January 23, 2008

Media Bears Routed — At Least Today

Filed under: Economy,MSM Biz/Other Bias,Taxes & Government — Tom @ 4:32 pm

Armageddon averted:

NEW YORK (AP) — Wall Street pulled off a stunning comeback Wednesday, surging higher in late trading and wiping out what looked to be yet another precipitous decline. The Dow Jones industrials, down more than 323 points in earlier trading, ended the day with an advance of just under 300 points, according to preliminary calculations.

As to other indices, the S&P 500 ended up 28; NASDAQ advanced 24, and, unlike the other two majors, is still down for the week.

Makes sense (markets tend to do that, eventually). Now that the Fed gave the Cramers of the world their candy, there have been too many good earnings reports to ignore. Tech is struggling a bit because the likes of Apple and Ebay have issued conservative guidance on their 2008 results — probably because, as Zogby has documented, consumers have largely been convinced by the naysayers into thinking that the sky is falling. Years of non-stop negativity will do that.

But for now, media vultures ready to pounce on a market crash to go along with their non-existent-as-of-yet recession are just going to have to wait a bit. Awwww.

Tax C-C-C-C ….. Changes: NY Times Won’t ID Major Factor in Ireland’s Success

Filed under: Economy,MSM Biz/Other Bias,Taxes & Government — Tom @ 7:40 am

In an article (HT Jim Taranto at Best of the Web) describing Ireland’s emergence as an European Union powerhouse (“Entrepreneurship Takes Off in Ireland”), reporter James Flanigan of the New York Times simply could not bring himself to specifically identify one of the main reasons for the country’s success (bolds are mine):

Ireland is now alive with enthusiasm for entrepreneurs, who seemingly rank just below rock stars in popularity.

….. The relatively new emphasis on entrepreneurs in Ireland is the culmination of nearly four decades of government policies that have lifted the economy from centuries of poverty to modern prosperity.

The change began when Ireland entered the European Union in 1973. In subsequent years, the government rewrote its tax policies to attract foreign investment by American corporations, made all education free through the university level and changed tax rates and used direct equity investment to encourage Irish people to set up their own businesses.

“The change came in the 1990s,” said James Murphy, founder and managing director of Lifes2Good, a marketer of drugstore products for muscle aches, hair loss and other maladies. “Taxes and interest rates came down, and all of a sudden we believed in ourselves.”

So tax rates “changed,” eh? And we learn in the next paragraph that “taxes and interest rates came down,” as if by some external supernatural force.

Are you noticing a chronic case of word avoidance?

The reason taxes “came down,” of course, is that they were proactively C-U-T, cut (the word “cut” does not appear even once in the article).

Flanigan did eventually get to describing the cuts, but still managed to avoid the C-word:

Government help for Irish entrepreneurs grew out of an overall economic policy devised in 1987 that reduced personal taxes, said Kevin Sherry, a director of Enterprise Ireland who specializes in start-up companies.

Income tax rates in Ireland today are 20 percent on the first $50,000 of income and 41 percent on income above that. But there are value-added taxes of 21 percent levied on all goods and transactions, with the exception of health and medical services, children’s clothing and food.

The tax on corporate profits, though, is 12.5 percent, which is an incentive to own a business.

The Times’s C-word allergy is all the more maddening because, like so many other Old Media outlets, it doesn’t hesitate to describe reductions in projected spending increases in government programs as “cuts,” even though, virtually without exception, year-over-year dollars spent continue to increase. You would think that employing the three-letter C-word when a cut actually does occur — even a dreaded tax cut — wouldn’t be that difficult. But it clearly is.

Cross-posted at NewsBusters.org.

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UPDATE: Flanigan dates the beginning of the country’s economic surge to the country’s entry into the EU in 1973.

That’s not exactly the history found in Wikiland (bold is mine):

From 1973 to 1983, Ireland was hit by two oil crises, a series of bank strikes that paralysed business activity for 18 months, poor industrial relations, public pay rises, and runaway inflation. However, poor management of the state finances was being addressed with repeated increases in taxation of all beneficial activity, until employment became less attractive than welfare. At the same time it was found that Irish industry was completely unprepared for competition that arose as a result of free trade with continental Europe. Ireland’s heavy industries, located primarily in Cork, almost disappeared between 1982 and 1984. Agriculture, The only sector of the economy which was competitive at this stage, was constrained by production quotas, and prevented from taking up the slack in the economy. At the same time Ireland was producing its first generation where university education was widely attained. There was mass unemployment, with many people with tertiary education working minimum wage jobs or being out of work. Emigration returned to 50,000 per year. From 1982 to 1986 the national debt had doubled, mostly due to stabilization policies like welfare, gigantic subsidies to semistate organizations and public utilities, and an effort to reduce inflation and stabilise the currency.

This situation changed dramatically in the mid 1990s as the result of a second, more prodigious, economic boom, known as the “Celtic Tiger” (as in “tiger economy”). This was led by a surge in inward investment in high end industries in services, and lower taxation levels. From 2002, this was augmented by low interest rates set by the European Central Bank which encourage private sector consumption.

