Sunday, December 31, 2006

Cost of Economic Corruption

Tyler Cowan utilizes Walt Whitman to condemn Protectionists, but does the effect really work? Why wouldn’t it work? I basically think the Whitman Quote would work equally well, if one substituted ‘Free Trader’ for ‘Protectionist’, and ‘Free Trade’ for ‘Protection’. Could it be that a normal Trade mix, coupled with suppression of economic corruption of Market forces by use of political corruption, might provide greater benefit than either extremism.

The Angry Economist has a short Post on faith in Markets, which may tie in with Tyler’s piece above. Why is there so much protection of business from taxation and Risk in the passage of law by the U.S. Congress? It is obvious that Congress has actual little faith in Markets, and even less faith that their own Incomes will be maintained without such regulation. The French Revolution, I actually took a Graduate level History course on it (can’t remember much of anything), occurred because of an aristocratical corruption of the royal Court, so they were free of taxation and of submission to the same laws as the Common people. Is the current structure so much different, though We may have to substitute ‘aristocracy’ with ‘Corporation’.

The basic fault evident in both discussion is the creation of a artificial Upper Class immune from the same difficulty as the general Polity. It is the very antithesis of free Markets, and cripples all efforts to improve the living standards of both the Poor and Middle Class. Question: What would be the effect of a law stating no one could get tax remissions greater than triple the Average tax remission Average of the lower half of Income Earners? I would suggest the National Debt would be paid off within the decade, Wages would rise dramatically while Prices would stagnate, and the net median Wealth of American Households would jump 20% within a decade as well. lgl

Saturday, December 30, 2006

Beggars' Opera

One has only to study this article by David Cloud to recognize that the American Taxpayer is in real trouble. The Wars against Terrorism, which was not supposed to cost even $100 billion, has had Congress appropriate $507 billion to this Fight since 2001. The current special appropriation request allocates $26.6 billion in ‘reconstitution’ to repair and replace equipment used for Y2007 alone; what ever happened to the estimated $8 billion per Year for such Costs a scant few months ago? The new request, coupled with the September grant, will push the cost of the War for Y2007 to around $170 billion.

The chicanery in the current system of Defense appropriations boggles the mind. The Defense budget exceeds the Government spending of most nations; yet, We cannot fight a War with this Appropriation devoted to the design and maintenance of Weapons systems with no realistic expected use in the time-frame of their technical superiority. The Special Appropriations necessary for the actual fighting of Wars do not spring into being in the form of any budget; simply as Calls for more money anytime they run out. It would not be so embarrassing, except that the fighting potential of the Taliban is increasing in Afghanistan, and the fighting capacity of the U.S. military is being matched in Iraq, where Insurgents have yet to surrender the Initiative.

The Democrats must move to control this situation, so quickly getting out of hand. I would advocate an immediate creation of a War Committee, composed equally of Representatives and Senators. The War Committee would sit in continuous session, and tasked as immediate Bursar of all Defense expenditures; payment not to be made, no matter the level of Appropriations scheduled by Congress, until proper usage of the Funds are guaranteed by the requisite department agents. Any other course will lead to a financial debacle, considering how many Hands are in the Till. lgl

New Year Resolutions

Dean Baker gives Us somewhat of a Rant which should be read. The basic fault with his viewpoint lies in the fact All who write on economics have an agenda, even if they profess to have none–may actually believe they don’t. His presentation of a New Year’s List, though, makes me imagine I should provide one of my own. What can be dumber than provision of a List which must actually devolve into a cite of One’s own failures.

New Year Resolutions:
1) Actually read all the economic Papers which I should–only trouble being I have a problem with my Eyes, and the bright lights of the Computer bother me after successive hours on it.

2) Hold firm in my belief that most economic institutions survive because of their inherent success; and the crises reported continually are only the hook of Journalists; the existence of actual threat would lead to alteration of institutional operation.

3) Understand that American medical practice is among the worst in the World, simply because the Cost brings a failure of medical provision. There is Private provision of medical health care elsewhere in the World, but it is much cheaper than in the United States, simply because there exists the alternative of Public Health Care.

4) Realize that the Market resolves almost all economic issues. Discussion of those economic issues rarely provides Solutions to economic problems, and rising Standards of Living suggest that the self-same economic problems were and will never be that catastrophic.

5) Explain to Readers that the problems of the World arise because of demographics, not because of economic issues. We have an Ageing population, We have an increasing population, and We have an more Consumption-oriented population. We need greater control of Our Social agenda, not Our economic agenda.

I could continue with another five resolutions, but my Readership is probably getting as bored as myself. The main point to be communicated lay in statement that almost no economic progress will be achieved in the United States economy, until American health care Costs reduce to the average of other nations, somewhere in the range of Resource allocation as existed here before the advent of Medicare. This is not to say such Programs are totally at fault; it is simply to say We must control the Rent-Seekers. Otherwise, except for an overuse of Energy, the economy is in fairly good shape (don’t get me started on financial paper Inflation, and it’s destruction of real economic incentives). lgl

Friday, December 29, 2006

Capital Accumulation

PGL at Angry Bear has a Post which bears study and contemplation. The one element of the Sowell Quote from the National Review article which bothers me comes in the distortion of the Decision-Making process in the Production cycle. Production comes from a decision to produce a saleable Product. Sale of this Product is like the Production process itself, a slow and laborious process with huge Operating Costs. Neither Production or Distribution is a rapid wealth accumulation process. What is the rapid wealth accumulation Process?

The Answer is convincing old wealth accumulation that the Production process and Distribution will provide a high Return of sustained duration if bought. The Purchase of the Process of Production and Distribution, or a percentage of it, remains the avenue for rapid wealth accumulation. Does rapid accumulation of wealth, therefore, affect the Production Decision-Making Process–only to the degree that the Producers hope to acquire great wealth rapidly by selling the Processing to old Wealth. Will such Hopes drastically alter the Decision-Making Process? No. Will such Hopes alter the Funding system of original and final Production?–No. Will fulfillment of such Hopes incite the new Wealthy to immediately enter into more significant Profit-making endeavors?–not more likely than Anyone else in the Near or Long term. It simply makes the new Wealthy into Investment Seekers, like their predecessors of old Wealth who made them wealthy by purchase rights of the Production process.

The question then must be asked if taxation of the proceeds of Production, or sale of the Production rights, can affect the Decision-Making Process of Production. The Economic answer would state Taxation could only affect Production and Distribution, if and only if it affects the percentage Profitability of the Production and Distribution process; Taxation of the Profits from sale of the Production and Distribution rights affects only the Purchase price of the sale of those Rights, not the Production process itself or it’s funding. I am sure many Economists would disagree with my assessment, but if Fed policy has ever proven anything, it has proven Liquidity is not bound by any degree of Scarcity. lgl

Thursday, December 28, 2006

Roll It All into One

Tyler Cowan comes out in favor of Universal 401(k) Accounts for the Poor in this NYTimes article. Greg Mankiw asks if this is the best way to help the Poor, or if an increase in Earned Income Tax Credits is not the better answer. Felix Salmon states the plan would still leave the Poor without utilization of the Plan, and cut the Medical benefits they need. Arnold Kling says personal savings accounts will face enough trouble, without saddling the plan with the Poison Pill of cutting Benefits. Mark Thoma doubts We can incite the Poor, who lack funding for some basic necessities, to contribute much to personal savings accounts.

