First of all, I believe in climate change. In fact, I believe it changes all the time. From season to season (best I can tell Winter has always been colder than Summer) so we get at least 3-4 major shifts in climate every year. I have even started noticing climate change in the morning and afternoon. Surprisingly, it seems to me to be much cooler in the morning (now that we are into the Summer months) than in the afternoon.
All kidding aside, there has always been climate change. Remember a few years ago when the crisis was the hole in the ozone layer? This was going to cause us all to be burned because the UV light would be too intense for humans to handle. Where did that scare go? This frenzy cost American dearly as we gave up CFCs for ozone-friendly coolants. This meant new AC units for everyone (huge cost), pump sprays instead of aerosols (carpel tunnel syndrome), and the smuggling of CFC coolants from Mexico. Surprisingly, the rest of the world did not adopt the same policies as we did in the US?
The thing about green house gases is that CO2 is not the only one. Methane, from the natural decay of living organisms, is a huge contributor to the green house effect. So is water vapor. Thankfully no one is proposing we limit water vapor emissions. After all, this actually sustains life. Wait, so does CO2. Plants need it for their survival.
So where did all this carbon come from in the first place? Well it came from the CO2 that was originally in the environment millions of years ago when volcanoes we producing livable land and salts that would make sea water. Plants absorbed (or maybe it is adsorbed) this CO2 and made energy through photosynthesis. The residual carbon was then deposited in soil when plants died. Through years of pressure and transformation, it bonded with hydrogen to form hydrocarbons (aka crude oil). During this time, the earth cooled off because there was less C02 in the atmosphere. So much cooling took place that the earth experience an ice age (actually several). So man is really just putting a little of this material back into the atmosphere so future generations can have a little crude oil of their own.
Just fly over the country at 40,000 feet and you realize quickly how small man really is. To think that man can actually influence climate is an incredibly arrogant assumption. There are just too many variables including solar, lunar, and other celestial effects that far outweigh anything man can muster that might effect climate.
So why do I choose to reduce my carbon footprint? For one reason, I hate waste. We live on a planet with scarce resources and I would like future generations to enjoy a high standard of living and it will take resources to do that. Conserving for the future is really what the environmental argument should be about today. Lowering every one's standard of living and pushing us back to the middle ages in terms of living conditions is not an alternative that I am interested in pursuing. However, that is exactly what will happen if we allow environmentalists to hijack public policy and government.
Friday, May 30, 2008
Oil and Housing
Don Boudreaux made a great point today at the Cafe Hayek blog that I have not thought about. Why is it okay for one type of asset to increase in price and get government scorn and yet another asset declines in price (moderately I would say, 10-15%) and the government does everything it can to get the price to rise? Let's call the first asset apples and the second asset oranges.
Would people say it is fair to have government suppress the price of apples yet welcome the increase in oranges? In fact government is proposing programs that would use money made by apple growers (windfall profits tax) to support the prices that orange growers get for their oranges. That does not seem right does it?
Now replace the above apples with oil and oranges with housing and see if it makes any more sense. It does not. Assets are assets and there are times when it is better to own or produce assets over others. Right now it is better to own oil production than a nice home on the coast. 5 to 10 years ago it was certainly the other way around when crude was around $10 per barrel and homes on the coasts were appreciating 10-20% per year.
Cheap oil is not a right and neither is a guarantee your house will appreciate in value. Both assets' prices are functions of the market and what consumers around the world value. Right now consumers value crude oil more.
Would people say it is fair to have government suppress the price of apples yet welcome the increase in oranges? In fact government is proposing programs that would use money made by apple growers (windfall profits tax) to support the prices that orange growers get for their oranges. That does not seem right does it?
Now replace the above apples with oil and oranges with housing and see if it makes any more sense. It does not. Assets are assets and there are times when it is better to own or produce assets over others. Right now it is better to own oil production than a nice home on the coast. 5 to 10 years ago it was certainly the other way around when crude was around $10 per barrel and homes on the coasts were appreciating 10-20% per year.
Cheap oil is not a right and neither is a guarantee your house will appreciate in value. Both assets' prices are functions of the market and what consumers around the world value. Right now consumers value crude oil more.
Thursday, May 29, 2008
Letter To My Senators Regarding Cap and Trade.
Feel free to copy and send to your Senators.
Dear Senator,
The upcoming legislation proposed by Senators Lieberman and Warner is bad for Americans, including Kansans. Recent research published by the Heritage Foundation shows this Bill would lower wages and salaries by over $800 (in real terms), cost over 5,000 jobs, and cost the state over $1.1 Billion in lost production. The truly alarming fact is these are big numbers for a small state. This Bill could cost Texas over 41,000 jobs!
Perhaps the most disturbing element of this bill is the underlying tax that will be paid by industry. As with anything, if you want less of it, tax it. This Bill will give us just that, less industry. Who will bear the cost of this tax? Consumers. Our standard of living will decrease and the prosperity that we enjoy today will begin a steady decline. I do not want that for my family and future generations and I do not believe you do either.
We cannot let the radical environmentalists take this country and our government hostage. The Lieberman-Warner Act is bad policy that must be defeated.
