Monthly Archive for November, 2008

Christina Romer To Chair The CEA

Obama has picked Christina Romer to chair the CEA. Romer is a good pick who knows alot about recessions, how to fix them and macro economics in general.

However, one thing that you will probably not read in news stories on the pick is some of the work she has done. National Journal writes:

“At the same time that Obama is calling for higher income taxes on people making $250,000 or more, the Romers have found that tax increases are generally bad for economic growth and that they primarily discourage investment — the supply-side argument that conservatives use to justify tax cuts for the rich. On the other hand, the Romers have shredded the conservative premise that tax cuts eventually force spending reductions (‘starving the beast’). Instead, they concluded that tax reductions lead only to one thing — offsetting tax increases to recover lost revenue.”

They disagree with the general conservative view of starve the beast but share the general conservative view that lower taxes are better for economic growth.

The Economist blog has more. James Pethokoukis has more.

Obama’s Great Economic Team

Bruce Bartlett, conservative economist, pretty much sums up my reaction to Obama’s choice of economic team:

So far, I am very impressed. Larry Summers at the NEC is brilliant. Tim Geithner at Treasury inspires confidence. Peter Orszag at OMB tells me that we will get honest numbers on which to base policy for a change. And Christina Romer at the CEA puts one of the nation’s top experts on the Great Depression at close hand.

This group has made me realize just how poor Bush’s appointments in recent years have been in the economic area. When slavish political loyalty is apparently the only requirement for a Bush Administration job, and demonstrable competence barely counts at all, it doesn’t tend to attract the best and the brightest. When on those rare occasions, Bush managed to get someone who is competent, there is no evidence that he paid the slightest attention to them, preferring instead the counsel of “Mayberry Machiavellis,” as former White House adviser John DiIulio called them. No wonder we are in the mess we are in.

The full post can be found here.

Quote Of The Day

“The one sector that definitely needs to contract is the financial sector. Maintaining Citi as a zombie bank is not really constructive. I would feel better if it were carved up, with the viable pieces sold to other firms and the remainder wound down by government. In my view, getting the financial sector down to the right size ought to be done sooner, rather than later. From my perspective, the whole TARP/bailout concept is misconceived. The priority should not be saving firms. The priority should be pruning the industry. Get rid of the weak firms, and make good on deposit insurance. Then let the remaining firms provide the lending that the economy needs.” —Arnold Kling, economist on the bailout of citibank

Quote Of The Day

“The Democratic Party is allied with the unions, a marriage of head and heart. Obama has promised to support the “card-check” legislation that the unions see as vital for expanding their membership and bargaining power. The state of American auto manufacturing — an example of union power in action — ought to give him pause. No doubt there is plenty of blame to go around for the mess that the industry is in….But on top of that, the unions raised wages and benefits to insupportable levels, and for years blocked efforts to cut costs and increase efficiency. Worst of all, by anointing themselves co-managers, they reduced the domestic industry’s ability to react promptly to shifts in demand. Is this how the Democratic Party intends to strengthen the economy?” — Clive Crook, writing in National Journal

As The Union Big Three Crash, The Non-union Honda Hires

ABC News reports:

Detroit may be in the doldrums, but Greensburg, Ind., is celebrating its shiny new auto plant.

Honda Motor Co. opened a new factory in the town of 12,000 in October, bringing jobs and hope.

Honda CEO Takeo Fukui flew in from Tokyo for the plant’s dedication ceremony Monday, eager to take advantage of the trouble American automakers are in.

“At Honda, we always understand that challenging times … represent opportunity,” Fukui said.

Honda’s new plant in Greensburg represents the “other” American auto industry — the U.S. plants owned by foreign carmakers. Unlike the American “big three” automakers — GM, Ford and Chrysler — the foreign-owned companies are not looking for bailouts. Instead, they are expanding to places like Greensburg.

“This is an American-made automobile. Hoosiers make it,” said Adam Huening, news editor of the Greensburg Daily News. More than 900 nonunion employees were hired to work in the plant and expect to turn out 200,000 Honda Civics per year, including some powered by natural gas. The plant, which costs $550 million, will likely grow to employ 2,000 workers.

Unlike the American big three, Japanese automakers are not saddled with enormous costs for retirees. Their younger, mostly nonunion American workers get paid far less.

At Honda, workers receive about $44 an hour, including benefits, while GM employees receive $73.

….

In places like San Antonio, Georgetown, Ky., and West Point, Ga., 15 foreign-owned assembly plants and dozens of supporting factories have been built in the United States. Most of them are in southern states without auto union traditions, and like Indiana’s new Honda plant, they are designed for flexibility.

The full article can be found here.

