BrianGarst.com

Malo periculosam, libertatem quam quietam servitutem.

Economics & the Economy Archive

Tuesday

30

October 2012

0

COMMENTS

The 3 Myths of Disaster Shysters

Written by , Posted in Economics & the Economy, Energy and the Environment, Liberty & Limited Government

It’s that time of year again – when a major natural disaster is dominating the news cycle, and every economic, scientific and political snake oil salesman or huckster comes out of the woodwork to peddle their magical wares. Here are three myths with which the disaster opportunists are trying to swindle you:

1) There’s an economic silver lining to all this destruction because it will spur economic activity. This one isn’t so much trying to sell you anything as it is cheer you up, but its widespread acceptance nevertheless can have devastating policy consequences – like passage of foolish economic “stimulus” bills. This myth is basically just Bastiat’s broken window fallacy:

Paul Krugman is rather infamous for his love of destruction as economic catalyst, crediting as he does the destruction of WWII for ending the Great Depression and having noted the economic good that could come from the 9/11 attacks. And then there’s his belief that what the economy really needs to get turned around is an alien invasion. Krugman is utterly fixated on what is seen – such as the making of bombs or the rebuilding of homes – while he ignores what is unseen – like everything not built so that resources can be used instead to fight little green men.

Krugman is not the only one to fall for this myth. Commentators are quick to highlight the expected economic gains from Hurricane Sandy, with some only concerned that Sandy won’t cause enough destruction, and that hurricanes like it don’t happen regularly enough, to really get the economy rolling.

For a more in depth critique at the flawed logic behind this persistent myth, check out this excellent column by Tim Worstall.

2) Hurricane Sandy (or whatever the disaster de jour may be) proves that Global Warming is real! In the minds of some, anything that happens today must be more severe than anything that came before, if for no other reason than that it affects them. That sort of narcissism is almost certainly behind the blathering of Meghan McCain, who thinks the wandering of a mere Category 1 hurricane into her northern enclave is proof positive that Republicans are Neanderthal deniers.

This interpretation was also given the official blessing of Al Gore, the high priest of Global Warming hysterics:

The images of Sandy’s flooding brought back memories of a similar–albeit smaller scale– event in Nashville just two years ago. There, unprecedented rainfall caused widespread flooding, wreaking havoc and submerging sections of my hometown. For me, the Nashville flood was a milestone. For many, Hurricane Sandy may prove to be a similar event: a time when the climate crisis—which is often sequestered to the far reaches of our everyday awareness became a reality.

While the storm that drenched Nashville was not a tropical cyclone like Hurricane Sandy, both storms were strengthened by the climate crisis.

…Hurricane Sandy is a disturbing sign of things to come. We must heed this warning and act quickly to solve the climate crisis.

Every major weather event these days is proffered as anecdotal proof of global warming (or “climate change”). But anecdotes are not evidence, and major storms are nothing new. In fact, global hurricane frequency is trending down, and as Patrick Michaels points out, we’re setting records for the longest drought of Cat 3+ hurricanes hitting shore:

It’s been 2,535 days since the last Category 3 storm, Wilma in 2005, hit the beach. That’s the longest period—by far—in the record that goes back to 1900.

But don’t expect any of these facts to stop the reflexive blaming of global warming for all natural disasters.

3) Only Big Government can save us from chaos and natural destruction. Any time destruction lurks, statists can be counted on to furiously construct strawmen for public whipping to placate the frightened masses. The most ridiculous example comes, naturally, from the ever dependable shills of big government at the New York Times, which editorializes that “A Big Storm Requires Big Government,” before going on to outline a list of government functions that comprise probably less than a percent of the federal budget. Good job, New York Times, I’m now convinced that we need a massive welfare state, pointless “green energy” loans, wasteful stimulus bills and a cumbersome and counter productive regulatory structure, all because of a Category 1 hurricane. Well done.

Reason appropriately takes them to task, noting that not only has big government failed, and miserably so, at disaster response in the past, but it actually stood in the way of private action. That’s right, big government – being the angry and jealous God that it is – actively prevented help from other sources during Katrina:

Even as they fumbled their own responses to the disaster, government officials found time to block private relief efforts. The Salvation Army was initially forbidden to send boats to rescue refugees sheltered in one of its facilities, one of the group’s officials told the press. It seems the private relief organization’s efforts didn’t fit the government’s schedule. Likewise, the American Red Cross said. Days after the storm hit, “The state Homeland Security Department had requested — and continues to request — that the American Red Cross not come back into New Orleans following the hurricane.”

