Maybe.

The U.S. economy grew last quarter at the slowest pace in more than four years, a 0.6 percent annual rate that may prove to have been the low point of the expansion.

The gain in gross domestic product, announced by the Commerce Department today in Washington, was lower than the 0.8 percent rate economists had forecast, and less than the government's previous 1.3 percent estimate. A private report from Chicago today showed a jump in business activity, while figures since the end of March show a rebound in corporate spending and consumer confidence.

Traders further reduced bets that Federal Reserve Chairman Ben S. Bernanke will need to cut interest rates this year. The prospect of a recession, given a one-in-three chance by former Fed Chairman Alan Greenspan, looks less likely as business investment and manufacturing strengthen.

The reports "signify a clearing of the decks for a better performance going forward,'' said Carl Tannenbaum, chief economist at LaSalle Bank in Chicago and president of the National Association for Business Economics.

So why would a weak report do this? Because of the nature of the revision.

The preliminary estimate of the first-quarter increase in real GDP is 0.7 percentage point, or $17.4 billion, lower than the advance estimate issued last month. The downward revision to the percent change in real GDP primarily reflected a downward revision to private inventory investment and an upward revision to imports that were partly offset by an upward revision to personal consumption expenditures.

Businesses offloading inventories while consumers are spending more is likely to lead to more economic activity going forward. Indeed, it may already be happening. So far, those concerned about the end of the "home ATM" have yet to be proven right, but it's still early.

Labels: economics

True to his word, Governor Tim Pawlenty did execute the veto on the tax bill last night. He put the blame right onto the DFL leadership in his veto message:

I am very supportive of many of the tax provisions in the bill such as increases in direct property tax relief to homeowners, sales tax exemptions for agriculture products, acceleration of the single sales factor for corporate income tax and the increase in the military combat credit.

Unfortuanately, the bill contains a policy provision that would put government growth on autopilot. I was very clear in communicating my opposition to this measure. DFL leadership and staff were aware prior to the end of the session that its inclusion would result in the entire bill being vetoed. This provision could have been removed from the bill prior to final passage, but DFL leadership made a different choice.

When legislators and the Governor assemble the state budget, we shouldn't assume that every program should automatically grow. We need to examine every taxpayer dollar that will be spent and ensure that we are streamlining and keeping government efficient and effective. ... Each program should be evaluated on its merits and the overall growth in the budget should reflect that type of approach rather than assuming autopilot increases.

I've stated a couple of times here and here why I opposed the inflation provision, but let me add one more reason, and perhaps explain why the DFL was willing to risk a lot on getting it in the bill.

It is the Dept. of Finance and the state economist, currently Tom Stinson, who create the forecast. In it they have to forecast various macroeconomic phenomena for the state economy that drive the tax base. Once you know the various tax bases, you can generate a revenue forecast. The rule is, if we do nothing and the economy does what the forecast says, here's the revenue we will receive. This is a mechanical exercise, requiring nobody to make a judgment. Judgment eventually comes into play when the state's Council of Economic Advisors sit down with the state economist and the forecasters, and they argue over whether the forecast (which is bought from a national private forecasting firm) meets their expectations of the economy. The forecasting firm has different scenarios, and the council can advise which of those they think are most likely. The forecasted surplus or deficit is then that number subtracted from current spending.

It is rare that someone in the Legislature questions the forecast, which I think is remarkable. A friend tells me that there were questions during the early 1980s, and that may be some of the reason why the current set-up is what it is.

What the inflation factor does is put a group of economists -- state employees trying to provide good economic information -- in the position of deciding how much money will be spent next year to provide each department the capacity to provide the same level of services they do now. Are they really in a position to make that decision? No. And that decision is at its base a political one, and it's why we elect representatives.

So why would the DFL really want this? The answer is rather apparent -- having someone else say there's a deficit to fund current level of expenditures allows them to avoid responsibility for raising spending themselves. This is the most disingenuous line offered in the debate, from the most likely source:

Senate Majority Leader Larry Pogemiller, DFL-Minneapolis, said estimating inflation doesn’t require lawmakers to actually give those increases to every program. But he said government shouldn’t be able to hide rising costs.

Set aside that inflation isn't estimated -- it's a forecasted number that you put on ad hoc. More important, it is the responsibility of government to accept that it has been unable to control costs. To put this onto the budget not only makes government bureaucrats complicit in increasing the cost of government, it removes any incentive for state departments to become more efficient.

Gary awards the Governor the Vezina Trophy (God help me, I've had to learn more about hockey this year than I ever wanted to know). TvM's First Ringer has also pointed out that this veto cuts off for a time an increase in the dosage of LGA to the tax dollar addicts in local government:

The measure makes about as much sense as feeding the crocodile your foot in hopes he won’t take your leg and historically hasn’t worked to reduce local government demand for funding and lower property taxes. Instead, cities which have received higher amounts of LGA per capita also spent significantly more per capita than those cities that have been budgeted less. This has remained steady even with a 2003 revision that made LGA need-based and not simply ”grandfathered in” spending. Even with this change, LGA still has unfortunately provided some cities (half the citizens of Minnesota don’t recieve LGA) the ability to spend past the median and average on all services, essential or not. Meaning for the heavy DFL core cities, Pawlenty’s veto was an immediate call for tax increases...

Ringer hopes that Pawlenty will not succumb to calls for a special session now -- even from some Republicans who should know better -- as he holds the high ground. I agree, even if it costs me lunch.

Labels: legislature, Minnesota, Pawlenty

In previous posts I mentioned college graduation ceremonies I attended, three in a period of three weeks: a public university in Minneapolis; a small Lutheran University in Thousand Oaks, CA; Marquette University in Milwaukee. Also mentioned were the audience response, the preponderance of female graduates (and the dirth of male graduates), and miscellaneous items. This post will review the speakers.

The first speaker, Ms. Tene' Wells worked for 20 years at Honeywell and Medtronic, major employers in the Twin Cities in MN. Currently she is president of Women Venture, a nonprofit women's economic development agency in St. Paul. Her address focused on the continued discrimination against women and people of color.

The second speaker, Ms. Audra Strickland, an Assembly woman from the 37th District in CA was the best of the three. She reviewed the story of the movie "Amazing Grace" and its hero, William Wilberforce, the man who worked 18 years to get the British government to stop the British slave trade. The Brits did and eventually blockaded all African ports effectively stopping all African slave trade, period. Ms. Strickland focused on goals and an awareness that if you believe in something, though it may take time, it can be achieved.

At Marquette, the main speaker was the clever and witty, recently retired writer from Sports Illustrated, Steve Rushin. His talk was entertaining but he had to include the college story of dropping Mexican food in a rain puddle, picking it up, returning to his room and drying his burito on the radiator. Though minor, he also had to poke fun at President Bush. He did say that his father told him once he graduated (from Marquette) the "bank of Dad" was closed. He was enjoyable but what was the message?

Nowhere in any of these talks were students reminded of the opportunities in the US, the freedom to choose what one can do, to think and say various opinions without fear of being thrown in jail and tortured. Have we dumbed down our curriculum, eliminated so much teaching of our history that we no longer have the perspective of how good things are? Except for Ms. Strickland, most of the speakers focused on themselves or what is wrong instead of the incredible advantages and responsibilities that still exist here and not anywhere else.

