January 14, 2007

Weekend Question 3: Do We Want to Be Just Like Denmark?

Filed under: Economy,Taxes & Government,TWUQs — Tom @ 9:29 am

ANSWER: Though on the surface it’s appealing, no.

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Henrik Rasmussen at TCS Daily explains why, and in fact notes a phenomenon occurring in Denmark that BizzyBlog has frequently commented on:

“It is entirely possible to have a large welfare state, with generous benefits, without choking the economy,” says Jonathan Cohn of the New Republic in a new series of articles, glorifying the Danish economic model. He enlists the support of several prominent economists from left and right.

….. perhaps a dose of reality from someone who has actually lived in Denmark is in order.

First, let’s compare material living standards …..

….. (the) numbers indicate that the 10% poorest in the United States have roughly the same standard of living as their Danish counterparts while the remaining 90% of Americans are better off than the Danes.

….. Which brings me to my second point. Cohn points out that “Americans simply work more hours, don’t get as much vacation, and can’t take such generous pregnancy or sick leaves.” True, on paper Danes and Europeans in general have much more free time than Americans. However, as Constantin Gurdgiev points out in this article, recent research from Sweden and Germany suggests that Americans have just as much leisure time as Germans and Swedes when one accounts for the time spent on “do-it-yourself” services such as cooking, grocery shopping and home repair. While Americans spend more time on the job, Swedes and Germans spend more time working at home performing basic services that Americans pay others to do for them.

Anecdotal evidence suggests that the numbers from Germany and Sweden apply to Denmark as well. For instance, Danes rarely go out to eat compared to Americans, and shopping for groceries, clothes and other everyday items requires more time in Denmark due to smaller stores, higher prices, and a lower variety of goods. In addition, Danes tend to spend long hours stuck in public transportation due to the high cost of cars and gasoline. High taxes tend to complicate life and cut into people’s free time in more ways than immediately meet the eye.

Finally, there are the “generous” non-cash social benefits of the Danish welfare state to consider, primarily the health care system, which all Danes can use free of charge.

….. (But) US healthcare is better than the Danish version, exactly because Americans spend more on healthcare than the Danes. As in most government-run healthcare systems, Danish patients face significant waiting times for many types of treatment that Americans can get immediately. The United States is also ahead of Denmark when it comes to employing modern technology. For instance, America has 62.1 DTX scanners (for osteoporosis) per 1 million people compared to 8.0 in Denmark. The ratio for MRI scanners is 27 to 10 in America’s favor, and the ratio for CT scanners is 32 to 14.6, again in America’s favor.

Furthermore, Americans have better access to many preventive drugs than Danes, who often have difficulties getting prescriptions until they show serious medical complications. Competition between insurance companies is exactly what causes this American superiority in access to drugs.

In fact ….. (a) mass exodus (from Denmark) is already taking place. For instance, estimates of Danes living in London vary between 35,000 and 70,000, which is roughly 1% of the total Danish population of 5.4 million. According to the leading Copenhagen business daily Børsen, the average income of these Danish Londoners is more than $100,000 per year.

To put this number in perspective, imagine the reaction if 3 million high income Americans moved to London in search of greater economic freedom. Perhaps even The New Republic would realize that there’s something rotten about high taxes.

If the Danes who can are voting with their feet, it doesn’t seem like a place to imitate.

January 13, 2007

Weekend Question 1: What Should You Do If You Win a Huge Lottery Prize?

Filed under: Money Tip of the Day,TWUQs — Tom @ 11:40 am

ANSWER: Nice problem? Yes, but it IS a problem. Don’t tell anyone except your spouse or partner. Maybe your parents. Maybe your kids. It can be done that way. It should be done that way.

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I’d say the scope for what’s covered here would be any prize that nets out to $5 million or more in cash, but I can think of many situations where a lower prize amount would carry many of the same problems discussed here.

The New York Post’s latest (HT Nix Guy) on the guy from West Virginia who has apparently has seen the $100-plus million he won some years ago entirely spent and/or stolen made me think of this.

So did what happened after a big Mega Millions winner who purchased the winning ticket at a Kroger store near the University of Cincinnati redeemed his (or her) $102 million dollar cash-option prize — by sending his (or her) banker:

5/2/2006 2:19:42 PM

The winning Mega Millions lottery ticket sold at a Corryville Kroger that’s worth $265 million has been claimed.

The person’s name has not been released because the winner opened a trust and claimed the money anonymously.

The winner opted for the lump sum option and took $102 million after taxes.

On April 19th, Corryville’s Kroger store got a check for $100,000 for selling the winning ticket. That money will be put back into the community, store officials said.

Think of the noise this person has avoided by having people not know who he (or she) is. The following just scratch the surface:

  • Getting bugged by “financial advisers,” charities, get-even-richer quick schemes, political organizations, hard-luck stories, etc., ad nauseam.
  • Having distant relatives and friends come out of the woodwork for transparently obvious reasons.
  • Getting treated differently (of course that will happen) by close friends and family.
  • And don’t overlook the fact that someone coming into a lot of money has financial and security problems on their hands — IF people know about the money.

Is it important to avoid the noise after winning a big-cahuna lottery prize? I can’t think of anything more important. YOU have to adjust the reality of being so rich you, and your spouse or partner, don’t need to work any more. Nice problem? Yes — but it IS a problem, and as the story of the Mountain Stater noted above shows, it has to be dealt with coolly and calmly, which he clearly didn’t do. When handled well, getting big money is, of course, a splendid opportunity to do a lot of very good and noble things.

Of course you have to tell your spouse. Whether you tell your kids or parents depends on your belief in whether or not they will tell anyone else about your good fortune (of course, you will instruct them not to).

