January 2012

More Stimulus Money Wasted

by Hans Bader on October 21, 2010

in Deregulate to Stimulate, Economy, Politics as Usual, Stimulus to Nowhere

A lot of money was wasted in weatherization projects paid for by the stimulus package, note The New York Times Green Blog and Professor Jonathan Adler.

Eighty percent of homes audited by federal investigators in Illinois “failed final inspection ‘because of substandard workmanship.’ In some cases, technicians who tuned up gas-fired heating systems did so improperly, so that they emitted carbon monoxide ‘at higher than acceptable levels.’”  In two-thirds of the homes audited, “contractors billed for labor charges that had not been incurred and for materials that had not been installed.” Illinois itself “had found a 62 percent error rate when it re-inspected homes weatherized by CEDA,” and that “some of the work created fire hazards.”

Stimulus money also went to prisoners and dead people, wasteful welfare spending, abandoned bridges to nowhere, and unnecessary government buildings.  The stimulus subsidized foreign green jobs and wiped out jobs in America’s export sector.

Liberal newspapers, like the editorial boards of The Washington Post and The New York Times, now parrot false claims by the Obama administration that the stimulus has “saved or created” jobs, and cite a non-existent consensus among economists in support of that claim.  But in reality, many leading economists, including Nobel Prize winners, were skeptical of the stimulus, including but not limited to Alberto Alesina, Robert Barro, Gary Becker, John Cochrane, Eugene Fama, Robert Lucas, Greg Mankiw, Kevin Murphy, Thomas Sargent, Harald Uhlig, and Luigi Zingales. The “‘stimulus’ is not the road to economic recovery. It’s the problem, not the solution, writes Nobel laureate economist Vernon L. Smith.” The Cato Institute even ran full-page ads in The New York Times and Washington Post, featuring a statement signed by 200 economists opposing the stimulus package.

The Washington Post itself once admitted that there was no consensus among economists for the stimulus, conceding that “[f]iscal stimulus is far from a sure-fire remedy. Economists disagree about the efficacy of every pump-priming effort from the New Deal to last year’s tax rebates. In general, fiscal policy had fallen out of favor in economics. . .Many economists note Japan’s failed attempt to borrow and spend its way out of a recession during the 1990s” through “repeated stimulus packages. As it is, Japan piled up a massive debt and recovered only modestly, leaving it vulnerable to today’s downturn.” (See Editorial, “Priming the Pump,” Jan. 25, 2009, at p. B6).

More Support for Privatization of Virginia Liquor Sales

by Michelle Minton on October 21, 2010 · 3 comments

in Deregulate to Stimulate, Economy, Nanny State, Personal Liberty

Yesterday, the Virginia Retail Federation (the advocacy arm of the Retail Alliance and the Retail Merchants Association) came out in support of privatizing liquor sales throughout the Commonwealth of Virginia. They did, however, have one condition for their support: make it easier for small and independent retailers to obtain licenses by increasing availability and reducing the minimum bids on the initial license auction.

As I have written in the past, Virginia is one of only 18 states to retain it’s monopoly on liquor sales after prohibition. The current proposal would shut down the state’s 332 liquor stores and auction off 1,000 licenses to businesses around the state (most of which already sell wine and beer) and use the money for Virginia’s transportation projects (the revenue generated from the initial sale of licenses and taxes is disputed, but it’s somewhere in the neighborhood of $400 million).

The current proposal for privatization of Virginia liquor sales:

1,000 Retail Licenses up for Auction

600 Tier 1 licenses (i.e. grocery stores) cost=  min. bid + $2,000/year

150 Tier 2 licenses (i.e. specialty stores) cost = min. bid + $1,000/year

250 Tier 3 licenses (i.e. convenience stores) cost = the min. bid + $500/year

Wholesaler Fees: Licensing fee= 2.5x profits of spirits lines to be distributed

Excise Tax: $17.50 per gallon

Some statistics about Virginia liquor sales versus the rest of the country:

Outlet Density in Virginia: Density of liquor store outlets in Virginia is 0.6 per 10,000 adults

Outlet Density in the U.S.: Density in the U.S. on average is 3.2 per 10,000 adults

