Sunday, September 30, 2007

Myanmar and Religion 

Not much has been covered on the Buddhist monk demonstrations for democracy in Myanmar. They took to the streets starting about a week ago. The military junta let them protest for a couple of days then started a major crack down.

Curfews have been instituted - anyone on the streets after dark are shot. If you need emergency medical treatment, you not only have your medical problem but you also risk disappearing if shot. Unlike the rights driven west, rights mean nothing in a thugacracy.

One of my friends is from Myanmar. The name will be omitted to protect him/her. However he/she has not been able to contact family members for a few days now. Internet access has been severely restricted; phone calls are monitored. My friend says there are far more murders than reported in the press - the military junta shoots people, then removes the bodies - no trace, no way for any international rights organization to document. Family members won't know the status of loved ones for years, perhaps, never.

He/she says he/she prays every morning, Buddhist prayers, for the family. I mentioned, we remember the family in our prayers.

Buddhists, Christians, Jews, even Hindus can find a way to pray for others without demanding submission to their respective belief system. Food for thought.


Saturday, September 29, 2007

Your quote of the day 

I support and practice many types of socialist programs including income redistribution, welfare payments, disability support, free health care, and social saftey nets. But I only practice socialism IN MY OWN FAMILY; and socialism like this only works when you know the names of the people involved. In any situation when you personally can't name everybody involved, then the market is superior to socialism.
--Walter Williams, via Mark Perry.

I was listening last week to an interview Ed Morrissey did with Matt Bai, who had written about the progressive movement's funding by billionaires. Why, they wondered, do George Soros, Pierre Omidyar and other super-rich people support creating socialism when their riches were gained in the market?

My answer: Because they have the cell phone numbers of the political leaders. They're family.

Janet adds: Reason billionaires on the left support socialism include: 1 - because they are so wealthy, they think they are smarter and better than the rest of us and therefore, should tell us what to do; 2 - it gives them control over us - they are so wealthy taxes mean nothing to them so they push socialism and its related control and taxes on the middle class, thereby, destroying the middle class. The wisdom of crowds concept results in the betterment of all mankind - this idea threatens them. 3 -some get their kicks by creating chaos and instability (which they can with this much money); people react with fear. The billionaires sit back, chuckle and take control. Frankly, this attitude is not a positive development for the planet.


Friday, September 28, 2007

Economics aggregators 

This is cute, but I still prefer this. The latter has an RSS feed to which I have a real addiction.

Busy morning 

I am taking some radio interviews this AM after release of today's Quarterly Business Report. The letter 'R' in the headline (you won't see it in the online piece, but they have "The R-Word" in big letters above the fold in the print copy -- I could not look at it during breakfast) is about half the front page. Every other quarter the paper has run this story on a Sunday, so it was a surprise to see it today, but I guess the news value of what we said was enough to move it up.

One thing to note: The survey period was right at the height of the subprime mortgage crisis, but the data we collect outside of the survey was taken before it. The survey is not used in the probability estimate.

The new report in full should be up here shortly; I don't have a final copy myself yet.

UPDATE: The number one comment I see (for example, here) is that a 40% chance of recession means a 60% chance of there not being a recession. Yes, that's quite true. But the history of economic growth since WW2 is that expansions last 57 months and recessions last ten months. A 40% chance that we're in recession six months from now is thus much more than what you would expect just by chance. That's enough of a signal to tell me something important. It's also why a signal of 20%, even though it's pretty unusual with the model we're using, doesn't really trip my trigger.

Also, reading this new note from the Dallas Fed says something similar to what we're saying about the local economy:
Two decades ago, keeping tabs on shifts in investment spending and consumer durables purchases was crucial for understanding swings in GDP growth. Tracking shifts in investment spending remains critical, but changes in household spending on nondurable goods are now more important than movements in consumer durables. Meanwhile, the fraction of jobs growth volatility attributable to firms in professional and business services has risen to the point where this sector has become the largest contributor to short-run swings in aggregate jobs growth.
Thus the fact that local manufacturing has held strong isn't as indicative of economic strength as it might have been twenty years ago.

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Exporting your tax base 

In some ways, when a city or state lowers its excise tax rates it benefits from having taxes paid by those who live in other cities or states. The states losing tax base don't like this. In the EU, you get discussion of "tax harmonization", which is really a code for stopping tax competition. It happens in the States too. Ed Morrissey talks about Tennessee's attempt to stop the loss of its cigarette tax revenue by posting police on its borders looking for Tennesseans coming back from neighboring states with a few low-tax cartons.

My experience as a former New Hampshirite living near Massataxes, I mean, Massachusetts is that surveillance happens pretty often. Someone in Ed's comments mentions the battle over liquor taxes between the states, as NH sells spirits in state-run stores often placed strategically along its borders. But "Tax-Free NH" doesn't have a sales tax on clothing either, and the southern half of the state is full of malls with parking lots full of cars with Massachusetts plates. Ditto Bangor, Maine, with cars from visiting Canadians escaping the GST.

How big an export is it? One estimate I've seen suggests more than 10% of beer taxes paid in NH are paid by out-of-staters. I don't know what it is for the sales tax, but it's enough to get MA border businesses to lobby for tax-free weekends. If Tennessee really wanted to stop exporting its cigarette consumption over the border, it could do the same.

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Thursday, September 27, 2007

Small change or large beer 

When I worked in Ukraine it wasn't unusual for there to be problems with small change in retail transactions. Indeed, more than once I got a stick of gum for change in lieu of, say, 1000 karbovanets (would would have been $.006). I took the gum, never chewed it (I could only imagine what would be in my mouth), and never could pass it off as Krb 1000. I suspect I mostly threw them away. That's a loss.

Frank Stephenson today writes of a small currency problem in Guatemala that was due to government error. A friend of his in the country wrote:
Last year -nearing the Christmas season- the Banco de Guatemala (our central Bank) acknowledge to the embarrassment of it's authorities that it had run out of cash (due to bad planning, really). You can imagine that a large portion of Christmas sales in Guatemala are transacted in cash so the ineptitude of the central bank caused a mini-crisis specially in rural areas. The Banco de Guatemala did not acknowledge this but I know that they were purchasing Q20 bills for up to Q40 and Q50 (!!!). Somebody made a bundle out of this mess.
There was a period in Ukraine where the public phones needed coins that were worth maybe Krb 10 at a time where Krb 40,000 bought US $1. (Note: the karbovanets was Ukraine's temporary currency in the early 1990s, replaced by the hryvna in 1996.) The coins were worth far more for the metal than their exchange value, so they became scarce. But you needed them for calls, so babushkas would trade them at 15-20 times their face value. Some complained of this 'profiteering', so the government -- which owned the phone company still -- simply made public phones free. Result: babushki impoverished, and the phones soon neglected, broken and vandalized.

Tyler Cowen noted a few months ago that this phenomenon of small currency shortages is pretty common. Recommended therein is this book by Tom Sargent and Francois Velde, reviewed by Art Rolnick and Warren Weber at the Minneapolis Fed. But those stories apply mostly to token money (coins made of base metals worth much less than face value), not the paper currency Stephenson describes.

One thing I learned from gum money in Ukraine -- I used to try to buy beer on the street there (the local brand was Obolon', actually quite good in unpasteurized form if fresh), which came in both 0.33l and 0.5l bottles. I like the smaller bottles -- bring two home, one with dinner and one in the fridge for later, not too much for an evening. Alas, they are Krb 80,000 at the time and the seller didn't have change. (Gum and beer, not good.) The bigger ones? Miraculously, 100. Easier to buy those and just not finish the second ... though sometimes I did. Maybe more than sometimes...

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Two notes from colleagues 

I have a couple of notes to pass along.

At various conferences over the years I have run into Kevin Grier, a fine economist and econometrics helper to many. He's currently at the University of Oklahoma, and has now taken up blogging with the revived Mungowitz End Kids Prefer Cheese. This is doubly good news, as you now get two great senses of humor combined with a taste for solid economic and political analysis ... and it means Munger is back! Added to my blogroll, it should be for you too.

Second, I had the pleasure of interviewing Tim Taylor, managing editor of the Journal of Economic Perspectives and someone interested in teaching principles at all educational levels, a few years ago. He's been working on a textbook recently that is sold through Freeload Press (I discussed them back in 2005). It's now ready for use. I was just noting with students this month that the cost of textbooks in my class, even for an electronic-only copy, is $60 -- much better than the $140 you might pay for a new print copy but still more than a tank of gas. Tim says you can buy an advert-free copy for $30, so the cost reduction is pretty good -- or you can look at a .pdf with some ads for free.

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Whither the ECB? 

Edward Hugh is wondering whether ECB President Trichet is even paying attention to what is going on with the euro.

So this is the point. We are soon going to be into declining rates at the ECB, and then what is going to happen to euro/dollar. I ask you? Are the markets ready for this?

Even ECB-adviser and hawk Joaquim Fels now has the current ECB rate as neutral, and of course, if the fundamentals are deteriorating, neutral quickly becomes �overtight�. No wonder Trichet is hard to find at the moment.

And yet at Eurozone Watch we see the EURIBOR rate has taken off. That may account for short-term euro/dollar appreciation as much or more than anything else. The ECB has no mandate for anything other than price stability, and how it defines that is its own decision.

As to Edward Hugh's comment, I point out Stephen Kirchner's comment that "fixed exchange rates wrecked havoc by transmitting economic shocks, including monetary and fiscal policy mistakes." If the US and Europe have had different reactions to the shock of the subprime mortgage meltdown, what would you prefer to adjust if not the exchange rate?

"Yes, King, but have they?" Damn good question to which I don't have a good answer. It's not as if the euro/dollar appreciation is anomalous from the US' point of view.


The people I work with 

One thing about deciding to be an academic as well as an economist is that you find out the university is populated with people nothing like you at all. I conclude this after reading the lead article in the Chronicle of Higher Education, (subscribers' link, temp link) this morning on the reaction to Columbia President Lee Bollinger's handling of the Ahmadinejad invitation by the school's own faculty.

But for many professors at Columbia, Monday's event also revived their impression that Mr. Bollinger had bungled earlier free-speech controversies on the campus and fallen short of his own billing as a staunch advocate of the First Amendment.

"Free speech is what he's been famous for throughout his career, although occasionally he hasn't been true to that part of himself," says Philip S. Kitcher, a professor of philosophy. "This time he was. This is the kind of guy we thought we were getting as president."

Still, Mr. Bollinger faces a host of questions in the wake of the speech by Iran's president, Mahmoud Ahmadinejad.

By using his introduction to castigate the Iranian leader before Mr. Ahmadinejad even had a chance to speak, some professors argue, Mr. Bollinger was not only rude but undermined his own ideals of free speech and academic freedom. And while his withering remarks may have made him look courageous, some academics believe that he misused his role as a university leader. Mr. Bollinger's own words had the effect of aligning Columbia with U.S. foreign policy against Iran, some faculty members believe. And as a result, the university president may ironically have devalued the views of those on his own campus who disagree with that policy.

"His were not intellectual statements; they were political statements," says Gil Anidjar, an associate professor in the department of Middle East and Asian languages and cultures. "He has enlisted the university in the rhetoric of war and brought the power and weight of an institution into the debate. Those of us who disagree are only individuals and don't have that power."

Pause on this sentence a minute:
Mr. Bollinger's own words had the effect of aligning Columbia with U.S. foreign policy against Iran, some faculty members believe.
Now let us read from Mr. Bollinger's introduction. Recall, as I said yesterday, the decision to bring Ahmadinejad to Columbia is for the students' education, not to somehow change Iran. Does it further the students' education to ask Ahmadinejad to answer questions about imprisoning scholars, funding terror, building nuclear weapons and fighting a proxy war in Iraq? I do not think he did it particularly well, but I am willing to think it could have been done well.

But the people in the academic sphere I work in do not even want to give him that chance.
Stanley Fish, a legal scholar who served as dean of the College of Liberal Arts and Sciences at the University of Illinois at Chicago, says Mr. Bollinger unwisely heightened the stakes for himself and his university. "By seizing the reins, he set this up as King Kong versus Godzilla," says Mr. Fish. "I was a little surprised to see him inserting himself into this event in an aggressive way."

Stephen Joel Trachtenberg, who served as president of George Washington University before stepping down in August, says Columbia doesn't need the kind of publicity that the Iranian president's speech drew. And he believes that Mr. Bollinger failed to justify the invitation by making use of Mr. Ahmadinejad's presence to push Iran to advance peace initiatives. "I don't think Columbia got value for the exposure," says Mr. Trachtenberg.

Unfortunately presidents worry too often about publicity and not enough about what their students are learning. It is intriguing that in its coverage, the Chronicle chose not to interview a single Columbia student.


"Way whiter than average" 

Long-time friend of this blog Linda Seebach is blogging herself now, and in this post tells us why the claims that Minnesota is doing so well on standardized tests are missing the point.
Every two years, the NAEP tests a national sample of fourth- and eighth-graders in reading and mathematics (see for details). White and Asian students score significantly higher on this and similar tests, and so do more affluent students. The reasons are hotly debated, as are the potential solutions, but that is a different debate.

Results are reported as scaled scores on a single yardstick, so that, for instance, the average score for fourth grade reading is 220 and for eighth grade reading 261 (math, 239 and 280, respectively).

Scaled scores for black and Hispanic students are 25 to 30 points lower than for white students, depending on the test. Those are big differences, the equivalent of two to three grades � the visible sign of the achievement gap you hear so much about.

NAEP�s charts show states as green if they�re above average, yellow if they are not statistically different from average, and red if they are below average. Overall, Minnesota is refreshingly green on all four tests.

But look at black students separately, and Minnesota is dull yellow average on all four tests. Likewise, it is average for Hispanic students on all four tests. For white students, it is above average statistically on three of the four, but by only a few points. The state owes its high ranking primarily to the fact that it draws a larger proportion of its students from groups that on average score higher.
Income probably matters as well as family size. Linda correctly gets the idea of ceteris paribus; NAEP report cards, not so much.


Wednesday, September 26, 2007

He gets principles 

At True North, the Policy Guy explains the importance of one of the fundamental lessons of economics:
What we have in single-payer systems � or at least any single-payer system that incorporates enough of the population to have market power � is an attempt to allocate resources without prices. When you don�t use prices, you end up�when government is the purchaser�using politics. And with that comes rationing, political favoritism, misplaced priorities (bridges to nowhere), and a host of other ills.
All scarce goods must be allocated somehow. If you won't use price to do so, then it's first-come-first-served, or equal shares, or some other rationing mechanism. Price allocates according to who is willing to sacrifice the most to get it, using a widely-accepted medium of exchange. If willingness to pay doesn't work for you, tell me please what does.

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Buffers and hostages 

I think this post by Drew Emmer may have nailed it better than we thought.
When Larry Pogemiller took "buffer language" out of the disaster relief bill during the amazingly polite one day Special Legislative Session the only folks with a clue about what he was doing were a very few leaders in the House, Senate and Governor's office. Remember, nothing was allowed in or out of that $157 million emergency funding bill without the consent of Margaret Kelliher, Larry Pogemiller and Tim Pawlenty.

...With the gavel adjourning the Special Session still echoing in our ears our politically astute Governor took to the airwaves to voice his concern about the possibility that Uncle Sam may end up being tardy in the delivery of the $250 million Congress pledged to rebuild the bridge.

