Friday, July 31, 2009

Because when these cars are gone, we'll, um, buy some more cars! 

I'm surprised the Senate isn't rushing back to session to make sure they are on the weekend news programs, after the House has replenished the CARS program.
he House voted Friday to transfer $2 billion in emergency funding from the economic stimulus plan to the "cash for clunkers" program, but the extension faces a tougher path in the Senate.

The House moved rapidly to pass the measure after learning Thursday that the initial $1 billion allocated to the clunkers program may have been close to exhausted after just one week. The new legislation would shift $2 billion from the $787 billion stimulus plan to the program.
Everyone seems to be in a hurry to reload the government cheese tray even though so far the government has only processed about a fourth of the $1 billion initially allocated. The dealers are screaming about not getting paid and government blinked and rolled out some more "clunkfare", as James Taranto called it. The government that couldn't stimulate fast enough, he observes, suddenly is spending money too fast. And they seem to like it.

Henry Payne observes that only nine of twenty models made by Chrysler will qualify for CARS. By quickly acting to triple the size of this program, the government assures that many cars that would have been useful to young people who need good, cheap transportation will not have cars available to them. Immigrant families that would like a larger car for their children to ride with them will not be able to get them. In their haste to get people to spend at a time when many are feeling the need to save, they've only dragged demand for cars forward, as Mike Shedlock notes today. It delays the day of reckoning. How many more ways can government reinflate the bubble?

That's why, Ed, we're in a hurry to spend this money. It was explosively popular because it was first-come, first-served: It was practically creating a bank-run style stampede on dealerships. "Act now, because when they're gone..." And just like anyone making that promise, it's just too easy to come back and try to reap more money ... and more unfavored larger cars ... and remove more affordable cars from the market that poor people can buy from.


Today's GDP number 

A quick note before I take a nice afternoon of golf with friends:

The GDP numbers are interesting. Not only is the headline number better than expected, but final sales were virtually flat. But,
Real gross domestic purchases -- purchases by U.S. residents of goods and services wherever produced -- decreased 2.3 percent in the second quarter, compared with a decrease of 8.6 percent in the first.
That is, a big drag on US GDP is coming from us purchasing fewer imported goods. Real imports fell almost 16% while real exports fell only 7%.

Savings continues to increase.
Personal outlays decreased $18.1 billion (0.7 percent) in the second quarter, compared with a decrease of $27.6 billion (1.1 percent) in the first. Personal saving -- disposable personal income less personal outlays -- was $566.0 billion in the second quarter, compared with $426.9 billion in the first. The personal saving rate -- saving as a percentage of disposable personal income -- was 5.2 percent in the second quarter, compared with 4.0 percent in the first.
I think that rate continues higher, but having it come from imports rather than domestic production might be helpful on a number of fronts, including the value of the dollar.


Thursday, July 30, 2009

An open letter to Delta AirLines 

(This letter was originally sent to Delta on July 13. I have received no reply from them, or from Czech Air whose agents in Prague were part of the story. At the suggestion of several, I am posting this here to let you know at least one travel snafu. The letter has been edited for grammatical mistakes.)

I have never had flights so screwed up as this one. The ticket was reserved via Czech Air, but problems were through Delta. See etkt (deleted). My NWA WorldPerks number is (deleted).

On my way to Armenia I had a 15 hour layover in Prague. Reportedly there was a hotel room at the end of that leg of the flight. This was not received. I ended up paying for a room out of my pocket.

On way back, told at transfer desk in Prague, after already coming in from Yerevan, that my ticket to JFK had been "canceled by Atlanta-Delta." After much complaining, I received ticket to JFK. Why would you cancel a ticket for a trip that was already in progress?? And then of course I get the "extra special passenger screening" in front of the gate.

On arrival at JFK, I get in seven hours early before the next flight. There are TWO flights to MSP before mine. May I wait-list either of those, I ask. "Not in your class," replied the desk agent. Why, if those planes were not full, could I not take an earlier flight??

Your desk agents in PRG and JFK made this a very unpleasant trip back. Never had more than one boarding card. Had to buy my own hotel room in Prague to change, shower and sleep. I do not understand how "Skyteam" is supposed to make my experience in international travel better. I NEVER had these problems with NWA. I am very unhappy you have bought them.

And to add insult to injury, I typed the above in your online form, and your system did not accept any of the remaining information. I should point out that I am a radio talk show host at AM1280 the Patriot in Minneapolis, and I think this experience will make for a very good segment on my show soon.

A similar letter will be going to Czech Air.

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The price of a blue dog 

The main worry expressed by the Blue Dogs is that the Congressional Budget Office has predicted that leading bills on Capitol Hill won�t bring down medical inflation. The irony is that the Blue Dogs� argument � that a new public insurance plan designed to compete with private insurers should be smaller and less powerful, and that Medicare and this new plan should pay more generous rates to rural providers � would make reform more expensive, not less.
Jacob Hacker.
House Democrats reached a deal with conservatives in their caucus that would reduce the overall cost of the package and ensure more funding for rural hospitals, concessions that could allow the Energy and Commerce Committee to finish its consideration of the legislation.
Apparently Collin Peterson and Keith Ellison are unhappy with the compromise. I am beginning to wonder if any bill gets you to 218 and 60.

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The deadweight loss of higher taxes 

According to the Tax Foundation's new study, government has to raise taxes $1.40 to gain $1 of additional income.
Consider the combined effect of President Obama's proposal to raise the top tax rate from 35 percent to 39.6 percent and the new surtax. This means high-income households will receive 54 cents rather than 65 cents from every dollar they earn; that is, the after-tax reward from earning income falls by 17 percent. Based on the research mentioned above, with such large increases in tax rates, we can expect taxpayers facing the top tax rates to reduce their reported incomes by nearly 7 percent.
According to the SOI Bulletin from the IRS, there were 354,093 returns filed that had adjusted gross income over $1 million. Those returns sum to $1.211 trillion. 7% of that is about $85 billion, or more than 0.6% of 2006 GDP. In economics this is known as the "deadweight loss" of additional government. That is lost each and every year if we allow the Bush tax cuts to expire, and impose the high-income surtax to pay for health care.

In related news, the tax burden of the top 1% of the income distribution now exceeds that of the bottom 95%. Thanks, rich people! (Mankiw notes that this is due to "both changing tax policy and the changing distribution of income.")

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Limited time offer! Act fast! 

The Cash for Clunkers program might run out of money sooner than anticipated.

Car dealers on Wednesday began expressing concern that the government's "cash for clunkers" incentive program could run out of money as soon as the end of August due to strong initial response from consumers.

"It's important for customers to act because we don't know when the curtain is going to fall on this thing," said John McEleney, chairman of the National Automobile Dealers Association.

I was suspicious when I read that this morning, because it sounds like one of those "limited time offers" to boost demand through expectations that the price will rise later. Moe Tkacik reported yesterday that we were even seeing some people trade cars worth more than the $4,500 maximum rebate. (Of course, just because a car has book value of $5,500 doesn't mean someone will give you that in cash for it.)

But people in the auto industry here in St. Cloud reported that this was so; the buzz was that they could even run out of money in two weeks. Again, I think they're saying this to increase business. (Notice that the program begins before 2010 cars are off the lots, so this isn't increasing demand as much as helping auto firms work down inventories. That actually would work against higher GDP numbers in Q3, since a decrease in inventories is a subtraction from GDP. I knew you wanted to know that.)

And there's a catch in this that one person told me this morning. Before they were credited their $4,500, the buyer was told by the dealer to sign a waiver that put them on the hook to pay the $4,500 to the dealer if the car was for some reason declined by NHTSA. Here's a webpage saying the same thing, and advising you not to sign it. For them to file the paperwork they have to destroy the car. If the car is declined and you signed the waiver, your car is now worth $25 (at least up here with the local scrapyard.) You're now out $4,475. Some people sign the waivers, while others don't want to accept that risk. And yet the report is that this is successful?

The local Toyota dealership, when presented with a CARS transaction by a potential buyer of a Prius, threw up its hands and said it didn't know how to work with the program. That person now owns a Ford. Of course, my skepticism is such that I figured the Toyota guy knew his Prius would sell at any rate and didn't want the hassle. Another consumer information site dedicated to CARS includes an email from another Toyota dealer:
The 30 dealerships I know have more than 1200 cars sold and are more in the 40% range submitted. If the rest of the country is anywhere close to us it sure seems like a billion will go lightning fast.

I am not saying that there may be a possibility that this will all slow down soon , but PLEASE don�t blame dealers for hyping this. I wouldn�t pay five cents to promote or advertise for customers. I am terrified that I will not get paid the roughly $300,000 I need to collect from Uncle Sam right now.

Come on out to my dealership and watch people who are working 18 hrs a day to process your deals and tell me you think WE are hyping anything. If the money runs out early it is the dealer who will be screwed.

Trust me, they either will add money to this or it will be over soon. Not saying that to get you in the store either. I don�t need any more deals. I need to get paid on the deals I have already done.
So when government health care gets started and you go to get that health care that the mean insurance companies deny you, and the claims pile up from medical care providers at the new Medicaid-for-all, who is going to process? How many will be denied? According to one man I spoke to this morning, a fellow was making a deal and had to verify, among other things, that he had owned the car for a year. No problem, he said, here's a copy of my insurance policy statements for the last two. Not good enough, he was told, he had to have a letter from his insurance agent on the agency's letterhead, faxed to the dealership, in order to provide the government with the documentation they wanted.

These are the people who want you to trust them with your health care.


Wednesday, July 29, 2009

No signs of recovery up here 

The Ninth District economy contracted since the last report. Decreases in activity occurred in the retail spending, tourism, services, residential construction, agriculture, mining and manufacturing sectors. The commercial construction sector was stable at low levels, while the energy and residential real estate sectors saw moderate increases. Labor markets slackened since the last report, and wage increases were moderate. While a number of prices were lower than a year ago, prices have generally remained stable since the last report.
From the new Federal Reserve Beige Book released this PM. Further details on jobs and wages:
Labor markets slackened since the last report. The University of Minnesota recently announced plans to reduce the school's workforce by 1,200 positions over the next year, mostly through attrition, but 370 employees are expected to be laid off. Also in Minnesota, a trucking company with 200 employees recently announced it will close by the end of August, a Minnesota-based regional airline plans to furlough up to 110 pilots and a health insurance company will lay off 100 workers. ... A temporary staffing agency survey of Minneapolis-St. Paul businesses showed that 13 percent of respondents expect to hire workers during the third quarter, while 19 percent expect to reduce staff. A Minnesota staffing services company noted that the pace of business in early July was much slower than usual. However, another placement company noted an increase in demand for experienced information technology workers.

Wage increases were moderate. According to respondents to a recent St. Cloud (Minn.) Area Business Outlook Survey, 24 percent expect to increase employee compensation over the next six months, down from 35 percent in last year's survey. A Minnesota bank branch cut pay by 5 percent for all salaried staff.
That's of course the survey I co-author; a copy can be found here. I keep being asked about where the bottom here is. If this a U-shaped recession, the bottom is like finding the bottom of your cereal bowl: you know you're near the bottom, but seldom know you're past it until you're several months out. And the shift in what we build here (read: manufacturing) compounds it, as Rich and I will discuss in the next Business Central. Ernie Goss says this is so for the state as a whole.

I find myself thinking a bit about Bryan Caplan's suggestions for what this wave of creative destruction means for St. Cloud and most of outstate Minnesota. There's a good amount of vacant commercial and office property here (as well as Minneapolis/St. Paul.) What's going to occupy that space? St. Cloud was long the home of Fingerhut which distributed mail-order products. That space is still here, and internet sales could be fulfilled from here. I wonder why we don't see more internet businesses use that space. Caplan also suggests that the retail that would grow would be "services and products with short shelf-lives and/or high weight to value ratios." I.e., the stuff the internet doesn't deliver well. What would those be? Who in St. Cloud would deliver those products?

I'm more sure what we are rotating away from (manufacturing) than what we're rotating towards. Can there be destruction without creation? Not if the price system works. So it will be something. But what? As Caplan says, if I knew, I would be doing it rather than writing this blog, or teaching.

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Neither necessary nor unnecessary to whom? 

While I was thinking about QALYs last night, I remembered an excellent summary video of an Arnold Kling presentation to Cato from June. It's less than ten minutes but the second part of this makes a major point I think gets lost here. You'd do well to watch the whole thing. I can wait...

At one point he says roughly this: around age 50 men are usually told to get routine colonoscopies. They're not fun (given my health issues of the last four years, I've had three procedures, including one in hospital when I really was in no position to argue.) They're also not given in Canada; you only get a colonoscopy if you've got family history of colon cancer or some symptoms. In three of the four cases where they'd be recommended, waiting times exceed what gastroenterologists would recommend. (Lucky for hypothetical me, my symptom was the one that got you in the fastest.)

But actually catching colon cancer at the earliest stage, before the polyps turn cancerous, is best. You probably can wait, though, and maybe you will be fine -- there's likely to be other symptoms that present to tell you waiting time is over. So it isn't really a necessary procedure. Kling's analysis is that there's a middle ground between treatments that are necessary and those that are simply unnecessary and wasteful.

But nobody chooses to spend money on something they see as wasteful. If I tell you "you don't need that colonoscopy" you probably would go without it, because they're really no fun. But you accept it -- I accepted it twice in three years -- because there's a chance there's a polyp that has a chance to become cancerous. It's really in that middle category in the continuum that Kling lays out.

So for those, you really have to work the cost-benefit analysis. You weigh the probability that the colonoscopy will find something times the benefit of early detection, and put that against the cost. Guess what? Your health insurance provider has made that calculation too, which informs its guidelines of how often it will cover your colonoscopies. Since it may face the cost of non-detection in the form of higher insurance claims later, it has some incentive to get it right. (I will acknowledge the possibility that they don't pay for colonoscopies often enough and then drop your coverage later when you get colon cancer. It would seem we have laws about this already; if that's really the problem, you need to enforce the laws you have rather than radically change the health care system.)

Suppose we thought there were too many colonoscopies in the US. How could we cut that back? We could have people pay a higher share of the cost, and have that work through the cost-benefit analysis to reduce the quantity demanded. If it's really a case of neither necessary nor unnecessary, that seems reasonable.

But that, critics would say, means the rich get colonoscopies and the poor don't. That's unfair, so we should use a different rationing system than price. OK, but that means you move the cost-benefit analysis away from the patient and to government. And to do it, it has to take the cost of the treatment and compare it to the benefit as it sees it rather than as the patient sees it.

And that's where you get the QALY.

So what does it mean to use a QALY calculation for a treatment that is neither necessary nor unnecessary? The political economy of that is difficult. No politician will want to be seen as funding some unnecessary procedures -- that supposedly is why they want to have health care reform. But if colon cancer mortality rates start to reach British or European levels, those who pass Obamacare will not see power again for a very long time. Knowing that, they are likely instead to keep funding many of those middle-category procedures, just as they do now. Electoral outcomes are part of the cost-benefit analysis when government chooses your medical procedures.

This is what makes Keith Hennessey's analysis all the more real.

Under the current bill, as scored by CBO, spending rises faster than taxes increase each and every year after the ten year window, ad infinitum.The point I would make is that the only way to make those two lines Hennessey has drawn converge, is by taxes. Now it could show up as spending cuts by continuing to decrease reimbursements to doctors and hospitals, but that's just a tax on those providers by a different name. (It makes no difference to you if I pay you $50 for a $100 procedure, or pay you $100 and then charge you a 50% surtax because you're a doctor. It just gets scored differently.)

Shorter version: Government grows, massively. If output grows 3% a year and taxes have to grow 8% a year to keep funding this beast, government's share of GDP gets larger.

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Tuesday, July 28, 2009

Don't mention the Germans! 