There will always be jerks, people who discriminate, lie, cheat, steal, avoid reality and look for the negative. But wouldn't it be nice if universities actually taught pride in what we have accomplished as a nation, what benefits we have rather than focusing solely on our warts? It is unlikely the graduation speakers have any clue as to how bad things are in so many places on the planet. And the students, why should they be optimistic when all they hear is what is wrong? The other side is that there also will always be people who work honestly, have ideas and create a better world for so many.

If we continue to emphasize only what is wrong, things won't change and people will get stuck where they are. People need dreams, encouragement, a belief that life can and does get better. Therefore, we need to recall, repeat, and emphasize what a great nation we are. Only then, can we help others achieve the freedoms and opportunities we take for granted.

We Americans pride ourselves on our ability to assimilate various cultures. We are not multi-cultural but we are multi-ethnic and each subset brings its own flavor to the table.

Tonight my husband and I had dinner in a local Mexican restaurant, nothing fancy, just a nice family place. What struck us was this: here we are enjoying Mexican food, listening to a Mexican trio play and sing not only Mexican ballads but also Italian love songs and best of all, "Roll Out the Barrel" polka plus a few others. Only, only in America!!

I got several emails over the last couple of days about Christopher Hayes critique of economists at the AEA and the discussion it's spawned at TPMCafe. I was going to write something else earlier today but reading Paul Krugman gives me at least one shortcut.

...I'd like to warn against an error I think both sides tend to fall into: assuming that you have to use heterodox economics to reach conclusions critical of free markets. As I said, both sides tend to fall into that error: the heterodoxishly-minded bash neoclassical economics because they claim that it automatically makes you a defender of capitalism red in tooth and claw, and the free-marketeers reject warnings about markets gone wrong as somehow necessarily reflecting ignorance of economic theory. It just ain't so.

There are opinions I hold based on empirical evidence I've seen and others I hold as a matter of ethics. Taking from the rich and giving to the poor through force is theft, and solving a utility maximization problem to show that society has more utils after theft isn't going to persuade me to vote for redistribution. But just as Krugman says he was persuaded after looking at the data to change his views on the effects of trade on income distribution, many of us were persuaded that the Washington Consensus was wrong not by some new theory, but just by watching it in practice and finding the results far short of the promises. (Not convinced we could have done better, just that we oversold it.)

Ezra Klein also gets it:

There's no doubt that economics, like any other profession, has its sacraments, protects it orthodoxies, and exhibits group-think -- but those tendencies have, in my read, manifested more in the emphasis of certain conclusions over others (free trade boosterism over Dani Rodrik and Alan Blinder style concerns) than in the entire profession hewing to an outdated and insufficient intellectual framework. I'd be willing to believe differently, but I'm not seeing the proof. The profession actually seems quite flexible and adaptive when you dig into it. It's the public face which is somewhat less expressive.

What orthodox or any-other-dox economics provides you is a prism to ask the first question of inquiry: Is it true? Thus Craig Newmark can take a paragraph of Hayes and regard it as not fitting what the received literature tells us. That causes one to doubt some of the rest of what Hayes has done. But it's not that Craig's or my minds couldn't be changed by evidence to the contrary.

Thus I'm glad when my friends ask questions and are patient enough to let me expand my answer -- the quick public statement is seldom enough to get people to understand.

Evidence of Klein's sacraments, orthodoxies and group-think comes in both surveys (I still refer to Frey et al. [1984]; see also Whaples [2006]) or studies of how famous economists come to be (much of the work by David Colander, for example). Economists disagree on climate change but I doubt more than the public as a whole. We disagree on solving Social Security, but again that is an empirical issue; we know the ground rules of what constitutes a solution but haven't yet found it.

I think the most telling thing about the differences economists have from the public is in looking at how we score them on their economic knowledge. Only a handful of economists would view these results as anything other than a big problem. Of that handful, how many are heterodox?

Part of the issue is simply sorting. Frey, Pommerehne and Gygi [1993] found that students who ended up studying advanced economics were more likely to believe that a price rise caused by increasing demand was fair, compared to those who just took an intro class or those who never studied economics. Other studies (like Whaples [1995]) argue that attitudes change as one learns more economics. I think both probably are true. Perhaps because women are less inclined to support globalization do we find economics still a majority-male profession.

(In re that last link, a female friend I sent it to contends globalization increases the competition for men in industrialized countries. There are mail-order brides, but no mail-order grooms. That would mean women in developing countries should be pro-free trade; we should see a reverse pattern in males. This, my friends, is a testable hypothesis. Get to it.)

But as to heterodox economics per se, I'm left with the conclusion someone else drew (that I can't find right now but know it isn't my original thought): It would be nice to have a discussion with someone who knows neoclassical economics and has rejected it. The problem is many heterodox economists I meet are simply unaware of the details of neoclassical economics. And I'd agree that the reverse is true too.

Labels: economics

Brad DeLong wonders why more people don't go to college, when the college premium has risen to 90% from 30%. A commenter on Daniel Drezner's blog on the same subject wonders if some of that is explained by the premium's capture by colleges through higher tuition. But it can't be all. And I note just from watching #1 and his friends that the decision to delay college comes much easier these days. Casual empiricism, sure, but it's a mindset I don't recall seeing in my younger days.

Labels: economics, higher education

The latest St. Paul Legal Ledger contains an op-ed by Phil Krinkie of the Taxpayers League.

The 2007 [Minnesota Legislative] Session can best be described in the scenario of a child peering into a large plate glass window of an enormous candy store. Thechild's mouth waters at the sight of the many tempting treats. The child then darts through the doorway - first to the chocolates, then the lemon drops, hot cinnamons and of course gummy bears, loading up onvirtually every type of candy in the store.

Finally the child heads toward the check out counter to pay for their cache of goodies. As the clerk starts to total up the cost of the child's ambitious desires, the child's eyes start to widen as well as sadden with the ever growing total. When the clerk finally rings up all the desired purchases and presents the child with a total, there's a gulp and a long pause.

The child looks up at the clerk and softly admits that they don't have enough money in their piggy bank to cover their "planned" purchases. The clerk with a stern voice suggests that they return some of the candy to the shelves, picking only a few items. But rather than wanting to make some choices, the child then asks the clerk if perhaps they could cut a deal. The clerk looks back at the child and explains - NO DEAL! Recognizing that it was a lost cause, the child then decides to reduce their desires and puts back a significant portion of their selected candies. After completing their purchase and leaving the store, the child then tells all of his or her friends what a big meany the store clerk is at the candy shop.

Displaying a child-like attitude to the property of others is evident as well in this report on Hillary Clinton's speech at the Manchester (NH) School of Technology in my home town:

The Democratic senator said what the Bush administration touts as an ownership society really is an "on your own" society that has widened the gap between rich and poor.

"I prefer a 'we're all in it together' society," she said. "I believe our government can once again work for all Americans. It can promote the great American tradition of opportunity for all and special privileges for none."

Let's set aside the inconvenient truth that the rising gap occurred during her husband's administration as well as the two surrounding it. What is truly shocking is to say, at a technical skill where students are investing in their own human capital,

We have sent a message to our young people that if you don't go to college ... that you're thought less of in America. We have to stop this.

This isn't even a liberal position. It is a perverse position that somehow you don't get to have greater income after you invest in your own skills. You are not entitled to the rewards of your own hard work in college.

If the point is that we should invest more in alternatives to college, we agree, but pretending that a technical college education and an Ivy education are equivalent or somehow shouldn't be differentially rewarded is just nuts. You cannot "stop this", because "this" is reality.

