Main


September 2, 2010

"Disrespectful to Take Money from One Man's Pocket and Put It in Another's"



WestsideCommunityCenterColoradoSprings2010-08-30.jpg"A March fair to raise private funding for community centers, held at Westside Community Center, was sparsely attended." Source of caption and photo: online version of the WSJ article quoted and cited below.


(p. A1) COLORADO SPRINGS, Colo.--Like many American cities, this one is strapped for cash. Tax collections here have fallen so far that the city has turned off one-third of its 24,512 street lights.

But unlike many cities, this one is full of people who are eager for more government cutbacks.

The town council has been bombarded with emails telling it to close community centers. Letters to the local newspaper call for shrinking the police department and putting the city-owned utility up for sale. A commission is studying whether to sell the municipal hospital. Another, made up of local businessmen, will opine on whether to slash the salaries and benefits of city employees.

"Let's start cutting stupid programs that cost taxpayers a pot of money," says Tim Austin, a 48-year-old former home builder now looking for a new line of work. "It's so bullying and disrespectful to take money from one man's pocket and put it in another's."



For the full story, see:

LESLIE EATON. "Strapped City Cuts and Cuts and Cuts." The Wall Street Journal (Tues., APRIL 13, 2010): A1 & A16.






September 1, 2010

Energy Department Wastes Energy



(p. A17) WASHINGTON -- Like flossing or losing weight, saving energy is easier to promise than to actually do -- even if you are the Department of Energy.

Its Web site advises that choosing new lighting technologies can slash energy use by 50 to 75 percent. But the department is having trouble taking its own advice, according to an internal audit released on Wednesday; many of its offices are still installing obsolete fluorescent bulbs.

And very few have switched to the most promising technology, light-emitting diodes, which the department spent millions of dollars to help commercialize.

Many of the changes would generate savings that would pay back the investment in two years or so, according to the report, by the department's inspector general.

In one case, the Department of Energy made most of the investment by installing timers to shut off lights at night when it moved into a new building in 1997. But it got no benefit: as of March of this year, it had not bought the central control unit needed to run the system.



For the full story, see:

MATTHEW L. WALD. "Energy Department: Make Thyself Fuel Efficient." The New York Times (Thurs., July 8, 2010): A17.

(Note: the online version of the article is dated July 7, 2010, and has the title "Energy Department Lags in Saving Energy.")





August 30, 2010

Districts with More Government Pork Have Less Private Hiring



(p. A19) You can't read models, but you do talk to entrepreneurs in Racine and Yakima. Higher deficits will make them more insecure and more risk-averse, not less. They're afraid of a fiscal crisis. They're afraid of future tax increases. They don't believe government-stimulated growth is real and lasting. Maybe they are wrong to feel this way, but they do. And they are the ones who invest and hire, not the theorists.

The Demand Siders are brilliant, but they write as if changing fiscal policy were as easy as adjusting the knob on your stove. In fact, it's very hard to get money out the door and impossible to do it quickly. It's hard to find worthwhile programs to pour money into. Once programs exist, it's nearly impossible to kill them. Spending now creates debt forever and ever.

Moreover, public spending seems to have odd knock-off effects. Professors Lauren Cohen, Joshua Coval and Christopher Malloy of Harvard surveyed 42 years of government spending increases in certain Congressional districts. They found that federal spending increases dampened corporate hiring and investment in those districts.



For the full commentary, see:

DAVID BROOKS. "A Little Economic Realism." The New York Times (Tues., July 6, 2010): A19.

(Note: the online version of the article is dated July 5, 2010.)


The research referenced is:

Cohen, Lauren, Joshua D. Coval, and Christopher J. Malloy. "Do Powerful Politicians Cause Corporate Downsizing?" NBER Working Paper No.15839, March 2010.





August 28, 2010

Cuban Health Care Checkup



(p. A17) . . . it's a good time to check in on the state of the Cuban health-care system. That's just what Laurie Garrett, a senior fellow at the Council on Foreign Relations, does in the current issue of Foreign Affairs magazine.


. . .


Slightly more than half of all Cuban physicians work overseas; taxed by the Cuban state at a 66% rate, many of them wind up defecting. Doctors who remain in the country earn about $25 a month. As a result, Ms. Garrett writes, they often take "jobs as taxi drivers or in hotels," where they can make better money. As for the quality of the doctors, she notes that very few of those who manage to reach the U.S. can gain accreditation here, partly because of the language barrier, partly because of the "stark differences" in medical training. Typically, they wind up working as nurses.

As for the quality of medical treatment in Cuba, Ms. Garrett reports that hospital patients must arrive with their own syringes, towels and bed sheets. Women avoid gynecological exams "because they fear infection from unhygienic equipment and practices." Rates of cervical cancer have doubled in the past 25 years as the use of Pap tests has fallen by 30%.

And while Cuba's admirers love to advertise the country's low infant mortality rate (at least according to the Castro regime's dubious self-reporting) the flip-side has been a high rate of maternal mortality. "Most deaths," Ms. Garrett writes, "occur during delivery or within the next 48 hours and are caused by uterine hemorrhage or postpartum sepsis."



For the full commentary, see:

BRET STEPHENS. "Dr. Berwick and That Fabulous Cuban Health Care; The death march of progressive medicine." The Wall Street Journal (Sat., JULY 13, 2010): A17.

(Note: ellipses added.)


Reference to the Garrett article:

Garrett, Laurie A. "Castrocare in Crisis; Will Lifting the Embargo Make Things Worse?" Foreign Affairs 89, no. 4 (July/August 2010): 61-73.





August 27, 2010

Government Protects Us from Julie Murphy's Lemonade Stand



JulieMurphyLemonadeStand2010-08-16.jpgJulie Murphy and her lemonade stand. Source of photo: online version of the NYT article quoted and cited below.


(p. A8) When life gives you lemons, make lemonade.

When health inspectors cite you for it, get famous.

Julie Murphy, a 7-year-old Oregonian, set up a lemonade stand on July 29 at an art fair in northeast Portland. County health inspectors shut her down, however, telling Julie and her mother, Maria Fife, that they needed a temporary restaurant license, which costs $120. The penalty for selling food without a permit, they warned, was $500. At 50 cents a cup, that's a lot of lemonade.

Others at the fair urged the family to give away the lemonade, and they wrote "free" and "suggested donation" on Julie's sign with a marker. But the inspectors were unmoved.

Julie left the fair in tears.



For the full story, see:

JOHN SCHWARTZ. "Sorry, Kid: No License, No Lemonade." The New York Times (Sat., August 7, 2010): A8.

(Note: the online version of the article is dated August 6, 2010.)





August 23, 2010

"The Survival of Freedom and Accountable, Limited Government Is an Enormously Important Value"



GellnerErnest2010-08-05.jpg "Ernest Gellner in his office at the London School of Economics in 1979." Source of caption and photo: online version of the WSJ article quoted and cited below.


(p. W8) 'I am sorry, I have written another," Ernest Gellner used to say in his later years before publishing a new book. "I just couldn't help it." Not even his death in 1995 stopped the flow. The last of his posthumous works, "Language and Solitude," appeared in the late 1990s. Now Gellner has been brought back to life--alongside his combative ideas and his maverick approach to intellectual combat--in a sympathetic but by no means reverential biography by his former pupil John A. Hall.


. . .


Many of the problems that Gellner addressed during his long intellectual career--such as the roots of nationalism and the role of contemporary Islam--are obviously of direct relevance today. But the most pertinent part of his legacy lies in his fearless endorsement of Western modernity at a time when it was becoming increasingly embattled in the academy and elsewhere.

As Mr. Hall demonstrates, Gellner believed that there really was a clash between "liberty and pluralism," on the one hand, and "authoritarianism and oppressiveness" on the other. In a passionate riposte to Noam Chomsky, who had accused him of ignoring Western crimes, Gellner charged that his critic had "obscured" the fact that "the survival of freedom and accountable, limited government is an enormously important value even when some of its defenders are occasionally tarnished."

This was the authentic voice of Ernest Gellner: honest, cool and reasonable. Mr. Hall is to be congratulated for reminding us of how much we miss it today.



For the full review, see:

BRENDAN SIMMS. "A Combatant in the Battle of Ideas; A defender of the West when it was most embattled, a defender of reason at a time of dangerous irrationality." The Wall Street Journal (Fri., JULY 23, 2010): W8.

(Note: the online version of the article is dated July 30 (sic), 2010.)

(Note: ellipsis added.)


The book under review, is:

Hall, John A. Ernest Gellner: An Intellectual Biography. London, UK: Verso, 2010.


ErnestGellnerBK.jpg













Source of book image: online version of the WSJ review quoted and cited above.












August 22, 2010

"Pork Actually Pushes Private Investment Out of a State"



Some West Virginia miners may have faced unemployment due to technological progress. But what they needed to improve their situation was economic growth from private enterprise, rather than Senator Robert Byrd's federal pork.


(p. A11) . . . mining companies developed more efficient techniques for extracting coal and natural gas, which eliminated the need for many blue collar jobs. Laid-off workers lacked the skills to attract other types of businesses and college students couldn't find jobs after graduation, so they left. Such dramatic changes would be serious obstacles for any politician.

. . .


By contrast, Byrd's solution was to steer federal largess to his state.


. . .


Take Route 50. Thirty years ago, the federal government extended the route from two lanes to four with the hopes of spurring development. But hit the open road today and you'll notice it's just that--open. "You won't see another car for two hours," says Russell Sobel, a professor of economics at West Virginia University. "You can't just build roads and expect that things will happen. People who want to transport goods and services need to be there."


. . .


"We've created this culture of dependency," warns Mr. Sobel, "Our human capital is not good at competing in the marketplace; it's good at securing federal grants."

Federal funding is a shaky foundation for an economy because no one can replace Big Daddy. In their recently released paper "Do Powerful Politicians Cause Corporate Downsizing?" Harvard professors Lauren Cohen, Joshua Coval and Christopher Malloy found that states that lose chairmanships on important congressional committees lose 20% to 30% in earmarks.

Even worse, they found that pork actually pushes private investment out of a state. When the federal government intrudes, it raises demand for the state's workers and real estate, jacking up prices. Often, companies can't compete, so they flee.



For the full commentary, see:

BRIAN BOLDUC. "CROSS COUNTRY; Robert Byrd's Highways to Nowhere; Government pork hasn't made West Virginia prosperous." The Wall Street Journal (Sat., JULY 10, 2010): A11.

(Note: ellipses added.)


The research referenced is:

Cohen, Lauren, Joshua D. Coval, and Christopher J. Malloy. "Do Powerful Politicians Cause Corporate Downsizing?" NBER Working Paper No.15839, March 2010.





August 21, 2010

Feds' Sugar Quotas Lead to More Demand for Obesity-Causing Corn Syrup



CornSyrupGraph2010-08-05.jpgSource of graph: online version of the Omaha World-Herald article quoted and cited below.


The federal government puts quotas on the amount of sugar that can be imported from abroad, with the result that U.S. consumers pay higher prices for sugar. One result, as taught in economics micro principles courses, is that demand increases for sugar substitutes, such as corn syrup.

Evidence is accumulating (see below) that corn syrup is worse for our health than sugar.

Michelle Obama is leading a drive to reduce obesity. If she is serious, she can begin by asking her husband to ask his congress to remove import quotas on sugar.


(p. 2A) Well-publicized research also has suggested that high fructose corn syrup poses an even greater threat of obesity and other health problems than regular table sugar.


. . .


Researchers at Princeton University made headlines earlier this year when they released the results of a study that found rats drinking a high fructose corn syrup beverage for six months showed abnormal weight gain and other factors indicating obesity. The study concluded that overconsumption of the sweetener "could very well be a major factor in the 'obesity epidemic,' which correlates with the upsurge in the use of HFCS."

A related study found that rats drinking the high fructose corn syrup solution gained more weight than rats drinking a basic sucrose solution.

"The conclusion from that is that high fructose corn syrup and sucrose are not the same after all," said Bart Hoebel, the professor who worked on the study.



For the full story, see:

Ross Boettcher and Joseph Morton. "Is Corn Syrup Slump Healthy? ConAgra, Farmers Divided." Omaha World-Herald (Wednesday, July 26, 2010): 1A-2A.

(Note: ellipsis added.)

(Note: the online version of the article is dated July 26, 2010 and has the title "Consumers sour on sugars.)





August 13, 2010

"Intimidation, Threats and Violence Against the White Farmers" in Zimbabwe



ForcingWhiteFarmerOffLand2010-08-04.jpg"A man tries to force a white Zimbabwean farmer off of his land in "Mugabe and the White African."" Source of caption and photo: online version of the NYT article quoted and cited below.


(p. C9) Lucy Bailey and Andrew Thompson's "Mugabe and the White African" is a documentary account of the efforts of Mike Campbell and his son-in-law, Ben Freeth, to hold onto their farm. It tracks their precedent-setting lawsuit against Robert Mugabe, the authoritarian Zimbabwean president, in a regional African court, as well as events on the ground in Zimbabwe: intimidation, threats and violence against the white farmers still holding out after a decade of land seizures by the government.

Many viewers will leave "Mugabe and the White African" thinking that they have seen few, if any, documentaries as wrenching, sad and infuriating, and those feelings will be justified. What has happened (and continues to happen) to the Campbells, the Freeths and some of their white neighbors is not only unjust but also a horrifying, slow-motion nightmare. That sensation is reinforced by the movie's political-thriller style, partly a result of the covert filming methods necessary in a country where practicing journalism can get you thrown in jail.



For the full movie review, see:

MIKE HALE. "Fighting His Country to Keep His Farmland." The New York Times (Fri., July 23, 2010): C9.

(Note: the online version of the article is dated July 22, 2010.)





August 10, 2010

We're from the Government, and We Are Here to Help



In February, I heard a wonderful presentation by Emily Chamlee-Wright on the recovery process from Hurricane Katrina. One of my favorite parts of her presentation was an account of how the federal bureaucracy hindered those whose entrepreneurship was needed for recovery. The account is included in her book The Cultural and Political Economy of Recovery, that documents her research on Katrina:


(p. 142) . . . , the bureaucratic structure governing disaster relief can stifle, or at the very least frustrate local leadership driving community redevelopment. Doris Voitier's efforts to re-open the public school system in St. Bernard Parish illustrate this point. Voitier had initially assumed that FEMA's newly created task force on education would lend the support and expertise she needed. But she quickly learned that FEMA's role was not so much to lend support as it was to regulate the decisions coming out of her office.

VOITIER: [W]e had our kickoff meeting in September. We didn't even know what a kickoff meeting was nor did we know we were in one until after it was over . . . . In their little book, which I read later, they tell them, "meet in the person's home territory," basically. Now . . . we were operating out of Baton Rouge, and so were all of the people who attended this meeting. We all got rental cars and drove down [to St. Bernard Parish] and met on the third floor of the building over by Chalmette Refining at 2 o'clock in the afternoon in 100 degree heat with no air conditioning or anything. [M]y assistant superintendent and I walk into this meeting and there were 27 people in this meeting are sitting around this table . . . and we were going through the introductions. And the first two people said, "We're so and so. We are the FEMA historical restoration team" I said, okay, tell me what you do. "Well, we make sure any buildings that are 40 years old or more, they're designated a historical building, we make sure all of the rules and regulations are followed for that or if there are any historical documents, paintings, or whatever, that they're preserved properly, and that you do (p. 143) everything you're supposed to do . . . ." Now here we are just trying to, you know, trying to recover, not worrying too much about that sort of stuff, but . . . thank you very much. So the next two introduced themselves and I said, "Well who are you?" "We are the FEMA environmental protection team." I said, "Tell me what you do." Well, same thing. "We make sure all of the environmental laws are followed, that if there are any endangered species that they're protected," you know, yadda, yadda, yadda. Okay. The next two, "We are the FEMA 404 mitigation team." I'm looking at them and I'm thinking, what in the heck is 404 mitigation? Because the next two were the FEMA 406 . . . . So I'm looking at them, I'm thinking, I don't know what 404 was and I certainly don't know what 406 is . . . . And you know. . . [I'm thinking] can't somebody help me get a school started and clean my schools . . . ?


Source:

Chamlee-Wright, Emily. The Cultural and Political Economy of Recovery: Social Learning in a Post-Disaster Environment, Routledge Advances in Heterodox Economics. London: Routledge, 2010.

(Note: first ellipsis added; other ellipses in original.)





August 2, 2010

Obama Mentor Saul Alinsky on Chicago Reform Candidates



(p. A15) When Barack Obama came to prominence as a presidential candidate, his Chicago background--in particular, his efforts as a "community organizer"--reignited an interest in Saul Alinsky (1909-72), the hard-charging activist whose 1971 book, "Rules for Radicals," was said to have had a formative influence on Mr. Obama's thinking.


. . .


Hardscrabble though his youth had been, Alinsky managed to get into the University of Chicago, where his major was archaeology. When the Depression dried up money for digs, he wangled a fellowship to study criminology and began hanging out with gangsters as part of his study, including Al Capone's "enforcer," Frank Nitti.

Mr. von Hoffman tells us that one of Alinsky's favorite stories involved a meeting between Nitti and Anton Cermak just after Cermak had been elected Chicago's mayor in 1931. The meeting's purpose was to negotiate the money that Capone would pay the city to keep its speakeasies stocked with beer and liquor: "As Saul told the story," Mr. von Hoffman writes, "Cermak explained to Nitti, 'You know I was elected as a reform candidate.' To which Nitti replied, 'What the hell does that mean, Tony?' and waited for an answer. 'It means,' the mayor said after a suitable pause, 'that the price is double.' "

The anecdote nicely illustrates the cynicism that informed Alinsky's ideas about the way the world works.



For the full review, see:

CHRISTOPHER WILLCOX. "A Chicago-Style Peace Disturber; 'Community organizer' Saul Alinsky lumped politicians in with gangsters.." The Wall Street Journal (Thurs., July 15, 2010): A15.

(Note: ellipsis added.)


The book under review is:

von Hoffman, Nicholas. Radical: A Portrait of Saul Alinsky. New York: Nation Books, 2010.





August 1, 2010

Jefferson "Was Experimental and Had a Lot of Failures"



JeffersonianGardeningA2010-07-12.jpg"In the vegetable garden at Monticello, his home in Virginia, Thomas Jefferson sowed seeds from around the world and shared them with farmers. He was not afraid of failure, which happened often." Source of caption and photo: online version of the NYT article quoted and cited below.


Steven Johnson has written an intriguing argument that the intellectual foundation of the founding fathers was based as much on experimental science as on religion. The article quoted below provides a small bit of additional evidence in support of Johnson's argument.


(p. D1) NEW gardeners smitten with the experience of growing their own food -- amazed at the miracle of harvesting figs on a Brooklyn rooftop, horrified by the flea beetles devouring the eggplants -- might be both inspired and comforted by the highs and lows recorded by Thomas Jefferson from the sun-baked terraces of his two-acre kitchen garden 200 years ago.

And they could learn a thing or two from the 19th-century techniques still being used at Monticello today.

"He was experimental and had a lot of failures," Peter Hatch, the director of gardens and grounds, said on a recent afternoon, as we stood under a scorching sun in the terraced garden that took seven slaves three years to cut into the hill. "But Jefferson always believed that 'the failure of one thing is repaired by the success of another.' "

After he left the White House in 1809 and moved to Monticello, his Palladian estate here, Jefferson grew 170 varieties of fruits and 330 varieties of vegetables and herbs, until his death in 1826.

As we walked along the geometric beds -- many of them planted in an ancient Roman quincunx pattern -- I made notes on the beautiful crops I had never grown. Sea kale, with its great, ruffled blue-green leaves, now full of little round seed pods. Egyptian onions, whose tall green stalks bore quirky hats of tiny seeds and wavy green sprouts. A pre-Columbian tomato called Purple Calabash, whose energetic vines would soon be trained up a cedar trellis made of posts cut from the woods.

"Purple Calabash is one of my favorites," Mr. Hatch said. "It's an acidic, al-(p. D7)most black tomato, with a convoluted, heavily lobed shape."

Mr. Hatch, who has directed the restoration of the gardens here since 1979, has pored over Jefferson's garden notes and correspondence. He has distilled that knowledge in "Thomas Jefferson's Revolutionary Garden," to be published by Yale University Press.



For the full story, see:

ANNE RAVER. "A Revolutionary With Seeds, Too." The New York Times (Thurs., July 1, 2010): D1 & D7.

(Note: the online version of the article is dated June 30, 2010 and has the title "In the Garden; At Monticello, Jefferson's Methods Endure.")





July 25, 2010

More on How Federal Regulations Delay Oil Cleanup



(p. A15) First, the Environmental Protection Agency can relax restrictions on the amount of oil in discharged water, currently limited to 15 parts per million. In normal times, this rule sensibly controls the amount of pollution that can be added to relatively clean ocean water. But this is not a normal time.

Various skimmers and tankers (some of them very large) are available that could eliminate most of the oil from seawater, discharging the mostly clean water while storing the oil onboard. While this would clean vast amounts of water efficiently, the EPA is unwilling to grant a temporary waiver of its regulations.

Next, the Obama administration can waive the Jones Act, which restricts foreign ships from operating in U.S. coastal waters. Many foreign countries (such as the Netherlands and Belgium) have ships and technologies that would greatly advance the cleanup. So far, the U.S. has refused to waive the restrictions of this law and allow these ships to participate in the effort.

The combination of these two regulations is delaying and may even prevent the world's largest skimmer, the Taiwanese owned "A Whale," from deploying. This 10-story high ship can remove almost as much oil in a day as has been removed in total--roughly 500,000 barrels of oily water per day. The tanker is steaming towards the Gulf, hoping it will receive Coast Guard and EPA approval before it arrives.



For the full story, see:

PAUL H. RUBIN. "Why Is the Gulf Cleanup So Slow? There are obvious actions to speed things up, but the government oddly resists taking them.." The Wall Street Journal (Fri., July 2, 2010): A15.






July 22, 2010

"We're Spending at a Rate that's Just Unsustainable"



ShultzGeorgeVertical2010-07-5.jpg
George Shultz, former Dean of the University of Chicago Business School, former Secretary of the Treasury, and former Secretary of State. Source of photo: online version of the NYT article quoted and cited below.


(p. 12) What do you make of the direction the Republican Party has taken since you served in Washington? Isn't the Tea Party a corruption of the values you stood for?
From what I understand of it, it is a reaction, which I share, to the fact that our government seems to have gotten out of control. We're spending at a rate that's just unsustainable.

That's a legacy of the Bush era, I guess.
Everybody is conveniently blaming everything on Bush, but he's not responsible for what's happened in the last year.

You'll be 90 in December. How are you?
I'm terrific. Feeling great. I'm vertical, not horizontal. That's a big thing.



For the full interview, see:

DEBORAH SOLOMON. "Questions for George Shultz; The Statesman." The New York Times Magazine (Sun., July 4, 2010): 12.

(Note: bolding of interviewer questions was in original.)

(Note: the online version of the article is dated June 28, 2010.)





July 21, 2010

Defenders of Climategate Benefit from Global Warming Fears



(p. A15) Last November there was a world-wide outcry when a trove of emails were released suggesting some of the world's leading climate scientists engaged in professional misconduct, data manipulation and jiggering of both the scientific literature and climatic data to paint what scientist Keith Briffa called "a nice, tidy story" of climate history. The scandal became known as Climategate.

Now a supposedly independent review of the evidence says, in effect, "nothing to see here."


. . .


One of the panel's four members, Prof. Geoffrey Boulton, was on the faculty of East Anglia's School of Environmental Sciences for 18 years. At the beginning of his tenure, the Climatic Research Unit (CRU)--the source of the Climategate emails--was established in Mr. Boulton's school at East Anglia. Last December, Mr. Boulton signed a petition declaring that the scientists who established the global climate records at East Anglia "adhere to the highest levels of professional integrity."

This purportedly independent review comes on the heels of two others--one by the University of East Anglia itself and the other by Penn State University, both completed in the spring, concerning its own employee, Prof. Michael Mann. Mr. Mann was one of the Climategate principals who proposed a plan, which was clearly laid out in emails whose veracity Mr. Mann has not challenged, to destroy a scientific journal that dared to publish three papers with which he and his East Anglia friends disagreed. These two reviews also saw no evil. For example, Penn State "determined that Dr. Michael E. Mann did not engage in, nor did he participate in, directly or indirectly, any actions that seriously deviated from accepted practices within the academic community."

Readers of both earlier reports need to know that both institutions receive tens of millions in federal global warming research funding (which can be confirmed by perusing the grant histories of Messrs. Jones or Mann, compiled from public sources, that are available online at freerepublic.com). Any admission of substantial scientific misbehavior would likely result in a significant loss of funding.

It's impossible to find anything wrong if you really aren't looking.



For the full commentary, see

PATRICK J. MICHAELS. "The Climategate Whitewash Continues; Global warming alarmists claim vindication after last year's data manipulation scandal. Don't believe the 'independent' reviews.." The Wall Street Journal (Mon., JULY 12, 2010): A15.

(Note: the online version of the article is dated JULY 10, 2010.)

(Note: ellipsis added.)





July 18, 2010

Federal Regulations Slow Oil Cleanup Innovation



CostnerKevinOilWaterSeparator2010-07-04.jpg"One promising device is an oil-water separator backed by the actor Kevin Costner, right." Source of caption and photo: online version of the NYT article quoted and cited below.


(p. A1) Two decades after the Exxon Valdez oil spill, cleanup technology has progressed so little that the biggest advancement in the Gulf of Mexico disaster -- at least in the public's mind -- is an oil-water separator based on a 17-year-old patent and promoted by the movie star Kevin Costner.


. . .


(p. A20) Ms. Kinner [co-director of the Coastal Response Research Center at the University of New Hampshire] and others cite many . . . reasons why cleanup technologies lag.

In testimony this month before Congress, Mr. Costner told of years of woe trying to market his separator, a centrifuge originally developed and patented in 1993 by the Idaho National Laboratory, for use in oil spills. One obstacle, he said, was that although his machines are effective, the water they discharge is still more contaminated than environmental regulations allow. He could not get spill-response companies interested in his machines, he said, without a federal stamp of approval.




For the full story, see:

HENRY FOUNTAIN. "Since Exxon Valdez, Little Has Changed in Cleaning Oil Spills." The New York Times (Fri., June 25, 2010): A1 & A20.

(Note: ellipses added; and bracketed words added from previous paragraph of article.)

(Note: the date of the online version of the article was June 24, 2010 and had the title "Advances in Oil Spill Cleanup Lag Since Valdez.")





July 17, 2010

Big Government Slows Economic Growth



(p. A15) Americans are debating whether to substantially expand the size of their government. As Swedish economists who live in the developed world's largest welfare state, we urge our friends in the New World to look carefully before they leap.

Fifty years ago, Sweden and America spent about the same on their government, a bit under 30% of GDP. This is no longer true. In the years leading up to Sweden's financial crisis in the early 1990s, government spending went as high as 60% of GDP. In America it barely budged, increasing only to about 33%.

While America was maintaining its standing as one of the world's wealthiest nations, Sweden's standing fell. In 1970, Sweden was the fourth richest country in the world on a per capita basis. By 1993, it had fallen to 17th.

This led us to ask whether Sweden's dramatic increase in the size of government contributed to its sluggish growth. Our research shows that it did.

We surveyed the existing literature looking at the trade-offs between government size and economic growth throughout the world. While results vary, the most recent research, by Diego Romero-Avila in the European Journal of Political Economy (2008) and by Andreas Bergh and Martin Karlsson in Public Choice (2010) find a negative correlation between government size and economic growth in rich countries.

The weight of the evidence demonstrates that when government spending increases by 10 percentage points of GDP, the annual growth rate drops by 0.5 to 1 percentage point. This may not sound like much, but over 30 years this would result in the loss of trillions of dollars each year in an economy as large as America's.



For the full commentary, see

ANDREAS BERGH AND MAGNUS HENREKSON. "Lessons From the Swedish Welfare State; New research shows bigger government means slower growth. Our country is a prime example." The Wall Street Journal (Mon., JULY 12, 2010): A15.

(Note: the online version of the article is dated JULY 10, 2010.)





July 14, 2010

India Government Spends Billions to Subsidize Fuel Use



IndiaGasDrumOnBike2010-06-29.jpg"An employee filled an oil drum in New Delhi on Friday. India's government has decided to reduce popular fuel subsidies." Source of caption and photo: online version of the NYT article quoted and cited below.


I smiled when I saw the ironic photo that appears above. It seems to imply that with government subsidies, even bicycle riders will buy motor fuel.


(p. B3) MUMBAI, India -- The Indian government on Friday reduced popular fuel subsidies, a long-delayed change that will help policy makers reduce a big budget deficit but one that will also worsen already high inflation.

Policy makers said the government would stop subsidizing gasoline. Diesel, kerosene and natural gas would continue to receive support at a slightly lower level. India spent about $5.6 billion to subsidize fuel in the last fiscal year, which ended in March. State-owned energy companies added the equivalent of an additional $4.4 billion by selling fuel below its cost.

India and other big countries committed to eliminating energy subsidies at a Group of 20 meeting last year, but policy makers here had repeatedly put off the politically difficult change.



For the full story, see:

VIKAS BAJAJ. "India Cuts Subsidies for Fuels." The New York Times (Sat., June 26, 2010): B3.

(Note: the online version of the article is dated June 25, 2010.)





July 12, 2010

Chicago's South Side Welcomes Wal-Mart: "The Audience Stood and Cheered"



WalmartChicagoSupporters2010-06-29.jpg"Supporters of a proposed Wal-Mart store in Chicago demonstrated at a City Coumcil zoning panel hearing Thursday." Source of caption and photo: online version of the NYT article quoted and cited below.


(p. B4) "We need jobs for our neighborhood, and Wal-Mart is willing to come, and they're willing to provide the jobs," said the Rev. Dr. D. Darrell Griffin, the pastor at Oakdale Covenant Church.

