Recently in Economics Category

This past Thursday I filled the trusty F150's gas tank, paying $3.689 per gallon for the privilege.

This afternoon on my way home I passed by the gas station and saw regular had jumped to $3.919 per gallon. WTF?

That's a 23¢ per gallon jump in only 5 days.

Did I miss some earth-shattering news that caused oil prices to spike some time in the past few days? I know prices tend to fall after the summer season ends and then jumps up a bit when the refiners start changing over to making the winter blends of gasoline as well as increasing fuel oil and propane production. But what the heck?

The Union Leader has a story about people suffering, not finding work. Cato's Roger Pilon, an excellent orator I once had the pleasure in the summer of 1990 of watching debate leftist Marcus Raskin (think Alabama playing football against Michigan), spells it out:

Prosperity comes from the bottom up--from free people pursuing their dreams, not from government planners.

For the most part I have been trying to avoid many of the campaign ads running on TV. But they are so pervasive that it is almost impossible to do so unless I'm watching something recorded on the DVR so I can skip right past them.

But I have noticed the tone and I have to say I'm not liking what I'm seeing.

It isn't that many of the ads are negative. That's pretty much par for the course. It is the focus of the ads and some of the outright falsehoods and very creative editing being put forward as the "Truth".

Before I go any farther let me give you this warning - I am not non-partisan. I am not going to pretend I'm non-partisan and I'm going to admit right up front that I am biased.

The upcoming elections in November are driving a great big wedge between those who believe the big issue for this election is the economy and those who think it's about anything but the economy. The first group is right and the second is wrong.

As I have said time and time again to many of the anti-Tea party folks (most who seem to believe the Tea party wants to impose some kind of Christian theocracy), the social issues don't matter worth a damn if the nation is bankrupt. If the economy collapses things like abortion rights, same-sex marriage, drug laws, ObamaCare, Social Security, and a whole host of other social issues will become marginalized because everyone will be too busy just trying to survive. None of that crap will matter to anyone. As Democrat consultant James Carville famously said, "It's the economy, stupid!"

The GOP ticket is focusing on the right issues, specifically the economy, jobs, and overreaching government regulations that have only hurt the economy. The Democrats want to focus on anything but the economy, and that's understandable. It's a losing issue for them. So they'll focus on all kinds of social issues that most Americans could care less about. They'll put forth ads and whispering campaigns about how Romney wants to take us back to the Middle Ages, ban all contraception, put women back in the kitchen, and steal lollipops from the mouths of children. (The last is more likely to happen, but it will be Mike Bloomberg doing that, not the Romney.)

Accusations of tax fraud, FEC and SEC violations, and wrongful death have been flung at Romney, yet every one of them has been found to be without merit. But that doesn't mean the Dems won't keep throwing those kind of accusations his way.

Romney's life is pretty much an open book, unlike our present President who is one of the most secretive persons to ever sit in the Oval Office. We know nothing about him other than what he wants us to know, and that's not much. But to hear it you'd think Romney was hiding all kinds of secrets. It's the standard Democrat tactic of accusing others of doing what they themselves are doing.

I've seen my share of presidential campaigns, but I have to say that this one is probably one of the most divisive and nasty ones I've ever seen. I also expect it to get worse, particularly if the Dems and their 'supporters' (the unions) decide to use their proxies (anarchists, OWS, etc) to up the ante and start with physical threats, voter intimidation, and outright acts of violence. Of course I also expect that if such a thing happens they'll get a pass from AG Jeffrey Holder, much as they did during the 2010 elections.

Finally, some good news about the EPA.

In this case, the U.S Court of Appeals for the District of Columbia slapped down the rogue federal agency, ruling that it had exceeded its legal authority in regards to application of its new Cross-State Air Pollution Rule.

Under the Clean Air Act's "good neighbor" provision, the EPA is authorized to regulate sulfur dioxide and nitrogen oxide emissions that cross state lines. But the Obama EPA ignored legal precedent and the plain text of the statute by enacting limits that far exceeded the scope of the law.

