Wednesday, December 17, 2008

The China Debt Dump and Taiwan

The Politico (via Instapundit) reviews four really bad economic scenarios. One of those is the oft cited "debt dump":
The Chinese own more than $500 billion worth of U.S. Treasury bonds, and billons more in the debt of other U.S. entities such as those held by Freddie Mac and Fannie Mae. And a general sense of mutually assured financial destruction keeps them from wielding that debt like a weapon: if the Chinese dumped U.S. debt on the global market, their own holdings of U.S. debt would decline in value, the U.S. economy would be damaged, ultimately harming the Chinese economy by reducing American ability to buy more Chinese goods.
Yeah. It's possible, but each dollar that China sold would be worth a little less than the last. That's the problem with dumping a liquid asset (USD) for another liquid asset (Chinese Yuan, gold, whatever). It would make much more sense for them to use their large debt position to buy something really expensive, like, US recognition of China's claim to Taiwan... er... Formosa.

Saturday, November 22, 2008

Will Obama Reduce the Minimum Wage

"We now risk falling into a deflationary spiral that could increase our massive debt even further," [Obama] said.

The MSNBC headline: Obama: 'Millions of jobs' in danger next year, but there's not a word about the almost 10% rise in the so-called minimum wage slated for the summer of 2009.
He noted turmoil on Wall Street, a decrease in new home purchases, growing jobless claims and the menacing problem of deflation.
That implies that the president-elect seems to be aware of one negative side-effect of the so-called minimum wage: it tends to increase unemployment. The reality is that there has always been, is now, and forever will be a minimum wage of $0. This minimum wage will be paid to more an more American workers as they queue up for unemployment benefits. Meanwhile, companies will invest in capital that improves productivity and reduces labor costs (ie: results in layoffs).
"I will need and seek support from Republicans and Democrats, and I'll be welcome to ideas and suggestions from both sides of the aisle," he said. "But what is not negotiable is the need for immediate action."
Of course he'll reach across the aisle. He doesn't want accountability when he can blame the Republicans. As for "the need for immediate action"... I'm glad to see that the president-elect has learned that expanding government power a la the $700 billion bailout need not benefit the country to benefit our betters in Washington!
"We have acted boldly, bravely, and above all, together," Obama said. "That is the chance our new beginning now offers us, and that is the challenge we must rise to in the days to come. It is time to act. As the next president of the United States, I will."
That's it? That's the end? Not a word about government regulation, slated to go into effect Jul24, 2009, that will increase unemployment? There's talk of a "deflationary spiral", but never any explanation of what that is. No indication that the real value of the so-called minimum wage has been rising the past couple of months; no acknowledgment that the real value of $7.25/hour will drive up unemployment.

Wednesday, November 19, 2008


Loading up on Anheuser Busch stock this past fall was a brilliant way to dodge the market mayhem. I knew it all along! (Except for some nail biting and sleepless nights when I worried that the sale wouldn't go through.) Ah, cash, sweet cash—almost as tasty as cheap beer during a recession!

Monday, November 17, 2008

Questions for Economists

I've been thinking about some things that have passed from the spotlight, but may still be relevant to understanding the financial crisis and the current state of the economy. If you're an economist, or play one on the Internet, please share your thoughts either in the comments below or with a link back from your blog.

1) If it had been available, would M3 data have provided an early warning about the financial mess?

In March of 2006 the Fed stopped publishing M3 data because "the Board judged that the costs of collecting the underlying data and publishing M3 outweigh the benefits." I'm all for fiscal responsibility, but, with the benefit of hindsight, would M3 have indicated a looming disaster? I would think that problems in the credit markets would vacuum up assets in the financial markets causing M3 to fall. Perhaps such an effect would not have been large enough to notice until it was too late.

2) How can we best balance unemployment, the minimum wage, deflation, and inflation over the coming year or two? (And, what are your expectations?)

The US Department of Labor lists the minimum wage at $5.85 in 2007 and $6.55 in 2008. It is scheduled to rise to $7.25 in 2009. Did the 2007 and 2008 minimum wage rate hikes contribute to our worsening economy? Won't the 2009 bump drive unemployment way up? Perhaps I should ask: what are your expectations about deflation? How many months of deflation are we likely to have? Would it be wise for the Fed to allow greater inflation, perhaps by not taking the newly minted money out of circulation, once the hemorrhaging has stopped?

3) Was it speculation that drove oil to its peak last summer and is speculation driving it down now?

I'm not even sure that I accept the premise that speculation contributes anything (except liquidity) to the oil market. Last summer I scoffed at the speculation argument. Now, I'd like to know how much travel has fallen off, whether vast new reserves of oil have come online, or whether other market forces are driving the oil price. Looking at oil today and last summer, is it possible to quantify speculation? For instance, can we determine that last summer's oil price was driven higher by, say, 20% because of speculation?

Saturday, November 15, 2008

Russ Roberts has a great opinion piece on discussing the bailout and the credit markets. Roberts point is that the issues with bank lending, the stock market, and consumer sentiment have little to do with liquidity—the availability of cash and credit—and everything to do with the principled risk avoidance caused by uncertainty about future policy direction. While Roberts doesn't explicitly say it, he hints at a second reason: loss of confidence in both markets and government (eg: Treasury Secretary Paulson, the bailout). Here are some key quotes:
Paulson doesn't realize that his erratic attempts at creating liquidity are creating the uncertainty that makes liquidity meaningless.

The great economist F.A. Hayek wrote that "the curious task of economics is to demonstrate to men how little they really know about what they imagine they can design."

With each improvisation, Secretary Paulson is proving how little he knows about what he imagines he can design.
Hayek and Roberts deeply understood the opening lines of William Blake's Auguries of Innocence. Paulson does not. Here they are... probably my favorite four lines of poetry:
To see a world in a grain of sand
And a heaven in a wild flower,
Hold infinity in the palm of your hand
And eternity in an hour.

Friday, November 14, 2008

They Better Start Teaching Say's Law

Don Surber fields a question about college tuition (via Instapundit):
Question: What fuels college tuition inflation?

Answer: Student loans. From the Chronicle for Higher Education: “The volume of private loans shrank by $173-million, or about 1 percent, to $19.1-billion in 2007-8. That decline reverses years of double-digit growth and does not reflect the recent credit crunch. At the same time, the volume of federal loans rose by 6 percent after inflation.”