The Economics Of The Minimum Wage On Teenagers

Charlene Kalenkoski and Donald Lacombe, both Associate Professors of Economics at Ohio University, have a new paper on the effects of the minimum wage on teenagers. They write:

Abstract:The relationship between minimum wage increases and youth employment is investigated using county-level data and spatial econometric techniques. Results that account for spatial correlation indicate that a 10% increase in the effective minimum wage is associated with a 3.2% decrease in youth employment, a result that is 28% higher than the corresponding estimate that does not control for spatial correlation. Thus, estimates that do not take into account spatial correlation may significantly underestimate the negative effect of the minimum wage on teenage employment. Improperly controlling for factors that vary systematically over space can lead to incorrect inferences and misinform policy.

This is of course similar to the affects the minimum wage has on Blacks, see here.

Link via Market Power.

Quote Of The Day

“I don’t see any reason to think that $25 billion would actually turn these firms around or even forestall collapse for very long. The car industry in general is in a big slump, and these companies in particular have been on a downward trajectory for a long time. You could buy General Motors for $1.75 billion or Ford for $4.11 billion. Asking for loans that are many times the total value of the enterprise seems to me like a mark of a very, very unsound underlying enterprise.” — Matthew Yglesias

Quote Of The Day

“I think it would be a terrible mistake to simply write a check to the auto industry without demanding major, major restructuring of its labor contracts. Without that the money will simply go down a rat hole and the automakers will just be back again in a year or two asking for more money. Obama has a strong hand to play here and I hope he uses his leverage. With bankruptcy as the only alternative to federal aid, he can drive a very hard bargain with the auto workers. If he caves and just writes a blank check, everyone will know he can be rolled and he will pay a heavy political price for it. If Obama shows toughness on this issue, I think it will pay enormous dividends for him down the road.” — Bruce Bartlett, quoted via Tyler Cowen

Thoughts On The Obama Victory

First, I sincerely congratulate Obama on his win. Though I disagree with him on some policy issues, there were alot of things I liked about him. With that said, I’d like to reflect on some possible outcomes of an Obama presidency, things that I will have an interest in throughout the next four years.

Black Culture: If there is one thing this election showed, it is that the view that a Black person cannot be president, that racism continues to play a significant role in todays economy, was flat out wrong. Personally, I never doubted that a Black man can become president but many people I know did. An Obama presidency proved they were wrong and will be a strong argument against anybody who continues to believe that race plays a significant role in limiting minority upward mobility. How his presidency will affect the Black community is something to watch. John McWhorter, one of my favorite Black authors, has made the case throughout the whole Obama candidacy that Obama will have a tremendous affect on Black culture. For example, in June he wrote:

As often as not, the idea was that America could not seriously support a black man for its highest office.I didn’t get this. The America I live in today does not seem as deeply stamped by bigotry as these people seemed to think. It seemed as if, on this topic, I was talking to people who had woken up after 25 years and didn’t know how the country had changed. Couldn’t they see that this man’s color was only going to help?…Barack Obama’s success is the most powerful argument against this way of thinking in the entire four decades since recreational underdoggism was mistaken as deep thought. A black man clinching the Democratic presidential nomination — and rather easily at that — indicates that racism is a lot further “beneath the surface” than it used to be.

He has made the point repeatedly in his blogginghead interviews with Brown University economist Glenn Loury, see for example, how he uses the Obama presidency to demolish Loury’s argument on “institutional racism” here (all of the interviews, btw, are a must watch. See here for a list).

Add in the fact that Obama is not shy on criticizing absent fathers, bad behavior, and a lack of focus on education in the Black community and you get a very interesting combination.

Black Politics: Thomas Sowell long ago explained why it is in the interest of Democrats to continue to perpetuate a view of the world that sees racism as primary. He wrote:

If the share of the black vote that goes to the Democrats ever falls to 70 percent, it may be virtually impossible for the Democrats to win the White House or Congress, because they have long ago lost the white male vote and their support among other groups is eroding. Against that background, it is possible to understand their desperate efforts to keep blacks paranoid, not only about Republicans but about American society in general.

Liberal Democrats, especially, must keep blacks fearful of racism everywhere, including in an administration whose Cabinet includes people of Chinese, Japanese, Hispanic, and Jewish ancestry, and two consecutive black Secretaries of State. Blacks must be kept believing that their only hope lies with liberals.

If, for the sake of argument, the view that racism is a prevalent part of our culture is eroded…what are the long term implications on Black politics? Would this loosen the Democrats hold on Blacks? Something to keep an eye on.

