The US Economy

Only a thought here:

There is not enough demand in this economy, and there was a time when progressives called on the government to help supply it.

Err, increasing demand in the economy. As far as I remember there\’s really only one way the Govt can do this. Defecit spending. Is that really what progressives in the US should be calling for? More defecits?

On Being Ruled By Tax Exiles

I can sort of understand the logic here:

A forthcoming constitutional reform bill could include measures to stop tax exiles from sitting in the House of Lords, the cabinet secretary said yesterday amid further questions about the tax status of the millionaire Tory donor Lord Ashcroft.

Of course, it\’s about nailing Ashcroft rather than there being any principle to it but let\’s take the argument at face value.

We shouldn\’t be ruled by people who do not live under the same law as us. It should not be possible for people who are not resident and subject to UK law to influence said law over those who are resident. That is the point, isn\’t it?

OK, then we shouldn\’t be ruled by the European Union then, should we? Should not allow non-residents to make 80% of our law for us.

I Hadn\’t Expected This Problem

This is a bit of a surprise, I must admit:

An American judge has prevented Deutsche Bank from repossessing 14 homes because the bank could not prove it owned the defaulting mortgages involved. The ruling by Ohio district court judge Christopher Boyko could have serious repercussions for banks and mortgage lenders, for whom the pooling of mortgage securities is a $6,500bn (£3,200bn) industry.

Pooling involves taking hundreds if not thousands of mortgages, putting them in one unit, and then selling parts of that unit to others. As a result, it can often be unclear which bank actually owns the individual mortgages.

Judge Boyko had ordered lawyers acting for Deutsche Bank National Trust Company to prove the lender was the ultimate owner of the mortgages. When it could not do so, he dismissed the cases.

If this is a general thing affecting a significant proportion of the pooled mortgages then there\’s actually a very much larger problem underlying the sub-prime mortgage problem than we at first thought. It\’s not that some of the paper is worthless, it\’s that if it cannot be attached to the underlying security then all of it is (technically) worthless.

But I can\’t believe that it is. For the pooling of mortgages has been going on for decades (it\’s one of the products talked about in Michael Lewis\’ "Liars\’ Poker" which is set in the mid-80s) and there will have been defaults before. Indeed, Fannie Mae and Freddie Mac exist to provide exactly this sort of pooling and securitisation.

So what has actually happened, anyone know? A particularly recalcitrant judge who is going to get over ruled? Or in the scramble to issue these loans, did some of the paperwork get missed?

Pay As You Throw

We\’re given some costs on this new pay as you throw scheme for domestic waste:

The Department for Environment, Food and Rural Affairs estimates that start-up costs for pay-as-you-throw schemes will be up £200,000 per council, with annual running costs between £200,000 and £500,000. If the schemes were rolled out across Britain, Defra says they could cost up to £60 million a year on average but with potential savings of up to £200?million from low waste costs.

As ever, there is no estimate for the greatest cost in the scheme. The cost of the households in actually sorting their waste. A few months back I phoned Defra and asked them what in fact was their estimate for the time it would take to sort materials so as to comply with the recycling schemes.

They said they didn\’t have one. Which is odd, because an American study (done in Seattle) showed that for purely domestic non-food waste it took 15 minutes per household per week. Include garden and food waste and it rose to 45 minutes or so. 24 million households and an average wage for the country of £9 an hour and you get costs from the time spent preparing for such a recycling system at £2,8 billion to £8.4 billion.

Now I agree that pay as you throw is only part of it, it isn\’t the whole sorting and recycling thing itself, but then again it is indeed part of the whole same movement. What the supporters of changes in the way that rubbish is dealt with is need to is show that the benefits of the new system are greater than the costs: and none of them are even including that £3 to £8 billion number in their calculations. Presumably because they know that if they do they cannot show a benefit over such a large cost.The entire monstrosity of a plan is simply going to make us all poorer by billions of pounds.

That\’s why no one is willing to provide accurate figures as to the costs and or the benefits.

