Category Archives: Economics

Rush, NYT, and Advertisers

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Dan Riehl has a post up looking at the nonsense being floated by some on the left forecasting the demise of right wing talk radio. One reason cited by those hopeful lefties is that Rush Limbaugh might change syndicators. They note that Cumulus, the company that syndicates his show, is losing money, and their spin is that the Rush v. Sandra Fluke tiff spooked too many advertisers. The possibility that Cumulus might have management problems is ignored.

So while drinking my second cup of coffee this morning, I pondered this thought—if it’s only right wing media that’s seeing a slow down in ad revenue during a funky economy, why did the New York Times see its ad sales drop 11 percent and earning fall over 90 percent during the first quarter this year?

Trickle Down Taxation

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Carroll County, where I live in Maryland, doesn’t seem to happy about Gov. O’Malley’s new Rain Tax. The Rain Tax law requires 10 jurisdictions in the state to collect a tax based on the amount of paved or roofed area on each piece of property.

The Legislature neglected to set a required rate, so one of our County Commissioners is proposing a one cent surcharge for all property tax bills. Not one percent. A penny.

I may vote for the guy next election.

On Specialization

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Back when I took Econ 101, some of the topics covered included economic specialization and division of labor. A society doesn’t have to become very large before the various task get split up among individuals. Some become farmers, some hunters, some shamans.

Specialization has become even finer in our modern world. Consider my field of engineering. I’m an engineer, but I don’t build bridges. I’m an electrical engineer, but I don’t design generating stations. I do electronics. Within that specialty, I do analog design. As an analog designer, I’m currently doing low-noise design. That’s radiation hardened. For space applications.

Other professional fields are equally specialized. Take law, for instance. There are many fine lawyers who specialize in criminal defense work. Indeed, some are certified as criminal law specialists. However, expertise in that area of practice may not equip a lawyer fully for work in a civil case. Team Kimberlin has seen a demonstration of this over the past few days in Los Angeles.

Hiring a properly qualified person to do a job is wise. Perhaps someone is wondering if I’m taking my own advice.

Yes, I am.

Fauxcahontas and Fuzzy Math

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Prof. Jacobson at Legal Insurrection has been following the economic nonsense concerning Senator Elizabeth Warren’s claim that the minimum wage should be $22 an hour.

Let’s do some math.

There are roughy 135 million workers in the U. S. 22 bucks an hour works out to around $45,000 year, which would give a total U. S. payroll of a bit more than $6 trillion. That’s just about equal to the total of all wages and salaries paid in the country last year. In other words, in a struggling economy business would have to drastically reduce their unskilled minimum wage employment in order to have money left over to pay their skilled employees. One consequence of increasing the minimum wage is to outlaw jobs for workers with lower skills, increasing unemployment and slowing economic growth.

Euphemistic Lying

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Or lying by euphemism. Stacy McCain calls out the President and his flacks in the press for the use of the term “new revenues.”

A business can generate “new revenues” by expanding sales. A government doesn’t have that opportunity, and it won’t find “new revenues” some magical, super-secret hiding place. They’re taxed out of our wallets.

In his essay, Politics and the English Language, George Orwell wrote that

one ought to recognise that the present political chaos is connected with the decay of language, and that one can probably bring about some improvement by starting at the verbal end.

He wrote that in 1946, but it’s also true today. Indeed, the time has come when we need to stop allowing the use of nonsense terms in our government’s financial planning. Not collecting a tax is not an “expenditure.” Spending more this year than last is not a cut just because you were planning an even larger increase. Etc.

Actually, there is a way that government can get new revenues.  Over the long haul since WWII, the federal government has been able to take in about 19% of GDP as taxes. That’s been true regardless of how high or low the tax rates have been. When government gets out of the way of the economy so that it can grow, that 19% share grows with increasing GDP.

When Jobs Are Outlawed …

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… only outlaws will have jobs.

The Minimum Wage Law does not create jobs. Rather, it outlaws jobs that are worth less than some arbitrary wage. When those jobs are outlawed, the market produces several responses.

Some folks give up and go on welfare.

Some low-paid workers continue to work in jobs that would otherwise be legal but are now off the books. That’s illegal, and they become outlaws.

Some turn to crime and become serious outlaws.

Do we really want to raise the Minimum Wage?

 

 

It’s the Spending, Stupid

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The federal government expects to take in about $2,900,000,000,000 in revenue this coming year. The interest due on the debt during that time will be roughly $246,000,000,000. That leaves around $2,654,000,000,000 to spend without adding a dime to the national debt.