So if you are concerned about the feds timeliness with the bridge dough, why did you allow Larry to remove the language that would allow MNDOT to act as the funding buffer until the federal cash was indeed transferred?
The reason, I suspect is that the transportation bill in May empowers a special Legislative Advisory Committee to move forward second-year monies to the first year of the biennium (Sec. 3, Subd. 9) "for trunk highway design, construction, or inspection in order to take advantage of an unanticipated receipt of income to the trunk highway fund or to take advantage of federal advanced construction funding" as well as "for trunk highway maintenance in order to meet an emergency."

This has set of a political debate that now has gone public, with the governor's office issuing a press release asking the DFL leadership to "put politics aside and do the right thing by granting the spending authorization to deal with this emergency situation.� This afternoon, the battle escalated as the DFL went into hostage-taking mode:

Several Democratic legislators today asked Republican Gov. Tim Pawlenty to fire his transportation commissioner, Lt. Gov. Carol Molnau, for mismanaging her agency.

More importantly, the DFLers said, if Pawlenty doesn't dump Molnau, they will.

If she remains in office when the Legislature reconvenes Feb. 12, Senate Transportation Committee Chairman Steve Murphy, DFL-Red Wing, said he would move within three days to have the Senate reject Molnau's confirmation as head of the Minnesota Department of Transportation. "We have the votes to reject her confirmation," Murphy said at news conference below the rusting Lafayette Bridge near downtown St. Paul.

A negative Senate vote would remove Molnau from her MnDOT post, but she would continue as lieutenant governor.

"Gov. Pawlenty is not going to fire Lt. Gov. Molnau," the governor's spokesman, Brian McClung, said. "We've heard these kinds of calls from Senator Murphy multiple times in the past, and we are hopeful he'll be able to move beyond the personal attacks to work with us together to find a compromise, comprehensive transportation plan."

The question is, was there an agreement on the buffer money before the special session, and why wasn't it in the bill that passed? While you were passing the $53 million that was in the appropriation, why not get the authority at the same time? Was it ever in there? I have checked the Senate and House websites and see no evidence. I will be asking questions of people throughout the rest of this week about this, which may be the story that dominates state politics the rest of the year.

I'm a little nervous about McClung's last line about "compromise, comprehensive transportation plans;" down that road lay tax increases.

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First JOBZ, then SEED 

Governor Pawlenty has a brand new program for rural economic development. Leo Pusateri at True North details what's in the Strategic Enterpreneurial Economic Development program, or SEED. Part of the initiative has the usual attempts at leveraging informational advantages governments have, so it creates trade shows and an Office of Entrepreneurship. That sort of thing may or may not help businesses, but at $2.1 million proposed it's small beer.

But the plan also creates a set of tax credits and micro-lending initiatives for rural businesses. Micro-lending is a fad in international development, even to the extent of creating a network of private loans from households to the developing world. But are we really to believe many entrepreneurs in Battle Lake, say, are being inhibited by not having a bank lend them $20k when they have a solid business plan? And should the government give a 25% tax credit to someone who invests money in an "angel" fund? These things are becoming a bit of a fad in economic development. The tax credits go to people with high net worth -- those are the angels -- and thus will be subjected to a good deal of demagoguery by the Left.

Likewise, SEED expands on JOBZ by adding grants for developing main streets and infrastructure in rural Minnesota. I've noted before that JOBZ is more about job- shifting than it is job creation. But even if the money was attractive, do we think the population drain in outstate Minnesota is going to be solved by an extra $70 million in loans and grants? That strikes me as unlikely to make much of a difference.

All this, of course, is an attempt to deal with the disappointment that both Republican and DFL leaders have had with the impact of JOBZ on outstate Minnesota counties. (Notice the targeting of SEED to rural MN.) In floor debate in the Senate last March,
[Senator Tom] Bakk said the eventual elimination of the Job Opportunity Building Zones (JOBZ) program is an admission of error on his part. Bakk was the Senate sponsor of the proposal four years ago. The program was intended to help economically depressed communities across Greater Minnesota, he said. Reports from the Dept. of Employment and Economic Development have indicated that economically depressed communities have not benefited, he said. Bakk said he has learned that the business tax climate has very little to do with a business�s decision about whether to expand or relocate in the state. The real obstacles to economic development are transportation, workforce availability, and other infrastructure matters, he said. (Link added.)
It's worth noting, by the way, that the Legislature is doing a review of JOBZ, with a report due in February. It will be very interesting to see how that review affects the chances of the Legislature's approval of SEED.

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Tuesday, September 25, 2007

Never wrestle with a pig 

I confess to be a little troubled by the Columbia University invitation to speak extended to Iranian President Ahmadinejad. If you invite an outside speaker to campus it is because there is an educational value for your students provided by the speaker. Columbia could make such a decision, and if so it should stand by it. I waited to speak until now because I wanted to see if Columbia could find a way to show the educational value derived from the invitation. It did not.

The American Association of University Professors has a statement about outside speakers, and this morning its president Cary Nelson sent an email to the membership.

What happens if taxpaying citizens, state politicians, or important donors demand that the president cancel a planned speech? University presidents, who have many constituencies to please, may find this a difficult situation. Matters can become very complicated if different groups make contradictory demands. Satisfying one group may offend another. That difficulty can be avoided if a president does the right thing by defending academic freedom and the university�s unique role as a place for ideas to flourish and to be exchanged. A president is not responsible for defending a speaker who has been properly invited by an authorized student, faculty, or employee group. Authorizing these groups to invite outside speakers that are of interest to them is an important way to sustain a vibrant campus intellectual life. Such a practice can be supported by all campus constituencies.

This reasoning holds true even when virtually everyone disagrees with an invited speaker. Students might at one time have invited an American Nazi Party representative to speak. The invitation might have sought to give the campus direct experience of a position all considered abhorrent. Once again, we should not assume that invitations represent endorsements. We should also give some credit to our student audiences. They do not need to be protected from outlandish ideas. They do not believe everything they hear, and they are on campus to learn to think critically.

Revulsion at ideas or fear of them is understandable, but ideas are best answered with thought and conversation, not with censorship. That is nowhere more true than at a college or university.
What I found very disturbing was Columbia President Bollinger's introduction of Ahmadinejad. This was not thoughtful nor was it conversation. It was moralizing at its most crass; it spoke volumes about Bollinger's conviction of his own decision to invite Ahmadinejad and not a bit about the Iranian president. The braver thing to do would have been to let the Iranian president speak first and then respond, being prepared to counter whatever was said. Had Bollinger any faith in the quality of the education Columbia's students were getting, he could have relied on them to ask good tough questions, and to have a context for real conversation. Alas, there was no conversation and by the liveblog done by the Columbia Spectator, no real engagement. Perhaps he knew the students were not prepared.

Bollinger instead demeaned his own reputation. He stooped to Ahmadinejad's level. He displayed, as Hugh Hewitt said so well yesterday, "cluelessness combined with epic self-importance." He wrestled with a pig, and the dirt on his career will not wash off.

UPDATE: I read Bret Stephens over lunch. I think it arrogant of anyone to think that bringing Ahmadinejad or Hitler or anyone else to campus would be edifying for the tyrant. But that's not the university's goal. Its goal is to educate the student, for the student to look pure evil in the face and recognize the soft words behind which it hides. Chiding or admonishing Ahmadinejad, as Bollinger tried to do, only makes the university appear the fool.


Taking off pounds collectively 

This made page one of our newspaper:
People will lose weight for money, even a little money, suggests a study that offers another option for employers looking for ways to cut health care costs.

The research published in the September issue of the Journal of Occupational and Environmental Medicine found that cash incentives can be a success even when the payout is as little as $7 for dropping just a few pounds in three months.

After reading Tyler Cowen, I think perhaps the fact that it is only $7 is part of the reason for its success. You can reward too much. But then the article says those who had a higher payment lost more weight. So what else helps? I think it is peer pressure:

Plant worker Vonderahe Rivera said the financial incentives offered by her employer have helped her lose a total of 50 pounds and keep it off. Over the past five years, the O'Fallon, Mo.-based VSM Abrasives, which makes sandpaper, has been rewarding its 125 employees with cash for trimming their weight and an extra day off each year if they don't gain it back.

"The money is great and the day off is great," said the 51-year-old Rivera.

This year, she lost 25 pounds and got $125 when her employee team reached their weight-loss goal. She used the money for some new outdoor furniture. Being part of a group also keeps her motivated, Rivera said.

A local firm here in St. Cloud has a set of five things one can do for health -- do them, and your health insurance premium is reduced, more the more of the five you do. The firm isn't too big, though, and I wonder if the knowledge of who did what is a positive motivation.

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Pay now or pay more later 

The cost of delay is almost always larger than people think. Take for example Social Security. Andrew Samwick highlights a new report from the Treasury Department. In short, it says that if you wait to solve Social Security you get both the problem of baby boomer retirements being a larger share of the public and lower fertility rates leaving us fewer people to tax to pay Social Security benefits. The report puts a figure of $13.6 trillion -- about one year of GDP -- on the present value of the shortfall in Social Security over an infinite horizon. (You often hear a smaller number of about $5.1 trillion, but that only gets you to about 2080, and then you have to fix the problem again.

So what does it take to fix the problem? The report says if you were to not touch the current recipients of Social Security and only pay for the problem by increasing payroll taxes, you could take care of the permanent issue by a payroll tax rate increase of 3.5% (from the current 12.4% to 15.9%.) If instead you were to pay for it by just cutting benefits, the reduction today would be a little more than 20% of benefits. Obviously a combination could work as well. But if you wait until 2041, when the current $2 trillion surplus in Social Security would be exhausted, you would have to raise the payroll tax 5.8% or cut benefits 30%, or some combination of the two.

Of course, chastened by the Bush experience with the issue in 2005, don't expect to hear these solutions brought up in the elections next year. But those data do help us understand the cost of delay.


Churches and the political left 

I have posted some thoughts on these over at True North.

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Monday, September 24, 2007

When a short-term loan really is short term 

I can't add to James Hamilton's explanation. I said it before, but the professor provides the evidence that the bump in liquidity really was short-term. The take-away:
This is not to insist that concerns about higher inflation are unfounded. But, if one wanted to motivate such concerns from a monetarist perspective, one could not point to money that has been printed so far. Instead, the story would have to be that, in order to achieve the path for the fed funds rate that the Fed is now likely to set for the following year, the Fed will eventually need to add more reserves that do end up as more cash in circulation. In this scenario, markets have been reacting to an anticipation of future money creation and not to something that has already happened.

The correlation of blogging and scholarship 

Dani Rodrik has tried to determine if there's much of a relationship between economists who blog and those who are doing good, useful research in economics. The short answer is that the relationship is positive but only because the top ten economist-bloggers include three U. Chicago bloggers (Levitt, Posner and Becker), the very prolific Brad DeLong, and a passel of George Mason economists (is a blog required for tenure there?). Take those out, he says, and the relationship pretty much disappears.

Somehow this blog, #20 on Aaron Schiff's list, didn't make Rodrik's sample. I doubt I'd have changed the correlation, but for the sake of completeness, here's my Google Scholar page. I don't know what he used for the ranking of citations, but my guess is I am a little below the median of the group.

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Persuasion, force and the possibilities of private censorship 

I was wandering through Minnesota blogs a few nights ago and stopped by Charlie Quimby's site to see a post titled "Free Market Censorship." I considered that an oxymoron (this is currently Littlest Scholar's favorite word -- a 13-year-old's life apparently gives many opportunities for its use) and said so in his comments. He has responded with a second post that contains a little derision for my view. Allow me to explain this to my readership a little better.

Charlie first complained that when he forwarded email that was "anti-war, pro-environment progressive" to a group of his friends, some did not receive them because "AOL subscribers and users of "free" email services such as Microsoft-Hotmail and Yahoo" were having that email filtered out by those providers. I suggested it was not for him to complain. Those services do not have a duty to him as a sender but have some duty to the recipient, since they are the ones who sign a contract with the service providers. Charlie checked out the AOL contract and thought AOL had a great deal of rights retained to deliver or not deliver mail.

So what? Subscribers have the right to not subscribe. They can go to other sites or buy their own ISP services. The filter on email to this domain is set by me, for example, and the cost of this site is less than the cost of an AOL subscription. People buy AOL, or use Hotmail and Yahoo, because they require less work and knowledge of the internet than buying your own domain. You're free to make that trade or not. And if you are a subscriber, you can choose as well to complain to AOL or Microsoft about their policies. This is an example of Hirschman's concepts of exit and voice to describe dysfunction in a relationship.

But as long as exit is possible, in what sense are you censored?

A little sidetrack: Yesterday in the St. Cloud Times, editorial page editor Randy Krebs announced a new policy on letters to the editor regarding candidates for political office. The new rule:
For submissions that cite an incumbent�s vote on specific legislation, the author must provide documentation from a reputable source that verifies the vote. That documentation can be a newspaper article, minutes from a meeting or even a link from a credible Web site that tracks such votes. (Examples include links to the appropriate files on The Library of Congress or the Minnesota Legislature�s Web sites.)
Who's Krebs to decide what's a "credible web site" or "reputable source"? Well, he's the person designated by the paper's owners to decide what's on the editorial page, that's who. When he sends back a letter and says "I don't think your source on this is reputable", you have no right to demand your letter be published. You may complain, and you may publish it on a blog, and you may denounce the policy. But you don't get to tell a private newspaper what is to be published on its pages. You can't, and because of the First Amendment neither can the government.

(Note: With this policy the Times can no longer really say it publishes all letters, and it has opened itself up to criticism of applying the standard unequally to conservative or liberal letters, to Republican and Democratic letters. That's their problem, though, and I think we can assume they've evaluated that problem versus the problem of unfounded claims in letters and the barrage of responding letters that ensue, and decided this was how to handle that problem. Again, they're a private entity, and that's their right.)

Many years ago I read an essay by Mark Skousen in which he highlighted a passage from Alfred North Whitehead's Adventures of Ideas. In one essay in that book Whitehead argues that persuasion, the respecting of a human's right to choose, is the most fundamental sign of the advancement of society. Using Skousen's excerpt:
The creation of the world -- said Plato -- is the victory of persuasion over force... Civilization is the maintenance of social order, by its own inherent persuasiveness as embodying the nobler alternative. The recourse to force, however unavoidable, is a disclosure of the failure of civilization, either in the general society or in a remnant of individuals...

Now the intercourse between individuals and between social groups takes one of these two forms: force or persuasion. Commerce is the great example of intercourse by way of persuasion. War, slavery, and governmental compulsion exemplify the reign of force.

Charlie's second post is little more than a diatribe against commerce, at least when one of the parties to commerce takes the form of a corporation. Yet the examples of force in his story are not found. You are not forced to accept Hotmail as your email service. You are not forced to take a job with a company that refuses to pay you for overtime. You may do so because you are ill-informed or ill-prepared to explore alternatives, but last time I looked your right was only the right to pursue happiness, not have it delivered to you with a bow on top.

The penultimate paragraph tries to attach to my view something I do not believe:
But I find it extremely comical that an economist can overlook how corporations enjoy the protections of government � particularly through lobbying, political back scratching and the courts.
Good heavens, no. I don't overlook it. I call it "rent-seeking" and I abhor it. Economists have long recognized its existence and the inefficiency of it. Where Charlie and I might disagree is how to cure it. He would argue that there are not enough government restrictions on economic activity and seek political solutions to put more on. I would argue instead that as long as government has the power to place these restrictions on economic activity businesses will seek to control it, so the only solution is a constitution that reduces government's power to write the restrictions in the first place. The original U.S. Constitution was closer to that ideal than the one that we have now with direct taxation; the pre-New Deal executive and legislative branches understood this better than the post-World War II ones, with the notable exception of Reagan (at least in the first term.) This blog is chock full of examples of rent-seeking, and I hold no brief for corporate power.

