EXCERPTS:
Posted: 12:53 AM, September 30, 2010
Federal copy editors are demanding the city change its 250,900 street signs from the all-caps style used for more than a century to ones that capitalize only the first letters.
Changing BROADWAY to Broadway will save lives, the Federal Highway Administration contends in its updated Manual on Uniform Traffic Control Devices, citing improved readability.
At $110 per sign, it will also cost the state $27.6 million, city officials said.
Studies have shown that it is harder to read all-caps signs, and those extra milliseconds spent staring away from the road have been shown to increase the likelihood of accidents, particularly among older drivers, federal documents say.
The new regulations also require a change in font from the standard highway typeface to Clearview, which was specially developed for this purpose.
As a result, even numbered street signs will have to be replaced.
"Safety is this department's top priority," Transportation Secretary Ray LaHood said last year, in support of the new guidelines. "These new and updated standards will help make our nation's roads and bridges safer for drivers, construction workers and pedestrians alike."
The Highway Administration acknowledged that New York and other states "opposed the change, and suggested that the use of all upper-case letters remain an option," noting that "while the mixed-case words might be easier to read, the amount of improvement in legibility did not justify the cost."
COMMENT:
There are two questions here. The most obvious question is whether the benefits of making the changes justify the cost of making those changes. The less obvious, but ultimately more important question, is who should make the decision about whether the benefits justify the cost? Should the decision be made by the local government, who will bear the cost of changing the signs? Or should it be made by the Federal Highway Administration, who can impose this requirement without having to bear any of its costs? How much incentive does a federal agency have to take into account the costs that their regulations will impose on others?
Thursday, September 30, 2010
Monday, September 27, 2010
Tax Cuts and Revenue: What We Learned in the 1980s - WSJ.com
EXCERPTS:
"The Reagan tax cuts reduced rates for all income classes, even though it was well understood that cutting the lower rates would result in substantial revenue losses. Low tax rates (below 20%) do not cause much of a disincentive for working, saving or investing, and hence there is little supply-side effect. We did argue, however, that reducing the high marginal rates (up to 70% on high-income earners) would cause little, if any, revenue loss, because of the large, positive supply-side effects. Were we right?
Since most of the Reagan tax cuts applied to lower- and middle-income earners, there was close to a dollar lost in tax revenue for each "dollar" of tax cut for these groups. Still, CBO figures show that total tax revenue only fell from 19.2% of gross domestic product (GDP) in 1982, before most of Reagan's tax-rate reductions were put in place, to 18.4% of GDP in 1989, the year he left office. This happened because the U.S. economy grew by more than one-third in real terms (34.3%), much faster than the 24.3% rate expected even by economists within the Reagan administration. Thus, by the time President Reagan left office, the economy was generating more tax revenue at a maximum 28% rate than many on the left forecast it to generate at a maximum 70% rate.
The Reagan tax-rate reductions did, in fact, pay for themselves—but it took about seven years.
The Obama administration wants to extend the Bush tax cuts only for those making less than $200,000 a year. This will significantly reduce federal revenues. But the rate cuts it does not want to extend would be more likely to increase tax revenues.
The reason is simple: Those who earn more than $200,000 annually are among the ones who create most of the new jobs and fund new investment—the engines of economic growth. Without these jobs and new investment, the economy will be smaller and throw off less tax revenue.
"The Reagan tax cuts reduced rates for all income classes, even though it was well understood that cutting the lower rates would result in substantial revenue losses. Low tax rates (below 20%) do not cause much of a disincentive for working, saving or investing, and hence there is little supply-side effect. We did argue, however, that reducing the high marginal rates (up to 70% on high-income earners) would cause little, if any, revenue loss, because of the large, positive supply-side effects. Were we right?
Since most of the Reagan tax cuts applied to lower- and middle-income earners, there was close to a dollar lost in tax revenue for each "dollar" of tax cut for these groups. Still, CBO figures show that total tax revenue only fell from 19.2% of gross domestic product (GDP) in 1982, before most of Reagan's tax-rate reductions were put in place, to 18.4% of GDP in 1989, the year he left office. This happened because the U.S. economy grew by more than one-third in real terms (34.3%), much faster than the 24.3% rate expected even by economists within the Reagan administration. Thus, by the time President Reagan left office, the economy was generating more tax revenue at a maximum 28% rate than many on the left forecast it to generate at a maximum 70% rate.