Aaron Broussard, Jefferson Parish president, put it best when he told interviewers, “Bureaucracy has murdered people in the greater New Orleans area and bureaucracy needs to stand trial before Congress today.”

But in the eyes of some, any failure of government is just proof that it needs more money (success, meanwhile, is proof that it needs more money), and so we get hand wringing over potential, hypothetical or imagined FEMA cuts from the same people who blamed FEMA for everything wrong that happened during Katrina.

The Reason post also notes, as I have here in the past, that there are in fact alternative and better sources of disaster response. This is not to say that government has no role or purpose, as the statist strawman would imply, but that it might be better to only leave government in charge of monitoring, analyzing and disseminating information, while bringing in those who know what they are doing and have actual experience to handle the logistics of rapidly moving goods and services into devastated communities.

Whatever their miracle cure of choice, consumers should cast a wary eye on those who see disaster coming and can only think to lick their chops at the opportunity to advance their agenda.

Monday

3

September 2012

2

COMMENTS

In Need of Capital Day

Written by , Posted in Economics & the Economy, Free Markets, Taxes

The Department of Labor cites Labor Day as “dedicated to the social and economic achievements of American workers,” adding that “it constitutes a yearly national tribute to the contributions workers have made to the strength, prosperity, and well-being of our country.” Celebrating the hard work of Americans with a yearly day off is fine with me, but there are additional forces contributing to the “strength, prosperity, and well-being of our country” also worthy of recognition. Perhaps the time as come, for instance, for a Capital Day.

Hard work is important. Americans have long considered a strong work ethic a virtuous quality, and this has been to our advantage. But hard workers are all over the world, and the US hardly leads the world in average hours worked. Yet America is consistently at or near the top in worker productivity. What accounts for this discrepancy? Simply put, capital.

Another way to look at American prosperity is this: hard work is a necessary, but insufficient, condition for achieving prosperity. Give even the hardest worker a spoon, and it will take a long time to build a ditch. Give that same worker a shovel, and it will take less time. Now give that worker an expensive digging machine and that ditch will be completed exponentially faster. That is where growth in worker productivity comes from.

The mixing of capital and labor is where the true magic happens, and American prosperity is due to our once unique devotion to an economic system – the free market – that most efficiently matches these two ingredients.  Unfortunately, America today is no longer the most devoted to economic freedom, and the trend is heading in the wrong direction. A less free economy, generally speaking, will mean more inefficient distributions of capital and labor, resulting in a less productive workforce and thus a less prosperous economy.

In order to invest capital in our workers, we first need capital to invest, and that means savings. Unfortunately, neo-Keynesian economic thought can be reasonably accurately summed up as “savings = bad; spending = good.” Just consider the examples of politicians asserting that unemployment checks or food stamps boost economic growth because the recipients are more likely to spend it.  And then there’s the many government policies which reduce or inhibit capital formations, like direct taxes on capital such as the capital gains tax or death taxes, financial regulations and laws which discourage US investment, and other costly burdens on business – such as Obamacare.

So while we celebrate the contributions of hard working Americans of all stripes, we should keep in mind the importance of capital in achieving prosperity, a fact all too often forgotten by policymakers. Perhaps a yearly reminder in the form of a Capital Day is needed to do the trick.

Sunday

15

July 2012

0

COMMENTS

This Might Have Something to Do With Those Fleeing Jobs

Written by , Posted in Big Government, Economics & the Economy, The Courts, Criminal Justice & Tort, The Nanny State & A Regulated Society

While the left is obsessing over whether Mitt Romney hired any dirty foreigners while CEO of Bain, or to manage his money, jobs are being lost right now as American manufacturers are sued out of business. But don’t expect any hand-wringing from Democrats this time, as they rely heavily on trial lawyers to maintain their power (Hat-tip: Overlawyered).

Citing the costs of lawsuits against the company, Blitz USA will close its gas can manufacturing facility in Oklahoma after almost 50 years in production and lay off more than 100 employees at the end of this month.

According to a release from the company, which makes 75 percent of the portable gas cans sold in the country, Blitz USA has been bombarded by litigation from users who allege the cans’ design did not protect them when they poured gasoline onto fires.

Since 2007, the Southeast Texas Record has reported on about 10 suits filed against Blitz USA in the U.S. Court for the Eastern District of Texas.

…Among the lawsuits that have hit the company hard is a $4 million judgment in Utah, which is currently on appeal.

The plaintiff in the Utah case tried to start a fire in a wood-burning stove inside a trailer home by inserting the nozzle of the gas can into the stove and pouring gasoline onto the fire. The plaintiff was severely burned and his 2-year-old daughter was killed by the resulting conflagration.

