Saturday, October 02, 2010

Amazing Illusion; One of the Best Ever

The two birds in the image above are identical. Not just in size and shape, but in color too. Don't believe it? Check out the same image with the background removed.

Thanks for Paying Your Federal Income Taxes, Here's Your Itemized "Taxpayer Receipt"

From the policy paper "A Taxpayer Receipt" from a D.C.-based policy group called "The Third Way":

"Corn syrup, milk chocolate, sugar, cocoa butter, coconut, almond, soy lecithin… any consumer can read these ingredients and their nutritional value on every package of a75-cent Almond Joy. What is provided to a taxpayer with a $5,400 tax bill? Nothing. For many Americans, the amount they pay in taxes is larger than any purchase they make during the year, but studies show they know almost nothing about where that money goes.

An electorate unschooled in basic budget facts is a major obstacle to controlling the nation’s deficit, not to mention addressing a host of economic and social problems. We suggest that everyone who files a tax return receive a “taxpayer receipt.” This receipt would tell them to the penny what their taxes paid for based on the amount they paid in federal income taxes and FICA."

MP: See the example above of an itemized tax receipt for the median tax filer in 2009 making an adjusted gross income of $34,140, and paying $2,790 in federal taxes, and $2,610 in Social Security and Medicare "contributions," for a total federal tax bill of $5,400. 

And here's a slightly different version of an interactive itemized tax receipt calculator at a website called "Where My Money Goes," which allows you to put in any income amount and see an itemized tax receipt (thanks to Alex Rodriguez for this website).

China's Currency Policy is the Greatest Anti-Poverty Program in America, Why Should We Complain?

Warren Meyer writing in Forbes asks "Why Are Democrats Promising to Raise Prices?" by pressurng China to appreciate its currency instead of celebrating cheap imports from China as one of the most effective anti-poverty programs in America today?
Democrats claim the American manufacturing base is declining in the face of unfair competition from a Chinese government that is unfairly helping its own manufacturers through currency manipulation and export subsidization. To which I say: So what?

We should be thrilled that the Chinese government and its people see fit to spend their own money to subsidize lower prices for American businesses and consumers. Last week, President Obama put substantial pressure on the Chinese prime minister to revalue Chinese currency, a revaluation that would have the effect of raising prices of all Chinese goods in the United States. What possible sense does such a move make, particularly in a recession?

There is no question that if Democrats are successful in changing China’s currency policy and/or imposing new tariffs (taxes) on Chinese goods, prices will rise for all Americans, but particularly so for the lower income brackets that are supposedly the Democrats’ constituency.  In a sane world, Democrats would be celebrating Chinese imports as one of the greatest anti-poverty programs that exist in America today. 

Except for CFC, Auto Sales Reach 2-Year High

Vehicle sales were released today for September, and here are some highlights:

1. On a "seasonally-adjusted annual rate" basis, total U.S. light vehicle sales increased to 11.76 million units in September, which was 2.55% higher than August, and 25.4% higher than September last year (see chart above). 

2. Except for the artificial sales stimulus of "cash-for-clunkers" (CFC) in August 2009 when sales topped 14 million (at an annual rate), September vehicle sales reached the highest monthly level in two years. 

3. Ford and Chrysler led the automakers in September with sales increases of 46.4% and 60.9%, respectively, compared to the same month last year.

4. Light truck sales were especially strong in September, with a 40.8% increase over last year.  See related CD post "The Pickup Truck Indicator: Recovery is Real."

5. Year-to-date vehicle sales this year are 10.3% ahead of last year. 

Friday, October 01, 2010

NFL Income Inequality: It Just Keeps Getting Worse

Click once, and then again to enlarge.
According to a new report from the Census Bureau, the top 20% of American households earned 50.3% of the total income in 2009, just slightly higher than the 50% share of income for the top fifth of households in 2008. Looking at a longer period of time going back to 1967 when the top quintile earned 43.6% of all income, the share of income going to the top fifth increased throughout the 1970 and 1980s, until stabilizing in the 49-50 percent range in the mid-1990s.

