Monthly Archive for January, 2009

Bill Easterly Is Blogging

Developmental economist Bill Easterly has a blog called Aid Watch.

He starts off:

Today, I foist a new blog called Aid Watch on the blogosphere. The objective is to be brutally honest when aid is not helping the poor, but also praising it when it is.

The blog can be found here.

A Fiscal Spending Spree

David Brooks, writing in the New York Times, describes the fiscal stimulus bill making its way through congress:

The bill marked up Wednesday in the Appropriations Committee is a muddled mixture of short-term stimulus haste and long-term spending commitments. It is an unholy marriage that manages to combine the worst of each approach — rushed short-term planning with expensive long-term fiscal impact. The bill has three essential failings. First, it lacks any strategic vision. This $825 billion bill has to be passed within weeks. There’s no time for fundamental rethinking or new approaches. Instead, there’s a sloppy profusion of 152 different appropriations — off-the-shelf ideas that mostly create costlier versions of the status quo.

…Eleven of the programs in the bill account for the vast majority of the actual job creation. The rest may be worthy or not, but they have little to do with stimulus. The total package is so diffuse, it costs $223,000 to create a single job.

Second, the bill has relatively modest short-term impact. Many parts don’t even pretend to be stimulus measures, like funding for basic research, or special ed programs. But even the parts of the bill that aim to stimulate will have modest near-term impact. A study by the Congressional Budget Office found that less than half of the money for infrastructure and discretionary programs would be spent by Oct. 1, 2010.

According to The Washington Post, of the $30 billion devoted to highway spending, only $4 billion will be spent in the next two years. Less than $3 billion of the $18.5 billion for renewable energy and less than half the financing for school construction will be spent by 2011.

The Appropriations Committee chairman, David Obey, fulminated against the C.B.O. Wednesday, and the uselessness of economists in general, but he had no answer to these findings.

Read the full article here. It looks like Democrats couldn’t even wait a month to start the big spending.

Quote Of The Day

“I’m watching Barack Obama on television talking about his plan for a “pay freeze” for White House senior staff. This is a nice gimmick, but it’s stupid policy. The amount of taxpayer money saved will be tiny. Meanwhile, this sort of thing can have a quite destructive impact on the public interest. One thing any administration needs, for example, is well-qualified lawyers. And well-qualified lawyers have the opportunity to earn quite a bit of money in the private sector. And while it’s perfectly reasonable to ask people to take something of a paycut when entering public service, there are limits to how much you can really ask people to give up. We don’t want to overpay our public sector workers, but we also don’t want to deprive the government of qualified staff.” — Matthew Yglesias

The Growing Power Of Politicians

Radley Balko writes:

After the 2000 Census, the richest county in America was Douglas County, Colorado. By 2007, Douglas County had fallen to sixth. The new top three are now Loudon County, Virginia; Fairfax County, Virginia; and Howard County, Maryland. All three are suburbs or exurbs of Washington, D.C. In 2000, 14 of the 100 richest counties were in the Washington, D.C., area. In 2007, it was nine of the richest 20.

Arnold Kling comments here.

Quote Of The Day

“Mr. Obama and the Democrats who favor labor standards in trade agreements mean well, for they intend to fight back at oppressive sweatshops abroad. But while it shocks Americans to hear it, the central challenge in the poorest countries is not that sweatshops exploit too many people, but that they don’t exploit enough. Talk to these families in the dump, and a job in a sweatshop is a cherished dream, an escalator out of poverty, the kind of gauzy if probably unrealistic ambition that parents everywhere often have for their children…sweatshops are only a symptom of poverty, not a cause, and banning them closes off one route out of poverty. At a time of tremendous economic distress and protectionist pressures, there’s a special danger that tighter labor standards will be used as an excuse to curb trade.” — Nicholas Kristof , writing in the New York Times

A Better Stimulus Plan

Harvard University economist Ed Glaesar proposes a better stimulus plan:

Today, the New Deal’s heirs are vociferously arguing that more of the stimulus package needs to be spent on public works rather than tax cuts. The big-government skeptics point out that the government can’t spend hundreds of billions of dollars on infrastructure projects both wisely and quickly. Good infrastructure spending doesn’t happen on a dime, and applying a “use-it-or-lose-it” rule to speed up spending will lead to a lot of waste. The country could certainly invest more, in both human and physical capital, but that spending should follow the rule that benefits must exceed costs. Good investments need plenty of time to plan and implement, which pretty much rules them out as good fiscal stimulus. Moreover, since many of these projects will disproportionately benefit the prosperous, many of them can be financed with user charges.

Yet skepticism about vast public works does not necessarily lead towards Alf Landon-like antipathy towards stimulus, or towards tax cuts for big businesses and the wealthy. A quite plausible alternative, which is partially present in the president-elect’s proposal, is for the fiscal stimulus to primarily take the form of payroll tax cuts for poor and middle-income Americans. Those are, after all, the people who are most likely to spend the money quickly.

Targeted tax aid for poorer Americans would be far more egalitarian than most kinds of infrastructure spending, such as broadband technology. Sensible infrastructure projects wouldn’t disproportionately employ the least-skilled Americans. Forgoing the payroll tax for households earning less than $75,000 a year is surer progressivism than bridge-building.

The full article can be found here.

The Limitation Of Regulations

There are many arguments one can make against regulations. Regulations tend to reduce innovation, reduce efficiency, distort the market, respond slowly to change and can make the problems worse.

