Rooted in Reason: Nurturing the Seeds of Liberty


Unstimulated by maliab
August 31, 2011, 9:07 pm
Filed under: Economy | Tags: , , , , , , , ,

The President will be unveiling his new jobs plan next week.  (Though when seems to be in doubt, as Rep. Boehner has indicated that Wednesday isn’t good for him and Congress, what with the GOP presidential debate and the last minute-ness of it all, and the White House has indicated that they’re not in love with Thursday as a day–with some commentators speculating that they don’t want to compete with the first NFL game of the season.)  If presidential conversation about jobs could create employment opportunities, we’d be at about 0% unemployment right now.

But, of course, it doesn’t.  And it turns out that buying jobs with huge chunks of federal dollars doesn’t do much better.

As the Weekly Standard points out, a study of the hiring practices of firms who received stimulus funds reveals that the stimulus package created as much job poaching as job creation.  Yet more proof (if we even needed it) that Keynesian economic theory so loved by this Administration seems to crumble in the face of the real world practice:

The Mercatus Center at George Mason University has just released an important new study on the hiring practices of firms that used stimulus funds. It’s fairly comprehensive, based on over 1,300 surveys of managers and employees. There’s been very little good empirical data on the stimulus thus far, so the study contains a lot of valuable insights. Among the findings by authors Dan Rothschild and Garrett Jones:

Hiring isn’t the same as net job creation. In our survey, just 42.1 percent of the workers hired at ARRA-receiving organizations after January 31, 2009, were unemployed at the time they were hired (Appendix C). More were hired directly from other organizations (47.3 percent of post-ARRA workers), while a handful came from school (6.5%) or from outside the labor force (4.1%)(Figure 2). Thus, there was an almost even split between “job creating” and “job switching.” This suggests just how hard it is for Keynesian job creation to work in a modern, expertise-based economy: even in a weak economy, organizations hired the employed about as often as the unemployed.

Put simply, stimulus funds caused more job shifting than job creation. Another key finding? Union-friendly wage protections kill jobs:

Among organizations required to pay prevailing wages, 38.2 percent thought that they could have hired workers at wages below the Davis-Bacon prevailing wage (Figure 3) while another 17 percent were unsure. This meant higher costs for the federal government and fewer jobs created.

Of course, merely having your economic philosophy proved disastrously wrong doesn’t seem much of a hindrance to the Left.  Talk about the power of wishful thinking.

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Dale’s Energy, Transit, Taxes (and More) Update by grassroothawaii
August 12, 2011, 7:53 pm
Filed under: Economy, Hawaii Sunshine, World | Tags: , , , , , , , , , , ,

Today, we have another update for you from Dale of Charley’s Taxi on the latest headlines in transit, taxes, energy, zoning, and more.  Some highlights (or lowlights, depending on how you look at it) from this edition include the questionable relationship between the rail project and the unions, the probability of a “double-dip” recession, an analysis of what causes cities to grow or shrink, and the effort to empirically demonstrate the existence of media bias.  Enjoy:

QUOTES

The bulk of [budget cuts] will have to be found by cutting real military capability and as a result, accepting real additional risk to the country’s security. — Michael E. O’Hanlon, Brookings Institution

“I drank so much vodka I could barely stand up. But I had to get home somehow and decided to do something I had never done before. 

I took a bus.     And here’s the good news. I arrived home safe and sound, cozy and warm, and able to go to work the next morning.  

