Monday, May 31, 2010

Happy Memorial Day!

A great day to relax with family and don't forget to thank a vet too.

Friday, May 28, 2010

Cities going broke

I hate to say it but I have a bad feeling that we are going to see more of these in the next couple of years.

Thursday, May 27, 2010

Liberal economic plan is working to perfection...

From USA Today we find out that government payouts are now larger than private paychecks:

Paychecks from private business shrank to their smallest share of personal income in U.S. history during the first quarter of this year, a USA TODAY analysis of government data finds.

At the same time, government-provided benefits — from Social Security, unemployment insurance, food stamps and other programs — rose to a record high during the first three months of 2010.

Those records reflect a long-term trend accelerated by the recession and the federal stimulus program to counteract the downturn. The result is a major shift in the source of personal income from private wages to government programs.

The trend is not sustainable, says University of Michigan economist Donald Grimes. Reason: The federal government depends on private wages to generate income taxes to pay for its ever-more-expensive programs. Government-generated income is taxed at lower rates or not at all, he says. "This is really important," Grimes says.

The recession has erased 8 million private jobs. Even before the downturn, private wages were eroding because of the substitution of health and pension benefits for taxable salaries.

The Bureau of Economic Analysis reports that individuals received income from all sources — wages, investments, food stamps, etc. — at a $12.2 trillion annual rate in the first quarter.

This is a worrisome trend that I don't see curtailing anytime soon with the wretched policies coming out of Washington.

Tuesday, May 25, 2010

The problem with regulation

Can you say regulatory capture? Economists have been studying this phenomenon for decades but some people simply are not convinced that it really does happen.

Monday, May 24, 2010

The Rand Paul kerfuffle

It is amazing how in three days so much has been written about Rand Paul and his statement about the Civil Rights Act of 1964. Here is one of the best I've read yet:

Even if Mr. Paul was speaking out of a principled belief in the rights of voluntary association, he was wrong on the Constitutional and historic merits. The Civil Rights Act of 1964—and its companion laws, such as the Voting Rights Act of 1965—were designed to address abuses of state and local government power. The Jim Crow laws that sprang up in the South after Reconstruction and prevailed for nearly a century were not merely the result of voluntary association. Discrimination—public and private—was enforced by police power and often by violence.

In parts of the mid-20th-century South, black men were lynched, fire hoses and vicious dogs were turned on children, and churches were bombed with worshippers inside. By some accounts, two-thirds of the Birmingham, Alabama, police force in the early 1960s belonged to the Ku Klux Klan. State and local government officials simply refused to acknowledge the civil rights of blacks and had no intention of doing so unless outside power was brought to bear.

The federal laws of that era were necessary and legal interventions to remedy the unconstitutional infringement on individual rights by state and local governments. On Thursday Mr. Paul finally acknowledged this point when he told CNN, "I think there was an overriding problem in the South so big that it did require federal intervention."

One tragedy of that era is that the frequent use of "states rights" arguments to defend Jim Crow discredited those arguments for decades and eased the way for federal intrusions on state power that really are unconstitutional.

Here is another one.

Contending that only government power saved us from slavery and Jim Crow, it ignores the role of private power – the abolitionists, and the civil rights movement – that brought about that government power. More important, it invites us to believe that government had little or nothing to do with slavery and Jim Crow in the first place when in truth we would have had neither without government’s creation of those legal institutions, with legal sanctions that kept them in place. Indeed, it is limited government, government limited to securing our rights, that is the surest guarantee against those twin evils.

Comment: If Paul had explained the historical fact that it was government power (in this case, state power) that knuckled private businesses to impose a racist law they did not want, he would have weakened the liberal notion that if private businesses are left to their own devices that they will certainly all be discriminatory. That is simply not the case. Jim Crow was state sanctioned racism. It is a historical fact that private owners of streetcar, bus, and railroad companies in the South lobbied hard against the Jim Crow laws. After the law was passed, they unsuccessfully challenged the law in court. These private businesses also implemented the law very sporadically in the beginning until some employees and even management were threatened with jail time if they didn't stop ignoring the law.

