Monday, March 31, 2008

The Last Snow? 

It's March 31 and the heaviest snow of the year is still coming down - at least 4" and up to 8" by tomorrow morning. I do not recall as heavy a snowfall as this, ever. It is so dense, it's almost unpackable. No snowmen this time.

A few photos for our guys in Iraq who visit this site periodically - enjoy it guys. Once this melts, this ought to be it - then again, we thought so last week.


Norm Coleman Campaign Launch 

I'm late with this but it is still worth viewing. Last Wednesday, March 26, the Coleman Campaign officially launched his bid for a second term as a US Senator. The kick-off was held at the campaign headquarters in St. Paul and the event was packed - well over 750 people of all stripes were in attendance! I was in the main room but there were two other rooms where video screens displayed Senator Coleman's talk.

A few photos of the event are included. Note the gratitude on the part of the Somalis. We sometimes wonder if anyone ever appreciates what we do - some of these people get it. Included with the Somali women is Barb White, Republican Candidate for MN's 5th Congressional District, seat currently held by Representative Keith Ellison.


Quote of the day 

Supervising the very complex derivative products of the banks and of the rest of the financial system would be an enormous technical challenge. The institutions themselves -- paying very high salaries and having their own survival at risk -- got it wrong. Would the Fed get it right?

Martin Feldstein, from the Wall Street Journal this morning. A useful rule: Regulators regulate when they have access to better information than the regulated. But also useful: Regulation to minimize systemic risk. Can the Fed do better?

American Ingenuity 

In spite of 40 years of negative press and educating our children to believe we are the lousiest nation on the planet with a myriad of sins so horrible as to warrant extinction, some manage to escape this educational-institution imposed mind set and then do something extraordinary, really extraordinary.

We Americans, all shades, types and personalities, still possess a uniqueness rare on the planet - we encourage people to think. And, we still have some people who REALLY think well.

DARPA, the Defense Advanced Research Project Agency (thank goodness for acronyms), has just contracted with Deka to develop the latest in prosthetic devices. Please, please, please go to this website and watch the film on their latest human arm. It is unbelievable!

When we: tell our kids that we are a rotten nation; refuse to push our children in academic endeavors; ignore the good America has done; teach only one side of history, government, etc.; use Garrison Keillor's Lake Wobegon description that all children are above average; make excuses for not learning; let them believe they are unaccountable for anything; lie to them by keeping truths from them - all this leads to a nation that eventually may not function.

Yet, in spite of the victim-driven, anti-American mantra, we produce thinkers, dreamers, idealists that no other nation produces. The kind of invention you will see in this film occurs NO WHERE ELSE ON EARTH.

Wake up, you negative forces. Just imagine what we could do if we encouraged the positive traits of our people.

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New Quarterly Business Report is out 

The news article is here. The Times has launched a new website for ROI Central Minnesota (and I'm telling you, that ROI stands for my name en Francaise) that has the report (in .pdf). It's a nice new site (I got to watch the roll-out last Tuesday) and will be a place I post some comments on. The trends and indicators page will be a great asset to my work.

El Tinklenberg -- pro-earmark candidate 

Elwyn Tinklenberg, running for the Congressional seat in the Sixth District, attacks incumbent Michele Bachmann for her vow to forgo earmarks this legislative session.

When 6th District Rep. Michele Bachmann recently pledged not to use the earmarking process to obtain federal funding, she could not have foreseen the emergency closing of a bridge in the heart of the largest city in her congressional district.

Therein lies the problem with taking extreme political positions that leave no room for the unexpected.

The Office of Management and Budget generally defines earmarks as "add-ons" to a general appropriation that direct additional spending to a very specific project. The problem being that too often the earmarks are "dropped" into committee reports and never seen by most of the Congress.

In 2005 earmark appropriations were estimated to total $18 billion. It was then that President Bush urged the Congress "to reform the budget process and expose every earmark to the light of day ... ."

The now-infamous $223 million "bridge to nowhere," in Alaska (almost as long as the Golden Gate and higher than the Brooklyn Bridge but only connects the 50 or so residents of Gravina Island to a city of 8,000), was an earmark obtained by Alaska Republican Congressman Don Young and often used as an example of earmarking excess.

Yet instead of citing the abuses of Young, Bachmann often is critical of Minnesota colleagues such as Jim Oberstar and Colin Peterson, who understand that earmarking is a legitimate response to important needs such as the I-35W bridge.

Well, El, our criticism of the Oberstar earmarks is not about the bridge but about the trails. Oberstar was quite proud of his 2005 bill that kicked a goodly bit of money into trails (I cannot even count them all.) But we continue:

The concern is that not all earmarks are "bridges to nowhere."

In fact, the emergency situation created by the closing of a bridge across the Mississippi in St. Could is a classic example of a time when earmarked funds can be an appropriate process. With what we know now, it's not clear that the DeSoto Bridge can be repaired, and there is some speculation it may stay closed until it can be replaced.

Originally scheduled to be replaced in 2016, that schedule could be accelerated if federal dollars could be secured to help pay for a new bridge; however, that appropriation would be an earmark � hence, the problem with Bachmann's pledge to not take earmarks for her district.

If the De Soto bridge is a project worthy of federal funds, then let Senators Klobuchar and Coleman and Rep. Bachmann enter a bill for the money. It may be attached to another bill for passage, but it would be owned by those people asking the government to spend the money.

My good friend Gary Gross comments in the chat on this article that the I-35W bridge is not an earmark. It was an appropriation and centerpiece of the legislation. The earmark reform people want is for spending to be accountable, not to forswear ever having an appropriation go to a specific project. To use the definition Tinklenberg chooses here would make the Tennessee Valley Authority an earmark.

But even more interesting is that Tinklenberg, rather than tack towards Bachmann on the earmark question, is willing to take a pro-earmark position. John Fund reports (quoted by the Club for Growth here) that Congress cannot get itself off the earmark habit even when it sees polls that strongly oppose it. It appears that the ability of people to even track them is being made more difficult now. Elect Tinklenberg, and he'll have an easier time sneaking a few in for us.

Hardly a profile in courage there. If he's going to be pro-earmark, you'd think he'd not want to hide his grabbing hand.

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Tales of the AP stylebook 

St. Cloud Times managing editor John Bodette defends his paper's use of the term "anti-abortion" in its coverage of a local appearance by Alan Keyes:

The Times follows The Associated Press Stylebook in matter of style and usage.

The entry in the AP stylebook on "abortion" reads: "Use anti-abortion instead of pro-life and abortion rights instead of pro-abortion or pro-choice. Avoid abortionist, which connotes a person who performs clandestine abortions."

So, when writing our news stories we use the terms anti-abortion instead of pro-life unless it appears in a quote or the title of a group or organization.

...The reason the AP Stylebook makes its decision probably involves clarity of terms.

Here is a key quote from the foreword to the 2006 edition of the AP Stylebook: "But just as the AP remains dedicated to its fundamental journalistic principles, the AP Stylebook remains committed to its original concept: to provide a uniform presentation of the printed word, to make a story written anywhere understandable everywhere."

The original article is not online that I can find (the Times still uses a one-week pay wall for its free archives), so I cannot give you the context, but I think that pretty well says it. I'm not arguing with the AP stylebook's representation of abortion positions, but interested that Bodette would consider anti-abortion part of its "clarity of terms".

This morning the Times runs on page 1 an unsigned AP article that contains the same paragraph as this one signed by Tom Raum of the AP in the Washington Post:
The two Democrats are calling for a more activist role for the U.S. government to protect individuals. McCain is echoing standard GOP dogma of protecting markets and opposing bailouts.
What "clarity of terms" is incorporated in the use of the word "dogma"? Is Mr. Raum engaged in making "a story written anywhere understandable everywhere," or is he making a political point that makes the free market position somehow less considered, a knee-jerk reaction rather than something thought out as being better for individuals. "Activist" is a word that has connotations for economists different than for the public -- to the latter, it's meant to say Democrats want to do something, while the Republicans want to do nothing, and want to do nothing because they aren't thinking, they're just acting on an -ism.

That's clear enough to me ... clearly, the AP is impugning McCain's policies. Is "impugn" in the AP Stylebook?

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Friday, March 28, 2008

Ward Churchill to come to Marshall 

We learn from an interested reader that Dr. Ward Churchill will speak at the 15th annual Indigenous Nations and Dakota Studies Spring conference on April 3. His topic: Genocide and the Dakota People.

I am not sure what he has been doing since he was fired for academic misconduct (on an 8-1 vote by the University of Colorado's Board of Regents). He sued for wrongful termination, which is almost de rigueur in these cases. At PowerLine, John asks how much Churchill is being paid and whether Minnesotans' tax dollars are picking up the fee. We will have an organizer of the conference on The Final Word with us tomorrow (show 3-5, the professor will be with us around 3:30), but the press release for the conference says
The conference is funded by Sakpe Bdewakantunwan Dakota Community, Yellow Medicine Dakota Community and the Tinta Wita (Prairie Island) Dakota Community.
We will find out if that is indeed so.

Forest Lake Rebuttal 

If you have been following the cowardly behavior of the Forest Lake School District personnel, you are aware that the principal, Mr. Massey, reneged on his word to alum Pete Hegseth, Executive Director of Vets for Freedom to allow Pete and his heroic buddies the opportunity to give students a chance to hear true events about Iraq.

Nick Coleman of the Minneapolis Star Tribune, ever the friend of the anti-military left, got his digs in yesterday. The school superintendent and principal cannot seem to decide why they went back on their word - was it parents? outsiders? the children? security? the press? Who knows - their story keeps changing.

In response to the unfair, unjust, and inconsistent comments made by Forest Lake administrators, Pete Hegseth has released the following statement:

"There was NO press conference called and there was NO safety threat.

"I called the superintendent 3 times, left 2 messages, he will not call me back.

"We did NOTHING wrong and we haven't piled on (can't say that about others in the media - Janet)...we haven't sent out anyone's contact information or asked anyone to email anyone (I chose to email to my list - Janet)"

Thanks, Pete

Pete, we thank you and the soldiers who were denied the opportunity to tell their real experiences, not media-biased experiences. Who lost? The students and anyone else who would be open to learning what really is happening in Iraq. All missed true stories of valor, leadership, calm in incredibly stressful circumstances. So many who could have learned much were denied by the politically correct (in reality, wrong) actions of so few.

Special thanks to you and our soldiers, agents of security, stability and therefore, peace.

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Women's Studies - What a Waste 

In past posts here, here I've written about feminist views on a number of items. Related to these posts is my belief that a degree in women's studies is the biggest waste of time and money a family and student can expend in an excuse for a college education.

Finally, one university has awakened to the uselessness of this field. Turns out London's Metropolitan University is dropping its undergrad program this summer - why, no interest. Maybe no interest because a degree in this topic area does not train one to think or prepare one for a career, a job or anything else productive.

A few years ago, one of the Twin Cities major papers (I forget which one) ran a front page article questioning the value of a college education. Seems a young lady had just graduated from one of our local private institutions (say $120,000 investment) with a degree in women's studies but couldn't find a job.

DUH - what does one learn in a women's studies curriculum? Do they learn about: Chinese foot binding; east African gender mutilation; the Hindu practice of making widows throw themselves on the burning funeral pyres of their husbands (until the Brits forced the end of this absurd practice); polygamy in the Middle East; "temporary" mandated marriages; etc. No, the female instructors of Women's Studies curricula focus on white men, period.

These feminists would like you to believe that they and only they are the reason women were able to get into a wider variety of industries. I hate to burst the bubble but it was the free market economy that opened up jobs to women. In the mid 1970's, the number of blue collar jobs fell below the number of white collar jobs. Guess which of these two categories can use the strengths of women better? Yep, white collar jobs.

Women's Studies has become a self-perpetuating whining industry within academia - get a master's or Phd. in women's studies, teach it and brainwash some more unsuspecting young women. Do they learn to think? No, they learn to assess blame for anything to men. At least one university has realized it's a total waste of time, money, energy, and education. I hope more will follow - a quick domino effect here would be beneficial to the planet.


Thursday, March 27, 2008

WIll an A+ keep them at bay? 

I mean the single-payer health advocates, who probably are cursing into their green tea after reading that Minnesota is the healthiest state in the union.
That's according to CQ Press, which is out with its list of the most healthy and livable states for 2008.

Minnesota supplanted Vermont as the nation's most healthy state, marking the first time since 1999 that Minnesota has come out on top in the annual survey. In its "Health Care State Rankings 2008: Health Care Across America" survey released Wednesday, the publisher examined 21 factors such as access to health care providers, affordability of health care and the general health of the population to come up with this year's list.

New Hampshire came in second followed by Vermont, which won the award as the nation's most healthy state six out of the last seven years. Maine and Massachusetts round out the top five.

Also in the rankings was an emphasis on preventative care. "Congratulations to the very healthy citizens and leaders of Minnesota!" the introduction concludes.

What say you now, Sen. Berglin?