The Reagan tax-rate reductions did, in fact, pay for themselves—but it took about seven years.
The Obama administration wants to extend the Bush tax cuts only for those making less than $200,000 a year. This will significantly reduce federal revenues. But the rate cuts it does not want to extend would be more likely to increase tax revenues.
The reason is simple: Those who earn more than $200,000 annually are among the ones who create most of the new jobs and fund new investment—the engines of economic growth. Without these jobs and new investment, the economy will be smaller and throw off less tax revenue.
Sunday, September 26, 2010
Czech president tells UN to stay out of economics | Reuters
EXCERPTS:
"UNITED NATIONS, Sept 25 (Reuters) - Czech President Vaclav Klaus on Saturday criticized U.N. calls for increased "global governance" of the world's economy, saying the world body should leave that role to national governments.
The solution to dealing with the global economic crisis, Klaus told the U.N. General Assembly, did not lie in "creating new governmental and supranational agencies, or in aiming at global governance of the world economy."
"On the contrary, this is the time for international organizations, including the United Nations, to reduce their expenditures, make their administrations thinner, and leave the solutions to the governments of member states," he said....
Klaus, a free-market economist who oversaw a wave of privatization in the 1990s after communism collapsed in his homeland, also said the world was "moving in the wrong direction" in combating the economic crisis.
"The anti-crisis measures that have been proposed and already partly implemented follow from the assumption that the crisis was a failure of markets and that the right way out is more regulation of markets," he said.
Klaus said that was a "mistaken assumption" and it was impossible to prevent future crises through regulatory interventions and similar actions by governments.
That will only "destroy the markets and together with them the chances for economic growth and prosperity in both developed and developing countries," he said.
"UNITED NATIONS, Sept 25 (Reuters) - Czech President Vaclav Klaus on Saturday criticized U.N. calls for increased "global governance" of the world's economy, saying the world body should leave that role to national governments.
The solution to dealing with the global economic crisis, Klaus told the U.N. General Assembly, did not lie in "creating new governmental and supranational agencies, or in aiming at global governance of the world economy."
"On the contrary, this is the time for international organizations, including the United Nations, to reduce their expenditures, make their administrations thinner, and leave the solutions to the governments of member states," he said....
Klaus, a free-market economist who oversaw a wave of privatization in the 1990s after communism collapsed in his homeland, also said the world was "moving in the wrong direction" in combating the economic crisis.
"The anti-crisis measures that have been proposed and already partly implemented follow from the assumption that the crisis was a failure of markets and that the right way out is more regulation of markets," he said.
Klaus said that was a "mistaken assumption" and it was impossible to prevent future crises through regulatory interventions and similar actions by governments.
That will only "destroy the markets and together with them the chances for economic growth and prosperity in both developed and developing countries," he said.
Saturday, September 25, 2010
California Business Exodus: If You Tax Something...
EXCERPT:
" The cost for a one-way 26-foot truck rental from LA to Houston is $2,279, more than 2.5 times the cost for a truck going in the opposite direction ($892), suggesting that there are a lot more people moving out of California to Texas, than from Texas to California."
QUESTIONS:
1. We've emphasized that prices are signals - they communicate information about the value of resources and coordinate the actions of producers and consumers. In terms of supply and demand, what does the high price for a truck rental in Los Angeles relative to Texas tell you?
2. California is known for high tax rates and intense regulation of businesses in comparison to Texas. Do you think there is a connection between the high tax rates and intense regulation, and the high price for renting a truck in Los Angeles? Explain.
" The cost for a one-way 26-foot truck rental from LA to Houston is $2,279, more than 2.5 times the cost for a truck going in the opposite direction ($892), suggesting that there are a lot more people moving out of California to Texas, than from Texas to California."
QUESTIONS:
1. We've emphasized that prices are signals - they communicate information about the value of resources and coordinate the actions of producers and consumers. In terms of supply and demand, what does the high price for a truck rental in Los Angeles relative to Texas tell you?
2. California is known for high tax rates and intense regulation of businesses in comparison to Texas. Do you think there is a connection between the high tax rates and intense regulation, and the high price for renting a truck in Los Angeles? Explain.
