Tag Archives: economics

The Basket Case That is Europe

Boy am I glad my grandparents decided to leave Italy for a new life in America. They may have traded sunny beaches for cold winters in New York, but the positives still far outweigh the negatives. Europe today is in shambles, and things only appear to be getting worse.

Economically, the European Union is pathetic. Only Paul Krugman has the lack of intellectual honesty to claim that the European economic model of excessive taxation, and more importantly regulation, is superior to a more free economy such as the USA’s. Even before the crisis in 2008, the EU’s unemployment rate was consistently 4 points higher than the United States’. Today, It is not uncommon to see European unemployment rates over ten percent as Europe appears to be sliding into another recession. For all of Obama’s faults, at least America has been growing (if only at an anemic pace). Ill credit the growth to the GOP, who are blocking Obama from forcing through even more bad legislation like Obamacare, Dodd-Frank and the stimulus. But you also cannot discount the unbeatable American spirit and work ethic. It takes a lot more than one bad president to keep us down.

Europe has always shown its lack of economic competence by supporting continually expanding government (except in places like Scandinavia, where they are actually paring back government). But more recently the world has been reminded that Western Europe is also unwilling to stand up to bullies like Putin, even as he rolls tanks into Ukraine. You would think the Europeans would be tougher. Men and women are still alive who have memories of the horrors that came about the last time an autocrat decided to annex large swaths of territory. But alas, Russian natural gas is simply too important to Europe (I thought they were supposed to be using all renewables by now?). So Germany, the only country on the continent with any relative economic strength, lets Putin off with light slaps on the wrist. Part of this is President Obama’s fault, of course. Before he came along, the USA would have at least tried to be a leader in sanctioning Putin in a meaningful way. Instead, we put light sanctions on him in a reactionary way because we didn’t want to “escalate” the situation and prompt him to do something drastic like annex Crimea or invade Eastern Ukraine. Oh wait…

It remains to be seen what will come of Europe’s economy and Putin’s aggression. Hopefully all will end well, with an economic boom and a dialing back of military tensions. No use cheering for more human suffering to occur.

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Humility and Conservative Ideology

It takes humility to be a conservative. In fact, I believe being humble is a big difference between liberals and conservatives. A liberal believes they are smart enough to engineer a society to conform to their own views of justice. A conservative acknowledges that people are unique and complex beings, who when put together form an even more unique and more complicated society that cannot possibly be fully comprehended by a single person or group. And without fully understanding something, says the conservative, there is no use trying to alter it “for the better”. There is a small chance the proverbial tinkerer will get it just right and the risk of unforeseen and unintended consequences is too high.

Lets use the economy as a case study. Liberals claim they can fix a bad economy by manipulating interest rates, regulating businesses and using fiscal policies such as deficit spending. Conservatives on the other hand realize that an economy is an immensely complex thing that is the sum of millions and millions of little decisions made by all the people in the economy each day. Because of this complexity, it is foolhardy to think that even the best minds in the world could ever take the perfect actions necessary to fix such a complex thing. Best to leave the managing of an economy to the millions and millions of interconnected yet impersonal people making their own decisions for themselves, and let the magic of the free market do its thing.

This is not to say that government fixing an economy is literally impossible. In theory, a government could take the exact right measures at the exact right time needed in order to improve economic conditions. But this task is simply too hard to complete and the risk of causing more harm than good is too high. It is the equivalent of having a first year biology student preform brain surgery. Yet liberal minded people still have the hubris to believe they can accomplish such a task.

Of Bailouts and Stimulus

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There are not many times that I agree with Paul Krugman. In fact, I once dropped an economics class because the required textbook was written by him and I refused to give money to someone who is so vile and arrogant. I can deal with someone who respectfully disagrees with me, but when a columnist complains about greedy corporations and the cost of college, and then his textbook is the most expensive one around, I get irritated. This is why I was surprised that when I read his column “Springtime for Bankers” I found myself agreeing with what he wrote. At least the beginning that is. 

