Wednesday, March 31, 2010

On the new college loans law

National Review:

First, the leeches have hardly been burned off. Sallie Mae and a few other now-former lenders have been promised big federal contracts to service loans under the new regime, so don’t worry — they’ll still get theirs.

Second, though this isn’t a federal takeover of anything close to a truly private market, it is marginally worse, from a free-market perspective, than the status quo ante. At least until the recent credit crunch, firms in the guaranteed-lending program got their money through capital markets, keeping at least a small amount of discipline about whether students won the capital that everyone was competing for. Now students will just take their dough from the Treasury.

In addition, some truly private student lending still goes on, but banks forced out of federal lending will almost certainly get out of the much smaller private sector for lack of economies of scale. And, of course, Uncle Sam will offer terms on the taxpayer’s back that are far more generous than any company with its own money at stake could proffer.

Oh, and don’t expect an honest accounting of how much taxpayers are losing on the deal. As the CBO has made clear, there’s a big difference between the rosy forecasts they have to make for official bill scoring and reality, which accounts for such non-trivial things as lending risk.

Third, the president’s goal of having a greater percentage of college graduates than any other nation in the world by 2020 — which this expansion of aid is supposed to help accomplish — is economically dubious. We already have far more four-year degree holders than we have jobs for them — to say nothing of whether we have the right four-year degrees for the jobs — and the greatest numerical growth in employment in the coming decade is supposed to be primarily in jobs requiring only on-the-job training. So what we are heading for if the president gets his profusion of sheepskins is not a stronger economy, but a much less efficient one.

The biggest lie of all, though, is that this will make college more affordable. While the president and others carry on about the extra money and generous terms they’ll put into Pell Grants and federal loans — the message that will buy them the most votes — they conspicuously ignore that colleges can and will raise their prices to capture all that aid. I mean, ever wonder why for decades college prices have risen much faster than incomes? It’s largely because taxpayers have been paying more and more of the bill.
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Policing for profit




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Hitler and 'universal health care'

Just sayin'.

Mises:

Hitler, the Humanitarian

It is a fact, and a very remarkable one, that the great demagogues of our age appear to be greatly worried about the health of their subjects. No one was more so than Adolf Hitler. His racism was the last word in "biological" demagoguery, unless the new antihereditary biology of the Soviets exceeds it, an expression of the identical nationalistic purpose. In terms of political results, it was a most effective demagoguery due to its emphasis on health and virility. As a committee report on health insurance of the Canadian House of Commons put it (March 16, 1943): "During the early years of Hitler's regime, the government's medical program was looked upon by many observers as one of the greatest props of the totalitarian state."

Before coming to power, the Nazis were violently critical of the social-insurance setup, considering it a weapon in the hands of their enemies, the Social Democrats. They objected especially to the extravagance and corruption in compulsory medicine and to its alleged effect in "softening" German manhood. Thereby they earned the applause of doctors as well as of businessmen and the approval of the disgruntled middle classes.

They promised thoroughgoing reform and drove their opposition home so forcefully that Chancellor Brüning was constrained to introduce in 1931–1932 several measures affecting the medical care system which were most unpopular with labor. A three-day waiting period before cash benefits became available was made mandatory. A small tax ("deductible") on prescriptions and a levy of fifty Pfennigs on each quarterly sickness ticket of the patient were imposed. This charge of twenty cents in American money per quarter, imposed on patients many of whom were unemployed, resulted at once in cutting the number of applications by about one-quarter! But these "deflationary" measures, together with the liquidation of the totally bankrupt unemployment insurance, also had the consequence of arousing an ill-feeling among the workers which had no small influence in bringing down the house of the Weimar Republic. Brüning took the blame; Hitler got the credit.

Once in power, the latter soon reversed his strategy. The ill-famed Dr. [Robert] Ley, boss of the Nazi labor front, did not fail to see that the social-insurance system could be used for Nazi politics as a means of popular demagoguery; as a bastion of bureaucratic power; as an instrument of regimentation, and as a reservoir from which to draw jobs for political favorites and loanable funds for rearmament. Brüning's extra tax on panel patients was cut in half. By 1935, with Hitlerian full employment under way, the few pennies of extra tax represented a purely nominal charge. The sting was taken out of it.

The führer gained in popularity by reducing to negligible proportions an unpopular measure which he himself had instigated. He lost no time in making a positive contribution of his own to the organization of compulsory medicine by extending it in 1939 to small business (handicraft), by tightening it in Austria (1938), and by establishing compulsory healthcare in occupied Holland (1941). One of his last "social" measures, in March 1945, was to have workers in certain irregular types of employment included. But his attempt to abolish the autonomy of the panels and to regiment them by centralization had been checked by the concerted resistance of the medical profession, the panel bureaucracy, and public opinion. Similar abortive attempts at complete bureaucratization of the panels were made under the Kaiser in 1909 and in the Weimar Republic's revolutionary days in 1919. The same goal is on the Social Democratic Party's agenda again in 1949.
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Reason on public workers

By law 40% of all public spending in California has to go to education. ...Holy crap.




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Should people be able to donate kidneys for money?

Uh, of course.

USA Today:

Paying people for living kidney donations would increase the supply of the organs and would not result in a disproportionate number of poor donors, a study by researchers from the University of Pennsylvania and the Philadelphia Veterans Affairs Medical Center concludes.

The study, published this month in the Annals of Internal Medicine, asked 342 participants whether they would donate a kidney with varying payments of $0, $10,000 and $100,000. The study called for a real-world test of a regulated payment system.

The possibility of payments nearly doubled the number of participants in the study who said they would donate a kidney to a stranger, but it did not influence those with lower income levels more than those with higher incomes, according to Scott Halpern, one of the study's authors and senior fellow at the University of Pennsylvania's Center for Bioethics.

Though it is illegal to buy or sell any organ in the USA, payments are accepted for those who become surrogate mothers, donate eggs or participate in clinical research, Halpern says.

[...]Fewer than 100 people give living kidney donations to strangers each year, Ross says, but up to 30% of respondents in the study said they would donate to someone they didn't know even without payment. This inconsistency, Ross says, means participants said what they thought they should say, not what they would do in a real-world situation.

[...]Last year, 6,475 people died while on the waiting list for an organ transplant, and 4,476 were waiting for a kidney transplant, according to the Organ Procurement and Transplantation Network, part of the Health and Human Services Administration.
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Greenwald on Cass Sustein as potential Supreme Court nominee

There's plenty more there, but I'm just quoting this part. Highly recommended if you don't know who Cass Sunstein is.

Glenn Greenwald
:

A media consensus has emerged that the retirement of Supreme Court Justice John Paul Stevens, the 90-year-old Ford-appointee who became the leader of the Court's so-called "liberal wing," is now imminent. The New York Times' Peter Baker has an article today on Obama's leading candidates to replace Stevens, in which one finds this strange passage:

The president’s base hopes he will name a full-throated champion to counter Justice Antonin Scalia, the most forceful conservative on the bench. . . . The candidates who would most excite the left include the constitutional scholars Harold Hongju Koh, Cass R. Sunstein and Pamela S. Karlan.
While that's probably true of Koh and Karlan, it's absolutely false with regard to Sunstein, who is currently Obama's Chief of the Office of Information and Regulatory Affairs. From the beginning of the War on Terror, Cass Sunstein turned himself into one of the most reliable Democratic cheerleaders for Bush/Cheney radicalism and their assault on the Constitution and the rule of law.
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Did Tea Partiers say 'racist epithets?'