In Martin Feldstein's column on health care reform today were these two paragraphs about which I'd like to comment:

To support their claim that costs can be radically reduced without adverse effects, the health planners point to the fact that about half of all hospital costs are for patients in the last year of life. I don't find that persuasive. Do doctors really know which of their very ill patients will benefit from expensive care and which will die regardless of the care they receive? In a world of uncertainty, many of us will want to hope that care will help.

I really don't know what to do with this paragraph. My first thought was that this was like that statistics that 1/3 of all accidents happen within a mile of one's home. Well, I think, that's hardly any wonder; you probably drive there more than you drive anywhere else. The press release I linked says it's because somehow we let down our guard, we relax around our homes when we drive, so we're less attentive. How do they know this? They asked drivers whether they relaxed. I don't think survey data is really how one learns this sort of thing.

When do we know it was the last year of life for a patient? It's something you determine ex post. Ex ante we all think we're the one who's going to pull through. We all believe we can beat the odds. This is what the Democrats are proposing: They will keep you from trying to beat the odds. But even if we were willing to allow them to do so, their project presupposes that you know in advance who will die within the next 12 months. And that you trust them with this. Do you? If we line up five top doctors and give them 100 patients with a variety of serious ailments, can they forecast who dies in 12 months? What would be an acceptable margin of error?

We are also often told that patients in Minnesota receive many fewer dollars of care per capita than patients in New York and California without adverse health effects. When I hear that, I wonder whether we should cut back on care, as these experts advocate, move to Minnesota, or wish we had the genetic stock of Minnesotans.
Genetics perhaps matters. Suppose I take this map:
and I overlay it with this map:

Do you see anything there? It isn't obvious. To me it says mostly "be lucky enough to be German, and you might live longer." Certainly up here we do. Heck, we even have the longest living man in the world from Melrose, MN. (That's about a half-hour from my house.) So do German-Americans get the benefit of higher factors on their QALYs?

Of course, mentioning QALY again gives you the answer. The data will likely not include ethnicity or sex. It will mention age, disability, and probably will include whether or not one has "risk factors" like smoking or obesity. If you're lucky enough to be from Minnesota and therefore have the great genes, it won't matter in someone else's decision whether you get treatment.

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Today's QALY homework 

On the show Saturday I assigned my students some homework, to learn about QALY, a "quality-adjusted-life-year."

We might already have our answer:
In Great Britain, for example, the National Institute for Health and Clinical Excellence (NICE) uses "cost per QALY" to determine if patients should receive expensive treatment or drugs. It was with this formula that NICE calculated the precise amount six months of an average Brit's life is worth. As the Wall Street Journal reports, "NICE currently holds that, except in unusual cases, Britain cannot afford to spend more than about $22,000 to extend a life by six months." In other words, patients whose country has guaranteed them "free" health care are in some cases refused treatment because the incremental cost per additional QALY is too high.
Now, what are those treatments worth? From the British Office of Health Economics, a table from a 1993 article:

Treatment �s Cost/QALY
Cholesterol testing and diet therapy 280
Advice from GP to stop smoking 350
Heart pacemaker implantation 1,420
Hip replacement 1,520
Coronary artery bypass graft 2,700
Kidney transplant 6,080
Breast cancer treatment 7,460
Heart transplant 10,110
Continuous ambulatory peritoneal dialysis 25,630
Neurosurgery for brain tumour 139,040

One British pound is about $1.60. So it's barely possible for someone to get dialysis, and if they have other health complications that reduce the value of a year of life (the QA part of QALY), buh-bye! And brain tumors? Fuhgeddaboudit!

Table source:

Let's back up and think a minute. We all make decisions as if we were rational maximizers. We don't always succeed, we make mistakes. And more often than not, what we decide to maximize isn't obvious to other people. But it's our choice. Rational maximization means doing a cost-benefit analysis, and tweaking things so that at the margin the next step of any action you take would increase costs more than it would increase benefits. That doesn't happen, as Peter Boettke points out here, because we think that's the best description of the human brain. It happens because that rule will maximize profits, and as competition in the marketplace drives down price only those who use the rule remain able to operate.

But whose benefits and whose costs? It has to be that person who bears them, or else the information about them is lost. And by having the person who bears the cost receive the benefit, and having them make the decisions, it turns out we get as a by-product prices that make us aware of what our decisions cost others.

When anyone else makes the decision -- let it be a neighbor, your rabbi, or a committee; it need not carry the name 'government' -- they lack the knowledge needed to solve the problem. "If we can agree that the economic problem of society is mainly one of rapid adaptation to changes in the particular circumstances of time and place," wrote Friedrich Hayek in The Use of Knowledge in Society, "it would seem to follow that the ultimate decisions must be left to the people who are familiar with these circumstances, who know directly of the relevant changes and of the resources immediately available to meet them." That's unlikely to be anybody sitting in Washington DC, when it comes to the care of my family in Minnesota.

Cindy at Ladies Logic has done her homework, you see:
Imagine if this kind of calculus would have been applied to Ludvig Von Beethoven or Stephen Hawkings or even Christopher Reeves (post paralysis). How were any of their lives any less full or meaningful than anyone elses? Remember that they (like people with severe Down Syndrome, people with advanced MS or CF, people who are old and arthritic, people paralyzed due to car accidents) would be considered people who are "irreversibly prevented from being or becoming participating citizens". What would their lives be worth under ObamaCare.
An 'A' for Cindy. Costs are determined by those who bear them. They are necessarily subjective. Who will decide what the cost of health care are? That person will have a different view of cost than say Dana Reeve. Who will decide the benefit? Do we want government to decide somehow a kidney transplant is good for Beethoven because, well, he's Beethoven, while your neighbor is just a truck driver or a lawyer, and ergo expendable?

Now of course that last line is fearmongering. It's hyperbole. But it doesn't seem to get through to people that any rationing system means someone is working a decision rule. And the models that this Administration uses imply that someone other than members of the sicks' families will use cost benefit analysis without any ability to know what the costs and benefits are. That at its base is a moral question. If you were on an island with 10,000 people and a virulent strain of flu broke out, and on that island there were 1,000 vaccines against the flu, do you want QALY to determine the distribution of vaccines? The answer would differ between young and old, between the hale and sickly. Who should have the right to decide who gets vaccine?

Gary Gross also gets it, regarding my "costs are always costs to someone" point:
... if Congress passed a law that set the maximum price of a gallon of gas at $1 a gallon ... the maximum price of a gallon of gas would drop to $1 a gallon but that wouldn�t mean that the cost of a gallon of gas would drop a penny.
The government can reduce the price of health care to ITS budget, but only by the use of force to compel doctors, pharmaceutical companies, hospitals, etc., to accept more of the cost through lower payments. Things don't have a cost; actions do.

Tomorrow, more tales of bad and good uses of cost-benefit analysis.

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Monday, July 27, 2009

Hall and Rose 

Funny that, while I'm finishing a post-conference re-write of my old paper on Hall of Fame voting in Major League Baseball (when we get it to the editors, we'll post a link on my research page), I find out Pete Rose might get reinstated and thus could be considered for the Hall. My ex-producer Matt Reynolds called and was livid about this.

I think Buster Olney has it about right (link for Insider subscribers):
When I first saw the story, I was surprised to feel this: total ambivalence.

Rose was an extraordinary player whose passion for success is reflected in his remarkable records: ... He was a great player who holds a unique place in the game's history. This is inarguable.

And so is this: During the past two decades, his behavior has been appalling. He has been nothing less than a lowlife. ...

If he's reinstated, that really doesn't ensure that the Veterans Committee would vote him into the Hall Fame. Undoubtedly, some members of that committee will argue that Rose always has considered himself to be above the rules, and given that, some won't want him in the club.

But quite frankly, Rose's legacy won't be affected one way or another by his inclusion into the Hall of Fame.

If he's honored at Cooperstown, he'll always be a dishonored former star. And he'll sell the moment.

And the rules for HOF voting are quite clear -- it would be the Veterans Committee who would vote on him, as he's been out of baseball more than 20 years (last played in 1986.) At the bottom of this press release (when Joe Gordon was elected by the VC) is a list of all the players who are on that committee. The Committee includes several former teammates of Rose: Bench, Carlton, Morgan, Perez, Schmidt, to name five. Hank Aaron says Rose belongs in the Hall. So it's not inconceivable that he could be put in.

As I remind people during our presentations on HOF voting, the Hall of Fame is a museum with an educational mission. It is ultimately up to its board of directors (which, by the way, includes Joe Morgan) to decide not only if Rose should be enshrined but how. It would be consistent with an educational mission to admit Rose but provide a full context of his career, including his journey into ignominy. Olney's ambivalence could be captured in a good museum display, and people could consider why baseball has rules on betting. It could create a display on the Black Sox perhaps next to Rose's.

I rather hope it does. It would be good practice for the coming storm over Barry Bonds.

Agree or disagree? You could comment to me, or you could write to the Veterans Committee yourself here, or by regular mail to Hall of Fame Veterans Committee, 25 Main Street, Cooperstown, NY 13326.

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Contempt for one's neighbors and constituents 

The Republican Party of Minnesota is releasing this PM a call for Rep. Collin Peterson to apologize for remarks about the people of his district (which is just west of where I live.) In response to a question about how his constituents feel about the Obama birthplace issue, Rep. Peterson is reported by Politico as replying
�Twenty-five percent of my people believe the Pentagon and Rumsfeld were responsible for taking the twin towers down,� said Rep. Collin Peterson, a Democrat who represents a conservative Republican district in Minnesota. �That�s why I don�t do town meetings.�
Republican Party of Minnesota chair Tony Sutton says this is evidence that Peterson doesn't want people to know his liberal views. Of course, Peterson is best known as a Blue Dog who sold his district for thirty pieces of silver on cap and trade.

But contempt for rural conservative Minnesotans is commonplace from the Anointed. Take this letter from one Betty Johnson of Cold Spring, who wants her Anointment well-known:
We recently returned from a trip to the Middle East along with people from 16 other states. Several well-informed people asked me if I lived in the area that Michele Bachmann supposedly represents in Congress.

Then they said she is a �laughing stock� in the nation and must be and embarrassment to me! They said she talks but doesn�t seem to know the facts and that her sponsors must want people to be confused and not pay attention to the facts.

My answer was the 6th District and Stearns County conservatives don�t care what the rest of the country thinks of them and their representative! They really did vote that woman into office twice.

How embarrassing! Is she stupid? No, she is just singing the song her sponsors want her to do. Voters need to understand she does not stand for us, the people. Her sponsors are big business and coal and gas interests.
Betty Johnson to voters in the 6th District: "You're all stupid stupid poopyheads! Stop voting for her! I know better! I go to the Middle East. What is wrong with this country? Isn't anyone a real Minnesotan anymore? Why don't they listen to me? Can't they read without moving their lips?"

Explanation of link: I sent a piece of humor regarding Obama to one of my liberal aunts last night along with my father. She sends back how she gets it and it was refreshing after watching Palin's valedictory, characterizing it as "double-speak and glaring 'pseudo-humility.'" Of course, my aunt lives in Los Angeles, a place that has made pseudo-humility an art form.

It's bad enough when Hollywood thinks all of Minnesotans can be described by the natives in Fargo, Grumpy Old Men and New In Town. It's worse when the Collin Petersons and Betty Johnsons think it's their way of getting accepted in polite society or the Politico.

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If California wanted to do this right 

Any time we see a financial crisis, it seems we get an experience with new, odd currencies. I wrote a few years ago about notgeld, the scrip issued by Austrian and a few German lander after WW I to pay for their goods when cash was tight. That could only be used to pay back debts to the government. Now it turns out California's IOUs are a new example. But Jesse Walker at Reason points to the lack of standardization as a reason why these notes lack a secondary market. This is creating a problem with discounting (to the extent banks even do it.) But you can't even return these bonds as an offset to taxes. You have to pay the tax in cash and wait to get your California cash redeemed for US currency in October. Thus California makes these IOUs less and less desirable.

Markets exist for everything, even CaliCash, but we know that increased liquidity will increase the price of any asset ceteris paribus. It would be better to issue scrip of standardized denomination, divisible, and useful in paying state or local taxes. Someone should get on the phone to the Governator and get this proposal to him. Or does he want to make them harder to accept?

Even cooler markets in everything: speculators offering to buy CaliCash on Craigslist. You'd probably get more from SecondMarket, but there are forms to fill out. So someone is willing to save you that time, it appears.

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I don't negotiate with the uninformed 

They say never engage in a battle of wits with an unarmed man. But I'm a teacher, so let me help a student out for a moment.
Yet, the real racket is math. Yes, I failed the placement exam and am in Math 70 this summer. I realize that math is important, but looking in my book at the chapters ahead I realized that Math 70 is sufficient for college students and anything beyond this is just nonsense and a waste of money for students not majoring in the sciences, economics or engineering.
Now if you've read this blog for any length of time you know my opinion on this: To be considered a college-educated student, college algebra is as basic to your education as English, philosophy or physical education. (And we could have a discussion about PE, if you like, but I'd defend it.) Math 70 is our remedial class called Basic Mathematical Skills. The placement exam this student failed was the one that makes it possible for you to take a finite math course that is our university's math requirement. That's right, we don't require the algebra here at SCSU. (It is now required of our majors, after many years of debate, even though a plurality of undergrad economics programs require some level of calculus.)

I've discussed Math 70 before. A student who takes it has already had a low score on his ACT, and either failed or didn't take the placement test. But somehow this student thinks that by "looking in my book at the chapters ahead" he knows what is sufficient for someone to know who's not going into a math-intensive field.

He'd probably do well as a government-single-payer health insurance administrator.
Why on earth would I need to know how to do the following in the world of journalism: 9+-3{(2)x=-14-13x}; what is x? Will I ask this to a police officer or a musician or a politician or an athlete? Will such an equation come up when trying to crunch numbers in investigating racketeering stories? Perhaps, but most people would probably use a good old calculator.
First off, I'm pretty sure you wrote that equation wrong given the unbalanced parentheses or {}. Second, it's basic to not only getting in to a good college but to surviving an ever-changing world and job market. You simply don't know enough to hold any job in which you have to manipulate symbols or values by a set of logical rules. You would really want me to believe you can be a writer without control of logic?

There are sources on the internet to help you out. Robert Niles, for example, offers a small statistics primer. I clicked through it, and it's a good start. (Many readers here probably think it's too simple -- trust me, dealing with journalists has taught me it's not.) But if you can't do college algebra, will you be able to grasp any of the books he's recommended at the end? I have a copy of Statistical Analysis with Excel -- I doubt this student columnist would have been able to use it. There's a whole collection of where writers have done math badly, including a whole section just devoted to the Harry Potter series. (Example.) JK Rowling may laugh all the way to the bank while being bad at math, but it's not likely she's proud of it, and she isn't successful because she's bad at math.

And if that's not going to work for you, could I suggest some books about math that are more literary in nature? Here's a list someone wrote on Amazon; I've read three of those, and I'd read just about anything Ian Stewart wrote. (Does God Play Dice? is the only book on chaos I liked better than Gleick's.) We teach a version of economics for non-majors, using books that purge the graphs but keep the intuition.

