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"I do not understand my own actions. For I do not do what I want, but I do the very thing I hate."
--Romans 7:15 (RSV)



Catholics Against Rudy

Main

May 14, 2008

God Bless Jim Bunning

Not only was a Hall fo Fame pitcher for the Phillies, but now, as a US Senator, he's fighting hard to stop rewarding the dishonest and/or incompetent who made or took mortgages they couldn't afford:

According to a summary of all the amendments, Sen. Bunning wants:


“to stop the bailout of the rich”
“to prevent the bailout of illegal aliens”
“to prevent the bailout of homeowners who used their homes as a credit card”
“to stop the bailout of sex offenders”
“to stop the bailout of drug offenders”

Another of Sen. Bunning’s amendments would change the name of the bill from “The Federal Housing Finance Regulatory Reform Act of 2008” to the “Bailout of Irresponsible Lenders and Borrowers Act of 2008.”

May 3, 2008

"Mr. Obama seems to think he can repeal the laws of economics."

Windfall Profits for Dummies - WSJ.com

We tried this windfall profits scheme in 1980. It backfired. The Congressional Research Service found in a 1990 analysis that the tax reduced domestic oil production by 3% to 6% and increased oil imports from OPEC by 8% to 16%. Mr. Obama nonetheless pledges to lessen our dependence on foreign oil, which he says "costs America $800 million a day." Someone should tell him that oil imports would soar if his tax plan becomes law. The biggest beneficiaries would be OPEC oil ministers.


There's another policy contradiction here. Exxon is now under attack for buying back $2 billion of its own stock rather than adding to the more than $21 billion it is likely to invest in energy research and exploration this year. But hold on. If oil companies believe their earnings from exploring for new oil will be expropriated by government – and an excise tax on profits is pure expropriation – they will surely invest less, not more. A profits tax is a sure formula to keep the future price of gas higher.
...
This tiff over gas and oil taxes only highlights the intellectual policy confusion – or perhaps we should say cynicism – of our politicians. They want lower prices but don't want more production to increase supply. They want oil "independence" but they've declared off limits most of the big sources of domestic oil that could replace foreign imports. They want Americans to use less oil to reduce greenhouse gases but they protest higher oil prices that reduce demand. They want more oil company investment but they want to confiscate the profits from that investment. And these folks want to be President?

Political campaigns usually feature economic illiteracy, but Obama seems to raising it to a new level.

May 2, 2008

Why do conservatives cheer increased government revenues?

An article at NewsBuster about government revenues setting an all-time record sparked the title question. I've actually been pondering this question for a while. What this means is that the government is now taking more money from the people than ever before. Why is that something to celebrate?

My hunch is that conservatives have spent so long arguing that the people are overtaxed, they rejoice at being proven right: tax cuts can spark economic development which will increase government revenues. But in focusing so narrowly on that one issue, they lose sight of the larger: we're working to reduce the size of government, and giving it more revenues is not the way to do that. They might win this battle, but the rhetoric undercuts our ultimate objective: smaller government. This increased revenue is not a cause for celebration in and of itself, but rather a call for further tax cuts.

Keep your eyes on the ball, guys.

April 30, 2008

Reports of the economy's demise are greatly exaggerated

BBC NEWS | Business | US grows by 0.6% in first quarter

The US economy grew by 0.6% in the first quarter of 2008.


The first quarter figure exceeded analyst expectations of a 0.2% growth and eased expectations of an economic slowdown.

Somehow, I doubt the media will be trumpeting these results. To the extent they're covered, it will be with a "yeah, but..." attitude. Because good economic news under a Republican presidency is no news.

April 23, 2008

Another reason to love Cole Hamels

The Club For Growth - http://www.clubforgrowth.org

In between innings of the Phillies-Mets game on Sunday, a segment aired on the center field screen asking the Philly players what they would change in the world. While most of the players cited world peace, Cole Hamels said that " there are too many taxes."

"...last time I checked, NAFTA is five letters."

The Campaign Spot on National Review Online

"Here, in Youngstown and across America, obviously the answer to our problems is not the siren song of protectionism," McCain said during a stop at Fabart, a rusting steel-fabricating plant that has only five remaining workers. "Protectionism and isolation has never worked in America's history."

According to USA Today, a former AFL-CIO official told McCain that in that region, NAFTA is a "four letter word."

McCain's response? "Jack, I am prone on occasion to make mistakes, but the last time I checked, NAFTA is five letters."

