Saturday, September 30, 2006

Poor Greg

It must be Pick-on-Greg Mankiw Day. PGL at Angry Bear tears into Greg about his Thoughts about the nature of SS payroll payments. All he did was present a Graph used in a presentation before Congressional Committee. PGL should be more worried that such drivel is presented to Our lawmakers as fact. An aside, while the commentary by Karl Smith at Greg's Post was interesting, I think the immediate following commentary by Anonymous was far more detailing; identifying the real Public debt in this Country.

Now it is my turn to carp at Greg, for his use of an article by David R. Francis. Notice again that this is a NBER article. My antagonism with the Francis posit lay in the simple use of numbers, an affliction particular to Economists. Both areas, Maine and New Brunswick, stand as substandard Income sections of each Country. Both, in the same geographical area, are noted for highly Seasonal Work settings; Employment more heavily reliant on Small Business creation than elsewhere; and Small Business which can endure major draft of labor elements to higher-Paying Jobs elsewhere seasonally. Economists have difficulty with the Concept that Employment opprotunities vary by region, not Numbers.

Some may notice I am having some amusement here, but I am not Friday Night Beer Blogging. It is a Saturday Fall morning, beautiful to be out, and I am thinking I should draw this to a close. I will simply tell Greg: Sorry! The Devil made me do it. lgl

Friday, September 29, 2006

Tax Expenditures

Tax Expenditures remain simply the fancy name for Tax loopholes. I am not enamored of the Thought of Andrew Chamberlain, but this article stands as a very effective Read. The link to the Congressional Reseach Service provides this:

For FY2006, the Joint Committee on Taxation (JCT) estimates that tax expenditures will amount to $945 billion -- over three times the projected FY2006 federal budget deficit.

Curtailment of Tax Expenditures could completely eliminate the current federal deficit levels, and would narrow the Income Gap in Employment. Business Profits would descend from it's vaunted Position, as Households regained advantage in Labor supply.

The Angry Bears weigh in somewhat on this subject with this Post, alternately stating that the Bush Tax Cuts (Tax Expenditures) applied too little Short-term economic fuel, and too much long-term fiscal irresponsibility.

Government mismanagement extends beyond inefficient Tax policy, read Greg Mankiw's Post about the planned Potato cartel. Here We have Government-allowed (think sponsored) destruction of Food supplies to maintain high Prices to Consumers. Think on this rationale: Government allows all the Production Costs of raising Potatos (granting farmers all subsidies and Tax allowances), free farmers from monopoly restraints, encourages farmer destruction of Food supplies whose specific goal is making Consumers pay more, finally allowing farmers to deduct their losses of crop. Consumers get to pay higher Prices, Taxpayers pay higher Taxes, farmers make no better Living than previously when on simple Support Payments, Government raises the quantity of their deficit spending, and more People go hungry. Am I the One who is insane? lgl

Thursday, September 28, 2006

Raptors and other Buzzards

The F-22 Raptor Fighter Jet stands as the Beltway enigma. Opposed by all designated Policy-makers and the Armed Forces Committee of Congress, it still continues to fly away with ever-increasing Taxpayer Dollars. The article tries to explain how the $350 million plane only costs some $130 million per plane, if maybe the Air Force could get the 750 planes it originally wanted. It has 74, is promised 183, and wants 381. Study the great abilities of the Plane: it's altitude of 60,000 feet can only be attained by using half the fuel in the tanks, Cruising Speed probably matches Top Speed (only half a tank at the altitude where such Top Speed can be attained), it's stealth technology is wonderful (it's onboard system cannot detect each other). Structural cracks are already being found in the 74 planes the Air Force has, and the extremes of altitude and Speed utilized will triple the structural crack threat; cutting the estimated life of each plane to one-third planned. I happen to agree with Dug-in Don on this one.

Robert H. Frank has an article on Consumers always wanting greater quality, with the willingness to pay for it. I would agree when it was greedy Air Force officers backed by the military/industrial complex; all expecting American Taxpayers to pay for the entire load. The first article mentions that the Senate is voting this Week on the $447 billion 2007 Defense budget. It would not be so sad, except for what is this weaponry planned? It is most definitely not for Occupational duties like in Iraq and Afghanistan. Does Anyone remember Rooster Cogburn in True Grit: Too much Gun!

OPEC goes with an informal leveling of Oil production; translated: We are going to keep pumping, but you Speculators are supposed to run the Oil price up. Why is it a administration, composed of Oil Executives and Contractors whose major business is Service industries to Oil companies, cannot get Iraq (3rd largest Oil Reserves in the World) to pumping Oil again? Could it be because Oil is quoted at $63/barrel, where before it was $37/ barrel when Iraq was pumping Oil? Shame, shame--that would suggest the Corruption had seeped out of Iraq. But why is the Corruption always connected to American Corporations? No wonder We are experiencing a slowing economy.

It may be defeatist to say this, but the Management Executive performance of Oil executives seems wanting in the self-originating War on Terror. The Contracting methodology of our current Administration may do more damage than al Queda ever presented. Security procedures are still deficient, Quality Control still does not exist in the Contract arena, American Casualties are still being endured because of faulty Equipment in the only active use of military personnel, and Our enemies are reportedly growing in strength and numbers. Did I forget that the American Taxpayers are paying 40% more for this inefficiency? lgl

Wednesday, September 27, 2006

The Economy wobbles

Durable Goods dropped again after the sharp drop in August. They fell only 0.8% stripped of Defense Orders, but follows a 2.7% drop in the preceding month. The real unpleasant note come in the drop of nondefense Capital Goods of 0.3%, meaning Business feels no hurried push towards growth. This may be because of the Manufacturers' Survey which showed U.S. Manufacturers confronted Fixed Costs some 31.7% higher than their foreign Competitors, and this disparity has been growing rapidly. They face higher Corporate Taxes, higher Energy pricing (especially Natural Gas), and the health care Costs and Pension Costs of the Ageing population.

A Kaiser Trust Survey capsules the basic pressure on Small Business in provision of health care:

The cost for family coverage under an employer health plan is now $11,480, nearly double the cost in 2000 – and that cost looks to rise at a similar clip next year, two nationwide surveys show.

A NYTimes article highlights the basic attitude of most Employees, which Employers consider their enemy. Entire Route Health Care becomes impossibly high in Cost as the Population ages.