Lew Rockwell:

Saturday’s “never mind” moment will live in infamy as the Congressional Black Caucus claimed the N-word was hurled 15 times. YouTube video shows that at least two of the men in the procession were carrying video cameras and holding them above the crowd. They have not come forth with evidence to show that even one person hurled the vile racist epithet. The video also shows no head movement one way or another. Wouldn’t the N-word provoke a head turn or two? Is it really possible that in 2010, in a crowd of 30 or 40 thousand people – at the center of a once-in-a-lifetime media circus – not one person’s flipphone, Blackberry, video recorder or a network feed caught a single incident? And if not, then at least someone could have found an honest tea partier to act as an eyewitness – or the Congressional Black Caucus would have confronted the culprit(s). If that had happened, there would be an investigation to see if the perpetrator was a left-wing plant.
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Tuesday, March 30, 2010

Fusion centers and the MIAC report

Lew Rockwell:

“People don’t know what fusion centers are,” says Catherine Bleish, who was the opening speaker at the 2010 New Hampshire Liberty Forum on March 19.

Fusion centers were created after the September 11, 2001, terrorist attacks as a way for local and state law enforcement agencies to share terrorism related information with the federal government, and vice versa. The idea quickly ran into problems, first among them the fact that there simply isn’t enough terrorist activity to justify the concept. Instead of shutting down as pointless, fusion centers gradually began expanding into sharing information about all crimes. Fusion center activity over the years has also raised concerns about government surveillance of legally protected political activity.

Bleish, who was led into becoming an activist by the 2008 Ron Paul presidential campaign, said she was informed of a report published by the Missouri Information Analysis Center, leaked in March 2009, which stated among other things that people with Gadsden flag and Ron Paul bumper stickers could be militia members or potential terrorists. Bleish, who is the executive director of the Liberty Restoration Project, spearheaded further investigation and activism, eventually leading to MIAC retracting the report.

“MIAC is a Department of Homeland Security fusion center,” she said during her speech. “These institutions are doing a lot of damage to the relationship between the general public and the law enforcement community.”
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Saturday, March 27, 2010

How do Republicans really feel about the individual mandate?

AP:

Republicans were for President Barack Obama's requirement that Americans get health insurance before they were against it.

The obligation in the new health care law is a Republican idea that's been around at least two decades. It was once trumpeted as an alternative to Bill and Hillary Clinton's failed health care overhaul in the 1990s. These days, Republicans call it government overreach.

Mitt Romney, weighing another run for the GOP presidential nomination, signed such a requirement into law at the state level as Massachusetts governor in 2006. At the time, Romney defended it as "a personal responsibility principle" and Massachusetts' newest GOP senator, Scott Brown, backed it. Romney now says Obama's plan is a federal takeover that bears little resemblance to what he did as governor and should be repealed.

Republicans say Obama and the Democrats co-opted their original concept, minus a mechanism they proposed for controlling costs.

[...]In the early 1970s, President Richard Nixon favored a mandate that employers provide insurance. In the 1990s, the Heritage Foundation, a conservative think tank, embraced an individual requirement. Not anymore.
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How much is one trillion?



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Illinois on the verge of having a 4 day school week

This is truly unbelievable. I wonder how long we can go without looking at the true cause of this problem. Let's take a look at this:

Charter school funding: $6,585 per pupil; public school funding: $10,771 per pupil.

NYC charter schools destroy NYC public schools in assessment tests.

The real cost in public schools is 44% higher than stated in the five cities surveyed due to capital costs, debt service, and employee benefits.

But our first move should be to reduce the school week? Hmmm.

CBS2 Chicago:

State House Has Passed Bill Allowing School Districts To Set Up Shorter Weeks; Mayor Daley Has Doubts.

Add an entire school day to the chopping block. State lawmakers want to move financially struggling schools to four day weeks. They say it will save money, and it won't affect classroom time.

The superintendent of one local school district believes the plan could work.

"I think it's something we should take a look at," said Dr. Kamala Buckner,Superintendent of Thornton Township High Schools District 205.

It's an intriguing proposal because district 205 faces a $5 million deficit next year and Buckner sees a shortened week as a viable option.

"That means the heat is not on, the lights are not on, we don't have to worry about cleaning the building," Buckner said.

The final vote on the bill was 81-21. It will now go to the state Senate.

State Rep. Bill Black (R-Danville) was the sponsor of the bill. He told the Chicago Tribune he proposed the idea after a school superintendent in downstate Vermilion County complained about increasing fuel costs associated with bussing rural children to school.

Daley said lawmakers should look for other ways to save money. He suggested having state workers take unpaid furlough days, the system that has been implemented in Chicago for city workers.
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Why everybody's freaking out about the end of Fed mortgage buying

Business Insider:



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Friday, March 26, 2010

Cato on the Citizens United case

I think it's surprising how much speech that Citizens United case would have curtailed. Also, as Reason says here, 26 states already allowed the donations in the same context as the Citizens United case.




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Transportation Secretary tries to favor walking over cars

CNS News:

Transportation Secretary Ray LaHood has announced that federal transportation policies will no longer favor “motorized” transportation, such as cars and trucks, over “non-motorized” transportation, such as walking and bicycling.

[...]“It is a way to coerce people out of their cars,” said LaHood.

The moderator later asked: “Some conservative groups are wary of the livable communities program, saying it's an example of government intrusion into people's lives. How do you respond?”

“About everything we do around here is government intrusion in people's lives,” said LaHood. “So have at it.”

Motorists now pay a federal tax of 18.3 cents on every gallon of gasoline they buy, and 24.4 cents on every gallon of diesel fuel. These taxes fund the federal Highway Trust Fund. According to a study by the Heritage Foundation, 26 percent of the money in this trust fund was diverted in fiscal 2008 to pay for things other than highways and roads. Of the total of $52 billion spent that was spent that year, $9.7 billion went to mass transit, even though mass transit passengers accounted for only 1.6 percent of surface-transportation passengers. The highway trust fund also gave $80 million that year to build trails.
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Thursday, March 25, 2010

Britain and France didn't want reunification of Germany

Times Online:

Two months before the fall of the Berlin Wall, Margaret Thatcher told President Gorbachev that neither Britain nor Western Europe wanted the reunification of Germany and made clear that she wanted the Soviet leader to do what he could to stop it.

In an extraordinary frank meeting with Mr Gorbachev in Moscow in 1989 — never before fully reported — Mrs Thatcher said the destabilisation of Eastern Europe and the breakdown of the Warsaw Pact were also not in the West’s interests. She noted the huge changes happening across Eastern Europe, but she insisted that the West would not push for its decommunisation. Nor would it do anything to risk the security of the Soviet Union.

Even 20 years later, her remarks are likely to cause uproar. They are all the more explosive as she admitted that what she said was quite different from the West’s public pronouncements and official Nato communiqués. She told Mr Gorbachev that he should pay no attention to these.

“We do not want a united Germany,” she said. “This would lead to a change to postwar borders, and we cannot allow that because such a development would undermine the stability of the whole international situation and could endanger our security.”

[...]Mrs Thatcher was not the only one worried by events in Germany. A month after the Berlin Wall came down, Jacques Attali, the personal adviser to President Mitterrand, met Vadim Zagladin, a senior Gorbachev aide, in Kiev.

