Monday, December 31, 2007
Happy New Year
Happy New Year! May 2008 be your best ever. If you encounter tests, trials and tribulations, may you overcome them and then, give yourself a pat on the back!!
We're looking forward to your readership.
I want my STC
Most people want a second carrier to serve STC, with Chicago and Denver the most frequent options sought. Right now the only scheduled service is to MSP via Mesaba Airlines, which operates as Northwest Airlink. Mesaba is one of the airlines that gets money through a grant program called the Essential Air Services Grant. There is a second program called the Small Community Air Services Development program that also funds regional airports subsidizing air travel from small communities.
How much is it? USA Today reports that over $100 million is used to subsidize these programs. Mesaba's parent, MAIR Holdings -- who also owns Big Sky Airlines -- earns some revenue from EAS payments, though others have done better:
That second carrier people want in St. Cloud? You'll probably need to find a grant to pay for that. And when airlines are cutting routes repeatedly and the regional carrier industry has three times the capacity as current flyers, good luck with that.One beneficiary of subsidies has been the airlines the DOT picks in competitive bidding to run the flights. Great Lakes, whose business is largely subsidized flights, went from post-9/11 red ink into the black in 2003, turning a small operating profit three years ahead of the rest of the airline industry.
The subsidies alone, excluding fares from subsidized flights, made up 30% of Great Lakes' operating revenue in 2002-06, company reports show.
(h/t: Peter Gordon)
Labels: economics, St. Cloud, travel
First it was pop cans
But understand the mechanism: The government creates a rule that requires us to pay deposits on cans. The cans have a legal price well above their price in the market without this price control. Some governments place a higher legal price than others. Ergo, those who get pop cans in the low-legal-price states have some incentive to move those cans to the high-legal-price states. It's an artificial incentive, one created by government, which government then has to prevent by creating the pop-can police.
It's happening again with cigarettes in Maryland. There, the cigarette tax is doubling:
So, two cartons, with 20 packs and 400 cigarettes, would sell for $127 in Maryland but only $77 in Virginia. Our previous report on illegal cigarette smuggling showed it was on the rise because of high cigarette taxes, and in this case, such an illegal transaction could net the smuggler a lucrative $50, or 65 percent profit. Plus there's online smuggling too.It doesn't take a U-Haul trailer to get a carton of cigarettes across the border.
Labels: economics, smoking, taxes
Franchising and economic growth
I ate a few years later in a Pizza Hut in Cairo. The service was noticeably different than that in local Cairene restaurants. (I know, "you were in Cairo and you went to Pizza Hut???" I was there five weeks, and you can only eat felafels for so long. Vegetarian in the Middle East is not for the finicky.) The food came to you hot and fresh, and you would not have noticed much difference in quality.
So how much is passed along to developing countries by franchises, I wonder? How much of what we know in America about entrepreneurship is contained in a course one takes to learn how to manage a Pizza Hut, a McDonald's, a Subway? I suspect it's more than a little bit; I bet there's a research paper or more in there for those willing to dig around.
What I forecast, not what I want
I wonder how many people remember what a sandwich board is?A formula showed a 39 percent chance of recession in October, according to the St. Cloud Area Quarterly Business Report, which is funded by St. Cloud State University and the St. Cloud Area Economic Development Partnership. The report was released Friday in ROI Central Minnesota magazine. ...
In the report, university economists King Banaian and Rich MacDonald use several economic indicators and a survey of business leaders to determine what the area economy looks like.
...Usually the fall survey is strong. But 84 area businesses surveyed reported the lowest fall indexes of future national business conditions and expected employment since the fall 2002 survey, when the area economy was experiencing a recession.
The area has seen recessions three times in the last 20 years. The last one persisted from May 2001 to February 2003.
The report’s authors said they expect the economy to continue weakening. In September, they encouraged business leaders to prepare for a downturn.
“We’re not walking around with sandwich boards saying ‘the end is near,’” Banaian said. “(But) if that signal we gave last fall was right, the worst could be yet to come.”
I got a few looks from people at church yesterday to suggest I might need to tell them Bob's line. We didn't create this recession, no matter what the local real estate industry sends me for mail (just a few; others have been very candid and informative in their assessments. And our forecast does not use any direct housing market indicators at any rate.) But the graph that the first sentence uses is here:
Global Warming Summary
I will be posting more this year. However, this particular site summarizes the gaping holes in the current mantra. Much of the data referenced is in agreement with my current reading, Unstoppable Global Warming Every 1500 Years. This book is packed with detail and references.
We owe it to our children and grandchildren to be honest with them about the earth's changing nature. Humans have adapted to the changing earth for millenia. To saddle our children with unsubstantiated facts that lead to unnecessary fears and anxiety, is grossly unfair, unjust, and just plain wrong.
Labels: global warming????
Sunday, December 30, 2007
Sliding Geese
A few days ago, we looked out our living room window to the hill behind our house. What we noticed was really wild. There were five schusses with geese foot prints at the top of the hill, a slight depression for 15-20', geese footprints at the bottom to the left of the depression, then wing tip indentations in the snow.
