Monday, January 31, 2011

Disappointing

Here, the WSJ chronicles some political pandering of Newt Gingrich.  I had not known that Gingrich was a lobbyist and supporter of the ethanol subsidy.  What a disappointment. 

Subsidizing ethanol for use as fuel in autos is one of the goofiest ideas the politicians have pushed off on we the people.  Having learned that Mr. Gingrich favors such idiotic ideas, his political stock plummeted for me.

Thursday, January 27, 2011

Should Congress Raise the Debt Ceiling?

In a word, no.  Here, in his usual clear and concise manner, Robert P. Murphy explains the issue in terms we can all understand.

He notes at the end of the article,
"Perhaps the strongest argument for not raising the debt ceiling is that the United States is bound to default — whether explicitly by reneging on payments, or implicitly by massive inflation — at some point anyway in the next decade or two. The government's own projections show the debt quickly rising to alarming levels under certain assumptions, and none of their models deals with the possibility of a continued depression and a collapsing dollar."
I keep saying it, hoping that repetition will finally get folks to give it a thought:  you can't borrow what hasn't already been produced and saved.  Even the U.S. Treasury can't.   

Wednesday, January 26, 2011

Let Freedom Ring?

Not a chance.  Read here, how the basic rights of Americans are trampled by our lovely federal government and its minions.

Don't get me wrong.  I know we live in a world with people who have no morality whatsoever.  I realize that people walk among us who are completely willing to steal your property, bash you head in, and blow up tens or hundreds of strangers --- all in the name of what they take to be either their right or their duty. 

So, yes, I believe we do need laws.  And sad to say, we will also need law enforcers --- police.  But we do not need TSA agents who are filled with certainty about their authority to violate the rights our Constitution guarantees. 

If you read the account I point to above, perhaps you will agree with me that whatever TSA agents were involved, and whatever FBI agents were involved, should themselves be sanctioned.  Perhaps you will agree with me that Aaron Tobey should be compensated --- with dollars levied as fines against the individuals who violated his First and Fourth Amendment rights. 

Or, perhaps you will disagree.  Perhaps you, like so many others, believe it is both right and necessary that TSA agents and FBI agents violate the Constitution.  As far as I can tell from available accounts, Mr. Tobey did not try to compel anyone to do anything at all.  He did not lie, cheat, steal, murder, rape, bash, smack, deceive with intent to defraud, or anything even remotely like compelling another to his will.  It was the TSA and FBI that did the compelling, utterly without warrant.

Mr. Tobey behaved morally; the government agents involved in the incident behaved immorally.  I would think differently about the whole deal, had Mr. Tobey initiated any kind of immoral act whatsoever.  Resistance to repel compulsion from another is not immoral.  It is initiation of compulsion that is immoral.

Wait, you say.  What does any of this have to do with a blog about economics?  Compulsion is compulsion, regardless of what government says is it's high and noble motive.  We are all compelled daily by our governments in all manner of matters economic.  Economic compulsion is also immoral.  Incidents like Mr. Tobey's seem to be cut from different cloth, but they are not.  

A Must Read

Read it here.  Not a new idea for readers of EconoBlast, but well stated, just the same.

A Regulator Is Coming Your Way Soon

Below, read about the gearing up of the new euphemistically named Consumer Financial Protection Bureau


Summer 2011 Undergraduate and Graduate Internships (10 Weeks)

The U.S. Treasury Department is currently working to execute the Dodd-Frank Act by building the Consumer Financial Protection Bureau (CFPB). The CFPB Implementation Team seeks undergraduate and graduate interns for the summer of 2011.

Description

This is an exciting and unique opportunity to participate in the ground-up construction of a brand new federal regulatory agency. Candidates should be comfortable managing multiple complex tasks in a fast-paced environment. Past intern projects have included: researching and analyzing consumer protection legislation; conducting legislative and regulatory research; researching issues in the field of consumer finance, such as mortgage and credit card disclosure policies; drafting talking points and memos; and providing administrative support. Law students will conduct legal research and writing, among other tasks, and will be supervised by attorneys.

