Tuesday, April 10, 2007

Let's Move Tax Day and Voting Day Closer Together

If you pay your income taxes next Monday, April 16, it will have been 160 days since you last voted on November 7, 2006 (see the graph above), and it will be 204 days until you vote again on November 6, 2007.

The day we pay taxes in April is about as far away from the day we vote for politicians as possible. It's been more than 5 months since the last voting day, and more than six months before the next election, and November is probably the time of the year that we are least likely to be thinking about April 15 and taxes.


1. Let's abolish withholding taxes, and require all taxpayers to write a check once a year for their entire tax liability, like taxpayers did from 1913 to WWII (or make monthly or quarterly tax payments). For someone with $100,000 of adjusted gross income that would mean writing a check to the IRS of about $17,400, and probably another $3,000 or so to the state treasury, depending on the state you live in. This would not only relieve companies and organizations of the costly burden of tax collection for the government, but would significantly increase our "tax awareness."

Here is an exercise about your tax awareness: What is your monthly car or cell phone payment? What is your monthly mortgage or rent payment? Most people know these amounts immediately, because most of us write a check for those expenses. Now, what is your monthly tax liability for federal income taxes, and what is the amount of state income taxes you pay monthly? Most of us have no idea what our tax liabilities are, because we don't write monthly checks for federal and state taxes, employers withhold those taxes and make payments on our behalf.

2. Next we should move Voting Day and Tax Day much closer together, like the same week or same month. We could move Voting Day to mid-April right after we pay taxes, or we could move Tax Day to early November right before we vote.

Having greater tax awareness and voting closer to the day we pay taxes might influence our voting behavior?

Monday, April 09, 2007

Wal-Mart More Selective Than Harvard

From the NY Times, "A Great Year for Ivy League Schools, but Not So Good for Applicants to Them," the acceptance rates this year are as follows:

Columbia University 8.9%

Harvard University 9%
Stanford University 10.3%
Cal Tech 16.2%
Amherst 17.5%

Acceptance rate for job applicants at new Wal-Marts: 1-3% (e.g. 11,000 applications for 330 jobs at the first Wal-Mart inside the D.C. beltway, a 3% acceptance rate, read more here)

Conclusion: Wal-Mart is more selective than an Ivy League university, and turns away more job applicants than Harvard or Columbia turn aways students.

Famed Violinist Goes Incognito on the DC Subway

What would happen if one of the world's great violinists performed incognito before a traveling rush-hour audience of 1,000-odd people in a subway station?

No one knew it, but on January 12 the violinist standing against a bare wall outside a Washington, D.C. Metro station in an indoor arcade at the top of the escalators was one of the finest classical musicians in the world, playing some of the most elegant music ever written on one of the most valuable violins ever made. His performance was arranged by The Washington Post as an experiment in context, perception and priorities -- as well as an unblinking assessment of public taste: In a banal setting at an inconvenient time, would beauty transcend?

Read what happened here.

Maybe to complete the experiment the Washington Post should next arrange for a mediocore street musician to get dressed up in a tuxedo and perform classical music in a concert hall with perfect acoustics, and see if "in an elegant setting at a convenient time, would mediocrity be obvious?"

Grammar Mistake's That Make You Look Stupid

If you want to craft an error-free message that reflects your professionalism, be on the lookout for these common grammatical slip-ups:

#1: Loose for lose
#2: It's for its (or god forbid, its')
#3: They're for their
#4: Effect for affect
#5: You're for your

Read more about the "10 flagrant grammar mistakes that make you look stupid."

Your welcome.

History of Corporate Income Tax, People Pay Taxes

Even before the personal income tax started in 1913, corporate income was taxed starting in 1909, at an initial rate of only 1% on income over $5,000, equivalent in today's dollars to about $113,000 of tax-exempt business income.

Until 1931, some amount of corporate income was tax-exempt - $2,000 or $3,000 in most years, equivalent in today's dollars to $45,000-$68,000 of non-taxable income. By 1932, tax-exempt corporate income was eliminated forever, and all business income gets taxed, starting with the first dollar of income. Also, by 1932 the corporate tax rate was up to 13.75%, having been increased gradually over the years from its original 1% level in 1909.

Myth: Corporations pay taxes.

Reality: Corporations really don't pay any taxes at all; people pay all taxes, in our roles as customers, workers and shareholders. In other words, higher taxes on corporations mean either higher prices for a corporation's customers, lower wages for its workers, or lower dividends for its shareholders, or all three.

Tax Law Complexity Continues to Grow

From the National Taxpayers Union’s 8th Annual Study of Tax Law Complexity Trends, released last year on April 17, 2006 (release of a new study is pending):

  • The total number of paperwork hours imposed by the Department of the Treasury exceeds 6.4 billion hours (most of which are IRS-related).

  • Taxpayers had to wade through 142 pages of instructions for the standard 1040 form and schedules, up from 128 pages in the previous year, and more than double the number in 1985. As mentioned in the post direclty below, the instructions in 1913 came on one page.

  • 9 out of 10 filers used a paid preparer and/or a computer for assistance in filing their tax returns.

  • Self-employed taxpayers filing the 1040 with small business schedules face an 80-hour completion task – the equivalent of two weeks’ paid vacation.

  • The 1040 tax form with common Schedules A, D, and others will take the average taxpayer 38 hours to prepare this year – with the assistance of a computer! Even the so- called “short” form will take more than half a day (12.6 hours) to complete.

