A slick play of law and order

Fred Thompson is really going to run for president. Good for him. Jim Galloway over at the Atlanta Journal-Constitution's Political Insider blog puts together some interesting pieces, largely drawing from a comment on Daily Kos, noting that by announcing his candidacy publicly on September 6th, he doesn't have to "officially" declare with the FEC until September 21st, meaning he doesn't have to form his campaign committee until after the October 1 filing deadline for fundraising.

[From Daily Kos] By delaying the filing of his organizational papers until books have closed on the third quarter of 2007, Thompson arguably will not have to file any disclosure reports with the FEC until January 31, 2008, after the Republican primaries/caucuses in WY, IA, NH, NV, FL …..

[From Political Insider] That poor financial showing that Thompson made this summer — the one where his goal was $5 million and he showed $3 million? Doesn’t look like it’ll happen again.

Clever clever.

My own assessment of the Fred campaign is that he hurt himself by not jumping in when his popularity was really at its peak about a month ago. As Galloway describes it:

His candidacy, or non-candidacy, had been taking on the feeling of a bad anxiety dream — the one where you’re trying to punch out an emergency phone number, but you keep hitting the wrong buttons.

An apt description. Had he announced right before - or even after - the Iowa straw poll, he would have stolen the thunder from Romney and Huckabee, and probably pushed some of the lower-tier folks out of the race, who had to be holding out hope that all the "will he, won't he" would lean to the latter.

Despite that assessment, taking his questionable fundraising off the table is a slick move of taking full advantage of the law, and I give credit to that. We'll see how it works out.

Commuter rail

When it comes to public rail transportation, I'm a bit like an agnostic who attends church every Sunday. In DC, having rail to get me around - particularly as I both live and work near rail lines - is exceptionally convenient and costs about the same for me as a tank of gas a month, all with the added benefit of not having to worry about parking. In New York, of course, rail is ubiquitous. In Boston, the T is cheap and relatively convenient.

But then there's Atlanta. And Miami. And now Charlotte's trying. And there are plenty of other metro rail systems that I have never been on but I understand are just as miserable, inconvenient, expensive, or poorly run. So my sense has been that for high-density places, particularly on the East Coast that developed before cars made distance negligible, rail is super. For everywhere else it probably isn't the way to go and generally wastes taxpayer money.

A new paper by a lead economist from the left-leaning Brookings Institute challenges the notion that any of the systems are truly adding much to the public good. As transportation expert Robert Poole explains, the paper looks at a number of factors and finds that the burden to the taxpayers for funding rail simply out weights the intrinsic benefits of having it:

Winston and Maheshri construct an elaborate econometric model to estimate the “consumer surplus” of 25 rail transit systems. This is economists’ term for the benefits to users, over and above the fares they pay. The large systems (New York, Washington, D.C., San Francisco’s BART, etc.) all produce significant consumer surpluses. But most of the smaller ones do not.

Next, the authors compare the consumer surplus of each system with its net taxpayer cost. On this measure, every single one of the 25 systems has negative net benefits, i.e., the annual value of the benefits to users is much less than the annual cost to taxpayers. Surprisingly, this is true even for the massive New York City rail transit system, which by itself accounts for two-thirds of the nation's rail transit passenger miles.

But what about larger benefits to the metro area? Rail systems are advocated not just to benefit their riders, but because they are expected to reduce traffic congestion, reduce air pollution, save energy, etc. So the final step in Winston and Maheshri’s analysis was to estimate the value of these “externality” benefits. They first conclude that the only one of these purported benefits large enough to make any difference is congestion relief. Adding the congestion savings to road users to the consumer surplus gives the total benefits of rail transit.

When this total is compared with the net taxpayer costs, only San Francisco’s BART produces net social benefits. Each year the system improves social welfare by an estimated $36 million. All 23 [sic] other U.S. rail transit systems are net losers. This means that each of those urban areas is made poorer by many millions of dollars each year.