My Take:
Enrollment of the Poor seems predictably less than perfect in any type of matching funds program; this being the arena for massed Capital. Greg Mankiw possesses the correct attitude in advocating increased Earned Income Tax Credits in order to gain any increased enrollment of the Poor in Income-generating capacity. Felix Salmon suggests the only improvement would be in Wall Street bonuses, at which I agree. Arnold Kling proclaims that medical benefits will have to be cut, but no one considers working on the medical problem from the direction of cutting Costs; the Day will come when Doctors must supply Patients with a list of both State-of-the-Art patented Drugs and Generic drugs capable of the same result. Many other medical Cost cuts could be made. I would advocate a totally separate plan:

I would turn to Greg Mankiw for his advocacy of Pigouvian taxation, and call for an Energy tax equal to the Cost of the Energy; all Energy Costs to be accounted–Fuel, Electricity, Heating, etc., and apportioned to each Customer according to use, and collected by the Energy Providers. The Energy tax would not generate Government revenue, but be devoted to Savings accounts (automatically deposited by the Energy Provider in the bank specified by the Customer) held in the name of the Customers, who could withdraw any Funds paid in over 10 years previously. These Savings Accounts would be held in the form of Bank Savings deposits, the Federal Government pressuring Banks to grant these Accounts the highest rate of Interest currently available continuously. The Federal Government would grant poorer Incomes a yearly set matching contribution equal to a maximum consistent with efficient Energy use. Foreign Oil Producers would wind up paying a great percentage of the Tax in the form of reduced Energy pricing to maximize Production, there would be guaranteed Universal enrollment and funding, Energy consumption would be cut, and the Poor would have established Savings. lgl

Wednesday, December 27, 2006

Sad Duty

Ritholtz claims that when adjusted for Inflation, Retail Sales over the Christmas Season will be flat, year over year. He goes on to provide a Reading List of recent News articles vindicating his position. I will ring in to present a slightly more dismal scenario, stating Retail Employee hours were higher at a higher rate of pay, larger Advertising Costs year over year (Inflation-adjusted), with lower Check-Out sales. Must-have Toy items were not as evident this Year, with both Parent and Child ignoring the Hype. Despite the huge Advertising push towards luxury items, Consumer purchase seem (at least initially) primarily Practical-Item provision. Retailers tried a tug-of-war for the shrinking American Consumption Dollar and lost.

Cactus at Angry Bear examines the differences between Corporations and Government. There is insight into the process, but important details have been left out. All Power structures seek insulation from the masses they impact. Citizens of a Country cannot never achieve the Transparency in Government operations they desire; Corporate Stockholders cannot get their own Corporate Boards to inform them of the Pay packages extended to Corporate Executives and Directors. No One has ever gotten a Politician to admit a failure in their policy; Corporate officers never discuss financial losses which occur because of Corporate inefficiency. Corporation continually attempt to claim the right forestalling self-incrimination granted to citizens, though claim of that Right qualifies them under the Rico Act to be a criminal organization. There is finally the definition of a Corporation–a imaginary person as defined by Government; therefore, a Corporation is actually only involvement of Government in the Private Sector, and has nothing to do with Private Enterprise.

William Polley has an excellent article on President Gerald Ford. It lists both his accomplishments and his failures, the first greater than children can understand today, and the later not as bad as the News media portrayed at the time. I backed Ford against Reagan for the 1976 Republican nomination, and would do it again if I had to do it over. I imagine this Country would be far better off if he had defeated Carter; the hard-line Right would not have captured the Republican Party, and the Democrats would have been dragged to the Center with the Liberal Left in retreat. Both effects would have been better for American politics. lgl

Tuesday, December 26, 2006

Right and Wrong

Daniel Gross attempts to explain the real misuse of two math Concepts: Averaging and the median. He points out, but not with great clarity, that letting the Bush Tax Cuts expire would not affect median Household Income drastically, though higher Income levels would experience the joys of Tax levels consistent with their lower Income compatriots. A nice Bar Graph would explain everything, but I don’t do graphs (Mickey Mouse won’t help me with the danged things). The best view would be vertical bars denoting total Income for each Income level, sided by a bar denoting the total taxes paid (Federal, State, and Local) on Average by each Income group. Try it sometime: Mickey Mouse loves you!

Ritholtz at The Big Picture explains effectively that Retailers received a Holiday which they did not appreciate. The telling point was that though the Store traffic in December was as great as in 2005, the actual Sales were down 1% on average purchase size. This indicates to myself that Consumers are ignoring Advertising, and searching out real value. I wonder how much additional Advertising was paid for this year. Check early Year reduction in Advertising budgets, a clear indication of a waning economy.

Dean Baker criticizes the Washington Post’s use of Private Accounts numbers in the Social Security debate, which had already been proven to be dubious last Year. No One, in fact, truly believes that Private Accounts could have a major impact in SS security issues, claiming only a doubling or so of current Interest rates on the Fund. What exists as the real issue remains the vast Windfall gains of Fund managers in their self-award of Salaries, Benefits, and Bonuses to themselves. Republicans think that about 0.03% of total Labor should receive these Windfall gains, which would eventually constitute about 2% of all Funds deposited with them; Democrats unexcited about this, unless of course, Political Campaign contributions increase proportionally. What bothers me is the suspicion that what little Problem exists will be finally settled by a Payroll tax increase anyway. lgl

Monday, December 25, 2006

The Military Option

The Military may be missing the commitment for increase of the Military forces available. Both the Army and Marines suggest in this article that they restrict the opening of new facilities–Training and Recruitment, refrain from introduction of new Recruitment incentives, and concentrate on Patriotism to induce the slow growth (6-7000 for the Army, 2000 for the Marines) that Command desires. I think ‘We have a failure to communicate here!’

Multiple-Tours in Combat zones may seem like an option, but it gets fairly Time-worn as Troops find themselves dumped in the press of Combat patrolling again and again; two psychological pressures arise under these conditions which have fancy names, though I simply call them ‘Gun-shy’ and "Trigger-happy’. Neither can be obviated by repetitive amounts of Training. Commanders can always tell when individual troops are effectively done; transfer to safe Duty, best if they are returned home to Stateside service, the only truly valuable option for the Military. Politicians and Generals regrettably fail to observe this proven alternative to Everyone’s injury.

What this Country really need are trained Reserves, and in numbers far in excess of what is currently available. I hereby advocate a new Law establishing a Volunteer option offered to all High School Juniors and Seniors; offering Summer employment at Boot Trainees' rates of pay, with a $1000 bonus upon completion of a summer Boot camp, adoption of this Offer would make them subject to Military Call-up for a potential 12 years service post-High School graduation. Seniors who attended the Junior Year Boot camp would receive a like Pay and bonus for a 3-month attendance of an advanced Military training course. The Goal of this Program would be the initial training of a desired 3 million Reserve complement, only called to Service upon Presidential decree, and at the discretion of Military Command as to the most-qualified. lgl

Sunday, December 24, 2006

The American Economy

The Big Picture examines the article by Floyd Norris and agrees that the Index of Spot Metals now reflects trends in the global economy, rather than the direction of the American economy, as Asia and China have become the marginal buyer of these metals. I would basically agree with Ritholtz and Norris, but caution that China has yet to go through it’s first globalized-style recession. Remember the example of Japan which is only just recovering from their first major recession of this type, and future economists should keep their eye on Taiwan and S. Korea. A secondary consideration is the changing format of the American economy; the expected poor performance of the American economy in 2007 could only set the stage for expansion of American manufacturing to come. I fully expect American manufacturing to increase by 17% by 2010-12.

