January 19, 2008 by Tom Armstrong.

Bruce Bartlett explains why the proposed stimulus package from the White House is asinine. Notable:

The underlying theory for the rebate idea traces back to the British economist John Maynard Keynes. He believed that spending was the driving force in the economy. It didn’t matter whether the spending was done by businesses on capital equipment, by governments on public works, or by consumers — spending is spending in the Keynesian model, and all of it is stimulative.

In Keynes’ defense, his theory was developed during a severe, world-wide deflation. Spending of all kinds was paralyzed by a lack of liquidity, and the Federal Reserve had difficulty injecting money into the economy because so many banks had closed. Under these circumstances, deficit spending by governments made sense as a means of getting money into circulation and overcoming deflation. The problem is that, once World War II seemed to validate Keynes’s theory, the idea of stimulating the economy by increasing government spending became the all-purpose cure for every economic slowdown, regardless of its underlying cause.

In the 1960s and 1970s, this usually took the form of public works spending. But in 1974, the White House was keen on the idea of cutting taxes to stimulate private spending. Since it was feared that a permanent tax cut might be inflationary, President Gerald Ford and the Democratic Congress agreed on a one-shot tax rebate. It was thought that cash-strapped consumers would take their government checks and immediately run out and spend them on food, clothing and other necessities. This would give the economy a Keynesian boost.

One dissenter was economist Milton Friedman. His research had led him to conclude that consumer spending was less a function of liquidity than something he called “permanent income.” Friedman observed that when workers lost their jobs, they didn’t immediately cut back on spending. They borrowed or drew down savings to maintain spending, in the expectation of finding a new job shortly. Conversely, consumers didn’t immediately spend windfalls. They kept spending on an even keel until they achieved a promotion at work, or other increase in their long-term income expectations.

Thus Friedman predicted that the $100 to $200 checks disbursed by the Treasury Department in the spring of 1975 would have a minimal impact on spending, because they did not alter peoples’ permanent income. Most likely, people would save the money or pay down debt, which is the same thing. Very little of the rebate would cause consumers to buy things they wouldn’t otherwise have bought in the near term.

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January 19, 2008 by Tom Armstrong.

Springfield, Mass. invested millions in CDOs at Merrill and subsequently lost 90% of its investment. Now it wants its money back. Please. They essentially are claiming incompetence on their part. They had no problem with the investments when they were profitable, but since the market has turned sour, they are refusing to accept responsiblity. They’re government, after all; their interests are paramount, they claim. It’s Merrill’s fault, they say. I wonder have far an individual would get with this claim?

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January 19, 2008 by Tom Armstrong.

Want proof public education has lost its way? The number of special education students has increased by more than 20% over the last 10 years in Tennessee and by 32% nationally. One reason for the growing numbers is the broadening of guidelines defining eligibility to receive special education services. My state of Tennessee now has 1 in 5 public school students identified as special-needs students. That’s ludicrous. If historic growth rates continue like this for much longer, special needs students will be the norm. Does that then mean they are no longer special and in need of special services? Do the remaining students not labeled as “special” then become special?

Schools will continue to label more students as “special needs” as long as doing so remains rewarding, which is unfortunate because some students are in need of special services, and they must complete with special-education services with students who are undeserving.

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January 19, 2008 by Tom Armstrong.

The White House conveniently losses damning evidence email. Story begins:

The White House possesses no archived e-mail messages for many of its component offices, including the Executive Office of the President and the Office of the Vice President, for hundreds of days between 2003 and 2005, according to the summary of an internal White House study that was disclosed yesterday by a congressional Democrat.

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January 19, 2008 by Tom Armstrong.

Someone forgot to do her homework. How sad!

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January 19, 2008 by Tom Armstrong.

Occasionally I enjoy reading a science book written for a general audience. A Short History of Nearly Everything, written by Bill Bryson in 2004, is perhaps one of the best I’ve ever read. This book, written by Byron and Fuller, on the other hand, was tedious and complex.

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