, or any of a host of programs, our citizens are not prepared to pay for these services.

We must eliminate the government programs that provide aide.  The incentive to come to the US should be to find good jobs, not receive government handouts.  Of course all of this immigration needs to be done legally.  We need to know who is coming into this country given the security of today's world.  Open borders are a threat to our safety and security.

As Americans we do not need to feel threatened by immigration.  There is really no choice but to embrace it.   What we need are fewer government programs that provide financial support and burden the tax payers.  Our great country must continue to attract legal immigrants who are tax-paying, law-abiding citizens and are contributors to society, not takers.  

A House Lost is a House Gained.

Steven Landsburg has written a fantastic column on the website Slate on the unseen side of the housing bust entitled The Case for Foreclosure.  

The point I like in this piece is that there is a bright side to a foreclosure.  When a home is foreclosed on, the lower resulting price allows a family to now afford a home that probably could not before.  This is particularly evident in the very expensive markets of California and the Northeast US.  We all see the people leaving the home, but rarely do we think about the new family moving in.

The subprime mortgage allowed families that could not attain homes with traditional mortgages (due to the high risk they represented to a lender) to finally achieve their dream of home ownership.  What is/was unfortunate is that many of these families could not afford these complex mortgages once mortgage rates that were adjustable, re-adjusted.  To compound the problem, homes have now fallen in value which has resulted in a negative equity position for many home owners since very little money down was required.  As a result, these people cannot afford to sell their property and pay off their mortgages.  So the logical thing for most of these families is to stop paying the mortgage and move on with their life.

When these families move on, it allows other families to move in.  This is a great prospect for these new families as they finally can realize the American dream.  In some cases, it will allow young people to get established that could not afford housing that has risen some 60% in the last 5 years.  The bright side to falling prices is greater affordability.

Houses that are foreclosed on do not disappear.  The asset does not vaporize into thin air.  It becomes a domicile that is now cheaper and thus becomes more affordable for more hard-working families.  That is a good thing.


Oil's End? I think not.

There was an opinion piece in the NY Times today that is just outright wrong. Timothy Eagon misses the mark on so many angles.

Oils End? -New York Times

First of all, US refinery capacity according to the Department of Energy has risen to 17,385MM BBLs/day in 2006 from 15,671MM in 1985. Mr. Eagan is right when we claims there are fewer refineries. In fact there are about half as many. In 1982 there were 301 operating refineries in the US and that number dropped to 149 in 2007. So how is it that we have half the refineries and more production?

The answer is very simple. Refiners have found ways to be more efficient with every barrel of crude oil processed and they have found better, faster and cheaper ways of processing crude. The production "creep" is the result of careful investment in better technology. This has saved millions of barrels of crude since we have become more efficient with our energy.

The $4/gal cost of gasoline is also a little misleading. Government involvement in the form of taxes adds about $0.55/gal to the cost of gasoline. On top of this, State and Federal regulations makes blending gasoline very complicated, and thus costly. Chevron Corporation has over 700 formulations of gasoline in the US to meet all the different government mandates. Maintaining that many formulas is a huge burden and goes way beyond the 3 octane grades you see at the pump.

The Exxon Valdez incident was most unfortunate and a real tragedy. However, it is lawyers on the plaintiff side that are as much to blame. The longer they drag out the settlement, the more money they get to keep. I am sure Exxon would have desired to get this over with a decade ago.

Oil has allowed us to live a standard of living in this country that could not even be imagined 100 years ago. We should be thankful that oil companies have allowed us to live this lifestyle. The alarming thing now is that these companies are no longer in control of oil reserves. Today national oil companies in Russia, Saudi Arabia, Kuwait, Venezuela and other control over 90% of all reserves. I doubt these countries will make it easy to afford this same standard of living.