As frustrating as McCain's been to conservatives over the years, I'm starting to reflect that he's right on the most important issues that face us today: Iraq, the right to life, free trade, taxes, etc. The issues where we disagree with him and he frustrates us the most are secondary. (Or in the case of his support for global warming remedies can likely be stopped by a determined GOP filibuster in the Senate.)

He's bothering me less and less all the time. Either that, or the Kool-Aid's tasting really good.

April 22, 2008

Tax Freedom Day: The Song!

YouTube - Tax Freedom Day: The Song!

Hat Tip The Corner

April 14, 2008

Another incentive for businesses to move to Delaware

New Jersey on the Chesapeake - WSJ.com

There was good news in Maryland last week, where the state legislature voted to repeal a widely loathed tax on computer services. Much less appealing is the way they did it: In place of the tech tax, legislators pushed through a late-night income tax rate surcharge on Marylanders making more than $1 million a year to 6.25% for three years.


Consumers and business groups had fought the tech tax that had many companies considering moving their offices over state lines. Republicans aimed to offset the computer tax repeal by slowing the rate of growth in state spending to 3.7% from the Governor's planned 5.9%. But Democrats who dominate the legislature jammed through the income tax hike after defeating five attempts to repeal the tech tax without it.

The surcharge continues Maryland's march up the ladder from a low- to high-tax state. Two years ago Maryland had a low flat tax rate of 4.75% on income of more than $3,000. Last year it made the code more progressive, raising the rate to 5% on single filers earning more than $150,000 and the top rate to 5.5% on those over $500,000. State pols also raised the corporate tax rate to 8.25% from 7%, and the sales tax to 6% from 5%.

As California and New Jersey have shown, a steeply progressive income tax makes state revenue highly dependent on relatively few earners. In good times, those earners do well and the pols spend the excess revenues. But in slowdowns, the state quickly finds itself in deficit, and, true to this form, Maryland's pols now find themselves on the New Jersey ratchet to ever higher rates.

As state Senate Minority Whip Allan Kittleman pointed out, many of Maryland's so-called millionaires are actually small businesses that pay taxes through their proprietor's personal tax returns. With the state's economy struggling, wise money would avoid cudgeling a sector that has grown to more than 440,000 small businesses statewide. They now have another incentive to move to Delaware.

The only thing that might save Delaware's economy is that the Democrats in surrounding states understand economics even less than ours do.

Employers warn that minimum wage increase will reduce employment, Senator refuses to listen

Some employers fear minimum-wage hike | delawareonline | The News Journal

Dukart said his company, which employs about 700, has very few workers earning minimum wage, and those who do usually get a raise within a year. Nonetheless, the proposal would drive up his labor costs for those earning the minimum and put pressure on him to increase other wages.

"From a business standpoint, we're getting hammered on every end," Dukart said. "When your labor increases, so does your payroll tax and workers' comp, and it just goes on and on and on."

Saul Hoffman, chairman of the economics department at the University of Delaware, said most economists agree that minimum-wage hikes cause some employers to cut back on hiring, making it harder for some workers to find jobs.

"If employment is lower, somebody isn't getting a job who would otherwise get a job," Hoffman said. "We don't see a layoff necessarily, but we just see a position not getting filled."

Dukart said a business can never afford to have an incompetent employee, but in the good times a boss might have "more of a heart."

"When times are pretty tough, you can't afford to have a heart as much," Dukart said.

Marshall rejected the argument that a minimum-wage hike would result in a loss in jobs, saying the evidence from previous increases shows that Delaware has not lost jobs.

What Marshall fails to understand is that we can't see how many jobs went uncreated because of the previous increases. It's this invisible, but real nonetheless, job loss that we should seek to avoid. And a job not created is an opportunity for someone lost, which reduces their work experience, which reduces their future income potential. The surest way to hurt the poor is to keep them from getting jobs.

Think of it this way: when gas prices go up, we try to use less gas. When electricity costs more, we make sure to turn the lights off when we leave the room. Is Senator Marshall denying the laws of economics don't apply to jobs? That somehow employers are exempt from behavior we all practice in our daily lives? Raising the minimum wage is bad economics, bad logic and bad for the poor while appearing helpful. So naturally Democrats love it.

April 11, 2008

Hayek with a Hot Dog

"[B]aseball is the professional sport that best embodies conservative principles."

It’s risky to hold baseball’s leaders up as paragons of wise conduct. Just like politicians, they’ll always disappoint you; the steroids scandal is just the latest example. But for the most part, throughout its history, baseball has been governed according to conservative principles: a preference for simplicity and freedom, a reverence for tradition, and a bias against sweeping changes. The result is a sport that may not reflect America as it is, but does the best job of reflecting America as it should be.

