Saturday, October 07, 2006

Wyoming Jobs

Michigan has the highest state unemployment rate in country, tied with Mississippi, at 7.1%. Hawaii is the state with the lowest unemployment rate, at 2.8% and Wyoming has the 5th lowest state unemployment in the counry, at 3.3%. The city of Flint's unemployment rate is 14.6%, and Genesee County's (where Flint is located) unemployment for August is 8.3%. There are currently 341,664 workers in Michigan who are unemployed, and 17,552 unemployed workers in Genesee County.

Bottom Line: Wyoming has a labor shortage and is recruiting workers in Flint, here is the
story in the Flint Journal.

Tax Tidal Wave

According to the most recent release from the Congressional Budget Office, the budget deficit has fallen by $68 billion, to $250 billion for FY 2006, which just ended on September 30. Compared to our GDP of $13 trillion, the current budget deficit is 1.9% of economic output, down from 2.6% in 2005, and well below the 2.7% average since the 1960s.

As the
WSJ points out, most states have budget surpluses, and including those brings the total U.S. public sector borrowing down to 1.5% of GDP.

The reason for the falling budget deficit? Well, it's not because of decreased government spending. According to the WSJ, "the federal budget expanded to $2.7 trillion last year, a 9% increase, or three times the inflation rate. Over the past six years the federal budget has increased by 49.2%."

The budget deficit is shrinking because of a "tidal wave of tax revenues:" Tax collections have increased by $521 billion in the last two fiscal years, the largest two-year revenue increase in American history (even adjusting for inflation).

* Individual income tax receipts rose by 13% in FY 2006, to a record-high of $1.049 trillion, surpassing the previous record set in 2000 at the height of the last economic expansion. From the WSJ, "The IRS tax-return data just released last month indicates that a near-record 37% of those income tax payments are received from the top 1% of earners -- 'the rich,' who are derided regularly in Washington for not paying their 'fair share.'"

* Corporate inclome tax receipts rose by more than 27% this year to $354 billion, a new record, and 71% higher than the peak of the last economic expansion in 2000.

Hmmmmmmmmm...... Sure seems like the "2003 tax cuts for the rich" turned out to be the largest tax hike in history. And what's not to like? Tax revenues are at an all-time high, the rich are paying more in taxes, the deficit is falling, and way below historical average as a percent of GDP?

Well, if you can't deny the reality of a healthy economic expansion, you can always claim that ''The benefits of the economic expansion have not been equally distributed.''
See the NY Times for that quote.

Thursday, October 05, 2006

Partisanship Rankings

Of all of the nationally syndicated newspaper columnists, who was the most consistently, one-sided and partisan in 2005? Economist Paul Krugman of the NY Times according to the website "lying in ponds," which analyzes op-ed columns for partisanship. For example, in 95 commentaries published in the NY Times in 2005, Krugman criticized Republicans 621 times and criticized Democrats only 18 times, for a partisanship ratio of 34.5X to 1 against Republicans. Likewise, Krugman praised Democrats 103 times and praised Republicans only 9 times. Therefore, these data show that Krugman spent most of the space in his NY Times columns criticizing Republicans, and got ranked #1 for partisanship in 2005 by "lying in ponds."

In contrast, economist Thomas Sowell ranked #16 in 2005, based on the following results: he criticized Republicans 65 times in his columns and criticized Dems 94 times. Sowell praised Republicans 89 times and praised Dems 13 times.

So far this year, Krugman ranks #3, and the top 5 most partisan columnists in 2006 are liberals (Molly Ivins, Joe Conason, Krugman, Bob Herbert and Frank Rich). Conservative Ann Coulter ranks #6. Ivans (528 anti-Rep comments), Krugman (534 anti-Rep comments), and Rich (566 anti-Rep comments) are even more anti-Republican than Ann Coulter is anti-Democrat ("only" 309 anti-Dem comments). Yikes!!

Supply and Demand for Exotic Cowboy Boots

Lucchese handmade cowboys are very expensive, and Lucchese anteater cowboy boots are very, very, very expensive. How expensive? Check out this listing on Ebay to find out, and here's another pair for sale. Hint: anteater boots are no longer being made.

Oil Companies Don't Set Oil Prices

A recent Gallup poll found that 42% of the general public believes the Bush Administration has deliberately manipulated gasoline prices in advance of the fall elections.

