For the Bears to go to the playoffs, the Vikings must lose.
For the Vikings to lose, the Packers must win.
Most people would conclude that Bears fans should root for the Packers.
Most people would be wrong.
No real Bears fan would ever root for the Packers.
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Sunday, December 30, 2012
What's a Couple Hundred Thousand Dollars?
In the interest of full disclosure, my own personal household's cash flow is dependent on government spending. Between my subsidized student loans from the Department of Education, and my husband's research grants from the Department of State, and the VA programs that mean that I can ship my dad off to a home when he goes fully senile (thank you for your service, Dad), going over the fiscal cliff is going to be very, very, very, very bad for me personally. No more loans, no more income, and no possible help from the Bank of Dad who now might have to provide for his own long-term health care. In short, homelessness and starvation await. And, with no housing subsidies or food stamps that normally pick up the slack in these times, we're royally screwed. That's just me. And, no, my situation would not have been better if we had stayed in Indiana (my income was heavily dependent on federal spending). If you know any students, retired folk, military members, and anyone who works in education, manufacturing, construction, healthcare, social services, or... well... anyone who sells anything to people who work in these sectors, there's a good chance that going over the fiscal cliff is going to be disasterous.
With so much at stake, Congress really needs to come up with a deal. Like now. Decreases in government spending will decrease the overall spending of the economy, thereby contracting the GDP of the United States. With less government spending, private firms and individuals will have less money to spend (if you don't buy that helicopter, then there is a factory that no longer has to employ people to build that helicopter), which means that fewer transactions will take place on which income and sales tax can be charged. Decreased spending will then lead to decreased revenues, requiring further reductions of spending, or increases in tax rates. Neither is a good idea for growing an economy, leading me to wonder what economic training Grover Norquist actually received. Not that Norquist is really paid to advocate for sound economic policy, but rather is paid to lobby for decreased tax rates.
This brings me to my main question: Why is the current hold up about whether taxes should be raised for everyone making above $250,000, $400,000, or $1M? What do these sums have to do with anything?
GIFSoup
What I find the most troubling thing is that Congress is hung up on which ad hoc level to set. There appears to be a complete disconnect from reality with these numbers. Congress could actually tie this to some measure that has real bearing on the economy. A multiple of the poverty line, based in real dollars that slides based on the number of members of the family. If one would set this at 10 times the federal poverty line, then an individual does not see tax increases until (s)he earns $111,700 per year. A family of four sees an increase at $230,050. If you use the Census Poverty Threshhold, you get slightly different figures ($114,840 and $228,110 if the family of four is two adults and two kids), but still in the same ballpark. Both methods would tie tax increases to some measure of real poverty and how much money is actually needed to provide for the basic needs of the population, or satisfiy the goal of shifting the tax burden to those who can afford it. It takes away the method of trying to figure out which figure sounds rich and which is middle class.
But, what is a middle class income? The answer is none of the above Median household income for the United States was $50,054 in 2011. That's one fifth of the smallest number that is being talked about, one twentieth of the $1M figure. Even taking 10 times the poverty level of the US doesn't get us close to this figure. If a solution should look at taxing the wealthiest households, then a multiplier of the median household income should be considered, be it 3 times or 5 times the national median.
What Congress should not be doing is throwing out these arbitrary numbers and think that sound policy is being produced. Nothing about the fiscal cliff has been about the creation of sound public policy.
With so much at stake, Congress really needs to come up with a deal. Like now. Decreases in government spending will decrease the overall spending of the economy, thereby contracting the GDP of the United States. With less government spending, private firms and individuals will have less money to spend (if you don't buy that helicopter, then there is a factory that no longer has to employ people to build that helicopter), which means that fewer transactions will take place on which income and sales tax can be charged. Decreased spending will then lead to decreased revenues, requiring further reductions of spending, or increases in tax rates. Neither is a good idea for growing an economy, leading me to wonder what economic training Grover Norquist actually received. Not that Norquist is really paid to advocate for sound economic policy, but rather is paid to lobby for decreased tax rates.