Tax Deadline Approaches: Bring Us Back to 1913

University of Dayton history professor Larry Schweikart traces the history of the U.S. income tax in today's NY Sun (Take Us Back to '13) and concludes that:

As it now stands, the income tax is oppressive in its rates and ridiculously complex. While a good argument could be made for alternatives, the best solution to fixing the tax code is to return to the lowrate simple form of 1913. (appears above)

See the entire 1913 IRS 1040 form here (only 4 pages including all forms and instructions).

We now have a 67,204 page tax code, which significantly contributes to the reality that 60% of taxpayers today have to hire a tax professional - I don't think anybody in 1913 needed help to fill out the one-page tax form above!

From the USA Today article from last week "67,204-page Code Confounds Taxpayers:"

This year, individuals and companies will spend about $300 billion on tax preparation costs. To put that in perspective, that is a 20% levy on top of the $1.5 trillion they will actually pay in taxes.

Shortage of High-Quality Workers in India

From the Boston Globe (via Cafe Hayek), an article "India High-tech Industry Out of Workers:"

Nearly two decades into India's phenomenal growth as an international center for high technology, the industry has a problem: It's running out of workers.

The problem is not a shortage of people," said Mohandas Pai, human resources chief for Infosys Technologies, the software giant that built and runs the Mysore campus for its new employees. "It's a shortage of trained people."

In 2000, there were maybe 50,000 IT jobs and 500,000 applicants. Now there are perhaps 180,000 annual openings, but only between 100,000 and 200,000 qualified candidates.

Much of the problem is rooted in a deeply flawed school system. As India's economy blossomed over 15 years, spawning a middle class desperate to push their children further up the economic ladder, the higher education system grew dramatically. The number of engineering colleges, for instance, has nearly tripled.

But the problems have simply grown worse. India has technical institutes that seldom have electricity, and colleges with no computers. There are universities where professors seldom show up. Textbooks can be decades old.

Instruction is by rote learning, and only test scores count. "Everything else is forgotten: the capacity to think, to write, to be logical, to get along with people," Pai said. The result is smart, well-educated people who can have trouble with such professional basics as working on a team or good phone manners.

Not to worry, it looks like the U.S. government will help out by continuing to restrict the competition for India's workers. From today's IBD:

This year, as in the past, 65,000 of these H-1B visas are available. Last Monday, the first day on which applications were accepted for 2007, U.S. Citizenship and Immigration Services received more than 150,000 petitions from companies needing them to hire scientists, engineers, architects, computer programmers and other highly trained employees. It's clear that a lot of skilled workers wishing to live and work here are out of luck.

The U.S. is again showing how well it can seal the border against skilled, law-abiding workers who are crucial to its economic future.

Sunday, April 08, 2007

Quote of the Day: Economics vs. Politics

Good economists are seldom popular with the political class. This is not a shortcoming unique to democratic systems. Dictators like good economists even less. Why is this?

As a rule, politics doesn’t educate. It obfuscates, pontificates and prevaricates. It often seeks to advance the interests of the few at the expense of the many. It is a playground for the short-sighted and the demagogic. Economics, on the other hand, tells us a great deal about how material life can be improved through the operation of entrepreneurship and markets. It informs us that there are laws beyond those that legislatures pass, and consequences for ignoring them.

The good economist is the one who takes the discussion of economic matters to the lofty level it deserves. When others spout clever sound bites, unsubstantiated charges and snake-oil remedies, it’s the good economist who raises his hand and calmly declares, "Wait a minute! Let’s look at the facts. Let’s separate the wheat (truth, logic and evidence) from the chaff (nonsense, false assumptions and panaceas)."

~Lawrence W. Reed, President of the Mackinac Center for Public Policy in Midland, MI

Saturday, April 07, 2007

Happy Easter: The Energizer Bunny Economy

From yesterday's Employment Situation Summary, the BLS reported that U.S. employment grew by 180,000 in March and that job growth in January and February was stronger than previously thought. The March U.S. unemployment rate edged down to 4.4%, the lowest level since October, matching a six-year low (May 2001 was the last time the jobless rate was below 4.4%).

Since January 2002 when civilian employment bottomed out at 135.7 million following the 2001 recession, more than +10.5 millions jobs have been added to the U.S. economy (see graph above, click to enlarge), despite record trade deficits, globalization, outsourcing, offshoring, etc. At that pace of job creation, U.S. employment has increased by:

5,780 new jobs every day for the last 5 years
240 new jobs every hour
4 new jobs every minute
1 new job every 15 seconds

In just the time it takes to read this post, at least several new jobs will have been created somewhere in the U.S. economy.

Lou Dobbs, listen up!

Restarting Michigan's Stalled Economy

For much of the 20th century, Michigan was a model of prosperity, a magnet for human capital -- attracting and retaining a critical mass of world-renowned engineers and entrepreneurs -- and seemed destined to be an economic engine for the nation. But then came the 1970s and the state has been sputtering ever since. Today, a deep fog has settled over a once bright business climate.

Read more of former Comerica Bank chief economist David Littman's (now with the Mackinac Center) article in the WSJ, "Restarting Michigan's Economy," where he proposes to make Michigan a right-to-work state.

Friday, April 06, 2007

Blame Ethanol for Rising Egg and Milk Prices

Almost 100 million dozens of eggs are sold each year in the week before Easter. And egg prices are on the rise, nearly 30% higher than they were at the end of 2006, according to a survey by the American Farm Bureau Association. The national average for a dozen large eggs is $1.51, 33 cents higher than at the end of the fourth quarter 2006.