I would also suggest that a huge prize winner not do anything in the first few months after winning that would betray a radical change in fortunes. Pay off debts? Sure (except those to family, which you might accelerate but not immediately eliminate; if they are interest-free debts, repay their generosity to you with significant gifts down the road). Quit work immediately and make a big scene while doing it? Tempting, but I’d resist. Get rid of the jalopy for a nice new car? Probably. Sell the house right away and move to a Bev Hills mansion? Uh, no.

One thing a big-prize winner who chooses to stay anonymous has going for them is most people’s short attention span. Almost no one is wondering who that May 2006 prize winner is any more, and that person or couple has hopefully has been able to reorder his, her, or their priorities to adjust to the new reality. He, she, or they have had the time to learn, and hopefully have learned, the accuracy of that tired-but-true Spiderman bromide: With great power (including wealth), comes great responsibility.

Some other time, I’ll hopefully have a chance to get into a riff about whether to take the cash or the payments.

January 7, 2007

Weekend Question 4: Did Gerald Ford Save New York City?

Filed under: Business Moves,Economy,Taxes & Government,TWUQs — Tom @ 4:05 pm

ANSWER: Felix Rohatyn thinks so. And he should know.

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Rohatyn says as much in his OpinionJournal.com op-ed on Thursday (bolds are mine):

Ford to City: OK
How the 38th president saved New York.

The year 1975 was a difficult one for the city.

….. a crisis had been building up here for some time. The city’s financial condition was deeply concerning, running a significant deficit as a result of an exodus of private sector jobs and an influx of new municipal employees. Politically New York was always a Democratic city, a union city, with a strong Republican business community and little contact between the two. Morale was bad, the city was dirty, crime was up and the economy was weak.

….. Year after year, and with the support of the state, the city spent more than it took in. It had the choice of raising taxes, cutting spending or borrowing. Naturally the politicians chose to borrow and, in addition, characterized tens of millions of expenses as capital investments. The result was to constantly reduce the city’s ability to make capital improvements while, simultaneously, increasing the debt by $1 billion annually. While the mayor had just agreed to a major pay increase for the municipal work force, no one really knew the level of the city’s deficit.

By the beginning of May we had little over a month to avoid a default–the next debt maturity of $1 billion would occur on June 18. At that point, Gov. Carey, brilliant and courageous, stepped into the picture.

….. Gov. Carey appointed a bipartisan committee of business leaders to review the impact of a New York bankruptcy. The committee unanimously recommended against it because of its unfathomable risks and we turned to a structure which became the Municipal Assistance Corp. The MAC was a financing mechanism, which could sell its own bonds backed by the New York sales tax and which might give the city time to bring its budget into balance. The banks and labor leadership joined in the recommendation and on June 18 the state legislature voted to create MAC. Gov. Carey immediately christened it “Big MAC” and the underwriters began selling its bonds.

….. We created the Emergency Financial Control Board, chaired by the governor, to control the budget. With the EFCB in control of the budget and the MAC in control of the financing, the state effectively controlled the city. The unions went along even though they were kept outside these structures because they knew this was the city’s only chance. They committed to investing part of their pension funds in MAC bonds while the banks extended their existing loans.

….. on Oct. 29, Ford gave his famous “drop dead” speech. He never spoke those words; but he indicated that he would veto any legislation proposing a financial bailout–and the meaning was quite similar. The Daily News engraved them in stone.

….. Ford deserves great credit for his willingness to change his mind. On his return to Washington, he signed legislation providing credit to the city; this unlocked other pieces of the package: from the banks, the pension funds and insurance companies. It saved New York but it did not save his presidency. Jimmy Carter was elected in 1976.

In 1980 the city balanced its budget; in 1981 it re-entered the securities markets and repaid the government guarantees. Since those dark days the city’s recovery was uninterrupted, except for 9/11. New York’s present economic boom is ample proof that those who opposed bankruptcy were right, and that in a crisis, bipartisanship and business-labor cooperation will go a long way. One of Ford’s greatest achievements may have been that he knew when he had pushed New York City to the limit and that, contrary to some of his colleagues, he also knew when to stop.

Between the Nixon pardon, which even most die-hard opponents at the time have come around to agreeing with, the tax cut that served as a bit of a field test for supply-side econ, and the tough-but-fair love for the Big Apple described by Rohatyn, the Ford Legacy looks ever more impressive, and should not be forgotten.

January 6, 2007

Weekend Question 2: How Many More Years Are We Going to Have to Read Reports Like These?

Filed under: Business Moves,Education,Taxes & Government,TWUQs — Tom @ 2:05 pm

ANSWER: More than a few is too many. The report involved shows that, at least in terms of meeting employers’ expectations, kids are not learning basic skills in school.
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From HR Magazine’s December issue (requires subscription):

Report shows new workers aren’t ready for prime time

A report released Oct. 2 by leaders from a consortium of business research organizations finds that new entrants to the workforce are sorely lacking in much-needed basic education and advanced workplace skills and, as a result, the U.S. economy is growing more vulnerable to competition.

The report, Are They Really Ready to Work? Employers’ Perspectives on the Basic Knowledge And Applied Skills of New Entrants to the 21st Century Workforce, is based on a detailed survey of 431 human resource professionals that was conducted in April and May by The Conference Board, Corporate Voices for Working Families, the Partnership for 21st Century Skills and the Society for Human Resource Management (SHRM). The survey examines employers’ views on the readiness of new entrants to the U.S. workforce—recently hired graduates from high schools, two-year colleges or technical schools and four-year colleges.

“The future workforce is here, and it is ill-prepared,” concludes the report.