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Student mobility and gas taxes 

The Student Senate at St. John's University has issued a condemnation of the Minnesota Legislature for its override of Governor Pawlenty's veto of the gas tax.
WHEREAS: The Minnesota Legislature raised the Minnesota tax on gasoline and diesel fuels; and,
WHEREAS: This increase has an enormous financial impact on people with fixed and low income; and,
WHEREAS: Students are a major demographic of people living on limited budgets; and,
WHEREAS: This tax will only affect students negatively when they are traveling within the state for internships and trips home; and,
WHEREAS: This will place an additional, undue burden on families who are scrapping to make tuition payments; and,
WHEREAS: This is a wholly avoidable tax levied against the students of the state; and,
WHEREAS: If the Minnesota Legislature is going to make claims that it will stand in support of its student constituents, it must understand that this tax is contradictory to any such notion; and,
WHEREAS: Saint John�s University and the College of Saint Benedict rely on diesel fuel for inter-campus transportation; and,
WHEREAS: This transportation fee is paid for by student dollars
NOW, THEREFORE, BE IT RESOLVED, THAT WE, THE SAINT JOHN�S UNIVERSITY STUDENT SENATE, do hereby condemn the Minnesota Legislature for raising the gas tax to levels so high that student mobility is threatened.
Will other student governments follow suit?

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Banks and customers write contracts 

Given the lengthy comments made in the chat accompanying this article, there appears to be a great deal of interest in banks trying to cater to Muslim businesses seeking credit. The comments seem to think this some great injustice, that Muslim borrowers are getting a favor from these banks.

It means no such thing.

Islamic banking in the United States is still relatively new, and there are regulatory concerns regarding it. In short, Islamic or shari'a law forbids the use of interest (riba, in Arabic) in any debt contract, be it as a payment on deposits or as a payment for a loan. Western banks see this set of customers as a potential source of revenue, and seek ways to accommodate the religious beliefs of the borrowers. It's similar in type to producing food that is Kosher to capture a Jewish client�le.

Islamic loans involve a different risk-sharing arrangement, so that banks in essence have an ownership stake in the business for a fixed period. On loans, that doesn't appear to be too hard. Deposits are a little harder. I can find several examples of lariba or no-interest financing of business firms. (I'll note that the Islamic bank I've just linked to, American Finance House LARIBA, has Islamic mortgages that qualify for repurchase by Fannie Mae and Freddie Mac.)

Now this is pretty much all I know about these types of loans as made in the USA, from my notes for teaching Money and Banking. I am not an expert in this field.

I fail to see, however, why anyone should be upset by the presence of a finance instrument that conforms to Islamic law. An ingredient to a hand up (vs. a hand out) is to give people access to credit. These loan programs are a good way to get someone into the role of entrepreneur, invested in and connected to the local community.

One person I spoke with asked if a Christian or a Jew would be able to take out this kind of contract? I would hope that answer is yes; I wish I could speak with a local banker who's offering them to see if this is true. Meanwhile, to qualify for these loans here in St. Cloud, potential borrowers are going through a financial education program.

It doesn't appear anyone has started the programs locally. I certainly hope some of the ignorance in the discussion from the Times does not leave a useful idea stillborn.

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Wednesday, March 26, 2008

KNSI tomorrow and Friday 

6-8am on 1450 KNSI (streaming audio available for those outside the St. Cloud area.) I'd like to talk about the story Janet has been covering the last few days about VFF and Forest Lake High. I'll have something to say as well about the DFL budget solution -- I'm going to suggest there's a deal here the GOP should consider.


Initiating and sustaining inflation 

At least two decades ago I tried to co-author a paper with someone (who deserves to retain his innocence for what I'm about to write) over what initiates inflation versus what sustains inflation. The old Friedman statement that "inflation is everywhere and always a monetary phenomenon" seemed to us to be more a statement about what sustains an inflation. If you never print money, you shouldn't get inflation that lasts long at all. Indeed, you'd think you would get no inflation at all (some define inflation purely as an increase in the money supply without reference to price indices of any type.)

So the question was, what causes an increase in the supply of money? Not too long ago reaction functions were all the rage, replaced by Taylor and McCallum rules, but basically making the money supply or a policy interest rate a function of observed economic phenomena. What's in those functions? "Policy choices", you say, and I say "sure, but why did you make those choices?" We argued that the institutions of a country mattered for that; so too do the preferences of the polity. Germany has a greater aversion to inflation than Italy; it chose institutions that expressed that preference. Thus the things that initiated monetary accommodation -- that led to the monetary expansion that sustained the inflation -- could be different things in different places. My co-author and I share an aversion to one-size-fits-all explanations of inflation.

But I never found this a terribly satisfying explanation. Why do Germans hate inflation more than Italians? Sure, the Germans had hyperinflation, but the Hungarians had worse -- are they somehow more foolish than Germans? Made no sense to me. And so when the paper drew rejection letters from several fine journals, we got the message: Bad idea, go back and try again. We went back, came up with different stuff, moved on.

I write all this as prologue to reading John Palmer's explanation of the current macroeconomic situation.
Every time I look at the data, it seems pretty clear to me that if aggregate demand is pushed upward, then in the short run the economy will experience reduced unemployment rates and (often with a lag) higher rates of inflation. During such a period, the unemployment rate drops below the natural unemployment rate (or the NAIRU), and that seems pretty much like what the North American economies were experiencing during the past few years.
And I keep reading that, and I ask: what initiated that increase in aggregate demand? He's suggesting that the inflation is, in the old language of my grad school days, demand-pull. But what was the first thing that pulled demand? War spending? Investment? Housing boom? Or perhaps the first shock came by a slowdown in productivity, which led to a cost-push inflation. Which is it?

Commenting on that post, Mike Moffatt says that "treating the current situation as a demand-side problem is terribly misguided." But even a supply shock is often accommodated by easy money because that's what the system prefers; the economy's closeness to a national election affects that choice. So too does the possible rapid loss of liquidity in the system, which is what I think Arnold Kling means when he says "The central bank matters more as a lender of last resort than as a monetary authority." If the central bank faces a suddenly illiquid financial system, it may accommodate inflation in order to provide liquidity. Some might see that as seat of the pants monetary policy, but it feels vaguely familiar.

John's story, as I read it, seems to assume a constant level of full-employment GDP. I mentioned the productivity slowdown before -- but even there, it's growing more than it did in the 1970s. knzn suggests it's actually better than you think.

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No excuses 

As sure as it is warming up outside (or getting to the busy season of an academic schedule, which is the period between the end of 'spring' break and commencement), it's time for baseball again. I keep reading how it's harmful for Boston and Oakland to be required to play meaningful games in Japan and then travel back to the States. I have two answers for this. First, it's silly to have them stay in the country this long for two nights' work. If I go overseas for three or four days, my answer is simply to keep myself on US time as much as I can. Even if I time-shift, it doesn't take me a week to shift back when I get home. There are other adjustments you can make, such as using a scrub player for your Japan game and then send him to the minors, or play your next exhibition games in L.A. to take off three hours from the shift.

But I'm sorry, there's no reason for bellyaching about the Red Sox being penalized by the schedule. If the Sox don't win the pennant, nobody is going to go back and say they lost it somewhere over the Pacific. Besides, ownership has to be happy selling all that swag.

We went on the road, we're 1-1. If they get back to Boston a game over .500, it's all good.

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The Morphing Anti-Military Left 

So the lefties think they won a battle at Forrest Lake HS this week - they may have won the battle but they are questionable on their war to destroy the USA.

Their latest slogan is another twisting of words. I won't give them traction but here's the counter:

US soldiers are agents of stability, agents of security, therefore agents of peace.
No nation on the planet can exist peacefully or be free without stability and security. The left thinks it takes only money - we'll we've poured billions into Palestine and what has it done - raise 5 year olds who think murdering innocents is cool. Give me a break!

Go US Soldiers!


Tuesday, March 25, 2008

Forest Lake HS - You Missed it Big Time! 

This is a followup to this morning's post. Many of you know, after promising Pete Hegseth, a Forest Lake HS graduate, and his Vets for Freedom Tour an audience with 150 social studies students, the principal, Mr. Stassey, cancelled the session. Why? He claims there were parents and "others" who said it was a political event.

Since when does providing our youth with stories of real heroes equal politics? When the left gets so scared to hear the truth, they need to resort to intimidation. Unfortunately, far too many of our so-called educators, for a variety of reasons, have little or no backbone. I'll discuss why in another post.

Tonight, there was a SRO crowd at the Fort Snelling Officers Club. We heard from Pete, Mike Baumann, the MN Chair of Vets for Freedom(VFF), and some truly great American heroes - people who saved the lives of thousands of Iraqis based on their dedication, skill, leadership, and true American spirit. The photo at the top says it all - it's just too bad too many of our educators and media are afraid to hear good news about Americans. This is a war with worldwide members of a culture that is so ill it raises its kids to murder and maim, with a promise for heaven. Just think people, how sick is this? We raise ours to live. We will win this war but it will take longer than necessary because of the cowardice displayed by far too many teachers and others on the left.

The shot below shows the crowd early - by the time all arrived, there was not an empty space on the floor. The kids above - their dad is a real hero.

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Bragging time for SCSU Econ 

The announcement of Jim Bullard to lead the St. Louis Federal Reserve is a happy point for us at SCSU. He was a double major in economics and in quantitative methods and information systems from us in 1984. I remember him coming during his grad school years to SCSU to give a paper to our department -- he graduated just before I came to St. Cloud -- and I thought his research then was already outstanding. His resume is one piece of evidence I am a decent judge of talent.

He replaces longtime president William Poole, who is retiring after ten years. The St. Louis Fed has a reputation for a high-quality research program and an advocacy of price stability extending back to the 1960s. It's a big task Jim faces, and he recognizes.
As the Eighth District charts its course for the future, I plan to focus on a few key areas by building upon the St. Louis Bank's strong economic research tradition; continuing to provide world-class, relevant economic information and education; enhancing the Bank's outreach to industry and university economics programs; and gathering and disseminating information used for economic policy decisions.
Good luck and congratulations from St. Cloud!

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Only Leftist Politics Matter 

It is a very sad state of public education in the USA when school officials expose elementary school children to sexuality issues, AIDS, gay rights etcetera over the vehement objections of parents who wish to protect their children from this type of material at an early age


the same institution prevents high school students from being exposed to heroes, bonafide heroes, who are trying to protect the very system that that will not let them speak.

Forest Lake High School in Forest Lake, MN, home of Vets for Freedom Executive Director, Pete Hegseth, pulled the cowardly move of the day by refusing to let the national tour of Vets for Freedom meet with 150 social studies students. The excuse is listed here, it's very lame.

I hope the Forest Lake residents remember this when the next school board elections occur. You can voice your frustration with the superintendent, Lynn Steenblock by calling him at 651-982-8103. You can also reach the school board members here.


Monday, March 24, 2008

Here, grab this mic, or, TANSTAAFL! 

So I get an invite to a Dennis Prager talk from the station tonight, as did all of NARN. Late last week we were asked to put forward someone who will emcee the event. I had never seen Prager talk before and thought it a good thing to see (I had met him ever so briefly onces before, at a state fair event.) So I accepted the ticket, but, given I had to teach late this PM and worried about traffic, thought it would be better if someone else did this. Usually, you cannot keep Mitch away from the microphone and he's better at it anyway.

I had not planned on having dinner because of the schedule anyway, so I was surprised by light traffic and hit the Northland Inn around 6:15. They get me a seat in the dinner anyway, I get to talk a minute with Prager -- who is as nice as you would expect if you listen to his show; he says there's no radio-Dennis vs. real-life-Dennis, and from what I see that is right. I get my chicken (no use to this vegetarian, and at this stage not replaceable so I did without a main course), push it aside and talk with Fraters three and Nih(i)list. Over comes station management: We need someone to stall for Dennis, he's running late. (The dinner guests were to get personal pics with Prager, more on which in a minute.)

Now, walking into a room of 40-75 people and talking for 10 minutes is easy, and a studio with just a mic and a producer, well, that's fun. But this thing was sold out, and I had no idea how big the ballroom was. Something "sold out" placed in the "Grand Ballroom" isn't likely to be 75 people.

It wasn't. It was 600. And save for the picture-takers wandering down in twos and threes, it was full.

It was at this point I realized, there ain't no such thing as a free lunch. Or even a chicken you gave away.

I suppose I did OK. It did not help that one of my Celtic heroes, Wolves GM Kevin McHale, was in the audience in the front row, or that the room was darkened and a bright spotlight was on the podium. But in and out, maybe three minutes tops (they wanted ten, and I think my facial expression in response convinced them that was not a good idea.) Apparently I did well enough that they had me give a minute as a close to get Prager out of the hall without being stopped by 50 fans.

Me, I got five on the way out.

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Bummer about the bridge, King 

The closed DeSoto bridge sits about 300 yards from my office up the river. It is one of three bridges within about three miles of each other, with a fourth a few miles further up that was just finished connecting St. Cloud and Sauk Rapids. Everyone thought that last bridge was wa-a-a-ay overdue for replacement; the new structure is visually pleasant. But not very busy. While traffic so far has been pretty light due to the holiday (there was a fender bender at 9am this morning on the Veterans Bridge, two blocks north of DeSoto, but it was gone when I crossed it at 9:35), I think tomorrow will be the first real test.

