Friday, February 29, 2008

Opportunity and Freedom 

My students were assigned some very, very small mini-cases to present to the class. Students were to read the information, summarize it, identify the pros and cons or causes. They were to ascertain whether or not information was unclear, missing, etc. and provide solutions or clarifications.

One case discussed the fact that the US has 4x the number of software engineers as India, 6x the number of software engineers in China. The question was, why?

The student who had solved this situation was from Africa. His major explanations included these gems:
"America provides more access to education than anywhere else. Americans always look for a way to improve software, they know (have the freedom) to make improvements"

Note: this statement is from a foreign student who recognizes what we have. I only wish more Americans internalized this fact.


A random thought, then off to editing 

Ob: absolutely nothing, I was reading something on a discussion list and wanted to find a quote from the Big Lebowski to respond. The quote page on IMDb seems to me to be the whole damn script, but out of order. And I lost twenty minutes laughing through it. If you ask me for favorite movie ever, that's in the family photo.

OK, the last paper for the book has arrived, and I'm off to finish editing, followed by Littlest's last game of her grade school basketball career. Lileks does this all the time, so why can't I?

The quote, you ask? It was about nihilists. And until this guy changes the spelling of his URL, he's blackballed from the Northern Alliance. I type the wrong one every time.

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Thursday, February 28, 2008

The coalition to not leave you alone 

One product of being taught by free market types in graduate school -- my undergraduate education had mostly left-liberal faculty, where in my senior year I was the only econ major wanting to take the Friedman side of a debate on monetary and fiscal policy -- is a certain resignation that, at times, elections bring together enough people in a coalition to create a majority that imposes its will to take the income of the minority. You might wish to complain about it, and surely it's wrong, but the process may require a certain amount of wasteful spending in order to get something done. That's the logrolling I wrote about on Monday, for example.

So where does this coalition come from? Drew Emmer points to a "shrewdly calculated outcome" of a relatively large coalition of firms who stand to benefit from greater government spending on transportation. It's a pretty interesting group, including pavers, engineers, local government, and large associations of firms who want someone else to pay for improvements on roads they ship on. Even a few firms that provide professional services, like the contractors' law and accounting firms are in on the game. If you were teaching state and local public finance or political science and wanted to show how coalitions form, Drew's list would be a good one.

But it extends a little further. My own union's lobbyist makes his reasons plain:

This is good news for higher education because the $416 million the governor had designated for roads and bridges in the bonding bill is now available for other types of projects�like higher education. IFO supported the gas tax increase for this reason.
The public universities are relying on the government to definitely spend their 3% of the budget on bonds, and now that they pushed the governor's road requests aside there's more room at the trough for these porkers to lard up. Understandable, though hardly commendable. But look who else is in? I got a copy of an email sent by ISAIAH to its membership:

Congratulations everyone! ISAIAH marks a huge victory with the successful passage of the Transportation Funding bill into law on Monday February 25, 2008!

Over the last four years, ISAIAH leaders have been champions of a vision for a transportation system that works for everyone, including those unable to drive. Every person has the regular need to travel, whether it is to their home, workplace, school, church or another location. ISAIAH envisioned that Minnesotans should be able to rely on transit as a thriving part of the state's transportation system.

This law was made possible through Minnesotans gathering around a common vision for a transportation system that: gets everyone where they need to go; is a responsible stewardship of our resources for the public good; considers the legacy we leave for the Minnesotans who will live here 30-50 years from now. is critical to note that the content of this law was shaped by the participation of these groups and many others. This includes ISAIAH and the Transit Partners Coalition of which we were founding members.
ISAIAH, of course, is a social justice group that affiliate with churches. I attend church at one of the group's sponsors. I drive about 300 miles per week, and my wife another 100 or so. We probably consume between us about 25 gallons a week. I wonder how the stewardship committee would feel if I withheld $1.25 a week from my offering (rising to $2/wk over the next few years), since the church has now decided I should contribute more to roads? Does the church think the government is a collection agent capable of doing His work?

And these folks aren't through:

While this is a critical infusion into Minnesota's infrastructure, it is also the product of compromise. ISAIAH and transit advocates believe some areas of transportation policy and funding still need additional attention in order to provide adequate and equitable support to our growing transit system. We will bring these to your attention as necessary at ISAIAH gatherings over the next year.

Of course, and if you resist the holy coalition that will not leave you alone until you have paid from your pocket for every additional need that they decide you should pay for, well, that would make you unholy, right?

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Now about that MN budget forecast appears that we are going to be headed for a showdown between the governor and legislature again, because this deficit is too big to fix with reserve funds and other legeredemain. You either have to cut spending or raise taxes, and the battle will be for probably $500 million or so between the two.

From the summary document, a couple of interesting points relating to the discussion just below on the possibility of recession in the state:
Projected individual income tax receipts fell by $313 million from November�s estimates. The decline in the personal income tax is due to slower growth in wages and declines in non-wage income. The forecast includes a small decrease in capital gains realizations in 2008. Declines in portfolio income, which includes interest and dividends as well as capital gains, explain about 75 percent of the decline in projected individual income tax receipts since the November forecast.
So most of this is because of stock market concerns. The forecasting firm Global Insights not only is calling therefore for a lower stock market, but it is also imputing a larger decline in Minnesota for key driver variables -- the forecasts that are used to generate the revenue figures -- than is expected for the country. They forecast employment to shrink -0.5% in 2008, which is a slump, not a pause. The detailed report has a projection of a 23,400 job loss 2007:III to 2008:III (see p. 23). Wage and salary income rise 2.5% for MN in 2008 versus 3.6% in the nation; any reasonable guess for inflation would lead you to conclude that real wage income in Minnesota is expected to decline. I think the forecast is a driven very much by the housing situation,
Housing is critical to the Minnesota outlook. Construction is expected to lose approximately 13,500 jobs in 2008. This forecast assumes housing permits bottom out in the second and third quarter of 2008. In 2007 it appears that job losses in construction lagged the decline in building permits up to 3 months, thus a �catch up� period is anticipated in the forecast. If the housing slump continues to deepen, however, it is unlikely that Minnesota�s economy will perform as expected. (p. 28)
...and I wonder if this is perhaps a bit too pessimistic. Total MN employment in construction was 112,432 in December 2007, down almost 6,400 from that time in 2006. You are telling me that you expect the rate of decline in the housing sector to more than double?? I sincerely doubt that, as it would drive down the level of employment in construction to 1997 levels. Tom Stinson said last week at the St. Cloud Economic Outlook that he thought prices in housing had to come down another 20% to reach equilibrium. Again, I'm not seeing why this figure is enough to lead to a double digit decline in construction, which has already shrunk.

Regardless of whether this figure is a little too high, it's unlikely we get to mid May without some adjustment of taxes (who knows, maybe they will tax clothes now.) Governor Pawlenty says he will use spending cuts but not in K-12 education. Expect the Legislature to talk more about tax loopholes (that's a technical term for "income the government doesn't currently tax but wants to".)

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How we might steer clear of a recession, at least locally 

One of the results of presenting last Thursday night was that it provided a hard deadline for me to forecast what happens to the St. Cloud economy in 2008. (My presentation slides are posted, if you're interested.) As I sit here waiting for the budget forecast from the state (the AP reports a Capitol source providing them with a $935 million number -- I'll post about this separately after Tom Stinson and the Dept. of Finance post their presentation) and as I digest the new MN and St. Cloud employment data, it's worth thinking how I use the words 'recession', 'slump' and what we're talking about.

I found this in the AP report very interesting, because it matches my local expectation:
"But this short, mild recession eliminates about one year of economic growth and one year of state revenue growth," the report reads. "The federal stimulus package helps limit the recession's length, but the rebates come too late to prevent U.S. output from declining in the first half of 2008."
One of the areas that Stinson has cited as experiencing real weakness has been production of building products. Wood product manufacturing has lost about 3000 jobs in Minnesota since 2005, and the construction area (broadly defined, including civil engineering) about 14,000, in an economy with about 2.7 million jobs. So at most those sectors might add 0.1 to 0.2% directly to the unemployment rate, not more. Locally, I see a slightly higher impact from these sectors, but not much more.

I noted last Thursday that there's a difference between 'recession' and 'slump', and that most of what people want to call the former (like a two-quarter decline in real GDP) is a better description of the latter. The quote above says nothing about a decline in GDP over a whole year. You might forecast three possible outcomes:
  1. A slump in January through about June, followed by slightly accelerated growth in the second half and a return to normal growth in early 2009. If you were to put that on a graph, you would get a pattern like a 'V' for 2008. Global Insights, the forecasting firm that the Minnesota government uses, has a -0.3% GDP forecast for 2008:I and -0.1% for 2008:II before bouncing back to 2.8% in Q3 and 2.7% in Q4. Those latter two are in the neighborhood of trend growth. Now unless you're going to argue that Minnesota gets hit worse than the nation as a whole -- and that might be Stinson's story, and if so I'm unpersuaded by what I heard last week -- I don't see that as a V. You might get instead...
  2. A pause in the first half and stimulus in the second half giving you something closer to normal growth in the year as a whole. There are some forecasters packing in some pretty high numbers for Q3, more like 4-5%. That would be good for local area retail, though it seems to me that this money is going more to the discount chains than to local, specialized retailers. I tend to watch (I call this FBWA -- Forecasting By Walking Around) some of our local stores to see who's buying, who's busy. I'd watch the bookstores, the sporting goods stores, and the electronics stores. If they look busy this summer, this story might be right. But I don't expect that. What I expect is...
  3. A pause in the first half and sluggish growth in the second half, to look like a U rather than a V. I still see elements of the credit crunch creating problems for retail in the second half -- notice that this will be to me the key area locally and nationally -- so that the share of the stimulus package that gets saved or used to reduce debt will be at least as large as in 2001. I will be looking at the budget forecast for what they are projecting for sales tax revenues for 2008-09. I think local area employment avoids being down for the year -- we have a fairly large education and health sector, which is immune to recession -- but unless retail grows more than I expect, those gains in the credit-insensitive areas will be largely offset by declines in manufacturing and construction. I don't necessarily call this a recession -- you'll note I've used 'pause' here several times -- but I don't object to the word any more.
It might come to pass that I'm more pessimistic than the state economist ... which would be a first! But I need to read the forecast first. Back after lunch with that.

UPDATE: Forgot to mention Ben Bernanke's projection:
Mr. Bernanke said �both fiscal and monetary policy face some additional constraints� relative to the start of this decade, he told the Senate Banking Committee.

In 2001, the federal government had a sizable projected surplus; it now has a deficit. In early 2001, inflation was 3.7%. Now, it�s 4.3%.

In addition, he pointed out that the negative effects of the stock market decline of 2000-2002 fell mostly on firms who pulled back on investment as a result. �In this case the consumer is taking the brunt of the effect,� because the asset in question is houses which are more important than stocks to the typical household.

Still, Mr. Bernanke has said he doesn�t project a recession this year.
Gosh, that makes me feel better...

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Wednesday, February 27, 2008

Which of these does not belong? 

All but one has adopted flat taxes or lower taxes recent. Summary here for all except for Russia, here.

Minnesota will be like one of those. Hint: Not the good one.

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Do you remember this game? If you're under 35, probably not, as it's been banned by the government since 1988. But for many people it was a good alternative to horseshoes, as it didn't gouge up your lawn. Bob Lawson notes that the game was great fun (for me too!):
I've used this example in class to highlight the trade-off between safety and other values (i.e., fun!). Somewhat shockingly I ask my students, "Ok, we have a game that provides millions of hours of fun and enjoyment for hundreds of thousands of people. Unfortunately, a few kids get maimed and maybe even killed. That's a price I'm willing to pay!" If they recoil in horror at my inhumanity, as they often do, I remind them that this isn't that different from saying, "Ok, we have this device that provides us with the incredible ability to get from place to place quickly. Unfortunately, tens of thousands of us will get killed and many more injured each year using it. I'm talking about cars. How many of you want to ban cars?" The issue is that we have to make trade-offs.
I also had a BB gun as a kid, and luckily my name is not Ralphie. In his case, his parents got to make the trade-off. We also had a dart board. But not for the lawn dart any more do we trust parents to make that decision.

My friends play bocce, which has some similarities to both jarts and horseshoes, but for some reason I find it unsatisfying. Ever been hit with one of those balls? Ouch! Call the CPSC!

(I'm sure John will now bring up curling.)

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Yes, it is your fault 

Anyone remember when Krispy Kreme was all the rage? Well the last one in Minnesota closed, and the reason is quite simple:
"Just not making the dough. Just not enough retail, not enough wholesale. We're a retail, wholesale operation and the retail just has not even met our expectations ... It's just disappointing," said Molly Spoor, the Director of Operations for the Maple Grove location.
Mild wailing from James, but Kathy's lamentation bears notice.

I'm so ashamed. This is my fault. I'll admit it. I'm to blame. Since the various Krispy Kremes about town were nowhere near the Cake Eater pad, I visited only occasionally when we had a car, and then not at all when we didn't. Maple Grove is quite the hike from the Cake Eater Pad. It takes about a half-hour to get there---and that's without traffic. I just couldn't be bothered to get in the car and drive all the way up there to get some donuts. I lamented their lack of inner city locations, but, woe is me, did nothing to support their glazed ambitions because it was too far to go for donuts. I should have made the effort. Really, I should have.

To be fair, however, they did deliver to all the local Holiday stations, and there are a few of those nearby. I patronized their glazed deliciousness via the local gas station, but alas, they lost that contract to a local grocery store chain a few months ago. And while I like the local grocery chain's custard filled chocolate bismarcks, I still adored the glazed goodness of a Krispy Kreme. Unfortunately, I didn't adore them often enough.
Well, it's unfair of you, Kathy! You should know that your decision to not drive has impoverished Molly and many other KKD workers! I'm asking you to believe, "We are all in this together. From CEOs to shareholders, from financiers to factory workers, we all have a stake in each other's success because the more Americans prosper, the more America prospers.�

Oh, wait. That was politics, this was supposed to be about donuts. But Don Boudreaux points out that, well, shift happens:
Trade is just one manifestation of consumer sovereignty. Just as there are ... winners and losers from consumers shifting their expenditures from goods made in America to goods made abroad, there are winners and losers from consumers shifting their expenditures from goods made in Illinois to goods made in Arizona - and from consumers shifting their expenditures from donuts, beef, cigarettes, whiskey, and train travel to bagels, fish, yoga lessons, wine, and air travel. Trade plays no unique, or uniquely important, role as an avenue of economic change spurred in part by consumer sovereignty. The only practical way to rid the economy of such "loses" is to try to freeze it, a futile step that will in the long-run only make losers of everyone.
The decision of Americans to avoid carbohydrates in an effort to trim their waistlines is a choice that a free society should embrace, but KKD was a loser in that. Maybe they made mistakes in overly aggressive expansion, but I don't see any Dunkin Donuts here from the east nor an invasion of Tim Horton's from the north. As an east coaster, I'm very, very fond of the Double D, but because there are not enough of me my preferences are not fulfilled in the market either. By what right would I be able to claim my two honey dips and a coffee regulah no sugah? By what right would the worker at KKD have a claim on my purchasing pattern?

But isn't that what we do when make claims for "free trade as long as it's fair"? Or use tax expenditures to favor firms who invest with our friends rather than someone else's?

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Tuesday, February 26, 2008

An argument worth having 

My own representative, Larry Haws, is quoted in the local paper (not online, and my copy is at home so I'll do this from memory) saying he voted for the transit tax bill and its override based on thinking the gas tax was a better way of getting that money than getting it from grandma through property or income taxes. Again, not exactly those words, but that was the gist of what he was saying. And that's an argument worth having, a basis for voting that I can respect because that's the real choice that was made yesterday. I disagree with it vigorously, though.