Respectfully yours,
Dear Senator,
The upcoming legislation proposed by Senators Lieberman and Warner is bad for Americans, including Kansans. Recent research published by the Heritage Foundation shows this Bill would lower wages and salaries by over $800 (in real terms), cost over 5,000 jobs, and cost the state over $1.1 Billion in lost production. The truly alarming fact is these are big numbers for a small state. This Bill could cost Texas over 41,000 jobs!
Perhaps the most disturbing element of this bill is the underlying tax that will be paid by industry. As with anything, if you want less of it, tax it. This Bill will give us just that, less industry. Who will bear the cost of this tax? Consumers. Our standard of living will decrease and the prosperity that we enjoy today will begin a steady decline. I do not want that for my family and future generations and I do not believe you do either.
We cannot let the radical environmentalists take this country and our government hostage. The Lieberman-Warner Act is bad policy that must be defeated.
Respectfully yours,
Cap-and-Trade is Bad For Everyone...Even Kansas
George Will writes a great column today on what is going on with the Lieberman-Warner Act going through Congress. On top of this, The Heritage Foundation has done excellent research that shows what effects the Lieberman-Warner Act will have on states.
For Kansas, this legislation will cause incomes to drop by $805 (in real dollars) by 2030, cost the state 5,690 jobs and cost the state $1.1 Billion in Gross State Product. This is just for a small state like Kansas. It will cost Texas over 41,000 jobs.
Defeating this legislation is critical to the long-term prosperity of our country. From Will's column today:
What cap-and-trade is really about is taxes.
Finally...
For Kansas, this legislation will cause incomes to drop by $805 (in real dollars) by 2030, cost the state 5,690 jobs and cost the state $1.1 Billion in Gross State Product. This is just for a small state like Kansas. It will cost Texas over 41,000 jobs.
Defeating this legislation is critical to the long-term prosperity of our country. From Will's column today:
Speaking of endless troubles, "cap-and-trade" comes cloaked in reassuring rhetoric about the government merely creating a market, but government actually would create a scarcity so government could sell what it has made scarce. The Wall Street Journal underestimates cap-and-trade's perniciousness when it says the scheme would create a new right ("allowances") to produce carbon dioxide and would put a price on the right. Actually, because freedom is the silence of the law, that right has always existed in the absence of prohibitions. With cap-and-trade, government would create a right for itself -- an extraordinarily lucrative right to ration Americans' exercise of their traditional rights.
What cap-and-trade is really about is taxes.
A carbon tax would be too clear and candid for political comfort. It would clearly be what cap-and-trade deviously is, a tax, but one with a known cost. Therefore, taxpayers would demand a commensurate reduction of other taxes. Cap-and-trade -- government auctioning permits for businesses to continue to do business -- is a huge tax hidden in a bureaucratic labyrinth of opaque permit transactions
Finally...
Regarding McCain's "central facts," the U.N.'s World Meteorological Organization, which helped establish the Intergovernmental Panel on Climate Change -- co-winner, with Al Gore, of the Nobel Prize -- says global temperatures have not risen in a decade. So Congress might be arriving late at the save-the-planet party. Better late than never? No. When government, ever eager to expand its grip on the governed and their wealth, manufactures hysteria as an excuse for doing so, then: better ever.
Links of the Day.
Good reading for today.
Demand curves slope downward except in politics
Let Walmart Fix Healthcare
Climate Alarmism
"The college idealists who fill the ranks of the environmental movement seem willing to do absolutely anything to save the biosphere, except take science courses and learn something about it." ~P. J. O'Rourke
Blame COngress For High Oil Prices
The Moral Challenge of Globalization
Middle Class Jitters
I like this part....
Part of the deceptive sense of falling behind reflects the elastic nature of being middle class. According to Pew, 70 percent of households now have two or more cars, and a similar share has satellite or cable TV; 66 percent have high-speed Internet; 42 percent already have flat-panel TVs. Thirty years ago, no one's parents had this inventory. More students go to college and graduate school, so more have debt. Health care is expensive in part because modern medicine can do so much. Someone has to pay. One in 10 households now has a vacation home.
"Progress" keeps draining our pocketbooks. Pew finds that four-fifths of Americans find it hard to maintain middle-class lifestyles; in 1986, two-thirds did. But today's middle-class anxieties transcend the well-advertised "squeeze" on incomes. The deeper source of disquiet, I think, lies elsewhere. Middle-class families value predictability, order and security, and these reassuring qualities have eroded. People worry about rising living expenses; but what really upsets them is the possibility that their incomes or fringe benefits -- pensions, health and disability insurance -- might vanish.
Demand curves slope downward except in politics
Let Walmart Fix Healthcare
Climate Alarmism
"The college idealists who fill the ranks of the environmental movement seem willing to do absolutely anything to save the biosphere, except take science courses and learn something about it." ~P. J. O'Rourke
Blame COngress For High Oil Prices
The Moral Challenge of Globalization
Middle Class Jitters
I like this part....
Part of the deceptive sense of falling behind reflects the elastic nature of being middle class. According to Pew, 70 percent of households now have two or more cars, and a similar share has satellite or cable TV; 66 percent have high-speed Internet; 42 percent already have flat-panel TVs. Thirty years ago, no one's parents had this inventory. More students go to college and graduate school, so more have debt. Health care is expensive in part because modern medicine can do so much. Someone has to pay. One in 10 households now has a vacation home.
