Thursday's interesting reads

"Candidates respond to voters economic fears" Reuters:

Quoting Hillary Clinton: "We'll take on the oil companies and harness their record profits to create millions of clean energy jobs, high-wage jobs you can raise a family on. We'll take on the credit card companies so that you and your families aren't drowning in debt."

Though I disagree, I understand how someone can get mad an oil company executives making lots of money when people are paying high prices for gasoline. I don't, however, hear people talking about how much money farmers are making. Not only do they receive government subsidies, but they are reaping the rewards of very high food prices just like oil companies. But the bigest problem I have with what Clinton says relates to the credit card companies. Why in the world is it the credit card companies who are to blame for someone drowning in debt? Because of the credit card companies, they actually have access to money to pay for things. Without them, whatever it was these people bought that put them in debt could never have been bought in the first place. If she's talking about high interest rates, the only people who care about high rates are the people with balances. High rates reflect the risk to the card companies to lend people the money. If the rate isn't high enough to compensate them for the risk, they won't lend in the first place.

Quoting John McCain: "I think it is outrageous when someone who is the head of Bear Stearns cashes in millions and millions of dollars in stocks. I think it is unconscionable when the guy who is the head of Countrywide and his co-conspirators make huge amounts of money when Americans face the threat of losing their homes."

There we go calling business people "conspirators". Yeah, they conspired to get people to buy a home they couldn't afford. They conspired to convince people to lie on their mortgage applications. They conspired by telling people they could get a 20% return on their homes. Sure, they made mistakes. And there are probably people who there at Countrywide who acted dishonestly. But who are the losers from paying executives high salaries and bonuses? Shareholders. If an investor doesn't like it, he can sell the stock. If, on the other hand, an investor thinks that despite the high compensation he's paying the executives he can still earn an adequate return on the stock, he'll hold the stock.

"Visa Violators Swept Up In Widening Dragnet" WSJ by Miriam Jordan:

"Polish native Andrezj "Peter" Derezinski came to the U.S. 18 years ago and was soon living the American dream. The 41-year-old father of three owns two homes, some commercial property and a thriving heating and cooling business here.

Thursday evening, Mr. Derezinski is scheduled to be deported. On July 13, 2006, a police officer stopped Mr. Derezinski for talking on his cellphone while driving, in violation of a ban here. The officer tapped the Polish man's name into a database and generated a "hit" that indicated Mr. Derezinski was in the U.S. unlawfully. He had overstayed a tourist visa when he initially came to the U.S. and then ignored a deportation order in the mid-1990s...

Many illegal immigrants have become productive members of society, who pay taxes, own homes and contribute to the economy...

"I earned the respect of my clients," says Mr. Derezinski, brandishing letters from home builders attesting to the quality of his work and his personal integrity. "I grew the business 10 times over," he adds. The Derezinskis bought a home and commercial property in Chicago, as well as a vacation cottage in Wisconsin. Mr. Derezinski paid income tax and property taxes. He invested in the stock market."

I have big problems with this. Aren't these the kinds of people we ought to encourage to immigrate to the US? Aren't these the kinds of people we're keeping out by enforcing these "laws"? This is a man who started a company, contributed to the economy, and paid taxes (though maybe not income taxes). He didn't hurt anyone. Why are we opposed to him participating here just because he wasn't born here? We're shooting ourselves in the foot.

"Housing Bust Offers Insights" WSJ by David Wessel:

"Making every American adult a homeowner was always imprudent and impractical; now that's obvious. Four years ago, President Bush declared: "The more people who own their home, the better off America is." And as his administration proposed federal guarantees for mortgages without requiring down payments, then-Federal Housing Commissioner John Weicher told me in 2004: "We will have some defaults, but nearly all those families will remain homeowners."

It was true then, and clear today, that some people should rent. Some Americans don't earn enough to pay for a mortgage and maintain a house; in recent years, mortgage brokers worried little about the first concern and never mentioned the second. Homeownership can give Americans a stake in society and help build savings -- but not if they don't have any equity in their homes. Better to help them open savings or retirement accounts."

Again, we seem to have this romance with homeownership. Our goal as a society shouldn't be to encourage everyone to own their own home. Our goal should be to give everyone the choice to choose the best option for themselves. I think we do that fairly well, aside from the fact that homeownership is one of the most subsidized purchases available.

"The Strange World of Harold Meyerson" by Russell Roberts at Cafe Hayek:

"The reason manufacturing has become a smaller proportion of GDP is because other sectors have grown even more. The reason other sectors have grown even more is because we have such high productivity in manufacturing over the last 40 years. That's freed up people and resources to make other stuff.

In Harold's world, that's a bad thing, because that means losing high-paying manufacturing jobs for low-paying service jobs.

After all, doesn't a steel worker earn more than someone working at the cosmetics counter at the department store at the mall? Well, yes, some service jobs pay less than some manufacturing jobs. But some pay a lot more. Like the jobs in the finance sector that Harold cites. He cites finance, I suppose, because it invokes the image of speculators moving pieces of paper around, doing nothing as real as making a car. But of course finance jobs pay very well."

He's responding to this article in the Washington Post that mentions that "manufacturing accounted for 25 percent of America's gross domestic product in the 1970s but just 12 percent in 2006." Russ points out that manufacturing output has tripled since 1970, despite its falling share as a percentage of GDP.

"Mandates: a Tool for Shaping Your Values" by Michael Cannon at Cato:

"This [quote] illuminates a driving force behind mandates. Advocates do not merely want to improve health and longevity. They want to change other people’s values. They want to make the uninsured value health and longevity more than the things that must be sacrificed to comply with the mandate — things like barhopping, education, starting their own business, etc. And they are willing to use coercion (or the threat of coercion) to do so. The debate over mandates is not just about how to reform health care. It is also about who shapes your values.

No wonder there are so many people in the health care industry who support mandates."

I thought this fit in nicely with what I talked about before regarding paternalism.

"Flighty Regulators" WSJ editorial:

"But it's worth keeping in mind that the airline industry is largely self-regulating, a system that works because airlines have every incentive to be safe. The economic costs of an accident have been known to put airlines out of business. It's no wonder that maintenance-related commercial plane crashes in the U.S. are almost unheard of."

This is just another argument about why more regulation of anthing doesn't necessarily make it better. As long as you let people and business pay for their mistakes, they will have their own incentives to regulate. This applies to finance as much as to airlines.