I received a prepared email assailing yesterday's vote sent to a group of individuals mostly living in the Twin Cities directed against DFL Sen. Linda Berglin. I'm not sure how I ended up on this list, but it contains a number of prominent private citizens who I know to be conservative. One such individual sent back a message.

I agree that our overall tax structure is too high, but we need the roads and we need money to fund them.

I never thought that I'd support anything that Linda Berglin supported, but here it is. Thank you Linda.
I believe the description of my reaction would be 'gobsmacked', if you were British. I am admittedly one to respond to people who write things to me that leave me in such a state, and this was no exception.

I notice your address is in Minneapolis. I live in St. Cloud. Approximately 13,000 St. Cloud residents (out of the 105,000 workers in our area) drive outside our metro area to work each day, and most of those drive to some place in the seven-county metro. It�s about a 75-mile one-way trip. Assuming they get the average fuel efficiency of American cars, your �need� just cost my friends an extra $172 just to commute to work and back. They�d buy a more fuel-efficient car, but your �need� just hit them with an extra $200 for their tabs.

So as you enjoy the new roads and bridges you �need� � which will be not many, since a big chunk of this money will go for the half-empty trains you�ll watch while waiting at a crossing (but you�ll be waiting on new roads! O joy!) � thank a St. Cloud resident.
Using our benefit principle discussion from yesterday, I assume you to say that the commuters are paying for roads they benefit from so are properly charged. But the point is that all taxation and expenditure involves a reallocation, and the extra $172 is not going to improve I-94 or US 10. It's not going to be used to build a connector in Clearwater between those two highways. Rep. Haws chose to have his own residents who work outside of St. Cloud, who are likely to be wage earners with families, bear a larger burden instead of grandmothers. Even if we accept the premise of our interlocutor, that we "need" roads and bridges and even if we assume that we actually will get roads and bridges and not just more transit projects, what makes Grandma more deserving of protection from government taxation than the family trying to better themselves, provide for their children, and producing goods and services people want to buy?

As the old saying goes, those who rob Peter to pay Paul can always count on Paul�s support. If you're Grandma, Rep. Haws is your hero. If you're a worker commuting from St. Cloud to Hennepin County, or from Randall to Waite Park to work in our manufacturing plants, Rep. Haws decided you are Peter.

Here's Peter's friend
. I don't know if he would tax Grandma more; he might just decide to make some real budget choices.

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Budgeting involves choosing 

In some places, people look at the budget they have and make choices of what they can and cannot provide. Take for example the Bureau of Labor Statistics. I got a postcard this morning from BLS indicating that they were not able to mail any more paper reports due to unexpected budget issues. No big deal, I thought, since I get The WSJ economics blog writes that a rather valuable survey may have to go away because money is needed for updating other surveys. I think it's a hard choice to have to make, but notice that the Bush Administration is at least making choices. That's what they do in the big leagues.

Meanwhile, our minor league Legislature has decided to have you pay rather than choose.
Taxpayers are going to see a significant bump in their tax burdens now that the Governor�s veto of the Transportation Bill has been overridden.

That�s good news if you think that the bonding bill should devote significant resources to Polar Bear exhibits, hiking and biking trails, convention centers, and other local projects instead of high-priority roads and bridges.

�Legislators had an opportunity to demonstrate their commitment to prioritizing State spending by making local projects compete with roads and bridges. Instead, they chose to raise taxes and place the burden of making hard choices on citizens instead of on State Legislators,� said David Strom, President of the Minnesota Free Market Institute.

�Governor Pawlenty was absolutely right when he proposed using General Obligation Bonds to fund roads and bridges. In fact, we believe that he should have gone farther and proposed to use State bonds for State roads, and requiring that all bonding projects have cost-benefit analyses to demonstrate their worth,� Strom said.

�Now that Legislators have decided to raise taxes the bonding bill will have plenty of room for pork-barrel spending, as it always has,� Strom concluded.

Victory for universities, too. Met your match? Sure you will -- every time you fill up. And don't drive less! You'll just cut down their revenues, and they'll raise your taxes again.

It's not the size of taxes that describes government extortion. It's the size of government spending.

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Media Bias - The African Tour Not Covered 

President and Mrs. Bush went on a tour of Africa from February 17-21 - by the few accounts I heard of, it was incredibly successful. Where's our mainstream media coverage? Not too many places.

And you think there is no bias? If Bush were a Democrat on a goodwill tour of Africa being received well, do you think our mainstream media would ignore it? No.

What is the basic problem here? Americans are not being informed of the really good things our president is doing. Whether we like it or not, we are the world leader and when our president makes a point of carrying representative democracy to nations craving for something besides a tribal mentality and our media ignores it, that is plain wrong.

President Bush has done more to alleviate the scourge of AIDs in the African continent than any one else, including all the do-gooders in Europe. A total of $15,000,000,000 has been allocated to help Africans with this disease. Coverage? None.

The U.S. is the largest donor to the Office of the United Nations High Commissioner for Refugees (UNHCR), with more than 40 percent of that funding going to Africa in 2007. Coverage, none. (from White House memo)

Here are a few of the notices I found about this trip, nothing major.

NPR mini report - Note the snide, nasty remark in the second paragraph. Of course, this is NPR, funded by our tax dollars.

Rwanda: We cannot be everywhere but also must recognize that tribal conflicts too often are alive and well in many African nations. The US never colonized any nation in Africa. The Arabs and Europeans did, big time. Both groups, Arabs 700 years before the Europeans, engaged in pitting tribes against each other, originally for a source of slaves, later for other reasons. The Europeans left conflicting boundaries but based on my students, they also left decent school systems for boys and girls. The Arabs wiped out cultures, languages, etc. Schools appear to be for boys only. The US has provide far more hope, support, and direction than any other nation on the planet. Are our students taught this? No.

This unclear article in an unknown paper, includes this comment: "But as far as the international activist community is concerned, Bush's remarks fall on deaf ears." Part of the reason Bush's comments "fall on deaf ears" is because too much of the world's media likes to ignore Bush and any good done by the US while blaming us for any and all problems. They refuse to help, really help.

The list goes on - you get the picture. We need our media to we tout what we do right - which is a lot. When we and others on the planet only hear bad, incorrect, or politically negative news about the US, we all lose. Our children have nothing to believe in when they are shown and taught only the negative. Just ask yourself - what could or would you do if your parents and grandparents only told you what you did wrong? You would have no faith in yourself. A nation can only do good as long as it believes in itself - once that is gone, basic tribal (in the general definition of tribal) instincts take over - it's not pretty.

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Monday, February 25, 2008

Rules of the Game - Grow up Girls 

Listening to the feminists whine, moan and complain about poor Mrs. Clinton's treatment by the press is just making me gag. Grow up, girls, these are not playground games where little girls claim they want to compete with boys and then get the rules changed - this is life.

Many of today's feminists are claiming,"It's not fair. The press is attacking Hillary. She is being treated, like, well, a weak female. " (My paraphrasing.) Cokie Roberts on Stephanapoulos, DeeDee Myers on The Today Show, Ellen Goodman in the Pioneer Press, writer for the Boston Globe all running to Mrs. Clinton's defense because the press is well, not nice to Mrs. Clinton. Give me a break - the hit job by the New York Times on John McCain last week was a real hit piece - the puff balls being thrown at Mrs. Clinton (and Mr. Obama) can't hold a candle to what conservatives have to tolerate.

"The playing field isn't level." No, girls, it's not, never has been, never will be. It's called "who's in charge" and you whiners are not in charge. If your treatment of women who disagree with you is any indication, you wouldn't make the playing field level either, even if you were in charge.

Grow up, get over the victimhood mindset. Live is not fair. Life is not risk free. Mrs. Clinton chose to play in this game, believed she was "entitled" to Potus but she's not. She has accomplished relatively little on her own. She has ridden on her philandering husband's coattails. If she wants to play in the big leagues, she needs to learn the rules: stop whining (along with her "sisters"), stop crying (and running home to a girls school for support), and really earn it.

Frankly, I don't think she's got it. I'm not sure there's a woman today who does have what it takes to be POTUS. Obama doesn't have it either.

Women have had 40 years to make inroads in sciences, mathematics, corporations. They haven't in the numbers the fantasy dreamers thought up 40 years ago. Why not? Most don't want to. I know some who do but the majority of women do not. Those who like the hard sciences and mathematics do well and have no problems getting well-paying jobs. These women are bright and talented. They are not the empty suits comprising Phds. in "women's studies," social sciences and English professors. Nor are they the women who found their security in government jobs (to replace the men they trash so often).

Bottom line, feminists, stop your tired mantra and grow up or be quiet.


Do you want a job or wealth? 

The other night when I presented my slides for the presentation described here, I thought someone would catch me on slide 18, where I show employment in the St. Cloud area divided between credit-sensitive and credit-insensitive industries. I was unwilling to classify manufacturing so I made a separate line. The newspaper report picked up my remark that the industry had lost 310 jobs. But wages to the 17,437 workers still in manufacturing in the area -- more than 17% of area employment, much higher than national averages -- had risen $13.1 million between 2006:II and 2007:II. Nobody made any note of this. I wonder, is St. Cloud's manufacturing sector better or worse off?

That same day, Russ Roberts produces a fine essay discussing this very problem in a larger scale. Commenting on an op-ed by Harold Meyerson that observed that the biggest private sector employer now is Wal-Mart, whereas some years ago it was GM, Roberts observes,

It's a fact. Sort of. Actually, the federal government is the largest employer�1.7 million employees and that excludes the Post Office. Does that mean we've become a nation of bureaucrats because a little over 1% of all employees work for the government? Does it mean we're on a perilous downward path where instead of making things, we regulate things? That would be a silly statement. It is equally silly to conclude that because Wal-Mart is the largest private employer we've stopped making things.

Actually, making things is not the road to prosperity. The road to prosperity for a nation is to use the skills of its citizens wisely. The wise use of those skills depends on the skills and desires of people in other nations. Sometimes that means making stuff. Sometimes it means providing services in exchange for making stuff.

And as it turns out, we do make a lot of stuff here in the United States. Manufacturing output is dramatically greater today than 30 or 40 or 50 or 60 years ago, the halcyon era that Meyerson imagines once existed. Manufacturing output has almost tripled since 1970. What has happened over the last 60 years is that productivity in the manufacturing sector has increased greatly. That has allowed the US manufacturing sector to produce a lot more stuff with roughly the same or even a declining number of employees.

Wal-Mart is a red herring. It's success hasn't come at the expense of the manufacturing sector. The trends in the manufacturing sector go back 60 years, long before Wal-Mart existed.

Two points flow from this. First, contra Charlie Quimby, it's not true that state public employment has fallen. Go to DEED for the data, and you'll see that in Dec. 2007 state employment was 97,135 compared to 92,425 in Dec. 2002. Where employment fell was in local government, from 298,637 in Dec. 2002 to 292,534 in Dec. 2007. (This data is being revised by the state and will come out on Thursday.) Fewer government regulators at the local level strikes some of us as progress.

Second, and you can see it on slide 19 of the presentation linked above, St. Cloud area output in manufacturing isn't a one-time blip. We produced 5.2% per year more stuff in manufacturing between 2001 and 2005 (the last year for which we have local area GDP). But employment in manufacturing in St. Cloud stayed flat. Is this bad? I guess it depends -- do you want to get more stuff for the same number of workers and have the other workers find new things to produce, or do you want to force those workers into employment? Do you think they'll make more goods there than elsewhere?

If I can have more net worth AND more leisure time, am I better or worse off?

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Who to build, how to build, where to build? 

As we continue the discussion of the transportation budget today -- liveblogging going on at Let Freedom Ring and Ladies Logic capturing everyone's attention (UPDATE: The override passes) -- it's worth pondering some points that have bothered me. I find as I go through this debate to find confusion on the terms public provision and public financing, about transportation versus transit, and over whether some people have plans. Let's pose this as a series of directed questions.
  1. Does Minnesota need more money spent on transportation? Now it is popular for many to focus on where the money we already budgeted was spent: "MVST was supposed to be a fix, but it isn't." "The Legislative Auditor tells us we built too many new roads and maintained too few existing ones." "Our bridges are falling down." "You should have spent less on bike trails." None of these points is now relevant. They are sunk costs. The question before us is simply, should we budget for building new roads and bridges? Since Gov. Pawlenty proposed bonding for bridges, he certainly wants more spent. The House caucus has repeatedly said there's a compromise available, which surely means more to be spent. So the argument isn't over whether to build more roads and bridges. That's been agreed to by all parties. You want to punish for past decisions on bike trails or MVST? There's an election for that. As Mitch pointed out, you had a chance last time.
  2. Are we buying the right roads, bridges, etc., or is this another transit boondoggle? The MnGOP has been labeling this the transit tax. Probably so, but how many of the legislators live in the seven county area? If you wanted to stop the transit boondoggle, the only way would be to stop awarding Senate seats by population, and switch to one vote per county or some other geographic division. The next apportionment in 2010 will probably move more legislative districts into the second ring suburbs -- what do you suppose that does to demand for rail projects? So my point is that outstate will always be in the minority on transit; the governor's veto only requires the Legislature to hold party ranks together and to bribe a few legislators -- which they've done. That's not extortion or coercion, that's plain old logrolling. Some payment is already in HF 2800, and others will be forthcoming in the bonding bill that the Legislature will now re-write; after all, there's money to spend!
  3. No, but really, are they in the right place? But that doesn't mean we bought the package of roads and bridges that we should have bought. The problem with government provision of public services is that it provides goods in return for political support, not for places where benefits exceed costs. If you want the latter, don't expect government to do it for you. Governments have no profit motive and thus no assurance that what they spend will have the value provided for. Jim Fedako writes at the Mises blog:
    The difference between government and business is the chain of taxation versus the dollar vote. The public school district taxes regardless of value produced. Once the bond issue passes the voters, the bill must be paid, to be enforced by the long, strong arm of government. On the other hand, the entrepreneur must face the consumer every day, product in hand, hoping to make a sale. The consumer can as easily bypass as enter his store, based on a whim if he so chooses. The taxpayer? Well, just try to hide.
    Did we build bike trails that provide too few benefits for their cost? Are we paying for trains that have low ridership? When private firms do this, they fail. Government passes another tax.
  4. How would we prefer to pay? Public finance students are given a set of lectures on the benefit versus ability-to-pay principle. I have argued before that since many people will use the roads a generation from now it made sense via the benefit principle to bond for those roads and bridges. The Legislature, seeing the bonding bill as an opportunity for other transfers of public money to political constituencies, chose instead to use something closer to a current benefit principle rather than future benefit. The gas tax is preferred by some for roads because people who buy gas use roads, so they are the ones benefiting from their construction. But when goods are shipped to us in Minnesota we now either pay for transporting them from out-of-state or we get fewer goods. And sales and excise taxes are usually seen as being regressive both on firms and on households (any wonder why the big hitters in the Chamber of Commerce like this bill? It's anti-competitive.) Indeed, the three most regressive taxes in Minnesota are the cigarette tax, the gambling tax, and the motor fuels excise tax. At least one might make the argument for the first two as reducing bad behavior. Does the DFL think driving is a bad?
The argument was not about past decisions. It was not about whether to build roads, and it was not really even about transit versus roads and bridges. Those decisions were already baked in the cake. The decision was over who will pay. Now we know. The question will be whether anyone has enough votes to demonstrate this was not the politically optimal solution.