It is this inability to see tradeoffs, or as Thomas Sowell once called it, "the vision of the anointed", that creates both the MnDFL legislators and Mrs. Clinton. Robert George, reviewing Sowell's book by that title,

"The crucial role of vision," Sowell argues, "is that it enables a vast range of beliefs to be regarded as presumptively true until definitively disproved by unchallengeable evidence." Liberals --or, to use Sowell's disparaging label, "the anointed" -- view the world as "a very tidy place," where "prescient politicians can 'invest' tax dollars in 'the industries of the future,' where criminals can be 'rehabilitated,' irresponsible mothers taught 'parenting skills,' and where all sorts of other social problems can be 'solved."' All this is possible, as liberals see things, because human nature, as a "social construct," is far more malleable than most people imagine. Thus, in the vision of the anointed, "there is obviously a very expansive role for government and for the anointed in prescribing what government should do."

Sowell contrasts the vision of the anointed with "the tragic vision" of conservatives. What is "tragic" about this vision is that it assumes that problems such as crime, poverty, and irresponsibility cannot finally be "solved." Conservatives, recognizing that "there are no solutions, only trade-offs," do not go in for grand schemes to put an end to poverty, for example, or make health care a fundamental right, or pursue what Sowell derisively calls "cosmic justice." It is not that conservatives are happy that some people are poor, or without health insurance, or whatever. Nor, for that matter, are they complacent about it. Rather, they realize that liberal schemes to eradicate these evils a) never work, and b) inevitably impose huge social costs of their own.

Conservatives are meanies because they, like the store clerk, make the reality of tradeoffs real.

Labels: education, legislature

Google, search engine extraordinaire, brain trust magnifique, search engine for the world refused to adapt its logo for the American Memorial Day, May 28. After receiving multiple customer complaints about not doing anything for Memorial Day, Google responded that it took too much programming to do such a thing for one day. They also mentioned that they make only small adornments to their logo for other holidays.

Thanks to Little Green Footballs one can see that Google actually did a Memorial Day Google equivelent logo for Australia, Canada and England for years. Frankly, it's just adding a flag or a poppy. Why do they design a Google logo for other countries but not for their own?

Remember, this is the same Google that refused to work with the US government to identify high traffic terrorist websites (not individual users) but as soon as the Chinese government told Google it wanted Google to track individual users in China, Google capitulated to the Chinese government. Why do American companies exercise their "freedom of speech" and anti-government practices in the USA but let repressive governments tell them what to do?

I got fooled completely by the title of Richard Cohen's editorial. I thought he meant this neoliberalism. (Or, better, this.) That neoliberalism barely survived three months in Iraq postwar; while the Bush Administration continues to pay lip service to it, it still has a long way to go (take for example this piece by Austin Bay.)

I agree with Captain Ed that I would call Bush more liberal than most GOP front-liners. There has not been a veto of a spending bill, and the Dept. of Education grows larger and more powerful by the day. But I'd dissent from Ed here:

Iraq, as I have noted, is not an exercise in conservatism either. It is an expressly Wilsonian project, attempting to make the world safe for democracy by transforming the Middle East. The conservative strategy would have been to topple Saddam and leave the Iraqis to figure out the rest -- but that would have left vast oil resources in the hands of the strongest factions able to grasp power in the vacuum left behind. Instead, Bush and his team decided to attack terror by kicking out the struts that prop it up -- the oppression and despair in the Muslim world created by kleptocracies and mullahcracies in the region.

As Peter Berkowitz notes in his op-ed in today's WSJ, there's more than one strand of conservatism, and one of them is the neoliberal impulse I linked in that first paragraph. Applied to Iraq, it would have meant pension reform, privatization, reducing tariffs, and the promotion of private property rights in the country. Recognizing that markets are needed to efficiently allocated goods and services, the need for individual freedom and the constraints of imperfect information have all at various times been part of the Bush strategy, and those are conservative or, more correct, classical liberal principles. Berkowitz notes one type of split...

The split among conservatives has widened since Saddam was toppled in the spring of 2003. Traditional realists continue to put their trust in containment, and reject nation-building on the grounds that we lack both a moral obligation and the requisite knowledge of Arabic, Iraqi culture and politics, and Islam. Supporters of the war still argue that, in an age of mega-terror, planting the seeds of liberty and democracy in the Muslim Middle East is a reasonable response to the poverty, illiteracy, authoritarianism, violence and religious fanaticism that plagues the region.

...but there are others, which he blames on a lack of education about the conservative movement.

[I]n America ... conservatism has always revolved around the preservation of individual liberty. Of course modern conservatism generally admires virtues embodied in religious faith and the aristocratic devotion to excellence. It also tends to emphasize the weaknesses of human nature, the ironies and tragedies of history, and the limitations of reason and politics. At the same time, it wishes to put these virtues and this knowledge in liberty's service.

Balancing the claims of liberty and tradition, or showing how liberty depends on tradition, is the very essence of modern conservatism, ... The divisions within contemporary American conservatism--social conservatives, libertarians, and neoconservatives--arise from differences over which goods most urgently need to be preserved, to what extent, and with what role for government.

The varieties of conservatism are poorly understood today not only because of the bitterness of current political battles but also because the books that have played a key role in forming the several schools go largely untaught at our universities and largely unread by our professors. Indeed, perhaps one cause of the polarization that afflicts our political and intellectual class is the failure of our universities to teach, and in many cases to note the existence of, the conservative dimensions of American political thought.

Cohen, from a previous generation, may have read Hayek, Kirk and Strauss, but most of the left today -- and, sadly, much of the right -- have never been given a chance to grapple with the meaning of these texts. What would a course in democratic citizenship look like if they had?

Labels: higher education, politics

In the local morning paper a writer complained in an op-ed that somehow the DFL was thwarted from its rightful duty to raise taxes.

A climactic political battle was waged at the state Capitol a week ago. An electorally expanded DFL army and a GOP Delta Force squared off in the House chamber as the minutes ticked by toward a deadline.

...During this frenzy, the transportation veto appeared on the speaker's desk courtesy of the governor's office. With the override vote called, a handful of turncoat legislators who had supported the 5-cent gas tax hike originally scurried back to their GOP fox holes and the veto was sustained.

What Dr. Ohmann fails to remember is that the veto is needed to protect us from the tyranny of the majority. Katherine Kersten reminds us today,

Turn back to the scene just after the Revolutionary War. The American people were not about to give significant power to state governors. They had just thrown off one king - with his often-hated colonial governors - and the last thing they wanted was another. Instead, they placed their trust in "the people." In the new nation, the law would be whatever 51 percent of the people's elected representatives decided it was.

But "the people" can be despots too, as Americans quickly discovered. State legislatures across the country began confiscating property, enacting wild paper money schemes and adopting various schemes to suspend the ordinary means for recovering debts. When the people exercise unchecked power, a new kind of tyranny is born. John Adams labeled it "democratic despotism." A popular assembly "under the bias of anger, malice or a thirst for revenge, will commit more excess than an arbitrary monarch," a frustrated legislator wrote in 1783.

In response, when Massachusetts adopted a new constitution in 1780, it added a veto for the governor, with a provision that the legislature could override the veto with a two-thirds majority. Massachusetts' constitution became a model for other states, as well as the federal constitution in 1787.

