Rare Medium

November 5, 2013

“Wealth Transfer?” NOT

Filed under: Economics, Energy, Free Market — rare medium @ 12:26 pm

Following is a letter I wrote to the editors of the Wall Street Journal today concerning an op ed in today’s paper:

I applaud Shultz and Smith’s plea to develop U.S. energy resources (Making the Most of the U.S. Energy Boom, Nov. 5) as a means of reducing our reliance on unstable sources of oil. I am disappointed, however, in their use of the term “wealth transfer” when referring to oil purchases abroad. In a free market, wealth is not transferred, it is exchanged. In return for the money paid for oil, we received resources that enabled us to grow and create new wealth. Without these resources, we would arguably all be worse off.

At the same time, much of the cash used to pay for oil came back to us through the purchase of private jets, New York City apartments, and construction contracts. Kind of like having your cake and eating it too. If that’s a wealth transfer, sign me up.

Others, notably Boone Pickens, use this catchy phrase to increase the “scare” factor among the public. What? Transfer wealth? No, no, no! Next time you hear it, you know what to say.

October 30, 2013

Stop and Frisk Is NOT Racially Discriminatory

Filed under: Economics — Tags: , — rare medium @ 4:37 pm

New York City is headed toward electing Bill de Blasio their new mayor.  A well-known proponent of communism early in his career, de Blasio still believes the the Cuban health system is better than our own.  Really!

One of the many idiotic actions he proposes is to eliminate the ability of police to “stop and frisk,” as it is known.  This practice has enabled police to remove countless illegal firearms from the street.   De Blasio claims the procedure is racially motivated.  He cites statistics showing that blacks and latinos, because they are the subject of nearly 90% of all stop and frisks, are plainly being discriminated against.  This is true, he says, because the racial makeup of the City is only slightly greater than 50% black and latino.

But that is only half of the story.  What about the race of those doing the stopping?  The racial makeup of New York City patrolmen – those officers actually on the beat and engaging in stop and frisk – is also roughly 50% black and latino.  Assuming that a stop and frisk performed on a minority by a minority cannot be racially motivated, the actions of these officers should be removed from the data.

Here’s a more honest picture.  The website of the New York Civil Liberties Union reports that, in 2010, New York City police reported a total of 601,285 stop and frisks by its patrol officers.  Eighty-seven percent of those stopped were black or latino.  If we assume that half of those stops were conducted by black or latino police officers, then it would be true that only 43.5% of the stops were conducted by whites.  These were the only stops that could be considered racially motivated – white on minority. 

The U.S. Census Bureau reports that 54% of New York City residents are black or latino.  In order to claim racial discrimination by the police in stop and frisk, one would have to see a greater percentage of stops by white officers than the percentage of minorities in the population.  In fact, white officers could have made at most 43.5% of the stops, a percentage LOWER than the minority population.  There is no evidence of racial motivation in the stop and frisk date.

Why are people not concerned about the racial mix of the police officers making the stops?  Perhaps because ignoring those inconvenient facts supports the argument organizations like the New York Civil Liberties Union are trying to make – that the New York City Police Department is a racial discrimination machine. But it is a weak and specious argument, one more example of the Left pandering to racial minorities.

Good bye stop and frisk, hello street crime.  Good luck with your new mayor, New York.

October 29, 2013

Why the government can’t run health care

Filed under: Economics — rare medium @ 5:11 pm

Many reasons, but three are salient:

1) because the government can not POSSIBLY know what 300 million people want (we are finding this out in real time)
2) because the government does not compete with anyone and so does not need to provide good service or “competitive” products (no competitive edge, the hallmark of markets)
3) because the government doesn’t fire anybody (no accountability)

Consider these shortcomings, which are largely un-fixable, and ask yourself what in the world we are doing?!

April 25, 2013

Gimme Welfare!

Filed under: Economics, Income Inequality, Welfare — Tags: — rare medium @ 8:36 am

Lots of studies shed light on the negative incentive to work created by our welfare system. Not only is it more relaxing to sit on the couch and cash welfare checks than it is to get out the door and work, but it actually makes economic sense too!

Several economic studies examine the cost of leaving welfare to work. Focusing on the Earned Income Tax Credit (EITC), which is a payment the IRS makes to taxpayers with low taxable income, the studies generally show that, up to fairly high income levels – $30-40,000 plus – one actually suffers a cut in income by moving from unemployed to worker. The incentive clearly favors staying on welfare.

