Category Archives: Economy

Obama’s Advice: Don’t Do What I Do

President Obama recently returned from his overseas trip.  A trip in which he paid a visit to Ghana to deliver a speech to the Ghanian Parliment.  Now, don’t get me wrong, I think that it’s perfectly acceptable, recommended in fact, that Presidents travel the world and deliver speeches like this.  Further, I actually enjoyed the message that he gave early:

We must start from the simple premise that Africa’s future is up to Africans.

I love it.  In fact, it’s what is at my Libertarian heart.  Personal Liberty-Personal Responsibility.

Most of the speech was as you would expect, but I did have to laugh at Obama’s advice on creating wealth:

No business wants to invest in a place where the government skims 20 percent off the top … or the head of the port authority is corrupt. No person wants to live in a society where the rule of law gives way to the rule of brutality and bribery.

So, lemme get this straight.  Obama’s advice to Ghana is for the government NOT to take a cool 20% off the top.  But his advice to America is to increase the skim we are already taking off the top?

Nice.

How to Get a Ton of People to Cross a Freeway

Incent them.

See, for a long time the whole housing crisis and economy things has been blamed on greed.  You know, greed of the bankers and the banks.  Greed of the mortgage lenders and the lending houses.  Greed on the folks thta bought and sold mortgage backed securities.  All of ’em.  all Street is just infested with greed.  [Note the absence of the greed of the home owner.  Cause’ you know, guys who earn 17k as a fry cook at the DQ aren’t being greedy when they try and buy a 400,000 dollar house.]

Never understood that.  I have always felt it’s supposed to be that way.  You know, like when I’m offered two similar jobs, I take the one that pays the most.  When trying to buy a car, I try to find the best price and then again, when given a chose between gas at $2.55 or gas at $2.85, I always pick the $2.55 price.  Always.  Never occurs to me who is more deserving.  IN fact, the only person I think of is me.  And how I benefit.  We’re all greedy.  And the whole thing depends on that.  It’s why we invent all the things that we invent.  Because we want to make money.  And because of that, we have innovations and quality of life increases and all kinds of progressive stuff.

Anyway, so, I have tried to explain it this way.  Suppose I have a hundred bucks that I wanna lend in order to make some money.  And two guys come to me wanting to borrow that money and then repay me $103.  Who am I going to lend it to?  Well, I am going to try to identify which one is better able and most likely to repay me.  Then I’m gonna lend the money to him.  Every time.  Every single time.  Always.  Not ever the other guy.  Ever.

Except.

Except if I can change the rules a little and shade gain along with risk.  That it, if I am able to enter into agreement on different terms, I may be willing to lend to the other guy.  What, you ask, would cause me to lend to the less qualified borrower?  Why, by increasing the return.  I may be willing to lend to the guy if he agrees to pay me back $115 dollars.  And so we negotiate and come to terms.  Note, however, that neither of us are going to agree to terms unless we think that it is in our best interest to do so.

Now, in this small example, can you think of a thing that would cause me to ignore the ability of the borrower to pay me back?  In other words, what would cause me to just loan that hundo out to EVERYBODY that knocked on my door?  Nothing.  I would never do that.  Ever.

Except.

Except if Ii could turn around and sell that loan to another company.  Now to compress the story…what would cause THAT company to buy these loans from lenders without knowledge of risk?  The same thing.  The ability to sell ’em.  And you know who was buyin?  Fannie and Freddie.  And you know why THEY were buyin’?  Cause they had NO downside.  If they as a company fail, the government would bail ’em out.  And they did and Uncle Sam did too.

So, I have always said that if you lined up 10,000 people on one side of I-540 and I was on the other, I could increase the number of people who tried to cross by increasing the financial incentive to do so.  And, in the end, whose fault would it be if someone was hit and killed?  Tricky huh?

But today, today I am vindicated.

What is Good for Me is Not Good for You

Stunning.  Truly stunning.

As the State is considering adding new taxes to the mix, they are at the same time telling local municipalities that they, in fact, can not tax those same businesses.

CHAPEL HILL — Local governments are watching anxiously as state lawmakers consider eliminating one of their revenue streams.

It’s called the privilege license tax, a fee that businesses pay for the privilege of operating within a local government’s jurisdiction.

Some lawmakers say the state needs to replace an unfair hodge-podge of fees that differ by locale and businesses without clear reason.

I wonder why?