This brings me to my main question: Why is the current hold up about whether taxes should be raised for everyone making above $250,000, $400,000, or $1M? What do these sums have to do with anything?
 |
| Chosen just to remind me of this scene? |
What I find the most troubling thing is that Congress is hung up on which ad hoc level to set. There appears to be a complete disconnect from reality with these numbers. Congress could actually tie this to some measure that has real bearing on the economy. A multiple of the poverty line, based in real dollars that slides based on the number of members of the family. If one would set this at 10 times the federal poverty line, then an individual does not see tax increases until (s)he earns $111,700 per year. A family of four sees an increase at $230,050. If you use the Census Poverty Threshhold, you get slightly different figures ($114,840 and $228,110 if the family of four is two adults and two kids), but still in the same ballpark. Both methods would tie tax increases to some measure of real poverty and how much money is actually needed to provide for the basic needs of the population, or satisfiy the goal of shifting the tax burden to those who can afford it. It takes away the method of trying to figure out which figure sounds rich and which is middle class.
But, what is a middle class income? The answer is none of the above Median household income for the United States was $50,054 in 2011. That's one fifth of the smallest number that is being talked about, one twentieth of the $1M figure. Even taking 10 times the poverty level of the US doesn't get us close to this figure. If a solution should look at taxing the wealthiest households, then a multiplier of the median household income should be considered, be it 3 times or 5 times the national median.
What Congress should not be doing is throwing out these arbitrary numbers and think that sound policy is being produced. Nothing about the fiscal cliff has been about the creation of sound public policy.
Sunday, December 2, 2012
Sexualized Legos
I had the wonderful opportunity to spend Thanksgiving with a dear friend and her five children. The five children is the reason that I had not seen her in the Midwest lately (they don't tend to travel much), and the previous distances between her home on the East Coast and the Heartland were too great for me to travel to see her. Now, since a weekend to travel home to Chicago was too much, I gladly accepted an invitation to meet the newborn and gorge myself on food.
Her 9, 8, and 6 year old children appear to be obsessed with Legos. The oldest boys walked us through all the characters of the Lego Star Wars universe. Meanwhile, the oldest girl introduced us to Lego Friends, Legos for girls. Legos for girls? Legos are gender-specific? When did this happen?
I have issues with targeted girl and boy products, especially where there does not appear to be any type of need. Legos can have male figures and female figures, but really... building blocks being targeted to boys and girls differently? I'm still skeptical, but what I could not discount was how a 6-year-old girl had responded to a purple and pink playset. I remember having wanted a Barbie at that age, and the political debate that this caused between my parents about gender stereotypes and which message should be given to me. I didn't care. I wanted the glamour Barbie with the Dream House and the car that my friends all had. Instead, I had Day-to-Night Barbie who had an office and a studio apartment - corporate drone Barbie. None of my friends wanted to play with my Barbie, and I somehow felt left out. It's hard to be six.
With my own personal biases on the back burner, I thought I might get a couple of the Lego Friends figures as part of a holiday care package for the kids. I quick look at what's available at Target left me with a more startling view of the toys. Knowing that this is going to a household where both the boys and girls are taught to dress modestly, I realized that purchasing these toys could be offensive to the household's sensibilities. Every one of the girl figures is wearing a short skirt, low cut tank top, or both. Meanwhile the "Boy" oriented products have fully clothed characters, with the main difference between girls and boys being hair length.
I can understand that having pink and purple colored bricks might be appealing, mainly because you can never have too many different types of bricks. However, to create a specific "girl" line of Legos, dress them provocatively, and then market them to 6-year-olds? That's just not right.
Her 9, 8, and 6 year old children appear to be obsessed with Legos. The oldest boys walked us through all the characters of the Lego Star Wars universe. Meanwhile, the oldest girl introduced us to Lego Friends, Legos for girls. Legos for girls? Legos are gender-specific? When did this happen?
