Saturday, January 31, 2009

Thank You MNDOT and 911 

When we Minnesotans drive in the winter, we assume our great snow removers will do their job and we can go merrily on our way. And, for the most part, that is true. However, once in awhile we need help - this is my story of 36 hours of major car problems.

I love driving manual transmission cars, just love it. Perhaps because I feel more in control, perhaps another reason but simply put, they are fun to drive. I'm pretty easy on clutches, too. I sold a previous car with 150,000 miles on it and the original clutch. My current car's first clutch lasted 65,000 miles, the second one, 109,000 miles. One might conclude, I'm ok with clutches.

Monday I'm tooling along 35E and notice with every shift, the odometer needle approaches the red line and hovers there before declining. Hmmmm Then I start smelling something burning. Hmmm. Then I discover I can't accelerate over 60 mph so I pull off the road. I call my husband, AAA, the dealer, and lay back for a nap. Along comes MNDOT. The driver had noticed me sleeping and stopped to check. I explained the situation; he marked my car with an orange X so others would know help was on the way. The great thing was he stopped and asked. My car gets towed to the dealer and clutch gets replaced.

Tuesday, I pick up my car with the new clutch - fine. I drive to my class four hours later. As I'm approaching the 35W SR 65 split heading into Minneapolis, I hear a very unusual, fluttering noise. I turn off the radio and the noise is still there. I try to steer and it's hard to turn the steering wheel. Looking for a place to get out of speeding traffic, I aim for the sand barrels between the two roads only to discover I had no breaks. OOOOOO, not good. I stay in the right lane, call 911 assuming that I'm going to need a cop car to protect me from getting rear-ended because I now have no acceleration, no brakes, a totally useless new clutch, minimal steering and am searching for some place to get off the road (there are no shoulders in that section of highway).

Very, not good. However, someone was watching me because just past the I94 overpass on SR 65, there's a 50' patch of grass which gratefully had been half plowed by MNDOT. I manage to coast to the snow and get off the road by 6" - but I'm off the road where cars are continuing to whiz by me. 911 connected me with a tow truck; I wait; call my students and suggest they wait (or we need to find another night for class). Tow truck arrives, takes me to my class and tows in the car. Unfortunately, 48 hours later we hear that I need a new engine.

While these two days' events were rather frustrating, MNDOT came through both times, as did 911. Thanks to all of you. I need a new car but no accidents, I didn't freeze, and all will be well.

Labels: ,

Representative Kline Update 

We are so fortunate to have two very conscientious representatives in Washington, DC:
Representative Michele Bachmann and Representative John Kline.

Congressman John Kline focuses on issues related to our military (he is a retired Marine Colonel), education, ethics and our money. According to his latest report, the House of Representatives passed legislation to block the release of the second half of the $700,000,000,000 passed last fall. Why? Turns out the money wasn't spent as it was intended. Representative Kline realized this and did something about it.

As he states, "I opposed the release of more of your hard-earned money because we have seen no plan for how additional funds will be spent or how Congress intends to get the federal government out of the private sector."

While it is true the pork-driven Democrats passed the hogfest of all pork "legislation," (almost $1,000,000,000,000) not a single Republican supported this expanse of permanent government programs. Saddling subsequent generations with this level of debt is simply unfair and socially unjust.


Friday, January 30, 2009

Blogger talk with Sen. Hann 

A short blogger conference call with state Senator David Hann went a bit awry with the technology. The result was a ten minute conversation with the senator a few minutes later. (I hope the other bloggers got the same courtesy.) I have appreciated Sen. Hann's forthright assessment of issues, and in ten minutes we were able to cover three topics.
  1. The budget: There has been to date no proposal from the DFL majority, only Governor Pawlenty's which now will be subject to the saber-rattling of the tax consumers. The Legislature's rules call for budget targets to be set, but it was reported in the call that when asked if the DFL would be providing a budget, Senator Tarryl Clark, assistant DFL leader, said a simple 'no'. (Video was supposed to be forthcoming, but not received as of this moment. I will add it to Final Word's "TC No" collection.) To date, there have been no "substantive" hearings on any proposals in budget committees, said Sen. Hann.
  2. One of Gov. Pawlenty's proposals to balance the budget was to shift the timing of payments to school districts. This basically borrows from this biennium to the next one by lagging those payments, which incurs a cost for school districts that have to borrow money. Sen. Hann noted that nobody yet has estimated the "tails" or the impact of the Pawlenty budget on the next biennium. If the economy turns around and is robust, this may not be a problem. Sen. Hann was less certain this would be true, and is one reason he supports fully Pawlenty's program to stimulate business investment.
  3. Sen. Hann is generally troubled by the state of the economy, and he particularly pointed to the state not attracting private sector investment. This is a harm to the economy. I'm offering to seek data on private sector investment from official sources to talk about those trends.
I thank him for the time.

Labels: ,

Thursday, January 29, 2009

Non-cooperative solutions 

I had read this list of 10 worst pork economic stimulus requests made by Minnesota cities yesterday but had not commented on it. While I think Tom Steward is a fine political observer and supporter of conservative causes, I'm not as keen of this particular list.

Imagine: You are a college student and a member of a group on campus. Your group is going out for pizza and the bill is to be shared. Common practice is to split the tab. The pizza arrives. What happens? Everyone grabs, eats quickly. There is no incentive to conserve. Even trying to look noble and restrain your appetite does no good, because others are also facing the same incentives and gorge themselves. Seeing this is hopeless, you do too. In economics, we would say the marginal cost of eating another slice is zero. If you paid by the slice, you'd eat less (MC > 0).

The same is true with this Conference of Mayors. The Obama Administration has said it wants to spend gobs of money. The marginal cost to you of proposing one more program is zero. Indeed, if you do not get any of the money and some other mayors do, your opponent in the next election will say you are ineffective because you didn't bring enough slices of pork pizza back home. Principled stands of "no pork" are expensive -- look no further than the beating some representatives here in Minnesota took for deciding against seeking earmarks.

If all the mayors could get together and decide the size of the stimulus package, it might not be as big as this one is because their fingerprints are on it. They might choose to cooperate if they could negotiate. Since the size of the package is already set, and since others are feasting, there is no incentive to hold back on your own requests. Thus waste abounds, from skateboard park to snowmaking machines. The incentive to be frugal has been killed in D.C.

Labels: , ,

Wednesday, January 28, 2009


The stimulus bill passed the House without a single GOP vote. They'd've gotten no credit had they supported it, so there was no gain to helping. According to the Wall Street Journal's Political Diary, Rep. Mike Pence reportedly said to Pres. Obama at the Congressional confab yesterday "You mentioned that this bill had been negotiated in the House. Let me make it clear that there has been no negotiating in the House, because Democrats didn't include us in the process."

Bully for them. Here's hoping for 41 Fresh Water senators.

Just a bunch of Fresh Water economists 

Born in NH, and glad to live in MN. I suggest a new motto, buttons that read "Just Another Fresh Water Economist." May I suggest a silhouette of Friedman's face in the background? Hayek?

This is my set.* Let's go.

(Explanation of appellation.)

*--so Freshwater that Cato didn't even find me. But Boehner did.


Why unemployment lags 

Paul Krugman is making the case for the stimulus package based on the lag in unemployment -- it typically begins to fall well after the trough in the business cycle (as determined by NBER on the basis of series other than unemployment.) But one of those items NBER uses is the level of payroll employment.

The reason for this was explained years ago by Victor Zarnowitz. If you simply plot a sine wave and think of the wave as happening over time, you will see that from the bottom of the cycle you get a slow increase at first that quickens only after a bit. Employment grows from the trough, but Zarnowitz notes that at first it grows slower than the growth in the labor force (perhaps enhanced by discouraged workers re-entering the labor market.) Since UR = 1-E/LF, employment (E) has to grow faster than labor force (LF) for the unemployment rate UR to fall.

I fail to see how that becomes an excuse to have later stimulus. That shape of the growth of employment is simply a result of time-to-build issues: Just as there are lags in implementation of stimulus bills, there are also lags in the process of adding workers to the production process (hiring and training are not instantaneous -- these, btw, are part of the new Keynesian paradigm that Krugman embraces.) They do not avoid the types of concerns about the lateness of fiscal policy implementation envisioned by Friedman almost half a century ago. All that is old...


Worse than an audit 

What fresh hell is this? Are we about to see Gopher-File-ia? How about if you just stick to writing the instructions in English? (h/t: Tax Foundation.)


Tuesday, January 27, 2009

Media alert: Hot Air radio 

I'll be on The Ed Morrissey Show at 2pm today CT. We'll discuss new data on housing. Let me also point to this article in the WSJ this morning on the same data, with some additional city-level data. Please listen in!

Labels: ,

Pelosi's modest proposal 

With apologies to Jonathan Swift.
A Modest Proposal
For Preventing The Children of Poor People in Ireland
From Being A burden to Their Parents or Country, and For Making Them Beneficial to The Public
By Nancy Pelosi

It is a melancholy object to those who walk through this great town or travel in Hopenchangeland, when they see the streets, the roads, and cabin doors, crowded with beggars of the female sex, followed by three, four, or six children, all in rags and importuning every passenger for an alms. These mothers, instead of being able to work for their honest livelihood, are forced to employ all their time in strolling to beg sustenance for their helpless infants: who as they grow up either turn thieves for want of work, or leave their dear native country to fight for oil, or sell their virginity.

I think it is agreed by all parties that this prodigious number of children in the arms, or on the backs, or at the heels of their mothers, and frequently of their fathers, is in the present deplorable state of the kingdom a very great additional grievance; and, therefore, whoever could find out a fair, cheap, and easy method of making these children sound, useful members of the commonwealth, would deserve so well of the public as to have his statue set up for a preserver of the nation.

But my intention is very far from being confined to provide only for the children of professed beggars; it is of a much greater extent, and shall take in the whole number of infants at a certain age who are born of parents in effect as little able to support them as those who demand assistance from the government.

As to my own part, having turned my thoughts for many years upon this important subject, and maturely weighed the several schemes of other projectors, I have always found them grossly mistaken in the computation. It is true, a child just dropped from its dam may be supported by her milk for a solar year or six, with little other nourishment; at most not above the value of a high-speed internet connection, which the mother may certainly get, or the value in food stamps, by her lawful occupation of tax consumption. Thus I made my proposal known to all on ABC:

There is likewise another great advantage in my scheme, that it will prevent those voluntary abortions, and that horrid practice of women murdering their bastard children, alas! too frequent among us! As you know, this is an issue I have studied for a long time.


Trust and morality and economics 

Robert J. Shiller this morning,
A critical aspect of animal spirits is trust, an emotional state that dismisses doubts about others. In talking about animal spirits, Keynes sought to convey the message that swings in confidence are not always logical. The business cycle is in good part driven by animal spirits. There are good times when people have substantial trust and associated feelings that contribute to an environment of confidence. They make decisions spontaneously. They believe instinctively that they will be successful, and they suspend their suspicions. As long as large groups of people remain trusting, people's somewhat rash, impulsive decision-making is not discovered.

Unfortunately, we have just passed through a period in which confidence was blind. It was not based on rational evidence. The trust in our mortgage and housing markets that drove real-estate prices to unsustainable heights is one of the most dramatic examples of unbridled animal spirits we have ever seen.
One certainly does not need to be Keynesian to talk about trust. Tim Harford calls it "responsible for the difference between the richest countries and the poorest." I wrote about this in our last Quarterly Business Report as well:
What we await is the restoration of trust in financial transactions and between banks, which accounts for the sharp increase in banks� holding cash rather than lending to customers. That will take some time, and no government policy will quicken the rate at which banks will decide to lend again.
During last night's presentation, my co-author Rich MacDonald expressed serious skepticism about the financial industry, which has laid off a relatively small number of workers compared to the size of the industry (based on his numbers, less than 4% of the FIRE workforce.) I think that key determinant in this is the degree to which Americans generally trust each other. That level has been sufficient to support democracy in the English-speaking world or Anglosphere. I'm more optimistic that our culture and moral fiber maintains trust even when confidence is shaken as it surely has been the last 18 months. To the extent it does, this recession shall pass, and like Shiller I'm not inclined to think stimulus does anything to shake that.


Where I was yesterday 

Sorry to have gone silent on you yesterday, but I was prepping this talk as well as a lunchtime Kiwanis. Oh and the usual department meeting on Monday. We'll do a little better today.

Mrs. S says that's a good picture, but do I REALLY move my arms as much as that? That's why I do radio.

Labels: , ,

Friday, January 23, 2009

Senator Coleman Conference Call 

I was involved in the recount of the MN US Senate election as documented here and here as well as other posts. The last step of the legal process is the trial that will begin this Monday, January 26.

Why a trial?

The inconsistencies in the recount were mind-boggling. The Franken team pushed for acceptance of votes that do not appear to be valid. That is, the Franken team pushed until they got ahead, then said, "We need to quit." Well, we don't. Had Senator Coleman been ahead now, the Franken team would have eagerly gone to court. So, let's go to court and get this settled.

MN law states that voting is not a residential right but rather a citizen's responsibility. When someone's vote is ignored or counted twice, that action disenfranchises a legal citizen's vote. The questionable practices and procedures of the recount can be summarized as follows:
1 - Votes were counted twice (originals and duplicates)
2 - There was no application of universal, consistent standards handling absentee ballots.
3 - Votes that cannot be found, should not be counted; a recount is a recount of votes from Election Day.
4 - A general statement that the law was applied unequally.
The statistical odds, covered here by King, of so many "found" votes going 100% for Al Franken is abysmally small. Why? What was really happening?

I've been actively involved in elections for three cycles. Our law and procedures need to be tightened. This race hopefully will drive home the need for IDs to vote and a checking of all voters as to whether or not they are citizens.

Labels: ,

Nationalizing banks 

Here's the article that should send shivers down your spine.
The U.S. government�s decision to pledge billions of additional dollars with strings attached to Citigroup Inc. and Bank of America Corp. may be nationalization by another name, according to former bankers and regulators.

Faced with pressure from lawmakers, banks have shaken up management, eliminated executive bonuses and staff and canceled conventions. They�ll be forced to do monthly reports on how they�ve boosted lending while slashing quarterly dividends to one cent a share for three years.