From an article I just wrote for national distribution through McLatchy (formerly Knight-Ridder) newspapers:

The basic economic reality of world oil trading is that even the biggest oil companies don’t set gasoline or oil prices, any more than farmers set the price of corn, soybeans, coffee or sugar. Oil and gas prices, like all world commodities, are set by the twin forces of global supply and global demand in a competitive international marketplace, not in the conference rooms of oil companies.

And many people also mistakenly think that the major oil companies are still sitting on top of most the world’s oil. But oil companies today control only a small fraction of the world’s oil reserves – about 2.5 percent. Most of the world’s oil is owned by the national oil companies of foreign governments such as Saudi Arabia, Iran, Russia, Venezuela, China, and India. The fact that U.S. oil companies control such a small fraction of the world’s global supply of oil is another reason that makes it almost laughable to think that they could deliberately manipulate gasoline prices for political reasons.

Oil and gasoline prices in the U.S. change daily, in response to the relentless and dynamic changes in global economics, forces that are totally beyond the control of U.S. oil companies.

Wednesday, October 04, 2006

Excessive Government Spending is the Problem

According to a Heritage Foundation report titled: "Tax Rate Reductions Strengthen the Economy, But Excessive Government Spending Threatens Long-Run Performance,"

The U.S. economy has enjoyed strong growth in recent years, especially compared to the lackluster performance of other developed nations. Unem­ployment is low, income is high, and wealth is at record levels. Government is not the reason for the economy’s growth, but policymakers can improve economic performance by reducing or eliminating barriers to productive behavior. The Bush Admin­istration’s 2003 tax cut—which lowered marginal tax rates on work, investment, and entrepreneur­ship—has encouraged growth and improved com­petitiveness.

Regrettably, the benefits of better tax policy have been undermined, especially in the long run, by excessive government spending. The Bush Admin­istration has presided over a dramatic increase in the burden of government spending. Whether measured in nominal or inflation-adjusted dollars or as a share of GDP, federal outlays have grown at an unprecedented rate. This is harming economic growth because government spending is deter­mined by political rather than economic motives. This results almost inevitably in a less efficient allo­cation of labor and capital compared to what would happen if market forces governed the use of those resources.

Ending the Inflation Tax: Indexing Capital Gains

Income tax brackets have been indexed for inflation since the Reagan tax cuts of 1981 to prevent "bracket creep" - where inflation pushed income into higher tax brackets, resulting in an increase in income taxes and tax burden, but no increase in real purchasing power. There is now a house bill that would likewise index capital gains taxes for inflation. From yesterday's WSJ:

An investor who purchased a stock for $10 in 1956, and sold it for $20 today, would still pay a 15% capital gains tax on the transaction, even though adjusted for 50 years of inflation he'd be a net loser.

From 1979 to 1994, roughly 33% of the increase in shareholder wealth, or some $1.5 trillion, was due to inflation. This means Americans are paying far higher capital gains tax rates than advertised. A 1993 study by then Federal Reserve Board Governor Wayne Angell calculated that the average real tax rate on investments from 1972 to 1992 in Nasdaq stocks was 68%. It was 101% in the S&P 500, 123% in the NYSE, and 233% in the Dow Jones Industrials. On three of the four major indexes, the average taxes were higher than the actual return.

Inflation remains a hidden thief that transfers gains unfairly to the government from taxpayers. The Pence-Cantor bill would protect against this by allowing any taxpayer holding an asset for more than three years to have a gain or loss determined by a cost basis adjusted for inflation. The proposal would immediately raise the after-tax return on capital investment, thus providing an incentive for more of it.

DJIA Hits New Record

How Do You Fire an Incompetent Public School Teacher?

It's not easy, check it out here.

Tuesday, October 03, 2006

iTunes Pricing

I own more than 1,000 CDs, and I buy new music almost every week. I will often now buy single songs for 99 cents through iTunes, especially when I want to listen to a song right away, and not wait to buy the CD, or when I might only like one song on a CD.

Yesterday, I did something new for the first time: I bought an entire CD through
iTunes Store for $9.99, it was Diana Krall's new CD "From This Moment On." Normally I would prefer to own a physical copy of the CD to have the liner notes, and have a physical copy of the CD for my library. The CD is available for sale on for $10.88, and I would usually be willing to pay $1.89 extra to get the CD compared to downloading from iTunes store.