I have issues with targeted girl and boy products, especially where there does not appear to be any type of need. Legos can have male figures and female figures, but really... building blocks being targeted to boys and girls differently? I'm still skeptical, but what I could not discount was how a 6-year-old girl had responded to a purple and pink playset. I remember having wanted a Barbie at that age, and the political debate that this caused between my parents about gender stereotypes and which message should be given to me. I didn't care. I wanted the glamour Barbie with the Dream House and the car that my friends all had. Instead, I had Day-to-Night Barbie who had an office and a studio apartment - corporate drone Barbie. None of my friends wanted to play with my Barbie, and I somehow felt left out. It's hard to be six.
With my own personal biases on the back burner, I thought I might get a couple of the Lego Friends figures as part of a holiday care package for the kids. I quick look at what's available at Target left me with a more startling view of the toys. Knowing that this is going to a household where both the boys and girls are taught to dress modestly, I realized that purchasing these toys could be offensive to the household's sensibilities. Every one of the girl figures is wearing a short skirt, low cut tank top, or both. Meanwhile the "Boy" oriented products have fully clothed characters, with the main difference between girls and boys being hair length.
I can understand that having pink and purple colored bricks might be appealing, mainly because you can never have too many different types of bricks. However, to create a specific "girl" line of Legos, dress them provocatively, and then market them to 6-year-olds? That's just not right.
Tuesday, November 20, 2012
Monday, November 12, 2012
Synergies
Sometimes things just seem to fall into place. I've been pretty fortunate in my college education that when world events have gone down, I have been enrolled in the perfect class at that very time. For example, when Bill Clinton was impeached, I was in a class on the American Presidency.
Currently, I'm in a class where we take economic models and apply them to public policy. We're also about to go over the fiscal cliff. SYNERGY!
Or, oh yeah... this blog is about to get epic...
Currently, I'm in a class where we take economic models and apply them to public policy. We're also about to go over the fiscal cliff. SYNERGY!
Or, oh yeah... this blog is about to get epic...
Sunday, November 11, 2012
Poor Decision Rules
I know that my previous post is going to have some detractors, so I've got this one in the can and ready to post immediately following.
Consider the following situation: You have $100. I tell you that you can put this in a bank account, and by this time next year, you can have $100.05. Or, you can put it in a higher yield bond and earn $105. Or, you can go into a business venture and earn $120. What are you going to do? Unless you have decided to live off-grid in a self-sustaining agrarian commune that has no use for money, you'll pick the $120. Now, I tell you that last year, your options were $100.05 for the bank account, $105 for the bond, or $130 for the business venture. What is your decision? Still the business venture, right? Of course! Because if you want to maximize your profits, the business venture is still the best decision! You don't suddenly go, well, it was $130 last year, so I refuse to earn $120 this year.
So how do taxes really kill jobs? I haven't figured this one out.
If you are one of the companies that claim that Obama's policies kill jobs, and vow to cut jobs because of the threat of higher taxes, you probably have a business that's on the ropes to begin with. Looking at some of the companies whose CEOs have threatened this, it's pretty hard to see any of these companies actually having to really lay-off people because of an increase in taxes. While Murray Energy and Westgate Resorts are private companies, Papa John's is a publicly traded company with profit margins of 10.58% in their 2011 Annual Report. How much of an increase in taxes (payroll, income, etc.) would it really take for this rate to be so low that being in business is no longer the most profitable option for John?
Take this one step further, if taxes rise for John, they are rising for every business and pizza chain. So if Papa John's slips in profitability to 8%, it's a safe bet that all other businesses will have similar shifts downward. The attractiveness of Papa John's as an investment stays at the same level relative to the other options that exist at that time. If John is correct though, and the margin slips to nothing, then you wave to look at the other options for investing that are available. Interest rates for bank accounts are practically nothing. If companies are shedding jobs left and right, then they are not expanding, the demand for loans decreases, meaning that the interest rates on loans decrease. Even a 3-4% margin will be attractive to an investor.