�When the Treasury tells a bank to pay a penny a share vs. its old dividend, you know who�s calling the shots,� said Jon Bruss, a 40-year industry veteran and founder of Hartland, Wisconsin-based Fortress Partners Capital Management Ltd., which invests in banks. �It may not be de jure nationalization but I think it�s de facto nationalization.�

(Full disclosure: I hold stock in Citi.) You'd think, no, it really can't be that bad, can it? Isn't this an exaggeration? Thanks to a brand new blog tracking the Congress (written by Dave Dziok from Rep. Michele Bachmann's office -- h/t: Gary), we learn that it's not. The devil in legislation is in the details, and Dave's post shows us several votes on amendments. Consider:

Amendment #10, Hensarling (R-TX)�Strikes a provision in the underlying legislation that grants the Secretary authority to require a government observer to attend the meetings of the board of directors of any institution that has received TARP assistance. Loses 151-274. I wonder if Geithner will be reporting those government-paid frequent flier miles?

Amendment #62, Holt (D-NJ)�Requires that the Secretary, when making purchases with TARP funds, make purchases at the lowest price and maximizes the efficiency of the use of taxpayer resources. This motion was withdrawn; it was thought too cumbersome.

Amendment #2, Myrick (R-NC)�Prohibits institutions that have received TARP assistance from entering into agreements with a foreign companies to outsource customer service functions, including call-center services. So if you call your busted bank, you won't get Bangalorean accents.

Amendment #56, Hinchey (D-NY)�Directs the Secretary to require any institutions that received TARP assistance to inform the Secretary of the precise use of the funds. The Secretary would be required to conduct an analysis of the use of the funds and submit a report containing Treasury�s findings, conclusions, and any recommendations for further legislative or administrative action. This passed with all but one vote in favor.
Does this look like an arms-length regulation of the banking system, or does it insinuate government into banking to a very large degree? Mrs. Bachmann, whose own amendments were also defeated, voted no on TARP2, and we can hope now only for changes in the version the Senate passes. I'm not holding my breath, and I think our slow slide towards European banking (heavily regulated, few choices for consumers) is quickening.

UPDATE: Tyler Cowen, almost simultaneously:
You might claim: "they didn't nationalize it the right way" and maybe they didn't. Still, once you proceed down the nationalization path, you have to live with the nationalizations you will get, not the nationalizations as a professor might recommend they be done. The AIG transition was overseen by Bernanke and Geithner and of course Congress isn't nearly as smart or as well-informed as those two guys.
No, but with 92% more self-dealing!

Labels: ,

Whatcha gonna call it? 

I'm tempted to keep The Final Word name for the NARN Volume 3 show, but it seemed Michael thought the name would be retired with his departure. The Misanthropic Frat Boy at Nihilist in Golf Pants came up with a list of potential names, which included some commenters' suggestions as well. Sounds to me like a poll idea! So I've taken some that I liked, and are having them run against "Final Word." You can vote once a day, and we'll run the poll for a week. Have fun.

I know Mom will ask why not the King Banaian Show? Well, while for now it's a solo act, it may not be forever, and all the NARN shows have had some catchy subtitle, which an unspellable last name kind of inhibits. (If this was Mitch, I could see Ice Ice Bergie. Or not.)

Labels: , ,

Any time you survey, you will revise 

Steve Perry seems to think he's discovered something new: economic data can be revised.
As I noted in my earlier post this morning, the number of jobs lost in Minnesota for 2008 that was being bandied about the Capitol just last week was roughly 39,000. The new number, 55,000+, underscores just how rapidly the economy is losing ground beneath the feet of bean-counters and prognosticators.
Rapidly losing ground? Indeed the pace of recession, at least in terms of job loss, quickened in the second half of 2008 both nationally and in Minnesota. But go back to 1982, when job loss was in a 12-month period averaging 3% a year. Even for the second half of 2008, the average rate of job loss was 0.9% (Data.)

Data revisions are nothing new, and I noted last spring one that turned a negative outlook for the end of 2007 to a positive one. The data come from surveys, which like the polling data we all read last year in the elections are subject to standard errors. In Minnesota those bands on the unemployment rate, for example, are +/- 0.6%, so that when we say the unemployment rate this morning is 6.9%, we are using an estimate for which the 90% confidence interval is 6.3% to 7.5%. A revision like the one noted by Perry is no cause for gasps (the difference is less than .6% of total employment; here's the estimates of standard errors for employment by state.) It's part of the normal process of reporting and revising survey data.

Labels: ,

School rentseeking 

Mitch writes about proposal in the Minnesota Legislature to scale back or end the charter school program in the state. Mitch quotes this article, which ends with the following paragraph:
Legislators are likely to propose freezing the number of new charters. In part, that's in response to criticism that charters suck students, and the state money that comes with them, out of the regular schools. Also, such a freeze could save money. According to House figures, the state spent more than $69 million last year and this year providing aid to charter schools to rent building space.
Mitch's emphasis included in that quote, who notes the outflow of students and their parents from St. Paul and Minneapolis schools.

Complaining about charters sucking money out of "regular schools" (read: government schools) is like complaining about WalMart "sucking money" out of "mainstreet businesses." Our answer to that has always been 1) consumers save money; 2) small business should learn to compete. Having government regulate charter schools is like, well, having main street business owners on the town planning commission ... which happens about everywhere. We more easily recognize it in the latter case as rent-seeking behavior.

As regards $69 million in renting building space: if all of those students went back into a government school, wouldn't they clamor for more buildings and pass more bonding referenda? You see the $69 million going to charter schools for rental. What you don't see is the $69 million or more or less that doesn't get spent buying more public school space. The good economist sees both.

Labels: ,

Thursday, January 22, 2009

Oh, the loss! 

The best candidate for replacing Sen. Clinton has withdrawn his name.

Well done!

Labels: ,

Obama's and the Democrats' Socialist Policies 

While it may take a while for the impact of the socialist policies (the government can spend our money more wisely than people can - Larry Pogemiller, DFLer in the MN State Senate), the Democrats may wish to ponder the following two scenarios:
1 - The story about the Central American rebels who went to villages to gain support:
The rebel leader said to the crowd:
"If a man has 2 houses and another has none, shouldn't the man with two share one?"
"YES!!!!" replied the villagers.
"If a man has 2 tractors and another has none, shouldn't the man with two share one?"
" YES!!!!" yelled the villagers.
"If a man has 2 cows and another has none, shouldn't the man with two share one cow?"
Dead silence....................
Stunned, the rebel leader turned to the village chief and asked, "What did I say wrong?"
Replied the chief, "Most of the villagers have 2 cows."

2- Here is a (perhaps apocryphal) quote attributed to Margaret Thatcher that nevertheless captures an important truth: "The problem with socialism is that you eventually run out of other people's money."

Labels: , ,

In lieu of mirth, a gift aFoot 

Our friends at the Kool Aid Report (who, by the way, would like me to remind you that Learned Foot was the winner of our sparsely-competed Bowl Mania Challenge earlier this month), have been sponsoring a Blogs for Mirth Day. Try as I will, I guess I'm not fly enough to get that FAQ.

But I thought they might like a story.

On Tuesday the Women's Center at SCSU -- whose ad for this event prefaced their existence by saying they work "with passion and purpose to end sexist oppression" advertised an event on campus titled The Female Orgasm! The exclamation mark was in the title; given the title, it hardly seemed necessary. Event description:
Join us to laugh and learn about the "big O," the most popular topic sex educators Marshall Miller and Dorian Solot teach about!

Orgasm aficionados and beginners of all genders are welcome to come learn about everything from multiple orgasms to that mysterious G-spot.

Whether you want to learn how to have your first orgasm, how to have better ones, or how to help your girlfriend, Dorian and Marshall cover it all with lots of humor, plenty of honesty, and an underlying message of sexual health and women's empowerment.

Are you coming?
Again, I have to wonder: Had SCSU a Men's Center, and had it an event celebrating the male orgasm, what would be the reaction of the campus community. In the case of this event, the university yawned.

The couple apparently has made a small industry of these presentations. Undoubtedly the sex education business could use improvement (I have kids, I hear what they think they know ... and I correct when I can), and I guess it's fine to hire out to someone to do this function for you. One wonders why the theme is so, well, explicit, and what it has to do with a Women's Center that says its mission is to fight sexist oppression. They suggest using either a women's center or a GLBTQ-L.S.M.F.T. group to help raise the money, so I will guess this isn't the only time.

I figured I wouldn't pay this program much attention. The ad wasn't all that tasteful, and I figured if I hadn't known what I needed to know in two marriages I was beyond help. However, one bit of excitement (!) was that the flyer said there were t-shirts and buttons. I simply had to know -- what could they be? And so we procured a couple of shirts.
To Brother Foot, who won that contest and who has long been as big a feminist as Mitch Berg I say, sir, this is the mirth I offer you today. One of these shirts shall be yours to wear.* The other will be used as a prize, as you see fit, for the next MilF. I could not think of a better use for them. Happy Mirth-day to you. Send email to arrange collection of your prize.

*regrettably these came in large. I had no reports of XLs of these babies anywhere. Maybe XLs do not love them.

Labels: ,

Twin deficits, Hopenchange edition 

A couple of decades ago when the world was working (successfully, alas) to scare Bush41 into a tax increase, everyone was writing about the 'twin deficits', that budget deficits and trade deficits are linked. Of course this doesn't really work out well empirically in the latter 1990s, but the basic story still has some validity.

In short, there's an identity in economics that says investment has to be paid for somehow. I.e.,

public investment + private investment = public saving + private saving + funds from foreign sources

Or, more simply, total savings and total investment from all sources should be equal.

Let's consider a couple items in that identity. Public saving is also known as budget surplus. Deficits like we have now are negative numbers. We are currently expecting, pre-stimulus and pre-SonofTARP, to have public saving from the federal government fall from -$455 billion to $1.2 trillion for FY09 (which covers the first three quarters of 2009.) How does that get paid for?

The "crowding out" story is that an increase in borrowing by government has to push up interest rates, which has a (smallish, arguably) offsetting effect to increase private savings and a larger effect to decrease private investment. The Obama administration current is arguing that interest rates will stay very low because of the state of credit markets. Do you buy that? Do you think credit-constrained banks and investment houses will swap their precautionary balances of cash for Obama Victory Bonds, pushing interest rates up?

Savings has risen, according to BEA data, with personal savings currently at $130 billion in Q3 (the Q2 number having been a tad bloated due to saving of the stimulus checks.) So where do we think this number is going to go Q4? The BEA estimates on spending and saving look to be around $275 billion. Some offset, but not enough to finance the increase.

Perhaps foreign sources, but this would mean a fastly-widening U.S. trade deficit. With the drop in oil prices, as Casey Mulligan notes, this is highly unlikely. If anything, the trade deficit would appear to be decreasing, not increasing.

So as we wait for the Q4 numbers from BEA, and start thinking about how bad this and next quarter will be, somebody has to run these numbers. (See also Federal Reserve Report Z.1, Table 8.) I've ballparked some numbers for Q4 based on reading some of the BEA data and a few forecasts, then started ratcheting up the deficit figure based on the CBO forecast. There's always a small statistical discrepancy, which I've left in. Note that most of what business saves is taken in replacement of What happens to the other numbers, is the question. Guesses are in billions of real dollars, at annual rates. I have a hard time making that data add up without either hypothesizing a massive increase in private saving, a collapse in investment, or a large run-up in trade deficits.

Twin Deficits 2008-09?
category 2008:IV 2009:I 2009:II
Residential investment 330

+Nonresidential investment 1350

+Government investment 100
equals: Total investment 1780

Household savings +275

+Business savings (retained earnings) +1500

+Government surpluses -650
+Foreign savings +700

equals: Total savings 1825

I don't know what happens here, but I think we're missing a story in the tale of economic woe for 2009.


What I wouldn't give for more educated churches 

An article in this morning's local paper describes three bits of "food for thought" being discussed at a local church.
One in 10 U.S. households experiences hunger.

A basic North American meal travels 1,500 miles to get to your dinner table.

Research shows that hungry children are more anxious and depressed and less likely to do well in school.

Food and its connection to the community will be the topic of a new study series at a St. Cloud church known for examining complex issues.

�Food for Thought� begins Sunday at First United Methodist Church. It�s open to the public.

This is the fourth study series hosted by the church. Past series have focused on Islam, Christian identity and war.
Let's take those three points separately; they don't hold up well to actual thought:
  1. One in 10 hungry is one of those bits of alarmist garbage you read on liberal websites. Its origins are a USDA report that Robert Rector debunked fifteen months ago.
    In 2006, around two-thirds of food insecure households experienced �low food security,� meaning that these households managed to avoid any disruption or reduction in food intake throughout the year but were forced by financial pressures to reduce �variety in their diets� or rely on a �few basic foods� at various times in the year. According to the USDA, the remaining one-third of food insecure households (around 4 percent of all households) experienced �very low food security,� meaning that at least once in the year their actual intake of food was reduced due to a lack of funds for food purchase. At the extreme, about 1.4 percent of all adults in the U.S. went an entire day without eating at least once during 2006 due to lack of funds for food.
    1.4% went an entire day -- this is known by some of us as fasting. If you were a high school wrestler, you may have experienced "very low food security".

  2. How far your meal travels is not an issue as far as hunger is concerned. In fact, the ability of food to travel is a blessing of our modern trading system. That item in and of itself should be an indication that you are talking greenism through the kitchen door and are trying to end the process that has made the world so much wealthier. If we restrict food trade, we're reducing the very "variety in their diets" that is being used to bloat the number of people hungry!

  3. With those two put out of the way, the third point is that hungry kids do less well in school and are more anxious and depressed. True enough, but that tells us nothing of whether this is a problem. Kids forced to listen to soft jazz on the school intercom all day are probably anxious and depressed too, but luckily schools don't do that.
I am often bombarded with such messages in churches (I was raised Methodist, and such messages is only one reason I am no longer.) Whenever I question the pastor or the lay leaders about why they think such things are true, they trot out points like these three without any critical thought whatsoever. On the list of places I wish I could spend more time teaching economics, a seminary would be pretty high in priority. Even in very conservative Protestant denominations (I have very little experience with non-denominational churches, so I won't infer about them) the level of understanding of basic economic principles is parlous. We want people to trade with each other. We want people to eat, but we also want them to trade with each other. Places that trade with each other are less likely to war with each other. Give trade and peace a chance!