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Congratulations to the Captain: I'm still the Fifth Beatle 

You would never know it, but two blogs of the Northern Alliance joined at the same time; the last to join was Captain's Quarters in December 2003. But one less will remain after next month.
Beginning on March 1, I will begin working for Michelle Malkin, a friend, mentor, and writer I have long admired. She has offered me a position as writer at Hot Air, and my blogging will appear exclusively there.

That means that I will close out Captain�s Quarters sometime in March. This saddens me, as it has become my ever-ready home and because of the terrific community it has generated. I hope that the CapQ community comes with me to Hot Air, and Hot Air will have open registration today for 12 hours in order to allow CapQ commenters to join me at my new digs.

Nobody who meets Ed ever dislikes the guy; nobody who reads his blog can doubt he's one of the hardest workers in blogging. The friendship between Malkin and Ed goes back a good ways and the move will make Hot Air one of the leading sites for political commentary on the internet for a long time. I know we've had some top blogs retired because of writer fatigue in the past, but has any been subject to a buyout before? (I assume his new compensation plan from Malkin includes a lifetime supply of Notre Dame football jerseys.)

Worth noting: In his 12/03 post accepting NA entrance (NARN was still four months away) Ed said:
I don't listen to a lot of talk radio because I find that a great deal of it is shrill and annoying, and even when people don't make a habit of screaming into a microphone, they still tend to get childish and demeaning.
And Al Franken wasn't even on the air yet! Ed's keeping his archives up indefinitely.

I had to go back and look at the formation of the Alliance while thinking a few minutes about this. Originally considered to be Lileks, PowerLine and Fraters Libertas (now known as Act One, or the Opening Act, or Top Billing, or whatever in our radio lives), we added Mitch and myself in May 2003 before Ed. One guy now runs the blog of a newspaper, another group is giving away $25k for a book prize, and Ed is off to Hot Air.

I guess my life as Pete Best continues. Mitch, Chad and Brian? Your comments invited.

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Friday, February 22, 2008

Saturday on AM 1280 

Tomorrow, Saturday the 23rd, I will join Michael Brodkorb for the Final Word of the Northern Alliance Radio Network program on AM 1280 the Patriot. We will be joined by Mary Liz Holberg, MN House Representative from Lakeville. Main topic - the irresponsible transit bill our legislature is in the process of trying to ram through before the actual budget numbers are released.

Please join us and share your thoughts.

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My secret and not so secret life 

While the rest of the Minnesota blogosphere was watching the MN House Transportation debate in either gleeful fascination (tax consumers) or horror (tax producers), I was hunkered down with a presentation to do last night at the Kelly Inn for the Economic Education Winter Institute's Economic Outlook. It's the 12th year we've done it, the fourth for me. The local newspaper report leads with my remarks. I notice at the time of this writing that the article drew over 200 comments. I don't have time to read them -- I'll explain more in a minute. But state economist Tom Stinson was also on the panel, and the paper's reports of his remarks bear noting:

Some of the big factors that are causing the decline are in the housing industry and the credit market, Stinson said.

New housing starts have been the lowest since World War II and have declined 25 percent during the last year.

"We're not making a dent in the (housing) inventory," Stinson said. "We have an 11-month inventory, we would like to have a four-month inventory."

Senior loan officers also are tightening standards of all types of credit in the commercial and home markets, Stinson said.

The state's diversified economy hasn't allowed it to become recession-proof, he said.

"Minnesota is going to have another slow year," Stinson said.

While his and my definition of slow might be different, notice that he DID use the word "slow". Slow could mean slow growth. As I said last night, the growth rate of jobs in Minnesota has to expand enough to absorb new workers. Tom Gillaspy, the state demographer, reminded the audience that this is the year the first of the Baby Boom generation turns 62. It's therefore not clear whether this will slow expansion of the labor force. This and 2009 represent also the last of the boomlet of students graduating high school. Nonetheless, it can easily turn out that Minnesota grows at a very sluggish rate rather than slumps (declining state GDP), and this would lower revenues somewhat below forecast as well as see a rise in unemployment. I don't think Stinson rules that possibility out, and after reading that I conclude his and my forecasts are closer together than I had previously thought. (I'm probably still a little more optimistic than Tom, but that's a pretty normal state of affairs.) We'll have to wait for the forecast on Thursday for more precise figures, but that's my read of what he was saying.

While I would have liked to have stuck around more last night and then discussed the transportation transit tax bill today, I went to my secret life today. I am confessing to being a basketball junkie, particularly when it is Littlest at play. Her school plays in a tournament in New Ulm each February, and this is her last year in the school so our last tournament. I suppose I could have had someone drive her down but I would not miss this for the world. Watching 10-14 year olds from very small schools -- hers has less than thirty students for K-8 -- play co-ed is pretty neat. Watching your Littlest chug up and down the floor with a huge smile on her face, one that does not vary if her team is up 10 or down 20, and seeing it on all the other kids too, is a world I will miss escaping into as she heads to high school next year. She will try to continue playing for her next school -- she can score and she's a ferocious defender, though probably has to move from point guard now -- but I don't think HS will be the same. We were within two with two minutes to go but lost by six today and out of the championship. Momentary sadness, then the kids realized they were here for the rest of the day to play around and have another game tomorrow, and the usual frantic buzzing of tweens and teens resumed.

Janet is kind enough to sit in for me tomorrow on Final Word, and I will not hear the show as her next game -- the last they will play here -- is at 3:15 for a consolation prize. If they win there'll be a small trophy, but regardless there'll be pictures and memories. And for a weekend, not a care about the soft economy or your silly transit ripoff.

I've just been called to pizza.

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Thursday, February 21, 2008

When Government Cannot Stop 

The MN House passed a transit bill today, 89 to 44 in favor. This bill is not for roads, 75% is for "other" transit (read more light rail that will NEVER pay for itself), trails, etc. This bill is not for the metro area where 60-70% of the state's population resides. This bill is for special projects - it is a TRANSIT bill, not a transportation bill. Very little will help the Metro congestion problems.

The bottom line is that MN taxpayers who rank 11th in tax burden, will be gouged, again. - for what? The legislature could not even wait for the budget to be presented. No, the DFL club had to rush this bill through, the third day after the current legislative session started. What do you think these part time legislators were doing during their off-time? We're supposed to have a part-time legislature. Looks to me like this DFL club is far too eager to "need a year long session" to "get all the work done" - at our expense. They have gotten so busy doubling committees, spending our money on committees, and trying to find more ways to put their hands in our pockets, that they forgot, WE voted them in. Perhaps it's time for us to start finding ways to vote them OUT.

This political behavior of Democrats in general, and some guilt-ridden Republicans who think it is their duty to make the rest of us pay for their dreams is nuts. I'm reminded of this quote by Vernon Howard (word in parentheses is my paraphrase):
Permitting your life to be taken over by the (government) is like letting a waiter eat your dinner. (You pay, he wins.)
It is time Minnesotans say, "Enough is enough. Stop letting people gorge themselves at the government trough; stop spending MY money for unnecessary, irresponsible pet projects because you don't know how to say 'no'."

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Wednesday, February 20, 2008

Lunar Eclipse 

At this very moment my husband and I are sitting in our office watching an incredibly clear, spectacular lunar eclipse. There is not a cloud in the sky. As we're watching, we're recalling where we were on July 20, 1969, almost 40 years ago - when NASA landed an American space capsule on the moon. It was a night (in the US, daytime in other places) to celebrate, cheer, be proud of what we Americans have always been good at - setting our minds to something and doing it.

It is sad that we dismantled the program and all the engineers who pulled off that achievement. It was awesome. Since then, we have dumbed down our education system, taught our kids most of where we have erred. They do not understand that massive accomplishments of countless men and women of the US. They don't learn that off shoots from the space program drove the computer industry, powdered drink beverage industry, metal alloys applied to wheelchairs, especially those for wheelchair athletes. Countless other inventions came from the space program because it demanded the best of everyone and our society thrives on continual improvement.

It is my sincere hope that that we will find a way back to setting national goals (vs vapid platitudes) and showing the world why we are what we are. We have much to be proud of - much. It's time we teach our children, and do it soon.

If you can, get the DVD for the movie, In the Shadow of the Moon which tells the story of US astronauts landing on the moon wonderfully. Summary is here.


Moving, quite moving 

This new trend using information on interstate migration and economic freedom seems to be catching. Phil Miller uses state-level data and argues that the higher your rank on state economic freedom, the more interstate shipping (using United Van Lines data, not U-Haul as I did earlier) flows into your state. Dirck the Noorman does a similar correlation pattern with states voting for Kerry and for Bush in 2004 -- the movement is from Kerry states to Bush states.

However, Charlie Quimby argues that there's a balancing problem for trucking firms to get their fleet to places they are most needed. This seems to help explain the data I saw on U-Haul to some extent. But United Van Lines (which Phil and Dirck use) would have to be explained by intra- versus inter-state shipping, which Charlie could perhaps argue for us.

Two quibbles with Phil's and Dirck's posts unrelated to Charlie's critique. First, the flow in the 1980s was almost exactly the opposite -- people moved from Flyoverland to the coasts. I don't know that the Midwest is a whole lot more economically free now than twenty years ago. You would need to do a similar study over time to demonstrate this better. Also, I really hate regressions that regress on a ranking when we don't know the degree to which the ranked states are separated. That is, states 4 through 13 might be almost identical in economic freedom but all very different from state 14, but you are asserting that state 14 is as different from 13 as 13 is from 12. I realize Phil is doing a quick-and-dirty for a blog, but we should acknowledge that is what it is. It would be fun to have a senior student write a thesis with a more careful analysis of this data.

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First they came for your cigarettes, and then for your arts 

Discussing the recent attempt by bars to circumvent the smoking ban in Minnesota by exploiting a loophole allowing actors to smoke on stage, James Lileks notes:
But the underlying issue is amusing, too: if the legislators want to cinch the loophole shut, this means the state will regulate not only the content of a theatrical performance but the definition of a theatrical performance.

In the olden times, of course, everyone knew what a play was, and what it wasn�t. People standing on a stage thee-and-thouing to a seated audience: a play. People milling saying anything that came into their heads: not a play. But having redefined theater to mean anything its practitioners wish it to be, we accept with shrugs the idea of a spontaneous plotless event as theater. And now the state has to say it�s not. Moreover, the state will base its decision on the intentions of the play�s author. Heck of a precedent.
Delightful, and yes indeedy, it looks like Tom Huntley will be delighted to be thrown into that briar patch.

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Happiness is a warm gun 

From this morning's StarTribune:

It was a sight that would catch anyone's attention, a woman riding a bicycle around St. Cloud Monday night in bitter cold. Turns out there was another reason a citizen took notice: The cyclist was carrying a gun.

Police caught up to the bicyclist a few minutes after a call came in around 11:15 p.m. They found her near 14th Avenue N. and St. Germain Street with a shotgun strapped to her back, said Sgt. Joe Kraayenbrink.

Turns out the 22-year-old suspect is a felon and had a warrant out for her arrest, police said.

About a mile from where I'm sitting right now, in an older section of town near small businesses and the new city library still under construction.  There are many people who ride bikes here in town, but none I know who carry weapons.

(h/t: Ken Doyle)


Tuesday, February 19, 2008

C'mon, a few more taxes won't hurt! 

The battle over the budget deficit -- with a revenue forecast still ten days away -- is heating up and before we even get to that the Minnesota Legislature is trying to salt away some money for transportation. I talked a little below about a corner of that debate, but let's get some additional information together.

The big news today is that the Legislative Auditor produced a report on transportation that said several things. I'm reading the report in bits, so don't consider this a thorough review, but what I have gleaned is this:
  1. "After 2003, inflation-adjusted revenues from Minnesota motor vehicle and fuel taxes declined, and the state made substantial use of debt financing to support the state trunk highway system." According to the last Tax Handbook, Minnesota collected $650 million on the gas tax in 2005 and $646 million in 2006. Which will of course lead people to think we aren't taxing enough, but consider the reasons offered: people are driving no more miles than before, in no small part because of more efficient vehicles and rising gas prices causing a reduction in the amount of gas used. Now I doubt we've raised the price of gas to the point where it's elastic in demand -- which would mean the gas tax revenues would fall for an increase in gas tax rates -- but it's almost certainly true that it's more elastic than previously estimated, so that a proposed 42.5% increase in the gas tax rate will not increase the amount of gas tax revenue raised by anything close to 42.5%. Yet it appears from reading the research summaries on the transportation bills that the DFL intends to spend more than $300 million per year on transportation, immediately freeing up that amount from the bridges to make pork.
  2. "Since 2002, the ride quality of state trunk highways has generally declined. The structural condition of bridges has generally improved." Call me paranoid if you must, but I think that second sentence isn't going to appear in news reports. MnDOT uses some qualitative measure of ride quality and for principal highways aims for 70% of them in good or very good condition. It looks like we're at 66-67% rather than 70%: Not very good, but we seem to be exerting a lot of effort for 3% improvement. Expected remaining years of useful life of the roads has indeed declined, but this was not enough of an emergency for the Legislature to pass anything more than a lights-on transportation bill. If the highways are in such dire condition, why is the Legislature this year threatening to not fund transportation unless their one bill is passed?
  3. We've spent more on highway expansion than on highway preservation. OK, that one looks real, though in a state where population is moving so dramatically away from the west to the east, do we really want to spend money preserving roads in places the people have left? 21.5 per 100 in-migration to Sherburne County, with large gains also in Isanti and Morrison counties. Name a western county, and you will see population decline. I find the LA's analysis, though correct, a little too macro-oriented. But because the Legislative Auditor isn't thinking that way, the office is arguing for much greater spending on highways.
So with that in mind, look at where we are. The DFL leadership came out with a press release today decrying the lack of money and that we need the tax increase. Not that it will do a thing for the deficit if it comes forward -- indeed, my argument is that the DFL is hurrying this bill along because they fear the revenue forecast will suck all the air out of this plan, forcing them either to pass more tax increases for that or cut spending, in which case nobody will be able to support both a tax increase for a budget deficit AND THEN a tax increase for transportation. But if they can pass the transportation tax increase first, they can pretend that didn't happen while fixing the budget.

Meanwhile, Governor Pawlenty continues to say he's going to veto the transportation bill.
Brian McClung released a statement in response to the DFL news conference. In his statement, McClung said:

"We appreciate the legislative auditor's report. It contains many helpful suggestions that we expect MnDOT to implement. Regarding the DFL press conference this afternoon - it appears DFL legislators are determined to pass a massive and overreaching $8 billion tax increase that the Governor has said he would veto. Just recently, DFLers increased the overall amount of their gas tax hike to 8.5 cents, in addition to license tab tax and sales tax increases. They are essentially disregarding the Governor's concerns and appear to believe they have the votes to override a veto. We'll soon find out the answer to that."
The governor's red veto pen is going to be challenged early, and while I am not sure this is more than a wild goose chase, the DFL is undoubtedly trying to buy some votes somewhere. (At least AAA's girlfriend got a good meal.) It's easy to have it both ways as Drew Emmer suggests -- you could have six GOPers vote for the bill but then vote to uphold the veto (they'd've voted for it before they voted against it.)

The Governor is taking an ax to the state payroll, implementing a hiring freeze. Now, there are some folks who are trying to make an argument that savings by budget cuts are just as harmful as tax increases. The logic is pure Keynesianism: if you cut spending by a dollar there's a dollar less of aggregate demand, but if you increases taxes by a dollar some taxes are paid out of savings, so aggregate demand only falls by the part that is funded by reduced consumption. It's part of those bad principles of macro courses where the instructor teaches the students government spending and tax multipliers. But, the story is always told using lump-sum taxes. For it to be right, the taxes must be taken from the public in some way that doesn't change the return on labor, capital, land or entrepreneurship, or alter the relative prices of goods purchased. (A head tax would be one example.) If the tax change DOES change the return on any productive resource, then the tax increase will decrease the supply of output and has an effect that could be more harmful than a spending cut. Increasing income taxes would be one example of a tax that changes the return on productive resources. It's an empirical question, as I often say, and the devil is in the details. Don't be fooled by simplistic explanations.