Veterans Bridge was built in its current form in 1971, and was redecked and widened to four lanes in 1996. Traffic was routed for some time to DeSoto. We have thus had experience with having a bridge out. While St. Cloud has grown dramatically in the last ten years, most of the growth is either on the west side of the river anyway, or is up in Sauk Rapids and comes over the new Sauk Rapids bridge or the University bridge (to the south of Desoto -- many old-time Sauk Rapidians I know that come to campus use that bridge instead.) Most of the Sauk Rapids traffic will now come in over the SR bridge, but it then gets caught in a pinch to two lanes in North St. Cloud (between 11th and 15th Sts. North.)

Personal note: Littlest ends her schooling in Sauk Rapids this May; for the last two years that particular area has been our personal issue. The new bridge, as I say, is nice!

The east side of the river would more naturally commute west than the other direction. There are 15,703 on the east side of St. Cloud as opposed to the more than 50,000 living on the west side; the downtown and the shopping areas are mostly congregated to the west. (Data via ZipSkinny, h/t: Carpe Diem.)

Everyone up here is still wondering -- replace or repair? The key point most people should keep in mind is that there are plans to both widen the University bridge (a long story of slow-growth advocates winning a battle and losing a war, but that's another blog post some day) and renovation of Highway 23 through downtown and out about halfway to Crossroads mall at the other end of town. Both of those other projects were due to go in 2010. The desire would be to handle the Desoto/Highway 23 bridge with the road reconstruction, but you don't want TWO bridges out at the same time and you don't want to repair the road and the bridge separately. So when people ask me what's going to happen, I don't know. It makes far more sense to do the DeSoto bridge first, but that means someone has to agree to move forward the road reconstruction or accept the slow build-out of Highway 23.

It's not going to be pleasant no matter what for those who commute from the east side, but the lack of east side development is actually now a blessing. If that side of St. Cloud had developed like the west and south had, this would be a much bigger disaster.

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No boundary on his arrogance 

I can scarcely believe this true, except I have it from two sources. One is Psycmeistr, who has the tale told this way:

On Saturday March 8, 2008 State Senator Larry Pogemiller and State Representative Phyllis Kahn held a town a meeting at the Brian Coyle Center in South Minneapolis. The advertised purpose of the meeting was to get feedback from constituents on topics like the state budget, the gas tax and transportation funding. In reality, it was a way for these two long-time DFL incumbents to tell you what they think of your ability (or lack thereof) to think and act for yourself.

Direct from Senator Pogemiller: "I think it's simplistic and naive to say people can spend their money better than the government."and he went on to include... "The notion that everybody can individually spend their money better than government I, I just think is trite, wrongheaded and anti-democratic."

The other was Freedom Dogs, with audio confirming these quotes.

I have a hard time believing anyone could be this arrogant. I was listening to the podcast attached to this post from Cafe Hayek, wherein Russ Roberts debates a physician in favor of single-payer. Russ said something I thought rather profound: We don't want health care, or health insurance. What we want is health. And the question becomes then, who can better help optimize your health. You? Your doctor, whom you pay directly? A committee of doctors? A panel of government bureaucrats? I'm pretty sure most us would not choose the last option.

Because that is the case of people spending other people's money on other people. The track record on that kind of arrangement isn't very good.

Sunday, March 23, 2008

Training our Brains 

For decades I've used the phrase, "Train your brain" to encourage my students and others to learn more. Our nation has lived through 37+ years of telling kids that memorizing dates, facts, languages, etc. really isn't necessary. I use a times table fact test in my college Management Information Systems class. Students who were made to learn the facts do well, the "feel good" only group does not. Poorly performing students usually have to work harder. In my latest class a key reason to learn basic data was driven home.

The night's topic covered the more abstract computer software programs: neural networks, fuzzy logic, artificial intelligence, expert systems, etc. These areas of software development attempt and often succeed in producing products that think and move like humans - imagine robots.

What drove home the incredibly amazing function of the human brain (and my strong belief in the necessity of learning language symbols (alphabets and sounds), math facts, historical dates, geographical features, religious basics, etc.) was this article discussing the chess competitions between the world's greatest chess players and computers. The computer was processing 200,000,000 moves per second, a phenomenal capability. The computer doesn't "consciously" do the calculation. It is programmed to quickly assess a chess situation, "review" data and decide which move to make. Our human brains work much the same way.

The reason we must teach basic facts is this: a fact once learned is in the brain forever. The brain uses the facts it possesses automatically. When cultures developed written symbols for speech, they made rapid advances, therefore we must teach children written symbols to survive today. After memorizing the fact, 7 x 6 = 42, we rarely consciously calculate it but our brain uses that fact millions of time during our lives, naturally. When we commit to memory rivers, imports, exports, mountain ranges, belief systems, major cities, etc. we become able to picture where an event occurs - the necessary associations and correlations simply "appear."

Our brains are our mobile computers. Think of your brain as a muscle. If it is not exercised, it will atrophy. As a species and member of various groups on this planet, we owe it to ourselves and our posterity to make sure our children learn the symbols, math and geographic facts, balanced history, and yes, a foreign language. Only then, after discovering the world of information and committing basics to memory will they really succeed, which in turn gives them real self-confidence.

We deny children life when we make learning only about "feeling good" for one cannot give someone self-esteem - it must be earned and fact learning is the foundation. To really think, to draw conclusions, to understand who and what we and others are results in self-confidence and better decisions. Children know when they don't know. They may not be able to express the frustration but they know. And when they learn, they know they know - they get excited about learning more. My college students who do not know basic multiplication tables are at a disadvantage - because they know they don't know what they intuitively know they should know. This self-awareness eats away at their confidence just as it does with other students. It is time to demand knowledge of basics.


Being #1 Carries Responsibilities 

Saturday in the Western Region of the NCAA Basketball playoffs, #7 West Virginia upset perennial NCAA basketball powerhouse #2 Duke University, . The victory for West Virginia came two days after Duke managed to squeak by #15 Belmont 71-70, the final Duke basket occurring with less than six seconds remaining on the clock. Everyone goes after Duke and many people, outside of Duke's enclave and alumni, root for the other team.

During my career at IBM we experienced similar reactions - for a non-IBM company to beat us in a bid, whether it be telecommunications, hardware, software, consulting, etc. people outside of IBM and without knowledge of the environment often rooted for the other company.

In the USA, world leadership - unrequested but thrust upon us, Americans often experience this knee-jerk reaction to go against the USA. If there is anyway to criticize us, it is done, internally and externally. We regularly print half-truths and teach our children that we are really a terrible nation.

Being #1 makes an entity a target - goes with the territory. In Duke's case, they will feel bad, analyze what went "wrong," identify the positive and come up with a new plan. They will be back with force next season. For IBM, we lost sometimes, we felt rotten, we analyzed what went "wrong," identified what worked and went after the next bid. In both environments, people adapted.

My concern for the USA is that far too many, including most of those on the left, only look for what goes "wrong" from their point of view. They spread their negativity anywhere they can. They refuse to look at what worked; they do not appreciate the efforts of those trying to protect us. They ignore the good - it doesn't exist in their world.

Did you ever notice, none of these critics want to leave. Most do not want to return to a home nation. Why? They don't answer - oh they always have some American to blame and imply that if "they are in charge" everything will be better but massive replacements of anything rarely produce success. Not one socialist system has worked, not one - but many have resulted in millions, tens of millions of deaths.

If Duke players and coaches spent their entire season each looking only at their mistakes, if IBMers only looked at sales failures, if Americans are told and taught only what the press doesn't like, if Americans refuse to teach and learn what we have done well, and if in any of these areas someone tried to instill an unwarranted guilt on the team, the salesmen, the nation, in every situation, the individual and group loses.

The US remains one of the most self-critical nations that has ever existed. Because of this freedom of expression, people feel they are free to take shots at us without any obligation to place things in context.

It is time to realize that though we have much, we have never been an imperialist nation. We fix our major problems. We have advanced the cause of freedom everywhere. My foreign students remind me every semester - they come here for freedom: religious, educational, job opportunity, etc.

Maybe it's time those who are so negative, for whatever reason, to try living somewhere else - six months would do it. Maybe then, they will realize what we have is a true gift; that what we have is what so many people desire and our constant self-critiquing is just wrong. We are a beacon - we must keep the light burning. We must be responsible to ourselves, our children and others.


Saturday, March 22, 2008

Bhutan up the happiness 

Like Angus, I read this article from the WSJ this morning and laughed heartily. My co-editor has an article in the book on happiness measurement which takes this literature to task, and I won't refer to it yet. But here's my question -- how do you ever know if happiness went up or down? "Gross national happiness rose 2.8% in the third quarter, buoyed by an increase in betel nut consumption and an absence of glowing reports on the Yankees' PR push. A sharp rise in showings of RoboCop on Star Movies bucked against the trend."

How are you going to know how your country is doing when your idea of measuring welfare is done like this?

Outside the government high school in Thimphu, 29-year-old researcher Karma Wangdi recently interviewed Bhanaan Humagai, a 16-year-old high school student.

Question: On a scale of 10, how happy are you?

Answer: 8

Question: How stressed are you?

Answer: Somewhat stressed. I am studying for exams.

Question: Have you ever thought of suicide?

Answer: No! (laughs).

Do you code the answer for suicidal thoughts differently if you get laughter with the 'no'? And there are different kinds of laughs available.

Seriously, we know from Easterlin that happiness doesn't increase even when income increases greatly, when looking over long periods of time. So periodic measurement of happiness is either going to be a measure of what have you done for me lately, or is going to be used to denigrate economic growth as traditionally measured. Given Angus' observation that
the only concrete policy steps taken to raise it are (1) a smoking ban, (2) a dress code, and (3) setting limits of how much of the country can be developed.
...we can infer which it will be.


Friday, March 21, 2008

Fed officials as Supreme Court nominees 

Mark Thoma notes that the composition of Federal Reserve governors and presidents is quite red.

Of all the members of the Federal Open Market Committee, five members of the Board of Governors (usually seven, but two sets are currently empty) and twelve district bank presidents for a total of seventeen, how many were appointed under Democratic presidents?

Answer: There is just one, William Poole of the St. Louis Fed...
And Poole, an inflation hawk if there ever was one, is stepping down at the end of the month. Both Thoma and Felix Salmon say there is little doubt that this isn't about politicizing the Fed:
Clearly there's a lot of politics surrounding the area of fiscal policy concerned with tax cuts. And there might be a very weak correlation between the hawk-dove spectrum and the Republican-Democrat spectrum. But it's very easy to think of Republican doves and Democratic hawks. And the Fed, in particular, seems to have done a very good job of remaining genuinely independent, which is one reason why Greenspan's testimony in favor of the Bush tax cuts was so very shocking.
Justin Fox expands on the point, noting the salaries of presidents over governors probably leads to less presidential turnover. But he doesn't think the turnover and the current composition reflects any partisanship.

But that doesn't mean the choices of governors and presidents aren't influenced by political considerations. A speech back in 2000 by then-Governor Lawrence Meyer contains an interesting footnote:
When Susan Phillips' term expired on January 31, 1998, it took the Administration a year and a half to nominate Carol Parry for that position. Alice Rivlin announced on June 4, 1999, that she would be resigning from the Board, but the President has not nominated anyone to replace her. In the meantime, the President renominated Vice Chairman Roger Ferguson to a full term as governor after the expiration of his short partial term on January 31, 2000. The Republican leadership of the Senate Banking Committee has refused to hold hearings for either the new nominee, Parry, or Ferguson, reserving the opportunity for the new President to make these appointments and therefore possibly to convert the positions from Democratic to Republican appointments. In the meantime, the Board remains below its statutory number of members and could remain so for the many months after the new President takes office, if past experience is any guide to the time it takes to make appointments and get them through the confirmation process.
I posted last November that several Fed appointments are now being held up by Senator Christopher Dodd; these appointments are still awaiting action. Supreme Court justices they are not, but Fed governors and presidents are important, particularly at this time of great uncertainty. We should acknowledge that both parties have participated in using the hold on monetary policy (and even fiscal, in the case of Parry). But we shouldn't accept it.

UPDATE (Saturday): Thanks to Justin Fox for a link. He notes the case of Randall Kroszner's renomination to a full term as governor, which is one of the nominations Dodd is holding up. Kroszner has in fact already testified before Dodd's committee. There's some discussion that Dodd is holding up Kroszner due to the latter's activism on mortgage regulation, which displeases Dodd.

As to Kroszner still voting, I think this isn't unusual. Ferguson continued to be a voting member of FOMC after the expiration of his partial term in January 2000 (example). I can't find a published rule on it, however.

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Is it possible for metro DFLers to represent St. Cloud? 

If you've read here for awhile, you know I'm not a very big fan of JOBZ. That said, St. Cloud area business leaders assert that it has saved 970 jobs in the area and added about 610 more jobs. That's not a huge surprise, as Central Minnesota is the fastest growing area for jobs outstate. Some wonder, with good reason in my opinion, whether the jobs they say they have saved.