Labels: , ,

Wednesday, January 21, 2009

Who's discredited on state business taxes? 

After the State of the State speech, Senate Majority Leader Larry Pogemiller argued that Gov. Pawlenty's proposal to reduce corporate income tax rates to increase job creation is a "failed strategy" at the national and state level. See for yourself at the end of this clip.

There has long been debate over the responsiveness of business location and employment to state corporate tax rates, but to call it failed is almost certainly an overreach. Chile is a good example of a country that grew after tax rate cuts in the 1980s (see Perry and Leipziger, for example); evidence for the US could be found in Alan Auerbach's work (see for example the 1994 NBER Macroeconomics Annual.) More recently, Djankov et al. (2008):

We present new data on effective corporate income tax rates in 85 countries in 2004. The data come from a survey, conducted jointly with PricewaterhouseCoopers, of all taxes imposed on �the same� standardized mid-size domestic firm. In a cross-section of countries, our estimates of the effective corporate tax rate have a large adverse impact on aggregate investment, FDI, and entrepreneurial activity. For example, a 10 percent increase in the effective corporate tax rate reduces aggregate investment to GDP ratio by 2 percentage points. Corporate tax rates are also negatively correlated with growth, and positively correlated with the size of the informal economy. The results are robust to the inclusion of controls for other tax rates, quality of tax administration, security of property rights, level of economic development, regulation, inflation, and openness to trade.
Wheeler [2006] also documents the evidence on reduction of state taxes; she summarizes the findings:
  1. Employment -- "Four out of seven studies found small effect on employment; one found 6 percent increase in employment when 1 percent tax decreases were offset by transfer payment expenditures. Two studies found effects only in limited cases using data prior to 1975."
  2. Domestic investment-- "One study found that a 1 percent decline in the ratio of taxes to personal income that is financed by an equal reduction in transfer payments would lead to a 9 percent increase in investment."
  3. New firms -- "One study found that a 1 percent decrease in the effective tax rate leads to a 9.5 percent increase in the number of firm births in the communications industry and a 2.7 percent increase in the furniture industry."
I would hardly call this "discredited". I would argue instead that Sen. Pogemiller's reaction is informed more by ideology and a fear that he might have to make larger spending cuts, and without much concern for the level of economic activity in Minnesota.

Labels: , , , , ,

The reach 

George Will:
Obama's unprecedented power derives from the astonishing events of the last four months that have made indistinct the line between public and private sectors. Neither the public as currently alarmed, nor Congress as currently constituted, nor the Constitution as currently construed is an impediment to hitherto unimagined executive discretion in allocating vast portions of the nation's wealth.

He acquires power just as the retreat of the state has been abruptly reversed. The retreat began 30 years ago this May, when Margaret Thatcher became Britain's prime minister; it accelerated 20 months later when Ronald Reagan was inaugurated; it acquired an exclamation point a year after that, when adverse market forces compelled French President Francois Mitterrand to abandon socialism in a nation receptive to it.
The first thing you see on the White House's website: Change Has Come to America. It is telling, I think, that the website was changed even while the parade was in progress. It has a blog. Can we hope President Obama Twitters from his Blackberry? Question: Does this kind of outreach befit a president more like George Washington or Francois Mitterand?


My baby, my baby she wrote me a letter 

FIRE has been sending letters to public universities, including ours, that updates the schools on the latest in campus free speech rulings from DeJohn v Temple.

The basic point is that for too long, our nation's public colleges and universities have completely ignored the fact that as government institutions, they are legally required to be in full compliance with the First Amendment. That these public institutions have continued to maintain unconstitutional restrictions on student speech�despite over twenty years of federal caselaw striking down speech codes!�is an affront to our legal system, a black mark on our public system of education, and an embarrassment for our nation.
No doubt the university is more focused on budget issues than speech codes right now, but following court decisions should not be optional for universities. The letter will serve as notice that free speech advocates will be on the lookout for violations, including at SCSU, which still has a "red light" for its speech code from FIRE.

(h/t: reader jw)


Tuesday, January 20, 2009

Those darn lags 

According to Congressional economists, the effects of the Obamaspendorama would not reach the economy "until it's already on the mend."
Overall, only $26 billion out of $274 billion in infrastructure spending would be delivered into the economy by the Sept. 30 end of the budget year, just 7 percent. Just one in seven dollars of a huge $18.5 billion investment in energy efficiency and renewable energy programs would be spent within a year and a half.

And other pieces, such as efforts to bring broadband Internet service to rural and underserved areas won't get started in earnest for years, while just one-fourth of clean drinking water projects can be completed by October of next year.

Still, other elements of Obama's $825 billion economic recovery plan, such as $275 billion worth of tax cuts to 95 percent of filers and a huge infusion of help for state governments, will be distributed into the economy more quickly.
The CBO's website appears to be down this morning. I'll update this post when I find the link.

Meanwhile, Greg Mankiw links to a paper by Mountford and Uhlig, which finds that tax cuts provide a much larger multiplier effect than does government spending (.91 vs. 1.57). Tax cuts take olonger to work through the economy, however, perhaps too long for a Congress who has little more than six quarters before it faces re-election. David Weil:
Unfortunately, discretionary fiscal policy is rarely able to deliver on its promise. Fiscal policy is especially difficult to use for stabilization because of the �inside lag��the gap between the time when the need for fiscal policy arises and when the president and Congress implement it. If economists forecast well, then the lag would not matter because they could tell Congress the appropriate fiscal policy in advance. But economists do not forecast well. Absent accurate forecasts, attempts to use discretionary fiscal policy to counteract business cycle fluctuations are as likely to do harm as good. The case for using discretionary fiscal policy to stabilize business cycles is further weakened by the fact that another tool, monetary policy, is far more agile than fiscal policy.


When you require other people to pay costs for your benefit 

Ed Morrissey reports on the stalling of our school buses last week because of the blending of biodiesel. The superintendent in Sauk Rapids reported the same thing -- several buses were having trouble on Wednesday, and they could not risk broken down buses Friday. Things appear to have been worse in the Cities. (Wiki on gelling of biodiesel.)

We currently require a 2% blend of biofuel in our diesel(known as B2). The Legislature passed last May a rule requiring an increase of diesel to a 5% blend, B5. Many metro area bus districts have actually moved to B10 and B20. Governor Pawlenty and DFLers have both supported biodiesel standards here. Is anyone going to ask the question whether they are appropriate for our climate?

Labels: , ,

Monday, January 19, 2009

Equal Pay for Equal Work 

Yesterday's feminists are at it again - the Equal Pay Act of 1963 is being revived with the old claim that women still make roughly 78 cents to a male colleague's dollar, according to this "Intelligence Report" in the January 18, 2009 issue of Parade Magazine. There are two problems with this meme:

1 - Maternity leave: The report sort of addresses the time off for raising kids, which when factored into pay for women, negates the differences. The phrase the article uses is "A log of 'maternal profiling' goes on." Well, when you take time from work to raise kids, you lose those years of income, period. It's a choice. If you want to go back to work, you can and you won't lose time. (I chose to return to work after a six week maternity leave - for me, it was the right thing to do. Two years later, I was raising my son myself and did for another 14 years.)

2 - The idea that businesses intentionally treat women unfairly. The anti-business Democrats want the Lilly Ledbetter Fair Pay Act to override the Supreme Court decision in Ledbetter v. Goodyear. In this case, the Court ruled that women must sue within 180 days of the start of pay discrimination, not years later. While I agree that 180 days might be too short a time limit, removing all time limits is simply beyond the pale.

Ignored in all the hyperbole is the fact that individual preferences are key to the wage gap. This quote from this Washington Post article drives home the point:
Surveys have shown for years that women tend to place a higher priority on flexibility and other personal fulfillment than do men, who focus more on pay. Women tend to avoid jobs that require travel or relocation, and they take more time off and spend fewer hours in the office than men do. Men disproportionately take on the dirties, most dangerous and depressing jobs.
While the mantra of "equal pay" sounds good, it must be tied to "equal work" and performance.
And will this law support men getting equal pay in areas where women now out earn men? (Some 30 professions including engineering management, speech-language pathology, and radiation therapy)

By allowing employees to sue anytime after they "feel" they've been discriminated against, in other words remove the statute of limitations, and placing the burden of proof on the employer, the result will be fewer jobs. There simply is no way, other than the market to value jobs and there is no way an employer can be held accountable for something that may have happened 10, 20 or even 30 years ago.

The US House passed the Lilly Act - if it becomes law, it is one more nail in the coffin of free markets.

Labels: ,

Most fowl 

h/t: Mark Perry.

Labels: , , ,

Waste the rest of your day 

95 Old School Games You Can Play Online
courtesy Craig Newmark.


Not all wine and roses tomorrow 

At least one group is going to mark the Inauguration with a protest.
The mainstream media has extended its honeymoon with the new administration; even as scandals, bailouts, proposed federal works programs, a falling economy, and questionable cabinet appointments take place.

Many Americans say, "Give him a chance. He can fix our problems." But, why be fooled again?

Government is limited by the United States Constitution for a reason. Society is a responsibility of the people, not the government.

We already know the real Barack Obama. We know his cabinet appointments; we know his voting record; and we know his beliefs.

He promises more foreign intervention, more socialism, more restrictions on our civil liberties, and a greater disregard for the Constitution.

Rather than wait for another politician to disappoint the American people, let's stand up as patriots and say one day of Barack Obama is enough.
Our local campus has a YAL chapter; I agreed to serve as its adviser when they said they needed one in order to form. Here's their press release:
Tomorrow, Barack Obama�s Inauguration Day, students will participate in an activism event on college campuses nationwide declaring, �Change? What change?�

Thus far, 41 chapters of the group Young Americans for Liberty (YAL) have confirmed their participation. Each chapter will distribute flyers, hand out pocket constitutions, and talk to students about the dangers of Barack Obama�s policies on their campus.

The local YAL chapter at the University of St. Cloud will host their own event on campus at Atwood Memorial from 10:00am � 3:00 pm. Media is welcome to attend.

�This is no doubt a historic day, but Barack Obama does not offer real change. His policies only enforce bigger government, an increase to the already massive budget, the same foreign policy, and the continued destruction of our civil liberties,� says Sam Swedberg, President of the YAL chapter at the University of St. Cloud State .

YAL�s event, Real Change Requires R3volution, seeks to peel back the marketing of Barack Obama and expose his policies for what they really are � not real change. Before taking office, Barack Obama has put forth an $800 billion economic plan, promised more troops in Afghanistan, and begun talks of reviving the draft.

�Not all young people are excited about the policies of President Obama. Who do you think will pay for all of this reckless spending? Who will fight and die in these unnecessary wars oversees? Our generation will,� says Jeff Frazee, Executive Director of YAL, in Arlington, VA.

For more information about the event, please visit and join us on campus at Atwood Memorial tomorrow, Tuesday, from 10:00am � 3:00pm.
That "R3volution" is of course a Ron Paul trademark. Please do not infer from my advising of the group that I am in agreement with the positions of Rep. Paul. I believe, however, that students who disagree with liberal orthodoxy on this campus need to organize, and am happy to let a hundred libertarian groups bloom.

I would point out to them (and will when I see them next) that no policies have yet been enacted; his fellow Democrats are already shredding big parts of Obama's stimulus plan, including the $3000 tax credit for new jobs. But a compromise between Obama and the Democrats is unlikely to produce less state control of the economy.

Labels: , ,

Tax that fellow behind the tree 

Here's an intriguing poll. It is headlined "Many OK with taxes, spending cuts to balance budget." 49% support a combination, while 41% favor primarily budget cuts (see poll results and splits here, starting at question 8.) But it's all about raising someone else's taxes. Raising the top individual income tax rate (which affects probably less than 100,000 taxpayers in Minnesota) is favored by 53% of those polled; no word how many of those responding favorably were in the group whose taxes would rise. But when asked whether or not they would support a sales tax expansion to food and clothing, 81% said no. Nobody I've heard has even come remotely close to asking to tax food. Clothing is another matter. The Minnesota Taxpayers League notes in an e-update this morning "It�s easy for people to say yes to tax increases�as long as it�s not their taxes."

Source of title.

Labels: ,

One more comment on the upcoming inauguration 

Let me give a more local view of the hagiography of Obama. Over the weekend a small debate on campus broke out over Inauguration Day events being offered by the multicultural student services office here on campus (and some viewing opportunities through the student programming board.) Classes were invited. Some people wondered why we are doing this.

Undoubtedly some of the fascination with Obama is race. How could anyone think not? So when we have groups on campus dedicated to advocacy for particular races (called "underrepresented" or "historically underserved" or some such), celebrations of an advance of those races is to be expected. Tuesday is a great day for many reasons -- it reminds us of the robustness of our democracy, for one thing, and for another it marks an important expansion of political participation that we could not have imagined fifty years ago. So I do not have any problem that student organizations organized on race -- of which we have all but one, as there's no white student organization; just as Indoctrinate U pointed out, we have no male analog to a Women's Center -- celebrate the accomplishments of that race.

Is this hagiography evidence of left bias in the university? I don't know. When you have Obama visiting the Post and they snap cellphone pictures like ten-year-old girls at a Jonas Brothers concert, it's hard to blame a university for setting up a few big-screen TVs to watch an inauguration. It just reflects the mood of the times.

Nor would I complain greatly of having students taken from a classroom to watch the Inauguration, provided that the course is one for which presidential inaugurations or race relations was germane to the topic. I would ask, if a chemistry professor took her class to this event, what the Inauguration has to do with chemistry. I teach economics of developing countries tomorrow, 12:30-1:45. I will not take my class to it; we will have our normal lecture. That's my contract with them and what the state pays me to do. If students want to cut class and watch the Inauguration it is their right to do so. As with any other class, I do not incentivize absenteeism by sending out notes ex post or answer emails of "what did we do in class today?" Nor will I tomorrow. But that's my decision, based on what I see my contractual and ethical duties to be to my employer and to my students.