"Progress" keeps draining our pocketbooks. Pew finds that four-fifths of Americans find it hard to maintain middle-class lifestyles; in 1986, two-thirds did. But today's middle-class anxieties transcend the well-advertised "squeeze" on incomes. The deeper source of disquiet, I think, lies elsewhere. Middle-class families value predictability, order and security, and these reassuring qualities have eroded. People worry about rising living expenses; but what really upsets them is the possibility that their incomes or fringe benefits -- pensions, health and disability insurance -- might vanish.
Wednesday, May 28, 2008
Why you should avoid Delta Airlines...
I ususally have an unpleasant experience every time I fly Delta...and United...and sometimes American. Fly Continental and your flight will be 100% better.
Delta Will Ruin Your Vacation
Delta Will Ruin Your Vacation
Minimum Wages Equal Minimum Number Of Jobs.
A little data that supports the notion that higher minimum wage is good for those that actually find jobs, but that the number of jobs is a lot fewer.
Political Calculations Blog
Political Calculations Blog
The Only Cure For High Oil Prices
From Mark Perry and IBD:
But to hold U.S. companies responsible for the surge in gasoline prices is nonsensical. After all, the main contributor to gasoline prices is the cost of world crude oil, which alone makes up 70% of pump prices, according to the U.S. Energy Information Administration.
As for the charge that oil companies have been driving up prices, consider that U.S. refiners that produce gasoline, diesel and jet fuel are reeling from the impact of high world crude prices. Some actually lost money in the first quarter of this year.
World oil prices might be expected to decline if there was more spare oil-production capacity. But control of world oil prices is not in the hands of investor-owned oil companies in the U.S.; those companies control just 6% of worldwide oil reserves, while national oil companies of foreign governments own 80% of the world's oil reserves.
Even if the control of oil prices were in American hands, which it is not, we would still face the fact that Congress refuses to allow access to plentiful oil and natural gas deposits beneath federal lands and U.S. coastal waters.
It's hard for our government to ask the main oil-producing foreign countries to increase their production when 85% of the U.S. outer continental shelf and the Arctic National Wildlife Refuge are closed to domestic energy production.
______
Congress will never admit this is a problem they helped create. Instead they will continue to finger point and find fault with Big Oil.
But to hold U.S. companies responsible for the surge in gasoline prices is nonsensical. After all, the main contributor to gasoline prices is the cost of world crude oil, which alone makes up 70% of pump prices, according to the U.S. Energy Information Administration.
As for the charge that oil companies have been driving up prices, consider that U.S. refiners that produce gasoline, diesel and jet fuel are reeling from the impact of high world crude prices. Some actually lost money in the first quarter of this year.
World oil prices might be expected to decline if there was more spare oil-production capacity. But control of world oil prices is not in the hands of investor-owned oil companies in the U.S.; those companies control just 6% of worldwide oil reserves, while national oil companies of foreign governments own 80% of the world's oil reserves.
Even if the control of oil prices were in American hands, which it is not, we would still face the fact that Congress refuses to allow access to plentiful oil and natural gas deposits beneath federal lands and U.S. coastal waters.
It's hard for our government to ask the main oil-producing foreign countries to increase their production when 85% of the U.S. outer continental shelf and the Arctic National Wildlife Refuge are closed to domestic energy production.
______
Congress will never admit this is a problem they helped create. Instead they will continue to finger point and find fault with Big Oil.
Best Political Commentary Of The Day.
There is nothing worse (to me) than a hypocritical politician. Wait, is there another kind?
David Boaz from Cato writes a great Op-Ed in the WSJ today. Here are my favorite parts...
The people Mr. Obama is sneering at are the ones who built America – the traders and entrepreneurs and manufacturers who gave us railroads and airplanes, housing and appliances, steam engines, electricity, telephones, computers and Starbucks. Ignored here is the work most Americans do, the work that gives us food, clothing, shelter and increasing comfort. It's an attitude you would expect from a Democrat.
Or this year's Republican nominee. John McCain also denounces "self-indulgence" and insists that Americans serve "a national purpose that is greater than our individual interests." During a Republican debate at the Reagan Library on May 3, 2007, Sen. McCain derided Mitt Romney's leadership ability, saying, "I led . . . out of patriotism, not for profit." Challenged on his statement, Mr. McCain elaborated that Mr. Romney "managed companies, and he bought, and he sold, and sometimes people lost their jobs. That's the nature of that business." He could have been channeling Barack Obama.
There is a whiff of hypocrisy here. Mr. Obama, who made $4.2 million last year and lives in a $1.65 million house bought with the help of the indicted Tony Rezko – and whose "elegant suits" and "impeccable ties" made him one of Esquire's Best-Dressed Men in the World – disdains college students who might want to "chase after the big house and the nice suits." Mr. McCain, who with his wife earned more than $6 million last year and who owns at least seven homes, ridicules Mr. Romney for having built businesses.
But hypocrisy is not the biggest issue. The real issue is that Messrs. Obama and McCain are telling us Americans that our normal lives are not good enough, that pursuing our own happiness is "self-indulgence," that building a business is "chasing after our money culture," that working to provide a better life for our families is a "narrow concern."
They're wrong. Every human life counts. Your life counts. You have a right to live it as you choose, to follow your bliss. You have a right to seek satisfaction in accomplishment. And if you chase after the almighty dollar, you just might find that you are led, as if by an invisible hand, to do things that improve the lives of others.