All of which is remarkable because I had never driven a bus before.” — Henry at AA meeting

The effect of the people’s agreeing that there must be central planning, without agreeing on the ends, will be rather as if a group of people were to commit themselves to take a journey together without agreeing where they want to go; with the result that they may all have to make a journey which most of them do not want at all. — F.A. Hayek

The al-Qaeda network is fully prepared to continue the jihad against the American infidels by launching deadly attacks, but your outdated and rusting transportation infrastructure needs to be completely overhauled for those strikes even to be noticed.— Ayman al-Zawahiri

TOP HEADLINES
The Debt-Limit Debate: Addressing Key Concerns, Veronique de Rugy, Jason J. Fichtner, Mercatus Center, George Mason University, 5/26/11

The Debt Ceiling: What is at Stake? Vernoique de Rugy, Jason J. Fichtner, MercatusCenter, GMU, 4/28/11

Glimpse into daily life in North KoreaJean H. Lee, David Guttenfelder, MSNBC, 7/23/11

Journey into North Korea, MSNBC PHOTOGRAPHS

The Official 1984 Reagan ScorecardJonathan Rowe, Paul Glastris,Washington Monthly,

How Government Regulation Affects the Price of a New Home, Paul Emrath, National Association of Home Builders, July 2011

Obama Undercuts Case for HSR and Rail Transit, The Antiplanner, 8/04/11

What the Budget Control Act Means for U.S. Defense, Michael E. O’Hanlon, Brookings Institute, 8/02/11

Why Did America Destroy Its Great Cities?, Frank Gruber, Huffington Post, 8/02/11

CBO: Federal Loan Guarantees for the Construction of Nuclear Power Plants, August 2011

Intoxicated on Independence: Is Domestically Produced Ethanol Worth the Cost?,Scientific American, 7/28/11

The U.S. May Need More Lawyers!, Clifford Winston, Robert W. Crandall, Huffington Post, 7/29/11

The Obama EPA’s Brave New Future, Heritage Foundry, 7/28/11

Higher fuel standards mean higher death toll, Washington Examiner EDITORIAL, 7/28/11


When it comes to population growth, Houston is No. 1, Rice University, 7/06/11 

News in Hawaii

CEO of troubled rail car company that won Honolulu bid steps down, Gene Park, Honolulu Star Advertiser, 8/05/11

Inouye, Akaka, Cantwell and Johnson Introduce Bipartisan Bill to Help Facilitate Business Travel, Trade with Asia-Pacific Region, Hawaii Reporter, 8/04/11

‘Sinkhole State:’ Hawaii is in the 47th Worst Financial Position of All 50 States,Hawaii Reporter, 8/03/11

Trains Helped Kill the Greek Economy – They’ll Kill Hawaii’s too, Panos Prevedouros, Fix Oahu, 8/01/11

The New Airline & Air Service Strategy Metrics, Boyd Group International, 8/01/11

American Airlines is dropping SFO-Honolulu this fall.

Honolulu Rail in Illegal Pact with Local Unions, Panos Prevedouros, FixOahu, 7/29/11

Ansaldo Honolulu’s parent firm rethinking rail car business, Gene Park, Honolulu Star Advertiser, 7/29/11

Rail Bid Judges Ignored Ansaldo’s Past Problems, Michael Levine, Honolulu Civil Beat, 7/28/11

New vehicle charging station powers up at Capitol garage, Honolulu Star Advertiser, 7/28/11

Solar Power Plant on Oahu Does not Pass Muster, Panos Prevedouros, Fix Oahu!, 7/27/11

Traffic Accident Investigation on Oahu: Stuck in the 1980s, Panos Prevedouros, FixOahu!, 7/28/11

TAXES & ECONOMIES

Brutal: Dow Plunges Amid ‘Double-Dip’ Recession Jitters, Guy Benson, Townhall, 8/04/11

Editorial: An Unwelcome Debt Milestone, Investors Business Daily, 8/04/11

US debt exceeds entire economy GDP, markets alarmed

Academic Panel Sees 50% Chance US to Plunge Into Recession, MoneyNews, 8/03/11

Political DerivativesNicole Gelinas, National Review, 8/03/11

Moody’s, Fitch: US Must Do More to Avoid Rating Downgrades, MoneyNews, 8/03/11

Where’s Your Budget, Mr. President?, Paul Ryan, Wall Street Journal, 8/03/11

Meredith Whitney: US Headed for Double-Dip Recession, Forrest Jones, MoneyNews, 8/02/11

What the Budget Control Act Means for U.S. Defense, Michael E. O’Hanlon, Brookings Institute, 8/02/11