But a contract for email services is a poor choice for an example of government protection of corporate power because government does not restrict your choices for email service. Government is the source of all coercion; corporations can only bend it to their will if we first allow government to do it. The conservative or libertarian argument is to get government to stop using force, not to use it "in the name of the people." If you fail to understand why, look up the countries whose official names begin "People's Democratic Republic of..."

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Reality, check. Logic, umm... 

I have thought of running the series "Spot the Non Sequitur", but the double entendre would be too cruel. And besides, I think this one is an example of a red herring rather than a non sequitur. My readers can decide.

Pat Kessler runs a series of "Reality Checks" for WCCO television in the Twin Cities. The media seems to love this sort of thing -- look at the wonders it did for Eric Black's career. So occasionally I read these looking for, well, reality. Instead I find this.
"They attacked us and they will again. They won't stop in Iraq," the ad says.

This is a DISTORTION of the facts.

There is no link between the 9/11 in American [sic] and Saddam Hussein in Iraq.
The statement quoted in the ad by Freedom Watch is not a fact; it's a prediction that "they" -- who are terrorists and extremists, not identified as Iraqis, at least not in that ad -- will attack "us", and that this is more likely if we pull out of Iraq. That's not a distortion of fact; it's a hypothesis with which you may reasonably agree or disagree.

But even if you disagree with that hypothesis, support of your proof is not begun and ended with a statement that there's no link between the 9/11 attack and Saddam Hussein. The proposal to stay or go in Iraq has nothing to do with Saddam at this point given that he has achieved room temperature. It has to do with whether who we are fighting includes those who would attack here if we chose not to fight. Again, that's a debatable point; there are no settled facts, and Kessler's conflation of Saddam with that debatable point is an example of using the editorial voice of "Reality Checker" to assert one side of a debate as a settled fact.

Perhaps WCCO could run a segment called "Logic Check". And start with its own reporting.

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Book Review: 200 MPH Billboard 

The last time I paid attention to stock car racing, Cale Yarborough and Richard Petty were names and I'd never heard of the acronym NASCAR. New England wasn't a place you watched that kind of racing (there were drag races nearby, but no ovals.)

Now, of course, NASCAR has taken off to become the fourth sport of America -- taking out hockey as well as golf and tennis for attention in America. Unlike most sports industry models, as Ross and Szymanski point out, NASCAR is organized more like McDonalds: the participants or the owners of the vehicles or tracks do not control NASCAR; NASCAR is its own separate entity.

In The 200-MPH Billboard: The Inside Story of how Big Money Changed NASCAR, Mark Yost has written a description both of that transformation of NASCAR into a unique business model, and its ability to sell the sport to other businesses. The early chapters tell the story of the Bill France family and its building of the sport's economic model. While it seemed natural that these teams would be sponsored by the makers of automobiles or the parts inside them, it took the vision of France and a few others to see the possibility of using the cars themselves as a means to market other products.

First came Junior Johnson and RJ Reynolds. Still reeling from the decision in the late 1960s that cigarettes could no longer be advertised on television, RJR had an advertising budget with no place to spend it. At the same time, NASCAR was struggling to replace support from the automakers. Yost describes the decision as "the most momentous business decision in the history of NASCAR." Not only did the Winston Cup come into existence in 1971 and RJR funded a $150,000 purse for the Talladega 500 that same year, but RJR was able to convince other corporate entities to join in advertising. Each looked up into the grandstands, says one historian in Yost's book, and saw their customers. And the advertisers saw it in their own interest to help NASCAR create a more uniform feel for their racing venues and their cars. In short, the days of lugging your vehicle to the track and hoping you won enough money to afford gasoline for the drive home were over.

Yost details the expansion of the sponsorship base through the middle of the book. Much like baseball's expansion of advertising from beer and tobacco to credit cards and shaving products, NASCAR's success required them to grow from tobacco, beer and automotive products. By the mid-1980s such brands as Folgers, Tide and Crisco were being advertised by NASCAR vehicles and drivers. Such sponsorships reinforced the need for a uniform, well-regulated competition in NASCAR, which the industry's corporate structure permitted.

The latter half of the book focuses then focuses on case studies of this business model. I found the story of Texas Instruments' use of NASCAR to push its DLP technology for wide-screen television the most interesting of these. Not only did TI create demand from fans and viewers of NASCAR events on television -- the people most likely to buy HDTV -- but they also created events with Circuit City that could help get the latter to push their version of HD in a very crowded market. There are several such B2B stories in the book, which is an aspect of NASCAR sponsorship that has few parallels in the major team sports.

Yost concludes by looking at the challenges NASCAR faces and whether the sport has peaked in popularity and profitability. It's a fair question, though Yost speculates greatly in the last few pages in ways that lead one to think he sees growth still. As NASCAR has 70 Fortune 500 companies as sponsors, it would be hard to bet against it.

Cross-posted at The Sports Economist.


Sunday, September 23, 2007

Union-Sponsored Anti-war Demonstration Flops in St. Paul 

As noted here on Saturday, two key public unions (AFSCME and SEIU) along with other assorted unions and anti-war groups used members' dues to stage a rally (?) on the steps of the MN Capitol in St. Paul. Since some union members do not support these causes, is this a fair use of their dues?

A second point is interesting. This particular anti-war assemblage spent weeks weeks planning, contacting members, etc. However, it would take a very large imagination to call this rally a success - max, 300 people. How many thousands of members comprise AFSCME and SEIU, not counting the other organizations behind this event?

On the other hand, a stalwart band of military and mission supporters are beginning to appear at various anti-war functions. The base group, Families United, founded by MN's own Merilee Carlson who lost her son, Shrek in Iraq, organized a quick response. Though the group was small, it made an impact.

The anti-war crowd is not used to seeing any opposition but now supporters of our troops are pulling together. These people realize we are in a fight for freedom and civilization.

Everyone wants peace but once peace=pacifism, freedom for all, including the anti-war crowd, is at risk of disappearing. As long as there are those who wish to destroy us and suppress others' beliefs, someone will have to take a stand. Right now, it's the US.

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Saturday, September 22, 2007

Freedom of Choice and Protesters 

Labor unions, religious bodies and non-profits will hold an anti-war rally at the MN State Capitol. Participating groups include: MN ACORN, MN AFL-CIO, Mpls. and St. Paul central labor councils, SEIU, AFSCME, Catholic Archdioces Office for Social Justice, the Methodist Social Ministry Team, Sierra Club, Wellstone Action, TakeAction MN, Progressive Majority and more.

Reads like a "Who's Who" in the protest business.

As with most Americans, I treasure our free speech privileges. As with most Americans I like Choosing how I earn my living and I like even more keeping my earnings. I like being able to have opinions that as a general rule do not prevent me from getting promoted.

Why can people be forced to pay dues to an organization that supports candidates and positions that are abhorred by the member? There are restrictions in the private sector but the public sector (AFSCME and SEIU) and non-profits are pretty free to do what they wish with their members' dues and contributions. Perhaps it is time for union members who oppose the use of their required dues to support causes with which they disagree to let their unions know. As for non-profits, people can stop donating.

Being forced to contribute seems grossly unfair and unAmerican.

Friday, September 21, 2007

Your weekend quiz 

I'm scared to give this quiz to my students, so I give it to you instead. I missed three of the sixty questions, including one of the questions on the NAEP test.

There is no prize for beating me, except that you may feel quite superior. I was honestly stumped on two of the three, the other a mental error I should not have made.

See you Monday. There's a show tomorrow, but I'm still so Italy'd out I have no idea what we'll do yet. I hear Michael's angling to dump me because he found better help.

P.S. When you go to church Sunday, say a prayer for Zimbabwe. It's getting worse...

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And while I'm on this central bank thing... 

...I have to disagree with Greg Mankiw that we have no explanation of why we have central banks. Central banks as public entities really began with the Bank of England. Why did it exist? To provide loans to the government engaged in colonial expansion and war. Why did the first two Banks of the United States exist? To provide loans to a government that was new and in a war with a bigger power.

Each government, early in its development, found it desirable to expand without resort to taxation. Often that's due to war, but not always.

What's more interesting is the evolution of central banks after they stop being useful for raising funds for government spending. What do they do then? Who are their supporters? The bankers? The bond markets?

There are lots of answers in Mankiw's comments that sniff around this answer. But we've had these answers for a long time.

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More evidence of the dual mandate 

The WSJ blog has a note on a speech by Fed Vice Chairman Donald Kohn earlier today. He argues (along with a survey paper he discusses by David Laidler, which I would love to read if I found it) that the monetary policy has two unanswered questions: What's the best way to support the goal of price stability? And how do asset prices help you steer monetary policy?

That answer, he points out, is fundamentally different in the U.S. and Europe, and makes a very political argument for this:
A formal inflation target represents a national embrace of a goal, in which elected authorities recognize the primacy of price stability and publicly support--indeed, even require--the central bank's pursuit of that goal. To the extent that elected authorities channel the desires of the electorate, a central bank directed to adopt an inflation target is being given a strong signal as to the goal's importance to the public at large. This affirmation has often been reinforced by the granting of operational independence to the central bank to achieve that goal most effectively. An important effect of such public acceptance of price stability is that it erodes the standing of those who would direct central bank action toward other ends. In such an environment, workers, businesspeople, and investors can make plans with the expectation that nominal magnitudes will be predictable and so devote their attention to more productive matters.

For the European Central Bank, this framework was established by treaty. In most other instances, the adoption of an inflation target involved laws and mutual understandings, not constitutional changes. The early adopters of inflation targets were parliamentary democracies, which is not too surprising given that in such a system a single branch of government can enact laws and put them into effect. With regard to an inflation goal, the parliament can erect the formal apparatus and the finance minister can serve as the government's point of contact with the central bank.

The system in the United States is different in that two independent branches of government are responsible for economic policy making, making agreement on a single goal problematic. Moreover, those two branches have already spoken as to the appropriate aim of the nation's central bank: The Congress, in a law the President signed, has given the Federal Reserve a dual mandate that directs us to foster maximum employment and stable prices over time. This instruction is not an accident of history, in that, in the past, the Congress has shown no appetite to amend its legislation.

I am amused by that last line, as it sounds a good bit like the argument for the antitrust exemption in baseball. The problem with it is that the Fed's independence is quasi-constitutional, in that it likely could not be done without a long public debate and would require broad acceptance of the changes proposed. So arguing that everyone likes the dual mandate -- adopted in 1913 -- because Congress hasn't changed it suggests we have the same understanding of inflation now as then. We don't. But the line does require people to say things like Governor Warsh did this afternoon, that their mission is to watch the real economy. That's not what we teach in intermediate macro.

Not even Kohn, as he then argues that our there's no inherent difference in the dual versus single mandate:
Nor is this instruction unreasonable, in that the dual mandate has come to be interpreted as assigning us the responsibility for attaining price stability in the long run, which will bring with it maximum employment, and of being mindful of resource utilization in the succession of short runs that make up the long run. The dual mandate seems proper and fitting, given that economic costs are incurred both by having inflation stray from its long-run goal and by having output deviate from the economy's potential to produce; and it seems to produce results not too different in practice from those associated with central banks that are flexible inflation targeters.
You could not have made that argument even 25 years ago, yet it seems so facile now.

Sure, you can argue that in the long run price stability maximizes output, but at what point is your performance evaluated? And when you have the goals the Fed does, you are subject to complaints like knzn's,
We want a stable financial system (even though the system is constantly evolving); we want stable prices; we want stable interest rates; we want stable employment; we want this; we want that; � The macroeconomy is like a spoiled child demanding all sorts of subtle and incompatible things. Rather than trying to make the child (who, by the way, isn�t very good at making decisions, since he has to use the democratic process to do it) specify �I�m willing to accept X amount of interest rate variance in exchange for Y amount of inflation variance� and so on, isn�t it better just to appoint a wise and respected nanny to make the necessary compromises? which the lack of a single goal makes life difficult for the Fed. And yet you when you have people who argue for price stability uber alles, you have no leg to stand on either.

When people asked me why the Fed went to 50 bp on Tuesday night, I said the Fed knows something we don't. As I said a while back, they had to have seen the CPI report that wasn't public until Wednesday morning. I don't think the Fed necessarily believes the economy is headed for a recession, given some of the data that's out there, but the good price report gave them reassurance that they would have some room to deal with the growth side of the mandate. William Polley says pretty much the same thing in the second point here. He also talks of what happened to the long bond as the announcement occurred (he was with students on a field trip to the Chicago Board of Trade at the time of the announcement):
From the gallery in the CBOT, we watched it happen as the 10 year numbers went red and you just wanted to have a moment of silence for the passing of low inflation expectations. You teach this stuff for years, saying "this is what can happen..." and then it does.

I have to admit that the market reaction troubled me a bit. They didn't get the message. Or they got the wrong message. Or worse...they got it just right.

I think that's the problem with the dual mandate; you are not sure if the weight the Fed places on inflation changed, or if their forecast is for core inflation to subside, or ... whether they got that right. I do not think it matters even if you were to have the Fed adopt inflation targeting, though it would help. As much of the world has moved to a sole price stability mandate as has moved to inflation targeting (Fed Governor Mishkin makes that point here), but that requires an act of Congress, one that may come before or after they get around to removing baseball's antitrust exemption.


Thursday, September 20, 2007

Gary's laid up 

A phone call from Gary of Let Freedom Ring told me that he was on his way to the hospital with some recurring stomach issues. His blog will be silent only for a little while, we hope. I'm close to the hospital, so I'll try to see how he's doing later. Keep Gary in your prayers, please.

UPDATE (9pm): He's home and well enough to talk for about 45 minutes just now, but still will need some medical attention down the road.

Update by Janet - 10:30 AM. Gary posted an update at 3:00 AM this morning about people's reaction to the blast against General Patraeus. It's worth the read. You can read the short article here.

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Was he studying underwear fifty years ago? 

Of all the things Greenspan said in the Daily Show interview, the one I liked the best was this:
The trouble is that we can�t figure that out. I�ve been in the forecasting business for 50 years. � I�m no better than I ever was, and nobody else is. Forecasting 50 years ago was as good or as bad as it is today. And the reason is that human nature hasn�t changed. We can�t improve ourselves.
Contrast that with a post this afternoon from Real Time Economics:
[NPR] Science correspondent Robert Krulwich explained: �What [Greenspan] would do, is he would keep his ear as low to the ground trying to figure out � what are people really up to? Men�s underpants was the one that really got to me. He once told me that if you think about all the garments in the household, the garment that is most private is the male underpant, because nobody sees it except people like in the locker room, and who cares? Your children need clothes. Your wife needs clothes that have to change. The children grow. You need clothes on the outside. But, the last purchase that you don�t have to make is underpants. � If you look at the sales of men�s underpants, it�s just pretty much a flat line, it hardly ever changes. But on those few occasions where it dips, that means that men are so pinched that they are deciding not to replace underpants. And he said that is almost always a sort of foreshadow of �here comes trouble.� � It�s not that he was right or wrong: I just loved the way he would sneak around human behavior by looking at things like that.�
OK, I can hear you snickering "THAT won't work in Canada", but you have to question the thought. But I think it's also quite strange in this way: It assumes that you can tell the economy's future by looking at consumption trends, yet it's investment booms and busts that tend to be the most pronounced before business cycle peaks and troughs. Maybe underwear leads a little, but sales are normally considered a coincident indicator.

