Government – Page 131 – artdiamondblog.com

“The Nature of Freedom of Choice”

Former Senator George McGovern was the Democratic candidate for president in 1972. In the commentary below, he defends our freedom of choice:

(p. A15) Economic paternalism takes its newest form with the campaign against short-term small loans, commonly known as “payday lending.”
With payday lending, people in need of immediate money can borrow against their future paychecks, allowing emergency purchases or bill payments they could not otherwise make. The service comes at the cost of a significant fee — usually $15 for every $100 borrowed for two weeks. But the cost seems reasonable when all your other options, such as bounced checks or skipped credit-card payments, are obviously more expensive and play havoc with your credit rating.
Anguished at the fact that payday lending isn’t perfect, some people would outlaw the service entirely, or cap fees at such low levels that no lender will provide the service. Anyone who’s familiar with the law of unintended consequences should be able to guess what happens next.
Researchers from the Federal Reserve Bank of New York went one step further and laid the data out: Payday lending bans simply push low-income borrowers into less pleasant options, including increased rates of bankruptcy. Net result: After a lending ban, the consumer has the same amount of debt but fewer ways to manage it.
Since leaving office I’ve written about public policy from a new perspective: outside looking in. I’ve come to realize that protecting freedom of choice in our everyday lives is essential to maintaining a healthy civil society.
. . .
The nature of freedom of choice is that some people will misuse their responsibility and hurt themselves in the process. We should do our best to educate them, but without diminishing choice for everyone else.

For the full commentary, see:
GEORGE MCGOVERN. “Freedom Means Responsibility.” The Wall Street Journal (Fri., March 7, 2008): A15.
(Note: ellipsis added.)

Price Ceilings Also Hurt Those Who Mow Lawns

“Arjun Murti at Goldman Sachs studied the 1970s’ oil spikes. One had drivers lined up at a gas station in San Jose, Calif., in 1974.” Source of caption and photo: online version of the NYT article cited below.

The best part of the article below was the photo above of a gas line caused by the government’s imposing price ceilings on the price of gas. I’ve seen other photos of gas lines, but this is the first one I remember with someone waiting to fill up a lawn mower.

For the full story, see:
LOUISE STORY. “An Oracle of Oil Predicts $200-a-Barrel Crude.” The New York Times (Weds., May 21, 2008): C1 & C4.

Government Fails to Elevate

“Charles Sterrazza, left, and Matthew Benzinger, both in hard hats, worked on an escalator under the watchful eyes of passengers.” Source of caption and photo: online version of the NYT article quoted and cited below.

(p. A18) New York City Transit has spent close to $1 billion to install more than 200 new elevators and escalators in the subway system since the early 1990s, and it plans to spend almost that much again for dozens more machines through the end of the next decade. It is an investment of historic dimensions, aimed at better serving millions of riders and opening more of the subway to the disabled.
. . .
These are the results:
¶One of every six elevators and escalators in the subway system was out of service for more than a month last year, according to the transit agency’s data.
¶The 169 escalators in the subway averaged 68 breakdowns or repair calls each last year, with the worst machines logging more than double that number. And some of the least reliable escalators in the system are also some of the newest, accumulating thousands of hours out of service for what officials described as a litany of mechanical flaws.
¶Two-thirds of the subway elevators — many of which travel all of 15 feet — had at least one breakdown last year in which passengers were trapped inside.
. . .
. . . the cost of all this goes beyond the hefty capital investment and the roughly $25 million spent each year on maintenance and repair. It can be calculated in terms of people delayed on their way to work, people injured in accidents, people forced to alter their travel routines. And for the disabled, it means that many areas of the subway system still cannot be reliably navigated.

For the full story, see:
WILLIAM NEUMAN. “$1 Billion Later, Subway Elevators Still Fail.” The New York Times (Mon., May 19, 2008): A1 & A18-A19.
(Note: ellipses added.)

Source of map graphic: online version of the NYT article quoted and cited above.

Key to Government Revenue is Economic Growth, Not High Tax Rates

Source of graph: online version of the WSJ article quoted and cited below.

(p. A23) Kurt Hauser is a San Francisco investment economist who, 15 years ago, published fresh and eye-opening data about the federal tax system. His findings imply that there are draconian constraints on the ability of tax-rate increases to generate fresh revenues. I think his discovery deserves to be called Hauser’s Law, because it is as central to the economics of taxation as Boyle’s Law is to the physics of gases. Yet economists and policy makers are barely aware of it.
. . .
The data show that the tax yield has been independent of marginal tax rates over this period, but tax revenue is directly proportional to GDP. So if we want to increase tax revenue, we need to increase GDP.
. . .
What makes Hauser’s Law work? For supply-siders there is no mystery. As Mr. Hauser said: “Raising taxes encourages taxpayers to shift, hide and underreport income. . . . Higher taxes reduce the incentives to work, produce, invest and save, thereby dampening overall economic activity and job creation.”

