Wednesday's interesting reads

"Obama Denounces Ex-Pastor For 'Rants'" WSJ by Nick Timiraos and Jackie Calmes:

"Yet after weeks in which Mr. Wright's racially incendiary comments have roiled the Obama campaign, the minister's defense of himself in recent days -- and his dismissal of Sen. Obama's remarks as political calculations -- forced the candidate's action."

What Obama is thinking:

"Shut up, shut up, shut up!"

What Obama is saying:

"I am outraged by the comments that were made [by Wright] and saddened over the spectacle that we saw yesterday. You know, I have been a member of Trinity United Church of Christ since 1992. I have known Reverend Wright for almost 20 years. The person I saw yesterday was not the person that I met 20 years ago. His comments were not only divisive and destructive, but I believe that they end up giving comfort to those who prey on hate and I believe that they do not portray accurately the perspective of the black church. They certainly don’t portray accurately my values and beliefs. And if Reverend Wright thinks that that’s political posturing, as he put it, then he doesn’t know me very well. And based on his remarks yesterday, well, I may not know him as well as I thought either."

The whole Pastor Wright issues has had zero impact on my decision of who to vote for. I'm just surprised that, as a politician, it's taken Obama so long to actually and formally denounce the things Wright has said.

On another Obama note...

"Religion issue hurting Obama with Indiana cafe patrons" Reuters "Tales from the Trail" blog:

"Barack Obama can talk about his childhood years in Kansas and upbringing by his white Midwestern grandparents, but if voters at one small-town Indiana cafe are any indication, he has a long way to go to convince them he represents heartland America."

The post talks about how people are uncomfortable with Obama because his religious affiliations, either with Islam or with Christianity as taught by Jeremiah Wright, don't "sit well" with them, or, rather, don't represent them. This raises two problems for me. First, why do we feel the president needs to "represent" us in this way? Who is going to represent those Americans who are Jewish, Muslim, or Hindu? As soon as we begin to feel that a politician needs to represent us, we become a special interest of that politician. Isn't that kind of the problem with W. Bush and the neoconservatives? Because they played a large role in electing him, they also played a role in policymaking. This is also manifest in congressmen and women representing the interests of their home states and passing legislation that benefits the people of those states to the detriment of the other states (farm subsidies passed for the benefit of states like Iowa and my own Georgia come to mind; earmarks in general is another example).

"The New York Times Should Take Credit Where It’s Due" by Indur Goklany at Cato:

"In a piece by Jad Mouawad, Tuesday’s NY Times reports that Oil Price Rise Fails to Open Tap. He identifies a number of reasons for the lack of responsiveness on the supply side...

Surprisingly, in an otherwise decent article, absent from this report is the credit that is due to the New York Times itself (and like-minded entities) in their long-standing efforts decrying the search for oil and gas within the US. A search of the Times site for the words “editorial drilling oil gas”(sans quotes) over the past few years reveals a constant stream of editorials in the Times decrying efforts to drill for oil and gas...

And of course the NY Times has been in the forefront of opposition to any drilling in the Arctic National Wildlife Refuge based on the logic that it would supply only six months of US oil consumption while forever sullying the Wildlife Refuge (an arguable claim).

Using this logic we could shut down every farm in the U.S. — and the world — since no single farm provides more than a few hours’ worth of food, and food production is the single greatest threat to terrestrial and freshwater biodiversity worldwide.

This is not to say that drilling – or farming, for that matter — is acceptable everywhere, but reflexive opposition to energy production is not."

"A lawmaker is not a researcher" by Coby Loup at Flypaper (HT: Neal McCluskey with Cato):

"What’s surprising is that so many people continue to believe that these embarrassments stem from a failure of political will, rather than the inherent obstacles posed by, as the Post puts it, the “turbulent forces of politics, policy and public opinion.” We always think we’ll do better next time around, when our guys or gals are in office.

But lawmakers have proven again and again (and it’s only natural, given the dynamics of representative government) that the voices of constituents and interest groups are louder than the voice of science. For another great example of this, see Michael Pollan’s wildly-popular New York Times essay on how the Senate Select Committee on Nutrition was hijacked by the meat and dairy lobbies and consequently released “scientifically-based” nutrition guidelines that have proven remarkably wrong-headed and disastrously influential on our eating habits."

Again, special interests and the inherent structure of our representative government create all the wrong incentives for politicians. The answer is better politicians but fewer opportunities for politicians to exert influence (ie, smaller government).

"Cigarette Smuggling" by Walter Williams at Townhall (HT: Club for Growth):

"Tell me what's wrong in people wanting to wear a Swiss watch, having a drink, purchasing tea from a Dutch seller rather than an English seller, or cheap cigarettes from North Carolina rather than expensive ones from New York. People in government or those in pursuit of a do-good agenda think they know better and think they have a right to use government's brute force to hinder peaceable voluntary exchange...

The easy solution to cigarette smuggling, and its attendant activities, is to eliminate the confiscatory taxes. Unfortunately, for politicians and do-gooders, the attack on smokers is a moral crusade that sees only benefits and costs are irrelevant. Or as novelist C.S. Lewis put it, 'Of all tyrannies a tyranny sincerely exercised for the good of its victims may be the most oppressive.' "

This is where I begin to feel conflicted. As a Mormon, I'm opposed to several activies he mentioned (smoking, drinking, etc) that are being taxed or have been taxed or made illegal. However, the government trying to enforce these morals, again because a majority voted for them, to me at least, contradicts our doctrines of agency and choice and accountability. Instead of going to government and asking them to impose our morals on others, we should go to others directly and try to convince them directly ourselves. Mormons have an example of this in the Book of Mormon when chief judge (government official) and high priest (church official) Alma resigned from his position of chief judge so we could teach the people full-time (so to speak) in his position of high priest. It isn't inconceivable that he could have, in his position as chief judge, enacted laws that enforced the morals of the church.

Speaking of Mormons and government intervention, I saw this yesterday, though it's an older post...

"Faith of Our Fathers" by Timothy Egan on a NY Times opinion blog:

"And when the church set up a huge polygamous theocracy in the West, President James Buchanan was forced in the 1850s to send an army of 2,500 – nearly one-sixth of American forces – to uphold the law." [Emphasis added.]

I've obviously been thinking quite a bit about the ability of the majority to impose its will on a minority. I was recently debating the premise of limiting immigration here. My argument, which they refused to answer, came back to the question of whether a majority has the right to limit the freedoms of a minority. They kept coming back to the "illegality" of undocumented foreign workers, but to me that misses the point. I brought up instances from our history when discrimination and worse was made legal, such as slavery and Jim Crow laws, or gave a "what if" and asked what they would do if a supermajority decided to make their own religion illegal. I equated those to the majority limiting the freedoms of a minority simply because they disagree with them.

All of that reminds me of the issue of making polygamy illegal. Robyn said she’s heard this, but I did some research about the laws surrounding the legality of polygamy and basically they were instituted specifically with Mormons in mind. Effectively, just like some of our immigration laws, they were passed by the majority as a way to legally discriminate against the minority (and then cry that the minority deserves to be discriminated against because they break the law). I have a hard time with the imposition of the will of the majority on the minority simply because they have a majority. More democracy/majority rule isn’t necessarily a good thing.

Other than this, the NY Times article itself is still disgusting and blatantly biased.

"Is a Windfall Profits Tax Justified by Ability to Pay?" by Gerald Prante with the Tax Foundation (HT: Club for Growth):

"Yesterday, Democratic presidential candidate Hillary Clinton made the following statement in support of her windfall profits tax on oil companies to finance a temporary gas tax holiday:

'We will pay for it by imposing a windfall profits tax on the big oil companies. They sure can afford it.'

They can afford it? What does that even mean? A windfall profits tax will be borne almost entirely by the shareholders of the oil companies. Companies really have no "ability to pay" as their taxes are borne by individuals, which is where the true "ability to pay" lies...

If one truly feels that the current profits Exxon (and others) have made are excessive and unfair, then really the only fair tax would be to somehow tax those shareholders past and present that have truly benefited from those "excess" profits."

I've mentioned it before, I wish there was a way to not tax corporations themselves, but to somehow allow the tax liability to pass through to shareholders, similar to an S corp. It would get rid of any special tax treatment of certain industries (like big oil) and allow them to use that money for additional investment or the payment of dividends (so shareholders could pay for the tax on their share of the profits). Of course, dividends wouldn't be taxed separately. The biggest obstacle I can see is a logistical one: determing each shareholder's share of income would be an administrative nightmare.

"New Face, Yes, But With Ideas Dating To '30s" IBD op-ed by Thomas Sowell:

"One of the painful aspects of studying great catastrophes of the past is discovering how many times people were preoccupied with trivialities when they were teetering on the edge of doom. The demographics of the presidency are far less important than the momentous weight of responsibility that office carries.