Thursday, September 23, 2010
Wednesday, September 22, 2010
Confessions of an Exploited Teen - Thomas Sowell
Thomas Sowell talks about his experiences as a teenage worker and the effects of having a minimum wage law.
A Tale of Two Economic Recoveries
EXCERPTS:
"We now know the recession ended just as the stimulus money started to get spent. According to the White House's own 100-day stimulus report, issued at the end of May 2009, only $45.6 billion in spending and tax relief had gone out the door by then. In other words, less than 6 percent of the stimulus money was in the economy as the recession ended, making its role in stopping the downward spiral somewhat murky.
This news also makes it harder for Obama to blame President Bush for the nation's current economic troubles.
Obama rightly notes that he was handed a terrible economy. But now we learn that the recession he inherited was just five months away from being over when he took office. So while Obama doesn't own the recession in any way, shape or form, he certainly owns the recovery, which is now well into its 15th month.
 |
The chart shows unemployment and consumer confidence 14 months after the end of the 1981-82 and 2007-2009 recessions, and average GDP growth for the four quarters following the end of each recession. (Bureau of Labor Statistics, Bureau of Economic Analysis, Conference Board
"We now know the recession ended just as the stimulus money started to get spent. According to the White House's own 100-day stimulus report, issued at the end of May 2009, only $45.6 billion in spending and tax relief had gone out the door by then. In other words, less than 6 percent of the stimulus money was in the economy as the recession ended, making its role in stopping the downward spiral somewhat murky.
This news also makes it harder for Obama to blame President Bush for the nation's current economic troubles.
Obama rightly notes that he was handed a terrible economy. But now we learn that the recession he inherited was just five months away from being over when he took office. So while Obama doesn't own the recession in any way, shape or form, he certainly owns the recovery, which is now well into its 15th month.
"Recession Officially Over," Business Cycle Dating Committee, National Bureau of Economic Research
EXCERPTS:
"CAMBRIDGE September 20, 2010 - The Business Cycle Dating Committee of the National Bureau of Economic Research met yesterday by conference call. At its meeting, the committee determined that a trough in business activity occurred in the U.S. economy in June 2009. The trough marks the end of the recession that began in December 2007 and the beginning of an expansion. The recession lasted 18 months, which makes it the longest of any recession since World War II. Previously the longest postwar recessions were those of 1973-75 and 1981-82, both of which lasted 16 months.
"CAMBRIDGE September 20, 2010 - The Business Cycle Dating Committee of the National Bureau of Economic Research met yesterday by conference call. At its meeting, the committee determined that a trough in business activity occurred in the U.S. economy in June 2009. The trough marks the end of the recession that began in December 2007 and the beginning of an expansion. The recession lasted 18 months, which makes it the longest of any recession since World War II. Previously the longest postwar recessions were those of 1973-75 and 1981-82, both of which lasted 16 months.
Friday, September 17, 2010
Principles for Economic Revival - WSJ.com by Shultz, Boskin, Cogan, Meltzer and Taylor
Excerpts:
"Since the onset of the financial crisis, annual federal spending has increased by an extraordinary $800 billion—more than $10,000 for every American family. This has driven the budget deficit to 10% of GDP, far above the previous peacetime record."
"Since the onset of the financial crisis, annual federal spending has increased by an extraordinary $800 billion—more than $10,000 for every American family. This has driven the budget deficit to 10% of GDP, far above the previous peacetime record."
Tuesday, September 14, 2010
Monks Told They Can't Sell Caskets Retail - Stossel | FOXBusiness.com
Stossel | FOXBusiness.com: "- Sent using Google Toolbar"
Friday, September 10, 2010
What Should the Federal Reserve Do Next? - WSJ.com
A Symposium: What Should the Federal Reserve Do Next? - WSJ.com: "- Sent using Google Toolbar"
Prices Report Reality; Government Threatens to Shoot Messenger (Or At Least to Falsify the Message)
This is a short letter from one of my favorite bloggers, Don Boudreaux. It's worth reading.
‘Clunkers,’ a classic government folly - The Boston Globe
EXCERPTS:
"Why are used-car prices rocketing? Part of the answer is that demand is up: With unemployment high and the economy uncertain, some car buyers who might otherwise be looking for a new truck or SUV are instead shopping for a used vehicle as a way to save money.
