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

Money, Time and Energy

From 4-Block World.

More On Taxes

From Jessica Hagy at Indexed.

Sunday, March 25, 2007

Workers Compete Against Other Workers

From "Free Exchange," The Economist's blog:

"The biggest problem that musical artists have is not the recording industry. The main problem musicians face is other musicians. There are too many of them.

The reason almost no musician ever makes much money is that there is a huge excess supply of people who want other people to listen to them sing or play an instrument. When all the primates are vying to get up on stage to impress the other primates, there's little reason to pay the primates much."

Amen. A couple points from a recovering musician:

1. Music is a "tournament labor market," like the market for acting and the market for crack cocaine (see Freakonomics, the chapter "Why Do Drug Dealers Still Live With Their Moms?"), where there are the select few who win the music tournament (Prince, Christina Aguilera, Norah Jones, BB King, Eric Clapton), and then everybody else - the thousands upon thousands of "struggling starving artists" all over the country. Talk about a "disappearing middle class" - music NEVER had a middle class, it has always been a few rich tournament winners and thousands of poor artists trying to make it to the top, with almost nobody in the middle income category.

2. The problem ALL workers face is other workers! There are many effective ways to reduce competition from other workers: form a union to restrict the supply of workers (autoworkers, carpenters, plumbers, electricians, etc) or create occupational liscencing laws to restrict the supply of workers (doctors, accountants, lawyers, barbers, appraisers, etc.).

1040 Form and Instructions in 1913, Only 4 Pages

The very first 1040 Federal Income Tax form from 1913 appears above (click to enlarge). Notice that:

1. Taxes were only paid on income above $20,000, equivalent to $407,000 in today's dollars, at the initial rate of only 1%. (Correction: Income taxes in 1913 were actually assessed on income above the personal exemption of $3,000, equivalent to $61,000 today).

2. The highest marginal tax rate in 1913 was 6%, which applied to income above $500,000, equivalent in today's dollars to about $10 million.

The entire 1040 tax form in 1913, including all forms and instructions, was only 4 pages, click here to view. All instructions in 1913 were contained on a single page, compared to the 2006 1040 Instructions, which run 143 pages long, without any forms.

More On "Abundance Denial"

I posted before on the topics of "Abundance Denial," and the "paradox of progress," which generally describe the phenomenon that even though wealth, prosperity and abundance for the AVERAGE person is at an all-time historical high (both U.S. and globally), the media constantly dwell on minor problems without celebrating the broader, more upbeat context in which they exist.

From Reason Magazine comes a good article "Now for the Good News: Mankind has never been healthier, wealthier or freer. Surprised?" Here is an excerpt:

"Worldwide, life expectancy has more than doubled, from 31 years in 1900 to 67 years today. India’s and China’s infant mortalities exceeded 190 per 1,000 births in the early 1950s; today they are 62 and 26, respectively. In the developing world, the proportion of the population suffering from chronic hunger declined from 37 percent to 17 percent between 1970 and 2001 despite a 83 percent increase in population. Globally average annual incomes in real dollars have tripled since 1950. Consequently, the proportion of the planet's developing-world population living in absolute poverty has halved since 1981, from 40 percent to 20 percent. Child labor in low income countries declined from 30 percent to 18 percent between 1960 and 2003.

Man’s remarkable progress over the last 100 years is unprecedented in human history. It’s also one of the more neglected big-picture stories. Ensuring that our incredible progress continues will require not only recognizing and appreciating the progress itself, but also recognizing and preserving the important ideas and institutions that caused it, and ensuring that they endure."

Who Pays Taxes, and What Do They Get?

Since both taxes and spending affect the well-being of Americans—taxes make people worse off, and government spending on useful things makes people better off—it’s not enough to simply ask which Americans bear the nation’s tax burden. We also need to know which Americans receive the most dollars of government spending. To address that issue, the Tax Foundation just released a study titled "Who Pays America’s Tax Burden, and Who Gets the Most Government Spending?" The analysis shows:

1. America’s lowest-earning one-fifth of households receives $8.21 in government spending for each dollar of taxes paid in 2004. Households with middle-incomes receive $1.30 per tax dollar, and America’s highest-earning households receive $0.41 per tax dollar.

2. Government spending targeted at the bottom 60% of U.S. households is larger than what they paid in taxes in 2004. Overall between $1.03 trillion and $1.53 trillion was redistributed downward from the two highest income quintiles to the three lowest income quintiles through government taxes and spending, year—a fact that’s not obvious by looking at taxes alone.

Policy Conclusions:

Many lawmakers favor sharply progressive taxes and oppose any tax reform plan that cuts the level of tax progressivity—such as a single-rate income tax or a retail sales tax—despite the economic benefits of those tax reforms.

But tax progressivity is only half the picture, and any amount of progressivity can be achieved by some mix of tax and spending changes. That means it’s possible to move toward a flatter, more economically neutral tax code, without reducing the progressivity in the fiscal system. In that case, lawmakers’ opposition to economically efficient tax reforms no longer makes sense.