Federal budget deficit spurs back 1 year T-Bill

Since our federal government can’t seem to balance the budget, the feds have decided to bring back the one year Treasury bill. I wish I could say that this is a good thing.

Critic of climate change silenced?

The issue of climate change has become so politically and emotionally charged that even scientists are becoming acrimonious with one another. Al Gore likes to say that the debate over global warming is over. But William Grey begs to differ.

VH news roll for Wednesday.

A larger no drill zone off California: Say “bye-bye” to potential future supplies of oil and gas. I understand that taking care of our environment is important. But...

Sneaky ways to get better gas mileage: since we have no plans to explore for our own oil.

Tips for improving gas mileage: Drafting behind big rigs not encouraged.




Public schools and the Union

From Reason TV:

Vikki Reyes has had it with Locke High, the school her daughters attend in the Watts neighborhood of Los Angeles. She walked in on class one day and recalls “the place was just like a zoo!” Students had taken control, while the teacher sat quietly with a book.

Comment: I grew up in a rough part of N.Y.C and I also had the misfortune of having attended a high school that was very much like the one portrayed in this video. I am convinced that the only way to improve our public schools is by creating the market incentives that do not exist now in education. Teachers unions like to talk about how much they care about our kids but the results, as seen in this video, are almost always less than desirable.

VH news roll for Monday.

Hugo Chavez threatens to expropriate steelmaker Sidor because he doesn’t want to pay what the shareholders are asking for; this is not a good way to entice foreign investment in your country, Chavy.

In a world spooked by climate change, an old technology is being entertained for long distance travel--zeppelin’s. It would only take (gasp!)40 hours from N.Y.C. to London. Don’t sit me next to the screaming kid, please.

Texas wants a reprieve from bio-fuel standards: More proof that corn ethanol is a disaster.

The Milton Friedman Prize

Congratulations to Yon Goicoechea for being a thorn in Hugo Chavez’ side.

Happy Friday!

Here is a funny little clip from the Onion regarding child-care.

Report: Many U.S. Parents Outsourcing Child Care Overseas

VH news roll for Thursday

Gas prices in Newfoundland soar and they heavily regulate their gas prices.
There is resistance to federal meddling in the housing crisis.
US deficit at record high and rising...and with the economy slowing down do we really need to raise taxes?
Schools fall short despite 25 years of reform: Progress still eludes our public schools.

The last Maoist collective in China goes capitalist.

It seems that the last bastion of the Maoist collective in China has called it quits and has moved to adopt capitalism. The idyllic village of Nanjie was a model of clean egalitarianism. It was noted for, “it’s well-kept apartments and spacious schools.” I'm sure that Progressives everywhere had their hearts swell with great satisfaction when learning of the fairness of Nanjie: The village provided “free housing, schooling and health care, supporting a standard of living so much better than surrounding towns.” But like most attempts at a collective society where everything is “free,” this workers utopia in central China was a bankrupt illusion.

No real changes in Raul Castro's Cuba

From the Christian Science Monitor

On Monday morning, Pollán and nine other Damas were roughed up by a mob and arrested near the offices of President Raúl Castro. "We are here to demand the release of our husbands and won't leave until they are free or they arrest us. We have waited long enough, we want to talk to the new president," Pollán said, according to Reuters.

Moments later, a bus pulled up and about 20 female corrections officers tried to arrest the women, who sat on the sidewalk, clasped arms, and refused to move. A mob of about 100 Cuban government supporters, mainly women from nearby government buildings, joined the fray, picking the Damas up, throwing them into the waiting bus, and yelling insults, Reuters reported.

Comment: While there have been some small amounts of liberalization in Cuba since Raul Castro took control from big brother Fidel in February 2008, the island nation continues to exhibit its brand of intolerant socialism. This is a reality check for those who believed that sweeping reforms would move quickly through the country once Fidel gave up the reins. F.A. Hayek once said: “Dictatorship is the most effective instrument of coercion and the enforcement of ideals.” Cuba remains a dictatorship until further notice. Stay tuned.

Raising Taxes on a Weak Economy.