As pointed out by the PointOfLaw.com blog in a July 9 post, the plaintiff blamed Blitz USA for failing to warn consumers of the dangers even though the plastic gas container is imprinted with instructions to “Keep away from flames, pilot lights, stoves, heaters, electric motors, and other sources of ignition.”

If it’s not frivolous lawsuits, it’s overzealous bureaucrats, onerous regulations or a President that belittles your accomplishments.  Perhaps before the left, or anyone for that matter, again complains about outsourcing and loss of American jobs, they should ask themselves why anyone would want to do business in this country in the first place. It’s become clear that we as a society increasingly do not appreciate such efforts.

Saturday

14

July 2012

2

COMMENTS

Does the Left Hate Foreigners?

Written by , Posted in Economics & the Economy

If I took liberal arguments seriously, it would be hard not to conclude that they just don’t like foreign people. They have come completely unhinged over the idea that Romney allowed some dirty foreigners to handle his money. Matt Welch described how this “Swissophobia” harms middle-class Americans, and I similarly called them out in an editorial at the Daily Caller:

In an effort to score political points, Democrats are pounding Mitt Romney over his use of offshore bank accounts. Over the weekend, Senate Majority Whip Dick Durbin remarked, “You either get a Swiss bank account to conceal what you’re doing, or you believe the Swiss franc is stronger than the American dollar.” DNC Chairwoman Debbie Wasserman Schultz recently wondered aloud, “Why does an American businessman need a Swiss bank account and secretive investments like that?” Maryland Governor Martin O’Malley even called Romney’s Swiss bank account a “bet against America.” These attacks reek of populist nonsense tinged with more than a little economic xenophobia.

Harry Reid similarly called on the US Olympic committee to burn the Team USA uniforms because they were made by filthy Chinese fingers. Senate xenophones have even introduced legislation that would prohibit US athletes in future Olympics from wearing contaminated foreign made uniforms (even though they are purchased with private dollars, and thus none of their business). So do Democrats just hate foreigners? Do they not care about the welfare of anyone who’s not a US citizen?

Probably not, since I know better than to take their arguments seriously. After all, many of the same folks condemning Romney have similar investments. In reality, they are just displaying (or preying upon) economic ignorance. They don’t understand the globalized economy, nor the benefits of trade.

Sadly, the left is not the only side guilty of this. Populists on the right, like the ignoramus Donald Trump,  also sometimes prey on such ignorance and similarly distrust free trade. The central fallacy of this fear of foreign competition is the belief that economics is a zero sum game. It’s not, and because of the benefits of specialization, trade can and does make all parties more prosperous. Don Boudreaux put it better than I can:

Mr. Reid’s outburst reveals his ignorance of a foundational conclusion of economic science, namely, that people are enriched when they’re free to purchase from whomever they choose regardless of political boundaries.  …[E] economists’ overwhelming, non-partisan, and research-based consensus today is, as it has been for years, that free trade (even when unilateral) is beneficial.  Mr. Reid’s temper tantrum proves that he is either inexcusably dimwitted about matters on which he legislates, or interested, not in science and realism and truth, but in scoring political points by appealing to the uninformed emotions of constituents.

If people could be made more prosperous by limiting trade across political boundaries, why not prohibit interstate trade? Do the citizens of Texas lose out when they buy from Florida? Would the people of New Jersey be more wealthy if they quit trading with New York? Of course not, and anyone who suggested such would be laughed out of office. So why aren’t Reid and the other trade deniers?

Monday

4

June 2012

3

COMMENTS

Obama Continues Cynical Campaign of Division, Trots Out Unequal Gender Pay Myth

Written by , Posted in Economics & the Economy, Free Markets, The Courts, Criminal Justice & Tort

In a cynical, dishonest and divisive effort to boost his flailing campaign and distract from the latest jobs report reflecting his dismal economic record, President Obama is trumping the Paycheck Fairness Act (or as I like to call it, the Trial Lawyer Payout Enhancement Act), a new onerous regulatory regime which will benefit trial lawyers at the expense of businesses and the economy, and which is based on the discredited premise that women earn less than men for equal work.

The administration propaganda machine is now offering e-cards that you can send to annoy your friends and remind everyone you know that America is still an awful, sexist country. Here is an example:

Notice the fundamental dishonesty here. A “typical 25-year-old woman” is not the same as “a typical 25-year-old man.” Women are more risk-averse, make different career choices, work different hours and value different rewards. So why should they be expected to earn the same?