Interns will be assigned to one of several policymaking teams, which are responsible for building the individual divisions of the CFPB. These divisions include, for example:

* Bank and Nonbank Supervision, which will review business practices to ensure that financial services providers are following the law;

* Consumer Response, which will operate a toll-free consumer hotline and website for complaints and questions about consumer financial products and services;

* Enforcement, which will enforce federal consumer financial laws;

* Research, which will collect and analyze information about consumer financial markets;

* Rulemaking, which will write new rules that are required by the Dodd-Frank Act; and

* Financial Education, which will seek to ensure that consumers have the information they need to make the financial decisions that work for them and their families.

Qualifications

Prior knowledge of consumer financial issues and /or law is helpful but not required. Candidates must be enrolled in a degree-granting academic program, have excellent analytical and writing skills, and must be comfortable using Microsoft Word, Excel, and PowerPoint.

Application

Candidates should submit a resume and cover letter by January 30, 2011 to mailto:ConsumerIntern@treasury.gov Candidates should indicate if they would prefer to be placed into particular policy teams. Offers will likely be made by late February.

The U.S. Treasury Department and CFPB are Equal Employment Opportunity Employers.

The long tentacles of government regulation are coming your way soon.  Enjoy!
 

Tuesday, January 25, 2011

Has Obama Discovered the Morality and Power of Voluntary Exchange?

Here, Jeffrey A. Tucker discusses and explains Obama's new attention to regulation and free enterprise.

Are we now supposed to believe that Mr. Obama has had an epiphany?  Really?  Please excuse me for admitting my skepticism. I would love to be proved wrong.  I'll keep watching, but I will be breathing all the while.


Wednesday, January 19, 2011

I Hear You Talking

Here, BHO writes in the WSJ about the burden of government regulation.  I will offer but one observation; pay no attention whatsoever to what the President said; pay attention to what he does.

It's easy to extol the virtues of voluntary exchange from the bully pulpit; our president is really quite good at it.  But when it comes to walking the talk, it's another story altogether.  Our president does not believe that ordinary sentient adults have the ability to make their own choices, nor does he think they should be allowed to do so.

How do I know that?  I pay attention to what the president does, not what he says.  He championed and signed into law two acts of Congress that will spawn regulations the likes of which we have never seen.  If Obama really believed the words he wrote, he would have vetoed both bills.

It's really hard to take BHO seriously following his enthusiastic support of what are quite possibly the worst pieces of legislation ever penned by Congress, both chock full of mind numbing regulation and limitations on voluntary exchange among sentient adults.

The Patient Protection and Affordable Care Act, the euphemistic name of the absolute worst piece of legislation ever passed and signed by a president (a.k.a., Obamacare), if not repealed, will add a layer of ham-fisted regulation to the U.S. Code that will truly boggle the mind.

The Wall Street Reform and Consumer Protection Act (a.k.a., the Dodd-Frank financial reform bill) will also spawn hundreds of regulations over the next few years.  Somehow, it wasn't enough that the financial services industry was already the most regulated industry on the planet.  Read about it here.

As readers of EconoBlast know, I've written many words in this blog about the perils of regulation and virtues of voluntary exchange.  If you're interested in a review, just use the blog search field on the EconoBlast home page with the key word "regulation."

If Congress and the President would really like to see America revert to a job-creating economic dynamo, I know one of  the keys to promised land.  Get rid of 90% of the regulations currently ensconced in the U.S. Code.  Oh, hell; why hold back?  Repeal 100% of the laws that  regulate voluntary exchange among sentient adults.  I dare you.  I double dog dare you. 

Wednesday, January 12, 2011

Extend the TSA to All Public Places!

Rep. Robert Brady, D-PA, says he will draft a bill criminalizing the use of language or symbols that could be read as threats to members of Congress.  I will resist my nearly overwhelming urge to call Mr. Brady a denigrating name that begins with "m" and ends with "n."  Read more about Mr. Brady's plan here.