In the last presidential debate (you know, the now infamous “Stephanopoulos” debate on ABC that has caused so much wailing and howling from Democrats), Charlie Gibson asked, Senator Clinton and Senator Obama, very good and revealing questions regarding taxes. Aside from letting Bush’s tax cuts lapse, we all know that both senators have plans to raise capital gains taxes, and in Obama’s case, he also has his sights set at lifting the cap on wages. Now, here is what I was thinking when I was watching this debate and particularly the subject of raising taxes. If the American economy is still weak and sluggish in 2009 and one of these two is president, are they still going to go ahead and raise taxes? From all that I have heard for months from Hillary and Obama, I think that this is very likely scenario. If the economy is still in the doldrums come 2009, raising taxes when the economy is hardly growing in order to satisfy an ideological dogma would be a sure-fire way to sink the American economy. I commented on a liberal blog about this very likely scenario just last week and I didn’t get a straight response from anyone.

The next president is going to have a very difficult time putting our fiscal house in order: The federal budget deficit is at about $9 trillion and that doesn’t include unfunded entitlement obligations (Social Security and Medicare) that total up to about $73 trillion. This brings me to the other pair of questions that goes unanswered on liberal blogs when I ask them: When baby boomers start to retire en masse and they start using the services that were promised to them, how are we going to pay for them AND for the universal health care for every citizen in America that liberal Democrats pine for? How high are taxes going to have to go? I have never gotten a satisfactory answer to those two questions.

In U.S. News, James Pathokoukis noted the plethora of government programs that Obama wants to implement if he becomes president. Obama, “wants to reduce carbon emissions by 80 percent through a cap-and-trade system, proposes creating a ‘credit card Bill of Rights,’ advocates expanding the Family and Medical Leave Act, and, of course, touts a healthcare plan that would get the government involved in the sector as never before.” I don’t know about you but that long expensive list doesn’t seem like its going to fit Obama’s well known promise of not wanting to increase the deficit.This all seems like a lot of false promise and lot's of "hope."

If one of the Democrats do indeed get into the oval office in 2009 and they raise taxes on a weak or slow economy, they are going to find that all of their pet progressive programs are going to go up in smoke: There is a danger that raising taxes while the economy is in a slump may not only reduce revenue, but also kick start the sort of dreaded stagflation that haunted our country during the 1970's. There is one thing that was well illustrated by Bill Clinton in 1997--He cut capital gains taxes from 28% to 20% and he ended up with a budget surplus. It seems that the current crop of Democratic candidates have forgotten that bit of his presidency. Why? Are they so consumed to pander to populist sentiment in their zeal to get elected that they will say and do anything? Even populist politicians can become unpopular when their big government works projects don't work out as planned. They would do well to remind themselves of this well worn fact.

PBS Newshour explains the 2008 credit bubble.

Here is a video on our current housing troubles and credit issues brilliantly explained by the PBS Newshour.

Obama, Hillary, McCain-telling the truth?

Our political candidates can duck and cover but they can’t escape the vaunted ”Truth-o-meter!” It’s too bad we can’t hook them up to one of these contraptions when they have their so called “debates.” (If one really existed, of course.) It would be so much fun.

California unemployment at 6.2%

The unemployment rate here in California is third highest in the country. The current political impasse regarding the state budget will only get uglier and nastier. The state of California has an $8 billion budget deficit.

Update: According to the S.F. Chronicle today (4/20), the budget deficit may actually be at $11-14 billion.

$4-per-gallon gas

From the San Francisco Chronicle:

While Buehlman said he despises the oil companies, he's grateful that soaring gas prices are prompting him and others to reduce the amount they drive.

"I look at it as a gift, a blessing," he said. "The profiteers are giving us the opportunity to make a decision to do something better for our planet, for our community."

Comment: Market forces are at work. As the price of gasoline rises, consumers will invariably begin to adjust their behavior by curbing their gasoline consumption. The big “guess” by many economists was where exactly is the price point at when demand would start to level off and then start to decline. It seems that in California, particularly the San Francisco bay area, that magical point may be about four dollars.

There are many people in the bay area and around the country who do not understand how the economics of the oil industry work. If you couple that with the quotidian cynicism of recent times—Well, you tend to get quite a bit of the type of quotes that you see above; an irrational and emotional response to higher gas prices. Of course, having local politicos pander to these sort of views doesn’t help either.

The Corporate World

Life in the corporate world can be terribly demoralizing if you happen to work at a crappy job. Here’s hoping that your work-life is a happy one.

