January 31, 2008 by Tom Armstrong.

Two former police officers were convicted in federal court Wednesday of participating in a robbery ring that disguised home invasions as drug raids.

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January 31, 2008 by Tom Armstrong.

Bad sign:

The Labor Department reported that the number of laid off workers filing applications for unemployment benefits soared by 69,000 to 375,000. That was the highest level for jobless claims since the week of Oct. 8, 2005, when the economy was dealing with the disruptions caused by Hurricane Katrina and the other Gulf Coast hurricanes.

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January 31, 2008 by Tom Armstrong.

I took this short, 14-question quiz and was told I agree most with John McCain. What? My second choice was Ron Paul. I cannot disagree more with McCain. I will never vote for McCain, not even as a vote against Obama or Clinton. What can you expect from a 14-question quiz that asks the basic questions? Take the quiz (2 or 3 minutes to complete) and see what I mean.

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January 30, 2008 by Tom Armstrong.

I just purchased shares of Fifth Third (FITB) a few days ago, so now’s a great opportunity for you guys to make yourselves some big money by shorting that stock like crazy. All the stock market pros call me before they make a move. They ask me what I’m buying and then they know what to sell.

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January 30, 2008 by Tom Armstrong.

Hillary Clinton is total sleaze.

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January 30, 2008 by Tom Armstrong.

In today’s WSJ, which begins:

Does restricting “eminent domain” — the power of government to seize private property — harm economic growth? A new report from the Institute for Justice looks at the evidence and concludes the answer is no.

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January 30, 2008 by Tom Armstrong.

President Bush was eager to ask Congress to reauthorize the No Child Left Behind Act (NCLB) in his final State of the Union Address. Students are achieving record success, with minority students, poor students, and students with disabilities reaching all-time highs in a number of areas,” claims the Bush administration. The evidence, however, suggests otherwise.

With the impending reauthorization of NCLB, political officials around the nation are echoing the recent sentiments of Tennessee’s governor, Phil Bredesen, who recently said: “When you step back and look at all the things we can do to improve the quality of our workforce and the quality of life for young adults, there’s nothing more important than raising the high school graduation rate.” Most educators disagree. Graduation does not improve skills or the quality of life; learning does. But Governor Bredesen, along with others, is reacting to incentives created with the NCLB legislation.

Legislation is bound to contain incentives that lead to unintended consequences, but NCLB takes the cake. Not only does it harm the students it aims to help by rewarding failure, it reports this failure as success.

In a perfect world, Congress could pass legislation to improve student achievement and all would go according to plan. Since we don’t live in a perfect world, though, all Congress can do is enact legislation that intends to facilitate student learning. NCLB aims to help students by requiring schools to demonstrate yearly progress in their graduation rate and student test scores. Since schools can more easily manipulate data to show student achievement than to actually teach students, it’s no wonder we get more data manipulation than student learning. What’s most disconcerting is that schools are requiring less student achievement with NCLB than they ever did without it. Here’s why:

• NCLB requires schools to demonstrate improvement in student test scores on an annual basis. States, since they are free to design their own tests, are watering them down. That is, states are making tests easier to pass, and this is occurring nationwide. States have also been lowering passing grades on the state tests and permitting longer time to complete the exams. Because the states are free to administer tests that are watered down, they can manipulate the data. These states can report that student achievement is improving when, in fact, nothing has changed but the definition of passing. For example, a state could create an easier test with a lower passing score, and this would be reported as success. How convenient. Only in government is failure reported as success.

• Schools are also asked to report annual progress in their graduation rates. Several techniques are being used by the schools to meet this requirement, and not one of them has anything to do with helping students succeed in school. Some schools are now promoting their own grading scales. The grading scales are staring at the lowest possible passing grades—70% for many schools. When the lowest grade on the scale is still passing, nobody can fail. This tends to promote high graduation rates.