Using NFL salary data from USA Today, the shares of total team payrolls going to the highest-paid  20% of players in 2000 and 2009 are displayed in the chart above for all 32 teams. The average share of NFL payrolls going to the highest-paid 20% of players in 2009 was 62.4%, higher than the 59.5% share in 2008, and much higher than the 56.3 percent in 2000.  Between 2000 and 2009, income inequality increased for 27 of the 31 teams that played in both years. 

For the second year in a row, the Indiana Colts led the league in income inequality, with just two players (Kelvin Hayden at $17.5 million and Peyton Manning at $14 million) capturing more than 30% of the total team payroll of $103.4 million in 2009. Top-paid Kelvin Hayden's salary was a whopping 56.4 times more than his lowest-paid teammate, Rudolph Hardie, who made the NFL minimum of $310,000. That would mean that Kelvin Hayden was paid almost as much for each quarter of regular-season play ($273,125) as Rudoph Hardie made for the entire season. (How can that be fair?)

In other words, there is significantly greater income inequality in the NFL than in the general U.S. population, with 62.4% share of team payrolls going to the top fifth of NFL players in 2009, compared to 50.3% of total national income going to the top quintile of American households. And while the share of income going to the top 20% of U.S. households has been constant for more than a decade, payroll inequality in the NFL keeps increasing each year.

What are some of the lessons we can learn from the escalating income inequality in the NFL?

Find out here at The Enterprise Blog.

Booming Bull Market Rally in Emerging Markets; MSCI Index Reaches 27-Month High Today

BLOOMBERG -- "Emerging-market stocks rose, sending the benchmark index to the highest level in 27 months (see chart above), and currencies strengthened as reports showed China’s manufacturing grew and developing-nation fund inflows hit an 11-month high.

The MSCI Emerging Markets Index climbed 0.7 percent to 1,082.92 at 11:07 a.m. New York time, poised for a fifth straight weekly advance.  China’s manufacturing expanded at the fastest pace in four months in September, adding to signs that growth is stabilizing in the world’s fastest-expanding major economy. Investors poured $4.3 billion into emerging-market equity funds in the week ended Sept. 29, the biggest amount since October 2009, and the funds are poised for record annual inflows."

MP: The Emerging Markets Index has gained 9.4% over the last month, and 19% over the last twelve months, and reached the highest level today since June 30, 2008, 27 months ago.

Stronger Yuan Will NOT Bring Jobs Back to the U.S.

Nancy Pelosi claims that "One million U.S. jobs could be created if the Chinese government took its thumb off the scale and allowed its currency to respond to market forces." 

In the NPR "Planet Money" report, Adam Davidson is pretty skeptical about Pelosi's claim, based on the following example:

Some American manufacturers that use industrial springs can buy them in China for 95% less than in the U.S. - if they cost $1.00 here, they're only 5 cents from China, shipping included.  In that case, even if China's currency appreciated significantly by 30% or 40% or more, the springs from China would still cost only 7 or 8 cents, or maybe even 10 cents, and there would be NO jobs coming back to the U.S. That's just one example, but there are many other products (toys, T-shirts, shoes, low-end electronics, commodities, etc.) that are so cheap to produce in China compared to the U.S., that even a greatly-appreciated renminbi/yuan wouldn't bring any manufacturing jobs back to America, and certainly not anywhere close to 1 million jobs.

A similar point was made in a WSJ article in May, subtitled: "You're not going to change the balance of China trade by adding 25 cents to the cost of a T-shirt."

There are other reasons that a stronger renminbi wouldn't bring jobs back to America:

1. A stronger renminbi/yuan would give China an advantage for any commodities, inputs, raw materials, and energy products (oil and natural gas) that it imports, which might allow them to maintain the current prices for exports to the U.S.

2. If a stronger renminbi/yuan did make Chinese exports to America more expensive, manufacturing production and jobs would likely shift to other areas in Asia (Vietnam, Bangladesh, India, Thailand, Korea, etc.) and not back to America.

Real Consumer Spending Increases in August to 27-Month High, Almost Back to Pre-Recession Level

According to today's report from the BEA on "Personal Income and Outlays," real personal consumption expenditures reached a 27-month high of $9,321.2 billion in August, the highest level of consumer spending since May of 2008 (see chart above).  Real consumer spending in August was just $34.3 billion (or 0.37%) below the peak of $9,355.5 billion reached in December 2007, the month the U.S. economy went into recession. 