Mr Attali said that Moscow’s refusal to intervene in East Germany had “puzzled the French leadership” and questioned whether “the USSR has made peace with the prospect of a united Germany and will not take any steps to prevent it. This has caused a fear approaching panic.”

He then stated bluntly, echoing Mrs Thatcher: “France by no means wants German reunification, although it realises that in the end it is inevitable.”
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Another video on Keynesianism, the Great Depression and Japan

Only 5 minutes long or so, but good. Here.

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What is the effect of anti-bribery legislation?

Marginal Revolution:

Although the purpose of international anti-bribery legislation, particularly the U.S. Foreign Corrupt Practices Act, is to deter bribery, empirical evidence demonstrates a more problematic effect: in countries where bribery is perceived to be relatively common, the present enforcement regime goes beyond deterring bribery and actually deters investment. Drawing on literature from political science and economics, this article argues that anti-bribery legislation, as presently enforced, functions as de facto economic sanctions. A detailed analysis of the history of FCPA enforcement shows that these sanctions have most often occurred in emerging markets, where historic opportunities for economic and social development otherwise exist and where public policy should encourage investment. This effect is contrary to the purpose of the FCPA which, as the legislative history shows, is to build economic and political alliances by promoting ethical overseas investment.
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Wednesday, March 24, 2010

Biased research against charter schools?

Ed Week:

Charter laws such as New York state’s, for example, in which the authorizer-review process is rigorous, the areas of oversight clearly but crisply spelled out, and wide latitude exists to create and re-create school programs, have resulted in exceptional results statewide while providing intervention for failing schools when necessary.

But states like New York have something else that allows their schools to thrive: They collect and review data constantly—the kind of data that a recent study by Stanford University’s Center for Research on Education Outcomes, or CREDO, ignores in favor of using “virtual” students in comparisons of progress with traditional public schools.

Why study made-up, composite kids when you can study the real thing? Why ignore years of state-by-state data when you can access the real poverty data (missing in the federal statistics CREDO used) and the real condition of students, schools, and even the laws that affect their outcomes?
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Charter school funding

Edreform:

Charter schools are public schools and should receive the same type and amount of funding as conventional district schools. But they do not. Charter schools across the United States are funded at 61 percent of their district counterparts, averaging $6,585 per pupil compared to $10,771 per pupil at conventional district public schools.
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Thomas DiLorenzo on Lincoln

Mises:

As Lincoln stated in a famous, August 22, 1862 letter to New York Tribune editor Horace Greeley, "My paramount object in this struggle is to save the Union, and is not either to save or destroy slavery. If I could save the Union without freeing any slave I would do it; and if I could save it by freeing some and leaving others alone I would also do that."

The Emancipation Proclamation was a propaganda strategy designed to deter England from supporting the Confederacy. It came as a complete surprise to most Northerners, who thought they were fighting and dying by the tens of thousands to preserve the union. As a result, there were draft riots in New York City; a desertion crisis was created in the U.S. army, with some 200,000 deserters, according to historian Gary Gallagher; and war bond sales plummeted. According to James McPherson, the "dean" of "Civil War" historians, Union soldiers "were willing to risk their lives for the Union, but not for black freedom . . . . They professed to feel betrayed."

Slavery was ended in 1866 with the Thirteenth Amendment, but at the cost of 620,000 lives; hundreds of thousands more that were crippled for life; and the near destruction of almost half the nation’s economy. By contrast, dozens of other countries (including Argentina, Colombia, Chile, all of Central America, Mexico, Bolivia, Uruguay, the French and Danish colonies, Ecuador, Peru, and Venezuela) ended slavery peacefully during the first 60 years of the nineteenth century. Why not the U.S.?

Lincoln may have "saved" the Union in a geographic sense, but his war destroyed the union defined as a voluntary association of states. Forcing a state to remain in the union at gunpoint renders that state a conquered province, not a genuine partner. This was the overwhelming sentiment of Northern opinion makers at the outset of the war.

As Horace Greeley wrote on March 21, 1861: "The great principle embodied by Jefferson in the Declaration is that governments derive their just powers from the consent of the governed." If southerners wanted to secede, "they have a clear right to do so." "Nine out of ten of the people of the North," Greeley wrote, were opposed to forcing South Carolina to remain in the Union.

As of 1857, writes Roy Basler, the editor of Lincoln’s Collected Works, Lincoln had rarely ever mentioned the issue of slavery, and even then, "when he spoke of respecting the Negro as a human being, his words lacked effectiveness."

[...]And those political views were clearly stated by Lincoln when he first ran for the Illinois legislature in 1832: "My politics are short and sweet, like the old woman’s dance. I am in favor of a national bank . . . in favor of the internal improvements system and a high protective tariff." These three things -- protectionism, government subsidies to railroad and canal-building companies, and central banking -- were called the "American System" by Henry Clay. Economists have another word for them: "mercantilism."

[...]As soon as Lincoln maneuvered the South Carolinians into firing the first shot (at a customs house, Fort Sumter) tariff rates were immediately raised to an average of 47 percent and higher, and remained historically high for decades after the war.

During the war Lincoln established a number of tyrannical precedents, including unconstitutionally conducting a war without the consent of Congress; suspending habeas corpus; conscripting railroads and censoring telegraph lines; imprisoning without trial some 30,000 northern citizens for merely voicing opposition to the war; deporting a member of Congress, Clement L. Vallandigham of Ohio, for opposing Lincoln’s income tax proposal at a Democratic Party political rally; shutting down hundreds of Northern newspapers and imprisoning their editors for questioning his war policies; ordering federal troops to intimidate voters into voting Republican; and intentionally waging war against civilians.
Mises:

The U.S. House of Representatives had passed the Morrill tariff in the 1859-1860 session, and the Senate passed it on March 2, 1861, two days before Lincoln’s inauguration. President James Buchanan, a Pennsylvanian who owed much of his own political success to Pennsylvania protectionists, signed it into law. The bill immediately raised the average tariff rate from about 15 percent (according to Frank Taussig in Tariff History of the United States) to 37.5 percent, but with a greatly expanded list of covered items. The tax burden would about triple. Soon thereafter, a second tariff increase would increase the average rate to 47.06 percent, Taussig writes.

So, Lincoln owed everything--his nomination and election--to Northern protectionists, especially the ones in Pennsylvania and New Jersey. He was expected to be the enforcer of the Morrill tariff. Understanding all too well that the South Carolina tariff nullifiers had foiled the last attempt to impose a draconian protectionist tariff on the nation by voting in political convention not to collect the 1828 "Tariff of Abominations," Lincoln literally promised in his first inaugural address a military invasion if the new, tripled tariff rate was not collected.

At the time, Taussig says, the import-dependent South was paying as much as 80 percent of the tariff, while complaining bitterly that most of the revenues were being spent in the North. The South was being plundered by the tax system and wanted no more of it. Then along comes Lincoln and the Republicans, tripling (!) the rate of tariff taxation (before the war was an issue). Lincoln then threw down the gauntlet in his first inaugural: "The power confided in me," he said, "will be used to hold, occupy, and possess the property, and places belonging to the government, and to collect the duties and imposts; but beyond what may be necessary for these objects, there will be no invasion--no using force against, or among the people anywhere."