Greg Mankiw, Arnold Kling, and Tyler Cowan all weigh in on Immigration, based upon a Study.
I have a little difficulty with the Kremer premise, knowing the levels of subjugation suffered by female immigrant Household labor and withholding of promised Wages, especially in many of the greatest Importer Countries of such labor. It smells more of Indentured Servitude of the Poorest and least capable of defense. Mark Thoma provides an interesting overall article on Worker response to Inequality, but has aside views to the impact of Immigration. lgl

Tuesday, September 26, 2006

As the World Turns

Menzie Chinn provides some very good material. It is sad One has to wonder if she really speaks English. This Post contains really good elements, and Readers should take the time to interpret. My only comment states base Wage rates have been too sluggish, while Stock Options and Bonuses continue to expand. Craig Depken can be informed that basic Marine Enlisted Wages did not exceed about $18 per month until at least WWI. I have no Source information, but know their Wages did not reach $60/month until 1940. Tyler Cowan has a relatively good defense of the IMF, mainly consisting of questioning what We would replace it with when encountering future problems. Consumer Confidence is up, but I wonder in what exact context.

The current News is the rumble from OPEC that Oil prices are dropping too rapidly, and that Oil Speculators are trying to use it to boost Short-term Gains. The truth may be, as I reinterate may be, that OPEC cannot restrict Oil production, due to the fact such interruption of production will have even worse impact upon Investment schedules in the OPEC nations. A secondary effect impacts Consumer Confidence; Consumers expecting relief from the high Energy pricing makes up the overwhelming majority of the Confidence rise, and efforts to destabilize that decline will bring a downturn in Expenditure patterns. It would not be beneficial to either the U.S. economy, or to OPEC.

American Business must relearn lessons once taught by Economists after the Great Depression. Nothing so drastic could happen now (God forbid), but Consumer Incomes have been running behind both Business Profits and Prices for too many Years. Consumer Credit Debt still afflicts less than half of the Consumer Households, but there are two distractions from assuming well-being; those with Consumer Debt suffer high monthly payments in comparision to their Income, and those without Consumer Debt will not buy much without an increasing Income. It does not matter if there is a Money Supply constriction due to improper Government policy, or due to reasonable Household Consumption response; it still remains a constriction. lgl

Monday, September 25, 2006

Short Review

Readers should access an article from the Christian Science Monitor by David R. Francis. Congress is still playing Politics with the Budget, and has little hope of cutting down the budget's overall size, even after the November Elections. (sense of proportion: elimination of all dicriminatory Spending--without touching Social Security, Medicaid, and Medicare--would not equal the 33% increase in Federal Spending brought by George W.'s first term).

Arnold Kling again provides an essential Read on the problem of financing Medicare. I, though, contend the necessity of universal provision in Health Care, as does Krugman. My proposal has always been to provide Health Care through the basic Necessities, then have private health insurance handle all expensive exotic care.

Ritholtz brings the Oil Prices decline into prospective. The major reason I advocate, though, he did not list; the level of production at Oil-producing and Oil-refining facilities has been dropping off full production.

An Associated Press article is unremarkable except for two Quotes here listed:

The conflict, now in its fourth year, has claimed the lives of more than 2,600 American troops and cost more than $300 billion.

a government-produced National Intelligence Estimate became public that concluded the war has helped create a new generation of Islamic radicalism and that the overall terrorist threat has grown since the attacks of Sept. 11, 2001.

Synopsis: The Iraq/Afghanistan Wars have not met any of the criterea advanced for a War on Terror, or have they attained any of the Mission Goals of the Military and White House. The Bush Tax Cuts would not have been attainable within a balanced Budget, even if the foreign wars had been canceled. Even the Oil Speculators have become sceptical (or weary) over the continuous Crisis exhortation of the current administration. Arnold Kling can still be counted on for a judicious assessment, but he may be among the last of the honest of the Conservative stripe. Why does the current leadership so remind of the Nazi hierarchy in the Period 1943-45? lgl

Sunday, September 24, 2006

Trade and Pollution

Readers should read James Hamilton about Government interference in normal Business practice, and Greg Mankiw and Phil Swagel's definition of the use of Zeroing in application of anit-dumping duties. The above Posts highlight injurious use of Government management on efficient Business practice. Special Interest agendas and political power grabs can be introduced, solely through the methodology of Government agencies. Unrestrained use of this power violates the rights of Property, and nullifies Investment opprotunities.

Walmart announces a more sensible program as well as the $4 Proscription program. They are trying to reduce their Packaging volume by 5%. It stands as a Step in the right direction, but it could even be improved. The mode of the future will be bulk Shipping. Walmart is trying to place the Investment Costs upon the Suppliers with this plan, which is a demerit to the Plan. Walmart should consider in-Store Individual Packaging. It would markedly lower Supplier Costs to bulk Ship, It would raise Walmart labor rolls but provide ability to provide more source employment (creating their own Consumer market), and allow Walmart to provision higher Wages and Benefits. Walmart could extend these facilities to other Retailers, as well as their Suppliers--a potential Profits avenue. An efficent program would lower Operating Costs, bring a resurgence to the Manufacturing base in the United States, reduce Landfill demands, and could reduce Packaging Costs by maybe 30%.

The Walmart program to capture the Proscription market with a cheap Series of Proscriptions will be matched by Competitors (Target already leading the way). A very effective counter-plan could be easily implemented by the major Retailers. Walmart and other Retailers who capture a large volume of their Customers' Incomes, should offer a Proscription plan paid by a 5% premium paid on all Products purchased, it directed to the Customer's Proscription Plan, and applied against all Proscriptions purchased through their Outlet. Such a Plan would have to be entirely Voluntary, but subscription to the Plan would rapidly spread as Customers could detail the real reduction of oversize Proscription purchases (high Cash outlays). lgl

Saturday, September 23, 2006


Greg Mankiw, who is going to think I am picking on him though I am not, rewrites Ip's paraphrase in an article in the WSJ. I will not provide the Ip Quote which was truely wrong, but I will provide the Mankiw Rewrite:

From 2000 to 2004, the average tax rate for all taxpayers fell from 15.3% to 12.1%, representing 21% tax cut. The tax rate of the richest 1% fell from 27.5% to 23.5%, a 15% tax cut. For the bottom 50%, the tax rate fell from 4.6% to 3%, a 35% tax cut. As a result of these changes, the top 1% paid a larger share of the tax burden in 2004 than it did four years earlier, and the bottom 50 percent paid a smaller share.

A clear Statement is it not?--Not! It says much, and little. Greg fails to provide actual numbers on the Average Cost of the Household Budget for each Income group. He does not compute the real Tax Cut Savings of both Percentages (15% and 35%), or the ratios of 15%a/ACHa and 35%b/ACHb. This is the real computation of Household contribution to the Public Debt accumulated by the Tax Cuts. Greg Mankiw also did not provide information as to the Percentage of the Public Debt attributable to the Tax Cuts; which Liberals and Democrats perhaps rightly claim as future Taxes.