Sales in Virginia: Liquor sales rate is 1.62 gallons per adult

Sales in the U.S.: 2.04 gallons per adult

Sales in D.C.: 4.46 gallons per adult

Excise Tax on Liquor in MD/D.C.: $1.570 per gallon

Excise Tax on Liquor in Virginia: $20.13 per gallon

Though there are concerns that selling the state’s profitable liquor sales “business” will result in an net revenue drop for Virginia, it is unlikely that this will be the case (considering the number of residents who will repatriate liquor stores, restaurants, and bars in Virginia). Regardless of the final numbers, the state needs to get out of the business of selling booze and back to its proper role of serving citizens. Even if the revenue generated from the sell-off of licenses is only enough to widen Route 1 it will still result in tangible benefits for residents, unlike the archaic state-controlled liquor sales that provide absolutely zero value and, in fact, hinder life and business in the Commonwealth of Virginia.

Morning Media Summary

by Lee Doren on October 21, 2010

in Economy, Energy, Environment, International, Legal, Personal Liberty, Regulation, Trade

Tech:

Canada Says Google Wi-Fi Sniffing Collected Personal Data:
“Canada’s privacy commissioner said Tuesday that Google’s recent Wi-Fi sniffing was a serious violation of Canadians’ privacy rights and included the collection of personally identifiable information.”

Google Resumes Work on Oklahoma Data Center:
“Google is resuming work on a major data center project in Pryor, Oklahoma, saying it will soon need to being additional data center capacity online. The $600 million Oklahoma project was originally scheduled for completion in 2009, but was delayed due to the slowing economy. It is now expected to be operational by the end of 2011.”

Having a ball:
“The rise in digital music-sales is scant compensation. People tend to buy tracks, not albums, from sites like Apple’s iTunes. They can obtain their favourite music much more cheaply than they could in the CD era. And even digital sales are now stalling. In Japan, mobile and online single-track sales rose only a shade during 2009. So far this year Americans have bought 841m digital tracks, mostly from Apple’s iTunes, according to Nielsen Soundscan—down from 847m at this point last year. Apple now offers plenty of other opportunities to spend money, from iPads to more than 250,000 apps. Music executives believe the company is cannibalising the musical part of its own business.”

India to build observatory to study neutrino particles:
“The environment and forests ministry gave the go-ahead for the observatory to be built in the Bodi West hills on the coast of southern Tamil Nadu state.”

Cloud Telecomputers to Exhibit Glass Platform at AstriCon 2010:
“Cloud Telecomputers, a software innovator in business applications and IP telephony, today announced that it will be exhibiting Glass, its unique Android-based platform for desktop business smartphones, at AstriCon 2010 in National Harbor, Maryland from October 26-28.”

Google: 244,000 Germans say ‘no’ to Street View:
“Internet giant Google says more than 244,000 Germans have asked that their homes be made unrecognizable in its Street View program, scheduled to launch in Germany next month.”

Global Warming / Environment / Energy:

Introducing ‘Climate Hawks’:
“On Monday I asked, “What should we call people who care about climate change and clean energy?” A fantastic discussion ensued, up to 226 comments and counting — thanks to everybody who weighed in, not only on the site, but on Facebook, Twitter, email, and “words spoken in my physical presence” (kids, ask your parents!).”

Climate Change Doubt Is Tea Party Article of Faith:
“At a candidate forum here last week, Representative Baron P. Hill, a threatened Democratic incumbent in a largely conservative southern Indiana district, was endeavoring to explain his unpopular vote for the House cap-and-trade energy bill.”

Al Gore urges California to vote no on climate initiative:
“The future of climate change legislation in the United States could rest in California, where voters will decide on Nov. 2 whether to pass Proposition 23, a ballot measure that would roll back the state’s ambitious greenhouse gas emissions targets. With some polls showing voters in California split over the issue, former Vice President Al Gore released a video today explaining his opposition.”

Spain’s Solar Deals on Edge of Bankruptcy as Subsidies Founder:
“Across the plains around Lerida, the northeastern Spanish town where they spent weekends, farmers were turning over their fields to photovoltaic panels to capitalize on government solar- energy subsidies. Vilimelis persuaded his father, Jaume, who made a living growing pears on 5 acres (2 hectares) of land in Lerida, to turn over a portion of his farm for the project, Bloomberg Markets reported in its November issue.”