 

Johann Hari and The Laffer Curve

Slighty unfortunate that Hari makes exactly the same mistake about The Laffer Curve that Jonathan Chait does.

Trying to explain this idea to an eager Cheney, "Laffer pulled out a cocktail napkin and drew a parabola-shaped curve on it," writes the liberal New Republic journalist Jonathan Chait. "The premise of the curve was simple. If the government sets a tax rate of zero, it will receive no revenue. And if the government sets a tax rate of 100 per cent, the government will also receive zero tax revenue, since nobody will have any reason to earn any income. Between these two, Laffer\’s curve drew an arc. The arc suggested that at higher levels of taxation, reducing the tax rate would produce more revenue for the government."

No, there\’s a reason it\’s called the Laffer Curve rather than the Laffer Arc. The point is that there is a  level of taxation (and we must be very careful to point out that this will vary for different taxes too) which maximises revenue collection. Go to the right of that point and raising the rate will reduce collections. If you\’re already to the left then reducing the rate will indeed reduce collections.

The point is that if you\’re to the right then reducing the rate will increase collections….and vice versa, if you\’re to the left then increasing the rate will.

We also need to be careful to distinguish between the short and long term. Let\’s have a completely made up example, shall we? OK, we have a taxation system which, via its deadweight costs (which is what we\’re really talking about with the Laffer Curve, the lifting of them, and there isn\’t a single economist alive who would try to insist that taxes don\’t have deadweight costs) leads to a growth rate of 2% pa. We fiddle around with such taxes until we\’ve engineered a growth rate of 4% (well, I did say this was completely made up, didn\’t I?). In the process, we\’ve reduced tax collections by some amount. And we find that we\’ve reduced collections in year two, and three, and four….does that mean we\’ve reduced collections for all time then?

Clearly, no, because the difference between a growth rate of 2% and 4% compound quickly (for one meaning of "quickly") starts to get noticed. For example, a 2% growth rate means the economy doubles in size in 35 years or so. A 4% one means it doubles in 17.5 years or so.

So if we had a 4% growth rate, and taxation levels of only 75% of those in the 2% growth rate scenario, you would see that at some point in the future total tax collections in the higher growth scenario would in fact be higher than in the high tax scenario.

OK. So The Laffer Curve is not buncombe then. The statement that always lowering taxation rates will always increase revenue is indeed buncumbe though: as is the statement that they never will.

The question is, where are we on the curve and further, what timescale are we talking about?

I\’ll also add my usual whine here about the phrase "supply side". It has come to mean, in the annals of American liberalism, exactly this about marginal taxation rates. But that\’s not the way it started out, not the way I continue to understand/use it. It\’s about reform of the supply side. Privatising BT, breaking up AT&T, these are also supply side reforms. Education vouchers would be supply side reform, GP fundholding was a supply side reform. It\’s about what it says on the tin: reforming the supply side of the economy.

From 1947 to 1973, the US economy grew by 4 per cent a year – while the richest Americans paid a 91 per cent top rate of tax.

Err, Johann? A little research perhaps before you write about things where you have no knowledge base?

President John F. Kennedy proposed a series of tax rate reductions in 1963 that resulted in legislation the following year that dropped the top rate from 91 percent in 1963 to 70 percent by 1965. The Kennedy tax cuts helped to trigger the longest economic expansion in the history of the United States. Between 1961 and 1968, the inflation-adjusted economy expanded by more than 42 percent. On a yearly basis, economic growth averaged more than 5 percent.

That\’s just sloppy.

 

 

Was Reagan a Bigot?

From the Corner:

I\’m getting a lot of emails pointing out that of course people believe Reagan was a bigot. Let me clarify what I meant — nobody who has seriously examined the man and his political career believes that Reagan is a bigot.

OK, and Paul Krugman responds:

That is, of course, not the question. Reagan’s personal attitude is of no consequence. The question is whether he deliberately appealed to bigots, as a political tactic. And he did.

OK, fair enough all round I\’d say. Reagan appealed to bigots in the same way that Jesse Jackson did (Hymietown) and Al Sharpton did (Tamara Brawley).