You don't know enough to know that what you don't want to learn is good for your writing.
Of all the classes I have taken at SCSU, none required of me more than the basic use of addition, subtraction, multiplication and division.
I suspect you're right, and for that I apologize on behalf of the faculty. We have done you an ill service by not expecting more of you.
Now, for the teachers and students who think Math 193 is important for all students, I ask why? Students who appreciate it are probably going to actually utilize such a craft in their job fields and the teachers will say it is important because all students (by that, every student at SCSU) will need these skills (they won�t). Friends of mine who have graduated and have gotten high paying jobs have attested to me that what they learned in Math 193 has never been a part of their jobs.
I doubt you know who to thank for many of your abilities. I know how to tie a bow knot. I don't remember who taught me, maybe it was Boy Scouts, maybe Dad. All I know is I can do it. I know how to think logically. I cannot possibly tell you where I learned that lesson. It's the stock of learning from the flow of many classes, many problems, many teachers. And the one thing about which I have no doubt is that practice sharpens your skills. I haven't done a geography geometry proof in years (or I should say "hadn't" since I had to help Littlest with a few two years ago) but I know that part of how I solve an economics problem builds on connecting thoughts in exactly that same way. Writers do them too, connecting sentences that link one paragraph to the next.

Just because you don't type ax=b doesn't mean you don't use algebra. And just because you don't know you're using it doesn't mean you're not using it.

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Alternative energy in the UK and Midwest 

(In which I am a little more rant-y than usual.)

I am often amused by the blog of James Delingpole, who I first heard on a Dennis Miller podcast some months ago and who wrote the most wonderful depiction of Robert Gibbs and the American media in its reporting on President Obama's trip to England a few months ago. He's piqued me with this story now on building wind farms in national parks, proposed by a group whose mission is to preserve nature. You've seen wind farms, haven't you?
So the best way of conserving natural England, a body calling itself Natural England has decided, is to destroy it. Can anyone come up with a more ludicrous example of the warped, supposedly �progressive� but in fact utterly poisonous, wrong and self-defeating thinking so prevalent in these dark times?
Last week we find out that our neighbor colleges, St. Benedict's and St. John's, have decided to get into the solar farming business.
St. John's soon could become home to the largest solar farm in Minnesota and possibly in the Upper Midwest, providing as much as 20 percent of the campus's electricity on a cloudless day.

St. John's and the Order of St. Benedict are partnering with Westwood Renewables, an Eden Prairie-based company that received a $2 million grant from Xcel Energy for a renewable energy project.

They hope to install about 1,800 solar photovoltaic panels just northwest of the St. John's campus in Avon Township. The panels would produce up to 400 kilowatts an hour or about 575,000 kilowatt hours annually, roughly the same amount of energy that 65 homes consume in a year.

The project is part of St. John's goal to end its contribution to global warming. In 2007, it joined more than 300 colleges and universities nationwide signing a pledge to become "carbon neutral."
Well yes, yes, quite noble.
"It's a nice step forward," said Brother Benedict Leuthner, treasurer for OSB, which is spearheading the project. "It's surely not going to solve all our energy needs."

When nights and cloudy days are factored in, the solar farm would supply about 4 percent of St. John's electricity needs annually, Leuthner said.
Now I'm not a real statistician, just an economist, but I think that means 96% of their electricity needs would still be met with fossil fuels? So this is a small "part of St. John's goal to end its contribution to global warming". As Radar O'Reilly would say on M*A*S*H, "wait for it..."
The project's backers hope it will raise awareness ...
YES! "Raise awareness." Short of a sensitive nose, there is no surer bullsh*t detector than the words "raise awareness". It's your five-year-old saying "Oh yeah? I'll show you!" It's vague and meaningless, as the rest of the sentence makes clear.
...of Minnesota's potential to produce electricity from the sun, one of the cleanest sources of renewable energy. The St. John's site would serve as a research and education tool for students and visitors who want to learn more about solar power.
You know what makes these things very clear? Profits. Perhaps in our Democrat-ruled country that's a bad word. It's most certainly a taxed word. But its usefulness in guiding resources is unparalleled in human history. To wit, from later in this article:
Solar hasn't caught on widely in Minnesota largely because it costs more to produce than other types of renewable energy such as wind.

Electricity in Minnesota comes mainly from coal-fired power plants and is inexpensive compared with other parts of the country, [SJU professor of environmental studies Derek] Larson said. In California, customers pay a higher rate for any electricity they consume above a base level. The state also offers incentives for homeowners who install solar panels.

"It becomes really economically smart," Larson said.

New federal tax credits and rebates from the state and utility companies should make solar energy more appealing for Minnesota homeowners, [Doug] Shoemaker [a renewable energy spokesman] said.
Professor Larson, have you thought about where California gets the money to offer incentives for solar panels? Mr. Shoemaker, where do those federal tax credits come from? They are paid for by taxing other things in lieu. It isn't as if the government reduces its spending dollar-for-dollar with those tax credits and rebates.

But more to the point. if it costs more to produce a kilowatt by coal-fired power plants, and it's inexpensive here versus other parts of the country, why not use the coal? "Oh, but it harms our planet!" you say. Instead, the brothers at St. John's and sisters at St. Ben's decide this is better:
This is a 16 acre solar farm at Florida Gulf Coast University. For four hundred acres, multiply that picture by 25.

400 acres could grow about 16,000 bushels of corn, selling between $3-$4 per bushel normally. They could go organic perhaps and do better on a dollar basis. But they never did that, those nobles of St. John's and St. Ben's. That area has been a nice bit of pasture or wooded land. People hike around there. Now they won't because they'd goof up the mirrors. You'd wreck their "demonstration" to "raise awareness" that solar would be a good idea, if coal just wasn't so damn cheap.

So raise the price, they'll say, through cap-and-trade. Then all those people who drive trucks or, say, work in extraction industries in the Iron Range (not many of them left) will have time to visit the beautiful hills around St. John's.

And see the pretty mirrors.

But hey! They're saving the planet with those things, if you'll just have your awareness raised.

POSTSCRIPT: After crafting this I came across at least one government bureaucrat who understands.
India will continue to use coal to meet its energy demands, says Rajendra Pachauri, chair of the UN Intergovernmental Panel on Climate Change (IPCC).

�Can you imagine 400 million people who do not have a light bulb in their homes,� Pachauri told reporters here Monday.

�You cannot, in a democracy, ignore some of these realities and as it happens with the resources of coal that India has we really don�t have any choice but to use coal in the immediate short term,� he said.
He must be some conservative nut, right? No, actually, Mr. Pachauri shares a Nobel Peace Prize ... with Al Gore. So at least raising consciousness comes after lighting one's home. There's still a place called Hope.

Even better, another Indian minister says retreating glaciers in the Himalayans are a natural process.
"We have to get out of the preconceived notion, which is based on western media, and invest our scientific research and other capacities to study Himalayan atmosphere," he said. "Science has its limitation. You cannot substitute the knowledge that has been gained by the people living in cold deserts through everyday experience."
Nurture that common sense, dear Indians. We'll want to import some when we get leaders here who can use it.

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Friday, July 24, 2009

Checking out 

Gone the rest of the day to the Millard Fillmore blogger golf bash. Maybe you'll see some info via Twitter; supposedly we'll have Mitch doing commentary again.

If you're in St. Cloud and not able to take part in the MilF, maybe I could interest you in a free night of comedy, courtesy of GREAT Theater.

A Funny Thing Happend on the Way to the Forum

Outdoors at Lake George
Performs: July 23, 24 and 25 at 7:30
Bring your own chair or blanket

Featuring a community theatre cast of fantastic actors with a live orchestra, you won't want to miss this hilarious Broadway Musical "Under The Stars." Featuring bawdy slapstick comedy this production is recommended for ages eight and up.

Among those appearing is Mrs. S. I saw the show last night and it's absolutely hilarious. The cast has a great time and the audience does too. Crowd fills in around seven, so if you want to sit up close show up early. (I am a huge Zero Mostel fan, and this is one of my favorite movies. Particularly when it includes Phil Silvers.)

NARN is in studio tomorrow, so please be sure to listen in.

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Thursday, July 23, 2009

Flattery will get you in your buddy's column 

My NARN friend Ed Morrissey writes a column for the American Issues Project today that picks up on my praise of something he wrote earlier this week. The debate over health care is not a debate between rationing and not rationing; it is a debate between rationing by government and rationing by the current system of a little choice for individuals, a medical education system controlled by doctors and government, and third-party payers in insurance companies. Given that's the current system, as Atul Gawande noted last January, you're most likely going to make small changes on that system.

Ed points out two differences between our system and the models of single-payer that proponents use. First, in the systems of Britain and Canada, if one wanted to opt out of the national health system, where would one go? True, you'd have to have a lot of money to do it, but that option is simply not available. Yet the various stories from Canada of people making choices when ill to opt out and use private solutions either in Canada or the USA are something American consumers take for granted. Tell them they won't have that option -- as President Obama got dangerously close to doing last night -- and you will lose a lot of support for changing the system. It's true that when we're not sick we, like most people, don't pay a very high share of our health costs -- as is true everywhere else, Arnold Kling points out. But we seem to have very inelastic demand for treatment when ill. (There must be a dozen good dissertations in health economics in that last paragraph.)

Secondly, Ed worries for the diversity of health care choices under the proposed system:

The rationing decisions come from a voluntary association between the consumer and supplier, not from a coerced �choice� imposed by politicians. If you don�t like the rationing decisions made under single-payer, you will be left with no other options, and the lack of competition will mean that little pressure can be brought to bear to improve those decisions through normal market forces.

In a free market system, even with insurers, the goods or services available to consumers allow for diverse choices and get rationed on the individual's ability to pay. That's true for anything, even the essentials of living � food, drink, clothing, shelter, as a moment's thought will corroborate. Few Americans, at least so far, have argued that any of these basic commodities should be governed by a single-payer entity that assigns those choices by any other means than the fruits of one's labors.

I saw a great headline in our campus newspaper that illustrates one of the problems we have in economics: "Economy leaves many unemployed". To borrow the line from Soylent Green, "the economy is people!!!" It is the actions of millions of individuals who buy and sell, truck, barter and exchange with one another. Or think of the scene from Repo Man
Duke: The lights are growing dim Otto. I know a life of crime has led me to this sorry fate, and yet, I blame society. Society made me what I am.
Otto: That's bullsh*t. You're a white suburban punk just like me.
Duke: Yeah, but it still hurts.
The economy doesn't "leave many unemployed"; at this particular moment workers are not as persuasive in convincing employers that their own situations would be made better if they hired more labor. We get our income by convincing others to give it to us in exchange for something of value. Our ability to convince people depends on choices we make.

That is as true of health care as any other good. We get it by convincing someone else to help us become healthier and to stay healthier. The use of government payments -- "single payer" obfuscates who it is we're enlisting to pay -- brings into that relationship an entity with the legal monopoly on the use of force. I cannot persuade my golf partner the optometrist to give me an eye exam for $20; he's really good at what he does, and the time I spend in the chair could be used on someone else willing to pay $100. But if I tell him "you'll get paid by the government" and the government sets his compensation for an eye exam at $20, he has less freedom to refuse my demand for an eye exam. I might be able to persuade him out of friendship, but why should I bother if I can use government force instead?

When I persuade someone else to exchange with me, we agree on values. When government pays for health care, it imposes its values.

This is why I wanted my question asked of President Obama last night: "Who will provide medical services to the 46 million Americans you say will now receive coverage under your plan that do not now?" Will the government try to persuade them? If so, with money they earn or money they acquired through confiscation (taxes)? Or will the force be more direct? If the government is going to be in the business of promising health care, how will it deliver? It will impose its values on someone; it would be nice of the Democrats to tell us who. Maybe someone will persuade them to tell us, because unlike them, we can't force an answer.

My thanks to Ed for introducing me to the AIP audience; I hope you liked what you read here, and invite you to look around.

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The mailman doesn't ring recovery, yet 

Bad news from UPS, via The Business Insider:

�Our trends so far in July show no material uptick in growth, We don�t have any confidence that either demand or activity is going to pick up substantially.� ...

�The economic environment continues to be difficult. Declines in both our domestic and international businesses appear to be stabilizing but volumes will remain significantly below last year�s levels,� said Kurt Kuehn, UPS�s chief financial officer.

�Although declines in economic indicators are less dramatic than earlier in the year, questions remain as to when business activity will begin to strengthen,� he continued. �The business environment in the third quarter should be similar to the second quarter."

Edward Harrison wondered a couple weeks ago if FedEx and UPS are better cyclical indicators than traditional cyclical stocks like Alcoa. If we're in the third quarter now and UPS is saying things are not looking up for them, that is a very bad sign for an early recovery of this cycle.


With a thong in their hearths 

I just wrote to several friends asking "What would be worse: Seeing your daughter in a nudie magazine or seeing her wearing this?"

Please people -- when you use CafePress to make symbolic clothing, THINK. In somebody's head, somewhere, someone has to say "wait, you're putting that on what?" And then shoot the idiot who says back "but it's made in the USA", great help to Darfur there, chap!

Other ugly uses of world poverty at Aid Watch.

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Yes, yes it does 

Paul Krugman:
I found Obama�s health care presentation so impressive � so much command of the issues � that it had me worried. If I really like a politicians� speech, isn�t that an indication that he lacks the popular touch?
O. sounds like a professor, he thought, noting that Howard Fineman found him a hectoring preener. If Krugman finds that press conference impressive, it says more about Krugman than it does about Obama.


Wednesday, July 22, 2009

This afternoon we attended a luncheon sponsored by the Center for the American Experiment (CAE) in Minneapolis. The key speakers were John E. Chubb and Terry M. Moe, authors of Liberating Learning: Technology, Politics, and the Future of American Education.

As far too many of us are aware, American students perform poorly on international tests. Today's speakers attributed much of our students' poor achievement on the stranglehold the teachers' unions have on politicians. Since 1989 Teacher unions have been the #1 contributor to federal campaigns. Their protectionist mindset has have blocked reform for over 25 years.

The authors' solution to the problem is based on the pervasiveness of technology. When students and school systems find ways around the union defined classroom and learn via the Internet, the number of teachers required will decrease resulting in a decrease in union dues, and a release of the stronghold these unions have on education reform.

While I agree that there need to be changes, the following questions were left unanswered:
1 - What country that outperforms the USA attributes its success to the use of computers?
2 - The average number of instruction hours/day and length of school year are higher in countries that outperform US students (see here)
3 - During the past 40+ years we have raised children to believe they are perfect. In the process we have lowered standards and expectations. As a result, we have students who will not, do not and cannot compete in a competitive world.
What is needed is a commitment to:
1 - Content loaded instruction,
2 - Respect for learning,
3 - Respect for teachers,
4 - behavioral standards.
I taught in various levels of schools before the "whole child," "self-esteem" concept took hold. Children develop self-esteem when they learn. Filling them and their parents with false evaluations and using gimmicks to teach avoid the real issue - students and their parents in other countries respect education, they work at it, and they learn. To accept anything else, regardless of mechanics, is cheating our children.

One of today's questions was about teaching the "whole child." What this inane concept creates is a classroom lacking content with the phony idea of creating self-esteem in children. It's a lazy way to approach education.

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A preface like Swiss cheese 

I am sure everyone will focus on the health care portion of the President's press conference tonight. But he said some things about the macroeconomy and the stimulus that deserve some attention as well. Let's look at the opening remarks:
Six months ago, I took office amid the worst recession in half a century. We were losing an average of 700,000 jobs per month and our financial system was on the verge of collapse.
It really wasn't the worst in a half-century until after Obama took office, but you could argue charitably that it would have gotten there no matter what. Fine.

But the data on employment only hits near 700,000 jobs lost in December. That average is an average of December and January, a period part of which he was president and for all of which his policies were the dominant news story of the period. Obama's five month cumulative loss (2.64 million jobs) is about two bad months away from Bush's 3.7 million jobs lost in his last twelve months. It's a very elastic definition of "bending the curve" (to use a current term of art) that the Obama administration is using here.
As a result of the action we took in those first weeks, we have been able to pull our economy back from the brink. We took steps to stabilize our financial institutions and our housing market. And we passed a Recovery Act that has already saved jobs and created new ones; delivered billions in tax relief to families and small businesses; and extended unemployment insurance and health insurance to those who have been laid off.
This is of course well-trodden ground. The "created or saved" line has not gone away. This was the first point where I thought "he's not trying to convince me of anything. This is a rally-the-troops presser." He knows the line has no value to independents or conservatives.

