With Respect to Gambling in Casinos There Are Two Groups

The Dismal Political Economist is One Group and Everyone Else is in the Other



Mainland Chinese tourists are bused into
Macau’s casinos Dominic Nahr/Polaris



Even with a recession and stagnation gripping the western world there is still one industry that is thriving, casino gambling.  And nowhere as Business Week reports is it thriving more than on the island of Macau.

Macau’s gambling revenue is now four times larger than that of Las Vegas, and the gap should keep growing as more casinos open. MGM China Holdings, which operates one casino in downtown Macau and plans another on the Cotai Strip. . . . First-half profits rose 380 percent, to $236.6 million, the company reported on Aug. 19, with sales doubling.

And it is a pretty nice place and getting nicer.

 



Macau at night - ever wonder where the money
came from to build this?



Everything about the new Galaxy Macau casino and hotel is big. The $2 billion complex, which opened in May, has three hotels with a total of 2,200 rooms. The gaming floor is 39,000 square meters, with 600 tables and 1,500 slot machines. A rooftop beach features 350 tons of white sand and a 4,000-square-meter wave pool

And it is doing wonders for the city of Macau

Many non-gaming companies are struggling to find and keep employees. “It’s hard to run a business,” says Jiji Tu, managing director of MSS Recruitment, a local employment agency. . .

The labor shortage is holding back Ronald Cheung, who oversees Midland’s six offices in Macau. The property agency opened a new branch in early June, and with demand for real estate so strong, Cheung says he would like to open more if only he could find the people.

Leaving The Dismal Political Economist to ask the question, Why?  Casino gambling is not gambling.  The guaranteed winners are the casinos, the guaranteed losers are the players.  Yes, not everyone loses, but the winners are so few that the losers easily finance the elaborate playgrounds in which they sustain their losses.

The entertainment value of gambling is the potential winnings.  But once a person understands basic probability theory, the joy goes away.  Winning is pure luck, and the luck is not on the player’s side.

The Dismal Political Economist has taught statistics and probability during his university teaching days.  Here is his ideal final exam for Probability Theory 101.



How The DIsmal Political Economist
Sees Casino Gambling



"Each student is given $100.00 and a bus ride to the local casino.  Once inside the student’s behavior is observed.  Any student that plays any game with the $100.00 automatically fails the course."

This exam cannot be given, of course because no student would ever pass the course and the world would be deprived of statisticians who can design casino games that guarantee winnings for the house.

[As a public service do not forward this Post to any persons starving in the sub-Sahara region.  They might not understand world priorities the way we do.]

Fixing the U. S. Economy with Capital Gains Tax Reductions

Yeah, The Problem is a Huge Capital Gains Tax Rate of 15%

Writing in the Wall Street Journal opinion pages under the heading

An Entrepreneurial Fix for the U.S. Economy

Edward R. Muller and Larry Zimpleman write that the U. S. can encourage entrepreneurs by, for example, “letting in immigrant entrepreneurs who hire American workers”, thus creating a massive federal bureaucracy  necessary to monitor and enforce such a program and “giving licensing rights to academic entrepreneurs at universities", thus giving away public research dollars, and “having government provide data to rankings of startup friendliness of states and localities" , thus getting the feds involved in a dubious activity.

They also include this recommendation



Steve Jobs and Tom Wozniak - Created Apple
But Only Because they didn't know how high
capital gains taxes were.



Reducing the cost of capital through capital gains tax relief for early stage investments

Thus repeating once again the old, tired, worn out and discredited idea that it is high taxation that is obstructing business creation in the United States. 

In arguments like this the burden of proof is on those who proposed change.  Is anyone aware of any significant evidence that it is the high capital gains taxation rate of, get this, 15% that is stopping entrepreneurs from starting businesses? 

On the other hand, just mentioning “cutting capital gains taxes” is all that is necessary to get your right wing rantings printed in the Wall Street Journal opinion section.

Michelle Bachmann: God Sent the Earthquake and Hurricane Irene to Tell Americans to Cut Federal Spending

Well They Both Did Hit Washington, Didn’t They

Michelle Bachmann (R, Mn) was in Florida over the weekend campaigning for the Republican nomination for President.  As one report accurately put it, she missed Hurricane Irene but now has to content with Hurricane Perry.