Now comes a study by the staff of the Ranking Member of the Senate Budget Committee showing how much more lucrative it can be to be poor than to work. The figures are amazing even to me, but they come from a seemingly legitimate source, so I’ll pass them on. If one includes ALL of the available government payments under means-tested programs – primarily medical assistance, food assistance, cash payments, and housing assistance (but NOT social security or Medicare) – the average daily cash-equivalent payment per household below the poverty level would equal $168. (See link below.) This compares to an average daily income of $137 for the household with $50,000 in annual income, the median family income across the country. On an hourly basis, that translates to $30/hour for the welfare household versus $25 for the working household. After taxes, the $25 would drop to $21-23.

These are gross numbers, of course – averages – and can mislead on a per household basis. Still, eye-opening, a trillion dollars a year if combined with state programs (which the above numbers do NOT do). See for yourself.


April 24, 2013

GE Capital Choses Butter

Filed under: Economics, Politics — Tags: , — rare medium @ 3:23 pm

Along comes the announcement today that GE Capital has decided to no longer finance the trade of guns. In the age-old economic tug-of-war between guns and butter, GE Capital is decidedly dairy.  Let’s hope it’s NOT because they are on some corporate goodie-goodie kick and want to show support for the gun-banners.  What do you bet?  Good to know, though, that they do NOT support the second amendment.  Go meatball!

April 20, 2013

Margaret Thatcher RIP

Filed under: Economics, Margaret Thatcher, Politics — Tags: — rare medium @ 5:48 pm

It is hard enough for a CEO to turn a medium size company around and make it prosper.  It is nearly impossible for a political leader to do it on the scale of an entire country, yet Thatcher did it.  By the late 1970’s the United Kingdom was sinking under the weight of labor stife, meager economic growth and a loss of entrepreneurial spirit.  Many observers had written the country off as a lost cause.  Thatcher’s leadership reversed the trend and put the ship right again, touching off a long period of prosperity and growing national pride.  Reagan, of course, did the same in the U.S., but few other leaders of the 20th century could claim similar accomplishments.

The British and American press have made little of her recent passage.  Her philosophy of limited government holds no attraction for them, and they are loathe to highlight examples of its success, even shining ones.  She was far too “nuanced” for the taste of many, but you knew where she stood and where she wanted to go.

One cannot claim she was not a strong thinker.  Hear her words from “Statecraft: Strategies for a Changing World,” published the year after 9/11, quoted in today’s Wall Street Journal:

“The world we all view so much more clearly now, with eyes wiped clean by tears of tragedy, was in truth there all along.  It is a world of risk, of conflict and of latent violence.  Democracy, progress, tolerance – these values have not yet taken possession of the earth.  And the only sense in which we may have reached the ‘end of history’ is that we have gained a glimpse of Armageddon.

We now know that bin Laden’s terrorists had been planning their outrages for years.  The propagation of their mad, bad ideology – decency forbids calling it a religion – had been taking place before our eyes.  We were just too blind to see it.  In short, the world had never ceased to be dangerous.  But the West had ceased to be vigilant.  Surely that is the most important lesson of this tragedy, and we must learn it if our civilization is to survive.”

April 19, 2013

All That Glitters…

Filed under: Economics, Mark Twain — Tags: — rare medium @ 11:36 am

Mark Twain is one of my favorites. The passage below is from “Roughing It” (1872), reprinted today in the Wall Street Journal.

“Gentlemen,” said I, “I don’t say anything – I haven’t been around, you know, and of course don’t know anything – but all I ask of you is to cast your eye on that, for instance, and tell me what you think of it!” and I tossed my treasure before them.

There was an eager scramble for it, and a closing of heads together over it under the candle-light. Then old Ballou said:

“Think of it? I think it is nothing but a lot of granite rubbish and nasty glittering mica that isn’t worth ten cents an acre!”

So vanished my dream. So melted my wealth away. So toppled my airy castle to the earth and left me stricken and forlorn.

Moralizing, I observed, then, that “all that glitters is not gold.”

Mr. Ballou said I could go further than that, and lay it up among my treasures of knowledge, that nothing that glitters is gold. So I learned then, once for all, that gold in its native state is but dull, unornamental stuff, and that only low-born metals excite the admiration of the ignorant with an ostentatious glitter. However, like the rest of the world, I still go on underrating men of gold and glorifying men of mica. Commonplace human nature cannot rise above that.

A round of Pabst to the dull, unornamental “people” of gold.

