Professor Mark J. Perry's Blog for Economics and Finance
Saturday, November 10, 2007
Challenge: Raise Taxes on Your Rich Selves Now!
On Capitol Hill, a leading Democrat - Rep. Charles Rangel - has proposed an additional tax on wealthy people and a levy on hedge fund managers to help pay for easing taxes on the middle class.
In 2005 (most recent year available) it took income of $145,283 to be in the top 5%, according to IRS data. Members of Congress earned a base salary of $162,100 in 2005, putting each member of Congress into at least the top 5% category and making them part of the group most would agree is "the rich."
Given Bill Clinton's $9-10 million in income from speeches in 2006 (see a list here), the Clintons are probably the kind of super-rich Americans in the top 1/10 of 1% that John Edwards has in mind when he unveiled his plan to raise taxes on the rich: "The top 300,000 income-earners in America now make more than the bottom 150 million combined. Our tax code has shifted most of the burden onto the backs of working Americans."
When a presidential candidate like John Edwards or Hillary Clinton, or a tax-raising member of Congress like Rep. Rangel, tells us that they think taxes should be raised on the rich (which includes themselves), isn't it a fair question to ask them how much they voluntarily added to their tax bill this year, and how much they plan to add next year? After all, if they think "the rich" should pay more taxes, shouldn't they already be doing so voluntarily?
Challenge: If taxes increases for "the rich" are a good thing, the members of Congress and presidential candidates (all part of either "the rich" or "super-rich") don't have wait for the Bush tax cuts to expire or for Congress to pass new tax legislation, they can immediately raise taxes on themselves voluntarily by making a gift to the U.S. Treasury.
Here is the link to the Treasury's website with instructions for politicians, presidential candidates, or any citizen who wish to make a general donation to the U.S. government into an official account called "Gifts to the United States."
For example, what if Edwards, Rangel or Clinton proposed legislation to force everybody to "donate" 5 pints of blood every year. Wouldn't it be a lot more credible if they were already donating blood themselves right now voluntarily, and not waiting until they were forced to "donate" blood by their own legislation?
Quote of the Day: You Can Fight Or Ignore Economics, But Economics Will Win Every Time
Attempting to put all the drug dealers in jail is simply not possible. There is a demand for their job function, so the only effect of jailing somebody who has taken on that job is to create a job opening at a higher pay rate.
The War on Drugs is a War on Economics. You can ignore economics if you want. You can even fight economics. But economics is going to win every time.
~The Angry Economist
Alcohol Nannies and The New War On Alcohol
David Harsanyi, a columnist at the Denver Post, is the author of the book "Nanny State: How Food Fascists, Teetotaling Do-Gooders, Priggish Moralists, and Other Boneheaded Bureaucrats Are Turning America Into a Nation of Children."
Part of the book was published in the November issue of Reason Magazine as an article titled "Prohibition Returns! Teetotaling do-gooders attack your right to drink."
A D.C. police officer who arrested a middle-aged mother of two driving in Georgetown after eating in a restaurant and having only one glass of wine (only 0.03% BAC), was quoted as saying "If you get behind the wheel of a car with any measurable amount of alcohol, you will be dealt with in D.C. We have zero tolerance .... Anything above 0.01, we can arrest."
Note: That would mean that .0001 of you blood is alcohol.
From the article:
Drinking is under attack these days in ways we haven't seen since the failed experiment with national alcohol prohibition in the 1920s. Indeed, for many neoprohibitionists, that experiment wasn't a failure at all, since it did cut alcohol consumption, which is all that matters. We can see that mentality today in policies that go beyond preventing drunk driving or punishing drunk drivers and aim to discourage drinking per se.
Pretty scarcy stuff from a very interesting article.
(HT: Society and Money)
Top Ten Reasons That $100 Oil Won't Last
1. The amount of oil in storage tanks around the world is near all-time highs.
Source: Wall Street Journal article "Why $100 Oil Can't Float"
Global Cooling More of a Concern Than Warming?
Friday, November 09, 2007
Quote of the Day: It Takes A Lot of Pretending
It takes faith to believe in global warming.