The findings reflect employers’ growing frustrations with the preparedness of their new hires and reveal that employers expect young people to arrive with a core set of basic knowledge and the ability to apply their skills in the workplace. Unfortunately, the reality is not matching the expectation.

“It is clear from the report that greater communication and collaboration between the business sector and educators is critical to ensure that young people are prepared to enter the workplace of the 21st century,” said Richard Cavanagh, president and CEO of The Conference Board. “Less than intense preparation in critical skills can lead to unsuccessful futures for America’s youth, as well as a less competitive U.S. workforce. This ultimately makes the U.S. economy more vulnerable in the global marketplace.”

….. More than 40 percent of surveyed employers say that many high school graduates are not prepared for the entry-level jobs they fill. Specifically, recent high school graduates lack the basic skills in reading comprehension, writing and math. The results reveal that respondents believe that no high school graduates meet the standards of excellence for any of these skills.

The findings show an especially big gap in writing skills. Nearly three-quarters (72 percent) of incoming high school graduates are viewed as deficient in basic English writing skills, including grammar and spelling.

….. Two-year and four-year college graduates fared better than high school graduates in their level of preparedness, though respondents still noted that they possessed poor writing skills. And a relatively small percentage meet the standards of excellence. Nearly half (47 percent) of survey participants report that two-year college graduates are deficient in this skill.

A few bright spots

Workforce readiness of high school graduates was reported to be adequate by a majority of survey participants in three areas considered critical for current and future workplace needs:
• Information technology.
• Teamwork.
• Diversity.

(Aside: How do you demonstrate adequate readiness for Diversity? — Ed.)

Future hiring plans

But the level of competence of entrant workers is influencing hiring plans. When asked how their hiring practices will change:
• 28 percent of employers projected that their companies will reduce hiring of new entrants with only a high school diploma over the next five years.
• 49.5 percent said the percentages of two-year college graduates they hire will increase.
• 60 percent said their hires of four-year college graduates will increase.
• 42 percent said their hires of post-graduates will increase over the next five years.

Translation: Employers are having to hire college graduates to get a skill set that should be, but usually isn’t, possessed by high-school grads. In response to employers’ plans, which represent a natural reaction to an inferior product, more and more kids will have to go to college just to get skills they should have picked up in high school, without which they won’t be able to get even the most basic of jobs. Rinse and repeat up the educational food chain.

I know it isn’t the case, but it’s almost as if there’s a conspiracy by the educational establishment to maximize the amount of time kids have to spend in school (and of course, the money parents and taxpayers have to spend) before they are employable.

But I DO know that this IS the case: The costs of education continue to go up at twice the rate of inflation (or more), and, on the whole, the payback on that “investment” (as those who wish to continue taxing us for the continued mediocrity like to call it) is as low as ever.

I think it’s long past time to bust the factory model of schools into teeny tiny pieces, and move towards individualized education that will ensure that each non-handicapped child possesses an agreed-upon skill set. If a kid gets there by 16, or even 14, he or she can move on to further education, “college” or other. If it takes until 20 to get that skill set, so be it. This makes too much sense, and the vested interests in place to prevent this are probably too formidable for something like this to ever see the light of day.

But there is a feisty group that is following an individualized achievement-oriented format, and they are among those who are most reviled by the educational establishment. They would be known as “homeschoolers.” The establishment needs to get off its high horse and learn what works from them.

Weekend Question 1: Got a Winning Investment Strategy?

Filed under: Economy,Taxes & Government,TWUQs — Tom @ 10:01 am

ANSWER: I know better than to guarantee investment results. But you’ll be impressed with what Andy Roth at the Club for Growth came up with when he looked at investment results when Congress was and wasn’t in session.

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Mind ….. boggling, but it makes perfect sense — so much sense that you wonder why no one else has uncovered it:

I have calculated that if you had invested $1 in the stock market at the beginning of 2006 and only invested it on those days in which Congress was in session, then your return by the end of the year would be as follows:

In Session (S&P 500): 2.25%
Conversely, if you invested that $1 on days when Congress was out of session, your return would be:

Out Session (S&P 500): 11.56%
That’s quite a big spread (9.31% to be exact). Alternatively, if you invested that money in the Nasdaq Composite instead of the S&P 500, the results are even more dramatic:

In Session: -5.70%
Out Session: 8.19%
Spread: 13.89%

…… if you had invested $1 in the Dow Jones Industrial Average back in 1897 when the index first started and conducted the In/Out Session schemes until the year 2000, here’s how much money you would have:

In Session: $2
Out Session: $216

That $2 figure is not a typo. Jaw-dropping, huh?

The logic as to why that has worked out as it has is simple:

  • Regardless of whether Congress is up to something good or no good, the markets hate uncertainty. When Congress is in session, laws might get passed. When they aren’t, that “certainly” isn’t going to happen.
  • The track record of Congress, certainly since the New Deal and probably during much of the time before that, has been to pass laws and regulatiions restricting economic freedom and open markets. Of course the investment markets aren’t going to like that, and will negatively react when it happens.

But Andy, the problem is — you told everyone. Some smarties out there already knew this but didn’t tell us, which might explain their mansions, cars, etc. Now we’re going to see the craziest inflows and outflows you’ve ever seen on days when Congressional sessions begin and adjourn.

Anyway, the logical answer to all of the above is this — Nancy, Harry, Mitch, John, EVERYONE — GO HOME. It looks like paying everyone congressperson and senator their full salaries to stay home would be quite a deal. 535 more people on the golf courses would be a small price to pay for the differences in investment performance Andy cited.

December 28, 2006

Will There Be a New King of the Road in 2007?

