A Tale of Two Train Conductors

There are a lot of analogies out there about how the American economy is a train headed for a cliff and Congress is arguing about how to stop it from going off the cliff. I think I’ve got a better one.

Once upon a time there was a train. It had two conductors, Ronny and Donny, and every now and then the passengers would change their minds about which one of them should be guiding the train. Now the train was climbing a mountain, because it seemed that this led to (ahem) a higher standard of living then if it remained on the ground. (The farther up they went, the more wood from trees it took to keep the train going, but they just kept going farther up the mountain to get more trees.) Soon the train was very, very far up the mountain. The air was foggy, and they couldn’t tell how much higher the mountain went, but they knew that eventually they would get to the top and that the train tracks ended there, and there the train would crash. So the passengers built a catapult on top of the engine, and had Ronny and Donny launch a big boulder that landed somewhere ahead on the tracks, figuring that they would stop the train when they got to the boulder.

Sooner or later the train approached the big boulder. The passengers told Ronny and Donny that they wanted to keep going up the mountain for now, so they chose one of them to pick up the boulder and launch it farther along the tracks. This continued on for several years, and sometimes the passengers would change their minds about who should be in charge of kicking the boulder along the tracks, too.

One day while Donny was conducting the train and Ronny was in charge of the boulder, the train got close to the boulder again.

“Go move the boulder, Ronny,” Donny said.

Continue reading A Tale of Two Train Conductors

The Struggles of the Long-Term Unemployed

Econ bloggers have been discussing this topic for awhile, but now it’s even making its way into the New York Times (I saw the same article on Yahoo! Finance yesterday). The longer you’ve been out of work, the harder it is to find work, because your skills get rusty and if you’ve been out of work for a year you don’t look as attractive as someone who’s currently using those skills at a job. There are openings out there, but we are hearing about increasing numbers of employers saying they are only interested in workers who currently have jobs, or essentially, “Unemployed need not apply.” Well, now what are you supposed to do, right?

Of course, there are NYTimes readers who view this as discrimination and want a legislative fix. But, like a lot of things, I think this problem is part of a strong enough reality that you can’t just pass a law to make it go away. Employers have enough applicants right now that they can be picky about hiring the best workers, regardless of how much you try to make them consider unemployed workers along with employed workers. (A bit of a straw man here, but what are you gonna do? Some sort of affirmative action that mandates a percentage of new hires have been unemployed for more than X weeks? Just thinking about the bloated regulation required to stop businesses from getting around that law’s intention has my head screaming boondoggle!)

Of course, there are Marginal Revolution readers who don’t view this as a problem at all. Back in February TomHynes remarked, “It doesn’t matter. Hiring an employed person creates a job opening at his former company. Eventually a job goes to an unemployed person. Which is better – five employed people get slightly better jobs and an unemployed person gets a job, or an unemployed person gets a job?” I like this thinking because it’s clever, and because it fits my bias about problems solving themselves without government help. But I’m not convinced that it fully works in reality, either, because if such remarks are true now, they would also be true in a situation where there aren’t millions of long-term unemployed folks. In that situation, there are still enough employed and recently unemployed folks to work the merry-go-round, so when you add the long-term folks to the mix, what stops them from being ignored just like the times when they aren’t there at all? When an employed person creates a job opening at his former company, it may eventually “trickle down” to an unemployed person, but how do we do know that this process is happening fast enough with the long-term unemployed to make a difference? The sheer numbers of the long-term unemployed are nearly proof that it isn’t.

This is one of those complicated issues about which I don’t have a strong, informed opinion. There are two sides to me here.

Continue reading The Struggles of the Long-Term Unemployed

Debtpocalypse & Treasury Forecasts Don’t Add Up

I’m still not sure how concerned to be about this upcoming debtpocalypse or whatever. For one thing, the stock market is supposed to crash, and Treasury interest rates are supposed to rise (and if money’s being pulled out of both investments I’m not sure where it’s going to go… Euro bonds? No way. Commodities? Not with oil dropping every time the global economy coughs. Gold, maybe? Not all of it… I just don’t know.)

But more on those Treasury bond interest rates. We keep hearing that the United States will suffer irreparable damage to its credit, and that not increasing the debt ceiling will lead to the interest on our debt going up by so much that we would actually be increasing the debt! That sounds pretty bad. So why do I keep reading about non-pocalpyse forecasts like this one?