I just can't see how this works.


DC Protest - Not - They have no Traction 

This past Saturday, September 15, I flew to Washington, DC to join up with Families United. Their session began on Sunday evening but I decided to arrive early to check out the latest anti-war protest.

Well, it was a flop, an undeniable flop. First, max 3000 protesters. Second, I heard (cannot prove) that ANSWER was paying people $20 to carry a sign in the march. Third, as late as Friday, ANSWER was petitioning for protesters to march, participate in a pathetic "die in," and read the names of American's fallen heroes.

We walked along side the marchers on Pennsylvania Avenue. The usual anti-___ crowd marched: left-over 1960's hippies; the current version of copy cats; Palestinians; Iranians; and a plethora of various ad-hoc, anti ____ groups. Protesters cannot handle challenges and facts. They have their arguments but when countered, they cut and run. (Note the plastic water bottle in the protester's hands below.)

The walk was about a mile. When we arrived at the Capitol, the protesters were already leaving - they were too tired to stay for the rally. Once the "die-in" started, more left. Other than about 150 taunting the police, the few remaining were on the Capitol grounds playing simple games; one group, an upgraded version of "patty-cake" because they were "tired. They had driven from Ohio the night before and ," well, you know, they were tired. Excuse me - I drove the Ohio-DC route for years - max time? 6-8 hours. When asked "What about our guys in Iraq who are up 36 hours straight in 120 degree hear?" This inconvenient fact was ignored by the protester who was also an event organizer. I said, "You must be disappointed in this turn-out. There's no one here." He was not pleased but had no response.

The "die in" crew climbed a 3' wall at the base of the Capitol, "fell" into the arms of the Capitol police, were hand-cuffed and carted off to the local DC jail. I heard no reading of names. Many of the "die-in" participants appeared to think it was cool to be arrested. I'm sure they thought they would be released. However, if a person is arrested and has an address 50 miles outside of DC, he/she must remain in jail until bail could be posted on a weekday. Since they were arrested on a Saturday, they could not be released until Monday. One poor youth called his mom in New Jersey to bail him out; she immediately drove to DC only to discover that she had to wait until Monday to post bail. So, her little darling spent about 36 hours in the local jail along with all the usual weekend arrestees. I doubt it was a pleasant 36 hours.

The Capitol police should be commended for their professionalism and performance. They remained cool under a lot of taunting. They simply took the protesters one by one as they "died" and walked them through the process.

This demonstration, after much hype, simply had no traction, none, zero. Bush has nothing to worry about here - Congress, yes; protesters, no. For the entire parade route and at the Capitol, people turned out to show their support and appreciation for those who serve in our military forces.

Saber-rattling at central banks 

Greg Mankiw points out a press release by Rep. James Saxton that called for a Fed Funds rate cut of 25 basis points and says it's the last thing we need. Mark Thoma says "we should be very careful about compromising the Fed's ability to act independently of the rest of government."

The Milan conference was about this very point. So permit me to share a couple of thoughts. First, unlike the ECB, which has price stability as its sole objective , the Federal Reserve still operates under a dual mandate for both price stability and to promote economic growth. It is a creation of Congress. As John Wood presented at the conference, in the confirmation hearings for the renomination of William McChesney Martin in 1956, Senator Paul Douglas said:
I have had typed out this little sentence which is a quotation from you: �The Federal Reserve Board is an agency of Congress.� I will furnish you with scotch tape and ask you to place it on your mirror where you can see it as you shave each morning.
The Federal Reserve has some quasi-Constitutional status as an independent agency, but it is not above Congressional review. The degree of Congressional discretion has been long debated, but its protector is not a law; it's the bond market. (That point, by the way, is implicit in Alan Greenspan's direct-to-classic interview with Jon Stewart Tuesday night.)

This takes me to the second thought then, which is how independent SHOULD a central bank be. That is, given economic policy is something governments will do -- should they do any? take that question somewhere else please, no time for it here -- what is the optimal amount of delegation the government should give to a committee of experts? To get at that question (though it might not have been her intent) there was a presentation at the conference by Katrin Ullrich of the Centre for European Economic Research which posed the question of whether you would want to delegate fiscal policy at all. The reaction of the workshop was quite interesting; basically, you can't delegate fiscal policy because "taxing and spending the receipts of those taxes is what legislatures do." The reason we delegate the job of price stability to the sages like a Greenspan or a Trichet or a Bernanke is not just because they are smarter, more conservative (in the sense of more inflation-averse, not a political statement), but because monetary policy doesn't create winners and losers. But of course, unexpected inflation does, through the debtor-creditor hypothesis that most of my generation of economists had to learn in grad school.

Certainly on balance, economists have decided that countries where central banks are insulated from political pressure and have clear goals for policy do better in providing price stability. That's not the point -- it's whether elected officials can ever say anything about monetary policy. Most of the time what they say is self-serving blather. But if the optimal degree of delegation was 'complete' we'd all have the gold standard or a currency board and be done with it. Some economists may feel that's the right answer, but it isn't the majority. Every once in awhile, central bankers should look in the bathroom mirror.

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Wednesday, September 19, 2007

"And be sure to fund my door-knockers" 

The DFL is sounding off on the AFSCME strike at the University of Minnesota.
At a news conference held at AFSCME strike headquarters in Dinkytown, three state legislators urged a quick end to the strike by clerical, health care and technical workers that began Sept. 5. They are the second group of lawmakers in as many weeks to speak out about the dispute.

"I am incredibly disappointed with the administration's actions," said state Senator Patricia Torres Ray, DFL-62, adding that having a "world class university" means the administration needs to "treat our workers as world class workers."

State Rep. Frank Hornstein, DFL-60B, was equally direct.

"We don't want the leadership of this institution to squander the goodwill they now have . . . . We don't want the strike to last a day longer," he said. "I speak for many of my colleagues in demanding that the collective bargaining process resume and the university come back to the table."
In the video included in the post, Rep. Tom Rukavina says the money was put into the bill for paying AFSCME off and also to hold tuition down. When the bill passed, the tuition increases were supposed to be 4-5%.

This is not true. While the U of M System got 14.9% additional money for the biennium, the money was designated to go into investments in technology, to keep the University from hemorrhaging faculty being bid away from other institutions, and for the new darling of the planners (including the governor's office), STEM. If someone can explain to me how the money was supposed to do all those things and, at the same time, lavish money on AFSCME, which of course spends hundreds of thousands on DFL candidates.

I'd like to think Tommy and the minions would sing for our faculty contract too -- which is currently in negotiations -- but I don't think we pay enough tribute.

Honeybee Virus 

Honeybee colonies are critical to our food supply. For the past few years beekeepers and environmentalists have been concerned about the decline in the number of bee colonies. The cause was difficult to determine. Now, scientists have made some inroads. Turns out the decline appears to be caused by a virus according to studies reported in the Washington Post.

When faced with these problems, it is very important that we keep our scientific facts straight and identify real causes versus emotional ones.

For the sake of our farm industry, I do hope scientists will find either a cure for this virus or a way to protect additional hives from this problem.

Good news on Infant Mortality 

There are times when we can lose perspective on infant deaths. Historically, many cultures had to deal with a high level of infant deaths. Today the numbers have plummeted, worldwide. It would be nice if the number were zero but we may not reach the level of perfection. In the meantime, it's nice to know significant progress is being made.

In 2006 worldwide deaths for children under age 5 were 72 per 1000 live births. This was a significant decline from 93/1000 in 1990 and 184/1000 in 1960. This is a 60% decline over this time period. Changes in nutrition, malaria prevention, and immunizations are making a difference.

In the US, the under 5 mortality rate is about 8/1000.

Enough is ENOUGH already 

While I was traveling, Mark Brunswick has posted a story on the local government junkies saying they can't wait four months for their next fix.

When legislators will meet again in February, will they really pass a gas tax increase in an election year? Will the housing implosion by that time have dried up revenue that could have gone to property tax relief as the economy turns sour?

A property tax bill vetoed by Pawlenty would have given cities like Hibbing a 10.1 decrease in its tax levy. Without the tax bill it is facing a 9.9 percent increase. Minneapolis would have received over $13 million in new local government aid. St. Paul would have received more than $9 million.

Tom Kuntz, the mayor of Owatonna and President of the Coalition of Grater Minnesota Cities, said cities awaiting help for local government aid cannot wait. Local budgets are being finalized by the first of December and a special session is needed by mid-November, he said.

�If the economy turns sour they don�t have the dollars to work with, there�s no chance in heck of getting an increase in local government aid.�

Well that's the game right there, isn't it? The state government cannot, of course, run a deficit, so if they pass the spending bills right then and there, the state will have to make up the money with a tax increase in 2008. But that wouldn't be blamed as much on these local weasels officials. So get your fix while your dealer is still offering credit? Particularly when the governor has said in the past "we'll get you that LGA."

Governor Pawlenty, I suggest you go on a very long trip. Milan is beautiful; I have an osteria I can recommend that is cheap and pours a free negroni at the end of your meal. Come back in January, sir, have a great time. We'll keep an eye on things while you're gone.

UPDATE 9/20: Drew has some interesting speculation about a quiet move made by the DFL leadership during the special session that might increase pressure for a second special session.

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Places in Europe I love 

As you can tell from the previous posts, I really did enjoy myself in Milan and Como. It's odd to me that Milan is not seen as a travel destination by many, though certainly it's a comfortable place. One walk through the Galleria did this for me, though finding a little cafe on Verdi Street to have a collection of Hollywood trivia was really enlightening in this way. The owner seemed happy to be found by us. You do NOT get this in Eastern Europe.

But Douglas Muir mentions another favorite place that I literally stumbled into many years ago: the Billa Supermarket.
In addition to the usual supermarket stuff, it has cold shelves full of salads and sushi, an icebox full of smoothies, and a deli that makes sandwiches to order. All fresh and tasty, and less than half what it will cost at one of the overpriced eateries on the departure level or out by the gates.
It's been awhile since I've had to lay over out by the airport -- if you live in Minnesota, you usually fly through Amsterdam or Frankfurt, not Vienna -- but I have a real love affair with Austrian Airlines that began with the Billa Supermarket. I was going to Slovakia and Hungary in 1993, then circling back through Vienna and up to Prague later in the month. The bags coming over from Dulles got lost, so all I had was my backpack; I was going not to Bratislava but a small town about fifty km east of there, where there was an old castle that was the Slovak Academy of Sciences. I had finished detailing the bags to the airline and was trying to find where my compatriots were hiring cars to go to Slovakia, and I ran into this market. All the things I absolutely needed for the next two days were there, including those sandwiches. (Being vegetarian in a Slavic country is no fun, so I had them make three sandwiches to go.) Eighty euros later, I was ready. Amazingly, the bags arrived two days later; I was walking outside the castle and watched a slow red truck wind up the road, with Austrian Air markings on it.

Every time I get caught with a layover at the Vienna airport since then, I hit that supermarket for the same sandwich. And I've rewarded the nice van that brought my bags into the Slovak countryside with business for its airline as often as I can.


Monday, September 17, 2007

Got to go fast, so here's your picture 

OK, check these out. Those hinged things on the left come down as your seat for a seminar. They are covered in some vinyl stuff so that when you sit in them you make the sound Roseanne Roseannadanna made when she sat with Eric Severeid in that old SNL bit. They are convenient to make a classroom fit more seats, but once one is seated in the middle one cannot leave without making everyone else stand up. This sounds like a good idea -- students should stay! -- but faculty in a workshop won't, particularly at one that lasts from 8 am to 7:15pm with only lunch and an occassional coffee break. Cripes! They become very uncomfortable then, as these people appear to be.

But this school had a great restaurant in its basement, which served wine with lunch. Any chance we can have this in the MnSCU system? And Bocconi also has these interesting creatures guarding it as you enter. I am not sure what animal this is supposed to be or whether it is really fierce or not. Maybe so.

Anyway, that's about it from here. At six euros an hour the internet is too expensive to post more. So Janet will keep you until Wednesday. Arrividerci!


Sunday, September 16, 2007

Why you want to have money 

I have found something I would give up this blog for.

I found Como.

This is actually up in Bellagio -- the only resemblance to the casino in Vegas is the port entry, which was actually disappointing -- which takes about 50 minutes by the fast ferry from Como. You could drive there if you wanted to, but the ferry and the small lake towns along the way are much better for the atmosphere.

The lake is long and thin with two branches, like an upside-down Y, and Bellagio sits at the junction of the two branches. Indeed, dinner was had today at a place called La Punta -- the point. Here's the view from there. The food was as always good. Hint: You need not ever order a real bottle of wine if carafes are available. The house wine is as nice here as any table wine in Paris.

Another fascinating thing: The use of pedals rather than handles in toilets. I consider this a great advance. In one very trendy club near the university at which I've been working, the styling is like an old taxi cab. This includes pedals for the toilet and the wash basin -- which is quite common -- with the foot pads for a car brake and an accelerator -- which is not. Better, the sink was styled like a drain pan for your oil.

The little bars and cafes are in the habit of putting food out with your beer. Tonight the first beer fetched chips with it. The second brought panini with Parma ham. And more chips after saying I don't eat ham. (My compatriots were grateful for zero demand from their drinking partner for the munchies.)

I also like the singing quality of the language here. It's not Chinese-style funky tonal. It's almost operatic. And how many ways are there to say Ciao? There are repetitive ones, there's a long one that sounds like a cat with a lisp, the one that comes with a kiss on the cheek, and the greeting that is like a ciao-contest. Who can make ciao sound more authentic? Film at eleven.

I have often argued that cities produce better styling particularly in females since competition is fiercer. Milan will stand as my proof. And this leads to molto coupling. Italians seem willing to neck anywhere, and in some cases they'd do well to stop at necking. This is the biggest annoyance I find -- the sound of smacking lips on the train is everywhere. The price of hotels may be part of the problem. But if this is the biggest problem, it isn't enough to detract from this place. Not that there's much to do in them. The room is hardly large enough to change your mind in, let alone be with the one you're with, as the Isleys might have sung. So you spend most of your time down here, which is the lobby of this hotel. (I'm currently sitting on that green couch that needs to be in Lileks next book of bad living rooms.)

It would be bad to be here without money, but nobody seems without money. The murderous part of being here is the current dollar-euro exchange rate, which is a hammer on my wallet every step of the way. There are very few Americans here, I believe in part, because of the cost of being in Europe right now. But the lake was worth it even at $1.4 per euro. What I need is enough money not to care.

BTW, right now on the radio in that lobby? Gorillaz.

Tomorrow: A really bad European classroom. And more food reviews!

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Friday, September 14, 2007

Unintended Consequences 

Anyone who has done laundry knows water needs to be at a certain temperature to get clothes clean. The US Dept. of Energy, in its infinite wisdom decided to impose requirements to use 21% less energy in the washing machines. The industry complied. One way to attain this goal is to lower water temperatures. Result?

It seems that clothes don't get as clean as they have in the past because of the lower water temperatures. What will people do if their clothes don't come clean? They will wash them again! We may use less energy per load but may very well increase the number of loads of laundry we do. So much for energy savings. (This reference is the summary version; original information was in a Consumer Reports article.)