Of more interest to The Dismal Political Economist, who was told this very same day by New York Times columnist Ross Douthat that no one had to worry about the religious beliefs of the Republican Presidential candidates was Ms. Bachmann’s take on the recent minor earthquake and the not-so-minor hurricane that hit the east coast.  



To Ms. Bachmann This is a Message about Cutting
Government Spending;  Wouldn't a Post on
 Facebook Have Been Easier?



"I don't know how much God has to do to get the attention of the politicians. We've had an earthquake; we've had a hurricane. He said, 'Are you going to start listening to me here?' Listen to the American people because the American people are roaring right now. They know government is on a morbid obesity diet and we've got to rein in the spending."

Ok, the quote is in the running for first place in the Most Incoherent Statement of August, 2011 contest, but she does seem to suggest that the Deity is sending us a message about government spending by raining down an earthquake and massive rain.

 See Ms. Bachmann, this is why you don't want people paying attention to  your campaign

One does wonder though, that in the age of Facebook and Twitter and the Internet and e-mail and the like if Ms. Bachmann wouldn’t prefer a different way of sending the message, one that did not involve the death of innocent people and massive destruction.  Or if no tragedy is too great for her to use to make political points.

Update:  Ms. Bachmann is now saying this was all said as a joke.  Ha Ha.  Well that does have some credibility since much of Ms. Bachmann's campaign could be characterized in the same manner.

Conservative Columnist Jennifer Rubin Takes Desperation to a New Level

Desperate Candidates Call for Desperate Columns

There are two main themes shaping up with respect to the 2012 Presidential race.  One is that the Republican field is lacking in Presidential timber. The second is that this deficiency in qualifications only partly matters, that the 2012 will largely be a referendum on Mr. Obama.

To further enhance the qualities of the candidates, Conservatives and their supporters in the press will have to convert  non-existent virtues into existent ones.  Jennifer Rubin in the Washington Post is one of the first to take a shot at it.  Her is her revision of the Bush persona.

The knock on George W. Bush that he was an anti-intellectual and uninterested in policy turned out to be dead wrong. He was an avid history reader and championed (unsuccessfully in some cases) detailed policies on stem cell research, Medicare Part D, education, immigration reform, Social Security and tax reform. And he went outside the Pentagon bureaucracy to redesign the Iraq war policy and implement the surge.

Really?  Well Republicans, be sure and bring all of this up in the next election.  Sure would help your cause.

Ms. Rubin also tries to prop up the accomplishments of Michelle Bachmann

Bachmann is beginning to highlight specific legislative accomplishments. A spokesman e-mails me, “She’s been an unwavering opponent of big-government liberalism and has stood firm on cutting spending, cutting taxes, and holding the line on life and traditional marriage. . . .. The very first bill Rep. Bachmann authored in Congress (in her first month in office in 2007) was a meaningful health-care reform bill (that garnered 64 co-sponsors), and one of the bills she most recently authored would pave the way to dismantle Obamacare (95 co-sponsors).”

Anyone see any accomplishments in there, anyone, really, just one?  Nope, none.

And so on to Mr. Rick Santorum

Likewise, Santorum is pounding home the message that, as the only former lawmaker in the race with a list of bipartisan policy achievements (e,g, welfare reform, the partial-birth abortion ban, Iran sanctions), he has a leg up on his opponents and is uniquely suited to face the challenges we face

Ms. Rubin conveniently omits the fact that the reason Mr. Santorum is “former” legislator is that he was soundly defeated for re-election.

So there you have it, the first in what will be many efforts to paint Presidential sheen on a group of candidates who lack it.  What’s next, calling Mr. Gingrich a person of “great ideas”?

Mr. Rubin’s column is titled, “Don’t Count Out the Rest of the GOP Field Yet”, which is good advice.  Everyone can do that later when the dullness of winter sets in and we all need something to occupy our tme.