While the EPA has not yet responded to Tuesday's court ruling, I expect it will do as it has in the past - ignore the court and continue to push more onerous regulations upon industry and impose fines and penalties on industries failing to meet the impossible conditions of some EPA rules.

One "impossible" condition we've heard mentioned in the media and the blogosphere in the past is the EPA penalizing the petroleum and refining industry for not using a mandated biofuel that doesn't exist. Talk about a Catch-22! But the petroleum industry is fighting back with the American Petroleum Institute filing a lawsuit against the EPA mandate in the D.C Circuit Court.

"EPA's unattainable and absurd mandate forces refiners to pay a penalty for failing to use biofuels that don't even exist," said API Director of Downstream and Industry Operations Bob Greco. "The mandate is effectively an added tax on gasoline manufacturers that could ultimately burden consumers."

The Clean Air Act requires EPA to determine the mandated volume of cellulosic biofuels each year at "the projected volume available." There was no commercial supply of the fuel in 2011, according to the EPA's own records. However, EPA required refiners and importers of gasoline and diesel to use or pay for credits to cover 6.6 million gallons of the nonexistent biofuels.

This sounds like an "protection" racket, something right out of Chicago.

Hey, wait a minute!!! It is right out of Chicago! In this case the corrupt and mob-owned political machine has wormed its way into the EPA, turning it into nothing more yet another mob operation. And who helped turn it into such a thing but Chicago's wholly owned stooge, Barack Obama.

In any case, I expect the court to rule against the EPA on this suit too. I also expect the EPA to ignore it as well, should it come, and continue its destruction of the American economy one rule, one regulation, one fine at a time.

Have any of you out there noticed that no matter how bad the economic numbers are, the Obama administration (and campaign) try to twist them around to make it seem things are getting better? That's certainly the case with both the latest jobless numbers, retail sales numbers, food prices (and by extension, gasoline prices), and manufacturing output. They're all heading in the wrong direction and Obama's folks trumpet them as if they're a prelude to the Second Coming.

One interesting spin on the latest jobless figures? "It's not 8.3%. It's only 8.254%!" Yeah, that makes it better.

Then there's the "unexpectedly" poor sales and manufacturing numbers. How is it explained away? Well, it's like this...ummm...uh...I guess they can't explain it away.

Perhaps they can borrow a lesson from California. After all, the Golden State political machine has gotten pretty good at taking bad economic news and making it sound good. Take one of their latest ploys, stating the state's falling population is a good thing because "it gives the state and the municipalities the time to rebuild and replace infrastructure for future good times." But they never explained that with falling population they also have falling tax revenues to pay for it all. Even Detroit never tried to pull that, knowing it would never fly. Perhaps the Obama camp will say the fall off in sales and manufacturing will allow retailers and factories to prepare for future demand? I wouldn't put it past them.

With the drought taking a toll on crops throughout the Midwest, you'd think Obama's administration would allow corn to be used primarily for food and feed rather than being burned in our fuel tanks. But that isn't going to happen and the result has been a spike in food and fuel prices.. I expect Obama will explain that away by saying "it's good for you" without really explaining why. That's pretty much par for the course for him.

America has an amazingly prosperous public sector that is paid for by the coercive power of the state. Ever try to refuse paying taxes? Doesn't work. Eventually, the guys in black with their armored tank come rolling in.

The private sector is supported by providing a service for which people choose to pay.

Get it? The fundamental difference between voluntary and involuntary. Google "Lysander Spooner."

WSJ's Daniel Henninger has recently written about the two job tracks, "America's Two Economies," in a typically very effective way. This may be an example of what he was talking about.

It may be prudent for a parent, pace John Derbyshire, to exhort the urchins as follows: "Get a government job!"

Wow. From a link in Instapundit I read this excellent Liberty Press (headquartered in Indianalpolis) blog entry by Asheesh Agarwal about the unions in Indiana complaining that freedom of association (or, Right to Work) will cause a decrease in revenues, so they're suing.