[...]Five weeks later, on April 12, Fort Sumter, a tariff collection point in Charleston Harbor, was bombarded by the Confederates. No one was hurt or killed, and Lincoln later revealed that he manipulated the Confederates into firing the first shot, which helped generate war fever in the North.

With slavery, Lincoln was conciliatory. In his first inaugural address, he said he had no intention of disturbing slavery, and he appealed to all his past speeches to any who may have doubted him. Even if he did, he said, it would be unconstitutional to do so.

But with the tariff it was different. He was not about to back down to the South Carolina tariff nullifiers[...]
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Public vs private benefits

Innovation and Growth:








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Bank of America used accounting devices 'substantially similar' to Lehman's

Zero Hedge:

A day after the Lehman Repo 105 scandal erupted, one, just one bank stepped up and said it had never used Repo 105-type transactions. The bank was Goldman Sachs. Of course, Goldman's claim is completely useless without a context as the proper refusal would be for Goldman's counsel to say that the firm had not used anything "substantially similar" to a Repo 105. The difference between that and the verbatim phrasing is like night from day. But at least the soundbite chasers bought it, and the whole topic of Goldman and Repo 105 promptly died away. We'll let that be... for now. Yet one bank which not only has not provided voluntary disclosure, but which has now gotten itself bogged down in semantics, after recently speculation had emerged that BofA had used "substantially similar" devices to Repo 105. Today, BofA provided a response on the record as to whether it had (ab)used Repo 105s and it appears, that inasmuch the firm is unable to say no, the answer is a resounding yes.
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High speed rail

There's a whole Cato report behind this. I didn't read the entire thing, but even the blurb was interesting to me.

Cato:

Over the past four decades, American cities have spent close to $100 billion constructing rail transit systems, and many billions more operating those systems. The agencies that spend taxpayer dollars building these lines almost invariably call them successful even when they go an average of 40 percent over budget and, in many cases, carry an insignificant number of riders. The people who rarely or never ride these lines but still have to pay for them should ask, "How do you define success?"
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Detroit figures

Lew Rockwell:

In 1994, the median sales price of a house in Detroit was about $41,000. The housing bubble pushed it up to about $98,000 in 2003. In March 2009, the price was $13,600. Today, the price is $7,000. Check the price chart.

There has never been a collapse of residential real estate values of this magnitude in peacetime history, anywhere. Detroit is dying.

[...]As recently as 2005, the home sold for $250,000. It was purchased by a woman who was lent $200,000 to buy it. It was financed by a subprime loan. The asking price was $189,000. Where the other $61,000 went, the woman has no idea. She defaulted.

The deteriorating house was bought by a Christian organization that is renovating it. The house sold for $10,000.

This is simply inconceivable to anyone who is unfamiliar with Detroit since 2005. Nothing like this has ever happened. How can we conceive of a lender lending $200,000 to a woman to buy a $250,000 home offered at $189,000? How can we conceive of a fall in price from $250,000 to $10,000?





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How Keynsianism led to Japan's lost decade

You can start 8 and a half minutes in. It's really just chit chatting up until there. Actually, although he's talking about Keynsianism in general after 8:30, he doesn't start talking about Japan until 15:30.



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Tuesday, March 23, 2010

There's an implant that can potentially reverse blindness but the FDA won't allow it

Good deal, huh?




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Murray Rothbard on Reaganomics

Mises:

How well did Reagan succeed in cutting government spending, surely a critical ingredient in any plan to reduce the role of government in everyone's life? In 1980, the last year of free-spending Jimmy Carter the federal government spent $591 billion. In 1986, the last recorded year of the Reagan administration, the federal government spent $990 billion, an increase of 68%. Whatever this is, it is emphatically not reducing government expenditures.

Sophisticated economists say that these absolute numbers are an unfair comparison, that we should compare federal spending in these two years as percentage of gross national product. But this strikes me as unfair in the opposite direction, because the greater the amount of inflation generated by the federal government, the higher will be the GNP. We might then be complimenting the government on a lower percentage of spending achieved by the government's generating inflation by creating more money. But even taking these percentages of GNP figures, we get federal spending as percent of GNP in 1980 as 21.6%, and after six years of Reagan, 24.3%. A better comparison would be percentage of federal spending to net private product, that is, production of the private sector. That percentage was 31.1% in 1980, and a shocking 34.3% in 1986. So even using percentages, the Reagan administration has brought us a substantial increase in government spending.

[...]Deficits. The next, and admittedly the most embarrassing, failure of Reaganomic goals is the deficit. Jimmy Carter habitually ran deficits of $40-50 billion and, by the end, up to $74 billion; but by 1984, when Reagan had promised to achieve a balanced budget, the deficit had settled down comfortably to about $200 billion, a level that seems to be permanent, despite desperate attempts to cook the figures in one-shot reductions.

This is by far the largest budget deficit in American history. It is true that the $50 billion deficits in World War II were a much higher percentage of the GNP; but the point is that that was a temporary, one-shot situation, the product of war finance. But the war was over in a few years; and the current federal deficits now seem to be a recent, but still permanent part of the American heritage.

[...]Tax Cuts. One of the few areas where Reaganomists claim success without embarrassment is taxation. Didn't the Reagan administration, after all, slash income taxes in 1981, and provide both tax cuts and "fairness" in its highly touted tax reform law of 1986? Hasn't Ronald Reagan, in the teeth of opposition, heroically held the line against all tax increases?

The answer, unfortunately, is no. In the first place, the famous "tax cut" of 1981 did not cut taxes at all. It's true that tax rates for higher-income brackets were cut; but for the average person, taxes rose, rather than declined. The reason is that, on the whole, the cut in income tax rates was more than offset by two forms of tax increase. One was "bracket creep," a term for inflation quietly but effectively raising one into higher tax brackets, so that you pay more and proportionately higher taxes even though the tax rate schedule has officially remained the same. The second source of higher taxes was Social Security taxation, which kept increasing, and which helped taxes go up overall. Not only that, but soon thereafter; when the Social Security System was generally perceived as on the brink of bankruptcy, President Reagan brought in Alan Greenspan, a leading Reaganomist and now Chairman of the Federal Reserve, to save Social Security as head of a bipartisan commission. The "saving," of course, meant still higher Social Security taxes then and forevermore.

[...]But the bottom line on the tax question: is what happened in the Reagan era to government tax revenues overall? Did the amount of taxes extracted from the American people by the federal government go up or down during the Reagan years? The facts are that federal tax receipts were $517 billion in the last Carter year of 1980. In 1986, revenues totaled $769 billion, an increase of 49%. Whatever that is, that doesn't look like a tax cut.

[...]Agricultural policy, for its part, has been a total disaster. Instead of ending farm price supports and controls and returning to a free market in agriculture, the administration has greatly increased price supports, controls and subsidies. Furthermore, it has brought a calamitous innovation to the farm program; the PIK program ["Payments In Kind"] in which the government gets the farmers to agree to drastic cuts in acreage, in return for which the government pays back the wheat or cotton surpluses previously held off the market. The result of all this has been to push farm prices far higher than the world market, depress farm exports, and throw many farmers into bankruptcy. All the administration can offer, however, is more of the same disastrous policy.
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20 ways the health care bill sinks its fangs into our lives and economy

Business Investors Daily:

1. 1. You are young and don’t want health insurance? You are starting up a small business and need to minimize expenses, and one way to do that is to forego health insurance? Tough. You have to pay $750 annually for the “privilege.” (Section 1501)

2. You are young and healthy and want to pay for insurance that reflects that status? Tough. You’ll have to pay for premiums that cover not only you, but also the guy who smokes three packs a day, drink a gallon of whiskey and eats chicken fat off the floor. That’s because insurance companies will no longer be able to underwrite on the basis of a person’s health status (aka socialism). (Section 2701).