Simple honesty brings the admission that I also did not make the computations involved, but to provide Greg's overtly primitive calculations as adequate to understand this Tax process, also consists of artificial framing of the Problem; though Mankiw may possess the greater justification for his analysis. lgl

Friday, September 22, 2006


The political process of Consensus seems like the greatest victim today. Bush, Musharrif, and Karzai are having a diplomatic conflict. Bush sided with Musharrif in his Agreement with the Tribes along the border, after Musharrif claims the U.S. Government threatened to bomb Pakistan back to the Stone Ages if he did not join Bush's War on Terror; Karzai claiming that Musharrif was making a deal with the Tribes who supported the Talibon. Hamas refuses to back their President's claim to recognize Israel. The Army is split between Donald Rumfield's desire to maintain current Force size, Army Command, National Guard Command, and retired Army officers over the Force readiness of the current Army. PGL at Angry Bear even highlights some of the conflict on Inequality on the Net.

Analysis: Bush is willing to sell out Karzai in order to get Musharrif to help capture ben Laden; I still estimate ben Laden could best be found sitting in a villa in Saudi Arabia. No Representative of Hamas could ever to expected to recognize the State of Israel, assasination being too prevalent in the warm, sunny land of the Gaza Strip. The retired Army officers are the only ones who can speak honestly about the Army, everyone else has either an out-of-date axe to grind, or suffer the threat of removal. The National Guard will likely get the shaft again, as it is the politically-expedient thing to do, and will again go to Iraq and Afghanistan underequipped and understaffed. In any case, nothing will be done until after the interim Elections in November. lgl

Thursday, September 21, 2006

Minimum Wage Effect

Hal R. Varian provides access to the Works of James K. Galbraith and Travis Hale .
(UTIP No.11) provides the following comment:

In this paper we show that inequality and unemployment are related positively across the European continent, within countries, between countries and through time. This contradicts the often-repeated view that unemployment in Europe is attributable to rigid wage structures, high minimum wages and generous social welfare systems. In fact, countries that possess the low inequality such systems produce experience less unemployment than those that do not. Moreover, large inter-country inequalities across Europe aggravate the continental unemployment problem. There is no paradox in low American unemployment. It stems in part from that country’s continent-wide programs of redistribution, including the Social Security System, the Earned Income Tax Credit, the federal minimum wage, and a uniform regime of monetary policy geared toward full employment, all of which reduce inter-regional inequality and all of which we recommend for adoption by the European Union

This is an older Paper (1998), but the intrinsic thesis that Minimum Wages increases and provision of Welfare services actually increase Employment, due to the fact that it increases the Opprotunity Cost of leaving Low-Wage Employment, seems sound.

Greg Mankiw makes a better argument for equalization of the Rich cross-Country, than for a reduction of Inequality, as the Source he cites confirms that In-Country Inequality is growing almost everywhere.

Baseline: There is undoubted increased Inequality, though the universality of the Trends throughout the World simply indicate the integration of the World Economy. The invection of Conservatives against current Welfare programs, on the other hand, actually works to their disadvantage; promoting Immigration (consistent with longterm increase of Welfare Costs) and increasing Labor mobility (consistent with rising Wage demands). lgl

Wednesday, September 20, 2006

Hiring Patterns

The EPI Snapshot by Bernstein and Bivens states that Manufacturing has been losing both Jobs and Wages, over the last year in the later case, and since 1998 for Jobs. Steven Pearlstein at the Washington Post claims Advertising is descending to young Kids in blue jeans and upstart firms on low Wages and Profit margins. Michael Mandel states that since 2003, Health Care has accounted for 80% of private sector Job creation. Phil Miller comments on success viability of Product Reps by stating: "Yes, Virginia. There are diminishing returns, even to donuts." I will finish with a short pass into School Breakfasts.

What does this mismah tell Us?

The real Trend in Jobs Creation, even Health Care, has come in the form of Sales Representatives. This Author does not know if he could find requisite data on the numbers of new Jobs in the field of Product Representation, but he knows it must be the fastest growing industry in the Economy. Miller discusses the double appearance of WSJ Sales Reps with Donuts. Mothers, Taxpayers, and even probably Congress, did not intend for dry Cereal and Juice in a Box for Breakfast when they allocated $2 bn for School Breakfasts. Advertising has descended to Sales Reps with High School education lecturing Doctors over Lunch on the value of their Product line. What is the exact definition of Job Creation?

The bad old Days of an Office call for Lunch or Coffee Break with Order delivery by Messinger seems to be over. It is social misconduct Today to suggest some Employee may hold some inferior position like delivering Orders. My Thought, though, contends it is the same old Messinger Boy or Girl, but now, they must sing and dance while you eat. lgl

Tuesday, September 19, 2006

Radical Surgery

One of the things I detest about Friends comes in their ability to ask sensible Questions (perhaps even worse than Students). An old Friend (yes, even the socially-destitute have a few) asked one of these typically insensitive Questions: How could fiscal policy be altered to boost the Economy under present conditions, in the face of a falling Dollar? I cannot guarantee that was the exact phrasing of the Question, but I mentally translated it as: How do you fix the Economy if it effectively blows because of a sliding Dollar?

Readers know any decent Economist would not touch either Firecracker with a long, long Pole. I, on the other hand, feel a Commitment to answer the essential Question (yah, Right!). Inquiring minds want to know, and all that. Reputations are never made, and easily lost, providing illustrative thought on such grand sweeps of Intellect. The irreverent thought suggests boldness, as something cannot be lost, if never gained.

The first element of fiscal policy change must be to get your own house in order. This means introduction of a fiscal program where Tax revenues exceed Federal Expenditures. It is so easy to say, isn't it? I would reduce the Tax rates to payment of Social Security taxes for Incomes less than $20,000/year, 10% for Income between $20,000-$30,000/year, 20% for Income between $30,000-50,000/year, and 30% for Income between $50,000-100,000/year, 35% for Income above $100,000/year.

The second element of fiscal policy change would nullify all Tax deductions, exemptions, credits, and removals of any type from the taxable base of Income: this means no Mortgage credits (slowly evaporating grandfathering here), personal deductions ($2000 Exemption for every Child under 18 resident in the Household, and every Adult over 70 resident in the Household--the only reductions of tax base allowed), elimination of all 401(k), IRAs, Keoughs, etc., and elimination of the special status of Capital Gains taxation (hereafter considered as simple Income). A universal Docking Fee or Tax will be assessed on all Imports at 3% of registered Value (used both for Docking Fee and normal Business Cost deductions) also to be introduced. This is it for tax policy.

The added Tax revenues, along with strong curtailment of Legislative and Presidential Spending, will bring fiscal Solvency. One might ask how one can curb Legislative and Presidential Spending, and I provide a Constitutional Amendment:

No member of Congress or Presidency can stand for ReElection to Office, if any Budget Year of their previous Term of Office was in Deficit except in a Budget Year of Declared War by the Senate.

