The Senate just passed an $18 billion spending bill. Since the House already passed it, the legislation is now headed to President Obama’s desk to await his signature and become law.
The hope is that the spending will create jobs. If you’re reading this blog, then you probably know enough about economics to know that isn’t what will actually happen. Remember: anything that Washington giveth, it must first taketh away from somewhere else. It’s a zero-sum game. All those new jobs that politicians will be touting for the cameras will have come at the expense of other jobs elsewhere. On net, they’re not creating a thing.
Take, for example, the bill’s payroll tax break for small businesses. Yes, those small businesses benefit. Maybe the money they save will even be used to hire more workers. That’s easy enough to see. But that money had to come from somewhere. That is harder to see. Too hard for the Senate to see, at the very least.
The reason is this: the government is foregoing some payroll tax revenue. But since it isn’t cutting spending to match, it has to borrow more. And there’s only so much investment capital to go around. Because Washington is borrowing more, less is left over for private investment opportunities. At the very least, companies will have to offer investors higher interest rates to lure them away from government bonds.
That makes getting loans more expensive. And when something gets more expensive, there tends to be less of it. Because of today’s bill, about $18 billion less capital will be available for the private sector to create jobs.
The legislation the Senate passed today is no jobs bill, at least on net. It is a spending bill. It doesn’t create jobs, it only redirects them.
[youtube:http://www.youtube.com/watch?v=zsgjxZ7psx0 285 234]
This blog titled “Toyota Crash Victim Speaks Out Against Media Smearing Automaker” exploits my cache as a victim of a REAL Toyota defect, which I detailed in my Los Angeles Times piece “Toyota Hysteria.” (The inset photo is of my Toyota MR2 after a problem with the rear end caused it to fishtail next to a cliff and send me and my future wife right over.)
“Basically, Fumento is the real deal. He’s got personal negative experience with Toyota, and yet he still manages to say that Toyota is being railroaded by uninformed and uneducated members of big media.”
It also displays my journalism record. I presume I’m the only Toyota defender who was in combat with the Navy SEALs!
My only problem with it is it says “He calls Prius driver James Sikes a ‘media whore liar.’” My writing style is intentionally understated. Among my over 800 articles you will not find the word “whore” and may not find the word “liar.” I provide the facts and allow readers to draw their conclusions.
That said, I must say that Sikes truly is a . . . Nope! Not going to do it!
George Stigler won a Nobel Prize for his work on the economics of regulation. He wrote extensively about regulatory capture, and in fact coined the term. He was one of only a few sane souls who stubbornly insisted that regulations be judged by their actual results, not their intended results. Good intentions, however noble, are not enough. Here’s an example of Stigler at his finest:
Regulation and competition are rhetorical friends and deadly enemies: over the doorway of every regulatory agency save two should be carved: “Competition Not Admitted.” The Federal Trade Commission’s doorway should announce , “Competition Admitted in Rear,” and that of the Antitrust Division, “Monopoly Only by Appointment.”
-George Stigler, “Can Regulatory Agencies Protect the Consumer?”, from The Citizen and the State: Essays on Regulation (1975), p. 183.
Since the very first man installed the very first toilet inside the home, women have been there to nag him to put down the toilet seat. A new invention created by the Danish toilet seat company Pressalit may soon change all of that:
The AutoClose loo keeps track on you using an infra-red beam – and will raise and lower the seat accordingly. The seat closes automatically after you’ve stepped out of range
While this new innovation is something to be applauded for the millions of men who are too lazy/don’t care to put down the toilet seat and their vexed female housemates too lazy/hurried to look before they sit, this is just a small improvement on one of mankind’s greatest achievements: the indoor Crapper.
The idiomatic expression used above might verge on vulgarity, but the term “Crapper” has historical significance. The flush toilet’s apparent champion, Thomas P. Crapper, should be lauded as an innovator (I should note that the term “crap” has a different suspected origin). Like Edison for widespread electricity usage, Thomas Crapper seems in part responsible for the 
implementation of indoor plumbing–an achievement that should not be overlooked. Where there was no plumbing or waste management human populations were, historically, ravaged by disease and death.
Before the Black Death struck down ~400 million in the 14th century (with additional waves sweeping Europe and elsewhere for hundreds of years), the bubonic plague decimated the emperor Justinian’s Byzantine empire in 541-542 AD.
While these diseases probably would have spread even if a city-wide system of waste management was implemented at the time, anecdotal evidence provides reason to believe that it would have been far less severe.
