Free Markets, Free People

Monthly Archives: June 2011


RightOnLine

OK, I’m sitting in the bloggers lounge at RightOnLine in the Twin Cities. If the name tags waiting to be picked up are any indication, it is going to be very well attended. It’ll be interesting to see how different this is from CPAC.

I may attend some of the breakout sessions just to get a feel for what is being pushed by Republicans. Hopefully I’m going to hear a lot about fiscal issues, budget, debt, deficit and spending cuts.

Michele Bachman, Tim Pawlenty and Herman Cain will be speaking here. I’m going to try to live blog their speeches. I’m also trying an experiment with the iPad, using it as my primary means of blogging (a little downsizing).

So … let the games begin.

~McQ

Twitter: McQandO


New CAFE standards could cost a quarter million jobs

When is a "green job" not a job? When you lose yours because of the initiative:

The Detroit News’s dogged David Shepardson has unearthed a study by one of world’s most respected automotive research firms that reveals that President Obama’s radical CAFE mandate that vehicles average — average! — 62 MPG by 2025 “could force vehicle prices up by nearly $10,000, reduce sales by 5.5 million vehicles annually, and eliminate more than 260,000 jobs.”

Shepardson is quoting from the Michigan-based Center for Automotive Research and the 260,000 job loss figure (consistent with past job losses from CAFE rule hikes) is another dent in White House’s propaganda that Green creates jobs.

The CAR study also reveals that Obama’s NHTSA and EPA have been gaming the figures when it comes to the cost of their new rules. The center’s study predicts it will cost between $3,744 and $9,790 per vehicle, while the agencies have low-balled the figure at $770 to $3,500 per vehicle.

The resulting costs would shrink the new-car market, with 5.5 million potential buyers disappearing (and manufacturing jobs with them) by 2025. That assumes that the auto fleet can even be built to meet such an absurd spec. Currently, no car — much less the average — meets 62 mpg. Indeed, only a handful of small vehicles meet the 35-mpg fleet-wide standard mandated in just five years.

Yes friends, just like the story I covered the other day, we have an administration which is more agenda driven than reality driven. We’re in the middle of a horrible recession, unemployment hasn’t really moved in over a year, the future doesn’t look much better, but the agenda to raise the price of energy (at the cost of jobs) and CAFE standards (at the cost of even more jobs) continues apace.

If you’ve ever wondered what market distortion and intrusion by government looks like, this is a good example.  And this intrusion will cost hundreds of thousands of jobs and price many consumers out of the new car market (again, this administration sees that as a feature, not a bug). 

Another in a litany of reasons Mr. Obama needs to be retired in 2012.

~McQ

Twitter: @McQandO


Ethanol subsidy axed

Or an alternate title: “A good start”.

The Senate voted 73-27 Thursday to kill a major tax break that benefits the ethanol industry, handing a political win to a bipartisan group of lawmakers that call the incentive needless and expensive.

The vote also could have ramifications on future votes to reduce the deficit. Much of the GOP conference supported Feinstein’s bill even though it does not include another tax break to offset the elimination of the ethanol tax credit.

[…]

Feinstein’s amendment to an economic development bill would quickly end the credit of 45 cents for each gallon of ethanol that fuel blenders mix into gasoline. The credit led to $5.4 billion in foregone revenue last year, according to the Government Accountability Office.

The amendment also ends the 54-cent per gallon import tariff that protects the domestic ethanol industry.

So we have actual bi-partisan agreement to end a subsidy and cut spending.   Good.  I’m also pleased with the fact that the tariff would be lifted.   This means less market distortion and real signals sent by that market as to whether or not ethanol is a viable product in the energy sector.  My guess is it is, however, not to the extent the subsidy made it.   It may also have an effect of lowering food prices as less corn production will probably go to ethanol than is now.

As the article points out, the issue is “more regional than partisan”.  That’s probably the case with many subsidies.   Let’s carry this on by hunting down a few more of those types of subsidies and immediately end them.  A few billion here, a few billion there and pretty soon you’re talking big money.

~McQ

Twitter: @McQandO


On Kissinger

There will be light blogging today as I head from DC to Minneapolis for RightOnLine. A few thoughts on Henry Kissinger.

One, an hour to listen to him talk about China is way to short a time and I, and I’m certain everyone else in the room, could have spent at least a day questioning him. He impressed me as a very deep thinker in the strategic sense and he made the point that one of the primary differences between China and the US (among many) is the fact that the Chinese culture and history produce many strategic thinkers and planners while they’re actually few a and far between in the West. When asked to name foreign policy strategic thinkers in the US at the moment he was at a bit of a loss.

Anyway, I recorded the whole interview and want to take the time to go through it and write it up.

I also had a chance to read parts of the book. It’s fascinating. You have to remember this was a man who had many one-on-one discussions with Mao. In fact, he said he originally planned to make the book about conversations he’d had with Chinese leaders, but it grew into one that covers the country’s history, culture and philosophies to help the reader better understand why the Chinese react to events as they do. Like I said above, fascinating stuff and interesting to read (at least the random parts I read – which tells me the entire book is like that.