"Sixty percent of the cost of eggs is due to the feed, and the feed costs are just about double compared to a year ago," he said.

So why are feed prices rising? Many experts blame increased ethanol production.

more here.

And that's not all. Increased ethanol production is driving up the price of milk in Wisconsin, by more than 27% in the last year. Read about
that here.

Self-Sufficiency: Road to Poverty and Bad Fashion

From Wired Magazine, a story on the "100 Mile Suit:"

When educator and designer Kelly Cobb decided to make a man's suit only from materials produced within 100 miles of her home, she knew it would be a challenge. But Cobb's locally made suit turned into a exhausting task. The suit took a team of 20 artisans several months to produce -- 500 man-hours of work in total -- and the finished product wears its rustic origins on its sleeve.

Cobb's suit is a demonstration of the massive manufacturing power of the global economy. Industrial processes and cheap foreign labor belie the tremendous resources that go into garments as simple as a T-shirt.

Here's a photo gallery of the 100-mile "suit."

Thanks to Russ Roberts at Cafe Hayek, who points out that "Self-sufficiency is the road to poverty."

Having access to the global economy gives us access to the best the world has to offer, which is usually better (and cheaper) than what your local area has to offer. Think globally, shop globally, travel globally and invest globally.

Questioning Free Trade: It's P.C.

If you question whether global warming is happening, or whether human activity is causing it, or whether it’s worth doing anything about it, then you must be a crack-pot. You are standing athwart the “consensus of scientists.” You are disputing “settled science.” You are a “global warming denier,” the moral equivalent of an apologist for the Nazi holocaust.

But no such accusations are made against the protectionists who question the benefits of free trade among nations, deny the manifest evidence of its success, or challenge its status as a human right. Such people are in fact standing athwart 250 years of economics, and an overwhelming consensus of living economists. These protectionists are denying the enormous gains in standards of living and human freedom that are the direct result of free global trade.

Question the global warming consensus and you’re something between a fool and a Nazi. But question free trade? Ah … that’s different. That’s politically correct.

Read more here from Donald Luskin's article "A Convenient (and Excellent) Truth. The benefits of free trade are settled science. (Although that won’t stop the deniers.)

Thursday, April 05, 2007

Record Tax Revenue: The "Tax Hike of 2003"

The Congressional Budget Office reported today that through the first six months of the fiscal year (Oct 2006 - March 2007), total tax revenues collected increased by $83 billion compared to the same period last year, an 8% increase. As the table above shows, individual income tax receipts increased by $49B (+11.4%) and corporate taxes increased by $24B (+18.5%), compared to the same period a year ago.

We keep hearing about the "tax cuts of 2003" (rates were decreased) when it was actually a "tax increase," if we look at what happened to revenues. In 2006, tax revenues were at all-time historical high of $2.4 trillion. At the current pace, tax revenues collected this will be $2.64 trillion, and will set another record.

The Good Old Days of Cheap Gas Are Now

As the graph in my post below shows, gas prices today in real dollars are about the same as gas prices back in the 1930s and 1940s, a little higher than the 1950s, 1960s and 1970s; and significantly lower than the early 1980s.

Another measure of the affordability of gas prices over time is to calcualte the cost of 1,000 gallons of gas at the average retail price in a given year as a percent of the average disposable per-captia income in that same year. Because real gas prices have remained relatively flat over the last 80 years, but real incomes have increased by a factor of about 4X since 1929, the cost of gasoline as a percent of disposable income has decreased significantly over time (see graph above, click to enlarge).

Even though gas in the 1950s sold for about 25 cents a gallon, it was about twice as expensive as in 2006, measured in the percent of disposable income to buy 1000 gallons - about 16% in the 1950s vs. about 8% in 2006. Likewise, to buy 1000 gallons of gas in 1981 was almost twice expensive (14.1%) as 1000 gallons of gas in 2006 (8.1%), as a percent of income.

If you're old enough to feel nostalgic for the "good old days of cheap gas" in the 1950s or 1960s, forget about it! The good old days of chear gas are now!

The Failed War on Drugs

Watch a 3-part Penn & Teller show on "The Drug War."

"When you criminalize things that aren't real crimes, you still create real criminals."

Real Gas Prices, Big Oil and Big Government

From George Will's latest column On Rising Gas Prices, "They come with metronomic regularity, these media stories about "soaring" gasoline prices...

Today, as the price of a gallon of regular "soars" almost to where it was (measured in constant dollars) in 1982, the "news" is: "Drivers Offer a Collective Ho-Hum as Gasoline Prices Soar'' (The New York Times, last Friday). People are not changing their behavior because the real, inflation-adjusted cost of that behavior has not changed significantly.

MP: See the chart above of real, inflation-adjusted annual retail gas prices from 1919 to 2007. Gas prices today (2007 average of $2.50 per gallon) are still about 20% below the peak in 1981-1982, and below the gas prices of the 1920s (average of $2.72) and 1930s (average of $2.73).

Will also points out that: In the 20 years from 1987 to 2006, Exxon Mobil invested more ($279 billion) than it earned in profits ($266 billion).

Big Oil's profits are much smaller than Big Government's revenue from gasoline consumption. Oil companies make about 13 cents in profit on a gallon of gas. Government makes much more. The federal tax is 18.4 cents per gallon. Mrs. Clinton's New York collects 42.4 cents a gallon. Forty-nine states -- all but Alaska -- make more than the oil companies do on every gallon.