Dean Baker states it is foolishness to worry about whether Oil is valued in Dollars or Euros. I would basically agree with his argument, but would continue to stipulate my own desire for the Transfer to Euros. Why? The Answer comes in the marginal discount Americans must pay for the greater volume of transactions conducted in Dollars. The entire World, except for Oil Producers, want cheaper Dollars to buy Oil. Baker has already explained why Oil Producers are not impacted by the cheaper Dollars. Foreign suppliers of Goods to American markets are willing to underprice their Goods (an expected 2-3%) to obtain Oil-trading Dollars. American Manufacturing suffers as consequence (think somewhere around 9% of their Profit line). American Consumers seem to gain advantage from this situation, but Consumer Debt mounts as they lose American Pay Raises and Hours Worked. The Dollar used as international Currency does not aid the American economy. lgl

Saturday, December 23, 2006

American Military Policy

Greg Mankiw presents a good Critique of a Washington Post story, hinged upon an economic analysis of increasing Productivity, rather on the posited view of Worker activism of the article. I am in total agreement with Greg in his assumption that increased Productivity was a necessary condition for rising Living Standards during the Period since 1900. It is rather a denial of history to dismiss Worker activism as unnecessary though, as no nation achieved those improved Living Standards without Labor unrest, except possibly for Switzerland; a place flush with Cash from elsewhere, and localized Government in Cantons. Swiss policy was basically one of avoidance of Labor unrest by close, homogeneous neighbors. Suppression of Union activity in Underdeveloped Countries will likely not generate rising Living Standards, or break the monopoly of traditional employers who limit economic opportunity and Job transfers. (no seeming relationship to the rest of the Post, until you ask what is the worst form of Labor unrest?)

Cactus at Angry Bear notes the Generals sudden pursual of more Troops for Iraq, and asks what comes next. I wonder at the same, understanding that the nominal increase proposal was very small when contemplating a military policy change. The reason the increase must be so small resides in the lack of trained Troops. I might say ‘I told You So", having established some time back the Concept that inveighing Troops to return is much simpler, the fewer the number of Tours they have already served in Iraq and Afghanistan. I suggested an increase in military troop levels of some 100,000 somewhere back when most of the current Troops were on their first Tour. I will not say it, but they will still hate me because I can say it.

This sea change in military policy must also be debated, as a Troop increase cannot be assumed to be a Saturation move, not even of Bagdad. Al Sadr will eat 20,000 more Troops without surrendering his control of the city. The western provinces would require an investment of at least 100,000 more Troops to quiet the area. The Kurds will be difficult in any attempt to move against their controlled areas. We could move Troops into the River valleys, but these are the only areas where Iraqi Police and Military seem to have effective control. The Military Objectives of any Troop increase should be clearly outlined. Christopher Hayes has a good Post on the desires of Bush, much commented upon by Mark Thoma, PGL and Steven Kyle at Angry Bear, with a related comment by Thoma again on articles concerning changing current U.S. policy on the pursuit of the Iraq war .

My Take on the issue is that Bush has decided to establish permanent bases in Iraq, while maintaining continuous pressure on the Iraq Government to allow American Oil companies First Call upon Iraqi Oil, with suppression of Iraq Oil production to conform to Saudi policy of Production curtailment to hold up the World Oil price. This Wealth Cronyism will lead to continuing pools of American blood on Iraqi streets. lgl

New Direction

Paul Krugman and Brad DeLong are very good economists, but they make a vast mistake in assuming the National Debt is unimportant, and can be ignored. Mark Thoma would seem to side with Krugman and DeLong, Tyler Cowan seems to possess greater doubts as to the efficacy of abandonment of Rubinomics.

My position remains that the National Debt must be reduced in order to cut Inflation(you could check back in the Dark Ages for a book I once wrote about the causes of Inflation), and to restart real Production in this Country (think reduction of Current Account deficits here). The Krugman thesis states: The Republicans spend and buy Votes, so should the Democrats! I sincerely believe there is something wrong with this proclaimed Political Truth.

The National Debt must be attacked upon three levels: cutting the Cost of Social programs (but not their benefits and promise), restructuring the Federal Tax system (eliminating the Tax Escape system, and introducing a fairer system), and cutting Waste and Pork-barrel Spending. The reduction in Cost from the Social programs will come from controlling the Profit margins in Health Care, introducing unitary benefits for Enrollees ( think placing mandatory limit on Benefit awards), and controlling Wage and Salary awards of Social program Providers (think Health Care; example: set Rule that Doctors can get no more than $200k per year of Government payments for Social program beneficiaries–to get any payment, they must accept a Government-dictated number of Patients). The Tax system must be fixed, or We will never achieve fiscal balance; I am such a Hawk on this issue that I would eliminate even the Personal Exemption, replacing all Tax escapes with lower rates of Taxation. The cutting of Waste and Pork-barrel requires some degree of restraint by Congress (like granting every Representative and Senator only a set amount of discretionary spending for each Congressional term, but a longer Statement that all tenure of said Individual must match this Spending lid, else all Congressional Retirement benefits are void).

The keyword in this discussion must be a practice of Self-Discipline on the part of Our Elect, based upon a real demand (enforced) by the Electorate. Democrats will be seen viable as Party and ideology if they clearly articulate their Goals. They will be viewed as only Beltway politicians if they do not provide a new Program which the Electorate can watch and understand, adding up the Advantages. lgl

Friday, December 22, 2006

The Shifting Sand of Numbers

Dean Baker wrote a Piece today, which is really worth the time to digest. He may be a little harsh in application of the numbers, but I basically agree with his assessment of 1% growth over the five Quarters. The main difference between Us may lay in the consideration of the importance of the slow growth. I find the slow growth to be the result of shedding inefficient enterprise, not necessarily a suppression of economic growth. Much, too much, economic expansion was created by the Bush Tax Cuts, and poor business planning and policy is finally being cut from the Production cycle. If my posit holds some validity, then it will additionally have value in countering Inflation. Restructuring will actually induce a better economic position for economic growth in the future. The trouble resides in the fact that I may be subject to simple wishful Thinking.

JP at The Capital Spectator tends to join myself in some wistful thinking, though he at least backs his ideation with some solid numbers. I do not share his bright opinion due to the fact I surmise (without heavy Checking of the Numbers) that most of the Consumer Spending gain come from Debt accumulation, while the Consumer Income gain came from Christmas season employment. Resolution of Christmas Retail numbers will tell the tale. Who you going to Call? Ghostbusters!

Menzie Chinn examines the Costs of Iraq, both the ‘burn’ rates and with the study of Reset Costs. The burn rates of maintaining a Force level in Iraq are reasonable, if We ignore the Cost additional of Press-ganging Troops to stay in the Service. The Reset Costs, though, remind of the immortal words "Iraq could never cost $100 billion!" Reset Costs must include the Cost of complete replacement of 70% of all Equipment at Brand-New pricing. Reset Costs will not be budgeted in at $8 billion per year either; think somewhere around 17% of new total equipment Cost. The longer the delay of the Bush administration to introduce these Reset Costs, the higher the yearly Cost will be, and the more equipment which will have to be replaced. lgl

Thursday, December 21, 2006

Free Trade?

Edward Hugh comments on a Bloomberg article, expressing a high degree of Free Trader philosophy. Nowhere is there discussion about the loss of purchasing power for Japanese labor, especially for Fixed Incomes. Japan identifies with the United States in many ways, one of which consists of the distribution of Export Income gains; the majority of such Profits going to the upper 20% of the Income Earners. This translates through a rough formula where the non-Gainers from Exports suffer all of the Purchasing loss, while the Gainers from Export Income attain Profits from that involvement, plus a hedge against Purchasing losses. Free Trade holds advantage only for Those who have Trade Share capacity.