Actually, I don’t.  See.  It’s much MUCH easier to be smart with someone else’s money than it is to be with your own.  Which is why governments, ALL of them, are not to be trusted with MY money.  This has nothing to do with conservative vs. liberal [although I do posit that conservatives are more for small government than libs are].  It has to do with the fact that the best people able to make decisions about their money are those people that EARNED it.  But hey, we all know that politicians are better able to spend our money than we are!

How to Get More of a Thing

I have posted a in the last week about getting less of a thing here and here.  I posit that when something becomes more expensive you get less of it.  As that same thing becomes less expensive, you get more of it.  For example, when you tax jobs, you get less jobs.  When you reduce the price of beer, you sell more beer.

Real life example is here.

MAIDE — Dirt could start moving as soon as August on a new $1 billion facility Apple is planning to build in Maiden, officials said Monday.

Catawba County commissioners and the Maiden Town Council approved incentives at a Monday evening meeting for the project, which is expected to create roughly 50 jobs 60 miles northwest of Charlotte.

The local incentives approved Monday are on top of changes to North Carolina law intended to attract the technology company. In June, Gov. Bev Perdue announced the expansion just hours after signing legislation that will cut the California-based computer company’s tax bill in this state by about $46 million over a decade. Apple must agree to invest $1 billion over nine years in land, property and equipment to qualify for the benefit.

See how easy this is?  When you reduce thhe cost of doing business, you do more business.  Funny that.  Truth and Facts!

Strange Numbers

This past Thursday, workers at a Smithfield Foods went to work covered by a Union contract.  And from all accounts, they are very very happy to finally be so covered.   For example, the article mentions as benefits:

  • Guaranteed sick leave
  • Time-and-a-half holiday pay
  • $1.50 an hour raise over the next four years

“We really did accomplish something with this union,” said Mattie Fulcher.  “We might not have gotten the raise that we wanted, but that will come in time. This is our first contract, and it is a start.”

Now, it’s hard to gauge “success” of this contract for the members.  Among the most glaring omissions of the article are the pre-contract benefits.  For example, what have the pay increases for the average worker been for the past 4 years?  Or, what was the pay multiplier for holidays and overtime before the Union came in to “save the day”?  We do get an idea of what pre-contract life might have been in respect to sick leave:

Fulcher said that on Thursday she got a 40-cent-per-hour raise…and she began earning sick time for the first time since going to work for Smithfield. The sick time is unpaid, but in the past workers earned disciplinary points that could lead to firing if they stayed home sick.

Okay, so lemme get this straight.  The new Union contract says that Ms Fulcher is able to begin to accumulate sick time.  Sick time that is unpaid.  And this is different than in the past when the worker was afforded unpaid sick time but could, if abused, be fired for taking too much sick time?  Now, the article doesn’t mention this specifically, it does point out that employees were given “discipline points”; whatever that means.  Look, I work in corporate America and my sick leave policy is pretty straight forward and generous.  If you are sick, stay home.  As often as you are sick.  And guess what?  few of us ever really call in sick.  But when we do, our bosses mark it down and track us.  Cause, ya know, far be it from an employee to take every other Friday off and claim to be sick.  Sheesh.

Next on the hit list, guaranteed hours:

The contract will also guarantee workers at least 30 hours of work each week…

Awesome.  Really awesome for peope who wanna work more than 29 hours a week.  Really REALLY bad for folks who don’t.  Cause guess what?  Those people get fired.  No company in their right mind is going to pay someone 30 hours of pay for 15 hours of work.  Nice.

And the last piece of good news:

Union members will begin paying dues of about $7 a week…

So, Ms Fulcher gets a $0.40 per hour raise AND gets to pay $7 bucks a week.  Let’s say, just for fun, that she works 40 hours a week.  40 hours at $0.40 is $16.  Assume a 15% tax burden and that 16 bucks goes to $13.60.  Of which $7 goes to the Union.  In the end, she gets $6.60 a week, or about $26.40 a month.  The Union’s take?  7 bucks.  7 bucks or $28 a month.  Guess who makes out better here?  The worker or the Union?  In this specific case, even considering that Ms. Fulcher kept her job, the Union made more money than she did.  But let’s not forget the folks that lost their job as a result of this.  In the end, they have lost the most.

Fruits of Our Labor

Six weeks ago Dave Ribar wrote about the affects of the new consumer protection measures.  Congress pass and Obama signed a new law that would restrict banks ability to raise rates and fees.  It seems that certain elected officials are shocked, just SHOCKED at the news that banks are responding by raising rates now:

Yesterday, Sen. Charles E. Schumer (D-N.Y.) once again requested that the Federal Reserve invoke its emergency powers to place a limit on interest rate hikes.