You need to pretend the sun is not the major factor in how warm Earth is at any given time.
You need to pretend that your choice of light bulb can really impact the temperature of the planet.
You need to pretend deviating temperatures of the past, before industrialization, didn't mean anything, while deviating temperatures in the industrial age spell doom and gloom.
You need to pretend that buying carbon credits from Al Gore will actually save the planet.
You need to pretend massive, government-forced redistributions of wealth can reduce the temperature of the planet.
That's a lot of pretending.
Goldilocks or Recession? Goldilocks!
Thursday Night Lineup
DEBATE: GOLDILOCKS OR RECESSION?...Mark Perry, University of Michigan economics professor and Carpe Diem blogger will join the market panel in a look at what's ahead for the economy.
Thanks to an invitation from Larry Kudlow, I appeared on a segment of "Kudlow and Company" last night, featuring a discussion based on this recent CD post, and this CD post, with a nice presentation of the graphs from those posts.
My position is that we aren't headed for a recession for the following reasons:
1. We won't have a recession unless and until the Business Cycle Dating Committee of the National Bureau of Economic Research says so, and that committee doesn't look at the value of the dollar, oil prices, financial sector troubles, or even the stock market, when it determines that a recession has started. It looks at industrial production, employment levels, real personal income, and real manufacturing and trade sales. In the discussions about recession, too much attention is paid to the subprime crisis, the falling dollar, the stock market and oil prices, and not enough attention is paid to the 4 variables that really matter - and none of them show any weakness, see this CD post and this CD post.
2. If the serious S&L crisis in the 1980s, when almost 1,500 banks failed (about 1 out of every 10), didn't cause a recession, then a subprime mortgage crisis by itself won't cause a recession. The banking sector has never been more stable than it is today - not a single bank failed in 2005 or 2006 (out of about 8,000), and only 3 have failed in 2007. That has to be a record unmatched at any other time in U.S. history.
3. Consider that in 1987, at the peak of the S&L crisis, there were 184 bank failures (3.5 every week) AND the stock market crash in October, with a 22.6% decline in one day (October 19) and a 31% decline in a week. That would be equivalent today to a 3,000 -4,000 point drop in the DJIA. Further, the unemployment rate in 1987 was 6.2% (vs. 4.7% today) and the 30-year mortgage rate was 11.26% (vs. 6% today). If the economy of 1987 was able to survive a major banking crisis and Black Monday without going into recession, today's much stronger and more stable economy will continue its expansion. See this CD post.
4. The significant increase in derivatives trading and risk-management instruments has helped insulate the U.S. economy from recent credit shocks, oil shocks and a falling dollar. See this CD post.
5. The U.S. economy is much more energy-efficient today than ever before - energy consumption per dollar of real GDP today is about half of the level in 1980 - and can absorb high oil prices better than ever before. See this post.
6. Oil prices will probably start falling by next year - futures trading indicates a price in the low 80s by 2009. And see yesterday's WSJ article "Why $100 Oil Can't Float": "The fundamentals give a clear message: The price is too high to be sustainable." Expect falling prices.
7. The weak dollar has significant benefits for the U.S. economy: Surging, record-high exports, adding about a percentage point to real GDP, see today's trade report, showing a 13.6% increase in exports since last year.
Are Oil and Gas Prices at Record Levels? Yes & No
The Washington Post ran an article on Wednesday titled "Oil at Record Price? That Depends":
Cambridge Energy Research Associates says the record is $99.04 a barrel, a level it said was reached in inflation-adjusted terms in April 1980.
The International Energy Agency agrees that April 1980 was the peak month, but it said that the price would translate to $101.70 a barrel today.
The Energy Information Administration says that the previous inflation-adjusted record, $93.48 a barrel, was set in January 1981.
That would make the price reached yesterday (Tuesday, Nov. 6), $96.70 a barrel on the New York Mercantile Exchange after a $2.72 increase, a new record closing price.
MP: One issue that adds to the confusion about record-high oil and gas prices is that we have daily price information for oil and gas, but we only have price index data with a lag, and that price index data is required to adjust for inflation. For example, we won't have October CPI data until November 15, so we can't even accurately compute real oil and gas prices in October until late next week.