Wednesday, April 04, 2007

Interesting Fact of the Day II

From the menu posted at any Starbucks, it is possible to make 19,000 different coffee drinks.

Interesting Fact of the Day

When you are on the 6th floor of a building in New Delhi (population 14 million, not too far behind NYC's population of 19 million), you can look out a window and see for miles. Reason?

You don't have dependable electricity in Delhi for elevators, so there are not many tall buildings - imagine having to walk up 30 flights of stairs when the power goes out. Or being trapped on the elevator between floors.

More On Sweatshops

Via Mahalanobis.

U.S. Labor Market Continues to Improve

From today's BLS Report on metropolitan area unemployment rates:

In February 2007, 101 metropolitan areas recorded unemployment rates below 4%, up from 77 areas a year earlier, while 36 metropolitan areas had jobless rates of 7% or higher, down from 52 areas in February 2006.

Unemployment rates were lower in February than a year earlier in 249 of the 369 metropolitan areas, higher in 94 areas, and unchanged in 26 areas.

The only two states to lose jobs from February 2006 to February 2007 were Ohio (-11,500 jobs) and Michigan (-44,600 jobs).

Denying Jobs for Desperately Poor People

University of Michigan police arrested 12 student activists yesterday after they refused to leave President Mary Sue Coleman's office, according to the Michigan Daily. The protesters staged the sit-in as part of Students Organizing for Labor and Economic Equality's Sweatfree Campaign, and demanded that the University toughen its labor standards for suppliers producing University-licensed apparel.

From Nicholas Kristof, "In Praise of the Maligned Sweatshop," available here or here.

Imagine that a Nike vice president proposed manufacturing cheap T-shirts in Ethiopia: "Look, boss, it would be tough to operate there, but a factory would be a godsend to one of the poorest countries in the world. And if we kept a tight eye on costs and paid 25 cents an hour, we might be able to make a go of it.

"The boss would reply: "You're crazy! We'd be boycotted on every campus in the country.

So companies like Nike, itself once a target of sweatshop critics, tend not to have highly labor-intensive factories in the very poorest countries, but rather more capital-intensive factories (in which machines do more of the work) in better-off nations like Malaysia or Indonesia. And the real losers are the world's poorest people.

Well-meaning American university students regularly campaign against sweatshops. But instead, anyone who cares about fighting poverty should campaign in favor of sweatshops, demanding that companies set up factories in Africa. If Africa could establish a clothing export industry, that would fight poverty far more effectively than any foreign aid program.

Even Paul Krugman wrote
an article in favor of sweatshops titled "In Praise of Cheap Labor: Bad jobs at bad wages are better than no jobs at all," where he concludes that:

As long as you have no realistic alternative to industrialization based on low wages (MP: i.e. sweatshops), to oppose it (the sweatshop) means that you are willing to deny desperately poor people the best chance they have of progress for the sake of what amounts to an aesthetic standard--that is, the fact that you don't like the idea of workers being paid a pittance to supply rich Westerners with fashion items.

Outsourcing to India Moves Beyond the Back Office

From today's NY Times article "India's Edge Goes Beyond Outsourcing"

“India is at the epicenter of the flat world,” said Michael J. Cannon-Brookes, vice president for business development in India and China at I.B.M., which has reduced its American work force by 31,000 since 1992 even as its Indian staff mushroomed to 52,000 from zero.

With multinationals employing tens of thousands of Indians, some are beginning to treat the country like a second headquarters, sending senior executives with global responsibilities to work there. For example, Cisco Systems, the leading maker of communications equipment, has decided that 20 percent of its top talent should be in India within five years; it recently moved one of its highest-ranking executives, Wim Elfrink, to Bangalore, the center of the Indian industry, as chief globalization officer.

Accenture, the global consulting giant, has its worldwide head of business-process outsourcing in Bangalore; by December it expects to have more employees in India than in the United States.

Tuesday, April 03, 2007

A Million Classical Musicians Bloom in China

From the NY Times article "Classical Music Looks Toward China With Hope:"

Three decades ago, the Communist Party was trying to wipe out Western classical music, but now deems it an essential component of the “advanced culture” it vows to create to make the country a true great power.

With the same energy, drive and sheer population weight that has made it an economic power, China has become a considerable force in Western classical music. Conservatories are bulging. Provincial cities demand orchestras and concert halls. China now has 30 million piano students and 10 million violin students.

The hardware side has also exploded. As of 2003, 87 factories made Western musical instruments. By last year the number had grown to 142, producing 370,000 pianos, one million violins and six million guitars. China dominates world production of all three.

MP: NY Times columnist Thomas Friedman proposed "The Golden Arches Theory of Conflict Prevention," observing that no two countries with a McDonald's franchise had ever gone to war with one another. Perhaps a variation of this is the "Classical Music Theory of Conflict Prevention" - no two countries that both embrace classical music will ever go to war with each other.

(HT to Bob Houbeck.)

Income Inequality by Position, MLB

I recently wrote about the increasing income inequality for MLB here, showing an increasing share of total income over time for the top 1%, 5% and 10%. Further analysis shows increasing income equality by position from 1988 to 2006, it appears that most of the income gains over time have gone disproportionately to first basemen and third basemen. Notice for example that:

1. In 1998, the average first baseman made 1.38 times as much as the average second baseman, and by 2006 that ratio had increased to 2.55 times.

