22 Million Ways To Support SCHIP

Bush may have vetoed SCHIP, but you can still help children (even children from wealthy families) recieve government health care. At the same time, you will be paving the way for the rest of us to get it too sometime soon.

All you have to do is… smoke!

Sin taxes are an unreliable and temporary source of income. “Sin” comodities (cigarettes, alcohol, etc.) aren’t necessary for survival so when taxes increase, demand, and thus revenue, decrease.

It is political suicide to put massive government expansions like SCHIP on the government doll immediately, so politicians use sin taxes knowing that, when funds run short, they will shift the burden over to more permanent sources of income.

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UAW Gets $35 Billion In Pocket Change

UAW’s strike against GM didn’t last long, but it caught the nation’s attention. That may not be a good thing, though, because now the nation knows that union health benefits are unsustainable in today’s economy and UAW bosses were given $35 billion in pocket change for assuming responsibility for retiree health care.

A key detail: payouts to the 300,000 retired members won’t begin until 2010 and GM will still have to make contributions if the original $35 billion proves insufficient.

But the union cannot be serious about taking on this responsibility. Throughout history union bosses have proven themselves adept at passing responsibility from themselves to others. And nothing has changed.

The Wall Street Journal reported that the UAW took the $35 billion only on condition that GM help lobby for a national health care plan. Chaching! Why didn’t I think of that? I wouldn’t blink at managing $35 billion so long as a national health care plan is implemented in the next four years. Even if I embezzled it all, I wouldn’t have time to spend it all before Hillary popped in her national plan.

First, this arrangement gives UAW all the more reason to put Hillary in office.

Second, what will become of the $35 billion “band aid” once the union throws its retiree members to the one-size-fits-all government meat grinder? Certainly not the feds and certainly not back to GM!

I’ll leave you to imagine the rest.

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The Fed’s Role In Maintaining Wall Street Stability

CNBC’s Mad Money host Jim Cramer went off on the Fed a few weeks ago over its actions in response to the market uncertainty and spike in interest rates coming off the bust of the sub-prime loan market (loans to customers with bad credit ratings.). The clip is very entertaining. Cramer’s solution is cut the discount rate/open the discount window (from what I gather, and I could be wrong, the feds offer short-term loans to banks trying to cover gaps in their money supply and Cramer is saying the interest rates on these loans should be cut to make it easier on these banks.).I believe a number of problems exist with this proposed solution, though. First, banks and investors assumed the risks by extending loans to these people with bad credit. Therefore, the Fed has not responsibility to bail them out.

Further, the Fed’s job is to maintain the long-term stability of the market by managing inflation. When they make decisions today, they are not trying to affect today’s market. Rather, they primarily try to affect the market two to three years from now. Therefore, for the Fed to take action today to affect today’s market is to sell out the long-term stability of the market.

Most moves to solve the problems, including some already taken, will include an influx of cash into the market. This influx, while maybe allaying some fears and propping up the market today, will increase inflation over the next year or more.

Further, investors have a short-term memory. A Fed bailout will alleve many risk-takers of having to bear the consequences of their lending habits. With Wall Street’s already short memory, lenders will soon be out assuming more high-risk loans.

The resilience of the stock market is, in large part, a result of the risk takers of society being free to work their magic. Soon, many who hit the bottom in the past month will be back on the street again. This is, in part, the beauty of a free market. It is also the bane.

It is not the Fed’s job to take the fall for Wall Street as lenders jump onto another passing train. The Fed should not intervene.

See “The Fed’s Alibi” for more commentary on the subject.

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Ethanol Intoxication

Matthew’s Note: Please welcome I, Pandora’s newest author, Paul. He has a brief bio on the about page, and the link there will show you all his posts as he continues to contribute here on I, Pandora. Here’s Paul’s first post:

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As I was making one of our annual trips with my family across Kansas, I noticed something startling. Now when driving across Kansas, generally anything different is good. However, as I reflected upon this change I realized that maybe it wasn’t for the better. What is that change?

Instead of the usual wheat I had seen for the past ten years trekking across what may be the flattest and most boring state in the Union, I saw fields and fields of corn!

This was not limited to a couple fields here and there; nearly the entire state was covered in corn. Why the change? Well the short answer is government ethanol subsidies and mandates.

In the past several years most of our politicians, president Bush included, have argued that America is “dependent” on foreign oil and must seek alternative fuel sources. And instead of letting the market and individuals decide whether it is cost efficient and necessary to develop new fuel sources, the federal government has offered enormous subsidies (billions of dollars) for researching how to develop and produce ethanol to supplement, and ideally replace, crude oil.