Individuals draw paychecks, not identity groups, and it is their individual choices which determine what that pay check is. Men, for instance, work in more dangerous jobs and, according to the Bureau of Labor Statistics, in 2010 (the most recent year for which data is available) were 12 times more likely to die from work-related injuries than women. Should we also create a new government agency to randomly kill enough female workers each year until this grisly inequality is eliminated? The BLS American Time Use Survey also reveals that men work more hours, even when only looking at those with full-time jobs, averaging 8.2 hours per workday for men compared to 7.8 for women.

When actually looking at the facts, it is rather ridiculous to look just at average pay for full-time men and women and conclude that any difference is necessarily the result of discrimination, as the feminists do whenever they trot out the context-less “pay gap.” Even the White House has in the past acknowledged these facts by observing that men choose to work in higher paying fields than women (many of which are higher paying because they are deadly, as evidenced above).

In fact, when comparing apples to apples, women often come out ahead:

When you compare apples to apples, the so-called wage gap disappears. Young, childless, single urban women earn 8 percent more than their male counterparts. Women who have never had a child earn 113 percent of what men earn. Unmarried college-educated males between the ages of 40 and 64 earn nearly 15 percent less than their female counterparts.

The Paycheck Fairness Act, in other words, is based on a faulty premise. Men earn more on average because they choose, on average, to work in riskier jobs, work longer hours, and are also more likely to negotiate salaries and ask for raises. That’s not discrimination; It’s individuals making free choices in a free society. This is not jut my own conclusion, but also that of Obama’s own Deparment of Labor:

“This study leads to the unambiguous conclusion that the differences in the compensation of men and women are the result of a multitude of factors and that the raw wage gap should not be used as the basis to justify corrective action. Indeed, there may be nothing to correct. The differences in raw wages may be almost entirely the result of the individual choices being made by both male and female workers.”

Unfortunately, the faulty premise behind the Paycheck Fairness Act is not its only problem.  Aside from being unnecessary, the law would have significant negative consequences if enacted. The Wall Street Journal explains:

The law automatically lists women as plaintiffs in class actions when lawyers sue employers, thereby requiring female employees to opt-out of litigation with which they don’t agree. Businesses would be treated as guilty until shown to be innocent, having to prove in court that their pay practices aren’t the result of workplace bias. The legislation contains no caps on damage awards, allowing plaintiffs to claim unlimited punitive damages even in cases of unintentional discrimination.

The bill is also a first step toward federal pay mandates. It requires the Equal Employment Opportunity Commission to collect data from employers about how they compensate on the basis of sex, race and national origin. Government rarely collects data merely to put it in a vault. These numbers will form the basis of class-action suits and will invite regulators to issue federal compensation guidelines.

This is a bad law to treat a non-existent problem. Worse, it is being advanced solely for the purpose of further dividing Americans in order to elevate President Obama’s reelection campaign. Because he has no record worth running on, the President will continue dredging up every myth, fable and scare-story imaginable in order to hit on every perceived identity grievance in existence.

Tuesday

29

May 2012

0

COMMENTS

When Special Interests Collide

Written by , Posted in Economics & the Economy, Energy and the Environment

The President has made promotion of “green energy” a central part of his agenda. His efforts have thus far been littered with waste, fraud and abuse, but nevertheless it remains a key plank of the President’s platform.

So why then is his administration slapping tariffs on solar panel imports?

The United States on Thursday announced the imposition of antidumping tariffs of more than 31 percent on solar panels from China.

…The antidumping decision is among the biggest in American history, covering one of the largest and fastest-growing categories of imports from China, the world’s largest exporter.

…Many solar panel installers in the United States have opposed tariffs on Chinese panels, contending that inexpensive imports have helped spur many homeowners and businesses to put solar panels on their rooftops. The new tariffs are likely to mean a substantial increase in the price of solar panels here.

…Chinese officials have been indignant at American criticism of their solar power industry, pointing out that the United States has urged China for years to embrace renewable energy as a way to reduce air pollution, combat climate change and limit the need for oil imports from politically volatile countries in the Mideast.

Chinese confusion is understandable given the rhetoric of this administration.  But there’s more than one special interest in Obama’s coalition, and while environmentalists like the proliferation of solar panels no matter their source, unions and other domestic manufacturing fetishists would rather limit their availability and harm consumers by raising prices in an effort to insulate domestic producers from competition.

