Only costing more jobs?

I came across the article Obama Steps up Confrontation. I found Obama's recent moves a little too aggressive. Senator Lama Alexander said the moves would only hurt him in the end, and I aggree. Antonia Ferrier points out that the Senate doesn't exactly work like most game theorist believe. As far as the new overhaul of student-lending loans that the Democrats attached to the Bill, I think it will only do worse to the economy as a whole. To my understanding, it is predicted to result in thousands of job loses. That doesn't make me very enthusiastic about recovery.

Climate Deal Postponed

Unfortunately, this article is blocked unless you subscribe to the Wall Street Journal, but the preview for it pretty much gives away the point. With lackluster results in regard to the Copenhangen summit, apparently the environmentalists are waiting until 2011 before trying to persuade the world to adopt their environmentally-friendly policy ideas. I think the whole idea of adopting policy to reduce “greenhouse gasses” and the like is unnecessary and ultimately dangerous to the state of our economy. Aside from generally making many types of businesses much more inefficient and expensive, other unintended side-effects could take place. Smaller businesses may find it harder to compete (similar to how Sarbanes-Oxley significantly lowered the number of businesses going public since its creation because of the higher costs associated with compliance), and of course personal freedoms will be stepped upon. Though I don't have any specific data to cite, I couldn't see this kind of legislation helping, in any way, the state of our economy.

Why everyone wont have health insurance

The goal of the new healthcare bill is to ensure that everyone young or old, rich or poor has health insurance, however over 30% of uninsured adults are between the ages of 19 and 29. Many people in this demographic myself included could afford to get health insurance. They choose not to because the likelihood of needing it simply doesn’t out way the cost. In my case with the exception of work physicals I haven’t been to the doctor in over 7 years. If I do get sick I can go to the doctor for a simple illness for an insignificant amount of money compared to the cost of insurance. The only reason I would purchase insurance at this point in my life is to prepare for the unlikely chance that I could develop cancer, diabetes, or some other illness requiring long term care. For me and likely many people sharing my situation what the health care bill has done is to eliminate the only real reason I had to buy health insurance in the first place. Under the new plan I will have two options get Health insurance or pay a 750 dollar fine. The fine can be paid, and a person can go without insurance without any fear of not being covered in the future, because you can’t be denied for preexisting conditions. Doesn’t this defeat the purpose of insurance? Don’t we get insurance to prepare for the unknown? What the healthcare bill has created is a large portion of a demographic that will still not have insurance but will pay 750 dollars a year in fines.

Health... Auto... What's Next?

In a recent article, it told of the new reversal on a 20 year ban that President Obama announced today. This would increase offshore drilling around the Gulf of Mexico. The EPA and Department of Transportation are expected to sign the final rule on Thursday, declaring new standards for the U.S. auto fleet. This bill forces U.S. automakers to produce vehicles that average 35.5 miles per gallon by 2016 and will start in 2012. How much will this cost the consumer? We all know that hybrid cars get better gas mileage, but they also cost thousands more. This bill by the EPA will raise the prices of cars forcing the average consumer to spend more money on something that might pay off over time. Here is my problem with this. We don’t want to pay the high price for oil that comes from the Saudi Arabia and the Middle East, so we decide to drill for our own oil. Sounds nice, but then U.S. automakers are forced to increase car standards that result in the consumer paying more anyway. Where is the savings? How can President Obama push for economic growth by regulating everything so tightly?

Will the market rally?

In January of 2009, the Federal Reserve started buying mortgage-backed securities that would total $1.25 trillion by the time the program ended at the end of the first quarter of 2009. According to an article in The Wall Street Journal, this program led many investors to buy corporate bonds. The author attributes the “rebound in the stock market” to the bond boom that came as a result of the buyback program.

With the buyback program ending today, some people are questioning whether or not the market is actually as strong as it seems. One portfolio manager, Joe Ramos, points out: “If we have an anemic recovery, then most of the market is overrated.” Jim Sarni, another portfolio manager, however disagrees, saying that the demand for high-yield bonds will sustain itself and the market will continue to rally.

Personally, I think that the bond buying will continue for at least a short period, but I think it will stop sooner than bullish investors like Sarni think it will.

Is Barack Keynesian?

OBAMA is spending more and more and people are bent out of shape. You can find several articles that prove this. EXAMPLE. With all his stimulus packages it proves so.... The real question lingers in asking if he is spending more than other presidents and is he trying to fix other presidents mistakes? Another crucial point is can we fix debt with more debt?