Post Office Pays Workers to do Nothing, Cheney Book Has Nothing right, IMF Head Fears Policy Makers Do Nothing, . . .

And Other News That Needs Comments

The U. S. Postal Service is in deep financial trouble.   It is losing billions each year and will have to be radically restructured.  One of the things the USPS has is something called “standby time”.  When there is nothing to do, employees show up and get paid to do nothing.

Long-standing labor agreements with two major postal unions prohibit the Postal Service from laying off or reassigning workers because of broken equipment or periods of low mail volume. Instead, idled employees show up for work, sit in a break room or cafeteria and do nothing

The good news,

it’s paying tens of millions of dollars less for “standby time” than it did just two years ago, 

Let’s reiterate a point here.  This is not the fault of the unions, whose job it is to bargain for everything they can get. (Conservatives make the same point about corporations when they pursue profit over public good, the Corporation’s mission is to maximize return for shareholders, not to act in a benign way for society.)

This abuse is the fault of management, who has not stood firm for managerial prerogatives and who has allowed this abuse to be written into contracts.  Of course, that fact will not prevent the unions from shouldering much of the blame.

Vice President Dick Cheney has a new book out, and in some places the reviews are not very good.

A new book by former vice president Dick Cheney levels “cheap shots” at colleagues and mischaracterizes events, former secretary of state Colin L. Powell said Sunday.

Let’s see, who to go with here.  One of the most intelligent and distinguished leaders of our time or Darth Vader?  

Talking about the dismal western world economy the new head of the IMF said

The world is endangered by “a growing sense that policymakers do not have the conviction, or simply are not willing, to take the decisions that are needed.”

leaving everyone to wonder what and who she was talking about.

Writing an opinion column in The New York Times Ross Douthat tries to defuse the concept that some Republican candidates are interested in a theocracy.  He says we don’t have to worry, that these candidates are not dangerous because they do not follow up on their beliefs, and illustrates that point with this sentence on Gov. Perry of Texas.

Perry knows how to stroke the egos of Texas preachers, but he was listening to pharmaceutical lobbyists, not religious conservatives, when he signed an executive order mandating S.T.D. vaccinations for Texas teenagers.

Thus tarnishing one of the few admirable accomplishments of Mr. Perry’s ten year’s in office while at the same time not defusing the issue at all.

Happy New Year – Federal Government’s Year Starts Oct. 1

Maybe There Won’t Be Fireworks



Happy New Year Oct. 1 America
Maybe No Budget Fireworks This Year



The Dismal Political Economist had earlier posted about the federal government having just concluded a deficit reduction/debt ceiling increase agreement was getting only a short reprieve from budget battles.  The reason was that the new fiscal year for the federal government starts October 1 and there is no approved budget or spending plan in place.

The question facing legislators is whether or not to enter into a new battle over federal spending, with the Republicans, particularly House Republicans possibly shutting down the government in order to force lower spending for fiscal year 2012 (which as we have to remind everyone starts October 1, 2011).



The recently concluded deficit reduction/debt ceiling agreement is supposed to have settled things for 2012 and 2013.

In the debt limit bill, Congress allotted $1.043 trillion for spending on federal agencies and national security in 2012, an amount that does not include money for so-called mandatory programs like Medicare.

 That level is $7 billion less than current spending, but $24 billion more than would be allowed under the budget drafted by Representative Paul D. Ryan, Republican of Wisconsin, and passed by House Republicans earlier this year. The ceiling rises to $1.047 trillion in the 2013 fiscal year, potentially saving Congress from another politically charged spending fight

Of course, nothing is ever settled in Washington. 



While the new agreement is expected to accelerate consideration of spending measures, the shortage of time means the House and the Senate will probably have to again enact temporary stopgap measures to give lawmakers a chance to assemble the bills and bring them to the floor.



At the same time, some conservative activists are pressing House Republicans to insist on lower overall spending totals, noting that the debt limit legislation established ceilings but does not require that all the money be spent.

But at this point the Republican House leadership appears on board to work with the agreed upon limits.  The fact that Congressional approval is at 12% and falling may have something to do with it.

 But after Jan. 20, 2013, look out, anything goes.