Politicians who supported the Wal-Mart store said they did so in part because of employment and revenue for the city.

"There are major corporations willing to invest significant money within our communities, which has not been done, really, since the '60s, when a lot of the corporations left the communities after the riots," said Howard B. Brookins Jr., a member of the council. "This is huge for us."


. . .


On Thursday, the zoning committee meeting was filled with about 200 onlookers wearing T-shirts with the Wal-Mart logo and slogans like, "Our neighborhood. Our jobs. Our decision."

Before he asked for a simple yes or no vote, Daniel Solis, chairman of the zoning committee, told the crowd, "We are now the model in this country."

After the unanimous vote -- which sends the proposal to the full City Council, where it is expected to pass next week -- the audience stood and cheered.

"It's going to bring jobs and help the community," Shawn Polk, 20, a college student who lives near the proposed store, said afterward.



For the full story, see:

STEPHANIE CLIFFORD. "Wal-Mart Gains in Its Wooing of Chicago." The New York Times (Fri., June 25, 2010): B1 & B4.

(Note: the online version of the article is dated June 24, 2010.)

(Note: ellipsis added.)





July 10, 2010

Former French Student Protest Leader: "We've Decided that We Can't Expect Everything from the State"



DynamismEuropeAndUnitedStatesGraph.gif
















Source of graph: online version of the WSJ article quoted and cited below.




(p. A16) "The euro was supposed to achieve higher productivity and growth by bringing about a deeper integration between economies," says Simon Tilford, chief economist at the Centre for European Reform, a London think tank. "Instead, integration is slowing. The lack of flexibility in labor and product markets raises serious questions about the likelihood of the euro delivering on its potential."

Structural changes are the last great hope in part because euro zone members have few other levers for lifting their economies. Individual members can't tweak interest rates to encourage lending, because those policies are set by the zone's central bank. The shared euro means countries don't have a sovereign currency to devalue, a move that would make exports cheaper and boost receipts abroad.

The remaining prescription, many economists say: chip away at the cherished "social model." That means limiting pensions and benefits to those who really need them, ensuring the able-bodied are working rather than living off the state, and eliminating business and labor laws that deter entrepreneurship and job creation.

That path suits Carlos Bock. The business-studies graduate from Bavaria spent months navigating Germany's dense bureaucracy in order to open a computer store and Internet café in 2004. Before he could offer a Web-surfing customer a mug of filter coffee, he said, he had to obtain a license to run a "gastronomic enterprise." One of its 38 requirements compelled Mr. Bock to attend a course on the hygienic handling of mincemeat.

Mr. Bock closed his store in 2008. Germany's strict regulations and social protections favor established businesses and workers over young ones, he said. He also struggled against German consumers' reluctance to spend, a problem economists blame in part on steep payroll taxes that cut into workers' takehome pay, and on high savings rates among Germans who are worried the country's pension system is unsustainable.

"If markets were freer, there might be chaos to begin with," Mr. Bock said. "But over time we'd reach a better economic level."

Even in France, some erstwhile opponents of reforms are changing their tune. Julie Coudry became a French household name four years ago when she helped organize huge student protests against a law introducing short-term contracts for young workers, a move the government believed would put unemployed youths to work.

With her blonde locks and signature beret, Ms. Coudry gave fiery speeches on television, arguing that young people deserved the cradle-to-grave contracts that older employees enjoy at most French companies. Critics in France and abroad saw the protests as a shocking sign that twentysomethings were among the strongest opponents of efforts to modernize the European economy. The measure was eventually repealed.

Today, the now 31-year-old Ms. Coudry runs a nonprofit organization that encourages French corporations to hire more university graduates. Ms. Coudry, while not repudiating her activism, says she realizes that past job protections are untenable.

"The state has huge debt, 25% of young people are jobless, and so I am part of a new generation that has decided to take matters into our own hands," she says. "We've decided that we can't expect everything from the state."




For the full story, see:

MARCUS WALKER And ALESSANDRA GALLONI. "Europe's Choice: Growth or Safety Net." The Wall Street Journal (Thurs., MARCH 25, 2010): A1 & A16.





June 27, 2010

Government Financing Is Not Best Method to Finance Creativity



(p. B4) Government financing is not the best method to prod companies to be creative, said Edmund S. Phelps Jr., a professor of economics at Columbia University who won the Nobel Prize in 2006. But he said it could work.

He spoke at the forum about dwindling innovation in the United States economy. China, India and Brazil are catching up with innovative output, he said, but not Russia.

A high-technology start-up, he said, inherently runs more risk if it can present its product to only one potential buyer -- the government -- rather than to a range of customers, some of whom may want the product, he said.

"If Russian politicians see that their own prosperity, and that of their people, lies in a more arms-length relationship between the government and business, that would open a lot of possibilities," he said.



For the full story, see:

ANDREW E. KRAMER. "Russia Plans to Promote Technology Innovations." The Wall Street Journal (Mon., February 4, 2010): B4.





June 26, 2010

Not All Entrepreneurs Believe in Property Rights



OdomBobbTitanCement2010-05-20.jpg"Titan Cement's Bob Odom in March at the site of a proposed plant near Wilmington, N.C. The company says hundreds of jobs would be created." Source of book image: online version of the WSJ review quoted and cited below.


Is it just me, or does entrepreneur Lloyd Smith, quoted below, come across as a bit arrogant in believing the government should enforce his view of what Wilmington should be like, even if that means violating the property rights of the owner of the land on which the cement plant will be built? (And even if that means that would-be janitor Ron Givens remains unemployed.)


(p. A3) WILMINGTON, N.C.--The old economy and the new economy are squaring off in this coastal city, which is having second thoughts about revisiting its roots in heavy industry.

Titan Cement Co. of Greece wants to build one of the largest U.S. cement plants on the outskirts of the city and is promising hundreds of jobs. The factory would be on the site of a cement plant that closed in 1982 and today is populated mainly by fire ants, copperhead snakes and the occasional skateboarder.

The proposed $450 million plant by Titan America LLC, Titan's U.S. unit, is welcome news to Ron Givens Sr., a 44-year-old unemployed Wilmington native. Mr. Givens's father supported 12 children while working at the former Ideal Cement plant, and Mr. Givens and two brothers have now applied for jobs with Titan. "I will apply for janitor if that's what is going to get me into that plant," he said.

But thousands of opponents have petitioned local and state politicians to block the plan. They object to the emissions from the plant and say it will scare off tourists, retirees, entrepreneurs and others who might otherwise want to live here.

An initial state environmental review has dragged on for two years, and critics of the plant have filed a lawsuit seeking to further broaden the review. The governor, amid public pressure, has asked the State Bureau of Investigation to probe the plant's permitting process.

"That's their tactic: Delay, delay, and at some point Titan will leave," said Bob Odom, Titan's general manager in Wilmington, of opposition efforts.

Among the most vocal opponents is a fast-growing class of high-tech entrepreneurs and telecommuters who moved to Wilmington in recent years, drawn to the temperate climate, sandy beaches and good fishing. They argue the plant, by curbing the community's appeal, will cost more jobs and tax revenue in the long run than it produces.

"I think we can be discriminating," said Lloyd Smith, a 43-year-old entrepreneur who moved here from northern Virginia in 2001 and founded Cortech Solutions Inc., a neuroscience company with nine employees and about $5 million in annual sales.

The standoff in Wilmington reflects a broader tug-of-war across the country as communities try to kick-start employment. It is unclear how much manufacturing will power the long-term U.S. economic recovery--even in southern states that have long embraced heavy industry but have begun to feel the new economy's pull.




For the full story, see:

MIKE ESTERL. "Clash of Old, New Economy; Cement Plant Is Resisted by Some Neighbors Who Would Rather Lure High-Tech Jobs." The Wall Street Journal (Tues., April 6, 2010): A3.


ServicesManufactureGraph2010-05-20.jpg


















Source of graph: scanned from print version of the WSJ article quoted and cited above.






June 22, 2010

Obama Delays Biotech Innovation



SeedApprovalDelayGraph2010-05-20.jpg



















Source of graph: scanned from the print version of the WSJ article quoted and cited below.




(p. A8) The crop-biotechnology industry, growing frustrated as it watches the approval time for new seeds almost double under the Obama administration, is pressuring Washington to clear inventions more quickly.

The logjam at the U.S. Department of Agriculture, which must clear genetically modified seeds, is slowing the launch of products that could give farmers more alternatives to seeds from crop biotech giant Monsanto Co.

Also, some biotech-industry executives worry the delays signal that the Obama administration, which has painted itself as pro-biotech, is gearing up for a far tougher analysis of the potential environmental impact of these crops, which could make it harder for inventions to reach the marketplace.

On average, a genetically modified seed takes 1,188 days to pass federal scrutiny, almost twice as long as in 2008, the last year of the Bush administration, according to the Biotechnology Industry Organization, a Washington, D.C., trade group.

"There is concern we might see other countries move ahead of the U.S.," said Sharon Bomer Lauritsen, executive vice president of food and agriculture at BIO, who added that the delays "might stifle investment in what has been a very dynamic part of the U.S. economy." BIO's members include hundreds of companies such as DuPont Co., Syngenta AG and Monsanto, as well as academic institutions.




For the full story, see:

SCOTT KILMAN. "Biotech Firms Seek Speedier Reviews of Seeds; Approval Time for Genetically Modified Crops Doubles under Obama as Some Fear Tougher Stance; Feds Blame Logjam." The Wall Street Journal (Weds., April 28, 2010): A8.





June 18, 2010

Mob Museum Financed from Local, State and Federal Tax Dollars



LasVegasOldFedCourthouse2010-05-19.jpg"The $42 million museum has been financed through a series of state, federal and local grants. It is set to open next March." Source of caption and photo: online version of the NYT article quoted and cited below.


(p. 4) The idea for the Las Vegas Museum of Organized Crime and Law Enforcement was seeded when the city bought the 1933 federal courthouse and post office from the federal government for $1 in 2002, with the strict understanding that the building -- one of the oldest in Southern Nevada -- be used for cultural purposes.

For much of the middle of the last century, organized crime ruled the Strip, developing and managing an array of casinos, skimming their way to success. Federal prosecutors put an end to their reign in the 1980s. The city determined its historical relationship to organized crime -- and the role the courthouse played in it -- made the site a perfect fit.


. . .


The $42 million project has been financed through a series of state, federal and local grants, and the work has progressed a bit glacially as money has trickled in.

The project, once listed as one that could stimulate this city's embattled economy, was attacked by Senator Mitch McConnell, the Republican leader, when city officials suggested that it might qualify for federal stimulus money.



For the full story, see:

JENNIFER STEINHAUER. "'2 Mob Museums in Las Vegas, Ready to Go to the Mattresses." The New York Times, First Section (Sun., April 25, 2010): 1 & 4.

(Note: ellipsis added.)

(Note: the online version of the article is dated April 24, 2010 and has the title "Vegas Mob Museums, Set to Go to the Mattresses.")





June 15, 2010

Barney Frank Calls European Agriculture Policy "Ridiculous"



(p. A13) Mr. Frank said the Jeffersonian notion that farming was a superior form of life has led to subsidies and protectionism in the U.S. Similar problems exist in the European Union. Saying EU agriculture policy is "ridiculous," Frank claimed European farmers should be bought out.

The idea that the "noble yeoman" must be protected at all costs leads to protectionism, Frank said.



For the full story, see:

Neal Lipschutz. "Davos Dispatch: Frank vs. Thomas Jefferson on Farming and Protectionism." The Wall Street Journal (Thurs., Jan 28, 2010): A13.


A version of the brief story appeared online as:

Neal Lipschutz. "Davos Live; Frank Takes On Jefferson Over Farming." Posted Jan 28, 2010. http://blogs.wsj.com/davos/2010/01/27/frank-takes-on-jefferson-over-farming/?KEYWORDS=Thomas+Jefferson+Protectionism





June 11, 2010

Fannie Mae and Freddie Mac Are Still a "Burgeoning Money Pit" for Taxpayers



(p. 1) If you blinked, you might have missed the ugly first-quarter report . . . from Freddie Mac, the mortgage finance giant that, along with its sister Fannie Mae, soldiers on as one of the financial world's biggest wards of the state.

Freddie -- already propped up with $52 billion in taxpayer funds used to rescue the company from its own mistakes -- recorded a loss of $6.7 billion and said it would require an additional $10.6 billion from taxpayers to shore up its financial position.

The news caused nary a ripple in the placid Washington scene. Perhaps that's because many lawmakers, especially those who once assured us that Fannie and Freddie would never cost taxpayers a dime, hope that their constituents don't notice the burgeoning money pit these mortgage monsters represent. Some $130 billion in federal money had already been larded on both companies before Freddie's latest request.

But taxpayers should examine Freddie's first-quarter numbers not only because the losses are our responsibility. Since they also include details on Freddie's delinquent mortgages, the company's sales of foreclosed properties and losses on those sales, the results provide a telling snapshot of the current state of the housing market.

That picture isn't pretty. Serious delinquencies in Freddie's single-family conventional loan portfolio -- those more than 90 days late -- came in at 4.13 percent, up from 2.41 percent for the period a year earlier. Delinquencies in the company's Alt-A book, one step up from subprime loans, totaled 12.84 percent, while delinquencies on interest-only mortgages were 18.5 percent. Delinquencies on its small portfolio of op-(p. 2)tion-adjustable rate loans totaled 19.8 percent.

The company's inventory of foreclosed properties rose from 29,145 units at the end of March 2009 to almost 54,000 units this year. Perhaps most troubling, Freddie's nonperforming assets almost doubled, rising to $115 billion from $62 billion.



For the full commentary, see:

Gretchen Morgenson. "Fair Game; Ignoring the Elephant in the Bailout." The New York Times, SundayBusiness (Sun., May 9, 2010): 1-2.

(Note: ellipsis added.)

(Note: the online version of the article was dated May 7, 2010.)





June 7, 2010

Class Action Suit Did Little for Class Members, But "Enriched" Attorneys



Many attorneys are good people, including my late father, one of my brothers, and one of my favorite former students.

But a few attorneys must be conscience-challenged; for instance the ones "representing" the class in the case described below.

More importantly, class-action litigation increases the costs and uncertainty of doing business, and thereby increases the prices of the products and services we buy.

In speaking to one of my classes a few years ago, Omaha entrepreneur Joe Ricketts made a strong case for tort reform. it is hard to disagree, unless, like the Democratic Party, you are receiving large contributions from trial lawyers.


(p. B1) . . . , a 2008 settlement of a class action against Ford Motor Co., involving incidents in which Firestone tires exploded on Ford Explorers, offered certain Explorer owners coupons worth $500 toward the purchase of a new Explorer and $300 toward the purchase of any other Ford vehicle.

As of March, only 148 people had redeemed a coupon out of 1,647 people eligible. The plaintiffs' attorneys who led that litigation collected about $19 million in fees.

"It was rather absurd," said Julie Hamilton Webber of Glendale, Calif., a class member who has a 1993 Ford Explorer. "The net result was the attorneys were enriched and did nothing for the class."



For the full story, see:

DIONNE SEARCEY. "Toyota Owners May Reap Little." The Wall Street Journal (Thurs., MAY 20, 2010): B1-B2.

(Note: ellipsis added.)

(Note: the online version of the article has the slightly different title "Toyota Owners May See Little.")





May 31, 2010

Feds Give EnergyStar Label to Fake Products Like Feather Duster Space Heater



EnergyStarSpaceHeaterFeatherDuster2010-05-18.jpg

















"A space heater with a feather duster qualified for Energy Star . . . as an air purifier." Source of caption and photo: http://blogs.consumerreports.org/home/2010/03/gao-audit-energy-star-program-bogus-products-energy-use-consumer-reports-testing-best-appliances.html



Those who call for more government regulations to protect us, should deeply ponder the story quoted below.


(p. A16) WASHINGTON -- Does a "gasoline-powered alarm clock" qualify for the EnergyStar label, the government stamp of approval for an energy-saving product?

Like more than a dozen other bogus products submitted for approval since last June by Congressional auditors posing as companies, it easily secured the label, according to a Congressional report to be issued Friday. So did an "air purifier" that was essentially an electric space heater with a feather duster pasted on top, the Government Accountability Office said.

In a nine-month study, four fictitious companies invented by the accountability office also sought EnergyStar status for some conventional devices like dehumidifiers and heat pump models that existed only on paper. The fake companies submitted data indicating that the models consumed 20 percent less energy than even the most efficient ones on the market. Yet those applications were mostly approved without a challenge or even questions, the report said.

Auditors concluded that the EnergyStar program was highly vulnerable to fraud.



For the full story, see:

MATTHEW L. WALD. "EnergyStar Program Audit Finds Fraud Vulnerability." The New York Times (Fri., March 26, 2010): A16.

(Note: the online version of the article was dated March 25, 2010 and had the title "Audit Finds Vulnerability of EnergyStar Program.")





May 30, 2010

MidAmerican Energy Gives Ben Nelson a $1.1 Million Ride from Georgia to Omaha



(p. 3B) LINCOLN -- MidAmerican Energy is suing the state after state officials grounded a $1.1 million sales tax refund the company expected on the purchase of a corporate jet.

Under Nebraska's 1987 economic development act, LB 775, companies can get sales tax refunds for such aircraft.

But the Nebraska Department of Revenue rejected the refund because MidAmerican's multimillion-dollar Falcon 50EX jet, purchased in 2004, was used to transport U.S. Sen. Ben Nelson, D-Neb., on a trip between Albany, Ga., and Omaha on Nov. 28, 2006.

Using such planes for fundraising or transporting an elected official disqualifies a company from getting the sales tax benefit, State Tax Commissioner Doug Ewald ruled, citing prohibitions in LB 775.

MidAmerican, an Iowa-based energy firm headed by Omaha businessman David Sokol, is appealing.

The company is asking the Lancaster County District Court to overturn the department's March ruling.

MidAmerican argued that a single trip taken by Nelson should not be enough to deny the refund. It also maintained that the state, under LB 775, should have based its ruling on the intended purpose of the airplane and can test that use only when the plane is purchased.



For the full story, see:

Paul Hammel. "MidAmerican Sues State Over Tax Credit on Jet." Omaha World-Herald (Friday, May 7, 2010): 3B.

(Note: the online version of the article was dated Thursday, May 6, 2010 and had the title "MidAmerica (sic) sues Neb. for refund.")





May 28, 2010

FDR's Logrolling to Pack Supreme Court



The unsavory political practice known as "logrolling" is discussed in one of the public choice chapters of the Gwartney et al text that I use in my micro principles courses. Here is an apt example:


(p. 193) . . . , McCarran was more than ever determined to (p. 194) fight the Court-packing plan, even if he lost all of his federal patronage.

Roosevelt had some success charming more malleable politicians such as young Florida senator Claude Pepper. Roosevelt invited the wavering Pepper into the Oval Office and turned on the charm. It helped even more when he turned on the spigot. "The president," Pepper recalled, "was not above a little logrolling, promising to help me win re-election in 1938 and, in my presence, notifying the army that he wanted to see some favorable action on a Florida canal project that I had been pushing." Pepper ended up backing Roosevelt.




Source:

Folsom, Burton W., Jr. New Deal or Raw Deal? How FDR's Economic Legacy Has Damaged America. New York: Threshold Editions, 2008.

(Note: ellipsis added.)





May 27, 2010

In Whom Can You Trust?



MedvedevKlausObamaToast2010-05-18.jpg"Russian President Medvedev, left, Czech Republic President Klaus, center, and U.S. President Obama, right, toast the treaty's signing on Thursday." Source of caption and photo: online version of the WSJ article cited below.


In the photo above, which of these three men would you want to sip champagne with? (Hint: the libertarian is in the middle.)


The photo accompanies this article:

JONATHAN WEISMAN. "Russia Sets Limits on Iran Sanctions." The Wall Street Journal (Friday, APRIL 9, 2010): A8.

(Note: the online version of the article had the title "U.S., Russia Focus on Iran Sanctions.")





May 26, 2010

Reid on Ben Nelson's Cornhusker Kickback: "He Got This for Him­self; He Wanted It"



(p. 5A) WASHINGTON -- Senate Ma­jority Leader Harry Reid this week defended the now-defunct Nebraska Medicaid exemption that was tucked into the Senate health care bill as Reid sought the support of Sen. Ben Nelson, D-Neb.

Nelson has said that he never asked for the exemption and that his goal all along was to provide relief for all states.

Tagged with the derisive moni­ker "Cornhusker kickback," the arrangement quickly proved po­litically toxic.


. . .


Asked why he didn't offer the same deal to every state from the start, Reid said, "Because I didn't have it for everybody at that time. I thought I could get it as we moved along in the legisla­tion, and I did."

Van Susteren said: "You're telling me that when Ben Nelson got that, when the two of you sat down together, you said, 'Ben, we'll do it this way. ... Nebraska's got it now, but after we get this passed we're going to go for ev­erybody?' " "No, no, no. He got this for him­self. He wanted it," Reid said.



For the full story, see:

JOSEPH MORTON. "Reid thought Nelson should boast of 'kickback'; The Senate leader says it was a "terrific" Medicaid deal that all states now share." Omaha World-Herald (Weds., April 7, 2010): 5A.

(Note: first ellipsis added; second ellipsis in original.)





May 24, 2010

FDR Cared About the Politics, But Not the Economics, of Social Security



(p. 116) Roosevelt's social security plan created an array of problems. First, it retarded recovery from the Great Depression by contributing to unemployment. From 1937 to 1940. employers and employees were docked for social security, and that money was out of private hands and lying fallow in the treasury. Lloyd Peck of the Laundryowners National Association concluded, "The burden of this proposal for employers to carry, through a payroll tax, will act as a definite curb on business expansion, and will likely eliminate many businesses now on the verge of bankruptcy."


. . .


(p. 117) When an accountant quizzed Roosevelt about the economic problems with social security, especially its tendency to create unemployment, he responded, "I guess you're right on the economics, but those taxes were never a problem of economics. They are politics all the way through." Roosevelt explained that "with those taxes in there, no damn politician can ever scrap my social security program. That's why, as Roosevelt admitted, it's "politics all the way through." Most politicians, following Roosevelt's lead, have taken delight in raising social security payouts and using that gift to plead for votes from the elderly at election time.




Source:

Folsom, Burton W., Jr. New Deal or Raw Deal? How FDR's Economic Legacy Has Damaged America. New York: Threshold Editions, 2008.

(Note: ellipsis added.)





May 23, 2010

Ben "Kickback" Nelson Seeks More Earmarks



NelsonBenEarmarksGraph2010-05-18.jpg Source of graph and photo: online version of the Omaha World-Herald article quoted and cited below.


(p. 1A) WASHINGTON -- In the battle to secure federal earmarks for Nebraska, Sen. Ben Nelson is feeling lonely this year.

The Nebraska Democrat is seeking 51 earmarks worth $183.1 million. The four other members of the Nebraska con­gressional delegation, all Republicans, have submitted no requests this year, three of them agreeing to a House GOP moratorium.

That's a big change from 2009, when Rep. Lee Terry re­quested 11 earmarks totaling more than $85 million, Rep. Jeff Fortenberry sought 28 earmarks totaling more than $75 million and Rep. Adrian Smith sought two earmarks to­taling $1.2 million.

Sen. Mike Johanns has abstained from seeking earmarks since joining the Senate in 2009.


. . .


(p. 2A) Johanns has criticized ear­marking as a method of direct­ing taxpayer money based on lawmaker clout rather than a project's merits. He said last week that the process would be better if lawmakers had to jus­tify their individual earmarks at hearings.




For the full story, see:

JOSEPH MORTON . "Nelson stands alone on earmark requests; He is seeking $183 million for Nebraska projects while the state's GOP lawmakers sit out this round." Omaha World-Herald (Tues., May 18, 2010): 1A & 2A.

(Note: ellipsis added.)





May 22, 2010

After Health Care Plan, Are There Any Limits to What the Government Can Mandate?



(p. A10) As they constructed the requirement that Americans have health insurance, Democrats in Congress took pains to make their bill as constitutionally impregnable as possible.

But despite the health care law's elaborate scaffolding, attorneys general and governors from 20 states, all but one of them Republicans, have now joined as confident litigants in a bid to topple its central pillar. In the process, they hope to present the Supreme Court with a landmark opportunity to define the limits of federal authority, perhaps for generations.

In the seven weeks since the legislation passed, at least a dozen lawsuits have been filed in federal courts to challenge it, according to the Justice Department. But the case that could carry the most weight, and may be on the fastest track in the most advantageous venue, is the one filed in Pensacola, Fla., by state officials, just minutes after President Obama signed the bill.

Some legal scholars, including some who normally lean to the left, believe the states have identified the law's weak spot and devised a credible theory for eviscerating it.

The power of their argument lies in questioning whether Congress can regulate inactivity -- in this case by levying a tax penalty on those who do not obtain health insurance. If so, they ask, what would theoretically prevent the government from mandating all manner of acts in the national interest, say regular exercise or buying an American car?


. . .


Jonathan Turley, who teaches at George Washington University Law School, said that if forced to bet, he would predict that the courts would uphold the health care law. But Mr. Turley said that the federal government's case was far from open-and-shut, and that he found the arguments against the mandate compelling.

"There are few cases in the history of the court system that have a more significant assertion of authority by the government," said Mr. Turley, a civil libertarian who acknowledged being strange bedfellows with the conservative theorists behind the lawsuit. "This case, more than any other, may give the court sticker shock in terms of its impact on federalism."




For the full story, see:

KEVIN SACK. "Florida Suit Rated Best As Challenge to Care Law." The New York Times (Tues., May 11, 2010): A10 & A11.

(Note: the online version of the article is dated May 10, 2010 and has the slightly different title "Florida Suit Poses a Challenge to Health Care Law.")

(Note: ellipses added.)





May 20, 2010

"I Cannot Consent to Buy Votes with the People's Money"



(p. 91) . . . Thomas Gore, . . . was first elected to the Senate in 1907, the year Oklahoma became a state. Gore had a populist streak in him, but he always recognized the protections to individual liberty that came from limited government. In the 1930s, therefore, he strongly opposed the federal government going into the relief business. Interestingly, Gore was made totally blind by two childhood accidents. He still managed to become a lawyer, and as a senator, he had to have family members or staff assistants read bills, books, and newspapers to him. Yet he claimed to see clearly through the political chicanery that would occur if the federal government entered the relief business. No depression, Gore argued, "can be ended by gifts, gratuities, doles, and alms handed out by the Federal Treasury and extorted from taxpayers that are bleeding at every pore." On the issue of relief, especially, Gore argued that state and city officials "have immediate contact" with hardship cases and can best "superintend the dispensation of charity." Soon after the ERA brought federal relief into existence, Gore said, "The day on which we began to make these loans by the Federal Government to States, counties, and cities was a more evil day in the history of the Republic than the day on which the Confederacy fired upon Fort Sumter."

In 1935, Gore helped lead the charge in Congress against funding the WPA with $4.8 billion. After he spoke against the bill, thousands of people in southeast Oklahoma held a mass meeting to denounce Gore. They sent him a telegram demanding that he cast his vote for the WPA and, by implication, start bringing more fed-(p. 92)eral dollars into Oklahoma. Gore responded with a telegram of his own. Your action, he wrote, "shows how the dole spoils the soul. Your telegram intimates that your votes are for sale. Much as I value votes I am not in the market. I cannot consent to buy votes with the people's money. I owe a debt to the taxpayer as well as to the unemployed." Shortly after dictating these words, the blind Senator was led to the Senate floor to cast a lonely vote against the WPA.



Source:

Folsom, Burton W., Jr. New Deal or Raw Deal? How FDR's Economic Legacy Has Damaged America. New York: Threshold Editions, 2008.

(Note: ellipses added.)





May 18, 2010

Housing Crumbles Under Portugal's Rent Control Laws



Stigler and Friedman's only co-authored paper showed the flaws in rent controls. Although excellent, the paper apparently is seldom read in Portugal (or New York City).


(p. B3) LISBON -- José Gago da Graça owns a Portuguese real estate company and has two identical apartments in the same building in the heart of Lisbon. One rents for €2,750 a month, the other for almost 40 times less, €75.

The discrepancy is a result of 100-year-old tenancy rules, which have frozen the rent of hundreds of thousands of tenants and protected them against eviction in Portugal. Mr. Gago da Graça has been in a lawsuit for a decade over the €75-a-month apartment, since his tenant died in 2000 and her son took over and refused to alter his mother's contract, which dates to the 1960s.

"We're the only country in Europe that doesn't have a free housing market and that's just amazing," Mr. Gago da Graça said.

Rules like these, which economists also blame for contributing to Portugal's private debt load, help explain why this nation of 11 million has followed Greece and Spain into investors' line of fire.


. . .


The . . . rules helped protect tenants, but also led to a chronic shortage of rental housing. This, in turn, persuaded a new generation of Portuguese to tap recently into low interest rates and buy instead -- often in new suburbs -- thereby exacerbating the country's mortgage debt and leaving Portugal with one of Europe's lowest savings rates, of 7.5 percent.

"This system of controlled rents is a major problem for the Portuguese economy, but we will probably be waiting for a generational change to have room for institutional reform," said Cristina Casalinho, chief economist of Banco BPI, a Portuguese bank. Beyond fueling housing credit, she added, the system "basically stops flexibility and mobility in the labor market because you can perhaps find a new job in another city but it will then be very difficult to rent a house there."


. . .


"Nobody has had the political courage to change something like these rental laws and I don't see the situation changing in the short term, even if I don't think the Portuguese tend to react as dramatically as the Greeks," said Salvador Posser, who runs a family-owned company renting out construction equipment.

Besides distorting pricing in the housing market, the tenancy rules have left physical scars. Portugal's historic city centers are dotted with abandoned and crumbling houses that are either subject to a court dispute or have rental income that cannot cover repair and maintenance costs.