They have also begun to mandate that gasoline sold in the U. S. must have a certain percentage of ethanol added to it.

Now what does this have to do with corn in Kansas? Well, in case you didn’t know, the main ingredient in the production of ethanol is corn. As lucrative government contracts and subsidies are offered, companies are chomping at the bit to try their hand at developing and producing ethanol. To do this, they need to buy corn. Lots of it. For anyone who knows nothing about economics, the price of a good is determined by two things: how large the supply of the good is and how large the demand of the good is. The higher the demand for the good is, the higher the price will be.

With the huge demand for corn generated by the new ethanol companies, the price has skyrocketed and is at its highest point in over a decade. As you can guess, if the relative price of corn to wheat doubles, farmers will stop growing wheat and start growing corn instead because they can make a much larger profit. Hence the fields of corn in Kansas instead of fields of wheat.

So why care that farmers are switching from wheat to corn? Well there are a number of results that directly affect you.

First, the price of corn has increased by quite a bit. This means that when you walk into your local grocery store instead of being able to buy five or six ears of corn for a dollar, you have to pay two or three dollars instead. So, people won’t have quite as much corn as they had before.

Second, corn is used to feed livestock (cattle, hogs, chickens, etc.). So as corn prices rise, the cost of feed also rises. This means that chicken and dairy farmers have to pay more money to feed their animals. They then raise the price of their products to cover this additional cost. So this explains, in part, the increasing prices for milk, cheese, eggs, beef, chicken, etc.

Third, this is the part that involves the switch from wheat to corn. Now that more corn is being grown, we can expect the price to decrease or stay the same depending on how much demand continues to increase. However, we have less wheat. That means the price of wheat will increase. What is made out of wheat? Bread, bagels, pie crusts, pasta, pancakes, muffins, cupcakes, biscuits, crackers, pretzels, buns, and anything else made with flour. These will all increase in price when their main ingredient increases in price.

“Why are we using food to fuel our cars?” This question has been bandied about by critics, economists, and others in relation to ethanol. Why indeed? Would it not make more sense to use something that cannot be put to another valuable use, such as crude oil? If you think about it, the ethanol subsidies are funded by our tax dollars. So in effect, we are paying billions of dollars to increase the price of our groceries.

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When Environmental Causes Collide

When environmental projects are mutually exclusive, the environment has no ability to tell us which of the two it favors. How then should we decide which of the two to take?

To date, environmental organizations have been fighting to get their policies implemented. Now that they have a sufficient foothold, the infighting begins.

Here’s just one example.

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“I’m OK With You Not Voting.”

I saw a statement from John Stossel, 20/20 reporter, this morning and it got me thinking.

“[S]tudents often ask what can be done about the ‘problem’ of young people who don’t care enough to vote. I always say that I don’t see it as much of problem ‘because most of you don’t know anything yet. I’m OK with you not voting!’ The students laugh, but I’m not joking.“

I agree. Often, voters make decisions without considering their options or looking at the secondary effects of political policies. Take, for example, Social Security.

I was talking with a friend the other day about the relative benefits of a 401(k) versus Social Security.

We were discussing our God-given responsibilities to care for our families and, if given a choice (we don’t have one right now, but hypothetically.) how this responsibility would affect our decision whether to put all our eggs into Social Security or into a 401(k).

At my friend’s current salary, we calculated that he will put $300,000 into Social Security (including the employer portion) over the next 40 years.

Then we calculated the “return” on his investment.

Social Secuirty: If Social Security pays my friend $25,000 a year, he must live 12 years beyond “retirement” to recoup his investment into Social Security. Unfortunately, at this rate, it is not likely he will recoup his investment because his life expectancy is only 75.15 years (https://www.cia.gov/library/publications/the-world-factbook/geos/us.html).

Although his wife will receive a small stipend, his children will get nothing from his investment. Further, $25,000 is close to or below the current federal poverty level. In 40 years, it will be even more so. In fact, it will probably be unlivable.

To be technical, some of these figures are variables. As Social Security becomes more unsustainable, benefits will be cut by increasing the “retirement” age. Also, the average life expectancy will probably be a few years higher in 40 years because of advances in nutrition and medical technology.

401(k)’s: Now for the alternative: If my friend puts the $300,000 into a 401(k) over 40 years until the age of 65, he will have $3,452,839.

Further, if he dies at 75, his wife will have plenty live off of and he will be able to pass the remainder on to his children (more Biblical mandates).