Another issue is whether or not gasoline prices (which consumers care more about than oil prices) are at record-high levels, especially since oil prices have been rising more than retail gasoline prices (see bottom chart above). Notice the breakdown of the historically close link between oil prices and gas prices in the last few months. Since late August, oil prices have increased by about 40% and gas prices by only 15%.
Using monthly gasoline price data from the Energy Information Administration back to 1976, and CPI data through September (and estimates for October and November), the top chart above shows monthly inflation-adjusted gas prices (in November 2007 dollars) from January 1976 to November 2007.
Bottom Line: The record for inflation-adjusted retail gasoline prices was set in March of 1981, when prices peaked at $3.35 per gallon. With current gas prices averaging $3.013 per gallon as of November 5 according to the EIA, we're still 11% below the record price for gas.
Fill ‘Er Up, Wash the Windshield, and Google It
Experimental Economics: M-F Stereotypes Are True
Greg Mankiw has a link to this interesting Slate.com article "An Economist Goes to a Bar":
The article discusses how two economists and two psychologists conducted a two-year speed-dating experiment at a bar near the campus of Columbia University, and they found these results:
1. Men put significantly more weight on their assessment of a partner's beauty, when choosing, than women did.
2. Women got more dates when they won high marks for looks.
3. Intelligence ratings were more than twice as important in predicting women's choices as men's.
4. Men avoided women whom they perceived to be smarter than themselves. The same held true for measures of career ambition—a woman could be ambitious, just not more ambitious than the man considering her for a date.
5. When women were the ones choosing, the more intelligence and ambition the men had, the better.
Conclusion: Male-female stereotypes appear to be true.
a) Males are a gender of fragile egos in search of a pretty face and are threatened by brains or success that exceeds their own.
b) Women, on the other hand, care more about how men think and perform, and they don't mind being outdone on those scores.
Thursday, November 08, 2007
Look Out Starbucks:McDonald's Coffee, Sales Rock
Sales in U.S. restaurants open at least 13 months advanced 5.4%, while Europe's comparable sales increased 6.4%, the Oak Brook, Illinois-based company said today in a statement. The median estimate for global sales growth among four analysts surveyed by Bloomberg was 5.2%.
Garage Sale Gestapos in Minnesota
Capital vs. Talent:Capital Is Plentiful, Talent Scarce
I came across an interesting 2005 New Yorker article titled "Net Worth," here are some excerpts:
In the traditional struggle between capital and labor, more often than not capital has won, because the real source of value for most companies has historically been the hard assets that they owned and controlled. Toyota owes its success to its machines, assembly lines, and system of production. For Wal-Mart, it’s primarily store location, technological efficiency, and product selection. For Coca-Cola, it’s carbonated beverages and exceptional distribution. Workers for these companies are, for the most part, interchangeable, so their bargaining power is limited.
But in a host of industries—most notably in what we now call the knowledge economy—the arrangement is different. In Hollywood, in Silicon Valley, on Wall Street, and in professional sports, hard assets matter far less than people. The employees—the so-called knowledge workers—make the difference between success and failure.
Capital is plentiful; it is skilled people who are scarce. The salient struggle is no longer capital versus labor but, capital versus talent. The upshot is that in many knowledge businesses the employees often do better than the shareholders.
Talented workers were always in demand, but only recently did they recognize how much they could get for their services. Things may be getting harder for traditional labor—real wages for most workers actually fell last year (2004)—but they’re getting better for the talent.
Bottom Line: The "capital vs. talent" argument could actually help explain: a) rising CEO pay, b) rising income inequality, and c) the decline of manufacturing wages and the power of unions, etc.
Wednesday, November 07, 2007
Crude Oil Futures Trading Predicts Falling Oil Prices
According to futures trading for crude oil on the NYMEX, we can expect falling oil prices over the next three years, to $82 per barrel by late 2009 (see chart above).
With Derivatives At An All-Time High, US Economy Can Handle $100 Oil, Falling $ and Subprime Crisis?