You have a volatile mix: Inexperienced borrowers, federally guaranteed lenders and the biggest sharks in capitalism: College presidents. Hence, the double-digit inflation in price.

Say's Law, simply stated, is that supply creates demand. This is why printing money, like the Fed is doing, usually causes inflation: the supply of dollars is larger after the printing but the supply of stuff is not, so the demand for stuff gradually becomes denominated in larger and larger quantities of dollars—prices rise, inflation. But, we have deflation right now, why's that?

The rise in M2 is not as pronounced as what's happened to M0, so the really big measures of our money supply have not moved much. I'm curious what M3 would've shown had it not been discontinued. I think it may have warned of the impending financial mess because, as wikipedia tells us, it includes "institutional money-market funds, short-term repurchase agreements, along with other larger liquid assets." Money-market funds started breaking the buck this past September, so I suspect that M3 data may have indicated the coming storm earlier in the year as it started to decline (well, that's what I think it would've been doing).

Getting back to Say's Law, you have to ask yourself: what is money? The text book answer is that it is a medium of exchange. The greenbacks in your wallet are money. If you've ever rented a car, you've probably learned that credit cards are a better form of money for that transaction. If you've bought a house, then you've learned that reams of legal sized paper signed by several people in triplicate are money.

And why is college tuition going up? Our government, indeed the American people at large based on bond and ballot initiative results, have never seen an educational expense that they do not want. So the supply of money, especially in the form of student loans, for college tuition keeps going up. Many more dollars chasing a few more slots for students, the market clears, inflation.

Bastiat's Candle Makers Live in Ontario

Headline: Online Carpooling Service Fined For Unregulated Transportation (via Slashdot)
...the web offers the ability to find other people traveling to the same general place you're heading and to set up a convenient carpool. It's good for the environment. It's good for traffic. It just makes a lot of sense. Unless, of course, you're a bus company and you're so afraid that people will use such a system rather than paying to take the bus.

A Petition

(Adapted from Bastiat's Economic Sophisms.)

From the drivers of buses and the producers of diesel fuel and generally of everyone connected with taxpayer funded transportation.

To the Honorable Members of an Ontario Court.


You are on the right road. You reject abstract theories and have little regard for the traveling public. You concern yourselves mainly with the fate of the humble driver of public transportation. You wish to free him from local competition, that is, to reserve the commuter's fare for a regulated industry.

We come to offer you a wonderful opportunity for applying your—what shall we call it? Your theory? No, nothing is more deceptive than theory. Your doctrine? Your system? Your principle? But you dislike doctrines, you have a horror of systems, and, as for principles, you deny that there are any in political economy; therefore we shall call it your practice—your practice without theory and without principle.

We are suffering from the ruinous competition of a local rival who apparently leverages technology so far superior to our own for the transportation of travelers that they are offering their service below our price; for the each traveler that uses this rival, our sales cease, all the travelers turn to them, and a branch of taxpayer subsidized Canadian transportation is all at once reduced to complete stagnation. This rival, which is none other than PickupPal, is waging war on us so mercilessly that we suspect they are being stirred up against us by perfidious Barbados (excellent diplomacy nowadays!), particularly because they have for that haughty island a respect that they do not show for us.

Now go read the unadulterated version!

Watching the Watchers

Via Instapundit and Ace: "Six agencies illegally scoured Joe the Plumber's records for dirt, including office of the attorney general, so that information could be turned over to national media." Ace goes on:
Check out this spin: The claim is they wanted to ensure the media wasn't misreporting information about [Joe the Plumber's] infamous thousand-dollar tax lien ...

They were protecting Joe from the media, you see. By passing them the fruits of illegal private-records searches.
Governments are not the only bureaucracies that can violate one's privacy. Last month twenty hospital workers were fired for HIPAA violations stemming from their snooping in the medical records of the Jacksonville Jaguars' offensive tackle Richard Collier. California has also fired a few people for HIPAA violations. The Mercury News reports:
Billingsley said UCLA hospital workers inappropriately accessed records of 1,041 patients since 2003. The hospital later disciplined 165 employees through firings, suspensions and warnings.

One former administrative employee, Lawanda Jackson, faces federal charges for allegedly selling information from Fawcett's medical records to a tabloid.
In corporate America, violations of privacy also result in firings. A couple years ago, AOL's CTO resigned and two employees were fired for privacy violations. In North Carolina a fired employee of a small business plead guilty to "intruding on her former company's e-mails and using the information fraudulently." If she released the information to the media for the betterment of society maybe she could have asked the judge for leniency at trial.

Violating the privacy of a politician can land you in jail—Palin's email hacker David Kernell looks forward to a court date in 2009. It can also precipitate a constitutional crisis when the tax payer funded Justice Department wants to investigate the tax payer funded office of a tax payer salaried Congressman, William Jefferson (D-LA), for evidence of malfeasance with tax payer money.

Here's my recommendation: whenever someone accesses my private data, send me an email or text message. Ideally, the email should include:
  1. date and time my information was accessed
  2. reason for the access
  3. name of the person who accessed my data
  4. contact information for follow-up
I think #3 will draw the most criticism. Perhaps an employee number would be more acceptable. Still... I can't help but think: When you're working on my dime—when you're drawing a salary from my tax dollars—you do not have the presumption of privacy at work. When government employees assume that they do have privacy at work, it leads to the abuse of power that Instapundit and Ace reported on. If government employees know that citizens will be notified of every access, then those employees will be more accountable to the people paying their salaries.

Thursday, November 13, 2008

Down a Peg

Instapundit gets well-deserved praise for not getting demoralized by McCain's loss. I think one of the silver linings of Obama's victory is that the vice presidency is going to be less active than it was with Cheney or Gore.

Community Service Redux

I can see Catalano's point (via Instapundit), but I think he glides past the issue of church involvement with community service. It really comes down to whether or not community service sponsored by religious institutions will be credited by the state. I don't expect any issues with Church youth groups staffing soup kitchens, but what about those same youth groups performing Handel's Messiah in a local park, or, to take it one step further, performing Be Thou My Vision in that park? The reaction on the right is largely driven by a fear that Christians and people of faith really aren't wanted in the state sponsored community.

John Galt Strikes in Chicago

This story seems to imply that Atlas is shrugging in the Windy City. Here are a couple of quotes:
...the news is especially alarming because the discussion concerns not just city jobs, but the private sector.

