Inflation explained by a pork producer

Government officials are reporting mild inflation and Ben Bernake of the Federal Reserve is seemingly unconcerned about rising prices.  Meanwhile the rest of us are experiencing rapidly rising prices at the filling station (gas at the pump now well over $4.00 per gal compared to $2.00 when Obama was elected) and grocery stores.  Turns out that the government, when computing inflation, excludes energy and foodstuffs from their calculation of the rate.  They probably compute inflation this way in order to underplay the rate of increase and thereby avoid larger payouts to the recipients of  programs  indexed to the official rate of inflation, such as social security and other welfare programs.

In this WSJ opinion piece we are given a simple and clear explanation of the cause of rising food prices.  It all comes down to the rising cost of grain -- in this case, corn -- which is the staple commodity of most foodstuffs, resulting from the government policy of subsidizing farmers to produce ethanol.  BTW, ethanol has been dismissed by the EPA as a non-consequential factor in the clean air movement. Also, this ethanol subsidy policy was accompanied by a tariff to protect producers of corn from foreign competition back in the '70's.  The double whammy of a protected and subsidized market and the dedication of 40% of the corn supply to ethanol leads to higher prices for the remaining 60% of the supply.  Solution: eliminate the tariff and deep six the ethanol industry and voila, more corn availability for everything else with lower prices across the board for food.  To accomplish this requires defeating the ethanol lobby, by now well entrenched and powerful.  It is disgusting to think all the rest of us are paying for the production of a useless product that doesn't even accomplish what it is supposed to.   Both political parties are to blame for this one. One other point, if we want to see lower costs across the board simply reduce corporate income taxes which are, after all, passed through in the price of goods to the consumers.  Somehow it always comes back to lowering taxes as a way to stimulate commerce.

Yale as the "Gay Ivy"

This article from early 2009 is not what an alumnus of my generation wants to read about his school.  And yet it appears to be reflective of what is happening at colleges and universities all over the country.  The fact that a couple of decades ago many universities kicked the military (ROTC, NROTC)  off campuses all over the country was bad enough, but now we see that what appears to be replacing these constructive and valuable additions to our nation's security is a solipsistic and even perverse culture.  And furthermore what is insulting is the celebration of  this destructive lifestyle with major commitments on the part of these schools which includes lifestyle courses, student centers and the like that promote and celebrate it. Color me intolerant and unable to comprehend how celebrating and supporting this lifestyle that should it dominate the culture would result in its demise, makes a whole lot of sense.

Sowell on Williams

Two conservative economists who happen to be black, Thomas Sowell and Walter Williams, take on the myths perpetrated by the democrat party for decades in William's new book reviewed here by Sowell.  Too bad these guys aren't listened to by democrats.  They have been right about the economy and what makes it work in their many books for decades.  Everything the dems have proposed and passed to help blacks has had the opposite result.  Sowell's remarks about William's book follow:

Walter Williams fans are in for a treat-- and people who are not Walter Williams fans are in for a shock-- when they read his latest book, "Race and Economics."

It is a demolition derby on paper, as Professor Williams destroys one after another of the popular fallacies about the role of race in the American economy.

I can still vividly recall the response to one of Walter's earliest writings, back in the 1970s, when he and I were working on the same research project in Washington. Walter wrote a brief article that destroyed the central theme of one of the fashionable books of the time, "The Poor Pay More."

It was true, he agreed, that prices were higher in low-income minority neighborhoods. But he rejected the book's claim that this was due to "exploitation," "racism" and the like.

Having written a doctoral dissertation on this subject, Walter then proceeded to show why there were higher costs of doing business in many low-income neighborhoods, and that these costs were simply passed on to the consumers there.

What I remember especially vividly is that, in reply, someone called Walter "a white racist." Not many people had seen Walter at that time. But it was also a sad sign of how name-calling had replaced thought when it came to race.

The same issue is explored in Chapter 6 of "Race and Economics." The clinching argument is that, despite higher markups in prices in low-income neighborhoods, there is a lower than average rate of return for businesses there-- one of the reasons why businesses tend to avoid such neighborhoods.

My own favorite chapter in "Race and Economics" is Chapter 3, which I think is the most revealing chapter in the book.

That chapter begins, "Some might find it puzzling that during times of gross racial discrimination, black unemployment was lower and blacks were more active in the labor force than they are today." Moreover, the duration of unemployment among blacks was shorter than among whites between 1890 and 1900, whereas unemployment has become both higher and longer-lasting among blacks than among whites in more recent times.

None of this is explainable by what most people believe or say in the media or in academia. But it is perfectly consistent with the economics of the marketplace and the consequences of political interventions in the marketplace.

"Race and Economics" explains how such interventions impact blacks and other minorities, whether in housing markets, the railroad industry or the licensing of taxicabs-- and irrespective of the intentions behind the government's actions.