I blogged before about why "The Energy Efficient Economy Can Handle $100 Oil," and Greg Mankiw linked to that CD post on his blog asking "Where have all the oil shocks gone?" As Mankiw summarized, "The economy is far more energy-efficient today than it was in the past, in part because economic activity is based more on services and less on manufacturing. As a result, energy prices matter less today."
Another reason that the U.S. economy today can handle record oil prices, a falling dollar, and increasing credit risks, without going into recession? Price, currency, and credit risks have been hedged effectively using derivative contracts (futures, options, swaps, etc.), insulating the U.S. economy more than ever before from oil shocks, currency risk and the subprime mortgage crisis.
As the top chart above shows, the volume of futures contracts at the Chicago Mercantile Exchange is at an all-time historical high, and have increased by a factor of 6X between 2000 (231 million contracts) and 2006 (1.403 billion).
Likewise, the value of derivative contracts (according to the OCC) held by U.S. commercial banks in 2007 ($152 trillion) is almost 11X 2007 U.S. GDP ($14T), compared to a ratio of 2:1 in 1994 (see bottom chart above) for Derivative Contracts:GDP.
Bottom Line: With derivative trading at an all-time historical high, which allows for low-cost effective hedging of price risk, currency risk, interest rate risk and credit risk, the U.S. economy of 2007 has been able to easily accommodate oil shocks, a falling dollar, and the subprime mortgage crisis, without the risk of recession.
U.S. Productivity Growth Is The Highest in 4 Years, Real Compensation Up by 2.7%
According to the BLS's report today, productivity in the nonfarm business sector grew by 4.9% in the third quarter, the largest gain in four years - since the third quarter of 2003. The 4.9% productivity growth was well above Wall Street's expectation of 3.4% growth, was also more than twice the average productivity growth over the last 25 years of 2.07% (see chart above, click to enlarge).
The BLS also reported that real compensation, adjusted for inflation, rose 2.7% in the third quarter, well above the average of 2.08% over the last ten years.
Why Subprime Mortgage Crisis Won't Cause A Recession: The U.S. Economy Survived S&L Crisis
The top chart above shows the annual number of bank failures in the U.S. from 1979 to 2007, using data from the FDIC. Between 1982 and 1993, 1456 banks (mostly S&Ls) in the U.S. failed, and at the peak of the banking crisis in the late 1980s about 200 banks were closed in each year from 1987 to 1989 (see bottom chart above). That's almost one bank failure on each business day of the year, for three years in a row!
One lesson we can learn is that even at the peak of the "S&L crisis," the overall economy performed well, with pretty impressive real GDP growth at above-average rates (3.4%, 4.1% and 3.5% from 1987-1989), and most importantly, the economy did not go into a recession even at the peak of the most serious banking crisis since the Great Depression!
In some ways, today's economy is in much better shape than the U.S. economy of the 1980s, e.g. unemployment rates today (4.6% average over the last two years) are much lower than the 1980s (7.3% average).
Consider also that not a single U.S. bank failed in 2005 or 2006 (see chart above), and only 3 banks have failed in 2007, which a very impressive record of only 1 bank failure per year on average over the last 3 years. I am pretty sure that there has never been any two-year period in U.S. history without a single bank failure in the U.S., and no three-year period in U.S. history with only 3 bank failures. The U.S. banking system has never been as strong and as stable as it is today.
Bottom Line: If the economy of the 1980s could withstand a banking crisis as serious as the S&L crisis (with almost 1500 bank failures) without going into a recession, a much stronger and more resilient 2007-2008 U.S. economy and banking system will not go into a recession because of the current "subprime mortgage crisis."
Tuesday, November 06, 2007
How Can You "Give Back," If You Never Took.....
Quote of the Day:
"Giving back" is a similarly mindless mantra.
I have donated money, books and blood for people I have never seen and to whom I owe nothing. Nor is that unusual among Americans, who do more of this than anyone else.
But we are not "giving back" anything to those people because we never took anything from them in the first place.
