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Saturday, May 07, 2005

Things Will Be Great Unless They Aren't

Don't you love it when economists follow the Krugman approach of predicting one thing but giving themselves an out if the opposite occurs? Here, from the NYT, an economist allows himself to praise the just-announced growth in jobs without being wrong if it does not continue.

Still, for all the good news, even optimistic forecasters were reluctant to declare that the recovery, which entered its soft patch in the first quarter, was firmly back on track.

"We still have the spike in oil prices to contend with," said Ian Shepherdson, chief domestic economist for High Frequency Economics. "It is entirely possible that by June many employers will say: 'Oh, my God. We hired all these people and the demand is not there to support them.' That is not my view, but it is certainly possible."

My prediction: The Red Sox will win the championship again this season but there may be injuries so it is possible they won't. You can quote me on it.

Friday, May 06, 2005

Jobless Recovery?

Just a little up-date on jobs from Reuters:

Employers created a surprising 274,000 jobs in April and added more workers in each of the two preceding months than first thought, the Labor Department said Friday in a report that may ease fears about economic growth.
The April jobs total far outstripped economists' expectations for 170,000 new jobs. Further underlining the surge, the government said 93,000 more jobs were created in February and March than it previously reported — 146,000 in March instead of 110,000 and a whopping 300,000 in February instead of 243,000.

Capra- The King of Old Hollywood

In a synopsis by Spencer Warren in The Claremont Institute on the relevance of the classic movie, "Mr. Smith Goes To Washington", we see the superstar director Capra portraying liberatrian theory for the betterment of the common man. As well, there is a healthy suspicion of government.

The Capra philosophy is:

Big business, however, is scorned in favor of traditional entrepreneurship. Note, for example, in Wonderful Life, the contrast between the cold-hearted banker, Potter, and the democratic, small Bailey Building and Loan. Government is not seen as a beneficent force. Politics is seen as morally corrupt, and is contrasted with the spontaneous moral action of free people in society. Thus, in John Doe a mayor who wants to get involved in his local John Doe Society is told, "No politicians." For Capra, "compassion" is found in virtuous citizens spontaneously helping one another, person-to-person, not in coercive government programs. Senator Smith introduces a bill for the government to lend funds for the construction of a National Boys Camp to help get poor children off the streets, but they are to pay off the loan with their hard-earned nickels and dimes. This is a far cry from the Great Society.

It is always amazing how immigrants often have a higher regard for our founding principles and the greatness of our system that many long-time Americans. Something about our taking things for granted. And something about their experience in other countries.

Why Is There Less Employment?

Simple economic principles about unemployment from Christopher Lingle on Tech Central Station. He says:

Jobs lost through changes in law or the regulatory environment tend to be persistent. By contrast, seasonal unemployment or unemployment caused by industrial and technological change tends to be transitory.

Pollution is Good, I guess. Who knows.

From the category of “you just can’t win, no matter what you do” … From the web site nature.com….


Our planet's air has cleared up in the past decade or two, allowing more sunshine to reach the ground, say two studies in Science this week.Reductions in industrial emissions in many countries, along with the use of particulate filters for car exhausts and smoke stacks, seem to have reduced the amount of dirt in the atmosphere and made the sky more transparent. That sounds like very good news. But the researchers say that more solar energy arriving on the ground will also make the surface warmer, and this may add to the problems of global warming. More sunlight will also have knock-on effects on cloud cover, winds, rainfall and air temperature that are difficult to predict.


So, in other words, that TERRIBLE HORRIBLE air pollution we’ve heard about since the 1960’s that added to the “greenhouse effect” is now clearing up only to….. create an even GREATER greenhouse effect!

I am confused, should we NOT pollute because that will create a greenhouse effect???... or SHOULD we pollute to stop the greenhouse effect??

We need the Greens to tell us what to do, because they’re so smart and they care so much about this planet and mankind and little fuzzy-wuzzy animals!

-- Mike Taylor

Greatest Generation?

Glad to see I am not the only one making this point.

Mickey Kaus, no conservative he, writes in Let's Not Save Social Security:

We should be sticking it to today's recipients! The generations that made out like bandits under Social Security are the generations now in their 70s and 80s. They paid into the system during the early, low-tax years and are drawing pensions vastly greater than their contributions. ...Protecting current retirees may be politically necessary--the political clout of the elderly is why Congress voted the excess benefits in the first place. Even solvency-obsessed scholars (much less politicians) shy away from cutting grandma's check, even if grandma is wildly rich. But let's at least notice that this is not fair. The changes today's non-retirees must face are more painful because nobody is willing to touch the Greatest Generation's windfall.

