Assorted links (4/27/2011)

Here’s a list of articles that I have been reading lately:

What Professor Obama Doesn’t Understand

Quoting from this article, “…after just one term of office he (Obama) will have run up more national debt in four years than all prior Presidents combined, from George Washington to George Bush.”

Robert W. Fogel Investigates Human Evolution

“A Nobel-winning economist and his colleagues track the startlingly fast changes in human height and longevity since 1700.”

The Fed vs. the FDIC on Lehman’s Failure

“A recent FDIC report on Lehman Brothers’s financial condition before its failure puts in doubt the Federal Reserve’s account of its decision-making, and raises significant questions about the nature of the financial crisis.”

The Tehran-Damascus Axis

“In The Wall Street Journal, Amir Taheri writes that reports of Iranian snipers gunning down Syrian democracy activists are credible given the deep military and intelligence ties between the regimes.”

Medicare As We’ve Known It Isn’t an Option

“In The Wall Street Journal, Betsy McCaughey writes that Congressman Paul Ryan’s premium support plan is preferable to President Obama’s rationing panel.”

Inside Every Leftist Is a Little Authoritarian Dying to Get Out

“As Friedrich Hayek explained in The Road to Serfdom (1944), when democracies allow government to direct economic activity, the inevitable failures lead to calls for a more authoritarian form of governance.”

Economists in the Wild

“Far from damaging brains and killing seals, applying basic economics to the environment preserves it.”

A Glimpse Behind the Commodity Trading Curtain

University of Houston finance professor Craig Pirrong provides a clear and succinct case study (based upon recent Russian wheat and corn shortages) concerning how speculation can actually improve the allocation of resources.

Cutting Expenditure Is A Good Thing

“The crucial question facing the United States is whether the current path of federal expenditure is vital to our economic well-being. If so, then the U.S. faces a grim economic future. This path implies an exploding national debt, and the taxation necessary to tame the debt would cripple economic growth.”

Why Isn’t China Democratizing? Because It’s Not Really Capitalist

“The presence of markets and economic exchange does not make a country capitalist.”

Diagnosing Krugman

This may very well be the clearest and most succinct essay explaining the philosophical divide between liberal and conservative political perspectives that I have ever read, by the Economist’s Will Wilkinson (HT to Don Boudreaux (cf.

What’s Left of the Left

“Paul Krugman’s lonely crusade.”

Bad News on Gasoline Prices–What Government Should Do in Response

“As gas prices in the United States continue their relentless march upward, the political question of the hour is what, if anything, the United States government should do about the situation.”

The Freedom Movement Comes to Syria

“It was inevitable that the caravan of Arab freedom would make its appearance in Syria. It was there, three decades ago, that official terror hatched a monstrous state—and where practically everything Arabs would come to see in their politics in future decades was foreshadowed.”

How Health Reform Punishes Work

“In The Wall Street Journal, Stanford University Professor Daniel P. Kessler notes that the government subsidies that will be offered to buyers of qualifying insurance policies in the new health insurance exchanges will induce sharp reductions in the supply of labor.”

Time for a Cease-Fire in the War on Oil

“In The Wall Street Journal, Joseph Mason writes that the Obama administration’s policies are depressing the domestic production of oil.”

A Case for Hell

“While large majorities of Americans believe in God and heaven, belief in hell lags. How did they lose the fear of damnation?”

The White House Wants a List

“Want a federal contract? Show politicians the money.”

What S&P had to say about taxes

“BOTH Paul Krugman and Ezra Klein argue that America is lightly taxed, relative either to other countries or to history. But why take it from them?”

Notable & Quotable

“Columnist David Harsanyi says that more and more people make others pay for their votes as they become increasingly disconnected from the cost of government.”

A Little Advice from Bernankes Old Teacher

“Stanley Fischer, the governor of the Bank of Israel who mentored Ben Bernanke at MIT, has some advice for his former student and other central bankers around the world on how to prevent financial crises like the one that swept over the world in 2008.”

California Dreamin’—of Jobs in Texas

“In The Wall Street Journal, John Fund writes that hounded by taxes and regulations, employers in the once-Golden State are moving East.”

AIG Tries to Sell Securities Based on Death-Bets

“American International Group in recent weeks has sought to rally support among investors and credit-ratings firms for a controversial deal: the sale of securities backed by insurance policies on the lives of older people.”

America’s credit rating: Wakey, wakey

“Standard & Poor’s may not have said anything new. That’s no reason for American politicians to ignore it.”