It became clear during the early days of the Republic, and thus during the Constitutional Debates Alexander Hamilton argued for the President to have a veto as well. In Federalist #73 he wrote,

The propensity of the legislative department to intrude upon the rights, and to absorb the powers, of the other departments, has been already suggested and repeated; the insufficiency of a mere parchment delineation of the boundaries of each, has also been remarked upon; and the necessity of furnishing each with constitutional arms for its own defense, has been inferred and proved. From these clear and indubitable principles results the propriety of a negative, either absolute or qualified, in the Executive, upon the acts of the legislative branches. Without the one or the other, the former would be absolutely unable to defend himself against the depredations of the latter. He might gradually be stripped of his authorities by successive resolutions, or annihilated by a single vote. And in the one mode or the other, the legislative and executive powers might speedily come to be blended in the same hands. If even no propensity had ever discovered itself in the legislative body to invade the rights of the Executive, the rules of just reasoning and theoretic propriety would of themselves teach us, that the one ought not to be left to the mercy of the other, but ought to possess a constitutional and effectual power of self defense.

Governors in many states have even more power than the President, insofar as they can use the line-item veto. Governor Pawlenty so far has reduced spending by $26,788,000 in five spending bills passed; one can expect a few more millions lopped off the two education bills that he hasn't yet received.

The original tax bill was instructive of the power of the veto, wherein a broad majority of Minnesotans supported the notion of taking money from the successful and giving it to themselves in lower property taxes. This despite the fact that property taxes per capita have fallen since 2000, according to Census data prepared by the Tax Foundation. It's not like there aren't options for property tax relief -- witness Florida, which is trying to pass "the biggest tax break being considered anywhere since California passed Proposition 13." (Link for WSJ subscribers.) To hear the DFL complain, our taxes must be rising at fantastic rates, but in fact at the state level the we're not even in the top 10. Governor Pawlenty in this case provided a bulwark against the tyranny of the majority, which leads Ohmann to whine,

Bottom line: No new revenue for roads, bridges and transit, plus no chance at accessing about $150 million in federal matching funds for highways.

During the preceding 41/2 months, new House Speaker Margaret Anderson Kelliher and other DFLers had led a campaign for all-day kindergarten and medical coverage of all Minnesota children. These high expectations were culled when rendezvousing with the governor was finally accomplished.

This despite the fact that the Legislature was presented a proposal by Pawlenty to use bonds to expand spending by $398 million a year for transportation, but chose to send a lights-on bill for $150 million less because their gas tax failed. Governor Pawlenty had made medical coverage for all children a priority, but the DFL failed to provide sufficient money for that. Such moves, Kersten says, reflect the value of the veto:

The will of the majority can change rapidly, as we've seen here in Minnesota. The veto ensures that dramatic shifts in policy occur only if a broad cross-section of society approves them. In addition, the mere threat of a veto can encourage compromise and push legislators toward the political center.

The battle of the last days of the Legislature were the battle between young and old DFLers, with the new candidates aware of the need to find that center and the old mistaking the electoral results for a call for a dramatic shift.

Labels: legislature, Minnesota

As stated in an earlier post, we attended the Memorial Day Service at Fort Snelling in MN. The crowd was larger than last year and the day, again, memorable.

Three people spoke: Senator Amy Klobuchar, Governor Tim Pawlenty, and Rear Admiral John Crowley, Jr. The admiral spoke of his Coast Guard service and what it means to be a shipmate. His talk was informative and showed the pride he has in the Coast Guard and related military maritime service people.

Senator Klobuchar thanked the vets and noted the reason for the day then proceeded to talk about herself, her political views, and getting the soldiers home. It was obvious someone wrote her speech, which by itself is fine. However, she either is a poor speaker or believed very little of what she said, minus getting our guys home. I have heard her speak before - much better than today. Her key point was that she supported the troops but not the mission. That's like saying I support Amy but not her office as a US Senator nor her role in government. The left does not understand what we are fighting and why, what we have to lose.

On the other hand, Governor Pawlenty thanked the vets, their families, those who gave their lives in past and present wars. He talked about freedom and sacrifice. He spoke of heroics performed by current and prior service people. His entire talk was about the honorees of the day: members of the United States Military Branches. One more key point - freedom is one generation removed from loss of freedom. He got a solid, sustained round of applause.

Personally, I hope all were able to attend a ceremony or at least set aside some time to honor our military. Truly, it is the best ever in every measure: intelligence, talent, skill, empathy, humanitarian behavior. We are one of the very few nations that understand why it is important to fight for freedom. Along with the Brits, Aussies and Canadians (though less as of late), we realize that free societies do more for more people than any other form of governmental structure devised.

Thank you, US soldiers!

Labels: American Heroes

Play the interesting little movie that Steve Conover has put together. Then check out the latest data on multifactor productivity. It's worth noting that multifactor productivity removes two items that can cause increases in output per hour of labor (which I think Conover means by productivity): an increased reliance on capital services per worker to produce output, and increasing skills of workers. Both of these are subject to diminishing returns (when thinking about Conover's point about covering public debt service.) The 1.1% growth of MFP is above the average for the 1980-1995 period, but below the level of the last ten years.

I have never given up the idea that measuring debt service as a function of potential rather than current GDP would be more useful.

Labels: economics

John Palmer, while teaching this summer in England, posted last week about social justice.

One of the papers at the conference I am attending has the phrase "social justice" in the title. Last week, before leaving for the conference, I told my colleagues at The Castle that typically this is just a buzz word/phrase for "condescending paternalistic pinko left-wing elitist interventionism". I'll be very curious to see if the paper fits the mold. I have tight priors that it will.

I haven't heard yet what he though of this particular paper, but he cites Roger Kimball's new essay in the New Criterion on Hayek's The Road to Serfdom, and the willingness of intellectuals to believe beyond all reason that they can build a new society, damn the costs.

Of course, you can’t make an omelet without breaking eggs. But it is remarkable what a large accumulation of eggshells we have piled up over the last century. (And then there is always Orwell’s embarrassing question: “Where’s the omelet?”) I forget the sage who described hope as the last evil in Pandora’s box. Unfair to hope, perhaps, but not inapplicable to that adamantine “faith in a better world” that has always been at the heart of the socialist enterprise. Talk about a hardy perennial! The socialist experiment has never worked out as advertised. But it continually blooms afresh in the human heart—those portions of it, anyway, colonized by intellectuals, that palpitating tribe Julien Benda memorably denominated “clercs,” as in “trahison de.” But why? What is it about intellectuals that makes them so profligately susceptible to the catnip of socialism?

I've answered that mostly by saying intellectuals have a hard time arguing for a moral basis to society. Several years ago Walter Williams made the argument:

If social justice has any operational meaning at all, it is that the purpose of law is to prevent one person from violating another person's fight to acquire, keep, and dispose of property in any manner so long as he doesn't violate another's simultaneously held fights, In other words, laws should be written to prevent force and fraud. Laws that force one person to serve the purposes of another are immoral. These values, expressed in our Declaration of Independence as the unalienable rights to life, liberty, and the pursuit of happiness, guided the framers in the writing of our Constitution and Bill of Rights. Today, our government has become increasingly destructive of the ends it was created to serve. Americans have become increasingly hostile and alien to the liberties envisioned by the framers. We have disregarded the inscription that graces the U.S. Department of Justice: "Where the law ends tyranny begins."

...[L]aws do not determine what is or is not moral conduct. In Nazi Germany, there were laws that required the reporting of a person hiding a Jew. In our country, the Fugitive Slave Act made assisting runaway slaves a crime. In apartheid South Africa, hiring blacks for certain work was illegal. In the former East Germany, assisting people in their efforts to escape to the West was illegal. Would any decent person demand that any of these laws be obeyed? Decent people must always ask: does the law have a moral basis?