The Problem resoves itself from this Point on. Business Profits would begin to drop, Consumer Spending would increase--creating Jobs, Business Investment would be based upon Business Comparative Advantage--instead of gaining Tax reduction, and the Federal Government would begin the slow process of fiscal responsibility. lgl

Monday, September 18, 2006


Those who want to darken their Day should try this link which informs the current political elite for the umpteenth time that fiscal policy remains unsustainable. It is most remarkable in it comes from the Congressional Budget Office, who are tasked with informing Congress about potential tragic endings of Congressional action. It stands clear that the CBO perform as efficiently as Everyone else in warning of disaster ahead. Don't you just love the Federal Government?

The Newspapers are alive Today with the Current Accounts imbalances. Like this was a problem which only showed this morning. Many have warned of shipping all those Treasuries overseas, in exchange for Consumer Goods; Things which are not remaining as cheap as they once were. Simply put: We need those 3 million Manufacturing Jobs back! Those Jobs would have generated a probable increase of 7 million Jobs since 2000. American Consumers, though, listened to the Free Traders, who told Americans they could get something for nothing--i.e., half-Price.

Many Free Traders still don't get it. You can still find Calls for devaluation of the Dollar. They cannot understand one simple fact: if you cut the value of the Dollar in half, it is just like Tax Cuts, Profits (identical to Tax revenues) are not going to double fast enough to save the current economic positions of Those grounded in Dollar incomes. The current situation is explosive in that the Current Accounts imbalances could trigger a slide in the value of the Dollar; one that might not cease before an economic stability can be achieved. We may be looking at higher Consumer Prices joined with suppressed Labor Rolls, and a huge drop in the Dollar.

Government intervention seems hardly viable; the Federal Government being the greatest Debtor in the World, the economy producing declining Profits under this Scenario, falling Employment, with the current methods of generating Business Profits being the culprit behind the situation. The American Taxpayers may find themselves paying $7-8 in future taxes, for each dollar they saved in the Bush Tax Cuts; in a time where those dollars are just as hard to earn. lgl

Sunday, September 17, 2006

Lost Time

I seem to have messed up my computer again, so it will take some qualified help to get my address box back again, and Links will be hard to access until it is regained. I decided to discuss Bush's great Push to give him the power to try Prisoners by military tribunal. It is of interest basically because the Beltway never talks about the actual Issues, because such clarity might interject genuine American involvement in the political process.

Take this Proposed action: Bush claims the need to throughly interrogate these Prisoners. The Opposition charges there is need to protect the Geneva Conventions. Real Reasons: Bush lacks the evidence to get any of the Defendents convicted under current American Judicial rules. The Opposition wants to see Bush and his gunment fall flat on their faces. The Bush Case against most Internees rests on Rumors, Informers, and innuendo. Hard evidence is lacking, even though Interrogators used all means possible already. Bush wants a controlled Court proceeding, one restricted even in terms of Press Coverage. The Opposition wants to highlight the ineffectiveness of the Bush team.

Are the Internees guilty? Some of them most definitely are guilty, many of them are innocent. No one wants the guilty ones set free, but there are many Innocent among them. How many? This author would expect about half were only in the wrong place at the wrong time, their sole crime was being stupid; lacking good excuse at the time. The Bush administration sees release of any more Internees as bad publicity; remember, they have been locked up a long time, without Charge or provision of basic Civil Liberties. The Innocents have turned into pawns in a political Chess game.

The entire reign of the two later Bush administrations seem a real disappointment to the American people. They entered Washington with such Promise to alter the Beltway format, and yet, Six years brought only massive Public Debt, a stranglehold over the Political Process by Special Interests, and two continuing Wars each of which have occasioned more Casualties since the advertised Cessation of Hostilities than during the Period of politically-defined War. The answer to all Problems of the Bush administrations resides in the immortal Words of Bush himself: We must stay the Course. One has to ask: What is the Course, and why is it worth staying on? lgl

Saturday, September 16, 2006

Tyler Cowan thinks that the Jacob Hacker book, The Great Risk Shift, evolves into a weak treatment of what Tyler considers to be the relevant Issues. The main argument of the Book, as defined by Cowan, remains "American incomes has been growing steadily riskier." I can agree with the intent of the Book, but not with the actuality of American incomes growing riskier.
Study of the article of Hacker’s linked by Tyler brings on the Quote:

The title of the project, "The Privatization of Risk" (Hacker 2004), is meant to capture two linked trends in the management of economic risk in the United States. The first is the contemporary celebration of the private sector as the first and best means of dealing with problems of all kinds. This enthusiasm for private-sector solutions is nothing new. In the United States, the belief that private commercial institutions should deal with economic risks goes way back, and is deeply rooted in our political culture and in the framework of social policies that have arisen in our nation (Hacker 2002). Yet today the enthusiasm for the private sector is joined with a sometimes unbridled faith that new technologies and new attitudes have finally "solved" the problems of risk management that once bedeviled private insurers and financial institutions. In this ascendant credo, not only should the private sector manage major risks; it can do it better than it ever has—and, needless to say, better than government ever could.

Hacker is correct in assuming risk is a social condition, but the assumption that the Private Sector provide the best mileau for risk management ignores the actual involvement of Government in those Private Sector solutions. Business investment and involvement would not be so risk-free without Government involvement in risk management. Business can reduce Tax assessments, forward and backward, with any incurred losses. The new Bankruptcy laws, State and Federal, hold American Households strictly accountable, but continue the venue of removing business management risk by wide salvation of Business assets under Bankruptcy. Courts further the process with denial of contracted Labor rights, while rigidly upholding the rights of Investors and Debt Carriers; though invariably, it is Labor which bears the greatest real (v. nominal) risk. Truly, Business has sloughed risk off upon American Households by shedding Contractual commitments and forcing higher Consumer prices.

Also check the link on Tyler’s site to Arnold Kling. Here again We hear about dastardly Government protection of Households, and the threat to Business enterprise; this time by granting protection to the Households. This despite rigorous Bankruptcy restriction for personal income, unless of course, it is Investment losses; here, poor victimized Investors can find removal of current Taxes, recoup previous Tax payments, and have deductions for future Taxation. We have not even entered into the realm of 401(k)s, Koughs, IRAs, etc., and the huge advantage of altering Income risk to Investment risk. lgl

Friday, September 15, 2006

Benedict, and the Drop

''The emperor comes to speak about the issue of jihad, holy war,'' the pope said. ''He said, I quote, 'Show me just what Muhammad brought that was new, and there you will find things only evil and inhuman, such as his command to spread by the sword the faith he preached.'''

The Pope went overboard with this Quote? Study of history relates Islam started innumerable wars of conquest against their neighbors until they covered N. Africa, Spain, the Balkans, and east into India. The Crusades were as much a reaction to the previous and enduring Muslim conquests, as it was an attempt to free the Holy Shrines in Palestine. Every Christian forced into Islamic society suffered some degree of discrimination and suppression during these Conquests, and the military reConquest of Spain was also called a Crusade.