“This is what many of us feared about a law that didn’t take effect right away,” Schumer said. “It was never going to take this long for the credit card companies to get ready for the new reforms. Instead, issuers are using the delay in the effective date to wring more dollars out of their customers. It is against the spirit of the law, and it is just plain wrong.”

And:

Rep. Carolyn B. Maloney (D-N.Y.) said the recent rate and fee hikes were “unfair and deceptive and must be stopped.”

“Capricious actions like these are why Congress overwhelmingly passed, and President Obama signed, my credit card reform bill: to level the playing field on behalf of consumers,” she said.

However, I am not so sure why this should catch these folks, or any of us paying attention, flat footed.  It’s not as if the companies didn’t warn us:

Bank executives had warned that the new law would force them to increase rates and fees because it would keep them from properly managing borrowers’ risk.

The reason for this?

The argument is that if banks can’t raise rates on riskier customers, they will have to raise rates on all.

Silly I know.  When banks lend money they wanna be able to asses risk and base rates accordingly.  When this ability is taken away from them, how would you expect them to react?

Look, it seems reasonable that different portfolios of risk would return different rates of profitability.  Sure, there IS profit for the banks by extending credit to borrowers who payoff their balance every month.  Equally likely is the fact that these borrowers will likely never default and declare bankruptcy; low risk, low gain.  On the other hand, by extending credit to high risk borrowers increases the chance that the banks simply lose their money.  In fact, we have been seeing this:

Banks have been hit with a record number of charge-offs, or debts they give up on because the borrowers have no way of paying them back. In June, credit card losses hit a record 10.44 percent, according to Fitch Ratings.

Once again, it seems that Liberal policies meant to protect the people have only hurt the people.  But this isn’t new.  An interesting fact is that it’s currently possible for individual Liberals to lend THEIR OWN MONEY to risky borrowers.  I wonder how many do?  And if they do, would they still scream for regulations on rate and limits and such.

Finally, I love the personal story that ends the Washington Post article.  You know, the token story of one single person getting taken advantage of by these evil evil companies.

Charles Chichester Jr., a 65-year-old retired U.S. Postal Service employee who lives in Fairfax County, was trying to pay off his credit card soon but now fears he will be unable to do so at all. He received a letter from Chase, he said, notifying him that his $373 minimum monthly payment would increase to more than $900. When he called to say he could not afford that, a Chase representative told him to consult with a credit counselor, he said. That’s exactly what he plans to do.

“The 900-something-dollar minimum monthly payment is just something I cannot do,” he said.

Of course, NOT on the list of things that Charles cannot do?

  1. Rack up more than $18,000 worth of debt on a single credit card while pulling a retired U.S. Postal Service employee’s income.

The Economist Weighs In

Look, I’m just a guy with a college degree.  I’m not an economist but I am handy with numbers.  And, mostly, I am capable of free thinking.  Which is why I find this article from The Economist laughable.

We start off well, in fact I had high hopes after just the first sentence.

DIAGNOSING what is wrong with America’s health-care system is the easy part.

I happen to agree with the author’s take.  I DO think that it’s easy to diagnose what’s wrong with America’s health-care system.  Which is why I was disappointed when The Economist got it wrong.  Not even 30 seconds later we are stunned to learn that nearly 50 million Americans don’t have coverage.  This is gross and simply unacceptable for a major news source to make a statement this absurd.  50 million.  Americans.  Uninsured.  Really?  Let’s take a look.

  • The real number being used is 47 million
  • Of those 47 million it’s been reported that 9 million are enrolled in Medicaid and failed to report it
  • 8 million are kids.  These kids are now covered by SCHIP

We’re down to 30 million now.  Fully 40% off the 50 million number quoted by the Economist.  But there’s more–way more.

  • 1.7 million are parents making more than 300% of FPL [federal poverty level]
  • 5.9 million are non-parent adults making more than 300% of FPL
  • 3.1 million are adult parents eligible for assistance today
  • 2 million are non-parent adults who are eligible for assistance today

Now we’re at 17.3 million.  17.3 million people who are not covered.  Now for the best part.  Wait for it—wait…waaiit……9 million aren’t even US citizens.  How AWESOME is that?!?

