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Saturday, February 28, 2009
Stimulus Disincentives
Family farms are losers in the stimulus pork barrel.
Bob Utterback writes a regular column called Outlook. It appears in the Farm Journal, the largest national circulation publication focusing upon family-owned farms.
Mr. Utterback travels continually among farming communities across the nation to gauge market conditions and farmers’ market sentiment. His February 14 column suggests that President Obama’s stimulus bill will be, on balance, a series of disincentives for family farms to run the risks of aggressive farming, because the stimulus bill unfavorably raises the risk / reward ratio.
Family farms have to contend with high levels of weather risks and volatile prices for seed, feed, and fertilizer, along with volatile sale prices for crops. In addition, such farms are quintessential small businesses, ones which nonetheless require large, long-term investments in land, storage facilities, and equipment.
Farmers, more than average worker-consumers, understand the essentiality of maximizing saving and minimizing consumption expenditures. They know that eating their seed corn will leave the fields bare for the next season. Moreover, farm families work long, hard hours all year long to build and to preserve their farms for future generations of their families. Reinstatement of punitive death taxes, as proposed in the President’s budget, is a meaningful disincentive to all that hard work.
Mr. Utterback’s interpretation of the stimulus bill, in the quote below, is that its primary effect is to transfer money from small businesses entrepreneurs to workers.
Though he doesn’t make the latter explicit, the main worker beneficiaries will be labor unions, which can demand higher wages and make them stick in future economic downturns, thereby intensifying their impact upon the national economy (e.g., the many thousands of laid-off UAW members who get full pay and benefits from General Motors, without having to work a single day). Democrat/Socialists, of course, aim to give labor unions new, special privileges to enhance their power to extort uneconomic labor contracts, which non-union workers, the vast bulk of the nation’s labor force, will pay for with lower wages, higher prices, higher taxes, and crushing inflation to offset labor union extortion.
Because of the speed of the global contraction, many countries are quickly putting together financial stimulus packages to help stabilize and encourage their respective economies. As a result, the potential level of debt that
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Friday, February 27, 2009
Politics in the Guise of Pure Science
Thanks to the Maggie’s Farm website for the link to this article by the estimable John Tierney, one of the very few voices of sanity on the New York Times staff.
Attorney General Eric Holder’s Scabrous Screed
Stuart Taylor, Jr., takes the Attorney General to task on The National Journal Website.
Let The Honest Talk About Race Begin
ERIC HOLDER’S ASSERTION THAT ‘THIS NATION HAS STILL NOT COME TO GRIPS WITH ITS RACIAL PAST’ IS OFF BASE.
Saturday, Feb. 28, 2009
?by Stuart Taylor Jr.
Dear Mr. Attorney General:
Your speech commemorating Black History Month by calling America “a nation of cowards” because we “do not talk enough with each other about race”—a topic about which we talk incessantly—was unworthy of the admirable public servant I believe you to be.
The speech was, as others have pointed out, embarrassingly misinformed, hackneyed, and devoid of thoughtful contributions to racial dialogue.
You can do much better. Please use your bully pulpit in the future to cut through the usual cant and state some politically incorrect truths about race in America that would carry special weight if they came from you. That would require mustering the courage to take on the Democratic Party’s powerful racial-grievance lobby. But it would do the country a lot of good.
The one point that you developed in a bit of detail in the February 18 speech was especially silly: “Black history is given a separate, and clearly not equal, treatment…. Until black history is included in the standard curriculum in our schools and becomes a regular part of all our lives, it will be viewed as a novelty, relatively unimportant and not as weighty as so-called ‘real’ American history.”
Bosh. The reality is that our high schools and universities are quite clearly focusing disproportionate attention on black history.
The proof includes a poll published last year in which 2,000 high school juniors and seniors in all 50 states were asked to name the 10 most famous Americans, other than presidents and first ladies. The top three finishers were black: Martin Luther King Jr. (67 percent), Rosa Parks (60 percent), and Harriet Tubman (44 percent). So is the only living finisher, Oprah Winfrey (22 percent).
