Tuesday, September 15, 2009

Dr. Milton Friedman Argues for No Licensure of MDs to a Group of MDs at the Mayo Clinic in 1978

Speaking to a group of medical professionals at the Mayo Clinic in 1978, economist Milton Friedman argues for "no licensure of physicians," because that would help to "reduce and elmininate the monopoloy power of the Amercian Medical Association. That monopoly power is derived almost entirely from the fact that the practice of medicine is an activity which can be engaged in by only those who have licenses from government. And the control over that licensure procedure is what has enabled the AMA to exercise its monopoly power for these many decades."

In addition to being an excellent economist, Milton Friedman was a brave and fearless man.

Milton Friedman Speech At the Mayo Clinic in 1978

Government's Health Care Role

Rising Cost of Health Care

The genius of Milton Friedman is that his economic insights are as powerful as they are timeless. Despite the fact that these comments were made more than thirty years ago in 1978 at the Mayo Clinic in Minnesota, they ring as true today as they did then.

Walmart’s Ongoing Commitment To Drive Unnecessary Costs Out of the Health Care System

BENTONVILLE, AK, Sept. 15, 2009 While the debate over health care reform continues, Walmart remains committed to doing its part to reduce the cost of health care for everyone. Walmart announced today it is expanding its prescription mail delivery program nationwide, making it easier to receive prescriptions regardless of whether or not customers live close to a pharmacy. From Cromberg, California, to Rockleigh, New Jersey, Americans can order, with a valid prescription, a 90-day supply of eligible prescriptions for only $10 and receive them via free mail delivery, simply by visiting walmart.com/pharmacy or by by calling 1-800-2REFILL. Further, Walmart’s free mail delivery program has no gimmicks, no memberships and no enrollment fees.

Walmart’s $4 generic drug program has helped so many patients afford their medication needs, but unfortunately we’ve found there are still too many patients unable to take advantage of our low prices because they are home-bound or live too far from a Walmart or Sam's Club pharmacy,” said Dr. John Agwunobi, president of Walmart’s health and wellness division.

“With this program, we’re able to provide consumers in every rural town or big city across America with more affordable prescription medicines through a convenient, free mail delivery system. Our $10 mail delivery prescription program is a true reflection of Walmart’s commitment to drive unnecessary costs out of the health care system so Americans can live healthier, better lives,” said Dr. Agwunobi.

Bottom Line: Wal-Mart deserves the 2009 Nobel Peace Prize for all its ongoing anti-poverty measures, including Everyday Low Prices and $10 prescription drugs.

The Empirical Evidence Against Big Government

The video above is Part II of a series on government spending, and this segment focuses on real-world evidence about the negative impact of government spending on economic performance, featuring Dan Mitchell of The Cato Institute. Part I is available here.

TED Spread Has Fallen 450 Bps in Last Year, Now At The Lowest Level in 5 Years, Since June 8, 2004

The TED spread is the difference between the risk-free three-month T-bill interest rate and three-month LIBOR (includes a credit risk premium), and is considered to be a good indicator of the overall amount of perceived credit risk in the economy. A year ago on September 15, 2009 the TED Spread jumped by 65.5 basis points (from 134.855 bps to 200.3588 bps) as Lehman Brothers filed for bankruptcy and fears about credit risk soared. Two days later on September 17 as fears about credit and financial risk intensified, the TED Spread jumped by another 82.6 basis points (bps) to more than 300 bps, setting a new record (back to at least 1990) for the largest one-day increase in the TED spread (that record still stands), and setting a new record for the highest TED Spread to date.

At the height of the financial crisis about a month later, the TED Spread hit 456.485 basis points on October 13, 2008, an all-time record. As the credit and financial markets have gradually healed, the TED Spread has fallen by more than 450 bps to the current level of about 15.75 bps, the lowest level in more than 5 years, since June 8, 2004 (see chart above). One more sign that the recession has ended.

Thomas Sowell's "Single Payer Plan": HIMSELF!

What did we do, back during the years when most Americans had no medical insurance? I did what most people did. I depended on a "single payer"-- myself. When I didn't have the money, I paid off my medical bills in installments. The birth of my first child was not covered by medical insurance. I paid off the bill, month by month, until the time finally came when I could tell my wife that the baby was now ours, free and clear.

In a country where everything imaginable is bought and paid for on credit, why is it suddenly a national crisis if some people cannot pay cash up front for medical treatment? That is not the best way to do things for all people and all medical treatments, which is why most Americans today choose to have medical insurance. But millions of other people choose not to-- often young and healthy people, sometimes deadbeats who use emergency rooms and don't pay at all.

Is this ideal? No. But if every deviation from the ideal is a reason to be panicked and stampeded into putting dangerous arbitrary powers into the hands of government, then go directly to totalitarianism, do not pass "Go", do not collect $200.

~Thomas Sowell

U.S. Tire Industry Opposed The Tire Tariffs

One of the most amazing and overlooked details about the "punitive tire tariffs" is that they were actually opposed by the domestic tire industry (Goodyear and Cooper). It was the United Steelworkers who filed the complaint, not domestic tire workers or the domestic tire industry.

From the NY Times:

Mr. Obama, responding to a complaint by the United Steelworkers, imposed a 35% tariff on Chinese tires for cars and light trucks. China has deplored the administration’s decision, suggesting it caved to domestic support for protectionism. The Tire Industry Association, which represents American tire retailers, said the decision was ill-advised and would lead to higher prices for consumers.