But an even bigger part of the answer is that the supply of used cars is artificially low, because your Uncle Sam decided last year to destroy hundreds of thousands of perfectly good automobiles as part of its hare-brained Car Allowance Rebate System — or, as most of us called it, Cash for Clunkers. That was the program under which the government paid consumers up to $4,500 when they traded in an old car and bought a new one with better gas mileage. The traded-in cars — which had to be in drivable condition to qualify for the rebate — were then demolished: Dealers were required to chemically wreck each car’s engine, and send the car to be crushed or shredded.
Congress and the Obama administration trumpeted Cash for Clunkers as a triumph — the president pronounced it “successful beyond anybody’s imagination.’’ Which it was, if you define success as getting people to take “free’’ money to make a purchase most of them are going to make anyway, while simultaneously wiping out productive assets that could provide value to many other consumers for years to come. By any rational standard, however, this program was sheer folly.
No great insight was needed to realize that Cash for Clunkers would work a hardship on people unable to afford a new car. “All this program did for them,’’ I wrote last August, “was guarantee that used cars will become more expensive. Poorer drivers will be penalized to subsidize new cars for wealthier drivers.’’ Alec Gutierrez, a senior analyst for Kelley Blue Book, predicted that used-car prices would surge by up to 10 percent. “It’s going to drive prices up on some of the most affordable vehicles we have on the road,’’ he told USA Today. In short, Washington spent nearly $3 billion to raise the price of mobility for drivers on a budget.
To be sure, Cash for Clunkers gave a powerful jolt to car sales in July and August of 2009. But it did so mostly by delaying sales that would otherwise have occurred in April, May, and June, or by accelerating those that would have taken place in September, October, or later. “Influencing the timing of consumers’ durable purchases is easy,’’ Edmunds CEO Jeremy Anwyl wrote a few days ago in a blog post looking back at the program. “Creating new purchases is not.’’ Of the 700,000 cars purchased during the clunkers frenzy, the estimated net increase in sales was only 125,000. Each incremental sale thus ended up costing the taxpayers a profligate $24,000.
"Why are used-car prices rocketing? Part of the answer is that demand is up: With unemployment high and the economy uncertain, some car buyers who might otherwise be looking for a new truck or SUV are instead shopping for a used vehicle as a way to save money.
But an even bigger part of the answer is that the supply of used cars is artificially low, because your Uncle Sam decided last year to destroy hundreds of thousands of perfectly good automobiles as part of its hare-brained Car Allowance Rebate System — or, as most of us called it, Cash for Clunkers. That was the program under which the government paid consumers up to $4,500 when they traded in an old car and bought a new one with better gas mileage. The traded-in cars — which had to be in drivable condition to qualify for the rebate — were then demolished: Dealers were required to chemically wreck each car’s engine, and send the car to be crushed or shredded.
Congress and the Obama administration trumpeted Cash for Clunkers as a triumph — the president pronounced it “successful beyond anybody’s imagination.’’ Which it was, if you define success as getting people to take “free’’ money to make a purchase most of them are going to make anyway, while simultaneously wiping out productive assets that could provide value to many other consumers for years to come. By any rational standard, however, this program was sheer folly.
No great insight was needed to realize that Cash for Clunkers would work a hardship on people unable to afford a new car. “All this program did for them,’’ I wrote last August, “was guarantee that used cars will become more expensive. Poorer drivers will be penalized to subsidize new cars for wealthier drivers.’’ Alec Gutierrez, a senior analyst for Kelley Blue Book, predicted that used-car prices would surge by up to 10 percent. “It’s going to drive prices up on some of the most affordable vehicles we have on the road,’’ he told USA Today. In short, Washington spent nearly $3 billion to raise the price of mobility for drivers on a budget.
To be sure, Cash for Clunkers gave a powerful jolt to car sales in July and August of 2009. But it did so mostly by delaying sales that would otherwise have occurred in April, May, and June, or by accelerating those that would have taken place in September, October, or later. “Influencing the timing of consumers’ durable purchases is easy,’’ Edmunds CEO Jeremy Anwyl wrote a few days ago in a blog post looking back at the program. “Creating new purchases is not.’’ Of the 700,000 cars purchased during the clunkers frenzy, the estimated net increase in sales was only 125,000. Each incremental sale thus ended up costing the taxpayers a profligate $24,000.