Just the power to nominate federal judges to trial courts and appellate courts across the country, including the Supreme Court, can have an enormous impact for decades to come. There is no point feeling outraged by things done by federal judges if you vote on the basis of emotion for those who appoint them."

Tuesday's interesting reads

"Liberal Dilemma" by Andrew Roth at Club for Growth:

"A 67-year-old anti-trust law in Pennsylvania is preventing Wal-Mart from selling $4 generic drugs. Instead, over four dozen different drugs have to be sold for at least $9.

So...if you're a liberal, what side of the argument do you support? Do you defend Wal-Mart (God forbid) and repeal the law so that people can get their much-needed drugs at "an everyday" low price?

Or do you side with the mom-and-pop pharmacies that supposedly can't compete against the big, bad Wal-Mart?"

"Self-Parody: Pessimistic Bias in the Media" by Bryan Caplan at Econlog:

"I while back I argued that it's easy to detect media bias from headlines alone. A recent NYT piece on life expectancy makes my point for me better than I ever could. The facts: U.S. life expectancy for all income levels rose. The headline: "Gap in Life Expectancy Widens for the Nation."

What's next: "Glass is Half Empty, Experts Say"?"

The article says this:

"Life expectancy for the nation as a whole has increased, the researchers said, but affluent people have experienced greater gains, and this, in turn, has caused a widening gap."

And attributes some of the "widening" to this:

"Doctors can detect and treat many forms of cancer and heart disease because of advances in medical science and technology. People who are affluent and better educated are more likely to take advantage of these discoveries.

Smoking has declined more rapidly among people with greater education and income.

Lower-income people are more likely to live in unsafe neighborhoods, to engage in risky or unhealthy behavior and to eat unhealthy food."

To which Russ Roberts at Cafe Hayek says this:

"Does anyone think that rising life expectancy is really a birthright [as mentioned in the article]?

If you go sky-diving every week without a parachute or even with one, you don't live as long as the average. If you smoke a lot and eat too much, you might not live as long as the average"

"The Fed Must Strengthen the Dollar" WSJ op-ed by John Chapman:

"The bottom line is this: the Fed should bury its errant Phillips Curve framework, and cease attempts to fine-tune perfect balance between inflation and recession. It should halt further rate cuts and soon begin a series of interest rate increases.

As for the risk of further credit-market blow-ups, the Fed's new lending facilities and the discount window are more appropriate tools for case-by-case illiquidity issues than blunt interest-rate mechanisms.

Neither current market imbalances nor the longer-term threat posed by moral hazard can be eradicated easily. And the considerable fiscal challenges facing the U.S. economy are not the responsibility of the central bank. But inflation and an unstable dollar are mortal enemies of prosperity. With inflation, millions are burdened by cost-of-living increases, real profit contraction, capital decumulation, and an inability to easily make contracts, calculate entrepreneurially, or invest."

I'm opposed to anyone in any kind of government capacity trying to "fine tune" anything. Milton Friedman proposed that the Federal Reserve be abolished in favor of a mechanical increase in the quantity of money over time. (He probably said it in several places, but I heard it here.) Doing so would get people out of money creation and provide for a more stable supply.

"Photo Finish" WSJ editorial:

"The Supreme Court ruled yesterday that states can mandate photo identification at the polls without violating the Constitution. The ruling in Crawford v. Marion County Election Board is a big deal, and not merely because it continues a welcome trend on the Court of deferring to elected bodies."

This is the news.

"Those opposing the Indiana statute, including the ACLU, Acorn, the Brennan Center and other liberal activist groups argued that ID laws impose an undue burden and disenfranchise some voters. The petitioners argued that even though Indiana offers free photo ID to qualified voters, the documents needed to obtain an ID – such as a birth certificate – could require payment or be an inconvenience.

Justice John Paul Stevens, writing for the majority, replied that such burdens are limited to a small percentage of the population and are offset by the benefit of reducing fraud. Furthermore, he noted, the law accommodates indigent voters or anyone who shows up on Election Day without proper ID by allowing provisional ballots to be cast. Those votes are counted if the voter can produce valid identification within 10 days of the election."

This is some of the commentary. I don't have a problem with these voter ID laws. Admittedly, I don't know how bad voter fraud actually is. (John Fund, also with the WSJ believes it is. For example, he says: "In 1982, inspectors estimated as many as one in 10 ballots cast in Chicago during that year's race for governor to be fraudulent for various reasons, including votes by the dead...St. Louis, Mo., officials found that in 2006 over 1,000 addresses listed on its registrations didn't exist.) I don't, however, believe being required to go down to the DMV is an undue burden to obtain an ID.

To me, though, if obtaining an ID is that much of a burden, I think that is a problem. That is especially so if these are people who would like to drive but are unable to because of the pain of getting a license. This probably sounds cynical, but I'd rather have someone able to drive when they want to drive than vote when they want to vote. Granted, this is more of a theoretical argument because I'd bet that most people who want to drive will drive whether they have a license or not, but having one's own transportation is such a huge leap forward in standard of living, to me at least, it trumps the benefit of feeling good about yourself when you "let your your voice be heard". There are probably several things like this that people can do to help increase the standard of living for the poor.

To me the question is why is this such a burden to overcome? Generally, the poor tend to vote with a certain party because that party has chosen to make the redistribution of money from the rich to the poor one of its main planks. I've heard of a lot of these voter registration drives. I've also heard of vans picking up loads of people to bring them to the polling station. Maybe they aren't keen on having to add another step to the process of getting these people to vote. I guess I'm not sold on the virtue of the people who do this. I'm sure some are legitimately concerned , but I'm suspicious of their motives. Are they motivated by a desire to see people exercise their right to vote, regardless of who it is for, or are they motivated because the votes will likely be cast for those of a particular party?

Taken a step further, what if those doing the rounding up really believe that a vote for a candidate in that party is truly in the best interests of the person being rounded up: does that make it OK? On the way to the polling station, do they provide a balanced assessment of the issues? (My assumption is that they don't have a knowledge of the issues. If they did and still needed to be rounded up, implying they weren't going to go otherwise, did they care about the issues? If they didn't care about the issues and weren't going to vote without prodding, why are they even voting?) My guess is that they don't get briefed on the issues any more than given a reason to vote for the person who represents the particular party.

"Environmental Disasters" by Arnold Kling at Econlog:

"According to Iain Murray's new book, the worst disasters come from environmental policy. It is remarkable the magnitude of the harm caused by government relative to the harm caused by the private sector from which it protects us. My co-blogger cites the number of people murdered by Stalin as an example of government-caused harm that is very difficult for the private sector to top.

Here are some more comparisons to consider:

1. The total death and illness caused by all of the chemical pollution ever created vs. the death and illness caused by the ban on DDT.

2. The GDP lost due to consumption of illegal drugs vs. the GDP lost due to the drug war.

3. The deprivation and suffering caused by predatory lending and other subprime mortgage shenanigans vs. that caused by biofuel mandates.

I think that as the world gets more complex and interdependent, we will see government activism cause ever-greater harm, because the unintended consequences become harder to predict, or even to trace when they do occur. "

"Greater Regulation of Financial Markets? Becker" Gary Becker on the Becker-Posner Blog:

"In evaluating the need for greater financial regulation, one should also not forget that the American economy greatly outperformed the European and Japanese economies during the past 25 years. Might that not be related in part to the fact that the United States led the way with major financial innovations like investment banks, hedge funds, futures and derivative markets, and private equity funds that were only lightly regulated? An infrequent period of financial turmoil may be the price that has to be paid for more rapid growth in income and low unemployment. Rapid income and employment growth might be worth an occasional period of turmoil especially if they do not lead to prolonged slowdowns in the real part of the economy. So far the effects on GDP and employment have not been severe, although the financial distress is not yet completely over.

Nevertheless, a few important regulatory changes are probably warranted. For the first time the Fed allowed investment banks access to its federal funds window, and the Fed guaranteed $29 billion worth of mortgage-backed assets to induce J.P. Morgan to take over that investment company. Since these types of Fed actions would likely be repeated in the event of future financial turmoil, investment banks would have an incentive to take on additional risk since they can reasonably expect to be helped out by the Fed in the future. For this reason it might be desirable for the government to impose upper bounds on the permissible ratios of assets to equity held by investment banks. The ratio of assets to the equity of the five leading investment banks did increase greatly from about 23 in 2004 to the highly leveraged level of 30 in 2007."

Posner adds the following:

"Perhaps what the savings and loan and now the broader financial-industry crises reveal is the danger of partial deregulation. Full deregulation would entail eliminating both government deposit insurance (especially insurance that is not experience-rated or otherwise proportioned to risk) and bailouts. Partial deregulation can create the worst of all possible worlds, as the western energy crisis may also illustrate, by encouraging firms to take risks secure in the knowledge that the downside risk is truncated."