Thursday, March 6, 2008

Ethanol, The Great Economic Hoax

Ethanol is a hoax and it time to stop it. Currently, ethanol enjoys a $0.51/gal subsidy from the US Government. That subsidy is paid to any refiner that blends ethanol into gasoline. So essentially, the government pays to have the cost of ethanol be $0.51/gal under its true market price.

Now the cost of ethanol does not end there. As a gasoline consumer, you also pay for it at the pump. Today that is about $3.09 per gallon. So for those keeping score at home, that is paying for ethanol twice. However, the cost does not end there. The US Government also supports the price of corn to the tune of over $38 Billion from 1995-2005. That is $127 for every citizen of the US. So that totals three ways you pay for ethanol. Now the payment does not even end there. Since corn is part of the food supply, it also drives up the cost of food when corn is used for fuel.

Currently, corn is trading hands for about $5.50/bushel. Before ethanol mandates, it was trading for about $2.50. In three years the price has over doubled, but that is not the end of it. Because farmers are planting more corn (meaning more acres), there is now less wheat, soy beans and other crops being planted. That means there is actually less supply of those other grains which is driving their price up. Wheat was trading for over $14/bushel today while soy beans are $14.58/bushel. Historically, these grains have sold for about $3-4/ bushel and $7/bushel. Again, tremendous increases in price.

Now these higher prices are driving the price of bread and anything made with wheat (cereal, crackers, gold fish) much higher as are soy products. Now the corn price increase is also driving up the cost of feed grains for meat producing animals. It now costs twice as much to feed chickens, turkeys, pigs, and cattle causing huge price increases for meat. So grain prices are drastically raising the price for food that Americans are trying feed their families.

Now the funny thing about ethanol is that is not a good fuel. It only has about 2/3 the energy content of gasoline per gallon so it drives fuel economy (MPG) down. Furthermore, studies show that is takes about as much energy to make ethanol as it produces as a fuel. This means it is doing nothing to eliminate our dependence of foreign oil since we have to burn diesel to grow the crops and harvest the crops that make ethanol. Another alarming issue is the massive use of water that ethanol production requires. Of course these plants sit no where near good water sources, so the are taking a massive toll on the underground aquifers. This is be a tax that future generations will pay when irrigation and drinking water wells are dry.

Ethanol is a hoax that is being perpetrated by the farm lobby and companies like ADM. A Cato Institute study showed that nearly 40% of ADM's earnings come from government subsidies and a good portion of that is from ethanol. While Americans have a soft spot for farmers, it is time to wake up and stop this madness as it is putting a huge burden on the consumer. If ethanol was a good product, it would stand on its own two feet without government help. Let consumers and the market decide if it is a good fuel, not the government.

Write your congressmen and let them know your feelings about the Ethanol Hoax. If you don't, these politicians will continue to placate the farm lobby and Americans will continue to pay and pay and pay and pay for ethanol.

Wednesday, March 5, 2008

Great Column,, Must Read

John Stossel has written another nice peice today in Townhall.com.

Influence-peddling

This is really a must read and pass it along column.

Liberty or Socialism?

Recently there was a bill in front of the Legislature in Mississippi that would outlaw serving obese people in restaurants. The bill, according to its originator, was to bring attention to the fact that obese people were becoming a big burden on government because it was driving up health care costs.

Now this seems very interesting to me for several reasons. How is a restaurant owner suppose to determine what is obese? Does everyone get weighed and a BMI calculated before ordering? If they tell someone they are obese, do you think that person would ever frequent that restaurant again? If the owner does serve someone that is obese, could they be arrested or fined?

The second issue I see around this legislation is the one where government is now legislating behaviors. There are huge costs to the government since they are picking up nearly half of all health care expenditures today. Naturally they would want to do something to hold down those costs. After all, we have a responsible bunch of politicians watching every penny we send to them.