Kaus fails to mention that this Greatest Generation voted in all of these New Deal programs and its expansions under LBJ that gave them more government freebies throughout their lives. So, not only do they reap massive returns on small contributions into the system but they double-dipped along the way by spending the monies supposedly earmarked for the retirements of all Americans on other give-aways. Now, they ignore the harm they are doing to the futures of their grandkids by fighting Social Security privatization while they are exempt from any of the proposed changes.

The Greatest Generation?

Cambodian Road Map To The Police State

Iconoclast David Yeagley, always an exciting read, reviews Margolin's "Cambodia: A Country of Disconcerting Crimes". Pol Pot used the natural hostility of children towards older generations, their naivete about the impossible goals of Communism and their ignorance of history to create the Khmer Rouge. This army of children executed 2 million people, razed cities, eliminated all intellectuals and erected a complete tyrrany in less than 4 years.

Yeagley says:

...Communism is the god of discontent, and needs no blessing. All it needs is a heart willing to hate, willing to call envy “justice.” Equality then means the violent destruction of all social and cultural distinctions. Freedom means absolute dictatorship over the people.

He then makes the following interesting parallel to America today:

Sounds like a police state, yet similar underlying conditions are developing in American youth, under our own nose. How? Because of prescribed permissiveness in American public schools: police are required to enforce the most basic, necessary child control. Kindergarteners are being arrested, handcuffed, and taken out of their schools, because only the police exercise physical authority in schools: teachers have abdicated discipline. Other adults merely frustrate the child with meaningless words.

Through this new Communism, the child is in this sense “equal” to the adult, and thus controls the day. The child answers only to the police. Children are indoctrinated to expect police intervention for safety and discipline. Control doesn’t come from the adults in schools, or the adults at home, but rather from the police, or Big Brother.


He then concludes:

This generation of children may become the next street thugs whose rebellion paves the way for a more authoritarian state. And no child will be left behind.

Sounds like Pink Floyd's "The Wall". I would add that the envy created by the media coupled with the overall historical ignorance of our culture is adding to the resentment natural in children. Always read Yeagley after your second cup of coffee.

Thursday, May 05, 2005

Science in our Schools-Educate or Indoctrinate?

Frontpagemag.com carries an essay by Pamela Winnick entitled "A Textbook Case of Junk Science".

We learn that our children are reading science books devoid of the mention of Einstein, Watson and Crick, that reduce the role of Mr. Curie while Marie gets a page and a half, and highlights black scientist Lewis Latimer who assisted Thomas Edison. Edison gets smaller billing in picture size and write-up. Native American culture is given colorful treatment while religion is deemed akin to "myth and superstition". Finally, "Al Roker, the affable black NBC weatherman, is hailed as a great scientist in one book in the Discovery Works series."

Much of the required reading for students is error-filled where "political correctness" trumps scientific accurancy.

More:

A study commissioned by the David and Lucile Packard Foundation in 2001 found 500 pages of scientific error in 12 middle-school textbooks used by 85 percent of the students in the country. One misstates Newton's first law of motion. Another says humans can't hear elephants. Another confuses "gravity" with "gravitational acceleration." Another shows the equator running through the United States. Individual scientists draft segments of these books, but reviewing the final product is sometimes left to multicultural committees who have no expertise in science.

Recently, I read a book my first-grader daughter took out of the library. It was a book produced by the Sierra Club about mountain lions. Near the end of this book, it discussed how terrible Western ranchers were killing these harmless beasts. The book said these animals would never attack a human unless they were attacked first. I told my daughter that this was a lie and that these lions were dangerous to man and were problems to farmers and ranchers.

The next day, Drudge reported that one of these natural wonders mauled a woman bicyclist. How dare this human intrude upon the lion's habitat? I cut out the article and taped it inside the library book for the next reader.

Have I just confessed to a crime?

No One Will Buy Stocks, Professor Siegel?

In WSJ's scare article "As Boomers Retire, a Debate: Will Stock Prices Get Crushed?" Wharton finance professor Jeremy Siegel says: "I don't think there will be enough assets from U.S. sources going forward to pay for people's retirements." His theory is that when the baby boomers start all selling at the same time, who will be there to buy. And with all of those sellers and not enough buyers, the price will go down. That is sound economic theory.

However, IMF economists Robin Brooks disagrees. Brooks says there will be no desire by all retirees to sell off stocks since companies will offer greater dividends to their shareholders in that case. He also says that it is impossible to predict macroeconomic changes decades in advance.

My prediction: World wealth will continue to rise not only because of burgeoning markets in China and India but because of the new markets that will grow from scratch: The Middle East and maybe Africa. The additional benefit of the democratization in Iraq and other Arab nations is the freeing up of the Arabic natural proclivity towards commerce.

Julian Simon's optimism springs eternal. The changes caused by global democratic freedom and free markets will benefit all for many years to come. In perpetuity, if governments allow it.