In the 16-month period between January 2008 and April 2009, real personal consumption fell in 13 of those months; in the 16-month period from May 2009 to August 2010, consumer spending has increased in 13 months, as the economy has gradually recovered.  Over the last seven months, consumer spending has increased in every month except April.   The August increase in real spending was the fourth straight monthly increase and beat the expectations of economists.

This rebound in consumer spending over the summer is consistent with the widespread increases in August state tax revenues (which includes sales taxes) that were higher than expected in many states, see CD post here with 13 states reporting increases in August tax revenues.     

Thursday, September 30, 2010

Another Record Week for Intermodal Rail Traffic

"The Association of American Railroads (AAR) today reported that U.S. railroads saw the highest weekly intermodal volume for 2010 and highest container count on record for the second consecutive week. For the week ending Sept. 25, 2010, intermodal traffic on U.S. railroads totaled 241,167 trailers and containers, up 17.3 percent from the same week in 2009, but down 2.1 percent compared with 2008. Container volume last week increased 19.2 percent compared with 2009, and rose 6 percent compared with 2008. Trailer volume last week rose 7 percent compared with 2009, but dropped 32.8 percent compared with 2008.

U.S. railroads originated 300,908 carloads for the week, up 10.7 percent compared with the same week in 2009, but down 8.2 percent from the same week in 2008. In order to offer a complete picture of the progress in rail traffic, AAR reports 2010 weekly rail traffic with comparison weeks in both 2009 and 2008."

MP: For the year-t0-date (38 weeks), carload rail volume is up by 7.2% and intermodal rail traffic is up by 14.7%. This marks the 37th straight week starting in mid-January of improvements in intermodal rail traffic compared to the same week in 2009, and except for a holiday-related decline in July, carload volume has increased for the last 31 weeks starting in late February.

Once again, Warren Buffett's favorite economic indicator improved last week and container rail traffic set an all-time historical high.  It has to be a sign of economic recovery that the amount of raw materials, natural resources, grains, chemicals, metals, lumber, paper, glass, sand, gravel, ores, coal, petroleum and farm products being shipped by rail around the country keeps increasing week after week.  After all, those inputs are being ordered by producers somewhere around the country, and will eventually be produced into some intermediate good or final product, and be counted as part of GDP in future quarters.  And an increased volume of inputs moving around the country and the subsequent increase in final output has to eventually translate into more employment. 

Markets in Everything: Ads on Currency?

Maybe this would help pay down the federal debt: sell advertising on U.S. currency?  Here are some possible designs that would allow companies to "cashvertise," including the one above for Campbell Soup. 

This blog points out that the USPS currently allows customized "branded stamps," so maybe the Bureau of Engraving and Printing should follow with "custom branded dollar bills."

$27.5m Because The Feds Don't Like the Font.....

NY Daily News -- New York City will change the lettering on every single street sign - at an estimated cost of about $27.5 million - because the feds don't like the font. Street names will change from all capital letters to a combination of upper and lower case on roads across the country thanks to the pricey federal regulation (see photo above).

By 2018, MADISON AVE. will become Madison Ave. and will be printed in a font called Clearview, the city Department of Transportation says. The Federal Highway Administration says the switch will improve safety because drivers identify the words more quickly when they're displayed that way - and can sooner return their eyes to the road."

HT: Steve Malanga

Wednesday, September 29, 2010

Companies Leaving California in Record Numbers



Update: See related article "Companies Fleeing California For Utah Over Confiscatory Tax Rate" (HT: Juandos): 

"Computer software giant Adobe, computer game monster EA Games, and Internet auction king eBay are abandoning California to set up shop in Utah. Why? California’s horrid business climate and high taxes."

Online Job Openings Reach 22-Month High in Sept.

"Online advertised vacancies rose 59,900 in September to 4,296,100 following a decrease of 57,100 in August, according to The Conference Board Help Wanted OnLine™ (HWOL) Data Series released today (see chart above). The gap between the number of unemployed and advertised vacancies (supply/demand rate) stood at 3.51 unemployed for every advertised vacancy in August (the last available unemployment data) but is down from its peak of 4.73 in October 2009. (see Chart 1 in the report).