April 6, 2008

McCain's Housing Restraint

George F. Will - McCain's Housing Restraint - washingtonpost.com

[McCain] says "it is not the duty of government to bail out and reward those who act irresponsibly, whether they are big banks or small borrowers." For now, he is with Senate Republicans in opposing the Democrats' proposal to empower judges to rewrite the terms of some mortgages, an idea that strikes at the sanctity of contracts and hence at the ethic of promise-keeping that is fundamental to social life. He opposes an additional dose of the toxin that has made the credit system sick -- he favors strengthening rather than weakening down-payment requirements for loans backed by the Federal Housing Administration. And he has admirably avoided the rhetoric of victimology, such as that used when The Post editorialized that "lenders pushed tens of billions of dollars in potentially high-interest mortgage debt on people ill-equipped to handle it."

...
With the command-and-control propensity of contemporary liberalism, Clinton predictably advocates a policy that has a record, running from Roman times to the present, that is unblemished by success. It is the policy of price controls: Her proposed five-year freeze on interest rates would be a control on the price of money.

Obama says that McCain's (again, relatively) noninterventionist response to credit difficulties proves that he favors a "you're on your own" society. McCain, a center-right candidate seeking to lead a center-right country, should embrace Obama's accusation as an accolade, saying:

"This is the crux of the difference between the two parties -- belief in the competence, responsibility and accountability of individuals. When Obama characterizes my position as 'little more than watching this crisis happen,' he again has part of a point. The housing market must find its bottom, and no good can come from delaying the day that it does."

The market, which bewilders and annoys liberals by correcting excesses without the supervision of liberals, is doing that as housing prices fall far enough to stimulate demand. Witness this recent Financial Times headline:

"Property sales pick up as prices plummet."

The story began: "Sales of previously owned homes in the U.S. rose for the first time in seven months in February, while sale prices fell by their most in at least 40 years." By golly, the Gershwins were right: The age of miracles hasn't passed.

Delaying the drop in home prices will only make the situation worse. As so often in life, the answer is obvious: pull the band-aid off quickly.

April 2, 2008

How Not To Save Housing

Robert J. Samuelson - How Not To Save Housing - washingtonpost.com

About 50 million homeowners have mortgages. Who wouldn't like the government to cut their monthly payments by 20 or 30 percent? But Frank's plan reserves that privilege for an estimated 1 million to 2 million homeowners who are the weakest and most careless borrowers. With the FHA now authorized to lend up to $729,750 in high-cost areas, some beneficiaries could be fairly wealthy. By contrast, people who made larger down payments or kept their monthly payments at manageable levels would be made relatively worse off. Government punishes prudence and rewards irresponsibility. Inevitably, there would be resentment and pressures to extend relief to other "needy" homeowners.

The justification is to prevent an uncontrolled collapse of home prices that would inflict more losses on lenders -- aggravating the "credit crunch" -- and postpone a revival in home buying and building. This gets the economics backward. From 2000 to 2006, home prices rose 50 percent or more by various measures. Housing affordability deteriorated, with home buying sustained only by a parallel deterioration of lending standards. With credit standards now tightened, home prices should fall to bring buyers back into the market and to reassure lenders that they're not lending on inflated properties.

I bought my house in 2001. I made a 20% down-payment on a house that was about 2.5 times my annual income, and at the time had enough savings to cover a good number of months of living expenses, including mortgage, should I lose my job. Last year, I took a home equity loan for a home-improvement project that was 15-20% of my home value, or 1/4 to 1/3 of my equity. I'm in a savings position now that if I had to, I could pay off my outstanding mortgage debt, the only debt I'm carrying by heavily dipping into my retirement account and other savings.

Meanwhile, others went into debt for the full purchase price of their property, plus closing costs, in houses that cost many times their annual income with little or no savings. And those people are about to get rewarded by the government for the profiigacy? And as Samuelson notes, my home value will suffer as a result? So, I get punished for doing the right thing, while those who took patently stupid steps will get rewarded?

Only in politics could this be considered a rational solution. The best bet: let housing prices fall (which would also help solve the affordable housing crisis we hear so much about). I'll lose some net worth either way, but overall it will be better for me, the economy as a whole and not create the moral hazard of showing the government will reward stupid decisions.

