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“Our practical choice is not between a tax-cut deficit and budgetary surplus. It is between two kinds of deficits: a chronic deficit of inertia, as the unwanted result of inadequate revenues and a restricted economy; or a temporary deficit of transition, resulting from a tax cut designed to boost the economy, increase tax revenues, and achieve . . . a budget surplus.” John F. Kennedy

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Jan 29 2010

Hayek vs. Keynes

Just a little econ rap diversion.  Give it a listen – it’s pretty amusing.

Carolyn

Economics Rap


Jan 29 2010

Proposed 28th Amendment

Came across this on Facebook and had to post it. I think this is something we can ALL agree on, unless you’re a politician, anyway.

Proposed Amendment to the Constitution:
“Congress shall make no law that applies to the citizens of the United States that does not apply equally to the Senators and/or Representatives; and, Congress shall make no law that applies to the Senators and/or Representatives that does not apply equally to the citizens of the United States.”


Jan 28 2010

Obama and Fundraising

C.M. Phippen

Our President, in his State of the Union speech, expressed concern about the recent Supreme Court decision which “will open the floodgates for special interests – including foreign corporations – to spend without limit in our elections. ”

I find it to be a positive sign that he’s concerned about contributions from foreigners and spending limits on election campaigns. After all, his own campaign accepted a reported $29,000 from two men in the Palestinian-controlled Gaza strip during the campaign and investigations uncovered donations from nearly 70 other countries, with no verification process in place to determine if the contributors were American citizens or foreigners.

While our president is concerned that corporations could potentially “spend without limit,” his campaign didn’t seem to be nearly as concerned about individuals spending without limit, in violation of existing federal law. The systems that McCain’s campaign had in place to verify donor’s identities and addresses and reject those that couldn’t be verified, were apparently nonexistent in the Obama campaign. There were numerous documented instances of individuals making small donations 20 or 30 times in one day in amounts that in some cases totaled up to $10,000.

So, while it is still illegal for unions and corporations to make contributions to individual politicians, they’ve been placed on somewhat more equal footing with American citizens. Maybe instead of getting all worked up about the Supreme Court, we could focus just a little more attention on the laws still in place to ensure the money raised for the upcoming elections in November is actually legitimate this time around.


Jan 28 2010

Obama and Debate

C.M. Phippen

In his State of the Union address last night, President Obama echoed earlier statements he’s made regarding the failure of a health care reform bill thus far in his administration. He reiterated his belief that the reason Congress has been unsuccessful in garnering more public support for the bill is that the administration hasn’t done an adequate job of explaining it to the American people.

Congress and this administration have done everything they possibly can to keep the details of the legislation from the American people, including burying them in a 1,000 – 2,000 page bill (House, Senate). According to David Axelrod, “And people will never know what’s in that bill until we pass it, the president signs it, and they have a whole range of new protections they never had before.”

The American people want the information up front and they want discussion and debate. Let’s be real – the beauty of 60 votes in the Senate was that the Democrats could avoid all debate.

According to our president, “[Disagreements] are the very essence of our democracy.” If he firmly believes this then it’s time to have a discussion based on the disagreements the majority of Americans have with his health care reform policies.

Stop treating us like children (“we know what’s best for you,” “you’ll appreciate it once you have it”) and start acting like the servants of the American people we’ve elected you to be.


Jan 23 2010

Brown Victory

by Carolyn Day

We all know by now that Scott Brown, a Republican, won in the Massachusetts special election Tuesday. According to a Rasmussen poll, 56% of MA voters said health care was their top issue. In another poll by Fabrizio, McLaughlin & Associates, 78% of Brown voters said their vote was meant to stop Obamacare.

This is about as clear a message as the American people can send. Between now and November, the administration and Congress will have the opportunity to get out in front of this and bow to the will of the American people who elected them; this is their warning. The alternative would be to simply continue to ram their platform down the throats of a disgusted populace that isn’t willing to take it anymore, and to pay the price come November.

According to a story in the Huffington Post,

“This needs to be a wake up call that people are still demanding change,” Joe Trippi, a longtime party strategist and high-ranking official on the Howard Dean and John Edwards campaigns told the Huffington Post. “I don’t think it is ideological, I don’t think it is left versus right. I think it is outsider versus insider. It is the new way versus people doing it the old way. That is still the carryover from 2008. And whether the Obama administration recognizes that is important. This is a wake up call that they can’t play the inside game.”

“The most important thing is for Democrats to acknowledge that they need to change course and then to change course,” said Simon Rosenberg, a former Clinton administration official and head of the Democratic group NDN. “They must acknowledge it has not been a good first year and they have to change.”