But since the law recently passed, making Indiana the twenty-third state to have Right to Work, look how the jobs have come flooding in, surprising even a free market guy like me (NH, are you paying attention?):

In its first few months of operation, the right-to-work law has, by almost any measure, helped to attract new businesses to Indiana.  Indiana has only 2.2 percent of the nation's population.  In April, the first full month after the law took effect, more than one in eight jobs created around the country were created in Indiana - more than in states several times the size of Indiana.  According to the state's economic development arm, almost fifty out-of-state companies cited the right-to-work law as one reason that they were considering opening a location in Indiana.

I just caught a report by ABC's Good Morning America covering the dismal jobs report for June. It was another almost-softball report for Obama, with economics commentator Matthew Dowd stating the American people no longer trust politicians to fix the economy.

The truth, however, is more likely that it is the President they no longer trust.

Throughout our history it has been shown again and again that both Congress and the President have the power to damage the economy, but can usually do little to fix it by any other means than getting out of the way and letting the economy fix itself. Time and again it has been shown that by getting out of the way the economy rights itself, growth returns, and all is right with the world. Then someone in Congress or the President decide that things "aren't quite right" and they start tinkering with one tax, regulation, rule, incentives, subsidies, and law after another, each of them adding burdens that puts more pressure on the economy. In turn the economy slows, falls into recession, and then the Powers-That-Be wonder why this happened, not understanding that they are the ones causing the problems.

This recession, the longest in US history, was fostered by job-killing, finance-twisting, illogical regulations, laws, and "incentives" that short-circuited the usual feedback mechanisms and allowed economic bubbles to be created. Once those bubbles burst, the economy fell and fell fast.

The Powers-That-Be keep ignoring history, keep doing the same thing over and over again, and then wonder why their various 'fixes' for the economy didn't work this time.

It's called insanity.

Another California municipality has collapsed financially, with the city of Stockton filing for bankruptcy under Chapter 9.

This is merely the latest in a series of municipal bankruptcies plaguing the Golden State. Far too many of the municipalities believed the good times would never end and promised things to their citizens and employees based upon that belief. However reality has proved them wrong, the bills have come due, and their coffers are empty.

State finances aren't in any better shape, with a projected $16 billion budget deficit in the offing. Unfortunately, unlike the cities and towns in California, the state cannot declare bankruptcy, meaning the taxpayers (what's left of them) are obligated to pay off the state's deficiencies. But as the state assembly and the governor are learning the hard way, raising taxes any more than they already have will not raise more revenue because the state is already on the wrong side of the Laffer Curve. The last round of tax hikes caused revenues to fall, leaving the state even deeper in debt.

How they believe yet another round of tax hikes will solve their problem makes me wonder if there is anyone sane left in the upper echelons of state government. Unfortunately the answer appears to be 'no'.

In light of the Supreme Court's ruling on ObamaCare, my only response is "We're screwed!"

It seems it took the majority, including Chief Justice Roberts, all kinds of elaborate and painfully twisted reasoning to justify the continuing existence of this godawful law.

While all hope is not lost, meaning it will take Congress to kill this law, repealing the ACA will probably have to wait until after the November elections, assuming Obama is kicked out of office bag and baggage and Harry Reid ends up as the Senate Minority leader. Otherwise we're stuck with a law that will seriously cripple a sixth of the American economy with draconian regulations and taxes. (One has to remember that the ACA requires 10 years of tax revenues to fund 6 years of benefits which is why the major part (and most expensive) doesn't go into effect until 2014. But what happens after those 6 years pass? Tax hikes, that's what.)

So once again the will of the American people is overridden by our supposed "betters" and we're still going to get stuck with the bill for their 'party'.

On more than one occasion I have opined that farm subsidies are something that should end because they have outlived their usefulness. These days farm subsidies have nothing to do with helping the family farm survive but are more about unneededcorporate welfare for the agri-businesses, i.e. crony capitalism.

However, the farm lobby is powerful and doing away with something that benefits the agri-businesses will be difficult even though it would save the American taxpayers $22 billion directly, and untold millions or billions indirectly when consumers no longer have to pay artificially high prices for some foodstuffs.