But what is the source of the moral basis? For the modern intellectual, Kimball finds, it has to be the intellectual himself. And that misses everything:

The road away from serfdom was to be found by embracing what Hayek called “the extended order of cooperation,” AKA capitalism. In The Wealth of Nations, Adam Smith noted the paradox, or seeming paradox, of capitalism: that the more individuals were left free to follow their own ends, the more their activities were “led by an invisible hand to promote” ends that aided the common good. Private pursuits conduced to public goods: that is the beneficient alchemy of capitalism. Hayek’s fundamental insight, enlarging Smith’s thought, is that the spontaneous order created and maintained by competitive market forces leads to greater prosperity than a planned economy.

The sentimentalist cannot wrap his mind, or his heart, around that datum. He cannot understand why we shouldn’t favor “co- operation” (a pleasing-sounding arrangement) over “competition” (much harsher), since in any competition there are losers, which is bad, and winners, which may be even worse. Socialism is a version of sentimentality. Even so hard-headed an observer as George Orwell was susceptible. In The Road to Wigan Pier (1937), Orwell argued that since the world “potentially at least, is immensely rich,” if we developed it “as it might be developed … we could all live like princes, supposing that we wanted to.” Never mind that part of what it means to be a prince is that others, most others, are not royalty.

The socialist, the sentimentalist, cannot understand why, if people have been able to “generate some system of rules coordinating their efforts,” they cannot also consciously “design an even better and more gratifying system.” Central to Hayek’s teaching is the unyielding fact that human ingenuity is limited, that the elasticity of freedom requires the agency of forces beyond our supervision, that, finally, the ambitions of socialism are an expression of rationalistic hubris. A spontaneous order generated by market forces may be as beneficial to humanity as you like; it may have greatly extended life and produced wealth so staggering that, only a few generations ago, it was unimaginable. Still, it is not perfect. The poor are still with us. Not every social problem has been solved. In the end, though, the really galling thing about the spontaneous order that free markets produce is not its imperfection but its spontaneity: the fact that it is a creation not our own. It transcends the conscious direction of human will and is therefore an affront to human pride.

Socialism, thus, is an expression of sin. Williams notes that liberty is not our normal state of affairs or is fragile. So too did Milton Friedman.

Labels: Hayek

Reported first by the Daily Camera, and reported as well by the CBS affiliate in Denver. The Camera saves the best statement by President Hank Brown for last:

“The record demonstrates that the committees took extraordinary care to consider only the allegations of research misconduct and were not motivated by any desire to punish Professor Churchill for exercising his First Amendment rights...

“Each expressly acknowledged the essential purpose of academic freedom and free speech in the University setting, but recognized that academic freedom does not protect fraudulent scholarship.”

Replies Ward Churchill's lawyer: “We’re done with kangaroo court; we’re getting ready for real court.” This should be fun.

Labels: higher education

Barry Ritholz posts a humorous email of quotes about inflation and other things from 1957. Here are the first six:

(1) "I'll tell you one thing, if things keep going the way they are, its going to be impossible to buy a weeks groceries for $20.00."

(2) "Have you seen the new cars coming out next year? It won't be long when $5,000 will only buy a used one."

(3) "If cigarettes keep going up in price, I'm going to quit. A quarter a pack is ridiculous."

(4) "Did you hear the post office is thinking about charging a dime just to mail a letter?"

(5) "If they raise the minimum wage to $1, nobody will be able to hire outside help at the store."

(6) "When I first started driving, who would have thought gas would someday cost 29 cents a gallon? Guess we'd be better off leaving the car in the garage."

Speaking of that last one, while writing the report I needed to write over the weekend I ran across this data. (Click for the larger graph.) It argues that we really are not spending as much on gas as we did around the second OPEC shock in 1979. We are down to 3% of household expenditures on gasoline versus 4.6% in 1980-81. Who knew?

Labels: economics

This is the beginning of Memorial Day Weekend, the time we all take to honor those who have given their lives for our nation.

It is so easy to get caught up in the negative, often anti-American press messages of the past 35+ years, press written and espoused by a media that is either ridden with guilt over whatever or is mostly incoherent as to why our ancestors and a new generation fought and now fights. Perhaps they are simply ignorant of the pluses of the United States of America, our history and what we have done for the world.

It is my hope that each of you will take the time to thank a soldier, a soldier's family, or visit Fort Snelling National Cemetery in Bloomington. There is a memorial service beginning at 10:00 AM on Monday, May 28. Gates will open at 7:30 AM. If you cannot attend the service, perhaps you can find some time this weekend to pay respects to those who have gone before us. Without their sacrifices, we would not have the freedoms we experience today. Without our current soldiers and veterans, we will not be able to pass on these freedoms to our children and grandchildren.

Many an academic has found himself or herself caught up in university senates where some people will try to jam the process by making incidental and privileged motions, each asserting they and they alone are the experts of parliamentary procedure. I also have sat in several church conferences where pastors pretend to the throne of parliamentarian. I fall prey to this insofar as I have to learn the process myself as chair of college committees and a relatively large department, though in the latter case I almost never need to call on it.

So, just to say in advance, while the forthcoming sounds like I know a lot about parliamentary procedure, don't mistake me for a parliamentarian. All us academics pretend to know procedure better than we do. However, it is helpful that a body like the Minnesota House of Representatives has permanent rules to which you can refer, at least for its actions. Hold onto that point, because we need to review them.

Michael has posted video created by the College Republicans of the remarkable power of the gavel wielded by Margaret Anderson Kelliher on Monday night. In it they make reference to the use of an incidental motion to "call the previous question". Judging by the reactions of the Republicans in the House, it appears that motion is almost never used -- at one time Kelliher says it's been used five times in recent years, though the video's graphic says five times since 1858. I have no idea when the other five times are. But the rule for the previous question exists in the House's permanent rules, and doesn't appear to have been changed in quite some time (i.e., the rule existed when the Republicans were the majority, though they claim not to have used it.) And the protests of Rep. Laura Brod appear to indicate that the Republicans were taken by surprise and not familiar with the rule. For instance, in Rule 3.10 -- of which Brod made a point of referring to the order of motions -- it specifically states that "if the motion for the previous question has been properly made, and if necessary seconded, and the main question ordered, the motion to lay on the table is not in order." Brod had tried to get the main motion -- the gas tax override -- laid on the table after it appears Kelliher had her motion by Tony Sertich and counted her fifteen seconds as required by the rules. If you wanted to derail this thing you could have asked for a call of the House (which ten members can do, and would have required a roll call in advance.)

There's no doubt though that this was premeditated, not only in recognizing Sertich from the speaker's chair -- which she correctly asserts her right to do, though it's pretty clearly out of turn -- and in the very quick finding of her fifteen seconding motions. Sertich's motion was not in the proper form according to the usual parliamentary rules (he doesn't state the previous motion which he is calling) but that's up to Kelliher to enforce or someone to emphasize in a point of order. The video is right in saying the DFL railroaded those bills to a vote.

One other point: Besides the overruling of a motion to lay on the table -- which is a specific rule of the MN House and not a normal rule under Roberts' -- the House is also unusual in that a motion to call the previous question only requires a simple majority there and not a two-thirds requirement as is normal elsewhere (which is why I had to spend time reading the permanent rules, because otherwise the GOP could have simply voted as a bloc to reject the previous question.) It would be in the interest of open debate in the Legislature if the permanent rules were never again allowed to be used in this way, and this could be done simply by having a super-majority requirement for that motion written into the permanent rules. I suggest the GOP make that a legislative priority in the next session along with the other rules stifling debate as I noted a few days ago.