Still working on some other items so this post tonight might have to substitute for more over the next couple of days. We'll see. 80 days down for the Legislature (including the one in Special Session), 40 to go.

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Thrill of Victory, Agony of Defeat 

I've been thinking about today's kids living in their protected world, where they are perfect, all brilliant, all beautiful, all talented. Too often, their parents wait on them, give them what they want (versus need), in other words, spoil them. Adults provide an excuse for failing, why something went wrong and usually someone else to blame. Personal accountability is avoided.

For decades, I loved watching ABC's "Wide World of Sports." It exposed me to sports I never knew existed. The best in the world attempted to win in their field. Sometimes they won, mostly, they didn't. It was life.

Recently I've be replaying the opening theme: "The Thrill of Victory (followed by incredible clips of athletes achieving success) and the Agony of Defeat" (followed by incredible clips of accidents, missed gates, poor landings, etc.). I learned from an early age that sometimes you win, sometimes you lose; sometimes it's your fault, sometimes not but only the individual can "fix" it.

When we prevent our children from experiencing losses and all those emotions that go with losing, we are robbing them of life. Adults who protect children so they never experience the "agony of defeat," are saddling them with an attitude that will result in far more failures in life. All will experience losses but if they do not learn how to handle them, they will lose confidence, not be able to cope. They will not learn that you can turnaround negatives, that personal changes can produce different results, that individual hard work benefits one and the team. If we continue raise our children in a la-la environment, they will not learn what they need to stay free because they will always expect someone else to "fix" their loss. They will look for the easy way out. Dictators are only too willing to take advantage of their delusions.


In lieu of any real blogging 

Reader KT thought the new "about" link to the right needs a Buttercup picture. We'll do you one better, sir.

This is Buttercup in training for basketball. Video courtesy of Littlest Scholar, creator of Buttercupland. Littlest loves the linkage.


Better roads, less accidents? 

Michael noted a comment by state Senator Steve Murphy that raised an eyebrow:

Minnesotans would pay more for gasoline with the DFL bill, Murphy said, but they will see transportation improvements.

�They�re definitely going to notice a difference because their roads are going to get fixed,� he said. �That�s the bottom line here, fixing roads and lowering the (vehicle crash) fatality rate.�

The state�s gas tax is 20 cents a gallon. Indexing would have resulted in a rate of 31.4 cents a gallon in 10 years, nonpartisan legislative experts said. By removing the inflation provision, the tax should be 28.5 cents a gallon by 2018.

Two thoughts: First, if I am driving on a better road, don't I drive faster? Potholes tend to slow me down. What part of building new roads leads to lower fatality rates? Certainly not during construction. If more and better roads leads to increased driving, will this increase or decrease the number of fatalities of vehicle occupants? I realize he said fatality rate, but as a matter of public policy do I care more about rates or about the number of fatalities?

Sounds like another job for cost-benefit analysis.

Meanwhile, did anyone notice how 7.5 cents of increase plus indexing became 8.5 cents? It appears the rate goes up five cents in September and then a half-cent a year after next if I read this right. I need to run off to something now, but I'll update this if I can draw a comparison between this and the old bill. The headline figures show a decrease in the total dollars spent, but they always sum 2015 dollars and 2008 dollars at the same value, ignoring discounting.

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Monday, February 18, 2008

What I'm working on this week 

My book is about two weeks away from shipping (anyone got a good idea for cover art?), but before that I have the Economic Outlook presentation, so I'm thinking about state recessions. David Beckworth has pointed to an article in the Economist on state recessions, but the map in the latter uses unemployment rates, which are a lagging indicator. Beckworth looks instead at the Philly Fed's dataset on state coincident indicators, using the model of Crone and Clayton-Matthews (REStat 2005 -- there's a readable recent article by Crone here. He points out that there has never been a recession in Minnesota without one nationally. As recent concerns about a national recession begin to fade, we have to wonder whether the statements of local recession are accurate. And yet Beckworth's chart shows that for December alone, Minnesota's coincident index fell at an annualized rate of over 3%, eighth worse in the nation. I have to spend a couple days pondering that data.

Between both these things and a report for the university for planning (ugh!) posting might be lighter than usual here.


How many more zeroes? 

Zimbabwe has created a ten million dollar note, which will currently buy about two loaves of bread. I believe I will purchase tonight a piece of the Million Zimbabwean Dollar Homepage, following the lead of Felix Salmon.

I hope I don't have to bribe someone to get that.

The official inflation rate for 2007 exceeded 66,000% (and suspected by some to be closer to 150,000%.) The record is Yugoslavia at 313,000,000%. The question will be whether Zimbabwe hits that Yugoslav record before President Mugabe is forced from power. The usual path of hyperinflations is for acceleration.


The dollar is weak, buy American 

Check out the picture at EclectEcon to see how much further the Canadian dollar is going these days.

Maybe this means a continuation of the trend of our trade deficit falling from 5.7% of GDP in 2006 to 5.1% in 2007? Exports up 12.2% last year, imports up 5.9% (which with rising oil prices is pretty indicative of switching to domestic production.) The decline in the dollar has to have an effect at some point.


Saturday, February 16, 2008

Who are we? 

King Banaian says,

I get occasional comments, sometimes rather hostile, as to what this blog is. I needed an "about" post anyway and don't have that in the template, so I decided to create one tonight.

Here is the very first post on this blog from September 2002 in full:
This is an opening post for 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's a team list; if you're a member and want to join in the fun, let me know.
It was that simple: The St. Cloud Association of Scholars was an organization that affiliated with the NAS and MAS here in Minnesota. I'm still a member of MAS, but most of the rest of the (the SCAs) organization has withered away. At one time there were four people regularly posting here, plus a couple of occasional posts by other SCAS members, but that ended a few years ago with retirements and the movement of me to the NARN.

NARN meant this blog changed roles. Needing material each week, which frankly this blog didn't lend itself to at the time. So more politics, and more economics. When Final Word was launched in August 2006, even greater focus on state politics ensued. Shortly thereafter I invited Janet Beihoffer to co-author SCSU Scholars, and she continues here to this day, though my output tends to dominate the page. (Her information is just below.)

Starting on NARN meant a decision -- do I change the name of the blog to, say, my own name? I decided against it. I had hoped, in vain it turns out, that other SCSU scholars would join this page. (If you're one reading this, the offer is still open.) The blog is my own work for the most part, and what appears here under my signature is mine alone, and does not reflect the views of my department, college of university.

For those looking to know my professional career, here's my university page, including all the coursework I do, the research, etc. There's a brief bio there if you really must know. My wife is referred to on this blog as Mrs. Scholar, our daughter is known as Littlest, and there's a high demand among readers for Buttercup and Pepper photos.

Janet Beihoffer says:

A Gen-xer was defined as someone born after 1965, who would hold multiple jobs and pursue multiple careers during their lifetime. I'm a bit older but the definition fits. My succinct previous career list includes: elementary teacher (grades 4,5,6); CPA (Peat Marwick which has become KPMG); small business consultant (U of M), IBM marketing career (large systems, telecommunications); EDI seminar instructor. I am currently an Adjunct Professor of Management Information Systems (MIS) at Metropolitan State University (I've also taught at the University of St. Thomas).

At the present time I am rather active in politics. I was elected chair person of the 2nd Congressional District Republicans in February.

King and I crossed paths via The Minnesota Association of Scholars, where we both serve on the Board of Directors. My blogging is erratic but I tend to discuss points avoided by the mainstream media (MSM) talking heads. I believe the vast majority of people are smart enough to figure out their own answers, if taught and given the necessary information, . It galls me no end when MSM information slants, hides, ignores or otherwise obfuscates real facts to protect someone's "agenda." My main focus areas include: education, the environment, the US military, the USA and the destructive results of the feminist and various (but not all) '60's "movements."

My husband and I have four adult children. Two are married and our first grandchild arrived in January. One is a 2nd Lt. in the US Army, currently stationed stateside. I've been a dog lover all my life. Our last one got very ill in December of 2006. There was nothing the vets could do. It was a sad time. We have not replaced her yet but that may change.

Blogging with King provides a terrific opportunity to express my opinions. I have enjoyed reading comments from so many of you. Thank you for your participation. Here's hoping we will see and hear from you in the future.

Friday, February 15, 2008

Tomorrow on the Final Word... 

We will have two interesting, different guests with one message: Stop spending. At 3:15 House GOP leader Marty Seifert will be on to discuss the first week of the legislative session. Think he knows something about taxpayer protection pens? I'll ask him whether the House GOP would be willing to take a hike from any House business until the I-35W bridge money is released by TCAG.

At 4:15 we will be joined by Erick Kaardal, lawyer for , whose group Citizens for the Rule of Law (and also Neopopulism) are suing the legislature and various over the abuse of per diems. I'm shocked, shocked! to hear that we would have groups wishing to deny per diems to our state legislators. I mean, how are they supposed to live on less than $96 a day? Readers will recall that we provided several dining tips for state senators struggling to make ends meet. (Just take the March 2007 archive and search for "per diem".) I would like to find out from Kaardal how we could simply limit the number of days legislators get to take per diem, as done in New Hampshire. It might keep a certain farmer home more. Sarah Janacek suggested last fall that the per diem issue never seems to work for challenging incumbents in elections ... but a lawsuit might get their attention.

Don't forget that there are eight total hours of local programming Saturdays on AM 1280 the Patriot. The David Strom Show 9-11, then NARN's Opening Act of John Hinderaker, Chad the Elder and Brian Ward 11-1, and Mitch Berg and Captain Ed as the Headliners from 1-3.

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The bridge is the enemy of the pork 

While the debating on how to fund transportation continues unabated (and apparently unsuccessfully, as it appears the bill is going forward with little change -- though the indexing of the gas tax might be pulled?), it's worth noting what the Legislature wants to fund instead. From the Anoka County Watchdog (thanks to Drew Emmer for posting), vote for that transportation bill and you will still get all that bonding money, now diverted to such wonderful items as
So it's worth understanding this -- these pieces of pork, these dollops of cream for legislators looking for a ribbon-cutting ceremony to occur, oh say, around October, are part of the inducement to pass an $8.4 billion transportation bill. To achieve these ends the DFL leadership seems prepared to go to any length, even to crippling the reconstruction of the I-35W bridge.

Make no mistake -- it is not only DFLers asking for these bits of largesse. Indeed, the bills introduced by Republicans are little more than offers to sell out some bit of the resolve the House GOP had last session in return for a photo op. As a companion to the earmark reform cry that may be a centerpiece of the McCain national campaign, I hope the Minnesota GOP leadership will ask each member of its caucus to withdraw these requests and refuse to put any more in this session. And refuse to vote on ANY bill on the floor until the Transportation Contingency Advisory Committee releases the money for completion of the I-35W bridge reconstruction. Like the U.S. House Republicans over FISA, just walk away from the floor until the money is passed over to MnDOT.

No pork: Bond for bridges.

A house that lasts 50 years is paid for over 30 years. A bridge that lasts 50 years doesn't have to be paid for in two. Let those who will benefit in the future share in the cost.

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The all volunteer community service army 

It's one thing when you hear liberals argue that we need to re-institute the draft to share the costs of national defense (as for example Rep. Charles Rangel has proposed for years.) Liberals dragooning a certain segment of society to serve their political ends ... and have others pay the cost. The kind of thing we protest pretty regularly: See Milton Friedman or William Meckling.

So when people who claim to be conservatives write this...
Democrats like to talk about college affordability, but that�s the least important explanation for why so many students don�t complete college. The real reasons are that students are academically unprepared and emotionally disengaged. National service should be a rite of passage for 20-somethings, and these volunteers could mentor students through high school and college years.
...I want to retch. Arnold Kling says, "after you, Mr. Brooks." That would let Brooks off too cheaply.

If young people need mentors and you want to create a program to supply them, at least have the decency to pay for them out of tax dollars rather than enslave young people. "These volunteers"???? Bleah.


About this Clemens thing 

My Patriot producer (sometimes known as Antoine) thinks Rocket came out the better of the hearings, though he says criminal charges might still proceed.
Overall, it was a terrible day for McNamee, a bad day for the Mitchell Report and an OK day for Clemens. McNamee looked like a villain, The Mitchell Report an unknowing accomplice and Clemens came off looking like he was the most trustworthy of the shady bunch.


1 The Rocket will end up in the Hall of Fame, mostly likely on the second ballot, and he'll probably go as a Yankee. ...

2 McNamee and Clemens will both be charged with perjury. McNamee on the steroid lies and Clemens for his comments about the Mitchell Report not trying very hard to contact him.
I'm still confounded by the faith people seem to have in the Pettitte statement, included in this complete set of affadavits, depositions and testimony. The man has admitted to cheating, and then in his affadavit says only at one point had Clemens said anything about using HGH, only that he had heard the stuff worked. But at least we are left to think everyone believes Pettitte's statement is truthful. It just doesn't help me decide anything about which of these men are lying. And meanwhile Mike Mussina's right: Pettitte is in for a difficult spring, and not just because he's behind in his training.

Still, there's something more than a bit grating about Clemens' repeated use of the word "misremembered", a word that just doesn't sound like something a good ol' boy uses. It sounds like a lawyer word, acted out by a guy used to bright cameras and pressure. That McNamee looked bad in comparison to Roger should come as no surprise to anyone: There are about 500 pitchers who have suffered that same fate on a mound pitching against him. I didn't watch, and am glad I didn't; those who did I suspect are victims of a oral version of a curveball.

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Thursday, February 14, 2008

Theories come later; now, just pray 

I was in class from about 4:30 to after 8, and only when I got in the car afterwards did I hear of the shootings at Northern Illinois. My first thought getting home was to see if Stephen was OK. He is, and has a full report.

I have no words of wisdom; what was said after Virginia Tech continues to apply. We're a big and open place, and you wouldn't want a university to be anything else. Sometimes the rest of the world wanders into what we think is our retreat from it.

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On behalf of the other St. Cloudians, thank you Governor 

I had mentioned briefly in my review last night two comments at the top of Larry Schumacher's live-blog of the State of the State address here in St. Cloud. To repeat:

State media folks are saying this sounds like a speech from a guy who hopes he's not going to be governor for much longer.

Locals who were expecting some kind of announcement regarding St. Cloud are walking out scratching their heads and asking why he came here.

Dave Aeikens of the Times said on my guest stint on the KNSI Morning Show this AM that the first comment was something that didn't make the newspaper, and that to do so it would have needed attributable quotes. Obviously that wasn't the plan; Larry was making a note about something he was hearing in the press row. I will let readers decide what the meaning of that note was; I think it's fair to say the press is currently reflecting back some of the combative nature of political discourse in St. Paul right now. (And I agree with Aeikens that an adversarial press is an important part of democracy, but I don't know that Larry's first sentence is evidence of that. Again, you decide.)

But he did write an article about the second sentence, titled "Speech attendees expected big news". The point seems to be that while the speech lavished praise on the city, we did not get goodies.

Yet many local residents lucky enough to get an invite from Pawlenty's office to the speech at St. Cloud's Civic Center walked out of the room scratching their heads afterward.