The tax cuts put about $65 billion in to the economy; last time we estimated the effect of this (from the 2008 cuts, which were larger) we had an effect on GDP of less than $20 billion. The UI payments aren't keeping the number of discouraged workers from increasing; see this for more.
Of course, we still have a long way to go. And the Recovery Act will continue to save and create more jobs over the next two years � just like it was designed to do. I realize this is little comfort to those Americans who are currently out of work, and I�ll be honest with you � new hiring is always one of the last things to bounce back after a recession.
President-elect Obama, January 8, 2009:
That is why I have moved quickly to work with my economic team and leaders of both parties on an American Recovery and Reinvestment Plan that will immediately jumpstart job creation and long-term growth.
The JOLTS report for May 2009: "The hires rate at 3.0 percent in May was at the lowest point since the series began in December 2000." Labor turnover is slower, as workers are afraid to change jobs and employers are not hiring.

Back to the press conference.
And the fact is, even before this crisis hit, we had an economy that was creating a good deal of wealth for folks at the very top, but not a lot of good-paying jobs for the rest of America. It�s an economy that simply wasn�t ready to compete in the 21st century � one where we�ve been slow to invest in the clean energy technologies that have created new jobs and industries in other countries; where we�ve watched our graduation rates lag behind too much of the world; and where we spend much more on health care than any other nation but aren�t any healthier for it.
The Gini coefficient, which measures income inequality, has risen steadily in the last forty years and was barely different in 2007 than in 2000. The last sentence is simply grafted from a campaign speech. Heritage points out that creating green jobs while destroying non-green ones doesn't mean a net gain in employment.

For supposedly the smartest president evah, he seems to stubbornly stick to facts that are wrong or incomplete. As I was a-Twittering to Ed tonight, though, impressing me wasn't the job. He's playing defense to keep nervous Democrats in place on the health care bill. On that, I'll let smarter political analysts have the floor.

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When the economy turns around, where will the jobs happen? 

When the recovery comes, job growth also is most likely to resurge first in the red states, while the blue states continue to lag behind. For reasons as diverse as regulatory policy, aging infrastructure, and high levels of taxation, blue states continue to be more susceptible to recessions than their red counterparts.

This assumption is borne out by an analysis of economic cycles by the website, which has found that since 1990 the states most vulnerable to economic downturns include the Great Lakes states of Michigan, Illinois, Ohio, and New York as well as Connecticut and California. Those most resistant have been generally red bastions such as the Dakotas, Nebraska, and Texas, and resource-rich states such as Alaska, Montana, New Mexico, and Wyoming.

This suggests that even the hardest-hit red states, notably Florida and Arizona, are likely better positioned in the long term for a recovery. A generation of out-migration may be slowing down temporarily due to the recession, but many people moved to places such as Arizona, Florida, Texas, and Georgia over the first seven years of the decade; in contrast, the high-tax blue states, including New York, New Jersey, and California, lost 1,100 people every day between 1998 and 2007. Most of them headed to the red states.

�When the economy comes back,� notes veteran California-based economist and forecaster Bill Watkins, �there will be a pent-up demand. People will compare and move to the places that are affordable and don�t have the fundamental tough tax and regulatory structures.�

From Joel Kotkin. The Pacific Research Institute's Economic Freedom in the States index makes Minnesota look only so-so on this scale, scoring below 30th of the fifty states for the size of government, fiscal, and regulatory policies.

I was interviewed yesterday for a longer piece by a reporter on which sectors would grow in central Minnesota, and where could you look for jobs now. The reporter had in her hands the results of a search from DEED's Employment Outlook Tool. Their projection is that we grow 1.4% a year in jobs in Central Minnesota. But they also expect heavy turnover of jobs as aging workers retire, with an additional 2% of per year needed to replace them. Suppose taxes rise; will retiring workers be replaced? Will skilled labor stay in-state?

Projections of labor force in Minnesota like these depend on assumptions about the cost of working and living in Minnesota.

(h/t: Stephen)

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One more question I'd like someone to ask President Obama tonight 

Ideally, Mr. President, your plan would add 46 million more consumers of health care, or at least, they would consume more than than they do now. How do you see the quantity of health care services supplied rising to meet that new demand? Normally, economics expects an increase in demand to lead to an increase in price. Do you expect that to happen under your plan? Why or why not?

I'm pretty sure I heard a version of that from Dennis Prager earlier this week.

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Tuesday, July 21, 2009

More CBO truth 

For much of its history, the United States devoted only a small fraction of its resources to the activities of the federal government, apart from fighting wars. But the second half of the 20th century was a period of sustained higher federal spending during peacetime. Over the past 50 years, primary federal outlays (which exclude interest spending) have averaged 18 percent of GDP. In fiscal years 2009 and 2010, spending on stimulus legislation and on efforts to stabilize the financial markets will result in unusually high outlays (primary spending will account for 26 percent of GDP in fiscal year 2009), but outlays are projected to fall back near their historical average after a few years.

In later years, primary spending rises again in both of CBO�s long-term budget scenarios. Under the extended-baseline scenario, primary spending would increase from 20 percent of GDP in fiscal year 2012 to 24 percent by 2035 and 32 percent by 2080. Primary spending would be even higher under the alternative fiscal scenario, reaching 26 percent of GDP by 2035 and 34 percent by 2080. Those higher levels occur largely because the alternative fiscal scenario assumes greater spending on federal programs other than Medicare, Medicaid, and Social Security than the extended-baseline scenario does.

From CBO last week. Permit me to point out a little economics here. We can divide the deficit between that which goes to paying interest on the debt and that which pays for everything else. The primary deficit is equal to the deficit minus the interest payments that service the national debt. In order for a government to be solvent in the long run, you must have the primary surplus project to be enough to some day pay off that debt. If you don't, your government's debt is in essence a Ponzi scheme.

The CBO is offering the warning on page 15 of the document:
Under the assumptions of the extended-baseline scenario, annual deficits would fall below 2 percent of GDP by fiscal year 2013. Debt would remain roughly stable as a share of GDP for the next decade. After that, however, growing spending on Medicare, Medicaid, and Social Security would lead to higher deficits, and debt would once again increase faster than the economy. By 2035, it would equal 79 percent of GDP. Federal debt peaked at 113 percent of GDP shortly after the end of World War II, a mark that would be passed in 2046 under the extended-baseline scenario.

Under the alternative fiscal scenario, deficits would decline for a few years after 2009 but then grow quickly again. By 2019, debt would reach 83 percent of GDP. After that, the spiraling costs of interest payments would swiftly push debt to unsustainable levels. Debt would exceed its historical peak of 113 percent of GDP by 2026 and would reach 200 percent of GDP in 2038.

Many budget analysts believe that the alternative fiscal scenario presents a more realistic picture of the nation�s
underlying fiscal policy than the extended-baseline scenario does�because, for example, it does not allow the impact of the AMT to expand substantially. To the extent that such a belief is valid, the explosive path of federal debt under the alternative fiscal scenario underscores the need for large and rapid corrective steps to put the nation on a sustainable fiscal course.
You'll note that 83% number for 2019 in the alternative fiscal scenario is in fact the CBO's original estimate.

CBO notes that between 1959 and now revenues have been between 16% and 21% of GDP. For us to pay down the debt, expenditures have to fall back to the 20% level and revenues get to 21%. This means raising revenues as a share of GDP that surpasses anything in peacetime even if we hold to an expenditure path that CBO itself doesn't really believe.

UPDATE: Ed notes that the CBO seems to be working outside its usual parameters. I'm between appointments, but I'll put some calls in to see if this is that unusual as Ed suggests. I'm not so sure.


Advance him to intermediate econ 

UPDATE (7/24): If you're visiting this from Ed Morrissey's AIP column, thanks a million! Please have a look around.

My little Eddie's all grown up:
...we have insurance companies rationing care, or to be more exact, rationing compensation, which isn�t quite the same thing in theory but does in practice. But why should that be a surprise? All markets are rationing systems for products of varying scarcity. That is why markets exist � to set prices that allow for rationing of finite amounts of goods and services based on supply and demand, with prices rationing goods and services to those who pay the most while allowing the greatest distribution. We have rationing systems for anything requiring a purchase. About the only thing we don�t ration is air.

What Kristol meant to say was that Kennedy made an argument for government rationing of medical care. We have that, too, in Medicare, Medicaid, the VA, and Indian Health Services, all of which are terribly dysfunctional, and none of which should build confidence in expanding the government rationing to the rest of America. Kristol responded to Kennedy�s call for just that by reminding people that they don�t need politicians in charge of their medical decisions.
It's not only markets that ration. All scarce goods are rationed somehow. And every rationing system creates a distribution of those goods. What I think the Democrats do is look at the distribution ex post and decides it doesn't like it, so it wants to change it. It's the common schism in politics between equality of opportunity and equality of outcome, or ex ante vs ex post equity. But the decision to change rationing systems doesn't just influence distribution. It can also change the production of health care.


Buy the premise, buy the bit 

I've been working on a longish piece on the role economic education has played in the financial crisis (i.e., do we bear responsibility?), and I've been interested in the discussions of graduate macroeconomics education that has been going on lately. I find myself sympathetic to this passage from Menzie Chinn:
So what was a common theme in the curriculum? For me, the defining feature in thinking about what model to use was whether the analysis answered the question posed, and whether the question posed was of interest. Now, whenever I read a dissertation prospectus, the key question I ask the student is: "What is the question being asked?", not "What is the methodology?" ...

I wonder if indeed the macroeconomic mainstream is as monolithic as conveyed by various observers. For instance, one certainly perceives a certain homogeneity amongst Ph.D.'s trained at certain universities. And there's a certain similarity in the mode of analysis preferred by economists in financial firms. Since the financial press tends to focus on Wall Street economists, one gets a misleading impression regarding the degree of uniformity of views.
I think one can argue, as no doubt some critics will, that Chinn's judgment of "whether the analysis answered the question posed" is colored by the methodology he favors that is the result of his training. Go back to the criticism last week of Larry Summers' use of a Google trend as a forecasting tool. In a conversation with Ed Morrissey, Ed said "well that's a very indirect measurement." I replied "pretty much everything we do in macro is indirect measurement, proxies of varying qualities. You have to make some decision if there's enough quality." (I think my quote of Ed is direct -- my own answer is of course edited to make me look more literate than what I might have said in a green room.)

Certainly one criticism of macro is proxy quality. If you think national income and product accounts don't really measure economic activity, you will think every mainstream economic forecast is crap. If you think the decision of Paul Samuelson many years ago to move economics more towards mathematical expression (and away from the Marshallian formulation that Mario Rizzo notes) then all the lovely models become useless.

The title of this post is advice on comedy from Johnny Carson. It applies to macro as well.


Jobs take more than education 

Gary gives us a lesson in how votes matter. In a vote for which no Republican joined the majority, the Minnesota House rejected a bill that would have provided for an investment tax credit for Minnesota firms. Within months, a firm in Minneapolis announced it would move to Wisconsin to develop products, and cited Wisconsin tax credits for "angel investors" as a reason for the move.

One of the common refrains of the DFL, that Gary cites, is that all we need to have high-paying jobs and investment in high tech is education. There's no doubt that education, or more generally additions to human capital, are part of the production process that will increase wages. But production is more than just human capital. You need bodies; you need physical capital; you need land; and most of all you need someone willing to accept the risk of guaranteeing those factors of production their payment regardless of whether what they produce is actually sold. (That last thing is of course profit, which is an incentive and not a residual.)

The productivity of any one factor is a function of the level of the other factors you have. All the brilliant people in the world won't be able to feed themselves if the physical capital they have to work with is destroyed. Reducing access to physical or financial capital renders Minnesota's investments in human capital nugatory.

To put it another way, our investment in education involves both benefits and costs. Those costs involve all the things we do not create in order to produce one more year of education for one more student. Any rational allocation of resources will recognize higher taxes as the cost of government-produced education. If the marginal productivity of the physical capital destroyed by higher taxes is greater than the marginal productivity of the human capital created by government education, more government education destroys wealth.

Gary quotes Rep. Laura Brod (R-New Prague), who gets it:
Minnesota needs to hear the wake up call that businesses like VitalMedix are sending as one after another flee our state and take innovation and good paying jobs with them. Many businesses are at the same tipping point and policymakers should be very concerned that the cost of doing business in Minnesota is simply out of whack and we are losing jobs because of it. Businesses and investors are price sensitive and have choices.
Gary identifies two local area representatives, Reps. Haws and Hosch, who voted against this bill. It should be doubly disappointing to their constituencies here in Central Minnesota, where a bioscience zone and a science initiative have been established by the state. It is like denying your garden fertilizer. You cannot support "education to create good jobs" with the one hand and deny the other factors that allow for job creation with the other.

UPDATE: I had meant to link the page with the vote before posting. Here it is. The amendment begins on p. 4911 (page 85 of this 114 page document) and the vote on p. 4918 (92).

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Monday, July 20, 2009

Call to arms of the day 

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The United States is facing an urgent financial crisis that threatens our fiscal and economic stability. Our government is currently borrowing about 50 cents for every dollar we spend. Medicare is already paying out more in benefits than it collects in taxes and Social Security is expected to do the same in less than five years. The individual share of this year�s deficit for every American is $3,500 - by the fall that share will approach $6,000. The national debt currently stands at $11.5 trillion, costing every American $37,600. The total unfunded liabilities for the United States are $60.6 trillion, which exceeds the total net worth of America. Paying off this liability would require every American to write a check to the Treasury Department for $198,000. ...We must put a stop to the spending spree in Washington. The best way to stimulate the economy is to cut taxes and spending drastically.
Graph at top courtesy John Rutledge, who was my professor at Claremont Graduate School for about two hours before joining the Reagan White House in 1981.

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Stop thinking like that! 

I was driving through town (for locals: down Third Ave N at the laundromat on the corner at Cooper) when a billboard caught my eye:
Recession 101:

Economic forecasts tend to be shovel-ready
As the local economic forecaster, I at first thought someone was taking a shot at me. (You DO realize, right, that the world revolves around me? Good, thought you did.) But no, this turns out to be a national campaign by someone who doesn't like bad economic news.
"Interesting fact about recessions ... they end."

"Self worth is greater than net worth."

"This will end long before those who caused it are paroled."

Those are a few of the messages drivers in Rhode Island and across the country are seeing as part of a billboard campaign dubbed "Recession 101" and funded by an anonymous East Coast donor who was depressed about how the country was reacting to the economy's tailspin.

The campaign began in June and is now appearing on more than 1,000 billboards across America, including a spot in New York's Times Square. The client wanted people to realize the country has undergone recessions before and made it through, said designer Charlie Robb.

"One of the lines is, 'Stop obsessing about economy, you're scaring the children.' That's the overriding concept of the thing," said Robb, founding director of the Florida-based Charchin Creative.
The whole campaign can be found here. I understand the desire to remind America of its resiliency and optimism. But seriously, those of us who write forecasts are not trying to do anything other than get the forecast right. The only people who hide bad news lately work at OMB.

At least one strand of research suggests that, if you want consumer sentiment to improve, start with the newspapers, not the economists.

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Why buy a state you already own? 