3. You would like to pay less in premiums by buying insurance with lifetime or annual limits on coverage? Tough. Health insurers will no longer be able to offer such policies, even if that is what customers prefer. (Section 2711).

4. Think you’d like a policy that is cheaper because it doesn’t cover preventive care or requires cost-sharing for such care? Tough. Health insurers will no longer be able to offer policies that do not cover preventive services or offer them with cost-sharing, even if that’s what the customer wants. (Section 2712).

5. You are an employer and you would like to offer coverage that doesn’t allow your employers’ slacker children to stay on the policy until age 26? Tough. (Section 2714).

6. You must buy a policy that covers ambulatory patient services, emergency services, hospitalization, maternity and newborn care, mental health and substance use disorder services, including behavioral health treatment; prescription drugs; rehabilitative and habilitative services and devices; laboratory services; preventive and wellness services; chronic disease management; and pediatric services, including oral and vision care.

You’re a single guy without children? Tough, your policy must cover pediatric services. You’re a woman who can’t have children? Tough, your policy must cover maternity services. You’re a teetotaler? Tough, your policy must cover substance abuse treatment (again, socialism). (Add your own violation of personal freedom here.) (Section 1302).

7. Do you want a plan with lots of cost-sharing and low premiums? Well, the best you can do is a “Bronze plan,” which has benefits that provide benefits that are actuarially equivalent to 60% of the full actuarial value of the benefits provided under the plan. Anything lower than that, tough. (Section 1302 (d) (1) (A))

8. You are an employer in the small-group insurance market and you’d like to offer policies with deductibles higher than $2,000 for individuals and $4,000 for families? Tough (aka no HSA's). (Section 1302 (c) (2) (A).

9. If you are a large employer (defined as at least 101 employees) and you do not want to provide health insurance to your employee, then you will pay a $750 fine per employee (It could be $2,000 to $3,000 under the reconciliation changes). Think you know how to better spend that money? Tough. (Section 1513).

10. You are an employer who offers health flexible spending arrangements and your employees want to deduct more than $2,500 from their salaries for it? Sorry, can’t do that. (Section 9005 (i)).

11. If you are a physician and you don’t want the government looking over your shoulder? Tough. The Secretary of Health and Human Services is authorized to use your claims data to issue you reports that measure the resources you use, provide information on the quality of care you provide, and compare the resources you use to those used by other physicians. Of course, this will all be just for informational purposes. It’s not like the government will ever use it to intervene in your practice and patients’ care. Of course not. (Section 3003 (i))

12. If you are a physician and you want to own your own hospital, you must be an owner and have a “Medicare provider agreement” by Feb. 1, 2010. (Dec. 31, 2010 in the reconciliation changes.) If you didn’t have those by then, you are out of luck (Wha? ...And for new doctors?). (Section 6001 (i) (1) (A))

13. If you are a physician owner and you want to expand your hospital? Well, you can’t (Section 6001 (i) (1) (B). Unless, it is located in a county where, over the last five years, population growth has been 150% of what it has been in the state (Section 6601 (i) (3) ( E)) (What? This is complete socialism). And then you cannot increase your capacity by more than 200% (Section 6001 (i) (3) (C)).

14. You are a health insurer and you want to raise premiums to meet costs? Well, if that increase is deemed “unreasonable” by the Secretary of Health and Human Services it will be subject to review and can be denied. (Section 1003) (In fairness, I think this is actually more fascism than socialism. Mussolini would be proud)

15. The government will extract a fee of $2.3 billion annually from the pharmaceutical industry. If you are a pharmaceutical company what you will pay depends on the ratio of the number of brand-name drugs you sell to the total number of brand-name drugs sold in the U.S. So, if you sell 10% of the brand-name drugs in the U.S., what you pay will be 10% multiplied by $2.3 billion, or $230,000,000. (Under reconciliation, it starts at $2.55 billion, jumps to $3 billion in 2012, then to $3.5 billion in 2017 and $4.2 billion in 2018, before settling at $2.8 billion in 2019 (Section 1404)). Think you, as a pharmaceutical executive, know how to better use that money, say for research and development? Tough. (Section 9008 (b)).

16. The government will extract a fee of $2 billion annually from medical device makers. If you are a medical device maker what you will pay depends on your share of medical device sales in the U.S. So, if you sell 10% of the medical devices in the U.S., what you pay will be 10% multiplied by $2 billion, or $200,000,000. Think you, as a medical device maker, know how to better use that money, say for R&D? Tough. (Section 9009 (b)).

The reconciliation package turns that into a 2.9% excise tax for medical device makers. Think you, as a medical device maker, know how to better use that money, say for research and development? Tough. (Section 1405).

17. The government will extract a fee of $6.7 billion annually from insurance companies. If you are an insurer, what you will pay depends on your share of net premiums plus 200% of your administrative costs. So, if your net premiums and administrative costs are equal to 10% of the total, you will pay 10% of $6.7 billion, or $670,000,000. In the reconciliation bill, the fee will start at $8 billion in 2014, $11.3 billion in 2015, $1.9 (Misprint?) billion in 2017, and $14.3 billion in 2018 (Section 1406).Think you, as an insurance executive, know how to better spend that money? Tough.(Section 9010 (b) (1) (A and B).)

18. If an insurance company board or its stockholders think the CEO is worth more than $500,000 in deferred compensation? Tough.(Section 9014).

19. You will have to pay an additional 0.5% payroll tax on any dollar you make over $250,000 if you file a joint return and $200,000 if you file an individual return. What? You think you know how to spend the money you earned better than the government? Tough. (Section 9015).

That amount will rise to a 3.8% tax if reconciliation passes. It will also apply to investment income, estates, and trusts. You think you know how to spend the money you earned better than the government? Like you need to ask. (Section 1402).

20. If you go for cosmetic surgery, you will pay an additional 5% tax on the cost of the procedure. Think you know how to spend that money you earned better than the government? Tough. (Section 9017).
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Zoning in Cleveland

Reason:

While Indianapolis privatized services, Cleveland prefers state capitalism. It owns and operates a big grocery store, the West Side Market. Typical of government, it's open only four days a week, and two of those days it closes at 4 p.m. The city doesn't maintain the market very well. Despite those cost savings, the city manages to lose money running the market. It also loses money running golf courses—$400,000 last year.

Another way that cities like Cleveland cause their own decline is through regulations that make building anything a long drawn-out affair. Cleveland has 22 different zoning designations and 673 pages of zoning guidelines.

By contrast, Houston has almost no zoning. This permits a mix of uses and styles that gives the city vitality. And the paperwork in Houston is so light that a business can get going in a single afternoon. In Cleveland, one politician bragged that he helped a business get though the red tape in "just 18 months."

Randall O'Toole, author of The Best-Laid Plans: How Government Planning Harms Your Quality of Life, Your Pocketbook, and Your Future, says Houston does have rules, but they are more flexible and responsive to citizens' needs because they are set by neighborhood associations based on protective covenants written by developers.