So, after getting the number down to 17.3 million, we’re able to shave off another cool 9 mill  bringing us to the grand total of 6.3 million.  And we get 50 million from The Economist.  Gross.

Next the author compares the benefits of American health services with OECD and their averages.  As far as I can tell, the comparison used three metrics:

  1. Infant mortality rate
  2. Life Expectancy
  3. Survival Rates for Heart Attacks

Again, the depth, or lack thereof, in reporting is surprising.  It has been documented that the infant mortality rate in the US is much higher than other countries because of the methods used in reporting.  According to WHO the definition of birth is:

Live birth refers to the complete expulsion or extraction from its mother of a product of conception, irrespective of the duration of the pregnancy, which, after such separation, breathes or shows any other evidence of life – e.g. beating of the heart, pulsation of the umbilical cord or definite movement of voluntary muscles – whether or not the umbilical cord has been cut or the placenta is attached. Each product of such a birth is considered live born.

However, in many cases, countries fail to report all births due to their own definitions; for example:

  • In Switzerland and other parts of Europe, a baby born who is less than 30 centimeters long is not counted as a live birth. Therefore, unlike in the U.S., such high-risk infants cannot affect Swiss infant mortality rates.
  • In Belgium and France — in fact, in most European Union countries — any baby born before 26 weeks gestation is not considered alive and therefore does not “count” against reported infant mortality rates.
  • Some of the countries reporting infant mortality rates lower than the U.S. classify babies as “stillborn” if they survive less than 24 hours whether or not such babies breathe, move, or have a beating heart at birth.
  • In Canada, Germany, and Austria, a premature baby weighing <500g is not considered a living child.

When these and other reporting anomalies are factored in, Norway, which has the lowest infant mortality rate in the world, ranks no better than the United States.  Further, since 2000, 42 of the world’s 52 surviving babies weighing less than 400g (0.9 lbs.) were born in the United States.  Hardly an indicator that the United States if failing in the area of infant health.

The CIA has the United States ranked 50th in life expectancy.  And, as noted above, the article uses this metric in it’s assessment of the United State’s system.  However, it has been reported that Life Expectancy is not a valid measure of a country’s health care system:

…robust statistical analysis confirms that health care spending is not related to life expectancy.  Studies of multiple countries using regression analysis found no significant relationship between life expectancy and the number of physicians and hospital beds per 100,000 population or health care expenditures as a percentage of GDP.  Rather, life expectancy was associated with factors such as sanitation, clean water, income, and literacy rate.8 A recent study examined cross-national data from 1980 to 1998.  Although the regression model used initially found an association between health care expenditure and life expectancy, that association was no longer significant when gross domestic product (GDP) per capita was added to the model. Indeed, GDP per capita is one of the more consistent predictors of life expectancy.

Yet the United States has the highest GDP per capita in the world, so why does it have a life expectancy lower than most of the industrialized world?  The primary reason is that the U.S. is ethnically a far more diverse nation than most other industrialized nations.  Factors associated with different ethnic backgrounds – culture, diet, etc. – can have a substantial impact on life expectancy.  Comparisons of distinct ethnic populations in the U.S. with their country of origin find similar rates of life expectancy.  For example, Japanese-Americans have an average life expectancy similar to that of Japanese.

And this is just the first paragraph.  Keeping up with the Liberal press is simply exhausting.


Not the End, but The Beginning of Worse

I was reading the News and Observer this morning and saw that Smithfield Packing finally succumbed to the kudzu that is Unions.

Smithfield Packing, union agree on NC contract

TAR HEEL, N.C. — Smithfield Packing Co. and a union that worked for years to organize a huge North Carolina slaughterhouse say they have agreed on their first contract for the plant.

I have not yet taken the time to check and see if Smithfield Packing is a publicly traded company or not, but I am sure that the value of this company just took a 10% hit.  Not only that, but employment in the company went down today as well.

I repeat, there is nothing, not ONE thing that is good about unionization within a company.  Unless, of course, you are a Union official.

Unions effectively tax …  [company] investments by negotiating higher wages for their members, thus lowering profits. Unionized companies respond to this union tax by reducing investment. Less investment makes unionized companies less competitive.

And a less competetive company is a company that is not as valuable as a more competitive compant.  If you need further proof that Unionization is a bad thing, take a look at the States with the highest unemployment rates and see how many of them are Union states and how many are right to work.