"This economic crisis is clearly keeping our very slow courts even more occupied because of the amount of conflict that it is creating between landlords and tenants," said Menezes Leitão, a law professor and president of PLA, a property owners association.

Mr. Posser cited a recent estimate that 8 percent of the buildings in central Lisbon were deserted, in large part because of rent-related obstacles. In Porto, the second-largest city, less than 10 percent of inner-city housing is available for rent, which has helped shrink the population by a third over three decades.

"We're still losing about 30 inhabitants a day," said Rui Moreira, president of the Porto Commercial Association.




For the full story, see:

RAPHAEL MINDER. "Like Spain, Portugal Hopes to Make Cuts, but It Is Mired in Structural Weakness." The New York Times (Fri., May 14, 2010): B3.

(Note: the online version of the article is dated May 13, 2010 and has the title "Portugal Follows Spain on Austerity Cuts.")

(Note: ellipses added.)


The original source of the Friedman and Stigler article (in pamphlet form) was:

Friedman, Milton, and George J. Stigler. Roofs or Ceilings? The Current Housing Problem. Irvington-on-Hudson, New York: Foundation for Economic Education, 1946.





May 16, 2010

Under FDR, WPA Workers Were Coerced to Support Democrats



(p. 87) According to Lyle Dorsett, who has studied the Hague machine in detail, "Concrete evidence shows that from the outset of the New Deal, Frank Hague was in complete control of all patronage in the state." And Roosevelt poured patronage into New Jersey in the form of massive public works (Hague owned a construction company), which included almost 100,000 WPA jobs annually during the 1930s and the highest rate of pay in the nation for these skilled jobs. One minor drawback to the high pay was that WPA workers in New Jersey had to "tithe" 3 percent of their salaries to the Democrat Party at election time. One WPA director in New Jersey--a corrupt but candid man--answered his office phone, "Democratic headquarters!"

Hopkins received mail regularly from people all over the nation who were denied federal jobs, or fired from them, because of their (p. 88) political views. Many of these letters are available in files for each state and housed in the National Archives. The title of these files is "WPA--Political Coercion." The hefty New Jersey file is very illuminating. One WPA worker complained about a mass-mailed postcard he received that stated, "You are either on the WPA or employed in some government department and by virtue thereof you owe a duty to the [Democrat] Party to do your part in making the canvass. Failure to do your active share will be reported to our county chairman, and you may find your position in jeopardy."




Source:

Folsom, Burton W., Jr. New Deal or Raw Deal? How FDR's Economic Legacy Has Damaged America. New York: Threshold Editions, 2008.

(Note: italics in original; ellipsis added.)





May 12, 2010

FDR Spent Other People's Money Freely, But Was Stingy with His Own



(p. 75) . . . when Roosevelt was spending his own money, he was sometimes very stingy. For example, when Roosevelt traveled by train from Washington to Hyde Park, he always wanted a private car for himself and his staff: Servicing this private car, which might include providing dozens of meals, newspapers, and various amenities for the president and his staff would require great diligence and attention to detail. But for round-trip service on Roosevelt's private car, he tipped the porter a mere five dollars. The reporters. on their car nearby, combined to tip eight to ten times more than the president did. Walter Trohan of the Chicago Tribune observed the unhappiness this created:

FDR wasn't a heavy tipper at any time, but was less so aboard trains. He gave five dollars to the porter on his car for the round trip from Washington to Hyde Park, which included payment for what guests he might have in his car. In the press car we each gave two dollars for the trip, but there were about twenty of us all told. Sam [Mitchell, the porter] soon begged off the private car; the honor of serving the President faded for a man raising a family and sending a boy to college as well as paying for a home, when he could count on forty dollars in the press car as against five dollars in the private car.



Source:

Folsom, Burton W., Jr. New Deal or Raw Deal? How FDR's Economic Legacy Has Damaged America. New York: Threshold Editions, 2008.

(Note: italics in original; ellipsis added.)





May 11, 2010

Alert Street Vendor Hero Saves the Day



OrtonLanceStreetVendorHero2010-05-05.jpg"Lance Orton, center, who sells T-shirts, said that as a veteran he was proud of his actions. But he spurned most questions." Source of caption and photo: online version of the NYT article quoted and cited below.


Hernando de Soto has shown that entrepreneurial street-vending is an important path for the very poor to constructively improve their lives. And yet governments around the world, including ours, consistently make it hard for street vendors to ply their trade.

Yet, on balance, street vendors make our lives better, not only through their products and services, but also through their alert eyes that make our city streets safer. Jane Jacobs made the point that the presence of good people observing the streets is a key ingredient of urban safety, one that was too-often removed by well-intentioned, but ill-conceived city-planners' urban-renewal projects.

The incident recounted below also adds one more case to the well-documented conclusions of Amanda Ripley, who showed us that our safety in avoiding and being rescued from disasters rests in the alertness, preparation, level-headedness and good will of ordinary citizens on the scene.

There may be professionals who are better trained, but outcomes often depend on what is done quickly, and usually only those who are on the scene are able to act quickly.

And although the politically correct will glower at you for mentioning it, there are obvious implications for the issue of gun control.


(p. A19) Even in Times Square, where little seems unusual, the Nissan Pathfinder parked just off Broadway on the south side of 45th Street -- engine running, hazard lights flashing, driver nowhere to be found -- looked suspicious to the sidewalk vendors who regularly work this area.

And it was the keen eyes of at least two of them -- both disabled Vietnam War veterans who say they are accustomed to alerting local police officers to pickpockets and hustlers -- that helped point the authorities to the Pathfinder, illegally and unusually parked next to their merchandise of inexpensive handbags and $2.99 "I Love NY" T-shirts.

Shortly before 6:30 p.m. on Saturday, the vendors -- Lance Orton and Duane Jackson, who both served during the Vietnam War and now rely on special sidewalk vending privileges for disabled veterans -- said they told nearby officers about the Pathfinder, which had begun filling with smoke and then emitted sparks and popping sounds.


. . .


But in a city hungry for heroes, the spotlight first turned to the vendors. Mr. Orton, a purveyor of T-shirts, ran from the limelight early Sunday morning as he spurned reporters' questions while gathering his merchandise on a table near where the Pathfinder was parked.

When asked if he was proud of his actions, Mr. Orton, who said he had been selling on the street for about 20 years, replied: "Of course, man. I'm a veteran. What do you think?"

Mr. Jackson, on the other hand, embraced his newfound celebrity, receiving an endless line of people congratulating him while he sold cheap handbags, watches and pashmina scarves all day Sunday.


. . .


As for Mr. Orton, he rested on Sunday at a relative's house, leaving others to talk on his behalf. "When he was in Vietnam, he said they had to make decisions and judgments from their gut, from their own feelings," said Miriam Cintron, the mother of Mr. Orton's son. "His instinct was telling him something's not right. I guess he was right."

She said Mr. Orton would mediate disputes between the police and other vendors, and when something did not look right, he would alert the police. "He always said, 'Downtown is where they're going to come to, and I'm going to be right there,' " Ms. Cintron said.

When Mr. Orton left Times Square about 7 a.m. on Sunday, he did so to a hero's reception. As he walked down the street, employees from Junior's restaurant stood outside applauding him. He briefly entered the restaurant before heading toward 44th Street.

Using a cane and wearing a white fedora, Mr. Orton limped away and hopped a cab home to the Bronx, but not before repeating a terror-watch mantra: "See something, say something."



For the full story, see:

COREY KILGANNON and MICHAEL S. SCHMIDT. "Vendors Who Alerted Police Called Heroes." The New York Times (Mon., May 3, 2010): A19.

(Note: ellipses added.)

(Note: the online version of the story is dated May 2, 2010 and has the title "Vendors Who Alerted Police Called Heroes.")


The most relevant Hernando de Soto book is:

Soto, Hernando de. The Other Path: The Invisible Revolution in the Third World. New York: Basic Books, 1989.


The most relevant Jane Jacobs book is:

Jacobs, Jane. The Death and Life of Great American Cities. New York: Random House, 1961.


The Amanda Ripley book mentioned is:

Ripley, Amanda. The Unthinkable: Who Survives When Disaster Strikes - and Why. New York: Crown Publishers, 2008.





May 8, 2010

FDR's Bad Bet on Aksarben



The "RA" mentioned in the passage quoted below, refers to FDR's "Resettlement Administration" program.

"Aksarben" is much better known to Nebraskans today as a much-beloved, but now defunct, horse racing track in Omaha, than as Nebraska's part in FDR's government housing debacle.


(p. 69) With a staff of (p. 70) 13,000 and a mammoth $250 million to spend, Tugwell made plans for resettling thousands of tenants and marginal farmers into new model communities.

The result was a disaster. "It was all done awkwardly and wastefully," Tugwell later confessed about the work of the RA. Even Roosevelt himself conceded, "I don't think we have a leg to stand on," when confronted with the high costs of the model towns Tugwell was building. Drawing model communities on paper was one thing, but it was another thing to relocate real tenant farmers into affordable houses far away in real towns with functioning services. One of Tugwell's model communities was Arthurdale in West Virginia. A major problem there was that the ready-made houses could not fit their foundations. Once that problem was solved, the planners discovered that most residents, people from poor backgrounds, could not afford to live there. That protest became a common one in model communities all over the nation. Finding meaningful and profitable work for unskilled laborers was another recurring complaint.24

What that meant was that sometimes the RA had communities built, but no residents either willing or able to move in. An example of this was Ak-Sar-Ben (Nebraska spelled backward), a "dream city" of thirty-eight green-shuttered houses, each on seven acres of land twenty miles west of Omaha on the Platte River. The problem was that no one wanted to move in. Ak-Sar-Ben became deserted. Nearby farmer Henry C. Glissman observed this project and drew this conclusion: "I predict that in time these homes will all be abandoned and stand as a gruesome monument to a government's inefficiency and folly in fostering a movement that to a practical mind has the earmarks of failure from the start."




Source:

Folsom, Burton W., Jr. New Deal or Raw Deal? How FDR's Economic Legacy Has Damaged America. New York: Threshold Editions, 2008.

(Note: ellipses in original.)





May 7, 2010

The Nanny State Versus Fun



MonsterSlide2010-05-05.jpg"A boy slides down the enclosed "Monster Slide," which drops riders the length of three flights of stairs." Source of caption and photo: online version of the WSJ article quoted and cited below.


We took Jenny to several children's museums when she was young, but none was as neat as the City Museum.

It appears that it has continued to get better in the years since.

My view is that a child's parents should generally decide what risks their child should be allowed to take. Parents have a right to be parents, and they generally do a better job of it than the government does.


(p. A1) The City Museum, housed in 10-story brick building, shows none of the restraint or quiet typical of museums. A cross between a playground and a theme park, it recycles St. Louis' industrial past into such attractions as slides made from assembly-line rollers. Just about everything can be touched or climbed, including dozens of Mr. Cassilly's sculptures, among them a walk-through whale on (p. A10) the first floor.

Despite the whiff of danger, or perhaps because of it, the City Museum is one of St. Louis's most popular attractions. Its 700,000 annual attendance is roughly twice the population of St. Louis and dwarfs the turnout at refined destinations such as the St. Louis Art Museum.

The injuries and lawsuits put the City Museum at the center of an enduring argument over the line between liability and personal responsibility. Some of the injured and their lawyers say the museum is deceptively dangerous and doesn't do enough to publicize its risks through signs or other warnings.

Mr. Cassilly counters that it is as safe as it can be without being a bore. "They [lawyers] are taking the fun out of life."


. . .


Mr. Cassilly trained as a sculptor but made most of his money as a developer, having bought, renovated and sold some four dozen homes and commercial properties over the years. In 1993 he paid $525,000 for two downtown St. Louis buildings once used by a shoe company, and opened the City Museum in 1997. It's now a for-profit enterprise that he co-owns with a local investor.

He says the museum is about first-hand experience, a "computer-free zone" where rules are kept to a minimum. At the "skateless park," kids run up and slide down wooden skateboard ramps now used as slides. One smaller ramp has a rope swing that kids use to swing across the ramp, not always successfully.

"I slipped and the edge scraped my leg," said Garett Vance, 11, sitting atop what the museum bills as the world's largest pencil with a museum-provided ice pack taped to his leg. His mother, Mindy Vance, says a friend warned her that the museum was dangerous but she wasn't deterred.

"You take a risk when you go anyplace," says Ms. Vance, a nurse-practitioner who lives in Springfield, Ill., about two hours away.



For the full story, see:

CONOR DOUGHERTY. "This Museum Exposes Kids to Thrills, Chills and Trial Lawyers; Defiant St. Louis Venue Owner's Claim: Attorneys 'Take the Fun Out of Life'." The Wall Street Journal (Sat., MAY 1, 2010): A1 & A10.

(Note: ellipsis added.)


DarkTunnell2010-05-05.jpg"Visitors passed through a dark tunnel. The injured and their lawyers say the museum is deceptively dangerous and doesn't do enough to publicize its risks. Mr. Cassilly, the founder, counters that it is as safe as it can be without being a bore." Source of caption and photo: online version of the WSJ article quoted and cited above.





May 4, 2010

Henry Ford's Finest Hour



(p. 52) Not all men who refused to sign the code could be easily intimidated. In the auto industry Henry Ford refused to sign the NRA code and jack up his car prices, as his competitors were doing. "I do not think that this country is ready to be treated like Russia for a while," Ford wrote in his notebook. "There is a lot of the pioneer spirit here yet:' However, General Motors, Chrysler, and the smaller independents eagerly signed Blue Eagle codes, which, under penalty of fine and imprisonment, regulated their production, (p. 53) wages. prices, and hours of work. Ford was astounded: his colleagues preferred stability and government regulation to competition and free trade. He was especially irked when Pierre S. DuPont, the former head of General Motors, urged him at a party to sign the code.

In the face of strong pressure from the NRA, Ford refused to sign the auto code. He defied the law, pronouncing it un-American and unconstitutional. Hugh Johnson, the NRA chief, and President Roosevelt, however, wanted government control as well as compliance. They tried to pressure Ford into signing the code, and when he refused they tried force. Ford would receive no government contracts until he signed--and with the large increase in government agencies during the 1930s, that meant a huge business. For example, the bid of a Ford agency on five hundred trucks for the Civilian Conservation Corps was $169,000 below the next best offer. The government announced, however, that it would reject Ford's bid and pay $169,000 more for the trucks because Ford refused to sign the auto code. As Roosevelt announced at a press conference, "We have got to eliminate the purchase of Ford cars" for the government because Ford has not "gone along with the general [NRA] agreement:"




Source:

Folsom, Burton W., Jr. New Deal or Raw Deal? How FDR's Economic Legacy Has Damaged America. New York: Threshold Editions, 2008.

(Note: ellipses in original.)





May 3, 2010

New York City Government Protects Us from More than Three Living in an Apartment



RoommatesBreakingLawMouaGroup.jpg"From left, Doua Moua, 23, George Summer, 30, and David Everett and Jasmine Ward, both 21, are among six people in a four-bedroom apartment in Hamilton Heights. "It's part of New York City culture," Mr. Moua said." Source of caption and photo: online version of the NYT article quoted and cited below.


(p. A16) Doua Moua, 23, played a menacing gangster in a Clint Eastwood movie, but Mr. Moua swears he really is a nice, gentle and rules-abiding fellow. At least he was until he moved to New York City and unwittingly slipped into a world of lawlessness.

Mr. Moua lives with five roommates. And in New York, home to some of the nation's highest rents and more than eight million people, many of them single, it is illegal for more than three unrelated people to live in an apartment or a house.


. . .


Mr. Moua's landlord, who did not want his name published for fear of a crackdown, said he wrestled with converting some of his apartments into four-bedroom units. He knew it was illegal to allow four unrelated people to live together, but decided that if tenants were willing to live in what was once a dining room, it was fine with him. He could collect slightly more in rent over all and charge less for each room.

"If it's done in a good way, and there's not unlimited cramming in, and the shared facilities are adequate," the landlord said, "then it actually helps solve the affordable housing problem, which I think is a good thing."



For the full story, see:

CARA BUCKLEY. "A Law Limits Housemates to Three? Who Knew?" The New York Times (Mon., March 29, 2010): A16.

(Note: ellipses added.)

(Note: the online version of the article is dated March 28, 2010 and has the title "In New York, Breaking a Law on Roommates.")



RoommatesBreakingLaw2010-04-30.jpg"From left, Anya Kogan, 27, Jordan Dann, 33, Nick Turner, 29, and Michelle McGowan, 32, share a town house in Brooklyn." Source of caption and photo: online version of the NYT article quoted and cited above.





May 1, 2010

Pear Growers Suffer From Unintended Consequences of Land-Use Law



PearGrower2010-04-30.jpg""We hit the wall," the 63-year-old grower says. . . . , Mr. Naumes showed off a Bosc pear." Source of caption and photo: online version of the WSJ article quoted and cited below.


(p. A3) MEDFORD, Ore.--Farmers say conditions in southern Oregon's Rogue River Valley are among the best in the world for raising pears. Yet for the past decade, acreage planted in pears has been halved, as has the number of growers.

Land-use regulations designed to maintain open space and preserve farmland are to blame, pear growers here say.

It is a paradox few foresaw in 1973, when Oregon passed Senate Bill 100. That measure, considered a landmark of the budding environmental movement, put Oregon on the map as the "greenest" of U.S. states by placing zoning decisions with a central agency, outside the purview of local authorities.

The law had a huge impact in restricting suburban sprawl throughout the state, preserving environmentally critical habitats.

But since the mid-1990s, more than 3,500 acres planted in pears have gone out of production here. From 87 pear farms operating in 1992, only 48 remain.


. . .


The credit crunch and consumers unwilling to splurge for $30 boxes of pears are behind much of the pain, growers say. Yet they insist their real headache is their inability to raise capital by selling land at top value, which they say would let them buy farmland further from residential areas. That is because land-use laws say their orchards must remain in agriculture.

"It's the worst case of unintended consequences you can imagine," says David D. Lowry, chief executive of Associated Fruit Co., the smallest of Medford's Big Three, who fears his business could be the next to close. Like others, he has plenty of land to sell, but no one willing to buy as long as it is zoned for farming only.



For the full story, see:

JOEL MILLMAN. "Oregon Pear Growers Sour on Land Law; Farmers Say Landmark 1970s Measure Aimed at Conserving Agricultural Areas Limits Their Ability to Nurture Investment." The Wall Street Journal (Fri., APRIL 2, 2010): A3.

(Note: ellipses added.)


PearBarGraph2010-04-30.gif






















Source of graph: online version of the WSJ article quoted and cited above.






April 30, 2010

FDR's NRA Price-Fixing Helped Big Firms "Ruin" Little Firms



(p. 50) Among those damaged was Carl Pharis, the general manager of Pharis Tire and Rubber Company in Newark, Ohio. Pharis employed over one thousand people, mainly in the Newark area. His company grew because, in Pharis's words, "we would make the best possible rubber tire and sell it at the lowest price consistent with a modest but safe profit." He and his employees had survived the grim Great Depression years because they had lower prices, a good tire, and solid support in central Ohio from buyers who knew the company because it was local and because it priced its tires lower than the larger firms. As Pharis said, "It is obvious that they cannot make as good a tire as we make and sell it at the price at which we can sell at a profit:"

Then came the NRA with its high fixed prices for tires. As Pharis said, "Since the industry began to formulate a Code under the N. R. A., in June, 1933, we have at all times opposed any form of price-fixing. We believe it to be illegal and we know it to be oppressive." He added, "We quite understand that, if we were compelled to sell our tires at exactly the same price as they sell their tires, their great national consumer acceptance would soon capture our purchasers and ruin us. Since we have so little of this consumer publicity when compared with them, our only hope is in our ability (p. 51) to make as good or a better tire than they make and to sell it at a less[er] price. . . . "

Since Pharis and other small companies were no longer allowed to sell tires at discounted rates, Goodyear and Firestone "could go out just as they have gone out," Pharis noted, "and say to prospective customers that, since they had to pay the same price, it would be wiser if they bought the nationally advertised lines."

In a nutshell, Pharis put it this way: "The Government deliberately raised our prices up towards the prices at which the big companies wanted to sell, at which they could make a profit, . . . where more easily, with much less loss, they could come down and 'get us' and where, bound by N. R. A. decrees, we could not use lower prices, although we could have lowered them and still made a decent profit."

Pharis was on the verge of closing down and having to lay off all of his one thousand employees. His company, with its low prices and quality tires, could weather the Great Depression, but not the NRA. "If we were asking favors from the Government," Pharis concluded, "there would be little justice in our complaints. . . . And so, if the big fellows, with their too-heavy investments and high costs of manufacturing and selling, cannot successfully compete with us little fellows without Government aid, they should quit."




Source:

Folsom, Burton W., Jr. New Deal or Raw Deal? How FDR's Economic Legacy Has Damaged America. New York: Threshold Editions, 2008.

(Note: ellipses in original.)





April 28, 2010

Government Quotas Raise U.S. Sugar Price from 17 Cents a Pound to 31 Cents a Pound



Every semester in my principles of microeconomics course, I show the students a wonderful old 60 Minutes segment on the U.S. government's sugar quotas program. I tell them, alas, that the policy is still the same. Below is recent evidence:


(p. C1) . . . , U.S. sugar farmers have successfully blocked efforts to significantly increase imports, assuring them of little price competition.

Restrictions on imports have caused American users to pay much more than the rest of the world for sugar. That gap recently blew out to its widest in a decade.

Mr. Vilsack's comments raised the prospect of increased demand for global sugar and drove prices up 2.7%, or 0.44 cent, to 16.98 cents a pound on ICE Futures U.S. Prices for U.S. domestic sugar dropped 2.1%, to 30.8 cents a pound. That narrowed the gap between the two to 13.82 cents a pound.




For the full story, see:

CAROLYN CUI and BILL TOMSON , ILAN BRAT. "USDA Says It May Relax Sugar Quotas For This Year." The Wall Street Journal (Weds., APRIL 14, 2010): C1 & C2.

(Note: ellipsis added.)

(Note: the title of the online version of the article is "USDA Says It May Relax Sugar Quotas.")





April 26, 2010

Much of the Value of "Chinese" Imports is Added Outside of China



(p. A17) In a 2006 paper, Stanford University economist Lawrence Lau found that Chinese value-added accounted for about 37% of the total value of U.S. imports from China. In 2008, using a different methodology, U.S. International Trade Commission economist Robert Koopman, along with economists Zhi Wang and Shang-jin Wei, found the figure to be closer to 50%. In other words, despite all the hand-wringing about the value of imports from China, one-half to nearly two thirds of that value is not even Chinese. Instead, it reflects the efforts of workers and capital in other countries, including the U.S. In overstating Chinese value by 100% to 200%, the official U.S. import statistics are a poor proxy for job loss.

Seldom noted in the union-controlled discussion of trade on Capitol Hill is that the jobs of large numbers of American workers depend on imports from China. The proliferation of transnational production and supply chains has joined higher-value-added U.S. manufacturing, design, and R&D activities with lower-value manufacturing and assembly operations in China.

According to a widely cited 2007 study by Greg Linden, Kenneth L. Kraemer and Jason Dedrick of the University of California, Irvine, each Apple iPod costs $150 to produce. But only about $4 of that cost is Chinese value-added. Most of the value comes from components made in other countries, including the U.S. Yet when those iPods are imported from China, where they are snapped together, the full $150 is counted as an import from China, adding to the trade deficit and inflating EPI's job-loss figures.

In reality, those imported iPods support thousands of U.S. jobs up the value chain--in engineering, design, finance, manufacturing, marketing, distribution, retail and elsewhere. A 25% tariff on imports from China would penalize the non-Chinese companies and workers who create most of the iPod's value.




For the full commentary, see:

DANIEL IKENSON. "China Trade and American Jobs; Studies suggest that one-half to two-thirds of the value of 'Chinese' imports is added in other countries, including the U.S." The Wall Street Journal (Fri., APRIL 2, 2010): A17.





April 23, 2010

April 22nd Was Tenth Anniversary of Democrats' Infamous Betrayal of Elian Gonzalez



GonzalezElianSeizedOn2000-04-22.jpg"In this April 22, 2000 file photo, Elian Gonzalez is held in a closet by Donato Dalrymple, one of the two men who rescued the boy from the ocean, right, as government officials search the home of Lazaro Gonzalez, early Saturday morning, April 22, 2000, in Miami. Armed federal agents seized Elian Gonzalez from the home of his Miami relatives before dawn Saturday, firing tear gas into an angry crowd as they left the scene with the weeping 6-year-old boy." Source of caption and photo: online version of the Omaha World-Herald article quoted and cited below.



Yesterday (April 22, 2010) was the tenth anniversary of one of the darkest days in American history---when the Clinton Administration seized a six year old child in order to force him back into the slavery that his mother had died trying to escape.


(p. 7A) MIAMI (AP) - When federal agents stormed a home in the Little Havana community, snatched Elian Gonzalez from his father's relatives and put him on a path back to his father in Cuba, thousands of Cuban-Americans took to Miami's streets. Their anger helped give George W. Bush the White House months later and simmered long after that.


. . .


Elian was just shy of his sixth birthday when a fisherman found him floating in an inner tube in the waters off Fort Lauderdale on Thanksgiving 1999. His mother and others drowned trying to reach the U.S.

Elian's father, who was separated from his mother, remained in Cuba, where he and Fidel Castro's communist government demanded the boy's return.

Elian was placed in the home of his great-uncle, Lazaro Gonzalez, while the Miami relatives and other Cuban exiles went to court to fight an order by U.S. immigration officials to return him to Cuba. Janet Reno, President Bill Clinton's attorney general and a Miami native, insisted the boy belonged with his father.

When talks broke down, she ordered the raid carried out April 22, 2000, the day before Easter. Her then-deputy, current U.S. Attorney General Eric Holder, has said she wept after giving the order.

Associated Press photographer Alan Diaz captured Donato Dalrymple, the fisherman who had found the boy, backing into a bedroom closet with a terrified Elian in his arms as an immigration agent in tactical gear inches away aimed his gun toward them. The image won the Pulitzer Prize and brought criticism of the Justice Department to a frenzy.


. . .


The Cuban government, which tightly controls media access to Elian and his father, said neither is willing to give an interview. A government representative agreed to forward written questions from the AP to Elian, but there has been no response.

Pepe Hernandez, president of the Cuban American National Foundation, said his group predicted in 2000 that Elian would become a prop for the Castro government if he were returned. It was one reason, he said, the group fought for him to be kept in the U.S. and would do it again today, although behind the scenes to avoid negative publicity for the Cuban-American community.

"We knew what this kid was going to be subjected to," Hernandez said. "And time has proven us right."




For the full story, see:

JENNIFER KAY and MATT SEDENSKY. "10 years later, few stirred by Elian Gonzalez saga." Omaha World-Herald (Thurs., April 22, 2010): 7A.

(Note: ellipses added.)

(Note: the online version of the article is dated April 21, 2010 and has the title "10 years after Elian, US players mum or moving on.")





April 15, 2010

Taxpayers Taking a Haircut as States "Scramble" to Find Something New to Tax



HaircutTaxpayer2010-04-05.jpg"A LITTLE OFF THE TOP; Michigan residents may have to pay a 5.5 percent tax for haircuts. States across the nation are considering similar taxes on services to solve their budget problems." Source of caption and photo: online version of the NYT article quoted and cited below.


(p. 1) In the scramble to find something, anything, to generate more revenue, states are considering new taxes on virtually everything: garbage pickup, dating services, bowling night, haircuts, even clowns.

"It's hard enough doing what we do," grumbled John Luke, a plumber in the Philadelphia suburbs. His services would, for the first time, come with an added tax if the governor has his way.

Opponents of imposing taxes on services like funerals, legal advice, helicopter rides and dry cleaning argue that this push comes as businesses are barely clinging to life and can ill afford to see customers further put off by new taxes. This is especially true, they say, in states like Michigan and Pennsylvania, where some of the most sweeping proposals are being considered this spring.

But this is also a period of economic gloom for states. Pension funds are in the red, federal stimulus help will soon vanish, and revenues from traditional sources like income and property taxes are slumping ever lower, with few elected officials willing to risk voter wrath by raising them.


. . .


(p. 20) But from coast to coast, desperate governments are looking to tap into new revenue streams.

In Nebraska, a lawmaker has introduced a bill to tax armored car services, farm equipment repairs, shoe shines, taxidermy, reflexology and scooter repairs. In Kentucky, Jim Wayne, a state representative, and some fellow Democrats are proposing taxing high-end services: golf greens fees, limousine and hot-air-balloon rides, and private landscaping.

In June, voters in Maine will decide whether to accept a state overhaul of its tax system that would newly tax services like tailor alterations, blimp rides, and entertainment provided by clowns, comedians and jugglers.




For the full story, see:

MONICA DAVEY. "States Seeking Cash Hope to Expand Taxes to Services." The New York Times, First Section (Sun., ed: March 28, 2010): 1 & 20.

(Note: ellipsis added.)

(Note: the online version of the article is dated March 27, 2010, and has the title "States Seeking Cash Hope to Expand Taxes to Services.")


ServicesTaxedGraph2010-04-05.jpg Source of graph: online version of the NYT article quoted and cited above.






April 8, 2010

If We Want More Jobs, We Need More (Steve) Jobs



(p. A19) Mr. Obama and his advisers need to grasp this essential fact: Entrepreneurs are not just a cute little subsector of the American economy. They are the whole game. They will give us tomorrow's Apples and the multiplier effect of small businesses and exciting new jobs that go with them. Entrepreneurs are necessary to keep our large multinationals on their toes. It's no coincidence that the entrepreneurial flowering of the 1970s forced a managerial revolution in large companies during the 1980s and 1990s. Without Steve Jobs, there would have been no Lou Gerstner to reinvent IBM in the '90s. Entrepreneurs like Steve Jobs make everyone better.


For the full story, see:

RICH KARLGAARD. "Apple to the Rescue?" The Wall Street Journal (Thurs., JANUARY 28, 2010): A19.