Kash provides a good Post on the disappointing 3rd Quarter revision of GDP growth. He mentions that a lot of Households are close to the Edge, potentially staring loan defaults and foreclosures squarely in the face. The major sorrow may not be the falling home prices, but the sheer inability to resell the overextended Properties before foreclosure proceedings. Most debate over the residential fixed investment issue ignore the fact that the Funds are not out there; Lenders are over-shelved with high risk Debt, faced with high Interest rates on Funds rental, and with a surplus of unsold Property existent in the Housing market. Energy pricing may be falling, but is not expected to stay there, while no one expects a quick rise in rates of Take-Home pay.

I have not been gathering materials on Retail sales through the Christmas Season, but have a suspicion that markets may not be clearing, requiring a long post-Christmas Sales season. The recent drop of the Dollar against foreign Currencies, like in Japan, will not aid in clearing the Retail markets. The American Consumer has been a little punchy since Q1,2006, and a new Generation of Consumers are learning of the hazards of Consumer Credit debt. I look outside my window, and see a Storm approaching; I look back at my Computer, and see a Storm approaching. It is not a Win-Win situation, and Free Trade philosophy may be at fault. lgl

Wednesday, December 20, 2006

Judging Economics

I have always had difficulty with both Pigou and Coase, and the trouble could be found rooted in a Footnote of this Paper:

7 According to Richard Posner, "a social cost diminishes the wealth of society; a private cost
rearranges that wealth." Economic Analysis of Law 6th ed. (New York: Aspen Publishers, 2003), p.

Externalities must be vocalized in some form, else they go unrecognized as either Social Cost or Private Cost. This though brings on a Time Constraint which itself must be vocalized, otherwise externalities become simple taxation of Property rights whenever Someone can (find) some externality which has not been exploited. Do I seem to favor Coase then? I think not, because he cannot effectively link Private and Public purpose. This Paper would like to tie externalities to economic efficiency, but the Paper again prints a Footnote:

10 Although mutually beneficial agreements are always Pareto efficient, this example shows why
using Pareto efficiency as a basis for public policy can mask serious moral rights violations. This
is the case whenever the allocation of resources (or rights over resources) from which Pareto
improvements take place is itself unjust.

And also this Footnote:

13 One reason Coase may be tempted to eschew responsibility is that from an economic
perspective a harm done is a sunk cost. And since economic agents (or judges considering the
case from an economic standpoint) are forward-looking, the question about who is to blame is
naturally substituted with the question of who it would be most efficient to blame. This forwardlooking,
consequentialist conception of blame, however, does not merely change our concept of
responsibility. It destroys it by reducing questions about liability to economic considerations.

What is wrong with Coase, Pigou, and this Paper resides in the Concept of Property Rights. Can Property Rights to anything be subscribed unilaterally to Anyone, when development of those natural resources extend beyond the Generations of both Those who inflict Harm, and Those who are the Victims? Can there ever be a Pareto efficiency when future Costs extends far beyond the constituent economic activity? Coase, Pigou, and this Paper refuse to evaluate magnitudes of injury, and duration of the damage. Those who destroyed the Cedar of Lebanon to build Ships and Temples felt justified, but where are the forests of Lebanon today? Fresh Water reserves are disappearing from this Country every year, and succeeding Generations will pay the real price for such damage, but what are the Transaction Costs here? lgl

Tuesday, December 19, 2006


Donald Lambro outlines the attempts by some Congressmen and Senators to block more Pork Spending through Budget Year2007, with a valiant effort to explain the horror of earmarks. The entire effort edged towards failure, not because of poor writing, simply because the Subject boggles the mind. Case in Point: The DoD Budget is far greater than was the War Dept. Budgets of WWII, both in nominal and real terms, yet We cannot fight a War without an additional Special Expense budget for each year of the Conflict. They do not call these special Appropriations any form of earmark, simply due to magnitude, but the Comment is the same, "Oh, by the way, We have to actually fight a War, so shell out the Cash; We don’t want to spend our own budgets."

Chris Dillow sets himself to an impossible task: defense of the current round of Bonuses for the City Workers. He suggests that for the ‘Rank and File’, the practice holds more than simple ‘Rent-seeking’; the practice common to big Executives. He may perjure himself with the statement that he was a previous member of the ‘Rank and File’, and his words might damper the injustices of a past life (Just kidding!). The debate, though, could be transferred to New York and the Brokerage firms. The facts really state that Investors must Vote with their feet, a very ineffective means to counter outrageous Charges; much lessened due to the monopolistic control of Brokers over the mechanisms of Investment. The highly competitive labor market holds no water, as it consists of Brokerage firms competing with each other; does Anyone know Anyone else who wants a broker as a Personal Physician, CEO of their manufacturing concern, or even a Fourth at Bridge?

Steven Kyle worries about the potential crisis of the Dollar, I hope Everyone caught the WSJ discussion between Kash and Menzie Chinn. The question I pose must be: Why does Everyone expect China to continue to buy U.S. paper? China has always had an antipathy to the U.S. Government, if not Our economy. They are busy developing alternate Resources throughout the World economy, and actively pursue Market outlets for their Products outside the United States. Many would claim Chinese bankers hold too many U.S. denominated assets to risk a sharp decline in their value, but do We actually know the inscrutable Chinese? lgl

Monday, December 18, 2006

Rights of Property

I enjoy the work of Cactus at Angry Bear, and often like to work in tandem, so that I follow up on Commentary on the gist of his argument. He presently has a good Work on Estate taxes. I have often considered the Subject, and still find our current system approaches the Estate problem from the wrong side. We think to tax the Estate, when We should instead tax the heirs. Why tax an Individual who has already been taxed on his assets?

The real thing to due is first give every American a Freebie, or some set amount of inheritance(whether in Cash or assets) which he can receive gratis. Thereafter a progressive taxation will be exacted from any and every heir. The method of taxation can be easily determined by any Estate owner, as can knowledge of non-taxed bequeath still allowed to any heir. The distinction between Gift and bequest disappears by act of law, and the Estate owner can determine for himself the best distribution of his paternity. He who has aggregated the Estate awards the distribution as is his right.

What have We done in the economic sense? We have left the property right of possession in the hands of the rightful Possessor. We have eliminated the complexity of Gift awards, Trusts, and various other Instruments from the realm of Estate Planning, as all find lack of need for such careful planning to avoid taxation. We have leveled the Playing Field for All, actually expanding the field of heirs, as Estate owners determine for themselves the amount of taxation they would have the heirs pay; naturally inducing an expansion of the heir field. Economic power can only be transferred from one Generation to Another only under the duress of proper taxation to level the Expenses of all economic enterprise. No one’s rights have been violated, and Estate Ownership has achieved permanent value. lgl

Sunday, December 17, 2006

All Things Wrong

Mark Thoma presents a good Post on environmental concerns, stating that Business must be forced to internalize the Costs of ecological damage. It is also equally obvious that Daniel Schrag has never before had the opportunity to testify before a Congressional Committee. Such Hearings always combine the worst Clowns with the budding Geniuses, so that Committee members can appear astute in their choice of the Right course. It is not so much like a Circus performance, as like a Carnival Midway. Woe to those Congressional Aides who allow Our Esteemed Elect to appear like dolts and idiots before the cameras.