Military Spending and the Budget Deal, Christopher Preble, Cato @ Liberty, 8/01/11

When a cut is not a cutRep. Ron Paul, The Hill, 8/01/11

Europe Declares War on American Ratings Agencies, Soeren Kern, Pajamas Media, 7/30/11

Finish the 710 Freeway, James E. Moore II, LA Times, 7/29/11

Crumbling transportation infrastructure could cost US $3.1 trillion, Metro Magazine, 7/28/11

African American Middle Class Eroding As Unemployment Rate Soars, John Roberts, FOX News, 7/28/11

Motorists’ Group Endorses “Trip Bonds” Legislation, American Highway UsersAlliance, 7/28/11

Solving the Long-Term Jobs Problem, Arnold King, Nick Schultz, The AmericanEnterprise Institute, 7/27/11

Greenspan: Fed Should Have Let Banks Fail, Greg Brown, MoneyNews, 7/27/11

Herman Cain Interview on Creating Jobs, Dick Morris, 7/27/11

Behind economic hard times, fear of the new, Robert J. Samuelson, Washington Post, 7/22/11

HIGHWAYS & BRIDGES, PPP & TOLLING, DRIVING ISSUES

DUI, Uninsured Motorists, Tolling, PPPs, Variable Pricing, RUCS and Sustainable Transportation

China falls in love with SUVs, Malcolm Moore, Telegraph UK, 8/04/11

Busting Congestion in Chicago (or Any other City), Reason TV, 8/03/11

Top 10 New-Car Deals for August, Jim Gorzelany, Forbes, 8/03/11

Taking transit – a testimonial at AA meeting, TollRoadsNews,  7/28/11

Golf cart drivers aim to be legal in small town, The Tennessean, 7/28/11

INRIX launches its Traffic app on Windows Phone 7 and BlackBerry cell phone platformsTraffic Technology Today, 7/25/11

New traffic camera website aiming to drive down congestion across the UK, Trarffic Technology Today, 7/25/11

6 Reasons Driving Has Peaked in U.S. CitiesEric Jaffe, Infrastructurist, 7/14/11

Replacing the Tappan Zee BridgeManhattan Institute, 6/22/11

INRIX TRAFFIC! App Now Available on App Store

TRANSIT
Frustrating, dangerous Metro problems for the disabled, Dana Hedgpeth, Washington Post, 8/06/11

Driving services help senior mobility without spending public money, Pamela M. Prah, Stateline, 8/04/11

Antonio Villaraigosa pushes bus-only lanes as MTA chairman, Ari Bloomekatz, Cornelius Pollmer, Los Angeles Times, 8/04/11

Low-Fare, Curbside Bus Operators Picking Up Amtrak Market Share, Don Stacom,Hartford Courant, 8/01/11

Chinese rail crash scandal: ‘official steals $2.8 billion’, Malcolm Moore, Telegraph UK, 8/01/11

China Imposes Blackout on Train Wreck Coverage, Sharon LaFraniere, NY Times,  8/01/11

With 210 injured, 35 fatalities, more concerns that government sacrifices people’s lives and safety for world’s largest public works project and cloaks failures in secrecy or propaganda.

A new third rail, The Economist, 7/30/11

Japan has operated bullet trains for 47 years without a fatal accident.

Report casts doubt on forecasts for California high speed rail, Dan Weikel, LA Times, 7/29/11

Cambridge used a now-obsolete survey method, made unrealistic assumptions, failed to properly analyze what would happen to ridership for varying levels of train service, and did not consider the impact of airline competition…But the bigger take away from all this is that there are now two independent reviews that show things are lacking here.

Al-Qaeda Claims U.S. Mass Transportation Infrastructure Must Drastically Improve Before Any Terrorist Attacks, The Onion,  7/28/11

Significant repairs and upgrades are needed for the militant group to consider destroying any roads, bridges or railways with terrorist attacks.