Retail Sales Increase By Largest Amount in 3 Years

WASHINGTON (MarketWatch) - U.S. retail sales rose a seasonally adjusted 2.7% in August, the biggest increase in more than three years (see chart above), boosted by government subsidies for cars, higher gas prices, and busy crowds at the malls, the Commerce Department estimated Tuesday. Sales were stronger than the 2.3% expected by economists surveyed by MarketWatch, largely because of widespread sales gains outside the gas stations and the auto lots.

The strong August sales will probably boost consumer spending in the third quarter, and help the economy grow for the first time in more than a year, economists say. Sales were strong at traditional mall stores. Sales at general-merchandise stores rose 1.6%, the most in more than two years. Sales at clothing stores rose 2.4%, while sales at stores catering to leisure-time activities, such as sports and reading, rose 2.3%, also a two-year high.

Empire State Manufacturing Survey: It's Beginning To Look A Lot Like The 2002 Recovery

NEW YORK FED -- In September, the Empire State general business conditions index posted its third consecutive monthly increase and its second consecutive positive reading (see chart above). Rising 7 points to 18.9, the index was at its highest level since November 2007, with nearly 40% of respondents reporting that conditions had improved in September and 20% reporting that conditions had worsened. Future indexes were generally positive and near last month’s levels. The future general business conditions index rose 4 points, to 52.3, a level last reached in October 2004.

MP: Both Empire indexes (general and future conditions) are pointing to an economy in recovery and both look a lot like the conditions in early 2002, in the post-2001 recession period.

Monday, September 14, 2009

Boeing Workers Vote 3 to 1 to Go "Union-Free"

Boeing Co. workers in North Charleston (SC) voted overwhelmingly to disband their union in a move that could give the region an edge in landing an aircraft plant the company is looking to build. Of the 267 ballots cast, 199 were in favor of decertifying the election that made them members of the International Association of Machinists. The company was pleased; the union was disappointed.

There's Really Only One Beneficiary of Tire Tariffs

You can probably guess who it is, but find out here for sure from The Cato Institute's Daniel Ikenson.

Believing in the "Magic of the Marketplace"

President Reagan’s visit to the NYSE in 1985 marked the first time a sitting president had visited the Exchange.
We who live in free market societies believe that growth, prosperity and, ultimately, human fulfillment are created from the bottom up, not the government down. Only when the human spirit is allowed to invent and create, only when individuals are given a personal stake in deciding economic policies and benefiting from their success – only then can societies remain alive, dynamic, prosperous, progressive and free.

Trust the people. This is the one irrefutable lesson of the entire post-war period, contradicting the notion that rigid government controls are essential to economic development. The societies that have achieved the most spectacular, broad-based progress are neither the most tightly controlled, nor the biggest in size, nor the wealthiest in natural resources. No, what unites them all is their willingness to believe in the magic of the marketplace.

~Ronald Reagan, quoted in the New York Stock Exchange's "A Tribute to President Ronald Reagan."

Wal-Mart Helps Many Small, Local Businesses

We have heard a lot of criticism of Wal-Mart by groups like Wake-Up Wal-Mart, which claims that Wal-Mart mistreats it workers with low wages, unpaid overtime, mandatory working off-the-clock, sub-standard benefits, etc. They also claim that Wal-Mart discriminates against women, it violates child labor and safety laws, and it destroys the environment and it even desecrates sacred grounds. Oh, and of course there is the claim that Wal-Mart hurts small, local businesses when it comes to town.

What you won't hear from the anti-Wal-Mart groups are stories like this from the
Idaho Falls Post Register, about how Wal-Mart actually provides significant benefits for local businesses:

Liberty Tomato Co.'s distinguishable gold bell label is likely a familiar sight to local Wal-Mart customers purchasing fresh herbs. For almost 10 years, the national chain has sold herbs grown by the Pingree (ID)-based business at Wal-Marts in Idaho, Utah, Wyoming and Montana.

Liberty owner Karen Reed said the partnership has been essential to the survival of her company, which opened in 1987. "We wouldn't be in business if we didn't have the partnership with Wal-Mart," she said. They are our biggest customer."

According to Mark Marvin, market manager of the Wal-Mart in Idaho Falls, Wal-Mart has partnered with several Idaho growers and producers over the years. These local suppliers will be highlighted during September at 16 Idaho Wal-Marts, including the Idaho Falls store, to promote the company's commitment to purchase from regional vendors.

Wal-Mart purchased $269 million in products from 316 suppliers located throughout Idaho in 2009, Marvin said.

The family-owned business, which was started by Wada's grandfather Frank in 1943, was among the first Idaho growers to partner with Wal-Mart 16 years ago, he said. Wal-Mart purchases about 12 percent of Wada's fresh potato crop for its regional stores, said Tom Barnes, Wada's Wal-Mart account manager. Specialty products made by Wada are also for sale in all of Wal-Mart's stores.

Gallup Index of Investor Optimism, U.S. Stock Market Capitalization Hit New Highs

PRINCETON, NJ -- Consistent with Gallup's Consumer Confidence measure and the continued strong performance of the equity market, the Gallup Index of Investor Optimism -- a broad measure of investor perceptions -- in August hit a new 2009 high of 9. This represents a 12-point increase from July and is the first time the Index has been positive since June 2008. The Index has improved by 73 points from February's -64 reading -- its lowest level since its inception in October 1996.

And as the chart below shows (using
World Federation of Exchanges data), investors have reason to be optimistic - the U.S. stock market capitalization has increased for the last six months, and by about $4 trillion since March, from $10 trillion to $14 trillion (estimate for September), the highest level since last September.

Tariffs Punish Our Own Consumers and Producers

From the WSJ article "Tariff on Tires to Cost Consumers":

1. Consumers who buy low-price Chinese tires -- the bulk of the tires China exports to the U.S. -- will be hit hardest by the new tariff, as shortages in this market segment cause retailers to scramble to find alternative sources in other countries.