It is admitted even by Muslims that Islam co-opted much of both Judeaism and Christianity. We must now contemplate whether a military attack upon a neighbor because of conflict between native and foreign religious beliefs should be considered as evil and inhuman by any religion. I must ask further if Terrorist bombs and assasinations are humane or good? The Pope, himself, lacks much in the way of divinity, the question of whether he previously belonged to Nazi institutions is still hanging. His Remarks, though, cannot be considered inflamatory in the light of previous history between Christianity and Islam.
U.S. Output in factories, Utilities, and Mines dropped by 0.1% in August. I would suggest Reuters check with the Weather Service, August is not a cooler month. I would continue to comment that the drop alone could come from reduced Energy prices. The lack of Gain, though, probably comes from reducing Business confidence, fed by increasing Inventories--which I have not checked by the way. The Consumers seem to be drifting. Is this a Problem? Far too early to tell, the real Telling Point will be early Christmas Sales. lgl

Thursday, September 14, 2006

The Mad Hatter

Reuters highlights "a larger-than-expected $64.61 billion federal budget deficit in August", based upon record Expenditures and a year-over-year decline in Receipts. David Artig posts some good commentary on the Reuters' article. I will be generous and simply state that the Bush administration's claim to halving the Deficit was based upon increased Tax receipts, which in all fairness, some Economists still predict based on lower Energy prices inciting a rapid rise in Consumer Spending, with resultant increase in Tax Receipts. Those Consumers, though, do not have rising equity in their Homes, face increasing Consumer Prices in other Goods, are awaiting Heating bills of winter, and possess a relative New Product mix with unused months of Product life. This Author has yet to see the benefits of Tax Cuts.

One of the few Tax Cuts which the Author does think make sense tries to help with the Cattle herd replacement after the Drought. This will not be a simple quest, as the Drought has been of long duration, and the Breed herds have also been cut. Restocking will eventually prove that there will not be Capital Gains, but Expensed Losses, simply to regain previous position for these Cattlemen.

The IMF is beginning to feel sorry for the United States, dropping its forecast from a growth rate of 3.3% for 2007 down to 2.9%. This Author rattles the Dice, and could come up with an even lower rate of growth: 2.1%. Lack of Consumer Sales growth combined with nominal declines in Energy Costs will detract from both nominal and real growth rates for the United States. Luckily, I am mostly wrong when I am not asleep. lgl

Wednesday, September 13, 2006

Means Testing and SS

The Internet starts to show some life in the debate of Social Security Means-Testing, and Everyone reading this Author regularly knows I am not afraid to jump off the Deep-end of the Pool. I have come up with yet another potential method to correct the imbalance of the Social Security Fund. First, one needs to study the demographics of the SS system, though, else Many will achieve a misconception as to the system. The System, as originally designed, implicitly utilized the Mortality or Death rate in its conception; no one believing then or since that the System could afford to pay Everyone who had paid in full benefits. Call this the Mortician's dilemma (similar to the Prisoner's dilemma--just more morbid). The System would work and pay for itself, if and only if enough Insured died before funds were oversourced.

What has happened? Medicine has brought on the Mortician's dilemma, People are not only living to draw SS benefits, but they are living to draw benefits for a unheard of time previously. Many have been the Calls: extend the Minimum Age which one would need to start drawing benefits, restrict Payments to only Those who need it, and cut benefits so that the social insurance is insufficient anyway. Along comes lgl, with an indecent Proposal.

Build in automatic Means Testing, square in the basic component of the System?--How?

Alteration of the Mandate: simply stating all Participants will be Means tested throughout the history of their life. All Participants will be taxed at their current assessments, not even have the level of taxation upon their Income raised. The Change would come in the acquired equity of the Insured. Each Participant will be charged $3500 per $100,000 worth of equity he or she attains; said assessment by request of Insured would be drawn from SS Withholding, or can be paid in lump sum to the Social Security Administration. Failure to pay this SS assessment will delay receipt of Benefits until the assessed amount equals the lost monthly Benefits from delayed receipt of Benefits.

What have We gained?
No one pay on the first $100,000 of equity. Those with more than $100,000 in equity must pay $3500, until they have equity of $200k, where they will pay $7k. One million dollars in equity will cost the Insured $31,500 in added SS tax. The Tax continues to add up to $ infinity, until such time as the Wealthy Insured finds no benefit from the SS system; but they still have to pay the base tax. The SS Fund deficit suddenly disappears, and Everyone other than the Insured are happy. lgl

Tuesday, September 12, 2006

Wages and Productivity

Edward P. Lazear published his Prepared Remarks of his Address to the National Association of Business Economics on September 12th. He contends that the average monthly Job growth rate for 2006 will be 135,300. It would seem to be a fairly defensible rate. The declining Unemployment rate to 4.7% is definitely not, coming only through a drop in Labor Force participation. It presents even worse image, when the majority of his Address directs to the major problem of the future: this being the increase in Dependency rates due to the Ageing population over the next half-Century.

Lazear contends "Output per capita is approximately 30 percent higher here than in the developed European countries and Japan." This is debatable on several levels, as the Countries involved have less Labor Hours averaged per Worker, along with greater security Welfare from Government programs, amid debatable equivalences with the American Standard of Living; All within a forum of lower Consumer Pricing. There are alternate methodologies to the American Drive Productivity. Lazear also submits a theoretical cure for future Dependency rates in America as increasing the Capital/Worker rate.

Japan’s core increase in Corporate Goods Pricing of 3.4% year over year highlights the major problem with the Lazear cure for the future. The push was Energy driven, and pushing the Capital/Worker rate stands as the most energy-intensive methodology for increasing Productivity of Labor. We need a less-intensive energy consumption Economy, with lower Cost Capital Equipment, and lower Consumer Prices. We also need a higher Labor Participation rate with Labor working less, but more Years in duration. Even Conservative Economists will eventually have to adopt this strategy.

The U.S. Trade Deficit just hit a record $68 billion in July, based solely on the increase in Oil prices. The American economic growth factors stand as totally dependent on Energy consumption, and in 50 years, the American economy will face the absolute need to import Oil to sustain its basic economy. The Conservative Economic approach does not sustain long-term maintenance of the American economy. llgl

Monday, September 11, 2006

Wrong Time

Reuters had an article today stating that U.S. Trade Negotiators were still committed to completing the Doho Round of Trade talks successfully. The Trade Talks have never been my favorite, as my Readers know, and the Bush fast tracking mandate resonates even less well. Free Trade treaties tie the hands of both Government and Business, disallowing optimum Trade negotiations at the point of impact Contract level. One article by Edward Hugh announces Japan has just had the worst month for Capital Equipment orders in 20 years. Another Post by him states that French industrial output is falling. Bush wants to tie the hands of the real Trade Negotiators exactly when Trade advantages can be realized through tough Contract discussions.

