Deficit Down Thanks to Taxpayers

President Bush can take credit all he wants for the 2006 budget deficit, "the smallest amount of red ink in four years" to use the AP's words. What disappoints me is how the deficit went down:

Both spending and tax revenues climbed to all-time highs in 2006. The sharp narrowing of the deficit reflected the fact that revenues climbed by 11.7 percent, outpacing the 7.3 percent increase in spending.

That's more money being sucked out of private hands and into a government that's incapable of spending it wisely. Imagine where the deficit would be if Congress could control its spending appetite and the President was willing to veto a spending bill.

"Federal Deficit Now Lowest in 4 Years" [via Blue Crab Boulevard]

Cheap Drugs Already Available at FL Wal-Marts

Wal-Mart pushed up its plan to sell some prescription drug for $4/month, four months sooner than expected.

Wall Street wasn't happy. The retailer's shares fell during the day. But Wal-Mart isn't stupid. They must think there's good money to be made even from drastically cutting drug costs.

"Wal-Mart To Sell Low-Price Drugs Sooner Than Expected"

Dow Jones Index Near All-Time High

An economic story that's flown under the radar is the rise of the stock market to near-record heights. It's almost come back from the Internet stock-charged bubble that burst in 2000:

The Dow Jones industrial average is just 53.59 points away from its all-time high close, going into today's trading. In pre-market trading, Dow Jones futures are up 3 points, S&P 500 futures rose 0.5 of a point, and Nasdaq futures rose 2.8 points.

On Tuesday, the Dow industrials closed at its highest level of the year, as investors reacted to a consumer confidence survey that appeared to show an economy not floundering as some had feared, but not growing too much to spur inflationary pressure. The Dow climbed 93 points, the S&P 500 rose by nearly 10 points and the Nasdaq Composite rose 12.3 points.

The all-time high on the Dow is 11,722.98, reached in January 2000.

When Bill Clinton was President I remember his administration touting new stock market high after new stock market high as a sign of their success in managing the economy. I think President Bush and the gang should do a little crowing of their own.

"Dow Just 53.59 from All-Time High Close"

Indiana Refinery to be Expanded

BP wants to expand its Indiana oil refinery to process Canadian oil. Those who complain about high gas prices and reliance on Middle East oil should get on board and make sure the regulators give their approval.

"BP Planning $3 Billion Whiting Refinery Investment"

Ford-GM Have Talked about Merging

GM and Ford merging would rock more than Detroit:

Senior executives at General Motors and Ford Motor Co. have discussed a merger or alliance, according to several sources familiar with the talks.

The talks began after Nissan CEO Carlos Ghosn broached the possibility of an alliance among Renault, Nissan and GM in July.

The Chevy and Ford fanatics would puke. For me, I'd want to short the combined company's stock. Nothing good happens when you take one faltering company and mush it together with another faltering company. Either GM or Ford will have to go under before the labor unions and calcified management really shake things up, become more innovative, and make cars people want to buy.

Both Ford and GM have to get under their union contracts and start from scratch. That means some factories would be unionized while other wouldn't. It means building cars would be more like building computers. Cars would go from designs to sell-able product in months instead of years. It means designing factories and manufacturing processes to quickly shift production from slow-selling vehicles to more popular cars. That way the companies wouldn't have to shut down production or offer margin-crimping incentives. GM and Ford have learn much from Toyota, Honda, and the other Japanese car companies. Now, they should look to Silicon Valley as their model. If they did it right they'd leapfrog the Japanese and be kings of the next generation of car making.

"The Ultimate Alliance"

UPDATE: GM's and Ford's home state has an abundance of economic problems as Jay Reding notes.

Get Ready to Flip that Playstation 3

People looking for a way to make a quick (legal) buck should know Sony has lowered the expected number of Playstation 3 consoles that will make it to North America this fall:

Sony Computer Entertainment Chief Ken Kutaragi told reporters that far fewer units will be available for the U.S. and Japanese launches, with the U.S. to be allocated 400,000 units, and Japan getting 100,000. As a result, Sony has now lowered its estimate of 4 million PS3s shipped by the end of 2006 to a more realistic 2 million.

Like what happened last year with the Xbox 360, eBay will be buzzing with high-priced game console auctions. European gamers with large wallets will be wanting their PS3.

"North American, Japanese PS3 Launch Limited to 500,000 Units"

"Sony’s PS3 Delayed In Europe"

Carnival of the Capitalists

The Business of America is Business hosts this week's Carnival of the Capitalists Q & A style.

Ford Might Go Private

Ford is thinking of going private and ditching the constant pressure to report to Wall Street while it restructures. The company's stock is in the tank with its market capitalization down to $14.5 billion. That would make Ford a tempting target for outside buyers if the Ford family didn't control 40% of the voting stock.

"Ford Motor Considers Going Private"

79-Year-Old Earns Economics Ph.D.