As for the universities, “the almost obsessive emphasis on race, class, and gender in the humanities and social sciences means that, if anything, black history is overrepresented in college history curricula,” in the words of professor KC Johnson, a distinguished scholar of American history based at Brooklyn College. (We co-authored a 2007 book on the Duke lacrosse rape fraud.)
It’s true that college black-studies courses are often “separate.” But the reason is hardly to slight black history. It is to satisfy demands for hiring more black professors, who tend to specialize in black studies. Some of them also use their platforms to spread the lie that America is still pervaded by white racism.
Your unelaborated assertion that “this nation has still not come to grips with its racial past” is also way off base, Mr. Attorney General.
To the contrary, this nation has adopted numerous civil-rights laws. It has replaced the once-pervasive regime of discrimination against blacks with a benignly motivated but nonetheless wide-reaching regime of discrimination against whites, euphemistically known as “affirmative action.” It sometimes seems more interested in teaching children about slavery and segregation than about math and science. It has elected a black president.
The country has replaced the once-pervasive regime of discrimination against blacks with a benignly motivated but nonetheless wide-reaching regime of discrimination against whites known as “affirmative action.”
For all of its flaws, this nation is “the least racist white-majority society in the world; has a better record of legal protection of minorities than any other society, white or black; [and] offers more opportunities to a greater number of black persons than any other society, including all those of Africa,” black sociologist Orlando Patterson wrote in 1991.
You also said this, Mr. Attorney General: “On Saturdays and Sundays, America in the year 2009 does not, in some ways, differ significantly from the country that existed some 50 years ago [and] is voluntarily socially segregated.”
Rubbish. It’s true that social self-segregation persists—especially, as Patterson has written, among “Afro-American students and young professionals.” But as Abigail Thernstrom points out in National Review Online: “In 1964 only 18 percent of whites said they had black friends; the figure today is 87 percent.” And the share of blacks with close white friends soared from 21 percent in 1975 to 82 percent in 2005. Sixty percent of whites report having black neighbors, up from 20 percent 50 years ago. A 2006 poll showed that half of the black respondents had dated whites and almost 40 percent of the whites had dated blacks.
Not to mention the black president, attorney general, former secretaries of state—one of whom served as chairman of the Joint Chiefs of Staff—power brokers, authors, entertainers, athletes, multimillionaires, and current and former CEOs at some of America’s biggest companies.
You said, “It is not safe for this nation to assume that the unaddressed social problems in the poorest parts of our country can be isolated and will not ultimately affect the larger society.” True. But you offered not a clue about how to address those problems.
As I think you know, and should acknowledge, Mr. Attorney General:
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Thursday, February 26, 2009
Stimulus Package Analogy
George Reisman explains that economic stimulus programs administered to an out-of-balance economy are analogous to giving additional doses of a chemical stimulant to a sleep-deprived person who needs, instead, rest and recovery.
With regard to the nature of true savings vs consumption, see Savings?, an article that I posted April 05, 2007.
Reducing the Deficit?
President Obama claims that his budget will reduce the Federal deficit. In Terry Jeffrey’s analysis, that asserrtion is a charade.
Wednesday, February 25, 2009
No More Unilateral Foreign Policy?
Our New liberal-progressive-socialist administration ostentatiously renounced the purported unilateral foreign policy modes of its predecessor in favor of the “sensitive” foreign relations protocol enunciated by Senator John Kerry in the 2004 presidential campaign.
Apparently that message was for domestic consumption only. The Obama Justice Department has managed to introduce the compassion of the IRS into a major blowup with Switzerland.
Sunday, February 22, 2009
Oxymoron of the Day
A Wall Street Journal headline pull-quote:
The European leaders of the Group of 20 agreed that all financial markets, products and participants including hedge funds must be regulated, and any measures that might distort competition must be minimized. [my italics]
Saturday, February 21, 2009
The Limitations of Econometric Computer Models
Computer models were the tools employed to inflate the subprime mortgage balloon that precipitated collapse of our financial markets. And the same sorts of inherently faulty computer models are generating proclamations that President Obama’s near-trillion-dollar stimulus and mortgage protection programs will create millions of new jobs and restore the economy to prosperity.