On Wednesday, Mayor Daley joined with local gas company officials to announce new programs to help low-income customers pay their heating bills.

[Mayor Daley] disclosed that corporate leaders are telling him they are planning huge layoffs in November and December, which will leave many Chicagoans out of work.

Mayor Daley also warned that local governments will be in jeopardy and may not have enough money to meet payroll, although he is not worried about paying City of Chicago employees.
Well at least city employees will be available to help the poor pay their heating bills!

Tuesday, November 11, 2008

Surveilling Sickness

Drudge has a flash up about Google volunteering to provide a new tool to help federal officials determine where searches for "flu" are coming from geographically. I've included the full text of the Drudge flash below.

I think there are some really valuable uses for Google's aggregated hive mind. Perhaps this is one of them. Is this sort of thing easy to subvert? If you wanted to make it appear that there's more interest in "flu" somewhere, you would have to generate more searches from that area. I don't think it would be hard for a nefarious group to drive around to various local wireless hotspots and do that. It sounds like Google's using a cluster of search terms, so maybe it is not easily subverted.

And how do they deal with local media inadvertently driving the searches? For example, if a local news report causes a spike in the searches for "flu", does the CDC respond before figuring out that there are no more flu cases than usual? Are these sorts of false positives common enough to obscure the signal in a lot of noise? I guess we will find out.

Update: Slashdot has more including a link to the new Google Flu Trends which includes information on how it works.

Update 2: Instapundit has a couple of links covering the privacy angle. In one, Orin Kerr promises to write an article on a Search Engine Privacy Act. In the other, the Vodkapundit's Stephen Green, reminds us of Google's moto: don't be evil. I still think Google's Flu Trends is possible without infringing on privacy, but I understand the concern. Drudge's headline "Sick Surveillance" is much more inflammatory than it needs to be. That said, I'm very interested in Orin Kerr's Search Engine Privacy Act.

Full text on Drudge:
Tue Nov 11 2008 15:34:50 ET

GOOGLE will launch a new tool that will help federal officials "track sickness".

"Flu Trends" uses search terms that people put into the web giant to figure out where influenza is heating up, and will notify the Centers for Disease Control and Prevention in real time!

GOOGLE, continuing to work closely with government, claims it would keep individual user data confidential: "GOOGLE FLU TRENDS can never be used to identify individual users because we rely on anonymized, aggregated counts of how often certain search queries occur each week."

Engineers will capture keywords and phrases related to the flu, including thermometer, flu symptoms, muscle aches, chest congestion and others.

Dr. Lyn Finelli, chief of influenza surveillance at CDC: "One thing we found last year when we validated this model is it tended to predict surveillance data. The data are really, really timely. They were able to tell us on a day-to-day basis the relative direction of flu activity for a given area. They were about a week ahead of us. They could be used... as early warning signal for flu activity."

Eric Schmidt, GOOGLE's chief executive vows: "From a technological perspective, it is the beginning."

Thomas Malone, professor at M.I.T.: "I think we are just scratching the surface of what's possible with collective intelligence."


A View from Germany

Davids Medienkritik blog provides a view of America from the perspective of German media. In a recent post about how German media will respond to Obama's election. The four responses that he offers are:
  1. Condescending Euphoria
  2. Cynicism
  3. Let's Feel Better
  4. America in Cultural Decline
I think that cynicism is the most likely response, but that's probably just projection. Davids has another post about this week's issue of Der Spiegel. The cover declares: "The World President: What He Wants to Do - What He Can (Not) Do", so they seem to be starting with a little bit of euphoria mixed with realism. Let's hope the realism wins out.

Sunday, November 9, 2008

Gorelick for AG

Glenn Reynolds brings news that Jamie Gorelick is being considered for Attorney General. She does have a certain expertise when it comes to trillion dollar disasters. Is there anyone else that was a player in both 9/11 and the 2008 financial meltdown?

A new job for Jamie—that's change you can believe in!

Saturday, November 8, 2008

Little Nukes, Big Idea

The UK's Guardian has a story about miniature nuclear reactors designed to power about 20,000 homes and costing about $25M.
The miniature reactors will be factory-sealed, contain no weapons-grade material, have no moving parts and will be nearly impossible to steal because they will be encased in concrete and buried underground.
It sounds like their solution to the disposal of nuclear waste may be to simply leave it encased in concrete underground, but then they do talk about refueling them every seven to ten years. Who knows...

As Glenn Reynolds would say: Faster please!

Why I Started Blogging

Don Boudreaux of Cafe Hayek describes the Theater of the Absurd that is America's first quagmire: Washington, DC. He eloquently opines:
It is not too much of a simplification to note that America is divided into two groups of persons: those who believe in their bones that what goes on in Washington is largely a serious quest by serious people to tackle serious problems seriously, and those who understand that what goes on in Washington is largely theater scripted so that the actors and actresses appear at first glance to be 'public servants' but in fact care for nothing nearly as much as maximizing their power and satisfying their megalomania.
I'm firmly in the later group of persons.

I started blogging shortly after the bailout passed. I was momentarily buoyed when the House voted it down that Monday a couple months ago. I saw a glimmer that the leviathan bailout might not survive in the Senate. I called both of my senators and my representative and urged no votes later in the week. That was the first time I've called my congresscritters. It will not be the last.

On Thursday of that week, after the Senate had voted overwhelmingly for the bailout, I was struck by the horrible realization that Congress was going to do something. The efficacy of the bill was not important. Larding it up with earmarks for wooden (but not plastic) arrow manufacturers didn't matter. The bailout was going to pass because Congress could never be seen as irrelevant. Don't you know that markets depend on the good graces of Congress to function? Why, it's none other than Congress that's responsible for enforcing Say's Law. Doing nothing was never a realistic option for those self-important popinjays.

And that is why they should all be fired at the end of each of their terms. Perhaps spending some time in their home districts will reacquaint them with the people they serve.

Thursday, November 6, 2008

Child Labor (UPDATED)

It is worthy of particular remark that, in general, women and children are rendered more useful, and the latter more early useful, by manufacturing establishments, than they would otherwise be.—Alexander Hamilton

Gateway Pundit brings news of Obama's plans to require children in middle and high school to perform fifty hours of service annually. Savor for a moment the irony of our first African-American president re-introducing involuntary servitude then consider that he does not specify whether this child labor is going to be compelled with the minimum wage or something more forceful. And do rid your mind of any inappropriate comparisons to other national youth programs.