Smaller towns complain that St. Cloud and Rochester don't need it. That's a bad deal for those two Cities, since the metro-area legislators don't like it. It's thus no wonder that the House DFL plan for closing the budget deficit throws JOBZ (and Q-Comp) on the pyre. That they are both initiatives of Governor Pawlenty just makes it all the better. The smaller cities in outstate are going to complain, but if there's enough cover for killing JOBZ, it will happen.

So it is interesting that while Reps. Gottwalt and Haws are trying to protect JOBZ for the benefit of St. Cloud according to radio reports -- Haws asking for revisions to improve efficiency, but no indication of using it as a funding source for deficit reduction or supporting other spending -- Sen. Tarryl Clark is disagreeing with the Governor's budgetary choices, without mention of how she would pay for this. Is she therefore siding with the metro DFL in axing a program that doesn't help Metro? If so, whose interests is she representing? She may be cheering the Husky fans with handouts of the renovated National Hockey Center, but she doesn't seem to say anything about how that is to be paid.

If she would like to take a stand to say JOBZ should be axed, or should be amended as Rep. Haws has, that's one thing. Killing the program, though, seems to go against the interests of the St. Cloud area.

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Thursday, March 20, 2008

A good sign? 

From our administration:

For Christians, Good Friday is a significant day of religious meaning. Tomorrow is Good Friday, but it is also a normal day of classes and open offices. There will be students, faculty and staff who are using appropriate means to observe their faiths. As we are a community that supports pluralism and diversity, please respect the religious observance of those who celebrate the conclusion of Holy Week.

I don't know; it feels a bit contrived, particularly the "using appropriate means". What would constitute inappropriate means, and what should be the campus' reaction to that? And if there are inappropriate means for observing Good Friday, are there also ones for observing religious holidays of other religions? I don't know, like I said. It is well-intentioned, I'm sure. I just don't know that this is a good sign. I would not like an administrator deciding which of my Good Friday traditions are appropriate.

Meanwhile, the protest I wrote about yesterday appears to have started a conversation on campus; most people seemed to think it was simply no big deal. I did put the question of a public expression area to them on our campus discussion list -- so far, no discussion. That is assuredly NOT a good sign.


We ain't been here before 

As I'm getting ready for my masters' level macro class, I read this.
U.S. Treasury three-month bill rates dropped to the lowest since at least 1954 as finance company CIT Group Inc. drew on $7.3 billion in credit lines after being shut out of short-term funding markets.

Investors pushed the rate as low as 0.387 percent as the loss of investor confidence in credit markets deepened. Surging demand for Treasuries is causing failures to deliver or receive the securities to climb to an almost four-year high in the $6.3 trillion a day repurchase, or repo, market.

``The market's insane,'' said David Glocke, who manages $75 billion of Treasuries at Vanguard Group Inc. in Valley Forge, Pennsylvania. He sold bills maturing in one week at a 0.05 percent yield. ``The biggest thing overall is the flight to quality.''

Three-month bill rates ended the day 1 basis point higher at 0.57 percent as of 2:57 p.m. in New York. They had tumbled 32 basis points yesterday. Rates on three-month bills were as high as 4.29 percent as recently as Oct. 15.

Krugman says liquidity trap.

Recommended reading 

I spent a segment of this morning's show on KNSI reading through Craig Westover's column on the Governor's Health Care Transformation Task Force. My first reaction: Any time you hear the words "government" and "transformation" in the same sentence, you can bet the outcome will include the use of coercion. Craig and I are on the same page.
"Successful transformation of Minnesota's health care system will require active participation and engagement from consumers, employers, health care providers, health plans and government," declares the Task Force Report. The obligations the Task Force envisions for the first four groups require fundamental behavior change; government's obligation is to "enact the necessary changes to law to implement the transformation plan." In other words, supply the muscle, the force, the coercion.
Craig has just posted part II of this essay. The report from the task force calls for competition and patient-centered care, but it cannot deliver:

"Competition" logically means individual health care providers competing for individual patients on quality and price based on the individual's conception of value � much like Lasik surgery works today. Independent Lasik surgeons have had to innovate, improve their procedures, upgrade their technology and lower their prices to attract patients. Lasik surgeons operate outside the managed care payment system.

In the task force world, "competition" is "managed." Under the task force payment reform plan, health care providers must bid as low as possible for a contract to serve a population of patients offered by a managed care organization. Think of it like putting out a bid to provide computer maintenance: The task force approach is health care on an industrial model where we carbon-based units are maintained and repaired according to the manual. Unfortunately, we are not all the same make and model.

In the task force health care system, a provider's profit depends on how "efficiently" it provides medical treatment. The provider can be "efficient" by developing innovative treatment methods or by rationing the treatment it provides. Which method the provider chooses has great consequences for the patient, but from the task force's perspective of keeping costs down, either approach would yield "high value health care."

And, lest the Transformation Task Force leave any minor detail of your life untouched, it would require every Minnesotan to have a minimum amount of health insurance, dictate to health plans whom they must cover for what at what price, and create a health insurance exchange that effectively would eliminate the role of private insurance brokers.

The beginning is HF3391, a bill wending its way through the Legislature now. The Lady Logician highlights the backdoor to universal care. All four of these links should be on your reading list.

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My forecasting career is over 

It appears I have been replaced by a canary and a colander. For the record, calendar soup tastes like lentil soup.

I have no idea why I landed on TDS last night, as I'm not a fan of the show, but this was hysterical.


Wednesday, March 19, 2008

KNSI tomorrow and Friday 

Filling in for Don Lyons, 6-8 AM on Newstalk 1450 KNSI. (Don's calling the Huskies in the Final Five, including tomorrow night's game versus the Gophers.)

We'll be taking the week off on Final Word, and we'll instead replay the interview with Governor Pawlenty. You can get the podcast if you can't wait.

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What do we want? A public expression zone! 

It being after all the fifth anniversary of the invasion of Iraq, and it being that I work on a college campus, I expected to see some campus protesters today. And sure enough they were there, marching about inside my building. "What do we want? Peace! When do we want it? Now!" It was that typical nostalgia for the Sixties that the modern student learns (some dare call it "critical thinking".) Students and faculty alike mostly were annoyed by the loud chanting, which interrupted many classes. There were calls made to campus security, but I never saw an officer come over to our building. The students left within fifteen minutes at any rate.

As someone observed, we have on our campus public expression zones. When the fire-and-brimstone preacher comes to campus, he's required to stand in the zone. Nobody seems to want to hold these students to that standard. Why?

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Using your money to buy their consensus 

Craig Westover points to the flaw in thinking about the bonding bill.
The emphasis is on �How much CAN we spend?� not �How much MUST we spend?�
I spoke this morning to a group of about fifty bankers, social workers, financial counselors and others on strengthening financial stability. In the process of doing this I was looking at materials we use to teach economics to kids in K-6 and 7-12 education. (My strategy is to reach the parents through the kids.) There were worksheets on how much of what we spend is discretionary versus mandatory, how much is fixed versus variable, etc. This is all pretty standard fare for teaching financial literacy. (I grabbed most of what I used from the Fed's education site.)

Now what about that logic applied to government? Craig's right -- we have both sides of the political debate agreed to borrow -- to "put on the credit card" -- 3% of what government takes from us. And we will be expected to pay the bill on that credit card. All that we teach in getting new families, families in financial distress, about financial literacy is contradicted by what their government does. Imagine if an employer were to take a share of your labor; he has signs around the plant announcing that you should be willing to pay more for a better Minnetaxco, Inc. He then announces that he is borrowing and additional 3% of what he has taken from you to "make investments" in Minnetaxco. To repay that loan, he will have to take a slightly larger share of your labor. There's interest to pay. But no worries, he is allocating those borrowed funds to help you produce more (which, of course, he can get a share of.)

Government doesn't calculate investment returns. At best, if it followed Craig's advice, it would do a cost-benefit analysis. But it has so many decisions to make about who's benefits count, and whose costs count. You cannot expect a government to calculate investment when it has no conception of risk of loss. It bears no risk. You do.

Craig continues:
If the bonding bill at that point is a mere $600 million, then that�s the appropriate and legitimate level of state bonding. If indeed everything on the list is both constitutional and necessary and the total is $1 billion, well, then we have to look for other sources of revenue � first eliminating extra-constitutional or unnecessary expenditures elsewhere in the budget.

To say we must know how much we have to spend before crafting a bill is simply indicative of the political division of spoils that is the bonding bill.

And that really is the issue here. The 3% is not a fund for investment in infrastructure; infrastructure is the vehicle to which we attach a spoils system that sees you as the source of the spoils. It only uses roads and bridges as a means of keeping you acquiecent.

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Tuesday, March 18, 2008

Should he have held out for unanimity? 

I had to go back through a few papers to see when more dissent was had in a meeting than this one. It's not all that unusual, it turns out. Belden (JMCB 1989 -- JSTOR link) notes that there were six episodes where three bank presidents dissented on an FOMC vote, and five of the six times all three dissented in favor of a tighter monetary policy (smaller or no decrease in the Fed funds rate target.) Alan Greenspan was much more patient in seeking unanimity in Fed decisions, argues Chappell, McGregor and Vermilyea (2007). WSJ's Economics Blog notes that this is the first time we've had five dissented FOMC moves in a row

In today's case, two presidents "preferred less aggressive action at this meeting". Bank presidents (as opposed to governors) tend to be more concerned with inflation. Given that the market had some expectation of a 100 bp cut, I am quite sure 75 bp was a compromise that was as close as Bernanke could get to a broad majority view. Turbulent times will spread out policy preferences.

I wonder if this is a good thing. Sudeep Reddy says that Bernanke views the dissents as a sign of a more democratic Fed. That would mean that it was more democratic pre-Greenspan as well, since that's the only period I can see where it drops (and I think I have a pretty good handle going back to Arthur Burns.) On the same blog, David Wessel notes a recent paper that argues central banks might talk too much.
The recognition that monetary policy is conducted in an environment of imperfect information is central to understanding both the potential benefits and limitations of central bank communications. It rationalizes the role central bank communications may play in helping to inform private sector decisions and expectations. But it also serves to emphasize that much of the information communicated by central banks is noisy and imperfect.
I noted last summer that Bernanke has been trying to wean financial markets from trying to read too much into Fed statements. I don't think he is trying to confuse markets deliberately, but he's clearly less worried about signaling dispersed policy preferences within the Fed than Greenspan was. Add to this dispersion the several new instruments extended for getting credit into financial markets (the kitchen sink was thrown, one says) and the desire to keep at least a couple bullets in the holster, and that we still need to convince some people that the issue is liquidity, not solvency, I'm calling 75 bp about right. I'd've argued for 50, but you wouldn't have needed to be Alan Greenspan to get me to accept 75.

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New SCSU blog 

Not affiliated with the Scholars, but Matt Barton, who teaches ENGL 432/532, Writing on the Web, has students writing a political blog. Greetings to Mr. Barton's students!

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Monday, March 17, 2008

The popularity of no plan 

Others are focusing on the Survey USA result that the State Legislature has a 28% approval rating. There's also the result that half of voters said they would be less likely to vote for those legislators who voted for the transit tax.

But, 58% approve the Governor's plan for closing the budget deficit. The crosstabs indicate a 55-28 lead with independents, and the plan is only opposed by self-identified DFLers by a 40-48 spread. The DFL plan has yet to be found.

Attempts to dent the Governor's popularity so far have not succeeded.

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Hard to be without my laptop 

The hard drive has some error right where the registry hive is, so I cannot load Windows. I have the hard drive out of the case, in a holder, and am this moment backing up all the files, so my losses are mercifully minimal (I hope.) But it does stymie much of what I can do, particularly at a time when, as Bill Polley puts it, this is a weekend we'll always remember -- and not just because we had Governor Pawlenty on Final Word this weekend (your podcasts here soon I hope!)

Friday, March 14, 2008

Well, he's there when WE want him 

In one of the sillier articles I've read, MPR is busy figuring out whether Gov. Pawlenty is qualified for Gold Elite on NWA. They even have pretty graphics. Does anyone check to see what the Legislature did for the month and a half before the Legislature even opened for session?

MPR is measuring inputs. What I care about is output. Has he delivered the production we expect from the governor? And how do I measure that? It's NOT based on how many times he talks with the DFL leadership.
"I've seen more of the former governors than I have of the current governor during the start of session," said DFL House Speaker Margaret Anderson Kelliher.

Kelliher said she's worried that Pawlenty has not been meeting with her or other DFL legislative leaders. She said the last time she met with the governor was on Feb. 13, one day after the legislative session started.

DFL House Majority Leader Tony Sertich said he hopes to see the governor come to the table as budget negotiations intensify.