We did not see the geese but look for yourself - what else could make these impressions?
Click on photo to enlarge.
Labels: MN wildlife
U of M's Women's Basketball
We were looking forward to the 2007-8 season with a bit of trepidation. Would a year of experience in a tough league prove beneficial? This season began with 12 players and added another this fall for a total of 13. Then one of the best defenders, a senior, got sidelined for the season with a torn ACL. The 6'4" freshman has had knee problems and most likely will not play. The team is now comprised of a core group of eight players: one senior, two juniors, five sophomores - not a lot of room for error or more accidents.
But they are really coming together. They hang tough no matter what - they simply refuse to stop trying. Their record is 11-3 record so far including wins in their first two Big-10 games. Two wins, against Michigan State (#24 pre-season) and Louisville, (#23 pre-season) have increased the team's confidence.
What has been just wonderful is watching incredible improvement in such a short time. The heavy part of the schedule, Big-10 is just beginning and much could happen. But the attitude, drive, persistence, teamwork, passing, and patience all look good. It should be a fun season.
Labels: U of M Women's Basketball
Friday, December 28, 2007
A quick note from a son of NH
By the way: The last time McCain ran, McQuaid referred to him as "the most liberal guy on the Republican side." The Leader endorsed Steve Forbes in 2000. McCain of course won, with Forbes a distant third. McQuaid called GW Bush "a wimp". So those who want to dig up something the Concord Monitor wrote 28 years ago to call the Union Leader a liberal paper should probably think whether that really applies.
By the way, part 2: This fellow used to write at the U-L, and it gets me to thinking that if the Loebs were alive today, they might have endorsed Ron Paul.
Labels: politics
Trade: It's an empirical question
When it comes to international trade, however, I suspect my position is not philosophical. It's not that "anyone, anywhere in the world has the ABSOLUTE RIGHT to trade with anyone else in the world" regardless of harms imposed on certain parties. Economists make the case for comparative advantage that trade is "Pareto optimal" (at least potentially), which is a consequentialist argument. When trade occurs between nations, we teach, both nations are better off. If we couldn't draw the proper before-and-after diagrams with production possibility curves or whatever other pedagogic device we might use, what would we say? Would we really assert it's an absolute right of man? I don't think so.
So as Paul Krugman reflected on international trade, he posited an empirical question to address those who make the consequentialist argument. Here's an example:
...trade between countries at very different levels of economic development tends to create large classes of losers as well as winners.Although the outsourcing of some high-tech jobs to India has made headlines, on balance, highly educated workers in the United States benefit from higher wages and expanded job opportunities because of trade. For example, ThinkPad notebook computers are now made by a Chinese company, Lenovo, but a lot of Lenovo’s research and development is conducted in North Carolina.
But workers with less formal education either see their jobs shipped overseas or find their wages driven down by the ripple effect as other workers with similar qualifications crowd into their industries and look for employment to replace the jobs they lost to foreign competition. And lower prices at Wal-Mart aren’t sufficient compensation.
All this is textbook international economics: contrary to what people sometimes assert, economic theory says that free trade normally makes a country richer, but it doesn’t say that it’s normally good for everyone. Still, when the effects of third-world exports on U.S. wages first became an issue in the 1990s, a number of economists — myself included — looked at the data and concluded that any negative effects on U.S. wages were modest.
The trouble now is that these effects may no longer be as modest as they were, because imports of manufactured goods from the third world have grown dramatically — from just 2.5 percent of G.D.P. in 1990 to 6 percent in 2006.
The statement about textbook international econ is certainly true. But the part that follows is an assertion based on data not placed in evidence. Greg Mankiw tells us Krugman is writing a paper in which that data might be forthcoming. We will see. Dani Rodrik thinks Mankiw hasn't shown the proper respect for Krugman's conjecture. But what Mankiw seems to say to me is that there's not enough here to reject the textbook view yet. And that those that reject the textbook view as a philosophical position rather than an empirical question may be called "protectionist". I think that's correct. And it is fit and proper for Krugman to go back and ask, does the received wisdom we held about trade when it was 2.5% of GDP still apply to a world where trade is 6%?
Don Boudreaux points that way as well, noting that a "pauper labor" theory of increasing inequality has already been shown to hold no water ... by Krugman himself. Boudreaux writes:
A famous trade economist argues that this concern is misplaced. In a 1996 essay, this economist - responding to a protectionist who fretted that western trade with low-wage countries would harm workers in the west - wrote that this protectionist "offers us no more than the classic 'pauper labor' fallacy, the fallacy that Ricardo dealt with when he first stated the idea, and which is a staple of even first-year courses in economics. In fact, one never teaches the Ricardian model without emphasizing precisely the way that model refutes the claim that competition from low-wage countries is necessarily a bad thing, that it shows how trade can be mutually beneficial regardless of differences in wage rates."We don't know what evidence Krugman has, so let's wait and see. But a consequential argument is always going to view both "anti-globalists and knee-jerk free traders" (Rodrik's words) as having a different argument. None of the economists cited here fit either of those camps.
Labels: economics
More Charlie Wilsons wanted (and more Philip Seymour Hoffman!!)