Much more on this as time permits.

~McQ

Twitter: McQandO


Henry Kissinger

Every now and then I’ve been given the opportunity to talk with some of our movers and shakers from the past. First it was former SecDef Donald Rumsfeld as he launched his book "Known and Unknown". And through the Rumsfeld office, I’ve been afforded the opportunity to now sit down with former NSA and Sec State Henry Kissinger today as he launches his new book, "On China".

Unfortunately I received the book yesterday and haven’t been able to read it, but as the title suggests, it is all about China – history, politics, foreign relations, etc. Kissinger has apparently been fascinated by the country ever since Richard Nixon sent him to Beijing to help open and better relations between the US and China.

If you have any serious questions about China – since that’s obviously going to be the theme of the coffee klatch arranged for today, I’d welcome them.  I think it will be a fascinating hour or two.  China has always been an enigma to the West, and it is no less so today.  Drop any ideas for q’s in comments and if they’re good, I’ll try to ask them.

~McQ

Twitter: @McQandO


WI Supreme Court reinstates law limiting public union collective bargaining “rights”

At least for now:

Acting with unusual speed, the state Supreme Court on Tuesday ordered the reinstatement of Gov. Scott Walker’s controversial plan to end most collective bargaining for tens of thousands of public workers.

The court found that a committee of lawmakers was not subject to the state’s open meetings law, and so did not violate that law when it hastily approved the collective bargaining measure in March and made it possible for the Senate to take it up. In doing so, the Supreme Court overruled a Dane County judge who had halted the legislation, ending one challenge to the law even as new challenges are likely to emerge.

The changes on collective bargaining will take effect once Secretary of State Doug La Follette arranges for official publication of the stalled bill, and the high court said there was now nothing to preclude him from doing that.

This, however, is not the end to law suits against the bill, it’s just one case which has been settled that had stopped implementation of the law in its tracks.  In fact, this finding was more about how the lower court judge had exceeded her authority:

The court ruled that Dane County Circuit Judge Maryann Sumi’s ruling, which had held up implementation of the collective bargaining law, was in the void ab initio, Latin for invalid from the outset.

"The court’s decision …is not affected by the wisdom or lack thereof evidenced in the act," the majority wrote. "Choices about what laws represent wise public policy for the state of Wisconsin are not within the constitutional purview of the courts. The court’s task in the action for original jurisdiction that we have granted is limited to determining whether the Legislature employed a constitutionally violative process in the enactment of the act. We conclude that the Legislature did not violate the Wisconsin Constitution by the process it used."

The court concluded that Sumi exceeded her jurisdiction, "invaded" the Legislature’s constitutional powers and erred in halting the publication and implementation of the collective bargaining law.

So – the law must now be officially published for it to take effect and according to the court, there’s nothing standing in the way of that happening.

I wonder if we’ll be treated to another spectacle of teachers and the like throwing a collective tantrum.  Oh, wait, it’s summer – they’re on vacation.  With no works stoppage available to them to make their point, probably not.

~McQ

Twitter: @McQandO


The “debate”

Consider this an open thread – talk about the debate last night between GOP candidates or whatever.  I’ve got to hit the road.

Conventional wisdom seems to be forming that Romney and Bachman (who announced her candidacy for President at the debate, thereby stealing a lot of the air in the room) were the winners.   Slate’s Joan Walsh, of course, think “American’s lose” regardless of which GOPer won.

I have to wonder where Walsh has been hiding these past 3 years if they think any of those on the stage last night could do a worse job than the present administration.

There’s also the media angle – CNN conducted it, and many have complained that John King spent way too much time on social wedge issues that are the least of our problems now rather than dealing with the economy and foreign policy, etc.

Finally, does anyone really care right now about such debates?   And isn’t it a debate in name only.  It’s a freakin’ Q & A session with the moderator doing the questioning.  I’d actually love to see a debate instead of some news anchor deciding to ask what’s apparently important to him.

~McQ

Twitter: @McQandO


US in worse shape than Greece

I’m not sure how many times we or our politicians have to hear this, but to this point, it hasn’t made the impression it should:

Much of the public focus is on the nation’s public debt, which is $14.3 trillion. But that doesn’t include money guaranteed for Medicare, Medicaid and Social Security, which comes to close to $50 trillion, according to government figures.

The government also is on the hook for other debts such as the programs related to the bailout of the financial system following the crisis of 2008 and 2009, government figures show.

Taken together, Gross puts the total at "nearly $100 trillion," that while perhaps a bit on the high side, places the country in a highly unenviable fiscal position that he said won’t find a solution overnight.

Bill Gross runs Pimco, a based in Newport Beach, Calif., manages more than $1.2 trillion in assets and runs the largest bond fund in the world.  Gross went on to say:

"To think that we can reduce that within the space of a year or two is not a realistic assumption," Gross said in a live interview. "That’s much more than Greece, that’s much more than almost any other developed country. We’ve got a problem and we have to get after it quickly."