Cronyism is the practice by which government officials provide preferential treatment (such as loans, subsidies or regulatory preferences) to handpicked firms or industries. It is a bipartisan practice, as we may once again find out if lawmakers reauthorize most of the farm bill currently moving through Congress. There is no justification for extending our current regime of agricultural subsidies -- a clear example of cronyism.

In 2012, the Department of Agriculture is projected to spend $22 billion on subsidy programs for farmers. Introduced in the 1930s to help struggling small family farms, the subsidies have become the poster child for government welfare for the affluent. Farm households have higher incomes, on average, than do nonfarm U.S. households.

Second, farm subsidies tend to flow toward the largest and wealthiest farm businesses. According to the Environmental Working Group database, in 2010, 10 percent of farms received 74 percent of all subsidies. These recipients are large commercial farms with more than $250,000 in sales and mostly produced crops tied to political interests. The Cato Institute's Tad DeHaven and Chris Edwards calculate that more than 90 percent of all farm subsidies go to farmers of just five crops -- corn, wheat, soybeans, rice and cotton. For every federal dollar spent on farm subsidies, 19 cents goes to small farms, 19 cents to intermediate (middle-income) farms and 62 cents to the largest commercial farms.

Other countries have ended farm subsidies and in the end everyone was better off without them, including the farms. The excuse "But we've always done it this way!" is lame. All subsidies do is distort the market by short-circuiting the free market feedback systems and give political power to both major parties because they can use them to reward their "friends" and punish their "enemies" by granting or denying them taxpayer dollars.

It's time to do away with that kind of foolishness and end yet another failed FDR-era policy.

That's what Paul Krugman has been saying. I heard him last week being interviewed on the BBC. But I enjoy an undergraduate at the University of Illinois looking at the data and posting it on his Facebook page to refute this claim by the recent Nobel-prize-winning economist who is more propagandist than scholar.

Getting a gig with the Gray Lady makes people sell their intellectual souls

The implosion of Detroit continues, with the city taking more actions to cut its costs even as revenues decline and more people leave the city seeking greener pastures. Their latest action: shutting off and/or removing half the street lights in the city. That ought to help the crime rate in the city...go up.

Detroit, whose 139 square miles contain 60 percent fewer residents than in 1950, will try to nudge them into a smaller living space by eliminating almost half its streetlights.

As it is, 40 percent of the 88,000 streetlights are broken and the city, whose finances are to be overseen by an appointed board, can't afford to fix them. Mayor Dave Bing's plan would create an authority to borrow $160 million to upgrade and reduce the number of streetlights to 46,000. Maintenance would be contracted out, saving the city $10 million a year.

When you have block after block of abandoned commercial buildings and homes, it makes no sense to waste money lighting streets where no one (except squatters) live. Of course many of those buildings and homes wouldn't be abandoned if decades of Progressive leadership hadn't driven the city into these dire straits. The city is a perfect example of the Thatcher Axiom: "The problem with socialism is that eventually you run out of other people's money." That certainly fits Detroit to a 'T'.

Detroit's dwindling income and property-tax revenue have required residents to endure unreliable buses and strained police services throughout the city. Because streetlights are basic to urban life, deciding what areas to illuminate will reshape the city, said Kirk Cheyfitz, co-founder of a project called Detroit143 -- named for the 139 square miles of land, plus water -- that publicizes neighborhood issues.

--snip--

Meantime, [Detroit Chief Operating Officer Chris] Brown said, the city will fix broken streetlights in certain places even as it discontinues such services as street and sidewalk repairs in "distressed" areas -- those with a high degree of blight and little or no commercial activity.

As Glenn Reynolds stated in his link to the story, it's like something right out of Atlas Shrugged or I Will Fear No Evil.

Much as cities in California have made mistakes when it comes to their finances, it appears here on the East Coast the city of New York is about to shoot itself in the foot, but in a different fashion.

While New York also has problems with its public employee unions, it's nowhere near the level seen elsewhere. Instead, the City Council is proposing rules that will help drive the last surviving industry out of the city - the financial industry.