To give you an idea of how much federal government that money would buy, consider that is 96% of what the government spent in FY2003 (corrected for inflation).

Could you get by with 4% less federal government than you had 10 years ago?

UPDATE–I could get by with 100% less TSA.

Obama Must Love the Poor …

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… because he keeps making so many. Joe Schoffstall reports that although the President promised to raise 2 million Americans out of poverty during his 2009 State of the Union address, the net result of his first term is 2.6 million more poor people. (H/T, Instapundit) That’s a 4.6 million person spread between promise and reality.

How’s that hopey/changey stuff workin’ for you?

So, What Does That Mean For You?

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I’m back from traveling for a research project, and normal blogging will resume on Monday. Meanwhile, here’s another staff post from a member of the Vast Hogewash Research organization:

The IRS on Wednesday issued a regulation that actuarially assumed the least expensive Obamacare plan for a family of 4 and 5 would run around $20,000 annually in 2016. So what does this mean for you?

As our regular readers can attest, we here at Hogewash! like to do the math. So what that amounts to, are premiums of over $1650 per month, per family. For many Americans, that’s more than a mortgage payment for their home. And if you don’t buy health insurance, you have to pay the IRS a penalty.

The penalty for not obtaining insurance is 2.5% of your taxable income. So here’s the question: what is this really? A healthcare bill, or a way to raise taxes on the middle class? Because who in the middle class would pay for that kind of health care plan?

For someone making between $40,000 – $60,000 per year, this plan is 1/2 to 1/3 of your salary. And that’s before taxes. After your mortgage payment/rent and bills, car note, plus basic necessities for your family, who in the middle class has the money to pay for something like that? Remember, that’s the Bronze Plan, the cheap plan.

Of course, this is all after your salary has been cut. You see, your company is eventually going to convert you to a part-time employee in order to avoid the massive penalties they too would incur under this tax scheme. Perhaps this new progressive administration really is trying to make everyone equal. Equally impoverished, that is.

Thank you John Roberts. Your legacy won’t be forgotten.

Expect the Unexpected

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Stacy McCain has a post up about the negative economic growth reported for the last quarter of 2012. He wonders how the Main Stream Media will spin their reporting. I’ll bet they will claim that they were drinking heavily while celebrating the election results and blame Busch.

Mr. McCain’s post is entitled Obamanomics Fails–Unexpectedly! in a riff on the Main Stream Media’s continuing disbelief that The Lightworker is unable to defy the Laws of Economics.

Folks, there ain’t no such thing as a free lunch. Expect the “unexpected.”

UPDATE–For the past year, I’ve expected the economy to begin contracting if Barack Obama were reelected. Business that were putting off investing in expansion in hope of a Romney victory are now being joined by joined by other firms facing the costs of Obamacare and four more years of over-the-top regulation and irresponsible fiscal policy. More people are going Galt.

The next four years are going to be tough brutal.

Don’t Know Much About History

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Stacy McCain offers a verbal spanking to Scott Lemieux for his use of the Liberal Random Epithet Generator. Mr. Lemieux does not approve of the Circuit Court ruling in the National Labor Relations Board case that held that Presidential recess appointments must be made only when the Senate is, in fact, in recess. Mr. Lemieux’s epithet is “Neo-Confederate Judges.” He seems to believe that Confederate judges would be opposed to organized labor.

Huh?

If I remember my history correctly, much of federal labor law has its roots in racism. The Davis-Bacon Act, for example, was specifically adopted to keep non-union (read, black) workers from taking jobs from union (read, white) workers. That’s the sort of thing I’d expect a Confederate judge would have upheld.

On Reynolds’ Law

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Philo of Alexandria has a thoughtful post up on Reynolds’ Law (yes, that Reynolds). For those Gentle Readers unfamiliar with it, here is Reynolds’ Law.

The government decides to try to increase the middle class by subsidizing things that middle class people have: If middle-class people go to college and own homes, then surely if more people go to college and own homes, we’ll have more middle-class people. But homeownership and college aren’t causes of middle-class status, they’re markers for possessing the kinds of traits — self-discipline, the ability to defer gratification, etc. — that let you enter, and stay, in the middle class. Subsidizing the markers doesn’t produce the traits; if anything, it undermines them.

Philo notes this:

Reynolds’ Law thus strikes at the heart of progressivism as a political ideology. Progressivism can’t deliver on its central promise. In fact, it’s guaranteed to make things worse in exactly that respect. It’s not that it sacrifices some degree of one good (liberty or prosperity, say) to achieve a greater degree of another (equality). That suggests that the choice between conservatism and progressivism is a matter of tradeoffs, balances, and maybe even taste. Reynolds’ Law implies that progressivism sacrifices some (actually considerable) degrees of liberty and prosperity to move us away from equality by undermining the characters and thus behavior patterns of those they promise to help.