For the full commentary, see:
DAVID RANSON. “You Can’t Soak the Rich.” The Wall Street Journal (Tues., May 20, 2008): A23.
(Note: ellipses added.)

Which Economic System Protects Us from ‘Natural’ Disasters?

“Jiang Guohua, the Communist Party boss of Mianzhu, knelt Sunday to ask parents of earthquake victims to abandon their protest.” Source of caption and photo: online version of the NYT article quoted and cited below.

(p. A10) One man shouted, “Was this a natural disaster or a man-made disaster?” In unison, the parents shouted back: “Man-made!”

For the full story, see:
JAMES T. AREDDY. “Reporter’s Notebook; Tears and Anger Flow as Parents Cast Blame in Children’s Deaths.” The Wall Street Journal (Tues., May 20, 2008): A10.

(p. A1) DUJIANGYAN, China — Bereaved parents whose children were crushed to death in their classrooms during the earthquake in Sichuan Province have turned mourning ceremonies into protests in recent days, forcing officials to address growing political repercussions over shoddy construction of public schools.
Parents of the estimated 10,000 children who lost their lives in the quake have grown so enraged about collapsed schools that they have overcome their usual caution about confronting Communist Party officials. Many say they are especially upset that some schools for poor students crumbled into rubble even though government offices and more elite schools not far away survived the May 12 quake largely intact.
On Tuesday, an informal gathering of parents at Juyuan Middle School in Dujiangyan to commemorate their children gave way to unbridled fury. One of the fathers in attendance, a quarry worker named Liu Lifu, grabbed the microphone and began calling for justice. His 15-year-old daughter, Liu Li, was killed along with her entire class during a biology lesson.
“We demand that the government severely punish the killers who caused the collapse of the school building,” he shouted. “Please, everyone sign the petition so we can find out the truth.”
The crowd grew more agitated. Some parents said local officials had known for years that the school was unsafe but refused to take action. Others recalled that two hours passed before rescue workers showed up; even then, they stopped working at 10 p.m. on the night of the earthquake and did not resume the search until 9 a.m. the next day.
Although there is no official casualty count, only 13 of the school’s 900 students came out alive, parents said. “The people responsible for this should be brought here and have a bullet put in their head,” said Luo Guanmin, a farmer who was cradling a photo of his 16-year-old daughter, Luo Dan.
Sharp confrontations between protesters and officials began over the weekend in several towns in northern Sichuan. Hundreds of parents whose children died at the Fuxin No. 2 Primary School in the city of Mianzhu staged an impromptu rally on Saturday. They surrounded an official who tried to assure them that their complaints were being taken seriously, screaming and yelling in her face until she fainted.
The next day, the Communist (p. A10) Party’s top official in Mianzhu came out to talk with the parents and to try to stop them from marching to Chengdu, the provincial capital, where they sought to prevail on higher-level authorities to investigate. The local party boss, Jiang Guohua, dropped to his knees and pleaded with them to abandon the protest, but the parents shouted in his face and continued their march.
Later, as the crowd surged into the hundreds, some parents clashed with the police, leaving several bleeding and trembling with emotion.
The protests threaten to undermine the government’s attempts to promote its response to the quake as effective and to highlight heroic rescue efforts by the People’s Liberation Army, which has dispatched 150,000 soldiers to the region. Censors have blocked detailed reporting of the schools controversy by the state-run media, but a photo of Mr. Jiang kneeling before protesters has become a sensation on some Web forums, bringing national attention to the incident.
. . .
. . . all at once the women doubled over in agony, a chorus of 100 mothers wailing over the loss of sons and daughters who, because of China’s population control policy, were their only children. The husbands wept in silence, paralyzed by the storm of emotion.

For the full story, see:
ANDREW JACOBS. “Parents’ Grief Turns to Rage at Chinese Officials.” The New York Times (Weds., May 28, 2008): A1 & A10.
(Note: ellipses added.)

“A memorial service for hundreds of students of Juyuan Middle School in Dujiangyan, where a mother held a picture of her son, turned into an angry protest.” Source of caption and photo: online version of the NYT article quoted and cited above.

Haley Barbour Proves the Economic Benefits of Tort Reform

“Haley Barbour, left, with Toyota officials in February 2007 moments after announcing Toyota Motor Corp. will build a $1.3 billion assembly plant in northeast Mississippi.” Source of caption and photo: online version of the WSJ commentary quoted and cited below.

