economics

Snakes on a bus

Sister Si-moan v. SE (via NewsBusters):

I'll give her the benefit of the doubt and assume that Sister Simone means well in this instance (although I can just hear the nuns who taught me: "You know what happens, class, when we ASS-U-ME...")  but the woman is dumb as a box of rocks—my apologies to all the ladies in habits who taught me over the years who had infinitely more on the ball than Sister Simone.

She needs to read a little Thomas Sowell, who might just know a wee bit more about economics than she does:

...the cold fact is that minimum wage laws create massive unemployment among black teenagers. Conversely, one of the lowest rates of unemployment among black teenagers occurred in the 1940s, when inflation virtually repealed the minimum wage law passed in 1938, since even unskilled labor was paid more in inflated dollars than the minimum wage law required.
 
Even during the recession year of 1949, black teenage unemployment was a fraction of what it would be in the most prosperous later years, after the minimum wage rate was raised repeatedly to keep pace with inflation. One of the few benefits of inflation is that it can in effect repeal minimum wage laws...
But Sister and her ilk are our moral and intellectual superiors, doncha know.  Right. 
 

Dead last


We might not be if only there were 57 states.

 

 

See Rich States, Poor States, by Art Laffer, Stephen Moore, and Jonathan Williams. 


 

What's the outlook for NYS? (click the image to embiggen)

And according to the NYTorch, the state's past "overall Economic Performance rank came in at 40th, due to a last-place ranking for domestic migration."

Yep, it's a going concern all right—people keep going.

And how's that "NYS is open for business" thing workin' for ya?

Thought so.

Sigh.

$5M theft in Dryden? Chump change

In fact (click on the image to listen)

At The Mountain Eagle:

MARGARETVILLE - As the state puts the finishing touches on new regulations for gas exploration in New York, elected officials in Delaware County are unhappy the proposed regulations could prevent the county from extracting much of the gas that lies deep beneath the ground. It is estimated that as much as 80 percent of the gas in the county could be off-limits if the proposed regulations become law. And if the proposed regulations go through as currently written, county officials want to be compensated for the lost revenue.
 
It was announced at the February meeting of the Coalition of Watershed Towns tthe Delaware County Board of Supervisors plans to vote on a resolution that seeks compensation for the value of the gas, estimated to exceed $81 billion in gross sales...
 
...According to Dean Frasier of the Delaware County Office of Watershed Affairs, the Board of Supervisors will be discussing a resolution that calls for New York City compensating it for the lost revenue should NYC succeed in having watershed lands off-limits to gas exploration....
And this isn't some evil, greedy gas company who would be suing—it'd be a NYS county suing NYS as well as NYC.
 
We here at Redneck Mansion at first read the dateline on this story as
 
 
"Margaritaville" 
 
Those folks in Delaware County could import their own sand to relax on while they sit 'n sip drinks with little umbrellas in them.
 
This stuff's not going away, people.
 

If Buffett were graded on this curve...

...he'd get an H—for hypocrite.

Economist Art Laffer, perhaps best known for the Laffer Curve (although the behavior the curve describes was noted in the 14th century and Alexander Hamilton was a supply-sider, too)...

...yes, Mr. Laffer explains it all for you—pay attention, Babs, Martha, and Shelly.  In the WSJ:

The political season has barely begun, and yet we already know that class warfare will be President Obama's key issue in the 2012 general election. It's even reared its ugly head in the Republican primaries, with the candidates trying to paint front-runner Mitt Romney as a cold-hearted capitalist and Rick Santorum proposing targeted tax breaks for the "working class" manufacturing sector.
 
But none in the GOP can compare with the progressive intelligentsia's obsession with tax increases on the rich to raise revenues and achieve social justice. In a New York Times op-ed last August, Berkshire Hathaway CEO Warren Buffett famously asked Congress to "stop coddling the super-rich," complaining that his effective tax rate was half that of the other people in his office. He then instructed Washington to raise tax rates on millionaires and billionaires like him and retain the employee payroll tax cut on those "who need every break they can get."
 
Waving Mr. Buffett's op-ed for all to see, Mr. Obama wasted no time in proposing a surtax on millionaires called the "Buffett Rule"...

...The "Buffett Rule" would not tax the vast majority of his shielded income, including either his unrealized capital gains, which are currently taxed at zero percent, or charitable contributions, which are tax deductible. If the "Buffett Rule" were applied as President Obama proposes, then Mr. Buffett's federal tax bill would have been $14.4 million, rather than the $6.9 million he actually paid. As a fraction of his true income, his effective tax rate would only have risen from 6/100ths of 1% to 12/100ths of 1%.