Reading John Lott today reminds me yet again of the research of Gavin Wright on the New Deal. (JSTOR copy here.) Written in 1974, Wright found that the distribution of grants and of WPA jobs were driven in no small part by political considerations.
The distribution of WPA employment was "a storm center from the beginning" (Howard 1943, p. 596), and charges of discrimination were common, most especially from governors who believed they were being shortchanged (Patterson 1969, pp. 54, 57, 77, 81, 198-200). Apprehension about the motives of WPA was promoted also by the fact that "the WPA was most reluctant to give out any information about the way in which state employment quotas were determined" (MacMahon et al. 1941, p. 223).
Wright found that if a state was more "in play" -- by which was meant the degree to which states switched support between Republican and Democratic candidates in the prior half-century -- it was more likely to receive grants and WPA jobs.

Lott writes:

Politico reported on June 5 that the �Stimulus tour� � visits by Mr. Obama and other administration officials �across the country to tout the massive spending program or hand out stimulus cash to grateful local officials� � overwhelmingly took place in states that voted for Obama: �52 of the 66 events were in states that backed Obama.� The other 14 events were in states that Obama lost only narrowly. A new study released by USA Today also finds that counties that voted for Obama received about twice as much stimulus money per capita as those that voted for McCain.

In our results, Obama's share of the vote accounted for only a small percentage of the variation in how the stimulus money is being allocated. A one percentage point increase in Obama's vote share means an additional $13.52 in per capita spending, but even then the relationship rests on the large amount of money given to D.C.

I would argue John needs a fuller analysis here of voting patterns. It makes no sense to be lavish on Washington DC in this view because the District is reliably Democratic. I would look for states that have had votes switch more often, swing states like Ohio or Missouri or Florida. If Obama's spending is politically motivated, you should be able to use that variability of voting with the measures Lott includes like unemployment, foreclosure and bankruptcy and find a result.

Looking at his regression, I see he's included per capita income and vote share for Obama -- I'd like to see a correlation of those two, because I suspect richer states voted for Obama. I would also think there's some multicollinearity in the various measures of economic hardship included. I'll send John a link, and suggest he try some additional tests to flesh out this result a la Wright or John Wallis (REStat 1987, JSTOR link.)

UPDATE (7/21): John emailed correlation coefficients for per capita gdp growth and Obama's vote share: .60 with DC included, .46 without. The DC influence is VERY strong.

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What would you replace the Fed with? 

It appears more people now are upset about that petition for central bank independence. At first David Henderson supported the idea that central bank independence reduced inflation. (See my papers linked at the bottom of the first link of this article.) While it seems reasonable to have a group of unaudited individuals finally be audited, "[t]he whole idea of a having one federal agency audit another typically excites mainly inside-the-Beltway people." Moreover, if we're going to audit the Fed, why not audit all those other agencies that are regulating us to death, like the EPA, or Treasury? Here's a weekly balance sheet; there is an audit it hires someone to do. What the auditing bills propose is to have someone else audit the Fed rather than Deloitte and Touche. Nobody as far as I can tell can explain why a different auditor would be better.

But Henderson appears to have had a change of heart, calling the Fed "illegitimate," even while maintaining it is more transparent than most government agencies. Meanwhile, Arnold Kling and Alex Tabarrok argue that the Federal Reserve suffers from a kind of regulatory capture by commercial banks. Here's Kling:
I perceive signs of what Danny Kaufmann calls "cognitive capture" of the Fed by the banks that it regulates. That is, the Fed sees the world through the eyes of the executives at large banks.
And Tabarrok, at greater length:

The primary reason that independent central banks are better at controlling inflation is that absent direct political control the default selection mechanism favors bankers, i.e. lenders, people whose interests make them more favorable towards lower inflation.

Thus, independence is a political decision that favors lenders in the decisions of monetary policy. Now, depending on the alternatives, there may be good reasons for making this choice but we should not fool ourselves into thinking that we have depoliticized money. We should not be surprised, for example, that "independent" central banks tend to make lender of last resort decisions that protect banks and bankers.

But neither point out that the Federal Reserve is in fact owned by commercial banks, specifically for that reason. The problem with a dependent central bank is a time-consistency problem. (Not long ago we thought enough of it to award a Nobel to its discoverers.) Central banks can promise price stability but, when they are subject to an electoral check, they can't deliver on the promise because of the possibility of temporarily raising output in advance of an election and having inflation come later (the "political business cycle", a topic I first wrote about in graduate school.) Central banks cannot make credible commitments to price stability without overcoming the problem.

It's true that a central bank could find another mechanism to overcome the problem, such as the Reserve Bank of New Zealand's contract that fires a central bank governor if he allows inflation to rise above a certain rate. Tabarrok notes this example as a case where the central bank does NOT have independence. But independence means two different things: It can mean independence of choosing its goals, or it could mean independence in choosing the instruments by which it meets those goals. You can tell me to keep inflation below 2% or I'm fired, but you permit me to use whatever means I wish to meet that target. Tabarrok misfires in calling the New Zealand central bank dependent. See Carlstrom and Fuerst [2006].

In the absence of a contract, one can choose instead to delegate monetary policy to someone who can overcome the time inconsistency problem. The old story we use in classrooms is to think about a father taking his two sons to a baseball game; the family goes once a year; the stadium is a three-hour drive from home. Brothers often fight in back seats, so the father turns around and tells them "stop or we won't go to the game." Of course the sons don't believe Dad, because Dad loves baseball, they know he does, and turning the car around is too painful for Dad. Delegation means giving the tickets to Mom, who let's say doesn't like baseball. "If you don't behave, Mom will not give us the tickets to go to the game." (I can't take credit for this metaphor -- it was in an intermediate macro text I read and used, but I can't find where I got it on my bookshelf. Apologies to the originator of that story.)

A government official cannot make a credible commitment to price stability, because if some price shock happens the cost of keeping the commitment is high unemployment which is painful to the government official. So he delegates monetary policy to someone who cares less about unemployment than he does, and cares perhaps more about price stability. That is in fact exactly what a commercial banker prefers.

Federal Reserve governors are chosen by the president subject to confirmation by the Senate. But Federal Reserve bank presidents (of the twelve branches) are chosen by the members of the Fed, the commercial banks. They are typically more inflation averse than the governors (see Havrilesky and Gildea [2007], for example.) In some cases the central bank's board is entirely chosen by bankers (see Swiss National Bank for example.)

The reasons for central bank independence at this particular time in history are, I believe, profound. James Hamilton writes:
The reason I find that loss of Fed independence to be a source of alarm is the observation that every hyperinflation in history has had two ingredients. The first is a fiscal debt for which there was no politically feasible ability to pay with tax increases or spending cuts. The second is a central bank that was drawn into the task of creating money as the only way to meet the obligations that the fiscal authority could not. Every historical hyperinflation has ended when the fiscal problems got resolved and independence of the central bank was restored.
I return to the question I asked before: if you abolish the Fed, what do you replace it with? Tabarrok's complaint that even delegating to commercial bankers makes it political would seem to lead to a complaint about governments maintaining a monopoly over money. Would only competitive money satisfy the objections? I suspect it would prevent hyperinflation, but multiple monies are also likely to sacrifice many scale economies that allow our current level of financial sophistication.

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Friday, July 17, 2009

Larry does Google 

A number of bloggers seem perplexed that Larry Summers is using Google Trends to get a feel for economic behavior. Ed Morrissey says:
I wonder whether a Google search metric falls within the Keynesian or Friedman schools of economic thought. If I had to guess, which is apparently what Summers is doing when he�s not busy counting Google searches, I�d say it falls within the Marx school of economic thought �. Groucho Marx.
But this really isn't news. Hal Varian and Hyunyoung Choi find that compared to time series analysis, including the results of Google Trends or Insight will improve predictions of the retail activity. In short, expectations matter, and people engaging in searches for goods will use Google. The research was mentioned in The Economist in April.

And Summers is right, but you'll note searches drop every summer. (Graph idea from here.) My argument? It's students researching papers for classes, which they don't take in the summer. But that's a SWAG, not something I would say at the White House.
The question is whether you could use that graph to help predict what happens in overall economic activity. On eyeball, it doesn't look so. But some undergraduate now has a nice paper to write.

UPDATE: Ed notes via email that "economic depression" has now zoomed up the charts (currently #2 as I type this.) A case of Goodhart's Law? Will bloggers ruin Summers' toy?


It's better to burn out than it is to modify 

Those loans the Bush and Obama Administrations have pushed to modify? Guess what? They are still failing.
Re-default is a huge problem, because it means those homes should have just undergone foreclosure instead of modifying their underlying mortgages. After all, if those borrowers default again, the modification merely delayed the inevitable. This might indicate that the modification efforts are more focused on getting all troubled homeowners to modify, without really determining who can successfully manage those modification terms.
And yet,
As complaints mount about President Obama's foreclosure prevention program, the administration is ratcheting up the pressure on mortgage servicers.

Financial executives will meet with Treasury Department and administration housing officials on July 28 to discuss how the loan modification and refinancing plan has been implemented. The administration plans to grill servicers that have done few modifications or have had many complaints.

Officials also want financial institutions to hire more people and train them better, expand their call centers, and send more mailings to eligible borrowers, according to a letter sent to servicers last week. The government also said servicers need to establish a way for borrowers to contest their treatment or denial.
You could have seen this coming from far off. Does this administration not understand incentives?

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Beggar thy neighbor 

Mitch points out the complaint among the Minnesota Left that Governor Pawlenty left other states' money on the table in the unallotment strategy. It's of course a bit of a prisoners' dilemma problem: If Minnesota forgoes other states' money (or, as Mitch rightly abbreviates, OPM) there's no reason to believe other states won't spend Minnesota's.

But there's a better, more selfish reason for spurning government cheese: the cheese is temporary. It leverages state taxpayers in order to get a two-year benefit. When the stimulus is withdrawn, what will happen to the state's effort? We can just imagine the calls to "stop the cuts" paid for by government employee union dues in 2011 or 2012.

It's not just beggar-thy-neighbor between the states, it's beggar-thy-taxpayer within the state. Governor Pawlenty is smart enough to not fall for that shell game and leave his successor a battle to restrain spending more in the next biennium. One has to wonder why the DFL, already focusing on the size of the 2011-13 projected deficit, would want us to add $62 million or more to the next biennium's deficit and beyond just to get $72 million of OPM now.

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No green shoots on Minnesota's horizon 

Confirming yesterday's employment report, we find this sentence in the state budget update:
While some of the lost withholding revenue appears to reflect smaller than anticipated bonus payments made in early 2009, withholding receipts in April, May, and June averaged more than $20 million per month below projections, consistent with weaker wage and employment growth than anticipated in February�s forecast.
The always downbeat Global Insights forecast offered by the MN Finance Department for their budgeting is forecasting -0.8% real GDP growth for 2010. Real income strongly influences midterm elections: Is it any wonder then that Congress (and the Minnesota DFL) is growing ever more worried about the state of the economy?

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Thursday, July 16, 2009

Minnesota jobs: no green shoots there, either 

Jobs are down in Minnesota still:
Minnesota employers cut 16,700 jobs in June, according to figures released today by the Minnesota Department of Employment and Economic Development (DEED).

The agency said the state�s unemployment rate in June rose to a seasonally adjusted 8.4 percent, up from 8.1 percent in May. The U.S. unemployment rate in June reached 9.5 percent.

The sectors that added jobs in June were trade, transportation and utilities, which gained 800 jobs, and financial activities, which added 600 positions.

Jobs losses occurred in June in construction (down 3,900), manufacturing (down 3,700), professional and business services (down 3,500), leisure and hospitality (down 3,000), logging and mining (down 1,000), government (down 800), other services (down 800), information (down 700), and education and health care (down 700).

Fishing around the data, I note St. Cloud is down 2,300 private sector jobs in the last 12 months. About all of that is from goods production, meaning construction and manufacturing. Health and education are actually up 700 over that same time. Retail trade (which is fairly large here) is flat.

State government employment? Up 1.9% in the last twelve months in Minnesota to over 100,000 workers. Overall government employment in St. Cloud is up 401 jobs. Hold that thought, the next time you hear about unallotment.

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Under questioning by members of the Senate Budget Committee, CBO director Douglas Elmendorf said bills crafted by House leaders and the Senate health committee do not propose "the sort of fundamental changes that would be necessary to reduce the trajectory of federal health spending by a significant amount."

"On the contrary," Elmendorf said, "the legislation significantly expands the federal responsibility for health-care costs."

Though President Obama and Democratic leaders have said repeatedly that reining in the skyrocketing growth in spending on government health programs such as Medicaid and Medicare is their top priority, the reform measures put forth so far would not fulfill their pledge to "bend the cost curve" downward, Elmendorf said. Instead, he said, "The curve is being raised."

From the Washington Post. This is stronger the Director Elmendorf indicated in his letter to Rep. Charlie Rangel yesterday.

He notes there that the estimated $1 trillion in additional deficits created by the House plan (which is really over six years rather than a decade, since nothing moves in the plan before 2013) does not include "the administrative costs to the federal government of implementing the specified policies, nor have we accounted for all of the proposal�s likely effects on spending for other federal programs."

Once again, the Democrats are working the umpire:

House Speaker Nancy Pelosi (D-Calif.) acted surprised by Elmendorf's statement.

"Did he say that?" Pelosi said during her morning news conference in response to a question about Elmendorf's comments. "It's the same person who said we're not giving any credit for prevention or renegotiating for lower costs for pharmaceutical drugs ... I disagree that they don't score in a positive way prevention, wellness, negotiating for lower pharmaceutical drugs."
But now she's got the Obama Administration also seeking a better plan:
The Obama administration indicated last week that it had similar concerns about the House bill. White House Office of Management and Budget Director Peter Orszag, Elmendorf�s predecessor at the Congressional Budget Office, sent a letter to House Democratic committee chairmen urging them to �maintain and strengthen� provisions in their bill that would have long-term benefits.

�Adopting a deficit-neutral health reform that expands coverage, however, is not enough because it would perpetuate a system in which best practices are far from universal and costs are too high,� Orszag wrote last Wednesday, when he also addressed the House Democratic Caucus.

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You call that a bargain? 

Menzie Chinn, commenting on Casey Mulligan's Economix piece this morning:

Note that $787 [billion in stimulus] is spent over several years (a flow). 3.5 million jobs is a stock. But wouldn't we want to incorporate how long those jobs would be around? That suggests we should use job-years instead of jobs, to make the numerator and denominator comparable. The Administration estimated the number at 6.8 million [2]. That works out to a cost per job-year of $116 thousand.

From my perspective, I view the appeal to the number of jobs created and saved alone as an inadequate approach. Rather, I think the concept of focusing on output makes more sense, as it incorporates indirectly how much income goes along with that employment. And GDP incorporates the returns to land and capital, as well.

So we spend $116,000 per job-year. What is output per job-year? In 2007, $88,540. Maybe a better return than I got on my 401k last year, but not a bargain.


Redistribution disguised as health care reform 

The Tax Foundation makes the new health care plan quite simple.

Let's begin with the assumption that government is going to pursue health care reform in a way that expands the role of government in that market. Let's even assume that such a policy is truly correcting a market failure in a positive way. From a public interest perspective, there are some possible market failure justifications for this intervention, the key ones being: (1) paternalism, (2) public health, (3) lack of adequate competition in health care market, (4) adverse selection, moral hazards and other similar market failures, and (5) redistribution.

But from a benefit principle perspective, none of the first four justifications would seem to imply that only those tax returns earning more than $350,000 in adjusted gross income should pay for those supposed benefits.

Therefore, the only argument you can really make for the very rich being the sole group to finance greater health care expansion is if you believe that the current level of income redistribution from the very rich to the non-very rich is not large enough.

Combined with the expiration of the Bush tax cuts next year, " the surtax would drive the top federal tax rate to 45 percent, the highest level since lawmakers rewrote the tax code in 1986," says the Washington Post.
"Tax is a four-letter word" with voters, said Sen. Ben Nelson (D-Neb.). Even families not ranking in the top 1 percent of earners "hope they're going to be there someday," he said. "So they don't necessarily think it's fair."