Gold vs. Dollar

Here's a video most Ron Paul supporters will love and understand.

The Flat Tax and The Fair Tax.

From the Club for Growth.

Dan Mitchell has been a flat tax advocate for years with the Cato institute. He does excellent work. I highly recommend reading any of his policy briefs. I hope everyone put their tax filings in the mail on time this year.

U.S. Farm Bill deadline looms

I’ve commented on the extravagance of the farm bill several times on this blog and every time I read an updated report on this bill, I am simply amazed at the largesse and scope of this massive government program. Additionally, most people I talk to have no idea that this bill has a lot more to it than just subsidies for farmers. This farm bill includes the following gratuitous programs: food stamps, nutrition programs, conservation programs, and even energy programs (includes 2.5 billion for the folly of bio-fuels). Now, I realize that the possibilities that the farm bill will ever be scrapped or scaled back are positively remote. So, I’m not going to get my hopes up. It will be interesting to see who supports this classic boondoggle.

The U.S. ranks 164th in account balances.

From one of my favorite blogs by Mark J. Perry - Carpe Diem

The CIA has compiled a list of countries and where they rank as far as account balances are concerned. I noticed that on this list, there are some large and rich economies towards the bottom of the list.

The price of beer in 154 countries.

So, after a hard day’s work dealing with inane crap from your lousy co-worker/boss, it’s time for a pint. (Or perhaps you just love your co-worker/boss and want to throw back a few.) But what if you’re traveling? What does beer cost in Amsterdam or London? Never fear, click here!

So, what’s your dream job?

Despite what many would think, a great job doesn’t need to have all of the niceties that one would think it would have to have in order for it to be a “dream job.” A few simple things will suffice.

A city in Ohio tires of failure.

After years of trying and failing, the city leaders of Youngstown in the state of Ohio have decided that instead of trying to attract new businesses into their city, they will simply raze dilapidated buildings and tear up blighted streets. They will turn eyesores into open green spaces. At first, I thought this was a good idea. But then I realized that the city will be spending public funds on what is called “project 2010.” The article doesn’t say how much exactly but hiring heavy equipment and the workers that man them can’t be cheap. Couldn’t those funds go towards something else? I understand that living near eyesores can be demoralizing but it doesn’t sound like the city of Youngstown is overflowing with the sort of tax revenue that would allow them to take such drastic measures.

And then I started to think about the Democratic primary in the state of Ohio and how all of Ohio’s economic issues were cast with the greater national debate regarding the economy, NAFTA, and union jobs. The state has indeed seen tough times. But it is largely due to its own doing. Industries have been leaving Ohio and none have come to take their place because the state is simply not business friendly and it also taxes its citizens quite a bit too: The state of Ohio has the third highest corporate income tax in the country (10.5%) and the sixth highest personal income tax (8.87%). Why move your business to Ohio when the state of Texas, for example, has far lower corporate taxes and no state income tax? Is it any wonder that the state of Texas is booming while Ohio has been in an economic rut for years?

It seems to me that there will be more defeated little cities like Youngstown in the state of Ohio until politicians there wake up and smell economic reality.

Food prices concern world leaders

Regarding ever-rising world food prices and the biofuel crops that caused them, it seems that riots and angry mobs have started to get the attention of some world leaders. It’s funny how that works. World leaders cause the problem in the first place, and then when their bad plan doesn’t work and a brick goes through a couple of windows, they come up with new bad ideas.

My favorite line in the article: “Mr Zoellick and Mr Strauss-Kahn said more work should be done on possible links between biofuel crops and food prices.” Genius.

Free markets and free people.

The New York Times had a piece on my favorite economist this weekend- Milton Friedman . Take some time and read through it when you can. Milton Friedman was one of the great intellectuals of 20th and 21st century America. The NYT does inject it's political slant but that is expected.

The ugly face of inflation.

From The Wall Street Journal (subscription may be required):

“The Federal Reserve is sharply cutting U.S interest rates -- the opposite of the usual response to rising inflation -- to prevent the housing bust and credit crisis from causing a deep, prolonged recession. That's making the global response to inflation more complicated.”

“On Wednesday, the World Bank estimated global food prices have risen 83% over the past three years, threatening recent strides in poverty reduction. The IMF forecast consumer prices in emerging and developing countries will rise 7.4% this year, the most inflation since 2001 though still well below the double-digit levels of the recent past.”