"I think it's shocking. It would be shocking to Minnesotans to know that their governor and their elected legislative leaders have not been in the same room since the start of the legislative session," Sertich said. "I've seen him more on the Sunday morning TV talk shows ... than I've been in the room with him."
Now, go to the last paragraph for the punchline,
House Speaker Margaret Kelliher acknowledged she hasn't invited the governor to any meetings. She said she'd be happy to hold one in her office if the governor would attend.
So first, he was traveling, they didn't want to invite him to a meeting, but they are criticizing his travel. Doesn't that put a pretty big hole in this story? Second, she is willing invite him to HER office. Would she go to his? He is, after all, the governor.

And he's home tomorrow. How do we know? Governor Pawlenty will be with Michael and me on the Northern Alliance Radio Network on AM 1280 the Patriot. The show begins at 3pm CT, and Governor Pawlenty will join us at 3:30.

Speaker Kelliher? Call us at 651-289-4488 and extend that invitation. Who knows? He might give you his cell, and you could reach out and touch him any time you want.

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The Paulbots' graven coinage 

Someone tipped me to a proposed action posted on the Ron Paul meetup board.
A great opportunity has come into our own backyards. Arthur J. Rolnick, Senior Vice President of the Minneapolis Federal Reserve, and Associate Economist with the Federal Open Market Committee, will be speaking at the University of Saint Thomas on Thursday, April 10th, 2008. Mr. Rolnick is coming at the request of the Economics Department to speak and take questions. This event will be open to the public.

As a liberty activist and student at Saint Thomas, I am urging all those who question the policies and secrecy of the Federal Reserve to attend. This is a unique opportunity to confront a man who is deeply involved in the inner workings of the Federal Reserve.

...I am asking all those who care about our increasingly graven [sic] economic future to attend in solidarity and show our dissent for current policy. By attending and speaking up on April 10th, we the people can make an effective impact on the conscience of Mr. Arthur Rolnick.
The relationship between Ron Paul supporters and Art Rolnick is through NORFED, the group that issued Ron Paul copper coins, sold for a dollar each and caught up in a wire and mail fraud prosecution. You can own one of those coins, but commerce in them as a competing currency is a crime (see this.)

Rolnick was quoted in an undated but certainly recent article out in Montana (the gold bugs have posted it -- I have no independent source for it) in which Rolnick responds to the NORFED claims that the Fed must be removed:
"The way I would respond to NORFED is this: The economy is incredibly productive. There's low inflation. The unemployment rate is the lowest in 30 years. What's broke?"

"These guys are right when they say there is nothing in the Constitution explicitly allowing a national bank. But the Constitution gives Congress the authority to regulate money and the value thereof, and courts have upheld Congress' implied powers."
Even as we head towards or are in recession, Rolnick's critique seems still valid.

"These guys" are the friends of Ron Paul. During my time in hard libertarian circles I saw many people like the poster of this call for action. I know Republicans are hopeful of keeping Ron Paul supporters engaged in its party politics. It might want to look a little more under the hood.

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Vets for Freedom - National Heroes Tour 

My friend, Pete Hegseth, is the Executive Director of Vets for Freedom (VVF), an organization comprised of Afghan and Iraqi vets who KNOW these battles against those who wish us dead, are critical to our survival as a nation.

Today a national tour begins in San Diego. As indicated on the VVF website, many of America's most decorated war heroes from Iraq and Afghanistan have packed their bags and are hitting the road on a national bus tour to take their non-partisan message of progress and freedom from coast-to-coast. The almost four week tour will end in NYC on April 9. It will be in Minneapolis/St. Paul on Tuesday, March 25. There will be a "Meet and Greet" evening event from 6:00-8:30 at the Fort Snelling Officer's Club in St. Paul. When I get more details I'll let you know.

In the meantime, check out their schedule and if you can, show a flag when you see them come through your town.

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Thursday, March 13, 2008

Expiration day looms? 

I was in on a blogger conference call with Senator Norm Coleman on Tuesday, in which his introductory remarks (and my one question -- guys, I usually show up with three and forget it when I do radio!) concerned the budget deficit. He was quoting several numbers that were I thought from something he was reading. His office was kind enough to point me to the document, created by the Republican Policy Committee. It makes one key point that I think bears repeating. If you let the Bush tax cuts expire in 2011...
A family of four with two children and an annual income of $56,300 ($50,000 today) will see its taxes increase by more than $2,000 � a 132 percent higher tax bill. A family of four with $67,600 in annual income ($60,000 today) will see its taxes increase by more than $1,800 � a 58 percent higher tax bill.
They quote a one-page press release from Treasury, which puts the assessments at $3,675 in 2011 for the current $50k couple w/kids versus $1,583 if the cuts are extended; $5,065 versus $3,207 for the $60k couple w/kids.

The Senate passed a bill today that will cut those numbers down, permanently extending the 10% tax bracket.
By a vote of 99-1, the Senate passed a Democratic amendment to permanently extend a 10 percent tax rate, mostly for low-income earners, along with a child tax credit and marriage penalty relief. These provisions are due to expire at the end of 2010. A Republican amendment that would have extended the remaining tax cuts was defeated.
The House, meanwhile, seems determined to go forward with fewer cuts. The House GOP is offering an alternative which has more reduction than the Senate plan. In a press release, Rep. Michele Bachmann described the House alternative in stark terms:

This is an assault on the American family: the Democrats� budget will force a $683 billion tax hike on working families and small businesses. In Minnesota�s 6th Congressional District, this means an average individual tax increase of $2,256 and an average loss of per person income of $1,609. It means 2,665 fewer jobs and $292 million less in our local economy.

Families will be attacked from both ends: this punitive budget will shrink opportunity and destroy jobs, while taking yet more money from the pockets of hard-working taxpayers.
The Heritage Foundation analysis of the Pelosi plan is here. There are competing arguments out there for whether the Pelosi Democrats are improving or harming tax progressivity. Gerald Prante has a rundown of the arguments.

I am sure there's more time to deal with these issues after the Novembre elections, but the Democrats I think have a tougher time the later it gets to having all these cuts expire. The numbers I gave in that first quote are numbers for four years from now (tax bills due in 2012), so it's easy to talk about them as being something not entirely real to voters. In 2010, that will no longer be true. So perhaps the time of decision on the Bush tax cuts actually is at hand.

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Lay your money down, before they take it away 

Greg Mankiw points to a bet you can now make at Intrade on the top marginal tax rate in America in 2011.
Notice that there is a one in three chance the rate will exceed the level that prevailed under President Clinton.
Too bad we couldn't have a contract like this in Minnesota. Anyone for a top rate of 8.5%? How about 9% giving us a top rate above those of the Arne Carlson Administration?

(Oh, and Arne? Put on your Gopher sweater and shut your pie-hole.)

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Two for two, two to go 

The second shoe of the recession has started brigade fell this morning, as retail sales surprised us with a -0.6% reading versus a +0.1% expectation. The year-over-year level of real retail sales graphed on the blue line to your left (courtesy Calculated Risk) has fallen below zero now for two of the last three months. While many want now to say "the recession has started", I'm going with the view that it started last December (about which I speculated two months ago.)

I will note that the UCLA forecast is just out, saying no recession. I think it's reasonable for disagreement still to exist and my earlier skepticism regarding the call of a recession in Minnesota is a conservatism in announcements that most economists share, I believe. But I'm now looking at graphs for employment and real sales, both of which are heading down (that WSJ economist survey now has 2008 job growth averaging a wretched 9,000 per month). We won't get the other two broad indicators for February until industrial production (Monday) and personal income (the 28th), but I doubt they are going to give us anything different than the world William Poole is describing.
Fed policy is always properly described as sort of walking a tightrope, trying to balance the various policy objectives. The problem is in today's situation, that tightrope is really being shaken hard. � The objectives (are) inflation control and of full employment. (It's) market instability that is shaking the tightrope.
And intriguingly the response is to act as the "fool of last resort". The question seems to be whether this is going to be something that the Federal Reserve can do with inflation being held under control, or whether the liquidity implied in these lending facilities cannot be mopped by offsetting Fed transactions? Steve Waldman is skeptical, John Palmer says it's not a good idea, and Ken Rogoff calls the United States "ground zero for global inflation." (h/t: Mankiw)


Ex-mayors can't budget 

Former St. Cloud Mayor John Ellenbecker wants to ding Republicans (especially local state Rep. Steve Gottwalt) for Governor Pawlenty's budget proposal. In it he demonstrates a flawed understanding of government spending.

...please read the Saturday report and note that while he cuts spending on children's health care and colleges, Pawlenty also proposes to increase spending on the state's 150th birthday party and proposes a "$14 million guarantee for local organizers raising cash for the Republican National Convention in September."

Before Gottwalt again decries the spending requests of the evil liberals, he might want to first take a closer look at the spending requests of Pawlenty.

State spending on both the state's birthday party and the GOP convention should be the very first cuts made by the governor and the Legislature.

Both can be funded completely by private donations, or not at all.

In fact, the national GOP convention is being funded by private donations. The $14 million guarantee is a back-up, expected to spend no money whatsoever. It does not cost the state a penny unless donations come up short. Who, by the way, is paying for security at the convention? The federal government, funded by a bill passed by the Democrat-led House. And that's real money, not just a back-up guarantee. For $14 million -- hell, you can't barely buy a do-over primary for that!

The sesquicentennial? Maybe half a point there. According to the governor's budget plan, that item is within the "other initiatives" for $11 million. Small beer. I wonder how the Speaker's husband will feel about this attack on spending on MN history?

UPDATE: Link to letter added, sorry!

UPDATE 2 (afternoon): This article from last December reminds that the Governor's original proposal was for a $2 million allocation for the Sesquicentennial.

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Wednesday, March 12, 2008

Increased tuition AND a Peace Corps job? That's hope! 

Joshua Sharf comments on an Obama plan to give $4000 tax credits usable for tuition (he reports it as something he heard on TV; here's a transcript from the Nightly Business Report that mentions the plan, and here's the American Opportunity Tax Credit from his website):
I'd give it about half an hour before every college in the country raised tuition by about, oh $4000. Repeat after me: subsidies either raise prices or create surpluses.
The first part is mostly true -- a $4000 subsidy increases the demand for higher education and pushes prices up. Now if we have slack demand for seats in higher ed it won't be a $4000 rise in prices, as the quantity of seats supplied will respond to higher prices and fulfill some of that new demand. As always, a question of elasticity, this time on the supply side, and in the short run most goods are fairly inelastic. So price is going to absorb most of the price.

What happens if it doesn't? With all those new students subsidized into attending college rather than entering the labor force, the only way to keep students from queuing up for scarce seats is to raise price. Now, it might not be taken in tuition -- I could be fussier about who I admit, the university choosing better students over more money. If I do nothing, applications rise for the same number of admissions, leading to a lower acceptance rate. That should be seen as a shortage, not a surplus.

Joshua says that he heard there would be a service requirement to the rebate. His paraphrase of the speech says "We're going to invest in you. But in return (There's always an, "in return." -ed.), we're going to require you to invest in us by volunteering in the Peace Corps, the VA..." I did not see any references to a service requirement in the Obama materials I viewed. But let's assume Joshua heard this right. Who's going to take that deal? Who would trade a two-year commitment to the Peace Corps for $4000 rebates (for how long? One year? Two? Four? Six?) I would say you can forget anyone from business programs, or many pre-professional programs. It doesn't cash flow ($4ooo over the first four years in; two years entry level salary in your field minus about $6000 "readjustment allowance" out -- yes, you get a little money for meals and so on, so suppose you call it another $6000 a year, is this math working for you?) Great deal, however, for the various people getting degrees in, say, the Department of the 3.7 GPA.

Again, not sure that's part of the Obama plan, but if it is, it's a double whammy.

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Did she take the pledge? Yes 

The Club for Growth has been seeking congresspeople who will take a pledge to forgo earmarks. Rep. John Kline announced his decision to forswear pork last July. A list the Club put up in January included members of Reagan 21, a group of Republican legislators who commit to Reaganite principles including the ending of all earmarks. One of the legislators on the list is Rep. Michele Bachmann of Minnesota, who is a member of Reagan 21. I had not seen any press release on this pledge and I had asked before about it, receiving a noncommittal answer. Last night I asked again about this, as there had been no correction on the CfG page when they updated it this week. This morning I received an email from her office confirming that she has in fact taken the pledge to forgo making any earmark requests "while fighting to reform the broken system."

For supporters of limited government, this is great news.

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Client 10+6 

TEHRAN, March 12 (UPI) -- Tehran's police chief has resigned following his arrest after being found naked in the company of six nude prostitutes in a local brothel.

Reza Zarei stepped down from his post following the raid, reportedly ordered by Ayatollah Mahmoud Hashemi Shahroudi, chief of the judicial authorities, Ynetnews reported Wednesday.

Zarei has been in charge of enforcing the Islamic dress code on Iranian women to help with "moralizing of the city," the Israeli news agency reported. During the past six months, hundreds of young people were arrested for not honoring the Islamic code of behavior.
Source: Elliot Spitzer says "wow! I could have had a V-6!"

How many people like this do I know? 

[Jack] Nelson-Pallmeyer, however, was barely civil, both during and after the debate. He spun every conspiracy fantasy known to the blogosphere about the Bush administration, and then added a couple original theories to boot. He seemed very self-satisfied in the manner of academics who just know they know everything. Nelson-Pallmeyer offered hysterics to an audience clearly receptive to them.