"We're of course pleased that the governor recognized the hospital, especially for its efforts at transparency and quality, where we think we're a little ahead of the curve," said David Borgert, government relations director for CentraCare Health System. Borgert was at the Civic Center to hear Pawlenty's speech in person.

"I'm still a little mystified why he came to St. Cloud, though," he said. "I think maybe we were hoping for something after Rochester."

Of course, that's 2005 when Rochester was the site of a state of the state address in which Pawlenty unveiled a plan for a University of Minnesota campus in the city. As Mayor Dave Kleis mentioned later this morning on my show, we already have the best university in Minnesota. (Full disclosure: Dave's a graduate of our university, and took a class from me while he was here. This fact makes me feel very old.) Mayor Kleis said some people were inquiring in the weeks after Pawlenty requested to give the address here whether it meant there would be a big announcement, but no representations were made that the Governor wanted to use St. Cloud as an illustration of Minnesota values.

The rest of the article does not really refer to anything relating to expectations regarding St. Cloud -- it contains the usual plaints for economic stimulus (stabilization policy being something most economists would doubt a state could enact notwithstanding) and scorn on Pawlenty's veto pen from lobbyists for more money for roads. And, of course, this little bit of scaremongering from our state senator.

Just a couple of blocks down from the Civic Center, the Minnesota Highway 23 DeSoto Bridge crosses the same Mississippi River that Pawlenty praised in his speech, said Sen. Tarryl Clark, DFL-St. Cloud.

But Pawlenty's transportation bonding plan wouldn't make any new money available for replacing the state bridge and others that share the same design as the Interstate Highway 35W bridge that collapsed last year, while the DFL plan does, she said.

"Even our bill doesn't have the money to do all that needs to be done," she said. "But at least it would let the Department of Transportation start figuring out which of these fracture-critical state bridges to address first."

Of course the governor's bill does have money for bridges (discussed here earlier) and the MnDOT has already made some decisions about which ones to address first. But Sen. Clark must not like those choices, and so refers to the DeSoto Bridge as "fracture-critical" to help drum up support for an unpopular gas tax hike.

But in general I thought Senator Clark's response to the Governor's address, while filled with DFL initiatives about which we'll disagree, at least managed to thank Governor Pawlenty for coming here. She called the show this morning as well and while she did say she thought the governor might offer something more for St. Cloud she didn't seem to make a very big deal about Governor Pawlenty not playing Santa Claus. Good for you, Senator. Gary has Rep. Haws response as well, which also takes a polite and grateful tone.

I'm frankly embarrassed by the Times article, however. A governor comes to St. Cloud, highlights St. Cloud and central Minnesota values, praises a local hero and lifelong public servant, and the local paper runs an article that sounds like a skit from an old Saturday Night Live where a comedienne keeps whining "Where's My Stuff?" I cannot imagine Pawlenty reading that with his morning breakfast without thinking "what's a guy gotta do?"

So to Governor Pawlenty, on behalf of at least those I've spoken to this morning but I think for many more, thank you for coming to St. Cloud. We've never had a governor bring the entire government of the state to our city to say "Much of this area is built on solid rock. This area's values reflect the strength of our state and the goodness of our people." And when we hear it, we know how to be grateful.

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Wednesday, February 13, 2008

State of the state in St. Cloud 

Well that was fun! Governor Tim Pawlenty came to St. Cloud to give the State of the State address, which Larry Schumacher found to be rather combative in tone.

State media folks are saying this sounds like a speech from a guy who hopes he's not going to be governor for much longer.

Locals who were expecting some kind of announcement regarding St. Cloud are walking out scratching their heads and asking why he came here.

Republicans looking for a good, partisan fight against the DFL are maybe the happiest people in the room today.

I'm a bit surprised by the editorial comments expressed by "state media folks". Don't they just report the news any more?

Also, within the speech, Larry notes many compliments made about St. Cloud businesses and organizations. He also paid tribute and a standing ovation was given to former mayor Al Loehr, which was certainly worthwhile. I find it interesting that the only reason someone would think the Governor would deliver a speech outside of the capital was to deliver goodies. I heard nobody as I left the speech expressing what Larry suggests.

Governor Pawlenty did at one point take out his taxpayer protection pen, by which he meant his veto pen. From the speech:
As we tackle the deficit, we must remember that Minnesota's hardworking familes are already squeezed enough. They're paying more for gas, food, and health care. The last thing they need is government rummaging around in their pockets looking for more. Government must learn to live within their means. We should not add to the burden of Minnesota families by raising their taxes.

Moreover, the well-being of the people we serve depends on their ability to have good-paying jobs. That, in turn, depends upon the willingness of companies to invest, stay, and grow in Minnesota. However, Minnesota's tax policies, job climate, and large government discourage economic growth.

We need to reduce taxes and regulations that discourage job growth, income generation, investment, entrepreneurial activity, research and exports. We'll need to do that in a manner that also leaves us with a stable state budget.

Our current tax system reflrects the economy and demographics of the 1960s. It's outdated and needs to be fixed.
I would have hoped for more ideas than a tax reform commission that Pawlenty called for, but
it shows a commitment to reducing the cost of doing business in Minnesota. He also called for a cap on property taxes, about which I have mixed feelings but would like to hear more about, as it pertains to Minnesota.

I was sitting next to someone heavily involved in regional transportation issues, and he had said Pawlenty would say nothing about transportation. I was sure that, after the DFL's announcement of plans last night (covered by Gary Gross) that there would be something. I should have bet my friend.
Just a few weeks ago, I announced my bonding proposal that includes four times more funding for local roads and bridges than ever before.

I would caution legislators not to delete this important funding from the bill to insert less important projects.
My friend had suggested before the speech that the governor had made the transportation lobby a new ally in the U of M and MnSCU systems, who want the DFL to pull transportation out of the bonding bill to make room for more of their projects. (I had suggested just that last month.) No such offer appears forthcoming from Governor Pawlenty.

I think the DFL got the message:

The governor's address drew a tepid reaction from DFL leaders. House Speaker Margaret Anderson Kelliher, DFL-Minneapolis, said she was disappointed that deficits and a way to jump-start the state's economy were not featured.

Assistant Senate Majority Leader Tarryl Clark, DFL-St. Cloud, said she thought that there was "a lack of vision" in the speech and that "the veto threats were not very productive."

Depends on what you're trying to produce there, Senator. Could it be ... pork? Could it be ... favors for your block of voters and contributors? Not sure why you'd think the governor would have a vision for that.

The governor thinks lower taxes is a winner. The DFL thinks taxes for roads and bridges is a winner. This should be a fun session.

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A recipe for protectionism 

I have found Minnesota 2020's peculiar program on "buying local" at first amusing, and now have to chuckle that we are going to suggest to lovers that you should "dine and eat local on Valentine's Day". I'm amused by the fact that Lee Egerstrom's logic seems to be that Minnesota is harmed when we trade with California for wine. That logic obviously does not extend to the computer on which he types this piffle, or the Prius he drives to the co-op.

Imagine replacing the words American and Brazilian with Minnesotan and Californian in this paragraph from Russ Roberts: point to an American steel worker put out of work by imports of Brazilian steel and say that he is "harmed by trade" is to misunderstand the nature of trade and its winners and losers.'s like saying that a man whose wife leaves him for another man is harmed by love. After all, the man married because of love. The man is the product of his parents who were touched by love. So it is with the steel worker. His steel job exists because of trade. His whole life is supported by trade of various kinds. So in what sense is he "harmed by trade?"

It's a profound point. It forces you to see just how trade and specialization and the division of labor create the incredible lives we lead, lives of wealth and health unimagined by previous generations.

The wealth of Minnesota depends on our ability to trade with those outside of Minnesota. Ask any corn farmer producing ethanol. Ask any wheat farmer. She or he is sending their goods out of state -- the extended market provides them with their income. Surely MN2020 cannot be so foolish as to think Minnesota firms must ONLY sell to Minnesota consumers? Yet they ask that Minnesota consumers trade only with Minnesota firms. On what basis?

The goods I want to buy are the goods that provide the most benefit to my Minnesota family. I have no obligation to sacrifice their happiness for the purpose of enriching a Minnesota business, when that business has no compunctions about selling goods we make to families in New York or Brazil. And specialization is how we become as wealthy as we are:
...most of us willingly embrace and accept economic change even though we know that it sometimes has disparate effects on us. There is always a temptation to ask for an exemption from the costs while enjoying the benefits.
A temptation that Minnesota "progressives" cannot seem to resist.'s wrong to say that trade creates winners and losers. We are all winners. But it's also true that the benefits from winning are not evenly distributed and that the political demand for exemptions from certain kinds of economic change isn't going away.

Ironically, the richer we become, the more specialization we have. The more specialized you are, the greater the risks (and rewards) from economic change.

That's just a risk we have to take, if we want to improve our lives.

UPDATE: For loquacious Bobby in comments, I give you Art Carden:
Trade is an issue that definitely cuts across economists' ideological spectrum. Here's Greg Mankiw on Barack Obama's anti-NAFTA stance, including an instructive quote from his colleague Larry Summers on NAFTA's success. Here's Paul Krugman on "Ricardo's Difficult Idea." Finally, here's Brad DeLong explaining why comparative advantage is the most misunderstood concept in economics. "Trade Promotes Economic Progress" is #4 among the "Ten Key Elements of Economics."
Art notes that three of those four did not work for the Bush Administration.

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Tuesday, February 12, 2008

Several thoughts on cigarettes 

Spurred by an email from Marcus Aurelius, who probably thinks I forgot about it, some random notes on smoking that I've found over the last few days.
  1. Mark was initially pointing me towards a summary article on the economic effects of smoking bans from the St. Louis Federal Reserve. Be it on Delaware racinos or bars and restaurants around the University of Missouri, the effects appear to be negative, though with levels that are rather modest. One might wonder if somehow bar owners could be compensated for their losses based on the evidence provided. That would drive up city or state expenditures, however.
  2. When you tax an activity in a locale, the typical result is that business shifts to the jurisdictions that don't bear the tax. The Tax Foundation highlights tax evasion from a $3 a pack increase in taxes on cigarettes in New York City. Much of the tax evasion for outstate New York residents (who only faced a $1.50 a pack hike) went to Native American reservations. Just as hypothesized by Minnesotans opposed to our smoking ban, " small businesses tend to be the ones hit hardest" by the cigarette tax increase in NYC.
  3. When two jurisdictions are adjacent to each other and one has a smoking ban but the other doesn't, the result appears to be more drunk driving, and more fatalities. Of course, our friends in Minnesota will argue this is just cause for a statewide ban, and for actively lobbying neighboring states to ban as well. Is a nationwide ban far off?

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Must be the hockey 

Because it can't be the taxes:
Politicians who think taxes don't matter might want to explain the Dakotas. North Dakota ranked second worst in out-migration last year, while South Dakota ranked in the top 10 as a destination. The two are similar in most regards, with one large difference: North Dakota has an income tax and South Dakota doesn't.
Source. A 26-foot truck from Minneapolis to Sioux Falls from U-Haul was $489, from Sioux Falls to Minneapolis $288. St. Cloud to Rapid City $880, Rapid City to St. Cloud $518.

Boy, those South Dakotans retiring to Minnesota to take advantage of our high taxes are sure getting a deal there! [/snark>

I had thought they had cherry-picked, and thought perhaps U-Haul was looking to move trucks into a higher-population market more generally, but it doesn't appear so. Someone could have fun with a study of those rates. Clearly you pay less to drop the car in the higher-demand market, and demand is a function of more than tax rates, but the ND/SD distinction takes out a number of confounding factors.

Mankiw asks if one has ever turned down a job that you would have accepted if it paid twice as much. I can think of one job I declined because net of cost of living and higher taxes (than Minnesota! Yes, Virginia, such places exist) I would have ended up with a worse standard of living. But it turns out the U-Haul would have been cheaper.

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Is this a recession? 

A local story by a reporter I talk to frequently looks at a family to try to talk about recession.

Cindy Haupert's life has changed since the economy took a dive.

Haupert, 36, once lived comfortably with her husband and two children in St. Cloud. She was a stay-at-home mom, working every other weekend. Her husband is an attorney. They made ends meet.

But gas prices would rise. Costs for homemade dinners and lunches would increase. And in September, when it was time for her son to go to kindergarten, she wanted him to go all-day, every day, so he could be ready for first grade. But that meant a $184 hit to the family checkbook each month. That doesn't even count lunch money.

"Now it's like we're living paycheck to paycheck. I can definitely see a change," she said.

Haupert is one of many Central Minnesotans whose daily life has changed because of the state of the economy. State economist Tom Stinson said Minnesota is already in a recession. Local economists are not as quick to cry the R word, but they admit that families and businesses are feeling the pinch.

I hear myself in that last sentence. And while I "admit" that families and businesses are feeling a pinch, it's because prices are going up, which is not the usual definition of a recession. It's also because this family had a change in its expenditures, which it could have anticipated. The Hauperts could have instead to a shorter kindergarten program and not taken the "$184 hit to the family checkbook." That they chose not to do it meant the value of full-time kindergarten was worth more than the other things -- including extra time -- that the Hauperts could have purchased instead.

Indeed, look how they adjust:

She now works an additional four days a week at Office Depot as a cashier while her fifth-grader and kindergartner are in school.

She tries to make up for extra costs. She clips coupons and budgets meticulously. She's allowed herself and her husband $90 per week for gas and $125 per week for groceries.

She takes advantage of mail-in rebates and uses gas coupons. She rides the bus when she can and doesn't take frivolous drives.

So she was able to sell more labor -- hardly a definition of recession, that! -- and she diverts time from other activities to clipping coupons. Aren't these the choices we make constantly, whether or not we're in recession?

When she and her husband bought a new TV to accommodate the high-definition requirement for 2009, they shopped around. They checked prices to see where they could get the best deal.

When they settled on one with a better warranty, they got an extra 10 percent off for comparing prices.

I wonder how big it was? How did they decide the size? How much time did they save, and how much was the 10% off worth compared to their time? Again, these are choices we make daily, regardless of where we are in the business cycle. They are the product of living with scarcity, which we ALWAYS must make.
"There's changes you can make," she said. "We don't splurge like we have in the past. You just have to learn to do your homework on what you get."
A family had its expenses rise by the choices they made and responded by working harder. Same as it ever was.

UPDATE: Bill Polley takes this in a different way:

I am seeing more and more anecdotal stories like this one where what people are really concerned about boils down to the increasing cost of living (inflation) and the choices that one has to make to cope with the increased cost. Gas prices are higher. Real incomes have not increased as rapidly. Thus, one will need to cut back on gas or cut back on something else. If that means shopping around for the best deal on an HDTV or getting one that is a couple inches smaller, then that's just the way it is.

We are now experiencing somewhat slower and more uneven growth of real income than at other times in our history. The current inflation we are experiencing is also uneven in the sense that some prices are rising faster than others. Some prices (like HDTVs) are even falling. And that does create some distortions. ...

So at the end of the day, I'm not sure what to make of this. Is this just a bad article and a bad interview subject for the point the writer was trying to make? Or is this indicative of the reasons behind the dissatisfaction with the economy for a significant number of people? If the former, then this post is a cautionary tale for journalists and we can perhaps leave it at that. But if the latter, then we really need to have a talk about the difference between a real recession and other economic events that can also cause households some distress such as changing relative prices that are not necessarily recessionary.

That last sentence is a very interesting point. What do we mean by "a real recession"? And I mean this not to be the "two-quarters-decline-in-GDP" discussion, which I agree with the journalists is rather quaint (and not really how we do it anyway) but a deeper question of whether the comovement of production across industries has somehow changed in the last two decades, or whether relative price variability has increased for a given level of aggregate inflation, etc. It may be that these relative price variations create greater distortion in household budgets than in the past as well due to, for example, innovations in financial instruments and institutions. Hard to say, but intriguing to contemplate.