Filed under: Business Moves,Economy,TWUQs — Tom @ 2:15 pm

Looks like itFrom an AP report in USA Today, a report that is surely causing heartburn in Motown:

Toyota set to overtake GM in 2007
Dec. 22, 2006

NAGOYA, Japan — Toyota (TM) announced on Friday a global production target of 9.42 million vehicles for next year, increasing the odds that the Japanese manufacturer will pass troubled General Motors (GM) as the world’s No. 1 automaker.

The latest figure, announced by Toyota in a release, marks a 4% increase over the 9.04 million vehicles the company expects to produce this year and easily clears the 9.2 million vehicles GM is estimated to have produced this year.

GM does not give targets for next year, but it has been forced to scale back production recently, seeing its market share eroded by Asian automakers, including Toyota, which have a reputation for better mileage.

….. Although GM says the perception that its cars are gas-guzzlers is unfair and inaccurate, it is undergoing restructuring after racking up more than $10.6 billion in red ink last year and $3 billion more the first nine months of this year.

Toyota, on the other hand, is on a roll. Despite some quality problems, it is reporting record profits, churning out best-sellers like the Camry and Corolla as well as carving out a reputation in hybrids, which use a fine-tuned technology of switching between a gasoline engine and electric motor to save gas at a time when oil prices are rising.

Toyota, which passed up Ford (F) as the world’s No. 2 automaker in 2003, also painted a bright picture of sales in 2007. It is expecting to sell 9.34 million vehicles globally next year, up from 6% from 8.8 million expected for this year.

Toyota has been plagued with a rising number of recalls as it standardizes parts to cut costs and develops and sells more vehicles at a faster pace. Its challenge is to maintain its reputation for quality cars and customer satisfaction at the same time that it continues to rev up production.

“There will be no growth without quality,” Watanabe said, adding that quality will be closely monitored at all levels of production, including design, development and procurement. “We’d like to continue our efforts to make good products that win support from our customers.”

Although Toyota’s production methods, which empowers assembly line workers and trims inventory, are praised by experts, transporting that production to new places remains a challenge.

….. Watanabe said the company is considering adding another plant in North America to keep up with growing demand, although he did not give details.

Of Toyota’s projected volume for next year, overseas production will rise 8% to 4.27 million vehicles while its domestic output will increase 1% to 5.15 million vehicles, the company said. The projections include Toyota’s subsidiaries, truck-maker Hino Motors and Daihatsu, which makes small cars.

In the U.S., the first Tundra pickups rolling off of Toyota’s Texas plant will arrive in showrooms in 2007, a sign of Toyota’s ambitions in a lucrative sector dominated by American automakers.

Toyota has used its ample coffers to purchase significant stakes in two of GM’s former Japanese alliance partners — Fuji Heavy Industries, the maker of Subaru cars, and truckmaker Isuzu. Toyota will be even using Fuji’s Indiana plant to make Camries starting in spring 2007.

The latter portions of the excerpt show that:

  • The company is not going to have a cakewalk to Number 1; if its quality reputation ever takes a real hit, things could reverse quickly (just ask Ford, whose fortunes turned for the worse not very long after its long winning streak of having the best-made American cars evaporated).
  • The company is taking up some of the auto-industry employment slack in North America caused by the decline of the Big Three.

Unfortunately, Toyota-related employment growth, with the possible exception of a few lower-level suppliers, will happen almost entirely in states other than Michigan. I wonder if that guy who crusaded against a Toyota plant in Western Michigan earlier this year and appears to have scared the company away from building in the state (there has been no news since the linked report) is proud of himself?

ALSO: It’s apparently a foregone conclusion that Toyota will be Number 2 in America next year, displacing Ford.

December 23, 2006

Weekend Question 2: What Time of Year Is It? (Year 2 Follow-up, Part 3)

Filed under: Economy,MSM Biz/Other Bias,TWUQs — Tom @ 12:28 pm

Last year, I sensed that journalists in general prefer to call this time of the year in commerce that of “holiday shopping” instead of “Christmas shopping,” but that when it came to people losing their jobs, they preferred to describe layoffs as relating to “Christmas.”

My instincts were proven correct, as you can see below from the results of three different sets of Google News searches in November and December (links to last year’s related posts are here, here, and here):

ChristmasSearch2005Results

I’ve decided to track the same items this year to see if there is any noticeable change or trend.

Here are all three sets of Google News searches during this Christmas season, compared to last year (the Dec. 22, 2006 searches were done at about noon; the posts on the previous two searches are here and here):

ChristmasSearchVeryTermsFnl_06v05

Wal-Mart, Macy’s, and others may be embracing “Christmas” as a permissible word again, but reporting about shopping during the 2006 Christmas season still leans overwhelmingly towards “holiday shopping.” As to layoffs, their association with “Christmas” has gone down a bit in the past year, and actually dropped off in the final pre-Christmas search, where the tendency to associate Christmas with layoffs was 2-1/2 times greater than the association with shopping (down from about 3-1/2 times as often in the last search a year ago).

Still, what I concluded at the end of last year (with minor editing) was again proven to be true in 2006:

It seems beyond dispute that there is a strong bias against using the word “Christmas” to describe not only the shopping season, as noted above, but also events, parades, and festivals that happen during the Christmas season. There is, however, a bit of an exception — “Christmas” is a word that is much more acceptable to use when “Scrooge” employers are letting people go.

Cross-posted at NewsBusters.org.