March 11, 2008

Spitzer, Prostitution, Firefly and the Limits of Libertarianism

John Derbyshire has an interesting post that manages to combine all of those above topics:

Prostitution, like drug trafficking, is one of those zones where libertarianism bumps up against the realities of human nature.

To a lover of liberty, it's hard to see why a woman shouldn't sell her favors if she wants to. Trouble is, weak or dimwitted women end up in near-slavery to unscrupulous men, and I think there's a legitimate public interest in not letting that happen.

The best private sector solution would be a guild system, like the geishas had in old Japan. There'd be entry standards for the guild. Women would have to pass exams, and have some entertainment skills other than the obvious ones. The guild would police itself, expelling miscreants. Freelancing outside the guild could be under strong social disapproval, even made illegal.

Firefly fans will get my drift.

Most hard-core libertarians would argue that a woman's body is her to do with what would and that includes the use of it for purposes of prostitution. While in my more libertarian moments, I have sympathy for that point of view, Derbyshire points out that reality of this world is often in conflict with libertarian idealism. Hollywood romanticism apart, most prostitutes are not like Julia Roberts in "Pretty Woman." (One judge I know once gave me a yardstick to judge prostitutes by: "The good-looking ones are undercover cops, the moderately attractive ones are men in drag, and the ugly ones are the actual prostitutes." I think we can safely assume that rule can be thrown out the window in the case of elite prostitution rings the likes of people such as Governor Spitzer or Charlie Sheen would visit.)

But at the same time, what self-respecting woman would demean herself that way? There's got to be something wrong in a woman's life, whether it be psychological damage or just desperation that would lead her to such a life. The one night I went to a strip club, back in my less religious days for a friend's bachelor party, I found them all depressing, even the more "up-scale" ones. Despite not being that religious at that point, the entire night, I just kept thinking, "What's the matter, didn't Daddy love you?" I would bet that often in a prostitute's life you'd find an absent and/or neglectful father. (This explains a great deal of teen promiscuity, as well: Daddy didn't pay attention, so the girl will do what it take to get attention from a guy.)

And that doesn't include the prostitutes who are in it due to kidnapping or some other sort of coercion.

The Prohibition argument could he used: these problems arise only due to the fact that prostitution is illegal, but it still doesn't deal with the roots of these issues. Besides, legalization would still leave a black market of prostitution, just as there are black markets for all sorts of legal products. In addition, it doesn't respond to the needs of those women who are in the "business" due to psychological damage. After all, what's the difference between a woman who services a man for $50, $5,000/hour or for a few drinks at a bar? As George Bernard Shaw put it: "We've already established what you are, ma'am. Now we're just haggling over the price."

Legalization would merely paper over the issues associated with prostitution. It deals with the legal troubles faced by the "johns," while ignoring the much greater problems facing the women themselves.

(For those who didn't get te Firefly reference: in that show, prositution is legal, as long as it's done through a prostitute's guild. One of the main characters is a prostitute with that guild, played by Morena Baccarin, who John Derbyshire has often expressed fondness for.)

March 5, 2008

Descreasing Home Prices is Good News

Robert J. Samuelson - The Housing Fix - washingtonpost.com

Gloom. Doom. Calamity. Home prices are tumbling. We're bombarded by somber reports. But wait. This is actually good news, because lower home prices are the only real solution to the housing collapse. The sooner prices fall, the better. The longer the adjustment takes, the longer the housing slump (weak sales, low construction, high numbers of unsold homes) will last.

Middletown Wawa strikes a "deal" with DelDOT

Middletown Wawa strikes a deal with DelDOT

Wawa Inc. has agreed to sell about a half-acre of land at its Middletown store to the Delaware Department of Transportation, a week after DelDOT filed court papers to take the land by power of eminent domain.

The business, however, will remain.

"Strikes a deal"? More like, gives in to an extortionist. DelDOT, no doubt, didn't like the price requested by Wawa, or Wawa didn't want to give up their land, so DelDOT threatened to take it from them regardless of Wawa's wishes. If I did this to my neighbor, it would be extortion (I think; I'm no legal scholar), but when the state does it, it's called "eminent domain."

It's thievery either way.

March 2, 2008

Book Review: Liberal Fascism

I finally finished this book, after having started it back in January. A combination of being really busy and a brief illness kept me from devoting as much attention as I would have liked.

Even had I had more time to devote to it, it still would have taken me a while to read; it's over 400 pages plus 60 pages of footnotes and is a very thought-provoking book, requiring much reflection and pondering of its many points. It shatters many commonly held myths about the historical Left and Right.

