"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.
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