We are heading into a tougher economic environment in this Country, and the rigors of matching Trade treaty commitments will only cut into the Profits of any Trade contract which is formulated. A real hazard resides in the Bush administration policy of making Agricultural concessions to get such a Treaty, when hard times will reinforce the need for the Agricultural subsidies which Bush would give away. It is also the one area where American production still has a real advantage, as the World has yet to learn how to feed itself. This Author wishes he was waving to the Bush fast tracking mandate in the Rearview mirror.

Here lies the Stupidty: We finally are beginning to see some curb on Consumer Spending, We are beginning to get a break on Energy with Oil down to $65/barrel, We have achieved Fed hesitation to raise the Overnight above 5.25%, and the Bush administation wants to hamstring Us with a snare of artificial restrictions that will never make sense. I can only hope that the Bush administration will work with the diligent speed of normal Government policy, and he will be out of Office before he can commit Us to any more drivel. lgl

Sunday, September 10, 2006

Retirement Plans

I have just finished scanning the article by Munnell, Soto, Libby, and Prinzivalli. The most important Quote was in the Introduction:

The bottom line is that over the period 1988-2004 defined benefit plans outperformed 401(k) plans by one percentage point. This outcome occurred despite the fact that 401(k) plans held a higher portion of their assets in equities during the bull market of the 1990s. Part of the explanation may rest with higher fees, which are deducted before returns are reported to participants. But the one percentage point shortfall understates the investment problem in 401(k) plans, since an aggregate number does not reflect the fact that more than half of participants in 401(k) plans do not follow the prudent investment strategy of diversifying their holdings. Finally, the available data suggest that IRAs produce even lower returns than 401(k) plans, which, if true, implies trouble ahead given the massive amount of money that is being rolled over into these accounts.

This leads to the question of why would Defined Benefit Plans outperform 401(k) plans and IRAs? My intuitive answer would be that the Defined Benefit Plans remained a function of the Production process, while 401(k) and IRA plans try to farm out the issue of Retirement to exterior Market forces. (Here, by the way, is where I start taking Heat from the Economists and Business Interests)

Retirement plans based upon portfolio holdings rely upon growth of Paper Profits, not upon Production. Defined Benefit plans insist that benefits are maintained, as long as Production is continued. Business management cannot avoid Commitments made to Labor as alternative to Wage payment. Are We at this same position with Stock Holdings plans?

We must review the nature of Corporate Stock. Such is bought and sold like unto a commodity. When and if Stock is static in amount, and Production is uniform, then Purchase Price gain by a Seller must equal Purchase Price loss by the Buyer. The Buyer can only gain from the Sale by a future increase in the level of Production represented by the Stock. It is exactly this hoped-for increase in Production which Everyone hopes will fund Stock portfolio Retirement Plans.

There is one thing wrong with this Happy ever After fantasy: the little requirement that Stock stay static in amount. Corporate Management quickly recognizes one fact seemingly undecipherable by Anyone else: they can realize the full value of increased Production by the issuance of more Stock, which they can sell at Market price. The added Stock issued suppresses the Market price of all Stock--transferring the value of added Productivity through the sold Stock back to the Corporate Management.

Retirement plans based upon portfolio holdings will never gain the value of increased Productivity, because of the correct Corporate management recovery of the value of such Productivity through Corporate Stock sale. Defined Benefit plans will always prove superior to portfolio plans, due solely to Corporate inability to shift the value of increased Productivity from the former plans. lgl

Saturday, September 09, 2006

Impact of Wealth

Alex Tabarrok does not write much, but provides good material; Paul Krugman writes a lot, and once in a while, comes up with a really good article. I wonder if Krugman really wanted to expound that Economists are useless, unless they are ignored; Some might say he himself is getting more useful every day. Never mind! Rent Control remains a no-brainer issue, except complete reliance on the provision of Rent funds to determine occupancy will, over the long-term, led to congestion.

Dean Baker makes some good points:

The growth in consumer credit overall slowed from a 7.3 percent annual rate in June to a 2.8 percent rate in July. For the revolving debt component (primarily credit card debt), the slowdown was much sharper, from 13.2 percent in June to a 3.4 percent rate in July.

This brings the annual rate of growth in credit card debt over the last three months to 10.3 percent. By comparison, credit card debt grew at an average annual rate of 3.2 percent from 2002-2005.

Baker's interpretation of the data ignores statistics showing over half of American Households hold no Credit Card debt, and also ignores that of those Households which do hold Credit Card debt, they are maxing their Credit limits. These Households lack elasticity to expand their debt ratios, which helps explain the July cutbacks of Credit Card debt growth, and present an ill wind for economic growth.

Greg Mankiw wonders whether Stock Options have much impact on Inequality:

On the other hand, whether these particular public policies have been quantitatively important to rising inequality is less clear. Although the stock market had some spectacular runs in the 1990s, average stock performance over the past decade has been about normal. So I am skeptical that the interaction of stock options with surprisingly good stock performance is a large part of the story of rising inequality.

My position on Stock Options and Inequality remains that they have a massive impact, through the creation of Financial Paper. Sale of this Financial Paper absorbs Capital funding without capital construction, leads to irrelevant Profits-Taking by the Brokerage, pressures Corporate management to prop up its Stock prices by cannabalistic Profit-taking, and suppresses long-term Capitalization projects due to the long periods before Returns.

This Post still does not destroy Jane Galt's exultation of wealth as some sort of beauty in itself.
One needs a more profound definition of Rich beyond monies, extending into Control functions of resources. This argument lacks weight as long as Prices of luxury Goods inflate faster than normal Goods. Envy, whether rationalized or not, still walks and talks like Envy. Maybe it is only because I would like to be a Conspicuous Spender myself; can Anyone loan me a little Cash? Oops, I have forgotten the Baker argument already. lgl

Friday, September 08, 2006

Taxes and Comparative Advantage

Greg Mankiw broadly states that Bush kept his promise to see that no American pay more than one-third of his Income in Taxes. I would like to state I agree with Greg Mankiw in his view of the Democratic, Liberal pursuit of unionization and Minimum Wages, though it can be statistically proven that increases in Minimum Wage reviberate upwards throughout the Wage and Salary structure as the shelves of Merit Pay and Seniority seek their incentive position. Greg is also one of those Conservative economists who are blind to the difference between Salary and Wage Income and Total Income. Labor, whose Salary and Wage Income equals their Total Income might not notice the difference either, except possible in the amount of their Take-Home Pay. This Author regrets one can so rarely find the Percentage rates of taxation on Total Income.