The Gospel According to Hollywood

“Warner Brothers and Cecil B. DeMille have led countless people to Christianity.”

John B. Taylor: Obama’s Permanent Spending Binge

“If government got by with 20% of GDP in 2007, why not in 2021, when GDP will be substantially higher?”

Government Mortgage Guarantees Are Unnecessary

“Many predict calamity for the housing markets without them. Federal Reserve data tell a different story.”

Matthew Kaminski: Searching for Hayek in Cairo

“To make democracy stick, the Arab Spring now needs an economic revolution.”

Henninger: Obama’s Likability Gap

“Obama today is different than the 2008 candidate.”

In defense of Paul Ryan’s Medicare plan – Fortune Finance

“The House budget chairman’s vision of bringing the market to Medicare isn’t perfect, but it’s the best choice in a world of poor alternatives.”

Here’s What Happens When The US Treasury Hits “The Desperation Stage”

“When the debt ceiling fight really gets hairy.”

Obama 2012, the dollar and the stink of instability

“President Obama’s approval/disapproval ratings are now an upside-down 45 percent/50 percent, according to the RealClearPolitics average. If those numbers were to hold until Election Day 2012, Obama would be a decided underdog for a second term, at least that is what statistical  modeling tells.”

Make the rich pay their “fair” share!

Another political narrative/canard that you can “set your watch to” (other than the gas “price-gouging” canard) is this notion that the so-called “rich” people (i.e., folks other than you and me) don’t pay their “fair” share of taxes.  In the current policy environment, one of the two major political parties wants to retain the Bush era tax rates for the “non-rich” (defined as  families earning less than $250,000 per year and individuals earning less than than $200,000 per year) and revert back to the Clinton-era tax rates for the “rich”.   Indeed, in a recent speech, President Obama noted that “…at a time when the tax burden on the wealthy is at its lowest level in half a century, the most fortunate among us can afford to pay a little more.”

I am curious what President Obama’s source is for this statement. Clearly, the top marginal personal income tax rate is considerably lower now than it has been in the past; e.g., 50 years ago (when JFK was in office), the top marginal personal income tax rate was 91%, whereas today it stands at 35% (under Clinton, it was 39.6%).  However, just because the top marginal personal income tax rate is lower now than it was under previous Democratic administrations, this does not automatically translate into a lower tax “burden” per se (assuming that “burden” is defined as the actual dollar amount relative to income that people actually pay).  Indeed, my Baylor colleague Dave VanHoose pointed out a recently published Tax Foundation article entitled “No Country Leans on Upper-Income Households as Much as U.S.” which documents that the U.S. has by far and away the most progressive personal income tax system amongst 24 OECD countries.  Here’s a particularly important table from this article:


Quoting from the Tax Foundation article, “…the top 10 percent of households in the U.S. pays 45.1 percent of all income taxes (both personal income and payroll taxes combined) in the country. Italy is the only other country in which the top 10 percent of households pays more than 40 percent of the income tax burden (42.2%). Meanwhile, the average tax burden for the top decile of households in OECD countries is 31.6 percent.”  Thus, in the U.S., the current policy is to have “…the wealthiest households in this country pay a share of the tax burden that is one-third greater than their share of the nation’s income.”  Furthermore, this share (see column 3 in the table above) is 24 percentage points higher than the average for the countries listed there.  Apparently the ante for “rich” Americans may be going up!


Is gas “price-gouging” to blame for high gas prices?

President Obama raised this question a couple of days ago during a “town hall” meeting in California. The MSNBC article entitled “Obama says new task force will examine gas prices” quotes him as saying, “”We are going to make sure that no one is taking advantage of the American people for their own short-term gain.” This article also quotes the President as saying that “The task force will focus some of its investigation on “the role of traders and speculators” in the oil-price surge”.

An article which appeared in the The Globe and Mail entitled “U.S. launches probe into energy prices”, notes that “U.S. Attorney-General Eric Holder made no allegation of wrongdoing against companies or speculators on Thursday. But the multi-agency Financial Fraud Enforcement Working Group will play a key role in identifying fraud in the energy market, he said” (italics added for emphasis).

While the notion that “high” gas prices result from “price gouging” by a cadre of unsavory and greedy oil companies, energy traders, and speculators makes for a provocative political narrative, it’s really bad economics. As canards go, this one is particularly favored by the political elites; indeed, as Tim Evans, energy analyst with Citi Futures Perspectives, told Reuters news service, “You can almost set your watch on these kinds of things.”