Or is it that only southern whites are bigots who politicians should not attempt to attract while other kinds of bigots are good clean voters?

The Yazzmonster

Should we, the unwanted and unloved Indy and Guardian sorts get the right to opt out of the licence fee?

Yes, of course you should. Everyone should have that right: although it would be better expressed as the right to opt in. You know, privatise the BBC and then suggest that those who wish to enjoy its output pay for it.

I\’ll tell you what\’ll be the first thing to disappear though: those appearance payments, those £50 and £100 cheques that you get for appearing on a radio programme. You\’ll be, I wager, less keen to appear at that point anyway.

Sasha?

Really?

In real terms, Americans are now paying as much or more for gas today as they were during the worst days of the oil-supply crunch after the Iranian revolution.

Not entirely convinced you know. 1979 you had gas rationing I think. Thus Americans were paying huge amounts in lost time as they queued for gas. That doesn\’t happen now so I think it could be said that while sticker prices, adjusted for inflation, are about the same, real costs are not.

Feminism and Sex

I was entirely prepared to believe this idea, that feminists are in fact better in bed. Then I started reading:

Feminists are happier in love and better in bed. I\’m extrapolating a wee bit optimistically, but it\’s cheering to come across a study about the f-word that doesn\’t conclude 99% of respondents think the women\’s movement was about unshaved armpits. What the Rutgers researchers actually found was that, in a survey of college students and older adults, all in heterosexual relationships, men paired with feminist partners reported greater relationship stability and sexual satisfaction.

OK.

This will doubtless do little to dispel the popular myth that the majority of feminists are man-hating lesbians

No you silly cow. Studying people, all of whom are in heterosexual relationships, tells you entirely bugger all about anyone who is lesbian, man-hating or not.

I stopped reading at that point.

 

Women and Sport

Excuse me?

The prime minister will also attack the "critical lack of investment and profile" at the elite end of women\’s sport, with no professionally paid women in team sport in the UK.

What damn business is that of yours? To have professional sports means that you have fans who are willing to pay to watch it. Either on TV or in person. That the public in general do not wish to pay to see women playing team games (well, certain forms of tag team "wrestling" find a ready paying market but that\’s not quite what is meant, I\’m sure) is not a market failure that needs to be corrected by the taxpayer.

It found that 80% of women are doing too little exercise to benefit their health. Government guidelines say five 30-minute sessions of moderate activity a week are needed to produce health benefits, with sports bodies charged with achieving three of the five.

Quite why sports bodies should be charged with this I know not. If five 30-minute sessions is what is required that can easily be achieved by banning vacuum cleaners and washing machines. Brooms and mangles were good enough for great grandmother so they should be good enough for today\’s women.

Or, of course, we might conclude that freeing women from back breaking domestic labour was a good thing and that if they\’re not doing the necessary exercise to make up for that then so damn what? Their choice.

Olympic Costs

The most pessimistic estimates of the final bill for the London 2012 Olympics were vindicated yesterday when the most senior civil servant involved on the project admitted that the entire £2.7bn contingency fund for the project would probably be spent.

Err, no.

The admission means the final cost is likely to be at least £9.3bn, more than double the figure given in London\’s bid book, a disparity which the Labour MP Don Touhig described as "the most catastrophic piece of financial mismanagement in the history of the world".

Again, no.

What we have here is that the most absurdly optimistic estimates have been shown to be the grossly untrue guff of lying bastards. Politicians, at the risk of repeating myself. The current numbers, £ 9 billion or so, are at least potentially somewhere in sight of reality. Realistic estimates are in fact more like Wat Tyler\’s. £20 billion and counting by the time it\’s all finished. Pessimistic estimates would of course have to be north of that figure.

Sorry folks, but this ain\’t over by a long chalk. If you want pessimism, think of Wat\’s point, that this is the largest peacetime construction project ever attempted in hte UK. And think how, say, Connecting for Health, the largest IT project ever attempted, looks like coming in at £30-£40 billion or so.