Wednesday, May 04, 2005

Freaky Econ Baby

Soxblog's Dean Barnett reviews Freakonomics in the Daily Standard. Freakonomics is a quirky empirical analysis of odd-ball and controversial theories that may just be true. The writers are Steven D. Levitt and Stephen Dubner. One contention is that the reduction of crime in the 90s through today is due to Roe v. Wade's abortions that actual avoided the introduction of probable criminals to our world. That is one of many observations that the numbers and connections tell the authors.

Says the authors: "Freakonomics-style thinking doesn't traffic in morality . . . [I]f morality represents an ideal world, then economics represents the actual world."

Economics is often the introduction of theories that belie common sense. This book sure does that and it seems worth the read.

Kerry: I'm Getting To It!

Thanks to Frontpage's War Blog for reporting on John Kerry's continued efforts to sign the form 180 to release his military records. According to Powerline.com, he has purchased a pen, it is close to being uncapped and a fund-raiser is being held to pay for the stamp to mail it in.

This just in:

While attempting to fill out the form, Kerry dropped the pen and the point pierced his thigh causing serious bleeding. He has now completed a form for another Bronze Star as this is related to his Vietnam War experience.

Private Accounts- One Lesson At A Time

One more point on the understanding of the man on the street on economic matters. They are not dummies. I discussed the privatization of Social Security plan with a retiree. The following is her biggest concern:

"I know that the people making a good salary will do well under the privatization plan but what about the low income 'hamburger flippers'?"

Two things.

If the privatization plan is truly generous enough so that most or all of the 12% of their payroll taxes are saved in these accounts, even a low income worker at a lifetime income of $20,000 per year will be in much better shape.

Roughly speaking: At $2,400 per year (12% of $20,000) and starting at the age of 20, that becomes around $28,000 with compounding by the time he is 30. Compounding turns that first decade's money into around $400,000 by the time he is 70. That ignores the savings going on every year until he retires at 70. If you add and then compound all of those $2400 per year savings, the numbers really grow. Basically, the hamburger flipper is almost a millionaire by the time he retires at 70. If his wife is working as well, the family wealth saved is greater.

The other option (something I gleaned from Milton Friedman) is to carve out a welfare program for just that portion of the populace that never saved enough during their working lives. This would be much cheaper than enslaving all workers to this no-return-on-investment program.

The retiree told me she had never heard the plan explained that way and it made sense to her. Additionally, she was already on board with the inheritance feature of the plan.

I propose that perhaps the percentage of privately invested funds be degressive. Allow the low wage earners to privately invest higher percentages while gradually lowering the percentages as people's income increase. Say, 12% for the $20,000 incomes and below and 11% for the $20,000 to $40,000 incomes and graduated in a similar pattern until the high earners are allowed to invest "only" 6%. This would make the higher income Americans pay off the current retirees while still placing money into their personal retirement accounts.

The USA Today reported that over 60% of Americans feel the Republicans will change the SSI program too much while the Democrats would not do enough to solve the problems. This is a stunning development as Bush has not only brought the issue to the forefront but has convinced people that the program has serious problems that must be immediately solved. As was shown from my conversation with this retiree, overcoming the public's fears as to the scope of the changes merely takes explaining. Americans at least know there is a problem that needs a solution.

Want To Be Rich or Just Have Alot of Money?

I'm a big fan of plain-speaking economist Walter Williams. Today in Townhall.com Williams discusses in "Only In America" simple truths about the rich. Over 80% of today's millionaires are first-generation rich. They never received much, if anything, from their family. Further, over 80% of the rich in 1892 were also nouveau riche. Moreover, in America, people migrate from one income quintile to others. 86% of the bottom fifth of earners in 1979 were in higher quintiles by 1988! Many in the highest fifth of income.

Time and again I have to explain this to friends who fall for the class-envy rhetoric spoken by demagogues.

These friends also fail to understand that there are the "rich" and then there are those whose incomes exceed a certain level- 2 different things. There are one-time or short-time high-earners and then there are the low-earners whose net wealth are in the millions and billions. John Kerry or GW Bush may make from $100,000 to $300,000 per year but their assets are much higher than that. This allows them to pursue public careers and eschew private business. Family-rich people can personally report relatively lower income but "they is rich". It is the successful people with high incomes that ideologues seek to tax while describing them as trust-babies to the public. Often these trust-babies are the ones doing the screaming about the rich.

But then on another economic issue many people fail to understand that deficits are caused by spending exceeding revenue rather than taxes being too low.

World: Don't You Wike Me?

Skip March comments further on VDH's recent essay:

Once again Victor D. Hanson hits the mark in his piece "Upon Being Disliked". I have yet to understand why we should care about being liked by countries like France and even Mexico. Does any one out there honestly think for one minute that Western European countries and their buddies care one bit whether the US likes them? I don't think so. A point I often made (to those who would listen) during the Iraq War and the presidential election.