A couple places (notably this IBD editorial) suggest the movie has a Hollywood slant. OK, maybe it does, though for someone my age you have enough knowledge of the Soviet invasion of Afghanistan and the role of the US with the mujaheddin in western Pakistan to put the proper history around it. You don't need to be an expert. It might have been nice to have seen Reagan at least once in the movie. But that appears an error of omission than commission, and it bothers one less. John Fund today wonders what happened to "Scoop Jackson Democrats" like Charlie Wilson. I wonder if Scoop Jackson would even be a Democrat. If this is how Dewayne Wickham treats Joe Lieberman, what would he do with a Charlie Wilson?
Labels: politics
Thursday, December 27, 2007
Buttercup's eggnog woes
Labels: Buttercup
Radio daze
- Today with Captain Ed on Heading Right Radio, 2pm. Scott Swett of "To Set the Record Straight" will be on for the first half hour, then I suspect we'll swing into talking about holiday sales.
- Tomorrow, 7-9am as co-host of Hot Talk on KNSI in St. Cloud. (Streaming occasionally works here.) Tony Garcia will be with me. Our usual nuttery will commence, though from time to time we steer into serious things like the Bhutto assassination, the funding of the St. Cloud schools and Northboonstardoggle.
- Saturday, 3-5pm as usual on The Final Word on AM 1280 the Patriot. We will be live with a wrapup of the year in Minnesota politics. Winners? Losers? Best piece of political art drawn by Freedom Dogs? (You know how I love "put your fork down!")
- Monday, 6-9am, back to Hot Talk, sans Tony. Last day of the year, what happened that affected lives of local St. Cloudians? The local paper has a list of difference makers. I have something to say about that. And of course there will be gloating as my Giants defeat the Patriots.
Labels: Final Word, KNSI, NARN
Wednesday, December 26, 2007
Muslims and Treatment of Women
In reference, I have a few questions to pose to the so-called feminist leaders of the west:
1 - Where is NOW's response to these murders? No where.It is interesting to note that so many western feminist professors, journalists, and do-gooders are quite at ease attacking the relative innocent behavior of white males but are incredibly ignorant (or playing ostrich) when looking at the horrific treatment of women from other cultures, particularly some Muslim cultures.
2 - Where are the other western women's rights groups? No where.
3 - Where are the female professors of "women's studies" that decry dead white male historical behavior yet ignore the current, abusive treatment of women in too many Muslim countries? No where.
4 - Where is the MSM that is so eager to criticize America while turning a blind eye to these abhorrent male Muslim actions? No where.
5 - Where are the female journalists who supposedly are so interested in covering women's rights? No where.
I
Labels: Feminists
More Snow Photos - for Our Guys!
The snowfall was beautiful - no wind for 24 house so the flakes literally floated from the sky. The formations on the trees are spectacular. Driving, another story but we're fine - you just drive slower and the DOT has done a great job of removing the snow.
Labels: global warming????
Press-ganging grandma
The town is pushing a program that would let seniors work part-time, for $7 an hour, to help pay off some of their property taxes.The tax workoff programs have existed elsewhere, we're told, but with property taxes becoming much more of a burden on homes that have less and less value lately, we'll hear more about these.
"People shouldn't have to sell their house, move away to a place with less taxes, leave behind their family and friends," said Town Supervisor Paul Feiner.
He envisions retired doctors mentoring schoolchildren, retired accountants helping with the town's finances, retired lawyers offering their services for a discount. But there are plenty of less-skilled jobs that need doing, he said.
"It's not like we're going to see grandma running the snowplow," he said. "There are lots of things people can do for the town and it wouldn't cost us that much to pay them."
The proposal has caused a stir in Greenburgh, a town of 90,000 in Westchester County, which has the nation's third-highest homeowner property taxes. The plan would be unusual if not unique in New York, but similar programs are considered successes in Colorado, Massachusetts, South Carolina and elsewhere.
One interesting thing the young 'uns are doing in California is to use Proposition 8 to reduce their tax bills.
Across the U.S., concerns about property taxes have reached levels not seen since the passage of California's Proposition 13 in 1978. That landmark law capped property taxes at 1% of assessed value and said the base assessment on a home couldn't increase more than 2% a year until it is sold. A companion initiative, Proposition 8, allows homeowners to get assessments temporarily reduced during a weak housing market, until home prices recover.With home prices down 6.7% in the nation (and more in CA, it appears) these revisions could be substantial. That cuts the amount of tax revenue the state collects and is helping create the fiscal emergency facing Gov. Schwarzenegger. And when Arnold tells Granny to get to work, you better believe she'll listen.
This year, thousands of California homeowners -- primarily those who bought their homes in the past few years, at the market's peak -- are getting a tax break because of Proposition 8. Assessors in counties such as Ventura and Contra Costa decided to review thousands of properties sold since 2005 and reduced many of the tax bills mailed this fall.
Buy local -- how productive?
John Palmer is thinking about these claims too.