“Since the NBER June 2009 end of the recession, HWOL has increased by 1 million advertised vacancies,” said June Shelp, Vice President at The Conference Board. “The HWOL series trough in April 2009 led the NBER official trough by about 2 months, reflecting a rather typical pattern where labor demand leads at economic turning points. Following the rapid HWOL rises in labor demand in the 4th quarter 2009 and 1st quarter 2010, the end of 2010.” (see Chart 2)."

MP: Although the increases in the HWOL index have slowed in recent months, the 4,296,100 job vacancies in September were the highest level since November 2008, almost two years ago.  

Tuesday, September 28, 2010

The U.S. Has More than 12,000 Tariffs

Most Americans think of the U.S. as a free-trade country with open markets, and countries like China and Japan as protectionist countries with closed markets. And yet the U.S. is quite protectionist, when we consider that there are more than 12,000 tariffs (i.e. taxes) on imported products that are sometimes as high as 350% in the case of tobacco (pictured above); 164% on peanuts; 100% on jam, chocolate and ham; and 48% on sneakers, see the 25 American Products That Rely On Huge Protective Tariffs To Survive, and read a short accompanying article.

HT: Juandos

ASA Staffing Index Reaches Two-Year High

From today's weekly report from the American Staffing Association:

"During the week of Sept. 13–19, 2010, temporary and contract employment rose 2.08%, pushing the index up two points to a value of 98 (see chart above).  At a current index value of 98, U.S. staffing employment is 42% higher than the level reported for the first week of the current year and is 23% higher than the same weekly period in 2009."

The index value of 98 for the ASA Staffing Index is the highest reading since the week of September 22, 2008, just about two years ago.  As I have previously reported, the ongoing improvement in the demand for temporary and contract employment, which is a leading labor market indicator, bodes well for positive broader-based and permanent employment gains in the future.

Global Air Traffic Above Pre-Recession Levels

"The International Air Transport Association (IATA) announced today that international scheduled traffic results for August indicating year-on-year increases of a 6.4% for passenger and 19.6% for cargo (see chart above).  August demand is down from the 9.5% increase recorded for passenger and 23.0% growth in cargo recorded in July.  The August 2010 data is partially distorted by the comparison to August 2009, by which time markets were already expanding rapidly in a post-recession rebound."  Other highlights include:

1. The August gain in freight traffic was the 11th consecutive monthly increase, and the 10th straight double-digit increase starting last November.

2. Passenger traffic has improved in 12 out of the last 13 months, with the only exception being the April decline because of the adverse travel effects of the European volcanic ash.

3. Global passenger traffic in August was 2% above pre-recession levels of early 2008.

4. Global international cargo traffic in August was 3% above the pre-recession levels of early 2008.

NY Fed Model: Slim Chance of a Double-Dip in 2011


The New York Federal Reserve updated its "Probability of U.S. Recession Predicted by Treasury Spread" yesterday with treasury yield data through August 2010, and the Fed's recession probability forecast through August 2011 (see top chart above). The NY Fed's Treasury model uses the spread between the yields on 10-year Treasury notes (2.70% in August) and 3-month Treasury bills (0.16%) to calculate the probability of a U.S. recession up to twelve months ahead (see details here) using the spread between those two yields (2.54% in August, see bottom chart above).

The Fed's model (data here) shows that the recession probability peaked during the October 2007 to April 2008 period at around 35-40% (see chart above), and has been declining since then in almost every month. For August 2010, the recession probability is only 0.08% and by a year from now in August of next year the recession probability is slightly higher, but only 0.61% (about 6/10 of 1%). According to the NY Fed Treasury Spread model, the chances of a double-dip recession through the middle of next year are essentially zero.

China's Currency Policy As A Form of Technology

Don Boudreaux at Cafe Hayek argues again that Chinese subsidization of its exporters through an (alleged) undervalued renminbi means that Americans get more output at lower costs, and asks "What’s the problem?"

We could also invoke Bastiat's famous Candlemakers' Petition, and think of China as the sun, providing us with manufactured goods for prices so low that it's almost like getting free light from the sun.  After all, if China was willing to ship goods for free as gifts to the American people, it would be even better than subsidized low prices, and we would really want to ask the question: "What's the problem?"