For instance, one of the few places with plumbing, Canterbury monastery, escaped unscathed during the darkest days of the plague in London.
So, when you find yourself in the bathroom on March 27th take a minute to stop and appreciate the human achievement that just might have saved civilization.
The current issue of Barron’s highlights the crushing burden that employee pensions are putting on state and local governments around the nation. The situation is so dire that some dismaying-enough estimates fail to capture the entire scope of the problem. Barron’s writer Jonathan R. Laing cites a Pew Center of on the States study that finds that, “eight states — Connecticut, Illinois, Kansas, Kentucky, Massachusetts, Oklahoma, Rhode Island and West Virginia — lack funding for more than a third of their pension liabilities. Thirteen others are less than 80% funded.” That sounds bad, but it is a relatively optimistic estimate! As Laing notes:
The size of the legacy-pension hole is a matter of debate. The Pew report puts it at $452 billion. But the survey captured only about 85% of the universe and relied mostly on midyear 2008 numbers, missing much of the impact of the vicious bear market of 2008 and early 2009. That lopped about $1 trillion from public pension-fund asset values, driving down their total holdings to around $2.7 trillion.
Other observers think the eventual bill due on state pension funds will be multiples of the Pew number. Hedge-fund manager Orin Kramer, who is also chairman of the badly underfunded New Jersey retirement system, insists the gap is at least $2 trillion, if assets were recorded at market value and other pension-accounting practices common in Corporate America were adopted.
Finance professors Robert Novy-Marx at the University of Chicago and Joshua Rauh of Northwestern University asserted in a recent paper that the funding gap for state pension plans alone might exceed $3 trillion, in part because state funds are using an unrealistic long-term annual investment return of 8% to compute the present value of future payments to retirees, as is permitted in government standards for pension-fund accounting.
This establishes a “false equivalence” between pension liabilities and the likely investment outcomes of state investment portfolios, which are increasingly taking on more risk by beefing up their exposure to stocks, private-equity deals, hedge funds and real estate. Using a much lower expected return — say, one at least partially based on the riskless rate of return on government securities — would both properly and dramatically boost the present value of the pensions’ liabilities while decreasing their likely ability to meet them. The academic pair, using modern portfolio theory, claim that state funds, as currently configured, have only a one-in-20 chance of meeting their obligations 15 years out.
Of course, 15 years out, the politicians who helped to perpetuate this debacle will likely be out of office — which gives them an incentive to back load benefits in the form of pensions. By the time the bill comes due, it’ll be somebody else’s problem. So, while union-friendly office holders can’t give their public employee union supporters everything they ask for today, tomorrow is a different matter.
For more on public sector unions, see here and here.
For many years, the climate alarmist movement pushed the development of corn ethanol as the “fuel of the future” on the grounds that it would decrease fossil fuel emissions. As I detail in my book, The Really Inconvenient Truths, massive efforts were devoted to promoting this technology, with a textbook baptist-bootlegger alliance between green groups and Big Corn (most notably Archer Daniels Midland). Politicians joined in happily, with Al Gore stumping for Minnesota Senator Amy Klobuchar because of her support for ethanol and countless Presidential candidates in Iowa talking up the fuel.
The result of that push has, it seems, been an increase in fossil fuels. For the latest on this, see Corned grief: biofuels may increase CO2 at Watts Up With That?
The indirect effects of increasing production of maize ethanol were first addressed in 2008 by Timothy Searchinger and his coauthors, who presented a simpler calculation in Science. Searchinger concluded that burning maize ethanol led to greenhouse gas emissions twice as large as if gasoline had been burned instead. The question assumed global importance because the 2007 Energy Independence and Security Act mandates a steep increase in US production of biofuels over the next dozen years, and certifications about life-cycle greenhouse gas emissions are needed for some of this increase. In addition, the California Air Resources Board’s Low Carbon Fuel Standard requires including estimates of the effects of indirect land-use change on greenhouse gas emissions. The board’s approach is based on the work reported in BioScience.Hertel and colleagues’ analysis incorporates some effects that could lessen the impact of land-use conversion, but their bottom line, though only one-quarter as large as the earlier estimate of Searchinger and his coauthors, still indicates that the maize ethanol now being produced in the United States will not significantly reduce total greenhouse gas emissions, compared with burning gasoline. The authors acknowledge that some game-changing technical or economic development could render their estimates moot, but sensitivity analyses undertaken in their study suggest that the findings are quite robust.