Read the whole thing, but before you go, let me add a comment of two.

The Progressive approach stems from an ideology that can trace its ancestry back through the Enlightenment back to the Greek philosophers. Part of the foundation of this stream of thought is the idea that if one learns to think the right way then one will begin to act the right way.

Of course, Western civilization is deeply indebted to the ancient Greeks, but there is another ancient people to whom we own a similar debt for their foundational effect on Western Civ, the Jews, and there is a significant difference between the Hellenistic and Hebraic approaches to knowledge. While the ancient Greeks would advocate thinking our way to acting properly, the ancient Jews would tell us to start acting properly and that would, over time, lead to correct thinking. Practice self-discipline. Defer gratification. Save. Invest. Work.

Owning a trumpet didn’t make me a musician. Years of practice did.

You Say That As If It Were a Bad Thing

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The New York Times has an editorial up whining about the Court of Appeals for the DC Circuit ruling that presidential recess appointments have to be made during a period when the Senate is actually in recess. You see, the problem with following the requirements of Article II, Section 2 of the Constitutions is that to do so would invalidate the appointments that Barack Obama made to the National Labor Relations Board and negate all the decision rendered by the NLRB for the past year. It would also bring the appointment of Richard Corday as head of the Consumer Financial Protection Bureau and the ton or so of regulations that agency has promulgated into question.

So what’s wrong with that?

Another Unfair Argument …

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… using math. Patterico shows how the President’s 2013 budget gets to be over $1,000,000,000,000 in the red. He says that when he tries to explain the budget to Democrats they don’t seem to see what the problem is.

And they want us to believe that they are the reality-based community.

It doesn’t matter how many times they send me to Room 101, I still believe that 2+2=4.

The Mark Twain Solution

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20130109-073106.jpgIt was several years ago that I first heard the suggestion that the debt could be monetized by minting platinum coins with huge face value, a trillion dollars, for example. The idea has reappeared recently as a possible response to the debt ceiling.

I wonder if those making the suggestion are basing their wishful thinking on a certain story by Mark Twain.

ECON 101 for 2013

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Stephen Green lays out an excellent set of reasons why it doesn’t matter what the President and the Congress do over the next few days; the federal budget and deficit won’t be fixed by any of the proposals now being offered.

I have one factoid to throw out in addition. It doesn’t matter what tax rates are. Since WW2, federal tax collections have always been more or less 19% of GDP. Because people, especially rich people, plan their affairs with tax consequences in mind, riaising rates slows economic growth so that collections invariably fall short of expectations. Lowering rates stimulates growth so that the feds get 19% of a bigger pie.

Mr. Green seems to understand this basic law of economics.

Reynolds/Green 2016.

Obamacare Insurance Exchanges

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CNBC reports that only 15 states have told the feds that they will operate a heath insurance exchange as mandated by Obamacare. (H/T, The Corner) This leaves roughly 2/3 of the country for the federal government to build exchanges for.

Meanwhile, I’m in one of the bluest states that is committed to running an exchange.

Anecdotes in Support of Data

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Zero Hedge has a couple of graphs posted that tell the employment story of my family. (H/T, Instapundit) My son, who just turned 25 on Thursday, had a great deal of difficulty entering the workforce, and, sure enough, the first graph shows that the number of workers in the 25 to 54 year old group has fallen back to 1997 levels.

I turn 65 on New Year’s Eve, and given the current state of things, I’m not planning to retire until the end of 2020. The second graph show that we geezers are hanging on to our jobs longer.

That’s how that hopey-changey stuff is working for us.

Avoiding the Fiscal Cliff

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Stephen Green points out that the federal government doesn’t have a revenue problem but that It’s the Spending, Stupid! Or as Wilkins Macawber put it:

Annual income twenty pounds, annual expenditure nineteen pounds nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

Why We Moved From California

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Erika Johnsen writes at Hot Air:

Whether it’s because we end up going over the fiscal cliff or because Republicans agree to President Obama’s plan of not extending the Bush tax cuts on America’s wealthiest earners, the possibility of an effective tax hike means that higher-income Californians may be in for a whopping aggregate marginal tax rate. The super-liberal state already succeeded in approving their own rate hike with Proposition 30 in the November election, and combined with the potential federal raises, they could be looking at a top bracket with a marginal income tax rate of just under 52 percent …

Of course, moving to the Democratic Peoples Republic of Maryland hasn’t been much of an improvement.