Brad DeLong puts together a good Piece examining the issue of inequality, from the viewpoint on how statistics are gathered to support the various claims. Wealth remains much harder to evaluate, than is Income; close examination will illuminate Wealth consists basically of the retention of Income over long Periods. Even a small Percentage increase in Income retention over substantial periods of time will bring vast difference in total wealth attained between two Incomes, despite their being the same. The methodology of Income retention should be studied, and the relative ‘fairness’ of those methods, before tirades are issued. The probable greatest source of Income inequality has been the passage of 401(k) style tax escapes, starting I believe in 1977 (memory is a dubious thing). These tax escapes, though, are popular (even among Economists); it is easier to rant against growing Income inequality, therefore, than to actually examine the cause of it.

Dean Baker suggests We need to examine how We finance the Research and Development of Drugs in this Country, not simply rant against the excesses the Drug industry is caught in (did you notice how sneaky I was, so I did not have to type pharmaceutical correctly?). Check both his links provided at the bottom of his Post. lgl

Saturday, December 16, 2006

Sin Taxes Again

Tyler Cowan provides a link to a good Paper, but if you are like me, just read his assessment. The passage listed fairly states the gains from moderate Inflation. It does not address the problem of chronic moderate inflation. Here is where the matrix changes to my mind. Chronic moderate inflation changes the Players’ reaction to the inflation. Older Households are trapped within the mix, and face a definite reduction of their collective wealth over time, thereby lowering the value of their past labor–a post-Wage Cut which they cannot assail; a simple 2% inflation rate per year will bring a halving of wealth (with Interest rates below 5%, and normal Withdrawals for Household Expenditures) in about 14 years. Young Middle Class Incomes will find no gain from chronic inflation, after Lenders adjust for the estimated chronic rate of Inflation. Foreigners will adjust their Purchase decisions to account for chronic inflation, after yearly reviews of their Investment protocols.

The real element in this argument states that chronic inflation remains a vehicle to discount Wages paid to Labor. The traditional weapon to fight inflation has always been tight Credit extension, but it works poorly at best. This is because Credit extension, in itself, serves as only a minor Propellent of inflation. The real drive of inflation is excessive Consumption. Do not assume this stands as an advocacy of some ideal Savings rate. It is not! This tract advocates direct use of taxation to limit both Credit extension and Consumption. There are methods to achieve such restrictions with effective, enforceable Tax forms. It may be time for implementation of such mechanisms.

Maximum Consumption levels can be established for every Income level, which match Economic evaluation of sound Purchasing practice, with an automatic Surtax on determined excess Consumption beyond this limit; the Surtax set at a level to naturally reduce Consumption to the acceptable limit of Consumption. Sound like Big Brother Economics? Most definitely! Why advocate such a course?

It would force Income Earners to Save and Invest for their retirement, or face additional taxation. It would reduce the total Consumption level of all American Consumers, and do this in a highly efficient manner; Consumers would rationally plan for such Consumption for which there is real Desire or Need, reducing the impact of Impulse-Buying. The Financial markets would adjust their Interest rates to reflect the new matrix, with lowered Interest rates both in borrowing funds and loan extension. It would compel Producers to extend the life-expectancy of their Products, in order to attract more Buyers. The total would lead to higher rates of Capital accumulation among American Households, a better mix of Consumption Products, a more stable Financial market, and reduce the pressures of an Ageing Labor force. lgl

Friday, December 15, 2006

The Hemlock Post

The first item must be to provide Those who would wish to read something good, and I would advise them to read Bill Testa’s article on the Chicago-Milwaukee region. It only foretells the future from my view–and study the graphs. PGL at Angry Bear presents some good material and links to current Thought on wealth inequality. Cactus at Angry Bear provides his justification of progressive taxation on basically sound reasoning, and it leads into the rest of this Post.

Some rude Critics of my economic philosophy suggested I provide an Outline for my progressive taxation of Patent and Copyright royalties, they mainly desirous of aligning major Opposition to me in the Economic community. I decided if I was to be railroaded into this, I would make them truly grunt and run. So here is the following.


1) Such Proceeds, for Tax purposes, shall be deemed separate and distinct (this means that Income from these Sources cannot be amended and disturbed by other Tax law operating. The main thing here is the immunity from other Tax Deductibles.)

2) Normal Business Operating Costs or Debt load will not affect the impact of the Tax.

3) The Tax will be owed in the Country where the Products are sold and used.

4) The Schedule rate of Taxation:

0–$1 million-----12% of all Proceeds
$1–$10 million–-15% -----------------
$1billion&up—--45% of all Proceeds

Is that enough to hang myself? lgl

Thursday, December 14, 2006

Sin Taxes

The War in Iraq is expensive by any Accounting procedure, and the Cost is likely to increase significantly in the future. No one else will say it, but the Cost of the Iraq War will exceed a half-trillion dollars sometime next year, and the Win which Bush insists upon doesn’t exist. Win what? There is no method to disarm the Sectarian sides in Iraq, no way to disarm the racial Sides in Iraq, and the Bush-backed regime is itself a Sect which uses violence against it’s enemies. The one Salvation of Iraq might be civil war where the Terrorists of all but one Side are destroyed.

Greg Mankiw provides a very good Post examining the purported increase in inequality, both Alan Reynolds and Greg thinking that heavy Tax-Shifting by Reportage methods created an illusion of increasing inequality which may not be the statistical case (the serious Student should check out the links provided, especially Bernstein and Furman). The Furchgott-Roth paper may lack a comparison Period to stabilize extreme Readouts. The real issue, though, may be Who owned the assets prior and after Tax-Shifting occurred. The previous Tax reportage system is likely to have simply hidden inequality which has been excessively large throughout.

Steven Kyle presents an examination of the real working of Social Security taxation, stating that Social Security taxation is higher than Income taxation until after you reach the median Household Income of $44k. The real fact here ignored, as everywhere else, comes in the use of Income bracketing. The practice literally allows upper Income brackets three advantages: a reduction of owed taxation, the ability to write-off their Social Security contributions, and the right to demand the highest Social Security benefits without payment. Am I being extreme? Now, I was going to propose Today the progressive taxation of Patent and Copyright royalties, as such are basically a gift from the Government (never really extended to myself). lgl

Wednesday, December 13, 2006

Supression of Wages

Chris Dillow examines Class and Character with some interesting links and personal thoughts. The real Generator for success, though, comes in the form of Confidence creation. Those of privileged Class possibly grow up within a Confidence reinforcement environment, but even relative Adults can endure such Confidence building with notable achievement (check the Before and After aspects of a U.S. Marine Corps Boot platoon). Successful Bosses recognize the best labor force remains a motivated labor force, and this motivation is based upon Confidence creation at both the Group and Individual levels.

Russell Roberts responds in two Posts to the commentary of Dean Baker on which I had posted yesterday. Russell questions the practicality of Dean’s argument, doubting that elimination of such trade restrictions would have much impact on the Wage and Pricing structure in the United States. The case for elimination of these trade restrictions is indeed doubtful of impact, but is there no other redress?