Minimum wage laws are classic examples. The last year in which the black unemployment rate was lower than the white unemployment rate was 1930. That was also the last year in which there was no federal minimum wage law.

The Davis-Bacon Act of 1931 was in part a result of a series of incidents in which non-union black construction labor enabled various contractors from the South to underbid Northern contractors who used white, unionized construction labor.

The Davis-Bacon Act required that "prevailing wages" be paid on government construction projects-- "prevailing wages" almost always meaning in practice union wages. Since blacks were kept out of construction unions then, and for decades thereafter, many black construction workers lost their jobs.

Minimum wages were required more broadly under the National Industrial Recovery Act of 1933 and under the Fair Labor Standards Act of 1938, with negative consequences for black employment across a much wider range of industries.

In recent times, we have gotten so used to young blacks having sky-high unemployment rates that it will be a shock to many readers of Walter Williams' "Race and Economics" to discover that the unemployment rate of young blacks was once only a fraction of what it has been in recent decades. And, in earlier times, it was not very different from the unemployment rate of young whites.

The factors that cause the most noise in the media are not the ones that have the most impact on minorities. This book will be eye-opening for those who want their eyes opened. But those with the liberal vision of the world are unlikely to read it at all.

 

New Yorker Magazine profile on Obama

Not having read this magazine for many years I'm in no position to judge whether it has the usual left-wing bias of most of the New York media establishment, however this article by Ryan Lizza fleshes out at least a little of the mystery man's past and talks about his approach to foreign policy that hasn't appeared anywhere else to my knowledge.  That fact alone makes it an interesting read as so little is known or has been revealed about his weird background.

Oil prices and the liberal cure

Ronald Reagan decontrolled oil prices after becoming president and the liberals reacted as one might imagine they would.  They were outraged:

 Liberals reaction to Reagan's decontrol of oil prices, executed on his first day in office:

The conventional wisdom was that oil prices would surely head higher as a result of Reagan's move. Democrats and liberal interest groups seemed to compete with each other for the most fulsome expression of economic illiteracy. In the annals of public policy prognostication it is difficult to find such a wide assembly of wrongheadedness. Sen. Howard Metzenbaum of Ohio said took to the Senate floor the next day to predict that "we will see $1.50 gas this spring, and maybe before. And it is just a matter of time until the oil companies and their associates, the OPEC nations, will be driving gasoline pump prices up to $2 a gallon." Sen. Don Riegle of Michigan said that "It will hurt our people within a matter of days." Sen. Dale Bumpers of Arkansas had previously predicted that "without rationing, gasoline will soon go to $3 a gallon," and now added that "Decontrol is designed to see how much we can squeeze out of the American people before they take to the streets." Maine's Sen. George Mitchell said "Every citizen and every family will find their living standards reduced by this decision." Democratic Congressman Ed Markey said "I believe that decontrol as a cure will prove to be worse than the disease of oil addiction." A Naderite advocacy group predicted that oil prices might go as high as $870 a barrel "under assumptions which many experts believe are realistic." Instead oil prices started falling almost immediately; from an average high of $1.41 in February 1981, pump prices fell steadily to a national average of 89 cents a gallon in the spring of 1986. Oil imports from OPEC fell by 2 million barrels a day by the end of 1982.

What more can one say. These people are socialists.

Inner city education by the Catholics

Sol Stern and Patrick McCloskey writing for City Journal, provide the usual City instructive piece that makes the case for the value of the early education experience offered to inner city minority and poor by the Catholic church.  It is very clear that simply throwing money at the dysfunctional public school system doesn't work.  Unions and politically correct policies imposed by the political class assure that teaching and learning of these particularly needy children will not produce positive results.  Some charter schools are having a positive effect in changing the education culture, however as this article tells us, at the expense of less will financed Catholic schools now closing two of their inner city schools for every one new charter school opened.  A visit by Sol Stern to one of these endangered Catholic schools reveals why they have been successful teaching these children, far exceeding the results obtained by the public schools and even many of the charter schools.  This  article explains the whys of their success which has a lot to due with discipline and the dedication of the instructors, and the religious values underlying the daily learning experience.  Their approach is about the opposite of that of the state run schools.

ADDED:  Here is an article on the massive move on the part of organized labor to unionize charter schools, which in large part owe their success to not being unionized.