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Previous Posts:
Dec. 9, 2006 — What Time of Year Is It? (Year 2 Follow-up, Part 2)
Nov. 26, 2006 — What Time of Year Is It? (Year 2 Follow-up, Part 1)
Nov. 11, 2006 — Will Christmas Be a Four-Letter Word This Year?
Dec. 22, 2005 — When You Can Say What at This Time of Year (UPDATE 2)
Dec. 7, 2005 — When You Can Say What at This Time of Year (UPDATE)
Nov. 29, 2005 — What Time of Year Is It?
Nov. 23, 2005 — When You Can Say What at This Time of Year

Weekend Question 1: Has Jeb Bush Gotten Enough Credit for What He Has Done as Florida’s Governor?

Filed under: Economy,Education,Taxes & Government,TWUQs — Tom @ 10:01 am

ANSWER: He has received a lot, but it’s almost impossible for him to get too much.

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This BizzyBlog post in June pegged off of a Weekly Standard column by Fred Barnes that ran down Florida’s impressive economic progress during Jeb Bush’s eight years as governor.

But this little nugget that I found in the course of what was going to be another Ho-Hum Hiring Headline post really puts Jeb’s tenure into perspective, especially compared to other states:

More than one-third of all jobs created in the United States during the past five years have been created in Florida, according to Tax Watch Center for a Competitive Florida.

Florida’s population of 18,090,000 per the latest Census Bureau release (Excel file) as of July 1, 2006 means that it has barely more than 6% of the nation’s population. So Florida’s share of job growth has been running at a rate that is over 5 times faster than the rest of the nation (33% divided by 6%) based purely on population — and it’s really more impressive than that, because the Sunshine State’s relatively high retiree population means that its workforce participation rate is lower. I reviewed the past three years of Bureau of Labor Statistics data (Nov. 2003 through Oct. 2006), and Florida has added 789,300 jobs during that time, and its overall employment has grown by about 9%.

Here’s a capsule reminder of Barnes’ economy-related points about Jeb Bush from his column earlier this year:

  • Political leadership: ….. he’s changed the policy debate from how much government can do to how much it should leave to the people and the free market. “That’s his greatest effect,” says Robert McClure of the Bush-friendly James Madison Institute in Tallahassee.
  • The economy: It’s bursting at the seams. Florida is no longer totally reliant on tourism, agriculture, and the retiree industry. Under Bush, Florida has become the fourth largest high-tech state. Its bond rating has been hiked to Triple A.
  • Taxes: Bush has slashed $20 billion in taxes over eight years and enjoys the heartburn this gives the media and liberals. “I do love it,” he says. ….. His tax cuts are all the more shocking in a state with no income tax but with a balanced budget requirement.
  • Education: Bush’s education reforms have been vindicated by scholarly studies. Jay Greene and Marcus Winters of the Manhattan Institute found testing to end social promotion in Florida schools had led to “substantial academic gains for low-performing schools.” ….. The percentage of African-American fourth graders reading at grade level doubled to 56 percent from 1999 to 2005.

This statement from his farewell a couple of days ago puts a fine exclamation point on what Jeb Bush has done:

“I really honestly believe we have made a difference,” Bush said. “My core belief at the end of the day is that if we can just build the field of dreams, just build the fertile ground if you will that allows people, individuals and families, to pursue their own dreams there will be more prosperity, more innovation and more good things happening than any government program ever created.”

“I believe that when I got here. And I believe it just as much as a leave.”

Is it too late for everyone to ignore his last name and draft him?

December 22, 2006

Top 10 Media Economic Myths of 2006

The Business & Media Institute has a list Here it is (Go to their site for the Institute’s reasoning; my comments follow each item; HT Pundit Review).

10. American Manufacturing Is Obsolete.

In addition to the overemphasis on the misfortunes of the Big 3, the fact that the manufacturing sector expanded in every month from January through October, before contracting very slightly in November, never got out of the business pages (print or web). The 41 consecutive months of expansion in manufacturing that just ended is the longest streak since the 1970s.

9. The American Dream Has Become a Nightmare.

There are a lot of arguments here, but the best one is that real incomes have gone up in the past 10 and 20 years, contrary to what Paul Krugman told Neil Cavuto earlier this month.

8. You Can’t Be Trusted with a Fork and Spoon.

So, for example, trans fats have to be banned, because you’re too dumb to stop consuming them. Never mind, as the Wall Street Journal reported, that the science on the hazards of trans fats is dubious, and that some of the same consumer nannies who liked them 20 years ago are railing against them now.

7. Wages are stagnant.

This mostly covered in Number 9, but I’ll borrow from the BM&I a bit here for more support:

Hourly compensation in non-farm businesses increased 7.7 percent from last year, according to a September 6 report from the Bureau of Labor Statistics.

….. Compensation includes benefits, which have been a huge growth area. Workers are paying a lower share of their health benefits than they did in the past – something journalists didn’t factor into the overall earnings picture.

6. Global Warming Doom Grows Ever Nearer.

Where do you begin? Oh, just read this post on a “contrarian” story about carbon dioxide levels that the New York Times decided to published it on Election Day in November, perhaps so no one would notice it.

5. Increasing the minimum wage will help the millions of poor workers.

A little BM&I borrowing here will do the trick:

In fact, the percentage of hourly paid workers at or below the minimum wage is at its lowest point since data were first collected in 1979. In 1980, 15.1 percent of those workers were minimum wage or below – compared to 2.5 percent in 2005. More than 20 states already mandate wages higher than the federal minimum.

Several economists have pointed out that the majority of workers move on from entry-level minimum wage positions relatively quickly. The BLS reported that “about half of workers earning $5.15 or less were under age 25, and about one-fourth of workers earning at or below the minimum wage were age 16-19.”

So the “obvious” answer is to take the bottom rung or two off of the ladder so young people can’t get their working careers started. Zheesh.