Here's one of the most interesting things from Poole's commentary:

And there is also the claim that rail systems increase the mobility of low-income residents. But the authors point out that the median annual income of rail users in 2001 exceeded $50,000, which was greater than the median income of the general population in that year. So rail’s primary market is not the poor (unlike bus transit).

Politicians love rail transit because it's so tangible and looks so clean and polished. Plus they get to break ground on it - a photo op holding a shovel is much more exciting than sticking a Bus Stop in the ground. Yet bussing seems to be a far more economical and flexible choice. Perhaps the politicians could just spend some of that rail money into make bussing sexier - or better yet, put a piece of that money to infrastructure, privatize public transit, and give the rest back to the taxpayers to grow the economy - which would increase demand for public transit.

Ringing endorsement

Fidel Castro called a possible Clinton-Obama ticket "invincible," reports CNN's political ticker blog. He was pouty about their lack of support for a continued undemocratic Cuba, but nobody's perfect, even St. Albert. This is an important endorsement for the possible future Democratic ticket - the first from a leader of a Red state.

For more on Fidel's leadership, you can review his strong application of the rule of law.

A $20 Million Idea

We have a neighbor who owns more than her fair share of Crocs - to the point that on the Fourth of July she was wearing one blue one and one red one. My wife pondered, as we sat on the porch sipping wine, whether she had any Jibbitz, which apparently are little plastic charms that can go on your Crocs. All the kids have them, she said.

What a brilliant idea, I said. How come we're not thinking of an idea like that? As Don Boudreaux points out:

Note that this invention isn't high-tech -- it's about as simple as simple can be. Yet it is indeed something that enough consumers choose to buy at prices that make the product profitable to produce.

And then I heard that he sold the company for $20 million. Now I really wish I had thought of it - and I've spent lots of time since then trying to come up with my own little big idea.

We all have $20 million ideas in us. Step one is to identify them, and step two - and this is the hard part - we have to make big risks to capitalize on them. Start with step one...

Quote of the day

The Democrats believe in government when they have a choice. Republicans believe in people when we have a choice...The Republican Party is the part of the people. The Democratic Party is the party of the government.

That's from Rudy Giuliani, in a speech he gave this week. He may be the most morally questionable candidate and I know there are some questions regarding his fiscal disciple towards the end of his tenure as mayor, but none of the other candidates are anywhere close to articulating the message above as well as he is doing.

Republicans can't win the White House again by talking about unsexy issues like tax cuts or by being against all the government-expanding ideas the Democrats throw out. Republicans have to offer a bold vision of a better tomorrow and inspire Real People to believe that a better future isn't given by government, it's made by the people, the communities, the businesses, and the families of this nation.

Hopefully they track bird flu this well

I came across an interesting article on Wall Street Journal's website about the cost of weddings, which argues the real cost of weddings is much lower than the reported $28,000 cost reported in a recent survey (which was financed by the crazy wedding industry). There was a most curious source of statistics in the article, however:

Roughly 2.2 million weddings took place last year, according to the Centers for Disease Control and Prevention.

So somehow keeping tabs on marriage numbers falls within the CDC's mission of "to promote health and quality of life by preventing and controlling disease, injury, and disability."

Interesting. Maybe my single friends that think one must be sick to get married are right!


(NB: The author notes for his own health and well-being that he disagrees with this last statement)

Fair deal?

In principle, I really like the Fair Tax, not least because it theoretically eliminates the IRS, or at least significantly reduces its size and scope. The Fair Tax also eliminates many of the tax perks that reward government-approved behavior or government-approved friends. Such simplification of the tax process would be real nice and probably a net-positive for liberty.

