Monthly Archives: May 2010

The Grapes of Wrath

The Economist has a good analysis of America’s jobless recovery.  It is worth reading just for chart #1, which compares this recession with those of 1973 and 1981. At the time, 1981 was compared with the Great Depression.  Homeless workers migrated from Detroit to Houston in search of jobs, only to freeze in their cars.  Pundits recalled Steinbeck.

In 1981, according to the Economist, employment fell by 3%, and climbed back to normal after 28 months.  Today, it has fallen by 6%, and has only now found the floor after 28 months.  It looks like being twice as deep and twice as long.

Lots of laid-off workers will never regain their former earning power.

The Economist says this is part of a long term trend toward lower standards of living in America.  This is the long term trend Jeremiah has been warning against.  In the short term, of course, the government must spend money on relief efforts – and the economic stimulus package is too unwieldy to qualify as a short-term measure.  It is starting to look more like a pork fund for the 2010 elections.

The most important thing the government can do right now is to provide tax credits for people to get out of their underwater mortgages, so they can relocate and find a job – from Detroit, say, to Houston.

The ultimate solution, though, is smaller government – and better education.  We do not want to fall into the trap Greece is in, where everybody depends on the government and the government is bankrupt.  Government can be a backstop when private industry falters, but there is no substitute for a flexible work force.

See also:  I Need a Freaking Job


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Five-Dollar Gas

Time’s cover story this week is a survey of the Gulf oil spill.  The article is strong on engineering and generally weak on economics.  Amid the misconceptions, however, are commendable candor – and one big idea.  Author Bryan Walsh dispenses with airy-fairy arguments for “renewable” energy and states frankly that America needs a lot of oil – about 20 million barrels per day, according to the DOE.

His big idea is to start taxing oil consumption.  The misconception is that this tax would fall “on the back of a wealthy industry.”  Americans burn an unbelievable 378 million gallons of gasoline per day.  An oil tax would mean higher prices at the pump, and no politician has the nerve to do that.  Better to blame the auto industry, tax carbon – whatever that means – and send our children to Arab wars.

We need to address the underlying issue, and that’s our dependence on oil.

Higher gasoline prices are exactly what America needs.  This is the only way we will begin the adjustment to smaller cars, public transit, and shorter commutes.  If we start now, there will be time to adjust.  Europe is already far better prepared than we are.  Perhaps President Obama, never one to waste a good crisis, will seize this opportunity.  He can use the tax money for his fusion program.

See also:  The Politics of Disaster

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Census Form is Racist

This year’s census form reveals the administration’s disturbing preoccupation with race.  In addition to the inevitable “select race” question, the form has a separate question just for Hispanics.  This is two questions out of ten, with twenty assorted check boxes.

If your people are from Europe, you are just plain “white.”  It makes no difference if they are from Holland or Poland or Spain.  No, wait – if you are Spanish, that counts as Hispanic.

Remember that the purpose of the census is to allocate seats in the House of Representatives.  The Constitution does not say anything about analyzing voter demographics.

Astute politicians, though, will not simply pander to Hispanics as a group.  Cuban immigrants, we know, tend to the fiscal and social right.  Mexican immigrants are mostly fiscal-left – and illegal.

Justice John Roberts said it best, “The way to stop discrimination on the basis of race is to stop discriminating on the basis of race.”  Everywhere there is a politician who wants to collar the Hispanic vote, or a bill to “protect” black Americans – say, from good schools – racism is perpetuated.

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Rebirth of Regulation

Robert Reich gave a commentary recently on NPR, calling for the “rebirth of regulation.”  Most capitalists have an instinctive aversion to regulation – and to Mr. Reich, who teaches at Berkeley.   Commentators on both sides tend to equate capitalism with the interests of shareholders and management.  In fact, capitalism is a system which needs regulation to survive.

Without regulation, companies have strong incentives to abuse their workers, damage the environment, cheat the bondholders, and so on.  If righteous managers refuse to do these things, they face competition from others who will.  The profit motive is the driving force in our economy.  Regulation determines whether it is used for good or evil.

Regulation costs money.  It costs the government to administer the regulations, and it costs the companies to comply.  These costs are dead weight on the economy.  Fines levied on errant firms, on the other hand, are good for the economy – assuming the regulations are sensible to begin with – because they improve market conditions for the righteous ones.

In writing new regulations, and setting up regulatory agencies, we must remember that the goal is to protect capitalism from irresponsible companies – not to punish capitalism at large.  We must remember that most companies are honest ones, and they pay our salaries.  Also, American companies face competition from less-regulated foreign ones.

Effective regulation requires a delicate balance.  Recent events support Mr. Reich’s assertion that the pendulum has gone too far to the right.

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