Friday, December 30, 2011
Thursday, December 29, 2011
As previously explained on this blog, China is the world's largest emitter of greenhouse gasses, even though its overall GDP is half or less than that of the USA. As also explained in that post, some project that China's production of greenhouse gasses will double by 2030. Almost a year ago this blog also called attention to China's under-reliance on nuclear power for electricity generation. As explained then, coal-fired plants account for a disproportionate share of China's electricity compared to various Western nations and Japan. Indeed, as also reported then, China, with the second largest economy in the world, ranks 9th in nuclear generation of electricity, behind such nations as Canada, Ukraine and South Korea. At the same, the post reported, China enthusiastically embraces nuclear power for military purposes, e.g., the propulsion of submarines. The post concluded as follows:
Tuesday, December 27, 2011
The story also helps illustrate the downside of over-reaching Federal regulation. As the story notes, there is also a federal minimum wage, currently equal to $7.25 per hour. (There is an exception for the first 90 days of employment for juveniles --- $4.25 per hour --- so long as employment of the juvenile does not displace an adult worker.) That wage edict applies to any employee working in interstate commerce or working for a firm, no matter how local, with $500,000 in gross sales. Thus, federal law creates a wage floor, even in those states (and there are five) with no minimum wage whatsoever or those with minimum wages lower than that set by the national government. As a result, states that wish to compete with other states for labor and capital by eliminating their minimum wages or, for instance, adopting differential wages for youth greater than 90 days, will find such a policy thwarted by the "one-size fits all" federal floor on wages, a floor that applies equally in Manhattan, New York and Moscow, Idaho. Competitive federalism suffers when the national government asserts a regulatory monopoly over matters properly left to the states.
Saturday, December 24, 2011
|A New Furnace ........|
In honor of the upcoming marathon, here are the ten best lines from the movie, in this blogger's estimation.
1. You used up all the glue on purpose! (Mr. Parker)
2. Nottafinga! (Mr. Parker)
3. Some men are Baptists, others Catholics; my father was an Oldsmobile man. (Ralphie as an adult) (Narrating)
4. Fra-gee-lay. That must be Italian. (Mr. Parker)
5. Uh, I think that says FRAGILE, dear. (Mrs. Parker)
10. Hey Dad! I bet you never guess what I got you for Christmas! (Ralphie)
A new furnace? (Mr. Parker)
He he, that's a good one Dad! (Ralphie).
Friday, December 23, 2011
|Not So Much|
California has not been doing well in this competitive struggle as of late. Once considered a land of opportunity, the state experienced a net outflow of citizens in 2008. The state's unemployment rate currently stands at over 11 percent, one of the highest in the nation. Will's Op-ed calls attention to part of California's problem, namely, a plethora of unduly burdensome regulations that inhibit the creation and expansion of businesses and thus job creation. Will focuses on the plight of CKE, Inc., which owns the Hardees and Carl's Jr. fast food chains. Each such restaurant creates 25 jobs, Will reports. According to Will, these and other "California restaurants are governed by 57 categories of regulations." Moreover, Will goes on to explain that:
Sept. 1 at Maryland
Sept. 8 Lafayette
Sept. 15 at Towson *
Sept. 22 Delaware *
Sept. 29 Georgia State (Family Weekend) *
Oct. 6 at Penn
Oct. 13 at James Madison *
Oct. 27 Maine (Homecoming) *
Nov. 3 at New Hampshire *
Nov. 10 at Old Dominion *
Nov. 17 Richmond *
Wednesday, December 21, 2011
Monday, December 19, 2011
Wednesday, December 14, 2011
If This is Fairness ......