Health-Care Fix

“Obama Signs Fix for Health-Care Measure, Student Loan Program”. This actually might be one good thing that comes out of the health care bill. The US government pays many students interest on college loans already. They might as well keep that money and be able to loan it out to more students as an interest free loan or even better, as bigger Pell Grants.

States' Debt looking like Greek Debt

This graphic shows state debt in three categories: bonds, unfunded pension obligations, and additional liability. The interesting part is the“additional liability” category this essentially represents hidden debt beyond the known pension obligation funding problems. The article this graphic comes from “State Debt Woes Grow Too Big to Camouflage,” Discusses just how bad the situation is as compared to the recent problems in Greece. One of the possible causes of the financial crisis in Greece was after the new Prime Minister announced that about two thirds of the countries total debt had been hidden by his predecessor investors did not pull out immediately, but they were no longer willing to continue investing in Greek debt. Although the author shows both support for trusting that the state debt situation is fine and opposition to that view. The fact that California paid last year’s vendors with i.o.u.’s, but still paid the bonds that came due, seems like the kind of move that won’t cause an investor panic, but could likely reduce future investment into state bonds, much like the situation in Greece.

BRIC's are Building

It is great to see that the BRIC's are helping out other countries. Especially, since that help is going to Africa. With all of the capital that they are receiving, they are slowly increasing productivity as we saw from an earlier article that we discussed in class. With this help they have been able to decrease the debts that they have with the West. Of course this works out to their benefit, because, as the article describes, they are able to receive things like copper and cotton to make finished goods with. We will have to see in the future how great these relationships are for both the BRIC's and Africa.


Economics in One Lesson

For another class, I read this summary of Henry Hazlitt's book, Economics in One Lesson. Thought written more than 60 years ago, his ideas have become more relevant with each passing decade, especially in the context of government spending during the past ten years or so. Even the summary is a bit lengthy, so you'll probably want to just skim it but here are two excerpts:

“It is highly improbable that the projects thought up by the bureaucrats will provide the same net addition to wealth and welfare, per dollar expended, as would have been provided by the taxpayers themselves, if they had been individually permitted to buy or have made what they themselves wanted, instead of being forced to surrender part of their earnings to the state.” (p. 36) "When the government makes loans or subsidies to business, what it does is to tax successful private business in order to support unsuccessful private business.” (pp. 47-8)

When government forcibly redistributes wealth from the rich to the poor, the increased costs that inevitably result cause a reduction in real wages.

Why we should hope the states win their lawsuits.

I found this really interesting article about the differences between US libertarians and their counterparts in the EU, check it out here. It points out that increased centralization decreases tax revenues because people no longer have a reason to "vote with their feet." The subnational governments will then have more trouble paying for projects without help from the central government. Some things are better dealt with at a federal level (national defense) however we must be careful about what powers we give up. Its a slippery slope to give up subnational power to the central government and it leads to less focused representation of individual citizens.

Who is ObamaCare Supporting?

The Wall Street Journal had an article titled “The ObamaCare Writedownsthat focuses on the effects the new healthcare plan will have on business. One of the major selling points of the new healthcare plan was that it will cut healthcare related costs over the next decade. However, it's already having immediate problems in the business world. Businesses like AT&T are making significant writedowns (estimated $1 billion) to compensate for the health bill. Everyone will have health insurance, but at what cost to business? Is it wise to pass something that may help the individual save on health costs or help those who are supporting the individual by giving them a job and monthly paycheck? This new plan neither supports the individual nor the company which leaves one question; who is ObamaCare supporting?


Square pegs & Round holes

The most unsettling part of healthcare reform to me is the amount of opposition present and the fact that it is still being pushed and passed. The President and Democratic Congress are like a child who is angerily pounding a square peg into a round hole just so they can show someone the work they've done. "The reformers' speed belies their words as well. If health care reform is so critically important, as they keep insisting, why not take the time to get it right? Hard as it is to believe, at one point Obama was urging the House and Senate to pass legislation by three weeks after they began debating it."Read more:
One big selling point of healthcare reform is that it will save money over time. I have a hard time believing that the goverment could correctly define "savings" at this point. I have yet to meet someone who believes that making private firms accept everyone as insured and then using goverment money which is generated through taxation to pay the difference of what they can afford and the newly generated cost will save money.
This has all the signs of Socialism written on it and in an economy that is down more taxation and imposed regulation will only slow the process of employment recovery and growth.