Private business did not want Jim Crow.

More from Power Hungry...

More from Robert Bryce's book "Power Hungry" --Chapter 13.

In this chapter, I learned that all hybrid vehicles like the Toyota Prius are manufactured with rare earth materials called lanthanides. In fact, these rare materials are used heavily in solar panels and wind turbines too. And without these materials, there can be no hybrids, wind turbines, or solar panels. Guess who has a de facto monopoly on lanthanides? China. And guess who also has a lot of the lithium for those high tech batteries in hybrid vehicles? China. (Chile, Argentina, and Bolivia also have lithium.) So, while we hear from environmentalists about the evils of imported oil from countries that hate us, depending on “green” technology will have us dependent on rare earth materials from at least some countries that don’t like us—China and Bolivia. We would be back in the same boat. Incidentally, the above is another reason why solar panels and wind mills are manufactured in China. They have the raw materials and the cheap labor. So when Obama spoke about “green” collar jobs making solar panels and wind mills…well, those jobs would actually be created in China.

Sunday, May 23, 2010

The Median CPI and Bees explained!

This is a fun video explaining median CPI.

HT: Carpe Diem

Saturday, May 22, 2010

The Big Payoff and the Big Comedown

This portion from Mortimer Zuckerman's article in the WSJ
needs some attention:

It is not an accident that in framing the national stimulus program in 2009 Congress directed a stunning $275 billion of the $787 billion as grants to the states to support public-service employees in health care, education, etc.

So now that stimulus funds have dried up, I guess states are going to have to do what they were able to push off with stimulus funds--make some deep cuts to state spending. The public sector workers and their unions got a sweet deal from Obama. Now it's time to sober up.

Thursday, May 20, 2010

More from Power Hungry...

More from Robert Bryce's book "Power Hungry" --Chapter 12. The most salient point in this chapter could be summed up easily:

1) “Every megawatt of wind power that is added to a given electricity system must be backed up with a megawatt of gas-fired generation.” That’s right. If your city or county or state decides to add wind mills to it electricity generation, it then needs to either add a back up or it needs to currently have enough energy capacity in the existing system to kick in when the wind doesn’t blow. And those “back-up” forms of generation must always be manned 24/7 just in case they are needed. Think about that for a minute. If you are a public utility and you are mandated to generate some of your power from wind, you know that this means more employment, more overtime pay for you workers, more capital equipment expenditure—all at the expense of taxpayers and customers that have to pay higher prices. This is a pretty sweet deal for utilities. Additionally, you have “green wash” cover by politicians, environmentalists, and the poor deluded average citizen that believes that something good is being done for the environment while shelling out more for electricity.

More to come.

Monday, May 17, 2010

Power Hungry--The truth about "green" energy exposed continued

More from Robert Bryce's book "Power Hungry" . Chapter 11 deals primarily with T. Boone Pickens and his attempt to sell Americans on his plan. Of course, and no surprise to me, the Pickens plan was just an elaborate way of separating taxpayers from their money. However, there was one piece of information that I found interesting in chapter 11 concerning wind farms and that gets very little press:

1) Oil companies and power utilities have been fined heavily for killing birds. Many of which are protected under the Migratory Bird Treaty Act (MBTA).

2) Despite the fact that wind mills are very effective bird Cuisinarts, they seem to have been exempted from MBTA.

3) “Michael Fry of the American Bird Conservancy estimates that between 75,000 and 275,000 birds per year are being killed by U.S. turbines.” This includes golden eagles.

4) Wind turbines also threaten bats.

At the end of this chapter, I concluded that the environmental movement and wind farm advocates consider birds to be an acceptable collateral damage on the road to the renewable energy utopia. Funny that they don’t hold wind power as accountable as other forms of energy generation when it comes to preserving nature.