So while some, including some campus readers of this blog, have questioned the events, I see no reason to complain about it. But two last observations that are less positive about the events on campus. First, I think it's fair for one to wonder how many classes will take advantage of this. It may be many. Faculty these days tend to think more about the object of study than the disciplines with which they study. They can justify taking the students to view the Inauguration by saying something like "I study current events". All of the fill-in-the-blank studies programs will have no problem providing some rationale. It is this lack of disciplinarity that, in my view, is cheapening college education. Lacking a discipline means lacking its ethical standards. That is stuff out of the toothpaste tube, alas, not likely to ever be put back in.

Second, in the course of defending the campus viewing opportunities, one professor wrote this:
I would hope the majority of those who did not vote for Barack Obama did not "not vote" for him because he is an African American. And of course, now he is President elect for all Americans, not just those of us who voted for him.
How unfortunate a paragraph. 56 million people voted for someone other than Obama, and each one of them now has to be judged by the anointed like this professor. Did a few vote for McCain because Obama was black? I suspect so. But did a majority of those who did not vote for John McCain not vote for him because McCain is white? Did a majority of those who work in multicultural student services "not vote" for McCain because of race? These questions are absurd, of course. So is the question implied in the quote.

If Obama is going to be a post-racial president, he needs to work on professors who cast aspersions on those who might have voted for McCain because they don't like trillion dollar stimulus bills, or who think a 72-year-old guy has more experience than a guy who writes a biography before he has one, or who thinks the guy with military experience might be better for national security than the guy without. Nobody should have to prove those reasons were not rationalizations for racial animus.

Labels: ,

The best column of the weekend 

Now Republican elites are reaching for their stash of lotus fruit, chewing them stems and all, desperate to forget, particularly their own orgy of federal spending to purchase support for the war in Iraq, their role in the departing president's political wretchedness secure in the history books.

And Democrats, now on their hopium with Obama of Chicago and the reforms they think will come with the Daley machine having a pipeline to the White House, expecting more federal health care, more federal schools, more federal this, more federal that. If we run out of money, don't worry, let's party and print some more.

Neither side is willing to see that they're so very much alike. The leviathan grows, horns and all.

And the two sides, Republican and Democrat, unleash their high priests to fight for what they've always fought for. Not ideas, not really, and certainly not the freedom of the individual.

Only power.

John Kass this past weekend.


Sunday, January 18, 2009

Yellow Ribbon City, Farmington, MN 

MN has a number of soldiers serving overseas, including members of the MN National Guard. Since 73% of active duty members and their families live off base within civilian communities, Governor Tim Pawlenty gave a local branch of the MN National Guard a directive to ensure ongoing support for service members and their families, across all military branches.

Today, Farmington was honored as Minnesota's first Yellow Ribbon City because of their efforts supporting its military men and women and their families. Farmington established the first "Warrior to Citizen" program, in the nation. Their goals are:
1 - Organize support for families of deployed soldiers
2 - Educate the community about soldiers before, during and after deployment
3 - Recognized all service members and families within the community
The event at the Farmington American Legion celebrated and thanked those who made the program possible. Minnesota's Nation Guard, Adjutant General, Larry Shellito spoke as did Congressman John Kline of MN's 2nd Congressional District. Annette Kuyper, the driving force behind the success achieved in Farmington, was recognized.

Why is support needed? For every 200 of us, there is one active US soldier. Often, people don't know anyone with a soldier in the family because many soldier families are integral parts of their communities. But when their family member is deployed overseas, support is needed: in general and in reaction to the often rude, inaccurate, and nasty press coverage.

The Yellow Ribbon programs, including this initiative by Congressman Kline to provide support for soldiers returning stateside from deployment across the USA, make a difference in the lives of our soldiers and their families. We owe all of them a debt of gratitude for standing up for what is right, protecting our freedoms, and that of our posterity.

(If interested in starting a "Warrior to Citizen" program, please contact AnnetteKuyper @

Labels: ,

Obama, Global Warming, and the White House Science Adviser 

Many of our readers know that I'm quite skeptical of the "global warming" aka "climate change" aka "latest label for Mother Nature's ebbs and flows" mantra. Anytime someone says (as is said in this referenced article), "It's over, there is no more debate" well, I question it. The more we learn the more a wise person will conclude that there is no end to learning and that new knowledge may be more accurate than past knowledge.

President-elect Obama appears to be a strong member of the doom and gloom, "world is going to collapse because of CO2 emissions (you know, the gas humans expel when exhaling)" crowd. To that end, he has nominated John Holdren as director of the Office of Science and Technology Policy. Professor Holdren has wonderful, academic credentials. He's a physicist, a professor of environmental policy at Harvard, a former president of the American Association for the Advancement of Science in addition to authoring a number of articles.

But "he is also a doom-and-gloomer with a trail of erroneous apocalyptic forecasts dating back nearly 40 years -- and a decided lack of tolerance for environmental opinions that conflict with his." His habit of predicting disasters that never occurred is disconcerting at best. How many good scientists are so narrow as to dis opinions differing from theirs? Arrogance, thy name is Holdren.

Professor Holdren has a history of missteps (putting it politely) when it comes to his expertise regarding the environment. This article by Boston Globe columnist, Jeff Jacoby, lists eight major issues that should raise questions about Holdren's qualifications for the job, including Holdren's belief:
- That oceans would rise by 13 FEET when the UN Intergovernment Panel on Climate Change said 13 INCHES
- The US only should incorporate "zero population growth"
- His claim that greenhouse gases will wreck the planet
Couple these beliefs with Holdren's association with Paul Ehrlich, the scientist who lost the bet with Bjorn Lomborg regarding mineral scarcity and one wonders if Obama really is open to other ideas.

Do we really want someone in charge of science who is a defeatist? Someone who thinks crawling in a hole and disappearing is good? Or do we want people who have a "can do" attitude, one that will lift us up and provide options for improving the lot of man with a minimum of government interference? I think the latter.

Labels: ,

Friday, January 16, 2009

Chart of the day 

So many ornaments on the Christmas tree!

The House Democrats' stimulus plan, via The New York Times. It will be fun to compare this to the other three plans (House Republicans, Senate Democrats and Republicans.)


If you increase demand without increasing supply... 

...and you control price, bad stuff happens.

Fausta has an interesting observation on the French health care system, that errors are made at rather alarming rates. But we Americans think no problem, it's not our system.

Think again:
Congressional negotiators trying to assemble a mammoth economic stimulus bill are considering including a provision to have the federal government subsidize COBRA health care continuation premiums for employees who lose their jobs, business lobbyists say.

Few details of the proposals are known, though lobbyists say their understanding is that the government would pay 50 to 60 percent of the premium, while the length of the subsidy would be 18 months, the maximum period of time employees can obtain COBRA coverage from their former employers. In other situations, such as divorce, death or marital separation, beneficiaries are eligible for up to 36 months of COBRA. A federal COBRA subsidy �has been pretty much agreed to,� said Sen. Max Baucus, D-Montana, who chairs the Senate Finance Committee.
That was last week. That appears to have made it into the House plan, and Democrats seem focused on propping up state Medicaid plans too. Now most people who are offered COBRA don't take it, as it is rather expensive (you pay both your and the employer's share, plus potentially 2% on top.) Those that do, as you might guess, are those who need insurance and therefore cost more. "Experts say that for every dollar of COBRA premiums, employers pay about $1.50 in claims," says the first article. If we put more people into COBRAs, the question will be whether they are those with high claims or those with low. Co-paying COBRA plans will increase the quantity of COBRA plans demanded (lowering the price), without adding anything to the supply of medical services. The experience of the French is instructive on the consequences.

Labels: ,

Circuit City quits 

At one point in this town -- a regional shopping center with representatives of most major chains -- the fellow like me who wants a new TV or computer had several choices of vendors, including three big boxes: Best Buy; Circuit City; and Ultimate Electronics. A few years ago Ultimate liquidated its local store (there are still some in MN), and today Circuit City announced it's following suit.
The company had been seeking a buyer or a deal to refinance its debt, but the hobbled credit market and consumer worries proved insurmountable. Negotiations for an acquisition went past midnight on Thursday, Circuit City lawyer Gregg Galardi said in court.

Two buyers - Mexican billionaire Ricardo Salinas Pliego, who controls a chain of electronics stores in Latin America, and the Golden Gate Capital private equity firm - had been looking to buy the company in a shrunken form, with either 350 stores or as few as 180 stores. But the company couldn't secure the necessary financing or support from vendors.

Some employees were notified Friday that they would lose their jobs and certain stores would begin close-out sales as early as Saturday.


The evolution of libraries 

I grew up around libraries. My mom worked near one and I often took the bus there to read and wait for her to get off work. I learned the old Dewey decimal system, snuck down in the basement to read Breakfast of Champions and Ball Four (both of which had bad words in them), find those long rods on which someone put a Globe or a Times for you to read. I loved the library. When I went to college and then grad school, I spent many hours each day in their libraries not just to research my papers but just to read journals.

That's why it rather pains me to write this, but I will anyway: Why do we have libraries? Or more to the point, why are libraries providing these services?

A few years ago, public libraries were being written off as goners. The Internet had made them irrelevant, the argument went. But libraries across the country are reporting jumps in attendance of as much as 65% over the past year, as newly unemployed people flock to branches to fill out r�sum�s and scan ads for job listings.

Other recession-weary patrons are turning to libraries for cheap entertainment -- killing time with the free computers, video rentals and, of course, books.

I wonder if Andrew Carnegie contributed his money for libraries to compete with the local Hollywood Video store? Many Carnegie libraries are now serving other functions, but many are these places now where people are waiting in dozen-deep queues for an internet connection. Aren't these functions available elsewhere? The City of Minneapolis spent $110 million a couple of years ago for its library; is this money well spent? Don't most people do these things in coffee shops now? In a city that offers free public wifi, for example, do we need libraries any more?

I'm quite certain that, once upon a time, a broad cross-section of society had no access to books or print news, etc., without access to a library. When I studied at Claremont it was rather common for people in the community to use this private school's library -- they could even get lending privileges. They still can. The old Carnegie library of Claremont is now a building on the Pomona College campus; the city has its own newer library a few blocks away. I have a soft spot in my heart for that old Carnegie -- I took my first class in grad school there, and a few years later taught my first section of principles of economics in that room to the right of the front door. But it hasn't been a library in over fifty years now.

The same is true in Minnesota
. St. Paul spends $36 per resident on its libraries while worrying over its budget for cops.

Labels: , ,

Thursday, January 15, 2009

Media alert: Hot Talk 

I will be sitting in for Dan "The Ox" Ochsner on 1450 KNSI from 8 to 11 am tomorrow morning, joined by Mike Landy. For those of you who listen to me on Final Word, the format is pretty similar, but this Mike is not Michael. (More on him tomorrow, since Saturday is MDE's swan song from FW.)

There's streaming audio from the KNSI link; please listen in, and call 320-251-1990 to participate!

Labels: , ,

State investment tax credits 

I didn't get to hear Governor Pawlenty's state of the state speech (I might watch it tonight after I get home from a late meeting), and as expected it was long on rhetoric, particularly about taxes:
Imagine a typical Minnesota kitchen table. A mom and dad have just tucked the kids into bed with a kiss and a prayer, and they come back to the table to confront economic reality.

On the table are bills, notices and a notepad with a budget that�s tighter than it�s ever been. Hope and fear are also at the table.

How do we pay these bills? How do we fix the car? How do we pay this mortgage?

How are we going to afford college or even retire someday?

The same emotions, concerns and urgency at that Minnesota kitchen table must be at all the tables we sit at here at the Capitol � the budget hearing table, the agency tables, and the negotiating tables.

And this day, on behalf of Minnesotans sitting at their kitchen tables, I ask each member of the legislature:

Please don�t add to their burden by increasing their bill from government.

Please don�t take more of their hard earned money.

Please don�t raise their taxes.
As I posted this morning, if you're going to make statements like this, you have to state what choices you really are making. (Turns out I said that last year too.) And one statement he made shows one place where he's being rather bold: Despite balancing the budget, he wants to reduce business taxation.
The way to renew our prosperity is to unleash creativity, innovation, entrepreneurship and job growth.

Successful economies are built by people. Our economic landscape is shaped by men and women who see unmet needs and opportunities in the world around them, and devise goods and services to meet them. For all the turmoil in our nation's financial markets, the malfeasance, corruption, and neglected oversight, this truth remains: While government can commission public works, write checks and foster conditions for job growth, it can�t match or replace the power of people who create goods, services, and jobs. ...

In 2009, it costs too much for employers to create and keep jobs in this state. If we want to build up employment, we need to bring those costs down. I�m proposing a Minnesota Jobs Recovery Act.

For starters, Minnesota�s business tax rate is way too high. A recent study by the Tax Foundation concluded that if Minnesota were a country, we�d have the third highest business tax rates in the world. It�s way out of line and it needs to get fixed.

Today, I�m proposing that we cut Minnesota�s business tax rate in half. This means reducing the current 9.8 percent business tax rate to 4.8 percent over the next 6 years. This will take us from having one of the worst business tax rates in the country, to having one of the best. It will help us keep and attract more jobs.

These days, lack of financing is a major barrier to small business success. To jump start small business job creation, I�ve proposed a 50 million dollar package of tax credits that will create over 100 million dollars in new investments.

In addition, I�m proposing a 25 percent refundable tax credit for small business owners that re-invest in their business quickly in order to stimulate our economy.

I�m also proposing a capital gains exemption for qualifying investments in small Minnesota businesses. This will encourage investment in Main Street and help grow jobs.
Wisconsin has a 7.9% corporate income tax rate; perhaps the Minnesconsin idea could be applied as a start? Even at the lowest in Pawlenty's proposal, we'd still be higher than South Dakota and North Dakota if income is under $8000.

The two changes work at cross-purposes, leading me to wonder how the Pawlenty Administration intends to implement the credits. Tax credits are more valuable when the marginal tax rate is higher; as the tax rate cuts work through the system, the amount one gets back on an investment through the credit becomes lower, especially for small businesses (unless the credit is refundable, which seems unlikely.) The proposal sounds similar to Ohio's plan, which was subject to a constitutional case a few years back. The research tends to support the idea that state investment tax credits, by reducing the user cost of capital, increase the amount of capital formation in a state (see Chirinko and Wilson (CW) [2006a and 2006b] and Ernst and Young [2003]). Tax competition between states tends to be substantial, and CW 2006b show that states tend to create these together to avoid losing businesses to neighboring states. Given we already have a kind of investment tax credit in JOBZ for outstate investment, metro area firms are most likely to benefit from Pawlenty's new plan.