So the “subsequent years” Flanigan referred to began at least 14 years later — 1987, which the Wiki reader has to infer is when the first economic boom must have begun.

The fact is that Ireland was considered an economic basket case until well over a decade after Flanigan’s 1973. EU-PU has had nothing to do with the country’s success, and in fact, if the bureaucrats in Brussels have their way with “tax harmonization,” has the potential to threaten it.

Romney Roundup (012308)

Filed under: News from Other Sites,Taxes & Government — Tom @ 7:10 am

I cede the floor for today’s Romney roundup to the newly-launched UndergroundJournal.net.

It’s a free membership site, and you won’t get to see everything unless you join. But even if you don’t want to join, the home-page columns on the far left and far right are presented intact and in full, and are worth a read.

Keep in mind that the site has been put together by folks who once supported Romney and were fooled and betrayed. So there’s a quite obvious “lover scorned” tone to a lot of the writing. And it’s totally justified.

Couldn’t Help But Notice (012308)

Of course it doesn’t answer the “What have you done for me lately?” question, but Jonathan Clements at the Wall Street Journal makes a good long-term point:

Moreover, the recent decline comes after five years of healthy gains. In fact, the shares in the Standard & Poor’s 500-stock index are still up 69% since the October 2002 market low.

And remember, over the past five years, U.S. small-company shares and foreign stocks have easily outpaced the blue-chip stocks in the S&P 500. The bottom line: Despite the recent carnage, you are likely sitting on handsome profits.

The S&P’s 69% return Clement referred to is 10.5% annualized during the 5-1/4 years involved.

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Six weeks before basketball’s March Madness, Thomas Sowell talks about an economic version of Bracketology:

Among the many lies we can expect to hear this election year, none will be bigger or more often repeated, in the media as well as by politicians, than the lie that there is a widening income gap between the rich and the poor.

Why is that a lie, when there are so many statistics that seem to substantiate it?

Let’s start at square one and take it a step at a time.

First of all, there is a fundamental difference between statistical categories and flesh-and-blood human beings.

When there is a growing disparity between one statistical category and another statistical category over time, that does not mean that there is a corresponding growing disparity between flesh-and-blood human beings over time, since human beings move from one statistical category to another.

The statistical categories in this case are income brackets. There is no question that incomes in the top income brackets have risen both absolutely and relative to the bottom income brackets.

The joker is that millions of people move from one income bracket to another.

The even bigger joker is that taxpayers whose incomes were in the bottom 20 percent in 1996 had a 91 percent increase in incomes by 2005.

Meanwhile, taxpayers in the top one-hundredth of one percent — “the rich” or “superrich” if you believe politicians and the media — had their incomes drop by 26 percent over those very same years.

Obviously, when millions of people’s incomes nearly double in a decade, many of them move up out of the bottom income bracket. Similarly, when other people who were at the top see their income drop by about one-fourth, many of them drop out of that bracket.

When we talk about “the rich” and “the poor” we mean rich and poor human beings, not rich and poor statistical brackets. Yet politicians and the media treat people and statistical categories as if they were the same thing.

….. Among the intelligentsia, it is fashionable to sneer at income mobility as a “Horatio Alger myth” — and, as someone once said, you cannot refute a sneer. But, among people who have not yet abandoned facts for rhetoric, it is worth stopping to consider whether they are being played for fools by politicians and much of the media.

Sowell got his 91% statistic from a Treasury Department’s mobility study released late last year. BizzyBlog coverage of that study is here.

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What viewers saw isn’t what went down when Jonah Goldberg appeared on Comedy Central’s “The Daily Show” with Jon Stewart:

It started civilly enough, discussing my new book, “Liberal Fascism.” But things got sufficiently testy that we spent nearly 20 minutes swearing and sparring, and only six minutes aired. The result was “choppy as hell,” Stewart conceded.

Largely left on the cutting-room floor were some important points that might have made my book seem a bit more nuanced. When he railed about conservatives and gay marriage, I pointed out that in my book, I’m sympathetic to it. When he took shots at Republicans, I noted that I criticize the likes of President Bush and Pat Buchanan for being “right-wing progressives.”

Viewers in search of more than disjointed, stuttering cross talk would be disappointed if they caught the whole exchange – it was all like that. Stewart, try as he might, could not understand where I’m coming from.

Remember that the next time someone claims that Stewart plays it down the middle.

I think anyone who appears on these shows should insist that their appearances be aired unedited. Failing that, interviewees should be able to post the unedited versions, or at least transcripts, at their own web sites in self-defense.

By the way, I was in a Borders book store a few days ago. Despite the fact that Goldberg’s book is a best seller (#1 last week, #10 this week at the New York Times; #9 at Amazon as this post was prepared), it was nowhere to be found in the front of the store with other best-sellers, or just-released non-fiction, or any other prominent place. When I asked where the book was, the clerk, as if he had responded to the request several times already, helpfully took me wayyyy back to where the two on-hand copies were — with the regular non-fiction books.

If Goldberg’s publisher has any kind of contractual arrangement with the store promising visible display, it was being broken.