According to President Obama, “the same thing that swept Scott Brown into office swept me into office. People are angry and they’re frustrated.”

People are angry, people are frustrated; this president still hasn’t adequately addressed the anger and frustration that existed when they elected him. Exit polls from the presidential election show that two of three voters cited the economy as their chief concern, while fewer than 10% mentioned healthcare. To say that the latest election was about change is correct, but if the message being sent by the voters is misinterpreted by the politicians, then the slaughter in November will be of astronomical proportions.

American voters are realizing that the amorphous idea of change many of them voted for in the last presidential election is worthless if not founded upon the principles of this republic.

A year ago Americans wanted change. The greatest economic system the world has ever seen was on the verge of collapse, unemployment and foreclosure rates were skyrocketing, and continuing deaths of American soldiers in a war that we were consistently told was unwinnable all converged to instill in many Americans the desire for change – no questions asked.

A new day was ushered in. Unfortunately for the ruling classes in Washington, now that voters understand just what this encompasses, they seem to prefer something else; maybe anything else.

President Obama says that if there’s one thing that he regrets this year it is that they “were so busy just getting stuff done and dealing with the immediate crises that were in front of us that I think we lost some of that sense of, of, you know, speaking directly to the American people about what their core values are.”

I’m glad he’s noticed that our core values have been missing in all the talk he’s has been doing over this past year. The president gave 411 speeches, 42 news conferences, and 158 interviews in one year and of course he failed to adequately talk about our core values – that would undermine his agenda.

If the legislation this administration and Congress are trying so hard to pass actually encompassed those values, so much talk would be unnecessary. The problem is that their agenda isn’t based on the values held dear by a majority of the American people. This administration was so busy “fundamentally transforming the United States of America” that they failed to notice that we noticed.


Jan 18 2010

Developing Nations and Global Warming

C.M. Phippen

One of the great environmental scares of the last 50 years is that of overpopulation. As mentioned in an article I recently wrote, Actual Effects of Global Warming Legislation on Temperature, it wasn’t so long ago that environmentalists predicted that overpopulation would lead to massive deaths from starvation even among Americans by the 1980s.

The solution proposed by those who feared the imminent population explosion was to greatly limit the number of children in each family, by force of government decree if necessary. This never came to pass in the U.S. but has created myriad unforeseen problems for China, which has had such a policy since 1979. The free market solution, as always, was that of innovation, and in that regard was wildly successful.

A shining example of such innovation is Norman Borlaug, a man credited with saving 1 billion lives through his development of high-yield grains and high-yield planting techniques. In conjunction with research that produced new strains of heartier and more productive wheat, he spent decades living among the poor in developing nations, teaching techniques to local farmers to improve their grain yields.

Mr. Borlaug is credited with saving the people of India and Pakistan from mass starvation during famine in the mid-1960s. He is also considered to be behind the growth in food production that has outstripped the growth of population since the development of his techniques.

Though doubted and questioned by environmentalists for much of his career, thanks to his work the grain production of the world increased from 692 million tons in 1950 (for 2.2 billion people) to 1.9 billion tons (for 5.6 billion people) in 1992. Additionally, less land was needed for the increased yields, protecting forests the world over, all while the average calorie intake rose from 2,063 to 2,495 per day.

This stands in stark opposition to the fearmongering employed by many environmentalists. At times throughout his life, Mr. Borlaug’s work was threatened by environmentalists who didn’t support his work of feeding the starving populations of the world, especially as he shifted his focus to the continent of Africa. They claimed that increasing the food supply would simply lead to greater population growth. Allowing Africans to starve was apparently a preferable outcome.

The amazing contradiction in this whole process is that rather than increasing population, the shift from subsistence agriculture to high yield agriculture actually decreases population over time. As knowledge becomes more important in an economy than physical strength, priorities and resources within the family unit shift toward providing better educational opportunities for (fewer) children and away from simply having many children to support the family through labor in the fields. Coming to this understanding, though, would require looking beyond stage one.

Writing in the Wall Street Journal, Gregg Easterbrook quoted Norman Borlaug as he spoke of the propensity of environmental activists in developed nations to want to dictate their version of a better way of life to those in less-developed nations in ways that keep the poverty-stricken from enjoying the blessings of modern life. He said, “Borlaug told me a decade ago that most Western environmentalists ‘have never experienced the physical sensation of hunger. They do their lobbying from comfortable office suites in Washington or Brussels. If they lived just one month amid the misery of the developing world, as I have for 50 years, they’d be crying out for tractors and fertilizer and irrigation canals and be outraged that fashionable elitists in wealthy nations were trying to deny them these things.’” Not much has changed.

The debate surrounding global warming is much like the debate that for decades has surrounded the transfer of knowledge to the less-developed countries of the world in order to provide food for their starving masses.