March 31, 2010

New York Forces Entrepreneur to Subsidize His Competitor


(p. A24) Last year, the State Legislature levied a new tariff on most of the businesses in the New York City region. The metropolitan commuter transportation mobility tax requires employers to set aside 34 cents for every $100 in payroll costs, and hand the money over to a battered, barely breathing patient on the state's fiscal operating table: the Metropolitan Transportation Authority.

The tax has not worked out so well. So far, its projected revenues are coming in about $400 million below the state's estimates -- which, in part, will mean reduced subway and bus service for New Yorkers starting this summer. It has also prompted a furious backlash from suburban officials who resent bankrolling an agency that, they say, benefits the city at the expense of its surrounding counties.

And then there is William Schoolman, 69, amateur activist, self-described ''prototypical entrepreneur,'' and proprietor of the Hampton Luxury Liner bus fleet. In December, he filed a lawsuit in State Supreme Court claiming the tax is unconstitutional and demanding its repeal. The reason?

''Competition,'' Mr. Schoolman said in a recent telephone interview, anger rising in his voice. ''This is the first time that I ever had to pay a subsidy directly to my competitor. That's the thing that really bothers me.''



For the full story, see:

MICHAEL M. GRYNBAUM. "Suing Over a Transit Tax, in the Name of Competition." The New York Times (Tues., February 16, 2010): A24.





March 30, 2010

Market Entrepreneurs Versus Political Entrepreneurs



HillJamesRailroad2010-03-16.jpg"James J. Hill (center) built a great railroad on his own dime." Source of caption and photo: online version of the WSJ commentary quoted and cited below.


(p. A17) Let's bring back the robber barons.

"Robber baron" became a term of derision to generations of American students after many earnest teachers made them read Matthew Josephson's long tome of the same name about the men whose enterprise drove the American industrial age from 1861 to 1901.

Josephson's cast of pillaging villains was comprehensive: Rockefeller, Carnegie, Vanderbilt, Morgan, Astor, Jay Gould, James J. Hill. His table of contents alone shaped impressions of those times: "Carnegie as 'business pirate'.'' "Henry Frick, baron of coke." "Terrorism in Oil." "The sack of California."

I say, bring 'em back, and the sooner the better. What we need, a lot more than a $1,000 tax credit, are industries no one has thought of before. We need vision, vitality and commercial moxie. This government is draining it away.

The antidote to Josephson's book is a small classic by Hillsdale College historian Burton W. Folsom called "The Myth of the Robber Barons: A New Look at the Rise of Big Business in America" (Young America's Foundation). Prof. Folsom's core insight is to divide the men of that age into market entrepreneurs and political entrepreneurs.

Market entrepreneurs like Rockefeller, Vanderbilt and Hill built businesses on product and price. Hill was the railroad magnate who finished his transcontinental line without a public land grant. Rockefeller took on and beat the world's dominant oil power at the time, Russia. Rockefeller innovated his way to energy primacy for the U.S.

Political entrepreneurs, by contrast, made money back then by gaming the political system. Steamship builder Robert Fulton acquired a 30-year monopoly on Hudson River steamship traffic from, no surprise, the New York legislature. Cornelius Vanderbilt, with the slogan "New Jersey must be free," broke Fulton's government-granted monopoly.



For the full commentary, see:

DANIEL HENNINGER. "Bring Back the Robber Barons." The Wall Street Journal (Mon., MARCH 4, 2010): A17.

(Note: the online version of the article is dated MARCH 3, 2010.)


The full reference for Folsom's book is:

Folsom, Burton W. The Myth of the Robber Barons. 4th ed: Young America's Foundation, 2003.





March 27, 2010

An "Entrepreneur's Visa" to Let the Future Sergey Brin In



(p. A19) . . . , there is one way to create a lot more jobs without spending federal money. Let's import them. More precisely, let's import the people who create them: entrepreneurs.

A bipartisan bill that would begin to do just that was introduced on Feb. 24 by Sens. John Kerry (D., Mass.) and Richard Lugar (R., Ind.). Their "Startup Visa Act" would create a new, two-year visa for immigrant entrepreneurs whose firms attract at least $250,000 in financing from American angel investors or venture capital firms.


. . .


Here's a way to improve on the Kerry-Lugar plan. Create a true "job creator's visa," one tied directly and only to job creation by new immigrant entrepreneurs. The visa could be a temporary one for immigrants already here on another visa who establish a business. It could then be extended if the firm hires at least one American non-family resident. The visa should become permanent once the enterprise crosses a certain job threshold (such as five or 10 workers). But it would not be tied to financing.


. . .


Google was founded by Sergey Brin, a Russian immigrant, and American Larry Page by borrowing funds from their own credit cards. Why on earth would we want to create an entrepreneurs' visa that couldn't let in the future Sergey Brin?



For the full commentary, see:

ROBERT E. LITAN. "Visas for the Next Sergey Brin; To create more jobs, let's import more employers." The Wall Street Journal (Mon., MARCH 8, 2010): A19.

(Note: ellipses added.)

(Note: the online version of the article is dated MARCH 7, 2010.)





March 26, 2010

United States Exports "High-Value-Added Services that Support Well-Paying Jobs"



ServiceImportsExportsGraph2010-03-16.jpgSource of graph: online version of the WSJ article quoted and cited below.


(p. A23) Exports of American services have jumped by 84 percent since 2000, while the growth rate among goods was 66 percent. America trails both China and Germany in sales of goods abroad, but ranks No. 1 in global services by a wide margin. And while trade deficits in goods have been enormous -- $840 billion in 2008 -- the country runs a large and growing surplus in services: we exported $144 billion more in services than we imported, dwarfing the surpluses of $75 billion in 2000 and $58 billion in 1992.

Equally important, Commerce Department data show that the United States is a top-notch competitor in many of the high-value-added services that support well-paying jobs.


. . .


. . . , will Washington offer tax breaks or other export incentives? While businesses may clamor for them, these would be a setback for freer trade -- after all, for years it has been America that has been hectoring other countries to end their subsidies to exporters. Will Washington try to pick winners in the global marketplace, like green energy? More often than not, this kind of industrial policy wastes money, fosters inefficiency and creates few permanent jobs.



For the full story, see:

W. MICHAEL COX. "An Order of Prosperity, to Go." The New York Times (Weds., February 17, 2010): A23.

(Note: ellipses added.)





March 22, 2010

Small Nuclear Reactor Will Run on Spent Fuel From Big Reactors



GeneralAtomicsEM2reactor2010-03--01.jpg "An artist's modeling of the proposed EM2 reactor, which would be small enough to be transported by truck." Source of caption and photo: online version of the WSJ article quoted and cited below.


(p. B1) Nuclear and defense supplier General Atomics announced Sunday it will launch a 12-year program to develop a new kind of small, commercial nuclear reactor in the U.S. that could run on spent fuel from big reactors.

In starting its campaign to build the helium-cooled reactor, General Atomics is joining a growing list of companies willing to place a long-shot bet on reactors so small they could be built in factories and hauled on trucks or trains.

The General Atomics program, if successful, could provide a partial solution to one of the biggest problems associated with nuclear energy: figuring out what to do with highly radioactive waste. With no agreement on where to locate a federal storage site, that waste is now stored in pools or casks on utilities' property.

The General Atomics reactor, which is dubbed EM2 for Energy Multiplier Module, would be about one-quarter the size of a conventional reactor and have unusual features, including the ability to burn used fuel, which still contains more than 90% of its original energy. Such reuse would reduce the volume and toxicity of the waste that remained. General Atomics calculates there is so much U.S. nuclear waste that it could fuel 3,000 of the proposed reactors, far more than it anticipates building.

The decision to proceed with its 12-year program indicates that General Atomics believes the time is right to both make a nuclear push and to try to gain approval for an unconventional design proposal despite the likely difficulty of getting it certified by the Nuclear Regulatory Commission.

The EM2 would operate at temperatures as high as 850 degrees Centigrade, which is about twice as hot as a conventional (p. B2) water-cooled reactor. The very high temperatures would make the reactor especially well suited to industrial uses that go beyond electricity production, such as extracting oil from tar sands, desalinating water and refining petroleum to make fuel and chemicals.




For the full story, see:

REBECCA SMITH. "General Atomics Proposes a Plant That Runs on Nuclear Waste." The Wall Street Journal (Mon., February 22, 2010): B1 & B2.






March 20, 2010

Brin Plays Google's "Ethical Trump Card"



BrinSergey2010-03-16.jpg "Co-founder Sergey Brin has been active in Google's dealings with China." Source of caption and photo: online version of the WSJ article quoted and cited below.


(p. A8) As a boy growing up in the Soviet Union, Sergey Brin witnessed the consequences of censorship. Now the Google Inc. co-founder is drawing on that experience in shaping the company's showdown with the Chinese government.

Mr. Brin has long been Google's moral compass on China-related issues, say people familiar with the matter. He expressed the greatest concern among decision makers, they say, about the compromises Google made when it launched its Chinese-language search engine, Google.cn, in 2006. He is now the guiding force behind Google's decision to stop filtering search results in China, say people familiar with the decision.


. . .


The move is the clearest manifestation yet of a tension that has always existed at Google.

The Internet company, on one hand, is analytical: It built its core search business on algorithms that determine the relevance of Web sites and has tried to apply quantitative analysis to traditionally subjective parts of a business, such as hiring decisions. On the other hand, Mr. Brin and co-founder Larry Page have passionately touted Google's ability to spread democracy through access to information, and adopted the unofficial and now-famous motto, "Don't Be Evil."

"At its best, Google is data-driven with an ethical trump card," said Larry Brilliant, who headed up the company's philanthropic efforts until 2009. Always it was the founders, Messrs. Brin and Page, who could play that card, he added.



For the full story, see:

BEN WORTHEN. "Soviet-Born Brin Has Shaped Google's Stand." The Wall Street Journal (Sat., MARCH 13, 2010): A8.

(Note: ellipsis added.)

(Note: the online version of the article had the date MARCH 12, 2010 and has the slightly longer title "Soviet-Born Brin Has Shaped Google's Stand on China.")





March 18, 2010

Minnesota Windmills Do Not Turn in Cold Weather



WindmillStandStill2010-03-01.jpg "Inspecting a windmill in Chaska, Minn. The blades on some in the area have been stationary." Source of caption and photo: online version of the NYT article quoted and cited below.


(p. A12) For those who suspect residents in places like Minnesota of embellishment when it comes to their tales of bitterly cold winter weather, consider this: even some wind turbines, it seems, cannot bear it.

Turbines, more than 100 feet tall, were installed last year in 11 Minnesota cities to provide power, and also to serve as educational symbols in a state that has mandated that a quarter of its electricity come from renewable resources by 2025.

One problem, though: The windmills, supposed to go online this winter, mostly just sat still, people in cities like North St. Paul and Chaska said, rarely if ever budging. Residents took note. Schoolchildren asked questions. Complaints accumulated.

"If people see a water tower, they expect it to stand still," said Wally Wysopal, the city manager of North St. Paul. "If there's a turbine, they want it to turn."

No one knows for sure why these turbines do not. Officials believe there may be several reasons, but weather is the focus of much speculation.




For the full story, see:

MONICA DAVEY. "When Windmills Don't Spin, People Expect Some Answers." The New York Times (Fri., February 5, 2010): A12.

(Note: the online version of the article was dated February 4, 2010)





March 14, 2010

Unlikely Tea Party Leader Protests the "Porkulus"



CarenderKeliTeaPartyLeader2010-03-01.jpg "Keli Carender resists the idea of a Tea Party leader -- "there are a thousand leaders," she says. But she has become a leader, and a celebrity. Ms. Carender at a recent rally in Olympia, Wash." Source of caption and photo: online version of the NYT article quoted and cited below.


(p. 1) SEATTLE -- Keli Carender has a pierced nose, performs improv on weekends and lives here in a neighborhood with more Mexican grocers than coffeehouses. You might mistake her for the kind of young person whose vote powered President Obama to the White House. You probably would not think of her as a Tea Party type.

But leaders of the Tea Party movement credit her with being the first.

A year ago, frustrated that every time she called her senators to urge them to vote against the $787 billion stimulus bill their mailboxes were full, and tired of wearing out the ear of her Obama-voting fiancé, Ms. Carender decided to hold a protest against what she called the "porkulus."


. . .


(p. 19) The daughter of Democrats who became disaffected in the Clinton years, Ms. Carender, 30, began paying attention to politics during the 2008 campaign, but none of the candidates appealed to her. She had studied math at Western Washington University before earning a teaching certificate at Oxford -- she teaches basic math to adult learners -- and began reading more on economics, particularly the writings of Thomas Sowell, the libertarian economist, and National Review.

Reading about the stimulus, she said, "it didn't make any sense to me to be spending all this money when we don't have it."

"It seems more logical to me that we create an atmosphere where private industry can start to grow again and create jobs," she said.




For the full story, see:

KATE ZERNIKE. "Early Arrival at the Tea Party: A Young and Unlikely Activist." The New York Times, First Section (Sun., February 26, 2010): 1 & 19.

(Note: ellipsis added.)

(Note: the online version of the article is dated February 27, 2010 and has the title "Unlikely Activist Who Got to the Tea Party Early.")






March 8, 2010

Federal Government Spending Soars



SpendingFederalGraph2010-02-28.gif








Source of graph: online version of the WSJ article quoted and cited below.



(p. A17) This has been an unforgettable year in the history of American spending.

It began with an eye-popping $800 billion stimulus bill that came from nowhere and went to nowhere. Done with that, the Washington Democrats turned to President Obama's health-care reform, which looked big at first, but turned out to be bigger. A well-publicized June estimate of the Senate bill's cost by the Congressional Budget Office put the 10-year price tag at $1.6 trillion. So $800 billion, then a trillion.

Dollar signs rocketed into the sky all year: hundreds of billions on various TARP salvage projects, much drawn from some magic stash held by the Federal Reserve. The Obama cap-and-trade bill was going to use an auction to siphon $3.3 trillion from various states to Washington over 40 years. Oh, almost forgot--an FY 2011 $3.8 trillion budget.




For the full commentary, see:

DANIEL HENNINGER. "It's the Spending, America ." The Wall Street Journal (Thurs., February 18, 2010): A17.






March 5, 2010

Arnold on Ben Nelson's Cornhusker Kickback: "He Got the Corn; We Got the Husk"



(p. A16) Senator Ben Nelson, Democrat of Nebraska, has been under fire in recent days for winning some plum provisions for his home state in exchange for voting for his party's big health care legislation.


. . .


In perhaps the most pointed criticism yet, Gov. Arnold Schwarzenegger of California, in his State of the State address on Wednesday, said: "California's Congressional delegation should either vote against this bill that is a disaster for California or get in there and fight for the same sweetheart deal Senator Nelson of Nebraska got for the Cornhusker State. He got the corn; we got the husk."




For the full story, see:

DAVID M. HERSZENHORN. "Prescriptions; Making Sense of the Health Care Debate; Spreading the Golden Corn." The New York Times (Fri., January 8, 2010): A16.

(Note: the online version of the story had the very different title: "Prescriptions; Making Sense of the Health Care Debate; Nelson to Fight for All States" and had the date January 7, 2010.")

(Note: ellipsis added.)





March 1, 2010

Thousands Waited Hours in Subzero Cold Trying to Enter Global Warming Conference ("This Is What UN Efficiency Looks Like")



(p. A10) As dozens of developing countries threatened to walk out of the Copenhagen climate-change summit, thousands of NGOs, journalists, lawyers, activists were still trying to get in.

The thousands queued from the early morning into the afternoon on Monday to register for the summit but found themselves in a line that barely budged for most of the day. Only those who already had accreditation -- obtained during the first week of the summit or over the weekend -- were let in; the rest braved subzero temperatures for some glimpse of a breakthrough.

Would-be attendees chanted "Let us in!" to Danish policemen ringing the Bella Center.

United Nations officials announced at one point that the process of accreditation would stop at 6 p.m. today, prompting boos and catcalls and cries of "shame" from those in line. One sign declared: "This is what UN efficiency looks like."



For the full story, see:

Guy Chazan. "Copenhagen Dispatches; Some Walk Out of Gathering, But Many More Want In." The Wall Street Jounal (Tues., December 15, 2009): A10.

(Note: the online version of the commentary had the title "Thousands Line Up for Climate Conference" and the date December 14, 2009.)





February 26, 2010

The "Bongo System" of Corruption in Gabon: More on Why Africa is Poor



BongoGabon2010-01-27.jpg "The image of Ali Bongo, the son of longtime ruler Omar Bongo, blanketed Libreville." Source of caption and photo: online version of the NYT article quoted and cited below.


(p. A5) The "Bongo system," as people here refer to it -- forsaking roads, schools and hospitals for the sake of Mr. Bongo's 66 bank accounts, 183 cars, 39 luxury properties in France and grandiose government constructions in Libreville -- is etched in the streets of this languid seaside capital, where he ruled for 41 years, and also in the minds of its inhabitants.


. . .


A Western family here spoke of embarrassment at visiting a government minister whose house is packed with the latest flat-screen televisions and other expensive electronic gadgets, and whose garage was full of luxury cars. The top aide to a leading opposition figure, discussing the "Bongo system," said: "You had to bring a suitcase to the palace. Bongo didn't write checks." The president, he said, "calls everybody to the palace, and the money is handed out. That's how the country was run."

He spoke of a "sandwich system" of vote-buying employed by the ruling party in rural districts: notables are called together for a meeting, and at the end, when all are tired, a tray of "sandwiches" is passed around. Inside each "sandwich" is up to $600.

Looking around at an outdoor restaurant, he asked not to be named because he said: "It's a police state. They mess up your life."


. . .


On paper, the government's budget allocations for health, education and transportation were impressive, "huge," said the Western development official. "But in reality, it was actually about 20 percent of what was on paper," the official said. "The rest was embezzled," he added, asking to remain anonymous because identifying him would complicate his work in the country.


. . .


"It's a tiny number that benefits from the country's riches," said a cigarette vendor, Price Nyamam, squatting on the pavement in the poor Rio district. He said he had degrees in economics and sociology. "You are obliged to do work that doesn't correspond to your aspirations."



For the full story, see:

ADAM NOSSITER. "Libreville Journal; Underneath Palatial Skin, Corruption Rules Gabon." The New York Times (Tues., September 15, 2009): A5.

(Note: the online version of the article has the date September 14, 2009.)

(Note: ellipses added.)


GabonDumpForaging2010-01-27.jpg "Foraging for food at the main dump." Source of caption and photo: online version of the NYT article quoted and cited above.





February 21, 2010

Chinese Subsidies Create Unprofitable Overcapacity and Risk of Crisis



(p. 5) . . . subsidies, . . . , have spurred excess capacity and created a dangerous political dynamic in which these investments have to be propped up at all cost.

China has been building factories and production capacity in virtually every sector of its economy, but it's not clear that the latest round of investments will be profitable anytime soon. Automobiles, steel, semiconductors, cement, aluminum and real estate all show signs of too much capacity. In Shanghai, the central business district appears to have high vacancy rates, yet building continues.


. . .


Over all, there is a lack of transparency. China's statistics on its gross domestic product are based more on recorded production activity than on what is actually sold. Chinese fiscal and credit policies are geared toward jobs and political stability, and thus the authorities shy away from revealing which projects are most troubled or should be canceled.

Put all of this together and there is a very real possibility of trouble.



For the full commentary, see:

TYLER COWEN. "Economic View; Dangers of an Overheated China." The New York Times, SundayBusiness Section (Sun., November 29, 2009 ): 5.

(Note: the online version of the commentary has the date November 28, 2009.)

(Note: ellipsis added.)





February 18, 2010

Socialist Chavez's Thugs Destroy Venezuelans' Economic Freedom



VenezuelanNationalGuardPriceInspection2010-01-24.jpg "A member of the National Guard stands guard during a inspection of prices at a store in La Guaira outside Caracas Jan. 12." Source of caption and photo: online version of the WSJ article quoted and cited below.


(p. A8) CARACAS -- President Hugo Chávez's decision to devalue Venezuela's currency in order to shore up government finances could backfire on the populist leader if the move leads to substantially higher prices and extends an economic downturn.

Just days after Mr. Chávez cut the value of the "strong bolivar" currency, some businesses were marking up prices. Shoppers jammed stores to stock up on goods before the increases took hold.

Amelia Soto, a 52-year-old housewife waited in line at a Caracas drugstore to buy 23 tubes of toothpaste. "Everywhere I hear that prices are going to skyrocket so I want to buy as much as I can now," she said.

Airlines have doubled fares; government officials said they were looking into reports that large retail chains were also increasing prices.


. . .


The price increases are setting the stage for confrontations with authorities following Mr. Chávez's orders to shut down retailers that raise prices.


. . .


The higher prices for consumer goods represent a huge liability for a country facing 27% inflation, one of the highest levels in the world.




For the full story, see:

DARCY CROWE and DAN MOLINSKI. "Prices in Venezuela Surge After Devaluation." The Wall Street Journal (Weds., JANUARY 13, 2010): A8.

(Note: the online version of the article has the title "Venezuelans Rush to Shop as Stores Increase Prices.")

(Note: ellipses added.)





February 13, 2010

"Conservation Is About Managing People," Not Wildlife



(p. C27) People are hard-wired to be fearful of large carnivores. What's more, it's hard for the poor to see the economic advantage of rewilding. Humans don't like conservationists telling them what they can and can't do with the land that surrounds them. As one conservationist counterintuitively points out to Ms. Fraser: "Conservation is about managing people. It's not about managing wildlife."


For the full review, see:

DWIGHT GARNER. "Books of The Times; Conservation as a Matter of Managing People." The New York Times (Fri., January 22, 2010): C1 & C27.

(Note: the online version of the article is dated January 21, 2010.)


The book under review, is:

Fraser, Caroline. Rewilding the World: Dispatches from the Conservation Revolution. New York: Metropolitan Books, 2009.





February 6, 2010

Chinese Economic Crisis Predicted by Investor Who Predicted Enron Collapse




ChanosJamesHedgeFund2010-01-23.jpg "James Chanos made his hedge fund fortune predicting problems at companies and shorting their stock." Source of caption and photo: online version of the NYT article quoted and cited below.


Chanos' views discussed below are plausible and worth taking seriously. Earlier and overlapping worries about the sustainability of China's boom were expressed in a credible and scary book by David Smick called The World is Curved.

In addition to some of the concerns expressed by Chanos, Smick also emphasizes that China's restrictions on the internet will dampen the ability of its entrepreneurs to succeed. That view seems prescient given China's growing attempts to censor the internet and to hack Google.


(p. B1) SHANGHAI -- James S. Chanos built one of the largest fortunes on Wall Street by foreseeing the collapse of Enron and other highflying companies whose stories were too good to be true.

Now Mr. Chanos, a wealthy hedge fund investor, is working to bust the myth of the biggest conglomerate of all: China Inc.

As most of the world bets on China to help lift the global economy out of recession, Mr. Chanos is warning that China's hyperstimulated economy is headed for a crash, rather than the sustained boom that most economists predict. Its surging real estate sector, buoyed by a flood of speculative capital, looks like "Dubai times 1,000 -- or worse," he frets. He even suspects that Beijing is cooking its books, faking, among other things, its eye-popping growth rates of more than 8 percent.

"Bubbles are best identified by credit excesses, not valuation excesses," he said in a recent appearance on CNBC. "And there's no bigger credit excess than in China." He is planning a speech later this month at the University of Oxford to drive home his point.


. . .


(p. B4) . . . he is tagging along with the bears, who see mounting evidence that China's stimulus package and aggressive bank lending are creating artificial demand, raising the risk of a wave of nonperforming loans.

"In China, he seems to see the excesses, to the third and fourth power, that he's been tilting against all these decades," said Jim Grant, a longtime friend and the editor of Grant's Interest Rate Observer, who is also bearish on China. "He homes in on the excesses of the markets and profits from them. That's been his stock and trade."

Mr. Chanos declined to be interviewed, citing his continuing research on China. But he has already been spreading the view that the China miracle is blinding investors to the risk that the country is producing far too much.

"The Chinese," he warned in an interview in November with Politico.com, "are in danger of producing huge quantities of goods and products that they will be unable to sell."




For the full story, see:

DAVID BARBOZA. "Shorting China: the Man Who Predicted Enron's Fall Sees a Bigger Collapse Ahead." The New York Times (Fri., January 8, 2010): B1 & B5.

(Note: the online version of the article has the title "Contrarian Investor Sees Economic Crash in China" and is dated January 7, 2010.)

(Note: ellipses added.)


The reference to the Smick book is:

Smick, David M. The World Is Curved: Hidden Dangers to the Global Economy. New York: Portfolio Hardcover, 2008.


ChanosJamesPoster2010-01-23.jpg











"Now Mr. Chanos is betting against China, and is promoting his view that the China miracle has blinded investors to the risks in that economy." Source of caption and poster: online version of the NYT article quoted and cited above.






February 5, 2010

Washington's Influence Business is "Booming" Though Fewer Register as Lobbyists



(p. A1) WASHINGTON -- Ellen Miller, co-founder of the Sunlight Foundation, has spent years arguing for rules to force more disclosure of how lobbyists and private interests shape public policy. Until recently, she herself registered as a lobbyist, too, publicly reporting her role in the group's advocacy of even more reporting. Not anymore.

In light of strict new regulations imposed by Congress over the last two years, Ms. Miller joined a wave of policy advocates who are choosing not to declare themselves as lobbyists.

"I have never spent much time on Capitol Hill," Ms. Miller said, explaining that she only supervises those who press lawmakers directly. "I am not lobbying, so why fill out the forms?"

Her frankness makes Ms. Miller a standout among hundreds of others who are making the same decision. Though Washington's influence business is by all accounts booming, a growing number of its practitioners are taking a similar course to avoid the spotlight of public disclosure.

"All the increasing restrictions on lobbyists are a disincentive to be a lobbyist, and those who think they can deregister are eagerly doing so," said Jan Baran, a veteran political lawyer who has been fielding questions from clients hoping to escape registration. "It is creating some apparent contradictions."


. . .


(p. A12) But for all its penalties, the law left the definition of a lobbyist fairly elastic. The criteria included getting paid to lobby, contacting public officials about a client's interests at least twice in a quarter and working at least 20 percent of the time on lobbying-related activities for the client.

Enforcement is also light. Lobbyists suspected of failing to file receive at least one official letter offering a chance to rectify their status before any legal action is taken.

After the rules changed, private companies and nonprofit groups immediately began to rethink their registration.

The Union of Concerned Scientists, which advocates on arms control, energy policy and environmental issues, had previously registered almost anyone who went to Capitol Hill on its behalf, said Stephen Young, a senior analyst for the group. That changed after the new law.

"We thought: 'Hmm, this is now not such an easy thing. Let's see if we are required to do it. We are not? Let's take them off,' " he said. The group terminated the registrations of "virtually all" its former lobbyists, he said.




For the full story, see:

DAVID D. KIRKPATRICK. "Law to Curb Lobbying Sends It Underground." The New York Times (Mon., JANUARY 18, 2010): A1 & A12.

(Note: the online version of the article is dated January 17, 2010.)

(Note: ellipsis added.)





February 2, 2010

Grumpy Forecaster Bites Pushy Politician



BloombergGroundhog2009-02-15.jpg




"Will there be six more weeks of winter? Will Chuck mind his manners at the Staten Island Zoo? Will Mayor Michael R. Bloomberg pull this stunt again? The answers are uncertain. It is clear, though, that the mayor can be persistent in the face of hostility." Source of the caption and the photo: online version of the NYT article quoted and cited below.



(p. A20) There are creatures -- hibernating bears come to mind, or emergency-room doctors after an overnight shift -- who don't appreciate being roused from their slumber. Perhaps that's what irked Chuck the Groundhog on Monday morning on Staten Island when Mayor Michael R. Bloomberg tried to lure him out of his wooden shelter.

Chuck wasn't up for whatever it was that Mr. Bloomberg had planned for him -- or for predicting how much longer winter was going to last, for that matter. And he got so annoyed at the mayor that he bit the mayor's left hand, his sharp teeth piercing Mr. Bloomberg's black leather gloves.

One can argue that Mr. Bloomberg sort of asked for it. As cameras rolled and the crowd took in the event -- a local imitation of the Punxsutawney Phil tradition -- Chuck at first refused to come out. Children chanted his name to no avail. Mr. Bloomberg seemed to realize that the reclusive rodent was spoiling the show.

He tried to lure Chuck out of his cottage with an ear of corn, but Chuck shrewdly grabbed the corn and dragged it inside to enjoy. The mayor tried again, twice, but then, seemingly out of patience, he grabbed Chuck by the belly with both hands before he could hide again and held him up in the air for everyone to see.

By then, the mayor had already been bitten.



For the full story, see:

FERNANDA SANTOS. "Reclusive Staten Islander Bites Mayor." The New York Times (Tues., February 3, 2009): A20.

(Note: the online version of the article has the slightly different title: "Reclusive Staten Island Groundhog Bites Mayor.")





January 31, 2010

TSA Hassles Cub Scout Mikey Hicks Who is 8 Years Old



HicksMichaelNoFlyList2010-01-23.jpg













"Michael Hicks, 8, a Cub Scout in Clifton, N.J., has the same name as a suspicious person." Source of caption and photo: online version of the NYT article quoted and cited below.




(p. A1) The Transportation Security Administration, under scrutiny after last month's bombing attempt, has on its Web site a "mythbuster" that tries to reassure the public.

Myth: The No-Fly list includes an 8-year-old boy.

Buster: No 8-year-old is on a T.S.A. watch list.

"Meet Mikey Hicks," said Najlah Feanny Hicks, introducing her 8-year-old son, a New Jersey Cub Scout and frequent traveler who has seldom boarded a plane without a hassle because he shares the name of a suspicious person. "It's not a myth."