However, the more I hear about the Fair Tax, the more questions come to my mind. A recent commentary ($) by Reagan/Bush deputy assistant secretary of Treasury Bruce Bartlett in the Wall Street Journal calls several facets of the Fair Tax into question, particularly the tax rate. (for an ungated version of most of the article, go to the Economist's View blog)

While the Fair Tax bill, authored and promoted by Georgia Representative John Linder (R), would add a sales tax of 23% to all items sold, you may have heard opponents argue that the tax is really an effective rate of 30%. Not being an economics major, I've never really understood this discrepancy, but Bartlett gives the clearest explanation I've ever seen:

In reality, the FairTax rate is not 23%. Messrs. Linder and Chambliss get this figure by calculating the tax as if it were already incorporated into the price of goods and services. (This is known as the tax-inclusive rate.) Calculating it the conventional way that every other sales tax is calculated, with the tax on top of the price, yields a rate of 30%. (This is called the tax-exclusive rate.)

The distinction is confusing, but think of it this way. If a product costs $1 at retail, the FairTax adds 30%, for a total of $1.30. Since the 30-cent tax is 23% of $1.30, FairTax supporters say the rate is 23% rather than 30%.

Hum....

Other criticisms are also raised in the commentary, such as the quirky facet of the bill that reimburses households below the poverty line for a piece of the tax to make it less regressive. Read the article for all valuable points. For some rebuttal, check out the comments at the Economist's View's post on the article.

More on the Fair Tax: http://www.fairtax.org/site/PageServer
More on the Flat Tax: http://www.ncpa.org/pi/taxes/tax7.html

Unexpected Opportunities

Truett Cathy has some useful advice to budding entrepreneurs - or to anyone, really: Work hard, never give up, be true to your values, and take advantage of unexpected opportunities. These virtues have taken him from near-penniless restaurateur to the billionaire owner of Chick-fil-A that he is today. His most recent autobiography, Eat More Chickin, Inspire More People: Doing Business the Chick-fil-A Way tells his incredible life story. He credits much of his success with taking advantage opportunities that suddenly appear.

The history of Chick-fil-A, in fact, is a series of unexpected opportunities. When we responded to them, we often found ourselves richly blessed.

Sometimes these unexpected opportunities are happy blessings that grow out of your our own doing, such as how Kids Meals "offered the opportunity to influence children...with a positive message." Sometimes its seeing a trend and choosing to capitalize on it rather than keep doing what you're doing, such as the way Cathy took advantage of the mall boom in the '70s and '80s to grow his restaurant chain. And sometimes, opportunity knocks in the midst of adversity:

The Chick-fil-A Chicken Sandwich itself was born in the wake of an unexpected opportunity. When one of my first two restaurants burned to the ground, I found myself with time on my hands and the availability to develop a new recipe.

Truett Cathy is a natural born marketer and entrepreneur, and the book features plenty of ideas on continually improving the value and service we offer to customers, no matter what industry we're in. He is doubly inspirational through his genuine commitment to core values. His very interesting story challenged me find ways to work harder but also to look at my life and double check my priorities. It will do the same for you.

One warning, though - it will make you hungry for a juicy Chick-fil-A sandwich with every page!

A victory for African farmers

Humanitarian aid group CARE has opted not to accept $45 million in government aid. Repeating that, a non-profit group has turned down $45,000,000 from the U.S. government to supply food from Africa. The reason? The "heavily subsidized American farm products" drive down the cost of African-produced crops, which negatively affects African farmers.

Under the current system, the money raised through selling the American crops is redistributed in Africa into anti-poverty programs. The Government Accountability Office has already declared that this program is inherently inefficient, but little has been done to stop the program because of all the special interests involved - farmers, shipping companies who move the food to Africa, and particularly the non-profits whose existence is financed by the plan (yes, that's right, a "special interest group" is more than just Big Oil and lobbyists).

Other groups who work in tandem with CARE are not pleased with CARE's decision, but Progressively Right applauds the effort. Even Jimmy Carter, who I rarely find myself on common ground with, agrees:

Former President Jimmy Carter, whose Atlanta-based Carter Center uses private money to help African farmers be more productive, said in an interview that it was a flawed system that had survived partly because the charities that received money from it defended it.

But doesn't the competition of the American food with the African food promote innovation? Isn't that what a market economy wants? Normally, yes. However, this program sells subsidized food at below market value. African farmers can't make an honest living because they are forced into dishonest competition.