The Norman Borlaug way of doing things: years of research; the development of a life-sustaining product and the knowledge to most efficiently use that product; decades of self-sacrifice and labor for the poor among us – is a far cry from the current “environmentalist” way.

The difference between that life of humble, dedicated service, juxtapositioned with the life of Al Gore and many of his cohorts, is astonishing. We’re all familiar with the excessively high home energy usage, private jet excursions, SUVs, and entourages in oil-spewing buses and jets which typify the lifestyle of many of those preaching global warming armageddon.

To justify such waste and excess, these global warming believers often purchase offsets, many which go to enrich a company owned by Al Gore himself. This enables the wealthy to continue living lifestyles of profligate excess while preaching against such, thus enabling them to avoid any sort of self-analysis or reflection, let alone make any sacrifices.

The difference between these lifestyles is fundamentally one of control: self-control v. control of others. It takes a special level of commitment to change oneself and live a life of service to others while effecting real change, but virtually no commitment at all is required to simply demand change of others while living a life of service to self. The icing on the cake for Al Gore is that he’s actually made potentially hundreds of millions of dollars by implementing this strategy of “other-sacrifice” (as opposed to self-sacrifice).

Fiona Kobusingye, in an article entitled, Africa’s Real Climate Crisis says:

Life in Africa is often nasty, impoverished and short. AIDS kills 2.2 million Africans every year . . . Lung infections cause 1.4 million deaths, malaria 1 million more, intestinal disease 700,000. Diseases that could be prevented with simple vaccines kill an additional 600,000 annually . . .

The average African life span is lower than it was in the United States and Europe 100 years ago. But Africans are being told we shouldn’t develop, or have electricity or cars because, now that those countries are rich beyond anything Africans can imagine, they’re worried about global warming.

Telling Africans they can’t have electricity and economic development – except what can be produced with some wind turbines or little solar panels – is immoral. It is a crime against humanity.

How about all those who tell the rest of the world to sacrifice start living lives of sacrifice themselves. Maybe at some point in that process of self-sacrifice and involvement in the realities of life for the poor of the world, they might come up with some real solutions that could actually start transforming real lives.


Jan 6 2010

Medicare and Mayo

C.M. Phippen

When President Obama touted the Mayo Clinic as a model for cost-efficient health care in this country, I’m sure he wasn’t able to see into the future and determine just how much that statement would make the health care system he supports look more and more like a bad idea.

According to the president, Mayo provides health care “much more cheaply” than other facilities around the country. Back in July, the Clinic roundly criticized the House legislation as missing “the opportunity to help create higher quality, more affordable health care for patients.”

Clinic officials went on to say that it would, in fact, do just the opposite because the proposals being touted by Washington aren’t patient-focused or results-oriented. “The real losers will be the citizens of the United States.”

Now, we see that even without the proposed cuts of over $400 billion contained in the Senate version of health care reform, Medicare reimbursement rates are still too low for such “cheap,” but quality care as is offered at Mayo. This presents us with quite a problem.

At a primary-care clinic in Arizona, Mayo has stated that these reduced reimbursement rates from the federal government have led them to stop accepting new Medicare patients. In 2008, at all of its hospitals and clinics, Mayo lost $840 million on Medicare patients and $120 million at its Arizona facilities alone. At the Glendale, AZ clinic, only 50% of the costs of treating a primary-care patient are covered by Medicare.

Is a further erosion in that reimbursement rate really supposed to lower health care costs for those on private insurance plans? On the other hand, if those rate reductions aren’t implemented, the cost of the current Senate bill skyrockets.

One of the reasons for which the Mayo Clinic’s operations have been praised is that their doctors are put on a salary rather than being paid on a per-treatment basis. Remember the populist rhetoric used to convince many Americans that their doctors were more interested in making money by cutting off the feet of diabetics than keeping them healthy through less expensive preventive measures?

There still needs to be money coming into the facilities, though, in order to pay the doctors, salary or not; so unless we expect our medical professionals to not feed their families or pay their mortgages, 100% of the costs of treatment must be paid. When the government fails to reimburse at adequate rates, private insurance companies must make up the difference. Of course, these increased costs are then passed on to those purchasing private insurance. Because government currently pays nearly 50% of medical costs in this country already, the enormous burden placed on private insurers amounts to a tremendous transfer of capital from the privately insured to government insured patients.

Do we really believe that increasing that percentage to 70, 80, or 90% will do anything to control costs without drastically reducing quality of care? There are plenty of free-market based proposals that help to bring down actual costs – maybe it’s time to acknowledge the truth about what works and what doesn’t and begin moving into that post-ideological world we were promised. Is that simply too much to ask of this administration and Congress?