Thursday, September 9, 2010
Fidel: 'Cuban Model Doesn't Even Work For Us Anymore' - International - The Atlantic
EXCERPTS:
"During the generally lighthearted conversation (we had just spent three hours talking about Iran and the Middle East), I asked him [Fidel Castro] if he believed the Cuban model was still something worth exporting.
"The Cuban model doesn't even work for us anymore," he said.
This struck me as the mother of all Emily Litella moments. Did the leader of the Revolution just say, in essence, "Never mind"?
I asked Julia to interpret this stunning statement for me. She said, "He wasn't rejecting the ideas of the Revolution. I took it to be an acknowledgment that under 'the Cuban model' the state has much too big a role in the economic life of the country."
"During the generally lighthearted conversation (we had just spent three hours talking about Iran and the Middle East), I asked him [Fidel Castro] if he believed the Cuban model was still something worth exporting.
"The Cuban model doesn't even work for us anymore," he said.
This struck me as the mother of all Emily Litella moments. Did the leader of the Revolution just say, in essence, "Never mind"?
I asked Julia to interpret this stunning statement for me. She said, "He wasn't rejecting the ideas of the Revolution. I took it to be an acknowledgment that under 'the Cuban model' the state has much too big a role in the economic life of the country."
Tuesday, September 7, 2010
What Happened During the Depression? - Thomas Sowell
EXCERPTS:
"There are always calls for the government to "do something" when things are going bad. Those who make such calls have almost never bothered to check out what actually happens when the government does something, as compared to what happens when the government does nothing....
There are two conflicting assumptions about what happened during the Great Depression. The most popular assumption, especially among politicians, is that the market failed and the government had to intervene to save the economy.
Another assumption is that the market went down and was on its way back up when federal intervention sent it down again and led to massive unemployment. If you don't let facts get in the way, you can just pick whichever assumption you like-- and the first assumption wins that popularity contest, hands down.
But, if you look at the facts, they go like this: Unemployment never hit double digits in any of the 12 months following the big stock market crash of 1929 that is often blamed for the massive unemployment of the 1930s. Unemployment peaked at 9 percent, two months after the October 1929 crash, and then began drifting downward.
Unemployment was down to 6.3 percent by June 1930, when the first big federal intervention occurred. Within six months, the downward trend in unemployment reversed and hit double digits for the first time in December 1930.
What were politicians to do? Say 'We messed up'? Or keep trying one huge intervention after another? The record shows what they did: President Hoover's interventions were followed by President Roosevelt's bigger interventions-- and unemployment remained in double digits in every month for the entire remainder of the decade.
"There are always calls for the government to "do something" when things are going bad. Those who make such calls have almost never bothered to check out what actually happens when the government does something, as compared to what happens when the government does nothing....
There are two conflicting assumptions about what happened during the Great Depression. The most popular assumption, especially among politicians, is that the market failed and the government had to intervene to save the economy.
Another assumption is that the market went down and was on its way back up when federal intervention sent it down again and led to massive unemployment. If you don't let facts get in the way, you can just pick whichever assumption you like-- and the first assumption wins that popularity contest, hands down.
But, if you look at the facts, they go like this: Unemployment never hit double digits in any of the 12 months following the big stock market crash of 1929 that is often blamed for the massive unemployment of the 1930s. Unemployment peaked at 9 percent, two months after the October 1929 crash, and then began drifting downward.
Unemployment was down to 6.3 percent by June 1930, when the first big federal intervention occurred. Within six months, the downward trend in unemployment reversed and hit double digits for the first time in December 1930.
What were politicians to do? Say 'We messed up'? Or keep trying one huge intervention after another? The record shows what they did: President Hoover's interventions were followed by President Roosevelt's bigger interventions-- and unemployment remained in double digits in every month for the entire remainder of the decade.
Friday, September 3, 2010
Paul Krugman Weighs In on Jobs Report - ABC News
Today's employment report showed that the unemployment rate is up a little, to 9.6 percent, and that payroll employment over the past three months dropped by 285,000. How should the government respond? In this video Paul Krugman, Nobel Prize-winning KEYNESIAN economist, says what the government needs to do is clear: spend more money.
We'll see in chapters 9 and 10 the theoretical basis for this Keynesian view.
We'll see in chapters 9 and 10 the theoretical basis for this Keynesian view.
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