2. The tariffs won't just hit Chinese producers. Both of the U.S.'s remaining domestic manufacturers -- Goodyear Tire & Rubber Co. and Cooper Tire & Rubber Co. -- make tires in China that they sell in the U.S. Cooper this year is on track to import 2.5 million tires that it made in China. It was planning to boost that to four million next year.

MP: In other words, the "punitive tariffs" on the Chinese will actually punitively penalize our own American consumers, especially poor and middle-class, the largest buyers of low-price Chinese tires, and we'll also punitively punish two of our own Ohio-based tire companies, which combined employ more than 88,000 full-time employees, many in the U.S.

Sunday, September 13, 2009

Greatest Human Being You Never Heard Of

Penn and Teller profile Norman Borlaug and his contributions to genetically engineered food (some strong language).

New York Times article today -- Norman E. Borlaug, the plant scientist who did more than anyone else in the 20th century to teach the world to feed itself and whose work was credited with saving hundreds of millions of lives, died Saturday night. He was 95 and lived in Dallas.

HT: Johan Norberg

Update: Reason Magazine interview with Norman Borlaug (Hat tip: HappyJuggler)

Obamacare: Suspending the Laws of Economics

In exchange for some bitter tax pills, Obama promised Americans would get eternal health care "security and stability." To deliver that, he would of course ban insurance companies from denying coverage to those with pre-existing conditions--tantamount to forcing fire insurance companies to write coverage on a burning building. He would also prohibit insurers from putting any limits on the coverage they offer and cap what they can require patients to pay out-of-pocket.

In other words, Obama would encourage unlimited health care consumption by patients while eliminating the last vestige of price consciousness. But the reason America is facing unsustainable health care cost increases is precisely because its third-party system of insurance doesn't encourage prudent consumption by patients. Indeed, if Obama really can tame health care costs by making patients even less cost-conscious, I have an even better idea for him: Simply pass a law banning anyone from falling sick and mandate good health for all. If he can suspend the laws of economics, perhaps he can also transcend the laws of physiology.

~Shikha Dalmia in Forbes

HT: Scott Grannis

Intrade Odds for Obamacare Fall From 40% to 15%

In a little more than two weeks, the Intrade odds for the contract "A federal government run health insurance plan to be approved before Dec 31, 2009" have fallen to 15%, down from 30% odds only about a week ago, and down from 45% a little more than two weeks ago (see chart above).

Cartoon of the Day: A Classic from Henry Payne

Why Do Politicians Prefer Targeted Tax Breaks?

You've got to hand it to the folks at the Mackinac Center for Public Policy. The free-market think tank in Midland (MI) keeps churning out studies that criticize the effectiveness of Michigan's economic development incentives, even though those reports are met mostly with indifference in Lansing.

Its latest study, finds that between 1995 and 2004, the Michigan Economic Development Corp.'s main business tax credit program generated just 17,971 of the 61,043 jobs the credits were expected to produce.

As it has several times in the past, the Mackinac Center is calling for the state to eliminate the MEDC and its Michigan Economic Growth Authority (MEGA) tax credit program. "You could shut down the department itself and we would be no worse off than we are today," said study author Michael LaFaive, director of fiscal policy at the Mackinac Center.

A scathing Wall Street Journal editorial on Sept. 4, agreed. Citing the Mackinac Center study, the Journal asked if the MEGA tax credits might better be called "cash for clunkers." The Journal editorial, though, ignored the fact that every state employs some kind of economic development incentive.

The Mackinac Center's core belief is that Michigan should end targeted tax breaks and lower business costs across the board. But shuttering the MEDC is about as a likely to occur as the Detroit Lions winning the Super Bowl this year. Created by Republican Gov. John Engler in 1999, the MEDC enjoys wide bipartisan support and has been strongly endorsed by Democratic Gov. Jennifer Granholm.

~Michigan business writer Rick Haglund

MP: There's a very good reason: a) why every state including Michigan has targeted tax breaks for targeted economic development, b) why those targeted incentives enjoy wide bipartisan support, and c) why targeted tax breaks and incentives are preferred over non-targeted, across-the-board lower business costs.

Q: What is the reason? Hint: It has nothing to do with economics, and everything to do with pure politics and photo opportunities.

6th Consecutive Monthly Gain in World Stock Value

As stock markets around the world gained ground last month, the total world stock market capitalization increased by $2.26 trillion in August, according to preliminary data from the World Federation of Exchanges. The August gain follows increases of $1 trillion in March, $3.59 trillion in April, $3.82 trillion in May, $600 billion in June, and $2.84 billion in July and is the first time in two years of six consecutive monthly advances in world stock market value.

The cumulative six-month gain of $14.145 trillion in world stock market capitalization brings the value of world equities up to $42.815 trillion in August, the highest level since September 2008, and marks a 49% increase from the February bottom (see chart above).

Global "Green Shoot" Explosion


The MSCI World Stock Market Index continued its six-month rally and reached a new 11-month high on Friday of 1119.23, the highest close since October 3 last year. From the March low, world stocks have now risen by 62.5% (see chart above).

Yesterday's (Saturday) Wall Street Journal was full of stories about positive economic news here and around the world, here's a sample below. Pretty amazing for so much positive news of economic "green shoots" in just a single issue of the WSJ (the last story below was from Friday).

1. Brazil Exits Recession in 1.9% Lift. Brazil pulled itself out of recession in the second quarter with strong performances by its industrial and service sectors. Gross domestic product expanded 1.9% in the second quarter compared with the first period, the Brazilian Census Bureau, or IBGE, said Friday.