It is my Thought that the licensing of high-Paid Labor stands as a valuable practice, which can easily be turned to advantage for the Consumers. A license to make $200k per year when ordinary high-skilled labor makes only $50k per year, should be worth somewhere in excess of $30k per year. Smart Legislators would produce law which would demand some such amount in Cash, or a Contract agreement with the Licensee to perform a relative number of hours at their trade in Community service treating the Poor, who cannot pay the normal Pricing for such service. The expansion of such Licensee’s clientele, among whom reside Poor who cannot pay for expensive Drugs and medical practices whether needed or not, will impel the Licensees to act as Purchase advocate obtaining the cheapest Drugs and medical services possible. lgl

Tuesday, December 12, 2006

Tax Parity

Felix Salmon questions the journalistic integrity of a NYTimes Editorial, stating it to be mainly based upon one partisan report (not yet statistically challenged). I will only say that the EPI, while liberal, feeds in the numbers carefully, knowing they will be eventually reviewed by the Right. Felix, though, moves on to ask where the Consumption is coming from, if the weakness in Consumption has been showing in the Middle Class. Here the Answer might be the increase in Immigration and Immigration wealth. Today’s Immigrants do not drive the junker cars of old, opting out for easy purchase contracts for new vehicles with low monthly Payments which extend forever. The same can be said for the rest of the Consumer Credit Market. The real element of the new Immigration comes in the form of their protection by the Consumer Credit extenders, who fear their return to their homelands.

Dean Baker makes an excellent Case for cutting the Wages of high-end Incomes. The real humor in the analysis lay in the fact such equalization of Incomes is easily achievable if the Income Tax system were actually Progressive. Economists do not discuss the Wage suppression process of truly progressive tax systems. Case In Point: Say there is an Income tax which demands a 30% tax on all Incomes between $50k-100k. Not much incentive to suppress Wage demands. Add a statement that Incomes over $100k will pay a tax rate of 50%. How many want to earn $120 per year?

Another Case may be more illustrative: Pass a Tax law which states that real percentage tax rates must be equal across Taxpayers. Some might say it does not matter, as lower Incomes pay nothing more than Social Security taxes. Wrong!! They pay a variety of State Property and Sales taxes and Imposts, plus Most must pay for other services like Car Insurance. Could this extended imposition by Government be included? Middle Class Taxpayers would demand that their losses from Government extortions be accounted in full. The real percentage tax rate has suddenly ballooned into a real nuisance for the high-end Taxpayers. Middle Class Taxpayers are suddenly standing with Shotguns, to officiate the Wedding of real percentage Tax rates to upper-end Income Taxpayers. The Wedding is also beneficial in removal of Deficit from the Federal budget, raises the actual Buying power of lower Incomes, and actually slows the extension of bad loans to bad Credit risks as mentioned in the first Paragraph. lgl

Monday, December 11, 2006

The Benefits of Tax Policy

Mark Thoma always presents good material, and here is real debate between advocates of the Real Business Cycle and the New Keynesians. I personally possess no faith in Monetary Policy, or find actual relationship between economic performance and any macroeconomic policy. It is my belief that Fed Lending rates should be pegged permanently around 3.75%, but this accomplished in slow stages of .05% at a time. Prescott stands in error in the thought ‘that the sky is not falling’. The trouble lay in the fact it is falling so slowly. We have transformed from a real Capital economy to a Paper economy.

Ed Prescott makes the same basic mistake as did all Economists before the Great Depression, thinking conditions will remain as they were. Does this mean I think there will be another gigantic recession? The Answer is definitely No! What We will see is the vast retreat in the value of the Dollar, and actually, all other World Currencies. The dedication of the Real Business Cycle Economists to Paper Instrument Investment starting circa 1965, with accelerations of Dollar devaluation in the 1980s and 2000-2006. (Short analysis: The multiplication of Paper to actual Capital disintegrates the Profitability of actual Production, scattering the Proceeds, denying actual real Capital investment funds, and lowering Fund returns overall). This means that no matter the magnitude of Investment flow into the Paper Instruments, attempts to Cash in these Instruments will lower the market for these Instruments faster than the amounts taken out. It is an illusion that such Investment can finance the Retirement plans for any significant number of Retirees.

Paul Krugman is quite right in his article linked in the Thoma Post, but both he and Mark think Government intervention has Value. Even if it were effective (something almost never actually seen statistically), all Government policy adopts a Partisan face where actual economic value is lost in the pursuit of Special Class privileges. The only effective arena where Government finds effective operation is in Tax Policy, and this only where real percentage Tax rates are uniform across all Taxpayers. lgl

Sunday, December 10, 2006

The Congressional Engine

The real note here comes in the form that Wilson Mixon nor Ed Guthrie exactly outline the expected losses pertaining to the forced Minimum Wage. It is my Thought that Opportunity Village may still be operating at a Profit, and that the Disabled Workers Costs remain the same–travel to work, Clothing, Mechanical Aids, etc. All these Republicans who worry about poor Minimum Wage labor losing their Jobs, never seemed to worry about the effects of Labor affected by Downsizing or criminal Corporate management (think Enron). It is also true that a guess-estimate of about 70,000 Workers in Nevada work for Minimum Wage. An increase of about One-Seventh of their total Wage might has some beneficial impact as well.

The Dollar is falling in value against other Currencies, but no one seems too worried; except for perhaps American labor, who again witness a reduction in their real Wages. The article mentions that the real magnitude of the National Debt has been reduced by devaluation of the Dollar. The article does not mention that the stored value of past American labor has also reduced in real terms. Politicians, especially Republicans, like to be persuaded generously by Lobbyists to spend vast amounts absent revenues (remember the old adage of using the Printing press to finance Government Spending) by printing up vast amounts of Treasuries. The Later are not much different from printing Dollar bills, though the Dollars have better Graphics. Republicans and Democrats, though, do not comment on the added burden applied to Households.

Congress working Overtime in the hours before adjournment to pass a Off-shore Drilling Act to reduce independence on foreign Oil; ah, first Oil to come sometime in the 20-Teens. It actually was not an independent Act, but part of a omnibus package (Magnificent thing: I even heard a rumor that Pet-Owners can deduct Pet Food costs as a Household Living Expense). I do not know exactly how long the total bill was, but Congressmen and Senators should be commended to having gotten it read this Year (if they did). lgl

Saturday, December 09, 2006

Economic Theory

Mark Thoma has an analysis of "The Autistic Economist" by Alcorn and Solarz, Yale Economic Review. The review with Mark’s comments need to be read as all, criticisms and counter-defense, both hold sway in the discussion. One basic failure of Economics as presently presented consists of Economist description of Markets in the first place. They discuss the possibilities of Choice between different Products, and the range over which that Choice can be made. They fall short in analysis of the development of that Choice.

Participants in a Market have already chosen what part of the overall Market in which they would produce or consume. The Producer has made an evaluation of his skills, resources, and his affinity to the production process. The Consumer has already spent a lifetime developing his Choice pattern based upon his needs, his desires, and how he wishes to allocate his Income. The Advertizer attempts to seduce the Consumer away from his previous Choice pattern with sensuous creation of new desires within the Consumer, or attempts to create Consumer desires for superior products with substituted effect. Markets drop from the position of being a vast monolith by the function process, and the Invisible Hand truly disappears to be replaced by quite normal human interaction.

Economists confuse themselves as much as Others, by examining their models and finding variations from their projections; concluding there is some unknown Variable not yet defined. It is simply the traditional battle between Tradition and Progression. Neither Producer or Advertizer possess assurance of at what exact point Consumer preference will change. No Consumer can define exactly when Producers will match their Income allocation range; the reason why Store Sales are such a vital element within the Consumer Buying pattern. Economics and Economists find failure only in their ‘trying to worry the bone’ too much. lgl

Friday, December 08, 2006

Adjusted Wage Increases

The NYTimes runs an article claiming that the labor market is tight, and has proof that year/year growth of Wage Labor below management level was 2.8%. Tyler Cowan has hopes of finally attaining labor market equilibrium. The growth of Wages is real, but still behind the productivity gains. Tyler also provides a link which should be studied. Do such Wage gains replace the huge losses sustained by American labor from American Corporate shedding of side benefits programs? Recovery from that Shedding would seem impossible to estimate, but probably requires a Pay increase overall in excess of 8%.