99.99999999% of all Americans would never contemplate and certainly never do what the deranged subhuman Jared Loughner did, even though most of us might be willing to make some remark about physically damaging a member of Congress.

After all, even that bastion of moral rectitude, Paul Krugman, spoke of burning Senator Joe Lieberman in effigy.  As little as I respect Paul Krugman, I don't think he should be put in jail for making colorful remarks.  I'd sooner want Rep. Brady in jail for wanting to criminalize particular patterns of speech.

Thankfully, we don't live in a society of sociopaths who are out there breathlessly hanging on every word uttered by some conservative radio talk show host that might incite them to violence.  Perhaps Mr. Brady  doubts his own inability to remain calm when others use strong political language.  Maybe other members of Congress should be worried about hanging around in the House chambers with him.

I grow really weary of the likes of Rep. Brady and all the others in our society who are oh so willing to use the force of government to compel the rest of us to do whatever it is they think we should be doing.  They are cowards.  If you want to compel me, get in my face and give it a go.  Stop proposing to use the force of government to play out your aggressive tendencies.

Rep. James Clyburn, D-SC, thinks the TSA should give all members of congress special treatment in airports.  He evidently doesn't feel safe milling about with the hoi polli.  I wonder if Mr. Clyburn would support having the TSA expand its operations to all public places? 

Mr. Brady and Mr. Clyburn both appear to belong to a class of spineless wimps, who like the Wizard of Oz want to sit behind a curtain and manipulate the rest of us with the force and guns of government.  Go away Mr. Brady; leave us alone, Mr. Clyburn.

Now that I'm done ranting, please understand that I, like you, feel grief and sympathy for the victims of Jared Loughner.  His actions are despicable and revolting.

But just as surely as Loughner was immoral in his use of force to compel six people to die, people who want to compel others with the force of government are also immoral.  People who do what Jared Loughner did are subhumans.  The rest of us do not need to be compelled by the likes of Mr. Brady and Mr. Clyburn to behave morally.

But I'm not so sure about Mr. Brady and Mr. Clyburn, themselves.  They appear to be quite comfortable with the idea of using force to compel all the rest of us.

Monday, January 10, 2011

Makes A Lot of Sense to Me

From Greg Mankiw's Blog: How much unemployment is structural?

Raghu Rajan cites the work of Erik Hurst:
As my colleague Erik Hurst and his co-authors have shown, states that had the largest rise in construction as a share of GDP in 2000-2006 tended to have had the greatest contraction in that industry in 2006-2009. These states also tended to have the largest rise in unemployment rates between 2006 and 2009.
The unemployed comprise not only construction workers, but also ancillary workers, such as real-estate brokers and bankers, as well as all those who work on houses, such as plumbers and electricians. So, the job losses extend far beyond those in the construction industry.
It is hard to believe that any increase in aggregate demand will boost the housing market – which, remember, was buoyed by visions of steady price appreciation that few seem likely to hold today – sufficiently to re-employ all these workers. Hurst estimates that this "structural" unemployment may account for up to three percentage points of total unemployment. In other words, were it not for construction, the US unemployment rate would be 6.5% – a far healthier situation than today.
 Structural unemployment is unemployment that won't go away just because the U.S. Treasury spends a few trillion dollars that it gets from money newly created by the Fed.  But that probably won't keep the pols and BHO and the Fed from doing it.

Humans Really Are Bizarre Creatures, No?


In light of the Citizens United decision, how strange and bizarre does this WSJ alert seem? 
News Alert
from The Wall Street Journal

Former U.S. House Majority Leader Tom DeLay was sentenced to three years in prison for conspiracy to commit money laundering. He also received five years for money laundering, but the judge converted that sentence to probation.

DeLay was convicted by a jury in November of illegally channeling corporate donations to several Republicans running for the Texas Legislature in 2002; such contributions were barred by state law.