From Captain Ed, regarding the last man standing between the DFL endorsement and Al Franken. Anyone who is a professor of Justice and Peace Studies can be expected to behave this way, Ed. It's in their qualifying exams for the doctorate.

But at least Nelson-Pallmeyer isn't hiding in a music department.

I do not have a KAR signal to turn on, but I will remind you of a typical KAR discussion of St. Thomas' Peace Studies program. This is still in my top five favorite KAR posts, and their essay would certainly get an A- in the J&P program. B's are so fascist...

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Tuesday, March 11, 2008

Earmarks here and there 

I was invited by Gary Gross to submit a couple of questions to his interview of Pat Toomey of the Club for Growth. One of the questions I asked was about earmarks.
Q: Do you believe that earmark reform is an issue that will resonate with American voters this November? Why or why not?
Yes. Grassroots conservatives are fed up with ridiculous wasteful spending that goes on in Congress and you are beginning to see that grassroots sentiment reflected in congressional activity. Last year, only eighteen congressional members eschewed earmarks. Only two months into the new year, a growing number of congressmen are taking an earmark moratorium, with the list currently at twenty-five House members and six Senators, including Rep. Henry Waxman, the first House Democrat to reject earmarks. The Club for Growth maintains a list of these congressmen, updated as appropriate, which you can see here. It is clear that congressional members are beginning to realize that this is an issue that is important to voters.
The latest issue of the Minneapolis Federal Reserve's FedGazette highlights pork-barrel spending. From the cover article:
In a classic 1981 paper in the Journal of Political Economy, Washington University economists Barry Weingast, Kenneth Shepsle and Christopher Johnsen used public choice theory to explain why politicians don�t insist on economic efficiency.

They developed an economic model of public choice mechanisms comprising a representative legislature to explain �distributive or pork barrel projects,� defined as projects whose benefits �are geographically concentrated and whose costs are spread through general taxation.�

The economists first set a benchmark for efficient expenditure of taxpayer dollars and then compared that to results from a model in which legislators were elected by geographically defined districts but financed expenditures through taxes raised from the public at large. They found systematic bias toward inefficiently large projects. �The districting mechanism in conjunction with the taxation system provides incentives to increase project size beyond the efficient point by attenuating the relationship between beneficiaries and revenue sources.�
The article goes on to note additional research that the amount of pork requested falls as the share borne by the local district increases. You will note that many local leaders complain when an earmark contains a requirement to "raise taxes" to match or supplement the earmark. But this is a perfectly good mechanism to keep earmark requests down. Smaller places have greater incentives to impose the cost of their pork on others, as the map below shows.

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Measuring inequality -- nothing new here 

As I mentioned below, Ed Morrissey of Hot Air., part of the NARN and erstwhile local broadcast partner, wants to talk about Brad Schiller's article in the WSJ yesterday. (UPDATE: Ed reminds me he wants to talk about sovereign wealth funds -- I've just skimmed this piece by Tim Swanson, but it looks in line with what I think.)

Part of Schiller's piece is a "no-duh-moment" for those of us with gray hair, who have argued these points with progressives for years now. There was Michael Cox and Richard Alm's Myths of Rich and Poor about ten years ago. The entire life of Julian Simon was devoted to combating the notion that vast parts of the world were worse off for development.

Thomas Sowell
observed in 2000 what he called "perennial economic fallacies",
EVERY TIME some new income statistics come out, two predictable fallacies follow in their wake. The first is that the rich are getting richer, while the poor are falling behind. The second is that the real income of American families has not risen significantly for years.
Nothing seems to have changed, says Schiller:
The Democratic candidates are railing against the "tax cuts for the rich," lamenting the stagnation of middle-class incomes, and decrying the deepening woes of the poor. In her January response to President Bush's State of the Union address, Hillary Clinton cited "seven years of stagnant wages, declining incomes and increasing inequality." Barack Obama echoes this theme by referring repeatedly to the "middle-class squeeze."
Careful analysis provided by Schiller shows, however, that most of the data shown here is influenced mostly by demographics. Mark Perry, for example, focuses on the relationship between household size and median income: "the average household size has declined by 21% from 1967 to 2006, while real, median household income increased by 31% over the same period." Schiller notes that the number of one-person households since 1970 has risen from 17% to 27%. Ironman points us in Perry's comments to his analysis of income distribution by age; an aging population will cause major changes in inequality measures that are not due to changes in income opportunities for younger workers. (Ironman has a summary of his findings here.) Indeed, that jump in households with one person would indicate increased affluence of Generation X, says Schiller. By focusing on households, and by describing snapshots at a point in time as if they were movies of families at different points in time, the progressives have completely mischaracterized the Census surveys.

To get the right measure, it would appear we should at least use per capita GDP rather than household. And in this regard the United States, in real per capita GDP (PPP dollars) has done well, moving from $14,420 in 1960 to $29,620 in 1990, $36,225 in 2000 and $39,682 in 2006. Real per capita incomes have risen 1.5% per year in the Bush years, approximately equal to the growth of average labor productivity. Just as it should be.

UPDATE: I should link what Ed's written. I didn't emphasize the story regarding immigrants, and I need to think through Ed's point that the survey shows it shows "that people move up the economic ladder at a pace that at least keeps up with immigration." I'm not convinced that you can conclude that from the data, though it's consistent with it. We'll see.


Two radios today 

I'm on two internet radio programs today. At noon CT I will be on Midstream Radio with Jazz Shaw and the Lady Logician. They write to ask me to explain Paul Krugman's column from yesterday. Consider me sympathetic to it; more below. (Note: Those wanting graphs with their Krugman go here.)

At 2:30pm CT I will be joining Ed Morrissey with his new Ed Morrissey Show (part of his new duties at Hot Air). He wants to talk about Brad Schiller's article in the WSJ yesterday on the reporting of inequality. That deserves a separate post which will appear above this one.

Back to Krugman. A speech by New York Federal Reserve President Timothy Geithner has him worried. What got him worried? Here's a paragraph:
The current episode has a basic dynamic in common with all past crises. As market participants have moved to reduce exposure to further losses, to step on the brake, the brake became the accelerator, amplifying the shock. Measured risk has increased more quickly than many institutions have been able reduce it, and attempts to reduce it have added to volatility and downward pressure on prices, further increasing measured exposure to risk. Uncertainty about the market value of securities and about counterparty credit risk has increased, and many hedges have not performed as intended. The rational actions taken by even the strongest financial institutions to reduce exposure to future losses have caused significant collateral damage to market functioning. This, in turn, has intensified the liquidity problems for a wide range of bank and nonbank financial institutions.
In English, then: Everyone tried to get out of their positions at once, and put downward pressure on prices of the assets they were holding. I had two people quote a statistic today to me while I was off-campus (and an international visitor on-campus) that 10% of mortgages today are worth more than the houses that are their collateral. The damage has spread even to hedge funds backed by Treasuries, which almost never happens: Treasuries are supposed to be safest of the safe. Now that's collateral damage.

The Federal Reserve facing these liquidity issues -- and still faced with inflation higher than they would like -- has engaged in what James Hamilton calls monetary policy on the asset side of the balance sheet. In it Hamilton says the Fed's policy has rotated from its usual actions on monetary base -- the liability side of the Federal Reserve balance sheet -- to its asset side. I've updated his table to show what's happened since mid-December:

There hasn't been still much of a change in the monetary base -- there has been about a doubling of bank reserves, indicating that banks are laying away some money to protect themselves. When I wrote in August, the Fed was trying to use the discount window itself. The Fed has moved towards buying more and more assets through its term auction facility. It is permitting a variety of assets to be purchased through this, leading one writer to refer to the Fed as a pawnbroker as Krugman mentions. But those collateral are no different in type than they bought before -- it's just that they're more risky, and everyone knows it.

(UPDATE: I failed to mention yesterday's action expanding a second "Term Securities Lending Facility." This strikes me just as more of the same; Douglas Elmendorf shows that it's two transactions combined to one, both on the asset side. Remember what Bagehot said? Lending on "any good paper". Or Jeffrey Lacker in August said, one needs to make credit available without interfering with market assessment of risk. It's the destruction of credit that is to be avoided. Does the TSLF interfere with market assessment of risk? I don't yet see it.)

Where I "mostly agree" with Krugman -- the effect of these effects diminishes each time we try to add more reserves this way while we sterilize the the inflow of money. The Fed is selling off its Treasury holdings to absorb back the excess credit they are creating. In theory, we should not be generating additional inflationary pressures this way, and nothing in the money supply data would indicate to me a sharp increase in inflationary expectations. But they are nonetheless there, even if Bernanke doesn't seem too concerned.

As to Krugman's conclusion, that something must be done about the risks in mortgage markets, I wonder what he thought of George McGovern? I've looked at the change in risks by looking at the change in the spread between Baa and Aaa corporate bonds; it's risen, but only to levels that existed in 2003. That is not part of the anatomy of a crisis. I also wrote last August that asking banks to take an ownership position in houses -- an idea that seems not only to be not going away but being encouraged by people who should know better -- is a major risk to us getting out of the current jam. The market seems to be compelling banks to take their haircuts (in part by selling a piece of themselves to sovereign wealth funds, something Ed wants to talk about.) The political system is what is stopping homeowners from being told to do the same thing.

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Monday, March 10, 2008

Non sequitur of the day 

From our new human resources newsletter, page one, first sentence below the table of contents:
In light of the recent concerns about safety on our campus, it seems to be a good time discuss efforts Human Resources has been taking to contribute to diversity.
Somehow I doubt that sentence would work at Northern Illinois.


Profiles in courage, logrolling edition 

From the local paper, a supporter of the transit tax (and a very good friend of mine). I think he'd like to blow kisses to the Override Six, but it turns out kisses weren't the coin of the realm. Here are the 22 lines:
9.21(e) Of the total appropriation under this
9.22subdivision provided to the Department of
9.23Transportation's district 7, the commissioner
9.24shall first expend funds as necessary to
9.25accelerate all projects that (1) are on a trunk
9.26highway classified as a medium priority
9.27interregional corridor, (2) are included in the
9.28district's long-range transportation plan, but
9.29are not included in the state transportation
9.30improvement program or the ten-year
9.31highway work plan, and (3) expand capacity
9.32from a two-lane highway to a freeway
9.33or expressway, as defined in Minnesota
9.34Statutes, section 160.02, subdivision 19. The
9.35commissioner shall establish as the highest
10.1priority under this paragraph any project that
10.2currently has a final environmental impact
10.3statement completed. The requirement
10.4under this paragraph does not change the
10.5department's funding allocation process
10.6or the amount otherwise allocated to each
10.7transportation district.
BTW, while reading that I found a point that refutes the claim that no money from this bill goes to transit (that Chris' letter makes):
9.16(d) Of the total appropriation under this
9.17subdivision, the commissioner shall use at
9.18least $50,000,000 for accelerating transit
9.19facility improvements on or adjacent to trunk
Subd. 2.Multimodal Systems

(a) Transit


2.31This appropriation is from the general fund.
2.32This is a onetime appropriation.
(b) Rail


3.1This appropriation is from the general
3.2fund for a grant to the Northstar Corridor
3.3Development Authority to fund advanced
3.4preliminary engineering, updated
3.5environmental documentation, property
3.6appraisals, and negotiations with the railroad
3.7to extend commuter rail service on the
3.8Burlington Northern Santa Fe rail line
3.9between Big Lake and Rice. This is a
3.10onetime appropriation and is available until

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Friday, March 07, 2008

All I know about Armenia now 

Following the example set by Nazarian (whose blog is a must read for the events ongoing in Armenia, h/t: Kouba), I will ask this bow be placed on blogs to commemorate the deaths of eight persons in Armenia on March 1st as a result of violence surrounding the presidential elections held there February 19th. Some video at The Armenia Blog.

The Economist
provides coverage. Notes from Hairenik details ongoing fighting in Karabagh that may be an attempt by long-time antagonists to use the unrest in Yerevan to their advantage.

I haven't posted more about this because it's hard to get a read on the situation, largely because suppression of the press is leading to a warped information flow. For example, there's this curious post on Neeka's Backlog that says the protesters are targeting property held by the ruling party and supporting oligarchs. But the press reports everything said about the protesters as a provocation engineered by Kocharian/Sargsyan. I think Neeka could be right, but how do I know? I find this post at Armenia Now perhaps the best expressing the view that democracy isn't well served by either candidate winning.

What I do know is eight people are dead; I'd like to think not in vain, but too many trips, too many disillusionments leave me doubtful.


A little this, a little that, and presto! No deficit! 

When I had a chance to interview Sen. Tarryl Clark yesterday on KNSI, I asked about the budget deficit and the decision to balance. Calling on this post, I asked whether these revisions would lead the Legislature to perhaps choose a mix of spending cuts and monies from the reserve that leaned more towards the latter. I intentionally did not say taxes, to not put words in her mouth to suggest she wanted to raise them. I cannot imagine the DFL wants to have two tax increases on its record this year. (They could prove me wrong, of course. But the size of the increase would not be large relative to the bad publicity, so I cannot see how it makes sense for them to go there.)