I admit that if the government is to be seen as being on the hook, regulations probably need to be in place to limit the risks to the taxpayer. The better alternative, however, is full deregulation in such a way that relieves the government of all risk of loss. Let it be born by those who assume it. But now the debate isn't between current options, but between options that might have existed two months ago.

"Vouching for Vouchers" Washington Post editorial (HT: Club for Growth):

"In making education his top priority, D.C. Mayor Adrian M. Fenty has been guided by one principle: Children trump politics. It's an idea that Mr. Fenty might want to expound on when he goes to Capitol Hill this week to defend funding for the city's unique school voucher program. Political ideology and partisan gamesmanship should not be allowed to blow apart the educational hopes of hundreds of D.C. children. Congress must respect the judgment of District leaders in giving parents a choice in one of the most crucial aspects of their children's lives...

Of all the arguments against vouchers, the most pernicious is that they hurt public schools. Never mind that D.C. public schools benefit financially from the funding formula. Public schools failed long before vouchers were even conceived of, and no less an authority than D.C. Schools Chancellor Michelle A. Rhee dismisses that argument out of hand. As she told the Wall Street Journal, "I would never, as long as I am in this role, do anything to limit another parent's ability to make a choice for their child. Ever." Let's hope Congress feels that same compunction."

"A Closer Look at Stadium Subsidies" by Dennis Coates at The American (HT: Club for Growth):

"Of course, even if the benefits of stadiums and arenas cover the subsidies, the subsidies still may not be sound policy. First, there may be enormous variation in the distribution of the consumption and public-good benefits. It is clear that not all citizens in a community benefit equally from the presence of professional sports franchises in their city. Indeed, because the tax revenues used for the subsidies are often generated from lotteries and sales taxes whose burden falls disproportionately on the poor, while the consumption benefits go mostly to relatively wealthy sports fans, the net benefits are distributed regressively. Second, we should consider the net benefits to the community of alternative uses of the funds spent subsidizing sports facilities. Good policy means using the money where the net benefit is greatest, not simply where the net benefit is positive. That’s something state and local governments should keep in mind before pledging millions of dollars to fund the next new stadium project. And it’s something Congress should remember when evaluating the future of U.S. tax policy."

After listening to this podcast, I've been opposed to government subsidies for sports stadiums. Government effectively artificially keeps ticket prices low, spreading out the cost of attending the events over everyone else in the city. I'm a baseball fan and love going to Braves games, but I don't think it's right that those of us going to the games are subsidized by those who aren't going to games.

Monday's interesting reads

"Dishonest tax increase" Waterbury Rep-Am Editorial (HT: Club for Growth):

"The legislature's decision to raise the minimum wage from $7.65 an hour to $8.25 by Jan. 1, 2010, is bad policy for all the usual reasons: It reduces job opportunities for unskilled workers and stimulates off-the-books employment, and may cause business closures.

Republican lawmakers opposing the measure brought up those points and more last week before the bill passed comfortably. But there was one argument they didn't raise: This is just another tax on business.

Writing for the online magazine Slate five years ago, Steven E. Landsburg called the minimum wage an "income transfer" that "places the entire burden on one small group: the employers of low-wage workers and, to some extent, their customers. Suppose you're a small entrepreneur with, say, 10 full-time minimum-wage workers. Then a 50-cent increase in the minimum wage is going to cost you about $10,000 a year. That's no different from a $10,000 tax increase. But the politicians who imposed the burden get to claim they never raised anybody's taxes.""

"Freer Trade Could Fill the World’s Rice Bowl" NY Times op-ed by Tyler Cowen (HT:Club for Growth):

"Restrictions on the rice trade run the risk of making shortages and high prices permanent. Export restrictions treat rice trade and production as a zero- or negative-sum game where one country’s gain comes at the expense of another. That’s hardly the best way to move forward in a rapidly growing world economy.

This lack of support for trade reflects a broader and disturbing trend. An increasing percentage of the world’s production, including that for agriculture, comes from poor countries. Over all, that’s good for rich countries, which can focus on creating other goods and services, and for the poor countries, which are producing more wealth. But it can slow the speed of adjustment to changing global conditions...

Lately, it’s become fashionable to assert that, in this time of financial market turmoil, the market-oriented teachings of Milton Friedman belong more to the past than to the future. The sadder truth is that when it comes to food production — arguably the most important of all human activities — Mr. Friedman’s free-trade ideas still haven’t seen the light of day."

On free exchange on economist.com ("Have a rice day"), the posts author quotes Dani Rodrik:

"Cowen argues that freer trade in food commodities such as rice would boost global supplies and help reduce prices. He is probably right about the first, but not about the second. The effect of freer trade on domestic food prices depends on whether a country is a food importer or exporter. Freer trade would reduce prices of food (relative to other prices) only in countries that are food importers. Food exporters would experience a rise in the relative price of food, and there is simply no way of escaping that reality."

To which the author correctly writes:

"Restricting exports in this period might well generate lower prices in exporting countries, as Mr Rodrik states. That's a bad thing from a long-run perspective, because it tells producers that they won't be allowed to capitalise on tight market conditions. Why up supply next year, when the government has limited the extent to which you can take advantage of high prices this year?

It's worth remembering that trade isn't just about current prices. It's also about long-run incentives and efficiency."

As always, it comes back to incentives. If the government takes away your ability to see the upside on your risktaking investment (in your farm), you're less likely to take a similar investment next year. This is what is wrong with windfall profits taxes, export quotas, and high marginal tax rates. It simply leads to less of the desirable thing in the future.

"Biofuels Disaster Must End" by Phil Kerpen & James Valvo with National Review Online (HT: Club for Growth)

"Big-government, command-and-control technocrats believe that when central planning fails, the solution is a better plan and smarter planners. They never step back and look at whether planning makes sense in the first place. This was true of the Soviet Union, with tragic five-year plan after five-year plan. It was true of Communist China, with Mao’s revolutionary upheavals. And today, here in the United States, it is true of government energy policy...

Unintended consequences are the inevitable result when politicians pick untested feel-good solutions to market-created concerns. A decade of ethanol policies has once again proven this true. But we now stand on the cusp of an even larger congressional blunder: cap-and-trade. And this time higher food prices will not be the only negative result...

But we’ve seen this too many times before. Each new generation of central planners believes the previous generation wasn’t smart enough. Yet central economic planning is forever doomed to failure since the approach itself limits human freedom, ingenuity, entrepreneurship, and innovation. These are the true engines of prosperity, and they will best manage all our problems, including those in the energy arena."

"Signs of Free Speech" by David Boaz with Cato:

"A Democratic candidate for the U.S. House of Representatives began placing campaign signs in supporters’ yards a full year before the election. Botetourt County officials reminded people of a longstanding ordinance about how long political signs can be displayed. In this case it’s the ACLU of Virginia threatening to sue. But Botetourt (pronounced BAHT-uh-tott) officials are not deterred in their determination to protect law, order, and the Botetourt way:

"'If we don’t have some semblance of order, we’d just have a libertarian society where anything goes,' said Jim Crosby, a longtime resident and former chairman of the Botetourt Republican Party."

Yep. First political signs in someone’s yard, then a bunch of competing churches, school choice, deregulation, women working outside the home, and pretty soon you’d have a libertarian society where anything goes."

"College education: the chance we've been waiting for" on freexchange at economist.com:

"So if there exists such a high return to post-secondary education why don’t more people pursue it? If the returns to a college education are so large then there should be more college graduates. I agree the US needs more home-grown skilled labour, but defining skilled labour as college educated may not be appropriate. A university degree may not always signal skills the labour market rewards. Ms Golden and Mr Katz point out, the high premium has not been realised by everyone with a college education...

I don’t believe post secondary education should only be intended for the elite few. Rather, certain university degrees have limited economic value. US universities often emphasise a liberal arts curriculum. The skills from this sort of education may not be useful for a large fraction of the population. In order for more people to benefit from education, be it completing high school or post secondary education, schools need to supply students with the skills the market rewards. This may mean a greater emphasis on quantitative subjects or more vocational training.

More education may indeed level the playing field. However, simply sending more people to university may not make a difference."

I left the following comment:

"I believe the push for everyone to go to a four-year college is misguided. To me it’s similar to pushing/encouraging everyone to buy a home, when it might not be in their best interest. People and schools should be focused on employable skills instead of simply cranking through. Ideally, parents and high school counselors can help introduce various career paths to young people, so they can choose the school option that works best for them. One-size-fits-all four-year college degrees that load students up with debt but doesn’t give them the skills they need to compete aren’t the answer."

"Rise of Nationalism Frays Global Ties" by Bob Davis with the WSJ:

"The global economy appears to be entering an epoch in which governments are reasserting their role in the lives of individuals and businesses. Once again, barriers are rising. Call it the new nationalism...