2. Between 1998 and 2006, the average salary for first basemen increased 8.61 times, compared to an increase in average salary of only 4.66 times for second basemen.

3. First basemen in 1988 made 48% more than catchers (lowest paid position), and in 2006 first basemen made 155% more than the lowest paid position (second basemen).

4. The overall salary range by position increased significantly from 1998 ($362,000 to $537,000) to 2006 ($1,816,000 to $4,632,000).

Speculation: To the extent that income inequality has increased for both the general population and in MLB (and other pro sports) over time, it is possibly a natural phenomenon resulting from an increasingly competitive, globalized environment? Perhaps the greater the intensity of the competitive process, the greater the degrees and level of competence, resulting in a natural increase in income inequality?

For example, wouldn't we expect income inequality to be greater in the 21st century than in the 18th century?

Coming Soon: WiFi In The Sky

From today's WSJ: U.S. airlines will start offering in-flight Internet connections, instant messaging and wireless email within 12 months, turning the cabin into a WiFi "hotspot." Carriers are expected to start making announcements around the end of the summer, with service beginning early next year.

My only question is, why didn't this happen years ago?

USA Today: Plastic Bag Ban is Full of Holes

San Francisco is the first city to ban plastic shopping bags - the city's Board of Supervisors approved legislation to outlaw plastic checkout bags at large supermarkets in about six months and large chain pharmacies in about a year. The stores are encouraged to use bags made of recyclable paper. Read more here.

From USA Today, comes an editorial in today's edition "Plastic-bag ban full of holes: San Francisco’s scheme sounds good, until you hear the costs." For example:

1. Plastic bags cost a penny each, paper costs about a nickel, and compostable bags can run as high as 10 cents each.

2. Compared to plastic bags, paper bags require four times as much energy to produce, and 85 times as much energy to recycle paper bags.

3. Paper bags generate 70% more air pollutants and 50 times more water pollutants than plastic bags.

4. Paper takes up nine times as much space in landfills and doesn't break down at a substantially faster rate than plastic does.

Spinach Farmers: Harvesting Cash

"Spinach might not seem to have anything to do with military operations. But there it is, in an emergency supplemental bill to fund the wars in Iraq and Afghanistan: $25 million for California spinach growers.

The war bill illustrates the axiom that guides the nation's agricultural policy: namely, that any principles of good government, common sense and fiscal sanity must always be abandoned in the cause of shoveling federal dollars at American farmers. Its $4 billion for disaster relief, together with millions for peanut storage, sugar-beet production and the Milk Income Loss Contract Program, isn't unusual, except for the fact that it was used to buy votes for a pullout from Iraq. For House Speaker Nancy Pelosi, apparently, all geopolitics is local, and some of her members are happy to lose a war if they can win a subsidy."

From the commentary "Fighting for Subsidies" by Rich Lowry.

The Angry Grammar Nazi

An angry caller to the SF Chronicle is really upset about the March 19 headline "Four-year anniversary draws protests," because it really should be "4th Anniversary." Check out the actual angry podcast call to Phil Bronstein, the editor of the SF Chronicle.

For another angry call from the same irate caller about the use of the phrase "pilotless drone," click here.

Monday, April 02, 2007

Poor Countries Overregulate Business

One of the main reasons that poor countries are poor and remain poor is because of excessive regulation of business (see graph above - high income countries have significantly less regulation than poor countries).

From the study "Doing Business in 2004: Understanding Regulation" by the World Bank's International Finance Corporation:

Number of days to start a new business:
Australia: 2 days
Venezuela: 141 days
Haiti: 203 days
Suriname: 694 days

Time to enforce a simple commercial contract:
Netherlands: 39 days
New Zealand: 109 days
Singapore: 120 days
India: 1420 days
Guatemala: 1459 days

Cost of enforcement for a simple commercial contract:
Austria, Canada and UK: Less than 1% of the disputed amount
Sweden: 5.9% of the disputed amount
U.S.: 7.7% of the disputed amount
Indonesia: 126.5% of the disputed amount
Congo: 157% of the disputed amount

Time to close a business and go through bankruptcy:
Ireland: 4 months
Japan: 5 months
Brazil: 4 years
India: 10 years

Conclusion: The optimal amount of regulation is not none, but is significantly less than what is currently found in most countries, especially poor ones.

Carpe Diem Moves Up in Rankings: 6 Months Old

Due to a huge spike in daily traffic towards the end of March (see chart above), Carpe Diem moved way up in the monthly "Traffic Rankings for Major Business and Economics Websites," which just came out today from Gongol.com based on March web traffic. Carpe Diem ranked #22 for "average daily pageviews" and #17 for "average daily visits. March also marked the 6th full month for Carpe Diem - the first posting was on September 20, 2006!

Thanks for your interest in Carpe Diem, and please let me know if you have any suggestions - feel free to send me your ideas for interesting links, stories, news, articles, research, graphs, etc.

Quote of the Day: How To Grow Out of Poverty

“Poor people grow out of poverty when their governments create an environment in which educated workers and capitalists have the physical and legal infrastructure that makes it easy to start businesses, raise capital, and become entrepreneurs, and when they subject their people to at least some competition from beyond – because companies and countries with competitors always innovate more, better and faster.”

~Thomas Friedman, "The World is Flat"

Predatory Lending, What About Banks and VISA?

Annual percentage rate (APR) on a 2-week payday loan = 390%.

APR on a VISA or Mastercard credit card with late fees = 700%.