This case proves once again that just because government has the best of intentions does not mean it will get the best of results. Congratulations to CARE for standing up to this program and, really, to its own mission. I hope this will force a more robust of both foreign aid and of our own domestic farm subsidies.

Hope continues

More news of progress being made in Iraq from an unlikely source, this time from German uber-magazine, Der Spiegel. The lengthy and well-written article gives a balanced look at the situation in Iraq at the moment, which essentially is not great but is on the mend and certainly full of hope.

Ramadi is an irritating contradiction of almost everything the world thinks it knows about Iraq -- it is proof that the US military is more successful than the world wants to believe. Ramadi demonstrates that large parts of Iraq -- not just Anbar Province, but also many other rural areas along the Tigris and Euphrates Rivers -- are essentially pacified today. This is news the world doesn't hear: Ramadi, long a hotbed of unrest, a city that once formed the southwestern tip of the notorious "Sunni Triangle," is now telling a different story, a story of Americans who came here as liberators, became hated occupiers and are now the protectors of Iraqi reconstruction.

What I would love would be for President Bush to go before Congress when he brings General Petraeus to give an assessment of the current situation in September. Let Bush admit that he made serious mistakes in the early conduct of the war (or at least after the first two months), reach out his hand a bit and thank the Congress for its continued vigilance in seeking what some might call a "strong finish" to this war, and say that now that this strategy is working let's all move forward together and work towards a free Iraq.

The opposite of genuine progress

Don Boudreaux, chair of the economics department at George Mason University in Virginia (and co-author of Cafe Hayek), has a recent editorial in the Pittsburgh Tribune-Review where he touches on an ongoing theme of this blog - that those political voices who label themselves as "progressive" often are anything but. He makes an appropriate - if a little over-the-top - comparison to feudal life, those "good old days" when a benevolent king or duke ruled over the serfs in his fiefdom.

Boudreaux touches on medication and on Social Security, though many other topics could easily be addressed, such as free trade, where so many "progressives" seem to think that the best way to promote progress is to lock to doors of our country and throw away the key.

I like the way he concludes:

In short, individualism -- and the freedom and free markets that it entails -- sparked and sustained progress as never before.

Today's "Progressives" seek a return to the status and static society in which the few direct and "protect" the many. That, of course, is the opposite of genuine progress.

It should be noted that while this article argues against those calling themselves "progressive," who generally are aligned with the Democratic Party, it could just as easily be a hit against those big-government Republicans that have so successfully weakened the party over the past decade...

Hot Dogs, Bums, and Books

This debate is rather interesting, particularly if you happen to be having a slow day at work with some time to read on your hands. Stephen Dubner, on the Freakonomics blog, asks five noted authors/economists/Mark Cubans this question:

You are walking down the street in New York City with $10 of disposable income in your pocket. You come to a corner with a hot dog vendor on one side and a beggar on the other. The beggar looks like he’s been drinking; the hot dog vendor looks like an upstanding citizen. How, if at all, do you distribute the $10 in your pocket, and why?

My thoughts? The most interesting facet of the debate is how each person chose to plug their own book - and their answers seem to correlate with how they answered the question:

Arthur Brooks - stuck between being liberal and conservative, realized he should mention it but didn't want to go overboard and give the title.

Tyler Cowen - the libertarian and economist takes maximum utility from posting by citing an example form his book, giving its name, and even giving the Amazon link.

Mark Cuban - No one cared about his book, and neither did he, so he skipped it.

Barbara Ehrenreich - liberal guilt prevented a book mention (but encouraged a swipe at that pesky middle class).

Nassim Nicholas Taleb - mentions his "next book," which leads us to wonder if he is indeed writing one or just playing on our own prediction that he will right another one.

Leave the Beltway

"Hi. How things with you today"

Why is this little kid talking to me while I'm pumping gas? He's only about 10, but maybe he's trying to hassle me. But better respond. "Doin' fine.".

But what if he's just nice?

Well, he was. I had a nice chat with the little boy who starts back to Atlanta schools next week. He even complimented by business attire.

