April 3, 2008 by Tom Armstrong.

I’ve changed domains. My new address: Here.

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April 3, 2008 by Tom Armstrong.

From this excellent opinion in today’s WSJ:

By last week, Mrs. Clinton was in full Ghostbusters mode, claiming that John McCain’s speech on the housing problem “sounds remarkably like Herbert Hoover, and I don’t think that’s good economic policy.”

No, Senator, it surely isn’t. Around our offices, we’re still recovering from the fact that Hoover was the last Presidential candidate we’ve endorsed. We’ve been trashing Hoovernomics ever since. The issue this year, however, is who is really pursuing the Hoover model.

To hear Mr. Schumer and his fellow-traveling columnists tell it, Hoover’s great policy blunder was to do nothing, all the while insisting that everything was fine. But the problem with Hoover’s economic policy isn’t that it was passive but that it was actively destructive.

In 1930, he signed the Smoot-Hawley Tariff Act, setting off a wave of protectionist retaliation that undid the globalization of the preceding decades and did far more harm to the world economy than the stock-market crash ever did. Two years later, amid a bad recession, he undid the Calvin Coolidge-Andrew Mellon tax cuts, raising the top marginal income-tax rate to 63% from 25%. The recession became a Depression.

Now, since we’re talking Hoover, which Presidential candidate has a similar agenda of protectionism and tax increases? Hmmm.

Oh, that’s right. Just the other day, one of the candidates for President was saying she’d withdraw from Nafta if the Mexicans didn’t do what she demanded, and she wants “a pause” in free trade. She also wants to repeal the Bush tax cuts, more than doubling the rate on dividends back to 39.6% from 15%.

Her Democratic opponent agrees with her, except that he’d raise taxes even more, including by eliminating the $102,000 cap on income subject to the 6.2% payroll tax (12.4% when you include employers), and raising the capital gains tax to at least 25%, and maybe even 28%, from 15%. Add up all of Barack Obama’s tax increases and his proposals would get entirely too close to Hoover’s top marginal rate of 63%.

Maybe we should be afraid of Hoover’s ghost.

This is also an excellent article in today’s WSJ. Outtake:

In sum, Mr. Frank is volunteering U.S. taxpayers to insure $300 billion in mortgages with underwriting standards to be named later. Connecticut Senator Chris Dodd thinks $400 billion is more like it. Quavering Republicans should do the political math. The Mortgage Bankers Association tracks 46 million mortgage borrowers, and 42 million are paying on time. More than 20 million households own their homes outright and, having worked for years to pay for them, probably don’t want to pay for someone else’s. Neither do 35 million renters who didn’t take a flyer on nicer digs.

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April 3, 2008 by Tom Armstrong.

Take this quiz (15 questions) on general knowledge that I give my students at the beginning of each semester to find out. 70% is passing. Incidentally, the average score of my students at the beginning of the year is around 30 to 40%. Oh yeah, my picture on the test is just meant to reinforce to my students that I am always watching over them–and it might also have something to do with my super-massive ego.

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April 3, 2008 by Tom Armstrong.

Hurricane season is just around the corner, so Americans should know where to turn to if disaster strikes.

It’s not the Federal Emergency Management Agency. A new study suggests Wal-Mart, Home Depot and Lowe’s would be a lot more helpful.

The study, by Steven Horwitz, a professor of economics at St. Lawrence University in Canton, N.Y., stresses that successful disaster relief depends upon responders having detailed knowledge of a local area and the right incentives to act on that knowledge.

Examining federal and private responses to Hurricane Katrina, the study says why FEMA was destined to fail and why for-profit companies succeeded at disaster recovery.

Read it all here.

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April 2, 2008 by Tom Armstrong.

No Child Left Behind (NCLB) is some of the worst legislation passed in this country since LBJ’s “Great Society.” For newer readers, just check my older posts on this subject for more information (I wrote this one a few months ago). It is not just a bunch of left-wing teachers who do not like the thought of being held accountable in the classroom who loath NCLB. Even right-leaning think tanks like CATO have little to say for it.

