New Name, Same Cheap Tricks

Mike Lillis at The Hill:

Democrats are now being careful to frame their job-creation agenda in language excluding references to any stimulus, even though their favored policies for ending the deepest recession since the Great Depression are largely the same.

Americans love stimulus. So much so Democrats are removing any reference to it. The new term is ‘job creation’. Speaking of job creation. Here’s Obama back in 2009:

I don’t believe it’s too late to change course, but it will be if we don’t take dramatic action as soon as possible. If nothing is done, this recession could linger for years. The unemployment rate could reach double digits.

Thank goodness we’re nowhere near double-digit unemployment. I guess that dramatic action really worked. He continued:

I understand that some might be skeptical of this plan. Our government has already spent a good deal of money, but we haven’t yet seen that translate into more jobs or higher incomes or renewed confidence.

You’ve spent $4.0 trillion to date. Unemployment is 9.1%. ‘Skeptical’ is an understatement.

09.07.2011 | 10:01  |  |

Public Debt Tops $10T for first Time  

Terence P. Jeffrey at CNS News:

At the close of business on Aug. 31–for the first time in the history of the country–the publicly held debt of the federal government topped $10 trillion, according to data released by the U.S. Treasury Department at 4:00 p.m. yesterday.

Hope and change.

09.05.2011 | 12:00  |  |

Market Failure

Gary S. Becker wrote a great piece on The Great Recession and Government Failure. In it he makes the point that while market failures are inevitable, it’s a mistake to assume that government intervention will improve the situation. I certainly agree, but I have a hard time accepting the term market failure. It’s not that markets are incapable of failing, they are. Monopolies are one example, public goods (in some instances) can provide other examples.

However, what most people point to as a market failure—say, the housing crisis, or the cost of health care—is usually something entirely different. Monopolies are already illegal in the U.S.,1 and there are also laws regulating most public goods. We figured out true market failures pretty early on in this country and made laws accordingly.

After a market bubble bursts—say, the dot-com bubble or the housing bubble—people call it a market failure. That’s not accurate. A market failure is an occurrence in the market which results in a persistent state of brokenness (inefficiency) in that market. That doesn’t happen often. Normally what happens are market corrections. It’s a lot like your son steals a candy bar and you discipline him. Your son is not a failure, he behaved badly and was corrected. This is a distinct occurrence from your son growing up and choosing a career of thieving. In that scenario, categorizing him as a failure is accurate (from a moral point of view).

Did lots of people lose money when the dot-com bubble burst? Yep. Are a lot of people going through foreclosure right now? Absolutely. That doesn’t mean the market is a failure. It is correcting itself, though. It’s painful for a lot of people, but it’s a serious mistake to think the government can step in and make it better. You don’t neglect disciplining your kid when he steals, doing that is exactly how kids end up making a career out of stealing. The market needs painful correction in order to learn.

What’s unfortunate is that the current administration doesn’t believe in the free market, and any time it starts to falter, it steps in fast and heavy. When the dot-com bubble burst, Bill Clinton was in office—a decidedly liberal president—but he didn’t really mess with the market. Part of the reason for this is probably because most of the people affected were what the liberals like to call “rich”, so there was little incentive to help them.

The market learned from this bubble bursting. It’s pretty tough to get funded in the tech industry today compared to 1997. You not only have to present a great idea, but you also need a comprehensive plan to make it profitable, and soon. Even then you’ve got to have investors that believe in your ability to execute your plan. The reason for this is because a lot of investors watched their money evaporate into thin air as the dot-com bubble burst.

Are banks are going to continue issuing copious mortgages to people who can’t really afford them? I don’t see why not. They got away with it once already. The government just stepped in and took away the financial pain (i.e. the consequences). Also, many home buyers who made terrible decisions by purchasing homes they could not afford are also getting bailed out through mortgage restructuring.

So, what many people are referring to as a market failure is not actually an event that results in a persistent state of brokenness. Instead it’s an event where the market acted badly. This normally fixes itself, but instead we have Uncle Sam stepping in to stop the normal course of discipline and consequences.

It’s also worth mentioning that in the case of the housing bubble, the market isn’t even the sole party to blame. Did banks irresponsibly issue mortgages? Yes. But the government did encourage them to issue these mortgages through faux private institutions like Fannie Mae and Freddie Mac. They took all of the risk out of risky mortgages by guaranteeing to buy them through these faux private companies. Don’t like your collection of toxic mortgages? No worries, Fannie Mae will buy them.