A SOLUTION TO THE BUDGET/DEBT PROBLEM

The budget/debt debate rages on in partisan terms with no solution in site.  The quote that follows is from the comments about an article on this subject that recently showed up on a blog site.  The anonymity of author of this quote lends a certain authenticity to it:

DC has a spending problem, and neither BHO's, the Gang of 6, nor Ryan's proposal really address lowering the debt - only the deficit. Nearly all the focus in DC is raising taxes including BHO's 'bipartisan' economic (tax) task force, and the 'Gang of 6' does no better. It confirms that government believes the money that anyone earns is the government's by default. Remember what happens when politicians say that a tax cut of any amount will "cost" the government? All agencies at the fed, state and local levels should cut programs by 5% each year for the next 5 years except for those efforts that directly support combat ops, counter-illegal immigration ops, or DHS ops. However, each agency should still be held to a budget cut of 5% made up of cuts to programs that do not directly support combat ops, counter-illegal immigration ops, or DHS ops. All open federal, state and local positions not filled should be eliminated immediately. VA care (except for service connected maladies) as well as SocSec and Medicare / Medicaid should be means tested. Re: SocSec & Medicare / Medicaid; raise the retirement age to 68 for those who reach 50 by 09/30/2011; and raise it to 70 for those who reach 45 by 09/30/2011. Cut fed and state congressional operational funding by 10% per year for 5 years. Freeze fed, state and local congressional / admin / support staff pay for the next 10 years. Stop fed funding of think tanks and FFRDCs they compete for programs. Cut corp taxes; cut cap gain taxes; do not fund Obamacare, and stop the additional taxes. Stop all subsidies; products should stand on their own merits. No business entity is too big to fail; no more bailouts; they repay what they’ve received. There are no sure things in the market; if companies/brokers want to make high risk investments, they must notify their shareholders / clients for due diligence; if not, they suffer criminal prosecution. Bonuses to be taxed as regular income. There is no point where one has earned enough, contrary to what BHO says. Further, 80% of the tax cuts in 2001 & 2003 were aimed at families, small bus owners earning less than $250K/yr. Re: gov furloughs/shutdowns. How many private sector jobs does it take to fund one fed job (even considering they pay taxes), and fed pay leads private industry by 1/3 to 1/2? Equivalency of pay is not a reality. They are paid with your tax dollars; their retirement portion is paid from their pay (your tax dollars); the gov's matching funds are paid with your tax dollars; their SocSec is paid with your tax dollars; their Medicare is paid with your tax dollars. That goes for state, county and municipal employees as well (e.g., teachers in the public schools/colleges). What does gov provide as a product beyond those in sec & def? What effort does gov do to produce 1 drop of oil revenue? What does gov do to produce 1 loaf of bread? Oh, they manage. Yes, much like MMS, USAID, DOEd, DOEn, DOC, NEA, NLRB, HHS, HUD, EPA, OPM, FDA (yes, I know they are d****d if they do release/recall and d****d if they don't) et al. DEFUND THEM ALL!

This solution in many ways seems to cut to the chase.  No excuses, no pussyfooting around.  Let's make companies compete for their success (no subsidies), no bailouts, let the free market make the call on who's successful and who fails.  As regards government, get it the hell out of the way simply be eliminating all the departments that don't have a narrowly and well defined reason for being that relates essentially to our internal security and national defense.  Shrink what's left of government bureaucracies by requiring them cutting their budgets by 5% a year until they are the right size.  Means test medicare and social security, cut capital gains taxes, etc.  Bottom line:  shrink the size of government substantially and create a tax environment that encourages private enterprise.  There is nothing to argue with in this proposal from a conservative's point of view.  Until consensus is reached that the government is both too big and too intrusive, this plan simply won't fly.  Unless conservatives stand their ground and convince the independents that this is the way to go, nothing substantial is going to happen.

  

Who's paying taxes and why

Democrat demagogues are on the march these days, led by the head demagogue himself, Obama.  Their subject?  The old standby of raising taxes on the rich.  Why these people keep beating this drum is difficult to comprehend inasmuch as the evidence suggests that a) it wouldn't make that much difference in solving the debt problem and balancing the budget, and b) whenever tried in the past this policy has not worked.  Here is a post by an economist/blogger who has done his homework and provides a revealing graph and the facts (heaven forbid) that prove that this policy prescription can't solve a), and with respect to b), demonstrates that lowering rates on the rich actually increases the taxes they pay.  A key sentence in this post reads:

"In 1979 the top marginal income tax rate was 70% and 18.3% of the total taxes paid were collected from the top 1% of taxpayers.  By 2007 the top tax rate was 35% (half of the 1979 rate), and the tax share of the top 1% had more than doubled to 39.5% (from 18.3% in 1979."

Don't imagine that Obama and co. will be deterred by this graph and these facts, however.  They will march in lockstep, pillorying the successful producers, until they find a way to push the economy over the cliff.  At which point, we assume, they will reconstruct it into a more fair, equitable and just system where wealth is spread around more evenly and we get an economy more like......Cuba's?  Maybe not Cuba's, but how about Europe's where they've "enjoyed" almost no significant growth for several decades, persistent 10% unemployment rates, and where the population is declining as a result.