George Will Writes Another Column Full of Factual and Logical Errors

Ok, This is Not News, a George Will Column Full Logic and Facts Would Be News

George Will is one of those opinion writers whose almost every word  raises the question, why does this man have a column in a regular daily newspaper?  Mr. Will has been writing, forever it seems like, in the Washington Post and is syndicated nationwide.  He is given a forum on ABC every Sunday morning. 

The current column of Mr. Will inveighs against a ruling that a Colorado school scholarship program that provides scholarships for individual to send their children to private schools, which are religious or sectarian in nature is in violation of the Colorado Constitution,

That document says that “no person shall be required to attend or support any ministry or place of worship, religious sect or denomination against his consent.”



Where Mr. Will thinks taxpayer
money should go



Mr. Will does not recognize that taking a taxpayer’s money to give to a school that teaches religion is requiring the taxpayer to support a religion against his consent. So even though he professes to be a Conservative, he would seem to support government taking taxpayer funds to support religion. Not exactly the Conservative position, is it?

The county in question is Douglas County outside Denver. 

Douglas County’s embrace of choice is notable because the median household income here is $99,522 and only 1.9 percent of families are below the poverty line. The county opted for choice because a few years ago conservatives were elected to the school board, and conservatives are pro-choice about most things — owning guns, driving SUVs, using incandescent light bulbs, etc. — other than killing pre-born babies. Liberals are pro-choice mostly about the latter.

Notice that what you have here according to Mr. Will is not support of religion, but giving parents a choice on education.  Of course Mr. Will fails to point out that parents in this county and indeed in every county in the United States do have that choice. The difference here is not choice, but that Conservatives want a taxpayer to pay for that choice, even if it means supporting a religion with which the taxpayers may disagree.

And notice how Mr. Will cleverly (?) brings in abortion into the argument, even though this issue is totally independent of the abortion issue.  As Mr. Will opines, if one is against the Colorado program, one must be in favor of killing babies. 

One of Mr. Will’s arguments is that this type of program is allowed under the U. S. Constitution.

In 2002, the Supreme Court, considering an Ohio program legally indistinguishable from Douglas County’s, said the Constitution is not violated by a scholarship plan that is “neutral with respect to religion” and involves parents directing government aid to schools by their “own genuine and independent private choice.”

But the Colorado program was ruled unconstitutional under Colorado’s Constitution.  Remember when Conservatives used to argue that states should be free to enact their own standards, you know, not having Washington dictate to them.  Mr. Will must have been absent from Conservative Ideology 101 class the day they covered that.

Here is Mr. Will commenting on the economics of the issue, and getting it totally wrong.

This is not an abstract legal question for Diana and Mark Oakley, whose son Nate, 13, has socialization problems associated with Asperger’s syndrome. Desperately unhappy at a large public school, he is, thanks to his scholarship, flourishing at a small private school.

The Oakleys have taken a line of credit to cover the $11,325 of tuition not covered by the $4,575 scholarship and other aid they have received. Such scholarships cost the county less than the more than $8,000 it spends per public school pupil, so the program frees up money for public schools.

See Mr. Will, the $8,000 per pupil is an average cost.  Costs of operating the schools are fixed costs with respect to small changes in enrollment, so the removal of a child from the public school system does nothing to reduce public education costs (In fact what happens is the average cost per pupil will rise).  So the school system is out $4,575.00 per scholarship with no reduction in costs.  This of course means a lesser education for those left behind in the public school system, but Conservatives really don’t care about those students do they. 

A not too hidden agenda of Conservatives is to ultimately destroy free public education in the United States.  In its place they would have 100% private schools, with government providing part but not all of the costs.  For children who cannot get into the private schools or have enough money to pay the costs, well, too bad, public education is not guaranteed by the Constitution.  And we all know how much Conservatives revere the Constitution, (except when it proscribes against what they want to do.  Then the Constitution is irrelevant.)

The Dismal Political Economist thinks the best way to get rid of programs like this that are so destructive to the public school system is to encourage Muslims to open a private school that teaches and supports Islam.  Once Conservatives in Douglas County find their tax money going to such a school, the life of the program can be measured in days, if not hours.