For my econ geek readers here's a story to let you know it's never too late to get that Ph.D.:

After a long and fruitful career, 79-year-old master’s degree graduate Herbert Baum has returned to the University of Chicago to earn his Ph.D. The oldest person ever to be awarded a doctorate by the University, Baum will receive the degree in economics Friday, Aug. 25.

When he left the University in 1951 to become a government agricultural economist in Washington, D.C., Baum had a master’s degree and was just short of writing his dissertation to earn a doctorate.

His dissertation contributes to agricultural economics by examining how to measure the impact of fees charged producers for commodity promotion and research. The thesis, based on a case study of the strawberry industry in California in which he was a leader, developed a model for researchers to understand the long-term value of the fees assessed growers. The model shows how the policies of the state strawberry commission, which supported research into improved varieties, improved production per acre and grower profitability.

Baum's dissertation committee included three Nobel Prize winners.

"University of Chicago Awards Ph.D. to Oldest Person Ever to Receive the Degree" [via A Constrained Vision]

Carnival of the Capitalists

Forty Media hosts this week's Carnival of the Capitalists.

King Leopold and Government Constraint

Belgian King Leopold II's rule is a case of instututional and cultural contraints limiting a government. It's a case of two Leopolds. As king of Belgium he implemented free trade, and the nation prospered. It prospered so much Leopold undertook public building projects that gave him the name "King-Builder."

But there was another Leopold. In Africa he personally owned the Congo Free State. There he had fewer constraints. He could more easily do what he wanted for personal enrichment. Millions perished.

Brian Micklethwait summarizes well Leopold's lessons to political economists:

Leopold II, pursuer of ultimate and permanent power whenever and wherever he could find it, was able to let rip in Africa, but not in Belgium. Her was a civilised Belgian ruler not because he liked his fellow Belgians and welcomed their massed and massive influence over him. He hated it. He just did, in Belgium, what he had to do. The environment made the difference.

Countries are governed the way they are, not because the politicians in some countries are intrinsically more greedy and corrupt than they are in other countries, or for that matter because people in different countries differ in their willingness to accept tyranny, but because different countries differ in the constraints they place upon rulers.

"Bruce Bueno de Mesquita on the Logic of Political Survival and the Two Faces of King Leopold II of Belgium"

"The Political Economy of Power"

More Money Posts than You Can Shake a Stick At

BarryBlog hosts this week's Carnival of the Capitalists.

Alaskan Pipeline Could Take Months to Repair

Fixing the Prudhoe Bay pipeline in Alaska won't be a quick fix:

BP said Monday it discovered corrosion so severe that it will have to replace 16 miles of pipeline at the huge Prudhoe Bay oil field — work that could shut down the nation's single biggest source of domestic crude for months and drive gasoline prices even higher.

Oil prices climbed more than $2 a barrel on the news, and gasoline futures rose, too. The West Coast is expected to be squeezed particularly hard, and the government is considering releasing oil from its emergency stockpile to ease the crunch.

BP PLC said it will have to replace most of the 22 miles of so-called transit pipeline at Prudhoe Bay, which produces about 2.6 percent of the nation's daily supply, or about 400,000 barrels a day.

When I was finally getting used to $2/gallon gas now I'll have to tolerate $3/gallon for a fairly long time. Those tiny, European Smart cars are looking pretty good right now.

"BP: Pipeline Closing May Last for Months"

A Face of Globalization

It's rare that Hilbert, Wisconsin, my hometown, gets a dateline in the Milwaukee Journal Sentinel. There's no way I can ignore the story of Todd Thiel's global investment firm McKinley Reserve managing $1 billion in assets from in such an out-of-the-way place. Cheap communications technology and inexpensive airfares allow Thiel to run his investment firm from little Hilbert.

McKinley Reserve is garnering plenty of attention for its $1 billion RiverWalk real estate investment in Dubai. McKinley is the first American company to actually own the land. That's something Donald Trump can't even lay claim to.

Technology like the internet and mobile phones means Thiel's company can communicate with clients and dealmakers all over the world. Airlines flying almost anywhere mean Thiel can go anywhere to get on-the-ground information and to seal deals personally. With a website like McKinley's you'd never know the company is run in a rural town of 1000.

With the ability to do business anywhere from anywhere something had to bring Thiel back to rural Wisconsin. He comes from a large family with relatives all over the Hilbert area. Hilbert is comfortable. "There's a lot of people who leave to go find things, but everything you need is right here. I don't fight traffic. I don't fight people. The cost of living is obnoxiously low," Thiel told John Schmid. It indeed is a comfortable place.

But access to global communications and travel is a double-edged sword. Thiel could just as easily move his company out of Wisconsin if state economic policies deteriorated. RedPrairie's CEO has trouble recruiting talent because of Wisconsin's high taxes and Milwaukee's high crime. Policy makers have to make sure the state is a pleasant place to live and make money or people like Thiel won't establish billion dollar companies here.