“As crops are sold for alternative-energy production, food prices have soared: The price of rice, the staple for billions of Asians, is up 147% over the past year.”

Comment: In another example of how the global economy is intrinsically tied together, we now have the threat of record high global inflation. Every time the Fed makes a move downward on interest rates, countries that have their currency tied to the dollar get a kick up in inflation. Of course, the two primary forces in all of this are food and energy prices. And I do believe that we are moving into an era where these two drivers are going to have a deleterious effect on the world economy for some time to come. As long as the U.S. continues to subsidize corn for use as ethanol and as long as the global energy infrastructure stays in its current modality, we are going to see slightly higher global inflation for some time. In this sense, I disagree with the articles rosy conclusion that an economic slowdown in the U.S. and Europe will quickly stabilize inflation as has previously occurred in history. The IMF also noted that world economic growth has slowed due to the financial crises in the U.S. The theory of a “decoupled” world economy (from the U.S. particularly) seems to hold little value.

Oh no! Gas Emissions!!

It seems that the European Union is having a very difficult time controlling gas emissions. They are hoping that the carbon trading scheme that they are relying on starts to work the way that they had intended it to do. Unfortunately, there were too many carbon credits doled out at the start of the program and the value of the credits and their supposed incentive did not materialize. We do know that the E.U. just loves depicting itself (see my last post here) as being far more environmentally responsible than the U.S. while claiming that industry can only benefit from a cap-and-trade scheme. I say forget cap-and –trade and if we must have pollution control than just have a carbon tax. It will save us from a lot of headaches.

The grass is always greener on the other side.

While the U.S. has experienced a downturn in its housing it seems that Canadians are still riding a real estate wave. The city of Toronto is having itself a condo boom. I say good for them. I hope that they keep it up for as long as possible. One interesting point on Canadian mortgages that the article mentions and that I did not know: “Canadians can’t deduct interest on their mortgages from their income tax like homeowners in the States, [so] people here tend to pay off their mortgage faster.” I’ve always felt that the mortgage interest deduction basically works as a middle-class entitlement. Should the federal government continue to have this tax-break when there are plenty of institutions around to lend (yes, even when times are tough) to qualifying consumers? Is it possible that this incentive is one of many factors that have driven undue speculation in the real estate market? I do believe that it has done so. Of course, abolishing such a popular tax-break would be politically unfeasible in the U.S. Our Canadian neighbors have correctly avoided this entitlement trap.

A Reversal on School Choice

It seems that long time school choice advocate Sol Stern has expressed doubts on the free-markets ability to enhance public education; His change of opinion on the matter is a serious blow to free-market advocates. In his City Journal piece, Mr. Stern points out that one of the reasons that he has come to his new conclusion is due to the perceived failure of the Milwaukee voucher program; A program in which he was a lauded proponent. As Mr. Stern states of the programs fifteen year run, “no ‘Milwaukee miracle,’ no transformation of the public schools, has taken place.”

What I found most striking about Sterns conclusion about the Milwaukee voucher programs difficulties and struggles was that Stern completely missed the real cause of its problems. Milwaukee's voucher program was hamstrung from the start because it never operated in a true free-market. The voucher program was capped at 1,500 students for the first eight years. Can you imagine any other industry being forced to cap it’s customers for that length of time? It’s no wonder that Catholic schools are closing down all over the country as Stern states in his article. The game was rigged from the get-go. Stern suggests that it is possible, “to create the conditions for vigorous market competition within public school systems, with the same beneficent effects that were supposed to flow from a pure choice program.” But I think that he is simply looking through the wrong end of the telescope because there are still no real incentives for long term and institutional reform. Or that the power of special interests will be curbed as Stern himself admits. Perhaps Mr. Stern and others like him should take a closer look at Sweden, and they should ask themselves why a notoriously welfare-state has done so well with their school choice program.

Chavez nationalizes cement industry

From the Associated Press:

"President Hugo Chavez on Thursday ordered the nationalization of Venezuela's cement industry, saying his government cannot allow businesses to continue exporting raw materials needed to help tackle a domestic housing shortage."

"Prior to Thursday's nationalization order, Chavez had already moved to nationalize Venezuela's largest telecommunications company and the electricity sector, slap new taxes on the rich and impose greater state control over the oil and natural gas industries."