I suppose it's good to see The One's enlightened return to a first principal of our great country: to wit, that children should be gainfully employed. Alexander Hamilton thought that child labor would be a boon to our manufacturing industries. He was proved correct and child labor laws eventually ended the practice. Perhaps there were reasons for those child labor laws. (At that last link, please disregard the section titled "Forced or Compulsory Recruitment of Children for Use in Armed Conflict.")

I sincerely doubt that these children will be gainfully employed since, as any good Keynesian like Our Dear Leader knows, "The government should pay people to dig holes in the ground and then fill them up." Perhaps someone would be kind enough to mention Bastiat's insights about the broken window...

I would personally like to thank all of the college students that worked on Obama's campaign. Since his plan calls for a hundred hours from each of you annually, you can continue doing so!

Update: Coyote Blog observes that the way to tax people who do not make money is to take away their labor.

Update 2: Greg Mankiw sees this as a sort of new draft. I'll note that America's most decorated Marine, Smedley Butler, lied about his age to serve his country. I can only wonder who the first such patriotic fourth or fifth grader will be!

Update 3: Glenn Reynolds has noticed with an unusually verbose: "FREEDOM!" and link to a blurb at Overlawyered. What does the Instapundit think of the constitutionality of the proposal?

Update 4: While not directly related, Don Boudreaux of Cafe Hayek mentioned the passing of Marshall Fritz on election day. Fritz was the founder of the Alliance for the Separation of School & State. It's likely that his organization will be in the vanguard of this fight, so do what you can to support them. Here's information on donating and here's their How Can You Help page.

Update 5: Dr. Helen believes it will be no more successful than the government's self-esteem programs of the 70's and 80's. She (and her commenters) ask: why not make it voluntary? That would be a reasonable improvement, but why not start there? Why did they choose to start with "required" service?

Update 6: Glenn Reynolds brings news that the site has been edited and the community service has been reframed as a goal not a requirement—perhaps that's why they call it The new text is:
Obama will call on citizens of all ages to serve America, by setting a goal that all middle school and high school students do 50 hours of community service a year and by developing a plan so that all college students who conduct 100 hours of community service receive a universal and fully refundable tax credit ensuring that the first $4,000 of their college education is completely free.
For reference, here's a copy of Gateway Pundit's screen grab. The text above is a re-write of the portion underlined in red:

He who controls the present, controls the past. He who controls the past, controls the future.—George Orwell
Update 7: Kudos to the Obama team for making this slight policy adjustment! I'd recommend that you guys port the site to a wiki. That will allow everyone to see the sausage being made—the historical edits to each page. Open government is a very good thing and it will prevent the new administration from being painted as Orwellian.

Last Update: Re-reading my initial post I have to admit that I was a bit over the top. What can I say... I was pretty fired up.

Cliff Mason over at CNBC has a post arguing that mandatory voluntary service is an oxymoron. Boston-based blogger Arkady finds irony in the pre-election fear that McCain would bring back the draft and is rightly concerned about the growth of government. I think he implicitly understand The Practical Rules of Bureaucracy. I will have a lot more to say about those someday...

Some final thoughts... Child labor law is not (and should not) be a barrier to high schoolers and college students doing volunteer work. I like the idea of encouraging children to do more work. In fact, I'm currently reading Young Bucks: How to Raise a Future Millionaire which encourages parents to train your children in entrepreneurship at an early age. (Here's the Glenn and Helen Show interview with author Troy Dunn.) My fear is that an Obama administration would structure volunteer work to preclude or restrict volunteering through religious organizations and religiously aligned colleges.

My brother was enrolled in ROTC at Grove City college his freshman year. The following year there was effectively no ROTC at Grove City. I believe that was a result of the Grove City College v. Bell decision and administrative actions at the college. I agree with the left that Federal dollars should not be spent on religiously affiliated institutions; however, I also believe that individuals should be empowered to choose such institutions and the way to empower them is to reduce their tax obligation on a dollar for dollar basis. Note that this works very well with my Pigovian Income Tax proposal... something else I'll have more to say about later.

Child labor law also needs to be re-visited. In particular, it needs to be modernized to recognize and encourage children to work in the IT sector. I have no specific recommendations because I know very little about the law, but I am sure that laws written a fifty or a hundred years ago to address problems in agrarian and industrial work can not all still be relevant.

Fiscal Restraint Returns!

If you look closely at the graph below, you'll notice that the Federal Reserve has slowed the rate of expansion of the money base (M0). I think one of their printing presses broke down under the heavy load and I'm optimistic that more will follow suit. Ah, in the absence of a cogent monetary policy, I'm pinning my hopes on hardware failures to get us through this mess!

See also: Your Tax Dollars at Work, Money Supply

The Future is Here

This does not bode well for The One's redistributionist plans: Obama Campaign Workers Angry Over Unpaid Wages. (via Drudge)

Update: Gatewaypundit has a video news report.

Wednesday, November 5, 2008

Shelby Steele in the LA Times

Shelby Steele has an excellent article in the LA Times today. When reading that piece I got a sense of wistful sadness about race in America. You can see what I mean in the first couple of lines:
For the first time in human history, a largely white nation has elected a black man to be its paramount leader. And the cultural meaning of this unprecedented convergence of dark skin and ultimate power will likely become -- at least for a time -- a national obsession.
The same sense of despondence appears later:
The torture of racial conflict in America periodically spits up a new faith that idealism can help us "overcome" -- America's favorite racial word.
In my essay last week, American Awakening, I outline a couple of steps on America's long racial sojourn. Those steps will not "overcome" the issue, but they will inform our discussion.

Tuesday, November 4, 2008

Hope or Insight?

The media is one of the least trusted institutions in the country. Many people think that the media openly lies to promote their own agenda. If you are one of those people that does not trust the MSM, would you feel compelled to honestly tell them your preferred presidential candidate? Are you going to be truthful with the WashingtonPost-ABC news poll, CNN/Opinion Research, Reuters/C-SPAN/Zogby, or Fox News/Opinion Dynamics? What about Gallup or Rasmussen? Since the two linked articles above are based on polls, what good are they anyway?

I think this is one of the reasons that there's so little confidence in the horserace polls this year.