Promotion of technologies based on theory rather than practice has been a hallmark of the green movement. Every indication seems to be that their foolish promotion of ethanol has been written out of their history, rather than being treated as a cautionary tale to learn from.
Free trade agreements can allow individuals from nations involved in a trade pact to trade freely without the hassle and counterproductive measures of high tariffs and other restrictive barriers, which significantly hurt economies. Additionally, free trade may ease tensions between nations (militarily speaking) and even help deter terrorism.
Coincidentally, Brazil decided to do all of the above. Brazil as well as Argentina, Paraguay, and Uruguay (the Mercosur bloc) agreed to a free trade agreement with Israel, which will become the first non-Latin American member of Mercosur. Brazil believes trade with Israel will “swell” to $3 billion in the next five years from its current level of less than $1 billion.
Additionally, Brazil’s president, Luiz Inacio Lula da Silva, plans to visit Iran in May. This comes after a visit to Israel to discuss trade and peace in the region. President Lula amplified the peace and stability talk by saying, “…that he hopes he can serve as a peacemaker in the region.”
What does a free trade agreement have to do with peace in the region?
1. A strong economic relation between Brazil and Israel helps promotes stability due to the possibility of severe economic loss.
2. Brazil clearly wants peace, economic stimulation and prosperity to drive Israel and Iran away from potential conflict by visiting both nations with economics in mind.
3. Iran does not want to lose Brazil as an ally, and Israel will not want to lose Brazil as an economic trading partner, so Brazil may be able to play a stronger role in “brokering” better relations between the two countries.
Not only do free trade agreements enable open dialogue and cross-cultural exchange between nations, they also create new economic opportunities in the developing world. Perhaps the U.S. should take a look at free trade agreements with nations to promote not only economic growth but also liberty, prosperity, and peace as side effects.
Southern California is a dry place, prone to droughts. So Angelina and Quan Ha, of Orange, CA, ditched their water-hungry grass lawn about two years ago. They replaced it with “a drought-tolerant garden filled with lavender, rosemary and native wildflower seeds.” They claim the switch is saving them hundreds of dollars per year, not to mention hundreds of thousands of gallons of precious water.
The city of Orange promptly sued them, claiming their lawn violates local regulations. At least 40 percent of a yard must be covered with living plants. The city contends that the sparse shrubs and plants in the Ha family’s yard don’t meet the threshold.
“Compliance, that’s all we’ve ever wanted,” Senior Assistant City Attorney Wayne Winthers said. “They put up a nice fence, but it didn’t show anything about how they had complied with code, as far as the front yard goes.”
This is a fancy way of saying, “you will do what I tell you.” This is not a healthy attitude for any person to have.
The Has pled not guilty in court on March 2. If they lose, they are looking at up to six months of jail time and a $1,000 fine.
Fortunately, after a rash of bad publicity surrounding the court hearing, the city announced within hours that it was considering dropping the charges.
(Hat tip to Megan McLaughlin)
The media are still resisting admitting that James Sikes’s Wild Ride was just another Balloon Boy Hoax, in which they played a vital role. Thus the Washington Post today states, “Sikes said he tried to free his gas pedal with his hand but did not say whether he put the car in neutral.”
Actually at his press conference the next day he said about five times he did not. That is available on the Web and I link to it in my Forbes.com article in which I exposed the hoax.
I also reported CNN asked why he didn’t put the car into neutral and he said, “I was afraid to try to [reach] over there and put it in neutral. I was holding onto the steering wheel with both hands – 94 miles an hour in a Toyota Prius is fast.”
Yet for much of the ride he had a phone in one hand!
He also claims to have reached way under the dash to try to pull up the accelerator. And the kicker is that the 2008 Prius is mounted on the dash so that you don’t have to take your hands off the steering wheel to shift as this image shows.
This alone shows Sikes to be a complete liar, yet the Post negates all these questions with its sloppy reporting.
The Post also says that a Toyota representative said “that Sikes was told by the 911 operator to put his Prius into neutral and turn off the ignition.”
Either the operator did or she didn’t. Why is this attributed to Toyota? Again, you can find that 911 call all over the Web and a link to it in my piece. You hear this poor lady BEGGING Sikes to turn off the ignition or put the car into neutral. He refused. It’s a fact, not a “Toyota claims.”
We need reporters to admit “We wuz wrong. This was another Balloon Boy Hoax and we blew it!” Then we need them to call off the witch hunt.
(Image courtesy of Jaime Arbona.)
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