Prove Me Wrong

I am SO sick of the election – seriously.  That one promises me this, the other one promises me that – I can’t help but to think “bullshit”.  Obama promises to create jobs by sinking money into special interest bullshit.  McCain promises to save the economy by sinking money into bullshit mortgage bailouts.

Now, I’ll be the first to admit that I don’t know everything>  Truth be told, that’s probably why I’m a libertarian – I couldn’t possibly know everything so let people make their own decisions (and their own mistakes).  But maybe I’m wrong.  Maybe Obama can really create jobs.  Maybe McCain can really save us all.  Fine, let’s measure it.

Come up with some real, tangible measures to show that your programs are really doing what you claim they are going to do.  If you are really ambitious, let your opponents come up with some measures that prove that there are real costs to what you are proposing.

Something tells me that you aren’t willing to actually put your ideas to the test – you would rather pontificate and blather.  So I will continue to call it all bullshit, because you are filthy stinking liars and I think that you know it.

Technorati Tags: politics

It’s Bush’s Fault

As I sit here to write this the Dow Jones has lost over 20% of its value year-to-date – most of it in the last month or so.  The news is full of doom and gloomy scenarios about how terrible the economy is.  Politicians are telling us how the credit markets are “seized up” and how they – and only they – are going to fix it.

But, for some reason, I have a hard time buying it all.  From where I sit things aren’t really looking all that bad.  I still see people going to the stores buying stuff, I haven’t seen mass layoffs or huge rises in unemployment.  Heck, I am still getting offered credit cards every time I turn around and my friend just closed on a house (and he has average credit at best) – so how are the credit markets “seized up?”

We have to keep in mind that the market isn’t the economy.  It is the collective expectations of the expected value of companies.  We all know that humans are emotional, the market is no better and in some ways worse because it is susceptible to crowd behaviors.

Every time the politicians tell us that credit markets are bad and they need to do something it scares investors.  Every time government agencies act in unison across the globe and do something drastic it scares investors.  What we are seeing right now are investors that are uncertain about what is coming next. 

I’m very scared – but not about the economy, about what the perceived state of the economy is going to force the government’s hand into doming something very, very stupid that will plunge us into another Depression.  Despite

If the Bush Administration would just come out and say, unequivocally, that they still believe in markets.  That there will be no more massive government intrusion into private business.  That things look a little bleak, but it will recover and this isn’t really the end of the world.  If Bush would do all of these things I think we would see an end to the wild swings in the market that have been the norm for the last couple of weeks.

Markets hate uncertainty and at this point we have no idea what they are going to do next.

Technorati Tags: economics,politics

Which is Riskier?

For the past 20 years, traditional pension plans, which paid benefits based on an employee’s years of service and pay, have been gradually replaced by individual accounts loaded with stocks and more exotic holdings, which provide benefits based on fluctuations in the financial markets. Today, only 18 percent of the work force, at most, including government workers and most private unionized workers, still have old-fashioned “defined benefit” plans.

This transformation has largely been the result of government policies that have encouraged, through tax breaks, the creation of 401(k)-type plans and promoted an approach to investing that favors risky stocks and bonds held in high-fee commercial accounts.

So what happened to all of those defined pension accounts?  They collapsed, the companies that provided them went out of business.  It would seem to me that tying your retirement to the long term success of a single company is far riskier than the success of the market as a whole.

Technorati Tags: economics,politics

In the History of Bad Ideas

This one has to be up there:

Paulson was in talks with Democrats about their proposal that the government be able to purchase equity in faltering companies as part of the plan, so taxpayers could benefit from future profits.

Giving government further incentive to manipulate, meld, twist and generally distort the market is a bad, bad, bad idea.  Imagine that a company comes along that is better for consumers in every way to one of these “bailed out” companies – Company A.  It will start making more money than Company A, Company A’s bottom line starts to suffer.

Does Congress just sit idly by while its revenue stream is effected?  Will Congress just let Company A slowly perish?  I’m agnostic as to whether saving Company A is the right thing to do.  It is possible that Company A is too important right now to let it just collapse, but it doesn’t always have to be that way.  What sort of distortions will occur if Congress is a part owner in Company A?  Does Congress get to pick the CEO?  Or Board of Directors?  Will there be a quid pro quo?  “We’ll support you as Chairman if you stump for Obama in ‘12”

I can think of nothing more unappealing than giving Congress a vested interest in the running of any specific company – business is too political as it is.

Technorati Tags: economics,politics

On to the Next Class

I know that many of you have been sitting on the edge of your seat wondering how I fared in my econ class.  Well worry no more, I got an A.

Relieved, I know.

I start my next class today - in fact I'm sitting in the class room as I write this waiting for the prof to arrive.  The class is American Presidents.  As part of the curriculum we are required to read two biographies of two different presidents - one from the 20th century and one from prior to the 20th century.

The book I am reading now is Thomas Jefferson by R.B. Bernstein.  I haven't gotten very far into it, but I've already lost a lot of respect for the man though.  He appears to be an opportunist and a hypocrite - but maybe that is OK.