Suppose I shop locally when I could get something for a lower price by shopping on the internet. I'd be better off, and I would have some money left over. If I paid the higher price to the local merchant they'd have the extra money instead of me. But they'd be shipping a bunch of the money outside the community, too, to pay for the merchandise they sold and to buy other things for themselves. I don't see much difference except they'd be richer and I'd be poorer.You'd need some kind of input-output analysis to get that figured out more precisely, but the only effect I see is that somehow the local shopkeepers will pay better wages to my low-wage workers than the Wal-Marts and McDonalds. But if those places disappeared, do you think the same number of jobs would be available by the local merchants at higher wages? A decrease in demand for workers would push wages up? You'll have to work me through that logic.
Labels: economics
And worse during the holidays
Put your hands where I can see them, Mucus Boy
I should have known better, as this is what happened last time too. The box says "Pseudoephedrine Free." As Jeffery Tucker points out this morning, you may as well have swallowed Pez than PE. And why? Because somebody somewhere might use pseudoephedrine to make meth. But this isn't just a rant on government deciding meth prevention for a few is more important than cold relief for many. Tucker finds a more sinister possibility:
It seems that most all pseudoephedrine is manufactured in China and India, and very cheaply, much more cheaply than it can be made in the United States or Europe. What that means is that these companies don't have lobbyists in Washington who can make an effective case for their product.Now that isn't a whole lot of money. But Tucker argues that lobbying by BI went up dramatically at about the same time the pseudoephedrine ban -- also known as the Combat Methamphetamine Epidemic Act of 2005 -- was placed as a rider in the Patriot Act reauthorization. Coincidence?
Contrast this was phenylephrine, the world's largest manufacturer of which is located in Germany. The company is called Boehringer-Ingelheim, according to MSNBC. It developed the drug in 1949 for use in eyedrops. In the last two years, virtually every manufacturer of cold medicine has changed its formula to include the Boehringer drug. Some continue to make the old formula available but only with special access.
Is it possible that the move against wonderful pseudoephedrine and in favor of useless phenylephrine was really a form of protectionism in disguise? That it was really about rewarding a well-connected company at the expense of companies without connections?
If that sounds cynical, take a look at this. It seems that our friends at Boehringer Ingelheim are rather interested in American politics, with 73% of its donations going to Republican candidates for federal office. You can see here that Boehringer even has a PAC located in Ridgefield, Connecticut. Someone with more time than I have ought to check to see how the people it supported for Congress voted on the act that resulted in a massive shift toward their product, and has nearly kept its competitive product off the market.
But we're going in the wrong direction. In Oregon, they'll now require you to get a prescription for pseudoephedrine. Meanwhile, a new company is making a name for itself and raising capital to sell software to track down criminals buying too much pseudoephedrine. How long before one must comply with a post-nasal drip test at the pharmacy counter?
Labels: economics, health care
Monday, December 24, 2007
Merry Christmas and Happy Holidays
Thank you for visiting our site, reading our posts and leaving your comments.
This time of year, we celebrate - Christians, the birth of Christ; Jews, Hanukkah; others celebrate what they choose, some do not celebrate. For those of you who do take time to remember during this season, Merry Christmas and Happy Holidays. Take your choice but enjoy.
We have had beautiful snowfalls. The term "White Christmas" is close to perfect this year. Here are a few photos taken outside our home.
King adds: To show you how cold it is: The family always wants pictures of us, for fear we have died in the cold (you'd think New Hampshirites would understand cold, but they get more snow than cold.) So we had procrastinated more than normal and on Wednesday Mrs. S makes Littlest take the camera outside and intercepts me before I dump the sport coat for sweats. The effect is:
Labels: Christmas
Shia + Sunni = Iraq - Where's the MSM?
In their drive for "news," too many media pundits, all over the planet, focus on the abnormal, the aberration, the unusual, and anything that will divide groups. Just consider the mouths that constantly play the race card in the USA. But Iraqis have already discovered that what appears on western television is not necessarily what is happening in Iraq. This ability to discern truth from propaganda is a very healthy sign for a nation's population who were under the thumb of a dictator for more than one generation. It shows what people can do when given the opportunity for free thought. Our soldiers have made a significant impact on Iraqi society and the Iraqis "get it."
There is more to do but the Iraqis are making incredible progress, governmental, physical, religious and emotional. They are a shining example of what people can do when given a chance.
HT Captain Ed
Labels: Iraq, US Soldiers
Because it's so much fun watching a second place team
You can see the Red Sox for less. Your field box seat at Fenway is $125, half what you pay at Yankee Stadium to watch the best team syringes can buy.
But you'll pay more on Stub Hub to watch the Red Sox get their championship rings. I can only hope one of those is under my Christmas tree tomorrow.
Labels: sports
Consumer led rally?
It nevertheless beggars the imagination how we are managing to have positive consumer spending when real disposable personal income has been down in both October and November. Maybe it's credit cards, as Michael Mandel notes more than 4% of credit card balances are at least 30 days delinquent. The question I think will turn on how aggressive price-cutting cited in many places this season ends up helping or hurting sales and the bottom line.
And there's still this sub-prime thing out there... Here's a couple facts from the local market that someone provided to me last week. Volume of sales in local real estate in the St. Cloud area is down 16.6% through November. Inventory of listings to sales is now over 24 months compared to 20 in November 2006.