Do I hear any advance on, say 0.5% of GDP in order to host an outdoor steroids party?

The Boy Foreign Secretary

Bold stuff:

He will suggest that by 2030 all cars purchased in the EU should have zero carbon emissions.

What an excellent suggestion. The response to which is "How"?

What technology are we to use? Electric? Hydrogen? Fuel cells? Chip fat?

In another bold move, he will suggest that by 2030 "we should consider extending the single market beyond our immediate neighbours, and to the Middle East and north Africa". This extended free trade area would not be an alternative to EU membership, but complementary.

I\’ve got a bold idea for you as well. Why don\’t we just declare free trade tomorrow? You know, with the globe? As we know, the gains from trade come from the imports we buy, not from the exports we make. So why are we waiting until 2030 to avail ourselves of this opportunity to make us richer? What is to be gained by waiting 23 years?

Errm, Very Libertarian Boris.

So London will ban plastic bags will it?

Yet when I saw that London councils had unanimously decided, with cross-party approval, to do away with the plastic bags given out free in the capital\’s shops and supermarkets, I am afraid that my heart sang.

Ah, no, this isn\’t libertarian at all. Doing as the local gauleiters insist you do is no more libertarian than insisting that you do as the national ones do. The libertarian solutions would run along the lines of offering a choice: perhaps you pay a deposit for your bag? Perhaps you are offered a choice of plastic or paper? The decision is thus left to the individual, with, if there really are external costs ot that choice, the imposition of a tax or fee to cover that externality.

Of course the British retailers are protesting, because they are worried that the great British shopper will be inconvenienced.

They fear that if we are all issued with nothing but paper bags, or if we bring our own bags to the shop, then we will waddle out without buying that extra packet of custard creams, with disastrous effects on their profit margins.

All I can say is that people who make this dire prediction cannot possibly have been to an American supermarket. The Americans use paper bags for their groceries.

They are far less practical than our plastic bags. They leak, they tear, they have no handles; and yet if you study the American supermarket shopper from behind, it is clear that these paper bags are no inhibition on their consumption of groceries.

One thing that you really should note. Such paper bags, in the American style, only work if you are shopping by car, in the American style. They are simply not compatible with any form of walking shopping. And are we, I wonder, actually desirous of encouraging more shopping by car?

Sitemetering

Sometime in the next couple of hours this blog will go through the 2.5 million visitors mark. That\’s including those who visited the old blog of course, but not those who visit it now after the divorce into Tabloid and Broadsheet editions.

That number is since April 2004, so roughly three and a half years. Not much when placed against some of the major blogs but a satisfying number all the same. Something of an ego boost to find there are that many people (or, as might be more accurate, a small band of eccentrics who visit often) who appreciate the sound of my howling at the wilderness.

I have to admit that this is all really rather done more for my pleasure than yours, a way of amplifying my complaints about the world rather than boring whoever I happen to sit next to while drinking, but thank you all for listening as and when you do.

 

Fortress Britain

Hmm.

Train passengers face routine airline-style bag checks and body searches as part of a new counter-terror crackdown announced by Gordon Brown.

So, er, has anyone done the cost benefit analysis?

This could include screening luggage at major stations like London King\’s Cross or Manchester Piccadilly using mobile checking devices that can be moved around the country.

And this will achieve what? Imagine that there are terrorists, primed and ready to bomb. So we set up the screening systems and start screening people coming into a particular station. Our bombers are therefore not going to use that station on that day, are they? The only way we could keep them off the railways is to screen all stations all the time: and no one at all things that that is going to be anywhere near cost effective. Remember that this would, from the evidence of the only bombing actually on trains in memory, that this would also have to include each and every London Underground station. And, err, every bus stop.

I can\’t see the value of this at all, other than in the sense of something being seen to be done, however wasteful and futile that something is.

Glasgow Airport is cited: what, we stop cars arriving at the airport now?

It is currently unclear who will bear the costs of any security improvements.

That\’s easy. The general public in huge delays. Time equals money, you know?