Brad DeLong and Marginal Revolution enlighten on differing views on Devaluation of the Yuan.
Tyler's taxation of foreign funds investment was of excellent craft, dedicated to the alienation of every side of the debate, due to the loss of Comparative Advantage by All participants. American Consumer, American Government, Chinese Government, and Chinese labor would all suffer economic duress, and both American and Chinese growth would be stunted. I must adjudge this was Cowan's intent.

Tyler, though, did bring discussion of Comparative Advantage to the table, for which he should be applauded. Forms of Taxation should be utilized to alter Comparative Advantage, but in the direction of American Production for the American Consumer market. This could take the forms of high Port fees, high Ship fueling fees, a 2% Purchase fee on Imports placed on all Importers, Fuel fees on all foreign Goods using American transport media--Trucks, Railways, and Airlines, and simple Education and Welfare tax of 2% on all foreign Goods to maintain Social Services in this Country. Artificial Comparative Advantage creation may seem to some Conservatives to be as bad as Welfare transfers, but as long as American Government must foot the bill for all American Production failures in the form of Support payments, why not? lgl

Thursday, September 07, 2006

Regulation and Taxation

Bryan Caplan suggests standardization of Regulations is another big reason why Big Business supports Federal regulation. The serious end of the matter may well be Big Business ability to write this legislation to ensure no conflict with their Business format, eclipsing both Kolko’s thesis of suppressing competition and Caplan’s standardization. Big Business likes regulations where they can tell Federal Investigators where to look for noncompliance.

Calculated Risk gives the lowdown on the Housing industry, be sure to read the links. No one actually talks of the real reason behind the Slowdown: millions of Units have been built in the last Six years, and while Housing has not outpaced Population Growth as yet, it has exceeded Homeowners who possess the capacity to buy–given the current lavish construction mode. The $200k market is saturated.

Stumbling and Mumbling takes on Jane Galt. It is informative Reading, though I have not yet read it; Doctor’s appointment in an hour. It still advance two different views on the hazards of inequality. My personal view states that it is not per se Inequality which inhibits economic growth, but the suppression of Labor’s share of the Total Income. Labor is currently suffering a double whammy–low Wage Income combined with high taxation of Labor, with Business and the Wealthy evading their fair share. This stands not as a Call for sharply Progressive taxes, simply elimination of Tax breaks which allow Business and the Wealthy to pay a lower percentage share of their Income than does Wage Labor. lgl

Wednesday, September 06, 2006

Productivity and Wages

The Associated Press had an article today titled 'Productivity Slows, Wages Post Increase' which aroused my ire by its wording:

Productivity is the key factor determining rising living standards. Strong growth in output allows businesses to pay their workers more without having to raise the cost of their products, which fuels inflation. But the current numbers raise concerns because they show wage pressures rising as productivity growth slows.

Productivity growth, which had been weak for two decades, began to rebound in the mid-1990s, reflecting the benefits produced by the spread of computers in the workforce.

What is wrong with that?
Economists act like Wages are almost an Enemy, which can only be countered by increases in Productivity. A real Truth would state that a concentration on Productivity leads to Labor exhaustion and Labor burnout, brings too critical managerial evaluation of Labor cadres, and is the wellspring of Downsizing, Layoffs, and Offshoring. Another Truth states Wages are responsive to Standard of Living conditions, not vice versa, with Wage demands developing pressure only under increased Living Costs. Robert J. Shiller has an article in which he describes the difference in Chinese and American prospective on Savings. It stands as obvious that while Chinese labor has less Consumer Products which they can buy, it cannot be the sole reason their Savings rate is so much higher. Chinese labor must receive a greater percentage of their actual Productivity than do American laborers. The real wellspring of Productivity is in the form of Business Profits, which may seem only to rise at the same relative rate as Wages, but devolves upon a much smaller economic class.

Don Bondreaux has an article which described a BLS report put out recently. Two important Quotes:

It's important to note that throughout the 20th century, the share of the average household's income spent on non-essential items increased steadily, although noticeably slowing down between 1984-1985 and 2002-2003.

It's surprising that average household annual expenditures changed its trajectory in the mid-1970s from one of rather modest decadal increases before then to much more dramatic increases since then. (It's true that these data are in nominal dollars, but the continuing hefty increases in household annual expenditures post-1975 seem not much muted by the collapse of inflation rates from the mid-1980s on.)

This records the fact cultural aspersions devoloped raising nonessential Consumer products to the level of Necessities. This raised real Living Costs. The Report, itself, details the porportion of Living Costs devoted to different sectors all rose along with Wages and Prices, but did not vary significantly in percentage of total Income. The sum total results in a Spector when the real percentage of Wage Income to Total Income has actually dropped over the Century. Conservatives make much of the fact so many own their own homes, but it is also true that the greatest majority hold the greatest amount of their equity in their homes. This ends with the necessity of lower Incomes gouging each other (because of real value of their Housing) to obtain any advance in their equity, and still requiring an alternate form of housing. lgl

Tuesday, September 05, 2006

Middle Class-Suffering?

Stephen Rose has a new article ($) in American Prospect. His basic contention stands that the Democratic Party fails in its message to the Middle Class because they concentrate on economic ills which the Middle Class actually does not suffer. The affluence current in the American way of life leads me to agree with him. Rose states One should believe the Numbers:

$63,300. That's the 2004 median household income of people in their prime working years, ages 25-59 (it's $70,000 for married households and nearly $80,000 for two-earner households).

$248,700. That's the median net worth of pre-retirement Americans, ages 55-64.

Zero. That's the median credit card debt for all American households.

Drowning in debt? Squeezed to the gills? Living paycheck to paycheck? I don't think so.

Other comments by Rose:

Fully 41 percent of prime-age American adults are in households with incomes above $75,000.

A majority of Americans have no credit card debt.
The NYtimes also had an article citing Studies discussed at the World Cardiologists Congress which ascribe dangers relevant to Drug-coated stents used in Heart patients. Such stents cost some three times more than bare-wire stents, but were initially deemed beneficial in preventing arterial scarring. The Studies claim coated stents may incite blood clots etc. (this Author wonders if this attestment is not the work of Drug companies, who stand to make about 15 times the profits from daily-administered drugs over the life of the Patient). I only know there stands only minute reason to suggest coated causes more Clots than bare-wire.
Another article brings Chevron's announcement of a new, potentially large Oil field in the Gulf of Mexico. The kicker here is the depth of the Find, with "the well drilled to a total depth of 28,175 feet." I wonder how much Energy must be expended to get a barrel of Oil to the surface. lgl

Monday, September 04, 2006

Taxes and War

I started out to day to write on the effects of Taxes, but simply decided to let Mallaby, Mankiw, and Kling explain themselves. It may be unnecessary to comment that Libertarian Conservatives can join with Leftist Thought on the practical removal of the Mortgage and Health Insurance provisions, but disconnect with the idea of taxing the Rich. Mankiw would shiver, as would Kling, at removal of 401(k)s or IRAs. They and all other forms of Savings and Investment credits have led to the Paper Instrument flood (Stocks, Bonds, etcetra etc.) They are the real Generator of Stock Options and Stock Grants; the Inflationary expansion of these Paper instruments brought on the demand for ever-increasing Corporate profits for Dividends to maintain Stock prices.