I suspect that the offer to cut corporate marginal tax rates is going to fall on deaf DFL ears. (I heard from one reporter that the DFL is already labeling the speech a billion-dollar addition to the deficit.) I am looking forward to the opening Pogemiller Yell. (You know that "Please don't tax me" line got a little color in Pogie's cheeks.) But by and large it was a relatively mild speech based on the reading. No dramatic veto pens, even when many expect he's going to get a budget he has to veto. Is he signalling softness? Or is he just keeping his cards close to his vest until the budget gets released in a couple of weeks? I think the latter, but I don't know that.

Labels: , ,

A Minnesota of wimps* 

There's some consternation on campus today about us being open while the surrounding school districts are closed. The temps are low enough that exposed skin can freeze in seven minutes. My house was -24 this morning (at last check, it was -15.) Is it safe for students, someone asked.

My first year up here there was a Saturday in January 1985 where the morning temperature was -34. My old '71 Chrysler New Yorker had a block heater that I had plugged in -- low temperatures seldom sneak up on you -- and sure enough it popped on the first time. Several people ran out to get jumps of their cars. That night a colleague and I went to dinner at a nearby supper club outside town. Several other cars were there; all were left running, perhaps for hours. We didn't have remote starters back then. At Panera this morning I counted (!) 22 cars in the parking lot, 14 of which were running. I was 23rd and 15th while enjoying a bagel and a cup of coffee. (I know some legislator is now going to introduce a bill to prevent this in the name of global cooling global warming climate change. Send me the bill, we'll mock it on Final Word.)

Exposing skin is the result of carelessness. I understand that children sometimes forget mittens. I would cancel school thinking of this. But college? Maybe we can use the cold to get rid of poorly prepared students -- it's quicker and cheaper than hiring composition or algebra instructors for sixteen weeks. Seriously, YOU LIVE IN MINNESOTA. If you do not know how to wear a ski mask, or a scarf, or a balaclava, then stay inside, move, or get Tom Coughlin Face.

Our campus meteorologist Bob Weisman wrote me a note that you have to go back to 1996 to a really cold January. (I wouldn't know -- I was in Ukraine that winter escaping the cold.)
The last really, really cold outbreak here was late January-early February 1996. That week, we had 6 straight lows colder than -30 and lows frequently below zero. We had one day with a high of -20, the coldest high in St. Cloud records. The record low for Minnesota (-60) was set on Feb. 2. This isn�t close to that.
We might set a record tonight, Bob says, but only because the record for St. Cloud for this date is a relatively mild -31.

* Alternate title: Life's hard; wear a balaclava.


What Doug Grow wants 

Read this about how to close the deficit.

Count the number of paragraphs before you get to "cut spending".

Grow's formula raises six taxes (and a fee) before you finally get to "cut private school aid for such items as transportation and textbooks." Emphasis mine. God forbid we touch the public schools.

Grow argues that even the laundry list of tax increases can't fix this deficit, that at the end,
The political reality is Republicans can doodle with cuts as much as DFLers doodle with tax increases. In the end, both cuts and taxes are going to be needed.
But note to Doug Grow: There are no needs. There are only choices to be made. If Governor Pawlenty decides, either today in the State of the State or sometime later, to sign tax increases, that is his choice. Same is true of the DFL leadership. I do not want to hear "we had no choice." You do. And you asked for the job of choosing. There is no theoretical basis for calling some spending 'need' and other spending 'want'. It's all 'want'. Tell us what you want, and we'll vote to tell you if it's what we want, too.

Grow wants a lot, and wants your money to pay for it.

Labels: , , ,

Carrying coals to Newcastle, Duluth edition 

The very last item on Duluth's list of I-wanna's from Santa Obama: "Spirit Mountain snowmaking and maintenance facility, $6,000,000, 70 jobs." That comes out to $83,000 a job. To make snow in Duluth, which averages over 80 inches a year. Tell you what. For half that, you can have all the snow in my back yard. Buttercup would like to have her yard back, guys. Help yourself. (h/t: Kristina Rasmussen.)

Labels: , ,

Wednesday, January 14, 2009

"A" is for Appeasement or O's Good Students 

This post by King reminded me of an article by Joseph Epstein in the December 8 issue of the weekly Standard. He refers to a David Brooks column in the New York Times that exults "the high quality of people President-elect Barack Obama was enlisting in his new cabinet, ." Why are these people so impressive? They all attended "superior" schools such as Harvard, Yale, Princeton, Stanford, etc. And, as referenced in King's article, a number of them teach in these institutions.

Some of us know these people: they work hard in high school, pile up activities, score high on SATs and get into one of the top 20 colleges. After arriving at an A school, they get more As and go on to the next level.

What is so bothersome about this? Academia is truly an isolated environment populated with far more believers in leftist causes than the population as a whole. Finding a conservative professor is difficult. Finding a professor who allows different points of view is even more rare.

Obama's A team learned early on to figure out what the teacher wanted: feminism, socialism, liberalism, anti-big business, etc. and gave it to them.
When did these students push themselves to examine another point of view?
When did they take a stand against a professor because they could prove the professor was wrong?
How many of them would have scored their perfect 800s on SAT tests before the grading scale got re-normed DOWN?
Can these people really think, make hard decisions or just accomodate what someone else wants?

As? Yes, for appeasement.

Labels: ,

Minnesotans and wealth 

This article argues Minnesotans do not flaunt their wealth. (Just their WELLSTONE!!!!!!! bumper stickers.) According to the article on which it draws:
"There's certainly less mass luxury on parade in the Midwest than either coast," said George John, who as chair of the Carlson School of Management's marketing department tracks buying trends. Even the virtuous rich are probably spending just as much as ever but "we just don't see it. Public consumption is only public to the extent we can see it, like the cars people drive, partly because American society is so segmented."
One thing they do is hide it in the garage. I watched some of Sunday night's episode of 24 in someone's garage. It had a heater, a 27" flatscreen TV. And it was only two car stalls. Many homes have three stalls, meaning the garage has a bigger footprint than the car itself. What goes in the third stall? The boat (pronounced "bo-o-o-o-oat" here.) The snowmobile. The ATV. As Joe Soucheray would call it, your wealth is tied to your cylinder index. (I'm a very wimpy 17.) Most people aspire here to higher C.I.s as much as they would jewels or fur.

Surveys show that about a third of Americans think they will someday be rich (with rich being probably in the area of $200k of income.) I haven't found a survey like this just for Minnesota -- I wish we had one -- but I suspect the share of Minnesotans who think they will be rich someday is higher. Better education helps, as does a relatively dynamic economy here. And so there's a tension in Minnesotan public policy; we probably have Scandinavian attitudes towards income inequality, but because we think the shoe will be on the other foot soon, we have an inclination not to go too far in terms of using taxes in the state for redistribution. Bryan Caplan notes (in discussion of Obama and redistribution) "It's not like, 'Look, we're raising your taxes to (more evenly) distribute [income]. We're doing it because we need to raise money.'"

But that doesn't explain really this reluctance to display wealth. Mrs. S (unlike me, a native of Minnesota) has always bought into the idea that the rich don't show it. When I observe on TV someone in a Brooks Brothers suit and say hey, he's rich, she will argue it may just be a middle class person putting on airs. I know at fundraisers I wear suits, and many locals do not. I know I've sat with people in flannel shirts over coffee, and after they leave a mutual friend informs me how well off that person was. Is it the luxury of not having to care for what you wear? Is it embarrassment over one's wealth? Or is it that the income distribution in Minnesota is more fluid, more dynamic, such that wealth comes to people who are not particularly of a certain class? If it's the latter, that cylinder index might be an interesting way to look at the distribution of wealth in Minnesota.

Labels: ,

A quick thought 

I read this from Arnold Kling:
The Obama Administration is being populated with outstanding academics, like Larry Summers and Cass Sunstein. It is not surprising that the academic world is expressing a lot of confidence in giving them huge amounts of power. These are people who are more than three standard deviations higher in IQ than average, but I still suspect that this leaves them more than three standard deviations below what would be needed to justify giving these technocrats $10,000 from every household in America to spend at the their discretion ... The folks working on the stimulus package are not people who have spent time in middle management in a large organization, where you see how life differs from a calculus problem or a term paper.
...and I remember the title of a very good history of Long Term Capital Management, When Genius Failed. How many Nobel Laureates worked for LTCM?

More on the magic of 1.57.


You can't get there from here 

I am happy to report that I have not had the disaster poor Ed had (or James?) but the weather has caused at least one disaster in our family, albeit a mild one. Littlest is playing basketball for a high school team this year, and to get from a piano lesson to a game eight miles away (according to GPS.) Game is scheduled for 6, we get out of piano at 4:50. Cake, right? Nope; not one, not two, but three accidents block the two paths from one place to another. First one has me skirting through residential streets. Locals can tell you horror stories of CR 134; Monday was mine. Finally navigating towards the school, we see Littlest has the home uniform on, but we're going to a road game. Got to head home. Now we find a guy puts his car in the ditch and tries to drive out onto Highway 15. Ends up stopping two lanes of traffic. James notes "If, after following the instructions in step one, you find yourself in the ditch, stay there. You�ve earned it." Not that chucklehead. A just God would have put his car in the Sauk River.

Get home at 5:20. Still six miles to game. 5:22, accident stops traffic by other major artery going to Sartell (where the game is.) Turn back around, head through another residential development to get around. Success. No, fail -- person driving 20 on a 45 mph road in front of me, only two lanes. Arrive 5:47. Success? She has only to put her shoes on and grab a ball. Maybe she can still play.

Except the game started at 5:45. Nobody told Littlest the game was a 5:45 start (she plays for a high school different than her own.)

She road the pine. But safely.


This makes teaching money and banking harder 

Federal Reserve Chairman Ben Bernanke, in remarks delivered in London today, said the Fed isn�t pursuing the quantitative easing approach to monetary policy that the Bank of Japan pursued from 2001 to 2006. That�s expanding the liability side of the central bank�s balance sheet, pumping more and more reserves into the banking system and targeting them at particular markets. In that approach, he said, �the composition of loans and securities on the asset side of the central bank�s balance sheet is incidental.�

The Fed, instead, is focused on the asset side of its balance sheet � �on the mix of loans securities it holds and on how this composition of assets affects credit conditions for households and businesses.� Call it �credit easing,� he said. The phrase was adopted by the Fed after pondering several other labels for its new approach.
Via the WSJ. This is, in fact, what Willem Buiter refers to as qualitative easing. Let me suggest that the first author of a money-and-banking text that has either qualitative or credit easing in its table of contents is going to make some sales.

Labels: , ,

Playing the cold card 

Mrs. S was taken over by a stomach flu Monday and stayed in bed. She often turns down the heat when in bed, so Tuesday morning when I woke it was -24 outside and only 53 inside. That shower I took reminded me of being in Ukraine, where we had no apartment thermostat (all heat and hot water was centralized by the city unless you installed an emergency hot water system.) In the winter I took many such showers. (Hint: take all your clothes in the bathroom with you, including shoes. I did that this morning.)

It'll be cold here all week. But I can't complain about the cold because in Eastern Europe it's much, much colder. -49C/-56F in Slovenia on Saturday colder. All of which is really annoying them with the Russians and Ukrainians fighting over gas.
Hungarian Prime Minister Ferenc Gyurcs�ny said this week it was unacceptable that �the bullets Ukraine and Russia shoot at each other hit Hungary.� Like other affected countries, it has set up gas-usage limits for consumers.

Eastern Europe has not seen such rationing since communist times. In Hungary schools were closed down during the week. Officials say they will compensate by sending children to school on weekends.

The Hungarian Ministry of Agriculture has handed out a list of food companies producing essential goods such as meat, milk and bread, and asked the government to ensure uninterrupted gas supplies.

Hungary has capacity to sustain some two months of heating public institutions and houses, 90 percent of which use gas, but only if it abandons all economic activity.
VOA News is also reporting on Hungarian gas shortages.

The Ukrainians understand this. They are in a very good strategic position, holding most of the gas lines than run to the EU as well as to the Caucasus. So it is trying to leverage that to get a good deal on its gas from the Russian firm Gazprom. It appears that Tuesday morning the Russians began to ship gas but were blocked by the Ukrainian side, even with international monitors supposedly present. (The Ukrainians blame Gazprom, naturally.) But as Stratfor points out the Russians have built a good buffer. I have noted that the January calendar normally contains a Russian-Ukrainian gas spat. This time, however, Stratfor thinks the Russians brought better weaponry to the fight.
...before 2004, the Russian-Ukrainian natural gas spat was simply part of business as usual. But now, Russia feels that its life is on the line, and that it has the financial room to maneuver to push hard � and so, the annual ritual of natural gas renegotiations has become a key Russian tool in bringing Kiev to heel.

And a powerful tool it is. Fully two-thirds of Ukraine�s natural gas demand is sourced from Russia, and the income from Russian natural gas transiting to Europe forms the backbone of the Ukrainian budget. Ukraine is a bit of an economic basket case in the best of times, but the global recession has essentially shut down the country�s steel industry, Ukraine�s largest sector. Russian allies in Ukraine, which for the time being include Yushchenko�s one-time Orange ally Yulia Timoshenko, have done a thorough job of ensuring that the blame for the mass power cuts falls to Yushchenko. Facing enervated income, an economy in the doldrums and a hostile Russia, along with all blame being directed at him, Yushchenko�s days appear to be numbered. The most recent poll taken to gauge public sentiment ahead of presidential elections, which are anticipated later this year, put Yushchenko�s support level below the survey�s margin of error. (h/t: Eclectecon by email.)
See also this analysis by Der Speigel, which finds that the EU was nevertheless caught flatfooted by this. My wager is that the Europeans are faced with enough trouble to help Ukraine solve this problem. The difference last we looked was about $49 per unit for the gas ($201 vs $250 per cubic meter.) When it only takes money to solve a problem, someone's money solves the problem. Whose, is the question. Russia's got a cash reserve, but the weather favors the Ukrainians.