Update: In light of Obama's historic victory, it must have been hope that buoyed my doubts about polling. The polls proved to be more or less spot on. I'm sure has more to say about that.

Congratulations to President elect Obama!

Sunday, November 2, 2008

I Just Hung-up on Rassmussen

That's (at least) the third pollster I've hung-up on this political season. I'm not the only one doing it. Jerry Pournelle (via Instapundit) has hung-up on five pollsters. Jerry remarks:
The polls do not record the "refused to respond"... and I suspect that more McCain people refuse to respond than the trendier Obama enthusiasts.
But the election is not over. There are more decline to answer voters than it takes to change the election.
The way to win elections is to get those who intend to vote for your candidate to go vote. Few readers here are not capable of getting two or three voters to the polls. That's well over a million votes. Think on it.
Don't just think on that. Make a plan to vote. Talk to your friends and relatives and plan for the great voting field trip. My daughter will be in pre-school so I'll have a couple hours to wait in line to vote. If you've got an infant, toddlers, or multiple schedules to work around, then you need a voting buddy. Ask a friend or relative to join you on your trek. One of you can supervise the kids at Monkey Joes or McDonalds or even at home while the other votes. Perhaps you and your voting buddy are in the same precinct and can help each other corral the tots at the polls. Think of it as a good civics lesson topped off with a trip for hot chocolate afterwards.

I want to return to polling for a second... I've been thinking to myself: "why do I keep hanging-up on pollsters?" And I think I have an answer. I've noticed that I'm generally pretty agitated when I learn that it's a pollster—I get at least one sales call a day, every day, and I'm never as annoyed as I've been when I get a pollster. Annoyed isn't quite right... I'm livid when it's a pollster.

I see the pollsters as part of the MSM. There's the WashingtonPost-ABC news poll, CNN/Opinion Research, Reuters/C-SPAN/Zogby, and Fox News/Opinion Dynamics. Rassmussen and Gallup may not have an explicit media sponsor, but they still seem like part of the MSM. As a conservative, I'm certain that the MSM is covering for Obama, so I believe my refusal to talk to pollsters comes from the reasonable fear that those pollsters will use my opinion to carry more water for the Obama campaign.

As Victor Davis Hanson observed the other day: "we have never quite seen anything like the current media infatuation with Barack Obama." It's not only the MSM that's coming to an end. Their implosion will continue to result in damage to organizations and individuals within their orbit.

Thursday, October 30, 2008

Write-in Candidates in Saint Louis

Glenn Reynolds mentioned Robert Heinlein's advice to vote against candidates, even when you can't find one worth voting for. It's long been my policy to never vote for a candidate that is running unopposed. If they can't drag themselves and their mother to the polls, then they do not deserve to win and I refuse to pile-on against some unknown write-in challenger.

This year, I want to find-out who the unknowns are. If you're running a write-in campaign in St Louis, please leave your name and a link to your website in the comments.

Wednesday, October 29, 2008

American Awakening

A common refrain earlier this political season was: "there's more that unites us than divides us." We are all Americans, after all. We must focus on that which unites us for the civility of our public lives. We must set aside our skin color, though we are still proud of our heritage. We must set aside our religion, though it is still paramount to each of us. We must unite as the American race.
"Keep ancient lands, your storied pomp!" cries she
With silent lips. "Give me your tired, your poor,
Your huddled masses yearning to breathe free,
The wretched refuse of your teeming shore.
Send these, the homeless, tempest-tost to me,
I lift my lamp beside the golden door!"
Statue of Liberty National Monument, The New Colossus by Emma Lazarus
Such were and will be the ancestors of the American race because we are a race defined by our love of liberty and united by our differences. Out of many different ingredients, we have created one American race in our great melting pot. This race is defined by an ideal that transcends time and place, a dream of freedom, a dream of unity for which we all strive.

We know of the slave's dreams of freedom and equality. We know of the African-American's dreams of liberty and justice. Americans have heard of these dreams deferred. We see how beautiful our black siblings are and we are ashamed of our wrongs against them. And in our shame we have fought for those dreams and for our own unity. We fought and died. Through that tumult we were able to advance our American ideal of freedom. But, though we remained one country, our civil fabric was horribly torn.

Dream of the American race transforming the jangling discords of our nation into a beautiful symphony of brotherhood! Hold fast that dream within your heart! That dream brought countless Americans to Washington DC on an August day in '63. America responded with the Civil Rights Act of '64 and other incremental steps toward our American ideal: Loving v. Virginia effectively legalized interracial marriage, Jim Crow laws were repealed, and affirmative action policies implemented to name a few.

As Americans we are dedicated to the proposition that all are created equal. Again and again our tweaks begin to approximate equality and rectify passed wrongs. Our instruments of change are not perfectly tuned. We see the over correction in affirmative action when one American is granted a job and a "more qualified" American is denied that job. Affirmative action is a blunt instrument that can mar our civil fabric. If affirmative action works it will someday no longer be required and if it does not work, then all it does is foster racial strife. We can do better. We must.

To end affirmative action by legislative decree would be far too jarring, rending the civil fabric. Yet, America’s first woman Justice, Sandra Day O’Connor, captured the feelings of many Americans when she remarked that the Court “had tried to be careful in stressing that affirmative action should be a temporary bandage rather than a permanent cure.” We need a mechanism to allow affirmative action to fade away while it continues to right past wrongs for a time. This is our dream of a future free from shame and bright beyond the telling of it.

There is a mechanism to gradually bring about that future—an American approach that is a novel appeal to individual liberty. When presented with a job application or when applying to college, indicate that your race is only American. In so doing, you opt out of affirmative action. Some Americans will do this and some Americans will not. In time, as we realize our dream of unity and mend the fabric of our civility, more Americans will do this than will not. In time, affirmative action will pass away by our collective resolve to be American.

Americans are foremost in the fight of the battles of the free because we dream that one day this nation will rise up and live out the true meaning of its creed. Our common American heritage is what unites us, but we lack an analytic tool, a metric, that would allow us to asses our unity. We do not know when one American has slighted another. We only learn of injustice and resentment when it boils over in violence described in the news. Oh, then we know the civil fabric was torn. We must know ourselves better. We must look into our soul.