What accounts for governments' bigger role? The terrorist attacks of Sept. 11, 2001, refocused the world on security concerns that can be addressed only by national governments. Countries enriched by the commodity boom are increasingly asserting their power, with Venezuela nationalizing oil fields and Russia threatening to cut off natural-gas supplies to Western Europe. A backlash against economic integration has also pressured national governments to retreat from multilateralism: Big pluralities in 21 of 34 nations polled by BBC World Service in December said the "pace of economic globalization" is moving too quickly...

The rising strength of national governments expresses itself in different ways. For rich countries, it generally means higher taxes and more regulation. In the 30 mostly rich countries of the Organization for Economic Cooperation and Development, tax revenue as a percentage of the local economy was higher in 2005, the latest year surveyed, than a decade earlier. That's because of the rising cost to governments of health care and social security."

I'm very uncomfortable with this trend.

"Citizens of poor countries feel exhilarated by their governments' new power. In Rio de Janeiro, Maria Aparecida Lemos, an AIDS patient who lost her sight, says she "celebrated like it was a party" last year when Brazil's president voided a Merck & Co. patent on an AIDS drug. A Brazilian company now makes the drug, Efavirenz, for a fraction of what Merck was charging. Under global trade rules, developing countries have the right to override patents in emergencies, but few had done so for fear of retaliation.

Merck says it had already reduced the price of Efavirenz and was willing to cut further, but not enough to satisfy Brasilia. "Brazil may not be the kind of place you want to invest in," says Jeffrey Sturchio, Merck's vice president for corporate responsibility. Brazilian officials shrug off such threats, figuring the country's growing wealth makes it a magnet for investment."

These countries need to realize this comes with a cost.

"The Fed's Bender" WSJ editorial:

"The Fed's decision to open the general monetary spigots has inspired a global commodity boom unlike any since the 1970s. Oil has climbed to nearly $119 a barrel today from $70 in late August, a 70% increase. Farm and other commodities have seen a similar surge, with corresponding increases in food prices leading to shortages and riots in Egypt and other places, and to rice hoarding even in Southern California.

The popular media explanation is that this price surge is a result of rising global demand, greedy speculators and human profligacy. All of a sudden, without warning, the world is said to be running out of food. After 30 years in intellectual hibernation, Thomas Malthus and the Age of Scarcity are back in style.

No doubt commodity traders are having a field day, but what they are speculating on is the Fed's refusal to stop the free-fall of the dollar. The weak dollar has created another speculative bubble, this time in commodities. Oil prices have been surging despite only the usual geopolitical risks to global supplies and despite a recent International Energy Agency estimate that global oil demand will fall as growth slows.

As for food prices, it's true that government policies supporting biofuels have created new demand for corn and other grains. This and price controls in some countries have contributed to the food panic. But the price surge has been so rapid and so broad across nearly all commodities that it can't merely be a function of supply glitches or new demand for specific grains.

Like oil, world trading in most commodities is denominated in dollars. When the dollar declines, especially as fast as it has since September, commodity prices surge and speculators gamble on even further declines. As the nearby chart shows, since 2003 the dollar price of oil has climbed far more rapidly than has the euro price – 273% in dollars, compared to 146% in euros. Note in particular the oil spike in dollars since the second half of last year. This reflects the European Central Bank's sounder monetary management. And it means that had the dollar merely retained the same purchasing power as the euro, today's price of oil would be below $70 a barrel."

"The Real Cost of Tackling Climate Change" WSJ editorial by Steven Hayward:

"The usual chorus of environmentalists and editorial writers has chimed in to attack President Bush's recent speech on climate change. In his address of April 23, he put forth a goal of stopping the growth of U.S. greenhouse gas emissions by the year 2025.

"Way too little and way too late," runs the refrain, followed by the claim that nothing less than an 80% reduction in emissions by the year 2050 will suffice – what I call the "80 by 50" target. Both Hillary Clinton and Barack Obama have endorsed it. John McCain is not far behind, calling for a 65% reduction...

By the year 2050, the Census Bureau projects that our population will be around 420 million. This means per capita emissions will have to fall to about 2.5 tons in order to meet the goal of 80% reduction.

It is likely that U.S. per capita emissions were never that low – even back in colonial days when the only fuel we burned was wood. The only nations in the world today that emit at this low level are all poor developing nations, such as Belize, Mauritius, Jordan, Haiti and Somalia."

It seems like some people won't be happy until we return to the stone age. Robyn told me about a blog she reads where the author was bragging about not having a microwave. Then lots of people commented about having gotten rid of their microwaves or lamented that they still had one. Why are people afraid of technological advancement and progress? Oh yeah, global warming.

The weekend's interesting reads

"Light-Years Ahead of the Crowd: Interview With James B. Rogers, Private Investor" by Lawrence Strauss with Barron's:

"Q: You have been quoted as saying you don't think bailouts of troubled companies are a good idea. Is that still your view?

A: Yes, it is. If the government had not bailed out the hedge fund Long-Term Capital Management in 1998, I don't think we would have some of the problems we have now. Investment banks have been going bankrupt for hundreds of years. It is not the first time something like Bear Stearns has happened and the world has always survived.

If you had a few investment bankers go broke in 1998 or after the dot-com bust -- or if they lost hundreds of millions of dollars -- they probably would have had a different approach to their balance sheets. But since relatively few people got hurt with Long-Term Capital Management, in a few months everybody had forgotten the lessons that should have been learned about leverage or crazy products or crazy approaches. The government has been intervening to save all its friends for a decade or so rather than letting the market work properly.

Q: But isn't it so that a Bear Stearns bankruptcy would have devastated the financial system?

If the system is so fragile that the fifth-largest investment bank can bring it all down, then you better go ahead and have the problems now. What if three or five years from now it is the largest investment bank that fails or the largest five or six banks that fail? Then there will be a disaster.

Q: As an investor, you often allude to the importance of understanding history.

History will teach you that, first, we have seen all of this before, whether it's bubbles or panics or collapses. And yet, somehow, the world adapts. It also shows that whatever we are seeing today is not going to be true in 10 years, as was the case with the bubble in technology stocks in the late 1990s. As an investor, it's crucial to figure out what is going to change."

This was actually from a couple weeks ago. I think he nailed the incentives discussion on the head. Incentives were distorted 10 yrs ago with LTCM. They were distorted this year with Bear Stearns. The longer they become distorted, the greater the pain will be when something really bad happens.

"Twenty-Five Years Later, A Nation Still at Risk" WSJ op-ed by Chester Finn:

"What to do now? It's no time to ease the push for a major K-12 education make-over – or to settle (as Barack Obama and Hillary Clinton apparently would) for reviving yesterday's faith in still more spending and greater trust in educators. But we can distill four key lessons:

First, don't expect Uncle Sam to manage the reform process. Not only does Washington lack the capacity to revamp thousands of schools and create alternatives for millions of kids, but viewing education reform as a federal obligation lets others off the hook. Yet some things are best done nationally – notably creating uniform standards and tests in place of today's patchwork of uneven expectations and noncomparable assessments. These we have foolishly resisted.

Second, retain civilian control but push for more continuity. Governors and mayors remain indispensable leaders on the ground – but the instant they leave office, the system tries to revert. The adult interests that rule it – teacher unions, yes, but also colleges of education, textbook publishers and more – look after themselves and fend off change. If three consecutive governors or mayors hew to the same agenda, those reforms are more apt to endure.

Third, don't bother seeking one grand innovation. Education reform is not about silver bullets. But huge gains can be made by schools that are free to run (and staff) themselves, attended by choice, expected to meet high standards, and accountable for their results.

Finally, content matters. Getting the structures, rules and incentives right is only half the battle. The other half is sound curriculum and effective instruction. If we can't place enough expert educators in our classrooms, we can use technology to amplify the best of them across the state or nation. Kids no longer need to sit in school to be well educated."

There might be some need for regulation and uniform standards, but only a floor of absolute basic topics that need to be convered and taught, not standards of student achievement. We then should give parents the freedom to choose how their tax dollars are spent. I'd like to give parents who choose to homeschool access to those funds, but it's have to be done in a way that doesn't give people the incentive to "home school" but use the money for tv's, cars, etc. Some schools very well might opt for the "budget education" and only provide the basics, but when kids score low on standardized tests, parents will pull their kids from the school and it would lose funding, forcing it to change.

Friday's interesting reads

"When Government Is Stupid, Be Grateful for Its Inefficiency" by Jacob Sullun at Reason Online (HT: Club for Growth):

"According to a new report from the Government Accountability Office, since 2001 U.S. Customs and Border Protection has failed to collect more than $600 million in duties that should have been imposed on imported goods "to remedy injurious unfair foreign trade practices." Specifically, the goods, mainly food products from China, were sold at "unfairly low prices," thereby violating "anti-dumping" rules. Due to CBP's dereliction of duty, American consumers presumably paid less than the government thinks they should for garlic, honey, mushrooms, and crawfish tail meat. This is the sort of bureaucratic inefficiency I can get behind."