• States are developing and promoting “alternative” diplomas. For example, my state of Tennessee has an alternative diploma that requires 21 credits for graduation. Prior to NCLB, my school district required 28 credits for graduation and would not offer this diploma; we are now pleased to offer this 21-credit diploma. Now we are cutting an extra year of education from graduation requirements, but our graduation rate is obviously improving. Our graduation rate goes up (which is reported as progress), but student achievement continues to drop—all thanks to the incentives created by NCLB.

• NCLB leaves loopholes so schools only have to test students who can pass the tests. For example, high-school juniors must take a writing assessment, which is typically organized through junior homerooms. Schools are excluding from the tests those students in those junior homerooms who lack enough credits to be juniors. The next year those students will be in senior homerooms and thus be excluded from the writing assessment. So schools have found ways to improve their text scores by excluding test takers who are most likely to fail. 

You will see the president and others report extraordinary statistics showing how NCLB is improving student learning, but take a closer look and you’ll see an education system that is being torn asunder by this legislation.Schools can’t work the miracles asked of them. In fact, nobody works miracles. Not even a privately-operated school system could meet the requirements of NCLB. When legislation is based on fantasy rather than reality, those impacted by the legislation must manipulate the system to report figures that can live up to the fantasy.

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January 29, 2008 by Tom Armstrong.

Thomas Sowell talks stimulus. Notable:

Of course markets can fail. Everything human can fail. But if Alex Rodriguez strikes out, do the Yankees take him out of the game and send in a pinch hitter for him?

No one would dream of suggesting such a thing. We are far more rational when discussing sports than when discussing politics.

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January 29, 2008 by Tom Armstrong.

Steven Landsburg in today’s LA Times on the stimulus package.

HT: Mark Perry

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January 29, 2008 by Tom Armstrong.

Great shark pictures.

HT: Glenn Reynolds

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January 29, 2008 by Tom Armstrong.

From today’s WSJ:

Wow. The tax rate fell to 15% from 20%, yet revenue collections have climbed by 152% in four years. The nearby table shows that the response by investors has been much larger than even many advocates had hoped to see. In 2002, the year before the tax cut, the capital gains realizations that filers report on their tax returns were $269 billion. Realizations grew smartly in each succeeding year, and CBO is now projecting that the total for 2007 will be $863 billion.

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January 29, 2008 by Tom Armstrong.

Dick Armey on how Congress plans to undermine contract law.

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January 28, 2008 by Tom Armstrong.

Splendid!

(HT: Division of Labour)

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January 28, 2008 by Tom Armstrong.

Rea Hederman at The Heritage Foundation on the stimulus plan. Good work–consider reading.

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January 28, 2008 by Tom Armstrong.

Everyone has their hands out with this stimulus plan.

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January 28, 2008 by Tom Armstrong.

Bush announces executive order to end earmarks.

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January 28, 2008 by Tom Armstrong.

Tax-happy Brazilian politicians have depressed the potential growth of their country’s economy.

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January 27, 2008 by Tom Armstrong.

This post from Radley Balko is a good.

Politicians love the protect-me-from-me mentality. For instance, they criminalize marijuana. They do it, in part, to create goodwill from the multitudes, but it’s also a method to push their preferences on the rest of society. Too much of this nanny-state mentality and people will revolt and lose respect for the state in general. Count me as one of those people who have lost respect for the government. Let’s permit informed and competent individuals to make their own decisions, although we know they will sometimes make poor decisions. Besides, people will tend to just ignore laws that they perceive to be unjust.

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January 27, 2008 by Tom Armstrong.

There is little to no systematic evidence that poverty-linked undernutrition–malnutrition caused by too little food intake–is an actual problem in America. “Food insecurity” numbers batted around by the FDA do not mean that people actually went hungry; they mean that people worried about going hungry, or changed their diet–usually by altering the composition of the diet, not by forgoing food–to avoid going hungry. But of actual sustained hunger, there is no evidence.