However, you are assuming that profitability is a result of attracting investors. From a labor standpoint, if a company can be more profitable by hiring more workers, it hires more workers. If a company can be more profitable by hiring fewer workers, it hires fewer workers. What it doesn't do, or rather should do, is think that a 5% increase in taxes for the majority owner means a retaliatory layoff of 5% of the workforce. The stockholders sure as heck should keep the CEO in check if he really thinks that's a good decision rule.
Consider the following situation: You have $100. I tell you that you can put this in a bank account, and by this time next year, you can have $100.05. Or, you can put it in a higher yield bond and earn $105. Or, you can go into a business venture and earn $120. What are you going to do? Unless you have decided to live off-grid in a self-sustaining agrarian commune that has no use for money, you'll pick the $120. Now, I tell you that last year, your options were $100.05 for the bank account, $105 for the bond, or $130 for the business venture. What is your decision? Still the business venture, right? Of course! Because if you want to maximize your profits, the business venture is still the best decision! You don't suddenly go, well, it was $130 last year, so I refuse to earn $120 this year.
So how do taxes really kill jobs? I haven't figured this one out.
If you are one of the companies that claim that Obama's policies kill jobs, and vow to cut jobs because of the threat of higher taxes, you probably have a business that's on the ropes to begin with. Looking at some of the companies whose CEOs have threatened this, it's pretty hard to see any of these companies actually having to really lay-off people because of an increase in taxes. While Murray Energy and Westgate Resorts are private companies, Papa John's is a publicly traded company with profit margins of 10.58% in their 2011 Annual Report. How much of an increase in taxes (payroll, income, etc.) would it really take for this rate to be so low that being in business is no longer the most profitable option for John?
Take this one step further, if taxes rise for John, they are rising for every business and pizza chain. So if Papa John's slips in profitability to 8%, it's a safe bet that all other businesses will have similar shifts downward. The attractiveness of Papa John's as an investment stays at the same level relative to the other options that exist at that time. If John is correct though, and the margin slips to nothing, then you wave to look at the other options for investing that are available. Interest rates for bank accounts are practically nothing. If companies are shedding jobs left and right, then they are not expanding, the demand for loans decreases, meaning that the interest rates on loans decrease. Even a 3-4% margin will be attractive to an investor.
However, you are assuming that profitability is a result of attracting investors. From a labor standpoint, if a company can be more profitable by hiring more workers, it hires more workers. If a company can be more profitable by hiring fewer workers, it hires fewer workers. What it doesn't do, or rather should do, is think that a 5% increase in taxes for the majority owner means a retaliatory layoff of 5% of the workforce. The stockholders sure as heck should keep the CEO in check if he really thinks that's a good decision rule.
Convenient Scapegoats
The 2012 Midwestern Granola Douche Canoe Award seldom has to look long and hard to find suitable candidates to earn the award. This week, Robert Murray, CEO of Murray Energy, submitted an application packet so thorough that I doubt we will find a more deserving recipient of the Douche Canoe this year. He appears to have mastered being a douche canoe in the fields of campaign finance, labor relations, business ethics, and employment regulations, all while cloaking this in religious rhetoric. Really. Brilliant and thorough.
This week, you may have seen news coverage of Murray's press conference in which he fired 158 workers because Obama won the election. If you had not been paying attention to the exploits of Robert Murray, then you really need to read these. If you are thinking that the name sounds familiar, then, yeah... he's the guy who has those mines in Appalachia and Utah that occasionally collapse. As a former miner whose father was injured in an accident, I don't want to believe that he really wants these things to happen in his mines, but his actions do not indicate that he is doing everything in his power to prevent deaths and hazardous working conditions.
This year, the highlights of Murray Energy's policies have been:
On Wednesday, he led his workforce in prayer, asking God to forgive the horrible thing he was about to do, then went ahead and told 158 people that they were to lose their jobs because Obama won. Matthew 6:5 aside, there are fundamental problems with this statement. Mainly, that it is a giant crock of bullshit.