Mr. DeLay is in the process of posting a $10,000 bond, prosecutors said. That will allow him to remain free during the appeals process, which could take years.
 Is there any chance at all that in the future humans will have better sense?  Not likely?  Sad, no?  Don't you think that after a few thousand years at it that we could get a set of laws laid down that we could just stick with?  Silly me.  What a thought.

Friday, January 7, 2011

Ancient Wisdom

Hat tip to Col. Bob in Austin who sends these words along.

So what have we learned in 2,065 years? 

"The budget should be balanced, the Treasury should be refilled, public debt should be reduced, the arrogance of officialdom should be tempered and controlled, and the assistance to foreign lands should be curtailed lest Rome become bankrupt. People must again learn to work, instead of living on public assistance."   

Cicero in 55 BC

Each and every day, each of us makes a decision about how we will live our lives.  Will we produce something of value that others will accept in exchange, so that we can acquire some of the value others produce?  Or will we just expect others to give us some of the value they have produced.

Health Care Round II

Here, David Brooks sums it up pretty well.

I have told several friends that ObamaCare as written will not be enacted as written.  I hope Congress will simply start over; I fear they will not.  Odds on bet is that we'll end up with sausage.  Too bad for us.  But it's hard to imagine that we can't do better than the worst single piece of legislation ever created --- the ObamaCare bill.

Thursday, January 6, 2011

Friends and Foes

Here, Karl Rove provides disturbing details about how Obamacare is already playing out to the benefit of friends and the disadvantage of foes.  That's not surprising, though.  That's what political solutions to economic problems always do; reward friends and punish enemies.

Wednesday, January 5, 2011

Tuesday, January 4, 2011

Fixing Social Security

Based on analysis in the annual report of the Trustees of the Social Security program,  the Social Security Trust Fund will experience negative cash flows as early as 2016.  That means cash outflows of benefits paid to recipients will exceed taxes paid in by citizens to finance the benefits paid out.  Unless Congress makes changes to the system, the fund will be entirely depleted by 2037. 

Dollars withheld from our pay checks as OASDI taxes are not placed in the Social Security Trust Fund (SSTF).  In fact, all that’s really in the SSTF is an electronic record of U.S. Treasury debt.  Since Congress runs an annual budget deficit in the hundreds of billions of dollars, all that’s in the Social Security Trust Fund (SSTF) is U.S. Treasury bonds.  That means the U.S Treasury is promising to reimburse the SSTF, plus interest, as the bonds mature in the future. 

But it wouldn’t matter if the SSTF actually had Federal Reserve Notes (i.e., real paper dollars with pictures of dead presidents on them) in Al Gore’s infamous “lock box.”  People can no more eat, be sheltered by, nor be housed by paper dollars than by paper Treasury bonds, let alone zeros and ones recorded on a hard drive in Washington. 

Our Social Security system is deeply and fatally flawed.  It is a poorly designed pension program cobbled to a poorly designed welfare program cobbled to a poorly designed disability program, all of which began during FDR’s New Deal push toward socialism.  Considered alone, none of the elements of what we now call Social Security would likely have been passed into law. 

Cobbled together during the Great Depression and subsequently amended to become the largest income transfer program in U.S history, Social Security must now be reformed.  Congress no longer has a choice.  One wonders if “the third rail” of politics will electrify some of the 545 who rule the land

Congress will likely be forced to reform the program within the next two or three years.  Since the current system is a pay-as-you-go system, once current OASDI payroll tax collections fall short of current benefit pay outs, continued payment of benefits will only increase the federal deficit faster.  Whatever fix Congress pursues, there will be blood.

Three principles guide my skeleton proposal for fixing Social Security.  First, the fix must not impede or slow economic growth, because without economic growth, fewer workers cannot possibly produce enough real goods and services to meet their own consumption demand plus the consumption demand of millions of Baby Boomer retirees.  The real issue is about real economic growth and increasing productivity of labor. 

The issue most certainly is not how much money is in a lockbox, and it is not how many workers per retiree we will have in future decades.  The number of workers per retiree has fallen for decades as technology improved productivity.  That’s a good thing, not a bad thing.