Labels: legislature, Minnesota

I noted Wednesday that I thought the nanny state bill SF 434 was in the first conference report of the omnibus HHS bill that Governor Pawlenty vetoed. In his veto message he did not specifically state opposition to this measure, and as a result, buried in the new HHS bill passed, they've stuck that stinker in as the 17th article, at page 440. This is not subject to line-item veto, though appropriations to it are (but you have to get to pages 491-92 to find those monies.)

Face it, folks, we don't know everything in these bills. The governor's office, thankfully, has staff ready to do such reading.

UPDATE (5/26): Alas, he's signed it and did not veto the money. He did cut almost $15 million out of this huge bill, but not the money for this new invasion into our families.

Labels: legislature, Minnesota

As I think more about this ordering of the bills being delivered to Governor Pawlenty, this appears to be more strategic than secretarial. The arrival of the HHS and State Government bills yesterday, assuming they arrived yesterday, must now be signed or vetoed (or line-itemed) by Saturday. Yet the Governor would not yet have the tax bill or the two education bills, so he again is in the box of being forced to sign them blind to any general budget resolution or the details of about half of state expenditures or what full revenues will be.

Given that the governor has said that he had to veto previous bills because he did not have a comprehensive budget, I wonder how he is supposed to sign these bills? Certainly he has some inkling what is in the ed and tax bills, but as we're finding out, some stinkers are still in the bills that passed with minimal scrutiny (more on this in my next post.)

Is the DFL-led Legislature gaming the governor into signing some bills without having all the information he needs to assess them? Behold these words:

Revisor of Statutes Michele Timmons, who heads the legislative office that compiles bills and sends them to the governor, acknowledged that the process "is taking a little bit longer this year" and that "it's not uncommon for the Legislature to make special presentment requests." Usually the requests are to speed up the job, not slow it down, she added.

She wouldn't comment on whether her staff could have gotten all the bills to the governor this week, but Kelliher said: "I'm sure that technically it would be possible."

I'm not governor, but if I was, I would not reward this behavior.

Labels: legislature, Minnesota, Pawlenty

There's been much ado about Rachel Paulose, the recently appoint US Attorney for the State of Minnesota. The Strib did their best to attack and defame her. Now, however, the Strib's only conservative columnist, Kathy Kersten, sets the record straight.

In Ms. Kersten's column today, she describes the REAL Rachel Paulose. Respected individuals from both political parties comment that Rachel is enormously qualified to perform the job as US Attorney, in spite of her: youth, minority status, and horrors, she's a Christian.

As one reads Ms. Kersten's column, the vast majority of individuals will realize that Ms. Paulose's appointment is warranted and that we are extremely lucky to have a person of her caliber in her position.

It is unfortunate that the media and the Democrat Party will only support minorities and strong women if they are Democrats. This same pattern occurred in the 2006 election - the Republican Congressional candidate for St. Paul's district was Obi Sium, a minority - he got minimal coverage. However, Keith Ellison, the minority Democrat candidate for the Minneapolis Congressional District got all kinds of favorable coverage.

Why?

Labels: StarTribune

Now I really want it vetoed:

The tax bill contains many items Pawlenty supports, including tax breaks for expansions of the Mall of America in Bloomington and Thomson West Publishing in Eagan, a $39 million state guarantee for costs of the 2008 Republican National Convention in St. Paul and tighter tax rules for firms with foreign operations.

But Pawlenty opposes a section that returns projected inflation to the state's official budget forecasts. To eliminate it, he would have to veto the entire bill, because line-item vetoes are allowed only for spending provisions, not policy. He warned legislators before the bill was approved that the inflation provision could bring down the whole measure.

Seriously, in one veto you stop this inflation nonsense and the corporate welfare to Thomson West and MoA? And frankly, Scarlett, I don't give a damn about guaranteeing costs for the RNC. Why does a government have to do that?

Of course, the corporate types will also be pushing for the foreign operations tax veto as well; I think this is as good as dead. $39 mil for the RNC guarantee (which, to be clear, doesn't cost us anything except in very dire circumstances) isn't enough sugar to swallow this lemon.

Labels: inflation, Pawlenty, taxes

I will make my first foray into the Internet radio life this afternoon at 2pm CT, visiting with old friend and fellow NARNian Captain Ed Morrissey on Blog Talk Radio. One of the greatest things that has happened to me in blogging is meeting Ed, and this will be the first time we're on the air together in quite some time (since Final Word began; before that we were a weekly habit.) We'll talk about immigration and the report on the mobility of low-income families with children. The call-in number for listeners is 646-652-4889.

Labels: Media, NARN, Northern Alliance Radio Network

Larry Schumacher does some good shovel work, finding out when the bills passed Monday in the frenetic close of the Legislature will get to the Governor's desk.

Brian McClung, Gov. Tim Pawlenty's spokesman, told the Capitol press corps today that Pawlenty has so far received only the Economic Development budget bill. He got it on Tuesday and must sign or veto it by midnight Friday.

The Health and Human Services and State Government budget bills will arrive Thursday and must be signed or vetoed by midnight Saturday.

The Higher Education and E-12 Education budget bills and the Taxes bill won't be coming until Tuesday, giving Pawlenty until midnight June 1 to sign or veto them.

The word is that the backlog from Monday night is pretty thick at the Office of the Revisor of Statutes, which must draft bills and prepare them to present to the Governor's office, and it's taking a while to sort out.

So if it takes that long to get them printed, how the heck did anyone on the House floor know what they were voting on? Did anyone have time to read? And did anyone care?

Labels: legislature, Minnesota

Mitch writes about record stores.

I used to love the feeling you’d get when you’d talk the totally-wasted stoner behind the counter into playing some sample on the house stereo; sliding the record out, dropping the needle, the anticipation as the record rolled toward the start…

I don't even remember the name of the place in Manchester, NH, where I did this, but the manager of the place, who also became the first lead guitarist I played with in a band (first song on stage: "Just What I Needed" by The Cars; God his solo rift was perfect!), probably was the single most responsible person for broadening my horizons of music. Just in the C's besides the Cars I got to listen to the first Elvis Costello album and Chick Corea (why he wasn't sorted into jazz is beyond me), and the Clash.

And it avoided the one-hit wonders; we didn't even make it through the third song of "Get the Knack." Am I better off now for being able to buy My Sharona and nothing else? Well, that's a bad analogy because that song had a half-life about as long as the Vikings' Super Bowl hopes, but I think some bands need time to grow from one song to an album, and if they can sell a song or two on iTunes or promote band dates on MySpace, it may give them the time and finances to see if there's really a band there.

Not that I dislike record stores or albums. The concept album has died, but some albums just seem to flow from song to song, perhaps why I still prefer prog-rock later in my evenings. In economics dissertations the preference is now that everybody writes a set of essays, which become three separate journal articles sometimes even before the dissertation is completed. I think something is lost when a scholar does not connect the chapters of a dissertation into a single thesis, and I think disjointed songs on an album suffer the same fate.

And that is very hard to do. Thus the democratization of recording music -- which is the upshot of the digitization Mitch discusses -- means more and more people producing single songs that work but do not create a line of thought from song to song.