Jan 4 2010

Cost of Global Warming Legislation

C.M. Phippen

For the sake of argument, let’s accept that it is worth doing whatever is possible in order to reduce carbon emissions by whatever amount we’re able, regardless of estimated minimal effect on the rise in global temperatures. As noted in an earlier article, Actual Effects of Global Warming Legislation on Temperature, ceasing all carbon-emitting activity would result in an immediate decrease in temperature of 0.152°C, while the Waxman-Markey climate bill would save us between .112°C and .195°C by 2100.

Here, then, is an investigation of the costs that would be required in order to achieve those minimal reductions in temperature increase.

According to economists, the cost of carbon emissions reduction is about $500 per ton of CO2. If the US were to completely eliminate all carbon emissions immediately, this would amount to $2.9 trillion, or $25,000 for each American household annually. This is, of course, a completely unrealistic scenario (although Waxman-Markey does require an 83% reduction in 2005 levels by 2050).

A system of cap and trade would attempt to use bastardized free-market principles by manipulating supply and demand through artificial limits on supply in order to “naturally” decrease demand. The hope (there’s that word again) is that this would spur development of new energy sources and allow them to become economically viable. Nevertheless, this is a costly proposition.

Most economists believe that a carbon tax would be much more efficient, but politicians know it would never be viable politically – their jobs are already at substantial risk even without anymore new taxes. The alternative is to implement a cap and trade system, which has the same effect as a tax without using that undesirable word.

Taking the Obama administration at its word and using its own analysis (which, by the way, had to be pried out of the hands of “the most open and transparent [administration] in history”), the cost would be $200 billion yearly, or up to $1,761 per American household each year. This would be the equivalent of increasing personal income taxes by about 15%, and make no mistake – a tax is a tax is a tax.

According to our president, costs under his proposed plan “will necessarily skyrocket” and increased costs will be “passed on to consumers.”

The administration claims that with all emission allowances being auctioned, “a cap-and-trade program could generate federal receipts on the order of $100 to $200 billion annually.”

The administration, though, has already promised up to 85% of the permits for free to friends of the legislation (and administration?). If the buying of votes we saw with the Senate health care bill is any indication, the remaining 15% will soon be gone as well.

According to The Heritage Foundation,

In our analysis, the higher energy costs kick in as soon as the bill’s provisions take effect in 2012. For a household of four, energy costs go up $436 that year, and they eventually reach over $1,241 in 2035 and average $829 per year over that span. Electricity costs go up $468, gasoline goes up $565, and natural gas goes up $161 by 2035. That’s a 58 percent increase in gas prices, 90 percent for electricity, and 55 percent for natural gas. Cumulative higher energy costs for a household of four from 2012-2035 would reach nearly $20,000.

As if this weren’t bad enough, these estimates of increased costs only include direct costs, not additional expenses which would be inherent in a new economy under cap and trade. Of course, production costs increase whenever we see rising energy costs, and this would be no exception. Increased production costs would impact the average family of four to the tune of $2,979 annually.

The projected impact on employment is significant and the probability of high levels of job loss directly related to a cap-and-trade system is profound, particularly in an economy already struggling to recover a portion of the 7.2 million jobs lost since 2007. Net job losses are estimated at approximately 1.145 million, even when the creation of new green jobs is taken into account.

According to a newly released study on the impact of clean energy policies over a 20 year period in Germany, “Significant research shows that initial employment benefits from renewable policies soon turn negative as additional costs are incurred.” The existence of renewable-energy jobs in Germany has also been found to be completely dependent on government support, and subsidization is as high as US $240,000 per worker. This, again, is after nearly 20 years of development.

The Obama administration was informed that, with regard to such climate change policies, “Economic costs will likely be on the order of 1 percent of GDP, making them equal in scale to all existing environmental regulation.” The Heritage Foundation has also estimated that overall GDP losses will average $491 billion per year from 2012 through 2035, resulting in a total GDP loss of $9.4 trillion during that period.

The German study also found that because more workers are needed to produce a given amount of energy in a green economy than is necessary with traditional energy production, the output potential of the overall economy is diminished, which in turn leads to lower net job creation.

There is also significant risk that countries such as China, India, and Vietnam aren’t willing to substantially curb their economic growth in exchange for feel-good (but do little) greenhouse gas emissions cuts. The net result of our passing this legislation without developing countries curbing their outputs as well is that our decrease in GDP could potentially be much greater than estimated as jobs shift overseas to those countries that don’t tax greenhouse gases.

There are myriad problems with a cap and trade system, not the least of which is that it will do very little to actually impact temperature, while significantly burdening the average American worker. Is it really worth so much to do so little?