OECD Data Point to Broad Economic Recovery. There are increasingly strong indications that the world economy is on the path to recovery, with both the leading developed and the leading developing economies emerging from a downturn, according to figures released Friday by the OECD.

China Industrial Output Rises, Bank Lending Picks Up. The Chinese economy continued to recover in August, official data showed Friday, as the expansion in industry accelerated and bank lending picked up.

Economic Confidence Rebounds. Economists and consumers [in the U.S.] are feeling better about the economy a year after the most frightening moments of the financial crisis.

Volkswagen to Boost Production in China. Volkswagen AG said Friday it will invest $5.83 billion in increasing production and capacity in China by 2011 in a bid to keep pace with soaring demand.

"Fear Gauge" Is Showing Far Less of It. The stock market's "fear gauge" registered a 52-week low Friday, nearly a year after the market sank in the wake of Lehman Brothers' collapse. The Chicago Board Options Exchange's volatility index (VIX) hit as low as 22.5 before closing at 24.2, up 2.6% from Thursday.

FedEx Raises Outlook, Stokes Hopes for Recovery. FedEx raised its earnings expectations in a further sign that the global economy is stabilizing, citing a recovery in international markets. The package-delivery giant is a bellwether for economic activity.

Is the Recession Over? Wait Until 2010 for NBER’s Answer. The economy is pulling out of its downturn, but don’t expect an end-of-recession declaration anytime soon from the National Bureau of Economic Research. One member of its Business Cycle Dating Committee, Northwestern University economist Robert Gordon, said he believes June will mark the trough for the recession that started in December 2007 (MP: In that case, we are now in the third month of an economic expansion). But he expects the NBER’s recession-dating panel to wait six to eight more months before voting on an end date to ensure the economy doesn’t experience a double-dip recession.

Saturday, September 12, 2009

Quote of the Day II

If you believe the Keynesian argument for stimulus, you should think Bernie Madoff is a hero. He took money from people who were saving it, and gave it to people who most assuredly were going to spend it. Each dollar so transferred, in Krugman’s world, generates an additional dollar and a half of national income. The analogy is even closer. Madoff didn’t just take money from his savers, he essentially borrowed it from them, giving them phony accounts with promises of great profits to come. This looks a lot like government debt.

If you believe the Keynesian argument for stimulus, you don’t care how the money is spent. All this puffery about “infrastructure,” monitoring, wise investment, jobs “created” and so on is pointless. Keynes thought the government should pay people to dig ditches and fill them up.

If you believe in Keynesian stimulus, you don’t even care if the government spending money is stolen. Actually, that would be better. Thieves have notoriously high propensities to consume.

John Cochrane

Quote of the Day

The case for free markets never was that markets are perfect. The case for free markets is that government control of markets, especially asset markets, has always been much worse.

Remember, the SEC couldn’t even find Bernie Madoff when he was handed to them on a silver platter. Think of the great job Fannie, Freddie, and Congress did in the mortgage market. Is this system going to regulate Citigroup, guide financial markets to the right price, replace the stock market, and tell our society which new products are worth investment? As David Wessel’s excellent "In Fed We Trust" makes perfectly clear, government regulators failed just as abysmally as private investors and economists to see the storm coming.

~U. of Chicago professor John Cochrane

Samuel Johnson: Entrepreneurial Genius

This month marks the 300th anniversary of the birth of Samuel Johnson (1709-1784), the greatest British writer of the second half of the 18th century, and the Wall Street Journal featured two articles on him yesterday:

1. "On the Quest for Happiness" and

2. "Samuel Johnson and the Virtue of Capitalism"

In addition to remembering him as a great writer, we should remember him as an entrepreneurial genius, for his work to single-handedly produce the first English language dictionary in 1755 after "only" seven years of work. In contrast, the first French dictionary was completed in 1694 after 55 years of work by the 40-member French Academy (they spent six years just on the letter G).

As this Freeman article "A Tale of Two Dictionaries" suggests:

Yes, Samuel Johnson was a genius, but the French Academy also had its share of geniuses; even if we were to make the wild assumption that Samuel Johnson had the mental powers of ten Academicians, Johnson would still have been outnumbered by four to one; so surely genius alone cannot explain the vast anomaly. I suggest that much of the contrast can be explained by the ineluctable differences inherent in a collective, government-sponsored effort and in one that is individual and profit-making (emphais added).

Update: Samuel Johnson might have also had four or five times more English words to catalog than the French, making his solo effort even more impressive.

The statistics of English are astonishing. Of all the world's languages (which now number some 2,700), it is arguably the richest in vocabulary. The compendious Oxford English Dictionary lists about 500,000 words; and a further half-million technical and scientific terms remain uncatalogued. According to traditional estimates, neighboring German has a vocabulary of about 185,000 and French fewer than 100,000.

Flint's Dramatic Shift: Manufacturing to Service

The chart above (click to enlarge) shows the manufacturing share of total employment in Michigan's 12 major metro areas in both 1990 and 2009 (data available here), and also for the state of Michigan and the entire U.S. What's most interesting is that despite the decline in the manufacturing job share in all 12 metro areas, the relative ranking of the 12 Michigan metro areas stayed almost exactly the same between 1990 and 2009, except for Flint, which fell from #2 in 1990 (30.5%) to #12 in 2009 (only 5.3%).