One thing that strikes me though is Madison's reluctance to add a bill of rights calling them merely a "parchment barrier" to government intrusion into citizen's rights.

Turns out he was right - though I can't imagine that not having a Bill of Rights would have improved matters any.

Technorati Tags: politics,Thomas Jefferson,constitution,school

Government Efficiency

A friend of mine applied for a job with the FAA two years ago and put me down as a reference.

I recieved a questionnaire for his security clearance... yesterday.

Why is it that we want these idiots running healthcare?

Don't Just Tax the Rich

Megan McArdle offers some reasons why we shouldn't place too heavy a tax burden on "the rich." 

High taxes on a narrow base are about the opposite of optimal tax theory.  This is not because economists are mean, cruel people who are primarily interested in serving their corporate overlords, but rather because the narrower the base, and the higher the rates, the more sharply the marginal returns to rate increases diminish.

Take an extreme example.  The top 1% of households, about 1 million in all, have about 20% of national income.  They've also experienced most of the income gains in the last twenty years.  So let's say we want to fund federal operations entirely out of their pockets.  Well, to do so, we'd need an income tax rate of 100%.  Even ardent liberals will surely concede that at these levels, the supply-siders are right, and we'll soon end up with no tax base.

Even a less extreme example--make them pay half the tax burden--ends up with a 50% effective rate on high earners.  And to get a 50% effective rate, you need an even higher marginal rate.  The problem for people who want to load tax increases on these people while cutting taxes for everyone else is that if you actually succeed in shifting the tax burden this way, you'll rapidly end up on the wrong side of the Laffer Curve.

There is another reason too - "the rich" are highly susceptible to changes in the economy.  They have done reasonable well for the last several years because the economy, in general, has done very well.  But when the economy starts to do poorly the rich tend to see some pretty dramatic drops in their income.  Its very much a high risk/reward system.

Do we really want the tax base so highly dependent on these wild swings?  It might be entertaining to watch for a bit, but probably not very good for the overall health of the country.

Technorati Tags: economics,politics

More on Diversity

Quite simply, Rep. Cohen will have to accept what the rest of the country will have to accept -- there has been an unofficial Congressional White Caucus for over 200 years, and now it's our turn to say who can join 'the club.' He does not, and cannot, meet the membership criteria, unless he can change his skin color. Primarily, we are concerned with the needs and concerns of the black population, and we will not allow white America to infringe on those objectives.

Doesn't having any sort of "insert race here" club/caucus/fraternity just reinforce the idea that said race is different?

I always kinda found it odd that there were black fraternities, a black Resident Council, a Black Student Union, heck, we even had a couple black only lunch tables in the cafeteria.  Meanwhile the rest of the fraternities, student unions and lunch tables were pretty integrated.  And let me point out quite clearly that this isn't a case of the majority segregating a minority - this is a case of a minority holding themselves apart.

I understand feeling more comfortable with people like you - we all do it.  I even concede that I have no idea what being black is like, I get that.  But holding yourself apart and preventing yourself from meeting and interacting with people that don't look like you is completely contrary to the large university experience.  It's contrary to the concept of diversity (one of the justifications for affirmative action, btw).  And most of all runs counter to the goal of eliminating racism and prejudice.  Blacks and minorities should be seeking to interact with as many people that don't look like them as possible if only to show that they are really just like them after all.

Technorati Tags: politically incorrect

Diversity

I know it may be politically incorrect to say so, but why is it that diversity means "anyone except white guys?"

My employer is celebrating diversity month and handled out Diversity Pamphlets to everyone as they walked in the building.  Not a single white person in the whole thing.

There are several posters around the office - not a single white guy anywhere to be seen.

Do whites simply not have any value?  Or are we so alike that we couldn't possibly represent the concept of diversity?

I don't get it.

Technorati Tags: politically incorrect

Truly Creative Capitalism

The true power of capitalism is its ability to take the basest of human instincts - greed and selfishness - and transform them into an engine that generates wealth, innovation and prosperity for the entire society. 

Truly creative capitalism would discover a method to use the powerful forces of self-interest to incent the despotic and authoritarian leaders of the poorest countries to embrace the power of markets.   It will take a wiser man than I to find such a system, but I can imagine how such a system might work.

Perhaps it is a betting-market based on the GDP growth of a nation in which the rulers get a controlling share.  Perhaps the leader would collect a percentage of all taxes generated from business.  Either way, if  such a leader could be convinced that they would become wealthier and more powerful by letting their nation prosper as opposed to simply stealing whatever they wanted a win-win situation might be created.

Without creating the incentives for these authoritarians to make institutional changes within their countries I fear that any effort by the developed nations or Creative Capitalists will simply be throwing good money after bad.  It may help a little today, but shouldn't creative capitalism really be striving to make long term advancements in wealth that only changes in institutions will really achieve?

Technorati Tags: creative capitalism