Zelizer's history is a little out of date. Despite the rhetoric, 1930s Democrats in fact fought for a vision of state-enforced cartelization, including the cartelization of labor, that, when implemented, both deepened and lengthend the Depression. (Many 1930s Democrats also fought to defend Segregation, hardly an example of "fairness to the middle class." Though it should also be noted that, during post-New Deal World War II, FDR issued executive orders banning racial discrimination in factories making weapons and ammunition for the military.) That vision first came to fruition in the 1933 National Industrial Recovery Act ("NIRA"), the centerpiece of FDR's New Deal. The NIRA encouraged industries to proposed so-called "Codes of Fair Competition," which, if approved by the President, would have the binding force of law. Such codes imposed express price fixing, output limitations, barriers to entry and/or various practices that facilitated anticompetitive collusion. Moreover, industries could only obtain approval of such codes if they agreed to pay minimum wages and allowed their employees to join unions --- labor cartels --- that then bargained for higher wages.
Of course, the Supreme Court unanimously invalidated the NIRA in Schechter Poultry Corp. et al. v. United States, reversing the criminal conviction of a small corporation and several of its middle class owners. (The Roosevelt Administration had indicted the defendants on 60 counts of violating an NIRA code. Violations included failure to pay minimum wages (that is, employing too many workers) and --- get this --- allowing customers to select individual chickens for purchase, contrary to the code requirement that the defendants and their rivals sell chickens in blocks.) Ironically, the Supreme Court would later declare so-called "block booking" (requiring customers to purchase an entire package of movies, for instance, unlawful per se under Section 1 of the Sherman Act.) The Court unanimously held that the Act was an unconstitutional delegation of authority to the Executive Branch and that application of the statute to the defendants exceeded the scope of Congress's power under the Commerce Clause. After the decision, Justice Brandeis sought out a lawyer from the Department of Justice and asked him to convey a message to FDR:
“This is the end of this business of centralization, and I want you to go back and tell the president that we're not going to let this government centralize everything."
Of course, proponents of centralization (both then and now) claim that expanding the power of the National Government will somehow encourage economic recovery and thus full employment. But the data show otherwise. For instance, President Obama's first Chair of the Council of Economic Advisors, Christina Romer, concluded that the NIRA raised prices and wages and thus slowed economic recovery. See Christina D. Romer, Why Did Prices Rise in the 1930s?, 59 J. Econ. Hist. 167, 187-93, 197 (1999). More recently, two UCLA economists, Harold Cole and Lee Ohanian, concluded that various New Deal policies, particularly those that artificially raised wages, both deepened and lengthened the Great Depression. Indeed, these scholars conclude that FDR's New Deal prolonged the Depression by seven years. Finally, in 1999, this blogger argued that 1930s state and federal policies that raised wages likely exacerbated the Depression, by thwarting the process of ordinary macro-economic adjustment. See Alan J. Meese, Will, Judgment and Economic Liberty: Mr. Justice Souter and the Mistranslation of Liberty, 41 William and Mary L. Rev. 3, 48-49 (1999). (I hasten to add that unlike Drs. Romer, Cole and Ohanian, this blogger's arguments were purely theoretical and did not rest upon the sort of sophisticated econometric analysis deployed by these economists.) That is to say, FDR's policies deprived millions of middle class or potentially middle class Americans access to employment, hardly a "fair" result or exemplar of "moral capitalism." Indeed, the NIRA, with its coercive limits on price, wages and output was hardly capitalism, moral or otherwise
To be sure, some New Deal policies ameliorated the plight of unemployed Americans. For instance, the Work Progress Administration ("WPA") provided jobs for millions working on parks and various forms of public infrastructure. Ironically, many who took such jobs were unemployed because other New Deal policies, such as the NIRA and NLRA, eliminated jobs these individuals might otherwise have obtained. As Richard Epstein has observed, coercive interference with free labor markets and resulting unemployment often gives rise to offsetting policies designed to ameliorate the human cost of such misguided policies. Speaking of the New Deal, Epstein has observed:
Hopefully today's Democrats have a different conception of "fairness to the middle class" that that which apparently animated the NIRA, NLRA and similar New Deal policies.