Think how great it would be if we could sustain all our consumption demand using the output produced by just 100 workers.  If 100 workers could be that productive, the rest of us could all enjoy using our time for whatever we like, 24 hours per day.  Productivity that high is not just around the corner, but that’s the direction technology takes us. 

Technology has always moved us toward greater productivity throughout history, and I am optimistic that it will continue to do so in the future at an ever-accelerating rate. Some might say I am delusional, but I choose to remain a technology hawk.

Second, the fix must not raise taxes to levels that discourage work effort, technological innovation, and investment in capital goods.  We cannot tax ourselves into economic prosperity that can sustain both a reduced work force and an enlarged retiree pool.  But we can certainly tax ourselves into reduced work effort, reduced private saving, and diminished investment in technology and capital investment. 

Without investment in technology and capital goods that voluntary exchange markets foster, the increases in worker productivity we’ll need ahead just won’t happen.  Government is not innovative; government does not create new technology; government does not put plant and equipment in place; government does not and cannot produce the goods and services future retirees expect to enjoy.  Private businesses operating in voluntary exchange markets do all those things.

Third, and perhaps most important, the fix must not expand the intervention of government in voluntary exchange markets, further deepening the dependency of the masses on a Robin Hood government, and further entrenching the power of the 545 over  the people.  I argue against government intrusion on two grounds: (1) it’s morally wrong to compel other people, which is a normative proposition, and (2) government intrusion doesn’t solve the economic problem with maximum economic efficiency, which is a positive proposition.

Logic and the record throughout all history show that maximum economic efficiency requires voluntary exchange.  The Social Security program we have today is the result of misplaced faith in government intervention–intervention that transfers income from people who earn it to people who did not. 

Some who favor such income transfers say the transfer is from the wealthy to poor, from the haves to the have nots, from people who have more than they need to people who have less than they need.  But even if that were the case, transferring income on the scale required by our Social Security system cannot be sustained.  Transferring income simply is not and has never been a viable solution to the economic problem. 

I propose that Social Security benefits be phased out over a period of 25 years.  During the phase out, the percentage of OASDI taxes going to finance benefits of current recipients would reduce from today’s 15.3% to zero percent.  The percentage of OASDI taxes going to finance Personal Retirement Accounts, which would be recorded in the names of and owned by individual workers, would rise from zero percent today to 15.3% in 25 years. 

The percentage of OASDI taxes going to mandatory Personal Retirement Accounts would be invested in two index mutual funds, one that tracks the Wilshire 6000 stock index and one that tracks a market-weighted bond index with a long-term dollar-weighted average maturity, a fund such as Vanguard’s Long-Term Bond Index Fund (VBLTX). 

At the end of the 25-year phase out period for Social Security, all government-mandated retirement pensions would be financed entirely by each individual’s wholly owned Personal Retirement Account.  Social Security as we know it today would be gone forever. 

The increased private saving mandated by Personal Retirement Accounts would quicken economic growth. The elimination of Robin Hood transfer payments would promote work effort and foster reliance in individual accomplishment and responsibility. The reduction of government intervention in voluntary exchange markets would increase economic efficiency, allowing the economic pie to grow as large as possible so that each American could enjoy a larger slice of a larger economic pie.

Of course, given the Social Security errors of our past, there will still be blood. Remember, there ain’t no such thing as free lunch (TANSTAAFL, hat tip to Robert Heinlein).  But recognizing that reforming Social Security imposes costs of transition cannot rise to the level of an decisive argument not to move to Private Retirement Accounts. 

Sadly, I doubt, though, that Congress will pursue the proposal I’ve outlined in this essay.  That would take courage and statesmanship, and both are in very short supply in Congress.

Sunday, January 2, 2011

So, What About Peak Oil?

The world never has a shortage of people who predict that the world will have a shortage.  Read about it here.  Malthus was incorrect, and so are contemporary doomsayers.