Tim Worstall weighs in with links to his previous Posts, which basically states Wages will not rise rapidly when Productivity is increasing, and Wages are gaining now because Productivity is falling. Not entirely the whole Answer. Wage increases must drag behind Productivity because Profits must be registered, evaluated, and Wage Demands must be examined for force (Business managers do not provide Wage raises gratuitously). They examine how tight the labor market actually is, how much Workers are actually pressured by Price increases, and what Wage mix they could endure with the extended Wage raises if the economy turned sour.

The tight labor market, itself, is more Urban Legend than reality. Retailers hire for the Christmas crowd, and most often offer as Wage only what they have to present to get the labor. This labor is expected to be Laid-Off or offered greater Pay by mid-February at the latest. Now We must talk about Immigration flows. A probable quarter-million to One million Mexicans employed in this Country plan to return to Mexico for Christmas. Immigration (legal and illegal) from Mexico traditionally declines during the Christmas season. We have lost many Entrants into the American labor market, though the BLS reports an increase in Those looking for Work (I imagine some native U.S. citizens are attempting to reenter the American labor market at a time of high viability). lgl

Thursday, December 07, 2006

Tax and Spend

Robert Shiller, Len Burman, and Greg Mankiw all miss the point: no one should suggest an elimination of Income inequality, but all should support equal percentage real taxation of all Incomes. Economic incentives will remain to work harder, though All will recognize there is not escape from Taxation. Does this mean there should be a flat Tax Rate? No. It simply means no Taxpayer will be allowed to pay less than those Taxpayers of lesser Income in real percentage terms. Guess what? Most of the lost revenues are recovered, and the National Debt shrinks.

Menzie Chinn clarifies that real Compensation has not show a great increase this Year, as touted earlier. Q2 Compensation was actually negative, Q3 was paltry 2.6%, and the Year over Year was only 4.3%. Those interested in the specifics of Compensation should go on to this Post. Output had been increasing 10% faster than Compensation since 1992, and productivity has risen over 5% higher than Compensation since 2000Q4. The elimination of Bonuses and Stock Options from the estimates could only massively lower Compensation rates.

Alex Tarbarrok poses some interesting questions which actually should be answered. The Savings rates is obviously defeated among lower Incomes, said Family members expected to Spend with the same abandon as the Better-Off. What percentage of the Gifts are Nonsense Gifts, bought solely because they are imagined desired. I remember the Husband who asked his wife if she wanted a new Car, or a string of Pearls. The wife adopted the same attitude as myself, asking, "Where would I wear the Pearls? I can drive the Car where I want." The famous debate between luxury and Practicality always surfaces, and I would advise adoption of the practical. lgl

Wednesday, December 06, 2006

Training and Taxes

The Economic Policy Institute describes the disturbing trend of Federal failure to maintain Employment and Training services. Real evaluation of the situation must state certain basic elements to the problem. Half of the Labor force are not acclimated to any form of Training programs, relying upon on-the-Job training to provide them with the knowledge and skills they require. Business management, though, has been moving in the direction of requiring developed Skill levels already acquired; conjoined with the awareness that labor cadres exist within the labor with this knowledge. The result consists of a massive segment of the Labor force actually being displaced from that labor force, what with Business Offshoring of their manual labor production in order to avoid social welfare Costs.

I still advocate a program where Community colleges are integrated with the High School system, funded by the School districts with heavy Federal funding. Most would claim this policy threatens huge Cost to the School districts, but the long-term outcome generated would consists of a greater employment of school district labor forces; Business Start-Ups still occur in areas with qualified labor and opportunity. I seriously doubt if the total Cost would exceed any one year of the Iraq War, and believe it likely that the program would pay for itself within a decade.

Arnold Kling poses a sound question: Will repeal of the Bush Tax Cuts actually reduce the numbers of Taxpayers subject to the AMT (Alternative Minimum Tax)? What difference? Taxpayers are paying one tax or the other. The real difference comes in the higher Income classes, where they must once again assume some of the Tax burden which so hinders the lower Income classes from restoring some Income parity with the higher Income classes. The bottom line states that All should share an equal percentage real Tax burden for a Government, which has lost all proportion in it’s Expenditures; such equality would propel a united Taxpayer front to limit the excesses of Government. lgl

Tuesday, December 05, 2006

China and Sweden

Menzie Chinn basically states that while the numbers might express that there is under-investment in China, he speculates there need be more Consumption, and less Saving and Investment. I agree with that assertion. The Chinese economy remains directed towards Exports, with foreigners providing the major elements of Chinese investment development. These foreign concerns express little interest outside of production for Export, cheap labor, and hold no desire to revolutionize the internal Chinese consumption markets. Native Chinese businesses are not taking Steps to organize and technologically advance the domestic Consumption markets. High Production will generate higher Wages, curtailing foreigner desire to invest in China, and will overbear the traditional Chinese domestic markets. China must start thinking in terms of Consumer Credit, before higher Wages and higher Production Costs leads foreign investment to drift away from Chinese shores.

Stefen Geens takes a savage look at the opposition of the Swedish LO, or umbrella union organization. The Landsorganisationen, though, makes the severe point: this is a real threat to the unions, and violates a trust of long duration. No one can doubt that the revisions will lower the Standard of Living of labor in Sweden over the long haul. No one doubts there is need to compel labor to find alternative employment. There is equally little doubt that Businessmen intend to turn compelled lower Wages to labor into profits for themselves. A Solution must be found unless All want to endure vast labor unrest. What to do?

My suggestion is legislation passed stating Unemployment Benefits will make up the difference between the lower-Waged Employment and their union Jobs for a Period of five years past the alternative Employment, guaranteed union employment when Jobs reopen, with Business detailed to negotiate Wage rates with the LO throughout the period of Employment of union membership. The Above, combined with the lowered Unemployment Benefits schedule, will generate the labor employment necessary, with security for the labor involved. lgl

Monday, December 04, 2006

Christmas Decorations

Richard Epstein makes a compelling case for the Big Drug companies, but falls short of engendering real belief. He makes much of the compacted time during which Drug companies can recoup their outlays for R&D. Patents awards last the full term from Date of Issuance of the patent. He tries to justify the immense Sales staff used to persuade Doctors to proscribe their Products, undoubtedly overlooking the data that Doctors are over-medicating their Patients; on the order of Six times the Proscriptions to their Patients, as was being done in 1960 (best free-fall Time prior to Medicare and Medicaid). He criticizes FDA regulation, even after widespread condemnation of lax FDA policies threatening the Public has come from Doctors, academic medical Researchers, and from within the FDA itself. Drug manufacturers are even well-known to discontinuance of Drug lines of high importance, simply because their Patents had run out, and they would not compete with the lower Profits of generic supply. Thanks to Greg Mankiw for the Pointer.

The New Economist has a Post and link to a Paper by Bordo, Erceg, Levin, and Michaels. It sounds like a relatively important Paper for Those interested in the area if they have the time to read it, which I don’t. Their concept of gradualism in monetary policy, though, undercuts the purpose of the policy in the first place. Shedding inflationary profits cannot be accomplished without loss of Book asset worth; gradualism would leave such worth unaffected, and inflation will not be cut. The gradualism, itself, would suppress Operating Profits, leading to long-term minimization of economic performance without suppressing the inflation.