This article (from the Goldwater Institute) explains more. Below is a summary:

It looks like Arizona is set to opt out of No Child Left Behind.  Arizonans need transparency and accountability in public schooling, but they do not need NCLB, says Matthew Ladner, vice president of research at the Goldwater Institute.

• Chief among the flaws of NCLB is the fact that it creates an entirely perverse incentive for states to lower their academic standards in order to meet a federal goal of 100 percent proficiency by 2014.
• A recent University of California Berkley study that found 10 of 12 states studied had lowered the standards for their state accountability tests.
• States have engaged in a “race to the bottom,” and sadly, Arizona is one of the leaders.

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April 2, 2008 by Tom Armstrong.

The psychology of victimhood and the politics of envy are powerful political tools and we see them being exploited this political season. Politicians telling Americans how bad off we are reminds me of one of Aesop’s Fables where a dog was carrying a piece of meat across a bridge. Looking down into the river, he saw his shadow, which appeared to him as another dog carrying a larger piece of meat. Attacking the “other” dog, he dropped his piece of meat into the river and it was gone for good. Aesop’s lesson is something to keep in mind as politicians offer their solutions to income inequality.

Read it all here.

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April 2, 2008 by Tom Armstrong.

From The Tax Foundation: 

Yesterday, members of the House Select Committee on Energy Independence and Global Warming spent the day beating up on oil industry executives for “excessive” profits and gouging consumers at the gas pump. Lost in the political theater is the fact that those “excessive” profits are net profits: that is, profits earned after taxes are paid to government. And while the oil companies have enjoyed a few good years, history shows that government has profited more from the domestic oil industry than has its shareholders.

Recent data from the Energy Information Administration shows that since 1981—the first year of the Windfall Profits Tax—total taxes from all oil industry sources exceeded the combined profits of all companies in every year but the past three. Between 1981 and 2006, government collected $1.65 trillion in total taxes after adjusting for inflation. That is 65 percent more than the combined earnings of the 16 largest domestic oil companies during the same period.

As the chart below shows, during most of that 25 year period, government tax collections were nearly twice industry profits in any given year. Indeed, in 2002, before the recent price spikes, the industry earned a collective $20.5 billion in profits. However, government collected more than $50 billion in combined income, property, severance, and excise taxes in the same year.

So, the lesson to members of the House committee is be careful of throwing stones when you live in a glass house.

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April 2, 2008 by Tom Armstrong.

From Cafe Hayek:

“Clinton Proposes Plan to Make Firms Inefficient” would have been a more accurate headline to this report at Newsweek.com.  I sent this letter in response:

Courting blue-collar votes, Hillary Clinton promises to use “tax incentives to persuade companies to ‘insource’ jobs in the United States” (”Clinton proposes plan to keep jobs in US,” April 2).  Because firms ‘outsource’ jobs only when doing so lowers firms’ costs of production, Mrs. Clinton’s proposal amounts to bribing American firms not to lower production costs whenever possible.  She wants to encourage American firms to produce inefficiently, which is to say wastefully.  In short, she wants us to be poorer than we would otherwise be.

Mrs. Clinton’s proposal is further evidence that good politics typically is bad economics.

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April 2, 2008 by Tom Armstrong.

The latest in the series of pointless gestures that constitute Congressional energy policy came yesterday, when executives from five major oil companies were paraded before Ed Markey’s House hearing on global warming. They served as political props for Members to denounce rising gas prices, ventilate Dick Cheney conspiracy theories and otherwise advertise their ignorance of the markets they purportedly oversee.

Read it all here.

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April 1, 2008 by Tom Armstrong.

Short profile of myself at my school’s Web site–which I am currently working on. The current Web site I developed for my school is here.

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April 1, 2008 by Tom Armstrong.