Do we really want the feds to start micr0-managing like this?

Suggestive tee: Round up the usual suspects 

The campus newspaper has a story that one of the bookstores has handed out tee-shirts with purchases that read

"I'm cheap, I'm used, I'm available."

Although the words are located directly above an image of a book, the meaning seems to vary among those who read it.

"It's talking about the person wearing it," said Kira Nelson, a senior marketing major. "It's disgusting."...

The Women's Center, along with other groups such as Women's Action, are taking steps against the message on the shirt.

"We did generate a petition for Mainstreet and gathered signatures that we will mail to Campus Book and Supply," said Jane Olsen, Women's Center director.

Olsen also sent a letter Tuesday to Campus Book and Supply expressing the center's views on the T-shirt.

"The message, 'I'm cheap, I'm used, I'm available,' sends the message that women and men are available for sex at any time and with anyone," Olsen said. "It's demeaning to both women and men."

Sigh. Another year begins, and the university leftists have their first cause. A t-shirt with a book on it. With any luck they'll burn a few, and our comparisons to Fahrenheit 451 will be complete.


Thursday, September 13, 2007

Stars of the North - Volunteers, American Style 

September 12, I had the privilege of attending a Star of the North awards ceremony for constituents of MN's Second Congressional District. As Representative John Kline said, there are all kinds of people who find a need and out of caring and love, volunteer and find a solution. Because of the selfless acts of so many, his office established a program to honor many of these doers.

Awards were given to 43 people who had done something out of the ordinary, reached out to others or saved a life because of their calm thinking. Honorees included:

A four-year-old boy who saved his mother's life after she had a diabetic attack; he called 911 and forced her to eat Reese Peanut Butter cups to stabilize her sugar.

An 11 year old whose mother collapsed; he called 911 and then got his younger brother and sister into another room, loaded a DVD, told them to stay there; returned to his mom until paramedics arrived. (Both moms are fine.)

A high school girl who launched a drive for prom dresses for victims of Hurricane Katrina.

Lakeville police who raised $50,000 for Special Olympics by jumping into a frozen Lake in January.

Multiple small groups that had fairs, benefit dinners, and other fetes to help families defray large medical expenses.

One woman donated a kidney to a complete stranger. Another child offered her hair to Locks of Love.

Another child has collected pop tops for the Ronald McDonald House.

A senior citizen reads to school children weekly.

Yes, I got an award for my four plus years of shipments to American soldiers in Iraq.

This giving attitude followed with actions is rare, period. In too many places on the planet, the government is the main source of help, not individual citizens. In 2006, a friend of mine had a young adult nephew from Norway visit him. They went to the Science Museum in St. Paul, a place staffed with many volunteers. His nephew asked what a "volunteer" was. My friend explained. The nephew replied, "Oh, we don't do that in Norway, the government takes care of all this." If we let our government take over too much of our society, we too will lose contact with our neighbor; we will lose the incentive and eventually the ability to help friends and strangers in need.

We need to remember: Part of what makes America exceptional are people like these honored tonight. It's these big and little actions that count. Our kind of thinking, generosity, just "do it" attitude is NOT universal but it IS American.

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Initial Milan 

Just in time for my visit to Milan, they are having a one-day transit strike. Judging from my brief perusal of the internet, these intermittent strikes are a common occurrence. Doesn't matter as much today, as I need to get a lot of work done and am pretty much confined to my room (which is about as small as my colleagues' offices -- I will be returning to one as soon as someone lets me out of being a department chair. I'll have to show you a picture of that.)

A nice thing about Milan -- you get B-52s, Hooverphonic and Morcheeba with your breakfast and work in the lobby. At least I have this morning.

I share Chad's complaint about being stuck in a room where the only English-language stations are CNN International and MTV. Both showed Britney's new act. Talk about overexposed!

More as I get out and explore.

Wednesday, September 12, 2007

Flood Relief on its Way 

Flood-stricken southeastern Minnesota soon will be receiving $165,000,000 in state aid headlines the Pioneer Press.

Under Section 12 of the Minnesota State Constitution, the governor can add a special session for extraordinary circumstances. Governor Pawlenty did just that, convening the special session to address the needs of this community and help them start rebuilding. But he also insisted on a commitment in advance from the DFL legislative leadership that flood relief was the only topic to be considered. He was smart to put this caveat in place because without such a commitment, the legislators could have run wild with all their pet Christmas Tree projects. As King stated yesterday, there were political moves to do just this. The governor kept his promise - flood relief only. Our governor held firm on his limited agenda and the DFL legislators gave up on all their other tax-increase dreams.

Legislative session rules are also covered in the state constitution. The legislature meets for no more than 120 days and must end on the first Monday after the third Saturday in May. It was designed as a citizen legislature, one where legislators had other jobs to which they returned when the legislative session was done. The plus of this structure is that legislators get their income from their careers, not the taxpayers.

Tuesday, September 11, 2007

There's many a slip between the flood bill and the lip 

Sneaking a quick peek before I get on the plane east, I find this on Mary Lahammer's blog:
There's a bit a chaos afoot at the Capitol tonight. Both chambers only gaveled in quickly and left again to keep crafting deals. What we're hearing is slowing things down is an effort led by the House to pass a property tax relief bill. The bill is apparently at the Revisor's office now and it's the same tax bill the governor vetoed minus his objections. The Senate is not on board. One high-ranking senator just told me "we're not interested" in doing the property tax bill. In fact several lawmakers have told me the Senate Tax Chair Tom Bakk may not be attending the special session at all. Gov. Pawlenty has gotten wind of this and just sent a letter out to "inform the legislature of the purposes for which they are convened" and he added that "a deal is a deal" to hold a one-day session limited to disaster relief.
They can not be this stupid. DJ Danielson is live-blogging the session and doesn't see any of this nonsense. It appears the flood bill is moving along smartly in the Senate. The House recessed. Pogie is still being Pogie:
According to Pogemiller, the possibility of a conference committee cannot be ruled out. In order to limit the possibility of this, he is encouraged amendments to be brought to the rules committee. Senate minority leader David Senjem is encouraging Senators to �hold the line and work within the framework of the bill.�

�As Senator (Dick) Day often says, we all have election certificates. I do not want to suppress debate, but encourage everyone to use their best judgment,� Pogemiller said.

Again, they can not be that stupid. Wreck this one-day session and the DFL majority in the House will go up in flames.

Well, I won't get to watch the end of this, I don't think. Janet should be here tomorrow; look for me either late that day (if the hotel has wifi) or Thursday (if it doesn't.)

A quick reminder about state bonding 

A wise fellow with good knowledge of state budgeting policy reminded me today that the government can pass a bond for capital projects but not for ordinary spending. Thus, any tapping of cash for project spending in the special session tonight (tomorrow?) would be money that has to be replaced with taxes or reduced government spending next February, if the forecast comes out badly.

This is why the quote that Michael has highlighted of Larry Pogemiller seems so odd. Surely the DFL knows what I just said; if there's a shortfall, that would pretty much guarantee a tax bill next spring. Once that engine is in the train station, there will be a lot of cars trying to get put on the train. They should be happy he got at least $75 to $80 million out of the surplus; I won't fault Pawlenty too much for giving that little bit to Pogie, but it might come back to haunt. Meanwhile,

Side note: I'm wondering about this data that Drew has posted on an extra $20 million in tax revenues for July and August. (It was down in July; I can't source the August data yet.) August is when taxpayers who took extensions on filing had to get their returns in. Note that almost all the excess tax revenue came in the individual income tax. It's possible that this blip is larger-than-expected payments in those August filings of 2006 returns and would not tell us anything about 2007. That's pure speculation on my part, though, as I have before.

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Outsourcing conservative commentary 

A new study says that because George Will is in more newspapers than any other columnist, "conservative voices such as his dominate editorial pages."

"He reaches half of the newspaper readers in America," said Paul Waldman, the study's author. "He has a huge megaphone, probably bigger than anybody else in America."

His group found that 60 percent of the daily newspapers print more conservative syndicated columnists each week than liberals. Twenty percent of the papers are dominated by liberals and 20 percent are balanced. Media Matters had no information on local columnists.

Let me emphasize that last line. Media Matters had no information on local columnists. It's remarkable how little one thinks before writing such an article.

Suppose you run a paper that runs five op/ed columns a day. Four will be written by liberal commentators, one by conservatives in the interest of "balance". The market for liberal commentators flourishes and the j-schools flood with young liberals seeking entry into that market. The j-schools discourage conservatives from applying for admission, and as a results the market for conservative commentary contracts into a small oligopoly of a few writers. Each oligopolist is syndicated broadly; many of the liberal writers end up being columnists for a major city newspaper and not syndicated. Editors will eventually not carry local conservative writers, because a few columnists can dominate the industry and provide the conservative view at low cost. They, in short, outsource the right side of their "balanced" newspapers.

Then some guy gets the bright idea to test for media bias and chooses, as his measure, the number of papers each columnist appears in. What will he find?

What he finds is a great trove of small cottage liberal writing industry, and a few grizzled veterans of conservative commentary providing one column placed on the far side of hundreds of papers. And will report it as a success ... for conservatives.

And the newspapers will smugly report same, and the j-schools will tut-tut and go back to admitting more liberals.

Overwhelming the editorialist 

Newspapers around the country are running editorials about 9/11. I am leaving on a trip this afternoon, which in part was scheduled as my little way of letting whomever is watching know that fear does not grip me on this or any other day. 9/11 does not overwhelm me.

But that sentiment doesn't seem to be shared by the editorial board of the St. Cloud Times. Their 9/11 tribute, which says the country was "changed forever" by the event, then continues:

Yet six years later, 9/11 often seems like a distant memory. Has America really forgotten? Have we healed? Or are we a nation in denial?

From our perspective, 9/11 isn't so much forgotten or ignored. Rather, it's simply overwhelmed. Ours is a nation facing too many disasters � natural and otherwise.

Look no farther than the borders of our own state.

Not even 26 days ago, massive floods destroyed life as countless southeastern Minnesotans knew it.

Six weeks ago tomorrow, the Interstate Highway 35W bridge in Minneapolis inexplicably collapsed � another seemingly unfathomable event.
I'll spare you the rest: it descends into conflating 9/11 with the Rocori shootings, the attack on the Red Lake Indian reservation, and the requisite Bush-bashing (suggesting they have done nothing to stop terrorism, despite evidence to the contrary.) I fully expect the last; the rest of the page includes the requisite "why haven't we caught bin Laden?" breast-beating, as if taking out that one person would stop it all. That's a failure of understanding; we can argue about this; when bin Laden is cold and dead and another train explodes somewhere with an idiot leaving behind an Allahu Akbar note, one of us will be right and one of us will either admit they were wrong or find another excuse.

But the flooding? That makes it harder to remember 9/11?

A natural disaster is an act of God. (Or maybe not -- the Katrina conspiracy theorists still have a market into which they sell tripe.)

This... is not a natural disaster.

This ... is a natural disaster.

Perhaps the problem is that one of these pictures you will see in a newspaper. (UPDATE: I found the Times' 9-11 essay with a few pictures ... on page 8A.)

The other, you won't.

Perhaps the editorialist is confused because she or he doesn't show the 9/11 images in the newspaper. She or he has no problem showing the others. Or, as Andy puts it (thanks to him for the links to the 9/11 images used in this post), "6 years is a heck of a long time for Americans, but our enemy thinks generationally. They don�t base their goals on election cycles. We need to remember that."

Who is overwhelmed? These people?

... or these...

What may be overwhelmed, dear editorialist, is your moral compass.

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September 11 - Remember - Fly Your American Flag 

On September 11, 2001, terrorists sponsored by al Qaeda murdered 2,974 innocent Americans:
246 on the four planes (no one on board any of the hijacked aircraft survived), 2,603 in New York City in the towers and on the ground, and 125 at the Pentagon. Among the fatalities were 343 New York City Fire Department firefighters, 23 New York City Police Department officers, and 37 Port Authority Police Department officers.
In a new poll, more than 80 percent of Americans described the attacks as the most significant historical events of their lives. More than 60 percent said that they think about the attacks at least weekly. And 16 percent said that they had visited Ground Zero.

Please fly your flag today, in memory of the innocent American victims from so many ethnic backgrounds, in tribute to those who sacrificed their lives trying to save others, and in recognition that those who volunteer to risk their lives for us, both domestically and abroad, are truly engaged in a high calling.

Monday, September 10, 2007

Five years ago today 

...this blog was born as
a group weblog for SCSU members of the NAS to discuss events at SCSU and elsewhere that would be of interest to us and to the SCSU faculty and staff.
It has obviously become something much different than that, due to a number of people and events. All the other members of the St. Cloud Association of Scholars either retired or moved on to other things. I decided to make it personal instead, and the habit of posting here each weekday was something I just fell into.

Later on, of course, came the Northern Alliance, the radio show and its evolution. Guest bloggers have worked here, and then last year we brought Janet, who I did not know before MAS, into regular posting. This is a statement about how often good things in our lives begin with an act you do that is unrelated, even orthogonal, to what happens in the end. There are so many blessings that have flowed from the decision to try out this Blogger thing that describing the beginnings of this blog cannot really be accomplished in a post. I'm probably going to write up an 'about' page (finally!) this week.

I will have to say the best part of this has been to find a whole new group of people to talk to, a group so large that even the list in my blogroll doesn't do the trick. So rather than name a whole bunch of people, I'd like to thank just the people who matter most.

The beautiful woman on the left is the woman that makes sure I get in the car each Saturday to do the show, who asks about the people on the right blogroll of the MOB, and who allows me to scoot down into the basement to post rather than do the housework that needs doing here. That too-tall kid on the right is the kid that ends up doing the work I would do if I wasn't doing this and is tied for the second-best thing in my life. That guy in the middle isn't my son, but the famed Psycmeistr, who can stand in for the dozens of other bloggers, readers and friends I've made through this. Put yourself in Leo's spot, dear reader, because you're one of our family, too.

The biggest of thanks, then, to Mrs. S and the Littlest Scholar for permitting me the pleasures of this blog. We'll stick this post at the top for the day.

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Is 25 symbolic? 

I haven't commented for a few days on the situation with monetary policy (I'm writing a paper for this conference, and I was well behind schedule), but the commentary around the blogosphere has been really good, so it isn't like you missed much. But I have an opinion, as the title suggests.

As I've noted (and those in the post as well), the Fed has operated in the repurchase market to allow the interest rate to be well below its target of 5.25%. James Hamilton, who has been the one noting this stealth easing, writes this morning,

At least the fed funds futures markets stood up and took notice of the employment report, with contracts on Friday predicting 4.94% for the month of September-- that's 6 basis points lower than on Thursday-- and 4.58% for November-- down 12 basis points in a single day, and suggesting a likely cut in the fed funds target of 75 basis points over the next two meetings. Apparently there were even rumors that the Fed would implement an intermeeting cut by 2:00 p.m. EDT last Friday.

First, there's little doubt that the employment report was negative, as much for the revisions to June and July figures as for the August report of a loss of 4,000 jobs. Try the government will to polish the turd, but when your revisions take out an extra 80,000 of job creation, well, that's just not going to work for most of us.

Now, revisions to previous data are almost always a surprise. Prof. Hamilton has been using a weighted average of the household and payroll surveys plus the ADP employment report, with the household survey telling us a whopping 316,000 jobs lost. But I believe the Fed has already taken note of these. In its open market operations last Thursday it issued $7 billion in 14-day repos and $16b in 7-day repos. Demand for these were unchanged from the previous week. The H.4.1 report showed an increase in reserves of $6.6 billion last week. Now some of that is normal for putting in credit for Labor Day weekend, but it doesn't appear much came back out.