How does one determine what is "unfairly low prices"? This was the main argument behind trust-busting back in the day: smaller companies can't compete when the larger companies can sell it so cheaply. Consumers aren't complaining about lower prices, only competitors. I really liked ones of the comments: "Protectionists - keeping the poor from enjoying better standards of living since the 1700's."

"Common Ground in New Orleans" by Kimberly Hendrickson with City Journal (HT: Club for Growth):

"For all the good sense of these recommendations, though, the most interesting piece of Mercatus’ work is what it calls its “socio-cultural studies.” As Boettke explains, at the core of the project is a deep interest and faith in civil society and a rejection of the pessimistic view of social capital popularized by Robert Putnam...

There is no shortage of commentary on the Gulf region about social divisions and bigotry. What is unique and inspiring about Mercatus’s work is that it accentuates the benefits gained by belonging to a particular group and the social capital generated by shared neighborhoods, shared values, and shared history. The free-market advocates are, in other words, reminding students of city politics that the story of race, ethnicity, and religion need not always be the story of ill will and oppression. They are also reminding their libertarian friends that there is more to healthy cities than properly functioning markets: culture matters."

She's talking about a project of the Mercatus Center at George Mason University studying the reconstruction of Louisiana and Mississippi after Katrina and Rita. What I think she doesn't realize is that libertarians don't necessarily believe that culture doesn't matter, only markets. There is, in fact, a "market" of culture. Culture emerges on its own and doesn't need to be mandated by government. This is what libertarians believe: that if left alone, the needs of society will largely be provided by society without the central direction of government. The desire for people to feel part of a group is real. "Social capital and neighborhood activism " as she refers to it as, simply don't need to be planned.

"When In Pain, Find Someone to Blame: NAFTA!" by Terry Paulson at Townhall (HT: Club for Growth):

"The American dream is not dead! Wealth is still out there; it is just on the move. Instead of throwing up protectionist walls, we must help Americans meet the challenge of change. As my great uncle on the farms of Illinois used to say, “It’s easiest to ride a horse in the direction it is going.” In short, it’s wise to develop skills that will produce what customers are going to need. If you’re good at something someone needs done, you will do well!

His second advice: “If the horse is dead, get off it!” In practical terms, don’t send around resumes for skills that are no longer needed. Instead, master new competencies or lose out to those who are willing to refocus and retool to take advantage of change.

Instead of whining about the economic cards you have been dealt or waiting for the government to save you from becoming obsolete, develop your own recovery program. In fact, always invest time in your Plan B, a “What I could do next” Plan."

A lot of comments didn't like what he was saying, so they complained a lot about free trade. I posted the following comment:

"a call to end free trade
i believe free trade is too devisive. it should eliminated in all forms. if i lived in minnesota, instead of georgia, i would push my representatives to pass laws that prevent companies from foreign states, like georgia, from buying my state's assets. it's egregious. have you heard how many of good minnesotans who work for northwest will be out of a job through no fault of their own? like a 1000. also, i just know they're going to try something sneaky, like plant someone on the city council there in st. paul or something. even though i'm from georgia, i just know it'll happen. that's what people who are only driven by money and profits do.

i also heard that texas has more fortune 500 companies headquartered there than any other state. if any of those companies had tried to move out of my state, you can bet i'd be calling my representatives. that's destroying jobs, i'd have said. you can't let them do that. if a company can just up and move from one state to another, it just isn't fair. they just shouldn't let that happen.

and while we're on the subject of companies moving around, we need to talk about people. i ran into one of those dirty alabamans the other day (i should know how dirty they are; i grew up there). anyway, i'm seeing way too many of them nowadays. at some point you've just got to say "enough. no more. we're full." they're a strain on our infrastructure and all. have you heard about the water problems we've had lately? i'm just glad i got here first, when, you know, the problems hadn't really begun. not only that, but they're competing for our jobs, too. (apparently the economy in alabama isn't doing so hot, but is that my problem?) scoundrels. we ought to pass a law to keep them out."

Thursday's interesting reads

"Immigrant Scapegoats" WSJ op-ed by Jason Riley:

"At the behest of unions seeking to restrict the supply of labor in order to inflate its price, pols and interest groups are already citing the state of the economy as a reason to scale back immigration...

The common assumption is that a job filled by an immigrant is one less job for a native.

But this reasoning is based on a fundamental misunderstanding of how our labor markets operate. The U.S. job market is not a zero-sum game. The number of jobs is not static. It's fluid, which is how we want it to be. In 2006, 55 million U.S. workers either quit their jobs or were fired. Yet 57 million people were hired over the same period. In a typical year, a third of our workforce turns over.

Immigrants help keep our labor markets flexible. And flexible labor markets – the kind that minimize the costs to a business of hiring and firing employees – enable workers and employers alike to find the employment situation that suits them best. Flexible labor markets make it easier for an employee who doesn't like his job to find another position somewhere else. And flexible labor markets make it more likely that an employer will expand his workforce or take a chance on a less experienced job-seeker.

A better fit between employers and employees increases productivity and makes markets more responsive to consumer demand...

The question is not whether the U.S. can survive without foreign labor. The question is whether the country would be better off economically by moving in a protectionist direction. Social conservatives fret that too many immigrants will have America slouching toward Guatemala. The bigger concern is that too few immigrants will have us slouching toward France."

"'Stimulus' and the States" WSJ op-ed by Janet Napolitano:

"As a result, states must now carry the additional burden of providing health care for these children...

Instead, these regulations are simply a maneuver to have someone else (i.e., the states) foot the bill...

Washington's failure to meet its obligations is forcing states to cut education, health care and other vital services. The federal government should accept its responsibility, do no harm and pay its bills. Once it does, we can work together to improve the quality of life for those we are privileged to represent."

I have two issues with this. First, if a state decides it wants to provide a benefit to its citizens, it shouldn't rely on federal tax receipts to pay for it. In fact, I'm nor sure I'd support any federally funded program that only benefits the members of a particular state. Second, I'm not a fan of politicans taking it as their personal responsibility, in their position as politicians, to improve my quality of life; that should be our own responsibility. It's just like how we shouldn't rely on government to teach our children about the creation; that should be our responsibility. And we shouldn't rely on the government to make sure we have the skills to compete in the workplace; that should be our responsibility.

"Bailout of the Year" WSJ editorial:

"To summarize: Congress mandated a return on student loans that is too low to attract private capital in the current market. So Congress will now use your money to create artificial investor demand. Taxpayers will bear more risk so that Congress can fashion a new business model to replace the one it just destroyed. The Bush Administration, unwisely but typically, has endorsed this approach."

I don't fully understand all that happened, but apparently congress lowered the rate lenders can charge students on loans. "Citibank subsidiary Student Loan Corporation cited "unprecedented federal legislation" in announcing its recent withdrawal from much of the market." Now, they want to subsidize lenders to get them back in the market. Another example of bad legislation needed to fix bad legislation.

Neal McKluskey with Cato had this to add about the "student loan crisis":

"In light of all this, the funny thing about the as-yet nonexistent student loan crisis is that taxpayers should actually hope it materializes. The only way to slow the vicious tuition-inflation cycle is to cut down on the cheap aid that fuels it, and since politicians are going to act as if there's a crisis no matter what, we might as well benefit from some of the market discipline a real crisis could bring."

"Evil Exxon" Jerry Taylor at Cato quoting Bill Dunkelberg from Temple University:

"Some presidential candidates have decided that Exxon is a symbol of what is wrong with America. Recent ads complain of Exxon’s 40 billion in profits as if Exxon is some evil entity. First of all, Exxon is not a person, it is millions of owners owning over 5 billion shares in their investment portfolios. Vanguard holds over 160 million shares for its clients, Fidelity over 100 million shares. Taking Exxon’s profits for hair-brained government schemes will just mean millions of people will have to work longer to accumulate their retirement assets. And, doesn’t return on investment count? 40 billion may not represent a particularly good return on the capital invested in the company. Size is not the issue, the percentage return is what counts.

And the government takes over 40 cents a gallon in tax, far more than the profit per gallon made by refiners. And the government doesn’t make any gas for you.

Hopefully voters will catch on to this sham. The last thing we need is government confiscating private sector profits and driving stock prices down. No help for our retirement and no help for the economy."

I wish I could think of a way to resolve the disconnect that exists that causes people and politicians to forget that taxing corporations is simply taxing shareholders and that fining corporations is simply fining shareholders. If making corporations no more than a passthrough entity wouldn't be such an administrative nightmare, I'd like to see a system where individuals paid the corporations taxes on their own returns. That would keep those profits from being taxes twice and would leave more cash at the corporations themselves, enabling them to make growth stimulating capital investments.