For the life of me I can't figure out how making it too difficult and too expensive to remain in New York City is going to help the city's finances. Is it possible the City Council has been infected with the "California disease"? After all, California's state and local level governments have been doing their best to drive businesses out of business or out of state. They have succeeded. That's why California is in the fiscal mess it's in. And now New York City wants to do the same thing?

Yet in the wake of JP Morgan's massive losses last week and the continuing controversy surrounding the Wall Street bailouts, the New York City Council is debating a measure that would require city banks to publicly disclose their efforts at "socially responsible" banking.

--snip--

Many bankers, as well as Mayor Michael Bloomberg, have voiced their opposition to the new plans. The regulations, they say, would add another burdensome layer to the web of regulations that already exist at the federal and state levels. The Council, however, appears unmoved, and support of key council leaders...give it a fighting chance at making it into law.

If it does, its supporters on the Council will hail it as a major victory, but it will be a loss for the city as a whole. The financial industry is the one industry keeping the city alive, yet New York's blue politicians seem unconcerned about the risks of antagonizing their major cash cow.

This is the same attitude held by many politicians in California and we've seen how well that's worked out for them. The City Council doesn't seem to understand that the banks and other financial institutions will have no problem departing the city for greener pastures. As the post linked above states, Fortune 500 companies have been leaving New York for decades. Wall Street firms will have no problems following them to places with better business climates. And with today's telecommunications infrastructure, those greener pastures can be anywhere, even here in New Hampshire.

I learned this morning that the Spanish unemployment rate is 24%. So why are going down the path of European economic policies, Mr. President?

Dick Lugar. I used to like him a lot. Several decades ago. He really cut me to the marrow, though, when the National Reciprocity for Concealed Carry Weapons nearly passed. He was one of the few Republican, if not the only one, who voted against it. This bill would have granted a person the right and privilege of being treated with respect when it came to his being able to have a sidearm concealed on his person--as long as he had a valid license to do so from his home state.

There were a few problems with it, but they were minimal in my opinion. One was Vermont didn't require a permit at all to do so for non-felons.

Acting on orders from Chuck Schumer--Doesn't she know she represents NH, not NY?--Jeanne Shaheen also voted against H.R. 822, which I hope comes back to bite her on the arse. It lost by two votes in the U.S. Senate.

But with Lugar's loss to a real conservative, it seems as though we're one step closer to the Second Amendment being treated like a marriage license or a driver's license.

I'm not the only one questioning the wisdom of blending ethanol with gasoline. It's not just the net energy gain or lose, the decreased fuel economy compared with unblended gasoline, or the problems ethanol causes in fuel systems. There's also the economic effects, particularly the always ubiquitous unintended consequences ethanol brings to the equation.

...[M]aking ethanol (grain alcohol) from corn...is a fairly straightforward and cheap process, so even without the federal subsidy, so-called "E10" gas (90 percent gasoline, 10 percent ethanol) is cheaper than straight 100 percent stuff. But instead of simply allowing refiners to mix in up to 10 percent ethanol if the market and production environment made it favorable, the law mandated a steep ramp-up to full sales of nothing but E10 in a very short time. On the surface we would move that much closer to energy independence with this law. Well and good.

The not-so-advertised reasons for the law have to do with the strength of the agricultural lobby. The E10 mandate was a tremendous windfall for everybody who grows corn. While some ethanol from corn was being used voluntarily as a fuel additive before 2007, the mandate caused this use to skyrocket. By 2011, according to the Mosbacher Institute report by economist James Griffin, 37 percent of the entire U.S. corn crop went toward ethanol production. And corn prices soared from $2.50 per bushel up to as high as $7.50.

If the only people hurt were U.S. food consumers (not everybody drives a car, but everybody eats), it would be bad enough. But the U.S. grows and sells more corn than any other nation, and much of it is exported to poorer countries, where it is a staple in many diets. While the rise in corn prices was not solely responsible for the worldwide inflation in food costs that led to food riots in many nations in recent years, the timing is suspicious, and there is no question that the EISA law led to hardships for many poor people around the world who were now even less able to afford to eat.