[...]Chicago's $1 billion expansion of the country's biggest convention center—McCormick Place—was unable to prevent an annual drop in conventions, and analysts say America already has 40 percent more convention space than it needs.

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NYC charter schools destroy NYC public schools

NY Daily News:

It's official. From this day forward, those who battle New York's charter school movement stand conclusively on notice that they are fighting to block thousands of children from getting superior educations.

An exhaustive, eight-year-long study has documented that kids in the city's charter schools have outachieved students at traditional public schools by an enormous margin.

Grade by grade, charter students climbed further up the skills ladder, so that by eighth grade they scored 31 points higher than their peers on math exams and 23 points higher on English tests.

What do those numbers show? They show that the charter children, most of whom are from poor and minority-group families, had gotten almost 90% of the way toward closing the divide in math scores between Harlem kids and those in Scarsdale, as well as two-thirds of the way in closing the gap in English.

There have been studies with pro-charter school findings before, but opponents always forced asterisks on the research. Not this time.

This time, Stanford University economist Caroline Hoxby measured the gains made by children who got into charter schools by random lotteries with those made by kids who didn't win spots in those drawings.

The winners and losers came from equally disadvantaged families and had equally motivated parents. But the results were astonishingly different all the way through high school, where charter students were 7% more likely to get a Regents diploma for every year of enrollment.

Charters are publicly funded schools run by private groups under close inspection by education authorities. Those that fail to deliver results are closed. In New York, most have succeeded, thanks to motivated teachers, talented leaders, focused missions and a minimum of bureaucracy.

While tens of thousands of parents have children on waiting lists for admission, the Legislature has capped the number of charters in the state. The teachers union has fought their expansion because most are not covered by its contract. And self-styled activists have fought to block charters from opening in traditional schools' buildings. (So a lot of these charters have to pay for their buildings whereas public schools don't)
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Davis-Bacon again

Washington Times:

Davis-Bacon is a blatant piece of special-interest, pro-union legislation. It hasn't come cheap for taxpayers. According to research by Suffolk University economists, Davis-Bacon has raised the construction wages on federal projects 22 percent above the market rate.

James Sherk of the Heritage Foundation finds that repealing Davis-Bacon would save taxpayers $11.4 billion in 2010 alone. Simply suspending Davis-Bacon would allow government contractors to hire 160,000 new workers at no additional cost, according to Mr. Sherk.

To make matters worse, the Davis-Bacon Act has explicitly racist origins. [...]The result was that black workers, who were largely unskilled and therefore counted on being able to compete by working for lower wages, essentially were banned from the upcoming New Deal construction spree. Davis-Bacon nullified their competitive advantage just when they needed it most.

More recently, the Obama administration extended Davis-Bacon via the American Recovery and Reinvestment of Act of 2009, known as the stimulus bill. According to an All-Agency Memorandum issued by the Department of Labor, Davis-Bacon now applies to all "projects funded directly by or assisted in whole or in part by and through the Federal Government."



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Consumer reports beats EPA

Mises:

Via Yahoo News:

The government has been keeping a secret about automobiles under wraps for the past 30 years.

And when it comes to testing cars, Consumer Reports leaves no stone unturned, no lug nut loose. And here’s the question Consumer Reports set out to answer — does your car get the gas mileage promised on the showroom sticker.

And under these guidelines by the Environmental Protection Agency, carmakers are allowed to test miles per gallon by running the vehicle not on the road, but on what’s essentially a treadmill for cars.

During an EPA spot check, the car ran with no air conditioning, no inclines or hills, no wind resistance and at speeds no greater than 60 mph.

There’s hardly anything real world about it, but it gives carmakers what they want — the highest possible miles per gallon to put on that sticker.
The article also points out that the tests conducted by Consumer Reports provide, no surprise here, more accurate results than the EPA’s tests. It is no coincidence that car manufacturers are not additionally offering other reports since they know that EPA standards result in fuel efficiency numbers that are higher than they really are. Indeed, this morning I was watching a segment on this and a Consumer Reports spokesman said that a good rule of thumb is to subtract at least 20% from the EPA’s published efficiency numbers.

Another government failure. Let’s have dynamic, comprehensive and independent testing instead of a static, tax-funded and bloated EPA.
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Monday, March 22, 2010

Reasons to be pissed about the health insurance bill

The health insurance bill passed, and it's one more triumph of the federal government over individual rights. All statists, rejoice! You've managed to succeed in having Big Brother intrude into one more aspect of your life. I, for one, am not happy about it, not only because I don't like living under the watchful eye of Big Brother, but also because I know that American health care used to be run in a very different way.

The government originally got involved in the health insurance industry in the 1920's, because health insurance was originally too inexpensive. That's right: too inexpensive. At the time, "fraternal societies," of which one-fourth of Americans were a part, contracted with individual doctors to provide health coverage for lodge members. This was such a good deal for the lodge members that lodge members only paid $2 for an entire year's worth of coverage. This is while non-lodge members paid $2 per visit to a doctor.

Well, that didn't last too long. The American Medical Association lobbied Congress to make it so that in order for a doctor to practice medicine in a state the doctor had to be licensed by the AMA. Congress agreed, and that was the end of the fraternal lodge insurance practice. The AMA made sure that its members did not contract with any more lodges. After all, the medical profession had its image and profits to protect.

The government continued to interject itself into the health care market and to screw it up. Licensing requirements expanded. Insurance companies could no longer compete across state lines. Tax exemptions for employer-sponsored health insurance were introduced during World War II as a way to get around wage restrictions. Medicare was introduced (which despite rallying cries to the contrary, is not doing well.) Congress even carved out an antitrust exemption for health insurance companies. If there were ever a case against a government-created monopoly, it may be health insurance.

As we can see, government intervention has taken us from inexpensive health care to health care that costs 1/6 of our GDP and is increasing in cost at four times the rate of inflation. Of course, the option of repealing the laws that brought us to this place is never brought up. No, government expansion is only brought up. But government expansion is not the solution. Government is not a creative force. For its very existence, it must take from private industry. Government expansion did not get us out of the Great Depression, and it won't get us out of this.

All this isn't even to mention the fact that the bill is an economic disaster. It does not decrease costs. It increases costs. The CBO has already estimated that it will increase costs for the individual market by 10 - 13%. Each person in the individual market will also have to spend on average $5,800 for an individual plan, and $15,200 for a family plan. Also, despite Obama's proclamations that this plan will save $118 billion over ten years, when Medicare is included the entire bill winds up costing over $600 billion over ten years. That's right. All these claims of cut costs are just based on accounting tricks.

I, however, think the situation is even worse than they're claiming. The Washington Post says that 19 million people will receive subsidies of $6,000 to help pay for their plans. 19 million * $6,000 = $1.14 trillion over ten years. That's right: trillion. This is simple math, but for some reason this number is never mentioned. I think that much like with Bush's estimated costs for the Medicare Modernization Act in 2003 and the Iraq war, we're just being told numbers on the low side to make things more palatable to us. Once the smoke clears, that's when we get the real numbers. ...Personally, I hope this bill covers treatments for a hemorraging national debt.