Michael Winston Hicks's mother initially sensed trouble when he was a baby and she could not get a seat for him on their flight to Florida at an airport kiosk; airline officials explained that his name "was on the list," she recalled.

The first time he was patted down, at Newark Liberty International Airport, Mikey was 2. He cried.

After years of long delays and waits for supervisors at every airport ticket counter, this year's vacation to the Bahamas badly shook up the family. Mikey was frisked on the way there, then (p. A3) more aggressively on the way home.

"Up your arms, down your arms, up your crotch -- someone is patting your 8-year-old down like he's a criminal," Mrs. Hicks recounted. "A terrorist can blow his underwear up and they don't catch him. But my 8-year-old can't walk through security without being frisked."




For the full story, see:

LIZETTE ALVAREZ. "Meet Mikey, 8: U.S. Has Him on Watch List." The New York Times (Thurs., January 14, 2010): A1 & A3.

(Note: the online version of the article is dated January 13, 2010.)

(Note: italics in original.)





January 23, 2010

Corrupt African Official Enjoys Malibu Estate, While "People Starve" and Obama State Department Sleeps



ObiangTeodoroMalibuEstate2010-01-16.jpg "The $35 million estate belonging to Teodoro Nguema Obiang, the agriculture minister of Equatorial Guinea and the son of its ruler, in Malibu, Calif., in the lower center of the frame." Source of caption and photo: online version of the NYT article quoted and cited below.


(p. A1) Several times a year, Teodoro Nguema Obiang arrives at the doorstep of the United States from his home in Equatorial Guinea, on his way to his $35 million estate in Malibu, Calif., his fleet of luxury cars, his speedboats and private jet. And he is always let into the country.

The nation's doors are open to Mr. Obiang, the forest and agriculture minister of Equatorial Guinea and the son of its president, even though federal law enforcement officials believe that "most if not all" of his wealth comes from corruption related to the extensive oil and gas reserves discovered more than a decade and a half ago off the coast of his tiny West African country, according to internal Justice Department and Immigration and Customs Enforcement documents.

And they are open despite a federal law and a presidential proclamation that prohibit corrupt foreign officials and their families from receiving American visas. The measures require only credible evidence of corruption, not a conviction of it.

Susan Pittman, a spokeswoman for the Bureau of International Narcotics and Law Enforcement in the State Department, said she was prohibited from discussing specific visa decisions. But other former and current State Department officials said Equatorial Guinea's close ties to the American oil industry were the reason for the lax enforcement of the law. Production of the country's nearly 400,000 barrels of oil a day is dominated by American companies like ExxonMobil, Hess and Marathon.

"Of course it's because of oil," said John Bennett, the United States ambassador to Equatorial Guinea from 1991 to 1994, adding that Washington has turned a blind eye to the Obiangs' corruption and repression because of its dependence on the country for natural resources. He noted that officials of Zimbabwe are barred from the United States.

"Both countries are severely repressive," said Mr. Bennett, who is now a senior foreign affairs officer for the State Department in Baghdad. "But if Zimbabwe had Equatorial Guinea's oil, Zimbabwean officials wouldn't still be blocked from the U.S."

Shown the Justice Department (p. A19) documents that detail the accusations of corruption against Mr. Obiang, Senator Patrick J. Leahy, a Vermont Democrat who wrote the law restricting visas, expressed frustration and anger with the State Department, which is responsible for issuing visas.

"The fact that someone like Mr. Obiang continues to travel freely here suggests strongly that the State Department is not yet applying the law as vigorously as Congress intended," Mr. Leahy said. The law was partly inspired by the accusations of corruption surrounding Mr. Obiang's family and the Equatorial Guinean government, Mr. Leahy's staff said.

"There are many instances of corrupt foreign officials plundering the natural resources of their countries for their own use while their people starve," Mr. Leahy said. "The law states clearly that if you do that, you are no longer welcome in the United States."




For the full story, see:

IAN URBINA. "A U.S. Visa, Shouts of Corruption, Barrels of Oil." The New York Times (Tues., November 17, 2009): A1 & A19.

(Note: The title of the online version of the article is "Taint of Corruption Is No Barrier to U.S. Visa"; the online version of the article is dated November 16, 2009.)





January 21, 2010

Green Danes Embrace Hot Air Escaping Through Open Doors



PedalPoweredSmoothies2010-01-16.jpg"Environmental displays in Copenhagen's City Hall Square include pedal-powered smoothies." Source of caption and photo: online version of the NYT article quoted and cited below.


I mainly liked the article cited below for the photo displayed above.

But there also was this bit, showing that beyond some silly green pretensions, not all is rotten in Denmark:


(p. A11) . . . , cracks in Copenhagen's green facade were easy to spot on Friday at the nearby Stroget, a popular car-free shopping area in the city center. In the late afternoon every shop door was propped open, sending clouds of heated air into the chilly street.

Some cities impose fines on shopkeepers who allow excess energy to escape through open doors.

But Jan Michael Hansen, the executive director of Copenhagen City Center, an organization representing shops along the three-quarter-mile-long corridor, was nonplused. A closed door keeps customers away, which is bad for business, he explained.

He seemed puzzled that the visitor brought it up. "I have never had an inquiry like this before," he said.




For the full story, see:

TOM ZELLER Jr. and ANDREW C. REVKIN. "Reporter's Notebook; Global and Local Concerns Meet in 'Hopenhagen'." The New York Times (Fri., December 10, 2009): A11.

(Note: the online version of the article is dated December 10, 2009.)

(Note: ellipsis added.)





January 16, 2010

Recession Is Prolonged By Doubts on Obama Policies



(p. A17) Several pieces of evidence point to extreme caution by businesses and households. A regular survey by the National Federation of Independent Businesses (NFIB) shows that recent capital expenditures and near-term plans for new capital investments remain stuck at 35-year lows. The same survey reveals that only 7% of small businesses see the next few months as a good time to expand. Only 8% of small businesses report job openings, as compared to 14%-24% in 2008, depending on month, and 19%-26% in 2007.

The weak economy is far and away the most prevalent reason given for why the next few months is "not a good time" to expand, but "political climate" is the next most frequently cited reason, well ahead of borrowing costs and financing availability. The authors of the NFIB December 2009 report on Small Business Economic Trends state: "the other major concern is the level of uncertainty being created by government, the usually [sic] source of uncertainty for the economy. The 'turbulence' created when Congress is in session is often debilitating, this year being one of the worst. . . . There is not much to look forward to here."

Government statistics tell a similar story. Business investment in the third quarter of 2009 is down 20% from the low levels a year earlier. Job openings are at the lowest level since the government began measuring the concept in 2000. The pace of new job creation by expanding businesses is slower than at any time in the past two decades and, though older data are not as reliable, likely slower than at any time in the past half-century. While layoffs and new claims for unemployment benefits have declined in recent months, job prospects for unemployed workers have continued to deteriorate. The exit rate from unemployment is lower now than any time on record, dating back to 1967.

According to the Michigan Survey of Consumers, 37% of households plan to postpone purchases because of uncertainty about jobs and income, a figure that has not budged since the second quarter of 2009, and one that remains higher than any previous year back to 1960.

These facts suggest that it was a serious economic mistake to press for a hasty, major transformation of the U.S. economy on the heels of the worst financial crisis in decades. A more effective approach would have been to concentrate first on fighting the recession and laying solid foundations for growth. They should have put plans to re-engineer the economy on the backburner, and kept them there until the economy emerged fully from the recession and returned to robust growth. By failing to adopt a measured approach to economic policy, Congress and the president may be slowing the economic recovery, and thereby prolonging the distress from the recession.




For the full commentary, see:

GARY S. BECKER, STEVEN J. DAVIS AND KEVIN M. MURPHY. "OPINION; Uncertainty and the Slow Recovery; A recession is a terrible time to make major changes in the economic rules of the game." The Wall Street Journal (Mon., JANUARY 4, 2010): A17.

(Note: ellipsis in original.)





January 15, 2010

The Decline of Motive Power in Socialist Venezuela



VenezuelaEnergy2010-01-10.jpg"In Venezuela, which faces power shortages, blackouts have spurred protests like this demonstration in Caracas." Source of caption and photo: online version of the WSJ article quoted and cited below.


(p. A11) CARACAS -- Venezuela, a country with vast reserves of oil and natural gas, as well as massive rushing waterways that cut through its immense rain forests, strangely finds itself teetering on the verge of an energy crisis.


. . .


The government has forced draconian electricity rationing on certain sectors, which could make matters worse for an economy already racked by recession. Critics say the socialist government is trying to snuff out capitalist-driven sectors with the rationing, while allowing government-favored industries in good standing to continue with business as usual.

Shopping malls, which analysts say use less than 1% of the power consumed in Venezuela, have nonetheless been a main focus for the government.

Malls have been told most stores can only be open between 11 a.m. and 9 p.m.

"In a certain way, Chávez is attacking capitalism with the orders on shopping malls," said Emilio Grateron, mayor of Caracas's Chacao municipality, a bastion of those opposed to Mr. Chávez. "By limiting the hours we can go to malls, he is trying to slowly take away liberties, to create absolute control over things such as shopping."

In Venezuela, whose capital Caracas is consistently ranked among the world's most dangerous cities, residents see shopping malls as one of few havens in the country.

The government's rationing efforts are also hitting metal producers. Their production has already been cut as much as 40%. Mr. Rodriguez, the electricity minister, said they may have to be completely closed to save more electricity.




For the full story, see:

DAN MOLINSKI. "Energy-Rich Venezuela Faces Power Crisis." The Wall Street Journal (Fri., JANUARY 8, 2009): A11.

(Note: ellipsis added.)





January 8, 2010

Obama's Bigger Government Brings More Lobbyists to Washington



(p. A21) One insight distinguished Barack Obama from the other presidential candidates last year. While he lacked experience or a special grasp of issues, Mr. Obama said he uniquely understood what ails Washington, and what was causing the endless squabbling and bitter stalemate on important issues. If elected, he said he would change the way business is done in Washington, end the partisan deadlock and the ideological polarization.

"Change must come to Washington," Mr. Obama said in a June 2008 speech. "I have consistently said when it comes to solving problems," he told Jake Tapper of ABC News that same month, "I don't approach this from a partisan or ideological perspective."

Mr. Obama also decried the prominent role played by lobbyists. "Lobbyists aren't just a part of the system in Washington, they're part of the problem," Mr. Obama said in a May 2008 campaign speech.

I was reminded of this last statement by a recent headline on the front page of USA Today. It read: "Health care fight swells lobbying. Number of organizations hiring firms doubles in '09." The article suggested that what Mr. Obama had promised to fix had only gotten worse.


. . .


In Washington it's business as usual, except for one thing. The bigger the role of government, the more lobbyists flock to town. By pushing for his policies, the president effectively put up a welcome sign to lobbyists. Despite promising to keep them out of his administration, he has even hired a few. So nothing has changed, except maybe that Washington is now more acrimonious than it has been.




For the full commentary, see:

FRED BARNES. "OPINION; Why Obama Isn't Changing Washington; There is no way he can grow the government without attracting more lobbyists and more political acrimony." The Wall Street Journal (Fri., NOVEMBER 27, 2009): A21.

(Note: ellipsis added.)

(Note: the date of the online version is given as NOVEMBER 26, 2009.)





January 6, 2010

Replication Easier than "Sweat and Anguish" of First Discovery



(p. 137) No one will deny that Japan's triumph in semiconductors depended on American inventions. But many analysts rush on to a further theory that the Japanese remained far behind the United States until the mid- 1970s and caught up only through a massive government program of industrial targeting of American inventions by MITI.

Perhaps the leading expert on the subject is Makoto Kikuchi, a twenty-six-year veteran of MITI laboratories, now director of the Sony Research Center. The creator of the first transistor made in Japan, he readily acknowledges the key role of American successes in fueling the advances in his own country: "Replicating someone else's experiment, no matter how much painful effort it might take, is nothing compared with the sweat and anguish of the men who first made the discovery."

Kikuchi explains: "No matter how many failures I had, I knew that somewhere in the world people had already succeeded in making a transistor. The first discoverers . . . had to continue their work, their long succession of failures, face-to-face with the despairing possibility that in the end they might never succeed. . . . As I fought my own battle with the transistor, I felt this lesson in my very bones." Working at MITI's labs, Kikuchi was deeply grateful for the technological targets offered by American inventors.




Source:

Gilder, George. Microcosm: The Quantum Revolution in Economics and Technology. Paperback ed. New York: Touchstone, 1990.

(Note: ellipses in original.)





December 30, 2009

"When the Sons of the Communists Themselves Wanted to Become Capitalists and Entrepreneurs"



JanicekJosefPlasticPeople2009-12-19.jpg"Josef Janicek, 61, was on the keyboard for a concert in Prague last week by the band Plastic People of the Universe." Source of caption and photo: online version of the NYT article quoted and cited below.



(p. A10) PRAGUE -- It has been called the Velvet Revolution, a revolution so velvety that not a single bullet was fired.

But the largely peaceful overthrow of four decades of Communism in Czechoslovakia that kicked off on Nov. 17, 1989, can also be linked decades earlier to a Velvet Underground-inspired rock band called the Plastic People of the Universe. Band members donned satin togas, painted their faces with lurid colors and wrote wild, sometimes angry, incendiary songs.

It was their refusal to cut their long, dank hair; their willingness to brave prison cells rather than alter their darkly subversive lyrics ("peace, peace, peace, just like toilet paper!"); and their talent for tapping into a generation's collective despair that helped change the future direction of a nation.

"We were unwilling heroes who just wanted to play rock 'n' roll," said Josef Janicek, 61, the band's doughy-faced keyboard player, who bears a striking resemblance to John Lennon and still sports the grungy look that once helped get him arrested. "The Bolsheviks understood that culture and music has a strong influence on people, and our refusal to compromise drove them insane."


. . .


In 1970, the Communist government revoked the license for the Plastics to perform in public, forcing the band to go underground. In February 1976, the Plastic People organized a music festival in the small town of Bojanovice -- dubbed "Magor's Wedding" -- featuring 13 other bands. One month later, the police set out to silence the musical rebels, arresting dozens. Mr. Janicek was jailed for six months; Mr. Jirous and other band members got longer sentences.

Mr. Havel, already a leading dissident, was irate. The trial of the Plastic People that soon followed became a cause célèbre.

Looking back on the Velvet Revolution they helped inspire, however indirectly, Mr. Janicek recalled that on Nov. 17, 1989, the day of mass demonstrations, he was in a pub nursing a beer. He argued that the revolution had been an evolution, fomented by the loosening of Communism's grip under Mikhail Gorbachev and the overwhelming frustration of ordinary people with their grim, everyday lives. "The Bolsheviks knew the game was up," he said, "when the sons of the Communists themselves wanted to become capitalists and entrepreneurs."




For the full story, see:

DAN BILEFSKY. "Czechs' Velvet Revolution Paved by Plastic People." The New York Times (Mon., November 16, 2009): A10.

(Note: the online version of the article is dated November 15, 2009.)

(Note: ellipsis added.)





December 24, 2009

Heretics to the Religion of Global Warming



SuperFreakonomicsBK.jpg















Source of book image: online version of the WSJ review quoted and cited below.



(p. A19) Suppose for a minute--. . . --that global warming poses an imminent threat to the survival of our species. Suppose, too, that the best solution involves a helium balloon, several miles of garden hose and a harmless stream of sulfur dioxide being pumped into the upper atmosphere, all at a cost of a single F-22 fighter jet.


. . .


The hose-in-the-sky approach to global warming is the brainchild of Intellectual Ventures, a Bellevue, Wash.-based firm founded by former Microsoft Chief Technology Officer Nathan Myhrvold. The basic idea is to engineer effects similar to those of the 1991 mega-eruption of Mt. Pinatubo in the Philippines, which spewed so much sulfuric ash into the stratosphere that it cooled the earth by about one degree Fahrenheit for a couple of years.

Could it work? Mr. Myhrvold and his associates think it might, and they're a smart bunch. Also smart are University of Chicago economist Steven Levitt and writer Stephen Dubner, whose delightful "SuperFreakonomics"--the sequel to their runaway 2005 bestseller "Freakonomics"--gives Myhrvold and Co. pride of place in their lengthy chapter on global warming. Not surprisingly, global warming fanatics are experiencing a Pinatubo-like eruption of their own.


. . .


. . . , Messrs. Levitt and Dubner show every sign of being careful researchers, going so far as to send chapter drafts to their interviewees for comment prior to publication. Nor are they global warming "deniers," insofar as they acknowledge that temperatures have risen by 1.3 degrees Fahrenheit over the past century.

But when it comes to the religion of global warming--the First Commandment of which is Thou Shalt Not Call It A Religion--Messrs. Levitt and Dubner are grievous sinners. They point out that belching, flatulent cows are adding more greenhouse gases to the atmosphere than all SUVs combined. They note that sea levels will probably not rise much more than 18 inches by 2100, "less than the twice-daily tidal variation in most coastal locations." They observe that "not only is carbon plainly not poisonous, but changes in carbon-dioxide levels don't necessarily mirror human activity." They quote Mr. Myhrvold as saying that Mr. Gore's doomsday scenarios "don't have any basis in physical reality in any reasonable time frame."

More subversively, they suggest that climatologists, like everyone else, respond to incentives in a way that shapes their conclusions. "The economic reality of research funding, rather than a disinterested and uncoordinated scientific consensus, leads the [climate] models to approximately match one another." In other words, the herd-of-independent-minds phenomenon happens to scientists too and isn't the sole province of painters, politicians and news anchors

.


For the full commentary, see:

BRET STEPHENS. "Freaked Out Over SuperFreakonomics; Global warming might be solved with a helium balloon and a few miles of garden hose." The Wall Street Journal (Tues., OCTOBER 27, 2009): A19.

(Note: ellipsis added.)





December 23, 2009

Copenhagen Global Warming Performer Asks for More Summer "Because It's Too Cold to Be Out Here"



(p. 12) . . . a small contingent of climate skeptics and libertarians opposed to caps on heat-trapping carbon dioxide emissions derided the United Nations talks.

"We want to be able to live our lives like we've always led them before -- as free citizens in free democracies," said David Pontoppidan, a graduate student in sociology at the University of Copenhagen, who addressed passers-by through a megaphone over the chatter of two helicopters hovering far above. "We want free debate; we want to be able to be taken seriously even though we don't agree with the U.N."


. . .

Leading the march from the square this afternoon, a man in blue coveralls, with vaudevillian face paint and a faux Cyrano nose, could be seen sweeping the street and peering into a rolling trash bin painted to resemble the planet. It emitted plumes of white dust and mournful musical notes.

"This is our comment on global warming," said the sweeper, Jens Kloft, a Danish performance artist. "We want to have an international compromise on global warming -- a better climate, but two more months of summer in Denmark please. Because it's too cold to be out here."




For the full story, see:

TOM ZELLER Jr. "Thousands March in Copenhagen, Calling for Action." The New York Times, First Section (Sun., December 13, 2009): 12.

(Note: the last two paragraphs quoted above are from the print version; the NYT deleted them from the online version. Also, the first paragraph quoted, is from the print version of that paragraph, and not the shortened online version. The online version of the article is dated Sat., December 12, 2009.)

(Note: ellipses added.)





December 19, 2009

Safe Drinking Water Matters More than Global Warming



(p. A17) Getting basic sanitation and safe drinking water to the three billion people around the world who do not have it now would cost nearly $4 billion a year. By contrast, cuts in global carbon emissions that aim to limit global temperature increases to less than two degrees Celsius over the next century would cost $40 trillion a year by 2100. These cuts will do nothing to increase the number of people with access to clean drinking water and sanitation. Cutting carbon emissions will likely increase water scarcity, because global warming is expected to increase average rainfall levels around the world.

For Mrs. Begum, the choice is simple. After global warming was explained to her, she said: "When my kids haven't got enough to eat, I don't think global warming will be an issue I will be thinking about."

One of Bangladesh's most vulnerable citizens, Mrs. Begum has lost faith in the media and politicians.

"So many people like you have come and interviewed us. I have not seen any improvement in our conditions," she said.

It is time the developed world started listening.




For the full commentary, see:

Bjørn LOMBORG. "Global Warming as Seen From Bangladesh; Momota Begum worries about hunger, not climate change." The Wall Street Journal (Mon., NOVEMBER 9, 2009): A17.





December 15, 2009

Wall Street Bet that Feds Would "Paper Over Mistakes"



In the commentary quoted below, "LTCM" stands for the Long-Term Capital Management hedge fund.


(p. A25) Because families without the real economic means to repay traditional 30-year mortgages were getting them, housing prices grew to artificially high levels.

This is where the real sin of Fannie Mae and Freddie Mac comes into play. Both were created by Congress to make housing affordable to the middle class. But when they began guaranteeing subprime loans, they actually began pricing out the working class from the market until the banking business responded with ways to make repayment of mortgages allegedly easier through adjustable rates loans that start off with low payments. But these loans, fully sanctioned by the government, were a ticking time bomb, as we're all now so painfully aware.

A similar bomb exploded in 1998, when LTCM blew up. The policy response to the LTCM debacle is instructive; more than anything else it solidified Wall Street's belief that there were little if any real risks to risk-taking. With $5 billion under management, LTCM was deemed too big to fail because, with nearly every major firm copying its money losing trades, much of Wall Street might have failed with it.

That's what the policy makers told us anyway. On Wall Street there's general agreement that the implosion of LTCM would have tanked one of the biggest risk takers in the market, Lehman Brothers, a full decade before its historic bankruptcy filing. Officials at Merrill, including its then-CFO (and future CEO) Stan O'Neal, believed Merrill's risk-taking in esoteric bonds could have led to a similar implosion 10 years before its calamitous merger with Bank of America.

We'll never know if LTCM's demise would have tanked the financial system or simply tanked a couple of firms that bet wrong. But one thing is certain: A valuable lesson in risk-taking was lost. By 2007, the years of excessive risk-taking, aided and abetted by the belief that the government was ready to paper over mistakes, had taken their toll.

With so much easy money, with the government always ready to ease their pain, Wall Street developed new and even more innovative ways to make money through risk-taking.




For the full commentary, see:

CHARLES GASPARINO. "Three Decades of Subsidized Risk; There's a reason Dick Fuld didn't believe Lehman would be allowed to fail." The Wall Street Journal (Fri., NOVEMBER 6, 2009): A25.





December 14, 2009

Gilder's Microcosm Tells the Story of the Entrepreneurs Who Made Personal Computers Possible



MicrocosmBK.jpg















Source of book image: http://images.indiebound.com/923/705/9780671705923.jpg




Many years ago Telecosm was the first George Gilder book that I read; I enjoyed it for its over-the-top verbal exuberance in detailing, praising and predicting the progress of the then-new broadband technologies. I bought his earlier Microcosm at about the same time, but didn't get around to reading it because I assumed it would be a dated read, dealing in a similar manner with the earlier personal computer (PC) technology.

In the last year or so I have read Gilder's Wealth and Poverty and Recapturing the Spirit of Enterprise. There is some interesting material in Gilder's famous Wealth and Poverty, which has sometimes been described as one of the main intellectual manifestos of the Reagan administration. But Recapturing the Spirit of Enterprise has become my favorite Gilder book (so far).

In each chapter, the main modus operandi of that book is to present a case study of a recent entrepreneur, with plenty of interpretation of the lessons to be learned about why entrepreneurship is important to the economy, what sort of personal characteristics are common in entrepreneurs, and what government policies encourage or discourage entrepreneurs.

In that book I read that the original plan had been to include several chapters on the entrepreneurs who had built the personal computer revolution. But the original manuscript grew to unwieldy size, and so the personal computer chapters became the basis of the book Microcosm.

So Microcosm moved to the top of my "to-read" list, and turned out to be a much less-dated book than I had expected.

Microcosm does for the personal computer entrepreneurs what Recapturing the Spirit of Enterprise did for a broader set of entrepreneurs.

In the next few weeks, I will occasionally quote a few especially important examples or thought-provoking observations from Microcosm.




Reference to Gilder's MIcrocosm:

Gilder, George. Microcosm: The Quantum Revolution in Economics and Technology. Paperback ed. New York: Touchstone, 1990.


Other Gilder books mentioned:

Gilder, George. Recapturing the Spirit of Enterprise: Updated for the 1990s. updated ed. New York: ICS Press, 1992. (The first edition was called simply The Spirit of Enterprise, and appeared in 1984.)

Gilder, George. Telecosm: The World after Bandwidth Abundance. Paperback ed. New York: Touchstone, 2002.

Gilder, George. Wealth and Poverty. 3rd ed. New York: ICS Press, 1993.





December 13, 2009

Young Firms Create Two-Thirds of New Jobs



(p. A25) While a slight improvement over last month's numbers, today's employment update from the Bureau of Labor Statistics presents a dismal picture for American workers. As policy makers search for the best remedies to strengthen our economic performance, they can't afford to overlook new firms and young firms.

Unfortunately, in troubled economic times the language of recovery is too often tilted toward large, established companies or to "small businesses," a broad term that traditionally applies to businesses with fewer than 500 employees. The conventional wisdom is that such businesses account for half of the labor force and are therefore the engine of future job creation.

That's not quite the case. The more precise factor is not the size of businesses, but rather their age. According to the Census Bureau, nearly all net job creation in the U.S. since 1980 occurred in firms less than five years old. A Kauffman Foundation report released yesterday shows that as recently as 2007, two-thirds of the jobs created were in such firms. Put more starkly, without new businesses, job creation in the American economy would have been negative for many years.


. . .


Entrepreneurs have a proven track record of job creation, especially in the early years of their firms. Eliminating or lowering the economic and regulatory hurdles that stand in the way of their success will pave the way for sustained expansion after the government's current stimulus measures come to their inevitable end.




For the full commentary, see:

CARL SCHRAMM, ROBERT LITAN AND DANE STANGLER. "New Business, Not Small Business, Is What Creates Jobs; Nearly all net job creation since 1980 occurred in firms less than five years old." The Wall Street Journal (Fri., NOVEMBER 6, 2009): A25.

(Note: ellipsis added.)





December 10, 2009

Congress Keeps Funding "Parochial" Earmarks



EarmarkArtMuseumAirCond2009-10-29.jpg"Reps. Donald Payne and Rodney Frelinghuysen are seeking $1.5 million to equip the Newark Museum, above, with new air-conditioning units." Source of caption and photo: online version of the WSJ article quoted and cited below.


(p. A3) Energy Secretary Steven Chu set out this year to address America's energy future with a network of new research labs. But lawmakers drafted their own blueprint: Instead of fully funding Dr. Chu's request, an energy-spending bill sets aside millions of dollars for such projects as an aviation-research institute, an environmentally friendly locomotive and air conditioning for a New Jersey museum.

When President Barack Obama signed a spending bill for the 2009 fiscal year in March, he said he wanted earmark-laden legislation to be an "end to the old way of doing business, and the beginning of a new era of responsibility and accountability."

Congress, however, hasn't given up earmarks -- the term for seemingly parochial projects funded at the behest of lawmakers.



For the full story, see:

STEPHEN POWER. "Earmarks Sap Energy Chief's Priorities." The Wall Street Journal (Thurs., OCTOBER 15, 2009): A3.





December 9, 2009

Stimulus Recipients "Have Strong Incentives to Inflate Their Reported Numbers"



(p. A19) After reporting GDP, the government released new numbers claiming that the stimulus programs have "created or saved" over a million jobs. These data were collected from responses by government agencies that received federal funds under the American Recovery and Reinvestment Act of 2009. Agencies were required to report "an estimate of the number of jobs created and the number of jobs retained by the project or activity." This report is required of all recipients (generally private contractors) of agency funds.

Unfortunately, these data are not reliable indicators of job creation nor of the even vaguer notion of job retention. There are two major problems. The first and most obvious is reporting bias. Recipients have strong incentives to inflate their reported numbers. In a race for federal dollars, contractors may assume that the programs that show the most job creation may be favored by the government when it allocates additional stimulus funds.

No dishonesty on the part of recipients is implied or required. But when a hire conceivably can be classified as resulting from the stimulus money, recipients have every incentive to classify the hire as such. Classification as stimulus-induced is even more likely if a respondent must only say that, except for the money, an employee would have been fired. In this case, no hiring need occur at all.


. . .


Net labor market figures do exist. Administrations have always been held to the time-tested and well-understood monthly job numbers put out by the Bureau of Labor Statistics, which reports the unemployment rate and the net job gain or loss for the economy as a whole. It is important to use reliable, accurate and well-understood numbers to determine the true causes of recovery. The unemployment rate, now at 9.8%, has continued to rise, and job losses have remained at high levels throughout the stimulus period. Few will be comforted by the good-news-only claim that the stimulus "created or saved" over one million jobs.




For the full commentary, see:

EDWARD P. LAZEAR. "Stimulus and the Jobless Recovery; Jobs 'created or saved' is meaningless. What matters is net job gain or loss, and that means the unemployment rate." The Wall Street Journal (Mon., NOVEMBER 2, 2009): A19.

(Note: ellipsis added.)

(Note: the online version of the article was dated Nov. 1st.)





December 8, 2009

"Market Wu" Annoys Maoists and Corrupt Bureaucrats



WuJinnglian2009-10-24.jpg "Wu Jinglian helped to create China's market economy, and now he is defending it against conservative hardliners in the Communist Party." Source of caption and photo: online version of the NYT article quoted and cited below.


(p. 1) AT 79, Wu Jinglian is considered China's most famous economist.

In the 1980s and '90s, he was an adviser to China's leaders, including Deng Xiaoping. He helped push through some of this country's earliest market reforms, paving the way for China's spectacular rise and earning him the nickname "Market Wu."

Last year, China's state-controlled media slapped him with a new moniker: spy.

Mr. Wu has not been interrogated, charged or imprisoned. But the fact that a state newspaper, The People's Daily, among others, was allowed to publish Internet rumors alleging that he had been detained on suspicions of being a spy for the United States hints that he is annoying some very important people in the government.