Let's get this clear: electing Obama had nothing to do with the firings. Instead, there's a simple business reason: Murray Energy competes on cost in an industry where prices are set by the commodity market. There's a lot of coal in Wyoming that's easy to get to. There's less in Galatia, Illinois, and Utah, it's harder to get to, more dangerous to mine, and higher in sulfur than other sources. If your plan is to buy the cheapest coal mines, the ones with the high sulfur coal, then try to sell them for prices near that of higher quality coal, you are going to fail. If the government tries to internalize the externalities associated with the burning of fossil fuels, especially by regulating the pollution caused by the sulfur content of your product, then your business fails. Most businesses do fail. Add to this a substitute good, natural gas, which is now so cheap you could basically give this away, and even without the EPA, the invisible hand of the market is going to smack you upside the head, and you are going to fail. Not letting Murray Energy fail? Well... where's the moral hazard in all of this?
Instead of blaming Obama, Murray needed to face facts: Coal is a mature industry. The only way to stay competitive in this industry is consolidation and maybe some favorable treatment by the government. He has a pretty good idea where Obama sits on this - he's not going to destroy the coal industry, but he's not going to help it become more profitable than it already is... and he's going to regulate the shit out of it. However, Murray was banking on Romney being more generous. He backed the wrong horse, so now he's having to face the problems associated for his own poor business strategy without a bailout by the Romney Administration. If anything, he should have just kept all his money, and prepared for the slow decline of his company. That would have been in his economic self-interest no matter who would have won.
This week, you may have seen news coverage of Murray's press conference in which he fired 158 workers because Obama won the election. If you had not been paying attention to the exploits of Robert Murray, then you really need to read these. If you are thinking that the name sounds familiar, then, yeah... he's the guy who has those mines in Appalachia and Utah that occasionally collapse. As a former miner whose father was injured in an accident, I don't want to believe that he really wants these things to happen in his mines, but his actions do not indicate that he is doing everything in his power to prevent deaths and hazardous working conditions.
This year, the highlights of Murray Energy's policies have been:
- Closing a mine in Ohio for a day so miners could attend a mandatory Romney campaign event, but not paying the workers for this mandatory event (I see a DoL Wage and Hour Division complaint here...)
- Tied bonuses and promotions of executives to their campaign donations to Republican candidates.
- Required executives and engineers to attend Republican fundraisers on their own dime.
- Created the Murray Energy PAC to funnel money to Republican candidates... while PACs are supposed to create an air that campaigns and PACs cannot coordinate, let's face it, when you see an ad funded by Murray Energy PAC attacking your opponent, you know who's behind it.
On Wednesday, he led his workforce in prayer, asking God to forgive the horrible thing he was about to do, then went ahead and told 158 people that they were to lose their jobs because Obama won. Matthew 6:5 aside, there are fundamental problems with this statement. Mainly, that it is a giant crock of bullshit.
Let's get this clear: electing Obama had nothing to do with the firings. Instead, there's a simple business reason: Murray Energy competes on cost in an industry where prices are set by the commodity market. There's a lot of coal in Wyoming that's easy to get to. There's less in Galatia, Illinois, and Utah, it's harder to get to, more dangerous to mine, and higher in sulfur than other sources. If your plan is to buy the cheapest coal mines, the ones with the high sulfur coal, then try to sell them for prices near that of higher quality coal, you are going to fail. If the government tries to internalize the externalities associated with the burning of fossil fuels, especially by regulating the pollution caused by the sulfur content of your product, then your business fails. Most businesses do fail. Add to this a substitute good, natural gas, which is now so cheap you could basically give this away, and even without the EPA, the invisible hand of the market is going to smack you upside the head, and you are going to fail. Not letting Murray Energy fail? Well... where's the moral hazard in all of this?
Instead of blaming Obama, Murray needed to face facts: Coal is a mature industry. The only way to stay competitive in this industry is consolidation and maybe some favorable treatment by the government. He has a pretty good idea where Obama sits on this - he's not going to destroy the coal industry, but he's not going to help it become more profitable than it already is... and he's going to regulate the shit out of it. However, Murray was banking on Romney being more generous. He backed the wrong horse, so now he's having to face the problems associated for his own poor business strategy without a bailout by the Romney Administration. If anything, he should have just kept all his money, and prepared for the slow decline of his company. That would have been in his economic self-interest no matter who would have won.