Using Market Processes to Reform Government Transportation Programs, Report No. 2: Improving Transit with Competitive Contracting, Wendell Cox and Ronald Utt, Heritage Webmemo #3312, 7/07/11

Public transportation has to change to remain viable, according to a new Heritage Foundation analysis. For decades, transit’s principal problem has been insufficient cost control rather than insufficient revenues. Over the past 25 years, transit’s operating cosdts have been approximately $15 billion (on a passenger mile basis). Had transit agencies kept costs within inflation – as most businesses do – transit would have been able to provide 40 percent more service in 2009. Without government unable to provide more subsidies, a much better solution is for transit systems to use competitive contracting to reduce costs and improve quality of service.  — Wendell Cox and Ron Utt

John Charles responds to Portland Mayor Sam Adams, John Charles, Cascade Policy Institute, 7/25/11

Los Angeles Metro Bus System Compares Favorably With Its Peer Group, Tom Rubin, New Geography, 7/28/11

KRM dead, Racine County to get back $300,000 in past rental car fees, Stephanie Jones, TheJournalTimes, 7/25/11

MetroAccess Knowingly Places Hundreds of Disabled Paratransit Passengers at Risk, Bus riders Union of Austin, TX, 4/02/11

ZONING, HOUSING & LAND USE

TODs, Eminent Domain, Property Rights

Plant a Garden, Go to Jail for 93-Days?! Nanny of the Month, Korchula Productions, July 2011

Growth controls = Housing Collapse, Sterling Burnett, National Review Online, 8/05/11

How Government Regulation Affects the Price of a New Home, Paul Emrath,k National Association of Home Builders, July 2011

Rural US disappearing? Population share hits low, Hope Yen, Associated Press, 7/28/11

Moving From The Coast, Wendell Cox, New Geography, 7/28/11

Program Offers Cash Incentives To Live Downtown, CBS Detroit, 7/25/11

In the five-year, $4 million “Live Downtown” program, first-time home buyers will get a $20,000 forgivable loan. Renters will get a $2,500 first year allowance, and $1,000 the following year. Employees who already own a home in the city will be given up to a $5,000 grant for exterior improvements.

Why Amnerica’s Young and Restless Will Abandon Cities for Suburbs, Joel Kotkin, Forbes, 7/20/11

When it comes to population growth, Houston is No. 1, Rice University, 7/06/11

Why Some Cities Are Growing And Others Shrinking, Dean Stansel, Cato Journal, Summer 2011

ENERGY & ENVIRONMENT

Beaver Fever Fanaticism: EPA Eco-Radicals Are Hurting Families at the Tap, Christopher Coffey, Pajamas Media, 8/07/11

Blame the Washington Bureaucracy for High Gas Prices, Rob Bluey, Heritage Foundry, 8/04/11

New Process Could Make Canadian Oil Cheaper, Cleaner, Kevin Bullis, MIT Technology Review, 8/03/11

GM Confirms Slow Chevy Volt Sales, Mark Modica, National Legal and Policy Center, 8/02/11

CBO: Federal Loan Guarantees for the Construction of Nuclear Power Plants, August 2011

Higher fuel standards mean higher death toll, Washington Examiner EDITORIAL, 7/28/11

Issa launches investigation into Obama’s new fuel economy standards, Andrew REstuccia, The Hill, 7/29/11

Grow Our Way Out, IBD, 7/29/11

President Obama Announces Historic 54.5 mpg Fuel Efficiency Standard, US DOT, 7/29/11

New NASA Data Blow Gaping Hole in Global Warming Alarmism, James Taylor, Forbes, 7/27/11

America’s power grid too vulnerable to cyberattack, US report warns, Mark Clayton, Jewish World Review, 7/28/11

The Obama EPA’s Brave New Future, Heritage Foundry, 7/28/11

Intoxicated on Independence: Is Domestically Produced Ethanol Worth the Cost?,Scientific American, 7/28/11