Below is the start of this RCM article:

Calvin Coolidge once said, “If you see 10 troubles coming down the road, you can be sure that nine will run into the ditch before they reach you.” The 30th president’s words are particularly prescient in light of the regulatory fever sweeping Washington.

In the past week we’ve been treated to a Wall Street Journal headline titled “Ten Days That Changed Capitalism,” which seemingly heralded the end of the market-driven consensus that has mostly prevailed over the last twenty-five years, and just yesterday Treasury Secretary Henry Paulson rolled out a new financial regulation blueprint meant to “to improve the workings of our financial markets.”

To support the new regulatory mindset is to assume that economically-free countries, as opposed to those centrally planned, are frequently burdened with sclerotic growth and commercial failure. One would also have to take a giant intellectual leap backwards in the direction suggesting that government bodies free of the discipline wrought by the marketplace are somehow better suited to solve the problems before us. In truth, it is private interests, those that operate fully accountable to consumers and investors, who regularly adapt to all manner of changes in what is a highly fluid economy.

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April 1, 2008 by Tom Armstrong.

This MSN article has the list.

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April 1, 2008 by Tom Armstrong.

From today’s WSJ:

As policy makers plot out a grand redesign of financial-market regulation, one huge corner of the marketplace ought to get a lot of attention: credit-default swaps.

These financial instruments, which don’t trade on exchanges, are like disaster insurance on debt defaults. Investors who buy these swaps get a big payment if a bond or loan defaults. In return for the protection, the investor has to make regular payments to the seller of the swap.

The market has become immensely important, yet regulators still haven’t figured out how to deal with it. The Bush administration’s blueprint for new regulation curiously had almost nothing to say about it.

Credit-default swaps were a factor in the recent troubles of Bear Stearns. Hedge funds and other firms that were on the other side of credit-default swap trades with Bear tried to exit from their positions or pass them on to other brokers. That set off a broader panic about Bear’s health as a counterparty, which pushed the firm to the brink.

Swaps also played a deciding factor in the Federal Reserve’s dramatic intervention. If Bear went down, others could have been dragged down through their exposure to the firm through swaps.

Many firms have no way of knowing about problems of their counterparties in these trades.

Such swaps were written against $45 trillion of underlying debt as of the first half of 2007, according to the International Swaps and Derivatives Association. In many instances, there are far more of these swaps written than there is actual debt that swaps are meant to insure.

The market is important for other reasons. The explosion in these derivatives occurred at a time when corporate defaults were near record lows. Moody’s Investors Service expects the junk-bond default rate to climb to a range of 7% to 7.5% in the next 12 months from just 1.5% now.

“We haven’t gone through a massive default cycle,” says Gregg Berman, co-head of the risk management unit at RiskMetrics Group. “I do not believe the market is remotely prepared for the fallout if that happens.”

Swaps also present potential insider-trading problems for regulators to work out. In 2006 and early 2007, during the leveraged buyout boom, credit-default swaps at times soared in value before details of big deals were announced. Just last week, swap values were moving before news broke that the buyout of Clear Channel Communications was in jeopardy.

One problem for securities regulators: Because these can be considered private contracts, and not securities, it’s not even clear if traditional securities laws apply to them.

Large commercial banks do need to file regular reports on their derivative exposures with the Office of the Comptroller of the Currency. The Depository Trust & Clearing Corporation also has set up an information warehouse that stores records of CDS trades. And the Federal Reserve Bank of New York has been pushing dealers and other firms to confirm and process trades more quickly. Last week, large dealers unveiled plans to centralize settlement of their credit-derivative trades by September.

But credit-default swaps have become too important for the wattle and daub approach regulators have given them in the past few years.

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March 31, 2008 by Tom Armstrong.