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Still betting on the come 

I've been trying to find this memo referred to in a story titled "State revenue collections fell short in January".

The state collected $86 million, or 5.2 percent, less than finance officials anticipated in their most recent budget forecast.

A memo from Finance Commissioner Tom Hanson says corporate tax revenues were hurt because the state paid out more than expected in corporate tax refunds in January.

Lawmakers returning to the Capitol on Tuesday are facing a $373 million deficit by the middle of 2009. The state's economist has predicted the shortfall will grow when finance officials update their budget forecast later this month.

Hanson's memo says Minnesota's revenues were still $19.3 million above projections for the current fiscal year. The bottom line will change when budget forecasters add in spending patterns.

Let's understand that this is a 5.2% shortfall of one month of receipts. That is, before we were $105 million ahead of the forecast, now we're only $19 million ahead. Given the odd seasonality that occurs to sales tax receipts when Thanksgiving falls early in November, I'm not convinced there is much in the way of useful knowledge in this report, except to scare people into thinking the Legislature should attach jumper cables to your wallet.

People are trying to force the solution without waiting for the evidence that a budget shortfall is here. Try waiting for the end-of-February budget forecast before you start offering tax bills.

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Monday, February 11, 2008

One solved 

The city of St. Cloud has decided no crime was committed by the student who had admitted to drawing a swastika on a chalkboard in a dorm (as discussed on this blog here.)

The swastika, which the student admitted drawing to �see if it would attract media attention,� is offensive but not illegal, according to a memorandum written by Assistant City Attorney Matthew Staehling. The student was identified in Staehling�s memo as an 18-year-old freshman.

The student drew the 3-inch by 3-inch swastika on a chalkboard inside Stearns Hall. Because the swastika was easily erased and didn�t require paint to conceal and didn�t cause any permanent damage to property, the incident was not criminal damage to property, Staehling wrote. The student denied any involvement in any of the other numerous acts of graffiti on campus that have been reported in the last three months.

The swastika is protected speech under the First Amendment, Staehling wrote, because the symbol doesn�t amount to �fighting words� that would be subject to a charge of disorderly conduct.

The swastika, Staehling wrote, �is protected as symbolic speech just as other offensive forms of speech are protected.�

Other uses of the swastika on campus could constitute a crime, he wrote, including the images that have had to be painted over or caused other damage to property.

The newspaper declined to publish the name of the student, but it is in the AP wire service story picked up by many other newspapers (based on the WJON reporting.) I will not repost the name here, but the link takes you to a name that would not call up an image of a rural white kid upset with diversity education. (A student is a freshman, and last year a student with that name wrestled for a Twin Cities-area high school. I assume my curious readers know Google, so finding the name and other details reported here will not be seen as private.)

City Attorney Jan Peterson was reported in the WJON piece to have said that "other recent swastika cases could be prosecuted as criminal if they meet the vandalism or "fighting words" standards." These have been the standards I have argued for from the very start. If we catch the people responsible for the "Student Cultural Center" (Multicultural Student Services, I think?) vandalism might meet that standard. The rest? We have graffiti that could be classified as vandalism or not, plus the so-far unsolved and unconfirmed report by a student of first being spat upon and then confronted with a salute that was described as one used by Nazis.

Because charges were not filed, it's unlikely the most severe penalties will be placed on the student according to the AP report. The Code of Conduct will be used, and a chalkboard swastika has to be found on this list of prohibited conducts for sanctions to apply.


Democrat Feminists, Round 2 

Last week I wrote this post on the whining done by Erica Jong and her comments about women.

Now, I am going to focus on an article by the diva of the women's movement, Gloria Steinem. In this article, "Women Are Never Front-Runners," Ms. Steinem whines that the women's sex barrier is not taken as seriously as a racial barrier. She claims "gender is probably the most restricting force in American life." She says the US polarizes gender roles more than the average democracy but cites no data to support this comment and ignores the fact that feminists who agree with her are the reporters and editorial writers for all forms of media that cover this topic.

One example: Historically women were perceived as weaker than men because they cried. In the 1960's and '70's Ms. Steinem's feminists decided to "be like men" and not cry. Since men and women are the same in their eyes, the media morphing of sex identification began. Now her media makes it a point to picture men crying and when Mrs. Clinton cries, she shows the "courage to break the no-tears rule." Whether or not Mrs. Clinton's tears were real is a secondary issue, her crying jag was in reaction to a gender question of "how she (Mrs. Clinton) does it all." Excuse me, there are plenty of politicians (and single moms) who do it all - people who: are not multi-millionaires; juggle homes and families; respect those with differences without playing a victim card; and don't stage questions on the campaign trail to generate sympathy.

Mrs. Steinem says a trait that worries her is that some women, especially younger ones, hope to deny or escape the sexual caste system. If Ms. Steinem knew anything about the history of women or the treatment of women today in the Middle East, Africa and Asia she would not throw around the term "caste system." (a social structure in which classes are determined by heredity) so lightly.

What Ms. Steinem misses, as did Ms. Jong, is that it was and is the Democrat Party that has used sex, gender, and race to divide this nation. It is mostly Democrats who pin labels on those with whom they disagree. It is mostly Democrats who are intolerant of free speech, professors who are not leftists, Republicans, conservatives, religious Christians, etc. Ms. Steinem is looking in the mirror when she makes her criticisms about her political party. She along with the Emily's List crowd are no-shows when the female candidate does not agree with them. So the issue is not gender, it's a very narrow, spoiled, totalitarian view of the world - her way or no way at all.

Ms. Steinem is supporting Mrs. Clinton because "she'll be a great president and because she's a woman." While supposedly decrying the sex barrier, Ms. Steinem uses sex as a qualification for president.

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But she's a SMALL dog! 

It's been a while since we've done any Buttercup blogging, and while I'm waiting for Littlest to post the latest pictorial, I now have to worry about my dog's carbon footprint.
Which do you think takes a bigger toll on the environment, owning a dog, or owning an SUV? My bet would be on the dog. I'm thinking of all of the resources that go into dog food.
Sad to say, I own both. I have a rather high bill for gasoline for the Touareg, and it just had a brake job that set me back half a day's pay. I pay a fair amount of taxes for the use of the roads, and presumably one has priced in the pollution in no small part by the restriction on building any additional refining capacity. Contra Mike Moffatt, dog food and gasoline do not play on a level playing field. Dog food competes with other uses of meat remains, and the land on which the cattle graze compete with other uses, like the ethanol some people want me to burn in my SUV.

On the other hand, Buttercup is a Boston Terrier. When she's not posing for Littlest or cheering the fortunes of the team that adopts her as a mascot, she eats relatively little food, takes up only a small portion of the bed or couch, and emits a relatively small amount of waste. This is important since I live in a city. I'd love a big dog that rode in my SUV, but I don't live in a place that can conveniently hold one (and because I live where it was -12 when I woke up this morning, the morning and evening walks hold no joy.) Oh yes, you say, there is Jasperwood! But that caters to a peculiar man's taste, and not this one's.

Cats cost less than dogs to feed (one site suggests $4./wk for a cat vs. $25./wk for a large dog.) Buttercup eats little more than a cat. Does $20./wk plus all the additional time in walking the larger animal correct for its imposition on the environment?

The point being, we value dogs and pay what they are worth, and Russ Roberts is right that there are tradeoffs. If there are externalities to dogs or SUVs they might be over or underprovided, but the prices we see in the market already capture these in some ways, and it isn't always obvious. Peter Gordon observes that using Atlantans behavior in urban and suburban settings doesn't tell us if the suburbanite has a greater carbon footprint because
...the Atlanta economy performs the way it does as a result of the interaction of all of its parts. Some analysts are fond of approvingly citing commuting habits of Manhattanites. So what? Manhattan is what it is because it is served by a vast hinterland and the aggregate accounts for the longest (solo auto) commutes in the U.S. This simple fact severely undermines what it is that Greens want to take away from the story.
Likewise, the price of the SUV and the price of the dog and the dog's food are the result of the places that support the production of large vehicles and dog food. And those prices are already influenced and infected, if you will, by the government.

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Taking classes 

I am in the middle of finalizing our department schedule, and as is their wont, some faculty are fussier about when they teach than others. Last year I tried to get faculty to subscribe for classes that I had placed on a schedule, indicated which courses were oversubscribed and which were undersubscribed, and then had the faculty work through disputes. This did not work too well as younger faculty did not want to compete against senior faculty. I really should have known better. So I've gone back to bilateral haggling between myself and the faculty, which always creates a few conflicts at the end where one course has nobody speaking for it. I can make bargains across semesters but that bargain is seen as favoring someone who's asked to pick up the slack the following semester.

The Chronicle of Higher Ed writes of students at Wharton using points in an auction system to get courses. (subscriber link; H/T: Carpe Diem, which has some of the article excerpted.) It's a great example of how market structures affect the allocation of scarce resources. Should faculty maintain their own lists of students for their courses and admit people on first-come-first-served? Should we have a ranking system, as does MIT?

Should students be able to sell a seat they got? Many schools don't permit or like this practice. Steve Levitt points out that he can't sell those seats, and probably students shouldn't either. I can imagine why faculty don't like this -- if their course is one for which high prices are expressed, that could be used as evidence of teaching effectiveness (or maybe just an easy 'A'.)

But now I'm thinking, could I schedule faculty this way? Suppose I give each faculty member 500 points, and maybe an extra 50 points for each year of service on the faculty. I then place the course schedule on a webpage and offer each faculty member a chance to bid on courses. Some people prefer nights and others mornings. Some prefer to teach only on Tuesdays and Thursdays and others are fine teaching a class or two each day of the week. And let's suppose I allow faculty to bank points. Maybe this would give me better allocation?

Your comments invited.

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Another thing we have in common 

I had no idea Ed was also a big fan of All That Jazz. My parents were always the last on the block to get stuff, like a microwave, a color TV, or HBO. So when we finally got the last of those in about 1978 -- I was already in college but living at home -- we were addicted to it. After I went to graduate school, I came back for Christmas and this movie was on constantly that break (1979-80), and like Ed, I was fascinated with Roy Scheider's portrayal of Bob Fosse (who I still keep trying to type as Ray Fosse, baseball addict that I am.) I don't know how many times I've said "It's show time, folks" before walking into a classroom. Too many, I'm sure.

I liked no other movie Scheider did as much as this (though his role in "The Russia House" was good, it's just not a good LeCarre movie). This was the start of the second half of his career as a supporting actor showing up in every political thriller you could imagine. Since I'm a sucker for those movies, I saw him often. I had no idea he was 75 now, and he was still working. He was an actor we took for granted, but someone who added something to the movies I liked.


Friday, February 08, 2008

Tomorrow on the Final Word... 

...Michael and I agreed to take up a conversation about John McCain's candidacy. Did his CPAC speech give you enough to overcome any qualms you had, or are you still wondering "quo vadis?" Why did Michael vote uncommitted (and did I ever commit?) Ben Golnik, Minnesota coordinator for the McCain campaign will return to field your questions.

Catch us 3-5pm tomorrow on AM 1280 the Patriot. Indeed, join the Patriot all day starting at 9am for the David Strom Show, then 11-1am will have me sitting in with Chad the Elder, followed by the Headliners Mitch and Ed at 1-3pm -- I want to hear Mitch give this idea the beating it deserves.

UPDATE: Derek from Freedom Dogs and True North has given us a meter to use to gauge your McCain support. I would have gone for McCainuum, but McCaintinuum it is:
Call us tomorrow, and tell us where you are on the scale.

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Time to call the recession yet? 

As I wrote a couple of weeks ago, a call on a recession requires you to look at indicators of each of the three ways we can measure aggregate economic activity -- employment, sales, and income. On two of the big three places now, we have the first sign that a downturn has begun.

Following on the weak jobs report last week, retailers are turning in poor sales reports for January.

Retailers turned in their worst monthly sales results in nearly five years, and big chains appeared to be girding themselves for a prolonged slowdown in consumer spending by announcing plans to close hundreds of stores and cut thousands of jobs.

Even gift-card redemptions, which were expected to give January sales figures a bigger lift, instead offered a glimpse at just how strapped consumers are. Wal-Mart Stores Inc. yesterday noted that redemptions were below its expections, and said consumers were holding onto the cards longer -- or using them to buy groceries rather than treats like electronics.

Wal-Mart's same-store sales rose 0.5% in January compared with a year earlier, far below its expectation of a 2% gain. For the fiscal year ended Feb. 1, Wal-Mart's U.S. same-store sales rose just 1.4% -- the lowest increase since the company began releasing such data nearly 30 years ago.

In the retail sector's overall results, sales at stores open at least a year, a key measure of performance, rose just 0.3% in January, below widespread expectations of a 1% gain, according to an index released yesterday by Thomson Financial. Half of all retailers tracked by the index turned in sales that lagged analysts' expectations.

Other chains reported similar results -- Costco was up 3% after deducting higher-priced fuel sales, Macy's was -7% after expecting to be +4%. (That had to contribute to the decision yesterday to close its offices in Seattle and the Twin Cities.) Retailers did not order as many goods for the holidays, leading to a 1.1% increase in wholesale inventories in December. Mish thinks people are hoarding their gift cards -- which would put some evidence against the idea that people are expecting higher inflation.

Add to this the report that credit-card delinquencies are up, and you have a recipe for lowering retail spending for the first half of the year.

So the jobs market seems to be in some trouble -- some of the data confounded by the presence of many ex-self-employed in the pool of unemployed workers -- and now retail sales is following suit. We should look for confirmation in the chain stores sales figures due on Tuesday and January retail sales report due Wednesday next week. The third leg of the stool on this, income, will not report for January until 2/29. I might not wait that long to decide the recession has begun, but I want a little more data yet.


The Democrat Feminists Are at it Again 

Hillary Versus the Patriarchy, by Erica Jong, is another diatribe by a leftist feminist. After attacking "alpha male" Bill Kristol for his comments about white women, she reverts to the feminist rhetoric of the 1960's to explain her support for Mrs. Clinton as president. Though Ms. Jong is a successful writer, she comes across as a bitter female. This paragraph is key:
She's (Mrs. Clinton) always worked twice as hard to get half as far as the men around her. She endured a demanding Republican father she could seldom please and a brilliant, straying husband who played around with bimbos. She was clearly his intellectual soul mate, but the women he chased were dumb and dumber.
A few observations: Did Mrs. Clinton have to go through all the years of routine work to EARN her partnership, or did she get a boost from her husband, the Governor? If Mrs. Clinton's father had been a Democrat, would Ms. Jong have made the same comment? She's upset because Hillary was pushed to excel? Is Mrs. Clinton's husband really brilliant if he "played around with bimbos?" And were the other women Bill played around with "dumb and dumber"? Katherine Willey had plenty of smarts and the last I read, Monica Lewinsky just graduated from the London School of Economics. Dumb? I don't think so.

Here is Ms. Jong's statement about Mrs. Clinton's run for the US Senate - in New York where Mrs. Clinton had never lived. Hmmm:
When she decided to run for the Senate she was called a carpetbagger.
Definition of a carpetbagger, American Heritage Dictionary: "An outsider, especially a politician, who presumptuously seeks a position or success in a new locality." (Seems to fit.)

Ms. Jong goes on to explain how Mrs. Clinton adapted, loosened up without drugs or booze, tolerated the behavior of her husband, raised her daughter, keeping Chelsea out of the spotlight (which presidents attempt to do with their kids), stood by her man through everything. Ms. Jong uses the word "smart" a lot - she, along with Mrs. Clinton were "bluestocking, straight-A Phi Beta Kappa," students from all-girls' colleges. The final dig is Ms. Jong's cheap shots at Colin Powell and Condoleeza Rice. So which political party is the divisive political party?