Of course, this doesn't even account for the potential government intrusion into our privacy. This bill nearly doubles the IRS's budget. Why would the IRS's budget nearly get doubled as a result of this if the government didn't have plans to look more deeply into our personal lives, and to keep more detailed records on us? Not to mention that the House version of the bill allowed for the "real-time (or near real time) determination of an individual’s financial responsibility at the point of service" (aka looking into your bank account) and for "enabl[ing], where feasible, near real-time adjudication of claims" (aka taking money from your bank account if deemed necessary.) I have no reason to believe that language is not in the final bill.

This bill is a mess. I'm glad that people are angry, but we need to get even angrier. We need to support states in their efforts to nullify this law. Thirty seven states have already said they intend to do just that. If we can get states to once again be bulwarks against the federal government, then we've succeeded, even if for a while we have to endure the government looking into our records and telling us to turn our heads and cough.



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On fractional reserve lending

The rest of the article has more info on fractional reserve lending.

George Washington:

From Fractional to Fictional Reserves

But whatever you think about fractional reserve banking, whether or not you agree with its critics, the truth is that we no longer have it.

As the above-linked NY Fed article notes:

In practice, the connection between reserve requirements and money creation is not nearly as strong as the exercise above would suggest. Reserve requirements apply only to transaction accounts, which are components of M1, a narrowly defined measure of money. Deposits that are components of M2 and M3 (but not M1), such as savings accounts and time deposits, have no reserve requirements and therefore can expand without regard to reserve levels.
And as Steve Keen notes - citing Table 10 in Yueh-Yun C. OBrien, 2007. “Reserve Requirement Systems in OECD Countries”, Finance and Economics Discussion Series, Divisions of Research & Statistics and Monetary Affairs, Federal Reserve Board, 2007-54, Washington, D.C:

The US Federal Reserve sets a Required Reserve Ratio of 10%, but applies this only to deposits by individuals; banks have no reserve requirement at all for deposits by companies.
So huge swaths of loans are not subject to any reserve requirements.

With the repeal of Glass-Steagall, deposits have been used to speculate in every type of investment under the sun, using insane amounts of leverage. Instead of the traditional 10-to-1 ratio, the giant banks and hedge funds were using much higher levels of leverage.

For example, Congresswoman Kaptur told Bill Moyers that while - on paper - there are 10-to-1 reserve requirements, banks like JP Morgan were using 100 to 1 leverage. She said that, with derivatives, leverage might be much higher.

And remember that most of the credit in our economy is actually through the shadow banking system, not through traditional depository banking.

As the Washington Times wrote in February 2009:

“Before last fall’s financial crisis, banks provided only $8 trillion of the roughly $25 trillion in loans outstanding in the United States, while traditional bond markets provided another $7 trillion, according to the Federal Reserve. The largest share of the borrowed funds - $10 trillion - came from securitized loan markets that barely existed two decades ago. . . .

Mr. Regalia [chief economist at the U.S. Chamber of Commerce] said ... 70 percent of the system isn’t there anymore,’ he said.”
Bernanke, Summers, Geithner and the boys have been working as hard as they can to re-start the shadow banking system, and traditional loans to individuals and small businesses have plummeted. So the percentage of shadow banking system lending to the all lending has probably skyrocketed again.

The NY Fed continues:

Furthermore, the Federal Reserve operates in a way that permits banks to acquire the reserves they need to meet their requirements from the money market, so long as they are willing to pay the prevailing price (the federal funds rate) for borrowed reserves. Consequently, reserve requirements currently play a relatively limited role in money creation in the United States.
In other words, as we've repeatedly written, reserves can be obtained once a binding loan commitment is made.

As William C. Dudley, President and Chief Executive Officer of the Federal Reserve Bank of New York, said in a speech last July:

Based on how monetary policy has been conducted for several decades, banks have always had the ability to expand credit whenever they like. They don’t need a pile of “dry tinder” in the form of excess reserves to do so. That is because the Federal Reserve has committed itself to supply sufficient reserves to keep the fed funds rate at its target. If banks want to expand credit and that drives up the demand for reserves, the Fed automatically meets that demand in its conduct of monetary policy. In terms of the ability to expand credit rapidly, it makes no difference.
Bernanke has proposed the elimination of all reserve requirements:

The Federal Reserve believes it is possible that, ultimately, its operating framework will allow the elimination of minimum reserve requirements, which impose costs and distortions on the banking system.

And - according to Steve Keen - about 6 OECD countries have already done away with reserve requirements altogether (Keen confirmed that Australia requires no reserves; I know that Mexico doesn't require reserves; and Canada, New Zealand, Sweden and the UK supposedly require no reserves as well).
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On fractional reserve lending

Just in case you don't know.

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Jefferson on secession from his first inaugural address

Lewrockwell.com:

“If there be any among us who would wish to dissolve this Union or to change its republican form, let them stand undisturbed as monuments of the safety with which error of opinion may be tolerated where reason is left free to combat it.”
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Sunday, March 21, 2010

Public-sector unions vs. private-sector unions

Cato:

Why has public-sector unionism thrived while private sector unionism has shriveled? One reason is that public agencies tend to be static—once a union has organized a group of workers they tend to stay organized. By contrast, the private sector is dynamic, with businesses going bankrupt and new businesses arising all the time. Since all new businesses start out nonunion, greater organizing efforts are needed to sustain private-sector unions.

Another factor is that many government services are legal monopolies, such as police and fire. The result is that consumers don’t have the option of abandoning unionized public services if they become too inefficient, as they can with unionized services in the private sector.

Finally, public-sector unions push for higher pay and higher government spending with little restraint. They don’t care if the cost of government services goes up because the burden is borne by someone else. By contrast, private-sector unions are aware that higher costs for employers may result in lost sales and fewer union jobs.

[...]Some of the most pro-union states also allow public-sector strikes and some have mandatory arbitration, which usually works in favor of the unions. Note that union rules can vary within states for different types of public-sector worker. For example, teachers are more likely to be allowed to strike than police or fire department workers.

[...]Bureau of Labor Statistics data in Table 2 show that union members have a 31-percent advantage in wages and a 68-percent advantage in benefits.

[...]A final type of inefficiency created by public-sector unions is the cost of strikes. In November, for example, transit workers in Philadelphia went on a six-day strike over disagreements regarding pay.12 The strike created chaos for the 800,000 residents of the city who rely on government subway and bus services, and it likely caused substantial damage to the local economy.
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Air pollution and growth 1990 - 2008

American Thinker:



Hoven's Index for March 18, 2010


Changes in annual US emissions of various air pollutants, 1990 to 2008:

Fine particulate matter: -58%

Coarse particulate matter: -39%

Ammonia: -6%

Oxides of sulfur: -50%

Oxides of nitrogen: -36%

Volatile organic compounds: -35%

Carbon monoxide: -53%

Lead: -79%

Source: The EPA.