He denied the allegations, and soon after they were published, China's cabinet denied that an investigation was under way.

But in a country that often jails critics, Mr. Wu seems to be testing the limits of what Beijing deems permissible. While many economists argue that China's growth model is flawed, rarely does a prominent Chinese figure, in the government or out, speak with such candor about flaws he sees in China's leadership.

Mr. Wu -- who still holds a research post at an institute affiliated with the State Council, China's cabinet -- has white hair and an amiable face, and he appears frail. But his assessments are often harsh. In books, speeches, interviews and television appearances, he warns that conservative hardliners in the Communist Party have gained influence in the government and are trying to dismantle the market reforms he helped formulate.

He complains that business tycoons and corrupt officials have hijacked the economy and manipulated it for their own ends, a system he calls crony capitalism. He has even called on Beijing to establish a British-style democracy, arguing that political reform is inevitable.

Provocative statements have made him a kind of dissident economist here, and revealed the sharp debates behind the scenes, at the highest levels of the Communist Party, about the direction of China's half-market, half-socialist economy.

In many ways, it is a continuation of the debate that has been raging for three decades: What role should the government play in China's hybrid economy?

Mr. Wu says the spy rumors were "dirty tricks" employed by his critics to discredit him.

"I have two enemies," he said in a recent interview. "The crony capitalists and the Maoists. They will use any means to attack me."


. . .


(p. 7) In interviews, Mr. Wu says he feels compelled to speak out because conservatives and "old-style Maoists" have been gaining influence in the government since 2004. These groups, he said, are pressing for a return to central planning and placing blame for corruption and social inequality on the very market reforms he championed.

At the same time, Mr. Wu says, corrupt bureaucrats are pushing for the state to take a larger economic role so they can cash in on their positions through payoffs and bribes, as well as by steering business to allies.

"I'm not optimistic about the future," Mr. Wu said. "The Maoists want to go back to central planning and the cronies want to get richer."



For the full story, see:

DAVID BARBOZA. "China's Mr. Wu Keeps Talking." The New York Times, SundayBusiness Section (Sun., September 26, 2009): 1 & 7.

(Note: ellipsis added.)


WuChinaTimeline2009-10-24.jpgSource of timeline graphic: online version of the NYT article quoted and cited above.





December 4, 2009

Calderón's Decision Is Bigger than Reagan's Firing of Air Traffic Controllers



ElectriciansProtestMexico2009-10-29.jpg"The Mexican Union of Electricians protests the government's decision to liquidate the state-owned electricity company in Mexico City." Source of caption and photo: online version of the WSJ article quoted and cited below.


(p. A19) Eight days ago, just after midnight on a Sunday morning, Mexican President Felipe Calderón instructed federal police to take over the operations of the state-owned electricity monopoly, Luz y Fuerza del Centro (LyFC), which serves Mexico City and parts of surrounding states. The company's assets will stay in the hands of the government but will now be run by the Federal Electricity Commission (CFE), a national state-owned utility and the major supplier of LyFC's energy.

The net effect of the move is to dethrone 42,000 members of the Mexican Union of Electricians, which had won benefits over the decades to make Big Three auto workers in Detroit blush. When the liquidation is complete, it is expected that the company will employ about 8,000. To appreciate the magnitude of Mr. Calderón's decision, think of Ronald Reagan's firing of the air traffic controllers--only bigger. As one internationally renowned Mexican economist remarked on Sunday, it is "the most important act of government in 20 years."



For the full commentary, see:

MARY ANASTASIA O'GRADY. "Mexico's Calderón Takes on Big Labor; Its state-owned electricity company was bleeding the national treasury dry." The Wall Street Journal (Mon., October 19, 2009): A19.





November 27, 2009

Incandescent Bulb Defended by Light Expert Who Relit Statue of Liberty



(p. A13) The Energy Independence and Security Act of 2007 will effectively phase out incandescent light bulbs by 2012-2014 in favor of compact fluorescent lamps, or CFLs. Other countries around the world have passed similar legislation to ban most incandescents.

Will some energy be saved? Probably. The problem is this benefit will be more than offset by rampant dissatisfaction with lighting. We are not talking about giving up a small luxury for the greater good. We are talking about compromising light. Light is fundamental. And light is obviously for people, not buildings. The primary objective in the design of any space is to make it comfortable and habitable. This is most critical in homes, where this law will impact our lives the most. And yet while energy conservation, a worthy cause, has strong advocacy in public policy, good lighting has very little.


. . .


As a lighting designer with more than 50 years of experience, having designed more than 2,500 projects including the relighting of the Statue of Liberty, I encourage people who care about their lighting to contact their elected officials and urge them to re-evaluate our nation's energy legislation so that it serves people, not an energy-saving agenda.




For the full commentary, see:

HOWARD M. BRANDSTON. "Save the Light Bulb!; Compact fluorescents don't produce good quality light." The Wall Street Journal (Mon., AUGUST 31, 2009): A13.

(Note: ellipsis added.)

(Note: the online version of the article is dated Sun., Aug. 30.)





November 24, 2009

Support Grows for School Vouchers in D.C.



VoucherRallyDC2009-10-29.jpg "Students from Bridges Academy in Washington, D.C., at a Capitol Hill rally last month in support of the city's Opportunity Scholarship Program, which gives students from low-income families scholarships for private schools." Source of caption and photo: online version of the WSJ article quoted and cited below.


(p. A2) The District of Columbia's embattled school-voucher program, which lawmakers appeared to have killed earlier this year, looks like it could still survive.

Congress voted in March not to fund the program, which provides certificates to pay for recipients' private-school tuition, after the current school year. But after months of pro-voucher rallies, a television-advertising campaign and statements of support by local political leaders, backers say they are more confident about its prospects. Even some Democrats, many of whom have opposed voucher efforts, have been supportive.


. . .


Many parents whose children receive vouchers say they are satisfied with the private schools they attend. During the 2008-2009 school year, about 61,700 students nationwide received vouchers, up 9% from the previous school year, according to the Alliance for School Choice, a pro-voucher advocacy group.


. . .


Created as a five-year pilot project by a Republican-controlled Congress in early 2004, the Opportunity Scholarship Program is the nation's only federally funded voucher program. It is open to students who live in the long-struggling Washington school district and whose families have incomes at or below 185% of the federal poverty level -- about $40,000 for a family of four. Recipients are chosen by lottery, although preference is given to those attending traditional schools deemed to be in need of improvement under federal law.

Joe Kelley entered his oldest son, Rashawn, in the first Opportunity Scholarship Program lottery in 2004, fearful about violence at the public middle school. Rashawn, now 17, received a voucher, and so have his three sisters. All attend a small, private Christian academy where they have been earning A's and B's. "It's a lot of worry off of me," said Mr. Kelley, a retired cook and youth counselor.

In an evaluation released in March, researchers found that in reading skills, voucher recipients overall were approximately 3.1 months ahead of eligible students who didn't receive scholarships. But there was no difference in math skills, and voucher recipients from the worst-performing public schools got no boost in either subject.




For the full story, see:

ROBERT TOMSHO. "D.C. School Vouchers Have a Brighter Outlook in Congress." The Wall Street Journal (Mon., October 19, 2009): A2.

(Note: ellipses added.)





November 22, 2009

World Trade Barriers Are Increasing



ProtectionistMeasuresBarGraph2009-10-28.gifThe small dark blue squares indicate the "number of nations that have imposed protectionist measures on each country" and the light blue squares indicate the "number of measures imposed on each category of goods." Source of quotations in caption and of graph: online version of the WSJ article quoted and cited below.


(p. A5) BRUSSELS -- This weekend's U.S.-China trade skirmish is just the tip of a coming protectionist iceberg, according to a report released Monday by Global Trade Alert, a team of trade analysts backed by independent think tanks, the World Bank and the U.K. government.

A report by the World Trade Organization, backed by its 153 members and also released Monday, found "slippage" in promises to abstain from protectionism, but drew less dramatic conclusions.

Governments have planned 130 protectionist measures that have yet to be implemented, according to the GTA's research. These include state aid funds, higher tariffs, immigration restrictions and export subsidies.


. . .


According to the GTA report, the number of discriminatory trade laws outnumbers liberalizing trade laws by six to one. Governments are applying protectionist measures at the rate of 60 per quarter. More than 90% of goods traded in the world have been affected by some sort of protectionist measure.



For the full story, see:

JOHN W. MILLER. "Protectionist Measures Expected to Rise, Report Warns." The Wall Street Journal (Tues., SEPTEMBER 15, 2009): A5.

(Note: ellipsis added.)





November 19, 2009

Legitimacy of Capitalism Rests on Rich Earning their Wealth



ZingalesLuigi2009-11-08.jpg











Luigi Zingales, Robert C. McCormack Professor of Entrepreneurship and Finance at the University of Chicago. Source of photo and information in caption: http://faculty.chicagobooth.edu/luigi.zingales/research/date.html.



(p. A21) Luigi Zingales points out that the legitimacy of American capitalism has rested on the fact that many people, like Warren Buffett and Bill Gates, got rich on the basis of what they did, not on the basis of government connections. But over the years, business and government have become more intertwined. The results have been bad for both capitalism and government. The banks' growing political clout led to the rule changes that helped create the financial crisis.



For the full commentary, see:

DAVID BROOKS. "The Bloody Crossroads." The New York Times (Tues., September 8, 2009): A21.

(Note: the online version of the commentary is dated Sept. 7.)


The reference for the Zingales article is:

Zingales, Luigi. "Capitalism after the Crisis." National Affairs, no. 1 (Fall 2009): 22-35.





November 18, 2009

Government to Decide Who Lives and Who Dies



ReaperCuveGraph2009-10-28.jpg











"The Reaper Curve: Ezekiel Emanuel used the above chart in a Lancet article to illustrate the ages on which health spending should be focused." Source of caption and graph: online version of the WSJ article quoted and cited below.




(p. A15) Dr. Ezekiel Emanuel, health adviser to President Barack Obama, is under scrutiny. As a bioethicist, he has written extensively about who should get medical care, who should decide, and whose life is worth saving. Dr. Emanuel is part of a school of thought that redefines a physician's duty, insisting that it includes working for the greater good of society instead of focusing only on a patient's needs. Many physicians find that view dangerous, and most Americans are likely to agree.

The health bills being pushed through Congress put important decisions in the hands of presidential appointees like Dr. Emanuel. They will decide what insurance plans cover, how much leeway your doctor will have, and what seniors get under Medicare. Dr. Emanuel, brother of White House Chief of Staff Rahm Emanuel, has already been appointed to two key positions: health-policy adviser at the Office of Management and Budget and a member of the Federal Council on Comparative Effectiveness Research. He clearly will play a role guiding the White House's health initiative.


. . .


In the Lancet, Jan. 31, 2009, Dr. Emanuel and co-authors presented a "complete lives system" for the allocation of very scarce resources, such as kidneys, vaccines, dialysis machines, intensive care beds, and others. "One maximizing strategy involves saving the most individual lives, and it has motivated policies on allocation of influenza vaccines and responses to bioterrorism. . . . Other things being equal, we should always save five lives rather than one.

"However, other things are rarely equal--whether to save one 20-year-old, who might live another 60 years, if saved, or three 70-year-olds, who could only live for another 10 years each--is unclear." In fact, Dr. Emanuel makes a clear choice: "When implemented, the complete lives system produces a priority curve on which individuals aged roughly 15 and 40 years get the most substantial chance, whereas the youngest and oldest people get changes that are attenuated (see Dr. Emanuel's chart nearby).

Dr. Emanuel concedes that his plan appears to discriminate against older people, but he explains: "Unlike allocation by sex or race, allocation by age is not invidious discrimination. . . . Treating 65 year olds differently because of stereotypes or falsehoods would be ageist; treating them differently because they have already had more life-years is not."



For the full commentary, see:

BETSY MCCAUGHEY. "Obama's Health Rationer-in-Chief; White House health-care adviser Ezekiel Emanuel blames the Hippocratic Oath for the 'overuse' of medical care." The Wall Street Journal (Thurs., August 27, 2009): A15.

(Note: first ellipsis added; second and third ellipses in original.)


The article that was the original source for the graph above, is:

Persad, Govind, Alan Wertheimer, and Ezekiel J. Emanuel. "Principles for Allocation of Scarce Medical Interventions." The Lancet 373, no. 9661 (Jan. 31, 2009): 423-31.





November 15, 2009

Massachusetts Dems Are "Gigantic Hypocrites"



(p. A3) BOSTON -- The Democrat-controlled legislature in Massachusetts is poised to pass a bill in coming days giving Democratic Gov. Deval Patrick authority to appoint an interim senator to succeed the late Edward M. Kennedy, strengthening the party's U.S. Senate majority and bolstering prospects for passage of a health-care overhaul.

The interim-appointment issue is contentious in part because five years ago, the Democrat-dominated legislature voted to take appointment power away from Republican Gov. Mitt Romney, changing rules so a seat remains vacant until a special election. The shift came as Sen. John Kerry campaigned as the Democratic nominee for president, and a Kerry victory would have given the governor the chance to name a Republican senator.

Some Democrats have expressed discomfort over the about-face, and Republicans are irate. State Republican party Chairman Jennifer Nassour called the Democrats "gigantic hypocrites."



For the full story, see:

WILLIAM M. BULKELEY and JENNIFER LEVITZ. "Vacant Senate Seat Triggers Flip-Flop." The Wall Street Journal (Thurs., SEPTEMBER 17, 2009): A3.

(Note: ellipsis added.)





November 13, 2009

Global Warming Is Least Worry of Vanuatu Island's Poor



(p. A19) In a warning often repeated by environmental campaigners, the Vanuatuan president told the United Nations that entire island nations could be submerged. "If such a tragedy does happen," he said, "then the United Nations and its members would have failed in their first and most basic duty to a member nation and its innocent people."

Torethy Frank, a 39-year-old woman carving out a subsistence lifestyle on Vanuatu's Nguna Island, is one of those "innocent people." Yet, she has never heard of the problem that her government rates as a top priority. "What is global warming?" she asks a researcher for the Copenhagen Consensus Center.


. . .


Torethy and her family of six live in a small house made of concrete and brick with no running water. As a toilet, they use a hole dug in the ground. They have no shower and there is no fixed electricity supply. Torethy's family was given a battery-powered DVD player but cannot afford to use it.


. . .


What would change her life? Having a boat in the village to use for fishing, transporting goods to sell, and to get to hospital in emergencies. She doesn't want more aid money because, "there is too much corruption in the government and it goes in people's pockets," but she would like microfinance schemes instead. "Give the money directly to the people for businesses so we can support ourselves without having to rely on the government."

Vanuatu's politicians speak with a loud voice on the world stage. But the inhabitants of Vanuatu, like Torethy Frank, tell a very different story.



For the full commentary, see:

BJøRN LOMBORG. "The View from Vanuatu on Climate Change; Torethy Frank had never heard of global warming. She is worried about power and running water." The Wall Street Journal (Fri., OCTOBER 23, 2009): A19.

(Note: ellipses added.)

(Note: the online version is dated Thurs., Oct. 22.)





November 10, 2009

John Mackey: "I Believe in the Dynamic Creativity of Capitalism"



MackeyJohn2009-10-28.jpg Whole Foods CEO John Mackey. Source of the caricature: online version of the WSJ interview quoted and cited below.



(p. A11) "I honestly don't know why the article became such a lightning rod," says John Mackey, CEO and founder of Whole Foods Market Inc., as he tries to explain the firestorm caused by his August op-ed on these pages opposing government-run health care.


. . .


. . . his now famous op-ed incited a boycott of Whole Foods by some of his left-wing customers. His piece advised that "the last thing our country needs is a massive new health-care entitlement that will create hundreds of billions of dollars of new unfunded deficits and move us closer to a complete government takeover of our health-care system." Free-market groups retaliated with a "buy-cott," encouraging people to purchase more groceries at Whole Foods.


. . .


What Mr. Mackey is proposing is more or less what he has already implemented at his company--a plan that would allow more health savings accounts (HSAs), more low-premium, high-deductible plans, more incentives for wellness, and medical malpractice reform. None of these initiatives are in any of the Democratic bills winding their way through Congress. In fact, the Democrats want to kill HSAs and high-deductible plans and mandate coverage options that would inflate health insurance costs.


. . .


Mr. Mackey's latest crusade involves traveling to college campuses across the country, trying to persuade young people that business, profits and capitalism aren't forces of evil. He calls his concept "conscious capitalism."

What is that? "It means that business has the potential to have a deeper purpose. I mean, Whole Foods has a deeper purpose," he says, now sounding very much like a philosopher. "Most of the companies I most admire in the world I think have a deeper purpose." He continues, "I've met a lot of successful entrepreneurs. They all started their businesses not to maximize shareholder value or money but because they were pursuing a dream."

Mr. Mackey tells me he is trying to save capitalism: "I think that business has a noble purpose. It's not that there's anything wrong with making money. It's one of the important things that business contributes to society. But it's not the sole reason that businesses exist."

What does he mean by a "noble purpose"? "It means that just like every other profession, business serves society. They produce goods and services that make people's lives better. Doctors heal the sick. Teachers educate people. Architects design buildings. Lawyers promote justice. Whole Foods puts food on people's tables and we improve people's health."

Then he adds: "And we provide jobs. And we provide capital through profits that spur improvements in the world.


. . .


"I don't think anybody's too big to fail," he says. "If a business fails, what happens is, there are still assets, and those assets get reorganized. Either new management comes in or it's sold off to another business or it's bid on and the good assets are retained and the bad assets are eliminated. I believe in the dynamic creativity of capitalism, and it's self-correcting, if you just allow it to self-correct."

That's something Washington won't let happen these days, which helps explain why Mr. Mackey felt compelled to write that the Whole Foods health-insurance program is smarter and cheaper than the latest government proposals.



For the full interview, see:

STEPHEN MOORE. "The Conscience of a Capitalist; The Whole Foods founder talks about his Journal health-care op-ed that spawned a boycott, how he deals with unions, and why he thinks CEOs are overpaid." The Wall Street Journal (Sat., OCTOBER 3, 2009): A11.

(Note: ellipses added.)





November 7, 2009

Vaclav Havel Criticizes Obama for Failing to Meet Dalai Lama



It is interesting that President Obama is open to meeting with authoritarian dictators of terrorist nations, such as Iran, but is reluctant to meet with the peace-loving Dalai Lama.


(p. A12) PRAGUE -- It was supposed to be an interview about the revolutions that overturned communism 20 years ago in Europe. But first, Vaclav Havel had a question.

Was it true that President Obama had refused to meet the Dalai Lama in Washington?

Mr. Havel is a fan of the Dalai Lama, who was among the first visitors to Prague's storied castle after Mr. Havel moved in there as president, the final act in the swift, smooth revolution of 1989. A picture of the Dalai Lama is displayed prominently in Mr. Havel's current office in central Prague.

Told that Mr. Obama had made clear he would receive the Dalai Lama after his first presidential visit to China in November, Mr. Havel reached out to touch a magnificent glass dish, inscribed with the preamble to the United States Constitution -- a gift from Mr. Obama, who visited in April.

"It is only a minor compromise," Mr. Havel said of the nonreception of the Tibetan leader. "But exactly with these minor compromises start the big and dangerous ones, the real problems."



For the full story, see:

ALISON SMALE. "Former Czech Leader Assails Moral Compromises." The New York Times (Thurs., October 15, 2009): A12.

(Note: the online version of the article is dated Oct. 13th, and has the title "Havel, Still a Man of Morals and Mischief.")

(Note: I have added a missing quotation mark at the end of the quote after the word "problems.")





November 6, 2009

How "Free" Government Health Care Works



OmahaFluVaccineLine2009-11-05.jpg"Michael Kellerman and daughter Jovi, 1, wait in line near 69th and Underwood for a flu shot Thursday morning." Source of caption and photo: online version of the Omaha World-Herald article quoted and cited below.


Thousands turned out this morning for Douglas County's first public clinic for H1N1 flu vaccinations.

The line ran out of the First United Methodist Church to the east, then down 69th Street before hooking west along Cass Street toward 72nd Street.

Police estimated that 4,000 people had gathered by 9:20 a.m.

Phil Rooney of the Douglas County Health Department said the turnout was no surprise.

"There hasn't been a clinic this size done in the county or in the surrounding counties recently, so we were prepared for a very large crowd, and that's what we've got," he said.

He said 252 people were vaccinated in the clinic's first hour. "The pace the first hour was slower than we wanted, so we're trying to pick that up," he added.



For the full story, see:

John Keenan and Rick Ruggles. "Long line for flu shots." Omaha World-Herald online edition (Thurs., Nov. 5, 2009).

(Note: as far as I can tell, having checked several online e-editions for Nov. 5 and Nov. 6, this version of the article was never published in any of the print editions of the paper.)

(Note: at some point the title of the online version of this article was changed to "Flu shot seekers turned away.")





November 3, 2009

Biofuels Fail to Meet Fed Industrial Policy Goal



(p. B10) In 2007, Congress set a national goal of creating an advanced biofuel industry, and established a quota for gasoline marketers to blend a modest 100 million gallons of such fuel into gasoline by 2010.


. . .

The industry is likely to miss Congress's initial quota of 100 million gallons next year, acknowledging that it will make a few million gallons of the advanced fuel, at most. It could fall even further behind the 2011 quota, 250 million gallons. The quota eventually rises to 16 billion gallons by 2022.

The industry partly blames the credit crisis for its slow pace, but acknowledges that getting the conversion techniques to work is the biggest problem.

"It's certainly turned out to be more complicated technically than people thought it would be," said Brian Foody, the president and chief executive of Iogen, which hopes to build a large-scale facility.




For the full story, see:

MATTHEW L. WALD. "Industry Built From Scratch." The New York Times (Thurs., October 15, 2009): B1 & B10.

(Note: ellipses added.)

(Note: the online version of the article is dated October 14th.)





October 29, 2009

Federal "Stimulus" Money Delays Omaha Road Work



Omaha132ndStreet2009-10-09.jpg "Work has been put on hold for this stretch of 132nd Street between Blondo Street and West Maple Road. Omaha officials say the stimulus funds will be worth the wait, but some nearby residents are upset about the slowdown." Source of caption and photo: online version of the Omaha World-Herald article quoted and cited below.


We live near the still-two-lane stretch of 132nd pictured above, and were happy to read in the Omaha World-Herald early last spring that the city would be finishing the widening of 132nd, by widening the above stretch during the summer of 2009. As the summer progressed and widening did not, we became more and more puzzled.

Well, after you read the passages quoted below, you will 'know the rest of the story' as Paul Harvey used to say:


(p. 1A) The federal stimulus program, which was designed to accelerate roads projects around the country, instead put the brakes on widening a major Omaha thoroughfare.

The chance to grab $3.5 million in stimulus funds was worth delaying a widening project along 132nd Street between West Maple Road and Blondo Street, Omaha officials decided.

Work was supposed to begin last summer. Now the project between the Champions and Eagle Run golf courses won't begin until next spring.

Preliminary work was begun in March, when utility lines were moved out of the way. Part of the street was closed for that work.

Area residents expected more crews to start work during the summer.

When nothing happened for months, a handful of residents in the nearby Sunridge neighborhood called the city. They com-(p. A2)plained that digging from the utility work was causing mud and rainwater to pool near the subdivision's entrances off 132nd Street.

Resident Mary Ellen Pollard was surprised to find out that the widening work had been put on hold because of the stimulus program.

"I thought that stimulus package was for projects that were ready to go," she said Monday. "If it was ready to go, why didn't they proceed with it? . . . The barricades are up. Let's go get it done."

Plans change, public works officials said.

Meeting federal stimulus guidelines for environmental studies on the 132nd Street project, plus other planning and documentation requirements, took several months, City Engineer Charlie Krajicek said.

"We expected to have some work going this year, but it just didn't work out," he said.



For the full story, see:

Tom Shaw. "Stimulus slows 132nd St. work." Omaha World-Herald (Tuesday October 6, 2009): 1A-2A.

(Note: the online version of the article is dated Weds., October 7 and has the slightly expanded title: "Stimulus Watch: Program slows 132nd St. work.")

(Note: ellipsis in original.)


Omaha132ndStreetMap2009-10-09.jpg


















Source of map: online version of the Omaha World-Herald article quoted and cited above.






October 26, 2009

Health Care Incentives and Information Improve When Patients Are Payers



Nobel Prize winning economist Vernon Smith sees that the current health care system is an incentive and information "nightmare." The third parties, who pay, have neither the incentive nor the information to reward the providers who do a good job. And patients, who have the information, do not have the power or incentives to reward those who do a good job. And since providers are not being rewarded for doing a good job, they will only avoid becoming cynical bureaucrats as long as they are mission-driven saints.

A better system, that goes a long way toward Smith's "solution," has been suggested by Susan Feigenbaum, who suggests that third parties provide payments directly to patients, who then may choose what services to buy from which providers.

Here is the core of Smith's analysis:


(p. A11) The health-care provider, A, is in the position of recommending to the patient, B, what B should buy from A. A third party--the insurance company or the government--is paying A for it.

This structure defines an incentive nightmare.


. . .

I don't know whether this problem has a solution. If it does, I think it requires us to find mechanisms whereby third-party payment is made to the patient, B, who in turn pays A, supplemented with any co-payment from B for services. Hence, from the moment B seeks services from A both know who is going to be paying A for what is delivered. A and B each has need for what the other brings to the table, and this structure carries the potential for nurturing the relationship between A and B. B is empowered to become better informed about the services recommended by various A's that he might choose among, and the A's might find it particularly important to build good reputations with B's.



For the full commentary, see:

VERNON L. SMITH. "The ABC Dilemma of Health Reform; Third-party payment creates a big incentive problem." The Wall Street Journal (Sat., OCTOBER 16, 2009): A11.

(Note: ellipsis added.)


Feigenbaum's prescient suggestion for reform can be found in:

Feigenbaum, Susan. "Body Shop' Economics: What's Good for Our Cars May Be Good for Our Health." Regulation 15, no. 4 (Fall 1992): 26-27.





October 22, 2009

George Shultz Sceptical of War on Drugs



George Shultz has a distinguished résumé. He was Dean of the University of Chicago business school, Secretary of the Treasury under President Nixon, and Secretary of State under President Reagan. Along with the late Milton Friedman, he is sceptical about the War on Drugs, and is willing to express his scepticism:


(p. A17) He has long harbored skepticism about interdiction as a solution to drug abuse in the U.S. Those doubts were prescient.


. . .


Mr. Shultz recalls what happened shortly after he left government, when his view that interdiction is not the solution came up after a speech to a Stanford alumni group.

Then, as now, he believed that we need to look at the problem from an economic perspective and understand what happens when there is high demand for a prohibited substance. When his comment hit the press, he says he "was inundated with letters. Ninety-eight percent of them agreed with me and over half of those people said I'm glad you said it, but I wouldn't dare say it. The most poignant comment was from [a former member of the House of Representatives] who wrote and said I was glad to see your statement. I said that a few years ago and that's why I'm no longer a congressman!"



For the full commentary, see:

MARY ANASTASIA O'GRADY. "George Shultz on the Drug War; The former secretary of state has long doubted the wisdom of interdiction." The Wall Street Journal (Mon., OCTOBER 12, 2009): A17.

(Note: the online version of the article is dated Oct. 11, 2009.)

(Note: ellipsis added.)





October 19, 2009

"Recent Temperature Plateau" May Undermine Case for Global Warming



GlobalWarmingPlateauGraph2009-09-27.jpgSource of graph: online version of the NYT article quoted and cited below.


(p. A10) The world leaders who met at the United Nations to discuss climate change on Tuesday are faced with an intricate challenge: building momentum for an international climate treaty at a time when global temperatures have been relatively stable for a decade and may even drop in the next few years.

The plateau in temperatures has been seized upon by skeptics as evidence that the threat of global warming is overblown. And some climate experts worry that it could hamper treaty negotiations and slow the progress of legislation to curb carbon dioxide emissions in the United States.


. . .

Underscoring just how little clarity there is on short-term temperature fluctuations, researchers from Britain's climate change office, in a paper published in August, projected "an end to this period of relative stability," with half the years between now and 2015 exceeding the record-setting global temperatures of 1998.

Whatever the next decade may hold, critics of global warming have lost no time in using the current temperature plateau to build their case.

"I think it supports the arguments of those who've said, 'What's the rush for policy on this issue?' " said Patrick J. Michaels, a climatologist affiliated with George Mason University and the Cato Institute, a group opposing most regulatory solutions to environmental problems.


. . .

A clearer view of whether the recent temperature plateau undermines arguments for dangerous climate change in the long run should come in a few years, as the predictions made by the British climate researchers are tested. Their paper appeared in a supplement to an August issue of The Bulletin of the American Meteorological Society.

While the authors concluded that there was a 1 in 8 chance of having a decade-long pause in warming like the current plateau, even with rising concentrations of greenhouse gases, the odds of a 15-year pause, they wrote, are only 5 in 100. As a result, the next few years of observations could tip the balance toward further concern or greater optimism.

Meanwhile, social scientists who study the way people understand and respond to environmental problems say it is not surprising that the current temperature stability has created confusion and apathy.



For the full story, see:

ANDREW C. REVKIN. "Plateau in Temperatures Adds Difficulty to Task of Reaching a Solution." The New York Times (Weds., Sept. 23, 2009): A10.

(Note: the online version lists a date of September 21 and has the title as "Momentum on Climate Pact Is Elusive", but the body of the article seems to be the same as the print version.)

(Note: ellipses added.)





October 18, 2009

Feds Spent $850,000 to "Green" Buildings, and then Tore Them Down



(p. 4A) WASHINGTON -- The four drafty buildings had been fix­tures of the Energy Depart­ment complex in Oak Ridge, Tenn., for more than half a cen­tury. They burned energy like 1950s sedans.