The book had its genesis in the frequent attacks upon himself in particular, and conservatives in general, where members of the Left would attack conservative views and policies as "fascist," and consider the argument over. Goldberg, like most students of history, knew these claims to be false as Fascism was virtually always a product of the Left. After all, if one philosophy holds for smaller, less intrusive government, while another calls for greater government control over virtually all facets of life which one is more fascistic? The one calling for larger government, of course, and yet it is the liberals, who subscribe to that point of view, who call conservatives fascistic. I believe it's for this reason this book had never been written before: liberals didn't know better and conservatives knew the charge was ridiculous and considered it unworthy of a response. Goldberg decided enough was enough and wrote a book that should, once and for all, demolish the association of Fascism and the Right.

He begins with a forward titled "Everything you know about Fascism is wrong" wherein he exposes the falsity of the association of the Right and the Fascists. He then continues with a chapter each focusing on Mussolini and Hitler, showing that their political roots lay in their nations' respective Left. He shows that the hatred between Communists and Fascists lay not in their political opposition, but in the fact they were fighting over the same political turf: the Left. (Think of how much many Republicans hate John McCain, for example, even though he agrees with him so often. Ann Coulter dislikes him so much she'd promised that she'd support Hillary Clinton over McCain, despite the many disagreements between the two blondes. We get angrier with those we expect to agree with us than those who we write off. Just like no one can make us as angry as those we truly love.) He also makes a point to define Fascism before beginning his discussion of its history: "Fascism is a religion of the state." The belief that "salvation" will come through a large, interventionist government that will remake society, and Man himself, for the better is the essence of Fascism.

Goldberg then takes us through American history showing development of Fascist thought and practice in our own nation. He points out that although it's often claimed it could never happen here, it, in fact, already has. Perhaps the most Fascistic President of all was Woodrow Wilson how centralized power, jailed political opponents and increased governmental involvement in the economy to previously unimagined dimensions. (A recurrent theme in this book is that American Progressivism is really just Fascism with a smile. Rather than imposing their will on the people, Progressives claim to be doing what's best for the people.)

The early 1920s did much to reduce the size and breadth of government, but that trend was reversed with the election of Herbert Hoover as President. Despite his portrayal as a typical laissez-faire President, he was actually a strongly interventionist President, as he had been in every public office he had held going back to the Wilson Administration. So, in the true history, there was a change only in degree, not in kind, with the election of Franklin Roosevelt, who may have been even more of a Fascist than Wilson. Both viewed their program in militaristic terms. Roosevelt created the National Recovery Administration, which determined what businesses could charge for their products and pay their employees. Businesses who did not comply were branded unpatriotic and even charged with crimes. (Declaring businesses "unpatriotic" is part of Obama's economic platform today.) Goldberg quotes many European Fascists admiring FDR's accomplishments and even expressing some envy at what he was able to accomplish.

He continues through American history with the 60s Hippie movement, which with its violence and attempts to overthrow the existing order, both political and moral, really does recall the early years of the Nazi movement in Germany. Fortunately, America didn't fall under the sway of such leaders as Germany did. (Another point for the Founding Fathers who prevented swift change the way the drafters of Germany's post World War I constitution did not.)

The weakest part of the book, in my opinion, dealt with Kennedy and LBJ. While he validly points out that Kennedy, as many actual Fascists did, used supposed emergencies to garner support for their policies, this was more, as Goldberg acknowledges, due to his need to have an emergency to focus on than an real attempt to centralize government power. Similarly, while LBJ did have some Fascist tendencies, I wouldn't include him as a Fascist either.

He continues on with a chapter on how the Left uses race as a means to achieve their goals, while attempting to cover up the fact that eugenics, which sought to breed out the weaker races, was a phenomenon of the Left. It was the Right, and especially Catholics, who opposed forced sterilization of blacks and the mentally handicapped. Margaret Sanger was clearly a person of the Left and an active proponent of reducing, if not completely eliminating, the black population. (Interestingly, that racism is still apparently extant in Planned Parenthood today.)

Economics is another area where conservatism and leftist views are confused. It's commonly assumed that conservatives being pro-business, are inherently Fascistic in their desire to help business. In fact, the historical record shows, it is largely the Left who has promoted government-business partnerships in order to increase the cohesion of society and unite it behind their view of how society should be. Again, it's the Left and their interventionist economic policies who are more Fascistic than the Right.