If the U.S. defaults on some obligations after Aug. 2, even if it pays bondholders, S&P forecasts short-term interest rates would rise 0.50 percentage points and long-term interest rates by 1 percentage point.

In the very same article, I read this:

Yields on benchmark 10-year notes rose six basis points, or 0.06 percentage point, to 2.96 per cent July 22 in New York, from 2.91 per cent on July 15, according to Bloomberg Bond Trader prices.

Still, markets through last week hadn’t demonstrated great concern about the potential for a default. Yields on 10-year- notes remained well below the average of 4.06 per cent during the past decade.

Wait. For whatever reason, the interest rate on U.S. debt is over a percentage point lower than it has averaged for the last decade. Apparently a lot of investors still think it’s a safer bet than some other countries’ debt. Or maybe they just have an insane optimism that the U.S. will really increase the debt ceiling, or at least, continue to pay the debt interest. Regardless, the forecasted crisis is that the interest rates will rise a whole percentage point and go back to the long-term average?

I’m just not seeing the catastrophe.

Do Fines Help Regulations Pay For Themselves?

Recently in a comment on a news article, I read someone arguing that the beauty of government regulations is that usually pay for themselves through fines, so it doesn’t make sense to blame regulations in discussions of debt and deficit. This was an interesting point, as I had never really thought before about fines from violated regulations as a source of income for the government. But the more I thought about it, the more I thought that this viewpoint contains an inherent contradiction – even if fines completely offset the cost of implementing and enforcing a regulation.

Continue reading Do Fines Help Regulations Pay For Themselves?

I Never Wanted To Be A Light Bulb Hoarder

When 2011 crosses over to 2012, the 100-watt incandescent light bulb will no longer be legally sold in the United States. The 75-watt and 60-watt bulbs will follow in respective years. The government wants us to use more energy-efficient lighting, and some folks are hoarding the old light bulbs in advance of the ban while others mock them for exercising the right to pay higher electric bills. How did this all happen? Are the alternatives to incandescents really better? And what marked my journey from sympathizing with the hoarders, to distancing myself from them, to actually becoming one of them?

Continue reading I Never Wanted To Be A Light Bulb Hoarder

The Right To A Lemonade Stand

Lemonade Tycoon - Business License Required

Did you ever play that game Lemonade Tycoon? Well, it may be going the way of the Oregon Trail, at least in Midway, Georgia, where police shut down a lemonade stand for want of a business license.

Midway Police Chief Kelly Morningstar says police also didn’t know how the lemonade was made, who made it or what was in it.

The girls had been operating for one day when Morningstar and another officer cruised by.

The girls needed a business license, peddler’s permit and food permit to operate, even on residential property. The permits cost $50 a day or $180 per year.

One girl, 14-year-old Casity Dixon, says the three had to listen to police and shut down.

The girls are now doing chores and yard work to make money.

Well, I think that’s pretty sad. Some folks are arguing that the police were just enforcing the law of the land, but if this law is designed to be enforced at this level, then I think this law is pretty dumb.

Look, I’m not the kind of conservative that thinks “business license” is a code word for “socialism,” but there’s gotta be a reasonable limit somewhere. Does it cost $50 for a garage sale in that town? How about a bake sale? Do Girl Scouts need a permit to sell cookies? Would I need a $180 business license to sell something on eBay or mow my neighbor’s lawn for some cash?

Continue reading The Right To A Lemonade Stand

Google Plus Is Much Harder To Block

In all the excitement around Google+, I’ve tried to understand what it has to offer that existing social networks don’t. It seems fairly similar to Facebook, maybe with better options and interfaces for things like grouping friends and controlling who sees what. But it’s getting a lot of attention and everyone’s been begging for invites to try it out. Google is responding to feedback and there will surely be many changes to Google+ as well as to the competitors trying to keep up. But it has stormed past 10 million users already and it will definitely be a major player in the social networking wars, at least for now.

Anyway, today I realized one interesting thing about Google Plus: it may be the first social network that’s already integrated into an existing site (this is essentially why it could grow and acheive critical mass so fast). Facebook, Twitter, LinkedIn, Foursquare, Quora, StumbleUpon, whatever – the site is the social network. But Google does a million things already. So what makes this really interesting?