EPA in crosshairs:
“On the campaign trail, Republicans have adopted the Environmental Protection Agency as a favorite symbol of the White House’s regulatory overreach. And behind the scenes in Washington, GOP staffers and K Street lobbyists who say they’ve been dissed by the EPA administrator are looking forward to getting some revenge.”

Hot air? White House takes credit for Bush-era wind farm jobs:
“The Obama administration is crediting its anti-recession stimulus plan with creating up to 50,000 jobs on dozens of wind farms, even though many of those wind farms were built before the stimulus money began to flow or even before President Barack Obama was inaugurated.”

Insurance / Gambling:

South Carolina Supreme Court Hearing Arguments in 2006 Poker Conviction (not same url from yesterday):
“The South Carolina Supreme Court heard arguments yesterday regarding a 2006 case involving a home poker tournament. The discussion centers on whether the state’s gaming laws were violated and/or whether poker is a game of skill or chance.”

Health / Safety:

As Injuries Rise, Scant Oversight of Helmet Safety:
“Moments after her son finished practicing with his fifth-grade tackle football team, Beth Sparks examined his scuffed and battered helmet for what she admitted was the first time. She looked at the polycarbonate shell and felt the foam inside before noticing a small emblem on the back that read, “MEETS NOCSAE STANDARD.””

Economics:

Toyota Recall 2010: Avalon, Lexus Among 1.53 Million Recalled Cars:
“Toyota is recalling 1.53 million Lexus, Avalon and other models, mostly in the U.S. and Japan, for brake fluid and fuel pump problems, the latest in a string of quality lapses for the world’s No. 1 automaker.”

Obama economic report focuses on women, ignores ‘Great Mancession’:
“While the recession has hit men far harder than women — so much so that some pundits have dubbed this economic downturn
a “mancession” — the Obama administration is focusing on the struggles women are facing during these tough economic times.”

Gov’t tax panel agrees to end tax break for stock investments:
“An expert panel of the government’s Tax Commission agreed Thursday to abolish a reduced tax rate for stock investments from January 2012 as scheduled, participants said.”

Shocker. George Soros Dumps $1 Million Into Media Matters Sinkhole:
“Media Matters, the liberal activist group that wages a rhetorical war against Fox News Channel and others in the conservative press, will announce on Wednesday the receipt of a $1 million donation from the philanthropist George Soros.”

Geithner’s Goal: Rebalance World Economy:
“Treasury Secretary Timothy Geithner said he would use weekend meetings of G-20 finance ministers to advance efforts to “rebalance” the world economy so it is less reliant on U.S. consumers, to move toward establishing “norms” on exchange-rate policy, and to persuade others the U.S. doesn’t aim to devalue its way to prosperity.”
Legal:

NPR fires Juan Williams:
“NPR fired political analyst Juan Williams Wednesday night over his statement on Fox News that he gets “nervous” whenever he sees people in “Muslim garb” boarding a plane. ”

Video: So You Want to Go to Law School:
“A young woman meets with an attorney to discuss her decision to go to law school.”

National Politically-correct Radio:
“Do the powers-that-be at NPR think Juan Williams is a bigot? Do they think a traveler who has a reaction (fair or unfair) like the one Juan describes, in our age of terror in the name of Islam, is a bigot?”

Tobacco Settlement Dollars Go Up In Smoke in Latest Government Scam:
“For the latest example of governmental bait-and-switch, look no further than your ashtray. Attorneys general from 46 states sold the public on the 1998 “Master Settlement Agreement” as a way to collect “damages” from the major tobacco companies and spend these sums to rescue teenagers from nicotine addiction.”

Labor:

Video: French throw national tantrum over small reduction to pension “birthright”:
“For Gilly and many other Frenchmen and women, social benefits such as long vacations, state-subsidized health care and early retirement are more than just luxuries: They’re seen as a birthright — an essential part of the identity of today’s France…”

Clashes, protest in French tensions over pensions:
“Protesters blockaded Marseille’s airport, Lady Gaga canceled concerts in Paris and rioting youths attacked police in Lyon on Thursday ahead of a tense Senate vote on raising the retirement age.”