"Global Village"

Taxing Times

Malcolm Gladwell notes a reason not to long for the "good old days:"

[I]n 1949, the highest paid CEO in America was Charlie Wilson of General Motors, who earned $586,100 in salary, bonus and stock. That's roughly equivalent to what some of the better-compensated CEO's are making today.

But what did Wilson pay in taxes? $430,350.

[via Club for Growth]

Marx as Literary Genius

Karl Marx biographer Francis Wheen sees Das Capital as more than a political economic treatise. It's a literary achievement of the first order. The number of literary references in the first volume--the only one completed before Marx's death--is astounding:

In 1976 SS Prawer wrote a 450-page book devoted to Marx's literary references. The first volume of Das Kapital yielded quotations from the Bible, Shakespeare, Goethe, Milton, Voltaire, Homer, Balzac, Dante, Schiller, Sophocles, Plato, Thucydides, Xenophon, Defoe, Cervantes, Dryden, Heine, Virgil, Juvenal, Horace, Thomas More, Samuel Butler - as well as allusions to horror tales, English romantic novels, popular ballads, songs and jingles, melodrama and farce, myths and proverbs.

Wheen writes,

The book can be read as a vast Gothic novel whose heroes are enslaved and consumed by the monster they created ("Capital which comes into the world soiled with gore from top to toe and oozing blood from every pore"); or as a Victorian melodrama; or as a black farce (in debunking the "phantom-like objectivity" of the commodity to expose the difference between heroic appearance and inglorious reality, Marx is using one of the classic methods of comedy, stripping off the gallant knight's armour to reveal a tubby little man in his underpants); or as a Greek tragedy ("Like Oedipus, the actors in Marx's recounting of human history are in the grip of an inexorable necessity which unfolds itself no matter what they do," C. Frankel writes in Marx and Contemporary Scientific Thought). Or perhaps it is a satirical utopia like the land of the Houyhnhnms in Gulliver's Travels, where every prospect pleases and only man is vile: in Marx's version of capitalist society, as in Jonathan Swift's equine pseudo-paradise, the false Eden is created by reducing ordinary humans to the status of impotent, alienated Yahoos.

To look at Marx's thought--as opposed to Marxism with all its strains--simply as a theory of exploitation and alienation is to look at Adam Smith's The Wealth of Nation without his Theory of Moral Sentiments. Doing such ignores the richness of thought contained in both men's works. It takes economics far from simply being about money.

"The Poet of Dialectics" [via Arts & Letters Daily]

Google to Build Michigan Office

Google announced they will open an office in Ann Arbor, Michigan that will create 1000 jobs within five years. The internet giant is already looking to fill positions.

In its search for a headquarters for his revenue-producing AdWords service Google the company looked at university cities like Boston, Boulder CO, Phoenix, and the winner Ann Arbor. Missing from that list was a Wisconsin city, specifically Madison. That's a city with a reputable university and a highly-educated workforce. AdWords manager David Fischer told the Detroit Free Press, "We see Michigan as an ideal location to recruit the best and brightest workers." Could it be Wisconsin isn't an "ideal location" like Michigan? And could it be one of the reasons it would be difficult for a company to "recruit the best and brightest workers" is the Badger State's tax and business climate? RedPrairie CEO John Jazwiec is considering moving his software company out of Wisconsin because it has trouble recruiting talent. Wisconsin's economic environment might have kept her out of Google's sights which would mean another opportunity lost.

"Google coming to Ann Arbor" [via digg]

UPDATE: Peter Cohan at Blogging Stocks sees this project as another example of "Google's underlying cheapness gene."

Ken Lay Dead at 64

Convicted felon and ex-Enron CEO Ken Lay died of a heart attack:

"Apparently, his heart simply gave out," said Pastor Steve Wende of Houston's First United Methodist Church. Lay, who lived in Houston, frequently vacationed in Colorado.

I think it was more of the stress of a prison sentence and the "$100 million in personal debt."

I found some Democratic Underground wacko looking for the Dick Cheney conspiracy angle:

I have to wonder if Cheney had him killed. Lay knew where a lot of bodies are buried.

Yes, I heard rumors Cheney went hunting with Lay earlier today.

"Enron Founder Kenneth Lay Dies at 64"

Ellison Takes Back Gift to Harvard

I'm under the weather today. Sleep has been my best friend. That's why there was no show prep for Charlie Sykes, and my first post is so late today.

Anyway, Oracle's billionaire Larry Ellison took back his gift to Harvard University, and it has to do with outgoing president Larry Summers:

An Oracle spokesman said on Tuesday that Mr Ellison’s decision to withdraw his pledge was “directly related” to the departure of Mr Summers, the controversial former US treasury secretary, whose brusque management style frequently clashed with members of the Harvard faculty.

“Larry Summers was the brainchild of this initiative. He and Larry Ellison had several dicussions about it. His last day at Harvard is this week, and his departure from Harvard is really the reason that Larry decided to reconsider the decision,” the spokesman said.