Notable from here:

Relativism allows everyone to be right, and puts our feelings ahead of everything else. We all know that it is not fun to find out that we are wrong about something, but a part of growing up is learning to cope with this negative feeling and learn from the experiences of failure. It would seem that many people today, however, would prefer to shield themselves and their children from ever being wrong or from feeling that hurt. This is true on the Little League diamond, where every player now makes the team, and in the school classrooms, where every assignment is given a modification to make sure every student can easily get by.

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March 31, 2008 by Tom Armstrong.

Notable from this article:

I’m not saying that I don’t like some politicians more than others. I like those who vote the way I want them to and I dislike the ones who don’t. But when you get right down to it, most politicians on either side of the aisle are pretty mediocre human beings. What is their great accomplishment, after all? These are people who have devoted their lives to convincing other people to hand over their hard-earned money so that they can get or keep a job that essentially consists of spending other people’s tax dollars. Often enough to keep the tabloid press occupied, these palookas are caught taking bribes, using drugs and getting involved in sex scandals. In other words, they often behave like the rock stars they aspire to be, even though they can’t sing, cavort around a stage or play a musical instrument.

…

I don’t happen to think it’s a coincidence that left-wingers are much more juvenile than conservatives when it comes to making idols of politicians. As psychiatrist Lyle H. Rossiter, Jr., points out in his new book, “The Liberal Mind: The Psychological Causes of Political Madness,” liberals are very much “like spoiled, angry children. They rebel against the normal responsibilities of adulthood and demand that a parental government meet their needs from the cradle to the grave.”

For over 35 years, Dr. Rossiter has diagnosed and treated more than 1,500 patients and examined nearly 3,000 civil and criminal cases as a board-certified forensic psychiatrist. Regarding the sort of liberalism being espoused by Obama, Clinton and their devout worshippers, he states: “A social scientist who understands human nature will not dismiss the vital roles of free choice, voluntary cooperation and moral integrity, as liberals do. A political leader who understands human nature will not ignore individual differences in talent, drive, personal appeal and work ethic, and then try to impose economic and social equality on the population, as liberals do. And a legislator who understands human nature will not create an environment of rules which over-regulates and over-taxes the nation’s citizens, corrupts their character and reduces them to wards of the state, as liberals do.”

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March 31, 2008 by Tom Armstrong.

 Below is  notable from here:

Something is holding back lower-income Americans from going to college, says Brink Lindsey, vice president for research at the Cato Institute.  It’s not that there aren’t major incentives for them to go.  In fact, the college wage premium — the difference between the average wages of college grads and those of high school grads has climbed to around 85 percent, up from less than 50 percent in 1980.

If more money isn’t the answer, what does have an impact?  In a word: culture. Everything we know about high performance in all fields of endeavor tells us that, while natural talent is a plus, there is no substitute for long hours of preparation and hard work, explains Lindsey.

Child psychologists Betty Hart and Todd Risley tested the effect of class on the differences in how parents interact with their young children.  They were able to document dramatic differences in the intensity and nature of the verbal stimulation the kids were getting:

• Professional parents directed an average of 487 “utterances” per hour toward their children, as compared to 301 for working class parents and only 176 for welfare parents.
• Among professional parents, the ratio of encouraging to discouraging utterances was six to one; for working-class parents, the ratio slipped to two to one; and welfare parents made two discouraging utterances for every encouraging one.
• By the time the children in the study were around three years old, the ones from professional families had average vocabularies of 1,116 words; the working-class ones averaged 749; the welfare kids, 525.

Once kids reach school age, the growing influence of peer groups reinforces the early patterns established at home.  College-educated professional parents make sure their kids are in college-bound peer groups, while working-class and underclass kids tend to gravitate toward others like them.  Consequently, children on either side of the class divide grow up with very different attitudes about the importance of school achievement — which leads to different expectations about future life plans and different self-conceptions in relation to larger society, says Lindsey.

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March 31, 2008 by Tom Armstrong.

Education and economic growth from Education Next.

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March 31, 2008 by Tom Armstrong.

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March 31, 2008 by Tom Armstrong.