APR cost of a bounced check at a commercial bank = 1,300%.

Congress and many state legislatures are now promising a crackdown on the "payday" loan industry for "unscrupulous" and "predatory" lending. But if payday lending is such a consumer rip off, no one has explained why these stores have become so popular. There are some 25,000 payday stores across America, and in many small towns the payday loan store is now as commonplace as the local post office.

This looks like another illustration of how to hurt working Americans in the name of helping them.

From today's WSJ editorial "Mayday for Payday Loans."

Sunday, April 01, 2007

Maybe This Is Why Americans Are So Fat?

And just how fat are Americans compared to people in other countries? Check out this graph below (click to enlarge):

Globalization of MLB

"Consider the Seattle Mariners. Their Opening Day lineup Monday will feature seven foreign-born players and two Americans -- Richie Sexson and Raul Ibanez.

Consider the New York Yankees, a team that can presumably afford the best talent on the planet. That team has Hideki Matsui and Kei Igawa (from Japan), Chien-Ming Wang (Taiwan), Robinson Cano (Dominican Republic), Bobby Abreu (Venezuela), Mariano Rivera (Panama) and Jorge Posada (Puerto Rico). Those stars complement their American idols Derek Jeter, Johnny Damon and Alex Rodriguez."

From the article "The Changing Face of Baseball" in today's Mpls-St. Paul Star Tribune.

Q: Wouldn't the anti-globalization protectionists like Lou Dobbs argue that foreign baseball players are "taking away jobs from Americans?"

A Final End to Blue-Collar Aristocracy?

The NY Times has an article today about 81,000 of the highest-paid blue-collar workers in the world who took buyouts from GM, Ford and Chrysler, in the largest exodus of workers from a single American industry in decades.

Read "The End of the Line as They Know It" here.

Saturday, March 31, 2007

Unemployment Rate Inequality

Income inequality gets a lot of attention these days, see a recent NY Times article here.

What doesn't get much attention is "unemployment rate inequality," by educational attainment, which is HUGE (see graph above). There is a persistent 5.24% gap between the jobless rate for those with less than a high school degree (average = 7.65%) and those with a college degree or higher (average = 2.41%).

The $10,000 Cowboy Boot: Lucchese Full Alligator

Lucchese Classics, hand-made American alligator belly boots (both top and bottom), made in the USA with farm raised American alligator. Price: $9,499.99, available here.

Let's Stop China's Foreign Aid to U.S. Consumers

News Report: "The US government is planning to announce a new tariff policy targeting state-subsidized goods in non-market economies, adding that the move is expected to lead to new duties on a wide range of Chinese exports. The report said the test case for the new policy was brought by US paper company Newpage before the Commerce Department.

U.S. industries from steel to consumer goods are now expected to bring forward similar action against imported goods benefiting from state support such as government grants, bailouts and low-interest loans."

Translation: The Chinese government, using tax dollars supplied by Chinese citizens, has been subsidizing American consumers and companies by giving government grants and low-interest loans to Chinese manufacturers, which allow them to sell their exports to Americans at low prices. Although these low prices raise the standard of living of many American consumers and businesses, U.S. businesses competing against Chinese producers would like Americans to pay higher prices for Chinese goods, so that they can compete more effectively.

In other words, we should use the political process to end the practice of China subsidizing American consumers and businesses, and force them to charge us higher prices. We should stop China's generous "foreign aid" to American consumers and businesses.

Question: What if Chinese producers received such generous grants and subsidies from the Chinese government that they were able to ship products here for free? Why should we object?

Friday, March 30, 2007

Economic Translations

News Headline: "US to impose penalty tariffs on China."

Quote: "The United States announced in an unprecedented decision Friday to impose penalty tariffs on China to offset government subsidies, as it grapples with a massive trade deficit with the world's most populous nation."

Headline translation: "US to impose penalty tariffs on U.S. consumers and companies buying products from China."

Quote translation: "The Unites States announced on Friday that it would impose penalty tariffs on American consumers and businesses buying products produced in China."

Communism vs. Slavery, Slavery Wins

In 1842, Cuba's slaves had daily rations of:
8 ounces of meat
4 ounces of rice
16 ounces of starch
4 ounces of beans.

By contrast, when Castro started rationing food in 1962, Cubans got:
2 ounces of meat
3 ounces of rice
6.5 ounces of starch
1 ounce of beans

(Note: Most of these ration amounts have continued, see Table 1 in this document.)

Conclusion: Living under a communism can be worse than slavery.

Read more here in today's IBD.

German Unemployment Hits Six-year Low

German unemployment reached a six-year low in March, as the job picture in Europe's leading economy continued to improve, see this news story and this other news story.

Notice in the graph above that:

1. The U.S. economy, even during its worst years for unemployment (2002 and 2003 during the "jobless recovery" following the 2001 recession) does better than the German economy during its best years.

2. There has been a persistent gap, averaging 3.3% over the last six years, between U.S. and German unemployment rates.

The Great Ethanol Swindle

1. While a boon to Midwestern corn farmers and big ethanol producers like Archer Daniels Midland (see chart above: ADM vs. SP500), ethanol has been bad news for the driving public. Ethanol costs more than gasoline, so adding it to gasoline increases fuel prices at the pump.

2. There is a 51 cent per gallon tax credit to ethanol producers. Other incentives include payments to corn farmers and subsidies for small ethanol producers. These add up to $5.1 billion to $6.8 billion per year—roughly $1.00 per gallon of ethanol. ("Ethanol is made by mixing corn with tax dollars.")