Krugman complains that the Wall Street bailouts during the financial crisis in 2008 were misguided and show that Washington believe that “what is good for Wall Street is good for America”. This, of course, is ridiculous. Krugman points out that even after the bailouts, America still suffers high unemployment rates, even if the Dow is hitting record highs. He doesn’t mention this, but I find it ironic that Obama, who decries “trickle down economics” (which is a straw-man, no true conservative economists supports giving money to the rich and hoping it trickles down to the rest of us), uses the stock market’s success to claim he is doing a good job healing America’s economy. Krugman also attacks Tim Geithner for claiming that as Treasury Secretary he did all he could do to save the economy in 2008. Krugman says:

Now Timothy Geithner, who was Treasury secretary for four of those six years, has published a book, “Stress Test,” about his experiences. And basically, he thinks he did a heckuva job.

He’s not unique in his self-approbation. Policy makers in Europe, where employment has barely recovered at all and a number of countries are in fact experiencing Depression-level distress, have even less to boast about. Yet they too are patting themselves on the back.

How can people feel good about track records that are objectively so bad? Partly it’s the normal human tendency to make excuses, to argue that you did the best you could under the circumstances. And Mr. Geithner can indeed blame much though not all of what went wrong on scorched-earth Republican obstructionism.

But there’s also something else going on. In both Europe and America, economic policy has to a large extent been governed by the implicit slogan “Save the bankers, save the world” — that is, restore confidence in the financial system and prosperity will follow. And government actions have indeed restored financial confidence. Unfortunately, we’re still waiting for the promised prosperity.

 

This is where my agreements with Krugman end.

Basically, Krugman is saying that when people need to admit when they were wrong and not make excuses. This puzzled me considering that Krugman has never found a problem that can’t be blamed on Republicans, supported creating a housing bubble to offset the dot com bubble in the early 2000s (gee, housing bubbles ended up great), and supports the idea of government fiscal stimulus, despite the fact that it has never worked to truly revive and economy despite being tried multiple times. When he is confronted with the fact that he was wrong about predicting the success of Obama’s stimulus, Krugman used the excuse that he and other policy makers underestimated the severity of the crisis and therefore if the stimulus was only bigger it would have worked. To me, this just shows that governments can’t be trusted to intervene in an economy. If politicians and economists don’t even understand the problem, how can they hope to solve it? 

 

P.S. 

If you want to see two of the great economists of the 20th century debate through rapping, click here

Are College Students Really “Food Insecure?”

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http://www.washingtonpost.com/local/more-college-students-battle-hunger-as-education-and-living-costs-rise/2014/04/09/60208db6-bb63-11e3-9a05-c739f29ccb08_story.html?tid=pm_pop

 

 

Apparently college students are so poor that they cannot afford food and are therefore “food insecure”. Or at least that’s what the Washington Post wants us to believe. Now I must admit that I do not have my own research and data to dispute them in an empirical manner, but I am still very suspicious of their claims.

For one, it points to a survey saying that 59% of students at Western Oregon University have experienced food insecurity. Thats a very high number. I know college students are poor, but to have well over half of them struggle to buy food seems awfully odd to me considering that we are simultaneously told that the vast majority of college kids drink too much (who pays for that?) and that our population as a whole is much too fat (to put it bluntly). The article mentions that students are often “too proud” to ask their parents or charities for help affording food. I understand that some kids have legitimate reasons why they want to not interact with their parents- perhaps a history of violence or abuse, and I understand not wanting to use private charity. But if our society has eroded to the point where we can’t expect families to help each other and therefore we need government to step in (undoubtably many reading this article will say “lets give all college kids food stamps!”) we have big problems as a country. And as for being too proud for private charity I understand this feeling, but I doubt these same students wouldn’t think twice about accepting food stamps from the government paid for by taxpayers. I remember seeing one past Facebook acquaintance who would put up lots of pictures of alcohol abundant parties and vacations on the beach, but between these pictures he once posted a status bragging that he was eligible to receive food stamps and would promptly take advantage of them. 

Now I do not think that all is well in food in America. We have agricultural subsidies that get paid out to big agribusiness that distort food markets and we have mindless ethanol mandates that actually have the effect of polluting the environment more, raising food prices by turing corn into fuel rather than food, and enriching politically connected businesses at the expense of taxpayers. Naturally these mandates were put in place to save the environment. But what else would you expect from big government “solving” our problems?