He said Mr Ellison planned to announce a donation to another organisation within “several weeks.”

Concerns about the pledge first emerged last week, after Christopher Murray, head of Harvard’s Global Health Initiative, who had been tapped to run the institute, said last week that the promised millions of dollars from Mr Ellison never materialised.

The planned Ellison Institute for World Health was to have studied ways to assess health policies around the world. Mr Ellison, whose wealth is estimated by Forbes at $16bn, had originally pledged the funds in a meeting with Mr Summers last year.

Ellison loves publicity so I wonder if he timed this announcement for Summers' departure or because Warren Buffett got loads of press for his massive gift to the Gates Foundation.

"Ellison Rescinds $115m Harvard Gift"

Buffett Donation is Estate Tax Dodge

You don't get to be the second-richest man in the world by being dumb. Warren Buffett has been a smart investor and is being smart in what happens to his money after he dies. James Taranto notes:

The federal death tax is currently being phased out, but it will reappear in 2011 unless Congress acts--which means that if Buffett lives that long, the government will confiscate 55% of his assets upon his death.

Buffett is wise with his own fortune but isn't smart about the estate tax. He's called its repeal "a terrible mistake." Yet he's finding a way to get out of paying it. That's pretty easy for the Sage of Omaha who can hire the best tax lawyers in the world. If he advocated the end of such pointless wealth redistribution he wouldn't waste money on legal fees, he could have found a more economically or personally satisfying use for his fortune, and we'd all be better off.

Critics Gloss Over Wal-Mart's Cheap Prices

Jason Furman, a self-professed progressive [PDF] who "instinctively recoil[s] at the big-box shopping centers spreading their uniformity across the American landscape" sees the benefits of Wal-Mart:

A range of studies has found that Wal-Mart's prices are 8 percent to 39 percent below the prices of its competitors. The single most careful economic study, co-authored by the well-respected MIT economist Jerry Hausman, found that grocery sales by Wal-Mart and other big-box stores made consumers better off to the tune of 25 percent of food consumption. That doesn't mean much for those of us in the top fifth of the income distribution—we spend only about 3.5 percent of our income on food at home and, at least in my case, most of that shopping is done at high-priced supermarkets like Whole Foods. But that's a huge savings for households in the bottom quintile, which, on average, spend 26 percent of their income on food. In fact, it is equivalent to a 6.5 percent boost in household income—unless the family lives in New York City or one of the other places that have successfully kept Wal-Mart and its ilk away.

So on the matter of price Wal-Mart is good. Of course price isn't the only concern to a consumer. The retail monster is not known for customer service and there are a number of goods and brands that aren't available in their stores because they refuse to deal with Wal-Mart's tough negotiators. Wal-Mart isn't perfect, but even it's biggest cheerleaders wouldn't claim that. The free market allows an assortment of business models from price-focused chains like Wal-Mart to those that emphasise quality, service, atmosphere, and aethetics like Crate & Barrel.

Furman is surprised "by how quickly Wal-Mart's critics move past the issue of low prices?" They move pass that fact because deep down Wal-Mart's critics are anti-capitalist, anti-freedom. They get a strange, negative reaction knowing someone is making a profit. James Joyner puts this view into one sentence: "The thing to keep in mind, however, is that the people who own Wal-Mart make a lot of money, and they are therefore evil." The anti-capitalists view the economy as a zero-sum game where Wal-Mart's profit is derived directly from the low-wage serfs who work in the stores (voluntarily I might add). It's not true, but it helps power their crusade against an American success story.

"Is Wal-Mart Good for the American Working Class?"

Adam Smith's Birthday

The founder of economics Adam Smith was born 283 years ago today. Although DealBreaker.com says today is the anniversary of Smith's baptism. Either way, it's good to be reminded of the field of study he started and the brilliant ideas he advanced.

Carnival of the Capitalists

Rethink(IP) hosts this week's Carnival of the Capitalists.

Paulson Nominated as Next Treasury Secretary

John Snow resigned and President Bush nominated Goldman Sachs CEO Henry Paulson as the new Treasury Secretary.

Snow has been the most quiet, least public Treasury Secretaries in modern times. Today, President Bush said, the Treasury Secretary is the "chief spokesman for my economic policies." Snow's lack of exposure (whether his fault or the White House's) made him a failure. The economy isn't in recession yet a malaise infest the public's attitude toward it.

Being a long-time Wall Street veteran Paulson will have the investment community's ear. Whether that will translate into getting President Bush more credit for the economy will have to be seen.

The AP has already jumped on Paulson's environmental work. He is chairman of The Nature Conservancy. Unlike most environmental groups it uses donated money to buy land and use rights for protection. They take advantage of the power of private property rights.

"President Bush Nominates Henry Paulson as Treasury Secretary"

"Bush taps Paulson for Treasury Secretary"

"Goldman Sachs Chair Paulson Replacing Snow at Treasury"

UPDATE: Wonkette is occasionally funny. "Paulson: does he have a cold or does he always talk like “Macho Man” Randy Savage?"