We must be introspective. The American centre can be the cap stone that prevents things falling apart. When you complete the census form in 2010 and when pollsters enquire about your race, indicate that you are American. If permitted and so inclined affirm your other racial identities. Claiming to be part of the American race demonstrates your solidarity with other Americans. Choosing not to identify as American communicates that we are not collectively living up to the American ideal. You are rendering a judgment on the sins of other Americans when you do not self-identify as American and in so doing you anonymously challenge us to work harder toward the American ideal. Both are required, both patriotic.

It is the contrast of these choices that creates our introspection. The mere act of self-identifying as American does little, though we hope and pray that it may mildly warm our civil fellowship. Poll after poll, census after census, we will begin to see the places where more Americans self-identify as such and where fewer do. O beautiful American dream that sees beyond the years! We will learn what brings Americans together and what sunders them. We will see hideous racism and glorious integration. And we will know better for we will know ourselves. If America is to become a greater nation, this must become true.

Americans are not constrained to a single race. This is captured in the label African-American. These Americans identify as both fully American and fully African. It is as if two roads diverge--a choice between two races, two identities. But it's a false choice. Americans, African-Americans, gladly choose to travel both and be one traveler. And that makes all the difference. The individual American striving for that ideal of liberty and unity… the American whose heritage includes European, African, Asian, or Native American blood… the American whose ancestors were Hindu, Christian, Islamic, Atheist, or Jewish… these Americans wear the great seal on their hearts: E Pluribus Unum. Out of Many, One. Just as the individual American is One, though of diverse origin, so our body politic is One, though of diverse composition. Let our future radiant shine with sweet hopes American!

There is much change and promise in this American future. Will we rather bear those ills we have, than fly to others we know not of? We will soar on wings like eagles because, united as Americans, our strength will be renewed. The change here proposed is an appeal to all Americans to make a positive difference in a small way. The magnitude of this change is amplified by the tranquil deliberations and voluntary consent of so many distinct communities. Every American is empowered to play a critical part.

The American soul yearns for racial reconciliation. The preservation of the sacred fire of liberty is justly considered, perhaps, as deeply, as finally, staked on this experiment entrusted to the hands of the American people. There is no shortcut. But we will laugh as we go because we will learn that we all have something in common: we are American.

Tuesday, October 28, 2008

Standing Up for Greg the Economist

Tim Wu takes a couple of shots at Greg Mankiw's work incentives under an Obama tax regime. Greg made the point that Obama's tax plans make it preferable for him to spend time with his family instead of putting out the extra effort to earn another dollar. Tim makes the following two arguments:
1. It assumes that his only incentive to do any work outside of his regular teaching and research is to make money. This seems so counter to what the idea of academia is for, and is passed over so easily.

Tenured academics like Greg M. have an incredible luxury: the time, freedom to work on what he wants, and a guaranteed paycheck (in his case, a large one). To say in that position you’ll only do “more work” if paid seems an offense to the idea of academia itself. Academics aren’t supposed to be on sale or work only on commission.
It appears to me that Tim is suggesting that tenured professors should not be paid for speaking engagements or consulting services. Since that can't be what he really means, I feel that Tim is being disingenuous. He is using the Professor's occupation to deny Mankiw the opportunity to freelance by implying that speaking and consulting are somehow part of his professorship. Neither Tim nor I know what the Professor's compensation includes, but I would not be surprised if it explicitly allowed and even encouraged Mankiw to pursue consulting and paid speaking engagements.
Greg M. himself is disproof of his own ideas. He spends alot of time blogging, and writing advice for junior professors and so on, all for free. If Obama wins, it looks like he’ll be doing more of that in the future. Obama, if his blog post is right, will alter the balance of commercial and non-commercial work he does. The irony is that that result might be better for society than Greg M. doing a bunch of consulting or paid-speaking.
The professor does not blog "for free." He blogs to receive the accolades of people like me, to improve his name recognition to advantage himself in future salary negotiations, and (perhaps most importantly) to sell his favorite text books. Similar, I blog in the hope of someday receiving a free, signed copy of the Professor's wisdom for defending him against economically illiterate attacks.

As to what is best for society, I do not think Tim is the one to judge. Surely a teenage neighbor of the Professor would benefit from a sitting job while Mankiw lectures out of town. Or perhaps one of his own children is old enough to be entrusted with the care of their siblings and the stimulation of the local economy. With a more favorable tax structure, the good Professor might hire a nanny or au pair to help raise the children, prepare meals, and clean the house. This would not only employ someone directly, but on that rare Friday night when the Professor has no speaking engagement, he and his wife could go out for a truly spectacular dinner at Aujourd'hui thus employing, in part, a few more people.

All of that is the work of the invisible hand.

Tim continues:
2. The implication, taken by other writers like “Beldar” though not by Greg himself, is that Greg working less is proof that Obama’s tax cut will hurt the country. But hold on - Greg represents 5% of the country. The rest — the 95% percent who get a tax cut, will presumably have reasons to want to work harder, because their taxes are going down.
Roughly 40% of wage earners pay no income tax. They do pay payroll taxes, but then a plan to return Social Security revenue is surely a plan to accelerate the collapse of that great ponzi scheme.
It’s a simple calculation. The tradeoff is those who make more than $250,000 doing less commercial and more non-commerical work, versus 95% percent of the population who have reasons to do more.

Its at least ambiguous. And since the money is worth more, on the margin, to people who make less than $250,000, they have more reason to want to work for it. $1000 means more to someone who makes $60,000 than to Greg M.
I agree with Tim; however, I think that the "Pigovian" income tax that I propose creates even greater incentive for lower wage earners to do additional work while also potentially increasing the Professor's incentives. It's not an either or.
The upshot: Obama’s tax plan will encourage a rich man like Greg M. to devote more time to the public and his children instead of paid speaking gigs, and gives a lot more other people more incentives to earn more money. Sounds pretty good to me.
I do not know if the Professor is rich since I only know that his income is in the upper middle class. Perhaps he is not particularly frugal, but would become so if allowed to work for and save more money. I'll agree that it "sounds pretty good" in one respect: Joe the Plumber can lowball Mankiw on a lot of those speaking gigs and probably do a reasonable job at the lectern.

Update: Welcome Instapundit readers!