Labels: , , ,

Tuesday, January 13, 2009

Why you should lock up that other $350 billion 

Immediately after GMAC became eligible for TARP money, GM reduced to zero the interest rate� on certain models. This, of course, penalizes GM competitors, including Toyota, Honda and other �transplants� whose cars are made in America by Americans for Americans, and Ford, which does not have the freedom of maneuver conferred by TARP money because Ford is not taking any�
Source; h/t: Coyote Blog, who notes "If you pay people trillions of dollars in response to a bad behavior (in this case, credit lenience) then you will just encourage more of that behavior, even if everyone acknowledges it to be a bad behavior."

While we're at it, note what is introduced as Senate File 1 at our own state legislature. I'll provide you a short translation: If Obama sends us money, we're spending it on stuff we like, such as "to promote a green economy." Tax cuts? Fuhgeddabouddit.

Labels: ,

I was too late to be insulted 

I met Brad DeLong when he was here at SCSU at our Winter Institute some years ago. There are people I like personally and disagree with professionally, many in fact*; DeLong was one. His presentation on technological change and growth was good, balancing history and economics. He was personally pleasant to talk to.

Unfortunately, he seems to have gone bonkers with this post, referring to people who disagree with the Obama stimulus package by way of responding to a request for comment by GOP House leader John Boehner as "ethics-free Republican hacks." I'm not sure what disappoints me more: that he called us that, or that he didn't even bother to list me among the people whose quotes he displayed. Yoohoo! Brad! See page 5. Guess he didn't get that far.

Nor is his standard really useful. He can only note that Council of Economic Advisors members have not signed on to the list. Yet Greg Mankiw has written about the stimulus in skeptical terms. And what about Nobel Laureates, such as Gary Becker? Who qualifies as being "an economist once upon a time"?

Having read the plan, the argument can be made that, even if you wanted to pass a stimulus package, the blend contemplated here does not get enough bang for the buck. The authors of that piece, incoming CEA chair Christina Romer and Biden adviser Jared Bernstein, say there's a "significant margin of error". Is it not appropriate, then, for a loyal opposition to suggest there is a different way? How is it hackery?

Don Boudreaux points out that being opposed to the Obama Spendorama isn't just about it not working. Even if it did, one might object on ethical grounds:
again supposing that fiscal stimulus by government will work and that the economists on DeLong's doo-doo list actually agree (for these suppositions are part of DeLong's premises), it's more likely that such opposition reflects an abundance of ethics rather than an absence of ethics.

It's no ethical challenge to support something that works. It is, however, a real ethical challenge to oppose something that you believe would work. Someone opposed as a matter of principle to government intervention into the economy might be sensible or not; but if that person sticks by his or her principles -- if he or she continues to oppose the intervention on moral grounds, or because of a belief that following what is thought to be a wise rule-of-thumb is best even at the cost of making things worse in the immediate case -- that person is ethics-infused, not ethics-free.

Which kind of person is DeLong? As Mom used to say, when you point one finger at someone else ... well, I bet your mom told you the rest. One wonders why he's so defensive.

*--sadly, it can go the other way. One macroeconomist whose work I have long admired came here to give a talk and was distressingly distant, glum and unfriendly towards the people who tried to meet him after the talk. He only used 20 minutes of his hour-long period for his remarks. He seemed only interested in picking up his honorarium. I think we've had enough through here that I don't identify him saying this; I still admire his work greatly, but I'd never invite him back.

Labels: ,

Doesn't that defeat the purpose? 

I just got a notice about National Stalking Awareness Month. Here's the press release from a year ago. I wasn't aware of it.


Monday, January 12, 2009

Cool Glacier Breakup 

The Perito Moreno Glacier in Argentina breaks up every four to five years for centuries. Like clockwork, give or take a week, Perito Moreno puts on a spectacular show. Argentina has built walkways for people to view the breakup.

This video shows the ice calving. No, it's not Al Gore, it's not global warming, it's not climate change. It's Mother Nature doing her thing, normal and natural.

Sit back and enjoy. If you like Enya, you experience a bonus.


Whatever will we do without Michael? 

Tis true, Michael Brodkorb will be broadcasting his last as a regular host on The Final Word next week. We'd like to make it a fitting sendoff, so we're taking suggestions for what tributes one might think Michael will have.

He won't go away entirely -- he will be filling in for me when I'm away at conferences if he's available. NARN is about to turn five (in March). I've been happy to make that drive each week I can to feed my radio jones, but some days it's harder than others. The 28 months we've been doing NARN 3: FW has been great fun but it's a grind.

For the time being, the format will be NARN's first solo show. (It's never really solo as I always have a producer; I anticipate Matt being across the glass.) Readers of this blog know my preference for economics to politics by and large, and I'll talk more of it in the show in its new form. But state politics will still be part of FW's coverage. More on this in the next two weeks as I prepare to fly the plane myself.

Labels: ,

A new documentary 

You can always get my attention by playing The Who. But I noticed this while grabbing a link to William Easterly's website for my course (in which we use White Man's Burden as one of my texts) and see someone's contracted to make a documentary on it. This video is the trailer.


Why we keep questioning the recount 

Suppose you are an election official in a precinct. You are collecting ballots with a machine that measures people as they come through the door. At one point your machine breaks down. You replace the machine with a backup, but you fail to turn that machine on for awhile. Later it is turned on, and you record your totals.

Later there is a recount, and in the process you discover the error by finding the extra, uncounted ballots. Naturally, since they appear by all appearances to be valid votes, you count them and include them in your totals.

This is not fiction. Ballots were thus discovered in Maplewood, Precinct 6 during the recount process for the Coleman-Franken race.* Folks at the Uptake who reported the incident noted in that article that the Election Night returns in that precinct favored Franken, 45.4% to 39.2%. If the 171 ballots are like the remainder, you'd expect 45.4% of the 171 to go to Franken and 39.2% to go to Coleman, which would give Al 78 and Norm 67. You can just imagine how bummed Norm would be; that finding is expected to cost him 11 votes.

Visiting the precinct results, however, we find Franken added 91 votes from that precinct and Coleman 54. He's out 37 votes, not 11. The Coleman campaign cannot believe its luck.

How likely is this to happen? To understand this I use the heuristic developed during the Rossi-Gregoire recount battle.
...assume that we have a large bag of marbles, they are either red (Rossi votes) or blue (Gregoire votes), there are a total of 856,963 (505,836 blue + 351,127 red) marbles in the bag (it's a BIG bag of marbles) - these numbers are inclusive of the 'new' ballots discovered (336 apparently), or 'enhanced' during the process.

These marbles are uniformly distributed in the bag - like people, they are all mixed up together and there is no formulaic method to tell where one of the 336 new ballots came from or what precincts or demographics characterize those ballots that required 'enhancing'.

We don't know anything about 171 people who showed up at the time in Maplewood when the machine was failed. There isn't any reason to assume they should be distributed differently than the 1100 or so who had their votes already counted. So for this the binomial distribution should work as a method of asking the question "how likely is it, if the bag is 45% blue marbles (Franken), that in a pull of 171 marbles from the bag I would get 91 blue marbles?"

The answer is 0.6%, or about 168 to 1. That's about on a par with the odds you got in March 2008 on the Tampa Bay Rays winning the World Series. The Rays didn't beat those odds. Franken did. As we'll see, he won lots of longshots.


Now that is purely a forensic exercise. Critics of this piece will say that "well, you can't prove what happened in that precinct." And I can't. I'm not saying it's fraud. You can't tell that from this type of analysis. I'm just saying it's pretty unusual to get that draw of ballots in that particular precinct. If there was no other story, I would probably shrug it off as a curiosity.

But because the race is so close and because there have been other stories, I wondered: Could we use that type of analysis elsewhere? I haven't had a chance yet to drill down to the precinct level across the state. But the 87 counties of Minnesota make an interesting level of analysis. Overall the recount added 1572 votes for the two top candidates. You are right to wonder: How did they miss so many ballots? Wasn't there doublecounting? We'll get to that in a bit. But the idea is that sometimes machines miss ballots, and sometimes they get misread. Machines do make mistakes; if they didn't we'd never need a hand recount.

The added totals were 1056 to Franken and 516 to Coleman (total 1572; I'm not talking about any vote changes for Barkley and the rest.) 786 of these came from the dreaded "fifth pile" of wrongly rejected absentee ballots that the two campaigns agreed to.** The Coleman campaign is fighting for more. Given that those ballots broke 481-305 to Franken, again in a race where you'd think they'd go about 50-50, one might hope that the remaining ones, currently frozen out and awaiting adjudication, might lean towards Coleman.

As to the remainder, they still broke Franken's way 575 to 211. That's pretty staggering. Just think about that a minute. You flip a coin 786 times and it comes up heads 575 times. Would you think it's a fair coin? I took the post-election review county totals (which had Coleman +215) and the final recount totals from Monday (which, skipping the absentees, had Coleman -49), and used the same calculation as I just did for Maplewood P-6. The larger the number of ballots the better this calculation is, as the random draw story I'm using depends on not appreciably changing the proportion of Franken and Coleman votes pre- and post-recount. You can view the spreadsheet here.

Some counties cannot be used this way because the manual recount showed fewer votes; it's hard to undraw a marble from a bag. Those changes weren't too large, as you can see on the spreadsheet. Franken lost nine votes and Coleman seven in Washington County (Franken had 44% of the two-party vote); Franken lost ten and Coleman five in Clay County (Franken 48% of two-party share.)

Of the remainder (all county percentages are for two-party vote share), here are the five with the largest impact that added at least ten votes:
Five others had very low randomness probabilities: Cass; Kandiyohi; Pine; Polk; and Sherburne; but the changes there were six or less. In short, the result came from changes in three very Democratic counties that are implausibly tilted towards Franken. One of them by chance? Maybe. All three? About as likely as your next two NBA champions being the Timberwolves and Oklahoma City. Franken hit more than one longshot.


So where did it all go wrong for Norm? Did the Coleman campaign do a poorer job on its challenges than the Franken campaign? One hopes not. I could go back and look at the challenges for patterns and I might, but the randomness assumption is harder to hold for challenges.

Could it be this just shows that the larger cities have higher error rates in counting votes than the other areas? That is, could this all be fine and I'm just getting fooled by randomness, as it were? Yes, I suppose that's possible, though given the vitriol hurled at anyone who cast aspersions on Twin Cities election officials, it would be quite an admission. Should Secretary of State Ritchie initiate a review of why Hennepin, Ramsey and St. Louis counties had such large errors in counting? You'll forgive me if I don't hold my breath.

There is also the disturbing question about absentee ballots. Why did they break so badly against Coleman? Did the Franken campaign do a better job of kicking the Coleman-rich absentee ballots to the litigation phase than the Coleman campaign did? I don't know. One way to get at this might be to take the absentee ballot data by precinct, compare it to the vote shares in those precincts and see which were which.

Or it may be that, as I mentioned earlier, the challenge process favored Franken either by aggressiveness, legal skill, dumb luck, or something more nefarious. We may look at that process too. There are many places to look. But the point of this article is simple -- one has to wonder whether the recount got the vote right. I suspect it's the question nobody will really ever answer.

*--I have wondered how the election officials missed this on election night. Why didn't someone reconcile the count of votes on the tape to the count of signatures? It's not important to my story, so I've skipped over this. Maybe someone already has an explanation.

**--On our radio show Saturday, Sarah Janecek pointed, inter alia, to that decision as one of the things that will be addressed in the contest phase of the recount before a judicial panel. The datum offered might be evidence of the effect of that decision, in allowing one side to skew the absentee ballots. But I would not say more about this unless I knew the overall distribution of absentee balloting.

*** -- UPDATE (11:15am): Gary Gross points out to me that in the Times chat, someone mentioned the possibility that the ballot errors are due to senior citizens "that overwelmingly voted for Franken." Well, no. Over 65s broke 43-42 for Coleman, according to a STrib exit poll.

Labels: , ,

Sunday, January 11, 2009

Children, Hamas, the Mainstream Press 

Some of you know that I taught elementary school a number of years ago. This was before the politically correct movement got in the way of real education. I teach a college class now and all I can say is we're cheating our children by giving them As, letting them think each of them is perfect all the time, that there is no evil except the USA and that all children deserve to win everything and get gold stars. When we don't demand standards and knowledge, we all lose, but more importantly, we are handicapping them for life.

Now, I've found this video about the Hamas (you know, those Palestinians whom Israel is fighting because these Palestinians seem to think they can fire rockets into Israeli homes, schools, etc. with abandon and nothing will be done about it because the mainstream press and the United Nations (UN) turn a blind eye towards this practice and do nothing).

Watch this video. Something is radically wrong when a culture teaches its 5 year olds to hate and become a "martyr" which in reality is murder. Would you want your kid or grand kid to be raised in such an environment of hate, prejudice and sheeer stupidity with a total disregard for all human life?

I think not. It's time that civilized nations and so-called psychologists look at the real damage being done to Palestinian kids. Start raising the noise level on this practice. The problem is not Israel - you won't find sane nations teaching guerrilla warfare to kindergartners - you will in Palestine - it's been going on for a very long time.

Labels: ,

Friday, January 09, 2009

Latest on Coleman Recount 

Yes, I know, we're tired of the recount but Minnesotans are entitled to fair election results. Far too many questionable practices have occurred during the recount. A good summary of the recount problem is this statement:
The state Supreme Court ordered that Democratic challenger Al Franken, the Coleman campaign, and local election officials all had to agree an absentee ballot should be included, before that vote could be counted. This effectively gave each party a veto power over which ballots would be accepted.
As I said here, the inconsistencies in this recount are rampant. Minnesota's Supreme Court justice, Alan Page, was one of two justices who objected to the default veto power as instructed above. His dissent included the following statement: "The court has abdicated its role as the defender of the fundamental right to vote."

What the Coleman Campaign is hoping for is a consistent method for identifying these ballots without double counting them. It seems as though Judge Page at least understands the problem.

It is my wish the same occur. Then we MUST look at MN Election Day procedures. It is time to require a government photo id to vote and insist on consistent election official training. There simply is too much at stake.

Labels: ,

What ends a credit crisis? 