"Higher Prices" by Thomas Sowell at National Review Online (HT: Neal McCluskey at Cato):

"[M]aking economic policies on the basis of human interest stories — which is what politicians increasingly do, especially in election years — has a big downside for those people who do not happen to be in the categories chosen to write human interest stories about.

The general thrust of human interest stories about people with economic problems, whether they are college students or people faced with mortgage foreclosures, is that the government ought to come to their rescue, presumably because the government has so much money and these individuals have so little...

Costs are not just things for government to help people to pay. Costs are telling us something that is dangerous to ignore.

The inadequacy of resources to produce everything that everyone wants is the fundamental fact of life in every economy — capitalist, socialist, or feudal. This means that the real cost of anything consists of all the other things that could have been produced with those same resources...

Prices force people to economize. Subsidizing prices enables people to take more resources away from other uses without having to weigh the real cost."

"Los Angeles Bans Bacon" by Drew Carey with Reason.tv. Just a great video.

Wednesday's interesting reads

"Just 'trust our incumbent senators' " Las-Vegas Review-Journal editorial (HT: Club for Growth):

"These provisions [that law allows candidates facing a wealthy opponent to receive larger contributions] were challenged by Jack Davis of New York, a millionaire Democrat who lost races in 2004 and 2006 to Republican Rep. Tom Reynolds. The law says "we're going to make it easier for your opponent to beat you," said Mr. Davis' lawyer on Tuesday. He also argued that the law protects incumbents who can more easily tap campaign contributors.

He's right, of course. Most "campaign finance" reform amounts to an incumbent protection racket designed to make it more difficult for challengers to compete. Justice Antonin Scalia picked up on that theme when he said he was "deeply suspicious" of the regulations in question. "Do you think we should trust our incumbent senators and representatives to level the playing field for us?" he said during Tuesday's arguments.

Regardless of how the court rules, the case again highlights the Byzantine lengths to which "good government" reformers will go in their odd quest to limit the role of money in American politics. Whether it's a command-and-control regulatory structure that bans Americans from advocating for or against a specific candidate as an election nears, or the creation of arbitrary financing rules that apply to some office-seekers but not to others, the efforts are constitutionally troubling and counterproductive, as the money simply flows through new and different channels, leading supporters of "campaign finance reform" to then call for even more interventions."

When the "good government" guys make laws that insulates them from competition, watch out. The WSJ ("The Millionaire Ruse") had this to add:

"If none of this sounds like it has anything to do with "keeping money out of politics," you're getting the idea. Congress sold the Millionaire Rule as a way of "leveling the playing field" against rich, self-financing opponents. As Justice Antonin Scalia noted sarcastically during Tuesday's Supreme Court oral arguments, maybe we should next require that the more eloquent candidate talk with pebbles in his mouth. Like most of the rest of McCain-Feingold, the Millionaire Rule is really incumbent protection, pure and simple."

"The Sky's Not Falling" by John Stossel at Real Clear Politics (HT: Club for Growth):

"Where is this "credit crisis"? Did the supermarket reject your Visa card? I still see Ditech commercials offering fixed-rate mortgages at around 5.5 percent.

Sure, some lenders are skittish while things play out. Some investment banks and brokerage houses are sitting on shaky mortgage-backed securities. But why call that a "crisis"?

Do we have 25 percent unemployment, as we did during the Depression? Do we even have 7.5 percent unemployment, 12 percent inflation and 20 percent interest rates, as we did during Jimmy Carter's presidency?...

This is not to say that lots of homebuyers aren't having a hard time. But the rapid rise and fall in housing values in some parts of the country -- and the rippling consequences at each stage -- do not justify scrapping what we know about economic success and turning to government control. Prosperity and stability come from people being free to innovate and produce -- and yes, fail. Bureaucrats, however well-intentioned, cannot know enough to manage that process. They are unqualified to give the green light to some innovations and the red light to others. Bailouts create irresponsibility."

"Who'll Pay Alabama's Tax On 'Big Oil'?" IBD editorial (HT: Club for Growth):

"While tapping oil company earnings is a popular elixir for politicians inflicted with the "do-something disease," the millions of bona fide human beings who are really behind Big Oil's supposedly faceless exterior would be the ones left ailing."

I guess I'm just proud of myself because I thought of the tendency for government to want to "do something" back in the fall. Not that anyone knew it, though.

"Must I Bank?" WSJ op-ed by Jonathan Knee:

"Rainer Maria Rilke, in "Letters to a Young Poet," offers some words of wisdom that the newly jobless would do well to consider: "This most of all: ask yourself in the stillest hour of your night: must I write?" Rilke warned of the hardships of his chosen craft, arguing that if the poet could even imagine living without writing, he would be better off doing so.

This kind of profound introspection is rarely undertaken by those young professionals who march off to investment banking careers based more on what is expected of them than on any deep commitment to the field. They should take a moment to ask themselves: Must I bank?

Such introspection, even if it comes late in life, can lead to greater fulfillment than scrambling for the next best investment banking job that might still be available. I wrote in my last book that the opportunity to really pause and face a world where the next step has not been preordained can be a profoundly cathartic learning experience. Judging from the emails I received after the last bust, many may have benefited from doing just that...

Whatever the other negative ramifications of the current financial crisis, if bankers use it as an opportunity to ask themselves these questions they will likely be happier and, if they decide to stay in the profession, better bankers as well."

It'll be interesting how many of my classmates when I go back to school will choose to be investment bankers and what their reasons for doing so are.

Tuesday's interesting reads

"Capitalism Day" by Don Boudreaux at Cafe Hayek:

"On this Earth Day, I celebrate capitalism -- the institution that, far more than any other, has made human lives clean, safe, dignified, and culturally rich. Capitalism is also responsible for giving people the wealth and leisure to permit them to mis-perceive nature as loving and bountiful, and to enjoy nature in a way that few of our pre-industrial ancestors could ever have enjoyed it...

Before refrigeration, people ran enormous risks of ingesting deadly bacteria whenever they ate meat or dairy products. Refrigeration has dramatically reduced the bacteria pollution that constantly haunted our pre-twentieth-century forebears."

And his list goes on. I knew he'd have something to say about Earth Day, especially after this post. I love nature and believe it should be respected. I don't, however, believe it should be placed above mankind.

"Benedict and Lou" by Don Boudreaux at Cafe Hayek:

"Mr. Dobbs fulminated that 'I really don't appreciate the bad manners of a guest [the Pope] telling me in this country and my fellow citizens what to do.'

Memo to Mr. Dobbs: I really don't appreciate your bad-mannered habit of incessantly telling me, my family, and my friends what to do. If we want to hire - or to befriend, or to live with, or simply to enjoy as neighbors - non-Americans in our own hometowns, you rudely tell us that we should not be allowed to do so. You insult us with myth-laden bombast and uninformed accusations. The Pope, in this case, spoke out for greater freedom of association; you continue to champion obnoxious restrictions on this important freedom."

"Texas leads list for Forture 500 headquarters" Houston Chronicle (HT: Club for Growth)

"The Lone Star State passed New York as home to the most big companies in the latest list compiled by Fortune magazine.

Texas now boasts 58 headquarters, three more than New York, the previous No. 1, and California, with 52. The Houston area has 26 of the companies.

Business experts say it's a matter of simple economics — Texas attracts companies with its low taxes, affordable land and large labor force."

Of course it's simple economics. That and a business-friendly environment. This article in the WSJ back in March says it all:

"So tomorrow the eyes of America will be on these two states moving in different directions. Ohio has an economy burdened by high taxes and work rules that impose heavy costs on employers. Texas embraces free trade, keeps taxes low, doesn't impose unions on business and has tooled itself for 21st century global competition. Ohioans may not like to hear this, but for any company considering where to locate a new plant or move an existing one, the choice between Ohio and Texas isn't even a close call.

The challenge for our national economy in a world of competition is to become more like Texas and less like Ohio."

"Earmark ban push prompts GOP turmoil" by Patrick O'Connor and John Bresnahan at Politico (HT: Club for Growth):

"The call to arms is particularly sensitive for House Minority Leader John A. Boehner (R-Ohio), who fell short earlier this year when he challenged his Republican colleagues to accept a moratorium while members study the annual earmarking process. Boehner gave ground during the GOP’s annual retreat in West Virginia in January, after some of the members in attendance raised questions about the effectiveness — and the potential political pitfalls — of a unilateral disarmament."

Everyone is worried about doing the political expedient thing rather than the right thing. Instead of only swearing off earmarks, they should go back to their states and districts and educate the people about the problems with earmarks. But they're afraid they will lose political power. If you lose political power by doing the right thing, that's OK. I can't think of any better ways to serve the best interests of your country as an elected official than that. The goal shouldn't be to stay in power. If it is, our elected officials will be more concerned with appeasing special interests that passing good legislation.