If consumers are leading us through this soft patch, my question is ... with what?
Labels: economics
Budgets reflect choices
The final general fund budget was set at $5.19 million, a 9 percent increase compared with the 2007 budget.OK, let's do a little math. 9% of $5.19 million is $467,100. LGA is falling by $140,000. Another $20,000 is going to downtown beautification after the building of the new Sauk Rapids bridge. (As someone who drives through downtown SR each weekday morning during the school year, I will say you are getting at least some value for that $20k.)
The budget was approved without much deviation from the preliminary budget, Finance Director Jack Kahlhamer said.
It includes an additional $20,000 for the street maintenance budget, as it will cost more to maintain the downtown beautification efforts related to the bridge project.
The city also agreed to fully pay for the Sauk Rapids-Rice school resource officer.
The school district decided it no longer could pay its share of the officer’s salary, Kahlhamer said.
Sauk Rapids is also looking to add one full-time position, either a police officer or maintenance worker, he said.
But the decision to hire a new employee could depend on funding outlooks — and Local Government Aid — in the years ahead.
The city will see a reduction of $140,000 in LGA in 2008 and is unsure whether cuts will continue.
That leaves over $300,000. What do we know about it? We know the school district, which lost a levy vote last month, decided to cut a position and that the city chose to pay for it instead. Perhaps this was agreed between the city and district, but at any rate it supports a claim that the city is raising your taxes because the district couldn't. We know the city is also looking for money for another position as well. It will choose to do so depending on whether more milk flows from the LGA teat.
So why does the newspaper run a sub-head reading "Hike reflects loss of Local Government Aid"?? Why not say "Hike reflects hiring decisions of Local Government"?
Note that this same newspaper, in the very same section, runs an editorial criticizing the vintage of science textbooks the school board is using. What is their preferred method of paying for this?
This board points the bulk of the blame at state and federal governments for everything from unfunded mandates to an outdated K-12 education funding formula. To say nothing of neither entity having a credible estimate as to what it takes to educate today's students to today's standards.Obviously the paper has forgotten the basics of budget constraints. Deciding to have newer textbooks or prettier downtowns or an extra maintenance worker can be paid for in three ways: you can tax more, you can borrow more, or you can spend less on something else. The Times editorial board and its headline writers appear blind to that last choice. If the newspaper were to, let's say, hire another reporter, it could either raise prices on the paper or its ads, it could borrow more money from its Gannett parent, or it could cut spending somewhere else in the office. I know the people at the Times, they are smart people, they know that choice and make it EVERY DAY. What is it, then, that blinds them to using that same logic to a textbook?
That's not to say St. Cloud school board members and district administration are free of blame. Clearly, more local diligence the past several years likely would have raised awareness, perhaps even funds, to address this situation.
The school board has made its choices: It chose to continue to use vintage textbooks. Now I don't know what new things have happened in physics in the last decade that are imperative to put in front of high school students in their textbooks (is there a webpage that can substitute?) But was it imperative enough to get teachers to accept a lower salary? Was it imperative enough to forgo keyless entries in all classrooms? Was it imperative enough to kill off a couple trips for the dance team?
Your budget reflects your choices, but the choices will only be rational when the budget constraint is hardened. The Times is wheezing for softening that constraint, and its headlines reflect that the only ones who will have to face a hard budget constraint are taxpayers.
Who always have.
Labels: education, St. Cloud, taxes
Sunday, December 23, 2007
Merry Christmas and the PC Crowd
The response has been overwhelmingly positive. Every recipient has responded with "Merry Christmas to you, too. " One may conclude they feel safe saying it since sometimes, note sometimes, we say it first. However, I have encountered a number of service people who are saying "Merry Christmas" before I do. Could there be a little backlash occurring?
One server at a national restaurant chain shared the following with us. She said the servers had a discussion to decide what to say. They all concluded that they were going to say "Merry Christmas" and the result was that very, very, very few customers objected.
One may or may not be Christian but face it, this is a happy time of year. It does us well to remind ourselves that we have a history of celebrating Christmas. Let's keep it.
Labels: Christmas
MN's Department of Transportation, Snow Removal
The second, again relatively successful rerouting of traffic is through the Crosstown/62 and 35W interchange construction project. This is a huge undertaking, long overdue, and will continue for quite some time. One is never quite sure from day to day how one will be routed through the maze, but DOT figures a way to make it work.
Our DOT takes a lot of heat, incredible criticism most of the time. I'd just like to say, they do some things well. Their ability to move snow is unsurpassed. Watching snowplow drivers do their job is like watching an art form: efficient and beautiful. Next time you are driving and the plows are doing their tandem snow removal, instead of getting frustrated, position yourself behind them and watch the show - it is truly fantastic!
Labels: Minnesota
Friday, December 21, 2007
Opportunistic tax cutting
Suppose one held the view that government is too large. Gridlock in Washington (be it partisan gridlock or an executive branch more small-government conservative than the legislative branch held by the same party -- no, we're not describing the Bush Administration 2001-06 here) makes it difficult to build consensus to right-size government spending. But during recessions, one might be able to argue for tax cuts that temporarily raised the deficit and then as growth returned one could argue for reducing deficits by reducing the size of government spending. I would call this "opportunistic tax cutting" or "opportunistic fiscal policy."