WP Columnist Kathleen Parker on Rick Perry, Another Conservative Myth Exposed, Pole Tax is Legal in Texas

And Other Quotes that Need Little or No Comment

Writing in the Washington Post, Conservative columnist Kathleen Parker had this to say about Texas Gov. Rick Perry

Faith and reason are not mutually exclusive, but Perry makes you think they are.

Kind of sums it up, doesn’t it.

Jon Huntsman, speaking in New Hampshire said of his positions

“I’m not trying to be everything to everybody . . . ,” he told audiences. “I’m running on my record. You’re not going to like 100 percent of it.”

Thus illustrating why Mr. Huntsman is neck and neck with Newt Gingrich in the race to be the next to leave the Republican race.

______________________________________________________________________________

Remember all that Conservative rhetoric about unemployment benefits keeping the unemployed from seeking a job.  From USA Today we have



These People Have Jobs at Ford
16,400 applicants will not



Memo to the nearly 17,000 people who applied last month for $15-per-hour Ford factory jobs: If you haven't heard by now, Ford won't be calling.

About 600 of the expected 2,700 jobs at Ford's Louisville (Ky.) Assembly Plant are left for new hires after the rest were claimed by workers on layoff, or UAW union members transferring from other Ford plants.

And another Conservative talking point goes down, and goes down hard.

___________________________________________________________________________

Michelle Bachmann (who?) gets it wrong again.  The WSJ reports that

Swedish appliance maker Electrolux AB was recently dragged into the U.S. presidential race when Republican hopeful Michele Bachmann said that the company had closed its doors in the U.S., after it moved operations of an Iowa plant to Mexico.

Electrolux is primarily known in the U. S. as Frigidaire and as far as its U. S. operations are concerned the Journal elicited this from its finance chief for the U. S. division

We have manufacturing facilities in Saint Cloud, Minn.; Springfield, Tenn.; Kinston, N.C.; and Anderson, S.C. We have a sizable presence in the U.S. We certainly are not leaving the country. The Webster City [Iowa] facility was closed and that production was moved to Mexico. But we also recently announced the closing of a Canadian facility and we're building a new facility in Memphis.

The bad news for Ms Bachmann is not that she gets this wrong, that happens regularly.  No,  it’s that nobody is paying attention to her, not even to her incorrect observations.  Hey Michelle, say "Hi Mr. Perry"

_______________________________________________________________________________


For decades everyone has believed that poll taxes are illegal.  It turns out in Texas they are not.

The Texas Supreme Court on Friday overruled the Texas trial and appellate courts and unanimously upheld the constitutionality of a $5 "pole tax' on strip club patrons. Combs v. Texas Entertainment Ass'n, No. 09-0481 (Tex. Aug. 26, 2011):

“A Texas statute requires a business that offers live nude entertainment and allows the consumption of alcohol on its premises to remit to the Comptroller a $5 fee for each customer admitted. We are asked to decide whether the statute violates the right to freedom of speech guaranteed by the First Amendment to the United States Constitution. We hold it does not.”

Not something Mr. Jefferson ever thought the First Amendment would have to address.

How Bad is the European Economy – Greece 2 yr Interest Rates at 45% and Spanish Regional Government Cannot Make Payments

and That’s The Good News

The control of the Spanish regional government Castilla-La Mancha changed from the Socialists to the Popular Party last May, and when it did the Popular Party found that the government had no money.



Spanish Government Facing Angry Creditor



One of the PP’s leaders promptly declared the region “totally bankrupt”. Another likened it to a bailed-out eurozone member by calling it “the Greece of Spanish regions”. He said it owed €2bn to its suppliers, including drugs companies, and would have trouble finding the cash to pay its 76,000 civil servants.



And in the rest of the country

In all, the Spanish public sector is late with an estimated €50bn due to construction companies, suppliers and service providers.

Meanwhile in Greece the interest rates on 2 year Greek debt in the secondary market hit 45%.  And France’s economy has just about stopped growing so the government will implement policies to make it grow even less. 