"Analysis of John McCain's Economic Plan" by John Tamny at Real Clear Markets (HT: Club for Growth):

"When we consider this reality, a cut in corporate rates is arguably one of McCain’s best policy positions for making it easier for corporations to form stateside. What’s a near certainty is that Bill Gates could not have created what became Microsoft in Paris or Bombay, so anything that makes incorporations easier here will accrue to both ours and the world’s economy. Notably, McCain gets immigration right too, so the ideal scenario for him over the long-term would be to push liberalized immigration rules that make efforts to work in the U.S. legal. A combination of corporate tax cuts and legalized work would in time lead to a revitalized entrepreneurial sector that would once again make the U.S. economy the envy of the world...

As for McCain’s desire to allow immediate expensing of business-equipment purchases, this is faulty industrial policy run amok made even worse considering McCain's stated aversion to aiding special interests. Put simply, we shouldn’t be complicating the tax code even more with rules that favor one business-constituent group over others. Secondly, it’s bad policy. The reality is that American business success stories from Google to FedEx to Goldman Sachs are successes of the mind, as opposed to equipment. Rather than pushing a Keynesian plan meant to stimulate equipment purchases, politicians should be closing special-interest loopholes in favor of reform that reduces the success penalty without regard to the kind of commerce engaged in...

One area to look is anti-trust given McCain’s idolization of Teddy Roosevelt. Despite the fact that anti-trust rules arguably weigh on our economy more than the most governmental policies, if as president McCain were to nose his way into pay, he logically wouldn’t stop there...

Indeed, while it’s presently fashionable to question the markets and the signals they provide, as a nation of investors we can rest assured that no matter who’s elected, the often harsh message of the markets will presumably restrain any of our choices from causing too much harm."

"The Case for Ending Ethanol Subsidies" by Diana Furchtgott-Roth at The American (HT: Club for Growth):

"Yet President Bush still believes in ethanol. “We worked with Congress to pass energy legislation that specifies a new fuel economy standard of 35 miles per gallon by 2020, and requires fuel producers to supply at least 36 billion gallons of renewable fuel by 2022,” he said in his speech last week. “This should provide an incentive for shifting to a new generation of fuels like cellulosic ethanol that will reduce concerns about food prices and the environment.”

The problem is that the new generation of biofuels is not yet commercially viable. When it becomes viable, perhaps with the help of government-funded research, it will undoubtedly succeed without government mandates."

The biggest problem is that government thinks it can specify what's best. It's the basic idea behind the title of Hayek's The Fatal Conceit: that government knows better than the rest of us. They believe that in their positions as elected officials (or even unelected buereaucrats) they are afforded a view of the world that the rest of us aren't privy to enjoy. They then feel overconfident in those views and hence the solutions they come up with. This is why I don't trust government.

"Government Involvement Should Be Expelled" by Neal McCluskey at Cato:

"But does this mean we should force all schools to teach about, and governments to fund, alternatives to evolution, like Intelligent Design, or for that matter such dubious fields as alchemy, or divining-rod theory? Of course not! Some scientific theories have much more merit—and supporting evidence—than others. But it must be scientists, along with voluntary, private backers, and parents and college students with free educational choice, who decide what science is good enough to learn and fund. In other words, it must be “natural” scientific selection—not selection driven by politics, or the slickest, most rabble-rousing documentary—that determines which theories live, and which die."

I do have a problem with people trying to force creationism and intelligent design into public schools. While I believe in the creation, I don't think it's the school's place. Science should be taught in school and religion should be taught at home. Parent's should be more concerned about what they are doing themselves to build the faith of their children and not rely on the state to supplement it for them.

"Message to Hillary: Americans Still Make Lots of Things" by Dan Griswold at Cato:

"On the eve of today’s crucial Pennsylvania primary, here is how the Boston Globe described a scene at a Hillary Clinton event in the western side of the state:

"We need to still be a manufacturing nation,” she said at a rally in downtown Pittsburgh yesterday, as a woman in the crowd shouted “Right on!” “I don’t think a country that doesn’t make things can remain strong and vibrant and leading in the global economy.”

Right on? Not exactly. Implied in Clinton’s remark is that manufacturing has been in decline and that we are in danger of becoming a nation “that doesn’t make things.”

One huge problem with her statement is that manufacturing output in the United States has continued to EXPAND in recent decades. According to the Federal Reserve Board, America’s factories produced 30 percent more in real output in 2007 than a decade earlier and three times more than in the 1960s...

The real beef of the Democratic candidates and their union allies is that all that stuff was made with fewer unionized workers than in years passed. We can make more and better things with fewer workers because of soaring productivity."

"The Real Joe McCarthy" WSJ op-ed by Ronald Kessler:

The Army-McCarthy hearings followed a pattern, notes Donald A. Ritchie, associate historian of the Senate. Typically, McCarthy held hearings in executive session first, "like a dress rehearsal," says Mr. Ritchie, who studied the transcripts of the hearings. Mostly McCarthy didn't have any hard evidence against the people he was interrogating; he just hoped to get them to contradict themselves or to take the Fifth Amendment, or to confess.

"He interviewed about 500 people in closed session," Mr. Ritchie told me. "He called about 300 people to public session."

"After they'd testified in closed session, he'd go out in the hall, and he'd tell the waiting press what had just happened," Mr. Ritchie says. "We looked at both the New York Times's and the Chicago Tribune's accounts and then we compared that to what actually went on inside the hearings. What he told the press grossly exaggerated what took place."

This is why powerful governments are a problem. They can use that power for good or bad, and they have the ability to destroy innocent people. It reminds me of a story in "Master of the Senate: The Years of Lyndon Johnson" (great book by the way, even though I can't stand LBJ despite his political genius) of how he effectively destroyed Leland Olds, saying he was a Communist, for political gain. Disgusting.

Monday's interesting reads

"The Truth About Milton Friedman" by David Boaz at Cato:

I mentioned briefly this article in the NY Times about Milton Friedman. Boaz largely quotes David Henderson are he critques, and largely rebuffs, many of the comments and assertions made by the author of the original article. It's way to long too pick something specific to quote but way too not to mention at all.


Cato Daily Podcast with Russell Sobel (HT: Club for Growth)


"Wal-Mart doesn’t put anybody out of business. It’s consumers that put stores out of business. And the reason that some stores fail after Wal-Mart comes to town is because consumers choose to go shop at Wal-Mart instead of choosing to keep shopping at the places that they were shopping at before. And the reason that they do that is because they can save a lot of money, or the convenience, or the product lines that are offered, but it’s not Wal-Mart putting anybody out of business. It’s consumers selecting to shop at Wal-Mart over those stores because consumers view it as in their better interest..."


People like to blame businesses for their own decisions. If you're opposed to something, a well-orchestrated boycott can do wonders. The only thing is that those who don't like Wal-Mart know they could never organize an effective boycott of Wal-Mart because people always like to pay less for something. Wal-Mart does that better than anyone else.


"Raised on welfare, the 'Why Bother?' generation that doesn't want to work" from the Daily Mail (HT: Club for Growth):


"An education system with a "dismal record" of educating the poorest, and a complex welfare system, have together created a far more divided society than other European countries, it finds.
Means-tested benefits and higher taxes have reduced the incentives available to those on low incomes to better themselves, Reform says.

It concludes: 'The unintended consequence has been a 'why bother?' economy in which a significant minority do not have the capability or motivation to succeed.' "

"Current-Account Deficit = Capital-Account Surplus" by Don Boudreax at Cafe Hayek:

"A trade deficit reflects decisions made by persons on both sides of a border. If foreign suppliers of oil to America spent all of their dollars on goods and services produced in the U.S., Americans' imports of oil would not raise the size of the U.S. trade deficit. America's trade deficit grows not just because Americans import lots of things (including oil), but also because foreigners choose to invest their dollar earnings in the U.S. For this reason, Mr. Engler's conclusion that it would be "good" if America's trade deficit were lower is questionable. I, for one, welcome capital inflows into the U.S. Such inflows of capital not only directly fund private investments in America, but help to lower Americans' cost of financing Uncle Sam's reckless habit of spending beyond his means."

I've never been able to see the doom and gloom of a trade deficit. To make the accounts balance, something has to be moving stateside to offset whatever we're buying. The answer is capital investment.

Friday's interesting reads

"Abolish All ‘Taxes’ " NYTimes op-ed by Richard Coniff (HT: Club for Growth):

"I propose we stop saying “taxes” and start calling them “dues.”

Yes, this is a little sneaky. Some conservatives may even call it Orwellian, and they ought to know. But the word “dues” also plays into the psychology of group identity, and that can work to the benefit of conservatives and liberals alike. Consider that “tax” comes from the Latin for “appraise” with punitive overtones of “censure” or “fault,” as if wage-earners have done something wrong by their labors. “Dues,” in contrast, is rooted in social obligation and duty...