Gasoline as a Percentage of Income

Glen Whitman whipped up some economic perspective that goes beyond adjusting current gas prices for inflation. He found that gasoline prices as a percentage of household income hasn't reached their early 1980s peak. He writes,

Even looking at the poorest fifth of the population, the fraction of income required to buy gasoline is still lower than it was in the early '80s.

It still doesn't ease the emptiness of my wallet.

"Affordability of Gasoline" [via Jonathan Adler]

The Power of Prices

Economics shows that when the price for something goes up consumers look for substitutes. We're seeing an example of this with the Air Force testing a new jet fuel:

In a series of tests — first on engines mounted on blocks and then with B-52's in flight — the Air Force will try to prove that the American military can fly its aircraft by blending traditional crude-oil-based jet fuel with a synthetic liquid made first from natural gas and, eventually, from coal, which is plentiful and cheaper.

As the price of oil goes up synthetic fuels made from coal, which the United States has lots of, become more cost effective.

"Military Plans Tests in Search for an Alternative to Oil-Based Fuel" [via California Yankee]

Mont Pelerin Society Essay Contest

A dream of mine is to attend a meeting of the Mont Pelerin Society, a group of classical liberal, libertarian, and conservative thinkers. The organization's website states, "Its sole objective was to facilitate an exchange of ideas between like-minded scholars in the hope of strengthening the principles and practice of a free society and to study the workings, virtues, and defects of market-oriented economic systems." Past members include Ludwig von Mises and my intellectual hero Friedrich von Hayek. Current members include Milton Friedman, James Buchanan, Gary Becker, and Ed Feulner.

If I get my act in gear and write one hell of an essay I could win and be invited. The topic is on this Hayek quote:

From the first establishment of (trade) which served reciprocal but not common purposes, a process has been going on for millennia which, by making rules of conduct independent of the particular purposes of those concerned, made it possible to extend these rules to ever wider circles of undetermined persons and eventually might make possible a universal peaceful order of the world.

That quote contains mini-summaries of Hayek's ideas: the importance of the rule of law, free trade, how dispersed knowledge is used to coordinate economic actions, and how we would have a better, more peaceful world.

Any essay of mine will draw upon Hayek's "The Use of Knowledge in Society." His The Constitution of Liberty and The Road to Serfdom will also have meaningful material. What I will need is a unique angle or hook to get the judges' attention. A few years ago I won an essay contest sponsored by Laissez Faire Books. My winning essay was title "Hayek's Alien Abduction." My hook was having the great economist kidnapped by aliens then transported to the present to see if his fears in The Road to Serfdom came to fruition. I'll need something more substantial to have a shot in the Mont Pelerin Society contest. If you've read any Hayek or have any thoughts on the above quote leave a comment or send me an e-mail.

A Picture is Worth a Few Billion Words (or Dollars)

Steve Verdon noticed Tim Russert had a little trouble understanding oil company profits. Being the econ geek he is he whips out some graphs.

"Helping Tim Russert"

Day of Rememberance

While ANSWER tries to gather the illegal immigration movement under its Stalinist umbrella Catallarchy turns today, May Day, the communist holiday on its head by making it a day of rememberance.

"May Day 2006: A Day Of Remembrance" [via Instapundit]

Economics 101

With the talk in Washington (by Republicans no less) of price gouging by oil companies it's obvious basic economics lessons are in order. That's where a resource like Wikipedia comes to the rescue with their entry on supply and demand. If someone knows of a site full of interactive or animated supply and demand graphs let me know. Seeing how the shifting curves affect prices helps me.

Some price manipulation may be occuring--the godfather of capitalism Adam Smith wasn't even that naive--but there's no need to leap to nefarious conclusions when non-evil explanations suffice.

Charlie Sykes read this Wall Street Journal editorial on his show today that applies the basic economic laws to gasoline prices.

A Tale of Two Headquarters

From the looks of the company headquarters you'd never guess Wal-Mart was the biggest name in retail. You'd never guess suppliers and potential suppliers come from all over the world to meet with company executives in a structure that looks like a high school. There are no flashing lights, no marble statues of Sam Walton spouting water into the air, and no post-modern architecture.

Compare this:

To this:

The second one is the new NY Times building to be finished later this year. It was designed in part by famed architect Renzo Piano. The facade will have ceramic tubes that catch the light allowing the skyscraper to change colors throughout the day. Striking, yes. I'm impressed even though it has a Pompidou (another Piano-designed building) feel to it.

Comparing the two headquarters is a brief tale of two companies. Wal-Mart strives for efficency and customer satisfaction. Their headquarters is there to achieve those goals with no focus on flash. It's aesthetically unpleasing, but it works; just like your typical Wal-Mart store.