Sunday, December 11, 2011
A recent essay in the New York Times entitled "The End of Tenure" reviews two books critical of modern higher education. The complaints summarized by the review are familiar, and they include:
1) Higher education costs too much, and tuition keeps rising faster than inflation.
2) Tenured faculty at some elite universities do not teach enough, leaving much of the teaching to be done by adjuncts and other faculty who are not on the tenure track.
3) Student debt is rising by leaps and bounds and is unsustainable.
4) Faculty conduct research that is of little practical relevance, a claim that, if true, implies that the social cost of additional teaching by such faculty members is relatively low.
No doubt at least some of these claims are exaggerated. For instance, recent data also published in the Times suggests that horror stories about students graduating with, say, $100,000 in debt are few and far between. Indeed, these data show that 90 percent of students who borrowed to obtain their bachelor's degree graduated with less than $40,000 in debt. Moreover, some of those individuals who emerged with more than $40,000 in debt presumably chose to attend private universities instead of less expensive public institutions, thus undermining somewhat any complaint about resulting debt burdens. (A North Carolina resident who could have attended UNC Chapel Hill but matriculates at Wake Forest or Duke instead should not be heard to complain about his or her resulting debt burden.) Also, the tuition announced by a college or university is merely a sticker price and does not reflect financial aid that schools provide in the form of discounts for students who demonstrate financial need and/or academic merit.
What though about the claim, implied by the very title of the essay, that the institution of academic tenure is partly responsible for these woes? This is not a new claim --- earlier this year a legal academic argued that proponents of academic tenure for law school faculty were insufficiently sensitive to the fact that the institution of tenure increases the cost of law school. Does the institution of academic tenure make college more expensive, reduce access to higher education and pump up student debt?
Certainly not. After all, eliminating tenure and the job security that tenure brings would make academic positions less attractive than before, with the result that schools would have to raise salaries to attract high quality faculty. Moreover, if eliminating tenure led to greater faculty turnover, schools would presumably incur additional costs searching for and replacing departing faculty. In short, other things being equal, eliminating tenure would increase college tuition, reduce access to college and further add to student indebtedness.
While the institution of academic tenure might have some shortcomings, any propensity to raise the cost of higher education is not one of them.
Saturday, December 10, 2011
2) During the same period, real manufacturing GDP grew over 18 percent in Right-to-Work states but just over 8 percent in other states.
Saturday, December 3, 2011
The article's argument falls wide of its intended mark. In any society, longevity depends upon any number of factors, of which the quality of health care is but one. Such factors include the prevalence of accidental death and homicide, the prevalence of unhealthy habits like smoking and excessive drinking, and cultural norms regarding diet and exercise. Indeed, according to one source, the 2008 homicide rate in the United States, 5.22/100,000, was more than ten times higher than that in Japan (.45/100,000), more than five times higher than in Spain (.91/100,000), and more than seven times higher than in Switzerland (.72/100,000). According to another source, America's per capita rate of death from automobile accidents is more than twice that of Japan and Spain and also larger than that of Switzerland as well. If, as seems likely, most victims of homicides and automobile accidents are significantly younger than the nation's average life expectancy, then such differences explain at least part of the gap between life expectancy in the United States and that in other countries. Any comparison of the outcomes produced by different health care systems would have to control for the numerous other independent variables that impact life expectancy.
Moreover, differences in accidental deaths and homicides also highlight another fallacy in the Daily Mail's argument, namely, the treatment of health care expenditures as an exogenous variable that "causes" death at particular ages. In fact, such causation may in many cases flow in the opposite direction. After all, many homicides and accidental deaths themselves result in significant health care expenditures. So do accidents and/or shootings and stabbings that do NOT result in death. Thus, any analysis seeking to isolate the impact of health care expenditures upon longevity, other things being equal, would have to treat health care expenditures as a variable driven in part by other independent variables. For all we know, such an analysis could conclude that the US Health Care System is more efficient than suggested by the Daily Mail's simplistic analysis.