 

To finish up, here’s the remainder of Stossel’s quote:

“… I only started to think I knew what ought to be done after years of reporting and reading voraciously to absorb arguments from left and right. The idea that most voters vote without having done much of that work is, frankly, scary.”

Scary indeed. We live with the repercussions every day.

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A Publicly Funded Political Party?

I don’t know where this video was taken, but I know these organizing and lobbying schools are common. California funds a labor center at the University of Berkly and Washington state funds another at its Evergreen College. Should the state be taking sides in the labor/management debate particularly in funding labor organizers and lobbyists?

It is not the government’s job to pick the winners and losers in an economy. It’s responsibility is to merely level the playing field so everybody can compete.

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Unions Vs. Competition

I’m reading an intriguing study on the decline in the labor movement over the last 50 years. The author says it is not because of the change from an industrial economy to a services economy. Nor is it the result of a better educated workforce, management opposition or government regulations. Rather, the decline is the result of competition.

The union heyday, between 1945 and 1955, was the result of “corporatist” policies. This title describes the combination of policies in three areas.

• Above-market price controls (limiting competition between companies)
• Pro-labor policies (limiting wage competition by mandating above market wages)
• Suspension of anti-trust laws (necessary to legalize the above two policies)

The original corporatist policy passed by Congress was ruled unconstitutional and, a few years later, the National Labor Relations Act (NLRA) was passed to replace it.

But, the author argues, while generally pro-labor, the NLRA was actually the beginning of the decline of Big Labor. Why? Because the NLRA only included the labor prong of the original corporatist policies. It abandoned the price controls and limitations on anti-trust laws.The resulting competition into the consumer market sparked the beginning of the end of Big Labor’s influence. Corporations now had to compete for profit and all expenses were scrutinized for potential savings, including labor costs.

Now don’t buy the rhetoric against profit (Oil companies anybody?). A free market will automatically adjust wages and prices (a global market complicates the equation, but it remains a truism). Why? Because:

• On one hand, companies must keep wages low enough to attract customers.
• On the other hand, companies must pay employees enough to maintain a competent and stable workforce.

Although it may take time, these two forces will balance out (Take the effect that the increase in gas prices and the government mandates for ethanol has had on the food market. Wages are increasing accordingly as the cost of cost of living increases and workers demand more.)

The conclusion: so long as the purpose of unions is to mandate wages above the market rate, unions will continue to decline because:

• Employers will become less efficient and
• Increased wages will decrease the number of employees an employer can hire with an available pool of money, reducing the number of potential union members.

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Colbert Congratulates Carpenters For Finally Becoming Management

A follow-up on last night’s post…

Colbert, from Comedy Central, spoofed the contradiction congratulating the Carpenters for reaching the echelons of “management.”

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Carpenters’ Union Outsources Picket Lines

In this video, one union boss oversees a picket line of homeless and transients the union hired to do work the union’s members won’t do themselves. When a reporter tries to ask the picketers questions, they say that they will be fired if they talked to him. The union boss remains tight lipped too.A few notes to complement this video…

Shopfloor’s Carter Wood did some research on how old this story is and poses the question: “The federal minimum wage went up yesterday. Did the carpenters give their homeless picketers a raise?”

Other mentions:

• Miami, Fla., October 2004: “When it comes to picketing, the Carpenters’ Union has discovered it’s smart to outsource. …That’s part of the strategy behind a flurry of protests outside a few Brickell Avenue towers in recent months. But complaints have filtered to Miami police regarding abusive language and use of the homeless to hold signs. “Maybe some are homeless, but not the majority,” Kuzmik said.
• Indianapolis, Ind., May 2005: “The labor group hires demonstrators–including many homeless and unemployed people who have little or no connection to the construction trades–to picket various projects, carrying giant fake rats on sticks or even wearing rat costumes.”
• Columbus, Ohio, August 2006: “Ohio and Vicinity Regional Council of Carpenters is upset that some contractors and property-management companies don’t pay carpenters the $22.50-an-hour standard wage and, perhaps, don’t pay for health insurance or pensions. So the union is picketing these companies. Well, sort of. The union itself is not doing the protesting. Rather, it has hired more than 160 nonunion people — the jobless and the homeless — to do its picketing.”
• Louisville, January 2005
• Denver, January 2006
• And as we noted yesterday, Street Sense, the self-help homeless tabloid, reported the story in August 2005.

Bret Jacobson at Laborpains.org also notes another newscase from back in August 2006. (Video here.)

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