I am reminded of the story about Charles deGaulle wanting the newly elected President Kennedy to assure him that the US would protect Western Europe with nuclear weapons if the Soviets attacked, while continuing to bash US foreign policy and undermine NATO strength. Of course the French think they are Western Europe so he really meant protect France. I suppose they figure they suffered enough holding off the Nazi's for about a week. Would anyone expect France to change not decades but centuries of behavior. And, If we cut off the $50 billion that illegal aliens send back to Mexico, Presidente Fox would be on "the blow" so fast he'd be eating into his own country's profits from the illegal drug trade. Thus sending the Mexican economy into a tailspin.

The geo-political scene has changed dramatically and the ankle biting French and their friends from the Democratic "Ankle Biting Demonizers" Party are trying to preserve the old. This is a primary reason why the French wanted to form a European Union in the first place and because they can't generate any new economic activity themselves. Hey, why not mooch off of unsuspecting neighbors, eh?

As for our own ankle biters here at home with their dearth of ideas other than to move farther to the left, maybe they should move to France where they will now have to work an extra day to pay for poor healthcare.

Tuesday, May 03, 2005

South Park Is Mine, Not Yours

Frank Rich attempts to secure “South Park” into the liberal camp after they lampoonedthe Schiavo matter in their viciously off-color, typically hilarious way. Rich recognizes that small government libertarians like the South Park duo, Trey Parker and Matt Stone, disagreed with the actions of Frist and Company in their attempt to keep Schiavo alive. But then, so did many conservatives as well. Rich leaps to the conclusion that the political effect of what the conservatives did in the Schiavo matter is similar to “what Hillary Clinton’s overreaching big-government health care plan did to the Democrats a decade ago…”.

That the public would equate the attempt to use the government to save a woman’s life to a socialistic reformation of the health-care system is delusional. While Rich’s wishful thinking is understandable, the libertarian streak resides largely to the right of center politically. Until Rich and other liberals can do credibly what Hillary is attempting to do not so credibly, that is sound like small government-free market- hawks, South Park’s occasional skewering of conservatives will continue to be a rare and healthy event. The Baldwins and the Streissands are too consistent for Parker and Stone to leave that fount of satirical fodder.

Sunday, May 01, 2005

Even You Can Retire at 55!!!

The NYT Week In Review’s lead story was about the impending retirement of a number of pubic employees and its financial effect upon state budgets. While the rest of America works in the private sector, where pension futures are dubious and 401k plans are the only protection for retirement ease, 11% of the country’s workers are public employees. Their retirement age is 55 with generous benefits and increases that are too good to be true.

Now, reports James Dao, state retirement funds face a $267 billion shortfall. Governors blame the weak economy for their fiscal woes. However, the WSJ reported Friday that state revenues increased by an average of 8.1% nationally (NY increased 8.5%, PA increased 9.3% and CA increased 8.2% for instance). So this shortfall is not due to the “stock market prices trending down” per Dao. It is caused by spending exceeding revenue. Cato's Moore and Silvinsky report that state government spending doubled between 1990 and 2000. That is way ahead of inflation. Moore and Silvinsky say that "states that keep tax rates low and restrain spending growth have the best economic performance and thus the best longterm fiscal health." And note, the term "restrain growth" is not cutting spending as normally reported in the MSM.

Who “negotiated” the terms of these retirement plans with the unions, anyway? Our state “managers” must have fought very hard for our money when dealing with the unions (that contributed large sums to their campaigns. Need we mention Jim McGreevey?).

Dao claims that the trade-off for these lucrative pensions for state employees (receipt of 80% of the best salary years) is the state jobs “connote a dull stability- the promise of unexciting pay, but a secure pension.” Is it dull when there is no threat of being fired for poor performance, you have every holiday and then some off from work and only minimal effort is ever expected.

It is interesting that the public employees complaining the loudest today are the ones now being assessed-the public school teachers. They have filed a lawsuit against the federal government over its gumption to require, not exemplary performance, but the mere tracking of their performance. When you do a bad job and know it, the worst thing is for others to know as well. Especially your employers.

Doa’s opening paragraph stated: “Interest rates are ticking up while stock market prices are trending down, eroding 401k savings.” Now, wouldn’t many 401ks be increasing if they were invested in bonds? And do not lower stock prices indicate lower purchase prices for people intending to buy now and hold them for a few decades? And this trend of stock prices dropping began when? The 1st quarter of 2005? However, the Dow has dropped in the 1st quarter of the past 3 years. Maybe the trend of a higher Dow in the following quarter will occur again. Life cycle investing can avoid these doomsday scenarios for retirees.

I guess I am shallow for being unconcerned for that about-to-retire American who just started a 401k plan last December and invested solely in the stock market. But then, he was not very concerned about himself either.

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