April 17, 2013

Nader’s Corvair Off Course Again

Filed under: Economics, Free Market, Job losses — Tags: , , — rare medium @ 11:27 am

Poor Ralph Nader.  In a vain attempt to remain relevant, he argues in a Wall Street Journal op-ed in favor of increasing the minimum wage.  My response:

To the Editor:

Ralph Nader, in his article in the WSJ on 4/16/13, makes a transparent attempt to present both sides in the debate over increasing the minimum wage.  Unfortunately, he ignores the most relevant argument against it:  basic economics.  First year students know that when the price of something goes up, the demand for it goes down.  This applies to the cost of labor as much as any other good or service.  Is it a surprise to imagine that, when a business faces higher labor costs, they will look for ways to offset that increase?  First year students also know that when the price for labor goes up, the supply of labor will also go up as more people enter the labor force to seek that higher wage.  The result of these two reactions to a higher minimum wage is obvious:  unemployment increases.

Nader touts the economic benefits accruing from those workers who receive the higher wage, but he fails to account for the number of jobs lost and never created due to employers’ higher costs.  He should know that teenage unemployment – that sector most affected by the minimum wage – has skyrocketed since the last increase in the minimum wage, and further, that the effect is most heavily felt by minorities.  Teen unemployment is now 25%, while black teen unemployment is 43%, nearly one out of two!  Teens generally don’t require a “subsistence” wage, they just require a chance to learn the basics of holding a job, such as showing up on time every day, putting in a full day’s work, and the satisfaction that comes from success.  Those not learning these things as teens may never learn them at all, and many will drop into the ranks of the permanent unemployed.

Sorry, but a man old enough to have ridden in a Corvair who hasn’t figured this out yet has no business writing for the WSJ. 

Dick Gillette

Norwalk, CT

April 10, 2013

Advertising: Who Controls Whom?

Filed under: Economics, Free Market — Tags: — rare medium @ 10:04 pm

I have seen it argued that advertising is nothing more than propaganda by big, evil companies to control the buying habits of their unsuspecting customers.  The entire marketing industry, it is said, is a zillion dollar exercise in consumer enslavement.

Let’s conduct a little thought experiment.  Say you are walking down the cereal aisle and are confronted with a long row of gray box after gray box with dark blue letters stating the type of cereal held within.  Pretty hard to find those Fruit Loops, isn’t it?  Wouldn’t you like the manufacturers to make it a little easier to find?  Of course the manufacturers would like to save the money needed to brighten up their offerings, but they need to try and stand out. So, who’s in control here, Big Cereal or you? If they don’t advertise, they lose.

In fact, the canned goods aisle, the salted snack aisle, and the personal products aisle pose the same challenge to manufacturers.  All of the aisles do.  To attract your attention they have to tell their story – they have to advertise. They lose, you win.

April 6, 2013

GDP and Why It’s Important

Filed under: Economics — rare medium @ 8:52 pm

Gross Domestic Product, GDP, is a measure of what economists call the output of the nation.  It measures all the money that we as a society spend in a period of time (normally on an annual basis.) GDP includes the total monies spent by consumers, businesses and the government. It records how much food we bought, how many cars and refrigerators, how much college education we purchased, how many machines industry acquired, and how much our government services cost.  Last year U.S. GDP was nearly $16 trillion.

GDP is a good way to measure of the elusive idea of standard of living. Economists presume that the more BMWs and pairs of skis we own, the better off we are. (They do distinguish between “better off” and “happy.” GDP is not a measure of happiness.) A common way to measure standard of living is the ratio of GDP to the total population, or GDP per capita.

Economists look at the change in GDP over time to gauge our economic progress. Since 1970, GDP has grown an average of 3% each year. Increasing GDP defines an economic expansion, decreasing GDP a recession.  As a result, much is made of the change in GDP from one three-month period (a quarter of a year) to the next, and the amount by which this quarter’s figure is greater than, or less than, the comparable quarter last year.

How should one think about the figures one hears in the news?  What does a 2% increase in GDP really mean?  A first cut is the fact that it is below the average of 3%. Beyond that, it is well below the growth we normally experience right after a recession, which is in the 4-6% range.

GDP growth has been around 2% since 2008. How much should it be? Think of GDP like a birthday cake. The more people you invite to your party, the less cake there is for each person. It is reasonable, therefore, to think that GDP should grow at least as fast as the population is growing, around 1% per year, in order for us to be able to consume at least as much stuff as the year before. But really, we should liken GDP to the cake and the oven we used to bake it in. Eventually, that oven is going to wear out and need to be replaced. Likewise, the capital equipment required to make all the stuff we buy needs to be replaced. This requires a higher GDP. And if we want to be able to buy more stuff this year than last, even more GDP is required to make that new stuff.

So, for the economy to be able to satisfy today’s needs and continue to create new and better products and services, we need to get GDP above 3%, the higher the better. A growing economy also produces more tax revenue for the government without raising tax rates. This is the only good solution to our debt problem.

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