Contra Mark Thoma, I would argue that fiscal policy isn't just stabilization policy. There is an argument for allocative policy (for those of us who grew our public finance roots on the Musgraves), assigning to public funding and provision those goods and services for which there's both a market failure and not a government failure. If one were to believe government was too large then proposing a 0.5-1.0% of GDP tax cut, as former Clinton Treasury Secretary Larry Summers did Wednesday, may be seen as an attempt to chip away at overgrown government. (I sincerely doubt that is Summers' major intent, but it might be a minor one.) When the next boom hits, government may not expand as much since, Felix Salmon puts it, "taxes are a hell of a lot easier to cut than they are to raise." Indeed they are; that's the point of the exercise.
Bucks, bowls, and NPV
If every Australian receives, or pays, a dollar a week, the total amount is very close to a billion dollars a year. And if you have a cash flow of a billion dollars a year, and your interest rate is 5 per cent, the present value of that cash flow (the amount of extra wealth you would need to generate the flow) is twenty billion dollars.But who knows how much is enough? The IMF says, according to this blog, that debt forgiveness to HIPCs (mostly in sub-Saharan Africa) of $32.8 billion is too slow. That's probably less than planned, but why is the higher number magical?It’s easy to stretch this gap even further. A dollar a week is about fourteen cents a day. And, if we looked at the US (about 300 million people), or the entire developed world (around a billion people, depending on your definition), the total would be that much larger. Fourteen cents a day for everyone in the developed world has a present value of one trillion dollars.
The fact that the same flow of money can be presented in such radically different ways, and that each of them is appropriate in certain contexts, is one reason public policy debates get confused.
The trouble, as Bill Easterly points out, is that Africa is already growing, we just don't know if the aid had anything to do with it.
Why do aid organizations and their celebrity backers want to make African successes look like failures? One can only speculate, but it certainly helps aid agencies get more publicity and more money if problems seem greater than they are. As for the stars — well, could Africa be saving celebrity careers more than celebrities are saving Africa?It would be nice to have the present value number, but it's used to count the wrong things.
In truth, Africans are and will be escaping poverty the same way everybody else did: through the efforts of resourceful entrepreneurs, democratic reformers and ordinary citizens at home, not through PR extravaganzas of ill-informed outsiders.
The real Africa needs increased trade from the West more than it needs more aid handouts. A respected Ugandan journalist, Andrew Mwenda, made this point at a recent African conference despite the fact that the world's most famous celebrity activist — Bono — was attempting to shout him down. Mwenda was suffering from too much reality for Bono's taste: "What man or nation has ever become rich by holding out a begging bowl?" asked Mwenda.
Wanna help them? Trade with them.
Labels: economics
Fare deal at last
Labels: economics, Minneapolis
Just get 'em to 50
I have two children. Most readers know about Littlest, but Oldest (from my first marriage) is not often mentioned because he is older by a decade and does not live at home. We do not talk every day like some parents do with their twenty-somethings. He walks to work from his apartment here in town, and I see him some days and we wave. We both like to text. But get together? Maybe once a month. He's pretty independent and I want to respect that. A measure of my success or failure as a parent is not in my view how many times a month I see him.
In the comments to Caplan's post someone mentioned an article from last year by Orson Scott Card that says two very important things: "good is good enough", and take the long view:
What is the measure of happiness? I suppose everyone has their own idea, but species-wide, the prevailing notion might run something like this:There are times where Mrs. S worries Littlest will be harmed in some way, that we cannot assure her safety. We worry about the choices our kids make, and perhaps that's wise if it turns out they are lousy risk-assessors. We would like to be sure they can MAKE IT TO 50! That seems worth worrying about, though understanding there are some risks you can't reduce to zero. But what your kids do for a living, whether they are the best they can be, may not be as important as just getting them to be self-sustaining people in families that care for each other when they hit the age you are. When someone says to me about my child "She's a good kid" or "He's a very nice young man" I sometimes hear a 'but' as in "but he could be ..." To which I would like to say, "yeah, so could we all. Your point is...?"
When your kids reach the age of 50:
1. They're married to somebody they like and trust.
2. They're supporting themselves.
3. Their own kids are growing up decently.
4. Everybody in the family is speaking to each other.
5. They're all good people -- contributing to society and living by the rules.
That's an achievable standard, isn't it? It doesn't look so hard.
Of course, your kids can make horrible choices that put the kibosh on some of these things. But if you teach them what's expected of a good person, and show it in your own life, you can't force them not to make bad choices. That happens, and it's sad, and all you can do then is help them work through the consequences of those choices and try to salvage happiness at the end of the road.
In fact, raising kids who are hardworking, self-supporting, reliable, kindly people who get along with each other is hard enough that I think any parents who achieve it have a right to be perfectly content with the job they did.
Why, then, do so many parents set impossible standards for themselves and their children, guaranteeing that they -- and their children -- will fail, and making everybody miserable in the process?