Sunday, October 26, 2008

Hell Hath no Fury

Glenn Reynolds linked to this Helen McCaffery piece and this Power Line post about the rampant misogyny on the Left. McCaffery puts it best:
I cannot predict who will win the presidential campaign, but I already know who will lose big: all women.
What's amazing to me is that the Left has managed to offend women on both sides of the political spectrum. Hillary was pilloried with sexist attacks during the nomination and the vitriol that has been showered on Palin is reprehensible. So, even if Obama wins November 4th, I think Hillary will get the Democrat nomination in 2012. Not only will she be the novel new historic candidate, but she'll have a tsunami of pent of rage at her back.

Friday, October 24, 2008

Lesson Learned

We've been hearing about the media bias in this election for months now. This Pew Research Center for the People and the Press poll captures in startling detail how blatantly biased the media has been. By an astounding margin of 61% (70% to 9%) voters say that the press want Obama to win.

Lesson: Propaganda does not require government sponsorship.

Update: The Anchoress makes the point that the MSM are bidding to become propagandists. Hey, everyone's NPR now! Here's how she puts it:
I personally believe that the press is going “all in” on Obama because they figure it’s the best way to shut down alternative media - which is killing them - and go back to being the only game in town. The only game in town, and completely beholden to the government. That’s scary as hell.
Glenn Reynolds (and The Anchoress) points to Michael Malone's Editing their Way to Oblivion post. The quote I found most interesting was: "A few days ago, when asked by a new acquaintance what I did for a living, I replied that I was “a writer”, because I couldn’t bring myself to admit to a stranger that I’m a journalist."

Thursday, October 23, 2008

Your Tax Dollars at Work

With declining circulation numbers plaguing most (all?) of America's newspapers, The Fed has developed a rescue package focussed on buying up "unneeded" paper and ink.

See also: Professor Mankiw, Money Supply

Tuesday, October 21, 2008

A Pigovian Income Tax

In a shameless bid to join Greg Mankiw's Pigou Club, I've devised a Pigovian income tax. I first thought about this a couple weeks ago after Professor Mankiw proposed a new metric for computing average marginal tax rate. In a follow-up post a reader suggested an improvement to the metric and dubbed this the "Mankiw effective tax rate".

At that phrase, my mind wandered. I began to think about what income tax policy Professor Mankiw would prefer. Readers of his blog would instantly know that he would prefer a Pigovian income tax, but what exactly is that. Let's start with a definition

Pigovian tax: (n.) a tax levied to correct the negative externalities of a market activity

This begs the question: what are the negative externalities of our current income tax policy? Obviously, the answers to that question are debatable. Here are the two negative externalities that I'll try to address:
  1. Free riding (The poorest people pay no income tax)
  2. Greed (The rich do not "pay their fair share")
Free riding and greed are related. The tax burden in modern America falls almost exclusively on the high income earners. The top 50% of earners pay 97% of income taxes. The top 5%, pay 60%. We're already soaking the rich. The bottom 40% of wage earners pay no taxes. They're free riding.

A corollary to both free riding and greed is class warfare. If the tax rates of the low and high wage earners could be linked, we could address not only greed and free riding, but also class warfare. So, my Pigovian income tax would tightly couple the interests of high and low wage earners. I would accomplish this by making the tax rate for the top wage earners a multiple of the tax rate for the bottom wage earners. For example, if we chose a multiple of two and set the bottom tax rate to 20%, then the top tax rate would be 40%. Let's apply the 20% rate to the bottom quintile and the 40% rate to the top quintile.

That leaves the middle three quintiles up for grabs. Tax brackets could be divided up differently and probably would be in the real world. Still, quintiles offer a simple way to illustrate my point. If we used a typical progressive scheme, we would wind up with progressively higher tax rates, say, 25%, 30%, and 35% for the middle quintiles.

I would prefer a tax policy that incentivizes productivity, so I will examine a policy of declining tax rates, say, 12%, 6%, and 0%. Let's consider these tax rates, but replace the quintiles with household income ranges so we can see what this might look like with real numbers.

Income RangeTax RateRevenue Est.
$0 to $20,00020%$51,401,950,000
$20,000 to $40,00012%$114,728,120,000
$40,000 to $62,0006%$155,023,760,000
$62,000 to $100,0000%$171,086,480,000
$100,000 and up40%$776,028,380,000

Note 1: I assume 22.25 million households per quintile which is slightly higher than the 2007 number implied at
Note 2: Quintile ranges are based on data from I used the mean income data there to calculate my revenue estimates.
Note 3: The also implies that total income tax revenue is about $1.25 trillion.

Are you shocked at that 0% rate for the upper middle class bracket? It has a couple of nice side effects. First, it clearly marks the transition to the higher "greed" tax. Second, it reduces the burden of filing tax returns for a quintile that is likely to have numerous deductions. If you're at the upper end of that quintile, there's no reason to itemize unless you can muster almost $40k in deductions. This would also apply, though to a lesser extent, with the middle class bracket of 6%. In that case, filers would have to decide if the burden of documenting a deduction was worth the 6% savings that it would net.

This incentive structure is the inverse of what currently exists. Because each tax bracket is at a higher tax rate, the incentive to itemize increases as earnings increase. I suspect that discouraging itemization (as my proposal does) will reduce fraud and raise revenues.

Monday, October 20, 2008

Great American Ponzi Scheme is running a great video series on social security or, what I like to call, the Great American Ponzi Scheme. The first presidential candidate to call it that, gets my vote. I suspect I'll be well into my 80s, awaiting my first social security check, before that happens.

McCain Rally in St Charles

I made it to the McCain rally in St Charles this morning, but just barely. I was on the last shuttle bus from the remote parking to the event and got there after McCain's motorcade. In fact, he was just starting to speak when I arrived. I was able to snap a few pictures.

I was welcomed to the event by the minions of our (presumed) Dear Leader.

McCain warming up the crowd.

McCain wrapping up his exhortations to the Forces of Light.

Wednesday, October 15, 2008

Ready... Aim... Fire!

Tyler Cowen summarizes Obama's economic plan. I don't get the $3,000 per new hire. If Obama's elected, won't employers just fire lots of people November 5th? They could rationalize it on economy/market uncertainty and wait for Obama's new hire bonus to kick-in before raising head count again.