David Boaz from Cato writes a great Op-Ed in the WSJ today. Here are my favorite parts...
The people Mr. Obama is sneering at are the ones who built America – the traders and entrepreneurs and manufacturers who gave us railroads and airplanes, housing and appliances, steam engines, electricity, telephones, computers and Starbucks. Ignored here is the work most Americans do, the work that gives us food, clothing, shelter and increasing comfort. It's an attitude you would expect from a Democrat.
Or this year's Republican nominee. John McCain also denounces "self-indulgence" and insists that Americans serve "a national purpose that is greater than our individual interests." During a Republican debate at the Reagan Library on May 3, 2007, Sen. McCain derided Mitt Romney's leadership ability, saying, "I led . . . out of patriotism, not for profit." Challenged on his statement, Mr. McCain elaborated that Mr. Romney "managed companies, and he bought, and he sold, and sometimes people lost their jobs. That's the nature of that business." He could have been channeling Barack Obama.
There is a whiff of hypocrisy here. Mr. Obama, who made $4.2 million last year and lives in a $1.65 million house bought with the help of the indicted Tony Rezko – and whose "elegant suits" and "impeccable ties" made him one of Esquire's Best-Dressed Men in the World – disdains college students who might want to "chase after the big house and the nice suits." Mr. McCain, who with his wife earned more than $6 million last year and who owns at least seven homes, ridicules Mr. Romney for having built businesses.
But hypocrisy is not the biggest issue. The real issue is that Messrs. Obama and McCain are telling us Americans that our normal lives are not good enough, that pursuing our own happiness is "self-indulgence," that building a business is "chasing after our money culture," that working to provide a better life for our families is a "narrow concern."
They're wrong. Every human life counts. Your life counts. You have a right to live it as you choose, to follow your bliss. You have a right to seek satisfaction in accomplishment. And if you chase after the almighty dollar, you just might find that you are led, as if by an invisible hand, to do things that improve the lives of others.
Tuesday, May 27, 2008
Sunday, May 25, 2008
The Housing Crisis Recap
As with all "crises," there are usually the finger prints of government all over it. The housing crisis is no different. It was government restrictions on building that distorted the market signals that ultimately led to short supply in many coastal markets. The short supply, created by smart growth initiatives in government, drove up the price of homes to levels that were unsustainable with real wage growth.
The financial system based on the proverb of sustainable, consistent growth in home prices was bound to collapse once growth in prices collapsed. There is nothing now that can really be done about this situation until wages and home prices find an equilibrium. That means the solution is ultimately lower home prices, rising wages or some combination of the two.
This disaster should be a lesson to all legislators. While the initiatives may have the best of intentions in the beginning, the unforeseen consequences of government interference in markets always creates a cure that is worse than the original disease.
Here is good piece on the crisis.
The financial system based on the proverb of sustainable, consistent growth in home prices was bound to collapse once growth in prices collapsed. There is nothing now that can really be done about this situation until wages and home prices find an equilibrium. That means the solution is ultimately lower home prices, rising wages or some combination of the two.
This disaster should be a lesson to all legislators. While the initiatives may have the best of intentions in the beginning, the unforeseen consequences of government interference in markets always creates a cure that is worse than the original disease.
Here is good piece on the crisis.
Friday, May 23, 2008
Way to go Neil!
We've got to wake up here, folks. And fast. We have to drill. And we have to drill this simple point through some environmentalists' thick skulls. If we do it now, we can look forward to having it soon. Not real soon, but sooner than if we do nothing at all. Pity is we could have had it much sooner had we explored much earlier. When we had the chance, and the legislation, and the opportunity. But we nixed the chance, and rejected the legislation, and blew an opportunity. Now, we're blowing our future.
Because this isn't about protecting polar bears. This is about protecting us. And our very economic future. Look, I'm not saying oil is the answer. But I know, not getting so much oil from guys who'd sooner wish us dead isn't the answer.
So look for alternatives here. Look at solar here, and wind here, and nuclear here. And yes, look for oil here. But for god's sake, do something here. Because it ain't getting any friendlier there. So here's what stops now. The blame game. The press conference game. The kangaroo court arading oil execs game. The whole "I'm outraged" game. Because you know what? I'm outraged that you, Congress, keep sayin" you're outraged, but don't do a damn thing about it. So stop talking, start doing. Stop blocking, start exploring.
And while you're at it, start looking for the backbone I know you hide. It's just above the ass I know you have.
Watch Neil Cavuto weekdays at 4 p.m. ET on "Your World with Cavuto" and send your comments to cavuto@foxnews.com
Because this isn't about protecting polar bears. This is about protecting us. And our very economic future. Look, I'm not saying oil is the answer. But I know, not getting so much oil from guys who'd sooner wish us dead isn't the answer.
So look for alternatives here. Look at solar here, and wind here, and nuclear here. And yes, look for oil here. But for god's sake, do something here. Because it ain't getting any friendlier there. So here's what stops now. The blame game. The press conference game. The kangaroo court arading oil execs game. The whole "I'm outraged" game. Because you know what? I'm outraged that you, Congress, keep sayin" you're outraged, but don't do a damn thing about it. So stop talking, start doing. Stop blocking, start exploring.
And while you're at it, start looking for the backbone I know you hide. It's just above the ass I know you have.