Or we could invoke Steven Landsburg's excellent essay "The Iowa Car Crop" and look at trade with China as a form of technology. To paraphrase Landsburg, "The fact that there is a place called China, with people and factories, is quite irrelevant to Americans’ well-being when we get access to cheap manufactured goods.  To analyze trade policies, we might as well assume that China is a giant machine with mysterious inner workings that produces manufactured goods at incredibly low prices." 

And we could ask the question: If China could produce cheap goods for Americans because it developed some amazing new technology, we wouldn't complain, so why complain when the result is the same because of a currency policy that gives us the same result.  Maybe we should think of China's currency policy as an "advanced form of technology with a giant machine with mysterious inner workings" that miraculously produces products for Americans at prices that rival the sun's provision of free light. 

Update: See related post at the Coyote Blog "Obama Presses Chinese to Raise Prices to the Poor and Middle Class."

Monday, September 27, 2010

Recycling is Garbage, Part II

More on recycling from Jeff Jacoby (see previous post here):

"Most of the stuff we throw out — aluminum cans are an exception — is cheaper to replace from scratch than to recycle. “Cheaper’’ is another way of saying “requires fewer resources.’’ Green evangelists believe that recycling our trash is “good for the planet’’ — that it conserves resources and is more environmentally friendly. But recycling household waste consumes resources, too.

Extra trucks are required to pick up recyclables, and extra gas to fuel those trucks, and extra drivers to operate them. Collected recyclables have to be sorted, cleaned, and stored in facilities that consume still more fuel and manpower; then they have to be transported somewhere for post-consumer processing and manufacturing. Add up all the energy, time, emissions, supplies, water, space, and mental and physical labor involved, and mandatory recycling turns out to be largely unsustainable — an environmental burden, not a boon.

Recycling makes many people feel good, but feelings are not the best test of environmental soundness.  When it makes more sense to recycle than to throw something away; government compulsion isn’t needed (Don Boudreaux reminds us that "The benefits of recycling clothing are large enough to prompt us to buy costly clothes-recycling machines that we routinely use to recycle for tomorrow the clothes we wear today.  We call these machines 'washers and dryers.'"). And when recycling is a profligate use of natural and human resources, government mandates can’t change the fact. Big Brother can force you to recycle your garbage, but that doesn’t make garbage-recycling green."

How the Cell Phone is Changing Lives in Cuba

"On the streets of Havana, it is rare to walk a hundred yards and not see someone texting. According to official statistics, by the end of the year the number of mobile phone users nationwide is expected to exceed a million. Considering the growth in cellphone use in other Latin American countries, it is a low figure, only about one Cuban in twelve. Nevertheless, one could say that no element of our economy has grown as fast, in recent months, as mobile phone use. Moreover, despite the technical limitations and the difficulties in purchasing modern and inexpensive phones, the symbol of modernity represented by this little gadget has begun to change our lives."

~Yoani Sanchez, dissident Cuban blogger, in the Miami Herald

Obama Responds to the Movie "Waiting for 'Superman'" (7:40) and Whether His Daughters Would Get Good Education at DC Skools (17:27)



There's No Magic Keynesian Fiscal Wand

From "John Maynard Keynes, R.I.P." by Richard McKenzie:
The late great economist Milton Friedman frequently peppered Keynesian enthusiasts in the 1960s and 1970s with a remarkably simple question that needs to be remembered today: Where does the government get the money it spends on roads (or bridges to nowhere)?

Friedman followed with an equally revealing observation: When the government engages in deficit spending, it must borrow the extra funds from someone who could have spent them on private-sector projects. An increase in government spending could be totally offset by a decrease in—or a “crowding out” of—private spending, as lendable funds are diverted from private to government uses. The net effect can be no net increase in aggregate demand—and no multiplier effect. Indeed, with the inevitable waste in government stimulus projects, the multiplier effect could as easily be negative as positive.

The country will learn anew an old lesson: Don’t count on the federal government to wave away the country’s economic troubles with some refurbished fiscal wand. The wand didn’t work in the 1960s and 1970s (it only contributed to “stagflation”). The wand is an illusion that should have died with Keynes long ago. We will also relearn the oft-repeated wisdom of Keynes when he wrote, “Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back.”