Saturday, May 15, 2010

Power Hungry--The truth about "green" energy exposed

A couple of days ago, I downloaded Robert Bryce's book "Power Hungry" to my kindle and I am about 1/3 of the way through it. The book is a trove of information on alternative energy and how unrealistic it is as a quick fix replacement for the much derided fossil fuels we depend on. I'm going to post some of the more salient points from some of the chapters as a reference for myself and others who may be interested in the information.

Chapter 10 dealt with Denmark and its wind-power generation. Here are some quotes and notes to ponder:

1) "Despite massive subsidies for the wind industry and years of hype about the wonders of the Denmark's energy policies, the Danes now have some of the world's most expensive motor fuel. And in 2007, their carbon dioxide emissions were at about the same level as they were two decades ago."

2) Denmark is an oil exporter because it has been very aggressive with its off-shore oil drilling in the North Sea. "Between 1981 and 2007, the country's oil production jumped from less than 15,000 barrels per day to nearly 314,000 barrels per day--an increase of 2,000 percent."

3) Despite its wind power generation, Denmark continues to import coal for electricity generation: Wind power will always need a back-up when the wind doesn't blow. Denmark also supplements their wind power with hydropower from Sweden when the doldrums come for an extended stay.

4) Denmark boasts near-zero energy consumption between 1981-2007 but this is achieved primarily due to near zero population growth and high energy taxes.

5) Electricity rates in Denmark are the highest in Europe. Danes shell out $.38 per kilowatt hour while the French pay $.17 per kilowatt hour. Americans pay $.10 per kilowatt hour.

6) "The Danes are among the most oil-reliant people on earth. In 2007, Denmark got about 51 percent of its primary energy from oil. That's far higher than the percentage in the U.S. (40%) and significantly higher than the world average of 35.6...Denmark is also more coal dependent than the U.S., getting about 26% of its primary energy from coal while America gets about 24% of its primary energy from the carbon-heavy fuel."

More to come.

Friday, May 14, 2010

Greece is the start of the avalanche

This is a great video by Freedomain Radio. Here are some salient points:

1) 20-30% of the Greek population works for the government.

2) Many Greek government workers can retire with a pension in their 40's!

3) Greek government workers work for 12 months but get paid for 14!

4) Greece was able to join the E.U. only by hiding its debt through swap agreements.

5) Greek taxpayers pay 44% (employees pay 16% and employers pay 28%) of salary for social security!

6) You will notice in this video that protestors have a penchant for red flags and Marxist inspired signs.

7) The ending comments on inflation, debt, and statism are spot on.

Thursday, May 13, 2010

Deficits, Debts and Unfunded Liabilities

Some the trenchant points in this Center for Freedom and Prosperity video:

1) Federal deficits will average $1 trillion per year from now on.

2) The national debt is 60% of GDP today but is set to rise to 90% of GDP by 2020.

3) The Public Held Debt is how much money the federal government has borrowed from private credit markets to finance deficit spending--this stands at $9.9 trillion!

4) The Gross Federal Debt includes the Public Held Debt plus what the treasury has borrowed from other government accounts--such as the social security trust fund--and this debt stands at $14.5 trillion!!

Is it no wonder why gold has hit a new record high of $1,242.70 an ounce.

Wednesday, May 12, 2010

Another "Stimulus" failure

Now that stimulus funds are drying up, states are going to have to do what they should have done over a year ago--tighten their belts, come clean with residents. They were able to "kick the can down the road" waiting for a better tomorrow that hasn't come. Now the pain will be more severe.

This is one of the reasons why I was against the "stimulus" package. It was obvious to me that state politicians would much rather take the easy way out of not doing the unpopular task of cutting public services but accepting a federal crutch to buy time out of a financial disaster. The incentive to do the wrong thing was simply too juicy to pass up.