Watch Neil Cavuto weekdays at 4 p.m. ET on "Your World with Cavuto" and send your comments to cavuto@foxnews.com
Green Initiatives
Donald Boudreaux writes a good column for the Pittsburgh paper today. I tend to agree with him on his two main points. The one that I particularly like though is the idea that people adopt "green" initiatives then these ideas turn into some sort of religion based on no facts.
I think all people should conserve and use fewer resources. If nothing more, it leaves more for our children to use later. However, I also like to save money. So buying a car that uses less fuel is not only green, but also economical. Furthermore, I like paying a smaller electric bill, so we put the thermostat on 78, not 72, or simply leave the windows open when it is nice outside.
Having the government force green initiatives on use is just abuse of power. If people want to reduce their carbon footprint then they should be allowed to make that choice. Maybe products should carbon labels on them so people can make choices just like they do with fat content or calories. If you want a low carbon lifestyle, then you buy those products with low carbon numbers. You might pay MORE for those choices, but they are your choices. I see this working with power. You can choose the high carbon power of coal at low cost, or you can choose the low carbon wind or solar option at high cost.
One thing I know for sure is the government will not make the best choice for all of us. It is simply impossible to do so. So let the market decide. If people on the coasts are worried about rising sea levels, then pay us Kansans to live a "greener" lifestyle so your million dollar homes and beach front condos do not become salt water aquariums. Or may you could move to higher ground both physically and ideologically.
I think all people should conserve and use fewer resources. If nothing more, it leaves more for our children to use later. However, I also like to save money. So buying a car that uses less fuel is not only green, but also economical. Furthermore, I like paying a smaller electric bill, so we put the thermostat on 78, not 72, or simply leave the windows open when it is nice outside.
Having the government force green initiatives on use is just abuse of power. If people want to reduce their carbon footprint then they should be allowed to make that choice. Maybe products should carbon labels on them so people can make choices just like they do with fat content or calories. If you want a low carbon lifestyle, then you buy those products with low carbon numbers. You might pay MORE for those choices, but they are your choices. I see this working with power. You can choose the high carbon power of coal at low cost, or you can choose the low carbon wind or solar option at high cost.
One thing I know for sure is the government will not make the best choice for all of us. It is simply impossible to do so. So let the market decide. If people on the coasts are worried about rising sea levels, then pay us Kansans to live a "greener" lifestyle so your million dollar homes and beach front condos do not become salt water aquariums. Or may you could move to higher ground both physically and ideologically.
Thursday, May 22, 2008
Government to the Rescue again...
Our Federal Government, at the request of a small hanger manufacturer, has imposed a tariff on wire hangers. These are the same wire hangers that dry cleaners use all over the country. Here is the story from NPR.
The Marginal Revolution Blog has this commentary...
The Marginal Revolution Blog has this commentary...
I would assume that most of the employees at M&B Hangers (the company in AL that wanted the tariff) does not pay many of their employees $212,765 per year. Let's assume they make $50K per year with benefits. So where does the other $162,765 go? My guess the owner of M&B Hanger is having a very good year at the cost of all those people that have their clothes dry cleaned. Another classic example of concentrated benefits and dispersed citizen cost.Advocates of trade restrictions often argue that protection will save jobs. Since we can observe price and cost increases associated with trade restrictions, we can estimate how much it costs to save each job in a protected industry. According to the NPR story, there are roughly 30,000 dry cleaners in the U.S., and on average, each pays an additional $4,000 per year due to the hanger tariff. This indicates an average annual cost of 30,000 firms x $4,000 per firm = $120 million. According to the U.S. International Trade Commission's report, U.S. employment in wire hanger manufacturing was 564 workers in 2004 and fell to 236 workers by 2006. Let's assume that employment in this sector would have fallen to zero in the absence of the tariff, and that with the tariff, employment will recover to 2004 levels. In other words, assume the tariff "saves" 564 jobs. Dividing the cost of the tariff to U.S. dry cleaners ($120 million year) by the number of jobs saved (564 jobs) indicates that each job saved costs about $212,765 per year. Keep in mind that the typical full-time worker in this sector earns about $30,000 per year. Even if we assume that industry employment doubles, the cost of the tariff is still roughly $120,000 per job.
Scarier than A Stephen King Novel
Here is a letter written to Congressman Paul Ryan from the CBO. Some snippets from the letter:
How Would Rising Budget Deficits Affect the Economy?
Sustained and rising budget deficits would affect the economy by absorbing funds from the nation’s pool of savings and reducing investment in the domestic capital stock and in foreign assets. As capital investment dwindled, the growth of workers’ productivity and of real (inflation-adjusted) wages would gradually slow and begin to stagnate. As capital became scarce relative to labor, real interest rates would rise. In the near term, foreign investors would probably increase their financing of investment in the United States, which would help soften the impact of rising deficits on productivity in the United States, but borrowing from abroad would not be without its costs. Over time, foreign investors would claim larger and larger shares of the nation’s output, and fewer resources would be available for domestic consumption.
How Would Increasing Income Tax Rates to Finance the Projected Rise in Spending Affect the Economy?