The real concern here is actually not the cost (although it is huge) but rather the loss of liberty Americans could face if we truly pursue a "nationalized" health care program. Since the government is paying for your health care, they feel they should be free to tell us what we can and cannot do. Drinking alcohol (liver disease), smoking (lung and heart disease), watching TV (heart disease), eating salty snacks (hypertension), sweet desserts(diabetes) and who knows what would be next. All of this done in the name of your good health (and lower costs).

How is this policy different than today? Well, insurance companies price the risk associated with the proposed "banned" behaviors and other factors that would effect their costs and then price the policy accordingly for each indidual or company. The government on the other hand, will have a one size fits all approach that will actually fit no one.

Fortunately the Mississippi Legislature failed to pass this bill. However, the fact that it was even considered let's you know where the politicians minds are. This alone should scare us all.

Monday, March 3, 2008

Is NAFTA Really All That Bad?




If this NAFTA thing is so bad, why is unemployment at 5% (very low historically), manufacturing production up, and productivity at an all-time high? No doubt there have been certain sectors of the Ohio economy that have lost out and not stayed competitive. However, does this mean our society should live the equivalent of an 8-track lifestyle when the MP3 lifestyle is possible? Moving jobs to Mexico has made us more productive as a nation and raised the standard of living for millions of Americans, and Mexicans.

Yes the Mexicans do not have the same environmental standards we do and yes they earn less per hour. However, these workers are also much less productive, thus the lower wages. Their standard of living has not gotten to the point where they can make a trade off between food and shelter and a cleaner environment. This is very much like the US 100 years ago.

As the Mexicans become more productive and their wages rise, their citizens will demand a cleaner environment. Until then, they must take care of the basic human necessities. Re-working NAFTA will not make Mexico's environment better, it will make it worse.

Be very suspicious of those that say Free Trade is bad for America. There is usually a special interest lurking in the background. Free Trade always has, and always will, make society more prosperous.

Sunday, March 2, 2008

The End of the Road

A recent story in the USA Today titled Independent Truckers See End of the Road caught my attention as something that sounded very disheartening for many Americans.  The article describes how the independent trucker is being squeezed by the high cost of diesel and that is cutting into the margins they make after being paid for loads that are allocated by freight brokers.

About 1/3 of all truckers are independent and have no logistics function of their own.  Instead, they rely on brokers that arrange for loads to be moved from one place to another then these   brokers contract with independents to move that freight around the country.  Now truckers are complaining that there is no transparency in the brokers' market so they have no idea how much the brokers are making.  As the truckers are being squeezed, it is believe that the brokers are making a very handsome profit at their expense.  So to get that transparency, the brokers are asking for the government to get involved and regulate the market.

Now when I hear the words "government involvement" and "regulation" I immediately get suspicious.  Rarely (if ever) do these two phrases every work out in favor of the consumer.  It usually means there is some special interest involved trying to enrich themselves or engage in some protective practice that drives up the costs for consumers.  I believe this case is no different.

What the independent truckers are experiencing is a process called "creative destruction."  This process was first coined by the 20th century economist Joseph Schumpeter.  The process of creative destruction is one where entrepreneurs find better, faster, and cheaper ways of meeting customer needs and it can mean putting the old ways and old methods out of business.  In this case, the better, faster and cheaper method of moving freight is by companies that have integrated their logistics and hauling functions.  Companies like Yellow, Werner, and JB Hunt have gotten more efficient by being integrated and have capitalized on the benefits of economies of scale.  They buy more trucks which drives down the price for each truck.  This same purchasing power gets leveraged in tires, trailers, fuel, and lubricants.  As a result, their costs per mile are much cheaper than the independent trucker.  Plus the knowledge these integrated trucking companies gain by being in the logistics business enables them to capture a greater share of the freight hauling revenue stream and find ways to move freight even more efficiently.