No secrets surrounding SEIU’s political contributions:
“I’ll give the U.S. Chamber of Commerce and their allies, including opinion writer Marc Thiessen, credit. Despite living in a glass house of secrecy and unwillingness to disclose where their own money comes from, they have no qualms about throwing stones ["Are foreign and illegal workers funding Democrats' attack ads?," op-ed, Oct. 18].”

SEIU Local 1000 exec argues for contract ratification:
“Jim Hard, former president of SEIU Local 1000 and the union’s current vice president for organizing and representation, sent an e-mail to members on Tuesday that passionately argues for ratifying the local’s tentative agreement with Gov. Arnold Schwarzenegger.”

SEIU blasts Angle in new ad:
“The Service Employees International Union (SEIU) launched a new television ad Thursday blasting Nevada Republican Sharron Angle.”

Transportation/ Land Use:

High-Speed Rail: The Wrong Road for America:
“In the face of high energy prices and concerns about global warming, environmentalists and planners offer high-speed rail as an environmentally friendly alternative to driving and air travel. California, Florida, the Midwest, and other parts of the country are actively considering specific high-speed rail plans.

Medical Trial and Error

by Greg Conko on October 21, 2010

in Culture, Health and Illness, Healthcare, Precaution & Risk, Regulation, Zeitgeist

The Atlantic has an interesting profile of medical researcher John Ioannidis, who famously concluded in a groundbreaking 2005 study (a different version of which can be found here) that the scientific conclusions of most of the articles published in medical journals are wrong.  I’m not sure what took The Atlantic so long to write the review.  After all, The New York Times Magazine covered the same ground way back in 2006, and the Times excerpted a lengthy section of Ioannidis’s new book on the subject in June of this year.  Still, the conclusions are worth taking into consideration.  After all, science is merely an organized search for the truth, and every scientist worth his salt knows that any one study can generate incorrect or incomplete results.  It is only once a given observation is tested repeatedly and reproduced that we should come to view the findings as anything more than provisional.

What’s troubling is the reception that Ioannadis’s work has gotten from quacks and cranks — exemplified by a handful of the comments following The Atlantic article, and elsewhere.  If science can’t be trusted, then science must be useless, according to some.  Others lay the blame at the feet of pharmaceutical companies peddling junk science in order to sell more drugs.  But, as pharma researcher and blogger Derek Lowe points out, “drug research probably comes out of [Ioannadis's] analysis looking as good as anything can. A large confirmatory Phase III study is, as you’d hope, the sort of thing most likely to be correct, even given the financial considerations involved. Even then, though, you can’t be completely sure – but contrast that with a lot of the headline-grabbing studies in nutrition or genomics, whose results are actually more likely to be false than true.”

In the end, the cumulative weight of a body of science, as opposed to any single study, still is right more often than not.  To quote science blogger Orac, “in many ways, the present system of randomized clinical trials and peer-review is, to paraphrase Winston Churchill regarding democracy, the worst system for finding the best treatments–except for all the rest. … Despite all that, it is a big mistake to take Ioannidis’ findings as “proof” that science is not the best methodology we have for answering fundamental questions about how the universe works, the pathogenesis of disease, or for identifying the most efficacious treatments. Certainly, it far surpasses any alternatives.”

“Rent Is Too Damn High” Candidate’s Rent is Actually Quite Low

by Kathryn Ciano on October 20, 2010

in Property Rights, Regulation, Sanctimony, Zeitgeist

Oh look, a politician building a campaign on the premise that he understands his constituents’ plight is actually…very far removed from the issues that are important to his constituents.

There is nothing new under the sun.

Turns out that NY governor-hopeful Jimmy McMillan, famous for his viral “rent is TOO DAMN HIGH” YouTube clip, actually pays very little. Rent for McMillan’s Brooklyn one-bedroom is a mere $800/month, much lower than Northwest Washington, D.C.’s average of $1100/month.

In fact, for the last decade, McMillan has not paid his landlord any rent at all. The New York Times reports, “Mr. McMillan said in an interview on Tuesday that for at least the last decade, he had lived rent free. “We’re like family,” Mr. McMillan said of his landlords. “They don’t want me to pay any money at all. I am basically living there rent free.”