There is, on the other hand, a lot of evidence of obesity among the poor; their obesity rate is estimated at 36%, and the obesity rate among poor children seems to be about twice the rate among non-poor children. The poor people are eating more calories than they need. Yet we propose to stimulate the economy by giving the poor money that can only be spent on more food.

(HT: Glenn Reynolds)

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January 27, 2008 by Tom Armstrong.

Steven Landsburg on why the stimulus package won’t help you.

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January 26, 2008 by Tom Armstrong.

Tax humor from The Tax Foundation:

“Why does a slight tax increase cost you two hundred dollars and a substantial tax cut save you thirty cents?”
            —Peg Bracken

“The art of taxation consists in so plucking the goose as to obtain the largest possible amount of feathers with the smallest possible amount of hissing.”
           — Jean Baptiste Colbert, Minister of Finance under King Louis XIV of France

“A fine is a tax for doing something wrong. A tax is a fine for doing something right.”
            —Author unknown 

“Nuclear physics is much easier than tax law. It’s rational and always works the same way.”
            —Jerold Rochwald 

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January 26, 2008 by Tom Armstrong.

Mark Perry tells us:

1. The Kennedy-Johnson tax cut reduced the top rate from 91% in 1963 to 70% in 1965, and the share of personal income tax paid by these earners rose from 16% to 18%.

2. The Reagan tax rates in the 1980s lowered the top rate from 70% to 50% and then to 30%, and the share of taxes paid by these earners rose from 14% to 22% of the total.

3. In 1997, the tax rate on income from capital gains was cut from 28% to 20%, and this rate reduction was accompanied by a substantial increase in revenues collected from capital gains taxes and personal income taxes collected from high-income taxpayers. In fact, capital gain taxes roughly doubled from $66 billion in 1996 (the last year before the tax cut) to $129 billion in 2000, when these earners paid 31% of all taxes collected.

Mark also says:

During the 1920s, The Revenue Acts of 1921, 1924, and 1926 reduced the top marginal income tax rate from 73% to 25% (see top chart, blue line). Did the drastic cut in tax rates cause tax revenues to fall? No, just the opposite. Personal income tax revenues increased substantially during the 1920s, rising from $719 million in 1921 to $1.16 billion in 1928 (see top chart, red line), an increase of more than 61% (this was a period of no inflation).

The share of the tax burden borne by the rich rose dramatically. As seen in the bottom chart above, taxes paid by the rich (those making $50,000 and up in those days) climbed from 44.2% of the total tax burden in 1921 to 78.4% in 1928.

Furthermore:

In 1980, the highest marginal tax rate was 70% and by 1988 the highest rate was cut to only 28%. The chart above shows what happened during that decade, exactly as predicted by the Laffer curve:

1. In constant dollars, the total tax revenue collected from the top 1% of taxpayers increased by 50%, from $58 billion in 1980 to to $87 billion in 1990.

2. On a per return basis, the average taxpayer in the top 1% paid 23% more taxes in 1990 compared to 1980 (inflation-adjusted real dollars).

Bottom Line: As the Laffer Curve predicts, significant cuts in the highest marginal tax rates during the 1980s caused both: a) total tax revenue collected (in real dollars) from the top 1% to increase, and b) the tax collected per return (in real dollars) for the top 1% to increase.

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January 26, 2008 by Tom Armstrong.

Chris Edwards says the president’s $100 billion plus stimulus package will just result in inflation. More money chasing the same quantity of goods will tend to produce inflation, but Chris assumes no slope in his aggregate supply curve. Aggregate supply in the short term may not alter much in our current situation, but his assumption of no aggregate supply change appears unreasonable. Read why he believes there will be no change in aggregate supply.

Update: I wrote the above before I went to take my exercise. While at the gym, I thought a little more about the above (I’ll admit it’s a little weird to ponder aggregate supply curves while doing heavy, unspotted squats–I forgot my iPod.) I just got back, so I’ll provide my take on Chris’s argument. He believes the short-term aggregate supply curve will be perfectly vertical in his example; I believe it will have a slight slope, so 100% of the “stimulus” would not result in inflation (assuming the checks represent additional spending, instead of being saved).