The Political Obsession with Middle-Class Markers

Glenn Reynolds at Instapundit writes:

"The government decides to try to increase the middle class by subsidizing things that middle class people have: If middle-class people go to college and own homes, then surely if more people go to college and own homes, we’ll have more middle-class people. But homeownership and college aren’t causes of middle-class status, they’re markers for possessing the kinds of traits — self-discipline, the ability to defer gratification, etc. — that let you enter, and stay, in the middle class. Subsidizing the markers doesn’t produce the traits; if anything, it undermines them."

(MP: For example, the political obsession with homeownership turned thousands, if not millions, of good middle-class renters into really bad homeowners and undermined the "American Dream.") 

Megan McArdle responds and asks a great question: "Who but a lunatic would loan money to an eighteen year old with no job and no credit record, in the hopes that they will graduate college and begin speedy repayment?"

Let's Hope This Trend Continues.....

NY Times -- "A private company in Maryland has taken over public libraries in ailing cities in California, Oregon, Tennessee and Texas, growing into the country’s fifth-largest library system. The company, known as L.S.S.I., runs 14 library systems operating 63 locations. Its basic pitch to cities is that it fixes broken libraries — more often than not by cleaning house."

“A lot of libraries are atrocious,” said the company's CEO Frank Pezzanite.  Their policies are all about job security. That’s why the profession is nervous about us. You can go to a library for 35 years and never have to do anything and then have your retirement. We’re not running our company that way. You come to us, you’re going to have to work.”

Sunday, September 26, 2010

Those Who Are Willing to Pay Higher Taxes Now Could've Rejected the Bush Tax Cuts in 2001



Linda McGibney responds this week on CBS Sunday Morning to Ben Stein's commentary last week "Raising My Taxes Is a Punishment" :

"I am an American. I am in the highest tax bracket. I also work in entertainment - which is what Mr. Stein does as well. I am fine with the tax increase. I think it patriotic that I am taxed in this way. I want to help my country.

I believe the fact that I can have a job this year, and hopefully every year to come, is a privilege. Mr. Stein, there are Americans who qualify for this tax increase under the proposed plan who don't feel "punished" by it. We feel it is our duty in hard times to help the rest of America.

I am a "have." I am willing to pay this tax increase. I'm not going to whine about it. I won't feel punished. I will understand it's the cost of doing business."

It should be noted that the current "Bush tax rates" are NOT the MAXIMUM tax rates on income, they are actually the MINIMUM tax rates. Anybody, including Linda McGibney, who wants to pay more in taxes can do that right now, and they could have been doing that all along. Ms. McGibney and others could have personally rejected the "Bush tax cuts" and continued to pay at the 2000 Clinton tax rates above in each year starting in 2001 instead of paying at the lower rates.  

In case there's any problem with the IRS accepting the additional tax payments for the higher tax rates, here is the link to the Department of the Treasury website "Gifts to the United States Government" for "citizens who wish to make a general donation to the U.S. government."  According to Treasury, "This account was established in 1843 to accept gifts from individuals wishing to express their patriotism to the United States."

Ms. McGibney and her supporters can express their patriotism immediately by making a gift to the U.S. government - there's no need to wait to see if the Bush tax cuts expire.

Markets in Everything: Name Your Price for Medical and Dental Procedures at PriceDoc

You've all heard of Priceline.com, where you can name your own price for airline tickets, hotel rooms, rental cars, and cruises. 

Now there's PriceDoc, an "online marketplace connecting healthcare providers with consumers looking for medical and dental procedures. PriceDoc enables consumers to compare and negotiate pricing on medical procedures in a given location in the U.S. while providers receive the benefit of generating patients who are willing to pay directly, out of pocket to the provider for their services.  Featured within the web site are "Make Offer" and "Name Your Price," opening the door for consumers to negotiate with providers for the cost of their procedures." 

Chart of the Day: Inflation-Adjusted Gold Prices

Adjusted for inflation, the current price of gold ($1,296) is 36.41% below the peak price of more than $2,000 per ounce (2010 dollars) in January of 1980 (see chart above). 

UK Politician: Companies Don't Need More EU Regulations To Enable Them to Sell Across Borders