According to the Times:

Mr. McMillan said that he moved into his apartment, a one-bedroom on Nostrand Avenue in Flatbush, Brooklyn, in the early 1980s but soon fell behind on rent when he left his job in the Postal Service on disability. The landlady, Mr. McMillan said, admired his Vietnam War service and forgave the back rent and, eventually, the future rent, too. In exchange, he did maintenance work, and after she died in 2003, her heirs continued the tradition.

Building manager Viola Hampton told the New York Post, “The rents should go up but they haven’t. People don’t have that kind of money… Everybody here is like a family,” and said of her tenant’s platform, “He’s not necessarily talking about himself. He’s talking about the poor person.”

He’s not necessarily talking about himself, but McMillan rents a rent-stabilized apartment in the East Village for his son, for only $900/month, again predictably well below the area average.

This politician insists on occupying a rent-controlled apartment for his son, rather than let that space go to a person who truly needs it. Even sleazier is his refusal to contribute to the collective pot from which he believes “the poor” so richly deserve to take. Will he at least allow the public to see his apartment, or his son’s? Reports the Times:

“Mr. McMillan declined to show the apartment, saying he feared for his neighbors’ safety, and fielded questions from the driver’s seat of his parked graphite-colored Honda CR-V, which is also his mobile office. When he travels, he sleeps in it, too; in the back were a sleeping bag, a bottle of Scope Original Mint mouthwash and a pair of nunchucks he keeps in a seat-back pocket. That weapon happens to be banned by the state he wants to run. “My main object is to protect myself,” he said. “I will worry about the consequences later on.”

McMillan is riding high on this YouTube-fueled wave of popularity. Yet this is exactly the type of broad overpromising that corrupts politics and politicians alike. His words say “rent is too damn high.” But McMillan’s actions say: “I and my family will eat until we are full, but the rest of y’all should share the wealth.”

Do your little honestly, folks; it makes little sense to cheat the people who trust your word, all while promoting one of the worst economic policies of our time.

Exploiting the Poor: International Trade

by Alex Schibuola on October 20, 2010 · 3 comments

in International, Labor, Trade

On last week’s Stossel (no video available yet), was mentioned that rich countries gain their wealth through the exploitation of poor countries. Professor Marc Hill of Columbia University opined that businesses operating in poor countries ought to pay workers an extra dollar per hour for their services. It’s a very nice thought at first; however, there’s no such thing as a free lunch (as I’ve mentioned — but it’s one of those things one can never say enough).

While companies could pay an extra dollar per hour of work, this increases the costs of producing their output. Let’s say that it’s shoes. Higher wages increase the costs of production and lead to a reduced supply of shoes. A lower supply of shoes entails a higher price for shoes and a lower quantity of shoes demanded (because people can’t afford the same amount at the higher prices). The reduced supply of shoes also means something more subtle: you need fewer workers to produce a reduced supply. While the workers who keep their jobs do benefit, what about the workers who lose their jobs?

This is one aspect of “fair trade” advocates that I find abhorrent. After imposing fairness, they completely ignore the unintended consequences of their “fairness.” They forget about the workers who lost their jobs as a result of “fairness.” In instances where attempts at free trade were subverted under the guise of waiting for fair trade, they forget about the workers who never even got the chance to take jobs.

Fair traders, by virtue of their actions, say, “Yes, so they’re starving and impoverished, and have lower economic growth, but at least they don’t have to work in sweatshops earning unfair wages. Besides it’s not a consequence of my fairness, it’s because of greedy capitalists. Now, I can sleep better at night, knowing that I created some positive benefits.” Even though the costs were far greater.

This same logic applies to the minimum wage as well.

Afternoon Links: October 20, 2010

by Nicole Ciandella on October 20, 2010

in Zeitgeist

1. In an attempt to push Fox and Cablevision to settle their programming-fee dispute–which has resulted in blackouts of  MLB playoff games–the FCC tweeted score updates during Game 3 of the Phillies-Giants series.

2. David Arquette beats up “Big Oil” in a bizarre ad opposing Prop 23.

3. In the wake of recent violence, no one wanted the job of Police Chief in a Mexican border town with a population of 10,000. So a 20-year-old female criminology student volunteered for the position.