Holland, Battle Creek, Benton Harbor, Muskegon, Grand Rapids and Kalamazoo were in exactly the same place and Jackson and Saginaw switched places. Ann Arbor, Detroit and Lansing each move up or down one or two places, but Flint was the only Michigan metro to move up or down more than 2 places, and actually moved down by 10 full places (#2 to #12). Flint (at 5.3% manufacturing share) is now remarkably less of a manufacturing town that its neighbor Ann Arbor at 6.5%. As much as everybody thinks of Flint as a blue-collar, manufacturing town, it's gradually become a service-based economy (see a related discussion here on the Flint Expatriates blog).

There must be something pretty unique about Flint compared to the rest of Michigan's metro areas, to explain such a dramatic change in manufacturing employment relative to the rest of the state. Here are a few ideas, please feel free to add more (Walt G?):

1. Flint was more heavily dependent on just one major employer (GM) than the rest of the state, and as GM has reduced its workforce over the last twenty years it has affected Flint more than other Michigan cities.

2. Flint's reputation as being a militant union stronghold may have led to more GM plant closings and job losses here than elsewhere in the state?

Don't Forget the Firestone Recall of US-Made Tires

There has been some lively discussion about the punitive, 35% tariff on Chinese tires on several recent CD posts (here and here), and the safety and quality of tires from China has been debated. But as one anonymous commenter points out, there have been major safety concerns in the past with American-made tires, e.g. Firestone:

The Firestone tire recall is perhaps the most deadly auto safety crisis in American history. US regulators in October 2000 raised the death count to 119 (the death count has steadily risen from 62, later to 88 and 101 deaths reported on 9/20/2000). Experts believe there may be as many as 250 deaths and more than 3000 catastrophic injuries associated with the defective tires. Most of the deaths occur in accidents involving the Ford Explorer which tends to rollover when one of the tires blows out.

UK Pensioner Stockpiles 1,000 Banned Lightbulbs

UK Daily Mail -- A pensioner has defied an EU ban by hoarding more than 1,000 traditional light bulbs - enough to see her "into the grave." Valerie Hemsley-Flint, 62, has spent more than £500 ($835) of her pension money stockpiling the old-style 100-watt bulbs. From September 1, EU countries were banned from producing or importing incandescent bulbs and shops can sell only energy-efficient ones.

But Miss Hemsley-Flint said the light from them is not good enough for her to read by and the flickering sets off her epilepsy. So she has bought 1,100 old-style bulbs and is calling on the Government to scrap the ban.

Simple Economic Analysis of the Tire Tariff: Americans Will Be Punished By the Punitive Tariffs

Economic analysis of the tire tariff:

1. Pw is the tire price in the U.S. before the tariff and Pw+t is the higher tire price after the tariff.

2. As a direct result of the tariff protection for inefficient domestic producers, their output expands from Q1 to Q3, and imported tires decrease from Q2 to Q4.

3. As a result of higher tire prices and fewer tires purchased, American consumers as a group will be worse off by the area (-a, -b, -c, and -d), which represents the loss of "consumer surplus" from the tire tariff.

4. American tire manufacturers will be better off by an amount represented by the area +a, because they have both increased sales (to Q3) and raised prices (to Pw+t) as a result of their protection from more efficient Chinese tire producers.

5. The U.S. government will collect tariff (tax) revenue on imported Chinese tires by an amount represented by the area c, which is the product of tire imports (Q4-Q3) times the tariff (t). If we can assume that the tariff revenue in area c will be redistributed efficiently to the economy, we can treat that as a net gain to the economy (this could obviously be argued).

So when you add it all up:

Costs of Tire Tariffs: American consumers are made worse by the area (-a + -b + -c + -d). (Note: This area could be quantified as a specific dollar amount if we had information about the supply and demand for tires.)

Benefits of Tire Tariffs: U.S. producers are better off by area +a, and the government is better off by area +c.

Net Loss: The costs of the tire tariff (-a + -b + -c + -d) are greater than the benefits of the tire tariff (+a + +c), for a net welfare loss of (-b + -d), which will be the "deadweight loss" of the tire tariff (costs to the economy that are NOT offset by benefits).

Bottom Line: America will be worse off with the tire tariff, not better, and we will suffer from higher tire prices, a net loss of jobs, lower economic growth, and a reduction in our country's standard of living. That is why economists almost universally support free trade and oppose tariffs and trade protection - economic analysis and empirical evidence clearly show that there are always net welfare losses from tariffs. Therefore, it will be Americans in the end who will be punished with the punitive tire tariffs.

Punitive Tariff Update: Costs vs. Benefits

CHINA VIEW -- Obama's decision came amidst enormous pressure from the United Steelworkers and other unions, which claim that tires imported from China have cost at least 5,000 American workers their jobs. However, the stiff 35% tariff, which will ultimately raise tire prices in the U.S., could affect 100,000 tire-related jobs in America, including such sectors as imports, distribution and retail.

The biggest hit would be felt by American consumers who now buy $50 Chinese-made tires and can't afford U.S. brands that cost as much as $150, many distributors warned.

MP: In other words, we're imposing a 35% punitive tariff on ourselves, and making thousands of American consumers worse off (especially the poor and middle class), along with making thousands of Americans with tire-related jobs worse off, possibly causing job losses. Those are the inevitable, significant costs of this trade protectionism, which will far outweigh the benefits to the U.S. domestic tire industry (as economic theory and empirical evidence of protectionism clearly show). But of course there's also a huge political payoff for Obama, who has bought union support for his health care plan by imposing huge costs on American tire consumers and workers in tire-related industries.