Liberals pushed to institute these policies in the name of helping lower income families afford homes. Their supposed intentions were great, but they messed with the free market and the consequences are that many people obtained mortgages who had no business buying a home to begin with, because they weren’t financially capable of making a mortgage payment in the long run. The result was actually the opposite of the policy’s stated intention. Instead of lower income families owning homes, many of them are now going bankrupt (or should be).

It’s important to note this, because Liberals are notorious for implementing policies that have great intentions behind them and disastrous consequences. Then, when their policies fail, they make the situation even worse by eliminating the consequences. Market failure may be a convenient term to push new legislation and regulation, but let’s make sure it’s a true market failure first. If not, call it what it is—a correction—and let it run its course and allow the market learn from its mistakes.

After all, you know what happens when you don’t discipline your kid, right? They become a spoiled brat.

  1. Some special types of regulated monopolies do exist, but the key word there is regulated. For example, utilities are generally granted geographic monopolies because the market is unlikely to provide competition naturally. Even here though, the market has made leaps and bounds through the use of technology over the past decade. In a lot of areas, you can buy your electricity from a host of different companies, despite there only being one power line connected to your house that is owned by one company. ↩
09.03.2011 | 9:00  |  |

Republicans Attempt to Slash U.N. Support  

Nicole Gaouette and Bill Varner at Bloomberg:

The bill by Ileana Ros-Lehtinen, the Republican chairwoman of the House Foreign Affairs Committee, would require the UN to adopt a voluntary budget model in which countries selectively fund UN agencies rather than according to a set formula. It would end funding for Palestinian refugees, limit use of U.S. funds to only purposes outlined by Congress and stop contributions to peacekeeping operations until management changes are made.

There’s one phrase that really pops off the page: “limit use of U.S. funds to only purposes outlined by Congress”. This should already be the case.

Which representatives are responsible for allowing monies taxed away from American citizens to be used for purposes other than those outlined by the representatives of said American citizens?

As for the rest of the bill, it’s a step in the right direction. I’m for getting rid of the U.N. entirely.

08.30.2011 | 8:54  |  |

Oregon to Buy 22 Electrical Outlets for $90K Each  

Jeff Barnard at The Washington Times:

Charging stations that can fill the batteries of electric cars in 30 minutes or less are moving from the city to the country.

Oh boy! Only 30 minutes to fill up—every 50 miles! Oh one more thing:

They will be able to handle only one car at a time.

What could possibly go wrong?

Let’s take a look at the numbers:

  • Distance between stations: 50 miles.
  • Charge time: 20% to 80% charge in 30 minutes (increase charge level by 60%).
  • Simultaneous charges per station: one.
  • Total cost: $2 million.
  • Profitability: The article neglects to mention if the charging stations will be profitable.1

So, let’s say you’d like to make a 300 mile trip. In a typical gasoline-powered family sedan (say a Honda Accord), if you averaged 50 MPH (pretty typical on an interstate including stops for fuel, the bathroom, etc), you’d make the trip in six hours. If you averaged 34 MPG2, you would use 8.8 gallons of gasoline, about $33 at current fuel prices.

Let’s make the same trip in a Nissan LEAF. Assuming you leave your house fully charged, a 300 mile trip would require at the very least five charges, but more likely six, because you don’t want to charge up at 250 miles in and arrive at your destination with a near-drained battery, so you’ll likely charge up at 300 miles, so that your car has a charge when you’re ready to leave. Six charges at 30 minutes each means you’re stopped for three full hours waiting for your vehicle to charge. Hopefully no one is already using the charging terminal, because that doubles the amount of time you have to wait. At a gas station, if all of the pumps are full, you need to wait about three to five minutes, tops.

My understanding is that electric cars consume something like $0.05 per mile in electricity. However those numbers are based off of charging the vehicle at night, during off-peak hours. Unless you’re traveling at night, you’re going to pay more for your electricity.3 Let’s use $0.06 per mile. You’ll probably pay more than that, but let’s be conservative. That amounts to $18 in electricity.

So in summary, a typical 300 mile trip takes 6 hours and costs $33 in a typical gas-powered sedan. That same trip takes a minimum of 9 hours in an all-electric car and costs $18. That’s a delta of three hours and $15, at best. Which means when I’m using an electric car I’m paying myself five bucks an hour to sit around and wait for my car to charge. That’s well below minimum wage in my state (and probably most states).

I wonder why electric cars aren’t taking off?

  1. My guess is that they are not. If they were, wouldn’t the writer want to point that out? ↩
  2. This is the EPA highway driving estimate for the 2012 Accord. ↩
  3. Unless there is some kind of subsidy at the charging station, but that’s not a real reflection of the market-based cost. ↩
08.26.2011 | 10:39  |  |