Governor Pawlenty is choosing a 40-60 mix.
The Governor�s budget solution reduces the growth in state spending by $341 million, uses $250 million of the $653 million budget reserve, and uses $250 million from the surplus in the Health Care Access Fund to maintain health care programs and eligibility for the disadvantaged.
There are some tax changes planned. Best news is a 1/8% cut in the state sales tax rate. That costs $77 million in the current biennium.

So you're thinking "wait! He got $841m in the paragraph above, but then spends $77m, and he needs $935m. Where's the rest of it?" There is some language in the last paragraph that indicates a couple of changes that, while maintaining the "no new taxes" pledge might be seen as a tax increase for at least one group:
The budget plan also includes a measure that will align Minnesota�s definition of a �foreign operating corporation� with the one used by the Internal Revenue Service and a program to collect money from individuals who owe back taxes to the state by matching data with financial institutions.
I'm waiting to read the full details before deciding he's moved first on the "close the foreign corporation loophole", but if not I'm not sure what that means. But the press release says "approximately 40% of the budget plan comes from spending cuts and additional revenues, 35% from balances or surpluses in non-general fund accounts and 25% from the state budget reserve." So there has to be somebody paying more.

Ah, here we are. The StarTribune details:

Pawlenty's proposal is at odds with DFL moves to increase aid to cities by $90 million and with bipartisan efforts to overhaul health care to increase coverage for under-insured Minnesotans.

The governor recommended paring $187 million from the state health and human services budget to make up for 20 percent of the shortfall in 2008-2009. Another $54 million would be cut from higher education.

Among the other steps, he proposed getting $102 million by doing away with a tax break that some corporations use to shield income from overseas operations.

Ugh. $54 million from higher ed. I guess I better start figuring out where to save some money in my office.

Altogether, though, a pretty good plan in my view, with a majority of money from temporary shifts and with a relatively light take on taxes, though I'm sure he's going to be dinged for closing the FOC tax break. We'll have that topic and more tomorrow on The Final Word.

UPDATE: Forgot to add the title.

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What keeps a forecaster up at night 

Writing the local forecast this week in part requires me to put blinders on to the national economic news for a few days. I find it better not to write in reaction to any signal in the RSS feed that day because, for all you know, it will be contradicted by another datum a few days later. Keep your head down, apply bum to chair, and write. (That's actually advice I heard given by James Buchanan many years ago, along with "don't get it right, get it written.")

Knowing the calendar was rapidly approaching on the jobs figure, we had all edits done last night about 9pm. Good thing, since this morning we got a surprise.
Nonfarm payroll employment edged down in February (-63,000), and the unemployment rate was essentially unchanged at 4.8 percent, the Bureau of Labor Statistics of the U.S. Department of Labor reported today. Employment fell in manufacturing, construction, and retail trade.
The Street expectation was for a gain of 25,000 jobs -- weak, but still positive. The sectoral declines were to be expected. I think the decision on whether this is going to be a recession or not depends on what happens in retail trade, and the drop here dampens the news from yesterday that retail sales were better than expected. The possibility opens up now that the peak of the last expansion was in December or January. Professional and business services employment fell for the second straight month, indicating a decline in business activity across the board. Except for that sales number, bears ruled the week. Two investment banks are now calling for a recession.

A quick reminder to those who look at the unemployment rate decline as a ray of hope: it's a lagging indicator. Employment is coincident to the business cycle, so the reason for unemployment rates to lag can't be because of the numerator -- it has to be exits from the labor force. The massive drop in household employment of 255,000 in February may be an indicator that some smaller firms and self-employed workers also are getting washed out of the economy; that too has to be considered a very negative sign.

I recommend James Picerno's graph of the change in employment over the last five years, labeled "The Trend Is Not Your Friend." BLS data for how the unemployed got there says an increasing proportion of them are those who were separated from their jobs involuntarily without prospect of recall. That trend, too, is unwelcome.


Only took 36 years for him to do me proud 

Michael likes to tease that I once went to a DFL caucus in 1990 -- tis true! And when I was a high schooler, I hung door hangers for George McGovern in my native NH in 1972. The caucus thing was an expression of revolt with the first George Bush and the IR's seeming one-trick, economics- free platform. I'll defend that choice.

McGovern? Up to now I could only chalk it up to youthful indiscretions. But today he writes one of the most sensible pieces on the credit crunch I've yet read. I am worried it will turn out there's another McGovern, but for now I can take refuge in the fact he wrote this concluding paragraph:
The nature of freedom of choice is that some people will misuse their responsibility and hurt themselves in the process. We should do our best to educate them, but without diminishing choice for everyone else.
"America, come home!" says Arnold Kling.

UPDATE: I see Chad was thinking the same thing.


Mrs. S writes 

...about per diems. I support her idea to pay more salary and reduce per diems, even if it costs more money.

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Hoops, teams, and choices 

Suppose you're a married person, and also a pretty good basketball player.  Basketball being a team sport and you wanting to take that next step in your game, you have to find teammates, and so you do.  You practice and play with these same teammates for a few years, winning some games, losing others, beginning to enter in tournaments and travel the state.  Your spouse likes that you are exercising, finds your teammates pleasant enough, but it's not like your spouse has close friends in your teammates.  They are just people you play hoops with.

Your team is entered in a big tournament, one to which the team has looked forward for months.  Two days before the tournament, your spouse surprises you with an offer of a great weekend, a second honeymoon.  All expenses paid.  "But I have a tournament this weekend," you say.  "Sweetheart, who are you going to choose?  Your teammates, or me?"  "Oh, oh, I choose you, of course dear." 

You call your friends, announce that, as much as you'd like to play, this time you have to say no.  "I have to go with my spouse, and I know that goes against your wishes."  "But without you we will likely lose the tournament.  If you can't be with us when we really need you, we are going to remove you from the team."  "Well, that's a shame, but I have to put my family first."  You go on your weekend with your spouse.  Your team asks for your jersey.  You made the right choice, you're sure -- who can argue that you shouldn't pick your spouse over a rec basketball team? -- but your choice isn't free.

Littlest Scholar is a basketball player.  Her coach allocates floor time and starting spots based in part on time spent in practice.  You miss a practice, even for a perfectly good reason like piano recital, and you don't start.  You will still play, you are still on the team.  But you don't start. I wish she started every game, and so does she.  She wants to play enough to be a leader, to wear a C on her uniform.  Then she gets interested in piano and decides to skip a few practices.  Coach says one night "Look, LS, if you can't show up for the practices, I want to give that C to JJ over there, who comes to every practice and works very hard."  "But I really want to learn piano, and I want to play basketball, and besides I'm older and JJ is just a sixth grader!"  "Yes, but you have to make choices, and we have to have our leaders be someone all players look up to, and that's the player working hardest for the team.  I understand your choice, but your choice isn't free."*

A state representative choose to accept the support of a major political party, and caucuses with it.  As she learns the ropes of being a representative -- it isn't easy, the rules are not like those experienced elsewhere -- she is given opportunities to take a leadership role under the tutelage of senior representatives in her caucus.  But she starts to miss meetings and votes, and then on a certain day when the caucus, the team, really needs her, she chooses to "vote my conscience" instead.  She is so certain she did right she tells the press that if voting her conscience was wrong then "I don't deserve to be here."  Those who helped her learn the ropes and trusted her as leader of the caucus on committees remove the C from her committee uniform. 

You can vote your conscience, and you can be independent-minded.

But your vote isn't free.

*The story about Littlest and basketball is fiction only because she would never pick piano over basketball.

Thursday, March 06, 2008

Government decides where you live 

A bill sponsored in the Minnesota Senate by Ellen Anderson (companion in the House sponsored by Jim Davnie) would give an option out for owners of homes financed by subprime or negative amortization mortgages. They get to stay in their houses for a year. The bill appears to impose a moratorium on foreclosures for a year. Homeowners would have to make the monthly payment they were required to make when the mortgage was originated.

Seems everyone has an idea what to do about the mortgage crisis. Federal Reserve Bank of Boston president Eric Rosengren touted a shared appreciation model where banks take a haircut on the principal of the loan but in return get a stake in any price appreciation from that point forward. I'm not so sure that giving banks a piece of a declining asset is such a good deal when what banks need to do is deleverage, but it doesn't appear anyone in a policy position is prepared to say interfering in mortgage contracts is bad policy.

So leave it instead to Steve Landsburg, who points out that those homes in the hands of people who cannot afford them without a subsidy (and will it really be paid ONLY by the banks?) keeps these houses out of the hands of someone who might benefit from it:
I predict with great confidence that when I say that foreclosures create new homeowners, a sizable chunk of my readers will scoff that "the people who can afford them would have been able to afford nice homes anyway." I could use economics to explain why those readers are mistaken (a glut of homes on the market leads to falling prices, etc.), but that's unnecessarily complicated. All it takes is the simple observation that there cannot be more homeowners than there are homes, and if one home becomes vacant, then there can be one new homeowner. Call it the law of conservation of homes.

That's one reason to temper your distress over strangers suffering foreclosure. Here's another: If you get to live in a nice home for a few years and then lose it to foreclosure, you are not worse off than someone who never got to live in a nice home in the first place. If the Treasury Department is looking for ways to help people, it would be nice to focus on the people who are most in need of help.

Losing your house is painful. Never having anything to lose is even more painful. How do the feds justify spending money�and, rest assured, any program to stop foreclosures will cost money�to help struggling homeowners instead of, say, the struggling homeless? Or, for that matter, a child starving in Africa? There is room for a lot of legitimate debate about how much we should be taxed to help the less fortunate. But whatever level of assistance we agree on, I'd like to see it targeted to those who genuinely are less fortunate.

There's at least one more reason to regret Secretary Paulson's eagerness to forestall foreclosures: If banks can't enforce contracts (or even if they "voluntarily" forgo the enforcement of contracts under pressure from the Treasury Department), they will undoubtedly be more reluctant to make loans in the future. Rest assured that somewhere out there�invisible to you and me but nonetheless real�is a young couple who, thanks to this intervention, won't be able to get the mortgage they want next year.

I predict with equal confidence that a sizable chunk of readers will attribute my observations to a failure of compassion. But which is more compassionate: to care about the fortunes of the people who happen to be in your field of vision or also to include those whom you cannot see? The homeless are out there. The starving children in Africa are out there. The would-be new homeowners are out there. Each of them, in different ways, stands to gain or to lose from the policy choices we make.
Here's one example of a homeowner-to-be MOBster who is getting her family's house from a bank. The bank got the property via foreclosure.
We don�t want to take advantage of people and rip them off, but we also want the market to dictate our housing price. We�ve been watching prices� we had an area in mind, what people around here call �south of the river.� Our hope was in an area that is still developing, we would find some better prices. It seems to be the case...
They are a couple who will have their first baby in less than four months (she is a former student of mine.) The Anderson-Davnie bill chooses to help current homeowners at the expense of Liz and Josh. I'm not saying one is more valuable than the other, but the question is, who do you want to decide who gets the house? I'm certain they could have afforded a house at the higher prices of three years ago, but it would be a smaller house, in some other, less desirable area. This bill would influence the decision of where the Lizes and Joshes of the world live too.

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FAIL that department 

One thing about doing early morning radio is that you become a fan of Fark for quick odd news items to throw when you've got 60-90 seconds to the next break. As any KARnie will tell you, a capitalized FAIL has a special meaning in the Farklands.

Craig Newmark hangs the sign on an economics department web page.
The homepage for Swarthmore's economics department presents seven "Questions of Economics". The first one is "What activities should governments undertake, and what can be left to markets?"

"Left to markets"??

In the department in which I was trained and the one in which I work, this question would be posed differently: "For what activities is the market sufficiently inefficient--explain carefully why!--that we should consider allocating by government instead?"
To be fair, I guess I should show you ours. I think we're OK, but have at it.

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When you're the third party... 

Big question: why is college so expensive? There�s the capital costs of maintaining a huge infrastructure, much of which is picturesque but aged � ivy is all that holds some of these buildings up - but the simple act of putting one person in a classroom to talk to 30 other people doesn�t seem like it should be as expensive as bypass surgery. Back in my time, you could get through the U without hanging a few hundred thousand in debt around your neck � but even then, the cost of sitting in a clammy auditorium with 300 people watching introductory Biology on TV monitors was the same as the cost of an English Lit class with 17 students drowsing in a suffocating classroom built in the time of Coolidge.
Lileks asks the question. The budget of the U and of MnSCU is getting bigger, and with the roads and bridges paid for without 'mortgaging our future' we have bonding bills with larger chunks for the U and MnSCU, paid by ... a mortgage on our future. (Along with hockey arenas. Our future wants to pay for hockey arenas.)

Why do we pay so much for college? Richard Vedder has blogged about this for years, and the argument in a nutshell is,
are rising costs inherent in the nature of the higher education delivery system based on third party payments, non-profit providers, a lack of a bottom line to measure performance, and other consideration of that nature?