The New York Times is a company in the midst of change. The newspaper business is slowly but surely losing to electronic and alternative media. It has turned from being the United States' "paper of record" to a source of derision, contempt, and ideological bias. Despite the threats to their long-term business they put energy into a new headquarters designed by a famed (and pricey) architect. They even had a reporter do a hit piece on how Wal-Mart was using webloggers to promote the company. That's an interesting way to grow the business. Maybe that thinking is why NY Times investors want changes in how the company's stock is structured. Here's the tale of the tape: New York Times stock vs. Wal-Mart stock. Where would you rather have your money?

Weblogger Covers Wal-Mart Media Conference

The center of all that's evil, Lefties would call that Wal-Mart, looks awfully plain. Rob at Say Anything says the "headquarters looks like my high school." Judging by the picture he took he's right.

Rob is down there for the company's media conference. He got a tour of the headquarters and listened into MSM arrogance while getting hijacked by a labor union.

Tom Forbes is also in Bentonville at the conference.

"Wal-Mart Conference Day 1"

A Sign of the Bubble Bursting?

Larry Kudlow is always the optimist:

The economy is in a boom.

We’ve never had it so good.

"Firing on All Cylinders"

Bolten Wants Snow Replaced

New White House Chief of Staff Josh Bolten wants Treasury Secretary John Snow replaced. Snow has been pretty much invisible while serving (like his predecessor Paul O'Neill so it's not like anyone would really notice. Part of it is the times we live in. We're at war so the foreign policy departments, State and Defense, get the limelight. Part of it is also the importance placed on the department by the President. Other than tax cuts Bush hasn't been an economics-focus President.

"Chief of Staff Is Expected to Shake Up 2 Key Teams"

Chunk of Change

Wow. According to the Legislative Fiscal Bureau (via MJS)...

taxpayers could have saved up to $1.9 billion in state taxes over 20 years if revenue limits had been in place.

The bureau report shows savings of about 4% annually, in both state and local taxes, if the so-called Taxpayer Protection Amendment were already law. The analysis was based on a new version of the measure under consideration by the Legislature.

The savings in state taxes came to about 4% in hypothetical snapshots taken by the bureau looking back 10, 15 and 20 years ago.

That would have translated into cumulative dollar savings of $473.3 million to $1.94 billion in state spending, depending on how long the proposed constitutional amendment had been in force, the bureau study says.

But not everyone's happy:

"Clearly, the impact would be devastating on schools and on the affordability of University of Wisconsin students," said Schmiedicke, Gov. Jim Doyle's top budget official. "Tough decisions need to be made, and this isn't the substitute for that."

Clearly, taxpayers mean nothing to the pro-tax forces in this state. It doesn't matter how much the hypothetical savings could have aided the state and our economy. What matters are state programs, which must be funded with extensive annual increases, regardless of whether we can afford it or not.

This is something the left conveniently forgets about tax and expenditure limits--they do not decrease existing expenditures, or remove funding from certain programs, but merely enforce reasonable growth rates. If necessary, every single program can increase at the given rate. As long as program officials and administrators are responsible, nothing will be "devastated."

I think that's the gist of the problem, however, is responsibility. Those who oppose TELs would never think to impose a requirement of responsibility upon anyone.

AT&T to Buy BellSouth

AT&T, formerly SBC, formerly Southwest Bell, formerly one piece of the Ma Bell empire, wants to buy BellSouth, another piece of old Ma (Grandma?) Bell. My initial reaction is this won't happen. There may be plenty of business and public policy reasons for this merger to happen--I am not fond of antitrust laws. It will take a lot of convincing of the public by AT&T and BellSouth that consumers won't be gouged. At a time when many people there's a conspiracy among oil companies to keep gas prices high the public will be highly skeptical of a business deal that reduces the number of major U.S. telecom players to three (AT&T, Qwest, and Verizon).

A part of the press release that caught my eye was the combined company will be headquartered in San Antonio, TX. If the deal goes through the U.S.'s #1 telecom players will be in Texas while the #1 retailer, Wal-Mart will be in Arkansas. Who would have thought 50 years ago that the dominant players in these two industries wouldn't be located either New York City or Chicago?

"AT&T, BellSouth to Merge"

Hamilton Never Looked Uglier

The feds continue to ruin our money. No, I'm not talking about inflation. I'm talking about adding garish colors that slowly evolve our fine greenbacks into euros. It's bad enough the fifty-dollar bill is pink. The new ten-dollar bill now includes yellow and red. It looks like the bill is suffering from yellow fever and chicken pox. (Is this prophetic of the bird flu?) Aesthetics have been abandoned to fight the counterfeiters. It means the coin-side of the federal moneymakers has the monopoly on the talent.

"New, More Colorful $10 Bill to Debut"

Carnival of the Capitalists

Lots of capitalist goodness at The Stalwart.

I'm Depressed

Carla Howell roughly estimates $7 trillion out of a $12 trillion economy last year was government controlled spending. We live during a time when people like Karl Rove think the nation is on the cusp of a long-term GOP majority. It goes to show you Republican doesn't equal conservative. Go John Shadegg!