In our local area forecast this month, I wrote the following paragraph:
What we await is the restoration of trust in financial transactions and between banks, which accounts for the sharp increase in banks� holding cash rather than lending to customers. That will take some time, and no government policy will quicken the rate at which banks will decide to lend again. But lending is how banks make money, and at some point they will. I think sooner, rather than later.
Bert Ely, earlier this week in the Wall Street Journal, agrees:
Banks are in the lending business: They do not need to be forced to lend. And contrary to popular and political opinion, banks have not stopped lending. Despite the recent financial market turmoil, a declining GDP, and an increase in loan-loss reserves, commercial bank lending actually grew $336 billion, or 4.9%, from August to Dec. 24, according to Federal Reserve data. While lending dictates or other restrictions may be tempting, the Obama administration must discourage Congress from imposing them on recipients of TARP investments.
Mark Perry provides the graphic confirming Ely's point, but the graph simply has a huge jump in September 2008 and then a decline. I think it's probably the conversion of former investment banks Goldman Sachs and J.P. Morgan into commercial banks that makes that jump. (See the jump in credit in the October 10 H.8 report.) That doesn't make the credit crunch any less bad than it is.

But it IS getting better, and the Federal Reserve is beginning to unwind some of its lending, indicating further some calming in the market. The markets expected the jobs report today (as I write this, the Dow is down less than eighty points); it might be finally the case where we are seeing a more forward-looking stock market, which would be a welcome relief.


Thursday, January 08, 2009

Global Warming (Oops, Climate Change) - Not 

Before this article disappears totally, I wanted to at least get it referenced.

As far as websites go, the Huffington Post is one of the most leftist ones out there. A few days ago, one of their writers wrote an article titled: Mr. Gore, Apology Accepted. It discussed the fear-
mongering on the left as it touts its mantra that CO 2 is going to be the death of the planet. It's a well-written article.

Today, the founder of the Huffington Post, Arianna Huffington, made the following statement:
"I am a firm believer that there are not two sides to every issue, and that on some issues the jury is no longer out. The climate crisis is one of these issues."

And we wonder why people are losing confidence? They get one side of an issue, only. Global Warming aka Climate Change is a foregone conclusion? What about human adaption if necessary? scientific improvements? Real data collection? Etc. Hello, Arianna, yes there is more than you want to learn or believe and more cracks are appearing in the "foregone conclusion" regarding GW. If the media were not so beholden to flamboyant but unprovable rhetoric, we'd all have better information. Decent scientists are proving that the leftist/control mantra of the last 15-20 years is rather empty.While Al Gore has made a ton of $$$ on his carbon credit scam, he still lives in a house that uses more utilities in one month than most Americans use in a year, his private jet, his private boat, etc.


Obama fiscal policy 

I was speaking earlier today on Ed Morrissey's show about the Obama speech today. Note that Ed used the picture of Amanda Carpenter instead (who occupied the first half-hour of the show.) Ed knows his audience.
Broadcasting Live with Ustream.TV I didn't see the Obama speech so I worked from a transcript. A few comments.

Ed played this for me:
We start 2009 in the midst of a crisis unlike any we have seen in our lifetime, a crisis that has only deepened over the last few weeks. Nearly 2 million jobs have been now lost, and on Friday we're likely to learn that we lost more jobs last year than at any time since World War II. Just in the past year, another 2.8 million Americans who want and need full-time work have had to settle for part-time jobs. Manufacturing has hit a 28-year low. Many businesses cannot borrow or make payroll. Many families cannot pay their bills or their mortgage. Many workers are watching their life savings disappear. And many, many Americans are both anxious and uncertain of what the future will hold.

Now, I don't believe it's too late to change course, but it will be if we don't take dramatic action as soon as possible. If nothing is done, this recession could linger for years. The unemployment rate could reach double digits. Our economy could fall $1 trillion short of its full capacity, which translates into more than $12,000 in lost income for a family of four. We could lose a generation of potential and promise, as more young Americans are forced to forgo dreams of college or the chance to train for the jobs of the future. And our nation could lose the competitive edge that has served as a foundation for our strength and our standing in the world.

In short, a bad situation could become dramatically worse.
"All we have to fear is the status quo," I think, is how Ed characterized that. But I think much of this is hyperbole. Take for example "2 million out of work." The context for this is a workforce over 140 million people. Through November, the 12 month percentage change in employment is a decline of 1.4%. (You can play with the data.) This doesn't even match the 12-month percentage change in March 2002, hardly a period that called for the drama of this speech. Payroll employment declines of 2.5% or more have occured in both the 1974-75 and 1981-82 recessions. We may get to that level; I think that's more likely than not some time in the next six months, at which point you will say "4 million out of work" rather than two. But let's keep some perspective rather than dwell on "we could lose a generation of potential and promise." That's just bathos. Four million jobs lost sucks, but it's not without recent precedent when the size of the economy is accounted for.

That same perspective is needed elsewhere. 2.8 million more people involuntarily in part-time work? Take a look at the data. 25% of them are workers age 16-24. We don't have data before 1994 for the unemployment series that includes part-time workers who wish they were full time (known as U-6), and we know it's higher than it has been since we've tracked the current series. But it was pretty high in 1994, also not a date when we thought the end of the world was nigh.

The lost GDP? From CBO's budget outlook, it's on a par, in percentage terms, with the 1974-75 recession. (See Figure 1 in the link on page 2.) Indeed, if you take that 8% gap and use Okun's law, you'd estimate excess unemployment of 8/2.5 = 3.2% approximately. The CBO estimates the natural rate of unemployment to be 4.8%, so the expectation from that would be an average unemployment rate in 2009 of 8%. Again, not that far out of line from other recessions, and better than 1981-82.

8% has only a single digit.

Don't believe me? Ask CBO:
By CBO�s estimates, economic output over the next two years will average 6.8 percent below its potential�that is, the level of output that would be produced if the economy�s resources were fully employed. This recession, however, may not result in the highest unemployment rate. That rate, in CBO�s forecast, rises to 9.2 percent by early 2010 (up from a low of 4.4 percent at the end of 2006) but is still below the 10.8 percent rate seen near the end of the 1981�1982 recession.
9.2% is a little high based on the Okun gap calculation, but certainly plausible for a one-month peak somewhere out there. Note that it's rather unusual to be above potential GDP, and usually being above means inflation. This yardstick is usually used to discuss the size of the budget deficit (notably, once TARP, Fan/Fred subsidy and the recession are pulled out of the calculations, the deficit is estimated to fall in the area of $250 billion.)

Rahm Emanuel noted that the new administration didn't want to waste a crisis, that they could pass things in crisis mode that wouldn't get past Congress in normal times. The speech tries to elevate a normal recession into a crisis. In doing so it risks imposing a solution to a problem that doesn't exist anymore when fiscal policy works through its lags. As John notes in that article, Bruce Bartlett has argued that passage of fiscal policy legislation has been a pretty good predictor of the end of recessions. Could it happen this time? The last two big recessions lasted about 16 months. If the recession started in December 2007, that puts you at April this year. Not sayin', just sayin'...

Labels: ,

One voice does not a news report make 

I am of course not a professional news reporter. But I think I have some feel for what a news story is supposed to contain. And the way this article from the black newspaper of Minnesota is written seems wrong to me. Lead paragraph:
A current assault case reflects the area�s racial tensions

St. Cloud State University (SCSU) student Douglas Tanner is scheduled to appear Thursday, January 8, in Sterns [sic] County District Court in downtown St. Cloud. His case raises a number of serious questions about Black athletes in St. Cloud and race relations on and off campus that we will examine in the stories that comprise this series.
The story goes on to interview Mr. Tanner, and reports no other sources. (The writer indicates trying to contact Mr. Tanner's lawyer "were not returned".) Mr. Tanner previously agreed to plead guilty to some charge -- it appears to be lesser, but the reporter doesn't offer that detail -- on advice from that lawyer, he says, but now wishes to withdraw the plea and fight the charges.

The problem with this article is that it is entirely told in the voice of Mr. Tanner. The reporter does not talk with anyone else in the article. Though we may learn more as the series progresses, it's unreasonable to print an entire article that is told by one person without presenting any independent verification of what happened in this case. Indeed, considering previous coverage this reporter has given the city and university, one wonders if he will ever provide another side of the story. Let's hope his editor asks that question.


Wednesday, January 07, 2009

Borrowing is borrowing 

I was reading this post by Ed Morrissey this morning and thought it's both right and wrong. Right, in that any lockbox is hypocrisy. The current Social Security surplus is estimated to be $155 billion in fiscal 2009. That number is already being spent. The new forecast for 2009 puts the deficit at $1.2 trillion, or almost 9% of GDP. $180 billion of that deficit comes from TARP, netting out the present value of troubled assets that the government plans to recover.

You may as well say the lockbox on Social Security was spent on TARP; the Social Security fund is being stocked with Treasury bonds anyway at this point. What actually will pay for the funds to be given to households as grants -- Ed's right here, too: The money isn't a tax rebate, since there are no taxes paid by many of its recipients -- will be additional borrowings from whomever we can borrow from. That's most likely going to be international countries such as BRIC -- Martin Wolf concludes as much yesterday -- though Russia's part of that will be small for the foreseeable future.

You might say tax cuts are tax cuts, and right now we need them so what the heck? let's borrow from BRIC and devil take the hindmost. But that would be wrong. Tax cuts that just allow consumers to purchase more means just the kind of flow Wolf discusses. We hand a dollar to a family making $30,000 a year, and it spends perhaps $.20 of it on imported goods. That's an old-fashioned Keynesian injection with a real leakage in the circular flow. Peter Ferrara shows that it's the same thing we did last winter. On the other hand you can have a tax rate decrease such as the corporate tax rate cut Larry Kudlow is seeking. It's much cheaper, it leaks less, and it has the potential for a bigger bang for the buck. (I'm not as enamored as Kudlow by the business tax breaks currently pushed by the Obama team. They do nothing for the fellow with the new idea ready to take advantage of a marketplace suddenly with lots of elbow room. The circular flow still applies; Hal Varian argues for stimulating private investment to use the savings that households are generating to replenish their portfolios ... and thus argues for investment tax credits.

Deciding what paid for government spending, or whether such-and-such a group is having money returned or getting a grant, is fun politics but not very useful economics. What matters is changing the size of government spending and the impact of different tax rates on economic activity. If you told me the corporate tax rate was being reduced "in order to rebate some of the payroll taxes corporations pay", I'd not complain about hypocrisy.

Labels: ,

Tuesday, January 06, 2009

Coleman Press Conference 

This afternoon at 3:00 Senator Norm Coleman gave a press conference.

There is much at stake here. While Mr. Franken may think he won, the recall has raised many, many questions,regarding the: clarity of the beginning recount rules; training of city and county clerks; and consistency of the application of rules during the recount.

Senator Coleman thanked his supporters and all who helped with the recount. Then he explained why the lawsuit is being filed. The certification process is not complete. Because of controversial actions that occurred in the recount process, MN must go through this final step. More specifically, the following questionable irregularities must be resolved:
1 - Some votes that were counted twice (original ballots and duplicate ballots)
2 - Some precincts had more ballots than the number of people who had voted in this election race
3 - The inconsistency of the counting and discarding of absentee ballots
4 - A desire to make sure the votes that are valid, are counted.
As the Senator said, speed is not the first objective. It is far better to get it right than rush through a process. In a democracy, it is important that all parties obey the law. It is also important that the law be applied as fairly and justly as possible. Fairness to MN voters should take precedence over "getting it done."

Senator Coleman is a quality individual. His grace and composure came through in this press conference. As he stated, "No one is indispensable." This is true, Senator, but some of you are less dispensable than others. Your class was very apparent this afternoon.

Labels: , ,

How much is he REALLY planning to spend? 

According to the AP:
President-elect Barack Obama said Tuesday that he foresees a $1 trillion U.S. deficit soon and "for years to come" as the nation climbs out of its economic crisis.

Obama, who takes office Jan. 20, spoke to reporters after meeting with his economic advisers.

He said that Peter Orszag, his pick for budget director, estimates that the current budget is already on course to hit $1 trillion, regardless of a planned economic stimulus package.

I'm sure Orszag has seen the 2009 budget and economic outlook to be released in the morning, but a trillion moves us at least $350 billion ahead of where we were in October. (I'm trying to adjust this for the effects of the bailout package.) Certainly the economic projections have worsened since then as well, but a trillion is more than 6% of GDP, and even the most profligate Bush budget barely made more than half that. That number, if true, is staggering.

Labels: ,

Ukrainian yawn 

The battle between Ukraine and Russia over natural gas, Jerome a Paris points out, are as old as Ukraine's independence. I haven't posted much about this because the battles have become annual events. I was reading through my book on Ukraine, published in 1998, and found this observation:
...the Russian government was still selling energy resources to Ukraine at less than half the world price it could receive. Ukraine was told by the Russian government that failure to adhere its currency policies to those of Moscow would result in being charged the full world price of oil and natural gas.
That refers to statements made in 1992. There are later references in the book to reductions in oil and gas imports in 1995 when the Ukrainians were sidestepping Russia by way of a trilateral barter arrangement which sent defense goods from Ukraine to Iran, who in turn paid the Turkmens to send natural gas to Ukraine. Gazprom basically bought the rights to the Turkmen spigot, preventing the Ukrainians from playing that game again.

LEvko notes that these contracts between Russia and Ukraine are always suspicious, going as far back as the mid-1990s, when current PM Yulya Tymoshenko was an energy executive. The contracts are not transparent:
It is this opaqueness that provides cover for continuing wide-scale fraud benefiting the two country's elites. These disputes have never been about gas prices and storage and transit rates, but about 'whose hands are in the middle-man's trouser pockets'.

Your blogger would suggest that it is not unreasonable to consider the current dispute is about elites both in Ukraine and Russia, fighting amongst themselves to maintain their piece of the action via these intermediaries, rather than the price of gas for Ukrainian consumers and its westward transit through the country which, as the Putin-Tymoshenko meeting illustrated, perhaps could be resolved without too many problems.
Ukraine is in pretty bad shape economically, and Tymoshenko and President Viktor Yushchenko are poised to run in elections against each other sometime in late 2009 (early parliamentary elections are expected in a few months). Right now Yushchenko is far behind, but Tymoshenko's star falls as this crisis drags on.