Should we follow Canada's example in banking?

In February Paul Krugman compared Canadian and American banking systems and argued that by following the example of the Canadian system, where there was no real mortgage crisis, we could solve many of the problems with US banks, and directly contradicted those who argued against big banks. Now some momentum is growing to regulate US banks after the Canadian fashion and encourage large "mega-banks." In the New York Times this week Peter Boone and Simon Johnson argued that the Canadian example is not the answer. They cite many of the same facts as Krugman, noting that while regulations for lending and leverage are stricter in Canada, in fact Canadian banks are as leveraged or even more leveraged than US banks. They content the only real difference is that Canadian mortgages are nearly all guaranteed by the Canadian government. That in actuality Canadian banks are just as inclined to risk taking as US banks and are even more certain of being able to receive a government bailout should that be necessary. The article even asserts that it is only a matter of time until Canadian banks start failing. These interesting points once again bring into question what exactly was responsible for the most recent financial crisis and exactly how to prevent it from occurring again. It seems that strong regulation could still be advisable at least for things like sub-prime mortgages and oversight into the sorts of risky behavior that government agencies like Fannie Mae and Freddie Mac engage in. The question of large or small banks doesn't seem to have an obvious answer however. While it could be argued that large banks can be more diversified and better able to handle market instability, especially in a well regulated market, the failure of such a large bank could prove catastrophic. On the other hand, with many smaller banks regulation is more difficult and in a crisis many banks could fail, which might not be as severe generally but could have just as dramatic local consequences and increase the amount of distrust in the banks and banking which would have severe consequences for long term economic growth.


New Deal - A Good Idea?

In the article Nostalgia for New Deal Job Plan, Radnofsky talks about how our state mayors have been making proposals that resemble FDR's New Deal programs during the Great Depression. They believe that such efforts can be carried out successfully if done so by local governments. I agree America's cities are in need of a better sense of unity. However, it is not clear how much of a positive effect the New Deal programs really had on our nation. Sometimes too much government intervention just brings unintented consequences. These programs would be focused on our metro cities. This makes since to me only because they, combined, are basically our economic engine. My question is, how much of an impact will the proposals really have on our economic output as a whole? Personally, I don't think it woul be much at all. Also, a great point made in the article, we are starting from a different position than we did back in the 1930's. We are definitely living in a different world today; ofcourse we should be skeptical of such an idea. I am keeping my faith in the private sectors to guide us to some form of a recovery.


Industry Instability through Subsidies

Highly subsidized solar power plants have been producing a lot of power in sunny southern Spain. The hope of this project was to replace dirty coal power with clean, renewable solar power. The project recently took a heavy hit when Spanish government officials came to the conclusion that many of these power plants would have to be subsidized indefinitely. As a result funding was abruptly cut and a cap was placed on solar power plant construction.

This is a good example of government subsidies moving an industry out of equilibrium. If the government subsidies had equaled the environmental costs of coal power generation as perceived by the Spanish public, then the value of the externalities would still be paid through private means in a typical Coasean scenario making the “green” option viable with or without government help. The problem of the government subsidies is the governments have a hard time judging the true cost of an externality thus they often over of under subsidize or over subsidize projects that could be taken care of in the market.



Over the past week I've watched in the news the account of the runaway Toyota Prius down the San Diego freeway. I did some research and I found an article concerning this incident. After reading this article I feel the owner of the car was just trying to cash in on the recent Toyota recall. What has caused this madness? Is it the capitalistic society that we live in today that is making American people so greedy? Or, is just the decline of America’s morals? Economically speaking is it easier to sue a big company for a huge settlement than to make an honest dollar through hard work? Is this a morally or ethically responsible way to operate? I probably have no right to judge this man but, isn’t it ultimately the responsibility of the vehicle owner to ensure the safety of their vehicle?

Has the Stimulus Bill Earned its Title?

As is often the case, Obama's "Stimulus Bill" received its title based off what it was designed to do; the big question, of course, is whether or not it deserves it. Economist Thomas Sowell writes very frequently of the perils inherent in accepting, as opposed to challenging, the validity of the titles of legislation, organizations, and the like. In his article "Stimulus or Sedative," Sowell puts Obama's optimistically named stimulus bill to the test, and ultimately concludes that the bill has indeed done more to harm the economy than help it. This seems to be the universal consensus for conservative economists in regard to this issue, along with most every piece of legislation designed to force the economy into recovery. (I'd bet nearly all of us familiar with Sowell's stances could have guessed his conclusion based off the title alone!)