Mr. Buffett's donation to the Gates Foundation goes to the heart of my critique of his public call for higher tax rates on the rich. Just look at the second contractual condition for his ongoing pledge to the Gates Foundation: "The foundation must continue to satisfy the legal requirements qualifying Warren's gift as charitable, exempt from gift or other taxes."

In other words, if his gift weren't tax sheltered he wouldn't give it. So much for "shared sacrifice"...
Ah, yes—time to dust off the trusty
 
...When it comes to raising tax revenues by raising tax rates on the rich, Mr. Buffett would...appear to be on the wrong side of the argument. Between 1921 and 1928, the top marginal income tax rate fell to 25% from 73%. During this period, tax receipts from the top 1% of income earners rose to 1.1% of GDP from 0.6% of GDP. The top income tax rate dropped to 70% from 91% after the Kennedy tax cuts began in 1964, while tax receipts from the top 1% of earners rose to 1.9% of GDP from 1.3% of GDP in the period 1960 to 1968. By the way, these periods were two of the biggest booms in U.S. history.
 
Guess what was the third period of boom?...
Cliffhanger. You'll just have to read the whole thing to find out if you're right.
 
And you know what they say in the old Muqaddimah: "It should be known that at the beginning of the dynasty, taxation yields a large revenue from small assessments. At the end of the dynasty, taxation yields a small revenue from large assessments."
 
People understood this concept in the 14th century. Why do our moral and intellectual superiors today have such a hard time with it?
 

Krugmania

In case you missed this:

Here in the epicenter (we're into earthquake metaphors today) of Rod Serling country, this Ramirez take on the unbearable moonbatness of Krugman resonates:

Michael Ramirez Cartoon

Learning from history...and economics

Now listen up, class.  This is a teachable moment.

In his recent column in the Washington Examiner, the Blogfather, Professor Glenn Reynolds, reminds us of a 1953 short entitled "The Case Against the 20% Federal Admissions Tax on Motion Picture Theatres" 

At the time this film was made, motion picture theaters were required to pay a 20% tax on gross ticket sales, and Congress was debating lowering this tax (as well as others) in a bill being considered by a Congressional committee. This film, which was made especially to be shown to members of the committee, sets forth the motion picture industry's case for reducing, if not eliminating, the tax. It presents statistics regarding the closing of theaters in general (approximately 4500 US theaters, or about 25%, from 1946 through 1952), and the number of theaters that have closed in each committee member's state. These closings have caused a steady decline of revenues. Additionally, theater owners in various midwestern cities tell how this tax has adversely affected their businesses. In the small town of Holton, Kansas, merchants state that the closed movie theater was the city's main entertainment center. Without it to draw people into the city, business has fallen greatly. In closing, a spokesman states that the industry is not asking for special favors, but wants to be treated the same as any other industry when it comes to taxes.

Who knew?  And the irony is wonderful, no?  As Reynolds writes

In the film, figures ranging from industry big shots to humble ticket collectors talk about how the tax is hurting their industry and killing jobs, and ask Congress to repeal the tax.

They even explain, in a sort of pre-Art Laffer supply-side way, that a cut in theater taxes might actually produce an increase in federal revenues as the result of greater economic growth.

No...really?  You mean sorta like this?

Laffer Curve - Govt Revenues v Tax Rates

And how ironic that the entertainment industry complained bitterly about being unfairly singled out for confiscatory taxes and demanded repeal:

When, since, have we seen such a firmly expressed appreciation of the harm that excessive taxation can do to the economy, voiced by representatives of the entertainment industries?

Today, those industries are a major source of Democratic contributions and spread-the-wealth rhetoric [think Michael Moore--tvm], even as they prosper based on this tax cut, and numerous other bits of favorable treatment scattered throughout the Internal Revenue Code. It's time for a change.

Were I a Republican senator or representative, I would be agitating to repeal the "Eisenhower tax cut" on the movie industry and restore the excise tax. I think I would also look at imposing similar taxes on sales of DVDs, pay-per-view movies, CDs, downloadable music, and related products...

....America, after all, is facing the largest national debt in relation to GDP that it has faced since the end of World War II, so a return to the measures deemed necessary then is surely justifiable now...

....And, given the entertainment industries' role as the Democrats' campaign finance ATM, it seems likely that the president might soon reconsider his rhetoric as well...

Read the whole thing.

And remember, class—this has been a 

h/t Tom

Smart fracking

Some people might think that's an oxymoron, but former US senator from New Hampshire John E. Sununu, an engineer by training, sees it differently, as do an increasing number of others.  A great piece in today's Boston Globe (h/t Henry):

ENLIGHTENED MOMENTS in politics are few and far between. Populism has a lot to do with it; playing to fear, anger, and other emotions is a safe move politically, and what the media love most.