So this the first Christmas season in which I am over 50, and I'd like to congratulate my parents on going five-for-five with me (assuming I'm capable of judging #3 and #5). If I'm lucky, I'll live long enough to see if I did as well.
Labels: education, marriage, Mrs. S
A Xenophobe at The Economist
From a blog post today at London-based Free Exchange, "in which journalists from The Economist Newspaper, Economist.com and the Economist Intelligence Unit post their thoughts and observations":
I am often accused of "elitism" for supporting free immigration, which is completely baffling on its face, since the reason for my support is the welfare of very poor foreigners.The writer is clearly xenophobic (both contemptuous and fearful) about those strange and foreign "poorer Americans."
...Poorer Americans, in addition to having less money, are on the whole also more racist, xenophobic, and sexist than wealthier Americans. "The elite", like it or not, is generally a liberalising influence in politics, and populism can and does take savage right-wing forms.
Labels: economics, humor, immigration, Media
Thursday, December 20, 2007
Where do ed majors come from?
- The choice of major isn't just driven by ability. There seems to be a correlation that has students from lower income families more likely to choose education as their major. If income and SAT scores are correlated, the correlation between education majors and SAT scores might be a mask for some other causal pattern.
- Those lower income students also tend to take more math and science in their college curricula. In short, students from lower income families who have the math skills tend to go into science and technology -- it offers a fast turnaround to a good-paying job. The humanities majors tend to get students from higher-income families because these are in some sense superior goods. If Mom and Dad will keep Assistant Professor Buffy in a nice apartment and without car payments, she's more likely to be willing to major in Victorian literature.
Coolest thing I've seen this week

A picture of GDP production by area. Higher spikes indicate more economic activity. That should give one some idea of why the Northeast dominates the USA. From G-Econ, courtesy Arnold Kling. I also liked looking at Russia and China there.
Labels: economics
Academic PEDs
Still, I think it's a valid question that the article asks: If you knew your student was taking a cognitive enhancer, what would you do? If you're an assistant professor at a university where tenure is competitive -- A's receiving tenure decreases the probability that B in the same department will gain it -- what is your reaction? There will be no Mitchell Report on this; figure it out for yourself.
(h/t: Chronicle of Higher Ed)
Labels: higher education
Wednesday, December 19, 2007
Many a slip, MnSCU version
The union -- the Inter-Faculty Organization -- delves into the details and discovers one reason why the money might not be there:
The data is easily available by reading through the system's budget documents. While I have plenty of beefs with the union, they have exposed a very important problem in the system.At the last MnSCU Board of Trustees’ meeting MnSCU officials revealed a little more detail than has been supplied in the past on how they plan to spend the $62.8 million increase in technology money this year. MnSCU is increasing expenditures on technology from $21,500,000 in FY2007 (last year) to $46,355,000 million this year—a 115% increase in one year. They are proposing an additional $4.7 million increase in system level technology expenditures next fiscal year. MnSCU currently has 140 system level technology positions, 20 of which are vacant. They are proposing to add an additional 55 new technology positions.
MnSCU received essentially block grants from the legislature of $666.8 million in FY2008 (this year) and $689.3 million in FY2009. The biennial increase in appropriations was 12.6%. The increase in appropriations this year to the MnSCU system as a whole was 10.6% The increase in appropriations sent out to the campuses by MnSCU was only 3.3%.
Faculty have complained that MnSCU is spending too much money on central office growth, particularly on system level technology, and not sending enough of the state appropriation out to the campuses, where education takes place. The amount of money MnSCU is spending on “Systemwide Set-Asides” is increasing from $58.9 million in FY2007 to $85.8 million in FY2008 (a 45.6% increase) and to $90.8 million in FY2009 (another 5.8% increase). At the last IFO Budget Committee meeting, Tom Fauchald, Budget Committee Chair, presented an analysis of the growth in state appropriations from MnSCU to the state universities as a percent of the university operating budgets. Here is the biennial growth by university:
Bemidji 2.50% Metro 2.92% Moorhead 2.18% Mankato 2.71% Southwest 1.93% St. Cloud 2.62% Winona 3.20%
When this was discussed at the town hall in Waite Park, most of the suggestions focused on why do we have a system office, and what does it provide? Why would a system office need to suck up almost a sixth of the state's appropriation? Why do we have a huge St. Paul office with more employees than any of the colleges and universities in the system save two? Is it really more efficient and better for SCSU that it is a system board of trustees in St. Paul that hired President Potter to our campus last summer, rather than a St. Cloud board of trustees? If there was, wouldn't that board provide the resources he would need to pay the salaries he was negotiating? You certainly would not get this situation where the state appropriates 12% more money to the system, but only 3% reaches the place where the students are.
It's a strange world, this MnSCU. I got the impression that more scrutiny of this spending pattern might come from legislators. It's long overdue.
Labels: legislature, SCSU
Psst, wanna ride a train?