He devotes a chapter to Hillary Clinton, who I had never bothered to read too much about and shows how from the 60s, she's been interested in remaking society and overturning many long held beliefs. He concludes the book with a chapter showing how many things commonly held in our society were first promoted, or first widely promoted by the Nazis, such as the "natural food" movement, environmentalism, anti-smoking laws, among others. He doesn't deride all of these things as wrong in and of themselves; in fact, he shops at Whole Foods frequently himself. However, he does point out that the desire to make things that are personal preferences or opinions mandatory does match the Fascist tendency perfectly.

He finished with an afterword discussing the dangers conservatives face that could draw them into Fascism. He uses Pat Buchanan as an example of a conservative who did become a Fascist. (Fortunately, the conservative movement has written Buchanan out of it in an October 1999 article in National Review. Another example of conservatives kicking extremists out of their movement, a step liberals seem reluctant, at best, to take.) He admits that, in many ways, President Bush does have some Fascistic tendencies, but they are largely in areas that the Left would agree with: the expansion of Medicare and the notion that government has to move when people are in trouble just to name two examples.)

This was an excellent book and one that anyone interested in political discourse should read to clear up a commonly held misconception. It will teach you a lot about history, exposing some myths that have, unfortunately, taken hold in our society and show that the real danger of Fascism comes from those most likely to cry Fascism.

February 6, 2008

Why the Middle Class is doing better than ever

reason.tv - Videos > Living Large

My doppelganger on why things are better than ever. (Yesterday, while working at the polls, one of fellow workers told me that I looked just like him, and even have a similar sense of humor. I guess that last bit's a compliment.)

It's not the Economy, Stupid

Robert J. Samuelson - Why It's Not The Economy - washingtonpost.com

We have a $14 trillion economy. The idea that presidents can control it lies between an exaggeration and an illusion. Our presidential preferences ought to reflect judgments about candidates' character, values, competence and their views on issues where what they think counts: foreign policy; long-term economic and social policy -- how they would tax and spend; health care; immigration. Forget the business cycle.

...
Sensible voters should look beyond the cheery or dreary economy of the moment. They should recognize that if presidents could control the business cycle, recessions would never occur, there would always be "full employment" and inflation would remain forever tame. Instead of judging prospective presidents on what they can't do, voters ought to concentrate on what they can do. There are plenty of real differences among the remaining candidates. But Carville is probably right. For many, it will be the economy, and it will be stupid.

The President's power to influence the economy, for good or for ill, is overrated. The Federal Reserve Chairman has much more influence, as noted in the article. Other issues, beyond the economy, should take precedence when deciding how to vote for President.

February 4, 2008

News-Journal Endorses Supply-Side Economics

When the rich feel recession, workers suffer

But economists say that recent signs of cutting back by the affluent could hurt the economy and deliver even more pain to lower-income workers, who are dependent on their business and fat tips.

For example, Nathan Warren has seen his monthly wages drop to $1,800 when his work as a limo driver was cut from five days to three. "I have to struggle to get by. I am pinching pennies," said Warren, 30, a Costa Mesa, Calif. resident. "I am eating more cereal and am not buying clothing."

Didn't the media deride this as "trickle-down economics" when Ronald Reagan argued this theory? Somehow, I doubt they'll give him credit for his concern for the poor.

January 19, 2008

We've tried tax rebates before. They don't work.

Feel-Good Economics - WSJ.com

One dissenter was economist Milton Friedman. His research had led him to conclude that consumer spending was less a function of liquidity than something he called "permanent income." Friedman observed that when workers lost their jobs, they didn't immediately cut back on spending. They borrowed or drew down savings to maintain spending, in the expectation of finding a new job shortly. Conversely, consumers didn't immediately spend windfalls. They kept spending on an even keel until they achieved a promotion at work, or other increase in their long-term income expectations.

Thus Friedman predicted that the $100 to $200 checks disbursed by the Treasury Department in the spring of 1975 would have a minimal impact on spending, because they did not alter peoples' permanent income. Most likely, people would save the money or pay down debt, which is the same thing. Very little of the rebate would cause consumers to buy things they wouldn't otherwise have bought in the near term.

Subsequent studies by MIT economists Franco Modigliani and Charles Steindel, and Alan Blinder of Princeton, showed that Friedman's prediction was correct. The 1975 rebate had very little impact on spending and much less than a permanent tax cut -- which would change peoples' concept of their permanent income -- of similar magnitude.

As I noted yesterday, if we want to change people's behavior in an economicaly beneficial way, we need to give them reason to believe a change will be lasting: permanent (or at least long-lasting) tax cuts will be far more beneficial than a one-time rebate.