But what is perhaps most limiting of all, is the complete failure of regulations to do what they are supposed to. Take the example of the SEC’s 2005 investigation into whether or not the allegation that Bernard Madoff “is operating a Ponzi scheme has any factual basis”. What did the SEC conclude? Felix Salmon quotes:

The 2005 review and Mr. Markopolos’s report prompted the SEC to open an enforcement case, a notch more serious in the SEC’s world than the previous examination. “The staff is trying to ascertain whether” the allegation that Mr. Madoff “is operating a Ponzi scheme has any factual basis,” according to the SEC case memo…
The staff found no evidence of fraud,” according to the SEC case memo.(emphasis mine)

Yes, that is right, even when the government is explicitly investigating a specific crime, you can’t expect them to get it correct.

Felix Salmon has more. A different example of the same thing is here.

The Concern With Obama’s Fiscal Stimulus Plan

Writes Harvard University economics professor Greg Mankiw in the NYTimes:

Over the last century, the largest increase in the size of the government occurred during the Great Depression and World War II. Even after these crises were over, they left a legacy of higher spending and taxes. To this day, we have yet to come to grips with how to pay for all that the government created during that era — a problem that will become acute as more baby boomers retire and start collecting the benefits promised.

Rahm Emanuel, the incoming White House chief of staff, has said, “You don’t ever want to let a crisis go to waste: it’s an opportunity to do important things that you would otherwise avoid.”
What he has in mind is not entirely clear. One possibility is that he wants to use a temporary crisis as a pretense for engineering a permanent increase in the size and scope of the government. Believers in limited government have reason to be wary.

The full article can be found here.

Quote Of The Day

“Al Franken is about to be elevated to the U.S. Senate as a result of funny business. Twenty-five precincts in Minnesota have recorded more votes cast than voters on Election Day. Ramsey County alone has 177 more ballots than people who voted. The vast majority of these over-votes have gone to Franken. In parts of the state, military ballots were not counted. Any ballot that was challenged was copied for review. But, in many cases, the election canvassers forgot to label the copy as a duplicate, so it was counted twice. So not only were the disputed ballots counted, they were counted twice!” — Dick Morris

Democrat Corruption – Before Taking Power

One of the benefits of being the party out of power is that the spot light is on the other party, meaning they are likely to have more scandals and you, as an outsider, can sit back and criticize. So not to miss out on all the fun, I give you the Democratic corruption record so far.

First on the list is Charles Rangel, chairman of the Ways and Means Committee:

Congressman Charles Rangel’s fate hangs in the balance as a report concerning the Ways and Means Committee chairman is being prepared for release in early January.

…He’s under investigation for allegedly using formal letterhead to solicit donations to a school to be named in his honor; helping one donor’s company keep a tax loophole; having unreported income from a vacation villa; and having several rent-controlled apartments at below market rates, including one set up for his campaign operations in violation of state and local laws.

This was quickly followed by Illinois Governor Blagojevich:

FBI agents arrested the governor on December 9 after federal prosecutors alleged, among other things, that he had tried to sell Obama’s former Senate seat. Blagojevich denies wrongdoing and has ignored calls to resign.

Then comes Bill Richardson, New Mexico governor:

New Mexico Gov. Bill Richardson is withdrawing his nomination to be commerce secretary, citing the distraction of a federal investigation into ties to a company that has done business with his state.

Two Democratic officials told CNN the investigation involves a California company that won municipal bond business in New Mexico after contributing money to various Richardson causes.

And last but certainly not least is possibly Hillary Clinton:

An upstate New York developer donated $100,000 to former President Bill Clinton’s foundation in November 2004, around the same time that Senator Hillary Rodham Clinton helped secure millions of dollars in federal assistance for the businessman’s mall project.

Mrs. Clinton helped enact legislation allowing the developer, Robert J. Congel, to use tax-exempt bonds to help finance the construction of the Destiny USA entertainment and shopping complex, an expansion of the Carousel Center in Syracuse.

Mrs. Clinton also helped secure a provision in a highway bill that set aside $5 million for Destiny USA roadway construction.

And all of this, only within the last couple of months. One wonders what else is next – is Rahm Emanual, or even Obama himself, somehow implicated in any of this? Lets hope not, but with the way Democrats are running things so far, I wouldn’t be surprised.

Obama Watch – President Elect Version

I am going to periodically give my thoughts on Obama’s actions, appointments, and anything else I may find interesting, with an overall rating on his performance. Today, I give you the President Elect Version.

Obama’s decision to invite Rick Warren to give the invocation at his inauguration has been much talked about. Some people call it a shrewd political move, others call it the first of an attempt at party realignment, and then there are those who call it a betrayal. However, what interests me the most about the move is its relationship to Obama’s political views.

As I pointed out in my post, Thoughts On The Obama Victory, Obama is not the type of liberal the presidency is used to; he has a large appreciation and experience with inner city liberalism. Though inviting Rick Warren would have been anathema to limousine liberal’s like John Kerry, Hillary Clinton, Al Gore and Bill Clinton, it’s almost a natural choice for an inner city liberal. Inner city liberalism is comfortable, even full on accepting, of evangelical Christianity, where Limousine liberalism is certainly not.

And so Obama’s choice of inviting Rick Warren gives me hope that he will, as I expected him to but was not sure, leave his distinguishing mark on the presidency, not just by being the first black president, but by being the first inner city liberal the presidency has ever seen. The next four years are sure to be interesting and Obama’s pick of Rick Warren is already starting to draw the lines, separating the limousine liberals from the inner city ones.

Then comes Obama’s economic team. Before the election one could make arguments on both sides that Obama was either an extreme liberal playing the center just to get elected or a true moderate who was willing to listen and follow what worked. Obama’s economic team is outstanding, and shows that those who held the view that he was a moderate were right. I can’t see how McCain could have ever picked a better economic team.

With that said, as of this point in time, I give Obama a clear A. He is shaping up to be a great president. Hopefully that won’t change.