However, buying the CD from Amazon involves: a) shipping (unless you order about $50 to qualify for free shipping), and b) waiting up to a week to get the CD, two costs that I would typically be willing to pay. But what convinced me to buy and download the online version of the CD this time: ONE BONUS TRACK, only available when you download the CD, and NOT available when you buy the CD in a store or online through Amazon.

Brilliant marketing strategy!

Wal-Mart's Expansion

Watch this incredible video of Wal-Mart's expansion across the USA, starting with one store in Arkansas in 1964! There are now 3,800 Wal-Mart facilities in the US, and 2,600 in other countries.

Return to Sender, India Post Loses Rupees

Q: How many people work at the world's largest post office, India Post?

A: About half.

Well, actually they work half days, finishing their deliveries by noon. Due to so much competition from UPS and FedEx, India Post has lost half of its business in recent year. From today's WSJ, "
As Economy Zooms,India's Postmen Struggle to Adapt:"

India's vast postal service, the world's largest, highlights a little-understood feature of this nation's economic transformation. While India often draws criticism for its failure to sell its vast network of state-owned companies, the government has quietly been opening many of its agencies to blistering competition from private-sector rivals.

But as India lets its public sector get squeezed, it faces a big dilemma: What to do with these often huge and politically connected organizations during the painful transition period where they have to become competitive and profitable or extinct?

Once the pride of India's civil service, India Post and its predecessor, the British East India Co., controlled most mail delivery for centuries. But since a reform-minded government started allowing more competition in the 1990s, more-efficient private couriers have eaten deeply into India Post's business.

Monday, October 02, 2006

Income Tax Cuts Benefit All

An article from today's USA Today:

Americans of every income have benefited from a drop in federal income tax rates as Bush administration tax cuts enacted since 2000 took effect, an independent analysis of newly released IRS data shows.

For example, millions of lower-income Americans — those earning $25,000 annually or less — have been taken off the federal tax rolls. In 2000, 29 million tax returns had no federal tax owed. Four years later, the number rose to 43 million returns.

A taxpayer who earned $35,000 in 2000 would have paid 8.5% of that income -- $2,989 after credits -- in federal taxes; in 2004, federal taxes would have accounted for only 5% of that taxpayer's annual income, or $1,792 (a 40% decrease in tax burden).

But those earning $75,000 to $500,000 are shouldering a larger share of total taxes paid as millions more of them earn higher incomes and get hit with the Alternative Minimum Tax, the analysis also found.

At the higher end of the income brackets, a $1.75 million earner would have paid $513,625 in 2000 federal taxes, when the rate for that earning bracket was 29.35 percent; four years later, when the rate dropped to 25 percent, that earner would have paid $437,500 (a 14.8% cut in tax burden).

Further, the overall tax buden of higher income taxpayers increased. Taxpayers who earned between $100,000 and $200,000 in 2004 paid 22.5% of all federal taxes, up from 19.4% four years earlier. Those who earned between $200,000 and $500,000 in 2004 paid 18% percent of all federal taxes, up from 15.4% in 2000, the analysis showed.

The Market Creates Wealth and Miracles for All

From today's WSJ, an article by Johan Norberg titled "Humanity's Greatest Achievement," in defense of global capitalism.

Think for a moment about what this morning would have looked like if it were 150 years ago. You wouldn't have had electric light, running water or indoor sanitation. You couldn't have gone to work by car, bus or train. You couldn't have used a computer, which performs calculations in seconds that would take decades with pen and paper. In short, you would probably not have found this morning very comfortable or enjoyable -- if you had been alive to experience it. Back then, the global average for life expectancy was around 30 years.

We tend to take our opportunities for granted, but our ancestors could not have imagined what we now have. In the last 100 years, we have created more wealth than in the 100,000 years before that, and not because we work more. To the contrary: In the last century, work hours have been halved in the Western world. It is because new ideas have made it possible for us to work smarter and find easier ways to satisfy our needs and demands.

The people we should thank are the innovators and entrepreneurs, the individuals who see new opportunities and risk exploring them -- the people who find new markets, create new products, think out new ways to handle commodities commercially, organize work in new ways, design new technology or transfer capital to more productive uses. The entrepreneur is an explorer, who ventures into uncharted territory and opens up the new routes along which we will all be traveling soon enough. Simply to look around is to understand that entrepreneurs have filled our lives with everyday miracles.

The ingratitude toward those who have given us almost everything seems strange. But perhaps there is a historical explanation. Wealth and innovation are recent phenomena.