Wednesday, July 15, 2009

Petition on central bank independence 

I'd've signed this one, if anyone had asked:

Amidst the debate over systemic regulation, the independence of U.S. monetary policy is at risk. We urge Congress and the Executive Branch to reaffirm their support for and defend the independence of the Federal Reserve System as a foundation of U.S. economic stability. There are three specific risks that must be contained.

First, central bank independence has been shown to be essential for controlling inflation. Sooner or later, the Fed will have to scale back its current unprecedented monetary accommodation. When the Federal Reserve judges it time to begin tightening monetary conditions, it must be allowed to do so without interference. Second, lender of last resort decisions should not be politicized.

Finally, calls to alter the structure or personnel selection of the Federal Reserve System easily could backfire by raising inflation expectations and borrowing costs and dimming prospects for recovery. The democratic legitimacy of the Federal Reserve System is well established by its legal mandate and by the existing appointments process. Frequent communication with the public and testimony before Congress ensure Fed accountability.

If the Federal Reserve is given new responsibilities every effort must be made to avoid compromising its ability to manage monetary policy as it sees fit.

Link added in cite. Some of my writings on the subject are here, here, and here.

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All scarce goods get rationed somehow 

From my favorite textbook, but in the Canadian edition, thinking about how we deal with scarcity.
The idea of rationing according to need appeals instinctively to many people but will appeal less to anyone ... who has thought about how vague, subjective, arbitrary, relative, uncertain, and subject to abuse this criterion would become in any society that tried to employ it on a large scale. Another system is "first come, first served." Whenever you see people standing in line to purchase something, you are observing the operation of a rationing system that employs this criterion, usually as a supplement to the willingness to pay money. Another system for rationing scarce goods is a lottery. That strikes many of us as a fair way to ration a scarce good when none of those who want it seems to have a better claim than anyone else. Sometimes we ration using the criterion of equal shares for all. ... Animals interested in feeding on a carcass regularly employ the criterion "might makes right" as their way of rationing a scarce good, as do human beings on some occasions. Humans also employ the criterion of merit in some contexts: Scarce goods go to those who deserve them for whatever reason.

Each of these rationing systems has advantages. But each has some serious disadvantages when considered as a general system for allocating scarce goods. People would spend a great deal of time standing in line if most goods were rationed by the criterion of "first come, first served." While a lottery commends itself to us on fairness grounds when no one has any special claim to the scarce goods, allocating by chance pays no attention to diversity of desire and condition. Equal shares for all makes little sense when goods cannot easily be divided into equal shares or when shares cut up into equal parts would be too small to be of much value to any user. ...

Rationing by any of the criteria just mentioned also ignores the problem of supply. Because very few goods fall from heaven like manna, how much will be available is rarely independent of the system used to ration. Most goods are produced by people who want to be rewarded for their efforts. A system of rationing scarce goods that does not produce appropriate rewards for those whose decisions create the goods will eventually collapse. (pp. 35-36)
All scarce goods are rationed. The goal for those who oppose Obamacare is not to call it rationing. The goal is to show that the rationing system currently in use in the USA allocates health care more efficiently than the proposed system. A rule to use could be one of Pareto efficiency: How do I make one person healthier without making anyone else less healthy? That;s a very conservative rule, of course (the alternative rule is Kaldor-Hicks efficiency) but scratch most single-payer proponents and you'll find someone who's perfectly fine with changes that harm someone's health without any means of compensation. "You don't deserve the system you have because we decided someone else wasn't being served well enough. So you have to take less." Crowder points this out very well in the video, that as long as there's a private plan around somewhere, at whatever cost, some people with high income will be able to opt out of the Canadian plan.

The last paragraph points out, though, that the impact of the choice of rationing system on the distribution of current production is only part of the story. Gary Gross gets one thinking about a counterfactual: Had we developed a Canadian or British system after World War II, would the Mayo Clinic exist?
Would the Mayo Clinic have gotten built if we�d had a system whose key principles would�ve been cost controls and universal coverage? I can�t see how that would�ve happened with a system centered on price controls. Frankly, any system that puts a higher priority on price controls and universal coverage than on quality couldn�t attract the capital for building something like the Mayo Clinic.
Heyne and Palmer provide us with a useful way of thinking about this.
Consider the case of a post-secondary education. What does it cost? The answer is that "it" cannot have a cost. We must first distinguish the cost of obtaining a post-secondary education from the cost of providing one. As soon as we make that distinction, we should also notice something that has been implicit in everything we have said so far about costs ...: Costs are always costs to someone. The cost of obtaining an education usually means the cost to the student. But it could mean the cost to the student's parents, which is not hte same. Or, if that student's admission entailed the rejection of some other applicant, it could even mean the cost to Julian (who was refused admission) of Marsha's obtaining entrance to the first-year class. Those costs will all be different. A great deal of fruitless argument about the "true cost" of things stems from a failure to recognize that only actions have costs, and that actions can entail different costs for different people. (p. 68)
So if you ask me "what does the Mayo Clinic cost?" or "what does St. Cloud Hospital cost?" I have to first ask you "whose cost is it, and for what action?" If you say "cost to Mayo of providing a clinic," we can then provide an answer. But if we ask "cost to the government (or its public option health plan) of putting Jane Doe in Mayo for a heart transplant", it's entirely different. They have different goals. And the reasons Mayo or St. Cloud Hospital want to build world class facilities are not just due to cost minimization; for example, SCH has a board of directors that have religious and community goals. It builds necessarily a different institution than Mayo.

Government-run health care means government goals. It usurps the goals of those institutions by changing the rationing mechanism. The price system, in contrast, allows those institutions to pursue their own goals. For those who would like to keep the American health care system in its current form (without saying it's perfect, with the possibility of reform but not transformation), this supply argument is very powerful, and we need to hear it more. That point will make us less likely to borrow much from the Canadian or British systems.

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It must be the water 

I had to come early to campus yesterday to cover a class for a colleague traveling. Early means about 7am, which everyone will tell you isn't prime time for me. It was raining heavily in St. Cloud at that time, and because of construction on campus they have me parking in a temporary lot with a temporary pass. The pass has to hang off my mirror, and it's big so that I can't leave it up while I drive. In my haste to a) get to class, b) get an umbrella over my head, and c) get out of the rain, I forgot to hang the pass yesterday. I blame lack of coffee.

It rained hard much of the day. We have had leaks in our building, and since we're on the top floor we get a fair bit of standing water; it's been twenty years since we've had any serious renovations of Stewart Hall. An old leak reappeared yesterday.

When I get back to the car, there's a parking ticket on my car. The ticket is in an envelope into which you're supposed to put your money. The envelope has water that I pour out. The ticket inside is waterproof; the ink is as legible as if it was sunny and 80 degrees.

I admired that, but I wonder: If you can make my damn parking ticket waterproof, why can't you keep water out of my classrooms and offices? What are this university's values? Is campus security more concerned about getting its $10 than the campus maintenance staff is about water in my rooms? Whose experience do we care about? Who's the customer of this campus? Who cares about them?

What you do well says something about your values.

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Tuesday, July 14, 2009

Party of the Rich..........................Democrats! 

For too long the mainstream media has parroted the Democrat Party mantra that the Republicans are the party of the rich. Bubble burst - false. While there are a few large Republican donors (Austins, Taylor and Cummins), according to this report, most of the largest donors to political causes are the Democrats.

What is very discouraging is many of these Democrat donors are businessmen (Opperman, Dayton clan, Burnet Realty, Pohlad, etc.). Why would those who have worked to build successful operations employing thousands of people support a party that wants to tax, control and blame others? It just seems counter to the mindset and skills required to make an organization successful. Guilt? Power? I don't know.

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Student research finds 98% of his faculty are Democrats 

Students are encouraged to think critically. So one student at the University of Oregon decided to do so, and inquired about the political affiliation of his journalism professors. That was not the kind of critical thinking his professors liked. The Christian Science Monitor gave the student, Dan Lawton, an opportunity to write about the experience:

The University of Oregon (UO), where I study journalism, invested millions annually in a diversity program that explicitly included "political affiliation" as a component. Yet, out of the 111 registered Oregon voters in the departments of journalism, law, political science, economics, and sociology, there were only two registered Republicans.

A number of conservative students told me they felt Republican ideas were frequently caricatured and rarely presented fairly. Did the dearth of conservative professors on campus and apparent marginalization of ideas on the right belie the university's commitment to providing a marketplace of ideas?

In my column, published in the campus newspaper The Oregon Daily Emerald June 1, I suggested that such a disparity hurt UO. I argued that the lifeblood of higher education was subjecting students to diverse viewpoints and the university needed to work on attracting more conservative professors.

I also suggested that students working on right-leaning ideas may have difficulty finding faculty mentors. I couldn't imagine, for instance, that journalism that supported the Iraq war or gun rights would be met with much enthusiasm.

What I didn't realize is that journalism that examined the dominance of liberal ideas on campus would be addressed with hostility.

A professor who confronted me declared that he was "personally offended" by my column. He railed that his political viewpoints never affected his teaching and suggested that if I wanted a faculty with Republicans I should have attended a university in the South. "If you like conservatism you can certainly attend the University of Texas and you can walk past the statue of Jefferson Davis everyday on your way to class," he wrote in an e-mail.

I was shocked by such a comment, which seemed an attempt to link Republicans with racist orthodoxy. When I wrote back expressing my offense, he neither apologized nor clarified his remarks.

Instead, he reiterated them on the record. Was such a brazen expression of partisanship representative of the faculty as a whole? I decided to speak with him in person in the hope of finding common ground.

He was eager to chat, and after five minutes our dialogue bloomed into a lively discussion. As we hammered away at the issue, one of his colleagues with whom he shared an office grew visibly agitated. Then, while I was in mid-sentence, she exploded.

"You think you're so [expletive] cute with your little column," she told me. "I read your piece and all you want is attention. You're just like Bill O'Reilly. You just want to get up on your [expletive] soapbox and have people look at you."

From the disgust with which she attacked me, you would have thought I had advocated Nazism. She quickly grew so emotional that she had to leave the room. But before she departed, she stood over me and screamed.

"You understand that my column was basically a prophesy," I shot back. I had suggested right-leaning ideas weren't welcome on campus and in response the faculty had tied my viewpoints to racism and addressed me with profanity-laced insults.

Lawton blogs, and from it I was able to find the "diversity plan" that Oregon signed on to in 2006. In relevant part:
As members of the University community, we take it upon ourselves to protect and enhance all intellectual discourse and to discharge the obligations such investigation requires of us. To that end, we should constantly work to make ourselves more adept at understanding how race, ethnicity, national origin or citizenship, gender, religious affiliation or background, sexual orientation, gender identity, economic class or status, political affiliation or belief, and ability or disability affect the way we live and learn, so that we are better able to respond to intolerance and prejudice, which violate our purpose and mission. (italics added)
I can't say I've ever done an exhaustive search of diversity plans, but I think it's fair to say it's rather rare to find political affiliation in the list of protections. But if Oregon has opened that door, Mr. Lawton seems well within his rights to walk through it and ask "do we really support this which we put in our plan?"

One may find, of course, that all 109 non-GOP say "oh, but my politics never influence my teaching!" For any individual faculty member, that may be true. But faculty meetings and classrooms are two different places. The meetings determine curriculum, distribution of scholarships, and chatter about students that could lead to that odd phrase in a reference letter. A student would be reasonably concerned that being openly conservative is detrimental to his place in a graduate journalism program.

Lawton's blog includes some responses from other students and faculty, including the identity of the journalism prof who equates conservative with Confederate. One hopes for a dean or provost with the courage to hold the diversity plan before the professor and ask for an explanation of his behavior. I won't hold my breath.


Quit yer job 

And the government will give you a house.
President Barack Obama is mulling new ways to delay foreclosure for jobless homeowners who are unable to keep up with monthly payments, an administration official said on Monday.

The official told Reuters it was reasonable for policymakers to consider options for loan forbearance -- allowing borrowers to delay, defer or skip payments -- that are more effective than those currently available in the private sector.

The number of failing home loans has been climbing for three years as risky borrowers have defaulted on their easy-to-get loans, property values have sunk and the unemployment rate has climbed.

But the official said the idea, which is still evolving, was difficult from a policy perspective and carries potential hazards. It could help more people struggling with economic difficulty, but it also could create perverse incentives that distort the housing market, said the official, who did not want to speak on the record about internal administration debates.

The official said such a program would be in keeping with other measures to help workers who have lost jobs in the current recession.
This is on top of free college, subsidized health care, extended benefits by time and dollars. And if your house is more underwater than before, they've got a program for that too.

Look, it could be worse. You could try buying temp jobs in New Hampshire.

H/T: Casey Mulligan.

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Paying more for someone else's better Minnesota 

The Tax Foundation has calculated the total effective marginal tax rate on the top income earner (over $1 million for a married couple; $800k for a single) by state, if the Obama health care plan for a surtax comes to fruition. Minnesota comes ninth on the list, with a total tax (income, Medicare, health surtax, and state income tax) at 52%. That means that the one millionth dollar earned by a Minnesotan would be 52% government and 48% citizen, the person who worked to get that last dollar.

Had gubernatorial candidate Tom Bakk had his way, that rate would be 53.35%, pulling within .05% of Vermont for seventh place. It would have been more expensive to be a millionaire in Minnesota than New York City or Washington D.C. South Dakota, by the way, would have a top rate of 44.88%.

Meanwhile, President Obama is telling Ghanaian people that a 20% skim for government is no place where business wants to invest. From your mouth to Dane Smith's ear, Mr. President!

(For more on effective marginal rates, see Kotlikoff and Rapson [2006].)

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Is everyone too big to fail? 

Think about the potential collapse of CIT Group right now. It got $2.3 billion in TARP money but now has an overhang of debt service that it might not be able to meet. Part of its claim to fame is a large minority and female lending operation. And now it wants to play the "small business" card.

A collapse would ripple across the �small and medium-sized businesses who rely on CIT to operate -- to pay their vendors, ship goods to their customers and make their payroll,� the New York-based lender said in internal documents obtained by Bloomberg News that make the case for its importance to the U.S. economy. CIT spokesman Curt Ritter declined to comment on the documents.

CIT executives spoke with regulators during the past two days, according to a person familiar with the talks, after its bonds and shares tumbled on concern that the Federal Deposit Insurance Corp. won�t allow the lender into its bond-guarantee program created last year to unfreeze debt markets.
The proper course of action here will be to find a merger (they've hired a reputable law firm to assist already) and for the government to monitor the situation but not interfere. It would sound confidence in the financial system and would be a win for the Geithner Treasury. But alas it appears Treasury is pushing the panic button, mindful that it bailed out GMAC. Of course, the latter has ties to a new union-owned business. So if you hear today someone from the Congressional Black Caucus speaking about CIT and minority owners, you'll have found the connection they are making to get the same political deal GMAC did.

It appears that it's FDIC and Ms Bair that are arguing for tough love, at least according to John Carney. I'm in the middle of House of Cards right now, and the similarities to the Bear Stearns collapse -- the markdown of credit ratings, the drying up of short-term lending to CIT -- are scarily familiar. And they point up once again the problems of the current regulatory regime that Minneapolis Fed President Gary Stern pointed up in a recent speech. (Square brackets indicate where I've spelled out abbreviations Stern uses.)
Just as we should not rely exclusively, or excessively, on [supervision and regulation], I do not think that imposing an FDICIA-type resolution regime on systemically important nonbank financial institutions will correct as much of the TBTF ["too-big-to-fail"] problem as some observers anticipate. To be sure, society will be better off if policymakers create a resolution framework more tailored to large financial institutions, in particular one that allows operating the firms outside of a commercial bankruptcy regime once they have been deemed insolvent. This regime would take the central bank out of rescuing and, as far as the public is concerned, �running� firms like AIG. That is a substantial benefit. And this regime does make it easier to impose losses on uninsured creditors if policymakers desire that outcome.