4. The housing bubble has burst.

See the post “More Fun and Tom and Rex,” where yours truly responds to an exaggerated set of claims by MarketWatch reporter Rex Nutting. It’s not too late for disaster to strike, but so far, the housing story is “Bubble, Schmubble.”

3. Bird flu is going to kill us all.

Since I’ve done nothing with this (mostly non-) topic, I’ll let BM&I take this one:

Out of the world population of 6.5 billion, 258 people have caught the virus and 154 have died, according to the World Health Organization as of Nov. 29, 2006. The death toll thus far is fewer than the number of people who die on U.S. roads in a two-day period. The total was 38,253 for the year in 2004, according to the National Highway Traffic Safety Administration.

2. Gasoline Is a Conspiracy – Going Up or Coming Down

First noticed here (5th item at link), Jack Cafferty at CNN was the primary purveyor of the irresponsible fiction that prices were coming down to make people feel better before the November elections. Because the lie was repeated often enough, it gained some traction with the public, even though there was no supporting evidence of any kind, and even though prices spiked UP a bit in the final week before Election Day.

1. The U.S. economy is hopeless – again.

Garbage — As Larry Kudlow has said time and again, this economy is the “Greatest Story (thanks to our adversary media) Never Told.”

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I would add one item to the list, namely that the Bush Administration’s halving of the budget deficit three years ahead of when it was promised went virtually unnoticed. If I had to throw one out, it would be the bird-flu situation, only because I think it’s relatively inconsequential and hasn’t been that successful at falsely scaring people — (UPDATE, Dec. 23: so far).

Regardless, as you can see, not a lot has changed from this post in May of last year, where I identified the origins of business media bias, which is what gave me much of the impetus to start blogging in the first place. If anything, it’s gotten worse.

It will be quite interesting to see how the change in congressional control with the White House in the same hands will affect the reporting on the economy in the coming two years. It would be hard to make the same news good for one party and bad for the other, but I’m sure we’ll see plenty of attempts at just that.

December 17, 2006

Weekend Question 4: Is Sarbanes-Oxley Unconstitutional?

Filed under: Business Moves,Economy,Taxes & Government,TWUQs — Tom @ 1:24 pm

ANSWER: The Free Enterprise Fund, a small accounting firm, and Ken Starr (yeah, THAT one) think so. If the Constitution means what it says, their case looks is very strong.
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From Starr’s subscription-only op-ed in Saturday’s Wall Street Journal:

The Sarbanes-Oxley Act powerfully illustrates the law of unintended consequences. Due to hasty drafting by Congress in the wake of the Enron and WorldCom scandals, Sarbox has cost the U.S. economy over $1 trillion, according to one study published by the AEI-Brookings Center. To add insult to grievous injury, it is unconstitutional.

That last point will be argued next Thursday before Judge James Robertson of the district court for the District of Columbia.

….. First, plaintiffs claim that Sarbox violates the constitutional requirement that power to enforce federal law be vested in the president or in executive branch officials answerable to the president.

Because the Board (the Public Company Accounting Oversight Board, or PCAOB — Ed.) exercises important governmental powers, its members are “officers of the United States,” who must be appointed in the manner set forth in the “appointments clause” of the Constitution (Article Two, Section Two) — that is, by the president and with the advice and consent of the Senate. Congress instead drafted the statute to insulate the Board’s wide-ranging exercise of executive and administrative powers from presidential oversight or control. By granting to the SEC, rather than the president, power to appoint Board members — Sarbox violates the appointments clause.

Second, Congress gave the Board disturbingly broad powers with only minimal oversight. The PCAOB has wide-ranging executive and administrative powers. These include setting standards regulating accounting firms and exercising disciplinary power over them. The Board is also immune from any effective control by the president or any head of an executive-branch department — the chairman of the SEC cannot remove PCAOB members at will.

Third, Sarbox confers impermissible legislative authority on the Board. The PCAOB can finance its own operations; it can levy fees on all public companies and even set its own salaries. But Congress cannot delegate its own legislative power: this is a basic violation of our bedrock system of separation of powers.

Responding to these arguments, the government says that because the Board is under the “broad and pervasive oversight” of the SEC, this cures any constitutional defects. Not so.

The Board’s members are clearly insulated from the checks and balances the Framers meant to impose. It is essentially a star chamber whose members are difficult to remove and who have been given unconstitutional power to levy taxes (“fees,” schmees).

On these arguments, the plaintiffs are, if you will, the Starrs of the show. A ruling in the FEF’s favor should be inevitable. The only question appears to be whether Judge Robertson and others involved will follow the Constitution they’ve sworn to uphold.

Weekend Question 3: What Do You Mean, You’re Time’s ‘Person of the Year’?

ANSWER: I didn’t say it. But I recommended Time’s selection, and then semi-predicted they wouldn’t do it (oh well).

FOLLOW-UP QUESTION: Why isn’t Charles Johnson of Little Green Footballs, who first broke the “fauxtograhy” scandal out of Lebanon, among Time’s “digital democracy” change agents?
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After looking at the weak collection of candidates available to vote for as Time’s Person of the Year last week (based on what they did in 2006, which wasn’t much), I wrote:

Perhaps YouTube, online forums, blogs, vlogs, podcasts, and online media should be the Thing of the Year: The Shadow Media. Of course, Time would be writing about its own likely eventual demise, but it would fit.

That’s essentially what Time has done in its mostly (in my opinion) good decision to name “You” as Person of the Year:

….. for seizing the reins of the global media, for founding and framing the new digital democracy, for working for nothing and beating the pros at their own game, TIME’s Person of the Year for 2006 is you.