That’s why New York Governor Andrew Cuomo’s decision to lift a ban on hydraulic fracturing - also known as “fracking’’ - should be celebrated as a victory for rational thought...

[....] The environmental records of both the process and the gas it produces are pretty strong, but the economics are even more compelling.

Job creation and tax collections in Pennsylvania counties producing shale gas have increased significantly during the past three years. Their neighbors have not fared so well. Governor Tom Corbett calls the investment boom, started under Democratic Governor Ed Rendell, “the foundation of a new economy.” New York could either ignore the economic development occurring in its own back yard or participate.

Above all, this transformation is a lesson that energy policy shouldn’t pick winners and losers...

Read the whole thing.

Guest viewpoint: economics and gas drilling

Jannette M. Barth, president of J.M. Barth & Associates, Inc., an economic research and consulting firm, gave a presentation in Newfield on June 3rd based on her paper entitled "The Economic Impact of Gas Drilling in the Marcellus Shale."  The talk was sponsored by PAUSE (People Against Unsafe Sources of Energy) and was attended by Tom Reynolds, who offers this commentary:

Getting the straight, untwisted facts concerning any aspect of fracking is very difficult.  However, the anti-fracking element seems particularly adept at emotional (rather than factual) presentations that are half-truths.  Since my background is finance, I was particularly interested in Jannette Barth’s study on the economic impact of gas drilling in the Marcellus Shale.  Both in her study and at anti-fracking meetings Barth states, “Studies used to support the claim that drilling will bring economic benefits to New York are either biased, dated, (or) seriously flawed.”

Then, she produces a study that is “biased, dated, and seriously flawed.”

  • Barth compares gas’s economic impact in NY’s top 10 gas-producing counties to neighboring NON-gas-producing counties. She unequivocally concludes that ‘gas counties’ are not doing better economically than neighboring counties. But gas jobs and payroll in “gas counties” make up less than 4/10s of 1% (.004) of the counties’ jobs & payroll.  Her conclusion can certainly be described as seriously flawed, based on the insignificant difference in gas-related jobs and payroll between the counties.   
  • Barth dismisses gas drilling’s economic multiplier of 1.4, i.e., every $1 of payroll has a $1.40 impact on the local economy.   She concludes that, “On economic impact alone, gas drilling should not necessarily be encouraged…it would appear to make more sense to encourage an alternative industry that would provide a greater economic impact…such as tourism.”  But Barth never actually gives an economic multiplier for tourism.  The highest I found was 1.67.
  • Barth ignores the fact that there has to be at least two parts to a multiplication operation, one being the base—in this case, the average salary to be multiplied.  Since Barth’s paper was published, the Ithaca Journal has published articles on two studies comparing average salaries.  Hospitality (tourism) has average salaries of about $20,000 while all industries other than agriculture were over $40,000.  To just equal the impact of gas, tourism would need an economic multiplier of 2.8! 
  • On rural environments, Barth states, “Unfortunately, it is difficult to assign precise monetary values to aesthetic benefits.”  Of course, it is difficult to value “aesthetics,” primarily because someone else usually owns it!  But the anti-gassers don’t want someone else’s property rights to interfere with their aesthetics.

Throughout, Barth uses possibilities in a way that can best be described as “it’s a fact that it’s a possibility.”  A few examples:

  • Barth states, “It is possible that local land owners who get rich from natural gas will move to Florida or other points south, taking their new found wealth with them.” She ignores the fact that it’s also possible they might not move!  And even if half moved, the half that stayed would be pumping NEW MONEY into the local and state economies. 
  • Barth also states that due to negative economic issues, “It is quite possible that…existing homeowners may be driven out.” That they might also stay, due to positive economic issues, is never mentioned.
  • “To some extent, gas drilling and other industries (tourism, sport fishing and hunting) may be mutually exclusive.”  Or maybe not?
  • “Far fewer retirees will choose to settle and second home owners would certainly be vastly reduced in numbers.”  Based on what study of occurrences that have not yet occurred?  

Towards the end of her paper, Barth quotes a study done by Headwater Economics, which compared western U.S. counties that focused on fossil fuel extraction as an economic development strategy to counties that did not focus on such industries.  Barth summarizes one of Headwater’s conclusions as, “While energy-focused counties race forward and then falter, non-energy peer counties continue to grow steadily.”