But I am skeptical that this regime will actually lead to greater imposition of losses on these creditors in practice. Indeed, we wrote our book precisely because we did not think that FDICIA put creditors at banks viewed as TBTF at sufficient risk of loss. We thought that when push came to shove, policymakers would invoke the systemic risk exception and support creditors well beyond what a least-cost test would dictate. We thought this outcome would occur because policymakers view such support as an effective way to limit spillovers. I don�t think a new resolution regime will eliminate those spillovers (or at least not the preponderance of them), and so I expect that a new regime will not, by itself, put an end to the support we have seen over the last 20 months.
Wasn't the Geithner Treasury supposed to have come up with a solution to all this? The cost of delay is rising. And since it appears Geithner has pushed Bair and other TBTF worriers aside, hang the cost of this next bailout squarely on the Obama Administration.

UPDATE: Simon Johnson wonders if campaign contributions had anything to do with it:

The decision therefore largely comes down to the administration. On this front, the lack of strong connections between CIT�s CEO and senior Treasury officials looks like a weakness. CIT seems to sit at the edge of the charmed circle, with regard to meetings, shared social engagements, and intellectual entanglements. This is a close call, but I think it is just on the outside of the circle � in the sense that with the overall financial market situation more stable, the GM bankruptcy well-managed relative to expectations, and other credit support programs still in place, the balance of official opinion will tilt against CIT.

So then it all comes down to political donations. At least in terms of what is in the public record, Mr. Peek has not been overly generous, but he did give money to John McCain � and not to any Democrats. If this is in fact the limit of his recent contributions, I think you know the outcome.

You're only too big to fail if you pay.

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Monday, July 13, 2009

What he said 

What we want is an independent Federal Reserve that won't be kow-towed by politics. The fact is that there's no way a new, Congressionally audited Federal Reserve could ever be more independent of Congress. That's just impossible. Even if some Congressmen have principled objections to the way the institution has handled itself during the crisis, that's doesn't describe the motivations of the whole body, which just wants to expand its power.

If you want a Fed that will stand up to Congress -- not print money every time Congressmen want to spend it -- then the last thing that makes sense is to make the Fed more answerable to Legislative branch.

Source. See prior posts here and here.


Does MN government spending buck the trend? 

At Division of Labor, Frank Stephenson points to a graph from the Economist, which tries to make the point that state governments are not spending enough. Scott Beaulier adds that "The scale on the Y-axis is suspect and implicitly makes positive state budget spending [growth] look like the desirable, normal outcome!" Well, one will claim, particularly if one is a DFL legislator, that you haven't fixed this for inflation. So I thought I would, just for Minnesota. (Source data.)
This is not just for state level spending but for ALL levels of government spending except federal. So if there's a shift between state and local, the effect is a wash. Had The Economist graph been adjusted to inflation, I think the pictures would be similar.

As a share of state GDP, sub-national government spending has stayed between 18-21% since 1992, and the DFL-passed spending bills are estimated to put that number a bit above 20% in the next biennium. Worth noting is that the unallotment planned by Governor Pawlenty represents only a half of a percent decline in that number. The graph below assumes no compensating changes by local governments or school districts in driving up taxes to replace lost revenue from state government. State real GDP is forecast to rise by 2.4% in 2010 and 3.8% in 2011.

It is normal for that number to rise during a recession, as government spending doesn't tend to fall as much as GDP when recessions happen. But to argue, as many do, that we're somehow starving government in Minnesota is not borne out by the data. Real spending still rises even with unallotment, though more in line with the restricted spending in the first years of the Pawlenty Administration than the 3.5-4% per year wishes of the DFL. I don't recall seeing people dying in our hospitals or our kids getting stupid then.

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Sunday, July 12, 2009

Where Are the Western Feminists? 

Seems a Saudi women's rights lady was planning a holiday on the coast in Bahrain with her friends. Slight problem - the border guard would not let her leave Saudi Arabia - why? She had her passport but NO male "guardian" to escort her.

As Ed Morrissey states so well in Hotair, women in Saudi Arabia are some of the most repressed women on the planet. They cannot drive, their education is severely restricted, they cannot vote - rights? Forgetaboudit! They are required to have a male (father, husband and even son) give them approval for most any activity.

The woman, Wajeha al-Huwaider, has been fighting for women's rights for years. Her work has been documented in a book ,The Next Founders: Voices of Democracy in the Middle East. Ms. al-Huwaider is a light in a very dark tunnel. (Let's hope the result is a republic, that is a representative government run by the Rule of Law where the same law applied to all citizens. While we preach "democracy" we are not a democracy, we are a republic, developed with the Rule of Law as the base.)

Where are the women in the UN who scream about women's rights? Where is NOW? Nowhere.


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Obamas, Again - Ok for me (Michelle) but not Thee 

Is a pattern developing? Previously I posted on this phenomenon of one standard for the Obamas, another for the rest of us. Here is another one: Michelle Obama's shopping in Paris.

In France, the vast majority of stores must remain closed on Sundays - an old law, for sure but nevertheless, a law. But when in Paris, when Parisians were barred from Sunday shopping, Michelle Obama wanted to spend time with her daughters, Sasha and Malia, at a very upscale boutique. Fine. I'll even grant that there may have been scheduling conflicts. But, the American Embassy in France made a call days in advance so Michelle and her daughters could shop privately, against the law on Sunday, June 8. Hmmmm?

Above (written 7/7/09 but not posted) incident is not as rare as one would think.

Update - Sunday, July 12 - again, Michelle Obama and her "OK for me but not for thee." It appears that during their trip to Russia, Michelle Obama was carrying a leather purse retailing for $5950 from Italian designer, VBH. But wait, "Not true," says the White House, "it was a patent leather imitation selling for only $875." Excuse me - $6000 or $875??? Just how many of us can afford either level of that kind of luxury? Royalty??? Can you imagine what the press would have done had Sarah Palin purchased a $6000 or even an $875 purse? Hypocrisy, thy name is mainstream western media.

How often are we going to see this pattern of "ok for me but not for thee?" So far, we only know about a few of these but are there more? Where is our press?

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Friday, July 10, 2009


In case you wanted to see what I was doing, here's a link to the conference, and to a short writeup from the Groong network. During the early 1990s when I was first developing an interest in post-Soviet Armenia, Groong was one of those news mailing lists that were all the rage at the time. Most are gone, but Groong keeps keeping on. Better than this website, which actually used a picture of one of my colleagues.

Readers of the write-up might wonder why I'd support household income supports as a free-marketer. I'm much more political economy oriented than a more pure economic line of thought. The difficult election last spring in Armenia (I discussed here) in my view left scars, and it would be unwise to risk the current political peace that has given a pretty good-looking government under PM Sargsyan some space to guide through the crisis. The amount of shock to the system from the Russian collapse can't be overstated; it's like the relationship between the USA and Puerto Rico.

The followup article on the person discussing my remarks, Central Bank of Armenia deputy governor Vache Gabrielyan, would make it seem like we disagree. Actually we don't. My remarks included a statement that it would be wise for Armenia to think about diversifying the circle of countries with whom it trades. There's little doubt in my mind that Vache is right that the relationship between Armenia and Russia will always be special, and unlikely they would soon cease to be Armenia's #1 trade partner. But that's not a reason to not to try to diversify -- a point I think he said as well.

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Thursday, July 09, 2009

Time out in Armenia 

We have finished the conference, and now I have a short time to pack before heading back to the airport. There is a Swedish soccer club in the hotel, and seeing all of them kind of makes me feel like I'm still in Minnesota, and it makes me a bit homesick (which is weird, because I love being in Armenia very much.) At any rate, I may post something more after this, but after about 3pm Minnesota time you won't hear from me again this week. When I get home, Mrs. S and I celebrate our anniversary. Thanks for reading.

UPDATE: At the airport, and the soccer team is here. I now realize what else was odd about this. I don't think I'd ever seen Africans in Armenia before. This team must be a youth team. I think we have parents with some of them.

Also got to see the archaeological site at Dvin -- Armenia's medieval capital -- last night on a chance run-in with some people I know. So packing was fast and sleeping was none. Someone else took the pictures, so I will have to wait for her to send them to me.


Wednesday, July 08, 2009

Won't get rid of me yet 

One nice thing about state budget troubles -- it encourages early retirement packages. I'm not old enough for this package yet, though, so SCSU will still have to put up with me. On the other hand, bummer on the timing of this:
In a resounding defeat for ousted University of Colorado professor Ward Churchill, a judge ruled Tuesday not only against his request for reinstatement at CU but that he deserves no financial compensation for having been fired from the school nearly two years ago.

The ruling from Chief Denver District Judge Larry Naves was in seemingly stunning contrast to a jury�s verdict from the civil trial Churchill brought against the school earlier this year.

At the conclusion of the 3�-week-long trial in April, six jurors decided that CU had unlawfully stripped Churchill of his job for expressing his political beliefs in a controversial essay about the Sept. 11 terrorist attacks, in which he compared victims in the World Trade Center to a Nazi architect of the Holocaust.

Naves threw out the jury�s determination that the school unlawfully retaliated against Churchill for expressing his First Amendment rights �as a matter of law,� stating in his 42-page ruling that the CU regents have absolute immunity from lawsuits in their roles as �administrative officials performing functions analogous to those of judges and prosecutors.�
In short, he's through at CU, gets no money, has his jury ruling overturned. But chances are we haven't heard the last from ol' Ward. �Ward Churchill is a tough guy, and he�s used to adversity,� says his lawyer. He should try getting used to finding a job. Preferably out of academia.

He should have stuck around and waited for early retirement.

UPDATE: According to Pirate Ballerina, he may have to compensate legal costs to the university. Want to make sure we note Jim Paine's vigilance at PB for all your Churchill news.


The devil's in the non-TARP 

I feel like I fawn over this website a bit in my posts, but Keith Hennessey does a great service in costing out all of the bailout (so far). It confirms a couple of points I've tried to make. First, the part that angered many voters last fall -- the bailout of banks directly, through what became the Capital Purchase Program -- has paid back $.87 on the dollar. In a perverse way, the bait-and-switch of the Obama administration with its focus on executive pay and other interferences in the banks probably increased the return on that bit of TARP. ("Perverse" insofar as if you wanted to help them and really worried about their finances, you wouldn't want to incentivize them to pay back quickly.)

Hennessey puts some data in perspective. The expected loss on the whole shooting match -- the foreclosure rescue plan, which is going to cost $50 billion but hasn't spent a dime yet; the $40 billion for GM and Chrysler, which doesn't include the screwing of creditors; -- comes out to about $138 billion. This is less than half of what we're spending on Fannie and Freddie.
CBO estimates that the cost to the taxpayers of the failure of the GSE�s, Fannie Mae and Freddie Mac, will be $384 B. That is 2.4 times larger than all the other TARP and non-TARP costs (shown here, and excluding the Fed) combined. Here�s the Budget Committee Republican staff�s Budget Bulletin:
CBO estimated that the federal government immediately absorbed a loss of $248 billion for the book of business the GSEs had in September 2008. To maintain an active mortgage market, the federal government is continuing to operate the GSEs, whose new commitments entered into after September 2008 would lose an estimated $136 billion over the 2009-2019 period according to CBO.
To be fair, the Fan/Fred die was cast many years ago, and there's bipartisan blame to share around. But I would hope someone in Bill O'Reilly's office digs that fact up and replays the Barney Frank interview, and then muses on having this same congressman helping to fix the current mess. Sorry I'll have to miss that -- someone tape it for me, please!


The U.S. press is bad, until you hear all the others 

If you think the press is bad in the US, you should watch an Armenian press conference. I just did at the end of the formal part of this conference. Almost everyone in this conference has said pretty much the same thing: we're in a deep recession, led by a collapse in construction that was the product largely of private money. The government is getting help from foreign aid to deal with the collapse in budget receipts thanks to a 9.5% forecasted decline in GDP according to the IMF.

You then hear all the plans from the government on what to do next. The Prime Minister yesterday was supposed to give a ten minute welcoming statement to us and instead lays out a 45 minute policy speech (as a member of the organization that developed the conference, I have to say we all were tickled.) So what gets covered? "We expect the recession to get worse." (Which is twisting his words, actually.)

A minister presents a paper discussing three scenarios -- bad, worse, awful. All that the press covers is "awful".

The press conference begins with a question to the IMF representative "How bad will it be?" It ends with a question "how can we afford to get out of this recession?" A focus on the negative, a lack of depth. I was standing with an American journalist and asked for an impression. "You hear what they are doing. They can only lead with bad news."

I've been at my share of American press conferences. I've had bad things to say about them, too. But it was many times better than this one. And according to an Armenian businessman, these negative reports are "hurting our economy." Where have I heard that before?

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Tuesday, July 07, 2009

What Is Missing? Dads 

This article by Katie Powalski of the Orlando Sentinel, published in the St. Paul Pioneer Press (PP) talks about a survey by Babytalk Magazine. In summary, Katie's article states that "Babytalk Mag. found many married women feel it might sometimes be easier to go the mommy route, alone." Key reasons for their conclusions included: The idea of not fighting with a partner over the best way to raise a child; not having the chore of keeping up a healthy marriage (69%); not dealing with in-laws (30%). According to Ms Powalski, single moms agree, with two-thirds of unmarried moms feeling it would be harder to be a parent if there were a man in the house.

I tracked other information related to the survey. Powalski's article was a bit selective in what it emphasize. Ignored in the PP/Sentinel article is the following statement from the survey: " a whopping 81% of unmarried moms also agreed that "marriage is a sacred institution" and that "a child needs two parents." And 64% admitted that they "wish they were married." Other key points were omitted, including the fact that a number of the people interviewed were in long-term, live-in relationships with the father of their child. The filter process was at work.

My husband and I just saw the movie, Up., a delightful story about a curmudgeon who takes a fantastic adventure with a young boy whose father is missing. Without spoiling the plot, it is quite apparent that the boy wants a man in his life.

I have done it all: Career, postponed first marriage, had a son, divorced, remarried 11 years after the divorce. During my "single parent" stage (of 12 years or so), I did everything I could to provide my son with male models (our family was out of state, his dad moved to the east coast, but our son did visit him): Doctors, Boy Scouts, Big Brother, karate, male teachers. Kids, boys in particular, need men in their lives because they do NOT need to emulate females. I was very fortunate, my son's step-dad provided that visible male role model that he (and all kids) needed. My second husband was there for most of my son's high school years, college, and now, career.

My conclusion on the PP/Sentinel article is that it focused far too much on the mom - it's the kids who need to be the focus. Survey after survey find that kids simply do better with dad in the house.

KING ADDS: Mrs. S and I saw Up between my trips, and loved it. If you are a father of a son with whom you have a less-than-full relationship, watch this movie and get your resolve Up.

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Faster, Johnny! Spend faster! 

One talk here was by the fine Russian economist Lev Freinkman. In Armenia, when Russia sneezes, Armenia gets pneumonia. So there was a lot of focus on his thoughts, and he was more positive. But he made this point that the Putin-Medvedev stimulus has been slow to be spent. This seems a common refrain these days. So, because they will spend more in the second half of the year, Russia will get better, goes the thinking. As if expectations never matter at all.

So I had to smile at Michael Goldfarb this evening:

New York Times reporter Nelson Schwartz finds the French are doing a better job of spending stimulus money than their counterparts in Washington. It's a fascinating story of how bureaucrats who've perfected the art of government waste got an extra $34 billion to fritter away, but Schwartz focuses on the rather paltry $100 million devoted to restoring the even more extravagant state-funded projects of pre-revolutionary France. He also hints at some anecdotal evidence that the money is having an impact.