~Thomas Sowell in his column today
Why A Recession is Not Pending: Jobless Rates for Educated Workers Remain Low and Stable
1. For workers with some college (but no degree), the unemployment rate in October 2007 was 3.5%, almost the same as October 2006 (3.4%), and about the same as the average rate of 3.6% over the last three years (see chart above, click to enlarge).
2. For college graduates, the October unemployment rate was 2.1%, exactly matching the average unemployment rate for that group of workers during the last three years (see chart above). The jobless rate for college grads has moved in a tight range between 1.8% and 2.5% for the last 24 months, with a slight downward trend.
Bottom Line: As long as unemployment rates remain stable for workers with: a) some college or b) a bachelor's degree or higher, there is no indication of a pending recession. Unless and until we see an upward trend in the unemployment rates for these two groups, the economy will continue on its expansionary path.
For example, in the last recession of 2001, the jobless rate for college grads increased in almost every month during the year, hitting 3% by December 2001; and the jobless rate for workers with some college increased from 2.7% to 4.2% during 2001.
The continued stability of unemployment rates for the most educated American workers, those whose role is most important in a knowledge-based, intensively-competitive, global economy, suggest that the Goldilocks economy will continue its healthy expansion into 2008.
Monday, November 05, 2007
EU vs. USA Smackdown: EU Still Below Mississippi
We've been having a lively discussion on Sweden and the EU, vs. the USA for standard of living, per capita income, etc., based on this post, this post and this post.
Thanks to Ironman at Political Calculations blog, there is now an updated, dynamic, sortable database at this link based on 2006 data.
If you click on the last column and sort from highest to lowest, you'll see that:
1. Based on 2006 data, if the EU countries as a group became the 51st U.S. state, it would be the poorest state in America, with only $27,394 in per capita GDP (PPP adjusted), below even Mississippi (GSP of $28,937).
2. If Sweden, Netherlands, UK, Germany and France were added individually as the 51st U.S. state, they would all rank #49 in per-capita GDP/GSP, ahead of only West Virginia and Mississippi.
3. In other words, updated data show that the results in 2006 are almost exactly the same of the previous posts based on 2002, 2003, 2004 and 2005 data.
Some Inconvenient Questions: How Much Should We Sacrifice Today for Future Billionaires?
From economist Steven E. Landsburg's recent Slate.com column ("Save the Earth in Six Hard Questions: What Al Gore doesn't understand about climate change"):
There is nothing particularly peaceable about Gore's rhetorical approach to climate policy. At his most pugnacious, Gore has depicted the fundamental trade-off as one between environmental responsibility and personal greed. Of course, as everyone over the age of 12 is perfectly aware, the real trade-off is between the quality of our own lives and the quality of our descendants'.
In other words, climate policy is almost entirely about you and me making sacrifices for the benefit of future generations. To contribute usefully to the debate, you've got to think hard about the appropriate level of sacrifice. That in turn requires you to think hard about roughly half a dozen underlying issues.
Here are two of Landsburg's inconvenient questions:
1. Many people (myself excluded, however) believe we should care more about our countrymen than about a bunch of foreigners—hence the sentiment for a border fence. If we are allowed to care less about people who happen to be born in the wrong country, why can't we care less about people who happen to be born in the wrong century?
2. If you expect economic growth to continue at the average annual rate of 2.3%, to which we've grown accustomed, then in 400 years, the average American will have an income of more than $1 million per day—and that's in the equivalent of today's dollars (i.e., after correcting for inflation). Does it really make sense for you and me to sacrifice for the benefit of those future gazillionaires?
MP: And if the economic growth rate is 2.5% instead of 2.3%, the average American would make more than $2 million per day in 400 years. Increase economic growth to 3%, and income for the average American would be $15 million per day in 400 years, in today's dollars!
Further, IBD reported in March that the average American household has a net worth of about $487,000. If real net worth grows at only a modest 2.5%, the average American household in 400 years would be multi-billionaires, with a net worth of almost $10 billion.
Question: Most people favor income redistribution from the wealthy to the poor through progressive taxes, estate taxes, etc. Isn't it then inconsistent for those people to show concern for the future rich, and advocate that the relatively poor (people living today) make sacrifices today for the relatively rich of the future (people living 100 years from now)? Won't that be a transfer of wealth and income from the poor (today) to the rich (tomorrow)?