Agence France-Presse/Getty Images

Customers at a bank in central Athens,

above; many Greeks have been withdrawing

large sums, squeezing banks.



Finland is demanding collateral before it will participate in the next bailout of Greece, which matters because (1) the bailout agreement is must be unanimous, giving each country a veto over any agreement and (2) other countries want to have collateral.

Finland may get non monetary collateral, but first someone has to figure out what that would be, particularly since the Greek government has agreed to sell off most of its valuable assets and thus has nothing with which to provide collateral.

Oh, and part of the Greek solution was for a debt swap with private European banks who in an unexplained burst of stupidity had purchased tens of billions of Greek debt during the last decade.  Now that deal may be coming apart.

When European officials were asked why they could not develop a plan to fix the European economy they replied that they certainly could develop those plans, and had already developed at least 137 so far, with several more on the way as soon as the most recent plans were discredited or shown to be unworkable.

But what about Greek banks?  Well there has been a slow, but steady run on Greek banks, which now has reached the point where the Greek banking system could fail.

Have a nice day Europe.

Late Summer Political Doldrums – The News is Kinky Friedman and Rick Perry

Running on Empty as the Summer Runs Down

The last week of August is the slowest non-holiday week of the year.  Proof  positive, several political news sites are reporting on the news that Kinky Friedman has endorsed Texas Gov. Rich Perry.



That's Funny, You don't look
Jewish



For those readers who are unfamiliar with him, Kinky Friedman is a musician and humorist who is something of a minor celebrity in Texas, particularly among my fellow Texans who think that Western Civilization reached its apex in Austin sometime around 1977.  Friedman ran against Rick Perry as an independent candidate for Governor in 2006 and considered doing so in 2010, before he dropped out of that race and ran a losing campaign for the Democratic nomination for Texas Agriculture Commissioner.

Such news leaves The Dismal Political Economist speechless.

Mitt Romney on Climate Science and Global Warming – He Tweaks His Position

Mitt:  You Can Only Makeover a Position So Many Times



Soon to be a cover story
on Mitt Romney?



[Editor’s Note:  The Dismal Political Economist was asked not to write this post.  It is obvious that Mr. Romney has some type of incurable mental disorder that forces him to abandon one position on an issue in favor of another the minute he perceives it is in his political interest to do so.  It seems unfair to continually call attention to Mr. Romney’s obvious political illness, and The Dismal Political Economist has promised to be more circumspect in the future if we let him publish this post.]

The politics of climate science is tricky.  It seems the vast majority of knowledgeable scientists have concluded that significant global warming is taking place, that this warming will be highly destructive and that the warming is in large part man made. 

Conservatives object to this position, not because they have any knowledge of the data and science behind it, but because it would require policy implementation that is at odds with their political philosophy. When hard science and political ideology conflict, political ideology must prevail.  (Kind of reminds one of Soviet style Communism doesn’t it?)

It appears the former Massachusetts governor Mitt Romney is aware of and accepts the science of global warming.

Just two and a half months ago in New Hampshire, Romney expressed concern about climate change and greenhouse gas emissions.

"I think it's important for us to reduce our emissions of pollutants and greenhouse gases that may well be significant contributors to the climate change and global warming that you're seeing," Romney said on June 3 in Manchester.

The problem,

The comments left the former Massachusetts governor in danger of being outflanked on the right when it comes to the question of climate change — which the vast majority of climate scientists insist is real and caused by man-made carbon dioxide emissions.

So now



Hey Mitt, A Little Help Here!



Hours after being called "mushy on environmental issues" by a Republican senator, Mitt Romney has tweaked his position on global warming.

Asked Wednesday at a Lebanon, N.H., town hall meeting whether he believed in global warming and if humans contribute to rising temperatures, Romney said he doesn't know.

But if anyone is disappointed in Mr. Romney, they shouldn’t be.  After all, as soon as it is politically advantageous for him to change his position again, he will.  Just wait for it.

Organized Labor to Seek Divorce from Democratic Party

A Split That Benefits Both Groups

Politico is reporting that the AFL-CIO will sever its long term relationship with Democrats.