I can think of several reasons why gas prices are high compared with historical norms and likely to remain so for some time:

  1. Rising demand from emerging markets (particularly China and India)
  2. Risks of supply chain disruptions due to the ongoing political upheavals in Libya and the Middle East
  3. Domestic supply constraints due to the ongoing deepwater drilling moratorium in the Gulf of Mexico
  4. The ongoing depreciation of the value of the US dollar vis-a-vis foreign currencies. The Federal Reserve’s major currencies index (which measures the foreign exchange value of the U.S. dollar against a subset of currencies in the broad index that circulate widely outside the country of issue) currently stands at 20–year lows. Since this past January, the value of the US dollar compared with other major foreign currencies has fallen by nearly 5%. Since trading in the global oil markets is dollar denominated, some of the rise in gas prices can be attributed to this factor alone.

Therefore, in order for gas prices to become cheaper for Americans, this will require some combination of 1) a slowdown in the global economy, 2) a favorable resolution of political risks in the Middle East, 3) a credible commitment on the part of the US government to rescind its deepwater drilling moratorium, and/or 4) a recovery in the value of the US dollar vis-a-vis other currencies.

Assorted Links (4/20/2011)

Here’s a list of articles that I have been reading lately:

Government Cash Handouts Now Top Tax Revenues

“U.S. households are getting more cash handouts from the government than they are paying in taxes for the first time since the Great Depression.”

The Default Major: Skating Through B-School

“Where’s the rigor? Undergraduate business has an image problem.”

Can business be taught?

“THERE was a time when higher education was only available to an elite few. These students studied the ideas of great thinkers, literature and history.”

The $4 trillion gap: Obama vs. Ryan, an apples-to-apples budget comparison

“OK, let’s try and actually compare the new Obama budget plan — “The Framework for Shared Prosperity and Shared Fiscal Responsibility” — with Rep. Paul Ryan’s “Path to Prosperity.” My calculations — partly based on work done by Goldman Sachs — find that the Ryan Path would save more than double, 130 percent. In dollars, it’s a difference of $3.9 trillion.”

Here’s JPMorgan’s Chilling Report On “The Domino Effect Of A US Treasury Technical Default”

“Lehman 2.0.”

Not even a deck chair on the Titanic

“A Congressional Budget Office analysis of the fiscal 2011 spending deal that Congress will vote on Thursday concludes that it would cut spending this year by less than one-one hundredth of what both Republicans or Democrats have claimed.”

The Man of Sorrows Motif Over Time

“”Passion in Venice,” now at the Museum of Biblical Art, looks at a specific form of Christ’s Passion and the evolution of its depiction.”

The Other Medicare Cutters

“Obama’s plan relies on a politically insulated board of experts.”

When Big Government Goes to College

“In The Wall Street Journal’s Main Street column, William McGurn writes that the more the feds try to lower the cost, the worse the problem becomes.”

Kathryn Schulz: On being wrong | Video on

“Most of us will do anything to avoid being wrong. But what if we’re wrong about that? “Wrongologist” Kathryn Schulz makes a compelling case for not just admitting but embracing our fallibility.”

Freakonomics » Here’s Why Health Care Costs Are Outpacing Health Care Efficacy

“In a new working paper called “Technology Growth and Expenditure Growth in Health Care”, Amitabh Chandra and Jonathan S. Skinner offer an explanation.”

Digital Innovators vs. the Patent Trolls

“In The Wall Street Journal, Peter Huber says that too many junk patents are being granted, clogging the courts and introducing confusion into the process of innovation.”

The race to the bottom…

Here’s a pretty scathing article (reproduced below) about business education from The Economist website entitled “The race to the bottom”.  At least the article recognizes that “It is notable that students who focus on “hard” subjects, such as finance, put in much more work than those who study “leadership” and the like.”

“IN MY day people who wanted an easy time at university studied geography or land management. Now, in the United States at least, the soft-option of choice is business studies. Business students of various sorts are the most numerous group on American campuses, accounting for 20%, or more than 325,000, of all bachelor degrees. They are also, according to a long article in The Chronicle of Higher Education, by far the idlest and most ignorant.