So I think the stealth easing has continued, and the actual Fed Funds rate will stay closer to 5% than the target 5.25% through to the meeting on Sept. 18.

The Fed has already said that "downside risks have increased appreciably" in an inter-meeting statement that does not include the word 'inflation' anywhere. The Fed will still get some information on inflation over the next week, with the PPI out on the morning of the first day of the meeting and CPI the next day. Let's suppose those two reports show quieting on the inflation front. Would a 25 basis point reduction in the Fed funds target be enough? If they were to cut 50, would Tim Duy be right that "this is the moment the tide turned on the 25+ year battle against inflation"?

I have been wrestling with that question myself. There are two things working against the Fed. First, it continues to operate under a dual mandate in the Federal Reserve Act that makes it pay attention to movements in the real economy, unlike the ECB's sole mandate for price stability. It has to give testimony to Congress about meeting those two goals. (While my own preference would be for a sole mandate for price stability, we won't have that until someone changes the law.) The paper I am writing for the conference included a review of that literature as well as a statement about the relationship between price and financial stability. In the long run, price stability provides for financial stability because it allows investors and borrowers to not be surprised in their debt contracts so that one of the two suffer losses. In the short run financial stability may threaten price stability, but if the instruments through which we provide for the former do not include inflating the money stock price stability may be maintained. Bernanke argued this himself last January.

So the financial stability question doesn't bother me so much. The Fed, though, has never been permitted to abandon its second mandate for high employment and growth, and is unlikely to do so now. And that is why, if the results of the inflation reports are mild, I wonder if 25 will be enough? I actually suspect not. I think the discussion that the Fed is being dragged "kicking and screaming" to a rate cut is premature. I would not be surprised by a 50bp cut, even with two or three dissenting votes (which would be above average, and not unusual for bank presidents to vote for tighter policy than the Board does. See Ellen Meade, for example.)

The news of the week and early next will tell us. I wouldn't put my chips down on a particular cut just yet.


It is on 

The special session, that is. Starts tomorrow night, 5pm, expected to be for one day. According to the StarTribune report,

Pawlenty's announcement, which came at a quickly-called news conference this afternoon, followed weeks of negotiations in which Pawlenty and legislative leaders dickered over the agenda for a one-day session.

On Monday, flanked by top House DFL and GOP leaders, Pawlenty said the package, which could go as high as $160 million, should be divided between the state�s cash-on-hand and long-term borrowing.

Senate Majority Leader Larry Pogemiller, DFL-Mpls., who has been the hold-out against any special session-borrowing, was absent from this afternoon�s announcement.

Earlier in the day he had sent Pawlenty a frosty letter saying that he would not stand in the way of a special session that included borrowing, but did not see the need for it when the state has more than $300 million in surplus funds.

Attaboy, Larry, peevish to the end. "I won't stand in the way" -- now that's real leadership. I suspect Tom Bakk is measuring curtains for the new office.

Pawlenty split the baby with the DFL on the split between borrowing and drawing down the reserve -- $80 million could be missed come February if the budget forecast comes out as badly as I think it might. But I suspect this was a quick way of solving the impasse, a fig leaf for the DFL that gets nothing on transportation and LGA and has to like it.

The PiPress initial piece says
Most of the relief money will help the August flood victims. A bit of it will help victims of the summer's drought and previous natural disasters.
I'm quite certain that isn't the Rogers tornado from last year, so I can't quite figure out what "previous natural disasters" this refers to.

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Saturday, September 08, 2007

Pitch In! Help Our Guys 

Many of you know that I ship packages to soldiers as a Soldier's Angel. Many of you also know there are other groups that remember our soldiers.

Today, Saturday, on the Northern Alliance Radio Network, a leader in the Operation Minnesota Nice told of this week's activities at the White Bear Superstore. If you have wondered or wanted to help our troops, you can drop off donations for our soldiers at the White Bear Superstore, located at 3900 N. Hwy 61, White Bear, MN (800.906.3760, receptionist 651.476.0285) through Saturday, September 15.

Items in high demand include: Baby wipes, foot powder, Power Bars (and any treat that can be put in a pocket or small compartment of a backpack but not chocolate unless it is coated like M & Ms and Reese's Pieces), Freezy Pops, tubes of powdered drink mixes, beef jerky, socks, lip balm, sunscreen tubes (small ones), instant coffee packets, teabags, powdered creamer, cookies, hard-coated gum, Pop-Tarts, Tuna kits, dental pics, floss, board games, travel size games, cards, CDs, eye drops, lotion, disposable razors - particularly those that have the soap/aloe on them so they don't drag (Mach), canned air, Silly String, shoe insoles, kazoos, mini flashlights, duct tape to name a few. If you don't have time to donate items, cash contributions are welcome. I can speak from experience that shipping is a bit pricey but it's for our guys.

So stop by the White Bear Superstore and pitch in to help our guys. We have the finest, most educated, most responsible military that has ever existed. The least we can do, is give them a bit of home while they are over there, protecting our freedoms.

Thank you in advance for your support.


Friday, September 07, 2007

Priorities, if you want to talk about them 

Gerald Prante writes about one priority Minnesota government spending has had recently: sports stadia.
Minnesota's public officials have "touched 'em all":

� Minneapolis forgives $74 million loan it made to the Timberwolves basketball team for the Target Center. Franchise asking for more aid.

� Xcel Energy Center built for the Wild hockey team with $65 million in city bonds and a $48 million interest-free state loan, plus a $17 million payment for state high school hockey tournaments to be held there. Franchise now asking that loan be forgiven, citing Timberwolves example.

� Legislature approves $392 million of taxpayer money for new Twins baseball stadium next to the Target Center, funded by sales tax hike in Hennepin County.

� State approves $136 million for new Univ. of Minnesota football stadium.

� After failed move to Anoka County, Vikings pro football team proposes a $1 billion stadium in downtown Minneapolis. Then-NFL Commissioner Paul Tagliabue lobbies for public funding. Team could threaten to move to Los Angeles.

This waste hasn't gotten much press since the bridge collapse. Instead, the hounds are sniffing Gov. Tim Pawlenty, who vetoed a gas tax increase. The governor should stand up and defend his veto as Minnesota already spends more than most states on roads. But instead he's backtracking fast, possibly because the most recent sports boondoggles have occurred on his watch.

The sad truth is that when it comes to spending priorities we have very few politicians who can withstand scrutiny, so expecting a public debate about it is foolish. Sports stadia, at least, both left and right can agree is corporate welfare. Getting rid of it is good. But the question comes to what is the proper scope of government. Arguing for a smaller government in the context of a flood and a bridge collapse is agreeing to play as the visiting team. You're on lousy terrain. Find another hill to fight from.

One bright spot: You can forget that Vikings stadium any time soon.

(Cross-posted at True North.)

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Offer and acceptance 

The debate over the special session continues. The terms of the trade -- agreed agenda for call to St. Paul -- are narrowing.

The DFL has offered a summary to the governor that includes only funding for the flooded areas of SE Minnesota. It's a fairly comprehensive list. What strikes me is what is not there, which is how to pay for it. Gov. Pawlenty responded this morning and saw this was the problem too. Here's what he still wants:
  1. A dollar figure for the spending, which the governor suggests can rely on estimates from FEMA and state and local agencies. He is to provide this number today. He has already acted on some requests and sent $32 million to the area.
  2. Bonding authority for any capital spending "related to flood recovery, rebuilding and mitigation as well as authority for the I-35W bridge if we mutually agree it is needed."
  3. "I am prepared to call a special session if you will also confirm your understanding by letter that the session will last no more than one calendar day, the agreed upon flood legislation will be the only legislation considered and passed, and that the Legislature will then adjourn sine die."
That's it. No gas tax. No LGA. Nothing else. Not even the seminar on conservatism some people seem to prefer.

The bonding piece is the part that has to happen. It's a way to prevent the DFL from coming back in February and proposing tax increases to "correct" the deficit "created" by Pawlenty by shifting money like that $32 million. Not that this is likely to stop them, but it removes one argument, and is worth holding out for. It's why Pogie is saying right now there's money on the bottom line they can use. Yes, for now, but come February he'll suddenly be lonely for it.

Believe it or not, that's what the sticking point at the end of this thing will be: to bond, or not to bond? Given the amount of backpedaling the DFL has done so far, I expect there will be bonding.

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The word of the day is "intermediation" 

Mitch points to a story of people who don't understand the value of financial intermediation. Mitch points to a left-wing blogger who thinks giving a bank money (that's right -- not even asking for interest on their money) to lend to people repairing homes doesn't somehow help those homes. Even better, Mitch finds that both parties have done this (I think, in fact, the Dems moved first on this one.)

We know from development economics that countries that develop better banking systems grow faster. Transferring idle funds from those who can wait to use them to those who have a use for them now helps both the lender (if they're paid interest -- in this case the political parties are buying PR) and the borrower.

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Science is not decided by a show of hands 

I read this this morning, but I've been trying to get some writing and coding done today so I saved it for now. I have never met Prof. Pekarek, but it would be my pleasure.

For the past 12 years, Pekarek has read everything he can find about climate change.

His conclusion � that the Earth has been getting warmer, but humans aren't causing it � puts him at odds with mainstream public opinion and much of the scientific community.

None of that seems to faze Pekarek, who keeps a sign in his office that reads, "Geologists own climate history."

Just because there appears to be a consensus among scientists that humans are causing climate change by producing greenhouse gases such as carbon dioxide doesn't make it true, Pekarek said. Four hundred years ago, there was a consensus that the Earth was flat, he said.

"Climate is a very complex system, and anyone who claims we know all there is to know about it, let's say, is charitably misinformed or chooses to be," Pekarek said. "We fool ourselves if we think we have a sufficiently well-understood model of the climate that we can really predict. We can't."

What's nice about his alternative explanation is it's falsifiable:

Pekarek's theory is that the warming effect is caused by solar activity such as sun spots, which affect cloud cover. Pekarek believes solar activity is decreasing and the Earth will enter a cooling period within the next few years � even if humans keep pumping more carbon dioxide into the atmosphere.

"That's the grand experiment," he said. "Give me five or 10 years and I'll have the answer."

Steve Conover reminds us that Galileo withstood great pressure from politicians and priests (the learned men of the times) before being proven right.
Scientific truths are not determined by a show of hands. If that were not the case, we'd never have heard of Copernicus, Galileo, Darwin, Einstein�or much of the contemporary evidence on the other side of the AGW debate, now begging for a hearing.
Hooray for Prof. Pekarek, a real SCSU scholar.

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Mrs. Scholar's latest column 

Today on Chinese toys and free trade. Yes, she talked this one through with me, and it's nice to be able to agree with one's spouse on economics. (We're still yapping about the train piece.) I was floored by the things she showed me about Amy Klobuchar's push to regulate every damn toy that comes from China.

Menzie Chinn argues this week that the Bush administration's "dismantling" of the regulatory agencies has left us susceptible to more protectionist impulses. That's not a bad point, but regulation is not likely, in my view to make our toys any safer. Chinn's argument implies that the American public cannot understand how the market has incentives to protect them that are stonger than the government's incentives; I say the public is smarter than that. And it's nice that Mrs. S agrees.

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Liar loans 

We know about "liar loans," a pejorative for a mortgage one might take out for buying a house where the borrower doesn't have to supply proof of his stated income. But what happens if the liar is a mortgage broker?
Al Ynigues, 65, said in an interview Wednesday that Carrington Capital Management refuses to modify his adjustable rate mortgage and that he faces foreclosure since his monthly payments have ballooned to $2,374. ...

Ynigues said that a Twin Cities broker misled him about the terms of the $270,000 home loan he originally got in 2004 from New Century Financial Corp., and that the lender and loan servicer turned deaf ears to his plight. Ynigues (pronounced INN-a-guess) said he wants to ask Carrington General Manager Bruce Rose to get him into a conventional fixed-rate loan with affordable terms. ...

A guitarist who runs his music lessons and recording business from his Apple Valley split-level, Ynigues said his income fluctuates between $1,500 and $3,000 a month. He said he recently discovered that his broker had inflated his monthly income on his loan application to $10,000.

Carrington's Rose did not return phone calls Wednesday and neither did the mortgage broker.
Now hang on here just a minute. A guy who's income "fluctuates between $1,500 and $3,000 a month" is trying to buy a $270,000 house? I understand that the broker may have duped the lender, and the lender is now unhappy (though if you are offering liar loans, you have to expect you'll get a few liars.) But a guy with less than $30,000 a year in income is stepping up to buy a $270,000 house? Did he read his application? No alarm goes off in his head that says "you know, this might be a little rich for me"? Does he bear no responsibility for his decision?

The article points out that leftist activist groups like ACORN are pushing for government action. The Economist writes this week:
State-led rescues are fraught with moral hazard: what investor wouldn't take on that �liar loan�, knowing that the taxpayer is ready to jump in and help when it all goes wrong? Money should go first, and perhaps only, to those who can show they were defrauded or deceived.
I tried to write something else here, but I struggle with having both the words "defraud" and "liar loan" in the same sentence. He has a cause of action against the broker, but the lender?


Thursday, September 06, 2007

From my cold, dead hands 

I draw the line at popcorn.

A fondness for microwave buttered popcorn may have led a 53-year-old Colorado man to develop a serious lung condition that until now has been found only in people working in popcorn plants.

Lung specialists and even a top industry official say the case, the first of its kind, raises serious concerns about the safety of microwave butter-flavored popcorn. ...

Exposure to synthetic butter in food production and flavoring plants has been linked to hundreds of cases of workers whose lungs have been damaged or destroyed. Diacetyl is found naturally in milk, cheese, butter and other products.

Heated diacetyl becomes a vapor and, when inhaled over a long period of time, seems to lead the small airways in the lungs to become swollen and scarred. Sufferers can breathe in deeply, but they have difficulty exhaling. The severe form of the disease is called bronchiolitis obliterans or �popcorn workers� lung,� which can be fatal.

Dr. Cecile Rose, director of the occupational disease clinical programs at National Jewish Medical and Research Center in Denver, said that she first saw the Colorado man in February after another doctor could not figure out what was causing his distress. Dr. Rose described the case in a recent letter to government agencies.

A furniture salesman, the man was becoming increasingly short of breath. He had never smoked and was overweight. His illness had been diagnosed as hypersensitivity pneumonitis, an inflammation of the lungs usually caused by chronic exposure to bacteria, mold or dust. Farmers and bird enthusiasts are frequent sufferers.

But nothing in the Colorado man�s history suggested that he was breathing in excessive amounts of mold or bird droppings, Dr. Rose said. She has consulted to flavorings manufacturers for years about �popcorn workers� lung,� and said that something about the man�s tests appeared similar to those of the workers.

�I said to him, �This is a very weird question, but bear with me. But are you around a lot of popcorn?� � Dr. Rose asked. �His jaw dropped and he said, �How could you possibly know that about me? I am Mr. Popcorn. I love popcorn.� �

The man told Dr. Rose that he had eaten microwave popcorn at least twice a day for more than 10 years.