“Anti-dumping” rules in general, because they are designed by and cater to these very same special interests, are a counter productive and unnecessary burden on the economy, and often work at cross-purposes with other policy actions, as explained by this video from the Cato Institute:

Saturday

7

April 2012

1

COMMENTS

Tuesday

3

April 2012

0

COMMENTS

Free Market Capitalism Breaks Out in New York, NYT Can't Figure Out Who to Blame

Written by , Posted in Economics & the Economy, Free Markets, Media Bias

In one of the odder stories I’ve seen in sometime, the New York Times describes competition among local pizza shop owners as if it’s reporting from the front lines of Afghanistan. In essence, new competition has forced prices at local pizza shops down from $1.50 to $.75. Wonderful, right? How great for the consumers!

But the article describes the “amped-up war of commerce” in the starkest of terms, warning that “escalation seems imminent,” as if the missiles might fly at any moment. They even note that both sides accuse the other of “unprovoked” price slashing, implying that it’s a negative thing that can only occur after some sort of initial affront. Not once does the piece object to this absurd characterization by offering the point of view of the consumer. Price cutting is not an action that must be “provoked,” it is a simple consequence of our competitive system where businesses fight to attract customers. Nor do we need the New York Times to delve into the he said/he said to determine who is the “true aggressor.”

There is no aggressor; there are merely multiple suppliers rushing to serve the same customers as cheaply and efficiently as possible. Perhaps if the New York Times understood the concept they wouldn’t be losing so many of theirs.

Tuesday

21

February 2012

0

COMMENTS

The Moocher Class

Written by , Posted in Economics & the Economy, Health Care, Welfare & Entitlements

There’s a rash of mental and physical disabilities sweeping the nation, but we don’t need to turn to the CDC for a diagnosis:

With their unemployment-insurance checks running out, some of the country’s long-term jobless are scrambling to fill the gap by filing claims for mental illness and other disabilities with Social Security — a surge that hobbles taxpayers and making the employment rate look healthier than it should as these people drop out of the job statistics.

“It could be because their health really is getting worse from the stress of being out of work,” says Matthew Rutledge, a research economist at Boston College. “Or it could just be desperation — people trying to make ends meet when other safety nets just aren’t there.”

As of January, the federal government was mailing out disability checks to more than 10.5 million individuals, including 2 million to spouses and children of disabled workers, at a cost of record $200 billion a year, recent research from JPMorgan Chase shows.

The sputtering economy has fueled those ranks. Around 5.3 percent of the population between the ages of 25 and 64 is currently collecting federal disability payments, a jump from 4.5 percent since the economy slid into a recession.

Are these people suddenly getting hurt? Are they getting stressed out or desperate from unemployment, as research economist at Boston College Matthew Rutledge suggests? I say not. What we are seeing is the moochiness factor.

Not all people on unemployment insurance are moochers by any stretch of the imagination. These folks understand they need something as a bridge to their next job and future paychecks, and they treat it as such. If I were suddenly unemployed I would similarly have no qualms accepting the payments, since I’ve already been forced to fork over my tax dollars for it. But make no mistake about it, there is a subset of recipients for whom UI is not merely a bridge, but a destination.

Recent academic research has unsurprisingly shown subsidizing unemployment increases joblessness:

This paper uses multiple regression analysis to estimate the impact of extended UI benefits on the unemployment rate after controlling for the severity of the recent recession. The extension of UI is found to have a positive and significant impact on the national unemployment rate… The UI benefit extensions that have occurred between the summer of 2008 and the end of 2010 are estimated to have had a cumulative effect of raising the unemployment rate by .77 to 1.54 percentage points.

I’m going to go out and a limb and guess that there is a good bit of overlap between the .77 to 1.54 percent of the population which decides not to work and instead mooch off of taxpayers for as long as possible, and the .8 percentage point increase in the number of “disabled” since the start of the recession. This overlap represents the moocher class.

Tuesday

7

February 2012

1

COMMENTS

DC’s Unjustified Optimism

Written by , Posted in Big Government, Economics & the Economy

According to Gallup, D.C. has the highest amount of economic confidence in the country…and it’s not even close.

It would be easy to say that Gallup over-sampled White House staffers wearing Keynesian blinders, but the truth is far more depressing. It would be nice if we could chalk up these results to a simple bubble mentality, as just another indication that folks inside-the-beltway are out of touch, but unfortunately the results are an accurate reflection of economic conditions.

Washington D.C. and the surrounding areas have weathered the recession like no other region. Whether it be politicians, federal bureaucrats, or lobbyists, the denizens of our nation’s Capitol have lived off a federal government sucking up all the wealth they could from the productive sectors of the economy. Simply put, while the rest of America has suffered, beltway insiders have continued to stuff themselves with the fruits of everyone else’s labor.

So of course they are more optimistic than the rest of the country. It’s easy to be confident in the economy, and take the long view, when you’re standing on the backs of hard working Americans.