The Bush Legacy: Obama’s choices in office could have, ironically enough, a positive affect on Bush’s legacy. For example, if Obama decides to take, even with the control of congress, a “pragmatic” approach to foreign policy and continues many of Bush’s more controversial positions, it could have a long run positive affect on how Bush’s legacy is viewed. Take Obama’s now ambiguous stand on Guantanamo bay. The AFP writes:

WASHINGTON (AFP) — Barack Obama’s presidential transition team said Tuesday it was working though the complicated issues involved in his campaign pledge to close the Guantanamo Bay “war on terror” camp in Cuba.

The Democratic president-elect is already under fierce pressure from human rights groups to close the controversial high-security facility but faces a legal minefield in deciding where to house inmates and how to try them.

“Senator Obama has said that he intends to close the facility at Guantanamo, that’s a complicated matter,” said his transition co-chair John Podesta.

“It’s under review … when we have something to say about that, we’ll say it,” Podesta said at the first news conference of the transition in Washington.

A complicated matter, huh? What to do with all the inmates inside? How will the judicial system work? Will GWB’s worries materialize? Will Obama find an alternative in name only to Guantanamo? Also, what will Obama’s position be on CIA interrogations? The continued Iraq war? The Patriot Act? How all this plays out will set the stage on how GWB is looked at in the future.

Inner City Liberal As President: I’ve always distinguished between inner city liberalism, which I find appealing on several grounds, and limousine liberalism which I find abhorrent on many grounds. Inner city liberalism is much more sincerely focused on problems of the poor. Concerns about jobs, equal treatment, human dignity and religion all play a role. Limousine liberalism is much more the rich mans religion: environmentalism, utopia, elitism and a general disdain for religion. Though I wouldn’t classify Obama as a complete inner city liberal – he does, after all, have alot of limousine liberalism in him – he is the closest there has ever been in the history of the presidency. So it will be interesting to see how this plays out in his politics and policies. How people view him and treat him.

It should be a very interesting next four years. 😀

Is Polygamy A Civil Right Too?

I came back from my vacation Sunday and while catching up with all of the politics, especially as a resident of California, I kept coming across pictures of proposition 8 (making marriage between man and woman only – constitutional) protests. Many of the protesters had signs that claim gay marriage is about equality, family values, and civil rights. One question I’ve wanted to ask when I am faced with such claims is: Is Polygamy also about equality, family values, and civil rights too? If not, why gay marriage but not polygamy?

After all, every argument you can make in support of gay marriage you can also make in support of polygamy. Remember, polygamists can love each other too. The practice of polygamy, like homosexuality, has also been around since the beginning of man. Also, like homosexuality, the desire is innate: most people would agree that men desire more than one woman. So I ask my fellow opponents of proposition 8 (the bill passed…but assuming it was still being debated), why is gay marriage a civil right but not polygamy? The only difference, IMHO, is gay marriage has political support, whereas polygamy does not. A tactical difference, not one in nature.

I, as an opponent of gay marriage, don’t make such pompous accusations. I believe that changing a fundamental unit of society is dangerous and could have cultural repercussions far into the future that we are not ready for. Given that the poor tend to bear the burden of societies experiments and is where marriage is the most fragile, this is a gamble I am not willing to take.

But I could be wrong. Which is why I am ready to leave it up to the wisdom of the citizenry. If the majority of my fellow citizens decide gay marriage is acceptable – thats fine with me. Just as if the majority of my fellow citizens decided polygamy is acceptable. I may disagree, but I don’t consider myself so right that I would deny them the ability to make that decision themselves.

Of course the opposite is true with many liberals. Their morals, their belief in gay marriage, “choice” in abortion, and the death penalty, are soo correct, so right, that they must force their views on a citizenry that does not agree with them. And of course those of us that disagree with them are not just wrong, we are evil. We are no different than those who denied interracial marriages. They are the chosen ones, you and I are just sheep.

The Rustbelt Model-Coming to a theater near you?

I have to say, having lived in Michigan for 2 years, I can still visualize the extent to which strong unions, a heavy reliance on big government and a general hostility to free markets can destroy an economy. Obama’s economic policies remind me of the same characteristics that brought the upper-Midwest to its knees. (h/t Instapundit)

Quote Of The Day

“Irresponsible individual voters ought to abstain rather than vote badly. This thesis may seem anti-democratic. Yet it is really a claim about voter responsibility and how voters can fail to meet this responsibility. On my view, voters are not obligated to vote, but if they do vote, they owe it to others and themselves to be adequately rational, unbiased, just, and informed about their political beliefs. Similarly, most of us think we are not obligated to become parents, but if we are to be parents, we ought to be responsible, good parents. We are not obligated to become surgeons, but if we do become surgeons, we ought to be responsible, good surgeons. We are not obligated to drive, but if we do drive, we ought to be responsible drivers. The same goes for voting.” — Philosopher Jason Brennan, writing on the responsibility of voters…via Caplan