Saturday, January 31, 2009

Senator Gregg for Commerce ?

The AFP (Agence France Presse) reports that Senator Gregg of New Hampshire is President Obama's leading choice for Secretary of Commerce. (You might recall that the President's first choice, Governor Richardson of New Mexico, withdrew.) Senator Gregg is a solid conservative, and his appointment would signal that the President is serious about reaching across the aisle. Moreover, the appointment of someone with the gravitas and intellect of Senator Gregg would also signal a larger role of the Department of Commerce that the Department has had in prior administrations.

http://www.google.com/hostednews/afp/article/ALeqM5gVBeA2BLjrnA8hfmXNCVzk2KZDvw

Note, however, that the appointment of Senator Gregg would leave a senate seat vacant, and the Democratic Governor of New Hampshire would be entitled to appoint Senator Gregg's successor pending the 2010 election.

Obama Repeals Order That Informed Workers of Their Rights


The Chicago Tribune reports that President Obama has signed an Executive Order reversing a Bush Administration rule that required businesses to notify workers of certain rights under Federal Law. At issue is a worker's right of a refund of compulsory dues payments that the Union wishes to use for political advocacy, and not collective bargaining. President Bush recognized the right in Executive Order 13201, which required certain federal contractors to post a notice that workers possess such rights.



Here is Executive Order 13201 and order that, among other things, repeals it:







Here is the story in the Tribune:




In Communications Workers v. Beck, 487 U.S. 35 (1988) the Supreme Court, in an opinion by Justice Brennan, held that Federal Labor Law requires Unions to provide pro-rata refunds of compulsory dues to employees who object to particular political expenditures. Hence, a liberal democrat union member can receive such a refund if his union endorses Ronald Reagan and attempts to use compulsory dues to fund an advertising campaign in his favor. Beck relied by analogy upon earlier decisions that read similar statutes narrowly to avoid First Amendment questions that would be raised by state ation compelling individuals to support political causes to which they objected. Indeed, in Abood v. Detroit Board of Education, for instance, the Court held unanimously that Michigan could not compell public employees to pay union dues that were then used for political purposes. The Abood Court quoted the admonition of Thomas Jefferson that the state ought not coerce individuals into supporting ideas they abhor.

According to Jefferson: "to compel a man to furnish contributions of money for the propagation of opinions which he disbelieves, is sinful and tyrannical.'"

Of course, Abood itself only applies in cases in which there is state action compelling unionization, thus bringing the Bill of Rights into play. Decisions such as Beck read similar principles into Federal Labor Law that applies to bargaining agreements between purely private enterprises and their employees.

You might not know any of this from the Tribune's story (or any others that I could find). Instead, the current version of the Tribune story describes the order by stating that it would

"Reverse a Bush administration order requiring federal contractors to post notice that workers can limit financial support of unions serving as their exclusive bargaining representatives."

Given what was involved in Beck, this seems like an incomplete description of the impact of President Obama's order. Failure to support a union's political speech and electioneering is not the same thing as "limit[ing] financial support of unions." Even under the now repealed Executive Order 13201, employees in agency shops could be compelled to support the Union's collective bargaining activities, even if they were not members of the union.

Friday, January 30, 2009

FTC and Whole Foods in Settlement Talks

CNN reports that the Federal Trade Commission has temporarily suspended its challenge to the Whole Foods/Wild Oats Merger so that the parties may engage in settlement talks.

Antitrust officianados will recall that the FTC challenged the merger in 2007. The Commission did NOT claim that the merger would substantially lessen competition in the market for retail groceries. Instead, it argued that the relevant market was much narrower, i.e., "premium, natural and organic supermarkets." The district court rejected the Commission's efforts to enjoin the transaction, and the parties consumated it. The D.C. Circuit reversed, albeit in an decision that produced three opinions, one of them dissenting.

Here is a link to the story on CNN.

http://money.cnn.com/news/newsfeeds/articles/djf500/200901291319DOWJONESDJONLINE000746_FORTUNE5.htm

"Corruption" in Higher Education ?















Today's Chronicle of Higher Education Blog reports that lobbying expenditures by higher education ranked 7th among various American industries. The Blog references a study by OpenSecrets.Org.


"Pharmaceuticals/Health Products" ranked first, followed by "Electric Utilities," "Insurance," and "Oil and Gas."


Higher Education edged out "T.V., Movies and Music" (8th), as well as "Securities and Investment" (10th) and Telecommunications Services and Equipment (17th). Note the correlation between the extent of regulation and intervention, on the one hand, and an industry's place on the list. Of course, a correlation does not tell us which direction causation runs. Perhaps government's interest in regulating an industry is exogenous, in which case fear of regulation drives lobbying expenses. On the other hand, perhaps such regulation --- which can protect firms from competition --- is a function of lobbying expenditures in the first place, with the result that better organized industries obtain more industry-friendly regulation as a result of their lobbying efforts.
Many in higher education see such lobbying as a form or symptom of "corruption." Indeed, much campaign finance "reform" is premised upon the notion that any money in politics is "corrupting" or "corrosive" or creates the "appearance" of "corruption" of "corrosion." I wonder if these same academics reject the financial benefits that accrue to their own institutions as a result of such lobbying efforts ?