"Big Government Is Even Bigger Than You Think" [via Cam Edwards/Farrah]

The Incredible Shrinking Deficit

Steve Conover, The Skeptical Optimist, sees a trend brewing. With some luck and a gridlocked Congress we could see the federal budget deficit at zero in a few years. It's so contrarian to what you hear from the MSM.

You can find this post along with other great business and economics writing at the Carnival of the Capitalists hosted this week by Wordlab.

"The Disappearing Deficit"

Sponsored by ACME

Not TAM, but this week's Carnival of the Capitalists hosted by Coyote Blog.

Google's Growth

Google is a joy for stock owners as well as employees. The perks of working there are lavish:

Meals of all kinds, painstakingly prepared by company chefs, are free at the company's headquarters in Mountain View, Calif., a modern corporate campus known as the Googleplex. Other amenities there include children's day care, doctors, dry cleaning, laundry, a gym, and basketball and volleyball courts. Maternity or paternity leave is 12 weeks at 75 percent of full pay. There is also up to $500 available for takeout meals for the entire family after a newborn arrives, courtesy of Google. Shuttle buses (with wireless Internet access for working while commuting) ferry employees to the Googleplex from throughout the Bay area.

It's easy to offer such great benefits when the company is growing and the money is rolling in. But what happens when times get tough, and they will? Shona L. Brown, vice president of operations said, "We will not pull back on our commitments to employees. The last thing we would do is take it out of the hide of our employees. That is a path to a downward spiral." I'm sure that's what GM thought when they doled out lavish retirment and health benefits that today are crushing the company.

CEO Eric Schmidt is a little more realistic though vague:

Another issue that we will face in the coming years is the maturation of the company, the industry and our work force. We, along with other firms in this industry, are in a rapid growth stage now, but that won't go on forever. Some of our new workers are fresh out of college; others have families and extensive job experience. Their interests and needs are different. We need to provide benefits and a work environment that will be attractive to all ages.

"At Google, Cube Culture Has New Rules" [via digg]

Leftists Would Say Bartlett is "Growing"

Bruce Bartlett isn't a fan of President Bush. Next year, he'll be coming out with a book titled Imposter: How George W. Bush Bankrupted America and Betrayed the Reagan Legacy. The book got him fired from a conservative think tank. During the Harriet Miers brouhaha he wrote in a column:

The truth that is now dawning on many movement conservatives is that George W. Bush is not one of them and never has been. They were allies for a long time, to be sure, and conservatives used Bush just as he used them. But it now appears that they are headed for divorce. And as with all divorces, the ultimate cause was not the final incident, but the buildup of grievances over a long period that one day could no longer be overlooked, contained or smoothed over.
...
I could go on, but the point is that George W. Bush has never demonstrated any interest in shrinking the size of government. And on many occasions, he has increased government significantly. Yet if there is anything that defines conservatism in America, it is hostility to government expansion. The idea of big government conservatism, a term often used to describe Bush's philosophy, is a contradiction in terms.

The case can be made. However Bartlett will lose mucho credibility in conservative circles because he doesn't reject a value-added tax (VAT). NY Times reporter Eduardo Porter writes,

Bruce Bartlett, who worked as an economic aide to Presidents Reagan and George H.W. Bush, recommends the introduction of a value-added tax - a kind of sales tax used in Europe and most other advanced industrial nations - to bring in the large amounts of new revenue he deems necessary to close the enormous budget gap.

I read this and scratched my head. A man who says he's a Reagan conservative wants the federal government to have more taxing power? You be the judge. In a 03.08.05 column he praised the VAT saying it's a "highly efficient tax." He countered VAT critics like the Wall Street Journal Editorial Board who think the VAT is a silent way to squeeze more money out of taxpayers:

Serious academic studies have concluded that the VAT cannot be blamed for raising the overall burden of taxation even in countries where it was a new tax and not a replacement for some existing tax. Writing in the prestigious National Tax Journal in December 1985, economist J.A. Stockfisch found no support for the view that VATs raise either the tax level or government spending.

Bartlett concludes:

[The VAT] may turn out to be the least bad way of financing needed tax reforms and the massive growth of federal health care spending that neither the White House nor Congress shows any interest in restraining.

When a conservative begins to advocate ideas that increase the size of government Leftists claim they are "growing" intellectually. They're are starting to realize government's growth is the only way to solve our nation's problems. After reading a 10.30.02 National Review Online column we see Bartlett has indeed grown:

On Saturday (October 26), the Washington Post reported that the Treasury Department is studying plans to impose a value-added tax (VAT) to replace the corporate income tax and finance other tax reforms. This is a dangerous road for the Bush administration to travel, both politically and economically.
...
In 1984, the Treasury Department published a comprehensive study of the VAT that recommended against its adoption. The reasons laid out in that report are still valid today. Adopting a VAT, however it is termed, would put the U.S. on a slippery slope toward European levels of taxation and government. The Bush administration will be making a terrible mistake if it starts down that road.