Friday, September 11, 2009

Punitive Tariffs Are On Americans, NOT the Chinese

WASHINGTON (AP) -- President Barack Obama has slapped punitive tariffs on all car and light truck tires entering the United States from China in a decision that could anger the strategically important Asian powerhouse but placate union supporters important to his health care push at home. The federal trade panel recommended a 55 percent tariff in the first year, 45 percent in the second year and 35 percent in the third year. Obama settled on slightly lower penalties -- an extra 35 percent in the first year, 30 percent in the second, and 25 percent in the third.

Translation: President Barack Obama has slapped punitive 35% TAXES on AMERICAN CONSUMERS (including the poor and middle-class) for all car and light truck tires VOLUNTARILY PURCHASED from Chinese producers, in a decision that could anger the strategically important Asian powerhouse but placate ANTI-AMERICAN CONSUMER union supporters important to his health care push at home.

Infographic: U.S. vs. India

Click to enlarge.
Mint.com -- India’s history, geography, religious and ethnic makeup, and culture are vastly different to the US and yet the two countries maintain a close relationship. Our infographic is designed to provide an at-a-glance view of the most important economic dimensions of the US and India and a few less important but fun ones too. Hence the lack of scale or numbers. In order to help compare and contrast the economic differences, we have simplified the data from the CIA World Factbook and Nationmaster.com . For the exact numbers in any category, check here and here.

Nurse-Run Health Centers: Real Healthcare Reform

Philadelphia Business Journal -- Nurse-managed health centers are one solution to the growing shortage of family medical practitioners. They are community-based, nonprofit clinics run by advanced practice nurses capable of delivering primary and preventive care more affordably than a larger health system, especially for low-income and vulnerable populations.

“Their true potential remains untapped,” said Tine Hansen-Turton, executive director of the Philadelphia-based National Nursing Centers Consortium. “These centers can provide the foundation for real health-care reform that will work, serving tens of millions of additional families across the United States.”

Cartoon of the Day: Grad Student Etiquette

Markets in Everything: College Classes at Midnight

In June, I reported about college classes at midnight, and they just started this term at Bunker Hill Community College in Boston. One English professor's class is full, but he's not too happy about midnight classes and says this is part of a national nightmare.

No American Should Have to Choose Between Health Insurance and Protein Powder or Alcohol

From Reason.tv.

As an example of how affordable basic medical insurance plans can be, there are various individual and family Blue Cross Blue Shield plans available in Michigan (rates in other states will vary) starting at $173.18 per month for the Individual Care Blue Plus plan, $52.82 per month for the Flexible Blue II plan, and $49.30 per month for the Young Adult Blue plan.

Of course, the rates for these plans vary based on age, number of family members covered, deductibles, co-pays, procedures and services covered, annual out-of-pocket maximums, etc., and the rates above are the minimum monthly premiums. But for many Americans, maybe that is all they need is the most basic coverage available. As I have pointed out before, basic medical insurance is currently available right now for millions of Americans at about the same monthly cost of a cell phone.

The Promise of Something for Nothing

Even those who can believe that Obama can conjure up the money [to insure millions more people] through eliminating "waste, fraud and abuse" should ask themselves where he is going to conjure up the additional doctors, nurses, and hospitals needed to take care of millions more patients.

If he can't pull off that miracle, then government-run medical care in the United States can be expected to produce what government-run medical care in Canada, Britain, and other countries has produced-- delays of weeks or months to get many treatments, not to mention arbitrary rationing decisions by bureaucrats.

Con men understand that their job is not to use facts to convince skeptics but to use words to help the gullible to believe what they want to believe. No message has been more welcomed by the gullible, in countries around the world, than the promise of something for nothing. That is the core of Barack Obama's medical care plan.

~Thomas Sowell

Calculus in 20 Minutes

Part 2 here.

Thursday, September 10, 2009

102,000 Disciplined Health Care Professionals Are In A National Registry. But Nobody Can See It?

NPR -- Twenty-two years ago, the federal government started keeping a list of nurses, nurse aides, pharmacists and pharmacy aides who've been disciplined by state licensing boards. It's called the Healthcare Integrity and Protection Data Bank.

There are more than 102,000 nurses, nurse aides, pharmacists and pharmacy assistants who've been disciplined and included in the registry. But hospitals and nursing homes aren't allowed to see the database.

By law, it was supposed to be open to hospitals and nursing homes when they hire staff and want to run a background check. But the Department of Health and Human Services never completed the regulation implementing the law. Turns out, slow-moving bureaucracy is the main culprit.

"Until the government makes these data available, patients are going to be injured in hospitals by nurses, nurse's aides who shouldn't be on the staff of the hospital. The only reason they're on the staff is: when the hospital hired them they didn't know what their past records was," says Dr. Sidney Wolfe, who runs the consumer advocacy organization Public Citizen's Health Research Group.

MP: And we are now considering allowing major increases in government bureaucracy and government control of health care?

Traditional Universities May Be Irrelevant by 2020

How Web-Savvy Edupunks Are Transforming American Higher Education

"The Internet disrupts any industry whose core product can be reduced to ones and zeros," says Jose Ferreira, founder and CEO of education startup Knewton. Education, he says, "is the biggest virgin forest out there." Ferreira is among a loose-knit band of education 2.0 architects sharpening their saws for that forest.

The edupunks are on the march. From VC-funded startups to the ivied walls of Harvard, new experiments and business models are springing up from entrepreneurs, professors, and students alike. Want a class that's structured like a role-playing game? An accredited bachelor's degree for a few thousand dollars? A free, peer-to-peer Wiki university? These all exist today, the overture to a complete educational remix.

The architects of education 2.0 predict that traditional universities that cling to the string-quartet model will find themselves on the wrong side of history, alongside newspaper chains and record stores. "If universities can't find the will to innovate and adapt to changes in the world around them," professor David Wiley of Brigham Young University has written, "universities will be irrelevant by 2020."