As for food stamps, undoubtably there are people in our society that truly need help affording food and we ought to help them. Private charity may not be able to help everyone in need and I personally don’t have an issue using modest government programs to pick up the slack. This is mostly because I believe that the slack ought to be very small. But today we spend billions more on SNAP (food stamps) than we did in the days of Bill Clinton. Part of this is because the Great Recession, but even during our current slow but nonetheless existent recovery the numbers of people enrolled in SNAP continue to increase. Why would an improving economy lead to MORE people struggling to afford food? Something tells me that SNAP is reaching more than just the ones who truly need help…

Of course the big tragedy of this situation is that as we spend more and more on government entitlements and welfare programs and move closer and closer to the cliff of fiscal disaster, we endanger the future of these programs that are desperately needed by the least fortunate in our society. We need to be fiscally responsible today so that we can be compassionate tomorrow.

 

The Cost of College

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If you read the budget reports of some colleges (not naming names…) they actually do brag about “only” increasing tuition by thousands of dollars each year.

 

 

Everyone is familiar with the fact that the cost of attending college has skyrocketed over the past 30 years and that students are finding higher education to be less affordable and less beneficial to their lives. For many the gut response to solving this problem is to increase government aid to students in the form of grants and loans. The problem with this strategy is that we have tried it already and the results are our current state of higher education. As college costs have been rising, government spending on financial aid such as student loans has risen as well. The theory behind this correlation is that colleges know they can increase tuition nearly as much as they want because they know that the government will give students more and more money to pay for college. Unlike a regular marketplace, there seems to be no incentive for traditional colleges to keep costs down. They have a long list of prospective students willing to pay whatever the price may be for that college degree we are all told is essential to our future. 

So what to do about the problem?

First, not everyone should go to college. I think education is great, but there is a difference between education and schooling and for some people it just doesn’t make financial sense for them to get a 4 year college degree. We all have different talents. Some are naturally geared toward academic subjects and some are excellent plumbers. Before we start looking down on plumbers, try to imagine the world without any running water…

Second, the people that decide to go to college should bear a big chunk of the financial burden so that they have to think hard about whether or not a college degree is their cup of tea. Its been long known that public schools have higher dropout rates than more expensive private schools. One explanation is that many students attend school for the “college experience” more than for studying, so they gravitate toward the cheaper schools where they have to pay less money to party on the weekends. One side effect of this is high dropout rates. Now I’m not against my fellow college students having a good time at school, just don’t do it at the taxpayer’s expense.

Third, and this is my own idea so it need a lot of refining, all people from the age of 18 to 25 (age is flexible) should be exempt from income taxes. This way, if you don’t go to college and start working right out of high school you can have a head start in saving money and accumulating wealth. And if you do go to college and get a job soon after graduation you can use your earnings to pay back student loans instead of paying taxes. This scheme can probably best be done with some sort of system of tax credits for young people with student loans or for working young people wanting to save.

Fourth, and perhaps most importantly, we need to let free market forces work to innovate the way we educate people. The future seems to be in online education that can be highly effective and drastically cut costs. At Boston College I have taken intro courses where you sit in a lecture a few times a week, write a paper, and take a couple tests. There is no reason why this course couldn’t have been given online at a much cheaper cost. Perhaps the future of higher education is a sort of hybrid system where you take cheaper online courses half the time and more expensive traditional on-campus courses half the time. This way you can get the benefits of both styles of education.

Expect many professors and college administrators to fight hard against these changes in the name of “protecting the student.” If costs of college goes down, college revenues will probably decline as well.

Is Inequality THE Issue of Our Time?

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http://www.brookings.edu/research/opinions/2014/01/06-income-gains-and-inequality-burtless

 

When I came across this article from the not-so-conservative Brookings Institute, I was suspicious. It is April Fools Day after all and this is an article from a liberal think tank opining that income inequality is not nearly as big of a problem as President Obama makes it out to be. It must be a joke right? Luckily my fears were assuaged when I looked at the publication date and saw it is actually an article from January, and makes some solid points.