The old saw is “garbage in; garbage out.” When the computer model is too complex and attempts to cover too wide a scope, its output is worse than useless; disaster is just around the corner.
Econometric computer models were at the root of the 1998 collapse of John Meriwether’s hedge fund Long-Term Capital Management (LTC). That event led the Federal Reserve to pull out all the stops and flood the market with liquidity to prevent a possible world-wide financial meltdown. Long-Term Capital Management had too many huge financial commitments to and from the world’s major financial institutions. Allowing it to fail, so the Fed thought, would risk system-wide disaster.
Mr. Meriwether’s computer models had built in all of the assumptions of risks that humans then could foresee in constructing very complex trades involving very complex financial instruments. He and his colleagues were as intelligent and as well informed as any group of securities traders in the world. They were former “masters of the universe” at Salomon Brothers, when in the 1980s it was the world’s largest non-governmental trader of securities. And Mr. Meriwether was at the top of the Salomon Brothers trading heap.
Yet, an unanticipated confluence of market conditions effected a swift collapse of LTC’s house of cards.
A nearly identical pattern emerged in our present financial collapse, beginning with the subprime mortgage meltdown. Some of the world’s most sophisticated computer jocks modeled some of the most complex financial instruments in history. A vast network of risk swaps among the world’s major financial players was constructed to hedge against all foreseeable risks. However, the computer modelers failed to foresee combinations of circumstances that would quickly undermine the risk protections built into their models.
Once again, unanticipated confluences of market conditions kicked the slats from under this vast financial structure.
To dig out of this economic debris, the nation is rolling the dice with the largest financial wager ever made: President Obama’s stimulus bill.
Why are we once again placing our bets on the same school of econometric-model economists who gave us the stagflation of the 1970s, economists who are using the same sorts of computer models that led to disaster in 1998 with Long-Term Capital Management and in 2008 with the subprime meltdown?
In a free-market economy, hundreds of millions of individuals can make better and faster economic decisions that come closer to sensing all available information than can any group of intellectual planners working with the world’s fastest block of supercomputers. Planners cannot possibly gather all available information in real time and cannot effectively integrate that information into policy enactments that must apply uniformly to the entire population.
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Friday, February 20, 2009
Tooth Fairy Economics
Tom Woods gives his perspective on why the current stimulus plan, indeed any stimulus plan, is worse than doing nothing.
A couple of quotes:
The primary fallacy of the tooth-fairy economics at the heart of the stimulus is the very idea that economic health is the product of government spending, which is financed either by borrowing (which leaves private businesses with a smaller share of the pool of savings for them to borrow from), printing money out of thin air, or direct seizure from the population. Whatever government spends the money on is necessarily arbitrary—government lacks the profit-and-loss feedback mechanism that keeps the private sector from squandering resources and employing factors of production in ways that do not cater to consumer wants…
In his recent press conference, President Obama cited the case of Japan as if it were evidence for his side of the argument. Exactly the opposite is true. Japan has done everything to itself that our government has done and is threatening to do to us, and with no results. From partial nationalization of its banking system to “stimulus” packages amounting to trillions of yen, from propping up zombie companies and dropping interest rates to zero, they’ve tried it all.
Naturally, the Keynesian response is that Japan simply didn’t spend enough. Oh? Thanks to the misnamed “stimulus” packages that the Japanese government imposed on its hapless people, Japan is the most indebted country in the developed world. So becoming the most indebted country in the developed world—and that’s saying something—still isn’t enough spending for Keynesians?
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Thursday, February 19, 2009
D
If we’ve been there before, supposedly our perception ought to be sharpened.
Unfortunately, not so. Read this article from December 1998, more than ten years ago.