The four-day Democratic National Convention in August is expected to pump $160 million directly into the regional economy.

The economic shot-in-the-arm, whatever the total actually ends up being, will be a welcome boost. But we’re beginning to question whether the short-term benefit is worth the long-term expenses.

Denver, and Colorado, could be left holding the bag for years to come.

Even before the Democrats awarded their national convention to Denver, Mayor John Hickenlooper had to promise a union-run hotel, the city’s first. He delivered.

Then, with the memory of picket lines set up by Boston police during the 2004 DNC convention hanging quietly over negotiations, Denver cops received at least a 14 percent salary increase for the next three years. The contract nearly tripled the percentage raise handed out in the previous three-year contract.

And last spring, after Gov. Bill Ritter wisely vetoed a bill making it easier to form labor unions in Colorado, the AFL-CIO threatened to ask national Democrats to find a new city for the convention if the state didn’t adopt a pro-labor measure.

Teamster president James Hoffa Jr. confronted Ritter, saying if he and Hickenlooper didn’t work out some key issues, the convention could be plagued with protests and picket lines.

“It could blow up,” Hoffa told Ritter.

Months later, right on cue, Ritter delivered his Friday afternoon executive order, granting state workers unnecessary collective bargaining rights that will drive up the cost of state government.

Unions have been thriving only in the public sector, and Ritter’s order ensured that they will continue to flourish there — at least until there’s a new governor to overturn the order.

And now, parking lot workers at Denver International Airport are the latest to hold the city hostage as they negotiate a new contract.

The Service Employees International Union’s chapter director for parking employees, Dennis DeMaio, said the union will strike during the DNC if it needs to. The union is concerned about which company may get the contract to manage parking at DIA.

The threat of a strike is enough to perk up most ears on the city council. After all, what would happen if 40 percent of the more than 6,000 delegates who are union members refused to land at DIA while their brethren were striking?

Then we learned that three city councilmen, two with strong union ties, met privately with representatives of the union and one of the companies vying for the parking contract. Not only was the meeting in violation of Colorado’s open meetings law, it raised questions about who those councilmen are working for: the union or Denverites?

Hickenlooper has promised that not a penny of taxpayer money would be spent on the convention. Yet it appears taxpayers could pay more indirectly for having the convention here.

Read it all here. (HT: Division of Labour)

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March 31, 2008 by Tom Armstrong.

More from Don Boudreaux and free trade.

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March 28, 2008 by Tom Armstrong.

Outtake from this article:

For the market economy to function well, it needs to be a profit system and a profit-and-loss system, with the losses being the penalty for bad decisions.

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March 28, 2008 by Tom Armstrong.

New York City residents are growing obese at a rate nearly three times that of other Americans, prompting some who cited a link between weight gain and smoking cessation to question whether the city’s crackdown on smoking may have had an unexpected result.

Read it all here. (HT: Club for Growth)

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March 27, 2008 by Tom Armstrong.

WASHINGTON - U.S. audio historians have discovered and played back a French inventor’s historic 1860 recording of a folk song — the oldest-known audio recording — made 17 years before Thomas Edison invented the phonograph.

“It’s magic,” audio historian David Giovannoni said on Thursday. “It’s like a ghost singing to you.”

Lasting 10 seconds, the recording is of a person singing “Au clair de la lune, Pierrot repondit” (”By the light of the moon, Pierrot replied”) — part of a French song, according to First Sounds, a group of audio historians, recording engineers, sound archivists and others dedicated to preserving humankind’s earliest sound recordings.

It was made on April 9, 1860, by Parisian inventor Edouard-Leon Scott de Martinville on a device called the phonautograph that scratched sound waves onto a sheet of paper blackened by the smoke of an oil lamp, Giovannoni said.

Read it all here.

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March 27, 2008 by Tom Armstrong.