Comment: Well, it looks like Chavez continues to turn the thumbscrews on his economy and his people. Nationalizing the cement industry will have short term benefits but will create shortages, inefficiencies, and it will cost the government a pretty penny. This is just another item that Chavez has added to the public debt. How long do you want to bet that cement output starts to decrease after nationalization? Look how much oil production has dropped off after that industry went public and Chavez pushed out some of the private companies.

And in other news regarding Chavez from the Times Colonist:

"Venezuela is preparing a "windfall" oil tax to boost the OPEC nation's revenues from record crude prices, only months after leftist President Hugo Chavez's nationalization crusade forced out two of the world's largest energy companies."

"The move extends Chavez's broad campaign to boost state control over oil operations that led to legal battles with Exxon Mobil and ConocoPhillips and helped spark a wave of resource nationalism throughout the Andes."

'"Because of high oil prices, oil companies have excessive earnings that go beyond reasonable levels of profitability," Legislator Angel Rodriguez told state news agency ABN."

Comment: Chavez and House Democrats (and some Republicans too) have something in common when it comes to “windfall” profit taxes. Great minds think alike, eh?

The Farm Bill

“Democrats are committed to ending years of irresponsible budget policies that have produced historic deficits. Instead of compiling trillions of dollars of debt onto our children and grandchildren, we will restore pay-as-you-go budget discipline."

--Speaker Nancy Pelosi, December 12, 2006

When the Democrats gained the majority in congress after the fall ’06 elections, there was a notable, if not highly vociferous, cheer by their liberal supporters. To them and their then newly-minted political champions, the country had smartly started to repudiate the destructive political acrimony of George W. Bush and his neo-con cabal - a demoralizing, wasteful, and degenerate band of wily thieves absconding with everything America stood for. The new house Democrats with the left’s stamp of approval would come to the country’s rescue: They would resuscitate the flailing moral body that is America at odds with itself and also bring back some semblance of fiscal responsibility, fairness, and equanimity to politics.

Months ago when Senate Democrats and House Democrats gave up on their false promise of ”pay-as-you-go” it wasn’t as if it was much of a surprise that they would abandon a plan that was far from feasible but that they actually had the audacity to claim that they could deliver on that promise in the first place. Puzzling still was that there were people that actually believed that they would come through with their promise!

And so here we are at April 2008 with a looming juggernaut of a farm bill that is larger than the one proposed by President Bush back in 2002 (that totaled to 260 billion dollars). It seems that the farm lobby will get the lavish subsidies it wants while a limp Democratic majority led by Nancy Pelosi will do very little to curb it’s appetite for taxpayer dollars. Attempts by a few intrepid congressmen to trim the fat off the farm bill have fallen flat on its face due to the amount of leverage the farm lobby has been able to exert:

“The agribusiness industry plowed more than $80 million into lobbying last year, according to the nonprofit Center for Responsible Politics, which tracks spending on lobbying. Much of that was focused on the farm bill.” (WSJ, 5/27/08, Farm lobby beats back assault)

Despite the fact that farm incomes have hit record highs over the last several years, farmers are about to get paid and it’s going to be sweet for them. “Farmers” like oil-baron billionaire David Rockefeller who will happily receive a fat subsidy from taxpayers.

Recently, in an act of political grandstanding, congress paraded oil executives in a circus of pretend chastising. But where are the executives of the large agri-business that have made record profits over the last several years due to high commodity prices? And why isn’t someone calling to end corporate welfare for farmers as they do for Big Oil?

This is surely one of those cases where the interests of the American taxpayer have been quietly subverted aside just as economist Bryan Caplan correctly characterized in his recent book, The Myth of the Rational Voter: “While the voters sleep, special interests fine-tune their lobbying strategy. Just as voters know little because it doesn’t pay, interest groups know a lot because-for them-it does.” While Democrats should not be altogether faulted for their inability to stop the largesse that powerful lobby’s curry - Republicans are equally as complicit – they’re lame attempt to paint themselves as fiscally responsible is a powerful reminder of how politicians will try their hardest to appear as if they have their constituent’s interests at the forefront of their public work. But as we have seen with the farm bill and the mighty farm lobby, all we really get from politicos is a lot of hot air and false promises.