But other Headwater studies, not quoted by Barth, give a much more complete description of their research. For example, “Energy producing states outperformed their peers  fiscally at the start of the recession, but ultimately the decline in fossil fuel prices and reduced revenue exposed (them) to the impacts of the recession.”  Headwater also said, “Predominantly rural areas with high levels of drilling and limited economic diversity may be the most overwhelmed by the buildup phase of the energy boom, but also are the places that ultimately may see the greatest long term fiscal gain from energy development.”  Further, Headwater states, “The tax revenue from fossil fuel extraction is the longest lasting legacy of fossil fuel development…it continues to accrue.”  On green energy, Headwater praises, “Colorado made energy revenue funding available for regional clean energy initiatives…the funding helped launch an effort that has grown businesses and jobs and has funded clean energy infrastructure.” 

Lastly, one of the four studies that Barth trashes is one done at Penn State.  Of it she says, “An intelligent lawmaker should not take this study seriously.”  After having read her study, I would suggest that anyone with at least a room temperature IQ should not take her study seriously.

***

You can find many of our earlier posts on fracking listed here.  Tom's commentary on fracking from March is here. The text of Jannette Barth's paper is here.  The video of Jannette Barth's presentation in Newfield on June 3rd is here.  The video of the Q&A following her presentation is here—Tom spars (politely) with her from about the 26:30 mark to about the 33:10 mark.

 

Whiskey Tango Foxtrot

Gas prices are rising in the US, in many places more than they are here. So naturally one of our fearless leaders (we know he is due to his valorous service in Vietnam) suggested launching a witch hunt in the form of a grand jury:

Sen. Richard Blumenthal (D-Conn.) on Sunday called for an aggressive federal probe — including a possible grand jury — into whether rising gasoline prices stem from illegal manipulation of energy markets.

That came on the heels of this:

President Obama and the Justice Department last week announced a multi-agency task force to explore whether there is price manipulation or fraud afoot and the role of speculative trading in energy futures....

Now us rubes here at Redneck Mansion are not, as they say in Ireland, eejits.  We have an understanding of basic economics—you know, like the law of supply and demand, which to our knowledge has not been repealed.  We also know that there's a lot of truth in Occam's Razor, the notion that the simplest explanation of a phenomenon is usually the best.  So, it seems to us unlikely that there's some complicated conspiracy comprised of "illegal manipulation of energy markets," "fraud," and "speculative trading in energy futures" that is necessary to explain the increase in gas prices.  Much more likely that it has something to do with supply and/or demand combined with local, state, and DC policies.

Obviously, there's a lot of uproar currently in the Middle East and North Africa, and even the suspicion that there might be disruptions to the flow of oil from that part of the world tends to drive up prices. Add to that the Luddites of the environmental movement and we're talking real supply problems.

You may remember the stories from 2008 (the last time we saw rapidly rising gas prices) about drilling in ANWR:

Surprise, surprise...today at Fox News (via Weasel Zippers):

Shell Oil Company has announced it must scrap efforts to drill for oil this summer in the Arctic Ocean off the northern coast of Alaska. The decision comes following a ruling by the EPA’s Environmental Appeals Board to withhold critical air permits. The move has angered some in Congress and triggered a flurry of legislation aimed at stripping the EPA of its oil drilling oversight.

Shell has spent five years and nearly $4 billion dollars on plans to explore for oil in the Beaufort and Chukchi Seas. The leases alone cost $2.2 billion....

[....] At stake is an estimated 27 billion barrels of oil. That’s how much the U. S. Geological Survey believes is in the U.S. portion of the Arctic Ocean. For perspective, that represents two and a half times more oil than has flowed down the Trans Alaska pipeline throughout its 30-year history. That pipeline is getting dangerously low on oil. At 660,000 barrels a day, it’s carrying only one-third its capacity.

Production on the North Slope of Alaska is declining at a rate of about 7 percent a year. If the volume gets much lower, pipeline officials say they will have to shut it down. Alaska officials are blasting the Environmental Protection Agency...

So what else is making the price that you pay at the pump higher? Taxes:

So keep this in mind, the next time your eyes bug out at the price on the pump: a huge portion of the money you’re shelling out is due to government actions that distort supply-and-demand — and the punitive levels of taxation in many states.

The idea of "gas pump activism" is appealing for purposes of both venting and communicating with other motorists, but keep in mind that the illusionists (or "dipsticks" to use one songwriter's oil-saturated metaphor) in DC distract us with one hand to keep us from paying attention to what's going on with the other.

thanks to Tom and Sister Toldjah

The Not So Dismal Science: Humanitarians v. Economists

Tags:

I knew this. From Hillsdale College's Imprimis:

...I propose to take on one of the greatest libels in the English language: the description of economics as “the dismal science.” I hold a different view —that when it comes to seeing the potential in even the most desperate citizens of this earth, our economists, business leaders, and champions of a commercial republic are often far ahead of our progressives, artists, and humanitarians. And therein lies my tale...

Read the rest.

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