The Washington Post did a more thorough job on the details of the French stimulus back in January. It's a mix of infrastructure spending, cash payments, and tax write-offs. But at just $34 billion the French stimulus is small potatoes compared to the $787 billion Democrats plan to spend. So the French have been able to waste less money faster. And they're arrogant about it.

But the question is, is it more or less arrogant than an administration talking about doing it again?


The dangers of conference collaboration 

It's the same in academics as in politics. When you decide to write up a conference, you mostly need money. Whomever gives you money usually wants to control the program, either by picking your speakers or putting themselves somehow into the conference.

So sure enough, when I saw on the program this morning that the conference has six cosponsors, I predicted the conference would be long. And indeed it was. If you were affiliated with a sponsoring group, you had a half hour to make your presentations and nobody interrupted you with a card for "time remaining" (a common thing at these conferences, if you're not familiar -- "5 minutes"; "2 minutes"; "time's up"; "for the love of God STOP!!!") On the other hand if you are not with one, you get the cards. A friend of mine from Macedonia presented a very interesting piece of work on the similarities between the countries, but off he went.

One of the organizers told me that a sponsor brought a flag to display. Flags at an economics conference. You'd be right to think that unusual. Now three sponsors were the IMF, the World Bank and the UN. I'd see one of them with a flag, sure. But it was not them. It was a bank. I'll guess they didn't get TARP money.

He who pays the piper waves the flag.

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Monday, July 06, 2009

Debt-free: good for you, but for the economy? 

While having dinner at the Marriott across the parking lot from Ruzyne airport (nice hotel, by the way, including meeting a group of Canadian Armenians on their way to mission in Armenia and a Czech hotel worker who studied at UM-Duluth) I read this article in the Atlantic on Moldova.

Earlier this year, The Banker, a respected British financial journal, ranked Moldova fifth out of 184 countries for economic stability in recession times, according to the 25 indicators used to compile its World Financial Health Index for 2009. Moldovans complained to me about corruption, the ruling Communists, and the president, but the kreezis ("financial crisis" - kb) did not come up in conversation unless I mentioned it.

Moldova lacks not only the energy reserves that characterize three of the four countries ahead of it on the index (Norway, Russia, and Kuwait), but also most of the attributes now associated with developed (read: leveraged) economies: among others, the prevalence of credit, state debt and debt interest payments, and domestic bank loans. The Moldovan government largely lives within its (admittedly limited) means; Moldovan banks, on the whole, exhibit what a year ago would have been diagnosed as risible, out-of-touch conservatism, lending modestly (35 percent of GDP, as compared with 230 percent in the United States) and maintaining a high capital-to-assets ratio. In fact, the country hardly has a banking or financial sector at all.

�We never think of going to the bank for a loan or using a credit card,� Roman told me. �We operate on a cash-only system here.�
I'm on my way to a conference about the "kreezis" in Armenia, which has had a rougher time in the last six months. Yet it is also characterized by relatively low lending. If anything, the government has basically force-fed a mortgage market on the banking system, but it's not much more than Moldova's. And in comparison to the rest of the CIS, Moldova has low GDP per capita. It's unclear to me why the author wants to make Moldova out to be some great place just because it lives on a cash-only economy.

It's hard to build capital when debt is taboo. And it's hard to build an economy when capital is relatively scarce. It'll be a good question to ask: Would Armenians rather be in Moldova?

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Shovel ready vs environmentally friendly 

We can have our recovery just as soon as the enviros tell us it's OK.
The $6.6 million 28th Avenue corridor project would increase future traffic flow in the southwest corner of Waite Park by connecting Minnesota Highway 23 and a realigned Stearns County Road 137, Waite Park City Engineer Terry Wotzka said.

�It�s a project of regional significance,� he said. �We�re ready to go on it.�

But Federal Highway Administration officials have not cleared the project to receive nearly $2.8 million in federal stimulus funding because of concerns about its potential environmental impact.

...Waite Park officials almost lost the stimulus funding last month, when a Minnesota Department of Transportation deadline to clear the necessary bureaucratic hurdles passed.

But some political arm-twisting convinced state transportation officials to give Waite Park more time. Now, they have until July 25 to satisfy federal officials that the project is worth the environmental impact of putting the extension through about 3.5 acres of wetlands, said Doug Hecox, spokesman for the Federal Highway Administration.

Environmental reviews are rigorous because they have to be,� he said. �Whether it receives (stimulus) money or not, we only have one shot to make sure we do it right.�
Highlight added. Why does it have to be? What is it about 3.5 acres of wetlands that is worth however many jobs this project was supposed to "create or save"? We had Sheriff Joe Biden up here a few months ago. Can't he move a little red tape for us? He's supposed to be on the job.

This is a perfectly good example of how the regulatory state supported by the Democrats ties itself in knots. And how, when faced by a revolt from its base supporters in the Greenocracy, the more mundane things like jobs and cars fall aside.

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Buyer's remorse, part N+1 

Colin Powell worries that President Barack Obama is trying to tackle too many big issues at one time and he offers this advice: take a hard look at costs and consider the additional red tape that will be created.

"The right answer is, 'Give me a government that works,'" the former secretary of state said in a television interview to be aired Sunday. "Keep it as small as possible," added Powell, who said he has spoken recently with Obama and stays in touch with him. Powell, a Republican, endorsed Obama last year over the GOP presidential nominee, Arizona Sen. John McCain.
Obama wants to overhaul the health care system and take on climate change while also helping the country emerge from the recession.
"I think one of the cautions that has to be given to the president � and I've talked to some of his people about this � is that you can't have so many things on the table that you can't absorb it all. And we can't pay for it all," Powell said.
"And I never would have believed that we would have budgets that are running into the multi-trillions of dollars, and we are amassing a huge, huge national debt that, if we don't pay for in our lifetime, our kids and grandkids and great grandchildren will have to pay for it."
Noted to me by a friend while I'm traveling. Why do we always think that boyfriend or girlfriend will be different with us than they were with the last five failed relationships they've had (and told you about)? It remains a surprise to me that anyone at all is shocked by this.

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Saturday, July 04, 2009

When the Government Runs the Store..... 

This story in the Seattle Times indicates the dilemma when governments try to run retail operations.

Appears the state run liquor operations installed a new distribution software program that controls the distribution of liquor throughout the state. Shortly after the problem was detected June 8, the distribution center was filling only 65 to 70 percent of the orders it was receiving. Now deliveries are up to 80% but for business owners, it just looks bad when you are simply out of stock of key beverages.

Those of you in the restaurant business know how critical it is to have product on hand for your customers. In this situation, either the software was improperly tested or possibly not capable of handling the load. However, 18,000 cases of anything is not much to track. (Just think of your credit card transactions, hundreds of millions of items to track a day, for decades.)

Life has become more complex and legislatures everywhere keep looking for one more angle to raise taxes. I teach MIS (Mgt. Info. Sys.) If a private sector supplier had run into this programming problem, you can bet it would have been fixed by now. Why? Two reasons: Relationships with the customers (restaurants) and profit, both motivators to fix what gets broken. Because public employees rarely can be fired, the incentive to fix problems is not the same as the private sector.

Think about this: Washington is a relatively small populated state. Ask yourself if you really want the federal government to take over even more of your health care, energy supplies, manufacturing, etc.


Friday, July 03, 2009

A happy Independence Day to you 

It's nice to be back in St. Cloud. I was expected to leave for another conference tomorrow overseas, and when I called to suggest I would not fly on the Fourth of July there was a momentary pause on the other side. "Oh, that's your Independence Day, isn't it?!?" Yes, and I'd like to have it with my family. (I'll have to skip fireworks, as I leave early Sunday.)

(UPDATE: Yes, this means NARN will be a replay tomorrow. However, if you really must hear me, David and Margaret will be live tomorrow and I'll check in with my monthly macroeconomic update, just after 10am.)

Let me second Janet's request that we fly the flag. Let's celebrate our heritage, and our families, and let's pray for the freedom that we celebrate that day extends to all men and women. I'm going to wear a flag pin while speaking overseas next week. Had I one with an Iranian flag and a green ribbon on it, I'd wear it instead. But an American flag will do, and it does well as long as we continue to recognize why oppressed people prefer to see our flag come over a hill than anyone else's.

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Does priceless mean infinite price? 

Just wonderin', as have several people who've emailed me about this cover. There were a stack of these in my office this AM. There's a suggestion that I should now work for free instead. I prefer the infinite price idea to justify my constant complaint of being underpaid and overworked.

Thanks to our local communications staff who put that together; I wasn't as enthused about the cover as others, but it seems to have gone over well. I am deeply grateful to this university that has given me plenty of opportunities to be successful and in my corner when I am. When I do write critically of the school on this blog, I hope readers understand it's the disappointment one feels when a loved one doesn't meet the ideal vision one has of it. It has long been populated with wonderful people, most of whom are friendly even when in deep disagreement. One can hardly ask for more.

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This graph shows the unemployment rate compared to the stress test economic scenarios on a quarterly basis as provided by the regulators to the banks (no link).

This is a quarterly forecast: the Unemployment Rate in Q2 was higher than the "more adverse" scenario.

Note also that the unemployment rate has already exceeded the peak of the "baseline scenario".
From Calculated Risk, hat tip to Henry Blodget, who correctly adds:
The larger story here, unfortunately, is that the Obama administration continues to blow its credibility on the economy. By being too optimistic from the get-go, the administration is opening the door for critics and opponents who are already arguing that the Obama plan has failed.
The only surplus this administration has is in hubris. See my posts here and here for more on overselling your forecast.

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Mrs. S writes 

...about the gold standard. I was surprised she decided to do this topic, and when she sent me a draft of it I was quite surprised how much she had learned.
But after World War I came the Great Depression. Country after country abandoned gold standard after the Depression. During World War II the allies held a meeting at Bretton Woods, N.H., to establish that the dollar was fixed to gold and everyone fixed to dollar. But that ended in 1971 because the United States didn�t want to play by those rules either.

I asked [St. John's economics professor Louis] Johnston if the gold standard made sense for today, and he argued that it would not. �Governments have no better sense of what a currency �ought� to be than anyone else, so there is no case to give a government a monopoly in this area. Let markets determine what the value of a currency will be.�

It turns out the value of our currency is not assured by government promising to convert money to gold. Instead, it depends on government doing those things that a gold standard would require. If we have the gold standard and no discipline, it fails. If we have the discipline, we don�t need a gold standard to tell us what our dollar will be worth 20 years from now.

Do we have that discipline now?

See also, as always, the Concise Encyclopedia of Economics.

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Flying OUR Flag 

On Independence Day, July Fourth, Americans fly more American flags than possibly any other national holiday. Why? I believe at some level we know how fortunate we are to live in a country with the ideals and subsequent freedoms that we have. At times, we take them for granted, but underneath, I hope we realize that we, indeed, are very fortunate.

Yesterday we replaced our tattered flag with a bright, new one. With the flag came an insert covering all aspects of flying our flag - everything from: Displaying the flag properly, folding it correctly, respecting it, and basic facts. You can go here for details.

We must remember that freedom isn't free, people have died for our freedom, and because of our ideals, our flag is recognized around the world. Some will debate as to why, but the most telling reason is the answer to this question: "If all nations of the world had open immigration, where would people choose to go? The USA." Our flag represents freedom for everyone, everywhere.

Happy Independence Day

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Thursday, July 02, 2009

What a Canada Day 

I have some experience with other countries' independence day celebrations, but Canada's was different. A day of celebration, downtown Vancouver was full of families with flags and Maple leaf tattoos. I saw several military platoons around the waterfront. The fireworks left much to be desired but the people were in a good and festive mood.

I have to say I ignored Vancouver as a destination wrongly. It is a great city. Sort of Euro but without the attitude. Talking to Canadians reveals people who are curious about America but not envious or dismissive of our country. It had been 13 years since I last was here. I won't wait so long next time.

Wednesday, July 01, 2009

Independence Day Tea Parties 

For all who will be around for the Fourth of July, our Independence Day, this is an invitation to participate in a Tea Party, hopefully near you. Those in the Twin City Metro area are welcome to join all independent minded people at the Capitol in St. Paul to celebrate our freedoms between the hours of 3 and 6. Afterwards, depending on your schedule, you may want to stay for great fireworks.

For those of you outside the metro area, go here to find a location that hopefully is near you.

Happy Birthday, USA!

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The Canadian job? 

Did someone pinch about 17,500 ounces of gold from the Canadian mint?
The Royal Canadian Mint is missing about C$18.8 million ($16.2 million) worth of gold and has not ruled out theft even as it continues to try to solve the mystery, according to an official on Tuesday.

An independent review by of the Mint's records found a discrepancy of 17,500 troy ounces of gold -- worth about C$18.8 million at current prices -- between the Mint's accounting and its physical count of precious metal done at the end of 2008.

The Mint refines 5.4 million troy ounces of gold a year, turning raw metal and scrap jewelry into 400-ounce bars.

The bars that the Mint makes out of scrap gold weigh about 27.5 pounds (12.5 kilos). It's a bit heavy to sneak out under a skirt or coat. And you'd have to take out 44 such bars for a theft that large. Mint officials say they had a lot of gold come in when prices rose above US$1000 an ounce. Hard to believe they'd end up with an explanation "we were swamped."

The mint's management has been told by government it will not get any bonuses until they find the gold. That should be reassuring. Wouldn't firing someone be the normal thing?

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Suppose you wanted to spend more? 

Canada spends about $3600 per person on health care. That's about half what the US spends, and some think we need to spend less and be more Canadian. Well, some Canadians want to be more American, too.
"Any wait time was an enormous frustration for me and also pain. I just couldn't live my life the way I wanted to," says Canadian patient Christine Crossman, who was told she could wait up to a year for an MRI after injuring her hip during an exercise class. Warned she would have to wait for the scan, and then wait even longer for surgery, Crossman opted for a private clinic.

As the Obama administration prepares to launch its legislative effort to create a national health care system, many experts on both sides of the debate site Canada as a successful model.

But the Canadian system is not without its problems. Critics lament the shortage of doctors as patients flood the system, resulting in long waits for some treatment.

"No question, it was worth the money," said Crossman, who paid several hundred dollars and waited just a few days.
So without denial of any service to anyone else, Ms. Crossman spends $700 to get her treatment. She upgraded her health care, of her own volition, with her own resources. I would not have thought anyone could object. But,
"Private clinics don't produce one new doctor, nurse, or specialist. All they do it take the existing ones out of the public system, make wait times longer for everybody else while people who can pay more and more and more money jump the queue for health care services," said Natalie Mehra, member of the Ontario Health Coalition.

..."One can understand that this is evolving and a mix of private and public seems to be favorable in some context. On the other hand, we need to be really careful that we're not treating health care the way we treat a value meal at McDonalds," Dr. Michael Orsini from the University of Ottawa told FOX News.
Ms. Mehra is economically illiterate. An increase in demand for doctors -- by paying them more -- will increase their income and induce young, smart people into medicine who now go elsewhere. (That is, if the medical profession allows medical schools to admit however many they want.) The fixed-pie thinking of Mehra -- if you get one more doctor in your private clinic I get one less doctor in my public medical factory line -- is a static thinking that fails to understand incentives. If you would just allow them to work, you could have as many doctors as you'd like.

But Dr. Orsini thinks there's something entirely different about health care. That appears to be the dominant thinking in Canadian public policy. They should talk to more Ms. Crossmans. Health care is a scarce good: People economize by seeking value for their dollar. The only reason someone would not want a patient to seek value is that that person -- the doctor, the government, the bureaucracy -- doesn't want to cede the power of being able to make that choice for them.

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