Biden Praise For GOP ?/ Obama Playing Catch-up ?

Even Joe Biden admits that the stimulus bill passed by the House needs lots of work. Biden says that the bill will "get better" in the Senate, in part because of Republican suggestions, which he says will lead to additional tax cuts and more infrastructure spending (hopefully at the expense of some of the non-investment spending identified in an earlier post. Is Biden admitting that Republicans are playing a constructive role here by opposing the bill in it's current form?

http://www.cnbc.com/id/28917177

UPDATE:

Gordon Smith, over at Conglomerate, agrees with Peggy Noonan's assertion that President Obama should have taken Republican objections to the House stimulus bill more seriously. Instead of simply meeting with the Republicans, Noonan says, Obama should have also listened to them. Smith opines that President Obama's failure to do so was a "big whiff" that could set the tone for the Obama administration. Perhaps Biden's comments suggest that the Obama administration is now playing catch-up, working to make changes in the package to meet Republican objections.

Here is the link to Gordon's post, which in turn links to Noonan's latest.

http://www.theconglomerate.org/2009/01/the-final-bill-was-privately-agreed-by-most-and-publicly-conceded-by-many-to-be-a-big-messy-largely-.html

http://www.typepad.com/services/trackback/6a00d8345157d569e201053703b876970c

Sister Super Bowl Picks Steelers

The Chicago Tribune profiles a local nun who has been predicting the outcome of the Super Bowl for 23 years now, and has a 17-6 record. I wonder if she has a fantasy football team.

Here is the story: "Divine Prediction For the Super Bowl."

http://www.chicagotribune.com/features/lifestyle/chi-0129-psychic-nunjan29,0,5824918.story

For some reason this reminds me of a line spoke by Coach Dan Devine in the movie "Rudy:" http://www.imdb.com/title/tt0108002/ "Our Lady of Victory, Pray for us."

Sister Jean predicts a 23-17 Steeler victory. I agree with her prediction, though I am biased, since the Steeler's Coach, Mike Tomlin, is a William and Mary graduate. Tomlin played wide receiver for the Tribe and averaged over 20 yards per catch. His rise to coaching, including his years at William and Mary, is discussed here:

http://www.nytimes.com/2009/01/26/sports/football/26tomlin.html?ref=sports

Thursday, January 29, 2009

F-22 Stimulus ?



Economic Stimulus ?



This morning Martin Feldstein, who chaired President Reagan's Council of Economic Advisors, weighs in on the version of the stimulus package the House passed yesterday. Among other things, Feldstein argues that some of the debt-financed federal spending will simply displace debt-financed spending at the state level, an argument I made in my previous post. He also argues that spending on infrastructure projects, e.g., roads and bridges, won't take place until it is too late to counteract the current downturn. Moreover, he contends that temporary tax cuts will provide little stimulus, since consumers will simply save the cuts, knowing that they will have to pay higher taxes two years from now. While savings is generally a good thing, Keynesians at least believe in the "paradox of thrift," i.e., if everyone saves too much, aggregate demand will suffer, and the economy will spiral into recession, unless the government borrows the savings and spends it. By contrast, it is said, so-called Classical economists believed that "too much" savings would reduce interest rates and therefore increase investment and long term economic growth, pursuant to "Say's Law."


How, then, would Feldstein stimulate the economy ? He proposes rapid increases in military procurement and construction of military bases. The F-22 Raptor, pictured above, costs over $100 million apiece. Instead of spending billions on mass transit programs, perhaps we can buy another 50 Raptors ? Feldstein does not mention Raptors; he may have in mind more mundane items such as ammunition and spare parts depleted during the wars in Iraq and Afghanistan.


Note that Feldstein's conclusion regarding the non-efficacy of temporary tax cuts follows naturally from Milton Friedman's "Permanent Income Theory of Consumption." See Milton Friedman, A Theory of the Consumption Function (Princeton 1957). According to Friedman, individuals make their consumption decision based upon their expectation of their long term "permanent income" and not simply the income they expect in a particular year. Hence, a temporary cut in tax rates, for instance, will have only a modest impact upon consumption, because the cut will have only a modest impact on the consumer's expected income over time. By contrast, a permanent reduction in tax rates will, other things being equal have a larger impact on consumption.


Here is Feldstein's op-ed, from the Washington Post, entitled: "The $800 Billion mistake."




Query whether Feldstein's implicit adoption of Friedman's hypothesis undermines part of his argument. For instance, while infrastructure projects might not literally create jobs within, say, the next six months, they may create the expectation of jobs (and profits for the firms that perform them) and thus increase the permanent income for thousands of individuals, thus increasing consumption expenditures sooner than one might otherwise think.