Business majors spend less time preparing for class than do students in any other broad field: less than 11 hours a week in the case of more than half of them. Not coincidentally, they also register the smallest gains in test scores in their first two years in college. One student, with a respectable 3.3 grade-point average, describes his typical day: “I just play sports, maybe go to the gym. Eat. Probably drink a little bit. Just kind of goof around all day.”

What accounts for this educational wasteland? To some extent it is a matter of self-selection. Many people choose business studies precisely because they don’t have a lot going on upstairs. And they prefer to spend their time networking and looking for jobs rather than, say, grappling with Schumpeter’s ideas about business cycles. But universities also bear some of the blame. Many universities have treated business studies as a cash cow: there is lots of demand, business students do not require expensive laboratories, and business academics can supplement their incomes with outside consultancy. Business studies is also a mish-mash of subjects, many of them soft and ill-defined, like leadership and business ethics. It is notable that students who focus on “hard” subjects, such as finance, put in much more work than those who study “leadership” and the like.

Students also complain about the quality of teaching. Why pay attention in class when all the instructor is doing is regurgitating chunks of a textbook? And why bother stretching yourself intellectually when the university does not seem to know what you are supposed to be studying (is business studies a branch of economics or psychology, international relations or history?)

Whatever the explanation, the dismal state of business education is beginning to register in popular culture, and presumably reduce the job prospects of the people who study it. In “Futurama”, Gunther decides to give up studying science, which is too demanding, and reconcile himself to a future as a moderately successful monkey who wears a suit to work. He enrolls in business school.”

Assorted Links (4/18/2011)

Here’s a list of articles that I have been reading lately:

Digital Innovators vs. the Patent Trolls

“In The Wall Street Journal, Peter Huber says that too many junk patents are being granted, clogging the courts and introducing confusion into the process of innovation.

The President’s “matching deficit reduction” claim is off by a trillion dollars (or more)

“Now, one plan put forward by some Republicans in the House of Representatives aims toreduce our deficit by $4 trillion over the next ten years.”

Firms Tip Scale Back in Favor of Stocks

“In Expedia’s planned spinoff of travel media unit TripAdvisor, chalk up another point for shareholders in the battle of stocks versus bonds.”

S&P Cuts U.S. Ratings Outlook to Negative

“Standard & Poor’s cut its outlook on the U.S. to negative, increasing the likelihood of a potential downgrade from its triple-A rating, as the path from large budget deficits and rising government debt remains unclear.”

Market Mauled As S&P Cuts U.S. Debt Outlook To Negative

“Ratings agency affirms AAA rating, but expresses concern about budget uncertainty.”

Students are drowning in debt

“THIS year American student-loan debt surpassed credit-card debt for the first time. More students are borrowing more money than ever before in order to buy a commodity that is often of dubious value.”

Tax the Rich! Tastes Great, Less Filling

“Tax The Rich! As an applause line it never fails. The desire to equalize economic outcomes runs strong if you believe that the rich got that way by theft, the poor got that way through no fault of their own, and tax hikes don’t influence economic growth.”

Where the Tax Money Is

“The Wall Street Journal says that President Obama targets the middle class while pretending to tax only the rich.”

The 30-Cent Tax Premium

“Arthur B. Laffer writes in The Wall Street Journal that tax compliance employs more workers than Wal-Mart, UPS, McDonald’s, IBM and Citigroup combined and drags down the overall economy.”

Reliable Tally of Gay Population Proves Elusive

“A demographer studying the size of the gay, lesbian and bisexual population has come up with a figure smaller than the 10% number that was once widely used. But social scientists say they are far from making a definitive estimate.”

On Green Energy: Renewable Energy Fails to Green the U.K. Economy

“Pursuing a new green energy economy in the United Kingdom has led to lost jobs and higher energy prices.”

Ultimate Spoiler Alert

“With President Obama and Paul Ryan having developed a cold contempt for the other’s position, where will the budget wars take us next?”

The Obama Growth Discount

“In The Wall Street Journal, former Sen. Phil Gramm writes that if Barack Obama matched Ronald Reagan’s post-recession recovery rate, 15.7 million more Americans would have jobs.”

Obama Is Likely to Lose

“But Republican unseriousness may be his trump card, Peggy Noonan argues.”

Why Conservatives Are Angry at Obama’s Debt Speech

“The reasons why they found it disingenuous and distasteful.”

Drugs: The Price Is Right

“AARP continues to mislead the public about the true trend and nature of pharmaceutical prices by maintaining a narrow view of the market.”