Going forward, Trumka (AFL-CIO Head)  said, the labor movement will build up its own political structures and organizations rather than contribute to and depend on the Democratic Party’s political operation.

This is good news for Democrats, and may even be good news for labor.

The Democratic Party has been too long dependent on organized labor for both money and election support.  Furthermore, the ability of organized labor to provide money and support is declining and may well decline significantly in the future.  In order to survive the Democratic Party must develop its own funding and support structure.  The removal of the union support should force the Democratic Party to accelerate this process.

For the unions, it is not clear what they will be trying to accomplish.

“We’re going to use a lot of our money to build structures that work for working people” Trumka said. “You’re going to see us give less money to build structures for others, and more of our money will be used to build our own structure.”

Exactly what that means is not clear. There is not going to be a “Labour Party” in the U. S. like there is in Britain.  And labor, like Democrats needs to recognize reality, that currently momentum is not with them, but against them, and that they need to proactively act if they are not going to become an even more irrelevant part of the political and economic landscape.

Maybe they are getting the message.

Signs of the Times

On A Recently Closed Border's Book Store



Thanks to The Incidental Economist

Fed Chairman Bernanke: We Will Do Nothing Because We Can Do Nothing, But Don’t Worry, the Fed Will Meet In September to Continue Doing Nothing

A Speech Filled with Higher and Higher Platitudes

The Federal Reserve System has a lot of money.  So every year they have a grand meeting in the Grand Tetons to talk about grand monetary policy.  This year the conference received unprecedented attention because of the stalled U. S. economy, the increasing political attacks on the Fed by Republicans (who are afraid the Fed will do something to help the economy and so help Democrats), and the issue of whether or not the Fed would make any policy changes to indeed help the economy.



Mr. Bernanke and Mr. Trichet,
Head of the European Central
Bank - Probably Not Discussing
Their Collective Failures



The Key element in the conference is the speech by Fed Chairman Ben Bernanke.  This speech took place Friday morning.  It was notable, indeed historic, for even though the Fed has  mandate to promote price stability and economic growth, the message from Mr. Bernanke this year was “Good luck folks, your on your own.”

the speech, delivered at a policy conference held each August in Grand Teton National Park, marked a return to the Fed’s position earlier this year that the Fed has done most of what it can, and that the rest of the government must do more.. . .

“Most of the economic policies that support robust economic growth in the long run are outside the province of the central bank,” he said.

This may be what Mr. Bernanke feels and it may be his response to Republican critics.  As for the economy,

“With respect to longer-run prospects, however, my own view is more optimistic,” Mr. Bernanke said in his prepared remarks. “The growth fundamentals of the United States do not appear to have been permanently altered by the shocks of the past four years.

Really, because everyone else thinks that the growth fundamentals of the U. S. have been drastically altered downward by the shocks of the past four years.  The biggest shock being that Mr. Bernanke thinks that is not the case.  Here is the latest report on the economy.

              The latest sign of trouble for the economy came Friday as the Commerce Department     revised down its already low estimate for second-quarter growth in gross domestic product. The economy grew by annual rate of only 1% in April through June, not the 1.3% rise that was previously estimated. That was after GDP increased by just 0.4% in the first three months of the year.

Brushing aside any constructive ideas, Mr. Bernanke went on to say  meaningless things like this.

“The country would be well-served by a better process for making fiscal decisions,”

Thus angering the large group of policy makers who think the economy would be well served by have a worse process for making fiscal decisions.

And jumping right into another controversy he astonished listeners with his bravery and insight when he said with respect to the deficit and the budget there should be

“clear and transparent budget goals, together with budget mechanisms to establish the credibility of these goals.”

Thus angering the huge block of people who thing there should be fuzzy and opaque budget goals with no mechanism to establish their credibility.  What political courage!

But not to despair

Mr. Bernanke made his standard announcement that the Fed would take any steps necessary to help the economy, and he said the issue would be discussed at the next meeting of the Fed’s policy-making board, in late September.

So all is well, the Fed is going to discuss things at their next meeting.  Well thanks anyway Ben, but don’t call us, we’ll call you.