I'm quite devoted still to the Fetus, not least of which for the guy who's worked there forever who seems to talk any genre I'm interested that day. Is it as good as the cut-out and used bins at the Rhino Records in Claremont back in my grad school (and KSPC) days? No, not quite, but close, and that's still very good. And yes, they play samples.

Labels: Media, music

While I await Governor Pawlenty's last demonstration of his goalie skills, it's worth noting a couple minor irritating bills that we've discussed before have gotten through to be laws.

• The cyber-bullying bill passed. So now each school district will have a new cost put upon them, and another place to practice zero tolerance.
• The governor signed off on the bill to regulate amusement rides, though it appears the law requiring riders not to "behave in an unsafe manner" on the roller coaster is not in the one he signed.
• You can no longer get warm in your car while you fill your gas tank. SF 1193 now says that "A person fueling a motor vehicle must be in close attendance to the dispenser nozzle during the fueling process." What constitutes close attendance is left to law enforcement officials, I guess.

In a number of cases, bills that were floated around alone ended up incorporated in omnibus bills; for example, freedom to poop ended up in the SF2089, the omnibus jobs and economic development bill that the governor vetoed. SF434, the cradle part of cradle-to-grave government care and advocacy of the nanny state, ended up in the first HHS bill. As time permits I'll check on some of the other silly bills we have discussed.

Labels: legislature, Minnesota, Pawlenty

Arnold Kling points out a very interesting CBO study released last week on the progress of low-income families with children. I am in particular fascinated by the results presented from the 2001 Survey of Income and Program Participation (SIPP) which allowed tracking the same families that were low-income in 2001 through the following three years.

The fact that average income was increasing between 2001 and 2003 for those households with children that were in the low-income category in 2001 does not mean that income was increasing for every household. Although about 60 percent of female-headed and other low-income households with children in 2001 experienced real increases in income of more than $1,500 over the next two years, about 25 percent of each group saw their income decline by more than $1,500 over the same period (see Figure 9).18 For households in which income increased, it did so substantially, nearly doubling between 2001 and 2003.

A $1500 increase is an increase of about 10%. The changes were not due to changes in marital conditions of these families. Also take a look at Box 1 of the report (p. 9) in which they show that only half of the families making the increases had bounced back from a bout of unemployment.

Kling notes that while we perceive no change in poverty rates, the income of the lowest quintile of families with children increased 35% between 1991 and 2005. Only for the top group did it grow faster. That does seem counterintuitive to me, as Kling points out, the effect of immigration on the poverty level should be to hold its income growth down. Or maybe that story just isn't right.

Labels: economics

Scott Johnson points to two pieces on the continuing effort to get Indoctrinate U on movie screens. Stanley Kurtz makes a good review of the film by Evan Coyne Maloney. Sonny Bunch notes:

Maloney is now looking for a way to distribute his film, which is an expensive proposition. "Your first set of prints will probably run you $20,000 to $25,000, and every set after that will be $2,000 to $3,000," Maloney says. It is virtually impossible for an independent filmmaker to shoulder that cost and convince theaters to run the films. If Indoctrinate U is going to be shown at your local art house theater, it will have to be picked up by a mini-major distributor, such as Lion's Gate, or New Line.

It would seem to me that the internet can provide as good a workaround and democratization of documentary film-making for the distribution houses as it does for opinion and analysis for newspapers. Maloney hopes so:

"We've got this database of people who've already expressed an interest in seeing the film, and there's other ways of getting it to them, from DVD sales, to the iTunes movie store. One way or another, people are going to get to see this film. The only question is, 'Is Hollywood going to demonstrate that they're really nonpartisan, and do business with folks like us?'"

We're trying to help, and direct you to our Final Word podcast with Maloney. If this story is new to you, visit Maloney's site.

The St. Cloud Times editorial board today says it simply: There's got to be a better way.

Minnesota has to find a better way to fashion a state budget and set policy so two things don't occur:

» Legislators cram and jam so many decisions and votes into the final hours of a session that nobody really knows what passed and what didn't.

» The public has no reasonable opportunity to learn about, much less weigh in on the final versions of major legislation.

The seeds for this debacle were sown early in the session when the DFL chose a set of rules that allowed much of the shenanigans that occurred over the weekend and on Monday in the rush to adjournment. I take you to the House Journal of February 26, 2007 (beginning at page 545) and March 1, 2007 (beginning at page 671). The discussion is over the permanent rules that the Rules Committee chaired by Democratic Leader Rep. Tony Sertich (the black hole of the Legislature, which is where among other things Swansongate still languishes.) Here are the highlights:

1. The report allowed for budget bills to be voted on by the House with only two hours notice. Dean Simpson offered an amendment to increase that to six hours. The amendment got sent to Rules and never appeared again. Thus the two hour limit was enacted.
2. Bills have traditionally had germaneness requirements, so that each bill would have only one subject. Such were not the rules offered by Sertich's committee. When Rep. Matt Dean tried to re-introduce the single subject rule, it was defeated by the DFL.
3. Rep. Mark Olson tried very hard to get sanity into this process. For example, he offered amendments to the rules that would have required a) conference committee reports for the budget to be completed a week before adjournment; b) forced the tax bill to get done first; and c) required a one-day notice for bills to be heard. All were defeated.

I could highlight other points, but in retrospect these were the key votes. The rules agreed by the DFL majority and forced upon the Republican minority were a key contributor to the gridlock and breakdown that occurred at the end of the session. The contributed to the lack of civility at the end of the session that Margaret Kelliher promised us at the beginning of the session.

Did the DFL overpromise and underdeliver? It appears so, and by it's own hands.

Labels: legislature, Minnesota

You know, sometimes being an ally is hard. Take this, for example, from Saint Paul.

Comments: Nobody deserves a stroke of lottery fortune less than Glen Taylor and Kevin McHale, the NBA's version of Bush/Rumsfield for 8-10 years. Of course, nobody deserves a stroke of lottery fortune more than KG, one of the few superstars with too much pride to ever bail on a sinking ship. Either that, or they're blackmailing him with a sex tape so he'll stay. But wouldn't it be nice to see KG play the David Robinson to Oden's Tim Duncan for the next 5-6 years? Hence, 10 points for "overdue good karma."

A media guy from Boston, I should have guessed as much. But if I want to get lame second guessing on complex issues of war and foreign policy, I'll read the Star Tribune editorial page. Bad Karma Simmons, may all the Celtics ping pong balls get stuck in the hopper tonight and they end up drafting Spencer Tollackson.

That's no ordinary media guy from Boston -- and God knows we've got lots of those. He refers to Bill Simmons, known originally as the Boston Sports Guy, who blogged sports before people had heard of blogs. Sports writers don't write for Jimmy Kimmel.

And then to curse the Celtics? It's not like we've had much for leadership there; we'll see your Kevin McHale and raise you M.L. Carr. We'll see your Malik Sealy and raise you Len Bias and Reggie Lewis. And you're Irish, for good measure? Isn't it bad enough Notre Dame sucks?

Fine, my friend. Keep rooting for the team that surrounds the most gifted player in the game with just enough talent to lose in the first round. Sam Cassell says hi.

Now if you'll excuse me, I need to learn how to pronounce Yi Jianlian. I can get you a great deal on a Celtics jersey, with #35 on the back.

UPDATE (5/23): Yi, the Chinese Brad Lohaus.

Labels: Celtics, NARN, sports

I'm glad my wife is not Sheila of London. She writes to Tim Harford that she's flirting like mad with another man because she is 'rather bored' with her husband. His answer is brilliant:

When I heard of your dilemma I thought immediately of an old paper from the Journal of Political Economy, ”A Theory of Extramarital Affairs” by Ray C. Fair, an economist at Yale.