[…]

"We’ve always wondered who will buy Treasuries" after the Federal Reserve purchases the last of its $600 billion to end the second leg of its quantitative easing program later this month, Gross said. "It’s certainly not Pimco and it’s probably not the bond funds of the world."

Now whether you realize it or not, that’s a good share of the bond market saying, "yeah, you know, not interested". That’s scary. And with China recently unloading some of its US debt notes, it’s not a happy picture for the US, fiscally. As Gross points out, in overall financial condition, we’re worse off than the basket case of Europe – Greece.

We have been getting these warning for literally decades.  We’ve done absolutely nothing substantial to mitigate them.  In fact, we added more to the pile (Medicare D and ObamaCare).   We’re going to crash.   It is time for a huge reality check, gut check or whatever you want to call it.  But like the shopping addicted, we have got to cut up the credit cards, cut spending to the bone, get government out of areas it has no business and take as much power of the purse away from the Fed as we can.  

This is beyond absurd.  And the time to address it is now (if it’s not already too late).

~McQ

Twitter: @McQandO


So why aren’t businesses hiring?

For a number of reasons actually.  Some numbers tell the story:

Two years into the recovery, hiring is still painfully slow. The economy is producing as much as it was before the downturn, but with seven million fewer jobs. Since the recovery began, businesses’ spending on employees has grown 2 percent as equipment and software spending has swelled 26 percent, according to the Commerce Department. A capital rebound that sharp and a labor rebound that slow have been recorded only once before — after the 1982 recession.

Demand has increased enough that business is producing at least as much as it was before the recession, according to the NYT, but businesses aren’t hiring.  Why?

Well, in lean times, headcount is the first casualty.  Layoffs are the rule.  That’s the fastest way to reduce the bottom line and either cut the losses being suffered to a manageable level or eek out a profit.

But, you say, once the recession is over, shouldn’t they rehire?   Well, like all markets, not if the cost of the commodity is too high (labor) and an acceptable alternative is available (equipment).  In this case that appears to be software in many cases.  

So – business cuts back during bad times, finds it can either get along without the extra headcount or finds a technological alternative (equipment) and when a level of prosperity returns, doesn’t hire (although I’m not sure I’d agree a proper level of prosperity has returned at this point, but I think it is clear that much more employment was expected by now, which is why we see the word “unexpected” appended to every down employment report).

Why is this happening?  Well in addition to the above, there’s an added problem that is often ignored or not mentioned.  Government tax policies.  In the case of equipment buying, the government has incentivized such purchases to the detriment of another – namely employment (labor).

With equipment prices dropping, and tax incentives to subsidize capital investments, these trends seem likely to continue.

“Firms are just responding to incentives,” said Dean Maki, chief United States economist at Barclays Capital. “And capital has gotten much cheaper relative to labor.”

Indeed, equipment and software prices have dipped 2.4 percent since the recovery began, thanks largely to foreign manufacturing. Labor costs, on the other hand, have risen 6.7 percent, according to the Labor Department. The rising compensation costs are driven in large part by costlier health care benefits, so those lucky workers who do have jobs do not exactly feel richer.

There’s your choice as a business – lower prices and tax incentives to purchase software and equipment or higher labor costs for workers.  If the machine can do the job, the business doesn’t have to pay healthcare, payroll, payroll taxes, etc.  In fact, the machine gives them a bottom line write off on their tax bill.  It’s a no-brainer.

~McQ

Twitter: @McQandO


Group still claims “scientific consensus” on AGW

Here’s their opening statement (last revised in March of this year):

Scientific societies and scientists have released statements and studies showing the growing consensus on climate change science. A common objection to taking action to reduce our heat-trapping emissions has been uncertainty within the scientific community on whether or not global warming is happening and if it is caused by humans. However, there is now an overwhelming scientific consensus that global warming is indeed happening and humans are contributing to it. Below are links to documents and statements attesting to this consensus. 

Of course it is the “Union of Concerned Scientists”, so you have to understand that this is coming from an advocacy group which cloaks itself in science, but was originally formed in the late ‘60s at MIT to oppose the Vietnam war.  Their political agenda is well known.  And, after viewing what can only be considered a rather interesting statement (for supposed “scientists”) you get to their links – the links which supposedly support their statement.

Except they’re mostly ancient statements, some dating back to 2003.  In fact, the most recent I can find is October of 2009 when the scandal of “hide the decline” was still a month away.  The American Meteorological Society’s statement is from 2007.  The US National Academy of Science statement is from 2005.

Seems to me, in light of what happened since 2005, it might be appropriate to ask the USNAS if it still holds those beliefs – because since 2005 the whole hoax has fallen apart.

Apparently the UCS dropped out of the fact finding part of this a few years ago and has just decided to adamantly maintain that AGW is the problem, Al Gore said it, they believe him and that ends the discussion (why, that sounds like a religion, doesn’t it?).

Heh … “scientists”.   Imagine “scientists” talking about consensus rather than proof.  Imagine “scientists” ignoring contrary facts.

They ought to change their name – see if “Union of Concerned Propagandists” is taken.

~McQ

Twitter: @McQandO

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