January 18, 2008

Thompson would wait on economic stimulus

Thompson would wait on economic stimulus - Yahoo! News

More seriously, he said he was not ready to embrace a stimulus package.

"We're all concerned about the direction of the economy," said the former Tennessee senator. "We've had a good run, but we can't take growth for granted." He said "we've got to have a potential stimulus package on the table to be discussed if it would make sense to be used in short order, but we're not quite there yet."

And doing nothing might leave the economy stronger, he said.

"There's a case to be made for that," he said. "And it just requires strong heads at the table and not snap judgments, you know, by politicians on the road trying to think of something smart to say in 30 seconds."

Every time I read something about Fred Thompson I like him more. While the rest of the political world is running around outbidding each other in the size of the stimulus they want to provide (Hillary bid $70 billion then Obama bid $75. Or maybe I have that backwards, it's not like it matters. And apparently Bush is pushing for a $150 billion package. Geez.) Thompson is alone in recognizing that all of this is pointless, and possibly harmful if we do it the wrong way. A few reasons why none of these proposals will likely do any good:

1) They're just passing money around, not creating new wealth: all these proposal are doing is taking money from column A and putting it into Column B. That's not a stimulus, that's redecorating. The money will either come from borrowing money (which means the government will be crowding out others from the bond market), new taxes (which will be robbing Peter to pay Paul in the truest sense of that phrase), or the worst case scenario, creating new money, thereby adding to inflation and decreasing the value of the money we already have.)
2) Most estimates put this at a short and shallow recession, if one occurs at all. Given the slowness of the political process and the federal bureaucracy, by the time this whole process plays out the recession may be over, if it ever happens at all.
3) If you really want to help the economy, don't do it with a short-term outlook, do something that will help for a long time: cut taxes permanently. Businesses aren't going to increase their hiring or output based on a short-term policy change: that would bind them to a higher staffing level in the long term for a short-term gain. So, do something that will give them the confidence that this change will last: cut their taxes, remove regulatory impediment. If businesses see that any gain in production will be short-lived, they'll just get through it with increased overtime or temporary workers. If we want a more lasting increase in employment, we need to give them a reason to do so. So them some reason to believe that government will get out of their way for an extended period of time.

I've long felt that Thompson was the only candidate in the race with a pair, but now it seems he's the only one with a brain too.

January 13, 2008

Things we learned in the last 12 months

So We Thought. But Then Again . . . - New York Times

There has been plenty of talk about “predatory lending,” but “predatory borrowing” may have been the bigger problem. As much as 70 percent of recent early payment defaults had fraudulent misrepresentations on their original loan applications, according to one recent study. The research was done by BasePoint Analytics, which helps banks and lenders identify fraudulent transactions; the study looked at more than three million loans from 1997 to 2006, with a majority from 2005 to 2006. Applications with misrepresentations were also five times as likely to go into default.

So, any "bailout" for mortgagees who are having trouble fulfilling their obligations will be subsidizing many people guilty of fraud. If we're going to support those in those situations (and that's something we shouldn't do, in my opinion), we need to make sure we don't reward those who are guilty of fraud.

Hat Tip: memeorandum

January 12, 2008

Book Review: Freedomnomics: Why the Free Market Works and other Half-Baked Theories Don't by John Lott

As the title suggests, this book is, in part, a response to Freakonomics. Lott does correct some mistakes made in that book due to improper assumptions or just failure to conceive of alternative explanations for the phenomena they discuss.

It's not just a response to that work, as it deals with a great number of other issues:

  • How granting women suffrage led to larger government
  • The anti-Catholic roots of public education
  • How the secret ballot reduces voter turnout
  • Campaign finance reform as a pro-incumbent policy
  • How women become more conservative as they get married and have children (and more liberal upon divorce)
  • How abortion increased crime in the 1990s (contrary to the claim in Freakonomics)
  • How governmental agencies are much more likely to engage in predatory pricing and other monopolistic practices than are private firms
  • Why campaign donations don't influence how a politician votes
  • How the free market increases personal and corporate honesty
  • Statistical evidence for media bias

It's definitely worth reading as it will shatter a great number of commonly held beliefs about they way things are and why they are that way. You'll learn a lot.

January 6, 2008

Ontario Health Minister Backs Free Crack Pipe Distribution Program

Ontario Health Minister Backs Free Crack Pipe Distribution Program

Ontario Health Minister George Smitherman supports a program that will distribute free crack pipes to citizens, ensuring that the program will stay alive despite strong opposition from Ottawa city officials.