(p. A9) Jackson, Miss. Shortly after winning election in 2003 by running on a tort-reform platform, Mr. Barbour stitched together a coalition of doctors, business groups, taxpayers and even unions to roll back the trial lawyer lobby.
“It was not just a battle,” recalls Charlie Ross, the Senate sponsor of the reform bill, “it was a five-year war.” The law that eventually passed was every trial lawyers’ worst nightmare. It capped awards for noneconomic damages, and prevented the popular practice whereby a plaintiff attorney seeking to bring a class-action shops around for a court where he’ll be likely to get a favorable ruling or judgment.
Almost overnight, the flow of lawsuits began to dry up and businesses started to trickle in. Federal Express invested $1 billion in a new facility in the state. Toyota chose Mississippi over about a dozen other states for a new $1.2 billion, 2,000-worker auto plant. The auto maker has stipulated that the company would pull up stakes if the tort reforms were overturned by the legislature or activist judges.
That hasn’t happened. About 60,000 new jobs have arrived in four years – not a small number in a workforce of about 1.3 million – and a sharp improvement from the 30,000 jobs lost in the four years before Mr. Barbour took office. Since the law took effect, the number of medical malpractice lawsuits has fallen by nearly 90%, which in turn has cut malpractice insurance costs by 30% to 45%, depending on the county.
Another encouraging sign: Fewer Mississippians are heading to law school and more are looking at business school as the best way to get rich. Many in the younger generation are pursuing a career path that will make them wealth creators, not wealth redistributors.
. . .
Thanks to Mr. Barbour, the state’s unemployment rate is down to about 6% from nearly 9%. Last year, Mississippi’s per capita income growth was 6.7%, third highest of the 50 states and well above the national average of 5.2%. Mississippi tort reform is making the poor richer, and the rich lawyers less fabulously rich. Now that’s a good way to close the income gap.

For the full commentary, see:
STEPHEN MOORE. “CROSS COUNTRY; Mississippi’s Tort Reform Triumph.” The Wall Street Journal (Sat., May 10, 2008): A9.
(Note: ellipsis added.)

Airline Deregulation Allowed Entry, Lower Prices, and More Routes

Source of graphic: online version of the NYT column quoted and cited below.

The top graph above usefully summarizes one of the main results of airline deregulation–lower fares. Other results are sketched below in a couple of passages from a Leonhardt column.

(p. C8) Flying is less expensive, as fares have fallen steadily, adjusted for inflation, and there are more flights to more cities. The barrier to entry is lower. Over the last 30 years, more than 150 airlines have sought bankruptcy protection or disappeared, but more keep springing up as investors continue to put hope over experience, said Denis O’Connor, managing director with AlixPartners, a restructuring firm.
“People don’t understand how easy it is to start an airline,” Mr. O’Connor said, because of a ready supply of pilots and other employees, as well as used airplanes. “Why would you put capital in something if you can’t make a go of it? Southwest is an example of why you would.”
. . .
. . . Southwest’s transformation from a Texas puddle jumper to the biggest airline in terms of domestic traffic (at least until the Delta-Northwest merger is completed) would not have happened without deregulation.
That airline’s evolution is what some experts point to as the best proof of why deregulation, for all its troubles, ultimately is better than a regulated environment.
“This is the free market at work, and we’re not used to it,” said Mo Garfinkle, a lawyer and a longtime airline industry consultant. “The idea of deregulation was to allow entry, whether it was successful or not.”

For the full commentary, see:
MICHELINE MAYNARD. “Did Ending Regulation Help Fliers?” The New York Times (Thurs., April 17, 2008): C1 & C8.
(Note: ellipses added.)

Democratic Representatives Drive Gas-Guzzlers at Taxpayers’ Expense

Source of graphic: online version of the NYT article quoted and cited below.

Seven of the eleven representatives in the table above are Democrats. Look at the gas mileage of the cars, and recall that it is the Democrats who are given to lecture us on how we need to do more about the environment.
(The four Republicans on the list are Reynolds, Fossella, Walsh and Saxton.)

(p. A1) Charles B. Rangel, the chairman of the House Ways and Means Committee, is not so caught up in the question of gas mileage. He leases a 2004 Cadillac DeVille for $777.54 a month. The car is 17 feet long with a 300-horsepower engine and seats five comfortably.
“It’s one of the bigger Cadillacs,” Mr. Rangel, of Harlem, said cheerfully this week. “I’ve got a desk in it. It’s like an airplane.”
Modest or more luxurious, the cars are all paid for by taxpayers. The use of a car — gas included — is one of the benefits of being a member of the House of Representatives.
. . .
(p. A19) Mr. Rangel said he frequently offers rides to constituents so they can discuss their concerns in the luxurious confines of his DeVille.
“I want them to feel that they are somebody and their congressman is somebody,” Mr. Rangel explained. “And when they say, ‘This is nice,’ it feels good.”