I was recently diagnosed with an ulcer in my esophagus, which has put me out of commission a few times from blogging or speaking, but has been treated well with medicine (so far). I have had to cut back to one of those mini-bags and move up my popcorn to earlier in the evening. But take it away from me, after I've consumed one (not two) bags at least as long as Mr. Popcorn here? I travel; I know how to sneak the stuff in my suitcase; I will not be denied.


Rudy in Town 

The press was there, the grassroots people were there. It was a wonderful, happy crowd.

Where? Lisa Murphy's Parkview Cafe in St. Paul, MN, the heart of MN liberalism. As Rudy said, "In a national election, you need to be able to take the battle to the opponent's turf, including a traditionally democratic state like MN. I can do that better than anyone else running for the Republican nomination."

Rudy and his team arrived on time. He was great with the wall-to-wall crowd, shaking hands, posing for multiple photos, sitting at one table and just talking with three young people. He spent at least 45 minutes with the crowd then went outside to hold his press conference.

He's at ease, comfortable with himself, the press, everyone. A couple of photos:


The other villains 

As the Duke lacrosse case spun further and further out of control until crashing into reality, most of the press focus was on the wrongdoing of Mike Nifong, the district attorney in the case. Most people didn't even give a second look at the behavior of Duke's faculty and fledgling leftists in their own student body. Standing out from that was KC Johnson, who has devoted great time and effort in uncovering the actions of Duke's academic community towards the wrongly accused.

Johnson and Stuart Taylor have now published Until Proven Innocent which is reviewed this morning by Abigail Thernstrom in the Wall Street Journal. Thernstrom summarizes the Duke academic response to the false accusations:
Richard Brodhead, the president of Duke, condemned the lacrosse players as if they had already been found guilty, demanded the resignation of their coach and studiously ignored the mounting evidence that Ms. Mangum's charge was false. He was clearly terrified of the racial and gender activists on his own faculty. Houston Baker, a noted professor of English, called the lacrosse players "white, violent, drunken men veritably given license to rape," men who could "claim innocence . . . safe under the cover of silent whiteness." Protesters on campus and in the city itself waved "castrate" banners, put up "wanted" posters and threatened the physical safety of the lacrosse players.
Johnson reports that Brodhead's review by Duke's Board of Trustees is forthcoming and that hard questions need to be asked. His first one:
On April 20, 2006, President Brodhead made his first off-campus appearance after the arrests of Reade Seligmann and Collin Finnerty. He told members of the Durham Chamber of Commerce, �If our students did what is alleged, it is appalling to the worst degree. If they didn�t do it, whatever they did is bad enough.�

In retrospect, does the president consider those remarks to be appropriate? And what did Seligmann and Finnerty�who attended a party they played no role in organizing and drank some beer�do that was �bad enough�?
Brodhead was still in high dudgeon in January 2007. The accused were exonerate in April 2007, and no review of the university's rush to pass judgment has been made yet. Perhaps President Brodhead's review can provide a time for reflection of the groupthink on Duke's campus that came perilously close to a grave injustice.


Who got snookered? 

Did Pawlenty get snookered, or was that the white flag? Are the gains from a special session short- or long-run? Over at True North, I've posted my thoughts on this question.

Remember True North as your one-stop shop for conservative thought in Minne-So-Cold.

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Wednesday, September 05, 2007

I now can die a happy man 

I was pretty sure I would die without seeing Leonard Read's marvelous I, Pencil quoted in a major newspaper. The Pioneer Press uses the pencil to skewer the morals of the cyclists who blocked streets in the Cities this weekend (which has made for great theater.)
But the fact that bicycles are available to participants in the Critical Mass ride, and virtually everyone, at a very reasonable cost, like the production of a pencil, results from the labor of thousands of people having differing ambitions, desires and political philosophies, most of whom have no intention of building a bicycle.

Further, not all of the antecedents of bicycle production would necessarily pass moral muster with the Critical Mass folks. Bicycle production depends on mining the Earth's resources (not always in environmentally friendly ways) and using vast amounts of energy (not always clean). Building bicycles relies on the mobility of thousands of people driving automobiles to jobs in factories where bicycles are manufactured.

Indirectly, people involved in oil exploration, drilling, shipment and refining contribute to the process of building a bicycle (not to mention the plastic water bottles clamped to the frames). And all those people and thousands more with links to bicycle production go to work every day so they can buy things like suburban single-family homes with big yards and lots of internal combustion engine-powered toys in the garage, including big boats and SUVs to tow them - and bicycles.

The influence of low-wage foreign labor markets also affects the ability of Critical Mass participants to ride their bikes. If the same standards were applied to bicycle manufacturing as are applied to coffee, we suspect there'd be a lot more Critical Massers sitting on their duffs drinking "fair trade" coffee than pedaling bikes built in or made with components from developing nations.

Our point is simply this: Riding a bike when and where one can is a healthy alternative to jumping, without a second thought, into a 2,500-pound automobile. But doing so does not confer moral authority on bicyclists. It does not confer the right to impede traffic as a way to make a statement or ride up to the border of provocation of police and fellow citizens driving cars on city streets. At least not without bearing the consequences of their actions without complaint.

I see the Mark of Fishsticks on this one. If so, Captain, I salute you. If not, somebody at the PiPress has lunch on me.

UPDATE: Kathy Kersten has memories of the NYC protestors from Annette Meeks.

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Minnesota Remembers 

Every once in awhile you discover a truly unique individual. Sunday, I attended a memorial service for those Minnesotans who have died in Iraq or Afghanistan defending our freedoms. The driver behind this memorial is John Enstrom and his wife, Bonnie. They have renamed part of their property in Ramsey, MN to Veterans Park, in memory of John's dad, a WWII vet and in honor of current American military service personnel.

Today's program included talks by Gold Star Mom, Merrilee Carlson, Blue Star Mom,Cindy McLean, color guard duties by Elk River American Legion, superb support from the Patriot Guard. Anoka County Commissioner Scott LeDoux also spoke briefly. Included are are a few photos from the event.

The park is open to anyone wishing to use it BUT you must contact John Estrom, before going there.


MSM, Global Warming, Facts vs Memes 

To listen to the mainstream media (MSM), one would believe that the ice in the Arctic Sea is melting, polar bears are disappearing and they definitely cannot swim. Therefore, if all this ice is melting, one should be able to take one's yacht and sail across the sea from Asia to Europe.

Brittish Andrian Flanagan wanted to prove the truth of this mantra so he decided to sail his yacht through the Arctic Sea. Unfortunately for him, he ran into an age-old problem: ice. It is still so thick, his yacht cannot make it through the sea. Now he has requested of the Russians to use one of their nuclear powered ice breakers to take his yacht out of the water and transport it over the most ice-bound portion of the Arctic Sea. During his current break from sailing, Mr. Flanagan discovered that the polar bears are doing very well, thank you. And, these polar bears can swim.

The groupthink mentality of the MSM is preventing people from even considering there might be other views related to the CO2 argument. We need to start reading more than one point of view on these issues. This is not to deny that the planet may be getting warmer (then again, we're not sure b/c much of the data used to calculate the rise in the earth's temperature was pulled from NASA records and a Canadian found a major flaw in their calculations - more on this later) but we certainly owe it to ourselves and the rest of the planet to consider options and other information. The argument that CO2 is the culprit and there is no more debate is arrogant and detrimental to plants, animals and other living things.

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Mrs. Clark, call your office! 

From KNSI this morning:
St. Cloud Senator Tarryl Clark says the Governor is changing his tune and playing word games to back away from calling the legislature back to deal with those important issues.
Her superiors:

Minnesota�s Democratic legislative leaders today dropped most of their wish list for a special session, and pleaded with Gov. Tim Pawlenty to call lawmakers back to St. Paul to only work on issues related to a Minneapolis bridge collapse and southeast Minnesota flooding.

The sound bite on the radio has Clark claiming Pawlenty is taking money away from nursing homes and schools to pay for bridges. Interestingly, when Sen. Clark heard the same plan on August 18th, she was described as "generally pleased."

I guess she didn't pick up her phone messages yet.

UPDATE: Worth noting, she's mentioned in this Bemidji Pioneer article:

Last week, Pawlenty authorized advanced state aid payments to cities affected by the flood. Asked whether he could provide further unilateral assistance if a deal with legislative DFLers can�t be reached, Pawlenty tersely said, �Yes.�

Sen. Keith Langseth, DFL-Glyndon, said he and four other DFL senators � Pogemiller, Assistant Majority Leader Tarryl Clark of St. Cloud, Taxes Chairman Tom Bakk of Cook and Transportation Chairman Steve Murphy of Red Wing � were involved in crafting the letter Pogemiller and Kelliher sent Tuesday.

�We do the absolute minimum,� Langseth said of Democrats� latest proposal.

Still think he's getting outfoxed, Andy? Still putting your $2 on the superperfecta?

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The way Andy could be right 

Too busy for much posting, but here's the way in which Andy's notion* (with assistance from Margaret) that the DFL is carrying the upper hand can be right and I would be wrong about this.
  1. The DFL has to pretend not to control its membership...
  2. ...while convincing a broad majority of them to vote on a bill likely to be vetoed...
  3. ...convincing their constituencies that this was the best way to get them their goodies to keep them energized for 2008...
  4. ...getting the press to cover this as leadership denied by Governor Pawlenty, and...
  5. ...convincing voters next year that they were "getting things done".
Believing any one of those statements is fine. Hitting the super perfecta there? I don't know. Seems like a lot of things have to happen right, and Andy's concerns the sort of worries Charlie Brown has as he approaches the football. If Maggie and Pogie sign the agreement and then renege or "let the savages run wild" and we cannot show this for the treachery it would be, we do not deserve to run for cemetery management boards, let alone the state legislature.

You could be right. My money is going on the other side, though, unless you give me good odds.

* -- I am officially declaring that the term p3wned is banned from the blogosphere. Violators will be prosecuted.

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Central Control vs Free Market (N. Korea vs S. Korea) 

This chart, more than anything I've seen recently, demonstrates the difference between a centrally controlled economy (North Korea) and a free market economy (South Korea). In 1948 both were on an equal footing except that the North had the economic advantage of being industrial heartland. The results graphed below show without a doubt, the difference competition, attitude, opportunity, and omission of central control make:

Here's the link - the graph is a bit difficult to read but hands down, central control of economies does not work.

Tuesday, September 04, 2007

Is that a white flag I see? 

On the air last weekend, I said that if Governor Pawlenty could in fact begin moving monies towards the flooded areas of southeastern Minnesota and towards the I-35W bridge repair, the DFL would ask to come back to the table for a more limited special session to get at least some credit for the clean-up. Pawlenty's task, I said, was to make sure the relief looked real and like it would cover everything. Thus putting up a site like Minnesota Recovers, replete with a TPaw quote on the masthead, is damn good politics. So too is changing the timing of municipal payments. It didn't require any action of the Legislature, and let all the credit go to the executive. Do that, I said, and they will have to take the limited focused session. It would be beyond foolishness for the DFL leadership to allow Pawlenty to deliver relief on his own; it would cost them politically.

It's happening.
House Speaker Margaret Anderson Kelliher and Senate Majority Leader Larry Pogemiller appear ready to drop the idea of a more comprehensive special session to deal with larger issues like property tax relief and a bonding bill and to focus exclusively on the two disasters which struck the state in August. They also suggest they would consider abandoning the idea of a gas tax increase, using $370 million in existing funding to address disaster needs.

�We have absolutely no interest in putting special legislation on your desk that you feel compelled to veto,� the letter said.

�It is unfortunate that you are unable to act decisively and comprehensively to the transportation challenge, either due to philosophy or politics,� the letter said. �However, we agree the emergency needs from the bridge collapse and the flooding remain and must be dealt with immediately.�

If that happens, and the DFL doesn't get the gas tax, or LGA/property tax, or a bonding bill, or all the other things Pogie says he didn't say but his uncontrollable caucus does, that looks like a victory for the governor's office. Those who have doubted him from the conservative ranks will have egg on their faces. Those from the liberal ranks who thought they were getting their untimed down will curse the fates.

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Is economic freedom contagious? 

The new Economic Freedom in the World 2007 is out from the Fraser Institute. In it is an essay by Russell Sobel and Peter Leeson on whether states that neighbor or trade with other states that become more free economically pass on that freedom. They test the hypothesis advanced by George Bush, among others:
�[a] new regime in Iraq would serve as a dramatic and inspiring example of freedom for other nations in the region � A liberated Iraq can show the power of freedom to transform that vital region, by bringing hope and progress into the lives of millions.
Geography and trade are two channels through which freedom might spread. If your neighbors are more free geographically, it's not too hard for your own citizens -- particularly the productive ones -- to move to the freer state. Such moves might cause the less free state to move towards the more free one in terms of policy. Imports are like advertising for freedom; freedom attaches in a cultural way to the goods traded, and sticks to the receiving country.

The results suggest that having the average score on the Economic Freedom in the World Scale of all your country's neighbors increase by 1 (on a 10-point scale) increases your country's freedom by 0.2 on the same scale. Likewise, if your import partners have an average increase of 1, your economic freedom goes up 0.2 or 0.3, depending on the specification. (There's an issue of whether you trade with countries who are like you in economic freedom, so it's possible that causality goes the other way on that; this isn't true for the geographic results.)

For those who might argue that Iraq is a beachhead to connect the Non-Integrated Gap, such results would be good, though the size of the effect isn't as large as one might hope.

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President Bush in Anbar Province in Iraq 

President Bush stops in Anbar Province, a part of Iraq everyone had given up for lost. Then we do the surge and he stops by, greets the troops, has no flak jacket. This is huge!!

Key paragraph from Fred Kagan:

Instead of flying into Baghdad and surrounding himself with his generals and the Iraqi government, Bush flew to al Asad airfield, west of Ramadi, the capital of Anbar Province. He brought with him his secretaries of State and Defense, the chairman of the Joint Chiefs of Staff, and the commander of U.S. Central Command. He was met at al Asad by General David Petraeus and Ambassador Ryan Crocker, as well as Iraqi Prime Minister Nuri Kemal al Maliki, Iraqi President Jalal Talabani, and Vice Presidents Adel Abdul Mehdi and Tariq al Hashemi. In other words, Bush called together all of the leading political and military figures in his administration and the Iraqi government in the heart of Anbar Province. If ever there was a sign that we have turned a corner in the fight against both al Qaeda in Iraq and the Sunni insurgency, this was it.

Read the rest - it's very important.

We can and must win. I've heard from a friend who shared that Senator Coleman has just returned from Iraq and is very pleased with the situation there.

No $50000-a-year jobs laying on the ground 

Thomas Benton applies an old economics joke to college advising. It's advice I'd like to pass along to all incoming students.

Nowadays, when students tell me they want to major in something because of a looming labor shortage, I say to them, "Sorry, there are no good jobs out there going begging, and there never will be. It is hard to find good work in any field." And then I send them right to career services.

Students shouldn't just talk with their academic adviser because, in the end, most of us don't know anything beyond the precincts of our field, and we are naturally biased in favor of it. Despite everything I know, I want you to go to graduate school. I can't help it; I have drunk the Kool-Aid. For all that's happened, I still believe in the value of the humanities and that some people should be teachers and scholars. And for that reason I can't be trusted completely.

So go talk with the people in the career-services office before deciding your life on the basis of my flattery, an article in Time magazine, or the advice of your Aunt Sally who listens to NPR. And don't just take career services' word for it: They have biases, too.