While this sounds like there is a terrible future in store for the independent trucker, you are right.  The independent trucker will fall by the wayside much as the way the buggy maker in the early 1900s did when the car became the cheaper and more efficient way to get from point A to B.  As bad it is might sound, this is good for society on the whole.  It means cheaper goods for everyone outside the circle of independent trucking.  It also means resources are used more efficiently than before, including the labor of the independent trucker.  These truckers will have to find jobs (maybe with the big trucking firms) that use their capabilities to create more value than they can as independents.  Creative destructions can be brutal, but it is ultimately what makes us a more productive society.

Saturday, March 1, 2008

America Still is Great, No Matter What the Politicians Say

There has been considerable campaign rhetoric the last year about how candidates for President are going to make American great once again.  I am very sorry to say, that I must have missed the announcement about Americas failure to be great.

Here is why America is great:

We are still a very economically free society.  According to the Wall Street Journal and the Heritage Foundation, the US is the 5th most economically free country behind Singapore, Hong Kong, Ireland and Australia.  Not bad out of almost 160 countries.  So why are we 5th? It appears we have more political corruption, restrictions on trade, and too many subsidies to get ahead of the other four.  In short, politicians are making the situation worse but we are still doing quite well.
The US still has free elections where every citizen has the same vote.  We have good Rule of Law where government cannot arbitrarily change laws, people are treated fairly in the Court System (although the out comes may not always be fair), and no one person is below or above the law.  The US exports more goods and services than any other country in the World, including China.  We are the most productive country in the world as we have increased our manufacturing output while at the same time employing fewer people in manufacturing (about 12% of today's workforce).  This means rising wages and lower costs for everyone.

As for wages, US Census data show that real family wages have risen from an average of about $48K in 1970 to about $70K in 2005 (all adjusted for inflation).  In families where one spouse does not work, the averages wages have gone from $47k to $64K since 1970.  All the talk about stagnant wage growth is hogwash.  

Not only have wages grown, but the costs of many items have actually dropped due to global trade.  Yes we do not make TVs in the US any longer, but we can get a cheaper set with a bigger picture, more features, and flat screen imported from Asia.  We send them airplanes, Harleys, life-saving medicines and Hollywood movies.

Our military is the strongest force the world has ever seen.  The beautiful thing about our military is this force is used for good, not for imperial aspirations as many believe.   As Colin Powell so eloquently said "all we ask for is some land to bury the dead."  We have saved Europe (twice), defeated communism, and disposed a brutal Middle East Dictators and have asked for nothing in return.

We have the third largest population in the world and people are thrilled about the opportunity to come to this country.  It is the land of opportunity where anyone can start with little or nothing and turn it into a great fortune.  We need people, even people that may not speak the same language or look like we do.  This is one of the key factors in our future prosperity.

Is America perfect?  No it is not.  However, it is better than anywhere else on earth.  So stop listening to politicians talk about Hope, Change, and a New Tomorrow.   What we have now is the highest standard of living in the World and a country that has not fought a war on our own land in nearly 150 years.  America still is Great.

Murtha Needs to Be Punished

I cannot imagine a more unethical man in all of Congressional history as Rep. John Murtha (D-PA).   This man, along with his pork barrel spending posse of Reps. James Moran (D-VA) and Peter Visclosky (D-IN) are hosting a party of campaign donors at the very lavish Ritz-Carlton Hotel in Pentagon City.  While this may sound like a gracious thanks, it is really about soliciting more funds while promising millions of dollars in earmarks to these very same donors.

These earmarks are funded with US Taxpayers' money.  This money is not part Rep. Murtha's personal check book, although he seems to treat it that way.  Wasteful spending such as this is the very thing that is driving $400 Billion annual deficits and creating the most corrupt Congress in the history of the US Government.

People you need to wake up and replace members of Congress that are placating to the wishes of special interest and that are profiting from nothing more than political access.  Profit is good when it is done through free and voluntary exchange.  On the other hand, it is a travesty when it is done through the wasting of tax payer dollars and government corruption.

I would encourage everyone to write their Representative and request they take action against this kind of behavior.  Rep. Tiahart (R-KS) already has my letter.