The buildings seemed like perfect candidates for a federal conservation retrofit program that relies on private contrac­tors that receive a percentage of the money they save. A deal was struck in 2001. The con­tractor reworked lighting and heating systems, among other things, and began collecting payments.


The project was count­ed among the department's "green" successes -- until auditors discovered that the buildings had been torn down several years ago, and the gov­ernment had paid $850,000 for energy savings at facilities that no longer existed.


The audit findings show the potential for waste and abuse at a time when the department is poised to launch billions of dollars more in stimulus spend­ing on an unprecedented welter of green projects across the country.


. . .


The problems are not exclu­sive to Oak Ridge. The audi­tors, from the department's inspector general's office, also determined that $565,000 had been paid over six years un­der the same arrangement to a contractor in Texas for a high­efficiency laundry that was no longer in use.


The department also paid out $3.4 million on another project without checking whether the conservation measures worked -- and $160,000 for measure­ments that were never taken.



For the full story, see:

THE WASHINGTON POST. "Audit finds 'green' projects resulted in waste, abuse; The findings point to a need for oversight as the government readies stimulus projects." Omaha World-Herald (Sun., Sept. 27, 2009): 4A.

(Note: ellipsis added.)





October 16, 2009

How Wilson and the Feds Turned "Only Influenza" into "The Great Influenza"



Here is the core of John Barry's account of how President Woodrow Wilson, and his administration, turned what might have been an ordinary flu, into what, by some measures, was the worst pandemic in human history:


(p. 396) . . . , whoever held power, whether a city government or some private gathering of the locals, they generally failed to keep the community together. They failed because they lost trust. They lost trust because they lied. (San Francisco was a rare exception; its leaders told the truth, and the city responded heroically.) And they lied for the war effort, for the propaganda machine that Wilson had created.

It is impossible to quantify how many deaths the lies caused. It is impossible to quantify how many young men died because the army refused to follow the advice of its own surgeon general. But while those in authority were reassuring people that this was influenza, only influenza, nothing different from ordinary "la grippe,' at least some people must have believed them, at least some people must have exposed themselves to the virus in ways they would not have otherwise, and at least some of these people must have died who would otherwise have lived. And fear really did kill people. It killed them because those who feared would not care for many of those who needed but could not find care, those who needed only hydration, food, and rest to survive.



Source:

Barry, John M. The Great Influenza: The Story of the Deadliest Pandemic in History. Revised ed. New York: Penguin Books, 2005.

(Note: ellipsis added.)





October 15, 2009

How Government Universal Health Care Works in India



JahanAmirIndianWeaver2009-09-26.jpg "Amir Jahan found her health insurance wouldn't pay for all of her $200 stomach surgery; she continues to work with an untreated tumor." Source of caption: print version of the WSJ article quoted and cited below. Source of photo: online version of the WSJ article quoted and cited below.


(p. A14) PANIPAT, India -- Amir Jahan can spin thick, white thread into magnificent cloth, but the 46-year-old weaver has been unable to unravel her health plan to pay for stomach surgery.

Under a health-insurance program introduced a few years ago, the Indian government has provided health-insurance coverage for the country's hand-loom weavers, a group of 6.5 million workers, 60% of them female, who are mostly illiterate and invariably poor. Yet holding an insurance card hasn't helped Ms. Jahan, who says the coverage only pays for minor ailments and not for major problems, such as the removal of a stomach tumor.

"The health care is all a sham," Ms. Jahan says angrily. "I was refused treatment on grounds of huge expense. I won't ever go to be humiliated again."

Ms. Jahan's health-care issues represent the problems that come with trying to provide insurance to India's poor. Access to quality care remains a distant dream for many in this country of 1.1 billion.

Last year, the Indian government launched the National Health Insurance Program on (sic) promised health coverage of $700 per person for families earning less than $100 a year.

Holders of health cards have to register in their home states to access benefits, thereby precluding a large population of migrant laborers. Those who can get past the complex state-identification and qualification process often can't cope with hospital bureaucracies.



For the full story, see:

VIBHUTI AGARWAL. "Indian Weavers Shun Health Plan." The Wall Street Journal (Sat., Sept., 2009): A14.





October 14, 2009

Gallup Finds Highest Doubts of Government in Decades



(p. A23) If you want to know why Americans are so fearful of a government takeover of the health-care system, take a look at the results of a new Gallup poll on government waste released Sept. 15. One question posed was: "Of every tax dollar that goes to Washington, D.C., how many cents of each dollar would you say is wasted?" Gallup found that the mean response was 50 cents. With Uncle Sam spending just shy of $4 trillion this year, that means the public believes that $2 trillion is wasted.

In a separate poll released on Monday, Gallup found that nearly twice as many Americans believe that there is "too much government regulation of business and industry" as believe there is "too little" (45% to 24%).

Perhaps most significantly, in both of these polls Gallup found that skepticism about government's effectiveness is the highest it's been in decades. "Perceptions of federal waste were significantly lower 30 years ago than today," say the Gallup researchers. Even when Ronald Reagan was elected president in 1980 with the help of the antigovernment revolt of that era, Americans believed only 40 cents of every dollar was wasted, according to Gallup.


. . .


Over the last decade, the federal government has become bloated and inefficient. Voters are on to the scam. Mr. Obama keeps calling federal spending an "investment," but Americans apparently feel this is the worst investment they've ever made. They've come to regard Washington as a $2 trillion Bridge to Nowhere. They are right.



For the full commentary, see:

STEPHEN MOORE. "Our $2 Trillion Bridge to Nowhere; Americans believe Washington squanders half of every tax dollar." The Wall Street Journal (Weds., SEPTEMBER 23, 2009): A23.

(Note: ellipsis added.)





October 13, 2009

Government Actions Helped Spread 1918 Influenza



GreatInfluenzaBK.jpg















Source of book image: http://www.virology.ws/wp-content/uploads/2009/08/great-influenza.jpg



I like John Barry's The Great Influenza very much, although not entirely for the reasons that I had expected to like it. I wanted to learn more of the details of the worst flu pandemic in history, and the book delivers those details.

But I had not expected that there would be substantial discussion of the epistemology of science and medicine, and of the political and global context that preceded and affected the 1918 H1N1 influenza pandemic.

As an added bonus, the book gives substantial coverage to the life and work of one of my heroes, Oswald Avery. As a result of his research related to the pandemic, he discovered that DNA was the genetic material---a huge milestone in the history of medicine. But he never received the Nobel Prize because the Nobel Committee didn't want to be seen endorsing controversial work that had not stood the test of time.

On the other hand, the Nobel Committee had no such compunctions about giving the Nobel Peace Prize to President Woodrow Wilson. Barry's book indicts Wilson for having major responsibility for the severity of the pandemic. His administration drafted huge numbers of young men to fight in WWI, bringing them into close contact in shoddy, incomplete training camps. Some of these young men already had the flu, and they quickly spread it to many of their fellow soldiers. The Wilson administration continued to move these soldiers around the country and to Europe, vastly speeding the spread of the disease.

Barry also documents that the Wilson administration, in the name of patriotism and morale, punished those who told the truth about the severity of the pandemic. The results extended far beyond the trampling of civil liberties. For example, there was a huge parade in Philadelphia to sell war bonds, a parade that could easily have been canceled, but was not---igniting the rapid spread of the disease in that hard-hit city. If the newspapers had been allowed to print the truth about the pandemic, then there probably would have been sufficient outcry to cancel the parade; or at the very least, many better-informed citizens would have avoided the parade, and saved their lives, and the lives of their family members.

There is also a lot in book about the biology of the disease that is of interest, and about the suffering of those who experienced it.

But what I found eye-opening was the extent to which the severity of the disease was due to avoidable actions by Woodrow Wilson and his administration.



Source of book discussed above:

Barry, John M. The Great Influenza: The Story of the Deadliest Pandemic in History. Revised ed: New York: Penguin Books, 2005.



For another eye-opening account about Woodrow Wilson and WWI, see:

Raico, Ralph. The Spanish-American War and World War I, Parts 1 & 2: Knowledge Products, 2006.



For a neat little paper on Oswald Avery, see:

Diamond, Arthur M., Jr. "Avery's 'Neurotic Reluctance'." Perspectives in Biology and Medicine 26, no. 1 (Autumn 1982): 132-36.





October 9, 2009

Doctors Seek to Regulate Retail Health Clinic Competitors



NursePractitioner2009-09-26.jpg"A nurse practitioner with a patient at a retail clinic in Wilmington, Del." Source of caption and photo: online version of the WSJ article quoted and cited below.


Clayton Christensen, in a chapter of Seeing What's Next, and at greater length in The Innovator's Prescription, has persuasively advocated the evolution of nurse practitioners and retail health clinics as disruptive innovations that have the potential to improve the quality and reduce the costs of health care.

An obstacle to the realization of Christensen's vision would be government regulation demanded by health care incumbents who would rather not have to compete with nurse practitioners and retail health clinics. See below for more:


(p. B1) Retail health clinics are adding treatments for chronic diseases such as asthma to their repertoire, hoping to find steadier revenue, but putting the clinics into greater competition with doctors' groups and hospitals.

Walgreen Co.'s Take Care retail clinic recently started a pilot program in Tampa and Orlando offering injected and infused drugs for asthma and osteoporosis to Medicare patients. At some MinuteClinics run by CVS Caremark Corp., nurse practitioners now counsel teenagers about acne, recommend over-the-counter products and sometimes prescribe antibiotics.


. . .


As part of their efforts to halt losses at the clinics, the chains are lobbying for more insurance coverage, and angling for a place in pending health-care reform legislation, while trying to temper calls for regulations.


. . .


(p. B2) But such moves are raising the ire of physicians' groups that see the in-store clinics as inappropriate venues for treating complex illnesses. In May, the Massachusetts Medical Society urged its members to press insurance companies on co-payments to eliminate any financial incentive to use retail clinics.


. . .


The clinics are helping alter the practice of medicine. Doctors are expanding office hours to evenings and weekends. Hospitals are opening more urgent-care centers to treat relatively minor health problems.



For the full story, see:

AMY MERRICK. "Retail Health Clinics Move to Treat Complex Illnesses, Rankling Doctors." The Wall Street Journal (Thurs., SEPTEMBER 10, 2009): B1-B2.

(Note: ellipses added.)


A brief commentary by Christensen (and Hwang) on these issues, can be found at:

CLAYTON CHRISTENSEN and JASON HWANG. "How CEOs Can Help Fix Health Care." The New York Times (Tues., July 28, 2009).



For the full account, see:

Christensen, Clayton M., Jerome H. Grossman, and Jason Hwang. The Innovator's Prescription: A Disruptive Solution for Health Care. New York: NY: McGraw-Hill, 2008.


RetailHealthClinicGraph2009-09-26.gif












Source of graph: online version of the WSJ article quoted and cited above.






October 1, 2009

Free-Market German Aristocrat Receives Ovation for Opposing Bailout



GuttenbergBaron2009-09-23.jpgBaron Karl-Theodor Maria Nikolaus Johann Jakob Philipp Franz Joseph Sylvester Freiherr von und zu Guttenberg. Source of name and photo: online version of the NYT article quoted and cited below.


(p. A7) BERLIN -- Could the heir apparent to Chancellor Angela Merkel be a wealthy, handsome 37-year-old baron who loves rock 'n' roll?

The baron, Karl-Theodor zu Guttenberg, vaulted to prominence this year when he took over the often dull job of economics minister in the midst of the financial crisis. His independent stand on a thorny economic matter earned him the respect of voters.


. . .

It was his independent streak that earned him the respect of voters, rather than just their curiosity. Mr. Guttenberg broke ranks with Mrs. Merkel over how to handle the troubled German automaker Opel. Mrs. Merkel supported a consortium led by Magna International, a Canadian auto parts maker, and Sberbank, a Russian bank. Mr. Guttenberg favored bankruptcy, and even offered to resign just months into his tenure.

He lost the battle, but gained credibility with voters -- an important commodity with a disenchanted electorate that has largely ignored the coming vote. At the big kickoff campaign rally in Düsseldorf for Mrs. Merkel's conservative Christian Democratic Union, Mr. Guttenberg was the only politician to receive a spontaneous ovation from the crowd of 9,000.



For the full story, see:

NICHOLAS KULISH and JUDY DEMPSEY. "Aristocrat's Rise Shakes German Doldrums." The New York Times (Weds., September 22, 2009): A7.

(Note: ellipsis added.)





September 28, 2009

Feds Ignore Birds Killed by Windmills



(p. A19) On Aug. 13, ExxonMobil pleaded guilty in federal court to killing 85 birds that had come into contact with crude oil or other pollutants in uncovered tanks or waste-water facilities on its properties. The birds were protected by the Migratory Bird Treaty Act, which dates back to 1918. The company agreed to pay $600,000 in fines and fees.

ExxonMobil is hardly alone in running afoul of this law. Over the past two decades, federal officials have brought hundreds of similar cases against energy companies. In July, for example, the Oregon-based electric utility PacifiCorp paid $1.4 million in fines and restitution for killing 232 eagles in Wyoming over the past two years. The birds were electrocuted by poorly-designed power lines.

Yet there is one group of energy producers that are not being prosecuted for killing birds: wind-power companies. And wind-powered turbines are killing a vast number of birds every year.

A July 2008 study of the wind farm at Altamont Pass, Calif., estimated that its turbines kill an average of 80 golden eagles per year. The study, funded by the Alameda County Community Development Agency, also estimated that about 10,000 birds--nearly all protected by the migratory bird act--are being whacked every year at Altamont.

Altamont's turbines, located about 30 miles east of Oakland, Calif., kill more than 100 times as many birds as Exxon's tanks, and they do so every year. But the Altamont Pass wind farm does not face the same threat of prosecution, even though the bird kills at Altamont have been repeatedly documented by biologists since the mid-1990s.


. . .

This is a double standard that more people--and not just bird lovers--should be paying attention to. In protecting America's wildlife, federal law-enforcement officials are turning a blind eye to the harm done by "green" energy.



For the full commentary, see:

ROBERT BRYCE. "Windmills Are Killing Our Birds; One standard for oil companies, another for green energy sources." The Wall Street Journal (Tues., SEPTEMBER 8, 2009): A19.

(Note: the online version of the commentary is dated September 7th.)

(Note: ellipsis added.)





September 27, 2009

Jane Jacobs "Rightly Condemned the ­Arrogance and Elitism of Urban Planners"



WrestlingWithMosesBK.jpg














Source of book image: online version of the WSJ review quoted and cited below.




(A15) In her day, she was a tenacious activist and an ­opponent of powerful interests, courting disfavor in high places. But today everyone loves Jane ­Jacobs, and understandably so. The author of the now-classic "The Death and Life of Great American Cities" (1961) is widely regarded as a common-sense visionary who ­reminded people about what makes ­cities livable.

According to Anthony Flint, the author of ­"Wrestling With Moses," Jacobs's most important ­contribution was the idea that "cities and city ­neighborhoods had an ­organic structure of their own that couldn't be ­produced at the drafting table." Mr. Flint, a former journalist who now works at the ­Lincoln Institute of Land Policy, clearly counts himself as a ­Jacobs fan. His book is a lively and informative ­valentine to her, aimed at showing us especially how she "took on New York's master builder and ­transformed the American city."

The villain of the story is Robert Moses, the ­"master builder" who for four decades--from the 1930s into the 1960s--led several well-funded, quasi-governmental agencies and radically transformed the landscape of New York, ­building roads, bridges, tunnels, parks, ­playgrounds, beaches and ­public housing. Though he never held elective ­office, he was ­powerful indeed, establishing a ­formidable base in the city and state bureaucracies. He might have fallen into obscurity after his death if it were not for Robert Caro, who immortalized ­Moses in "The Power ­Broker" (1974), a massive ­biography that portrays Moses as a despot whose creations helped to destroy the city.


. . .


One roots for Jacobs every step of the way, not least because she rightly condemned the ­arrogance and elitism of urban planners. And Moses was, in fact, a bully who had acquired too much power and disregarded the concerns of local residents. Slum clearance too often targeted functioning working-class neighborhoods, and urban renewal went far beyond what its utopian aims could possibly deliver.



For the full review, see:

VINCENT J. CANNATO. "Not Here, She Said; How Jane Jacobs fought the 'power broker' to save the Village--and a city." The Wall Street Journal (Thurs., July 29, 2009): A15.

(Note: ellipsis added.)


The source of the book being reviewed, is:

Flint, Anthony. Wrestling with Moses: How Jane Jacobs Took on New York's Master Builder and Transformed the American City. New York, NY: Random House, Inc., 2009.





September 26, 2009

Increase Health Insurance Competition by Ending Cross-State Ban



(p. A13) How do we get to a competitive market? The tax deduction for employer-provided group insurance, which has nearly destroyed the individual insurance market, is a central culprit. If we don't have the will to remove it, the deduction could be structured to enhance competition and the right to future insurance. We could restrict the tax deduction to individual, portable, long-term insurance and to the high-deductible plans that people choose with their own money.

More importantly, health care and insurance are overly protected and regulated businesses. We need to allow the same innovation, entry, and competition that has slashed costs elsewhere in our economy. For example, we need to remove regulations such as the ban on cross-state insurance. Think about it. What else aren't we allowed to purchase in another state?



For the full commentary, see:

JOHN H. COCHRANE . "What to Do About Pre-existing Conditions; Most Americans worry about health coverage if they lose their job and get sick. There is a market solution." The Wall Street Journal (Fri., AUGUST 14, 2009): A13.






September 25, 2009

Creator of Cap-and-Trade Now Says Plan is Ineffective and Inflexible



CrockerThomas2009-09-13.jpg











"When he was a graduate student in the 1960s working to reduce pollutants, Thomas Crocker devised a cap-and-trade system similar to one being considered in Congress." Source of photo and caption: online version of the WSJ article quoted and cited below.


(p. A7) In the 1960s, a University of Wisconsin graduate student named Thomas Crocker came up with a novel solution for environmental problems: cap emissions of pollutants and then let firms trade permits that allow them to pollute within those limits.

Now legislation using cap-and-trade to limit greenhouse gases is working its way through Congress and could become the law of the land. But Mr. Crocker and other pioneers of the concept are doubtful about its chances of success. They aren't abandoning efforts to curb emissions. But they are tiptoeing away from an idea they devised decades ago, doubting it can work on the grand scale now envisioned.

"I'm skeptical that cap-and-trade is the most effective way to go about regulating carbon," says Mr. Crocker, 73 years old, a retired economist in Centennial, Wyo. He says he prefers an outright tax on emissions because it would be easier to enforce and provide needed flexibility to deal with the problem.


. . .


Mr. Crocker sees two modern-day problems in using a cap-and-trade system to address the global greenhouse-gas issue. The first is that carbon emissions are a global problem with myriad sources. Cap-and-trade, he says, is better suited for discrete, local pollution problems. "It is not clear to me how you would enforce a permit system internationally," he says. "There are no institutions right now that have that power."

Europe has embraced cap-and-trade rules. Emissions initially rose there because industries were given more permits than they needed, and regulators have since tightened the caps. Meanwhile China, India and other developing markets are reluctant to go along, fearing limits would curb their growth. If they don't participate, there is little assurance that global carbon emissions will slow much even if the U.S. goes forward with its own plan. And even if everyone signs up, Mr. Crocker says, it isn't clear the limits will be properly enforced across nations and industries.

The other problem, Mr. Crocker says, is that quantifying the economic damage of climate change -- from floods to failing crops -- is fraught with uncertainty. One estimate puts it at anywhere between 5% and 20% of global gross domestic product. Without knowing how costly climate change is, nobody knows how tight a grip to put on emissions.

In this case, he says Washington needs to come up with an approach that will be flexible and easy to adjust over a long stretch of time as more becomes known about damages from greenhouse-gas emissions. Mr. Crocker says cap-and-trade is better suited for problems where the damages are clear -- like acid rain in the 1990s -- and a hard limit is needed quickly.

"Once a cap is in place," he warns, "it is very difficult to adjust." For example, buyers of emissions permits would see their value reduced if the government decided in the future to loosen the caps.



For the full story, see:

JON HILSENRATH. "Cap-and-Trade's Unlikely Critics: Its Creators; Economists Behind Original Concept Question the System's Large-Scale Usefulness, and Recommend Emissions Taxes Instead." The Wall Street Journal (Thurs., AUGUST 13, 2009): A7.

(Note: ellipsis added.)





September 22, 2009

In Economic Policy, as in Medicine: "First, Do No Harm"



(p. A13) Consider someone rushed into an emergency room in severe cardiac distress. After starting acute life-support measures, doctors still apply the rule stated by Galen of Pergamum more than 1,800 years ago: primum non nocere, or "First, do no harm." Treatment interventions are selected carefully from a battery of technologies and potent drugs while recognizing that any one of them, or a combination, could hurt the patient if misapplied or given in the wrong dosage. Economic interventions require no less care.


. . .


Our economic doctors should permit America's uniquely effective immune system to take over as companies and financial institutions deleverage their balance sheets. With people and with capitalism, the tincture of time is often the best medicine.



For the full commentary, see:

MICHAEL MILKEN and JONATHAN SIMONS. "Illness as Economic Metaphor; The first rule, as always, is do no harm.." The Wall Street Journal (Sat., June 20, 2009): A13.

(Note: italics in original; ellipsis added.)





September 21, 2009

Feds Force Farmers to Let Tons of Cherries Rot



LigonLeonardCherryFarmer2009-09-07.jpg "Leonard Ligon, a farmer near Traverse City, Mich., stands in mounds of tart cherries that he had to dump because of a price-stabilization program. Mr. Ligon says he discarded 72,000 pounds of the crop." Source of photo and caption: online version of the WSJ article quoted and cited below.


(p. A5) Farmers in Michigan and six other states are harvesting a bumper crop of tart cherries. But the bounty is turning out to be the pits for farmers whose fruit is rotting in orchards instead of bubbling in cherry pies.

Under a Depression-era federal program designed to keep prices from plummeting, tart-cherry farmers are being told by fruit processors to leave up to 40% of their crop unharvested.

"It's kind of heartbreaking," said Rob Manigold, a tart-cherry farmer near Traverse City, Mich. Michigan grows about 75% of all the tart cherries in the U.S.


. . .


The tart-cherry industry operates under a government-sanctioned plan called a federal marketing order that dates to 1933. It allows farmers and processors to legally regulate supply to keep prices stable. Other commodities that operate under similar programs include some types of dates, olives and kiwifruit.


. . .


This year, the industry board, a 18-member panel of growers and processors, determined that there were more than enough cherries in the fields to satisfy demand and to replenish the reserves. So the board limited how much processors can put on the market in the U.S. That leaves farmers with cherries they can't sell and are left to rot.

Bern Kroupa, a 61-year-old fruit farmer outside Traverse City in Michigan's northern lower peninsula, said this year he is going to let about a quarter of his crop -- about 500,000 pounds -- rot.


. . .


Leonard Ligon, another tart-cherry grower near Traverse City, Mich., generated a lot of local press last week when he dumped 72,000 pounds of cherries alongside a country road on his farm. "I wanted to make the public aware of the plight of the tart-cherry farmer," he said. "I could call it a mulch pile."



For the full story, see:

LAUREN ETTER. "Bumper Cherry Crop Turns Sour; Tons of Unharvested Fruit Rots Under Government Program to Keep Prices Stable." The Wall Street Journal (Sat., AUGUST 22, 2009): A5.

(Note: ellipses added.)





September 20, 2009

Global Warming Laws May Increase Food Prices



(p. A5) Some of the nation's biggest food and agriculture companies are planning to release a flurry of studies in coming weeks that scrutinize the potential impact of climate-change legislation, warning that it could lead to higher food prices.


. . .


In a letter sent last month to Sens. Barbara Boxer, the California Democrat, and Republican James Inhofe of Oklahoma, the coalition said the House bill "will increase food and feed prices and reduce the international competitiveness of our businesses."

The letter said Congress "must take extreme care to avoid adverse impacts on food security, prices, safety, and accessibility to necessary consumer products." The letter also criticized the House bill for failing to provide transitional assistance to "low-income households struggling with rising food prices."

When the group's studies are released, possibly by the end of August, they are likely to reignite tensions between food and ethanol producers that have raged since 2007 when Congress passed energy legislation that gave a big boost to the corn-ethanol industry.

The food industry has complained that the energy bill pushed up prices for corn and other key food ingredients that resulted in higher consumer prices as the ethanol industry siphoned more corn to make ethanol.



For the full story, see:

LAUREN ETTER. "Food Firms Fret Over Potential Impact of Climate Bill; Coalition, Including Agricultural Giants, Plans to Draw Attention to Concerns That Legislation Could Lead to Higher Food Prices." The Wall Street Journal (Weds., Aug. 13, 2009): A5.

(Note: ellipsis added.)





September 18, 2009

Obama Industrial Policy Risks Funding Dead Ends



(p. B1) President Obama has cast himself as a reluctant interventionist in two of the nation's major industries, Wall Street and Detroit. The federal aid, he says, is a financial bridge to a postcrisis future and the hand-holding will be temporary.

Even so, the scale of the government investment and control -- especially by the auto task force now vetting plans at Chrysler and General Motors -- points to an approach that has been shunned by the United States more than other developed nations.

"By any coherent definition, this is industrial policy," said Marcus Noland, a senior fellow at the Peterson Institute for International Economics.


. . .


(p. B7) . . . a more comprehensive, industrial-policylike approach to Detroit carries its own perils, economists say. In trying to manage the industrial shrinkage, they say, there is a fine line between easing the social impact and protecting jobs in ways that inhibit economic change and renewal. In pursuit of new growth, governments risk encouraging overinvestment in areas that prove to be technological dead ends.

In the Japanese experience, economists see evidence of both dangers. Problems, they say, are typically byproducts of what economists call "political capture." That is, an industrial sector earmarked for special government attention builds up its own political constituency, lobbyists and government bureaucrats to serve that industry. They slow the pace of change, and an economy becomes less nimble and efficient as a result.

Economists say the phenomenon is scarcely confined to nations with explicit industrial policies and cite the history of agricultural subsidies in America or military procurement practices.

But going down the path of industrial policy certainly holds that risk. "You have to bear in mind the opportunity costs of these kinds of government interventions, and remember that life is not an economic textbook and that politics can easily override economic rationality," said Mr. Noland, an author, with Howard Pack, of "Industrial Policy in an Era of Globalization: Lessons From Asia."




For the full story, see:

STEVE LOHR. "Highway to the Unknown; Forays in Industrial Policy Bring Risks." The New York Times (Weds., May 19, 2009): B1 & B7.

(Note: the online title is "In U.S., Steps Toward Industrial Policy in Autos.")

(Note: ellipses added.)


The full reference to Noland and Pack's book is:

Noland, Marcus, and Howard Pack. Industrial Policy in an Era of Globalization: Lessons from Asia, Policy Analyses in International Economics. Washington, D.C.: Peterson Institute, 2003.







September 16, 2009

Four Month Wait for Blood Test in Brits' Government Health Care



(p. 6) Founded in 1948 during the grim postwar era, the National Health Service is essential to Britain's identity. But Britons grouse about it, almost as a national sport. Among their complaints: it rations treatment; it forces people to wait for care; it favors the young over the old; its dental service is rudimentary at best; its hospitals are crawling with drug-resistant superbugs.

All these things are true, sometimes, up to a point.


. . .


Told my husband needed a sophisticated blood test from a particular doctor, I telephoned her office, only to be told there was a four-month wait.

"But I'm a private patient," I said.

"Then we can see you tomorrow," the secretary said.

And so it went. When it came time for my husband to undergo physical rehabilitation, I went to look at the facility offered by the N.H.S. The treatment was first rate, I was told, but the building was dismal: grim, dusty, hot, understaffed, housing 8 to 10 elderly men per ward. The food was inedible. The place reeked of desperation and despair.

Then I toured the other option, a private rehabilitation hospital with air-conditioned rooms, private bathrooms and cable televisions, a state-of-the-art gym, passably tasty food and cheery nurses who made a cup of cocoa for my husband every night before bed.



For the full commentary, see:

SARAH LYALL. "An Expat Goes for a Checkup." The New York Times, Week in Review Section (Sun., August 8, 2009): 1 & 6.

(Note: the online title is "Health Care in Britain: Expat Goes for a Checkup.")

(Note: ellipsis added.)






September 14, 2009

Clunker-Like Subsidies May Mainly Affect Timing of Purchases



(p. A6) The next program to test the effect of government funds comes this fall. Consumers who buy high-efficiency appliances such as refrigerators, washing machines and dishwasher can receive rebates of up to $200 on certain products; no trade-ins would be required. The $300 million program was included in the $787 billion stimulus law.

As with the clunkers program, it's unclear whether the rebate program will offer anything more than a short-term economic boost.

"The people who will most like likely respond to this are the people who need appliances, and they were probably going to buy appliances anyway," said Erik Hurst, an economist at the University of Chicago's Booth School of Business. "If all you've done is move that from tomorrow to today, then the economy is going to lag even more tomorrow."



For the full story, see:

SUDEEP REDDY. "Dealers Get More Time to File for Clunker Rebates." The Wall Street Journal (Weds., AUGUST 25, 2009): A6.





September 9, 2009

Congress Takes Exotic, Costly Global Warming Trip



GlobalWarmingGlobeTrottersMap.gifSource of map: online version of the WSJ article quoted and cited below.


(p. A1) WASHINGTON -- When 10 members of Congress wanted to study climate change, they did more than just dip their toes into the subject: They went diving and snorkeling at the Great Barrier Reef. They also rode a cable car through the Australian rain forest, visited a penguin rookery and flew to the South Pole.

The 11-day trip -- with six spouses traveling along as well -- took place over New Year's 2008. Details are only now coming to light as part of a Wall Street Journal analysis piecing together the specifics of the excursion.

It's tough to calculate the travel bills racked up by members of Congress, but one thing's for sure: They use a lot of airplanes. In recent days, House of Representatives members allocated $550 million to upgrade the fleet of luxury Air Force jets used for trips like these -- even though the Defense Department says it doesn't need all the planes. . . .