Medicare Spending Growing at Far Less Than Private Insurance Costs –

Another Conservative Position Obliterated by Facts

One of the major talking points in the Paul Ryan Plan to save Medicare by destroying Medicare and making it a private insurance program is that competition in the private insurance arena would mean lower cost increases than with Medicare.

The Dismal Political Economist has long asked the unanswered question of “if private insurance could keep medical costs from rising so fast, why hasn’t it already done so.”  Now new data is out that shows that Medicare costs are rising much slower than private insurance costs.  Peter Orszag, a former Obama Budget Director writes that

Medicare’s growth slowdown has been much greater than that of private health insurance, however, as Maggie Mahar has noted on the Century Foundation’s Health Beat blog. In the 12-month period that ended in June 2011, Standard & Poor’s index for commercial health insurance rose 7.5 percent, while its Medicare index rose only 2.5 percent. The S&P data show that Medicare spending growth has been falling fairly steadily over the past 18 months.






Images of the World As Conservatives
See It - The Big Things are Government
Destroying Society



He goes on to explain why this might be happening but of course it does not take an economist to understand that if Medicare is well run its growth in  health care costs should be lower than private insurance. 

None of this will sway a single Republican supporter of Mr. Ryan’s plan to turn Medicare over to private insurance, letting retired individuals take on more and more of the costs of heath care.  Facts, logic, data and analysis are just not part of their thought process.  Faith based ideology, that’s what counts.

Wall Street Journal Opinion on Taxes from Harvey Golub; The Totally Uninformed Response to Warren Buffett

Is Ignorance a Requirement to Opine for the Wall Street Journal?

Some time ago billionaire Warren Buffett wrote an editorial piece for the New York Times in which he indicated that he and his fellow mega-wealthy could and should pay more federal taxes.  Now in response to Mr. Buffet the Wall Street Journal opinion pages have enlisted Mr. Harvey Golub,



Running American Express - No Financial
Knowledge Required



Mr. Golub would seem to have reasonable credentials. Mr. Golub, a former chairman and CEO of American Express, currently serves on the executive committee of the American Enterprise Institute. 

Yet his comments border on pure nonsense (ok maybe they cross that border).

Of my current income this year, I expect to pay 80%-90% in federal income taxes, state income taxes, Social Security and Medicare taxes, and federal and state estate taxes. Isn't that enough?

Well yes, that is enough if that is what you were actually paying.  But as Brett Arends points out in the same paper (the news sections, not the opinion sections where his corrections to Mr. Golub would be banned) that 80-90% number is just not possible.

And one would think that Mr. Golub, being a former CEO of a company like American Express would know that individuals do not pay estate taxes.  The estate, which is a trust, pays estate taxes.  But then maybe Mr. Golub is so enthralled with the chance to make his anti-tax position known on the prestigious pages of the WSJ that he really doesn’t care about being accurate or correct (it's ok Mr. Golub, many contributors don’t care either).

Mr. Golub goes on to complain about the fact that he and his fellow mega wealthies pay most of the cost of government and says

Almost half of all filers pay no income taxes at all. Clearly they earn less and should pay less. But they should pay something and have a stake in our government spending their money too.

Which confirms that the position of many wealthy Conservatives is that they are opposed to tax increases except for those on lower income earners.

Then we have this from Mr. Golub

Gifts to charities are deductible but gifts to grandchildren are not

Indicating that in Mr. Golub’s world not only should he be allowed to make large gifts without paying the Gift Tax, but that the gifts to his grandchildren should be tax deductible, lowering his taxes even more.

And in conclusion we note this comment by Mr. Golub



Mr. Golub:  Can You First Read This
and Then Get Back to Us



President Obama has decided that I don't need all the money I've not paid in taxes over the years, or that I should leave less for my children and grandchildren and give more to him to spend as he thinks fit.

(emphasis added)

that nicely displays his ignorance of our governing system, namely that all spending must be authorized by the Congress and that no President has the right to spend as he or she sees fit.  But then we all know that while Conservatives revere the Constitution, many of them have neither read it nor understand it.  Mr. Golub is certainly in that group.