A Home: An Investment

I found this article in the New York Times called: "Great Time to Buy (Famous Last words)" and I have to say that I do not completely agree with what Frank Llosa,a real estate agent working in northern Virginia, says: “People are frequently buying for the wrong reasons,” . “In most cases, he says, they think that they are getting an income tax break or that their home is an investment.” From my point of view, buying a home as an investment is a good reason to buy a home.
I have been at SUU for close to four years now and, I have never heard one of my economics or finance professors say that buying a home is not a good investment. I ran some numbers to justify my point of view and this is what I found. My roommate and I pay $700 a month for renting a house in Cedar City, UT. We would pay this amount (700*12 months * 50 years) = 420,000 over our life time. Comparing this to if we were to borrow a $300,000 loan at 6 percent equals $367,680. There is a huge difference here, I can buy a home for $367,680 over 30 yrs and save $52,320 over 20 yrs not paying rent. I’m not counting the increase in value my home will gain over 30 yrs or the money I will be saving not making a mortgage payment over the next 20 yrs. What if I wanted to move and sell my house? Yes, the housing market could be in a slump and I might not recoup all the money I borrowed from the bank. So I lost some money but I also lose for paying rent for fifteen years and I decide to move. When housing prices rise rental fees rise, they do not remain the same. My conclusion it is always a good investment to buy a home when you are planning on staying somewhere for a long time.

An Austrian View on Health Care

This article was written regarding, the recent complaints about Congress’s failure to pass a health care bill. The article makes several good points.

1) This article notes that the state of US politics is not in an unusual position considering that we have changed into a large democratic regulatory-welfare state.

2) Secondly, the US is functioning as a large democratic regulatory-welfare state ought to.

3) Thirdly, because this article came from an Austrian School website, it also discusses the inherent inefficiencies of a command economy as would be the case with the bureaucratically run health care system as planed by the left.

Why Do People Trust Officials More Than Businesses?

The post "A Thought Experiment" on CafeHayek takes a quick look at the disparity of public opinion between elected officials and businesses. People seem to be more willing trust based on words than actions. Russ Roberts then poses a question about what would happen to a charity if it somehow became a public charity with a much larger budget and an elected official in charge. Read it and think about what would happen in that scenario.


Graphing Obama's Budget

Here is a post from Harvard professor Dr. Greg Mankiw about the president's budget from the CBO (Congressional Budget Office). As you can see, the CBO and the president disagree on where the line needs to be drawn as to what is too much spending. This comes as no surprise to anyone who follows Mankiw because he has written many posts against the healthcare bill and other bills that would increase spending. One thing to note about this graph is that it start's this year and moves in the future. So although the numbers are pretty accurate and the CBO would have a better idea than just about any other organization, this graph is only an prediction. As we have discussed in class, America is on the track to a rising GDP vs. Debt ratio. This is not necessarily a world-ending scenario but it is definitely something that the American people should be concerned about.


Changes in the Fed

Vice chairman of the Federal Reserve Donald Kohn is going to step down. This means that there will be three new seats for Obama to fill. This article is one that I found in The New York Times on the front page of Tuesday, March 2 paper. You can see the full article online at this link. Ben Bernanke will still be in charge of the Federal Reserve, but it will be interesting to see who will be filling the empty positions. The article talks about three individuals who Obama is eyeing to fill the positions. Daniel K. Tarullo, Kevin M. Warsh and Elizabeth A. Duke.

Unemployment Rate Graph

I found a simple graph of the whole countries unemployment over the last 20 years. The graph allows you to add on and compare any state, or county in a state, to the countries unemployment rate as a whole. I thought it was a good visual for comparison because it shows the big picture with just enough detail for comparison. Look up and compare your home town/county and see if you really do have in tough in comparison or not. Check out the counties in Michigan!


Pride? What is it good for?

After Speaking to Dr. Tufte, he gave me a cite that i found very interesting. Countries don't trade with each other people do. A country is nothing but a borderline of land, so why do some think that we must compete with others? I'm going to take the viewpoint that our "pride" is created by a cultural institution that makes us want to be better people; better than the next you could say. This pursuit to be better is a strong economic drive. We eliminate complacency and low self-satisfaction of our own lives and we search out our dreams. Many may have seen this mindset does not exist outside of our country borders when visiting third world countries. We have no limitations which makes us want to be better. Pride is a good thing as an individual basis which creates "pride" for our country.