And if one's position is that we should care about the rich in the future and make sacrifices today to leave them a cleaner environment, why doesn't he or she treat the rich living today with the same respect and concern, e.g. advocate a flat tax on income instead of a progessive income tax?
PetroChina is World's Largest Company, Tops $1T
SHANGHAI, China (AP) — PetroChina became the world's first company worth more than $1 trillion on Monday, surging past Exxon Mobil as the Chinese oil producer's shares nearly tripled in their first day of trading in China (see chart above, click to enlarge).
Adding the value of PetroChina shares traded in Shanghai, Hong Kong and New York — and those still owned by the government — the company's total market capitalization ballooned to just over $1 trillion, compared to Exxon Mobil Corp.'s $488 billion.
Sunday, November 04, 2007
Let a 1,000 Millionaires Bloom in China, And U.S.
BEIJING -- China has the world's fifth largest number of households with more than $1 million in liquid assets, trailing only the U.S., Japan, Britain and Germany, said a report released by the Boston Consulting Group.
There were 310,000 Chinese millionaires at the end of 2006, up from only 124,000 in 2001, more than 48,000 of which have more than $5 million in liquid assets. Given China's continuous and rapid economic growth, the report also predicted the number of millionaires to double by 2011, reaching 609,000.
These households, which only account for 0.1% of the total number of households in China, possess 41.4% of the country's total wealth, said the report.
According to this WSJ report, America’s inequality peaked in 1929, when the top 1% controlled about 48% of the wealth.
We hear a lot of hand-wringing about income inequality in the U.S., but perhaps there are some lessons from China. When a country experiences significant, dynamic change from new technologies, innovation, globalization, opening of markets, increased competition, etc., income inequality increases because talented entrepreneurs are able to generate huge amounts of wealth at levels that are not possible in a static, insulated, uncompetitive environment. Some of the same dynamics that are creating more millionaires and more income inequality in China, are probably also creating the same outcomes in the U.S. Not to worry.
Bottom Line: Wouldn't most Chinese agree (and wouldn't you agree) that the average person in China today is better off today than 10, 20 or 40 years ago, even though income inequality has never been higher?
Harvesting Cash: Big Sugar Invests $1.5m to Make $100m/Year. IRR = 6,666%; A Satan-Like Return
From yesterday's Washington Post:
When U.S. sugar farmers needed help this summer defending a $1 billion, 10-year subsidy plan in a new House farm bill, they found it in some surprising places.
The House sugar vote illustrates the hold that agricultural interests maintain on farm policy even as the number of full-time commercial farmers has shrunk to a few hundred thousand. Sugar groups have used campaign cash and far-reaching alliances with labor unions and politicians to expand their influence far beyond the 15 states and few dozen congressional districts where sugar is grown by fewer than 6,000 farmers.
So far this year, nine sugar farm or refinery groups have made more than 900 separate contributions totaling nearly $1.5 million to candidates, parties and political funds, according to federal election records and CQ MoneyLine. American Crystal Sugar Co., a Minnesota-based sugar-beet cooperative with 3,000 members, has made 317 contributions totaling $819,000. In July alone, its political fund contributed more than $70,000 to 26 House members, 24 of whom sided with it on the July 27 sugar vote.
Bottom Line: Wouldn't you invest $1.5 million today to get $1 billion over ten years ($100 million per year)? Your annual Internal Rate of Return (IRR) would be 6,666.67%, a return that would certainly catch the attention of Satan.
Question: Why is Congress selling special-interest legislation to Big Sugar at such a low price? They are giving $1 billion of benefits away to Big Sugar for a mere $1.5 million in campaign contributions. What gives? Couldn't they have charged $3 million or even $30 million? After all, Congress has a monopoly on special-interest legislation. What could Big Sugar say - "If you give us the sugar subsidies we want, we'll take out business elsewhere?"