MISCELLANEOUS

Obama’s War on the Welf-Made Man, Lurita Doan, Townhall, 8/08/11

2011 Hall of Fame Shannon Shane speech, 8/07/11

Parents: Hone Your Kid’s BS Detector!, Doug Giles, Townhall, 8/07/11

DEA Letting Cartels Bring Drugs Over the Border, Helen Whalen Cohen, Townhall, 8/06/11

USPS Bailout on the Horizon, Trey Kovacs, Open Market, 8/04/11

Anti-terror plan allies White House with Muslim groups, Neil Munro, Daily Caller, 8/04/11

Documents: Feds allegedly allowed Sinaloa cartel to move cocaine into U.S. for information, Diana Washington Valdez, El Paso Times, 8/04/11

Communist Party USA Officially Endorses Barack Obama, Vision to America, 8/04/11

Policing Beltway Lobbyists, Jonathan H. Adler, National Review Online, 8/02/11

UCLA professor’s new book empirically demonstrates liberal media bias {VIDEO],Jamie Weinstein, 8/01/11

Plug-and-Play Batteries: Trying Out a Quick-Swap Station for E.V.’s, Bradley Berman, NYTimes, 7/31/11

The U.S. May Need More Lawyers!, Clifford Winston, Robert W. Crandall, Huffington Post, 7/29/11

Gunwalker: William Newell Circles the Wagons, Patrick Richardson, PM, 7/28/11

NHS delays operations ‘as it waits for patients to die or go private’, Martin Beckford, Telegraph UK, 7/28/11

3D printing: the technology that could re-shape the world, Shane Richmond, TelegraphUK, 7/28/11

Obama to Banks: We’re Not Defaulting, Charlie Gasparino, Fox Business, 7/25/11

Germany’s Choice – Part 2, Stratfor Global Intelligence, 7/26/11



Sam Slom on our Economic Crisis by grassroothawaii
August 10, 2011, 5:07 pm
Filed under: Economy | Tags: , , , ,

So Senator Slom is right.  Again.  It’s getting to be a habit with him.  In Hawaii Reporter you can read his take on the debt ceiling crisis and fallout.  (My favorite part–where he mentions that Senator Inouye is Hawaii’s second biggest industry, right after tourism.  And that building your economic hopes on pork from Congress is building on shifting sand.)  Here’s a sample:

 A month ago, I wrote an editorial in Hawaii Reporter in opposition to raising the debt ceiling and conducting government business as usual.

Several professional people, including some friends, argued that I was wrong.  if we didn’t take action, we would face a lowered credit rating, a plunging stock market and higher interest rates, they said.

It was the same argument that was used to force passage of the failed TARP bailout in the last days of the Bush Administration and TARP 2 and stimulus subsidies and grants subsequently.

So, at the last minute, a bi-partisan political agreement on our debt was cobbled together. It pleased neither the right nor the left. In my humble opinion, it was a phony agreement with more promises and no meaningful reform. A “super” Congressional Committee? Really?

The ink wasn’t even dry on the new law when the President, true to his beliefs, authorized billions in new spending and more debt. I said publicly that our credit rating would decrease and there would be huge losses in the markets because we did not address the causeof our fiscal problems: excessive government taxation, spending and debt.

In spite of that “grand” debt agreement, or because of it, Standard & Poor’s downgraded the U.S. credit rating last Friday, from AAA to AA+, the stock market plummeted (again), and interest rates will increase.

Billionaire Warren Buffet responded to S&P’s action, saying  the US credit rating should be UPgraded to “AAAA.”

Over the weekend, the President’s men were quick to blame S&P, the Tea Party, Republicans in Congress and yes, President Bush. Today, President Obama added to the criticism of the messenger, S&P, quoted Buffet, and again called for raising taxes.

The gist of the attacks was that S&P didn’t know what they were doing, their accounting procedures are wrong, and besides, neither Moody’s nor Fitch downgraded the US credit.

I agree that ratings services are just that: ratings services. They don’t know everything.  They do make mistakes. Why didn’t all of them downgrade Fannie Mae and Freddie Mac years ago? Their comments are subject to debate. Kind of like consumer magazine ratings and movie reviews.