3. Ethanol lowers fuel econ­omy because a gallon of ethanol has only two-thirds of the energy content of a gallon of gasoline.

4. Ethanol can’t be sent in an energy-efficient way through pipelines like gasoline can, because it would be contaminated by moisture. Ethanol must be shipped instead by trucks, barges and railroads, which uses lots of fossil fuels. So the more ethanol we move, the more fossil fuel we use.

5. Ethanol use at current levels has also led to sky­rocketing corn prices as the available supply is split between food and fuel uses. This has led to higher prices for corn products and things such as corn-fed meat (see chart above).

6. The current ethanol mandate will supplant only 1.1% of petroleum imports by 2012, without taking into account the petroleum inputs in ethanol production and use. Once these inputs are taken into account, that figure falls by half to about 0.5%.

7. Eliminating tariffs and regula­tory barriers to lower-cost sugar ethanol imports from Brazil and other produers would expand access to global sources, thereby lowering prices. Predictably, such proposals have provoked strong opposition from the domestic corn lobby.

Despite all of these problems with ethanol, what is the political solution? More ethanol.

From the Heritage Foundation's "The Ethanol Mandate Should Not Be Expanded."

Taxi Controversy in the Twin Cities

Minneapolis-St. Paul is home to the nation's largest Somali community, and more than 600 airport taxi drivers in the cities are Somali, most of them Muslim. About 100 passengers each month are denied transportation because the Somali taxi drivers refuse to haul passengers carrying liquor. Some drivers have also refused to carry blind passengers with guide dogs, on grounds that the Koran says dog saliva is unclean. And some Muslim store cashiers in the Twin Cities have refused to scan pork products, alleging this also violates their faith.

Read more about the controversy in Linda Chavez's article "Intolerance in the Twin Cities."

Thursday, March 29, 2007

Income Inequality Increases for MLB - Who Cares?

Increasing income inequality gets a lot of attentions these days, see today's NY Times article Income Gap Is Widening, Data Shows: "Income inequality grew significantly in 2005, with the top 1 percent of Americans — those with incomes that year of more than $348,000 — receiving their largest share of national income since 1928, analysis of newly released tax data shows."

What if the statement read "Income inequality among professional baseball players grew significantly in 2006, with the top 1 percent of professional baseball players — those with incomes of more than $16,000,000 — receiving their largest share of total MLB payroll income since 1928, analysis of newly released payroll data shows." Would anybody be that concerned? Would anybody care?

Using the USA Today Database for MLB salaries going back to 1988, I am able to show in the chart above that income inequality has increased significantly from 1988 to 2006. For example, in 1988, the top 25% of professional baseball players earned 63.55% of all baseball income, and by 2006 the share of income of the top 25% of ballplayers was 72.04% of all income. The share of the bottom 50% fell from 12.33% in 1988 to only 8.04% in 2006.

Suppose that the income share of the top 1% of professional ballplayers at 6.70% of all baseball income in 2006 was the highest since 1928. Questions:

1. Would that increasing income inequality for professional baseball players matter?

2. If increasing income inequality among highly-paid professional athletes doesn't matter, why should it matter for the general population?

Good Press, Bad Public Policy to Tax Oil Companies

From today's Detroit News, my article "Penalizing Oil Companies Ends Up Hurting America,"

"Major U.S. oil companies already spend more on energy research and development (including biofuels and other renewable energy sources) than they earn in profits. That's on top of huge capital investments to meet our nation's growing demand for oil and natural gas.

Stigmatizing and penalizing our own oil companies might make for good press but it is bad public policy. It will likely lead to higher energy costs for American consumers, as well as undermine the efforts to reduce our nation's dependence on Middle East oil and strengthen national security."

Why Such Resistance to Free Trade?

More on the "paradox of progress" and "abundance denial" from today's WSJ article: "As Globalization's Benefits Grow, So Do Its Skeptics":

"For the past few years, the world economy has been growing faster than it has for decades, and that growth has been spread across the globe. Yet accompanying this prosperity is mounting skepticism about globalization -- the unfettered flow of goods, services, people and money across borders. The current round of world-trade talks is stalled, and the Democratic Congress is toughening its conditions for blessing Bush-backed trade pacts with Panama, Peru, Colombia, hardly economic powerhouses."

Read more here.

Buy/Sell Indulgences at the Green Church

To read about the history of religious indulgences, click here.

Buy/Sell Anything on Ebay

Wednesday, March 28, 2007

Quote of the Day

"No U.S. president or vice-president has ever visited Bangalore."

~Thomas Friedman, "The World is Flat" (p. 365)

Tax Freedom Day 2007: April 30

The average American will have to work another 33 days in 2007, until April 30 (a total of 119 days), to pay his/her share of federal, state and local taxes this year, according to an annual study released today by The Tax Foundation. That is two days later than last year's Tax Freedom Day of April 28 (see chart above), and represents 32.69% of the average American's 2007 income.

Comparatively, 100 years ago, the average American worked only 19 days, until January 19, to pay the tax burden then of 5%. Today, Americans work longer to pay for government (120 days) than for food, clothing and housing combined (105 days).

Big Three, Big Losses: Declining Market Share

The Big Three continues to lose market share, 15 percentage points over the last 17 years to be exact (71.6% in 1990 to 56.6% today), see chart above. A 15 percent loss of market share translates to more than 2.25 millions vehicles per year that are NOT being produced any more by the Big Three.