Update: EU vs. USA
From Political Calculations blog:
The Sweden-based free-market advocacy group Timbro compared the relative wealth of the nations of Western Europe against individual U.S. states. The key finding in Timbro's report was that:
"If the European Union were a state in the USA it would belong to the poorest group of states. France, Italy, Great Britain and Germany have lower GDP per capita than all but four of the states in the United States. In fact, GDP per capita is lower in the vast majority of the EU-countries (EU 15) than in most of the individual American states. This puts Europeans at a level of prosperity on par with states such as Arkansas, Mississippi and West Virginia."
Timbro's study was based on 2002 economic data, but since it was published, economic data for both 2003 and 2004 has been published. So, the question is now: what's changed in those two years? To find out, Political Calculations has created the following dynamic table comparing each U.S. state's Gross State Product (GSP) or each E.U. nation's Gross Domestic Product adjusted for Purchasing Power Parity (GDP-PPP) data for 2004, their respective populations and their corresponding per Capita economic data, which you may sort according to the column headings, either from highest to lowest value or vice-versa.
Bottom Line: If you click on the last column of the "US vs EU: 2004 Edition" chart, and sort it from highest to lowest, you'll find that Sweden would rank at the bottom of U.S. states (#49 including D.C), just barely above Mississippi and West Virginia.
Harvesting Cash: Farm Welfare-for-the-Rich
1. Sunday NY Times: When you consider that farm income is at record levels (thanks to the ethanol boom, itself fueled by another set of federal subsidies); that the World Trade Organization has ruled that several of these subsidies are illegal; that the federal government is broke and the president is threatening a veto, bringing forth a $288 billion farm bill that guarantees billions in payments to commodity farmers seems impressively defiant.
What finally emerges from Congress depends on exactly who is paying closest attention next week on the Senate floor and then later in the conference committee. We know the American Farm Bureau will be on the case, defending the commodity title on behalf of those who benefit from it most: the biggest commodity farmers, the corporations who sell them chemicals and equipment and, most of all, the buyers of cheap agricultural commodities — companies like Archer Daniels Midland, Cargill, Coca-Cola and McDonald’s.
2. Sunday NY Times: The Senate has one last chance to rid the country of an irrational, outdated and unfair 70-year-old program of federal farm supports that enriches the few at the expense of the many, distorts international trade and damages the environment. It has one last chance, in other words, to produce a farm program of which the country can be proud.
The old-fashioned bill would perpetuate a system that directs more than half of all farm payments to less than one-tenth of the farms, most of them concentrated in eight states and most of them producers of big row crops like corn, cotton, soybeans, wheat and rice.
To make matters worse, these lucky few get their billions regardless of market conditions — and conditions now happen to be particularly good, given the strong demand for corn-based ethanol as well as for American farm products abroad. So whenever you hear its proponents describe this welfare-for-the-rich program as a safety net, remember this: for the most part, it provides an extra bounce for those who don’t need a safety net while failing to catch those who do.
38% of Uninsured Make $50,000 or More
The chart above (click to enlarge) is from a study by Robert Ohsfeldt (Texas A&M Health Science Center) and John Schneider (Department of Health Management & Policy, University of Iowa) that supports Greg Mankiw's statement in today's NYTimes that:
"The Census Bureau reports that 18 million of the uninsured have annual household income of more than $50,000, which puts them in the top half of the income distribution."
As the chart shows, more than 38% of the uninsured have incomes of $50,000 or higher. To the extent that these 18 million remained uninsured, we would have to assume that many of them remain uninsured voluntarily (or are self-insured and pay for medical services as needed), since their income levels would certainly indicate that they can afford basic health insurance, but choose not to buy it.
Beyond Those Health Care Numbers: US Looks Good
Cartoon of the Day
More on Taxi Cartels: Breaking The Mpls. Cartel
Magistrate Judge Franklin L. Noel, in his ruling against the Minneapolis taxi cartel that led to an increase in the number of new taxi licenses by 45, “The established taxi vehicle license holders do not have a constitutionally protected freedom from competition.”
Nice choice of words. We have a lot of freedoms, but freedom from competitors isn’t one of them. Freedom to trade with potential customers is.
Read more here.
Read a previous post about the attempts to break the Minneapolis taxi cartel, with excerpts from an excellent George Will article about the situation.