It's not too often those pushing for mandates look at the consequences they may create. As long as those unintended consequences don't affect them, they don't care. Call it yet another proof that crony capitalism (better yet just call it crony economics because it really has nothing to do with capitalism) always causes more harm than good because only a few benefit and everyone else pays the price, with little if any return for what they pay.

So says the President in Guy Benson's "Obama's Worst Speech Yet." Lot of links!

The President is probably right, though.

But Guy Benson then asks an important question:

How is it possible that America remains plagued by "crumbling roads and bridges" after we've just spent $825 Billion of borrowed money on a stimulus program ostensibly fashioned to fund and execute precisely those types of "shovel ready projects"? 

Renewable fuels have been in the news for years now, with much of the emphasis on ethanol and so-called bio-diesel. Both of these fuels come directly or indirectly from food crops. Some bio-diesel is derived from vegetable oils and some from algae based conversion systems. The one big problem with any of these sources is that all of them take up considerable land to grow and the conversion process is neither cheap or easy.

But that may be changing.

A new process developed by UCLA may take the crops out of bio-fuels and allow for large scale production an alternative fuel called isobutanol, a "higher alcohol" with an energy density approaching that of gasoline. Its feedstock? Carbon dioxide.

Using a modified bacteria for the conversion and electricity as the sole energy source, the system has the potential to be "more efficient than the biological system."

Photosynthesis is the process of converting light energy to chemical energy and storing it in the bonds of sugar. There are two parts to photosynthesis -- a light reaction and a dark reaction. The light reaction converts light energy to chemical energy and must take place in the light. The dark reaction, which converts CO2 to sugar, doesn't directly need light to occur.

--snip--

[James] Liao explained that with biological systems, the plants used require large areas of agricultural land. However, because Liao's method does not require the light and dark reactions to take place together, solar panels, for example, can be built in the desert or on rooftops.

As nice as electric cars may be, their batteries still can't store enough energy or be recharged fast enough to make them practical except for local travel. Liquid fuels have a much higher energy density and it takes little time to refill a fuel tank. If the process created by Liao and his team at UCLA can be scaled up, the need for growing food crops for use as bio-fuel feedstock will disappear. That means agricultural operations can go back to growing crops for food rather than to turn into fuel.

According to Liao this process can also be used to generate a variety of other chemicals as well.

If this pans out, I can see it as a far better and less expensive means of generating bio-fuels than the present system.

Evergreen Solar, a company formerly based in Devens, Massachusetts, filed for Chapter 11 bankruptcy, closed it's plant, and moved its production to China. To add insult to injury, now Evergreen wants permission from the court to walk away from it's plant in Massachusetts. This is after it had received over $31 million grants, tax, lease initiatives, and other considerations from Massachusetts.

The Bay State taxpayers pony up the cash for yet another "green" company, and in the end the company takes the money and its assets and heads to China. I figure $31 million is just the beginning. As one commenter opined:

It's always fun and easy to spend other people's money. Now the state can spend $20mil on investigating what happened, $30mil on lawyers pressing charges, and then lose the entire case.

That's really adding insult to injury. But then, it's the Obama Way. (See Solyndra.)

I've covered the decline of Detroit more than once, covering the various reasons for its precipitous fall from grace.

It's decline continues as the Democrat policymakers continue their experiment to create a socialist utopia. Too bad it's been failing and in such a spectacular fashion that it's impossible to hide. No amount of dissembling and sleight-of-hand can point observers away from the obvious: Detroit is dying and it's the fault of the Progressives who have been running the city for decades.

They have implemented just about every socialist program, regressive 'redistributionist" tax, and punitive business regulation on their wish list upon the city and its residents and the results are clear to see: Detroit has gone from the richest city in the US (per capita) to the second poorest. (Only Cleveland beat them out for that honor.) Detroit can stand as an example of what the rest of the nation will look like if Obama and the rest of the Progressives get their way. The socialist experiment has failed and no amount of window dressing can change that, no matter how hard the MSM tries.