First, forget the standard models you’ll see in a Samuelson or Varian economics textbook,  and let’s focus on the practical.

Chris uses the cigarette industry, so I’ll stick with that. He says: A U.S. cigarette producer may notice a slight uptick in sales in those months as smokers spend their government checks. But cigarette producers probably watch the news and they will know that this is just a temporary blip. As such, they won’t add any new workers or buy any new machines.

I bolded what I believe to be his mistake. He assumes the cigarette companies are all operating at 100% capacity and will need to make additional investment to satisfy additional demand. I doubt the industry is at 100% capacity. It seems more likely that the industry has some excess capacity, and cigarette makers would choose to produce more cigarettes instead of charging higher prices–at least as much as they possibly could. Why? Cigarette makers have competitors, and they know hiking prices can result in loss of market share to other cigarette producers or producers of substitute products (Nicorette Gum). Supply will adjust somewhat, not just prices.

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January 25, 2008 by Tom Armstrong.

Art Laffer says we should cut top marginal tax rates to benefit the economy.

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January 25, 2008 by Tom Armstrong.

Last night’s debate had all the republican candidates (except Ron Paul) pandering to the voters in Florida. They all supported the idea that we should collectivize the property insurance market to benefit people living on Florida’s coast. Because home insurance on the coast of Florida tends to be prohibitively expensive, many home owners in Florida would love politicians to reach into my pocket–a person who lives in safe rural Tennessee–to help subsidize their insurance payments to live on the beach. The republican candidates were all proud to announce their desire to rob from me so others could live in their oceanfront mansions.

There is an adverse selection problem here and the politicians are trying to lower insurance costs for some people by forcing all people to “buy” the insurance policies. The problem is that the politicians, aside from stealing from me to subsidize others, are negating the benefits of our insurance markets. Prices fluctuate to encourage or discourage risk, and the republican candidates are happy to destroy those price signals. It’s risky to live in parts of Florida, like its risky to drive 100 mph on wet roads. Insurance prices will rise when houses are routinely destroyed by weather or a person is often caught breaking the speed limit or wrecking. Higher prices encourage one to take less risk, which often saves heartache, economic resources, and lives. The politicians, in their pleas to purchase votes, offer to subsidize  insurance costs for people taking risks they would not take without a subsidy, which wastes resources and human lives.

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January 24, 2008 by Tom Armstrong.

Mark Perry explains why we’re probably not in recession. Notable:

At the onset of the last two recessions (March 2001 and July 1990), initial unemployment claims were close to 400,000, and at the onset of the 1980 and 1981 recessions new claims for unemployment benefits were close to 500,000. This extremely positive news about the health of the U.S. labor market over the last month (301,000 claims) pretty much guarantees that we are not in a recession.

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January 24, 2008 by Tom Armstrong.

Don Boudreaux says:

Spending power is not so much the fuel for economic growth as it is its reward. And the key to economic growth is investment that raises worker productivity.

Read it all here.

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January 24, 2008 by Tom Armstrong.

Senator Dodd’s plan to remedy the subprime mortgage crisis will create a moral hazard.

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January 23, 2008 by Tom Armstrong.

The Left like to talk about being “fair.” Ok, let’s be “fair” to all and slash marginal tax rates for the wealthy–because that’s the “fair” thing to do. I’m sure, however, my definition of “fair” is not conducive to the Left’s political agenda. Notable:

In fact, as the chart below shows, the bottom 20% receive $23,176 more per year in federal spending than the pay in federal taxes. The top 20% pay $38,939 more in federal taxes than they receive in spending. This is in no small part due to the fact that so many low-income families have no income tax burden after applying their credits and deductions.

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January 23, 2008 by Tom Armstrong.

Hillary Clinton and Say’s Law.

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