The conservative movement doesn't need a "growing" conservative who won't reject a new tax.

Wondering about eBay

What's the point of hunting for deals on eBay when sellers slap on a big shipping charge? You may still end up getting a bargain, but something gets lost in the experience.

And I still don't understand the Skype purchase.

"Cyber Monday" a Myth

I fell for online marketers' claims that the Monday after Thanksgiving is the big online shopping day:

So what's up with this Cyber Monday idea? A little bit of reality and a whole lot of savvy marketing. It turns out that Shop.org, an association for retailers that sell online, dreamed up the term just days before putting out a Nov. 21 press release touting Cyber Monday as "one of the biggest online shopping days of the year."

The idea was born when a few people at the organization were brainstorming about how to promote online shopping, says Shop.org Executive Director Scott Silverman, who answered his phone, "Happy Cyber Monday." They quickly discarded suggestions such as Black Monday (too much like Black Friday), Blue Monday (not very cheery), and Green Monday (too environmentalist), and settled on Cyber Monday. "It's not the biggest day," Silverman concedes. "But it was an opportunity to create some consumer excitement."

The genesis of the concept goes back even further. Shop.org member Shmuel Gniwisch, chief executive of the online jewelry site Ice.com, recalls getting an e-mail from Shop.org last year, suggesting that online retailers come up with their own marketing hook to match Black Friday. "The online guys got together and said, 'Let's give people something different,'" he says. "The reality is, we didn't notice anything special" on the Monday after Thanksgiving.

The biggest online shopping days are actually "around Dec. 5 and Dec. 15."

Bravo to Shop.org. There are some cleaver people there. Too bad for them I'll discount anything put out by them as pure spin. Like The Who "I won't be fooled again."

"Cyber Monday, Marketing Myth" [via digg]

Carnival of the Capitalists

Plenty of good econ/biz reading at Gill Blog who hosts this week's Carnival of the Capitalists.

Sunday Night Pick-Me-Up

Dead Meat is a documentary that looks at the waiting, and waiting, and waiting...of the Canadian health care system. Unless you're a dog of course.

[via Dr. Helen]

Fed to Start Hiding Econ Data

Fiat currency is a given. Money backed in something tangible like gold or a basket of commodities will not happen in my lifetime. Doing so would restrict government power, something that rarely happens in modern times. Given that we're stuck with central banks printing money at will (but using fancy econometric and macroeconomic theories to support them) investors, consumers, and businesses need to know how much money is being created. The Federal Reserve has decided to no longer publish M3 money supply numbers. M3 covers not only cash but checking accounts (demand accounts in econo-speak), savings accounts, CDs, eurodollar deposits, and repurchase agreements. By manipulating the money supply central bankers attempt to regulate business cycles. Sometimes they do ok (Alan Greenspan) and sometimes they really blow it (the Great Depression). If Ben Bernanke becomes the next Fed chairman he will implement some kind of inflation targeting. Economic actors will be better off knowing how well the Fed is doing with the M3 numbers. Transparency is important. Economic actors won't want to rely solely on the good faith of the Fed, especially with a new Fed chair running the show.

Other great economics and business posts are found at this week's Carnival of the Capitalists hosted by The Entrepreneurial Mind.

"Unpleasant Trend - Fed Counters By Stopping Release of M3 Money Supply Data"

Peter Drucker, R.I.P.

Management guru Peter Drucker died at 95:

Peter F. Drucker, revered as the father of modern management for his numerous books and articles stressing innovation, entrepreneurship and strategies for dealing with a changing world, died Friday, a spokesman for Claremont Graduate University said.

...

In 2002, Drucker was awarded a Presidential Medal of Freedom. He has been called "the world's foremost pioneer of management theory" and a champion of concepts such as privatization, management by objective and decentralization. Business Week magazine hailed him as "the most enduring management thinker of our time," and Forbes magazine featured him on a 1997 cover under the headline: "Still the Youngest Mind."

In the early 1940s, General Motors invited Drucker to study its inner workings. That experience led to his first management book, "Concept of the Corporation," in 1946. He went on to write more than 30 books.

"He's very much an intellectual leader, and that's not common," said D. Quinn Mills, a professor at Harvard Business School who shared the podium at several conferences with Drucker. Quinn described Drucker's insights as rare.

After the big stock market decline of October 1987, Drucker said he had expected it, "and not for economic reasons, but for aesthetic and moral reasons."

"The last two years were just too disgusting a spectacle," Drucker said. "Pigs gorging themselves at the trough are always a disgusting spectacle, and you know it won't last long."

Drucker termed Wall Street brokers "a totally non-productive crowd which is out for a lot of easy money."

"When you reach the point where the traders make more money than investors, you know it's not going to last," he said.

"The