Update: Here's the bullet point from Tyler's post:
— for the next two years, give businesses a $3,000 income-tax credit for each new full-time employee they hire above the number in their current workforce;
The more I think about this, the more I think it's going to drive up unemployment in November when employers just fire lots of people November 5th. Doesn't "current workforce" mean the headcount of companies when the bill is signed? Assuming I'm wrong and that "current workforce" means workforce in October 2008, doesn't that create the incentive for employers to fire workers Nov 3rd and let them know they'll all be re-hired on the 5th if McCain wins? Is Obama intentionally trying to make workers worry about their jobs? And how does this restore confidence in the markets?

Please tell me I'm missing something....

Tuesday, October 14, 2008

Who's Better for the Stock Market?

Harvard's Greg Mankiw blogged today about Republicans, Democrats, and the Stock Market. His main point is that the efficient market hypothesis implies that the incoming president moves the market prior to taking office; therefore, it is meaningless to measure market performance from their respective start and end dates in office and conclude that Democrats are better for the market.

It seems to me an analysis that omitted the first and last years of each president's term would be a much better barometer. Investors with longer time horizons for their investments might skew this measure slightly, but not too much, I would think.

There's still the correlation-does-not-prove-causality issue...

Comment Policy

Due to popular demand, I'm going to enable commenting on future posts. I reserve the right to delete comments on a whim. Profanity, personal attacks, off-topic remarks, and spam tend to make me whimsical, if you know what I mean.

If I think you're a troll I will ban you (if I can figure out how).

I plan to close comments after a period of time not less than one week from the posting date.

Monday, October 13, 2008

Money Supply

Printing Press (noun): Mechanical device used by the Weimar Republic to deter rampant monetary expansion.

Last Friday I saw this graph at the von Mises Institute. Today (Monday), I noticed that the graph had changed—click on the picture to see the latest graph of our Monetary Base. (Update: The Fed dataset is for every two weeks. The picture below ends with the 9/24 data point. You'll see the 10/8 data point after the jump.)

Whew! We can all rest soundly knowing that our (nominal) bank deposits are safe!

If this worries you, I'd recommend the Zimbabwe strategy: buy something of value on your lunch break.

Wednesday, October 8, 2008

Hu's in Trouble?

The last capitalist we hang shall be the one who sold us the rope. — Karl Marx

Economists assure us that international trade is a good thing. I agree, and I think the advantages of trade are well described by the Ricardian model and comparative advantage. Yet, I worry that every dollar of debt we incur with China is a little more rope for them to use against us.

Here's an imagined conversation between Hu Jintao and George W. Bush to illustrate a repugnant possibility of China's vast holdings of US currency and debt instruments:
[Phone rings in Oval Office. Bush answers.]
W: This is W.
Hu: Howdy cowboy! Hu here.
W: The 2008 games... Great show, great show...
Hu: Let's cut to the chase. We've got some of your spare change we could loan you.
W: Right.
Hu: Furthermore, we've got a lot people to keep occupied. We can keep them occupied by either working in factories making McDonald's Happy Meal toys or we can muster them into armies. We like the Happy Meal gig and I think you do to.
W: Yup.
Hu: So how about you recognize our territorial claims to the island of Formosa?
W: Hmmm... You know I can't do that.
Hu: We'll burn $700B worth of US Government bonds and you'll recognize us as the rightful sovereign of that little island.
The above dialog reaches a spectacular low in (imagined and implied) moral turpitude. Unfortunately, this sort of option is going to remain on the table as long as China has significant holdings denominated in US dollars.

I don't know if we should do anything. Inaction is sometimes the best course of action. Nonetheless, the reality of the Templeton curve looms large before us. Politicians are oddly promising more spending during one of the greatest financial crises in American history. As a result, debt forgiveness will become more politically appealing.

I'd like to know how economists see this playing out. Are there similar examples from history that we can learn from? What policy changes should we consider?

Tuesday, October 7, 2008

Rush the Hill!

The tree of liberty must be refreshed from time to time with the blood of patriots and tyrants. It is its natural manure. — Thomas Jefferson

Both sides of the Congressional aisle are deeply mistrusted. A recent Rasmussen poll found that 59% of voters would like to replace our entire Congress. Yet the reelection rate is alarmingly high, sometimes reaching 98% in the House. Senate seats also favor incumbents though not to the same degree. It is time for the patriots and tyrants in Congress to go.

Term limiting members of Congress is politically difficult because existing plans rely on the Constitutional Amendment process. That approach would require Congressional approval—members of Congress would have to vote against their own interest, against keeping their high-paying jobs indefinitely. Their entrenched power tugs against such reform. The following is an implementation strategy that leverages state interests to overcome this political barrier and create a new kind of term limit.

This new term limit is distinct from past proposals. Instead of limiting the number of years that a member of Congress may serve, I am proposing that members not serve consecutive terms. There are several benefits to this approach. First, members will not campaign for themselves while they are on the public's dime (unless they run for an executive office). Second, after serving they will likely leave Washington, DC, and reacquaint themselves with their constituency in anticipation of another race two years out. Third, members will enter office with the expectation that they will have to find a new job—at least for a little while—at the end of their term. Perhaps the most important reason for this reform is that lobbyists would no longer have the pretense of an up-coming election by which to rationalize their "contributions" to sitting legislators. This may make a ban of such donations politically possible.

The main incentive for this term limit proposal already exists. Each state house is filled with legislators eagerly awaiting the opportunity to serve their constituents on the national scene as either a representative or a senator. State legislators have a political and a financial interest to increase the competition for Congressional seats since they would be the chief beneficiary. This incentive can propel state-level constitutional amendments and/or ballot initiatives that prevent members of Congress from serving consecutive terms.

Each state that adopts a term limit law provides an experiment in legislative reform. Collectively, they compose the Laboratory of Democracy. While I prefer the term limit plan outlined above there are many variations on this simple idea. Some states may only want to term limit their US Representatives, while not so constraining their Senators. Other states may choose term limits that follow the traditional approach of restricting the number of years that Congressmen may hold office. Perhaps a few bold states would impose term limits on both their Congressional delegation and their state houses.

The Promised Land of legislative reform is a term limit amendment to the US Constitution. Such an amendment would represent a compromise informed by the experiments within our Laboratory of Democracy. I suspect that such an amendment would be structured to impose term limits on state legislatures as well. Once a sufficient number of states have adopted some form of Congressional term limit the tipping point will be reached for Congress to act on a Constitutional Amendment.

The Tenth Amendment reads: "The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people." It is time for the states and the people to refresh the tree of liberty.