The program, designed to fight the possible spread of hepatitis C and HIV from sharing crack pipes, lost $7,500 from the city last year, putting the future of the free crack pipe program in jeopardy. City officials said there is no evidence that the program has actually halted the spread of communicable diseases, and that crack addicts need help, not supplies.

After the nonsense of giving free needles to drug users, I suppose free crack pipes were only a matter of time.

It's a simple matter of economics: if you want to get more of something, subsidize it. Need more doctors? Pay people to go to med school. Want more cars? Give money to General Motors. Want more drug users? Give people tools to do drugs with.

In the long run, this will likely cause more disease to be spread. After all, it takes rational thought to think to get a clean needle and if there's one group of people not exactly known for rational thought, it's drug users.

January 5, 2008

Economics can explain anything

Cost of coitus: Male monkeys pay for sex

Selling sex is said to be humankind's oldest profession but it may have deep evolutionary roots, according to a study into our primate cousins which found that male macaques pay for intercourse by using grooming as a currency.

Michael Gumert of Nanyang Technological University in Singapore made the discovery in a 20-month investigation into 50 long-tailed macaques in Kalimantan Tengah, Indonesia, New Scientist reports on Saturday.

On average, females had sex 1.5 times per hour.

But this rate jumped to 3.5 times per hour immediately after the female had been groomed by a male -- and her partner of choice was likely to be the hunky monkey that did the grooming.

Market forces also acted on the value of the transaction.

If there were several females in the area, the cost of buying sex would drop dramatically -- a male could "buy" a female for just eight minutes of nit-picking.

But if there were no females around, he would have to groom for up to 16 minutes before sex was offered.

Hat Tip: Club for Growth

January 4, 2008

Economics: Is there any problem it can't solve?

The Economics of Weight Loss (or: Dieting for Dollars)

So I heeded the suggestion of Tyler Cowen, an economist at George Mason University, and cooked up my own "Economist Weight-Loss Incentive Plan": I contracted with a friend to pay her $500 if I had not lost nine pounds at the end of 10 weeks. I and a witness (my friend's husband) signed the pact. My friend similarly obligated herself to take the payment and to spend it on herself. She affirmed her solemn pledge with her signature, witnessed by her husband (with a big grin).

I had her sign because I wanted to make sure that she would not wimp out on me at the end of the contract term and refuse to take the payment out of guilt. I wanted to be bound for the full cost (and pain) of my commitment.

Incentives matter. I may have to try this plan with someone. Probably someone I wouldn't want to give the money to otherwise, so a donation to a good charity wouldn't count. I'll have to think about this....

January 1, 2008

Book Review: Who Really Cares by Arthur C. Brooks

I decided to continue my reading this evening and read Who Really Cares: The Surprising Truth about Compassionate Conservatism. Arthur C. Brooks, a professor at Syracuse University, undertook a study of American charitable activity to see who gives time and money, not just to organized charities but also in informal methods such as helping out neighbors or loaning money to friends and family. To his surprise, he found that across the board, conservatives are far more likely to give money and time to others than are liberals. He had bought the commonly accepted belief that liberals are more generous than are conservatives. So strong was his belief in this that he rechecked his figures from multiple times from multiple directions but could not escape the ultimate conclusion: conservatives are more generous than liberals.

In many ways, this shouldn't come as a surprise to anyone: all the major religions promote charity as a positive obligation and, in America, religion is increasingly associated with political conservatism while irreligion is an increasing on the political Left. Similarly, survey after survey shows that those on the Left believe government has the ultimate responsibility to help the poor, while conservatives believe is falls to the community and charity. The conservative point of view is that we share a common responsibility where we must give our own time and money to help those less fortunate. Liberals prefer that the government, and by extension government employees, take care of the poor. This makes assisting the poor someone else's job. I think Brooks missed this point when considering why liberals don't give as much as conservatives: they believe it's the government's job to do so, so they don't. Just as no one who isn't paid to do so cleans windows at a McDonald's, liberals don't give as much money to help poor for the same reason: it's somebody else's job.

When discussing this book's thesis on the Internet a while back, liberals trotted out some claims that, had they actually read the book, they would have found disproven. For example, it was claimed that liberals are just as generous as conservatives, they just do it differently, through the government rather than through charity. There are (at least) four problems with this. By this standard, they are generous... with someone else's money. Second, is it really charity when it's forced? Third, conservatives still give more even after taxes are accounted for. Fourth, taxes and governme