Labels: ,

Hollywood - FINALLY Someone Is Doing Right 

Andrew Breitbart, author and commentator, has started a blog to combat the one-sided, elite, anti-American views of so much of the Hollywood culture.

Big Hollywood, his blog, is being launched today. Big Hollywood is not a "celebrity" gabfest or fan gossip outpost. Its topics will consist of politics and culture, a site for those who believe something has gone drastically wrong in Hollywood. Its objective is to change the entertainment industry. Wow - who would have thought that maybe, just maybe, there's something very ill in the mindset of the Hollywood establishment?

Hollywood used to produce the best films ever, stateside. Their product gave people hope, told positive, uplifting stories. But the drift left by the power brokers has gotten worse over the past few decades. Today, American corporations, the FBI, the CIA and elected U.S. officials (usually conservatives) are the bad guys. Real bad guys, those who want all of us, including Hollywood elites eliminated, are ignored.

This last election showed how much the influence of pop culture has on the American electorate. For 37+ years our education system and social construct has made us the bad guys and raised kids (now adults) to believe that they are perfect yet America is bad; passiveness is good but military is bad, etc. This view is destroying the very essence of America, the spirit that made us who and what we are. The right has needed a place to combat this negative, distorted, pop-culture view of America.

Big Hollywood just may be the vehicle that unites Republicans, conservatives, and libertarians - a place with a recognizable name that will challenge the singular, leftist Hollywood meme and the way we look at the world and ourselves.

Read more here.

Labels: ,

Monday, January 05, 2009

Democrats Fair? No Way; and We Pay 

US Speaker of the House, Democrat Nancy Pelosi, has decided to re-write the House rules today to ensure that the Republican minority is unable to have any influence on legislation. Her proposals are so draconian and will so polarize the Capitol, that any thought President-elect Obama has of bipartisan cooperation will be rendered impossible. (Hmmmm - is Obama in on this scam?)

Democrats had controlled the US House of Representative for decades before the Gingrich Revolution of 1994. During that time they implemented abusive practices that: had no term limits for committee chairs; encouraged backroom deals; denied debate on the floor of the House; denied Republicans the ability to expose and offer proposals to eliminate tax increases hidden by the Democratic majority; many other unfair, unjust, and secretive practices.

When Republicans took control of Congress in 1994, they opted for transparency. They opened committee meetings to the public and media, thereby making Congress actually subject to federal law. They set term limits for committee chairs, thereby ending committee fiefdoms. They guaranteed the then Democratic minority party the ability to offer amendments to legislation.

Democrat Pelosi's proposed repeal of procedures to provide accountability by elected members of Congress exposes a tyrannical Democrat leadership and mindset that is detrimental to the legislative process. A return to a Democrat "my way or the highway" of previous decades means we will all pay, and pay, and pay and pay........

Labels: , ,

These are my people 

A rather sleepy day here, as I'm en route back to St. Cloud from the American Economic Association meetings in San Francisco this weekend. Most of the weekend was spent in a hotel room interviewing, yet again. I met many fine young economists doing exciting things in labor economics. One enjoyable part of the interview process is how many new things I learn.

But the best part is the anthropology of the profession. I've mentioned before the game I played with the son of one of my colleagues, called "spot the economist." It's not very hard. Most of my tribe walk around with their badges from the conference hanging on their collars, even when they are out to dinner miles from the conference hotel. Four such bands of merry economists were spotted at one place down on the pier Saturday night. You just shake your head. In general economists drink beer; at an Indian restaurant last night I saw five tables of economists (two with their tags still around their necks) and fourteen beer bottles. Yes, one was mine. When in Rome...

Another group I saw was gathered watching a pro-Palestinian protest wandering up Market Street Friday night, as I was going to see a friend at the Marriott. As the group of protesters (a blend of people in keffiyehs, old military jackets, and seemingly airdropped extras from Three's Company) marched by, three blue blazer, Oxford-shirted nerds are engaged in a debate about monetary policy. I don't think it bothered them that, like me, they couldn't cross the street. They were just going to work this out on the sidewalk.

The best spotting, however, was saved for a 24-hour cafe that I love that was between my hotel and the conference hotel. It has a counter. If you come in solo, the owners request you sit at it and leave the tables for the twos and threes. Sure enough, the breakfast counter was full from 6:15 to 7:30 on the day I was there. (The help wasn't thrilled that I took up a seat for 75 minutes, but I talked a lot with them; none of the others did.) All were already in the blue blazer, drab tie and Oxford. Most had a Wall Street Journal under their arms (the hotels run out of the complimentaries by 7:30.) And this cafe, run by a Greek family, was oblivous to it all.

BTW, they have the best feta omelette I've ever had.

Last observation before I get on the next plane: Begging was in my opinion down from my previous trips. I don't think that's a good sign. You beg when you think there's money to get. You don't stand out with a cup if there's no return on the investment of your time. More of them nowadays seem to have decided to upgrade to street art by standing perfectly still, pretending to be statues. Sorry, but statues don't have stubble.

Back tomorrow; have a great afternoon. Go wish Ed congratulations on his new grandchild.


Sunday, January 04, 2009

Yankee Ingenuity - American "Can-Do" 

When teaching my class, I get torn between feeling sorry for students who don't learn the great-
ness of the US, its ability to create and think "outside the box" and frustration with them because there appears to be so little appreciation for all the advances we have made.

A great example is this article about the Mars Rovers sent to Mars in 2004 by NASA, the US' National Aeronautical and Space Administration - the agency that put men on the moon. The first rover landed on Mars five years ago. It was named "Sprint" and was expected to last three months. It is still going strong - well, sort of. Now it can only travel backwards because of a jammed wheel but it still sends data back to earth. Its buddy, "Opportunity," has a glitch in one of its arms because of an electrical short. Sometimes their power runs low because of dust covering their solar panels. Regardless, they're still operating - an amazing achievement.

Together, the rovers have driven more than 20km, and returned more than 36 gigabytes (36,000,000,000) of data. This has included a quarter of a million (250,000) images.

This project, along with other Mars robots, show what Americans are - the "can-do" people who do not need someone or some entity to tell them "no!" Our space programs provided so many benefits to all, from light weight metals for wheel chair racers to powdered beverages. Nothing is in isolation. If we regain this curiosity, asking "Why?" "How?" we can solve anything.

Labels: ,

Friday, January 02, 2009

When people spend other people's money on other people... 

KSTP reports:
There is a push at the State Capitol to make sure Minnesota workers get paid if they take a sick day from work.

The Minnesota Paid Sick Days Coalition along with Sen. Ellen Anderson and Rep. John Lesch will unveil the Healthy Families, Healthy Workplace Act Friday.

Sen. Anderson and Rep. Lesch say sick workers cost employers in lost productivity while also spreading illness in the workplace.

The bill would establish a minimum number of paid sick days and detail how workers can accrue sick days.
The government can better figure out the cost to employers of possible infection from sick employees than can the employers themselves. Right. Gotcha.

A reminder to Sen. Anderson and Rep. Lesch to read their Friedman:
There are four ways in which you can spend money. You can spend your own money on yourself. When you do that, why then you really watch out what you�re doing, and you try to get the most for your money. Then you can spend your own money on somebody else. For example, I buy a birthday present for someone. Well, then I�m not so careful about the content of the present, but I�m very careful about the cost. Then, I can spend somebody else�s money on myself. And if I spend somebody else�s money on myself, then I�m sure going to have a good lunch! Finally, I can spend somebody else�s money on somebody else. And if I spend somebody else�s money on somebody else, I�m not concerned about how much it is, and I�m not concerned about what I get. And that�s government. And that�s close to 40% of our national income.

Labels: , ,

Mrs. S writes... 

...about the question of where students vote:

...because levies are based on property value assessments, students � especially those living on campus � should not vote on property tax issues. It�s too easy to vote for something when one doesn�t pay for it.
She's not calling for students to not vote, but to vote where their permanent residences are, most often with their parents.

Labels: ,

More Thoughts on Bailouts 

King posted here and I posted here regarding bailouts. After some more reflection, a few other companies who "didn't ask the government to fix my problem" came to mind.

Locally, Toro Company faced bankruptcy in the early 1980's. On their own, they restructured and are again, a significant employer in the Twin Cities. The AT&T of prior generations does not exist today. It incurred all kinds of business and management problems. Then they were sold, resold, restructured numerous times and revived. Today, in a revised form, they are are alive and well.

It just seems that for some reason, today too many have developed the mindset that someone else should bail them out of their messes, often of their own creation. Life is not a constant betterment as my young broker told me in 1997: "We're in a new paradigm; stocks will always go up." Well, he discovered otherwise (and I sold off before the downturn).

As a group and individually we pay a price for our poor decisions and actions. Some institutions have ignored their responsibilities. To believe "only government can solve problems" or to that people are incapable of solving problems without someone else (government, parents, etc.) bailing them out, is denying reality.

What made the west grow and the US great was the attitude that, "Yes, we can do _____"then we did it. For too many years we have taught our children that they are perfect, can do no wrong, are always "A" students. They grow up (note, not necessarily mature) thinking life is a piece of cake - it's not. When hit with a problem, they panic. When we behave in a manner that solving problems on your own is impossible and "ONLY" a government solution will work, we are stifling growth and harming youth. When the 'big boys' of Wall Street, politicians and union and company executives, make mistakes then run for cover and refuse to take the steps to fix their messes, we all pay.

Labels: ,

Thursday, January 01, 2009

Bailouts, IBM, Personal Experience 

I have personal experience that relates to King's post from today.

I was employed by IBM during their rough years. Some of their problems had been brought on by themselves and not listening to the field people. Some problems were the result of market changes. Down-sizing occurred nine of the 17 years I spent there. IBM got behind the marketing curve. Their stock price plummeted and competitors were excited that Big Blue was in trouble. What did IBM do?

They finally realized the business model that had driven IBM's phenomenal success was no longer viable. Executive management was brought in from the outside - a difficult concept in a company that prided itself on training its managers and promoting from within. We heard that the outside CEO was told, "Don't let IBM fail." He didn't. Many people took early retirement; product production lines were reassessed and revamped; a couple of inefficient lines of business were sold; one or two plants were closed.

We never knew if we would keep our jobs but we kept going. IBM came back to life. The sales force was streamlined. Today, positions within the company are quite different. (Full disclosure - eventually, I took one of the buyouts.)

Net, IBM struggled, made changes, adapted and is still a force to be reckoned with. Never did IBM ask some politician to bail them out.


A New Year churn 

I was going to leave New Year's Day alone blog-wise -- I second Janet's wishes -- but I was provoked to thinking by something Gary Gross wrote this morning on bailing out newspapers.
I remember the wailing and gnashing of teeth during Reagan�s time. People bemoaned the fact that IBM, Sears and Montgomery Ward were going through difficult times, relatively speaking. I say relatively because IBM still held a market share north of 75 percent.

While politicians were whining about IBM�s, Sears� and Montgomery Ward�s difficulties, people weren�t noticing how Walmart was replacing Sears� and Montgomery Ward�s catalog operations. They weren�t noticing that this little company in Redmond, Washington was helping eliminate most of IBM�s market share with a product called Windows.

It�s just a matter of time before the newspaper essentially dies.
I italicized newspaper in that last sentence because Gary has hit a key point. The newspaper isn't journalism. It's a vehicle that delivers journalism. IBM isn't computing; it was a machine in which computing happened. I still marvel at what my iPod does, what my cellphone does. What they do we called computing thirty years ago.

I've written several times on this blog about the churn, the life cycle of a business firm and the process of new firms meeting consumer demand. The demand for what AT&T sold in 1959 still exists -- indeed, it's expanded in ways Ma Bell never imagined. But other firms moved more quickly to meet the demand.

I visited my parents over the weekend. They get their news through the TV, even though there's a newspaper in the house and a computer with a wireless connection. And they watch broadcast news from a local channel that gives local news. That's the same method they got the news fifty years ago (my dad worked nights until I was fourteen.) But they do get email from others who send them news. All of that is produced by people who write news -- which we call journalism. The product is there. The form in which it received has evolved, emerged in a digital age into something we didn't expect and for which we could not plan. Newspapers try to adjust to that emerging reality. Some will succeed; others won't. There's nothing to lament about it any more than there is any reason for a consumer to lament the loss of Bethlehem Steel. We still have steel products. We will still have news.

The parallels to the auto industry are obvious. The ones to banking aren't, but perhaps they should be. As economists rethink banking, perhaps one thing to consider is how the demand for credit has evolved, and how new instruments and new institutions emerge to meet that demand. In any crisis where Schumpeter's winds of creative destruction are unleashed, the demand that remains will be filled by new firms. Banking itself can change (just look at how it has changed in the last 75 years.) My New Year wish -- now that I got Schumpter into a local newspaper -- is that we develop a greater understanding in what Julian Simon called the ultimate resource.
...human groups spontaneously evolve patterns of behavior, as well as patterns of training people for that behavior, which tend on balance to lead people to create rather than destroy. Humans are, on net balance, builders rather than destroyers. The evidence is clear: the civilization which our ancestors have bequeathed to us contains more created works than the civilization they were bequeathed.

In short, humankind has evolved into creators and problem-solvers. Our constructive behavior has counted for more than our using-up and destructive behavior, as seen in our increasing length of life and richness of consumption.
Blessings on your New Year's Day; may you prosper.


Happy New Year 

To All Our Readers,

Thank you for joining us this past year and we hope you will continue to visit us in 2009.

While we will have differences of opinion, we still live in the freest nation ever devised for man. Our nation affirms that each of us is equal, in a fundamental sense, to every other person. And we do seek, with all of our imperfections, justice as well.

We are extremely fortunate.

But our liberty -- and equality -- and justice -- are all fragile. They have been gained for us through the efforts of many, at great cost. They require eternal vigilance and sometimes great sacrifice, even today. We've had it so good for so long that some of us have lost perspective on the fragility of freedom, how it can just evaporate, albeit slowly.

Let us be grateful for what we have. Let us be alert to all the dangers we face. And let us, too, be willing to make the sacrifices and bear the burdens needed to preserve these blessings for ourselves and for those who will come after we are gone.

Happy New Year to All - may you be able to handle and enjoy whatever 2009 brings your way.