Keynes Cometh (Sort of)/What Are We Stimulating ?


The so-called "stimulus package" has passed the House of Representatives. All Republicans and 11 Democrats voted "nay." The package consists of over $800 Billion in new spending over the next two years. The result will be a budget deficit in the neighborhood over $1 trillion for 2009. That's around 8 percent of our GDP, more than twice that of Italy. By contrast, the much-maligned deficits during the Reagan administration peaked at 6 percent of GDP and fell to 3 percent by the end of his Presidency. All at a time when we were winning the Cold War.
 
Why did fiscally-conservative Democrats and all Republicans vote against this stimulus package and thus defy a President with a 68 percent approval rating ? One need look no further than an article in today's Wall Street Journal, containing details of some of the spending in the package passed today. According to the WSJ, the package includes $1 billion for Amtrak, $2 Billion for childcare subsidies, $150 million for the Smithsonian, $7 Billion for modernizing Federal building and facilities, and $6 Billion for Mass Transit programs, to name only some of the programs least likely to serve as engines of job creation and long run economic growth. The WSJ also points out that the bill provides only $30 billion for much-ballyhooed maintenance of roads and bridges. Here is the WSJ article, which makes for depressing reading.

There is, of course, the dictum of Lord Keynes (whose photo appears above) to the effect that Government can stimulate the economy (and "create jobs") by borrowing unused private savings and paying individuals to dig large holes in the ground one day and to fill them up the next. If you accept the Keynesian framework, then you might "hold your nose" and support the package, on the ground that it's better than nothing and will stabilize an economy that is contracting.
 
However, even if one accepts the Keynesian framework, there are at least two powerful objections to these portions of the package just passed by the House. First, some such spending may simply displace debt-based spending that would otherwise have occurred anyway. For instance, individual states are perfectly free to issue debt to support mass transit projects but may choose not to do so if this package passes. Second, and perhaps more fundamentally, the House of Representatives and the President have missed a golden opportunity to include spending that will BOTH stimulate the economy in the short run AND enhance the nation's long run productivity at the same time. When economic historians write the history of this past couple of decades, they will likely conclude that Americans lived high on the hog, consuming far more than we produced, with the gap financed by borrowing from China, Japan and the Middle East, who purchased government securities and bonds backed by mortgages and credit card receivables. The only way to reverse this trend is to reduce our consumption significantly (an unlikely scenario) or increase our productivity significantly. Theoretically, government can help increase our productivity by making real and smart investments in things like research and development, infrastructure, and education. (Government can also help by simply enforcing rights of property and contract and limiting its regulation to combating externalities.) Subsidies for Amtrak, refurbishing federal buildings, more money for childcare, or additional expenditures on failing educational systems likely won't do the trick.






Wednesday, January 28, 2009

Lost in Space Robot Actor Passes Away

Last week the actor who played the Robot in "Lost in Space" passed away. Rest in Peace, Mr. Bob May. The Chicago Tribune reports the story here:



For those of you too young to recall, Lost in Space was a black and white science fiction series that ran for three seasons between 1965 and 1968. The story purportedly began in 1997, when the family Robinson, Dr. Smith and Major West were launched to colonize a planet orbiting Alpha Centauri, the second closest star to our solar system. Because of sabotage by Dr. Smith, the ship went off course, with the result that the group was "lost in space" as it were.

Those of you old enough to have watched Lost in Space or reruns thereof will recall the critical role the Robot played in the show, particularly as a foil to the cowardly Dr. Smith, whose rivalry with the Robot often provided comic relief.

The Robot's famous lines included: "Warning, Warning" and "Danger Will Robinson."

The Robot was formidable at times, capable of detecting approaching storms and other threats and shooting some sort of electrical rays from its claws. The Robot was also quite vulnerable, since removal of a small power pack attached to its exeterior would disable it completely.
Believe it or not, one can purchase life-size replicas of the Robot at the following site, which also includes several photos of the robot from the original series.


Flat Hat Resists More In State Students

Today's William and Mary Flat Hat contains two editorials, one by the paper itself, criticizing proposed legislation that would require eighty percent of William and Mary's undergraduates to be Virginia residents. Currently the figure is sixty-five percent at William and Mary and fifty percent at VMI. As both editorials point out, the proposal would, if enacted, reduce the quality of the College's student body while at the same time depriving the College of revenue generated by charging out of state tuition to the students the legislation would exclude. The timing of this proposal is particularly ironic, given that the Commonwealth has cut the College's budget by more than $10 million in the past 18 months and ordered the College not to raise tuition to offset mid-year cuts. Indeed, in the third item posted below, the Flat Hat called for an increase in the number of out-of-state students at William and Mary, to offset state budget cuts and ceilings on in-state tuition.

Here are the editorials in question.

http://flathatnews.com/content/69722/great-value-comes-price

http://flathatnews.com/content/69716/more-staters-will-only-water-down-college

http://flathatnews.com/content/69692/college-must-go-beyond-virginia