Craig Westover and I exchanged some email about this a few weeks ago, and he now has an op-ed in which he tries to use a two-tier pricing mechanism to generate a proper price for transit and in the meantime provide a market for trading riding rights that could be income support for those with lower incomes. It's an intriguing idea. You cannot expand it too much, of course, because one problem with LRT will be congestion -- if the train is too crowded, you drive both the low price and high price riders off it. But I don't see the problem as being insurmountable.
Labels: economics, Minneapolis, trains
Overtreatment or overdemand?
I turned to someone after the meeting and commented on this. "How many other businesses are there where the seller tells the buyer she or he is buying too much of the seller's services?" We scratched our heads and walked on.
Mark Thoma ties some interesting articles on health care together this morning under the title "Overtreatment." This is the title of a book by Shannon Brownlee which argues that between 20-30% of the health care services we consume in America do not produce improved health. The issue turns on the organization of health care into a fee-for-service system that makes doctors into piece-rate employees of third-party payers (for the most part.) More aggressive care didn't result in better health.
So there's two arguments here -- one is that the doctors and hospitals have no incentive to hold down costs, and the second is that doctors are just responding to what the patients are asking, and the patients are substituting professional health services for good personal health choices (exercise, diet, etc.) And I was trying to think, how could we figure out which of these stories is true? I had thought of the Levitt exercise on real estate agents: Doctors themselves should consume less dubious health care if it's a problem of consumer knowledge and consumer demand. But, as John Lott argued against, you'd have to figure the doctors know where the best, most effective, and cheapest procedures are. That test is unlikely to be persuasive.
So as I hear politicians begin to ramp up a debate in Minnesota next year over health care, I see more good questions than answers.
Labels: economics, health care
Tuesday, December 18, 2007
Bridges and budget constraints
I find this logic either amusing or irritating, depending on my mood. At the time I was irritated, but after visiting with friends I let it go.
Irritation returned this morning as I read the second in the StarTribune's full frontal assault on your wallet in the name of safety.
At what point did anyone discuss redistributing money to transportation from other parts of the budget? "Which ones?" you ask. Well, Phil Krinkie has an idea: Maybe we don't need to spend money on transit, particularly when you buy an 80 mile project but get a 40 mile project instead. Nicole Russell wonders about $50 million to provide security at the GOP Convention. Nice that Bemidji State gets some sugar for engineer and nurse training but could that money be better spent?For MnDOT to keep pace with all statewide transportation needs from 2008 to 2030 -- including construction, safety projects, maintenance, and upgrades -- it would cost taxpayers $38.1 billion, according to MnDOT's most recent estimates.
But over that same time period, with current funding policy, MnDOT estimates that it will only have $14.5 billion.
McFarlin said MnDOT's fiscal 2008 budget is short at least $85 million for scheduled construction projects.
Every additional dollar spent on bridge repair, construction, or inspection has three sources: You can tax more; you can borrow more; or you can spend less somewhere else. Dropping any of those three from the equation means you are optimizing subject to NO budget constraint. This is the height of folly; you cannot run your own home buying more of X, Y and Z without at least considering if you could do without so much of A, B, or C. Neither can you run a government.
Labels: economics, Minnesota, taxes
OPM
I think he would argue this is because I pay a fairly small share of it, my vote on whether or not to spend it is unlikely to be decisive, but investing resources in it is.
I suspect this might explain why no bigger hullabaloo is made over the item Lileks has found in the Minneapolis budget. That Mayor R.T. Rybak thinks it should be using OPM on making loans that banks could easily make (a violation of the yellow pages test) is bad enough. I might understand the desire to use money to take property owned by the city and make loans to help get it rehabilitated and back in use productively. Maybe. But the thought that the City of Minneapolis should offer itself as an alternative to Islamic banking boggles the mind. I fail to see how any court would uphold a unit of government in the United States making any loan to an entity on the basis of a religious test as passing muster of the separation of church and state, and that Rybak could not even SEE this as a problem is utterly amazing.
There are private market alternatives already in place for this, so even if you restricted your search of the yellow pages to interest-free loans, you have choices.
Labels: economics, Minneapolis
Monday, December 17, 2007
I think that'll leave a mark
There are a fair number of markets that are stable. I can’t undo the excesses of the last six years - housing prices rising at an unsustainable level, easy credit. When you have these kinds of excesses, it takes a while to work your way through it.Treasury Secretary Henry Paulson, responding to Alan Greenspan's comments on ABC News' This Week that government should use cash "in larger amounts to help homeowners rather than to try to fix" credit markets. Who do you think Paulson would consider responsible for those "excesses"?
Labels: economics
Actually, I get this
I can answer that: In my five years as a vegan who travels (in the first half of the nineties) I had a list in my head of restaurant chains and what they had that I could eat on my diet. Now I'm sure there are hundreds of restaurants that have better menus than the OG, but suppose I am sitting down to interview in one and scan the menu and find they do not have anything on it that is vegan. I am also trying to project myself in the interview as a guy who's a little aw-shucks, not pretentious, not a pain in the posterior. Do I want to take time reviewing some options the chef MIGHT cook for my fussy self?
Not that I'm a fan of the Huckster, but I can understand why he might look for a chain restaurant while traveling.
Labels: food, politics, travel