More for me, and more for you too 

Related to my post here, Tim Worstall makes the observation more broadly:

One of the things that people worry about, complain about, is the so called decline of manufacturing in the industrially advanced countries. The feeling seems to be that we've somehow packed up all the jobs into boxes and sent them off to China. Thus a suspicion of globalisation and trade in general.

The only slight problem with this is that there hasn't in fact been a decline in manufacturing output. For the UK it's flatlined over the past three or four years, it is true, but in the US manufacturing continues to grow.What has indeed fallen is manufacturing employment as these charts show.

Further, those charts show the reason why output continues upwards while employment falls: we're getting better at making things. Thus productivity rises and we need the labour of fewer people to make those physical things which we desire. We then also get the extra production of those people who go and do something else other than manufacturing: whether they go off and dig ditches or write software doesn't matter, we get both that production and the manufactures. This is the process known as us becoming richer, we've got more stuff to share around.

I wish I'd written that last paragraph.

(P.S., for those thinking I should be writing something else, this burst of activity is due to the book manuscript being shipped to the publisher! Physical exhaustion to come in a few moments, hopefully preceded by a bottle of scotch that's been waiting...cigar will wait for warmer weather.)


Parity even there 

Frank Stephenson questions a comment by Allen Sanderson on why NFL teams don't invest more in their player personnel. Regarding Mitch's Bears' choice of quarterback,
...what if a better quarterback (which means almost anyone since the imcumbent is Rex Grossman) allowed the Bears to charge higher ticket prices while selling out Soldier Field? This source indicates that stadium "gate" revenue is spilt 60-40 between the home and visiting teams, respectively. Thus, even a team could reap a large, though not complete, share of revenue generated by a QB upgrade.
I had thought about playoff revenue as a motivator. The players only get $18,000 per game in the playoffs, and thought team revenues would help with that. True, the teams only get $500k-$600k from the league for playoff games (less than a million for the conference championship, and about $3.5 million for the conference winner), but I am wondering who gets the concession revenue? Concession and parking prices can be adjusted upwards for playoff games. If it's the home team (or, possibly, its subsidiary that runs the stadium) that, along with player cost control, might provide some serious incentives.

What we know from baseball -- where the home team bags a much bigger share of the revenue both during the season and post-season -- is that a player has the highest value to a team that is in a big market and to a team that is on the edge between making and not making the playoffs. The steep price increase for players of above average major league talent is an indicator of that. If Stephenson is right, a Lorenz curve of player values versus salaries should show much more evenness for football than for baseball.

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Wednesday, March 05, 2008

Which is a better statement of monetary policy futility? 


Or this?
The latter actually won a competition.


Heckuva bootstrap there, Larry 

Courtesy Larry Schumacher -- whose second blogiversary was last week, so stop by and give him a nod -- I read my state representative's latest letter. Rep. Haws argues for asset preservation and job creation as guiding principles for the bonding bill.

For a better future we need to balance care for what we already own and what we would like to build. Sustainability, assets preservation, maintain care of existing buildings, renovate before building new, reduce the back log�all are foundation criteria for well-developed bonding bills.

Rigorous maintenance priority schedules will help guide our choices as we make our way through this bonding year at the State Legislature with a shared commitment to make effective use of tax dollars and ensure safe state building and schools. With this in mind, I carried a number of asset preservation bills...
I'll spare you the list; as you might guess, they are all local projects. He goes on,
These projects often have a Rodeny Dangerfield syndrome� "They get just no respect". But they need to be put high on the list for they will have, pay back in efficient, safety for citizens and employees, and jobs ready to go.
"Jobs ready to go." I'm not real sure about the beginning of that last sentence -- the commas look wrong, but it appears he means that maintenance jobs provide jobs ready to go. Gary disagrees with this, and he might be right. But let's think about the next sentence,
Overall, in 2008, every project considered for inclusion in the capital investment bill will be looked at in terms of the potential to create jobs as soon as possible.
So how is it that jobs are created ASAP that are also maintenance jobs, jobs that preserve assets? Constructing new items uses lots of building materials, tools, equipment, etc. There's a great maintenance project going on in my office building on SCSU's campus: They are painting the walls of the hallways, the first time I can remember them doing this since we moved into the building in 1988. (I travelled off campus most of the early 1990s, so I could be wrong, but ten years for sure.) Total employment? One person. One guy who works on my campus anyway. He's been working for about three weeks, and he seems to be about done. (Just in case he reads here: Great job. Place looks wonderfully new and clean.)

We've had a problem here in construction, and there have been declines in employment in that industry. If you wanted to create jobs ASAP, you'd want them to go back to work. But do construction workers do? They construct; they build stuff. People good at constructing can probably also do maintenance, but they aren't the same jobs and they aren't the jobs those workers are best at doing.

I have no problem with either goal Rep. Haws is choosing, but he's trying to strap one on to the other. Does he really want preservation and is bootstrapping a job-creation argument to it, or does he want job creation and bootstrapping preservation because those are the projects he thinks have the best chance of getting into the bonding bill (for him to receive credit for)? I'm not sure. But that letter looks held together by Red Green's favorite tool. And you know how those projects turn out.

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Idea of the day 

In commenting on Mitch's post about pennies (referring to mine), "kel" writes:
here�s where MN tic legislators could really put MN on the national map.

Pass a �rounders� tax on all retail sales mandating all sales amounts be rounded up to the nearest nickel. Mandate further that instead of allowing the extra revenue to fall into the hands of ignorant miscreant capitalist running dog retailers all additional monies will be directed to the state general fund (remember: State is Mother, State is Father!) where it can appropriately and generously be distributed for the necessary building (union) of amphitheaters, GLBT coffeehouses, light rail to Circle Pines and Northfield and of course the many necessary services for �the children�.

no more pennies in MN! the slogan could be �Go Penny Free!�
You know, that's utterly brilliant. Government can no longer make seigniorage revenues from pennies, so they ban them and tax all the round-ups. The other Colbert smiles...

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Quick note while working 

I am writing the new Quarterly Business Report and again unable to blog much today. (People at the Times are waiting, and I know they are reading here to check if I'm playing hooky.) But while working on this I noticed something that we've talked about on the blog. When state economist Tom Stinson first came forward to say the state was in a recession, he was quoted as saying
"We should normally add somewhere around 23,000 jobs or a little bit more just to keep up with labor market growth," Stinson said. Instead, the year-over-year job total fell by 700.
Last week DEED reported a revision of the number of jobs in Minnesota to a gain of 15,300 from January 2007 to January 2008. Most of these jobs came from revision of the previous data. This isn't booming growth by any stretch of the imagination, but it puts Minnesota quite close to the national average. I wonder if that revision makes him a little less certain of his recession forecast. It would for me. The revisions in the St. Cloud data are equally profound.

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Tuesday, March 04, 2008

Speaking, and media 

Program notes for the week:
As usual, busy and probably light blogging. But the book would be shipped if not for one page of references somebody didn't turn in yet. So light is at the end of the tunnel...

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Monday, March 03, 2008

Don't leave home without it! 

More than 600 deteriorating bridges across Minnesota would be replaced under a $1 billion capital investment proposal made by Gov. Tim Pawlenty on Monday.

Nearly 40 percent of the borrowing, or bonding, plan is devoted to transportation, Pawlenty said, a record amount.

..."The state has $790 million worth of locally deficient bridges," said Sen. Steve Murphy, DFL-Red Wing, who leads the Senate Transportation Committee. "We have another $1 billion in deficient bridges at the state level."

Pawlenty, he said, "is trying to fool the public into thinking that we can use the state's credit card one more time to cover his political career. The amount of politics that gets played out of the governor's office is repulsive and this is just one more example." (Patricia Lopez, "Pawlenty's plan borrows big for bridges, roads", StarTribune, Jan 14, 2008.)


The Senate Capital Investment Committee unveiled and then passed its plan Tuesday night.

The panel included more than $300 million for college building projects, $70 million to help build a Minneapolis-to-St. Paul light rail line and $80 million for hockey arenas in Bemidji, Crookston, Duluth and St. Cloud.

There's also nearly $100 million for state parks, trails, flood-control projects and other natural resources improvements and tens of millions more for sewer and water systems, landfill cleanups and other pollution control projects. (AP, Minn. Senate Considers $1 bn Public-Works Bill, Feb 28, 2008)

So we can't use the credit card for roads because that is "covering Pawlenty's political career", but we can use it to build $80 million worth of hockey arenas? When your paycheck is a little short, do you a) use the credit card to buy groceries, or b) coerce money from your neighbors and then use your credit card for steak tartar?

And not only that, it looks like Sen. Langseth wants to ask the credit card company to up the limit!

Minnesota Taxpayers Express: Don't Leave Home Without It!

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Pennies from Paulson 

Over the last six months, the cost of producing a penny and the material costs of the metal contained therein (97.6% zinc, the rest is the copper coating) has risen to a total cost of $.014, including production and record-high metal costs but not transportation. It's worth remembering that in 1943 the U.S. Mint, facing a shortage of copper and zinc from munitions demand, switched to a zinc-covered steel penny. People hated them -- they corrode when exposed to enough moisture -- but you still find collectors of them. If prices on zinc and copper continue to climb, you can expect some change in the composition of the penny.
That's me, in April 2006. Remember that the important price for the penny is zinc, not copper. Zinc was just in the beginning of the sharp upturn in the 5-year graph to your right. While it has come off its highs, it is still in the area around that point where I stated the above.

Thus it should come as no surprise to most readers to find out that Treasury Secretary Hank Paulson wants to run the penny out of town, but can't.

�The penny is worth less than any other currency,� Paulson said in response to a question in a Chicago radio station interview Friday morning. �But there�s great sentiment� and �I don�t think it�s politically doable to eliminate the penny.�

...Paulson described eliminating the penny as a back-burner issue for now as the housing crisis and slumping economy dominate his attention. �I got enough challenges to take on,� he said in today�s understatement of the day.
It would be nice to make arguments about the penny and price granularity, but the explanation for the penny's existence is not moved by these concerns. We are used to seeing prices with $.01 as the smallest grain; we don't process below that very well (as Nick Szabo argues) and we're not inclined either to deal with rounding up as Speed Gibson offers for a way to eliminate the penny. There's a feeling to the consumer that he or she has been had by this, that it's a scam, and I don't think any amount of explanation is worth the benefit of getting pennies out of the till.

The reason the penny will disappear is that the costs of production rise high enough to eliminate the seigniorage revenue pennies produce. That Paulson is talking about eliminating the penny indicates the government is losing money. Now you have to battle the psychic costs; anyone remember our experiment with the metric system?


That Chilly 

Gary emailed me something very funny this morning, from Saturday's Vikings press conference announcing the signing of WR Bernard Berrian.
Then a few words about Bernard Berrian; i, a, n, you know there is a large Armenian population in Fresno, some of you may or may not know. Bernard is not Armenian however with the i, a, n at the end of his name. We talked about heritage last night, right? We had a great visit here and had to keep him busy all day long with video games, etc., a lot of different things going through his head.
Childress must have been watching the news from Armenia, where it goes from bad to worse. A few bloggers are getting word out:

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Sunday, March 02, 2008

The DFL Feeds Boarzilla 

Every year at the Great Minnesota Get Together, aka The State Fair, attendees are treated to a view of the largest hog of the year, appropriately named "Boarzilla."

We now have another Boarzilla in Minnesota: a colossal coalition of special interest groups snorting up to the public trough. They eagerly anticipate the slop that soon will flow out of taxpayers' buckets from last Monday's transportation bill. Governor Pawlenty's veto was overridden by a DFL dominated legislature to feed this Boarzilla to the tune of a $6,600,000,000 tax increase, the largest in 150 years.

The DFL claims to be the party of the "little guy," but the little guy could not move fast enough to avoid being squashed by this Boarzilla. The DFL is also the party that is so very, very concerned about our environment. Look at these environmental lobbying groups, supporters of this Boarzilla-feeding bill:
Environmental Organizations
Alliance for Sustainability
Conservation Fund
Conservation Minnesota
Fresh Energy
Friends of the Mississippi River
Friends of the Boundary Waters Wilderness
Institute for Local Self � Reliance
Izaak Walton League � Minnesota Division
Lower Phalen Creek Project
Mankato Area Environmentalists
Minnesota Center for Environmental Advocacy
Minnesota Conservation Federation
Minnesota Council Trout Unlimited
Minnesota Environmental Partnership
Minnesota Food Association
Minnesota Land Trust
National Environmental Trust, Minnesota
Sierra Club (yep, those greens)
Sustainable Farming Association of Minnesota
Will Steger Foundation, (yep, THAT Will Steger, you know the one who still believes Antarctica is shrinking)
For a complete list of the gluttons, please see Drew Emmer's post at Wright Cty Republicans, a MUST READ. One might have thought that legislators, who are paid by us, might consider how much money they're taking from us. But no, the DFL just can't resist gouging MN taxpayers. They need to fatten their special interest groups which collectively make up a grossly gluttonous gargantuan Boarzilla.