Tuesday, November 29, 2011
Sorkin finds Jobs' failure to give more to charity "surprising," and also suggests that Jobs has received a sort of free pass not granted other super-rich individuals with meager giving records. As Sorkin puts it:
"But the lack of public philanthropy by Mr. Jobs --- long whispered about, but never said aloud raises some important questions about the way the public views business and business people at a time when some 'millionaires and billionaires' are criticized for not giving back enough while Mr. Jobs is lionized."
Sorkin points to Bill Gates, Warren Buffet and Sam Walton as billionaires who, unlike Jobs, have been criticized for not "giving back" significant parts of their personal fortune to society by making philanthropy a high priority.
Here are some thoughts on Sorkin's essay:
1. Sorkin does us a useful service by pointing out the double standard applied to billionaires on the question of philanthropy. Why criticize Warren Buffet or Sam Walton for miserly giving records, while leaving Jobs unscathed? Moreover, this blogger agrees with Sorkin that there IS such a double standard, that is, that some individuals, such as Jobs, somehow avoid public criticism for a perceived lack of charity while others with similar records come under fire.
2. However, identifying a double standard and thus concluding that the same standard should apply to all simply begs the following question: what should the standard be? Should billionaires feel obliged (albeit in some unenforceable way) to "give back" a large fraction of their after-tax wealth to charity? Is criticism directed at other billionaires fair? It's reasonably clear what Sorkin thinks, namely, that all billionaires, including Jobs, should feel some sense of obligation to "give back" significant portions of their personal fortunes to the rest of society, presumably in a way that benefits individuals with more modest financial means. At the same time, Sorkin does not expend much effort arguing this case, but instead seems to take as a given that such an obligation exists.
4. To be sure, society creates and enforces various background institutions and rules that help facilitate the creation and retention of wealth. Without property law and police protection, for instance, Sam Walton's Wal-Mart could not earn a profit buying and reselling products manufactured by others. Without the protection of copyright law, a form of property, Microsoft could not make several billion dollars per year selling its Windows operating system. As Nobel Laureates Ronald Coase and Friedrich Hayek both recognized, the "free market" in fact depends upon institutions of private property and contract law, both institutions backed by state force.
Still, while various forms of state action might be necessary to make the free enterprise system function, this does not mean that successful entrepreneurs or the companies they create owe some special obligation to share their wealth with others. After all, when it creates and supports various market-supporting institutions, the State is merely satisfying its most basic obligation under the social contract. Under that contract, individuals leave the state of nature and grant a portion of their natural liberty to the larger community. In return, the State creates and enforces property rights and rights in personal security, sometimes interfering with the liberty and property of those who would invade such property or security in the process. Such interference can include taxation that is necessary to support legitimate government activities, such as police forces, courts and the like, activities that facilitate the creation and operation of free markets and the wealth they produce. As James Madison explained in Federalist 10, government exists to protect liberty and property:
"The diversity in the faculties of men, from which the rights of property originate, is not less an insuperable obstacle to a uniformity of interests. The protection of these faculties is the first object of government. From the protection of different and unequal faculties of acquiring property, the possession of different degrees and kinds of property immediately result[.]."
In a free society premised on a Madisonian social contract, economic success does not oblige one to turn over a portion of one's wealth to the larger community. Wealthy individuals discharge their obligations to the State when they abide by general laws, including laws requiring the payment of taxes. Indeed, billionaires such as Mr. Jobs presumably paid far more to the State in taxes than the state expended to protect their property and personal security. Neither the State nor the larger community may invoke the satisfaction of its pre-existing obligation to protect liberty and property as justification for demanding even more.