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The Fed's control of academic publishing

Econ Journal Watch:

THE FEDERAL RESERVE SYSTEM IS NOT ONLY THE SUBJECT OF research by American monetary economists it is also a major sponsor of their research. The Fed (the Board of Governors plus the twelve regional Reserve Banks) employed about 495 full-time staff economists in 2002. That year it engaged more than 120 leading academic economists as consultants and visiting scholars, and conducted some 30 conferences that brought 300-plus academics to the podium alongside its own staff economists. It published more than 230 articles in its own research periodicals. Judging by the abstracts compiled by the December 2002 issue of the e-JEL, some 74 percent of the articles on monetary policy published by US-based economists in US-edited journals appear in Fed-published journals or are co-authored by Fed staff economists.1 Over the past five years, slightly more than 30 percent of the articles by US-based economists published in the Journal of Monetary Economics had at least one Fed-based co-author. Slightly more than 80 percent had at least one co-author with a Fed affiliation (current or prior Fed employment including visiting scholar appointments) listed in an online vita. The corresponding percentages for the Journal of Money Credit and Banking were 39 percent and 75 percent. The editorial boards (editors and associate editors) of these journals are even more heavily weighted with Fed-affiliated economists (9 of 11, and 40 of 46, respectively).
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The effect of debt on the economy

Does debt really help our economy grow?

Not anymore.

Economic Edge:




This is a very simple chart. It takes the change in GDP and divides it by the change in Debt. What it shows is how much productivity is gained by infusing $1 of debt into our debt backed money system.

Back in the early 1960s a dollar of new debt added almost a dollar to the nation’s output of goods and services. As more debt enters the system the productivity gained by new debt diminishes. This produced a path that was following a diminishing line targeting ZERO in the year 2015. This meant that we could expect that each new dollar of debt added in the year 2015 would add NOTHING to our productivity.

Then a funny thing happened along the way. Macroeconomic DEBT SATURATION occurred causing a phase transition with our debt relationship. This is because total income can no longer support total debt. In the third quarter of 2009 each dollar of debt added produced NEGATIVE 15 cents of productivity, and at the end of 2009, each dollar of new debt now SUBTRACTS 45 cents from GDP!

This is mathematical PROOF that debt saturation has occurred. Continuing to add debt into a saturated system, where all money is debt, leads only to future defaults and to higher unemployment.

[...]Modern monetary theory does not understand, nor does it correctly describe the debt backed money world in which we live. Velocity, for example, slows as debt saturation occurs. [...]Once people, businesses, and governments become saturated with debt, new money/ debt when introduced can only be used to service prior existing debt.
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Examples of rigged 'regulation'

Cato:

Auto dealers, in order to protect their investment from Internet competition, have lobbied their state legislatures to strengthen laws that prevent consumers from purchasing cars from anyone other than dealers. Those same dealers, of course, oppose environmental and work-safety regulations as infringements on their property rights. Farmers want the unrestricted right to export their products to other countries-a good pro-market position-but they also want government restrictions on output so that they can sell their products for higher prices. Those who already own homes in desirable neighborhoods vociferously support zoning restrictions to keep others from building homes in those same neighborhoods, which not coincidentally adds to the resale value of existing homes.

[...]There is a noteworthy recent example of regulated firms' seeking-and getting-the regulation of other firms. Under the terms of the 1998 tobacco settlement, the big four tobacco companies are to pay the states $ 206 billion over 25 years, as "reimbursement" for smoking-related Medicaid costs claimed by the states. The 19 smaller companies don't have to make payments-unless their market share increases because they offer lower prices. If the small companies' right to compete on the basis of price had not been limited, the government-organized tobacco cartel would have collapsed, and the states would have faced a prolonged battle in court over claims that are demonstrably unfounded. Tobacco will be regulated as long as three conditions persist: there is no good substitute for it, it generates great profits for the large companies, and smokers are a despised minority of voters.

[...]The Federal Agricultural Improvement and Reform Act of 1996 ended the market-distorting system of price supports and acreage controls that had augmented farmers' incomes for 60 years. The act replaced price supports and acreage controls with direct subsidies, to be distributed on a fixed, seven-year schedule. Farmers would get their money, but market forces would decide how much food was produced and at what price.

Farmers were happy with the new program in 1996 and 1997 because their new subsidies were greater than the price-support payments they would have received under the old system. But when farm prices plummeted in 1998, Congress reneged on the payment schedule and gave farmers about $ 6 billion more-further proof, if any were needed, that Congress cannot make long-term commitments to stay out of taxpayers' wallets.
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Davis-Bacon and unions

Heartland Institute:

Construction projects across the country cost more than they should because of a Depression-era minimum wage law meant to apply only to federally financed public works projects. The law is being applied to projects that have almost nothing to do with federal funding.

The Davis-Bacon Act’s wage requirements kick in at a mere $2,000 of spending. The original threshold was $5,000, but that was lowered to $2,000 in 1935 and has been there since. Had it been adjusted for inflation, the threshold would be more than $30,000 today, still an almost insignificant amount given the costs of most government-funded construction projects.

The act has been applied to a multitude of programs that have little to do with federally financed public works construction. For example, if a program involves federal loan guarantees, construction done with the privately borrowed money will probably be covered by Davis-Bacon.

The purpose of prevailing wage laws is to prevent contractors from undercutting local wage standards. This is considered necessary because of provisions in most public contracting laws requiring contracts to be awarded to the lowest bidder. There is a legitimate concern that a contractor from a low-wage area might submit a low bid and do the job with workers imported from lower-wage areas.

[...]Most prevailing wage rates are determined by voluntary participation in wage surveys. Construction companies with union contracts have a strong motivation to participate in such surveys, while non-union companies have little or no motivation to do so.

As a result, even though the federal Bureau of Labor Statistics’ Current Population Survey shows only about 14 percent of construction workers belonged to unions in 2007, union collectively bargained wage rates are frequently determined to be prevailing.

[...][O]ne benefit workers receive is a payment to a union retirement trust, but if the employee doesn’t remain a union member for the required period of time or doesn’t work enough hours in a given period to vest in the fund, the employee receives nothing. For a non-union construction worker covered by a 401(k) plan, by contrast, the funds are deposited immediately in the employee’s account and become the employee’s property.
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"Don't hobble Houston with land control"

Cato:

Cities with strong planning authority, such as Portland, Ore., and San Jose, Calif., almost invariably have the least affordable housing, the fastest growing traffic congestion and growing taxes and/or declining urban services. In the long run, these problems tend to suppress urban growth and job creation.

The national real estate firm Coldwell Banker reports that, in 2007, a Houston family could buy a four-bedroom, two-and-one-half bath, 2,200-square foot home for $170,000. The same house would cost more than twice that much in Portland and more than eight times as much in San Jose.

Such huge variations in the cost of housing from city to city did not exist 50 years ago. Today, they are mainly due to artificial housing shortages created by heavy regulations and land-use planning.

Planning also imposes huge costs on businesses. The same land shortages that drive up housing costs also increase the costs of retail, commercial and industrial developments. Congestion increases the costs of delivering freight and other goods to and from businesses. Higher taxes and more government regulation also make heavily planned cities less growth-friendly.

The result is that growth once attracted to places like California and Massachusetts is now attracted to less heavily planned states like Georgia and Texas. Between 2000 and 2006, California's population grew by 7 percent — mostly foreign immigration — while Georgia and Texas populations grew by 12 to 14 percent.

As Harvard economist Edward Glaeser observes, "places with rapid [housing] price increases over one five-year period are more likely to have income and employment declines over the next five-year period" because the rules that drive up housing prices also drive away employers.

Government planning spins out of control when it attempts to be comprehensive, prescriptive and long term. Comprehensive planning attempts to account for all of the impacts of any government action.

Prescriptive planning attempts to control how private landowners use their land. Long-term planning attempts to look decades into the future. No one can really predict the future, so such plans do far more harm than good.
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