HT: Paul Kedrosky via Mark Dodson

Retail Health Clinics Expand Services, MDs Protest

WSJ -- Retail health clinics are adding treatments for chronic diseases such as asthma to their repertoire, hoping to find steadier revenue, but putting the clinics into greater competition with doctors' groups and hospitals.

Walgreen Co.'s Take Care retail clinic recently started a pilot program in Tampa and Orlando offering injected and infused drugs for asthma and osteoporosis to Medicare patients. At some MinuteClinics run by CVS Caremark Corp., nurse practitioners now counsel teenagers about acne, recommend over-the-counter products and sometimes prescribe antibiotics.

Walgreen, the second-largest pharmacy chain by stores, plans to start a pilot program for managing diabetes in coming months. CVS's MinuteClinic is piloting a rapid test for conjunctivitis, or pinkeye, at its Atlanta clinics and working with the Cleveland Clinic to provide care to asthma patients.

MP: So how are the MDs responding to the increased competition from retail clinics? First of all, they don't like the competition:

Such moves (expansion of services at retail clinics) are raising the ire of physicians' groups that see the in-store clinics as inappropriate venues for treating complex illnesses. In May, the Massachusetts Medical Society urged its members to press insurance companies on co-payments to eliminate any financial incentive to use retail clinics.

But second of all, they are responding to the competition from retail clinics by acting more competitively themselves:

The clinics are helping alter the practice of medicine. Doctors are expanding office hours to evenings and weekends. Hospitals are opening more urgent-care centers to treat relatively minor health problems.

The Beatles: A Triumph of Capitalism

It was Brian Epstein's (pictured above) commercial flair that turned four musicians into a global phenomenon.

Appreciating the role of manager Brian Epstein, allows one to appreciate that the Beatles are as much a triumph of commerce as of art. They were not merely brilliant musicians fusing avant-garde influences with rhythm and blues music. They were a showbiz act managed by an inspired entrepreneur. They weren’t simply class rebels against the Establishment, they were the brilliant product of capitalist enterprise, the early pioneers of globalization.

The reason why the influence of the 1960s endures is because it was the dawn of modern consumer capitalism. It was this culture — of commerce and consumption — rather than the counter-culture that made the era and now shapes out time. And of this era, Brian Epstein was a symbol.

~Daniel Finkelstein in the UK Times

Almost 4 Out of 10 Uninsured Americans Live in Households Making More Than $50,000 Per Year

According to this Census Bureau report "Income, Poverty, and Health Insurance Coverage in the United States: 2008" (released today), there were 46.34 million uninsured Americans in 2008, up from 45.6 million in 2007.

The chart above shows the household income levels of those 46.34 million uninsured Americans. There are 9.725 million uninsured Americans living in households making $75,000 per year or more, and this represents more than 1 out every 5 uninsured (21% of the total). There are about 8 million Americans without health insurance in households making between $50,000 and $75,000, representing 17.3% of the uninsured. With those two groups combined, 38.3% of Americans without health insurance (17.75 million people) lived in households with $50,000 or more of household income in 2008 (see Table 7 for these data).

Update: According to The Kaiser Family Foundation, the average annual premiums for employer-sponsored health insurance were $4,704 for single coverage ($392 per month) and $12,680 for family coverage in 2008 ($1,056 per month). And various individual Blue Cross Blue Shield plans are available in Michigan (other states may vary) starting at $173.18 per month for the Individual Care Blue Plus plan, $52.82 per month for the Flexible Blue II plan, and $49.30 per month for the Young Adult Blue plan.

Q: With $50,000 or more in household income, wouldn't many or most of those 17.75 million uninsured households be without insurance voluntarily? That is, couldn't most of those households afford health insurance? Alternatively, with those income levels (especially the 9.725 million with household income above $75,000), couldn't many of those households choose to forego health insurance in favor of being "self-insured," at least for routine health procedures? Given the widespread availability of more than a thousand convenient and affordable retail health clinics around the country at Wal-Marts, Meijers, CVSs and Walgreens, these households could easily be on the "pay-as-you-go" model of self-insurance for health care, at least for routine medical services.

As for those uninsured Americans who are supposedly the reason for all this sound and fury, there is remarkably little interest in why they are uninsured, despite the incessant repetition of the fact that they are. The endless repetition serves a political purpose but digging into the underlying facts might undermine that purpose. Many find it sufficient to say that the uninsured cannot "afford" medical insurance. But what you can afford depends not only on how much money you have but also on what your priorities are. Many people who are uninsured have incomes from which medical insurance premiums could readily be paid without any undue strain (see chart above).

Soft Consumer Spending? Not At Outlet Store in MN

WSJ/WASHINGTON -- The U.S. economy continued to stabilize in July and August, but soft consumer spending amid a weak job market suggested that recovery will remain subdued. Consumer spending drives much of the economy. People are afraid to spend much because they have lost or are afraid of losing their jobs.

We keep hearing reports like the one above about "soft consumer spending." But then how do we explain this line of consumers standing in line waiting to shop at the Opitz Outlet in St. Louis Park, MN? The store had already been open for more than an hour and was already so crowded bargain-seeking shoppers had to wait in a long line to go in and spend money:

At least the bargain hunters apparently aren't afraid to spend money. It's great to see that "consumer greed" is alive and well in Minnesota. The smell of 90% savings must have a very strong, attractive, irresistible odor.

Thanks to Matt B for the photo.