Ms. Jong and her buddies ignore the gross abuse of women in the Arab world, many parts of Africa, Asia, and even the "honor" killings in the West. All of them refuse to address the arranged marriages of so many women on the planet. They omit the fact that many cultures still prevent women from attending school or participating in athletics.

The only females who mean anything to the Erica Jongs of the world are those who are Democrats or socialists. Otherwise, they brush off women who don't fit their mold. They dismiss women with different political views. They deny that Republicans have done as much or more for women. They want to be taken seriously, then tell us to vote for Mrs. Clinton because she put up with a wayfaring husband and "worked twice as hard" - at what? She doesn't even say Mrs. Clinton did it with class.

The article is worth the read, but don't expect Phi Beta Kappa caliber writing. It's a whining treatise, with factual errors, particularly regarding Iraq. Ms. Jong's conclusion is that people should vote for Mrs. Clinton because she's a woman, not that she's accomplished much outside of a law partnership because her husband was a governor. Pretty weak in my book.

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Thursday, February 07, 2008

Franken Style Healthcare = Rationed Care, Socialism 

King has a long post questioning Al Franken's proposal for universal health care. Below is important information people should know before buying the rhetoric of politicians who want to control us.

Before addressing specific fallacies of so called "single payor" (ie government) systems, check this site that includes a graph that corrects life expectancy data for differences in the rates of premature death from non-health-related injury, such as homicide and car accidents. Once these non-health-related injuries are excluded, Americans live longer than anyone else, even with our obesity problem.

First, the hospital infrastructure in England is deteriorating rapidly. Why? Prior to National Healthcare, hospitals were run by private operations and charities who made it a point to maintain and upgrade the infrastructure. There never have been nor are there plans in the British system to update these hospitals. When any institution refuses to build in preventive maintenance, sooner or later the structure will become unsafe. (Source is Weekly Standard). No politician has any incentive to include maintenance funds in any program he/she uses to "buy" votes.

Second, this article by Mark Steyn outlines major problems with the Canadian health care system. The entire article is good; the healthcare issues appear at the end. A key quote below:

Canadian dependence on the United States is particularly true in health care, the most eminent Canadian idea looming in the American context. That is, public health care in Canada depends on private health care in the U.S. A small news story from last month illustrates this:

A Canadian woman has given birth to extremely rare identical quadruplets. The four girls were born at a U.S. hospital because there was no space available at Canadian neonatal intensive care units. Autumn, Brook, Calissa, and Dahlia are in good condition at Benefice Hospital in Great Falls, Montana. Health officials said they checked every other neonatal intensive care unit in Canada, but none had space. The Jepps, a nurse and a respiratory technician were flown 500 kilometers to the Montana hospital, the closest in the U.S., where the quadruplets were born on Sunday.

There you have Canadian health care in a nutshell. After all, you can�t expect a G-7 economy of only 30 million people to be able to offer the same level of neonatal intensive care coverage as a town of 50,000 in remote, rural Montana.

Everyone knows that socialized health care means you wait and wait and wait�six months for an MRI, a year for a hip replacement, and so on. But here is the absolute logical reductio of a government monopoly in health care: the ten month waiting list for the maternity ward.
Third, there are numerous stories of people being denied health care because of government rationing. Age could be a factor as well as time of year. If you require surgery but the doctor has performed his alloted operations for the year, he can perform no more, period. As my friend's friend said, "You can get diagnosed but can't get treatment - (Canadians) try to treat everything with drugs and pain killers." The email listed example after example after example. When a government rations doctors' pay, by definition they ration services. This talk sounds good but ....

There's a reason Canadians and others around the world come to the USA for surgery. Our system is better, our hospitals are in better shape, and we have access when needed, not on some government timetable.

It is grossly unfair and unjust when a politician promises something that cannot be delivered by a government as well as it can be delivered today by the private sector.

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Hold the line 

The Senate Democrats were not impressed with President Bush's formula of a stimulus package equal to 1% of GDP, and have instead sought a larger package. Senate Republicans are supporting Bush and the House bill (which has the 1% rule imposed.) A political game thus ensues. And in the most interesting part of all, House Speaker Pelosi appears to be in the middle between the Republicans and Senate Majority Leader Harry Reid.
Pelosi issued a statement tailored to support the position of the Bush administration and Senate Minority Leader Mitch McConnell, R-Ky., who back her House-passed measure with a few modifications.

Pelosi said House lawmakers are "very receptive to additions to our bill which ensure that disabled veterans and additional seniors are eligible" for rebate checks and want to make sure illegal immigrants are denied them.

Pelosi pointedly did not endorse Senate adds-ons endorsed by Reid, such as provisions benefiting coal companies and a 13-week extension of jobless benefits. The unemployment insurance provision could advance through the House as a separate measure after the stimulus measure passes.
The newspapers are playing this as if the Republicans are to blame, but it isn't just them. Of course, the senators up for re-election want this passed ASAP, but the other 66 are willing to temporize to get maximum advantage. With all due respect to Michelle Malkin and Lassie, it's hard to come up with a good reason for drawing the line at 1%, particularly when you're looking for votes at the senior home. If you're going to cry "fiscal responsibility", how about you get to work on trimming a $3.1 trillion budget?

UPDATE (4pm): The Senate passed the bill without the add-ons. Victory for Pelosi, Bush, and Senate GOP.

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Wednesday, February 06, 2008

Back to KNSI 

It appears that, for a while at least, I'm the substitute for KNSI's Morning Show. I'll be on 6-8 tomorrow and Friday this week, and Wednesday through Friday next week. AM 1450 on your dial, and I believe their streaming works (from the link above) when they're on local programming. We might do a little politics tomorrow, just maybe.

UPDATE: Whoops! Missed communication had both me and Don Lyons there this morning. "The Senator" will be trying his hand at the host chair tomorrow. I'll be on next week.

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Is health care going to be THE issue? 

At least in one race, it appears so.
Al Franken, the comedian-turned-U.S. Senate candidate, thinks the current state of health care in Minnesota � and the United States as a whole � is anything but funny.

�Every other industrialized country in the world has universal health care � we�re the only industrialized country that doesn�t � and I think it�s no coincidence that we spend twice as much per person as any other industrialized country on health care,� Franken said during a visit to the Detroit Lakes Newspapers offices on Friday. �And yet we don�t have as good outcomes as they do.

�We�re last in the industrialized world in preventive care. We have 47 million people who are uninsured, with tens of millions more who are underinsured because they can�t afford full coverage � and they live in fear that they will go bankrupt if they have a medical crisis. Medical crises are the No. 1 cause of bankruptcy in this country.

�Fifty percent of the bankruptcies in this country are caused by medical crises. They don�t have that in other industrialized countries.�

Franken also notes that the current health care system has �tremendous waste,� with 34 percent of health care dollars being spent on administrative fees.

�No other country spends more than 21 percent (on administrative fees),� he said. �We have people going to work every day for insurance companies trying to figure out how to deny you care.

�I hear story after story of incredible waste in our system because we aren�t universal.�

Where do we start with this hooey? Let's look at a couple of leading examples, say, Sweden:
Health Minister G�ran H�gglund has criticized the lack of progress made toward shortening wait times in Sweden�s health system.

He made the comments in an opinion article published in Dagens Nyheter in which he stated that the 250 million kronor spent by the government on lowering wait times has apparently had a little effect.

The criticism comes in response to a report by the National Board of Health and Welfare (Socialstyrelsen) showing that nearly 45 percent of patients have longer wait times than are supposedly guaranteed by the healthcare system.
In J�mtland county, for example, four out of ten patients couldn�t even get through to their local clinic by telephone on the day they become ill.

H�gglund asserted that people are generally satisfied with the care provided�when they receive it.

�But the wait to receive attention�be it a telephone call to a local clinic or a first visit to a physician�is simply too long,� he said.
Hat tip Mark Perry, who wonders what would happen to Domino's or Northwest Airlines if four out of ten of their customers couldn't get their calls answered.

Next door in Norway, hospitals are suffering a budget crisis. This is worth reading in its entirety, but I will italicize the paragraph that should be used as a clue-bat to the back of Al Franken's noggin:
With waiting lists long, and patients still often lying in corridors, many Norwegians can't understand why medical care is under so much pressure in one of the world's wealthiest countries.

The board of Ullev�l University Hospital in Oslo, one of the country's biggest public health institutions, announced earlier this week that it needed to cut its budget by NOK 406 million (about USD 81 million). Medical personnel were quick to claim that patient care would be affected.

The cuts come after another year of reports that patients often have to wait months for operations, that clinics face shutdown or maternity patients are sent home within hours of birth. The physical plant at Ullev�l, like at many other Norwegian hospitals, can use some refurbishing, if for no other reason than to make the hospital a more cheerful, inviting place.

State officials, including Health Minister Sylvia Brustad of the Labour Party, argue that the hospitals are receiving more state funding than ever before, and that more patients are being cared for than ever. Nevertheless, cuts are warned and both hospital administrators and union leaders claim they're dealing with yet another health care "crisis."

Newspaper Aftenposten has gathered figures showing that Norwegian hospitals today have NOK 86 billion available, up from NOK 56 billion in 2002. Even though budgets have increased every year, the hospitals are using more money than they're getting. That's led to an accumulated budget deficit of around NOK 9 billion.

The number of doctors tied to Norwegian hospitals rose from 6,700 in 1995 to 10,854 in 2006, up 62 percent. The number of nurses and psychologists on staff has also increased, while administrative personnel has increased the least. The total number of hospital workers in Norway jumped from 67,098 in 1995 to 94,923 in 2006, with payroll costs jumping 70 percent.

Professor Terje Hagen of a health management and economic institute at the University of Oslo claims there is no crisis within Norwegian health care. "The hospitals have had tighter financial constraints in recent years, but they're still using more resources than planned," Hagen told Aftenposten.

Hagen says health care personnel aren't working as many hours as they did before, and notes there's more of them. Professor Ivar S�nb� Kristiansen puts the financial problems firmly on the rise in personnel and the resulting payroll hikes. He also rejects talk of a crisis.

"As I see it, neither hospital personnel nor politicians manage to say 'no' (to health care services that result in higher costs)," Kristiansen said. "When the possibilities for what can be done just get bigger and bigger, and no one sets priorities, budgets will burst.

"It's virtually immoral to talk about a crisis, when we are among the countries using the most money on hospitals in the world."
The budget that bursts is not the hospital's, in universal care. It's yours.

Now of course, Franken's supporters will argue that he doesn't really want single-payer, even though his health-care page says "A single-payer system would be the most effective in terms of reducing administrative costs, and I would be thrilled to support such a system." He just wants it for kids under 18 (that's the Obama plan, too.) But even his plan for adults -- every state mandated to come up with its own plan -- creates a problem that Glen Whitman identified a few months ago:
To enact any mandate, legislators and bureaucrats must specify a minimum benefits package that an insurance policy must cover. Yet this package can't be defined in an apolitical way. Each medical specialty, from oncology to acupuncture, will push for its services to be included. Ditto other interest groups. In government, bloat is the rule, not the exception.

Even now, every state has a list of benefits that any health-insurance policy must cover--from contraception to psychotherapy to chiropractic to hair transplants. All states together have created nearly 1,900 mandated benefits. Of course, more generous benefits make insurance more expensive. A 2007 study estimates existing mandates boost premiums by more than 20%.

If interest groups have found it worthwhile to lobby 50 state legislatures for laws affecting only voluntarily purchased insurance policies, they will surely redouble their efforts to affect the contents of a federally mandated insurance plan. Consequently, even more people will find themselves unable to afford insurance. Others will buy insurance, but only via public subsidies. Isn't that just what the doctor didn't order?
Who is going to write the mandate that says hair transplants are out? That physical therapy for a chronically arthritic shoulder is limited to only ten times a year, or that condoms are in but that new fancy IUD is out?

And what happens if you mandate that everyone buy their own health insurance, and they don't? As Whitman points out, in the 47 states with mandatory auto insurance, 12% of autos are uninsured -- a higher percentage than persons without health insurance in Minnesota. And in a third of the cases nationwide, the uninsured had household income over $50,000. (Source.)

(BTW, Arnold Kling recommends this excellent article, but it's a 7 MB pdf, so beware.)

The question comes down, as Grace-Marie Turner says, to whether you let individuals control their own care, or you let government. Sweden and Norway use government, and Al Franken thinks that's a good idea. Luckily for those Republicans suffering palpitations on their choice of presidential nominee, all of the remaining GOP candidates are not for the Scandinavian model of health care. John McCain says "To use their money effectively, Americans need more choices."

Here, by the way, is Norm Coleman's health care page. I don't see any mention of Sweden.

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Tuesday, February 05, 2008

Media alert 

Sticky for the day: I will be hosting an election returns show on AM 1280 the Patriot tonight beginning at 8pm. At some point Michael will arrive; we anticipate many local political figures calling in with their observations. Ed Morrissey is anticipated to stop by after his caucus (which I believe is his first experience ever with the MN system). THere's streaming audio available from the Patriot site if you are not in our broadcast range (which in the evening is quite possible.) We will have updates from other states as well on a night that could be decisive for John McCain but likely to be just another step in the danse macabre that has become the Democratic primary.

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Republican Caucus - Lakeville 

It appears a HUGE number of Republicans turned out for the caucuses. We had so many in Lakeville that the auditorium was overflowing into the hallways. We have not had a turnout like this that anyone can recall.

The straw ballot for the precincts that I'm aware of gave Romney well over half the votes. It's not the convention that is drawing them, it's the realization that there are problems the Dems refuse to address. We simply have to do it.

Hope yours went as well as ours.


Zeroes Matter 

Congress and President Bush appear to have settled on a budget. How many months did Congress stall on this basic need of our citizens? Oh, well. I have another point to make.

Many of our youth have very little concept of numbers. As stated early on, I give my college students a 50-fact multiplication test (50 seconds) to attempt to drive home the phenomenal processing speeds of computers.

Related to little exercise is a requirement that all numbers on papers include the zeroes. For example, gross sales of $46.5 billion is not allowed; it must be shown as $46,500,000,000.

Back to the US budget. A $3.1 trillion dollar budget has little impact but $3,100,000,000,000, that's another story. Maybe elected officials just might become more responsible with our money if they realized just how much of it they spend.

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The best paragraph I read Sunday, but not Monday 

We apparently have a small number of people � perhaps students � who are behaving badly and engaging in behavior that is immature and silly, heinous and hateful, or somewhere in between. But the vast majority of our 16,900 students and our faculty and staff are decent people who come here to work or study hard and treat each other with respect. They do what people on any campus do � go to class, socialize, teach and learn.
That's our President Potter yesterday discussing the Graffiti Game at SCSU, and it's a paragraph I absolutely agree with. I also note with approval that, again, he has refrained from the phrase "hate crime", choosing instead "bias-motivated incidents" and "expressions of hate". The acts "in some cases ha[ve] been criminal activity." I still don't know that someone who has behaved immaturely or silly has expressed hate or is motivate by violence, but it's a step in the right direction.

I think, however, that the essay then takes a wrong turn. Focusing on whether the incidents are harming minority enrollment seems to me to be making the wrong argument. We have fared quite well in enrollments generally because a softening economy reduces the opportunity cost of education so that people choose to attend universities. If our enrollment had gone down, would that really have told us anything? Would the campus' reaction have been any different?