Tyler Cowan tries to rationalize Christmas decorations. He is probably quite accurate in his assessment of the motives of Retail business at least. I personally detest those advertising ploys (such as having popular radio stations play nothing but Christmas music–grrrr). I wonder at the number of extra trains of coal required for the additional lighting (this is supposed to be an economic blog after all). I imagine the real purpose of early pressures for Christmas lies in Retail desire to foster guilt feelings in Customers who dream of a moderate Christmas with modest expenditure. lgl

Sunday, December 03, 2006

Social Security and Populism

PGL at Angry Bear again points out silliness of much commentary on the Social Security system. It is asked: ‘Add or Subtract What?’. I’d say start with the proposition that life expectancy will not increase more than three additional years by 2040. Add in the Proposition that this Country finally gets a handle on Health Care Costs (something from which We will drown in a decade, if left unchecked). Include the Proposition that Employment will increase by Nine million by 2020. I am good with Propositions, ain’t I? Glance through the Actuarial tables for a little time, and utilize the deficient mathematical skills of someone like myself, and ponder how little is actually known at this present time. Scratching on the back of a used napkin, I will go out on a limb, and say the Case can be made for the Social Security deficit to reverse and shrink sometime after 2027, though it will not be unmanageable at any time (We are not talking about great deficits here, when compared to the Bush Tax Cuts). Isn’t Everyone lucky that no one trusts me?

Mark Thoma tries to reconcile the Conservatives and Populists in the Democratic Party. I once wrote someplace that extreme Government intervention will never be beneficial, or would detailed Planning resolve basic economic constrictions (think malfunctions). Take the 401(k) programs. Very popular among All, but how effective? Not really–check out the real enrollment rates. Why? Management of a 401(k) is too complicated, requiring advanced knowledge by the Enrollee, or trust in Management staff who insists on huge Salaries and cannot explain the convoluted movement of investments of the Enrollee’s money. Great Government program–I think not! How could it be changed?

Here is where Economists will give a thousand answers, all basically Incremental in nature, and all basically tested (with flaws realized). I would recognize the deep hazards of Corporate internal financing of Investment; pass a law stating Corporate management could not risk Stockholders’ capital and Profits by such practice; they must obtain exterior financing which has been checked by exterior investment management for adequate Prospectus, Marketing strategy, and existent Consumption market for the proposed Product or Service. Most Corporations could achieve a relatively high Credit rating. Then I would pass legislation which states financial institutions could not obtain fund deposits (Private or Public) for less than Two percent above the Inflation rate. I would follow this legislation with passage of a law granting a limited Tax Credit (of some amount–preferably up to $10,000 per year) from Income taxes for equal amount investment to All Taxpayers who save in financial institutions. This law should eliminate all other Tax Credits for investment.

Everyone should realize there must be Cut-outs for Inflation rising above 8% per Year, and all legislation must be flexible to insure no adverse economic constrictions. This legislation, though, would eliminate vast Giveaways to the Wealthy from open-ended Tax credits for investment, while propelling a vast increase of actual Savings and Investment. Read the Mark Thoma Post, though, because there are major elements in all three positions listed which should be studied for Value. lgl

Saturday, December 02, 2006


Daniel Gross comes out slamming the GOP for being Protectionist in sentiment, with not all the anti-Trade rhetoric coming from the Democrats. He cites the Bush passage of the Steel tariffs and signing the Farm Bill into law in 2002 as radical anti-Trade. He goes on to equate Reid and Polosi with Smoot and Hawley, who sponsored the Tariff Act of 1930, even linking to a derogatory description of the Smoot-Hawley Tariff Act.

The 1930 Tariffs have gotten a bad reputation in the economic press, but they were not as disadvantageous as presumed. All industrial nations had overfilled Warehouse stock, all these nations did not have Consumers empowered to buy their Product, and Unemployment would have increased with or without the Tariff Act. It prevented the United States from enduring sharp competition in our domestic market, while We were going to be locked out of foreign markets anyway. The Act probably even aided the U.S. economy, by forcing American manufacturers to clear their warehouse through deep Product price cuts, which would have never been as extreme except for the erected barriers to Trade. This clearing of Stock through Price-slashing actually reduced the level of Unemployment in the following Period, and regenerated Business Operating funds.

The real criticism of the current Farm Act, besides the reintroduction of tariffs and subsidies which are foolish, lay in the underlying drive to subsidize giant Agribusiness Corporations. A different approach was needed, making Agribusiness function as a Cost-paying production. Small Farmers should have access to their own Fannie Mae or Freddie Mac, who would hold title to the land until the mortgages on land and equipment were paid; limitation of mortgage extension to Corporate concerns. No Farm Product supports should be allowed, but Farmers Cooperatives should be allowed to mortgage Farm Products with the above loan organizations, so such Cooperatives can act as their own Price-Sustaining Board.

I have always felt more favorable to tariffs than most Economists. Tariffs are a tool, like Monetary policy and Government intervention, with which to stabilize Our domestic market in it’s relations with foreign economies. Most Americans would favor Consumer access to only those Products which are conducive to Pension and Health protection provision. Sweatshop Wage and Salary rates find Americans cold, especially when such Rates are intent on being introduced into the American economy. Americans dislike to believe they are living upon the economic deprivation of Others; understanding innately such lifestyle will eventually attack them personally. lgl

Friday, December 01, 2006

Walmart, Keynes, and Friedman

This article presents a good overview of the development of Walmart over the years. An important part is the links to the work of Emek Basker and others. Basker finds a Short-range drop in Price (1.5-3%), and 3-4 times that reduction in the long-term for a wide range of Products. Walmart also caters to the poorer Consumer with sustainable Product and Pricing, so the implication is contained there has been a real rise in the Standard of Living among the Poor. A blog Post by Tim Worstall comments on the savings utilized by Consumers since the expansion of Walmart. I am a Walmart shopper myself, but use other Retailers as well; knowing well that competition actually establishes the Market format.

Brad Delong, Greg Mankiw, and Tyler Cowan all comment on the differences between Keynes and Friedman. Where can I come in on this contest of the Giants? Keynes thought in terms of a relatively horizontal LM curve, which held impact along the range of the flattening aspect. Keynes viewed Business and Industry as afflicted by periods of Funds constriction, where Interest rate adjustment would not affect the flow of Funds. Keynes was correct on his acceptance of Wage and Price stickiness, Friedman never integrated the Concept of Superinflation, and that doldrums deflation could overcome Monetary policy instruments. Keynes indeed lacked faith in the Market, but Friedman and Others suggest Markets will resolve every issue–highly debatable, especially within the context of war-torn or massive destruction conditions.

Keynes was far less confident about any permanent economic fueling of the Economy on a long-term basis. He stressed stability of economic performance, rather than excessive, continuous rates of rapid economic growth. Friedman spied potential for rapid expansion of Capital Stocks, with little consideration of limitations of Resource, financial capital, or survival of personal welfare instruments. Friedman did overturn the Concept of good, viable Government intervention in the economy; outlining it’s innate flaws. In sum, both men were absolutely essential to the progression of economics, they providing the Ying and Yang necessary for economic research and achievement. Keynes was wrong in his faith in Government intervention, leading to the sorry state of Government interference today; Friedman was wrong in his ideation of simply shifting Money for economic performance. I am wrong for thinking both are relatively worthless, economic performance commanded by unified and committed labor forces intent on the betterment of life; the Process in which both Government and Markets are noted most as detractors. lgl