A friend, though, lately asked me on a Internet forum at what Point Wars became bad for the Economy. I replied that Wars were always back for any Economy, and here is my rationale:

1) The Government, often pushed by by Business Interests themselves, engage in a spree of military supply Contracts.
2) Business initiate a overcapitalization of Material resources recovery, along with geared up Processing and Manufacturing. This process, along with military subscription of Labor, gives any Economy an aura of prosperity. It is a artifical image, as qualified Personnel often revert to military usage, and inferior Labor cadres (less qualified than pre-war industry standard) are pressed into service by both Government and industry.
3) The economic euphoria lasts only as long as the Period of overcapitalization lasts.
4) The Government has been purchasing these Supply Contracts with either higher taxation or with massive Government borrowing.
5) Citizenry find themselves with larger Tax rates in the Present, and higher Tax rates in the future.
6) The cessation of Hostilities stand equally as bad for the Economy. The military Supply Contracts rapidly diminish in number and size. Materials Supply industries curtail their labor force, who are joined by returning Servicemen, while Business overall slows to transfer their Product lines to Civilian Goods.
7) Even a full employment Economy prior to the War will find itself with a high significant Unemployment post-Conflict; one endured under policies of high Taxes and Public Debt.
8) We have not even discussed the direct Resource Costs of the expended weaponry and munitions, the undercapitalization of Civilian Goods industries in the War years, the increased Medical Costs of returning Casulties, or the loss of Labor cadres or labor potential of Returnees. lgl

Sunday, September 03, 2006


Alex Tabarrok provides a link to an excellent article on the Coase theorem. There may or may not problem with Coase:

If transaction costs are zero--if, in other words, any agreement that is in the mutual benefit of the parties concerned gets made--then any initial definition of property rights leads to an efficient outcome

Here is the rub as established by Coase: all externalities are dual. Can Anyone assert that all Effects of any operation can be reduced to two Parties? There is always the ‘ripple effect of water’and the economic impact of sloughing long-run Costs in immediate payments of impactual Costs. Most of the later generate 'build-up injuries' over time, resulting in down-the-road Costs previously dismissed. There is also the hazard of finding limitation to the Cost area. Take the example used in the Coase article by Friedman: Does the Pollution stop at the planned Resort area, or does the Pollution flow over and past the designated area to the Coast, and even the World? Can Property Rights be defined in such a Scenario? lgl

Saturday, September 02, 2006

Labor and Wages

Tne News and Internet, for reason known not even to itself, often tends to gravitate to one theme, especially on the Weekends. This time it is Labor and Wages. A NYTimes article stands as the best place to Quote from:

The low unemployment rate has come about despite a slow rate of job creation. At this point after the previous nine recessions, there were an average of 11.9 percent more jobs in the economy than there had been at the end of the recession.
But so far, as the charts show, there are just 3.5 percent more jobs than at the end of the last recession. That is less than half the lowest of the nine previous moves — a gain of 7.6 percent in the period after the 1953-54 recession. And that figure was held down by the fact that another recession, in 1957-58, had taken place by then.
Even the household survey, with its more positive numbers, indicates that little progress on jobs has been made in this recovery. There has been almost no increase, by these statistics, in the percentage of working-age Americans who are working. The decline in the unemployment rate reflects the fact that fewer of those without jobs say they are looking for work, as is required to be counted as unemployed.

This establishes that all is not rosy in the Job market. Another article clarifies the Bush and Congressional position on Americans who think to better themselves by Working overseas. Dean Baker is quite correct in stating that monthly Wage data is relatively useless, only year over year percentage Wage increases and indexing with Price percentage increase indexing give relatively solid information. Greg Mankiw gives the American Prospective to Europeans working less, coming from an European:
Europeans are working less and less for three reasons: first, increasing marginal tax rates (especially from the 1960s to the 1980s); second, a preference for leisure and, third, labor regulation and union-imposed standards for work time, including retirement regulations. Social multipliers compounds these effects: if a family member or friend has more time off, your own benefit from leisure increases, creating more social demand for leisure.

I personally expect it has more to do with a cultural expectation of European Workers that they will not get rich at their Jobs anyway, their Jobs will last the majority of their career, and they have an affinity for Cottage Trade craft labor effort.

The Adam Smith blog complains of the Cost of the European Union to every Man, Woman, and Child in Europe; I believing it is more like the cost to every Britan. Slate reminds Us all that Tax Cuts will not pay for themselves. Why have Either ever expected that Government was ever financially viable? lgl

Friday, September 01, 2006

World and Chinese Labor

I agree with Dean Baker that the Keith Bradsher article in the NYTimes generates some pain, We joined by PGL at Angry Bear. Baker assumes, though, that there will not be a shortage of Chinese Workers because over half of Chinese Workers are still in Agriculture. Inherent in this assessment stands the belief Chinese Agriculture can acquire the degree of mechanization achieved in American Agriculture. There are several reasons why this will not occur.

The foremost factor forestalling mass mechanization of Chinese Agriculture resides in the sheer mass of Capital equipment which is needed to spread across the entire growing area of Chinese Food production. The Agriculture Implement industry would have to rival the American and European industries--with a corresponding rise in Chinese Steel production. The second factor inhibiting the American model adoption sits within the Energy requirements for the adoption to take place, it eventually demanding an Energy consumption by China almost equalling current American consumption of Energy. The third factor remains the low level of Education of Chinese Agricultural labor. Massive inputs of mechanization into Chinese Agriculture would require advanced education to train proper Operation and Maintenance of the Equipment.

It is doubtful China can pull more than 15% more of its labor force from Agriculture, not now or ever. China faces another massive labor drain in the form of adequate Health Care provision for a definitely Ageing population. Their Health Care industry will never equal the percentage useage of American health care, but it is hard to visualize them utilizing less than half the American percentage use. Business invasion of China for cheaper Production Costs will eventually realize a decade brings vast changes to Chinese labor availability. Bradsher is right about that, though I wonder if Investors are that perceptive as yet.

Other News bring a Reuter's article which states both the PMI and ISM are falling, but still safely above 50, at 55.1 for PMI and 54.5 for the ISM. These means both the American and World economies are still growing, but cooling off. Another article provided a Statement that the ISM was expected to drop below 50 by Q1 2007. I would not lay Bets, but expect to see this by Q4 2006. We are in a Contraction, but not necessarily a Recession. lgl