But S&P happens to be right at this time. They see no willingness to change government fiscal policies or to improve the investment climate.

(Now go here to read the rest.)



Palmer on Energy and the Economy by maliab
July 21, 2011, 6:01 pm
Filed under: Economy | Tags: , , ,

Our last column from Gary Palmer of the Alabama Policy Institute received such a positive response, that I thought you might enjoy this one on the economic reserves in . . . well . . . our reserves:

The US Isn’t Broke

By Gary Pamer

Despite what you have heard from the politicians inWashington and from the hand-wringing media about whether or not to raise the debt limit, the United States is not broke. Our nation has abundant assets; we simply refuse to use them.

As sensible as the Cut, Cap and Balance Act that just passed the U.S. House of Representatives may be, it should be obvious that with Republicans only in control of the House, there is practically no chance of getting it passed by the Democrat-controlled Senate and signed by the President as part of a deal to raise the debt limit. In fact, the Democrats, along with President Obama, are insisting any legislation that includes spending cuts must also include substantial tax increases to raise federal revenue.

In an already weak and stagnant economy, the last thing we need is a major tax increase that would further slow an economic recovery. What the nation desperately needs now is legislation that will help get our economy growing again.

Consequently, what the Republicans should be pushing for in exchange for raising the debt limit is passage of legislation that will authorize the sale of oil and gas leases on federal land as the means to raise federal revenue. In other words, if Obama and the Democrats want to raise revenues, they should get it out of the ground instead of out of our pockets.

According to the U.S. Department of the Interior and the Bureau of Land Management, there are 800 billion barrels of recoverable oil from oil shale in the Green River Formation. This is three times more than the proven oil reserves of Saudi Arabia. The Green River Formation covers about 11 million acres in Colorado, Utah and Wyoming, with about 80 percent of the recoverable oil in a 1,225 sq. mile area of western Colorado.

The federal government owns or manages 73 percent of the lands that contain significant oil shale deposits in the West and 80 percent of the recoverable oil in the Green River Formation. In addition, there are several billion barrels more offshore. In fact, only about 15 percent of theU.S. coastal waters have been opened to exploration. Including the known oil reserves inAlaska and other areas of the nation, the U.S. has oil reserves worth trillions of dollars.

And that is just the oil reserves. The U.S. has an estimated 284 trillion cubic feet of recoverable natural gas. Together, it is estimated that there are enough oil and natural gas reserves on federal lands alone to power 65 million cars for 60 years and heat 60 million households for 160 years. In addition, the U.S. has 261 billion tons of coal that is recoverable using current mining technology, enough to last 249 years.

Opening some of these reserves for recovery would provide the federal government with additional revenue, hundreds of thousands of jobs to our economy, less U.S. dependence on foreign oil, lowered energy costs to help make U.S. businesses more competitive, and lowered household energy costs for utilities and gasoline. It is estimated that just allowing permits for offshore exploration and drilling to return to levels before the BP spill, including approval of backlogged permit requests, would generate 400,000 jobs and add $45 billion to GDP over the next two years.

Lowering energy costs would have a tremendous effect on household incomes, particularly for low income families. Americans are now spending 12 percent of their household income on higher energy costs for gasoline, electricity and heating. Since 2002, the household energy costs have more than doubled, rising from $2,180 per year to $4,410. Households with incomes below $50,000 annually, which is half of all U.S. households, are estimated to be spending 20 percent of their disposable income on energy costs; households with incomes less than $30,000 are spending 23 percent.

The federal government is actually adding to our debt problem by providing payments to states to help low-income households pay their rising energy costs. As of April 2011, the Department of Health and Human Services has spent almost $3.9 billion thus far in the current fiscal year on subsidies to help low-income households pay their energy bills, including $58.3 million in Alabama.

If the Obama Administration and the leadership of the Democrat-controlled U.S. Senate insist that any agreement to cut spending must be coupled with higher revenues, then the Republicans should put revenues from oil, natural gas and coal reserves on the table.