Nonetheless, tax rates would have to be raised by substantial amounts to finance the level of spending projected for 2082 under CBO’s alternative fiscal scenario. With no economic feedbacks taken into account and under an assumption that raising marginal tax rates was the only mechanism used to balance the budget, tax rates would have to more than double. The tax rate for the lowest tax bracket would have to be increased from 10 percent to 25 percent; the tax rate on incomes in the current 25 percent bracket would have to be increased to 63 percent; and the tax rate of the highest bracket would have to be raised from 35 percent to 88 percent. The top corporate income tax rate would also increase from 35 percent to 88 percent. Such tax
rates would significantly reduce economic activity and would create serious problems with tax avoidance and tax evasion. Revenues would probably fall significantly short of the amount needed to finance the growth of spending; therefore, tax rates at such levels would probably not be economically feasible.
How Would Rising Budget Deficits Affect the Economy?
Sustained and rising budget deficits would affect the economy by absorbing funds from the nation’s pool of savings and reducing investment in the domestic capital stock and in foreign assets. As capital investment dwindled, the growth of workers’ productivity and of real (inflation-adjusted) wages would gradually slow and begin to stagnate. As capital became scarce relative to labor, real interest rates would rise. In the near term, foreign investors would probably increase their financing of investment in the United States, which would help soften the impact of rising deficits on productivity in the United States, but borrowing from abroad would not be without its costs. Over time, foreign investors would claim larger and larger shares of the nation’s output, and fewer resources would be available for domestic consumption.
How Would Increasing Income Tax Rates to Finance the Projected Rise in Spending Affect the Economy?
Nonetheless, tax rates would have to be raised by substantial amounts to finance the level of spending projected for 2082 under CBO’s alternative fiscal scenario. With no economic feedbacks taken into account and under an assumption that raising marginal tax rates was the only mechanism used to balance the budget, tax rates would have to more than double. The tax rate for the lowest tax bracket would have to be increased from 10 percent to 25 percent; the tax rate on incomes in the current 25 percent bracket would have to be increased to 63 percent; and the tax rate of the highest bracket would have to be raised from 35 percent to 88 percent. The top corporate income tax rate would also increase from 35 percent to 88 percent. Such tax
rates would significantly reduce economic activity and would create serious problems with tax avoidance and tax evasion. Revenues would probably fall significantly short of the amount needed to finance the growth of spending; therefore, tax rates at such levels would probably not be economically feasible.
Pigs at the trough.
From the Detroit News:
This is what the farm bill will do for sugar growers. So this cartoon is appropriate since the Republican COngressman crossed the line and failed to support the President's veto. Yes Brownback and Roberts voted yea.
Imagine if Michigan's struggling Big Three automakers suddenly struck this
deal with Congress: The U.S. government would buy the Motor City's cars for
roughly twice the world market price, then resell them at about an 80 percent
loss.
This boondoggle of a deal would spur worldwide protest, and rightfully
so.
This is what the farm bill will do for sugar growers. So this cartoon is appropriate since the Republican COngressman crossed the line and failed to support the President's veto. Yes Brownback and Roberts voted yea.
Awful Energy Policy
Terrific Opinion in the WSJ today. Here is a section:
We have an abysmal national energy policy, and as our population grows and our economy expands, energy needs will increase. From 1980 to 2006 America's annual energy usage increased from 78 to 100 quadrillion British thermal units, and the figure is estimated to grow to 118 quadrillion BTUs by 2030. If our regressive energy production policies continue when the next administration takes office, our economy and the personal lives of Americans will be severely affected.
We have failed to increase our country's crude oil production. Domestic oil production has declined, to 1.9 billion in 2007 from 3.1 billion barrels in 1980, while imports increased to 3.7 billion barrels from 1.9 billion. We now importing about 60% of the oil we use.
One reason for the imports is that our public policy has forbidden offshore oil drilling for much of the estimated 85 billion barrels of recoverable oil and 420 trillion cubic feet of natural gas (an 18-year supply) that are on the Outer Continental Shelf, and another 10 billion barrels of oil in Alaska. Together they could replace America's imported oil for about 25 years, but the first President Bush issued a directive forbidding access to a significant portion of the Outer Continental Shelf. President Clinton extended the restriction through 2012 and vetoed legislation that would have allowed drilling in Alaska.
We have an abysmal national energy policy, and as our population grows and our economy expands, energy needs will increase. From 1980 to 2006 America's annual energy usage increased from 78 to 100 quadrillion British thermal units, and the figure is estimated to grow to 118 quadrillion BTUs by 2030. If our regressive energy production policies continue when the next administration takes office, our economy and the personal lives of Americans will be severely affected.
We have failed to increase our country's crude oil production. Domestic oil production has declined, to 1.9 billion in 2007 from 3.1 billion barrels in 1980, while imports increased to 3.7 billion barrels from 1.9 billion. We now importing about 60% of the oil we use.
One reason for the imports is that our public policy has forbidden offshore oil drilling for much of the estimated 85 billion barrels of recoverable oil and 420 trillion cubic feet of natural gas (an 18-year supply) that are on the Outer Continental Shelf, and another 10 billion barrels of oil in Alaska. Together they could replace America's imported oil for about 25 years, but the first President Bush issued a directive forbidding access to a significant portion of the Outer Continental Shelf. President Clinton extended the restriction through 2012 and vetoed legislation that would have allowed drilling in Alaska.
Tuesday, May 20, 2008
If you love it, you owe it to capitalism.