That loss of market share also translates into huge losses by the Big Three: Ford lost $12.7 billion in 2006, GM lost $2 billion in 2006 after losing $10.4 billion in 2005, and Chrysler lost $1.5 billion last year. Meanwhile, Toyota, Honda and Nissan continue to gain market share (almost double since 1990 to 33%), and make profits, see the comparison in stocks price above between Toyota (+150% in the last 5 years) and GM (-50% over the same period).

The current 4-year UAW contract expires in September, and negotiations for a new contract will soon be under way. In advance of the contract talks, 2,500 UAW members have just signed a "no-more-concessions" petition, suggesting they won't agree to pay any more of their own health care costs.

From today's Investor's Business Daily, "If the UAW isn't careful, it could kill America's Big Three. The union has made it clear that it will oppose the carmakers' insistence that workers have a larger financial stake in their own health care.

With Ford, GM and Chrysler projecting that they will pay $12 billion this year in health care costs for their U.S. employees, retirees and family members, that seems to be a reasonable request.

The UAW's golden era is over. Unless its leaders and members concede that it's been overtaken by economic reality and begin to act accordingly, the UAW will soon move into its rust years."

Tuesday, March 27, 2007

Airfare Price History

At the website Fare Compare, you can search for airfares, and you can also do a price history analysis back for two years, by many different fare categories (7-day advance, 14-day, 21-day), and by different airlines.

For example, in the graph above (click to enlarge), it displays a one-year history of the lowest airfares from Detroit to Jacksonville, on NWA (blue line) and the lowest fare on any airline (red line). As you can see, the round trip fares over the last year ranged from $125 to $325, and were higher in the fall and spring than the summer and fall. Pretty cool.

Smoking While Driving Banned in New Delhi

In response to almost 2,000 annual New Delhi traffic deaths in dangerous Indian traffic conditions shown in this amazing video, an Indian court has banned smoking while driving in New Delhi, the first measure of its kind in any major city worldwide.

Those caught smoking behind the wheel would pay 1400 ruppees (about $32), a heavy fine by local standards. Offenders caught more than five times would have their license revoked; the same fines apply to using a cell phone.

Existing traffic laws, which have not been updated since their introduction 20 years ago, are going largely ignored, for example seeing 6 people on a motorcycle, barefoot with no helmets, is common in India (see photo above). Read the full story here.

Hat tip to J. Howe.

Who Really Pays?

From Investor's Business Daily: "Far from 'favoring the rich,' as many believe, our tax code is massively redistributionist, sending literally trillions of dollars into low-income homes and far less into wealthy homes. This may be good or bad, depending on your point of view, but the fact is it's happening. And those who argue that recent tax cuts 'benefit the rich' ignore the reality.

The rich are being taxed at ever-higher levels, while more workers at the bottom of the income ladder are paying no taxes at all. As for spending, resources flowing to those at the bottom far outstrip those flowing to those at the top (see graph above).

Today, some 44 million Americans pay no taxes at all. Meanwhile, the upper 5% of all income earners in 2004 paid 57.13% of all taxes, up from 35.01% in 1980. In other words, the U.S. tax code is becoming more progressive, not less.

It's sad enough when a nation punishes its most productive citizens and rewards the least productive. But the real shame is that there are so many myths about taxes and poverty we can't even have an honest discussion about it."

Wrestlemania 23

Wrestlemania 23 will be held this Sunday, April 1 at Ford Field in Detroit. The event is sold out, all 65,000 tickets, but many are available on Ebay in all prices ranges from $65 to $1950. Notice that the Michigan ticket for $59.99 includes a $80 shipping charge, due to Michigan laws restricting ticket resale prices. In the "Hair vs. Hair" match, either Donald Trump or Vince McMahon will have their head shaved.

Wrestlemania V (1989) flashback: Jake "The Snake" Roberts defeated Andre "The Giant" (with Bobby "The Brain" Heenan) by disqualification, after Andre attacked the special referee "Big John Stud." During the match, Ted "The Million Dollar Man" DiBiase
stole Roberts' snake, "Damien." For several years, Roberts used his snake to gain a psychological edge over André, who had a dreaded fear of snakes (ophidiophobia), and even "suffered" a heart attack on national television over his fear of Jake's snake.

Source: Wikipedia, which has tons of wrestling history and trivia.

Harvesting Cash: Corporate Welfare for the Rich

The Bush Administration wants to reduce the eligibility cap for farm subsidies to an annual adjusted gross income (AGI) of $200,000, from its current level of $2.5 million (top 2.3% of taxpayers).

Today's WSJ editorial "Washington Harvest" asks, "Is it asking too much for Congress at least to cut off subsidies to the richest Americans, many of whom don't even farm for a living?

With all the political and media chatter about "inequality" these days, you'd think this welfare for the rich (farm subsidies) would cause a stir. But this is Washington, where corporate welfare is a bipartisan industry. The lower AGI subsidy cap has turned out to be the most controversial Bush farm proposal and is running into stiff opposition on Capitol Hill. Where are the Democratic class warriors when we need them?"

Monday, March 26, 2007

Quote of the Day II

"It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is the most adaptable to change."

~Charles Darwin

Quote of the Day

"Intel microprocessor chips are made from just two things - sand and brains."

~Tracy Koon, Intel's Director of Corporate Affairs

Interesting Fact of the Day

Number of universities and colleges in the U.S.: 4,000

Number of universities and college in the rest of the world: 7,800