Heck, I’ll save ya the time:

1 Nebraska Right to Work
2 North Dakota Right to Work
3 South Dakota Right to Work
4 Wyoming Right to Work
5 Utah Right to Work
6 Iowa Right to Work
7 Montana Forced Union
8 Oklahoma Right to Work
9 New Hampshire Forced Union
10 New Mexico Forced Union
41 Kentucky Forced Union
42 DC Forced Union
43 Tennessee Right to Work
44 Ohio Forced Union
45 North Carolina Right to Work
46 Nevada Right to Work
47 California Forced Union
48 South Carolina Right to Work
49 Oregon Forced Union
50 Michigan Forced Union

Interesting list, huh?

Universal Health Care: French Edition

So, the President travelled to the Mid-East and then Europe earlier this month.  While in France, the President delivered his Weekly Radio Address.  In this address, he spoke directly about our health care situation and how we need to change it.  I think that we should take the opportunity to explore the French version of this vision.

With just a little bit of Googling I found numerous articles from sources such as:

Reuters

The Organisation for Economic Cooperation and Development

Business Week

After just an easy overview of these articles, it is apparent that the French are kicking our asses in the whole health care thing.  In the Business Week article, France has itself coming in 1st with the US rounding out at 37th.  In Reuters, Uncle Sam is running 19th in a 19 man race while France, again, places 1st.  All in all, no matter how you look at it, America is lagging.  Perhaps Mr. Oabama had it right to initiate his Health care kickoff in the country that has it going on.

But, before we acknowledge that we have indeed failed, let’s take a look at what it is that has France ranked so high in all of our studies.  For example, in the Reuters study, it was a ranking of 19 nations in preventable deaths due to treatable conditions.  And in the Business Week article, it quotes the ranking done by WHO, The World Health Organization, that has France coming 1st and the United States a dismal 37th.  In that ranking, the WHO lists infant mortality rates, life span, available beds and doctors per citizen as well as deaths from respiratory disease.  And all of this, of course, as the United States pays more for it’s health care than any other nation.

On the face of things, it would seem that indeed, the United States is in dire need of reform and, in fact, may finally have to implement some form of national health care.  After all, America remains the only industrialized nation not to have such a system.

In the following days, I will look deeper into the claims made by various agencies.  Look deeper into the numbers and identify if yes, the United States is in as bad as shape as it would appear.

The Damage Done by Unions

I have long felt that Unions in America are not only hurting the companies, but they hurt the workers too.  In short, Unions are damaging to the economy as a whole.The current exhibit in this long list of such exhibits?  The bond market.

Reuters reported last week that the bond market has turned.  What once was a very well understood relation between companies, unions and bond holders has suddenly been turned upside down.  Or, if not upside down, it’s at least been turned to the point that no one knows which way is up.  See, the point of buying a bond is that the bond is considered “secure”.  This term, in legalize, is meant to convey certain rights in the event of bankruptcy.  As it is now being played out, this right is being denied, or attempted to be denied to the bond holders of the auto makers; Chrysler and GM.

See, Mr. Obama is trying to put the bond holders behind other, more politically advantageous groups, in this case, the Unions.

…the Obama administration is offering most of the recovery value of those companies to “a favored political class, in this case the United Auto Workers…

What does this mean?  It means that people buying bonds are no longer going to do so with the secure knowledge that they are going to “get theirs” in the event the company has to declare.  And, you may ask, what does THAT mean?  It means, for companies with bargained for employees, that they are going to have a harder time selling their bonds and raising the money they need to conduct business.  And that, my friends, is BAD for business.

The whole concept is a strange one.  Politically attractive, sure, but strange.  See, on one hand, almost ALL of America is upset right now with “investors”, “speculators” and other groups of people that might have been making money when the banking crisis hit.  Most people feel that somehow it wasn’t the individual home buyers or the government that caused this problem, but that it was the folks trying to make money by floating that money.  So, Obama has a huge lever in the court of public opinion.

Then, of course, those bondholders are not united or organized.  While they may trend to act as a group, there is not formal organization and certainly they don’t have “members”.  So, by helpin the unions out, you have helkped out a very organized outfit complete with mind numbing numbers of people who just wait to be told what to do.

The other area that this is so concerning is that we seem to have people who actually believe that money just flows.  From somewhere.  Just waiting to be picked up.  And that if I don’t have enough of it, well then, by gawd, someone must have my share of it.  So I am going to go take it back.  Sigh.  I get so tired of that mentality, so so tired.

However, in the end, I really think that it is this movement toward the support of the Union that is going to be the largest threat to NC.  I just wonder if anyone else sees it.