5. Assertions that these billionaires have not done enough for society ignore the enormous contributions they have already made. Mr. Jobs did not find $8 billion in his backyard. Instead, he created and led a company that created numerous products that individuals chose to purchase voluntarily. No one was forced to purchase an I-Pad or I-Phone. Moreover, the $8 billion that Mr. Jobs amassed represents only a fraction of the value that Apple's products conferred on those who purchased them. (Because demand curves are downward sloping, we can assume that most individuals would have been willing to pay more than the market price for Apple's products.) Moreover, as already mentioned above, billionaires like Mr. Jobs and the companies they run pay far more in taxes than the State pays back to them; presumably the State redistributes what is left over to others. Admonishing individuals like Mr. Jobs to give even more to others almost seems like "piling on."
6. None of this is to say that NO billionaire owes a duty to "give back" a portion of his or her fortune to the rest of the community. Some may have obtained their fortunes unjustly, as when the State grants a firm a monopoly and thus the power to gouge consumers. Others may have religious beliefs that require them to share the wealth they have created with others. Finally, some may believe that a free society flourishes when institutions that are independent of government take on charitable responsibilities that government would otherwise assume. Indeed, as explained previously on this blog, some believe that a decentralized system of higher education, independent of the State, is essential for a free society to flourish. Such individuals may feel bound to create or support private charitable institutions. None of these considerations, however, establishes that billionaires have an obligation to "give back" simply because they have amassed a large fortune.
Tuesday, August 23, 2011
Friends report that the quake was also felt in Arlington, Virginia and Middleburg, Virginia.
Update number 2:
The Wall Street Journal reports that the quake was felt in Manhattan, New York.
Update number 3:
The U.S. Geological Survey reports that the quake registered 5.9, not 5.8 as initially reported. The quake was centered 4 miles SW of Mineral, Virginia, 4 miles SSE of Louisa, Virginia, and 41 miles NW of Richmond.
Update number 4:
CBS News reports that the White House and the Pentagon have been evacuated.
Update number 5:
The Chicago Tribune reports that the earthquake was felt in Toronto and Boston.
Sunday, August 21, 2011
The Supreme Court granted certiorari to answer following question:
Saturday, August 20, 2011
September 4, 6:00 PM @ University of Virginia
Septmber 10, 1:30 PM @ VMI
September 17, 7:00 vs New Haven
September 24, 7:00 PM vs James Madison
October 1, 6:00 PM vs Delaware
October 15 12:00 PM vs New Hampshire
October 22 3:30 PM vs Towson
November 5 1:00 PM @ Rhode Island
November 12 12:00 PM vs Old Dominion
November 19 12:00 PM @ Richmond
Thursday, August 4, 2011
1. The chart inexplicably omits over $500 Billion --- the forgone revenue attributable to the two year extension of the Bush tax cuts to which President Obama agreed after the 2008 mid-term elections. (See this story.) Indeed, President Obama's own former director of the Office and Management and Budget, Peter Orzag, advocated such an extension shortly after he left the Administration. Fallows does not explain why we should ignore this forgone revenue.
2. The chart is also misleading in a more fundamental sense. In short, the chart is a gerrymandered portrayal of factors that drive spending, revenue and thus the deficit and resulting debt. In particular, the chart focuses exclusively on the fiscal impact of new programs adopted during the Bush and Obama administrations, respectively. Thus, the chart entirely ignores the cost of existing programs, adopted during previous administrations which, taken together, cost far more than the various programs and tax cuts portrayed in the chart. Indeed, according to one source, the National Government spent $28 Trillion in 2002-2010 alone. During 2002-2009, Fallows claims, the Bush tax cuts deprived the National Government of $1.8 Trillion in revenue, a figure that rises to about $2 Trillion if one includes the forgone revenue attributable to the cuts which Congress extended, with President Obama's agreement, after the 2010 mid-term elections. Thus, the Bush tax cuts equal a whopping 7.1 percent of the expenditures by the National Government during the period in question and are hardly the driving force in the current budget deficit, projected to reach $1.5 Trillion, or 10 percent of GDP, in 2011.