The transcript of this speech by the President of The Mises Institute is fantastic. Here are some key excerpts:
I'm sure that you have had this experience before, or something similar to it. You are sitting at lunch in a nice restaurant or perhaps a hotel. Waiters are coming and going. The food is fantastic. The conversation about all things is going well. You talk about the weather, music, movies, health, trivialities in the news, kids, and so on. But then the topic turns to economics, and things change.
You are not the aggressive type so you don't proclaim the merits of the free market immediately. You wait and let the others talk. Their biases against business appear right away in the repetition of the media's latest calumny against the market, such as that gas station owners are causing inflation by jacking up prices to pad their pockets at our expense, or that Wal-Mart is, of course, the worst possible thing that can ever happen to a community.
You begin to offer a corrective, pointing out the other side. Then the truth emerges in the form of a naïve if definitive announcement from one person: "Well, I suppose I'm really a socialist at heart." Others nod in agreement.
On one hand there is nothing to say, really. You are surrounded by the blessings of capitalism. The buffet table, which you and your lunch partners only had to walk into a building to find, has a greater variety of food at a cheaper price than that which was available to any living person — king, lord, duke, plutocrat, or pope — in almost all of the history of the world. Not even fifty years ago would this have been imaginable.
All of history has been defined by the struggle for food. And yet that struggle has been abolished, not just for the rich but for everyone living in developed economies. The ancients, peering into this scene, might have assumed it to be Elysium. Medieval man conjured up such scenes only in visions of Utopia. Even in the late 19th century, the most gilded palace of the richest industrialist required a vast staff and immense trouble to come anywhere near approximating it.
We owe this scene to capitalism. To put it differently, we owe this scene to centuries of capital accumulation at the hands of free people who have put capital to work on behalf of economic innovations, at once competing with others for profit and cooperating with millions upon millions of people in an ever-expanding global network of the division of labor. The savings, investments, risks, and work of hundreds of years and uncountable numbers of free people have gone into making this scene possible, thanks to the ever-remarkable capacity for a society developing under conditions of liberty to achieve the highest aspirations of the society's members.
And yet, sitting on the other side of the table are well-educated people who imagine that the way to end the world's woes is through socialism. Now, people's definitions of socialism differ, and these persons would probably be quick to say that they do not mean the Soviet Union or anything like that. That was socialism in name only, I would be told. And yet, if socialism does mean anything at all today, it imagines that there can be some social improvement resulting from the political movement to take capital out of private hands and put it into the hands of the state. Other tendencies of socialism include the desire to see labor organized along class lines and given some sort of coercive power over how their employers' property is used. It might be as simple as the desire to put a cap on the salaries of CEOs, or it could be as extreme as the desire to abolish all private property, money, and even marriage.
_____
What alarms me about the above piece is that our leading Democratic candidates, and maybe even the Republican to some extent, are leading America down the path of socialism. A system where the State controls the means of production, restricts property rights, takes power from the people then creates bigger bureaucracies. Many people will want to down play the dramatic tone of the above piece, but if we are not careful we will end up down a path to destruction in which we can not return. It is happen to every great society the planet has ever known. There is no utopia, only capitalism.
I'm sure that you have had this experience before, or something similar to it. You are sitting at lunch in a nice restaurant or perhaps a hotel. Waiters are coming and going. The food is fantastic. The conversation about all things is going well. You talk about the weather, music, movies, health, trivialities in the news, kids, and so on. But then the topic turns to economics, and things change.
You are not the aggressive type so you don't proclaim the merits of the free market immediately. You wait and let the others talk. Their biases against business appear right away in the repetition of the media's latest calumny against the market, such as that gas station owners are causing inflation by jacking up prices to pad their pockets at our expense, or that Wal-Mart is, of course, the worst possible thing that can ever happen to a community.
You begin to offer a corrective, pointing out the other side. Then the truth emerges in the form of a naïve if definitive announcement from one person: "Well, I suppose I'm really a socialist at heart." Others nod in agreement.
On one hand there is nothing to say, really. You are surrounded by the blessings of capitalism. The buffet table, which you and your lunch partners only had to walk into a building to find, has a greater variety of food at a cheaper price than that which was available to any living person — king, lord, duke, plutocrat, or pope — in almost all of the history of the world. Not even fifty years ago would this have been imaginable.
All of history has been defined by the struggle for food. And yet that struggle has been abolished, not just for the rich but for everyone living in developed economies. The ancients, peering into this scene, might have assumed it to be Elysium. Medieval man conjured up such scenes only in visions of Utopia. Even in the late 19th century, the most gilded palace of the richest industrialist required a vast staff and immense trouble to come anywhere near approximating it.
We owe this scene to capitalism. To put it differently, we owe this scene to centuries of capital accumulation at the hands of free people who have put capital to work on behalf of economic innovations, at once competing with others for profit and cooperating with millions upon millions of people in an ever-expanding global network of the division of labor. The savings, investments, risks, and work of hundreds of years and uncountable numbers of free people have gone into making this scene possible, thanks to the ever-remarkable capacity for a society developing under conditions of liberty to achieve the highest aspirations of the society's members.