Time named as “You” everyone trying to influence the world just a bit from their keyboard. That would include, to a miniscule degree, yours truly, and, again of course, many people who are reading this post.

Oh-so-predictably, two of the three “hard-news” members of the magazine’s “15 citizens of the digital democracy” are influencers from the left side; none are from the right — sorry, libs, a milblogger is not presumptively “conservative” (direct links may not work unless you have already visited Time’s web site):

  • Lane Hudson, the guy who outed Mark Foley, as Time perpetuates the fantasy that this guy acted on his own.
  • S.R. Sidarth, the person who made “macaca” a household word in Virginia’s US Senate race.
  • Lee Kelley, the milblogger at Wordsmith at War.

Additionally, Time errs in overstating the “digital democracy’s” influence:

You control the Information Age. Welcome to your world.

You control the media now, and the world will never be the same.

That will be news to Charles Johnson of Little Green Footballs, who first broke the news of what turned out to be dozens, if not more, photoshopped, staged, and manipulated pictures, as well as their manipulators, coming out of Lebanon. It ultimately exposed, for anyone who cares to pay attention, how Arab states have bought and paid for favorable news coverage out of the Middle East for years.

No one “beat the pros at their game” in 2006 better than Johnson, Gateway Pundit, Zombietime, and others too numerous to mention. The scandal ultimately snared Reuters, the New York Times, US News, and many other Old Media, who had to pull pictures, backtrack on story content, and were in some cases none too happy about it. Johnson popularized a word coined by one of his commenters (“fauxtography“), yet most people have no idea who he is.

Johnson’s relative anonymity (including, incredibly, not being one of Time’s “Digital Democracy Fifteen”), the almost non-existent fauxtography coverage outside of the blogs and forums (aside from the quiet Old Media corrections), and the relatively scant attention being paid to Jamil Hussein (my semi-satirical nominee for Person of the Year) and other “unofficial” (and, more importantly, factually questionable) sources of news from Iraq used by the Associated Press, the Los Angeles Times, and others, are all proof that, despite Time’s hype, Old Media, though no longer credibly “mainstream,” still mostly controls the dissemination of news.

We may have to wait a while for Old Media’s control over getting and distributing news at the source is overturned. The events of 2006 showed that turning the tables on Old Media is possible, and gave some hints of the the tantalizing results that could occur if that ever comes about.

Cross-posted, with Update 1, at NewsBusters.org.

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UPDATE: IncredibleLarry McShane of AP shows he doesn’t even comprehend, or perhaps pretends not to comprehend, who Time’s award went to:

The winners this year were anyone using or creating content on the World Wide Web.

Re-read the above. Mr. McShane, and presumably his layers of editors, totally misreported it. Could this be why?

UPDATE 2: Blog PI (HT Michelle Malkin) gets the crystal ball award for predicting what he and many others in Blogland are characterizing as a gimmick.

UPDATE 3: Don Surber is mostly OK with it. It does hearken back to An Army of Davids, does it not?

UPDATE 4, Dec. 18: Michelle Malkin makes some great points in her Hot Air vid about how Time ignored those who are NOT free to take full adavantage of “Web 2.0.” This would include mainland Chinese who are have their every word and keystroke monitored by Jingjing, Chacha and “friends,” thanks to American high-tech members of BizzyBlog’s Internet Wall of Shame.

December 16, 2006

Weekend Question 2: How About Some Truth in Packaging in Compromised News Reports?

That phrase explains why I believe dispatches from less-than-free countries would almost seem to need a qualifier. Allah explained on Wednesday, as he expressed exasperaton over Reuters’ reporting from the Holocaust-denier conference in Tehran:

None of these places grant true press freedom. Reuters’ reporters toe the tyrants’ line, either because they’re working for the tyrant or are under the tyrant’s heel. Reuters’ Western editors have to be aware of this, yet they do nothing about it. They publish the work of local stringers that amounts to official government (or insurgent, or Hezbollah) propaganda. We read such journalism coming from Iraq every day. When we challenge it, they sniff at us. But not at the crap their local stringers and scribes are doling out.

A prescription drug doesn’t come without instructions for proper use. Why shouldn’t news from less-than-free locations be handled similarly?

Would it be too difficult to point out, when it’s the case, in reports from a given country that “Country X places severe restrictions on press freedoms and Reuters dispatches from there must be viewed in that light”? Or “Reuters reporters covering the terrorist insurgency were escorted the entire time they were present, and operated under severe restrictions relating to what they could report”? I believe it’s irresponsible NOT to. If Country X or the terrorists doesn’t like that qualifier, fine; Reuters leaves Country X or cuts off contact with the terrorists. How difficult is that?

Of course (!), I’m not proposing this as a requirement. But because viewers, listeners, and readers have been conditioned for decades to believe that news reports, even from totalitarian countries, are objective if delivered by a “mainstream source,” I AM saying that to disabuse news users of that presumptive belief, professionally honest reports from such countries or in terrorists would routinely include such disclaimers.

They don’t. Why not? In the case of the Middle East, this is probably one reason.

Weekend Question 1: Does Barone Do Economics?

Filed under: Economy,Taxes & Government,TWUQs — Tom @ 10:07 am

ANSWER: Apparently yes, and pretty well on explaining the New Deal and Depression mindset.

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In the midst of this Monday post that was primarily about lobbying, he threw in some important reminders about where FDR & Co. were really coming from, and how we still to this day are in certain cases paying for their flawed worldview:

The problem here (with lobbying) is not free people; the problem is big government. More specifically, it’s a big government program set up during the New Deal whose purpose was not to stimulate economic growth and competition but to freeze the economy in place and stifle competition.