Google Plus might be harder to block. Now a lot of companies are actively engaging in social media these days, and it’s even being claimed that none of the “top 100 companies to work for” block social media, but social media can still be a productivity drainer in the workplace and a lot of companies like to block the major social networks. Block facebook.com? Easy. But who’s going to block google.com? Employees may use the search engine for their everyday activites. Some companies may even promote the use of Google Docs within their business. No one’s going to block google.com!

Of course it’s not just companies that try to block social media. Schools and universities do too. How many students will flock to Google+ if they realize that they can interact freely there?

Ah, and what about governments? An uncensored Internet makes dictators uneasy. Egypt tried to block Twitter during the revolts this spring, so Google and Twitter actually rolled out a feature for voice tweeting from your phone! China has scuffled with Google even before the Arab Spring revolters were using social media. But if a ruler wants to block social media without the backlash risk of actually blocking Google itself, it may no longer be able to.

Now maybe you can just block the subdomain plus.google.com, assuming Google’s syntax is going to stay consistent, so maybe all Google+ has done is move a social network from the domain sphere to the subdomain sphere. Still, with all the integration going on among Google’s services, it’s more complicated than it used to be.

And in their quest for an open world, I wouldn’t be surprised if Google changes the URLs to work from google.com/plus to make it even harder to block. But maybe blocking ability isn’t on Google’s mind at all. We’ll just have to wait and see.

Georgia’s Crops, Illegal Immigrants, and Unemployment Benefits

In April 2010, Arizona established a controversial illegal immigration law, and I heard anecdotes about Hispanics leaving the state. I thought this would be a good test of conservative and liberal ideologies. If conservatives are right and illegal immigrants are a net drain on resources, then the state’s economy should boom; if liberals are right and illegal immigrants contribute to an economy by doing jobs Americans don’t want and by paying more taxes then conservatives think, then the state’s economy should suffer.

Arizona’s unemployment rate in April 2010 was 9.5% and the 19th worst of the 50 states. As of May 2011 it’s tied for 17th worst at 9.1%. It’s one data point with lots of factors, but there’s no obvious “success” or “failure” thus far.

Well now we have something much more interesting.

Continue reading Georgia’s Crops, Illegal Immigrants, and Unemployment Benefits

The Growing Road Tax Problem

The interstate highway system was established in the 1950’s to improve transportation between the states (Wikipedia has a good history.) Its initiation was typical of a government project – it cost about 5 times as much and took about 3 times as long as initially estimated – but overall it’s been a pretty good success story for the pro-government crowd. It’s essentially a public good with positive externalities that helps facilitate transportation and communication between states. The opportunities and conveniences it provides are probably a much greater contribution to the overall economy than what the states would have had without it (although you can probably find a libertarian to argue otherwise).

Of course, ongoing maintenance of the highway system costs money, and in 1956 a tax was established on gas. Its current value of 18.4 cents per gallon has been basically unchanged since 1993. There are a few other sources of revenue and a few other uses of the revenue (see linked article), but for the most part the highway system is maintained by the tax.

In all the Tea Party rhetoric these days against taxes, it’s easy to forget one of the main reasons governments collect taxes at all – to pay for things that everybody uses. And for years, the federal gas tax has been one of the best examples out there of a proper tax. Unlike, say, income tax or sales tax, there’s a pretty direct correlation to what you’re paying for and where that money goes to improve your life. It’s not perfect – everybody doesn’t drive on the interstate in equal proportions – but it’s pretty good. People who use the most gas are the ones most likely to be driving down the long interstates, causing wear and tear on those roads but also paying into the gas tax. To put it simply: road use and gas use have been pretty strongly related.

But things are changing.

Continue reading The Growing Road Tax Problem

NFL Lockout: Socialism Doesn’t Solve The Greed Problem

In January, the funny but irreverent Bill Maher argued that the NFL is an example of the success of socialism, because “they literally share the wealth, through salary caps and revenue sharing – TV is their biggest source of revenue, and they put all of it in a big commie pot and split it 32 ways.” He called it an example of the Democratic philosophy that everyone deserves an equal opportunity, and said this is why the tiny town of Green Bay has just as good of a chance as a metropolis to produce a Super Bowl winner, unlike, say, baseball with its Yankee dominance.

Continue reading NFL Lockout: Socialism Doesn’t Solve The Greed Problem