...[H]is approach to the problem could equally have applied if you had written to say that you were 38 years old, rather bored with your husband and were thinking of taking up badminton. One senses that something is missing. I think the omission is uncertainty. You do not know how much fun an affair will be. Nor do you know whether your husband is likely to become more or less tedious over time. A cost-benefit analysis is going to be tricky, but we can say for sure that your potential affair represents a valuable option. As with all options it may be best to refrain from exercising it until the option is ”deep in the money” - that is, until you are so thoroughly fed up with your husband that you think nothing can save the marriage.

Until then, why not enjoy the saucy talk? It may be a lot more fun than the affair itself.

The Fair model is pretty well-known, and a couple of recent re-tests have turned some of the results into questions. Fair found, for instance, that infidelity increased over time in the marriage, but recent results do not support that. Harford's surmise, that "you know whether your husband is likely to become more or less tedious over time" is supported by that. But age does matter, at least in this paper up to a point: The probability of a man cheating on his marriage peaks at age 55, but for women the peak is 40. Most importantly, education matters but in a very economic way. If your spouse is much less educated than you are, you're more likely to be unfaithful to the marriage. "[T]he costs of infidelity increases as the quality of the spouse increases." But of course.

Here's the wiki on option time value.

Labels: economics, infidelity, marriage

Which was most important?

1. A bonding bill?
2. Approval of a referendum for the outdoors?
3. Getting an extra $500 per year from the average Minnesota family in higher gas taxes?

If you answered 3, you read the papers.

Though you have to love this:

"Time ran out. I was so close," said an upset Rep. Alice Hausman (DFL-St. Paul), left, who is comforted by Rep. Mary Murphy (DFL-Hermantown), after the Legislative session ended before Hauseman's bonding bill could be heard in the House of Representatives at the State Capitol in St. Paul on Monday May 21, 2007.

Boo hoo! I didn't get my pork!

Labels: legislature, Minnesota

Do not think, gentle reader, that this editorial escaped my gaze during my absence. It's clever, in that it strings together a set of fairly reasonable statements in order to make an unreasonable conclusion seem, well, reasonable. Let me demonstrate:

If Minnesota raises the top income tax rate, goes this refrain, wealthy citizens will flee the state, businesses will take jobs elsewhere, and entrepreneurs will be discouraged from coming here.

I don't think I've said that (read here and here.) Some of the wealthy will flee, certainly, but for many reasons, one of which will be better taxes. My parents left New Hampshire for Maine, a no-sales-or-income-tax state to one with both. Did they go for better schools or better roads? No, their kids were grown and gone, and they live on a private road. They moved there because it was a dream from their youth, when both visited the Downeast coast during the summer. Taxes reduced their income, maybe reducing the size of the addition they put onto the cottage they built or reduced the amount of labor they hired to help with landscaping or, ... you get the point. Money spent on taxes is not spent on other things they choose; it's spent on things the government chooses. Who would make the better choice?

So it is in Minnesota. Raising the tax rate on the wealthy does not lead to "caravans of limos, Hummers and Citations streaming over our borders -- "The Grapes of Wrath," Château-Lafite-Rothschild-style." This is an oversimplification, the creation of a straw man that is about the only thing Quimby and Smith can knock down.

But is it true?

Call it tried but not true, lacking in foundation. It's a worn-out argument that has always been thrown up against a more progressive tax system.

One thing to note is that the worn-out argument is still out there, and supported by a heckuva lot of economic research. Most of the research focuses on movement of people, though Scully finds tax rates above the low-20s to be negative for growth. Nobody that I see argues that taxes increase growth (though certainly from very low levels they may, by providing for the protection of private property rights).

It's not an argument about progressive tax systems per se. It's an argument against creating tax differentials for certain types of groups versus other states to which taxpayers may be highly mobile. So, for example, closing loopholes on foreign income earned by corporations in Minnesota changes the amount of tax paid by corporations without changing the after-tax return on the next dollar of profits re-invested into the state. It may affect location decisions for firms if there are other states with the loophole, but it's not likely to cause movement in capital already invested in Minnesota.

But unless you already believe that taxes are the root of all evil, it's impossible to look at the evidence and conclude that an income tax increase at the top would set off a massive millionaire migration from Minnesota.

What would constitute 'massive'? Suppose five firms hiring 25 workers each decide to change location from St. Cloud to Aberdeen. Would that be enough to discourage Quimby and Smith? It would matter quite a bit to those 125 workers now without jobs. Do you think anyone will support a worker retraining program for those jobs lost, or are they not enough to be considered 'massive'?

Interestingly, Quimby and Smith play a shell game by focusing on manufacturers:

Take businesses leaving the state. It is such a nonproblem, the Department of Employment and Economic Development doesn't even track business departures. When it did measure business outmigration, for nine years in the 1990s, Minnesotans paid higher income taxes and about 1.5 percent more of our income for government services than we do today. If businesses were going to flee the state because of taxes, that was the time to do it.

Yet during that period, only 95 manufacturers moved out of state, totaling an approximate peak employment of fewer than 5,000 workers. Over the same nine years, Minnesota gained nearly 400,000 jobs.

Did you catch that? Notice that the focus is on manufacturing, which is less than one-sixth of the state economy. The other 5/6ths of businesses? Minnesota gained 400,000 jobs, but what was this compared to the growth of other states? Minnesota ranked 18th in jobs created in this period, not much different from the national average; it was 16th in wage income growth in the period.

But the data show otherwise. Minnesota did no better than average in business start-ups. Most of its growth in the 1990s came from the expansion of existing businesses. Bureau of Economic Analysis data shows that proprietors income in the period grew less than 15%, versus nearly 22% nationally. So high taxes did hurt other businesses, but again, the G&J people have ducked this question by focusing only on manufacturing.

The data shows that in that period Minnesota was usually #6 of combined state and local tax burden. The ravages of Ventura and Pawlenty have taken us to ... #11. Hooray, we're out of the top 10! But in terms of combined federal, state, and local taxes, Minnesotans pay 32.7% of their income in 2007 under current law, versus 32.5% in 1997. We manage to stay high because other states have been engaged in tax cutting to a greater degree than we have.

The received wisdom of economists over the years is that of the Tiebout Hypothesis: People move to tax jurisdictions that offer the variety of services and tax prices that appeal most to their sensibilities. Progressives argue, with perhaps some justification, that Minnesota is a state that prefers high taxes and high services sorted through the years. But the high level of services that progressives and metro-area DFL legislators argue for require substantially higher tax rates that we see evidence does cause a shift in migration patterns. Moreover, one paper shows that increases in the size of the education industry is negatively correlated with growth in the fifty United States.

Quimby and Smith cite as evidence that taxes aren't stopping millionaires from living here the fact that we are 15th in millionaires per capita. Tiebout would argue that the rich would demand more services and thus would prefer Minnesota. So why aren't there more?

Most important, though, is that Quimby and Smith are focusing on too short a period to see the effects of taxation on growth. Capital, both physical and human, takes years to build and years more to achieve the amount of growth differential that would show up in the types of summary statistics they use. Richard Vedder focuses instead on a forty year period and shows that growth was much slower in the ten states with the highest state income tax rate increase between 1957 and 1997 versus the ten that increased the least. The effect is far more pronounced that the effect of changes in property taxes. His is also evidence of Tiebout's hypothesis:

People “voted with their fee