Remember that the New Dealers believed that the Depression showed that free markets don’t work and that economic growth was a mirage.

Franklin Roosevelt on taking office in March 1933 faced a deflationary downward spiral, and, to his credit, he stopped its momentum with an otherwise cockamamie scheme called the National Recovery Act, which set up 700-some industry codes barring price and wage cuts. NRA was foundering in May 1935, since it was obvious that everyone was gaming this ridiculous system, and Congress was uncertain to reauthorize it when the Supreme Court unanimously declared it unconstitutional.

Unfortunately, Congress kept passing freeze-the-economy-in-place legislation, including the dairy provisions of the farm bill. One in four Americans then lived on farms; they were a big constituency, and they were hurting. Things are different now. Only 2 percent of Americans live on farms. Our economy grows and grows and grows, and we realize, thanks in large part to the late Milton Friedman, that the Depression resulted not from the inevitable defects of free markets but from certain specific policy mistakes that we can, unless we take leave of our senses, refuse to remake.

But we’ve still got dairy price supports, which keep the price of milk well above what it would be if we had free markets. The people who benefit from these laws will, as the Post shows, work hard to defend them. And those people include not only dairy farmers but also trade association executives and lobbyists who are very well paid out of the money extracted by the system from milk consumers–a group tilted toward young families with small children, a group with very little wealth and tending to have below-average incomes.

That’s big government for you.

December 10, 2006

Weekend Question 4: What’s the Next Frontier for Junk Science?

Filed under: Economy,Environment,Taxes & Government,TWUQs — Tom @ 4:05 pm

ANSWER: Looks like it’s trans fats. The control freaks of the world are making quick progress without the science to back their claims.
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I had no idea about this until I read this editorial at OpinionJournal.com yesterday — yet another reason why WSJ and Opinion Journal are totally indispensable.

It turns out that, like the hysteria over “global warming” and “climate change,” the science relating to the harmfulness of trans fats, which were just banned in New York City last week, is NOT settled:

The Bloomberg Diet
The nanny state reaches into the kitchen.

You wouldn’t know it from the media coverage, but the science on the dangers of trans fats is still being debated, which helps explain FDA approval of the ingredient. It also explains why the American Heart Association, while no fan of trans fats, was critical of the New York proposal and fears it may backfire if food outlets revert to even less healthy alternatives.

The food nannies insist that trans fats raise cholesterol and cause heart disease. The problem, says Steven Milloy of the Competitive Enterprise Institute, is that the studies purporting to show this link are inconclusive at best. “People cite lab studies that show transient changes in blood lipids when people consume trans fats, but that’s a long way from heart attacks and heart disease,” says Mr. Milloy.

Walter Willett of the Harvard School of Public Health is one of the nation’s leading trans fat alarmists. Earlier this year he co-authored an article in the New England Journal of Medicine that said trans fats “appear to increase the risk of coronary heart disease more than any other macroingredient.” As evidence the article cited three studies. One showed a statistically insignificant correlation between trans fats and heart disease when other risk factors are considered. The other two studies found a link between very high consumption of trans fats and heart trouble, but statistically the association was weak.

And just as global cooling turned into global warming in the space of roughly 30 years, trans fats went from desirable to being on the outs in less than 20:

Before other cities decide to regulate diets absent a safety issue, they might also consider that some of the same people now pushing for a trans fat ban once recommended the ingredient as a substitute for another health scare: saturated fats. Twenty years ago, Mr. (Michael) Jacobson’s CSPI (Center for Science in the Public Interest) launched a public relations blitz against fast food joints for using palm oil to cook fries. The group claimed victory when restaurants started using partially hydrogenated oil instead. In 1988, a CSPI newsletter declared that “the charges against trans fat just don’t hold up. And by extension, hydrogenated oils seem relatively innocent.” Today, Mr. Jacobson is claiming trans fats kill 30,000 people a year. We wonder if he feels guilty.

The ultimate goal of these so-called consumer advocates is to persuade the FDA to turn on trans fats, a move that would serve the food industry up as the next entree on the plaintiff bar’s menu.

Although health-based lawsuits relating to food voluntarily purchased and consumed are absurd beyond belief, it would provide some relief if Mr. Jacobson were served up on a silver platter as a part of that process. But while it would fit the nannies’ definition of justice, it would never happen, because he has (conveniently) “seen the light.”

Just once, it would be nice if the climate police, the food police, the almost totally discredited recycling police, and the other control freaks of the world would admit that they are less than certain about the justifications for the laws, rules, and regulations they want to foist on the populace. Alas, that would open up the arenas involved to debate, which is the last thing they’ll tolerate.

Weekend Question 3: ‘One Death Is a Tragedy; A Million Is a Statistic.’ What’s 149 Million?

Filed under: Economy,General,Taxes & Government,TWUQs — Tom @ 9:38 am

ANSWER: The death toll (HT Club for Growth via One Oar in the Water) of those “killed or starved to death by their own Communist governments since 1918. These numbers do not include war dead. ….. All numbers are mid-estimates.”

The quote in the post’s title is attributed to Joseph Stalin.

Capitalism comes off relatively well by comparison. (/sarcasm)
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Previous Posts:
- April 7 — More on the Real Mao The News York Times’ Nick Kristof Couldn’t See Fit to Categorically Condemn
- Jan. 30 — NYT Columnist: Bush Reads “Mao: The Unknown Story,” Confirming That It’s a “Conservative” Book
- Nov. 30, 2005 — Fact-Based Historical Revision (Historian to Revise China’s Deaths from Mao Upward)
- Oct. 22, 2005 — Nicholas Kristof and Mao: He Just, Can’t, Let, Go