The Toxic Twins keep on sucking taxpayer funds

Two of the main causes of the housing boom and bust, Fannie Mae and Freddie Mac, continue to weigh heavily on taxpayers. Here is an abstract from the Boston Globe:

Fannie Mae has again asked taxpayers for more money — this time $8.4 billion — after reporting another steep loss for the first quarter. The taxpayer bill for rescuing Fannie and its sibling Freddie Mac has grown to $145 billion — and the final tally could be much higher.

The rescue of Fannie and Freddie is turning out to be one of the most expensive aftereffects of the financial meltdown, and Fannie Mae’s first-quarter financial report yesterday made it clear there is no end in sight.

“The losses are not going to stop soon,’’ said Anthony Sanders, a finance professor at George Mason University, who warns the housing market is likely to drop sharply again this year.

Late last year, the Obama administration pledged to cover unlimited losses through 2012 for Fannie and Freddie, lifting an earlier cap of $400 billion. And with the housing market still on shaky ground, Obama administration officials say it is still too early to draft any proposals to reform the two companies or the broader housing finance system.

Republicans, on the other hand, argue that the sweeping financial overhaul before Congress is incomplete without a plan for Fannie and Freddie. They propose amending the legislation to transform Fannie and Freddie into private companies with no government subsidies or shut them down completely.

The legislation “touches nearly every corner of the economy,’’ Alabama Senator Richard Shelby said in the GOP weekly radio and Internet address over the weekend. “But these major contributors to the crisis are left unscathed,’’ he said, singling out Fannie Mae and Freddie Mac.

Democrats call such arguments a diversion. They say Congress already gave the government far more power over Fannie and Freddie nearly two years ago when lawmakers passed a bill that set the stage for a government takeover over of the companies in September 2008.

Fannie and Freddie operate “in a manner entirely different than they had been during the crisis period, precisely because Democrats acted — in collaboration with the Bush administration,’’ Representative Barney Frank, Democrat from Newton, Mass., wrote last week in a memo to White House chief of staff Rahm Emanuel. Their losses “occurred before we took the first step towards reforming them . . . nothing we could do today will diminish those losses.’’

Comment: I find it extraordinary that Democrats still want to run interference for these two entities. When Fannie and Freddie were nationalized, I knew that they would continue to be used as a political tool for the current administration. BTW, all of their debt is "off the books." So, most Americans are not aware of the $5.5 trillion liability looming in the shadows. Can anybody say--Greece?

Here is another news link on Fannie Mae and it's massive debt.

Monday, May 10, 2010

Economics in one lesson

Henry Hazlitt can be heard reading a passage from his classic book; it is still very relevant today.

Wednesday, May 5, 2010

The Louisana oil spill and liberal dreams

This WSJ piece on off-shore drilling and the Louisiana accident is right on the mark:

As the oil in the Gulf of Mexico moves toward the Louisiana and Florida coasts, the left is already demanding that President Obama reverse his baby steps toward more offshore drilling. The Administration has partly obliged, declaring a moratorium pending an investigation. The President has raised the political temperature himself, declaring yesterday that the spill is a "massive and potentially unprecedented environmental disaster."

The harm will be considerable, which is why it is fortunate that such spills are so rare. The most recent spill of this magnitude was the Exxon Valdez tanker accident in 1989. The largest before that was the Santa Barbara offshore oil well leak in 1969.

The infrequency of big spills is extraordinary considering the size of the offshore oil industry that provides Americans with affordable energy. According to the Interior Department's most recent data, in 2002 the Outer Continental Shelf had 4,000 oil and gas facilities, 80,000 workers in offshore and support activities, and 33,000 miles of pipeline. Between 1985 and 2001, these offshore facilities produced seven billion barrels of oil. The spill rate was a minuscule 0.001%.

According to the National Academy of Sciences—which in 2002 completed the third version of its "Oil in the Sea" report—only 1% of oil discharges in North Americas are related to petroleum extraction. Some 62% of oil in U.S. waters is due to natural seepage from the ocean floor, putting 47 million gallons of crude oil into North American water every year. The Gulf leak is estimated to have leaked between two million and three million gallons in two weeks.