3. The chart ignores all sorts of tax deductions and loopholes, adopted before 2002, that, like the Bush-era tax cuts, deprive the National Government of revenue. Examples include the home mortgage interest deduction (including the deduction for second homes) and the tax exemption for employer-provided health insurance. (The former reduces annual tax revenue by $100 Billion per year.) Inclusion of these potential sources of revenue in the Fallows/New York Times Chart would reduce even further the apparent contribution of the Bush-era tax cuts to the deficit.
4. Finally, the chart and any arguments based upon it ignore entirely the long run link between structural deficits and economic growth (or lack thereof), a link emphasized by John F. Kennedy in his 1962 speech to the Economic Club of New York. As explained in an earlier post on this blog, JFK argued that across the board tax cuts during an economic downturn were the best way to encourage investment, work effort and economic growth and thereby, in the longer run, reduce the budget deficit. In JFK's own words:
"The purpose of cutting taxes now is not to incur a budget deficit, but to achieve the more prosperous, expanding economy which can bring about a budget surplus."
Of course, JFK did not believe that tax cuts alone would ultimately lead to a budget surplus. He also advocated spending restraint, arguing that reliance on government expenditures to stimulate the economy would "demoralize our government and the economy" and that government should not "spend more than can be justified on grounds of national need or spent with maximum efficiency."
Thursday, July 28, 2011
Perhaps those who claim that the rate on US Debt is the benchmark for rates on private credit will now argue that the debt ceiling deadlock will REDUCE rates for private borrowing!!!
Tuesday, July 26, 2011
Might Become a Safer Bet Than The USA
2. But let us assume that, contrary to logic and common sense, failure to raise the debt ceiling somehow leads the United States to default on its debt obligations. Certainly such a default will reduce the creditworthiness of the government of the United States and thereby reduce creditor confidence in US debt. Ratings agencies like Moodys and Standard and Poors would downgrade their rating of US Debt Securities. As a result, the national government would have to pay higher interest rates on any new debt it might issue if Congress were to subsequently increase the debt ceiling.
This prediction does not withstand scrutiny. Less charitably, the statement is economic balderdash. Certainly Treasury Bonds currently provide the floor for other lending, for the simple reason that such securities are perceived as safer bets than all other investments, whether AAA-rated state bonds, unsecured credit card loans or car loans. However, if the United States government defaults, creditors, as rational actors, will no longer treat such bonds as the safest possible investment, with the result that US Government debt will, by definition, lose its status as the "floor for other lending." Instead, creditors will presumably identify a different debt security as the safest bet and thus the "floor for other lending." For instance, creditors might choose the debt of states like Virginia, which currently enjoys a $300 million budget surplus and a long-standing AAA bond rating, as a benchmark. Or, creditors could choose a "market basket" of the debt of several states and/or well-managed private firms. In any event, if the United States government defaults, profit-seeking creditors, who operate in a competive capital market, will continue to judge other debtors the old fashioned way, that is, by assessing the prospect that such borrowers will pay back the loan in question. Those who do not, that is, who charge rates higher than justified by the risk presented, will rapidly lose business to those who do. Moreover, those borrowers who, like the Commonwealth of Virginia and millions of ordinary Americans, manage their affairs wisely will be rewarded.
Sunday, July 3, 2011
Wednesday, June 29, 2011
"[T]he big difference is that the economic mess Obama inherited was the creation of some of the very policies that Romney now endorses, including low taxes on the wealthy and deregulation."
Apparently Dionne, like Labour in the 1970s, believes that we can tax and regulate our way to prosperity.
Nor does Dionne specify which "deregulation" led to the current economic downturn or, for that matter, document his claim that Romney, who was not a public official at the time, supported such deregulation. Finally, he does not mention that deregulation in both Britain and the United States in the early 1980s apparently helped produce sustained periods of economic growth in both countries or that President Obama's administration has sought to expand the power of cartelistic labor unions in so as to increase the cost of doing business in the United States and interfere with the process of competitive federalism.
This blogger suspects that Romney's message will have more resonance than Dionne cares to admit.