Positivity: Canada’s unsung hero

Filed under: Positivity — Tom @ 5:58 am

From Ottawa, Canada:

Sunday, January 13, 2008

An Ottawa author chronicles how our ambassador to Peru risked his life for months to try to end a hostage-taking

Canadian ambassador Anthony Vincent is a hero in Peru and Japan but to most people in his own country he’s Tony Who.

That should change soon, thanks to an engrossing new book by Ottawa native David Goldfield. The Ambassador’s Word is the true story of a hostage-taking at a lavish Christmas reception in 1996 in the home of the Japanese ambassador in Lima, Peru. The incursion was staged by Movimiento Revolucionario Tupac Amaru (MRTA), a ragtag guerrilla outfit who demanded the release of hundreds of political prisoners in exchange for the hostages.

The book centres on the role of Vincent, who was one of the main intermediaries in negotiations between Peru’s then president Alberto Fujimori and the guerrillas.
(more…)

How to Keep the Bearish Business Press from Talking Down the Economy

Filed under: Economy,MSM Biz/Other Bias,Taxes & Government — Tom @ 1:00 am

Note: This article should also appear shortly at Pajamas Media.

Tuesday’s quick reaction by the Fed to steep overnight sell-offs in the overseas markets prevented what was looking a widespread rush to the exits Tuesday. This means that the portion of the business press, which has been possessed by dreams of a recession and a market crash for at least the past two years, will have to wait a bit longer before celebrating.

It’s clear that preparations to party hearty on bad news were in the works earlier in the day. A 7:44 a.m. Reuters report seemed to be icing the champagne for the late afternoon as it reported on Dow and S&P futures trading:

Some indications, such as the 531 point drop in futures on the Dow and 67 point drop in the S&P 500 futures as of 7:30 a.m. (1230 GMT), suggest the day ahead may rank among the biggest declines in Wall Street history.

Reuters then “helpfully” listed the five biggest percentage losses and five biggest point losses ever in the three major US markets.

Darn that Fed.

At about 8:30, as Armageddon appeared to loom, Ben Bernanke & Co. lowered two key interest rates by 0.75%.

The markets still closed down, but not badly. The Dow and S&P 500 slipped just a bit over 1% (128 and 15 points, respectively), while the generally more volatile NASDAQ fell about 2% (48 points).

Not that Tuesday’s finish mellowed out the press naysayers:

  • USA Today’s second sidebar at its article covering the Fed rate cut is called “Trying to Save the Economy.”
  • The Associated Press, in an unbylined article, said that “a recovery might take months or years.”
  • The AP’s also-unbylined coverage of developments relating to an economic stimulus package proposed by President Bush was entitled “US Moves to Avert Economic Meltdown.”

It is often said that economists are born pessimists. One of them is fond of saying that “Macroeconomists have successfully predicted nine of the last five recessions.”

America’s business press is going the dismal science one better: In the past three years, it has reported, as if already happening, at least three of the past (crossing fingers) zero recessions.

Perhaps the serious slowdown in homebuilding and the problems in the subprime lending industry will spread to the rest of the economy; you can hardly be blamed if you think they have, but in reality the jury is still out on that. Perhaps a recession will really arrive this time.

But these stubborn facts stand in the way:

  • According to the Institute for Supply Management (ISM), the manufacturing sector expanded in October and November, while contracting a bit, for the first time in nearly a year, in December.
  • But manufacturing, at less than 15%, isn’t really a huge part of the economy any more. More importantly, ISM’s “non-manufacturing” report on the rest of the economy showed that it continued to expand quite nicely, even in December, with little deceleration during the quarter.
  • Job growth has been less than stellar, but it’s still positive.
  • With the previous three items I’ve noted staying mostly positive, it’s hard to see how economic growth, which came in at an annualized 3.8% and 4.9%, respectively, during the second and third quarter, will go into negative territory during the fourth quarter. I would not be surprised if fourth-quarter growth comes in at about 3%.

All of that said, it appears that a significant slowdown has ensued, and that policymakers in Washington should be acting to prevent it from accelerating into something worse.

Four necessary defensive steps should be taken almost immediately:

  1. Cut interest rates.
  2. Pass a short-term stimulus package.
  3. Give investors the certainty that taxes won’t go up steeply in 2010, a mere two years from now. This, while usually referred to as “making the Bush tax cuts permanent,” should really be framed as “making the tax system that we’ve been living with for the past five years permanent.” Investor certainly will lead to greater capital investment in longer-term projects and more robust long-term economic growth.
  4. Cut federal income taxes across the board. This should also be in the neighborhood of 10%, and should also be permanent.

Predictably, Washington has done or is carrying out the first two, the easiest of the four steps, while punting on the final two, which would have more long-term favorable impact.

Federal tax receipts have increased 44% during the past four fiscal years, and federal receipts as a percentage of GDP are at or above their historical trendline. Making the 2003 Bush tax system permanent, and following it with another permanent cut, would do what supply-side tax fiscal policies have always done: get the economy going again, generate ever-increasing tax collections for the next several years, and keep the business-reporting bears at bay.

Tom Blumer is a CPA based in Mason, Ohio, outside of Cincinnati. He presents personal finance-related workshops and speeches at companies, and runs BizzyBlog.com.