From today’s WSJ: 

The claim that deregulation went too far is coming from many sides. We need more regulation, the argument goes, and even a single regulator to bring stability. Former SEC chairman, Arthur Levitt, Jr., made some of that case on this page. House Financial Services Chairman Barney Frank has prepared legislation, and others are rushing forward with their own plans.

Their diagnosis is wrong. Mistaken regulation contributed greatly to the current problems in financial markets. Take the 1970s Basel agreement between developed country governments, which followed bank failures in Germany and the U.S. The idea was to have equivalent risk standards in all the principal lending countries. The agreement required banks to increase their capital if they increased mortgage loans and other risky assets.

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March 26, 2008 by Tom Armstrong.

From the Tax Foundation.

Tax Freedom Day, the day on which Americans have earned enough money to pay all their federal, state and local taxes for the year, will fall on April 23 this year, according to the Tax Foundation’s annual calculation using the latest government data on income and taxes.

Tax Freedom Day is calculated by dividing the official government tally of all taxes collected in each year by the official government tally of all income earned in each year. Governments—federal, state and local—took 29.6% of income in 1970, 30.4% of income in 1980, 33.6% in 2000, and so on. This percentage is the nation’s total tax burden. We then use the historical trend and the most recent economic data to make a projection of what the tax burden will be in the current year and we convert that burden into a date—a percentage of the year—on which Americans will have earned enough income to pay their total tax bill for the year.

This year’s Tax Freedom Day falls three days earlier than in 2007. Fiscal stimulus rebates and a projection of slow growth in 2008 are the principal reasons for the earlier celebration. However, if the large projected deficit for 2008 were counted as a tax in the current year, Tax Freedom Day would fall on May 3.

 In 2008, Americans will work 74 days to afford their federal taxes and 39 more days to pay state and local taxes. Meanwhile, buying food requires 35 days of work, clothing 13 days, and housing 60 days. Other major categories are health and medical care (50 days), transportation (29 days), and recreation (21 days).

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March 26, 2008 by Tom Armstrong.

Love this site–it’s been a great time saver for me. They have Javascripts, FavIcon generator, htaccess password generator, htaccess banning generator, and more. No, I not being paid to advertise them (I do not earn money from this blog). The site has been a time saver for me, and students in my beginning Web page design class benefit from it.

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March 26, 2008 by Tom Armstrong.

Zimbabwe’s new 10 million dollar bill is red. One side has the official stamps of the Reserve Bank of Zimbabwe and some meaningless serial numbers. The other is a pastiche of a fish jumping out of a lake and a giant dam in the background. The bill, released for the first time last month, is actually not a proper currency note at all but rather a “bearer check.” Zimbabwe stopped printing real money long ago, when its inflation rate was still at a manageable level. Today these bearer checks are the only currency remaining. Last week in Zimbabwe 10 million dollars could buy exactly two rolls of toilet paper. By now it probably won’t get quite that much.

Read it all here.

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March 26, 2008 by Tom Armstrong.

Click on image to augment.

Reverse Convertibles

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March 25, 2008 by Tom Armstrong.

 From City Journal:

The economic impact of this breakdown has been profound. Researchers estimate that the entire rise in poverty in America since the late 1970s can be attributed to “changes in family formation,” a euphemism for the decline of families headed by two married parents. The latest Census data illustrate the problem. Only one out of ten American kids living in two-married-parent families is in poverty—and about one-third of these families are recent immigrants whose poverty is temporary. By contrast, 37 percent of children living with single mothers are impoverished.

Marriage seems to be the defining characteristic of economically successful families. With out-of-wedlock birth rates in America soaring, so that many traditional families aren’t so much breaking up as never getting started, the percentage of children living with cohabiting parents is growing. Yet these kids are three times more likely to be in poverty than the children of married parents. The data actually demonstrate that poverty rates for families headed by two unmarried parents more closely resemble the poverty rates of single-parent families than those of two-married-parent ones.

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March 24, 2008 by Tom Armstrong.

Some claim Wal-Mart deserves Nobel Peace Prize.

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