Given the enormous amounts of revenue that could be generated, opening up these reserves should be part of a common sense solution on the agenda of every member of Congress who truly cares about the American people. This would generate direct revenue from royalties and add hundreds of thousands of new jobs, generate billions in tax revenues for state and federal government, add hundreds of billions of dollars to the GDP over the next ten to 15 years and provide significant relief from high energy costs for millions of low- and middle-income households and for senior citizens on fixed incomes.

If members of Congress are looking for a way to ease the political pain of raising the debt ceiling, tying the increase to reducing energy costs and boosting an economic recovery would be a great way to do it while also continuing the fight for spending cuts.

Gary Palmer is president of the Alabama Policy Institute, a non-partisan, non-profit research and education organization dedicated to the preservation of free markets, limited government and strong families, which are indispensable to a prosperous society.



Short-Term Thinking on Debt by maliab
July 20, 2011, 5:12 pm
Filed under: Economy, Hawaii Sunshine, Limited Government | Tags: , , , ,

Well that didn’t take long.

Our nation’s spending has increased so much over the past decade that a showdown (like the current one over the debt ceiling) was pretty much inevitable.  It’s interesting to note that though the claim that we would have to cut spending by 44% to balance the budget sounds scary, it actually just means scaling us back to 2003 levels.  That’s not exactly the olden times when phone calls were a nickel and we had to walk to school in the snow.

Few things demonstrate the great contrast in economic policy like a debt/budget fight.  Because (as dull as these things can sound when reduced to charts and dollar figures on the evening news), what we’re really witnessing is a dispute over economic philosophy and the direction our country will take for the foreseeable future.  Consider this comment from Moody’s (which has made quite a few appearances in this space on the issue of credit and bond ratings):

“If the debt limit is raised again and a default avoided, the Aaa rating would likely be confirmed. However, the outlook assigned at that time to the government bond rating would very likely be changed to negative at the conclusion of the review unless substantial and credible agreement is achieved on a budget that includes long-term deficit reduction. To retain a stable outlook, such an agreement should include a deficit trajectory that leads to stabilization and then decline in the ratios of federal government debt to GDP and debt to revenue beginning within the next few years.”

To pass through this crisis without looking towards a long-term resolution is merely to pass the burden of our wasteful spending onto our children.  It is a future that will be defined by higher taxes and a weaker economy.  That’s not a legacy to be proud of.



And what does the Federal Reserve actually do again…? by grassroothawaii
July 14, 2011, 4:54 pm
Filed under: Economy | Tags: , , , ,

By Cannon Brooke

The Bureau of Labor Statistics’ recent jobs report echoes a frightening trend about the dismal state of our economy. This undoubtedly, reinforces our concerns how the market is beyond the foresight of this administration’s experts.  According to a report newly released by the Heritage Foundation, the United States is facing the weakest recovery in the post-World War II era. Even worse, this is happening despite that the recession “officially ended” back in June 2009.

At this point, surely one would think that we would be questioning the purpose of the Federal Reserve. After all, the objective of the Federal Reserve is to maximize employment through its policies of lowering interest rates during recessionary times. However, despite its policies being systematically employed numerous times over the past decades, why has it not worked?

Austrian economists such as Friedrich Hayek and Ludwig Von Mises would explain this problem by focusing on the foremost folly of central economic planning, the knowledge problem. The economic calculation problem exists because the market is far too complex to be comprehended by most people, consequently, and is left predicted and manipulated by a few specialists whom claim to understand the inner workings.

But this is exactly the problem.

The complexity of the market and the inherent nature of it having no structure and constantly shifting make it difficult for the Federal Reserve’s policies to be advantageous. An example of this can be seen, when the Fed lowers interest rates and attracts investment to one sector of the economy that would not typically see as much investment in a normal environment, leading to malinvestment.

A perfect illustration of this happening is the recent housing price bubble. Since interest rates were kept artificially low, it subsequently attracted many new investors. This in turn, created jobs for the real estate industry and employed many.  The problem is the market became over-expanded and many people could not afford their investment – popping the bubble.