Instead of denouncing taxes, politicians would do better to appeal to the patriotic corners of our hearts that warm to phrases like “we the people.” “Taxation” is a throwback to the time when kings picked our pockets. “Paying my dues,” a phrase popularized in the jazz music world, is language by which we can stand together as Americans."

I especially liked the line about people feeling they've "done something wrong by their labors." I was reading this thread on the CFA Forum where people were discussing the absurdity of a hedge fund manager who made $3.5 billion last year because of a "well-placed" (lucky/skillful) bet on subprime debt. You sure would think these guys felt he'd done something wrong because he made so much. Also, you can't help but think back to Obama's comments about the "fairness" of a higher capital gains tax and not wonder if he thinks people who pay that tax have done something wrong by their labors.

"Repeal Housing's Mortgage-Interest Deduction" by John Tamny at Real Clear Markets (HT: Club for Growth):

"The mortgage-interest deduction and all manner of housing subsidies distort investment in ways that reduce our pay, keep our rates of taxation higher than they might be, and make housing marginally less affordable for those who don’t yet own, but would like to. So while any attempt at repeal would generate all sorts of sky-is-falling protest, an end to the subsidy would pay great economic dividends that would accrue to everyone, not just the special interest that is today’s homeowner."

"Bush, Democrats Sell Fear Itself on U.S. Economy" by Amity Shlaes at Bllomberg (HT: Club for Growth)

"The suggestion behind such talk is that the current situation isn't merely depressing. It is that the slowdown is like the Great Depression of the 1930s. You almost expect Senators Obama and Hillary Clinton to repeat the lines from President Franklin Roosevelt's inaugural address of 75 years ago: ``The only thing we have to fear is fear itself.''

The analogy is absurd. This economy is to the Great Depression what an April drizzle is to Hurricane Katrina. So far, the Dow has declined about 12 percent from its record high of last fall. In the Depression, it dropped more than 80 percent. Unemployment is about 5 percent. In the Depression it was 25 percent.

Maybe 2 percent of mortgages are in trouble, and abandoned homes line some parts of Cleveland Heights. During the Depression, more than half of Cleveland was underwater. Today, one big bank has collapsed. In 1931, 1,400 banks collapsed. "

Just a little perspective.

"Talk enough about people losing their homes, and Washington will pass a law that "encourages'' -- or forces -- banks to forgive principal on some mortgages. Banks will take the lesson and restrict credit later."

There will be costs of action to help homeowners. No matter how well-intentioned they are, you can count on some degree of unintended consequences.

From my weekly letter from Senator Isakson:

"As the merger [of Delta and Northwest] is understood now, all of the conditions I laid out to support a Delta merger appear to be met. These conditions include that Delta must remain Delta, must remain in Atlanta and must be a good deal for Georgia and the employees of Delta. Last year I was opposed to USAirways trying to take over Delta at a time when Delta was vulnerable. Today, Delta is a strong airline and I believe Delta is making a deal for the right reason, rather than defensive reasons. While there may be opposition to the merger, I hope that as the details come out, people will see the deal is in the best interests of the country, travelers and the states involved."

At first he talks about the merger being good for Georgia and the employees of Delta but later he talks about it being in the best interests of the country. If you oppose a merger for the soul reason that it isn't called Delta and is located in Atlanta, you most assuredly aren't doing so because its in the best of the country.

Thursday's interesting reads

No commentary for today. Not...enough...time.

"Carbon Showdown" WSJ editorial:

"Incompatible as it might be with liberal promises about painless global-warming controls, cap-and-trade is designed to disrupt the economy. The only signal that will tell consumers to make less carbon-intensive energy choices is higher prices. An analysis by American Council for Capital Formation and the National Association of Manufacturers of the Senate bill sponsored by Joe Lieberman and John Warner, likely to be the template for future Congressional action, concludes that it will result in as much as a 2.6% reduction in GDP by 2030...

This effort has been appalling even when graded on the usual Congressional curve of self-interest and buck-passing. Democrats want to take credit for crowd-pleasing goals while shifting the blame for the costs achieving them onto unaccountable bureaucrats. But if a cap-and-trade program really is coming, then lawmakers should, well, make laws."

"Obama and Economic Opportunity" WSJ op-ed by Jack Kemp:

"Senator [Obama], I believe our tax code punishes this process of upward mobility, especially for people of color, and in some cases it actually prevents people from escaping poverty. In this respect, I believe your economic views are short-sighted. You've pledged to raise income tax rates to 39.5% and lift the cap on payroll taxes, which would end up raising the top rate on income to 52% or more. You also want to raise dividend taxes to 39.5% and capital gains to 28%, plus you want to return to a confiscatory 55% "death tax." Unwittingly, your plans would prohibit most black Americans, indeed most Americans, from ever getting rich or even richer. Your economic ideas, sincere as they are, would weaken the economy, weaken the dollar, and weaken our chances of reducing poverty and unemployment...

By giving people access to capital and allowing them to take ownership of assets, entrepreneurship will be encouraged and the cycle of poverty can begin to be broken. All persons should have the opportunity to go as high as their merit and determination can carry them. My favorite quote is from Abraham Lincoln, who said, 'I don't believe in a law to prevent a man from getting rich; it would do more harm than good. So while we do not propose any war upon capital, we do wish to allow the humblest man an equal chance to get rich with everybody else.'"

"The Housing Crisis: Maybe We Should Do Nothing?" by Tom Firey at Cato:

"Commentators err when they describe these borrowers as being irresponsible or foolish for signing such contracts. The borrowers simply made a risky but reasonable decision to try to buy a house, on very generous terms given their default risk, in a market that was experiencing tremendous appreciation. They are now making a reasonable decision to bail on their contracts and go back to renting in the wake of the housing market downturn. Of course, the borrowers feel pain when they lose their homes. But, unless they were deceived or defrauded, they were not the victims of raw deals.

Moreover, for the overwhelming majority of subprime loans, the borrowers’ original decision to buy has worked out nicely — more than 80 percent of subprime loans (and just under 80 percent of subprime ARMs) are currently in good standing. Moreover, many of the people who have used subprime loans, ARMs, and other oft-denigrated “exotic vehicles” over the past decade have realized significant capital gains, even with the recent decline in house prices. If some so-called “consumer advocates” get their wish and regulation is implemented to curtail or prohibit the use of subprime loans and ARMs, higher-risk would-be homebuyers as a group will be harmed...

All of this raises the question: Should government intervene at all in the foreclosure mess? In asking this, I’m not arguing that struggling borrowers should drop dead. But there is much more downside risk and much less justification for intervention than what proponents have acknowledged."

"Obama's Truly Radical Capital Gains Tax Agenda" by Dan Mitchell at Cato (I saw this on Club for Growth as well):

"Every so often, a politician commits the horrible mistake of saying what he really thinks. This happened at the Democratic debate. Barack Obama has a very punitive proposal to nearly double the capital gains rate. When asked by one of the moderators whether this makes sense, especially given the historical evidence of big “Laffer-Curve” effects, Senator Obama dismissed concerns about falling revenue, arguing that a high rate was justified by “fairness.” In other words, Senator Obama is so fixated on punishing success that he is even willing to reduce the amount of tax revenue flowing to Washington that he and his buddies can redistribute...

This exchange is particularly revealing since Senator Obama actually admitted that a tax rate increase might lose revenue, but he held firm to his position that the capital gains rate should be increased from 15 percent to 28 percent. This reminds me of a conversation I had years ago with an economics professor from an Ivy League university. He told me that he once asked his left-wing colleagues whether they would support lower tax rates if they knew that tax revenues would rise. Most of them, he said, shared Obama’s viewpoint that punishing success was more important to the statist ideology than increasing revenue for government."

"The Goal is Consumption" by Don Boudreaux at Cafe Hayek:

"I sent this letter a few days ago to the Washington Post:

'Emily DeRocco complains that "The April 9 Business article 'Don't Blame NAFTA for Downturn, Many Economists Say' quoted politicians, economists and labor representatives but not a single manufacturer - those at the heart of this wrenching debate" (Letters, April 12).

She's mistaken. Those at the heart of this debate aren't manufacturers (or politicians, economists, or labor representatives). Those at the heart of this debate are consumers. Or, those at the heart of this debate should be consumers. Unfortunately, consumers are too large in number and too disparate in interests to organize effectively for political purposes. The result is that consumers' interests in trade discussions are largely ignored, even though an economy's success is measured not by how well that economy satisfies the wishes of producers, but exclusively by how well, over time, it satisfies the demands of consumers.

Sincerely,Donald J. Boudreaux'

Producers exist to satisfy consumers; production is the means and consumption is the end. Protectionism is a policy built on the premise that consumers exist to satisfy producers."