4. If you’re a drug addict in the U.K., a private non-profit group will pay for your birth control or sterilization.

5. Why are women leading the tea party movement?

Rent Control: Why Is It So Bad?

by Kathryn Ciano on October 20, 2010

in Economy, Property Rights

When rent is “too damn high,” people move. Yet many cities still impose rotating rent controls, in a misguided attempt to make housing more affordable.

Governments can hardly be credited with behaving as rational actors. Still, for those of you with a lingering sense that maybe rent control-mongers might have a point, here’s a nonexhaustive list of why rent control is such bad policy:

  • Rent control reduces landlords’ incentives to rent out apartments. This means that rent control in a city keeps apartments available for rent scarce.
  • Demand skyrockets for the few available apartments. Unable to respond to rising demand in the logical way–raising price–landlords impose conditions on renters, or stop responding immediately to renters’ complaints because, after all, with such low vacancy levels renters have nowhere to go. This keeps relations between landlords and tenants tense and aggressive–hardly the friendly neighborhood model community-minded rent control-ers had in mind…!
  • Landlords paying more for apartments than they’re able to collect in rent cannot afford to maintain or repair units. Apartments stay in disrepair for the duration of rent-controlled tenancy, until landlords can collect market prices and therefore pay plumbers, caulkers, repairmen, etc.
  • Rent-controlled apartments cause stagnation. Tenants paying below-market prices for apartments are unlikely to move, even for higher wages or better jobs. This suppresses long-term economic growth, marginally disincentivizes the rent-controlled tenant’s instinct to find any work when unemployed, and depresses neighborhoods’ development overall.
  • Landlords afraid of statistically-inevitable squatters will rationally prefer shorter-term renters, inadvertently discriminating against just the people rent control is ostensibly designed to help, like retirees or families with young children.
  • Like any price control, restriction begets more restriction. If rent increases are only allowed between leases, rational landlords will not hesitate to evict bad tenants, even where under market price landlords would have more compassion for the same bad tenants. This translates to demand for further government interference on behalf of tenants, i.e., into deeper bureaucracy, more policing, and ever-more-developed landlords’ search for loopholes.

Exploiting the Poor: The Minimum Wage

by Alex Schibuola on October 20, 2010

in Economy, Labor, Regulation

Many people believe that the minimum wage is a major source of America’s prosperity. Actually as of 2009 only 4.9 percent of (employed) workers earn minimum wage or less. Prior to the Great Recession the average was between 2007 and 2000 was 2 to 3 percent.

This is another case of what is seen (workers who get minimum wage) and what is unseen (workers who don’t get to work because minimum wage). If the minimum wage was truly the path to prosperity, by that logic then, why don’t we raise the minimum wage to $100 dollars per hour? Actually that sounds pretty good — but wait a second — as economists have been saying for about 200 years now, “there’s no such thing as a free lunch.”

So let’s say that the law goes into place and is perfectly enforced (i.e., nobody works for $99/hour or less). Some businesses shut down, but all businesses cut down on employment because it is too costly to hire the same amount of labor as before the minimum wage increase.

We find that unions around the nation support minimum wage increases. It’s definitely not because union member workers earn minimum wage (because then they’d fire their union because the union dues would make their wages fall below minimum wage). It might be because they unions care about non-union workers, but wait is there a better reason? Let’s take an even more compelling look at the minimum wage.

Anyone can tell you that there is more than one way to do things. To get to New York, one can take a plane, a bus, a train, a car, walk, bicycle there, etc. Likewise in production, there’s more than one way to produce a good. Let’s say fence manufacturing: I can hire one skilled worker for $25 or I can hire three unskilled workers at $8.25 per hour ($24.75 total)—both create the same level and quality of fences. At those skilled/unskilled wages I’d prefer to hire unskilled workers and save 25 cents.

The skilled worker gets Congress to agree that people ought to be paid a fair wage, so they pass a higher minimum wage at $9 hour. All of a sudden I must pay the unskilled workers $9 (or $27 for all three). At a total of $27 for three unskilled workers all of a sudden the skilled worker becomes a better option at $25! In fact the skilled worker looks better all the way up to $27.00! How about the three unskilled workers? Now they’re unemployed. There’s no job out there that they have the skills to command a wage of $9.

While unions may or may not be naïve in thinking that they harm their fellow laborers by supporting minimum wage, they sure have one strong personal incentive to support it.

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