So the Federal Reserve’s policies worked in the short run, creating jobs and propping up the economy – but only in the short run.

The Federal Reserve’s goals are contradictory and have a long history of failure. How does artificially stimulating one sector of the economy benefit everyone? And how does the inflationary policies of the Fed create a productive economy and maximize employment by devaluing our money?

With the real unemployment rate just reaching a staggering sixteen percent, we should all be asking ourselves – why do we even have the Federal Reserve?



Going Broke for the Degree by grassroothawaii
July 12, 2011, 5:03 pm
Filed under: Education | Tags: , ,

By Cannon Brooke

It seems universities are making a considerable amount of the headlines today, however, this publicity is conspicuously disparaging. Some topics covered by the media examine the problem on campuses with binge and underage drinking, athletic scandals and the occasional student riot. But there is one topic that stands out – the burgeoning cost of a post-secondary education.

We all have heard the promises of holding a college degree, a life of intellectual fulfillment, and a substantially much higher income than non-degree holders. Going to college is viewed as a stepping-stone into adulthood, “a small price to pay” argue universities, for a quality education. Even politicians weigh in on this topic, some going as far as to say “on average you will earn a million dollars more with a bachelors degree than just having a high school diploma” (Hillary Clinton) over a life time.

However, with a tumultuous economy and student debt out-pacing credit card debt, the college experience is having many concluding that it just might be a scam.

A fundamental reason for the explosive tuition hike in recent years is the lack of productivity in universities. The efficiency of university personnel has been stagnating in recent years. So the question arises: how come the rest of the economy can become more proficient, utilize the latest technology to lower costs, while the universities on the other hand, need more administrators and professors to educate a given number of students?

And that is just the problem. Universities are NOT subject to the same market-based principles and are subject to the inefficiencies of the current non-profit and vague ownership model. Deans, presidents and other faculty have no incentives to lower the costs of attending a university since it is mostly taxpayer and donor funded. There is absolutely no accountability in academia. Also, all of the subsidies that the schools receive abate competition and reduce the market-imposed discipline to economize and innovate, leading to higher tuition costs.

The post-secondary education, particularly at the larger universities, is notoriously resistant to any kind of reform – and this is not a just few recalcitrant professors. Tenured faculty inordinately resists any change to the status quo and will veto proposals affecting their workload or opulence. This policy is further perpetuated by presidents placating constituencies [donors] and faulty unions by continuing lumbering decision procedures and other impediments to change – consequently, stifling innovation.

Universities often lure professors into their institutions by promising reduced workloads and extended sabbaticals so instructors can “research” and work on publication. This is typical in research universities. A focus on publishing and not instructing leads to undergraduate students feeling neglected, since emphasis is put on having their faculty publish in some obscure scholarly journal that nobody reads. As a consequence of this focus on “research,” a decline in teaching loads has occurred and the number of academic journals has multiplied.[1] Focusing on research and publishing in academic journals does not promote enhanced student learning, instead, subsequently drives up the cost of tuition and lowers the actual classroom time.

Low retention rates, declining analytical competency and years of debt are making some question the real worth of a college degree. With the cost of obtaining a four-year degree more than doubling since 1975 in inflation-adjusted dollars, there is no question as to why some are looking towards alternatives to this latest bubble that is certainly going to pop.[2]

I have written a working paper on the alternatives to college available on the Grassroot Institute’s website. The paper goes deeper into the problem with higher education and calls for a more pragmatic approach to post-secondary education. Please check it out and let me know what you think.

The link can be found here.

 

Sources:

 

[1] Vedder, R. K. (2004). Going broke by degree : why college costs too much. Washington, D.C., AEI Press.

[2]  Digest of Educational Statistics. 2009a. Table 26. Expenditures of educational institutions related to the gross domestic product, by level of institution: Selected years, 1929-30 through 2008-09. National Center for Education Statistics.




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