The job market is beyond your control, so focus on what you can control: Do research on the field that interests you before, during, and after your degree program. No matter what you've heard, you will not get a job on the basis of nothing but your degree and your inflated GPA. Get relevant experience through internships, preferably paid ones, but use your time in college to get a real education, instead of mere job skills. Believe it or not, successful business people don't like to be surrounded by philistines and ignoramuses.

Develop your writing and speaking abilities, mind your manners and appearance, do your work on time and without excuses (never say, "but I tried really hard"), earn the respect of your professors, and, once you have become an educated, responsible adult with some skills and a network of other adults willing to vouch for you -- you might find full-time, entry-level work -- making copies, fetching coffee -- in a city 500 miles away.

That's hard to swallow when every college seems to boast about unlimited prospects with minimal effort, but it is the truth for most undergraduates.

It does make you wonder what to do with government labor statistics sites that tell you which jobs are likely to grow fastest through 2014. What would you do with it? Did you need someone to tell you to go into law or medicine to make big money? You didn't know that before? Or that marketing managers do pretty well?

Greg Mankiw chose economics over law due to comparative advantage. I did about the same thing, though driven in my case as much by demand -- there were scholarships available for me in econ, not in law, and Paper Chase's John Houseman scared the everliving daylights out of me. My ego was much more fragile at 21 than now at 50. But I had at least some experience with the adult world, and at that age and after living at home through college a desire to leap at something. So off to grad school I went. (As a side note: years later a classmate and I went to a 99-seater in LA to watch some experimental theater, and there was Houseman in the front row. I didn't know whether to thank him or punch him then. I know I'd thank him now.)

A former student of mine has been working in the financial industry (good pay! growth!) for the last several years. Married and with children, she now thinks about going back to teach economics. She feels drained on her job by 10am. I check myself every time I start to write to her, that indeed I have drunk the Kool-Aid, and think it's a great life. For her? How would I know? I know I don't feel drained at 10am, or at 4pm. But is it the job, or me?

I waited two weeks to answer her email, and I don't know that it was a good answer.

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Polling Paul's support 

The StarTribune is trumpeting a new poll run by the Minnesota House at the State Fair that says 58% of voters support a dime increase in the gas tax. The question is worded:
Would you be willing to pay an extra 10 cents per gallon for gas if all the money goes toward state road and bridge improvements?
Well, 97% of it goes to the Highway Users Tax Distribution Fund, which distributes the money between the Trunk Highway Fund (62%) and county and municipal street aid funds. A majority of the THF funds go to construction; maintenance only gets about 15 cents of each dollar spent. (THF also relies MVST and license/tab revenues. See this.) About 8% of state and federal dollars go to transit, most of that Metro, which receives 20.5% of MVST revenues since 2001.

One can expect some of those places, plus road research, administration, and various reserve funds, to lead to less than a dime of the gas tax getting to roads.

Of course, a good majority of people voting at the Fair live in the Cities. They get the transit money, and even a disproportionate share of county state aid money relative to the share of metro roads designated as CSAH roads. Likewise, 69% of municipal dollars go to metro cities.

A government that robs Peter to pay Paul can always depend on the support of Paul." -- George Bernard Shaw

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"Fluid and uncertain" 

The Financial Times suggests this morning that Bernanke needs time to build a consensus for a rate cut, and that's likely to mean no inter-meeting reduction in the Fed funds rate.
Unlike his predecessor Alan Greenspan, Mr Bernanke is likely to go to considerable lengths to achieve consensus among his colleagues as to what should be done.

This will take time, which is one reason why the Fed is unlikely to cut rates between now and September 18, unless there is a sudden downward spiral in the markets.

In a speech on Friday Mr Bernanke provided intellectual leadership to the committee, edging it in the direction of a rate cut by emphasising the uncertainty of the economic outlook, the severity of the market crisis and the possible spillovers, to housing in particular.

Yet at the same time he continued to qualify his statements by noting that the risks depended to a considerable extent on how markets performed in coming days, and promising to use the timely data and information from business contacts to guide policy.

The differences on the committee are not hard divisions: all FOMC members see the situation as fluid and uncertain, and are revising their views in the light of new data and market developments.

These developments may well resolve the differences on the committee by September 18.

Yet there remains a strong chance the Fed could face a tough call against an ambiguous backdrop of limited improvement in markets and little hard evidence on spill-over effects.
The 18th date means they will have August CPI data in hand as a quick peek (formal release is the next day) along with retail sales and industrial production, so they should actually have a pretty good feel for how August went in the broader, real sector. Of course it's only one month. Early signs are that manufacturing has evaded the credit problems, which might favor the 25-bp side of the debate. I cannot imagine a no-change action, but again it's a fluid situation.

Ken Rogoff is of course right that the data the Fed will have at that meeting is 'fuzzy', though he puts more stock in the signal from asset market prices than I might. Asset prices fluctuate due to liquidity changes, and I am not convinced that the Fed should respond with permanent expansions of the money supply to those temporary changes. But I think the FT article will prove accurate -- no change before 9/18.


Find the fibber 

Many thanks to Speed Gibson for transcribing the David Strom Show interview with Larry Pogemiller. The whole thing needs reading, but in relevant part:
DS: [...] You are the leader of your caucus.

LP: It's a democracy. People get to vote yes or no. I can't tell Steve Murphy how to vote. I can't tell Tim Pawlenty whether to veto a bill or not. All I can do is control my own vote [and] keep my public rhetoric focused on the two things that are crucial to do right now, which are fix the bridge and do the flood relief. Every public comment I have made has been around those issues. That's all I can do.

DS: That's all you can do, but you are the leader of your caucus. When Steve Sviggum would go and cut a deal with the Governor, there were a lot of people I know in the Republican caucus who would complain, "Weill I'm sorry, this is not what I like. I don't want to vote for this." But at the end of the day, that was the deal that was cut.

LP: [...] The Governor have an agreement.

DS: Can you keep your agreement?

LP: Ahhh... In my 25 year history in the State Senate, I don't think you'll ever find one instance where someone says I haven't kept an agreement.

DS: I asking: can you keep your caucus in control or is it going to turn into a circus?

LP Absolutely it's not going to turn into a circus. The Speaker and I have the power to make sure it's a limited, short agenda. Absolutely.

DS: And are you assuring the people of Minnesota now ...

LP: I'm assuring the people of the state that we're going to do the right thing.

DS: No no, is it going to be a limited short session?

LP: It absolutely is going to be a limited, short session. Absolutely.

DS: So there's not going to be an attempt to pass a "compo", what you call a comprehensive, which is a sales tax people can't vote on ...

LP: David, I have no idea what members of the Senate and the House will try to do. All I can tell you is that it will be a short, limited agenda. We will accomplish flood relief and what's necessary on the bridge. That's all I can guarantee. That's what we will do.
Steve Murphy, Senate Transportation Committee chair, 3 Aug 07:

"I think people are clamoring for us to do something about this," Murphy said. "Our system is underfunded. I hate to tap taxpayers, but we haven't had real money in the system since 1988." That's the last time gas taxes, now at 20 cents per gallon, were increased.

"If someone gets in the way," he said, "they should be prepared to get steamrolled."

Murphy, 22 Aug:

Senate Transportation Committee Chairman Steve Murphy, DFL-Red Wing, said a temporary [gas] tax would be problematic and wouldn't meet ongoing road-and-bridge needs.

"It's snake oil, that's all it is," he said.

Murphy, 29 Aug:
We've got a long way to go from five cents, but at least the governor is making the move in the right direction," Murphy said. "I think that the more people find out what the depth and breadth of this problem is, they're going to be more willing to listen."

Murphy said that a nickel increase falls short because "five cents raises $150 million and we have over a $3 billion underfunding in transportation a year."

Still, he said, Pawlenty is showing courage.

"I've got to give the governor some kudos because that was an incredibly difficult thing for him to do. He's for all these years had this 'No new taxes' pledge, and for him to stand up and say, 'Maybe a nickel is not that outrageous,' is a huge step in the right direction."

Murphy said that state highways, which represent only about 18 percent of all the roads in Minnesota, are $1 billion behind in funding, and that that amount is needed every year for a 10-year construction cycle. Township roads, county roads, city streets and transit add another $700 million to $1.5 billion, he said, and rural Minnesota needs $710 million worth of bridge improvements.

Murphy said a long-term comprehensive plan should include increases in the gas tax, in license tabs, and maybe a wheelage tax and a metrowide or statewide sales tax initiative.

Tarryl Clark, Senate Assistant DFL Leader, 4 Aug:
We hoped all along the governor would be willing to compromise and we're glad to see he's willing to be flexible and move Minnesota forward. Hopefully, (a special session) would be about jobs and infrastructure, including transportation, bonding and Local Government Aid.
Keith Langseth, Senate Capital Improvement Chair, 30 Aug:

Sen. Keith Langseth, the chairman of the Senate Capital Investment Committee, also wants to see a borrowing bill on the special session agenda.

During a special session, Langseth predicted, lawmakers would repass the $334 million borrowing bill that the House and Senate approved during their regular session earlier this year.

If Pogemiller is just saying he can't control his caucus, perhaps it's time for that caucus to get a new leader. Either that, or ...
The biggest obstacle on the road to a special session may be a shortage of trust between Senate Majority Leader Larry Pogemiller, DFL-Minneapolis, and Pawlenty.
Flashback: Pogology.

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Monday, September 03, 2007

American Productivity and Job Satisfaction 

Today is Labor Day, a day set aside to recognize the contributions by all working Americans. Labor Day, the first Monday in September, is a creation of the labor movement and is dedicated to the social and economic achievements of American workers. It constitutes a yearly national tribute to the contributions workers have made to the strength, prosperity, and well-being of our country.

How do American compare to their counterparts around the world? Bradley S. Klapper of the Associated Press (AP), reports in the Washington Post that Americans get more done per hour than everyone but the Norwegians (source U.N. report). Americans work an average of 1,804 hours a year (2006). This amount is less than the Europeans but almost 400 hours more than the average Asian. Yet Americans produce more. Why? Our increased productivity "has to do with the ICT (information and communication technologies) revolution, with the way the US organizes companies, and the high level of competition in the country," said Jose Manuel Salazar, the International Labor Organization's head of employment.

Well, you might ask, are American workers satisfied with their jobs? The MSM would have us believe we are not. However, facts counter that meme.

An amazingly high percentage of Americans like their jobs. Data by the General Social Survey (GSS - 2002) discovered that 89% of us are very or somewhat satisfied with our jobs; 11%, not so satisfied. Maybe these statistics are different among "good" job holders and "bad" job holders? Or maybe between those with low incomes and little education. Not so - 9/10 are satisfied regardless of income, degrees, etc. 87% of "working class" people are satisfied.

If "working class" people could go to the beach instead of working, would they be happier? Again, the answer is "no" - most, along with others would keep working.

Most of us are functioning pretty well by working and are satisfied with our work. This attitude may also be a key reason Americans score better than Europeans on happiness surveys. In turn, this attitude towards work contributes to our productivity.


Real Reporting 

The September 3 Pioneer Press carries an article by Maricella Miranda about lost and found items at the Minnesota State Fair. You may think this story is irrelevant but if it is your parent, Ipod, cell phone, wallet, money, etc. it is important. The number of lost children (lost parents?) decreases every year: 459 in 1995, 143 in 2006. The number of missing adults has also decreased from 162 in 1994 to 102 in 2006. What accounts for the decrease? Cell phones.

As of Friday, August 31, there were 420 missing items, including a substantial number of electronic devices and wallets, all stored in a locked area. People even turn in wads of cash to the Care & Assistance Center. If you have lost something, contact them. (651.642.2202) You have up to 30 days to make your claim. After that, valuable items are donated to worthy causes.

Susan Warren of the Wall Street Journal wrote about competitive horticulture, the plant division dedicated to "Who can grow the biggest: pumpkin, squash, etc."She covers the special seeds, experiments in fertilizer, hand-pollination, etc. Did you know the huge pumpkin vines are 25 feet across at the base? The goal is to raise a one-ton pumpkin! Fascinating reading.

In both instances, the reporters selected a topic, gathered key facts, and interviewed key people about a story and let the story emerge versus the current punditry approach to journalism, the one that selects facts to support a "reporter's" preconceived idea. These stories are good examples of real reporting. They are fascinating, informative, well-written and give the reader the opportunity to learn something new and make their own decision.

Sunday, September 02, 2007

American Standards 

Americans take many things for granted, like: appliances that will 'always' work, cars that will 'always' run, food that is 'always' safe. Our expectation level is the highest ever for the human race. Sometimes the system breaks down, accidents happen, products don't work as well as we intended but overall, our track record with safe, clean production of almost everything is excellent. Our tolerance for error is very, very low.

Stateside, when we discover something wrong, we react with recalls, repairs and adjustments, quickly. Overseas, that is not always the behavior.

After the publicity on the breakdown in the safety of Chinese toy exports, the Chinese fired back at the US claiming that US soybeans contained pesticides, poisonous weeds and dirt. A trade official for the communist country said, "If we wanted contaminated soybeans, we'd just eat our own." (Pioneer Press, August 26, p. 3D)

Saturday, September 01, 2007

MN State Fair #2 

Yesterday we attended the MN State Fair. For the second year we began our visit in the Miracle of Birth building, open 9 to 9 daily. They have set up viewing areas where people can watch chickens hatch from eggs and pigs, lambs and cows give birth to their young. The place is packed all the time.

Yesterday, we were there when a calf was born, front hooves first, followed by the head, then the whole calf. At least 300 people were around the pen when the mother lay down to give birth. Sometimes the vets help move along the process, other times they let nature take its course. The building has ceiling mounted screens over which they play the current and previous births.

Once the calf emerged, it was greeted with cheers and claps. It was a tearful moment, one many rarely get to see. Both ladies standing next to me had been raised on farms. They shared that every calf is a plus and wanted; than man has been helping this process for millennia.

This particular calf looked a bit weak and the mother did not appear too keen on it. When we left, everything seemed ok. We checked back on our way out of the grounds and discovered that the calf was too big and had lacked oxygen during the birth - it didn't make it. However, this sad result is probably unknown to most who watched the birth and the excitement of watching piglets suckle, chicks hatch, lambs and calves nurse is truly wonderful. If you have not visited this building, please add it to your list of places to go - it truly is miraculous.


State Fair, Standards, Students 

Yesterday we made our annual trek to the Great Minnesota Get Together. While visiting the animal barns and seeing the ribbons won by MN youth, I recalled an article in the Pioneer Press, Sunday, August 26 that told the story of Paul Day, the outgoing superintendent of the State Fair FFA (Future Farmers of American) Show. Mr. Day, a fourth generation farmer, has spent his life teaching American youth as well as farmers as far away as Kenya, Russia and Japan. He is stepping down from his superintendent role this year, a position he held since 1985.

His motto, "Action not promises. Results, not excuses" garnered him critics but the fact that he had standards he enforced taught many students (and teachers) the necessary agricultural industry skills and book learning that make people successful and MN and the US leaders in world food production.

In far too many environments today, it is too easy for adults and youth to all get "blue ribbons", "best in class", etc. Truth is, we're not all blue ribbon in everything we do and we are not all best in class.

Reading about Mr. Day and his application of his standards leads one to believe that his students gained the necessary experience to succeed wherever they choose to go. As I've said before, my first choices for hiring would be those with military experience and those raised on farms. Both groups of youth understand life takes work and can be tough, it is not fair, and it is not risk free. They learn respect. They work. Mr. Day was a key influencer for many of the farm youth of our state.

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