Alan J. Reynolds: Obama’s Soak-the-Rich Tax Hikes Won’t Work

“Income tax revenues have been remarkably stable at 8% of GDP, regardless of tax rates. The way to increase revenue is to grow the economy.”

Henninger: Who Do You Trust?

“Obama and Ryan agree: This is a “defining moment.””

The Presidential Divider

“Obama’s toxic speech and even worse plan for deficits and debt.”

Donald L. Luskin: Remembering the Real Ayn Rand

“The author of “Atlas Shrugged” was an individualist, not a conservative, and she knew big business was as much a threat to capitalism as government bureaucrats.”

Assorted Links (4/13/2011)

Here’s a list of articles that I have been reading lately:

Today’s Obama Speech: Nearly as deceitful as it was dull

“Heartland’s Steve Stanek found President Obama’s speech less than inspiring.”

Understanding the President’s New Budget Proposal

Keith Hennessey breaks it all down for us!

Freakonomics » Clearing Out the “Rubber Rooms”

“Steven Brill’s excellent 2009 article on New York City’s “Rubber Rooms,” classrooms filled with teachers accused of misconduct or incompetence, provoked understandable outrage at New York’s beat-up school system. Now, two years later, it seems many of these teachers are being returned to the classroom…”

Little Girl Frisked By TSA

“Thought those pesky TSA pat-downs were old news? This video of a six-year-old girl getting frisked has been making waves, rekindling the debate over airport security.”

Back to the Future

“In his first floor speech, Senator Ron Johnson reviews more than a century of bigger government.”

Chicago School Bans Homemade Lunch

“Nobody likes being the kid whose mom packs the worst lunch, but isn’t this taking things a little too far?”

Perry ally pushed reforms at A&M, records show

“The architect of some of Gov. Rick Perry’s higher education reforms has worked closely with Texas A&M University System officials on implementing the controversial recommendations, records obtained under the Texas Public Information Act show.”

The Lessons of Fort Sumter

“In The Wall Street Journal, Global View columnist Bret Stephens writes that there is no substitute for principled leadership in war.”

There Is No Male-Female Wage Gap

“In The Wall Street Journal, Carrie Lukas of the Independent Women’s Forum writes that a study of single, childless urban workers between the ages of 22 and 30 found that women earned 8% more than men.”

The Constitution Doesn’t Mention Czars

“George Shultz writes in The Wall Street Journal that unaccountable White House aides are a product of a broken cabinet-nomination process. This is not the form of government the Founders intended.”

We’re in a Bubble and It’s Not the Internet. It’s Higher Education.

“Fair warning: This article will piss off a lot of you. I can say that with confidence because it’s about Peter Thiel. And Thiel – the PayPal co-founder, hedge fund manager and venture capitalist – not only has a special talent for making money, he has a special talent for making people furious.”

Obama Is Missing

“Where’s the Democratic vision on the budget?”  Even Paul Krugman of all people is unhappy about what’s going on these days with the POTUS!

The Fed’s Interest Rate Risk

“To make financial conditions more supportive of economic growth, the Federal Reserve has purchased large amounts of longer-term securities in recent years. The Fed’s resulting securities portfolio has generated substantial income but may incur financial losses when market interest rates rise.”

April 11: The Most Boring Day in History

“Last year, the computer program True Knowledge concluded that the most boring day in human history occurred, 57 years ago today. Using algorithms that used weighted values for more than three million facts including historical events, birthdays of significant people, etc., it determined that April 11, 1954, was really, really uneventful.”

Drivers start to cut back on gas as prices rise

See for an interesting assortment of anecdotal evidence concerning the effect of high energy prices on all sorts of different transactions, all noted by Harvard’s Greg Mankiw the last time that we had an oil price shock (in July 2008)…

Fort Sumter: Undermanned, Outgunned, Low on Supplies

“When the election in 1860 of Abraham Lincoln, a Republican whose party advocated slavery’s abolition, sparked slave-holding states in the Deep South to secede from the union, many took the forts on their territories with them. By early 1861, rebel forces had seized almost all but two major federal installations: Fort Sumter in Charleston, S.C., harbor and Fort Pickens outside Pensacola, Fla.”

PIMCO Officially Goes SHORT The US Treasury Market

PIMCO is betting that prices of US Treasuries will likely fall substantially, and yields rise…

The Auto Bailout and the Rule of Law

GMU Law Professor Todd Zywicki explains how the auto bailout undermined the rule of law and promoted crony capitalism…