Minnesota State Fair Sets New Attendance Record

Recession must be over?
WSJ/WASHINGTON -- The U.S. economy continued to stabilize in July and August, but soft consumer spending amid a weak job market suggested that recovery will remain subdued. Consumer spending drives much of the economy. People are afraid to spend much because they have lost or are afraid of losing their jobs.

We keep hearing reports like the one above about "soft consumer spending." But then how do we explain this:

StarTribune -- Minnesota State Fair officials reported Tuesday that attendance hit an all-time record by the time the gates closed Monday night (September 7). A total of 1,790,497 people made their way to the fairgrounds during the 12-day run (see photo above). That exceeded the old record, set in 2001, by 27,521. Those bumper crowds spent $25.2 million on food and drink (not including beer) during the fair's run, $1.1 million more than last year.

The Gender Wage Gap and Occupational Injury Risk

Given the huge gender gap for occupational deaths (see chart above, BLS data here), it's a little surprising that this gap has not received more attention as a contributing factor to the gender wage gap (see bold text below, emphasis added). If anyone is aware of research in this area, please let me know. Here is the abstract from one such study "Gender Wage Differentials and the Occupational Injury Risk: Evidence from Germany and the U.S.":

Numerous studies, in particular for the U.S., have shown that individuals in occupations with high injury risk are compensated for that risk by corresponding bonus payments. At the same time, male workers are overrepresented in the most dangerous occupations like scaffolders or miners, while females typically work in relatively safe occupations with respect to occupational injuries. It is therefore remarkable that almost all studies analyzing the gender wage gap have disregarded different occupational injury risks as a potential explanatory variable for observed gender wage differentials.

By merging data on occupational injury risks to German and US panel data on individual workers, this study analyzes gender wage differentials in Germany and the US considering fatal occupational injury risk. The Blinder-Oaxaca method for Tobit models is used to decompose the gender wage gap with and without consideration of the fatal injury risk. Our results indicate that the compensating wage differentials for risky jobs are reflected in the resulting gender wage gap, which is caused by the unequal distribution of occupational injury risks among men and women.

Male-Female Occupational Death Gap Is 13 to 1

According to the Institute for Women's Policy Research, "The ratio of women’s to men’s median weekly earnings for full-time workers was 79.9 in 2008, the third consecutive decline since the historical high of 81.0 in 2005."

Rep. Carol Maloney (D-NY) wrote earlier this year in an article titled "Still Not Equal" that:

In the aftermath of the September 11th attacks on the World Trade Center, the daunting and complicated task of distributing victim compensation began to take shape. The compensation plan, as it was originally proposed, was based on outdated government formulas which assumed that women victims would have worked for less of their lives than their male counterparts. In effect, the proposed system of compensation was providing less for the families of women victims simply because they were the families of women victims.

It was a sobering reminder of how institutionalized gender discrimination can be. This isn't from a history book - it is not an example of how difficult it was for women of our grandmothers' generation. This is an example of how women as young as our daughters, in this decade, are still facing the same obstacles we vowed to eradicate. I am proud to have successfully fought for equal compensation after September 11th, but know that there are many battles yet to be won.

Male-female wage differentials are frequently explained by women's group as the direct consequence of "instititutionalized gender discrimination," as Rep. Maloney claims. One other explanation for wage differentials could also be that men tend to work in higher-risk, less safe occupations, with a greater chance of injury or death (e.g. coal mining), at a higher rate than women, and are therefore compensated with higher wages for the greater exposure to risk (e.g. a window washer hanging off the top of the Sears tower washing windows outside 1,000 feet from the ground will make more than a window washer working inside the building.)

The chart above provides evidence that men suffered from fatal occupational injuries (4,703) at a much higher rate than women (368), by a factor of almost 13 to 1 (BLS data here) in 2008. For certain types of occupational deaths like "Contact with objects and equipment," the male-female gender death gap is even greater (41 to 1), and for "Fires and explosions" the gap is 24 to 1.

Occupational deaths are probably concentrated in male-dominated industries like construction (90% male) and manufacturing (70% male), and are probably almost non-existent in female-dominated professions like education and health care (75% female) and government (57% female). Notice also in the chart below that the male-dominated industries have suffered from much higher unemployment rates (19.2% for construction and 12.6% for manufacturing, in May) compared to significantly below-average jobless rates for female-dominated industries (4.9% for education and health services and 3.1% for government).

Men are also currently facing the greatest male-female jobless rate gap on record of 2.7% as I reported here, with the male unemployment rate reaching 10.9% in August compared to the female rate of 8.2%.

Bottom Line: Closing the gender pay gap might also result in closing the gender occupational death gap (exposing more women to job-related death and injury), and closing the gender jobless rate gap (women would be less insulated from job losses during recessions). TNSTAAFL.

Wednesday, September 09, 2009

Cartoon of the Day

Michael Ramirez.

Education Spending Doubled, Stagnant Test Scores

Since 1970, inflation adjusted public school spending has more than doubled. Over the same period, achievement of students at the end of high school has stagnated according to the Department of Education’s own long term National Assessment of Educational Progress (see chart above). Meanwhile, the high school graduation rate has declined by 4 or 5%, according to Nobel laureate economist James Heckman.

So the only thing higher public school spending has accomplished is to raise taxes by about $300 billion annually, without improving outcomes. The fact that more schooling without more learning is not a recipe for economic growth is confirmed by the independent empirical work of economists Eric Hanushek and Ludger Woessmann. Their key finding is that
academic achievement, not schooling per se, is what matters to economic growth.

Based on this body of research, the president’s decision to pump $100 billion into existing public school systems is likely slowing the U.S. economic recovery.

Andrew Coulson, Director, Cato's Center for Educational Freedom

CD Milestone and Summary Statistics

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