The biggest point is that the left would have you believe that since 1980 the rich have gotten richer AT THE EXPENSE of the poor. This is false. The economy is not a fixed pie like the one (several?) at Thanksgiving dinner. Just because one person gets richer does not mean that someone else had to get poorer. Since 1980 the “economic pie” has gotten bigger, allowing everyone to have a bigger piece of it. Now it is true that the rich have gotten richer at at faster pace than the poor- the rich have seen their AFTER TAX (this is important) incomes triple, while the middle class has seen their incomes rise by 40%. But the point is that EVERYBODY is better off. 

Margaret Thatcher understood this concept and delivered that best line ever in explaining the whole income inequality debate. When the Labour Party tried to nail her on income inequality increasing during her term as Prime Minister, the Iron Lady brilliantly fought back:

When Simon Hughes (Liberal Democrat member of Parliament for Southwark and Bermondsey) asked about the gap between the wealthy and the needy, Prime Minister Thatcher replied unyieldingly:

“What the honorable member is saying is that he would rather that the poor were poorer, provided that the rich were less rich,” she argued on November 22, 1990. She added: “So long as the gap is smaller, they would rather have the poor poorer. You do not create wealth and opportunity that way. You do not create a property-owning democracy that way.”

Mrs. Thatcher’s words were accompanied by a simple hand gesture, showing that the Left prefer a narrower gap between rich and poor, even if both are at a lower level, than a wider gap, where both the rich and poor are better off — albeit more so for the former.

 

I like to be fair so I will admit that the most of the American left probably does not want the poorer to be poorer so long as the rich were less rich. But when they constantly harp on income inequality as the sole problem with our economy in and of itself, I can’t help but think of what Thatcher said. Although I also try to remember that the only reason the left is harping on inequality is pure politics. They know their economic policies have failed the american worker and their signature health care bill is growing less popular by the day. They need something to harp on for the midterm elections coming up so they have chosen to appeal to natural human emotions like envy and hatred of the rich because that’s what worked in 2012 to beat Mitt Romney. 

As a conservative, I don’t believe in hating people because they are rich. There are plenty of good reasons to dislike people (such as them being jerks), but simply being rich is not one of them. However I agree, to an extent, that income inequality can be an issue in our society, especially when people become rich from having politician friends in Washington who dole out favors. But the answer to the problem is not more government, but less. If the government wasn’t doling out subsidies for oil and green energy, cronies wouldn’t have any favors to lobby for (lobbying firms have seen their revenues drop due to our “do nothing” congress). And most importantly, to help the poor and middle classes we need a good economy thats creating lots of good paying jobs. Americans want to work for their success because they know there is dignity in work, but thanks to liberal economic policies our economy is starting to look more European than American. This is not a good thing unless you would rather the poor be poorer.

 

 

P.S.

Here is the article I got that Thatcher bit from, followed by a video of the Iron Lady saying it herself:

http://www.nationalreview.com/corner/344974/thatcher-they-would-rather-have-poor-poorer-deroy-murdock

Save $400 Million by Switching Fonts

 

http://www.cnn.com/2014/03/27/living/student-money-saving-typeface-garamond-schools/index.html?iref=allsearch

 

I came across the article above on Facebook and saw it as a valuable lesson about government. The article is about a 14 year old who figured out that the government can save hundreds of millions of dollars if they switch the font that they print documents in to a thinners font that uses less ink. This sounds like it should be a bipartisan no brainer with no possible reason to not implement.

But this is government, so common sense doesn’t apply.

The government responded to this report by saying that they appreciate the suggestion but they are working to make most files digital so they don’t have to worry about printing costs. That’s great, but what about switching fonts so that during the time it takes to convert to being fully digital the government can save every cent possible? Or what about the fact that the government will always be printing at least some documents, so why not save money where we can? Especially when the cost saving measure is so effortless?

My suspicion is that the government is resisting the font change because someone, somewhere is benefitting from high ink costs. Think about it. Some company in some congressional district has to make the ink that the government buys, and that company hires people and pays taxes and such. If the government spends less on ink, that company gets less money and maybe has to lay off some workers.

That would be awfully inconvenient for the ink lobby/special interests. Better keep spending more than we have to…