Saturday, November 10, 2012
THANKS!
Just hit 1,000 page views. I'd like to thank the internet spambots and automatic indexers for coming across my page from time to time. However, if you are an actual person with a topic that should be covered... leave me a comment, and I'll try to get to it.
Economics Instruction
One thing that I love about the study of economics is that it takes concepts that sound intuitive, but uses graphs and equations to demonstrate these concepts, which can make it easier to predict future behaviors.
So, take your classic example of earning wages. If you get paid $10 per hour, you could work 8 hours and make $80, or you could work 2 jobs, and get paid $160 for 16 hours of work. If you work the same job for 16 hours, you can earn an extra $40 for overtime, meaning that you can earn $200. If you create a graph for the first example, plotting the goods purchased by your income on one axis, and the amount of leisure that you have, then you end up with a nice smooth line showing all possible outcomes that can occur for your labor. This is a BUDGET CONSTRAINT. (Stick with me... this is going somewhere fun...)
When you plot out the second situation, you have a line with one slope for the first 8 hours, and a second slope for the second 8 hours. Your budget constraint has a kink in it. Economists have called this a KINKED BUDGET CONSTRAINT, because they tend to use terms that look easy to understand. Generally, you see these kinked budget constraints when government policies are in play, like time and a half for overtime, or welfare payments, or the earned income tax credit.
One thing that I hate about the study of economics is that it takes concepts that sound intuitive, then give them terms that sound really, really, really, really bad if you see them over and over again. Take kinked budget constraints. Read this a couple dozen times when you are studying for an exam, and your brain will probably go here at some point:
So, take your classic example of earning wages. If you get paid $10 per hour, you could work 8 hours and make $80, or you could work 2 jobs, and get paid $160 for 16 hours of work. If you work the same job for 16 hours, you can earn an extra $40 for overtime, meaning that you can earn $200. If you create a graph for the first example, plotting the goods purchased by your income on one axis, and the amount of leisure that you have, then you end up with a nice smooth line showing all possible outcomes that can occur for your labor. This is a BUDGET CONSTRAINT. (Stick with me... this is going somewhere fun...)
When you plot out the second situation, you have a line with one slope for the first 8 hours, and a second slope for the second 8 hours. Your budget constraint has a kink in it. Economists have called this a KINKED BUDGET CONSTRAINT, because they tend to use terms that look easy to understand. Generally, you see these kinked budget constraints when government policies are in play, like time and a half for overtime, or welfare payments, or the earned income tax credit.
One thing that I hate about the study of economics is that it takes concepts that sound intuitive, then give them terms that sound really, really, really, really bad if you see them over and over again. Take kinked budget constraints. Read this a couple dozen times when you are studying for an exam, and your brain will probably go here at some point:
tee hee hee... kinky budget constraints... hee hee...
Thursday, November 8, 2012
Jon Huntsman for Secretary of State
No... Really... Stick with me...
I was listening to NPR this evening, and Mark McKinnon suggested that the reason that the GOP lost on Tuesday was because they did not nominate someone like Jon Huntsman.
This got me thinking... Jon Huntsman... he'd be an awesome Secretary of State.
If Hillary Clinton really does intend to retire, then why not nominate someone who has executive experience as a former governor who has a great relationship with China? The political cynic in me would say that it's a smart move for Obama to nominate a Republican in order to show that he's bipartisan, but no, it's just smart to nominate a rather capable person to office, regardless of their political party.
I was listening to NPR this evening, and Mark McKinnon suggested that the reason that the GOP lost on Tuesday was because they did not nominate someone like Jon Huntsman.
This got me thinking... Jon Huntsman... he'd be an awesome Secretary of State.
If Hillary Clinton really does intend to retire, then why not nominate someone who has executive experience as a former governor who has a great relationship with China? The political cynic in me would say that it's a smart move for Obama to nominate a Republican in order to show that he's bipartisan, but no, it's just smart to nominate a rather capable person to office, regardless of their political party.
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