The South Pole trip, led by Rep. Brian Baird (D., Wash.), ranks among the priciest. The lawmakers reported a cost to taxpayers of $103,000.

That figure, however, doesn't include the actual flying, because the trip used the Air Force planes, not commercial carriers. Flight costs would lift the total tab to more than $500,000, based on Defense Department figures for aircraft per-hour operating costs.



For the full story, see:

BRODY MULLINS and T.W. FARNAM. "Lawmakers' Global-Warming Trip Hit Tourist Hot Spots; Penguins, a Rocket-Propelled Airplane (and Tax Dollars) Also Involved." The Wall Street Journal (Weds., June 10, 2009): A1 & A4.

(Note: ellipsis added.)



RocketAssistedSiEquippedPlane.jpg "The type of rocket-assisted, ski-equipped plane that took the lawmakers to the South Pole." Source of photo and caption: online version of the WSJ article quoted and cited above.





September 8, 2009

Government Regulations Stifle Creative Venture Capital



(p. A9) This is a good time to recall that the venture-capital industry was born as a reaction to New Deal regulations that stifled capital and prolonged the Depression. The country's first venture-capital firm (other than family-run funds) was American Research and Development, planned in the 1930s and launched after World War II in Boston.

Its leader was longtime Harvard Business School professor Georges Doriot, who is the subject of a fascinating recent biography, "Creative Capital," by Spencer Ante. Mr. Ante, a BusinessWeek editor, tells me that as he researched the topic "one of the most surprising things I learned was how concerned financiers and industrialists had become about the riskless economy in direct response to the New Deal. Even in the 1930s, people understood that small business was the lifeblood of the economy."

American Research and Development backed early-stage companies deemed too risky by banks and investment trusts at the time. The firm was an early investor in Digital Equipment Corp., the Boston-area company that revolutionized computing.

Despite financial success, the history of the firm is a reminder that our regulatory system, by its nature focused on avoiding risk, has a hard time dealing with investment firms whose mission is to take risks. Doriot was a well-known name in commerce and academia from the 1940s through the 1970s. He was the first French graduate of Harvard Business School, a founder of the INSEAD business school and a leading adviser to the U.S. military.

But even as a pillar of Boston's commercial and academic worlds, Doriot had many run-ins with federal regulators. Over the years, regulators dictated compensation for the American Research and Development staff, tried to force disclosure of the performance of its early-stage companies, and second-guessed how it tracked the valuations of its investments.

The Securities and Exchange Commission hounded the company so often that Doriot once wrote a three-page memo saying, "ARD has more knowledge of what is right and wrong than the average person at the SEC." He was prudent enough not to send it. He did mail another memo to the SEC enforcement office in Boston, in 1965: "I rather resent, after 20 years of experience, to have two men come here, spend two days, and tell us that we do not know what we are doing."


. . .


No venture capital firm has asked to be bailed out, and none are too big to fail. As hard as it is for regulators to understand, the nature of venture capital is such that it should not even aspire to be a low-risk enterprise

.

For the full commentary, see:

L. GORDON CROVITZ. "No Such Thing as Riskless Venture Capital; New regulations could retard the innovation our economy needs." The Wall Street Journal (Weds., AUGUST 9, 2009): A19.

(Note: ellipsis added.)





September 7, 2009

Government Protects Us from Unlicensed Eight Year Old Lemonade Entrepreneur



DanielaEarnestLemonadeStand.jpgDaniela Earnest at her lemonade stand (left) and in court (right). Source of photo: http://3.bp.blogspot.com/_GGAmzDRA_BY/SnvDbYoMpzI/AAAAAAAAHEg/W1BI2XK8DH4/s400/daniela%2Bearnest.jpg


(p. 5A) THE FRESNO BEE

TULARE, Calif. -- Eight­-year- old Daniela Earnest made lemonade out of lemons in more ways than one last week.

Hoping to raise money for a family trip to Disneyland, the Tulare girl opened a lemonade stand Monday. But she didn't have a business license, so the city shut it down that day.


. . .

Tulare officials said they could not recall ever shutting down a lemonade stand before, though such action is not uncommon. Authorities across the nation have done it.


. . .


Daniela found the situation "pretty weird" but said it hadn't soured her on reopening the lemonade stand.



For the full story, see:

The Fresno Bee. "City puts squeeze on pint-size purveyor of lemonade." Omaha World-Herald (Sun., Aug. 9, 2009): 5A.

(Note: ellipses added.)





September 6, 2009

Mafia Will Get Fed Stimulus Money



(p. A13) Everybody is looking for stimulus money.

From bridge builders to food stamp recipients, from roofers to subway riders, from teachers to housing project residents, people are eager to feel some part of a tidal wave of federal dollars in their lives.

The mob is eager, too.

Federal and state investigators who track organized crime believe that some members have geared up to take advantage of the swift and enormous cash influx -- if they have not already -- looking, as the old Sicilian expression goes, to wet their beaks.

Nimble, innovative and with a seemingly boundless appetite for the taxpayer's dollar, the mob's more sophisticated cadre has plundered municipal, state and federal coffers for generations.


. . .


(p. A14) The distinctiveness of the immediate challenge surrounding the stimulus money is owed in part to the bill's twin imperatives: Get a lot of money out and get it out as fast as possible. And it is compounded by the fact that law enforcement agencies like the F. B. I. and prosecutors' offices are hip deep in the competing priorities of counterterrorism and the explosion of corporate and mortgage fraud cases.

Making matters worse, the money is flowing into familiar territory for those with a history of feeding at the public trough. Two of the largest portions of the stimulus pie in the New York City area are going to sectors of the economy -- Medicaid and infrastructure projects -- where the mob and Eastern European crime groups have flourished for decades, perfecting old schemes and developing new ones.

And it is not just criminals who are causing concern. Several officials noted that in an area where close to two dozen state and city legislators have been indicted in recent years, the flow of stimulus funds through government agencies will provide ample opportunity for corrupt public employees.


. . .


. . . , the speed with which the program has been put in place, along with what many officials have called insufficient oversight, has left some in law enforcement with grave concerns.

"It's coming out without the internal controls in place," said a law enforcement official who spoke on condition of anonymity because he was not authorized to discuss the issue publicly. "It's like putting a bank robber in a toll booth."



For the full story, see:

WILLIAM K. RASHBAUM. "Concern Is High That the Mob May Seek a Cut of the Stimulus Pie." The New York Times (Fri., August 31, 2009): A13-A14.

(Note: ellipses added.)





September 4, 2009

"Churchillian Steadfastness" Versus "Sullen Paralysis and Futile Efforts"



(p. A15) . . . beyond amelioration and providing the judicial (or in the case of the FDIC, quasi-judicial) procedures for reorganization, there is little more that the government can do to accelerate the unwinding and renewal necessary to put the economy back on an even keel.

The process involves a sequence of negotiations and experiments that cannot be truncated by throwing in more resources. As Frederick Brooks wrote in his celebrated book on software development, "The Mythical Man-Month: Essays on Software Engineering": "When a task cannot be partitioned because of sequential constraints, the application of more effort has no effect on the schedule. The bearing of a child takes nine months, no matter how many women are assigned." "Brooks's Law" suggests that increasing the size of software teams may delay development.

The wide variety of problems and circumstances in an economic downturn precludes the effective use of a single solution. And the federal government doesn't have the capacity to determine adjustments on a case-by-case basis. The late Nobel Laureate Friedrich Hayek taught that the "man on the spot" with the appropriate local knowledge was much more capable of making good investment decisions than a central planner.


. . .


Suppose that, when the financial crisis broke two years ago, our leaders had shown a Churchillian steadfastness and allowed the normal realignment to play out under a predictable judicial and regulatory regime. The prices of stocks, bank debt and houses would still have crumbled and unemployment risen. Although recovery wouldn't have been immediate, we'd at least have progress, instead of a sullen paralysis and futile efforts to turn the clock back.

More loans would have been renegotiated and foreclosed properties auctioned off. The FDIC would already be engaged in finding a good home for the loans and deposits of a megabank or two. That agency, now operating with about one-third the staff it had in the 1980s, could also have used some of the bailout money that helped pay for bonuses at AIG and its counterparties to recruit, train and retain more employees.

Best of all, more entrepreneurs and innovators, who capitalize on the opportunities to be found in the midst of turmoil, could have been building the foundations of a prosperous future.



For the full commentary, see:

Amar Bhidé. "You Can't Rush a Recovery; While small business struggles, Goldman Sachs was protected from its AIG mistakes." The Wall Street Journal (Thurs., APRIL 9, 2009): A15.

(Note: ellipsis added.)





September 2, 2009

Empathetic Judges Are Unjust to Bastiat's "Unseen"



(p. A15) . . . , a compassionate judge would tend to base his or her decisions on sympathy for the unfortunate; an empathetic judge on how the people directly affected by the decision would think and feel. What could be wrong with that?

Frederic Bastiat answered that question in his famous 1850 essay, "What is Seen and What is Not Seen." There the economist and member of the French parliament pointed out that law "produces not only one effect, but a series of effects. Of these effects, the first alone is immediate; it appears simultaneously with its cause; it is seen. The other effects emerge only subsequently; they are not seen; we are fortunate if we foresee them." Bastiat further noted that "[t]here is only one difference between a bad economist and a good one: The bad economist confines himself to the visible effect; the good economist takes into account both the effect that can be seen and those effects that must be foreseen."

This observation is just as true for judges as it is for economists. As important as compassion and empathy are, one can have these feelings only for people that exist and that one knows about -- that is, for those who are "seen."

One can have compassion for workers who lose their jobs when a plant closes. They can be seen. One cannot have compassion for unknown persons in other industries who do not receive job offers when a compassionate government subsidizes an unprofitable plant. The potential employees not hired are unseen.



For the full commentary, see:

JOHN HASNAS. "The 'Unseen' Deserve Empathy, Too." The Wall Street Journal (Fri., MAY 29, 2009): A15.

(Note: ellipsis added.)





September 1, 2009

BB&T Founder John Allison Speaks for Rand's Free Market Philosophy



AllisonJohn2009-08-14.jpg "John A. Allison IV, chairman of the banking company BB&T, is a devoted follower of Ayn Rand's antigovernment views." Source of photo and caption: online version of the NYT article quoted and cited below.


(p. 1) OVER much of the last four decades, John A. Allison IV built BB&T from a local bank in North Carolina into a regional powerhouse that has weathered the economic crisis far better than many of its troubled rivals -- largely by avoiding financial gimmickry.

And in his spare time, Mr. Allison travels the country making speeches about his bank's distinctive philosophy.

Speaking at a recent convention in Boston to a group of like-minded business people and students, Mr. Allison tells a story: A boy is playing in a sandbox, only to have his truck taken by another child. A fight ensues, and the boy's mother tells him to stop being selfish and to share.

"You learned in that sandbox at some really deep level that it's bad to be selfish," says Mr. Allison, adding that the mother has taught a horrible lesson. "To say man is bad because he is selfish is to say it's bad because he's alive."

If Mr. Allison's speech sounds vaguely familiar, it's because it's based on the philosophy of Ayn Rand, who celebrated the virtues of reason, self-interest and laissez-faire capitalism while maintaining that altruism is a destructive force. In Ms. Rand's world, nothing is more heroic -- and sexy -- than a hard-working businessman free to pursue his wealth. And nothing is worse than a pesky bureaucrat trying to restrict business and redistribute wealth.

Or, as Mr. Allison explained, "put balls and chains on good people, and bad things happen."

Ms. Rand, who died in 1982, has all sorts of admirers on Wall Street, in corporate boardrooms and in the entertainment industry, including the hedge fund manager Clifford Asness, the former baseball great Cal Ripken Jr. and the Whole Foods chief executive, John Mackey.

But Mr. Allison, who remains BB&T's chairman after retiring as chief executive in December, has emerged as perhaps the most vocal proponent of Ms. Rand's ideas and of the dangers of government meddling in the markets. For a dedicated Randian like him, the government's headlong rush to try to rescue and fix the economy is a horrifying re-(p. 6)alization of his worst fears.



For the full story, see:

ANDREW MARTIN. "Give Him Liberty, but Not a Bailout." The New York Times, SundayBusiness Section (Sun., August 2, 2009): 1 & 6.

(Note: the online title is the slightly different: "Give BB&T Liberty, but Not a Bailout.")





August 30, 2009

Native Americans Suffer from Government Health Care



(p. A11) Native Americans have received federally funded health care for decades. A series of treaties, court cases and acts passed by Congress requires that the government provide low-cost and, in many cases, free care to American Indians. The Indian Health Service (IHS) is charged with delivering that care.

The IHS attempts to provide health care to American Indians and Alaska Natives in one of two ways. It runs 48 hospitals and 230 clinics for which it hires doctors, nurses, and staff and decides what services will be provided. Or it contracts with tribes under the Indian Self-Determination and Education Assistance Act passed in 1975. In this case, the IHS provides funding for the tribe, which delivers health care to tribal members and makes its own decisions about what services to provide.


. . .


Unfortunately, Indians are not getting healthier under the federal system. In 2007, rates of infant mortality among Native Americans across the country were 1.4 times higher than non-Hispanic whites and rates of heart disease were 1.2 times higher. HIV/AIDS rates were 30% higher, and rates of liver cancer and inflammatory bowel disease were two times higher. Diabetes-related death rates were four times higher. On average, life expectancy is four years shorter for Native Americans than the population as a whole.


. . .


Personal stories from people within the system reveal the human side of these statistics. In 2005, Ta'Shon Rain Little Light, a 5-year-old member of the Crow tribe who loved to dress in traditional clothes, stopped eating and complained that her stomach hurt. When her mother took her to the IHS clinic in south central Montana, doctors dismissed her pain as depression. They didn't perform the tests that might have revealed the terminal cancer that was discovered several months later when Ta'Shon was flown to a children's hospital in Denver. "Maybe it would have been treatable" had the cancer been discovered sooner, her great-aunt Ada White told the Associated Press.


. . .


The Chippewa Cree Band runs its own hospital and has hired a registered dietician who has gotten the local grocery store to implement a shelf-labeling system to improve consumer nutritional information. They've also built a Wellness Center with a gym, track, basketball court, and pool. These are small steps that won't immediately eliminate heart disease or diabetes. But they move in the direction of local control and better health.

At a time when Americans are debating whether to give the government in Washington more control over their health care, some of the nation's first inhabitants are moving in the opposite direction.



For the full commentary, see:

TERRY ANDERSON. "OPINION: CROSS COUNTRY; Native Americans and the Public Option; After decades of government-run care, some Indians are finally saying enough." Wall Street Journal (Sat., August 29, 2009): A11.

(Note: ellipses added.)

(Note: the online version is dated Fri., Aug.28, 2009)





August 29, 2009

Andy Grove's Case Against the Car Bailout



(p. A13) Imagine if in the middle of the computer transformation the Reagan administration worried about the upheaval and tried to rescue this vital industry by making huge investments in leading mainframe companies. The purpose of such investments would have been to protect the viability of these companies. The effect, however, would have been to put the brakes on transformation and all but ensure that the U.S. would lose its leadership role.

The government's investment in General Motors might be directly helpful if the auto industry only had the recession to contend with. But that is not the case. The industry faces the confluence of a world-wide recession, rising fuel prices, environmental demands, globalization of manufacturing, and, most importantly, technological change involving the very nature of the automobile.



For the full commentary, see:

ANDREW S. GROVE. "What Detroit Can Learn From Silicon Valley; Vertically integrated production is a thing of the past. Will the auto industry's new overseers catch on?" Wall Street Journal (Mon., JULY 13, 2009): A13.





August 28, 2009

Small Business Sceptical of Big Government Health Plan



BriguglioPatty2009-08-14.jpg"No, I mean it," said Ms. Brigugulio, "I expect you to keep your word on this." Source of the photo and caption: http://boss.blogs.nytimes.com/2009/07/30/mr-prez-meets-ms-biz-the-story-behind-the-photo/



(p. A11) Patty Briguglio thinks President Obama may have a public relations problem selling his health care plan to small-business owners.

And Ms. Briguglio, who was photographed exchanging a wagging finger with the president at his health care forum Wednesday in Raleigh, N.C., should know: she runs her own small business, MMI Associates, a public relations firm in Raleigh.

Ms. Briguglio pays much of the cost of health insurance for her firm's 19 employees, though she does not offer a group plan. Because the members of her staff are so young, it is cheaper simply to provide an allowance for them to buy individual policies.

When Mr. Obama called on Ms. Briguglio at Wednesday's forum, she asked, ''What current long-term social program created and run by the government should we look to as a model of success and one that we as taxpayers should be confident that a new government-run health care system would be better than the current system in place?''

The president suggested Veterans Affairs hospitals and Medicare, both of which, he said, ''have very high satisfaction rates.''

And, he added, ''Medicare costs have gone up more slowly than private-sector health care costs.''

Ms. Briguglio was not completely satisfied. ''I've never associated any government program with 'cost effective' or 'efficient,' '' she said in a telephone interview on Thursday. ''I don't believe that the government will be a better steward of the money that I set aside for health care for my employees than I will be.''



For the full story, see:

ROBB MANDELBAUM. "To Challenges For Obama, Add Another." The New York Times (Fri., July 31, 2009): A11.

(Note: the online version of the article does not have the photo of Briguglio wagging her finger, that was published in my print version of the paper. The photo above is from later in the exchange, and appeared on the NYT blog.)





August 26, 2009

"How Do We Get on the Special Interests, Special Treatment Bandwagon?"



SodiumSilicatePouredIntoClunker2009-08-12.jpgUncreative destruction. "Jose Luis Garcia pours sodium silicate into a junkyard car engine to render it inoperable at a lot in Sun Valley, Calif., on Tuesday. The process destroys the car's engine in a matter of minutes." Source of photo and part of caption: online version of the WSJ article quoted and cited below.


(p. A4) WASHINGTON -- Who doesn't like the government's "cash for clunkers" program? Your mechanic, for one.

Owners of automotive repair shops say the program to help invigorate sales of new cars is succeeding at their expense.

Bill Wiygul, whose family owns four repair shops in Virginia, said he has already had five or six customers decide against repairs. A man who sits on the board of Mr. Wiygul's bank traded in his car rather than repair it. "He'd been a customer at our Reston store since it opened," Mr. Wiygul said.

The clunkers program, formally known as the Car Allowance Rebate System, offers subsidies of as much as $4,500 to consumers who trade in older vehicles and buy new, more fuel-efficient models. The program was initially given $1 billion. That money was spent in one week.

The Senate reached a deal to extend the clunkers program Wednesday night, agreeing to vote on a measure Thursday that would add $2 billion to the program, the Associated Press reported.

The House approve a $2 billion extension last week.

For Mr. Wiygul and other mechanics, until now the recession has brought them more customers as people fixed cars rather than go into debt for new ones. He has hired five people and is expanding one of the shops.

Auto dealers who offer the rebates on new cars in exchange for clunkers must agree to "kill" the old models by disabling the engines and shipping the dead vehicle to a junkyard.

The loss of such potential work -- as many as 250,000 vehicles will be destroyed in the program's first round -- prompted Mr. Wiygul to question the federal program's focus on dealers and big business at the expense of the little guy.

"How do we get on the special interests, special treatment bandwagon? How much is it going to cost me and to whom shall I send the check?" he said. "Who picks the winners in this game 'cause obviously the game is fixed."



For the full commentary, see:

GARY FIELDS. "Clunkers Plan Deflates Mechanics." The Wall Street Journal (Thurs., AUGUST 6, 2009): A4.





August 24, 2009

Huge Increase in Money Supply Increases Odds of Inflation



MoneySupplyGraph2009-08-12.gifSource of graph: online version of the WSJ article quoted and cited below.



(p. A15) . . . , starting in early September 2008, the Bernanke Fed did an abrupt about-face and radically increased the monetary base -- which is comprised of currency in circulation, member bank reserves held at the Fed, and vault cash -- by a little less than $1 trillion. The Fed controls the monetary base 100% and does so by purchasing and selling assets in the open market. By such a radical move, the Fed signaled a 180-degree shift in its focus from an anti-inflation position to an anti-deflation position.

The percentage increase in the monetary base is the largest increase in the past 50 years by a factor of 10 (see chart nearby). It is so far outside the realm of our prior experiential base that historical comparisons are rendered difficult if not meaningless. The currency-in-circulation component of the monetary base -- which prior to the expansion had comprised 95% of the monetary base -- has risen by a little less than 10%, while bank reserves have increased almost 20-fold. Now the currency-in-circulation component of the monetary base is a smidgen less than 50% of the monetary base. Yikes!


. . .


With an increased trust in the overall banking system, the panic demand for money has begun to and should continue to recede. The dramatic drop in output and employment in the U.S. economy will also reduce the demand for money. Reduced demand for money combined with rapid growth in money is a surefire recipe for inflation and higher interest rates. The higher interest rates themselves will also further reduce the demand for money, thereby exacerbating inflationary pressures. It's a catch-22.

It's difficult to estimate the magnitude of the inflationary and interest-rate consequences of the Fed's actions because, frankly, we haven't ever seen anything like this in the U.S. To date what's happened is potentially far more inflationary than were the monetary policies of the 1970s, when the prime interest rate peaked at 21.5% and inflation peaked in the low double digits. Gold prices went from $35 per ounce to $850 per ounce, and the dollar collapsed on the foreign exchanges. It wasn't a pretty picture.



For the full commentary, see:

ARTHUR B. LAFFER. "Get Ready for Inflation and Higher Interest Rates; The unprecedented expansion of the money supply could make the '70s look benign." The Wall Street Journal (Weds., June 10, 2009): A15.

(Note: ellipses added.)





August 21, 2009

"The Voluntary Slaves of a 'Compassionate' Government"



Thomas Szaz has been defending liberty for many decades. It is good to see him still eloquently at it:


(p. A13) If we persevere in our quixotic quest for a fetishized medical equality we will sacrifice personal freedom as its price. We will become the voluntary slaves of a "compassionate" government that will provide the same low quality health care to everyone.


For the full commentary, see:

THOMAS SZASZ. "Universal Health Care Isn't Worth Our Freedom." Wall Street Journal (Weds., JULY 15, 2009): A13.





August 20, 2009

Penn Government Protects Us from "Little Old Ladies Baking Pies"



StCeciliaFishFry2009-08-12.jpgStCeciliaFishFryTables2009-08-12.jpg





"After a state crackdown forbidding the sale of homemade pies, members of St. Cecilia Catholic Church in Rochester, Pa., proceeded with their annual Lenten fish fries anyway. The pie flap helped draw healthy crowds." Source of photos and caption: online version of the WSJ article quoted and cited below.








(p. A1) ROCHESTER, Pa. -- On the first Friday of Lent, an elderly female parishioner of St. Cecilia Catholic Church began unwrapping pies at the church. That's when the trouble started.

A state inspector, there for an annual checkup on the church's kitchen, spied the desserts. After it was determined that the pies were home-baked, the inspector decreed they couldn't be sold.

"Everyone was devastated," says Josie Reed, a 69-year-old former teacher known for her pumpkin and berry pies.

. . .

The disappearance of Mary Pratte's coconut-cream pie, Louise Humbert's raisin pie and (p. A10) Marge Murtha's "farm apple" pie from the fish-fry fund-raisers sparked an uproar that spread far beyond the small parish.

. . .

(p. A10) The ruckus at St. Cecilia's could lead to changes in Pennsylvania state law. State Sen. Elder Vogel Jr. has drafted legislation aimed at allowing nonprofits, including churches, to serve food prepared at home. That would cover fish fries held during Lent. "Once again, you've got the heavy hand of government coming in," he says. "These ladies bake pies, out of the goodness of their hearts."

Sen. Vogel, who sits on the state legislature's agriculture committee, says state officials seem willing to change the law. "They have more work on their hands than going after little old ladies baking pies."

The inspector's warning to St. Cecilia's carried no fine. But the inspector has raised some hackles by telling the women that the state would allow them to bake pies for sale in their own kitchens, if they paid $35 to have them inspected as well.

"Well, that's just ridiculous," says Ms. Humbert, 73, one of the parish bakers. She has been bringing raisin pies to the church for more than a decade and says she thought the women's kitchens "are probably a lot cleaner than some restaurants," but might not meet "nitpicky" requirements.

Ms. Pratte, 88, has been attending St. Cecilia's since she was a girl. She missed a step and spent two and a half weeks in the hospital earlier this year. She said it would be "kind of hard" to get to the church to do any baking. "I'd rather just make them at home," she says of her coconut-cream pies. Others say it's difficult to bake good pies in a strange oven.

Thanks to the publicity caused by the crackdown, the St. Cecilia's fish fries attracted more visitors than ever before.



For the full story, see:

KRIS MAHER. "Pennsylvania Pie Fight: State Cracks Down on Baked Goods; Inspector Nabs Homemade Desserts At St. Cecilia Church's Lenten Fish Fry." The Wall Street Journal (Fri., APRIL 10, 2009): A1 & A10.

(Note: ellipses added.)





August 15, 2009

Economists, Planners and Politicians Inflicted Iatrogenic Illness on Economy



In the passage below, Gilder was writing of the 1970s, 1980s and 1990s. But sadly, iatrogenic illness is of more than mere historical interest.

(p. 49) In recent decades, the U.S. economy has suffered from a combination of hypochondria and iatrogenic illness. The hypochondria stems from spurious statistics and deceptive anecdotes and erroneous theories of American decline. It results in a period of fear and anxiety, propagated by the media, measured in public opinion polls, and enhanced by alarmist demagoguery. Iatrogenic illnesses are diseases caused by the doctor--in this instance by hundreds of economic Ph.D.s, government planners, and politicians who have responded to the pangs of hypochondria by inflicting thousands of real cuts on the entrepreneurs who make (p. 50) the economy go, as if, like the physicians of the Middle Ages, the experts believe in bleeding the patient as a way of restoring him to productive health.


Source:

Gilder, George. Recapturing the Spirit of Enterprise: Updated for the 1990s. updated ed. New York: ICS Press, 1992.





August 13, 2009

Amazon Rebels Against Hawaii Tax



After Amazon's rebellion, summarized in the quote below, the Governor of Hawaii vetoed the tax, and Amazon has now invited its former affiliates to rejoin the program.

Lesson: sometimes entrepreneurial enterprise can fight the government, and win.


(p. B7) Amazon.com Inc. has informed its marketing affiliates in Hawaii that it is ending its business with them to avoid collecting sales tax in the state.

Lawmakers in Hawaii, following in the footsteps of North Carolina and Rhode Island, have passed legislation that would require companies to collect sales tax if they have marketing affiliates in the state. Affiliate marketers run blogs or Web sites and get a sales commission by featuring links to outside e-commerce sites.



For the full story, see:

GEOFFREY A. FOWLER. "Amazon Cuts Ties to Affiliates in Hawaii." Wall Street Journal (Weds., JULY 1, 2009): B7.





August 9, 2009

Democrats Continue Earmarks for Those Who Donated to Their Campaigns



(p. A5) WASHINGTON -- A House panel approved a big Pentagon spending bill this week that included nearly 150 items tucked in by lawmakers on behalf of companies and other entities whose employees donated to their campaigns.

The Democratic Congress and President Barack Obama swept into power on a promise to reform the process of lawmakers trying to dictate in detail how funds are spent, known as "earmarks." When Mr. Obama signed a spending bill for the current fiscal year in March, he said the earmark-laden legislation should be an "end to the old way of doing business, and the beginning of a new era of responsibility and accountability."

But as lawmakers work their way through spending bills for the next fiscal year, which begins Oct. 1, earmarks appear alive and well -- including those written for companies, foundations, and universities whose employees and political-action committees gave money to the campaigns of congressmen doing the earmarking.

The $636.3 billion 2010 defense-spending bill passed Wednesday by the House Appropriations Committee includes more than 1,100 earmarks, totaling more than $2.7 billion.

Members of the Defense Appropriations Subcommittee -- the 18 members of Congress who wrote the bill -- secured a total of 148 earmarks worth $461 million for entities whose employees have given $822,765 in campaign donations to those lawmakers since 2007. The data were compiled by the nonpartisan Taxpayers for Common Sense, which analyzed nearly 400 earmarks.



For the full story, see:

JAKE SHERMAN. "Bill Shows Earmarks Are Alive and Well." Wall Street Journal (Sat., JULY 25, 2009): A5.





August 5, 2009

Property Rights Would Allow American Indians to Prosper



(p. A19) President Barack Obama courted the Indian vote. During the campaign, he visited Montana's Crow Reservation last May and was adopted into the tribe under the Crow name "One Who Helps People Throughout the Land." There he said, "Few have been ignored by Washington for as long as Native Americans," and vowed to improve their economic opportunities, health care and education.

Two vital steps in this direction are to strengthen property rights and the rule of law on reservations. Virtually every study of international development shows that both of these are crucial to prosperity. Indian country is no different. The effect of insecure property rights is evident on a drive through any western reservation. When you see 160 acres overgrazed and a house unfit for occupancy, you can be sure the title to the land is held by the federal government bureaucracy.


. . .

My own research, published in the Journal of Law and Economics, shows that for tribes with state jurisdiction, per capita income grew 20% faster between 1969 and 1999 than for their counterparts under tribal court jurisdiction. All Indians are less likely than whites to get home loans, but the likelihood of a loan rejection falls by 50% on reservations under state jurisdiction.


. . .

Mr. Obama's rallying cry was "change," and that is exactly what he needs to bring about in Indian policy. The first Americans deserve to be freed from the bureaucratic shackles that have made them victims, and allowed to establish property rights and legal systems that can make them victors.



For the full commentary, see:

TERRY L. ANDERSON. "OPINION; Native Americans Need the Rule of Law." The Wall Street Journal (Mon., MARCH 16, 2009): A19.

(Note: ellipses in original.)