I don't think so. I think the university is simply managing its image and those paragraphs come a little too close to sounding like pandering. And to do so they made a deliberate choice:

As a community, in consultation with faculty, staff and student leaders, we have chosen to express our responses to these challenges openly and just as in-your-face as the people who have scrawled swastikas on walls where students reside and engage in activities. We�ve posted safety alerts and are working closely with St. Cloud police in investigating what in some cases has been criminal activity.

For that we have drawn attention to our campus � some of it unpleasant. We will continue to do so because, while every campus and every community grapples with these same issues, we choose to bring them out into the open and unite against the hate they represent.

Context, however, matters, as we'll see below.

When I was a junior high student I was fascinated with war. One of the ways I expressed that fascination was to draw pictures of dogfights of aircraft. I'm quite sure I put swastikas on the tail of a Messerschmitt Bf109 or a Stuka. (Warning: Clicking those links leads you to photos of aircraft sporting swastikas.) If one were teaching WW2 history here at SCSU, would it be a problem to show these photos in the classroom? I loved looking at books of aircraft in flight and combat; I had many of the Ballantine series of books on World War 2 on my shelves. Had I taken, say, the one for the Me-109 (with a full side view of the aircraft on its cover), and had it in my dorm room, would this have been a problem if, say, I was reading it in a student dorm lounge?

Suppose a student in his or her dorm who loves Mel Brooks is watching "The Producers". He leaves the door open for friends. When the dancing swastika comes on stage during "Springtime for Hitler", if a student should pass by the doorway and is offended, is the student watching the movie expressing hate? Is this a "bias-motivated incident" or an "expression of hate"?

Now instead he puts on his dorm door a poster for the movie, say, the last of the three here. (Warning: swastika on that link) Code of conduct violation? He instead puts it on the announcement board on his dorm floor for the purpose of inviting dormmates to his room for movie and popcorn. Violation?

Suppose he sketches it instead, including the swastika? Crime?

Silly and immature, perhaps. Insensitive, well, possibly. But hardly worth an effort like we've had here, hardly something for which "resistance is required." We really aren't the only campus that deals with these issues this way (take a look, for example, at Grinnell College) yet we seem also to be headed into the area of insisting on certain campus reactions as being acceptable and others not. What we really need is a discussion of where that line is, where freedom of inquiry abuts the desire of many on campus to call these swastikas disgusting. As long as the response to speech is itself speech, all well and good. But prosecuting speech is a dangerous place for a university to go; thinking through my Producers in the dorm story is a way to think about what lines are you ready to draw? Such a discussion would also have helped faculty and students understand the debate over, say, posting the cartoons of Mohammad at Century College.

The problem with President Potter's article is that it gets us no closer to understanding where that line is. There's no discussion of where free speech ends and expressions of hate begins, either in his own view or in the view of the courts (where I think the line is further in favor of free speech.) That was the better than best paragraph missing from President Potter's article and a for-now missed opportunity; I hope sometime we get to hear it.


The following day (Monday), the campus paper headline reads "Whiteboard swastika vandal identified". I do not know whether drawing a swastika on a whiteboard is vandalism; who has the property right to the whiteboard would seem to be one question. You could argue it is, but that makes the swastika no different than, say, a Ron Paul sticker plastered on a whiteboard. The article says the student was identified by another student, responding to one of the many safety alerts on campus. President Potter spoke Thursday night to student government:
"This is a learning community and one of the things that's most important to us is that having identified someone who intentionally thought to hurt others through hateful expression that we not react with hate when others are identified," said President Potter on the subject.
I'm unclear on the meaning of that; I would assume that our students are intelligent enough to not seek to assault someone who draws a swastika on a whiteboard. If we are worried about this, again, why the "Resistance Required!" labels on our safety alerts?
Many have been questioning whether or not these are actual hate crimes that are being committed. President Potter said by legal definition they are in fact hate crimes. A hate crime does not require physical assault; it does require the intent to intimidate a specific individual.

"Whether it is a hate crime or a copy cat act to make fun of the administrations response it is still hurtful to the community," Said President Potter to finish discussion on the issue. "I would like student government to stand with me and the students that have been targeted and say 'we will not accept this.' It will take a leadership role to get the majority of the community to stand up for our core values for what is right."
Not every act has been a crime, as the Times article has noted, therefore not all the acts could possibly rise to a "hate crime". Some of these acts are "behavior that is immature and silly, heinous and hateful, or somewhere in between," in Potter's own words. I believe the administration knows this; perhaps the reporting here omitted something to indicate Potter drawing a more careful line between those things which are crimes and those which are free speech that a majority of the campus finds repugnant. Nor do we know at all whether the whiteboard vandal (if indeed it is vandalism) was targeting any "specific individual", which would meet Potter's definition of a hate crime. It's too soon to say why it was drawn or who was the intended audience.

I see nothing wrong with his asking the student government to help him "stand up for our core values." I'm just wondering whether "freedom of inquiry" is in the core?

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I just report the greed, I don't make it 

John Palmer has an excellent post this morning on how people misunderstand economics as "making people greedy". Phil Miller recommends this as an antidote to those who argue that economists are evil.

I remember a great lecture in public economics that Tom Willett, my advisor in graduate school, gave on the use of assumptions in economics. It was not that we believe that individuals are greedy, but that the self-interest axiom leads to more correct predictions of human behavior. The realism of the assumption is irrelevant; if you need that assumption to make the model give you good prediction, keep it. Perhaps you can model a policy with enough public exhortations that would change people's motivations; perhaps not. The history of the world indicates that using policies that align incentives with individual self-interest work better in the aggregate. That is all. A single policy that might have worked because of public moralizing doesn't disprove the validity of the economic method.

Or, in John's terms, legislating for nirvana is usually disastrous. And worse, it leads one to think one can create nirvana; such a thought process lies behind this gem found by Angus that would argue for messing with incentives to live longer because you might be a net cost to government. (I hear Pigou rolling over in his grave.)

UPDATE: Peter Boettke reminds us of Deirdre McCloskey's observation that nobody writes folk songs for capitalism. Obviously Rush isn't folk, but it is capitalism.


Monday, February 04, 2008

Garrison Keillor Gets One Right, Finally 

Most residents of the Twin Cities know Garrison Keillor, the brilliant creator of A Prairie Home Companion, one of the longest running radio shows on NPR. Mr. Keillor, along with so many in the entertainment industry, have spent the last seven years criticizing our President, his policies, our nation and anyone who supported President Bush.

There is an exception and for this, I thank Mr. Keillor. Sunday, February 3, he had an opinion piece in the Star Tribune newspaper. (I cannot seem to find it - perhaps it's been removed? kb adds: perhaps it's a reprint of this article in Salon a few days ago) The title, "And the righteous, it turns out, shall muck up the earth" discusses how liberals are failing to teach our children well. In this article he attacks the liberal mindset that simply accepts lower test scores for poor and minority children. He duly notes that "reading is the key to everything. Teaching children to read is a fundamental moral obligation of our society. That 27% (of MN's children are below basic proficiency in fourth grade) are at serious risk of crippling illiteracy is an outrageous scandal." He's right.

The vast majority of children can be taught to read if they are given good texts, teachers who really care, and a learning system based on phonics - not the garbage that has been spewed from the ivory tower institutions of the past 36+ years. My last school taught poor and minority kids to read, at grade level. It can be done.

Teaching children to read is a must but so is teaching children to respect the law, even when we don't like the results. Children must also be taught that our nation was created to give people a chance to rule themselves, the first ever on such a massive scale. We made mistakes but what sets us apart is we correct them.

While I commend Mr. Keillor on this op-ed, I hope he will also start to realize the damage done to a nation's people (including their children) when far too many famous people spend too much of their media capital dissing our nation, our history, our elected officials, etc. At least Mr. Keillor knows where the reading problem is. His key quote: "It is morally disgusting if Democrats throw out Republican programs that are good for children." I never thought I'd read a comment like this by him.

Again, thank you, Mr. Keillor


Sometimes you just gotta have some action 

My friend Brad Humphreys is scratching his head over people who would pay more than $.50 for a contract that pays you $1 if the coin toss at the Super Bowl comes up heads. But when I looked at this bet on an offshore book rather than on a TradeSports exchange, I had to pay $1.15 to win $1, implying $.5209 for the cost of the bet offshore. So I'll add one possibility to the list of explanations Brad has: It's cheaper to pay for a coin toss on Tradesports than on Sportsbook.

BTW, for those interested, I had no money riding on last night's game except for $3 on a board among friends. None of my numbers came up. I cannot bet for or against my own team; I'm enough of a nervous wreck as it is.

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Why government-run health care costs more 

The Boston Globe reports that the cost of Commonwealth Care in Massachusetts is much higher than expected.
...the governor's spokesman, Joseph Landolfi, said, "It is clear that paying for healthcare reform will pose a much greater fiscal challenge than was anticipated by the previous administration. We are committed to making health reform a success by aggressively pursuing cost savings and efficiencies in the healthcare system, as well as working with legislative leaders to review options for additional state revenues so that we can continue to afford this important initiative."

The expanding need for new state and federal money is in sharp contrast to the statements made by former governor Mitt Romney, when he proposed the initiative in 2004 and as he campaigns for president. He has repeatedly suggested that the state could insure low-income residents largely by reallocating money paid to hospitals and health centers that serve the uninsured.

"The bill that I submitted to the Legislature didn't cost $1 more than what we were already spending," he said Wednesday night during a GOP debate. "However, the Legislature and now the new Democratic governor have added some bells and whistles."

In fact, Romney signed the law in 2006 as modified by the Legislature, approving most of the changes, but vetoing a few provisions that were overridden. Lawmakers then estimated that the initiative would cost the state only a small amount of new money in the first few years. It is now apparent that both Romney and lawmakers underestimated the cost of insurance subsidies as well as other parts of the initiative, largely because they based their projections on low estimates of the number of uninsured and the rising price of insurance. When the law was passed, neither Romney nor the Legislature estimated the costs beyond next year because they believed the enrollment growth would be all but complete.
Arnold Kling examines this problem from whether Massachusetts understood how many people would hop over to subsidized care from paying for it themselves. Moreover, forcing people to buy insurance imposes a cost on them, which the Globe article misses (there'd be no easy way to measure them.) But "health insurance is good for them and/or society needs them to buy health insurance. So who cares about their individual preferences?" Indeed.

"Everybody must insure" is a form of government coercion. Here's another, regarding recycling in Sweden. In both cases, the costs of coercion are simply set to zero.


Sunday, February 03, 2008

We now pause for this announcement 

On radio yesterday I said all we had to do was be there in the fourth quarter. As the time wound down, even when the Patriots put together the then-go-ahead TD witn 2:42 to go, I thought "we have won these games for the last three weeks. We have been able to move the ball on these guys. Why not now?"

But the drive, the scramble, Tyree's grip on a ball he had to catch, and Eli's calm as he looked at a seven-man blitz and calmly delivered the ball to Plaxico -- this one may be more special than the other Giants Super Bowls.

Friday, February 01, 2008

Tomorrow on the Final Word... 

... it's your final chance to hear from the NARN on the caucuses. We'll have Minnesota representatives from all four remaining GOP candidates and we want your questions and comments on who you are supporting and why. The last MPR/Humphrey poll has McCain well in front with Huckabee in second place (41-22, with Romney back another five.) Hillary Clinton is up seven on Barack Obama in that poll.

Is it possible to change minds still? Four spokespeople will try, and so will the callers. Join us please at 651-289-4488. Listen on the stream if you wish; the podcast will be available later.

Also, we plan a Tuesday night broadcast beginning at 8pm on the Patriot, with updates from party headquarters, call-ins from caucuses, national results, and expert analysis from as many people as will take a phone call from us. More details to appear on Monday, but we hope you go to the caucuses, then flip on AM 1280 the Patriot on your way home.

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And that's one, too 

A male student has been identified as possibly drawing a swastika on a Stearns Hall bulletin board on SCSU's campus. The exact nature of the act of which the student has admitted (according to the article) is that "Shortly after 5:30 a.m. Monday, January 28, residence hall staff in Stearns Hall observed a swastika drawn on an information board posted outside a sixth floor student�s room." But he has admitted only for one case. While the police cannot yet establish if a crime was committed (we do not have an anti-swastika law like New York's) the campus is likely to move forward against the student:

St. Cloud State spokeswoman Marge Proell said the man has been linked only to the Stearns Hall incident.

In a statement issued Thursday to students and staff, St. Cloud State President Earl H. Potter III said the university will address the matter under the Student Code of Conduct.

As many as 19 such incidents have been reported to campus security since November. The university has issued eight safety alerts during that time related to the incidents.

The Student Code of Conduct calls the following a "prohibited conduct":

4. Intentionally, recklessly or negligently placing any person under mental duress or causing any person to be in fear of physical danger through verbal abuse, harassment (including repeated phone calls), sexual harassment, hazing, intimidation, threats or other conduct which threatens or endangers that person's emotional, mental or physical well-being.
The question is whether the drawing of a swastika can be reasonably seen as causing mental duress. In that sense, the repeated advertising of the graffiti and other activity may have created the expectation that a student will be protected from seeing the symbol. (I worry I might have just suggested the prosecution's strategy.) If they pursue this case, it will be one broadly watched among free speech advocates. The ACLU is already on the case:

Teresa Nelson, legal counsel for the Minnesota American Civil Liberties Union, said the line between free speech and preventing a hostile environment on a public university campus isn't always clear.

...Nelson said it's tough to know at what point controlling acts such as the recent incidents becomes censorship of people expressing opinions.

The ACLU has an older FAQ on hate speech and free speech on campus. It's worth noting Ms. Nelson's qualification of the line as depending on our being "a public university campus." I read with interest an old post by David Bernstein in which the ACLU made a case in favor of four neo-Nazis wearing swastika lapel pins into a private restaurant and being arrested when they refused to either remove the pins or leave. In that case, the restaurant owner had a legitimate private property right to ask for the pins to be hidden in order to serve the patrons. But dorms are weird in that they're public university but a place where students might expect more privacy. As I'm not a lawyer, I'm not going to speculate on how that gets solved.

We will now wait to see if the graffiti stops. If it does, there will be naturally the suspicion that the student identified may be responsible for more than the one. But it is also possible that the student is a copycat, using the press hysteria and campus angst to call attention to himself, or perhaps to make himself a First Amendment martyr. We shall see.

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OK, that's one 

The level of payroll employment fell slightly in January, down 17,000 versus a market expectation of up 58,000 (let alone the ADP projection of +152k.) The goods sector was down as expected, but there was more weakness in retail sales and professional/business services than I think people were looking for.

There was also a jobs revision that reduces the growth in total jobs for the 2007 to reflect a new benchmarking of the payroll survey. This revised down March 2007 employment levels by 293,000 jobs and December 2007 by 254,000 jobs. The WSJ suggests this helps support the Fed's aggressive cuts in interest rates.

Given the other news of the week, it's not unreasonable for Captain Ed to wonder if we've found the business cycle peak.
Now we have crossed a Rubicon of sorts by seeing negative numbers in jobs for the first time in 53 months. The economic markets will see that, rightly, as a sign of continuing weakness in the economy, despite employment gains in most industries outside of residential housing and associated lending.

Expect to see the markets take a moderate hit today. The big question will be whether the Fed will wait six weeks until its next meeting to take any further action.

I would be surprised if the Fed acted on this measure alone, but a negative February, perhaps in the cards after the rise in unemployment claims last week, could get you there. Whether or not it's the top, I say, will need probably a negative February number in employment and a decline in retail sales. Retail trade employment was up 11,000 in January, but we'll need to see if that's because of the odd seasonal patterns this year or a sign that things are not as bad for retailers as we might think.