For the full story, see:
RAYMOND HERNANDEZ. “What Would You Drive, if the Taxpayers Paid?” The New York Times (Thurs., May 1, 2008): A1 & A19.
(Note: ellipsis added.)

“Representative Charles B. Rangel says his leased Cadillac DeVille projects an image of success.” Source of caption and photo: online version of the NYT article quoted and cited above.

Candy Competition

Source of graphic: online version of the WSJ article quoted and cited below.

In class, we discuss how consumers pay higher prices for candy and soft drinks because the U.S. government limits on how much foregin sugar we can import. Sometimes a student will claim that candy companies would not lower prices if the price of sugar declined. And sometimes that issue leads to a discussion of whether the candy industry is competitive.
The graphic above, and the quotation below, provide some relevant evidence.

(p. B1) The global confectionary industry has long lacked a dominant player. The top 10 manufacturers controlled just 47% of the $141 billion market as of 2006, the most recent available data. . . .
. . .
If the Wrigley acquisition is successful, Mars will become the world’s largest confectionary company with about 14.4% of the market, overtaking Cadbury’s 10.1%, based on 2006 figures, the latest available, from Euromonitor International.

For the full story, see:
JULIE JARGON and AARON O. PATRICK. “More Sweet Deals in the Candy Aisle?; Cadbury and Hershey in the Spotlight in the Wake of Mars-Wrigley Linkup.” The Wall Street Journal (Tues., April 29, 2008): B1-B2.
(Note: ellipses added.)

Great Example of Stigler-Kolko Capture Theory of Regulatory Agencies

George Stigler and Gabriel Kolko are associated with the theory that eventually, govenment regulatory agencies come to be captured by the industry that the agency is charged with regulating.
At the time of the exchange documented below, Wendell Willkie was the head of an electric utility, and Lilienthal was one of the heads of the TVA, which was in the process of taking customers away from Willkie’s utility. Willkie’s argument to Lilienthal is consistent with the capture theory. (But that Lilienthal pushed ahead with his plans, might be seen as inconsistent with the theory.)

(p. 182) Lilienthal set up a meeting in early October 1933 at the Cosmos Club in Washington, the club being, in Lilienthal’s words, “about as neutral a ground as we could think of.”
. . .
(p. 183) Willkie tried yet another tack. No one, he argued to Lilienthal, went into government without the intention of going into the private sector later. The private sector, after all, was where the business lived. If Lilienthal was too nasty, then he was not likely to find work at private utilities companies. Lilienthal was, by his own admission, “pretty badly scared” by the time he left the Cosmos.

Source:
Shlaes, Amity. The Forgotten Man: A New History of the Great Depression. New York: HarperCollins, 2007.

New York Rent Control Limits Incentives to Build Apartments

“Tryn Collins, left, and Mary Hill share small quarters at a loft building in Brooklyn that was transformed from a factory.” Source of caption and photo: online version of the NYT article quoted and cited below.

New York City has had rent control in effect for decades. Economists predict that one effect of rent control is that incentives are reduced to build and maintain apartments. As a result, those seeking living space, have fewer options. (For example, the WSJ a few years ago ran a front page article explaining how some enterprising New Yorkers were living in abandoned elevator shafts.)
The article quoted below, provides additional evidence.

(p. A1) One “room” is a cramped cubby that measures, in all, perhaps 25 square feet, just enough for a full-size mattress and whatever can be stashed beneath. The first-floor rooms, in the basement, are musty and windowless, like caves. The second-floor rooms have plywood walls but no doors, only cut-out windows that overlook a kitchen cluttered with day-old dishes, a chore wheel and the odd paintbrush.
One of the residents likens her home to a “giant treehouse.” Another says it is like “living in a public bathroom.”
“Where the stalls are just superficial sight lines that block the other person, but you can hear everything they do,” said Robyn Frank, a 23-year-old artist. She had just moved in to the McKibbin lofts in East Williamsburg, Brooklyn, and sometimes they literally become bathrooms. They are known for their giant, raucous parties; revelers occasionally urinate in the halls.
This is life in what some refer to as the McKibbin “dorms,” a landing pad for hundreds of postcollegiate creative types yearning to make it as artists, and live like them too, in today’s New York.
Newcomers marvel that such a place exists: two sprawling, almost identical five-story former factories filled with mostly white hip young things, smack in the middle of a neighborhood that has little in common with Williamsburg proper, its cocktail-mixing neighbor to the west.
Perhaps 300 people live in each building, which face each other and sit, respectively, at 248 and 255 McKibbin Street. Between one and eight people live in each loft. Few were born before the mid-1980s. Rents can range from $375 for one person to roughly $800 for a space.

For the full story, see:
CARA BUCKLEY. “Young Artists Find a Private Space, Only Without the Privacy.” The New York Times (Weds., May 7, 2008): A1 & A17.