...As for a drilling moratorium, it is no guarantee against oil spills. It may even lead to more of them. Political fantasies about ending our oil addiction notwithstanding, the U.S. economy will need oil and other fossil fuels for decades to come. If we don't drill for it at home, the oil will have to arrive by tanker and barges. Tankers are responsible for more spills than offshore wells, and those spills tend to be bigger and closer to shore—which usually means more environmental harm.

Comment: The wailing at liberal blogs regarding this horrible accident has, of course, reached its expected perfervid pitch. And I see the usual cavil arguments about a de-regulated oil industry prompted by George W. Bush prevented the use of an acoustic switch which would have prevented all of this mess. All of this is of course unfounded. Some countries do mandate the use of an acoustic switch (Norway, Brazil) and some do not (U.K.). U.S. regulators decided against the use of the switches because of cost and reliability issues. I tried to point out to one guy that all the acoustic switch does is set off the more central blowout preventer remotely and that subs had tried to activate the blowout preventer manually with no success which means that the acoustic switch may not have mattered one way or another. The blowout preventer is malfunctioning. He was not impressed with my argument but instead deleted my post. Classy.

I also made the following observation at other blogs when liberal bloggers were quick to jump on the "drill, baby, drill" crowd and their point on how safe off-shore drilling is: When an airliner tragically crashes and kills everyone aboard, does anyone suggest that society should revert back to ocean liners to get from, let’s say, Boston to London? No. When there is a pile up of cars where passengers are killed, does anyone suggest that society revert to the alternative of horse and buggy? No. Accidents happen even in a perfect world and no reasonable person is going to revert to a lower standard of living because of the threat of the odd incident. So why is oil held to a different standard than other technologies?

Oil is utilized in some form in every stage of production for a constellation of goods. How are you going to make medical devices, medicine, fertilizer, parts for vehicles, etc. without petroleum? Our economy would come to a standstill without it.

There are almost 4,000 oil rigs in the Gulf of Mexico that have been operating for years without an accident of this magnitude. This event is a clear outlier in an industry that has done a remarkable job with safety.

The usual argument I read at some liberal blogs is that we need to reduce our consumption of oil so that we don't have to drill as much. I find it astonishing that anyone could believe that this is possible with a growing population and a growing (I hope) economy. Even Denmark which is held up as a wind-mill utopia by liberals has INCREASED its off-shore drilling aggressively and its IMPORT OF COAL in order to meet rising demands. Additionally the Danes have to live with some of the most expensive gas and electricity prices in the world. And that's with very little population growth (just slightly above zero) compared to the U.S. Between 1998 and 2008, the Danish population grew by just 200,000 people. During the same time period, the U.S. population grew by 33 million people. So, I find it shocking that anyone would believe that we could "conserve" our way to less oil consumption.

Trust me, if the U.S. stops its off-shore drilling, countries like Denmark, Norway, Brazil, the U.K., China and others, are going to continue to expand and to be aggressive with their off-shore programs and we will have to depend on them to supply us and the rest of the world.

Monday, May 3, 2010

We don't need less investing and savings, folks

Dan Mitchell does a brilliant job at explaining the dis-incentive to save and invest with the capital gains tax.

Price controls, write-downs, and ObamaCare

I'm still guest posting over at The Bobo Files once a week. This week's entry deals with the write-downs that several major companies are going to have to do because of ObamaCare. Last week's post dealt with price controls and ObamaCare. Check them out when you can.

Sunday, May 2, 2010

The Greeks will get some of your hard earned money

Congratulations, dear American taxpayer. You get to shore up Greek profligacy. Ruminate on this when the austerity measures fail and the welfare-state loving Greeks are back to the streets putting bricks through windows. I've read several news articles on this and not a one mentions that the International Monetary Fund is largely supported by American taxpayers. I wonder why?