And yet, sitting on the other side of the table are well-educated people who imagine that the way to end the world's woes is through socialism. Now, people's definitions of socialism differ, and these persons would probably be quick to say that they do not mean the Soviet Union or anything like that. That was socialism in name only, I would be told. And yet, if socialism does mean anything at all today, it imagines that there can be some social improvement resulting from the political movement to take capital out of private hands and put it into the hands of the state. Other tendencies of socialism include the desire to see labor organized along class lines and given some sort of coercive power over how their employers' property is used. It might be as simple as the desire to put a cap on the salaries of CEOs, or it could be as extreme as the desire to abolish all private property, money, and even marriage.
_____
What alarms me about the above piece is that our leading Democratic candidates, and maybe even the Republican to some extent, are leading America down the path of socialism. A system where the State controls the means of production, restricts property rights, takes power from the people then creates bigger bureaucracies. Many people will want to down play the dramatic tone of the above piece, but if we are not careful we will end up down a path to destruction in which we can not return. It is happen to every great society the planet has ever known. There is no utopia, only capitalism.
Monday, May 19, 2008
The Free Trade Paradox
James Surowieki wrote a very good piece on free trade. While I am certainly an advocate for open borders when it comes to matters of trade, there is no doubt some in the economy who lose in the deal. However, on the whole, the country is better and so are our trading partners.
The issue this election cycle should not be to shut down free trade, but how to integrate displaced American workers. Tax credits for businesses that hire displaced workers, moving incentives from States with unfilled roles (see Odessa, Texas), and other put-people-to-work programs are what is needed to help the unemployed. More food stamps and welfare is not the answer to greater prosperity.
Bashing free trade and stoking fears and low wage countries plays much better in the papers and media than does actually getting people back to work. Unfortunately it does not look like either Democrat is terribly interested in doing what is best for people.
Any way, the article is worth the read.
Surowiecki Article
By the way, this is the same guy that wrote The Wisdom of Crowds which is an excellent book.
The issue this election cycle should not be to shut down free trade, but how to integrate displaced American workers. Tax credits for businesses that hire displaced workers, moving incentives from States with unfilled roles (see Odessa, Texas), and other put-people-to-work programs are what is needed to help the unemployed. More food stamps and welfare is not the answer to greater prosperity.
Bashing free trade and stoking fears and low wage countries plays much better in the papers and media than does actually getting people back to work. Unfortunately it does not look like either Democrat is terribly interested in doing what is best for people.
Any way, the article is worth the read.
Surowiecki Article
By the way, this is the same guy that wrote The Wisdom of Crowds which is an excellent book.
The Disaster Our Politicians Created.
According to the USA Today article this morning, the US now has obligations in excess of $57.3 Trillion, up $2.5 Trillion from last year. This is $531,000 for every man, woman and child in the USA. These obligations include Social Security, Medicare, Veterans benefits, Government pensions, and government debt.
This is not a Republican or Democrat issue. Both parties are equally culpable in this disaster. Unfortunately it might be too late to do anything about it. One thing is for certain though, the payments people were expecting in the future will have to be cut if we are to be saved. This means lower social security payments, less care with Medicare, cuts in Veterans programs, and lower government pensions. Congress will have to cap the budget and spend much more frugally if future generations are to enjoy prosperity. There is absolutely no way we can tax future generations enough to cover this short fall. We should all be very alarmed and hold our existing politicians accountable.
Bill for taxpayers swells by billions
This is not a Republican or Democrat issue. Both parties are equally culpable in this disaster. Unfortunately it might be too late to do anything about it. One thing is for certain though, the payments people were expecting in the future will have to be cut if we are to be saved. This means lower social security payments, less care with Medicare, cuts in Veterans programs, and lower government pensions. Congress will have to cap the budget and spend much more frugally if future generations are to enjoy prosperity. There is absolutely no way we can tax future generations enough to cover this short fall. We should all be very alarmed and hold our existing politicians accountable.
Bill for taxpayers swells by billions
Sunday, May 18, 2008
ONE Reason to Vote for B Hussein
We will get to rock bottom faster so Congress will have to make reforms or the irrational voting public will finally oust their own representatives. In fact, it might only take half a term in office before the angry mobs force B Hussein to resign after he makes friends with Hamas, Syria, and Iran then force the economy into a deep recession with high taxes, large income redistribution programs, and the debt coming from the hundreds of billions he has promised as part of his change campaign.
How Does Your Candidate Rank?
The Club For Growth has published the voting record of all House and Senate members and how their record stacks up to pro-growth positions on issues.
B Hussein and Billary came in at a tie for 97th. McCain was not ranked, but did vote pro-growth 94% of the time. As for B Hussein and Billary, they never voted pro-growth.
As for Kansas, Pat Roberts continues to be an embarassment as he was ranked 32nd with a 57% pro-growth record. Brownback was better at 15th and 82% pro-growth vote.
See are the results here.
B Hussein and Billary came in at a tie for 97th. McCain was not ranked, but did vote pro-growth 94% of the time. As for B Hussein and Billary, they never voted pro-growth.
As for Kansas, Pat Roberts continues to be an embarassment as he was ranked 32nd with a 57% pro-growth record. Brownback was better at 15th and 82% pro-growth vote.
See are the results here.
Friday, May 16, 2008
Good Article and Good Comments
Smart Money's Donald Luskin writes a good column today. It concisely says what I think I think.
Reaganomics in Retreat
Reaganomics in Retreat
Subscribe to:
Posts (Atom)