How nice it is to be out of the Washington beltway to a land where people are nice just because that's the way they were raised to be.

Right now, our Congressional reps are out of the Beltway in their home districts. I hope that while they're there they will be reminded of the Real People - the nice, salt-of-the-earth people - that are out there hoping that they don't spend there time in Washington screwing things up too much.

Even Rolling Stone gets it

The great danger of confronting peak oil and global warming isn't that we will sit on our collective asses and do nothing while civilization collapses, but that we will plunge after "solutions" that will make our problems even worse. Like believing we can replace gasoline with ethanol, the much-hyped biofuel that we make from corn.

That's the lead-in to a July 24th article from Rolling Stone that provides the best argument against use of ethanol I have ever read. It's full of fun facts:

• Even if the entire U.S. corn crop were used to make ethanol, the fuel would replace only twelve percent of current gasoline use.
• Filling the gas tank of an SUV with pure ethanol requires more than 450 pounds of corn -- roughly enough calories to feed one person for a year.
• the energy balance of corn ethanol is only 1.3-to-1 - making it practically worthless as an energy source.
• Corn is already the most subsidized crop in America, raking in a total of $51 billion in federal handouts between 1995 and 2005 -- twice as much as wheat subsidies and four times as much as soybeans. Ethanol itself is propped up by hefty subsidies, including a fifty-one-cent-per-gallon tax allowance for refiners.

Read it and and you will see that ethanol is not the answer to our future energy needs. You will also see the problems that come from government subsidies and having elected laymen pick technological winners and losers instead of having the market decide.

HT: Mercia Rising

Boomerang Outsourcing

For those protectionists out there who still believe that the American economy is crumbling as we become more global and continue to ignore the fact that short-term trends (outsourcing) are not necessarily reflective of long-term realities (the opening of new industries in America coupled with lower prices for commodities), then here is an article that I would like you to read.

It would be easy to imagine Reno, Ohio, as the type of place that would be hit hardest by outsourcing - a small American town losing out to the invisible hand shifting jobs to places like Bangalore and Guangzhou. Instead, outsourcing is bringing the jobs to Reno. Across the street from an Army Reserve center and next to a farm, a customer-service call center hums, its 250 workers answering phones for online travel agency Expedia. The center's owner? Indian conglomerate Tata Group.

Many people see globalization, and the economy in general, as a fixed pie, where one person's gain is another's loss. Just as with the above example, though, we see that it's not a winner-take-all system. The pie grows larger, new jobs and industries come about, new opportunities and realities appear.

Being truly progressive means thinking towards progress and potential instead of arguing about current obstacles. Are candidates and lawmakers who want to impose new tariffs on China and close our borders and complain about globalization really "progressive" then?

Don't raise the price of sheep

Club for Growth today released a petition signed by 1,028 economists who oppose legislation currently in front of Congress that would impose significant tariffs on imports from China. This would make it more expensive to import items from China, which, you may have noticed, now provides us with many things that we use every day, like this cute bighorn sheep that sits on my desk.

Here's an exerpt from the petition, which was published in today's Wall Street Journal:

As economists, we understand the vital and beneficial role that free trade plays in the world economy. Conversely, we believe that barriers to free trade destroy wealth and benefit no one in the long run. Because of these fundamental economic principles, we sign this letter to advise Congress against imposing retaliatory trade measures against China.

There is no foundation in economics that supports punitive tariffs. China currently supplies American consumers with inexpensive goods and low-interest rate loans. Retaliatory tariffs on China are tantamount to taxing ourselves as a punishment. Worse, such a move will likely encourage China to impose its own tariffs, increasing the possibility of a futile and harmful trade war. American consumers and businesses would pay the price for this senseless war through higher prices, worse jobs, and reduced economic growth.

The petition hearkens back to a similar one signed by as many economists in 1930. That one spoke out against the Smoot-Hawley Tariff Act, a bill that many believe made significant contributions towards causing the Great Depression. Are we seeking for history to repeat itself or can we finally begin to appreciate the value that comes with a globally connected world?