Economics

GM’s repayment of Federal loans is a shell game:

You may have seen the announcement yesterday by GM’s CEO that it was paying back a portion of the money it had been loaned by the taxpayers (who borrowed it to loan it) to keep the company from going under and providing it the room for the government to own 61%.
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Jamie Dupree brings us the rest of the story:

The issue came up yesterday at a hearing with the special watchdog on the Wall Street Bailout, Neil Barofsky, who was asked several times about the GM repayment by Sen. Tom Carper (D-DE), who was looking for answers on how much money the feds might make from the controversial Wall Street Bailout.

Back in late 2008, when Congress passed the TARP bank bailout, I posted about the proper term to describe the developing relationship between government and industry:

Pundits speaking for the huge popular majority opposed to the plan seem to have decided to call it socialism, or a nationalization of banking and real estate. There is a political philosophy which combines those terms. National Socialism. Or, in a word, fascism.

Now that Barry has been elected and enjoyed a kindred Congress, I am more convinced that his vision for society is not properly called socialism. An article at The Freeman takes up the question, “Is Obama a socialist?”

In essential terms, consumer surplus is getting more than you paid for. Or, in more rigorous terms:

Consumer surplus is a measure of the welfare that people gain from the consumption of goods and services, or a measure of the benefits they derive from the exchange of goods.

Consumer surplus is the difference between the total amount that consumers are willing and able to pay for a good or service (indicated by the demand curve) and the total amount that they actually do pay (i.e. the market price for the product).

The surplus may be in the form of additional goods, like the beer snit that usually comes with a bloody mary. Or it might be in additional utility, like napkins that come in handy dispenser packaging.

At a mega-drugstore on Central Avenue, the patron ahead of me was chatting on her mobile phone as the cashier rang up her merchandise. She bought two frozen pizzas (Red Baron brand), a few cans of soda-pop and a couple of bags of candy. And she paid by EBT card.

The politics of generosity and inclusion are a fraud. Taxes should not pay for candy in the name of charity. And if you can chatter freely on a cell phone, you’re not poor.

Just observed a “homeless” person camped out at a freeway exit (I-35W & New Brighton Boulevard). He was too busy with his iPhone to hold up his sign.

Arnold Kling goes Old Testament:

Pharoah created jobs for us. Moses led us away from those jobs. Even though those jobs helped to complete public infrastructure. Even though they were green jobs, where we used our muscles and our backs instead of fossil fuels.

Moses could have been part of the ruling class in Egypt. He chose freedom instead. Those of us who followed Moses also chose freedom. Freedom brings risks. But we preferred the risks of freedom to the security of bondage.

Do not confuse government with G-d. Government cannot miraculously provide us with manna--or health care. When we look at government, we should not see G-d. We should see Pharoah. Government-worship is Pharoah-worship.

I don’t think I am psychic, but sometimes I wonder. Last night, in thinking over the implications of Unicorn Care, the problem of Federal Debt arose. Despite the wailings of the leftoids and their rigged CBO scores, economics cannot be fooled.

The U.S. economy probably cannot support another massive program of waste. We ar still in the early stages of a depression, somewhat masked by financial shenanigans between Washington and Wall Street. Not only the costs of TARP and Spendulus; we suffer from the uncertainty as all the rules of business are in flux. There simply will not be enough production to keep up our lifestyles and make payments on the Federal debt. Even if lifestyles are made to suffer, Congress can’t tax what is not produced.

It’s easy to reduce the deficit, drop tax rates, and provide better services to more people. I could do all three at once.

Just mandate that people buy that better service and tax any non-government providers of it.

Et, voila!

Economically, we’re worse off. But financially, the government looks like gold.

Imagine the only kind of car legal to be owned and sold was a Cadillac. And that every adult had to buy one.

General Motors would be immensely profitable. And all that profit could be spent paying down GM’s debt. Or the government could take it to pay for other services, leaving GM at break-even (although with enough for lavish executive lifestyles, luxurious labor contracts and robust lobbying endowments).

Meanwhile, taxes could be reduced, as there would be no need for communal transport. And sales tax collection would be up with all those people buying expensive cars.

Recycling is one of the sacraments of the lefty/greenie religion. Sometimes, it is actually a good idea, too. Sippican offers an experiment to determine whether all that washing and sorting of your garbage is an act of faith or an exercise in reasoned stewardship of nature’s bounty:

I'll give you an experiment you can try at home, whether you're a raccoon or not. Strip the aluminum siding off your house, or the copper wiring, or steal a few manhole covers, or rip out all your copper plumbing, or cut all the steel fenders off your Prius. Go to the Yellow Pages and find a scrapyard and go there. They will weigh those items on a big scale for you. You don't even have to get out of your now fenderless vehicle. They'll weigh your vehicle coming in and out and calculate the difference. They will count money in your hand, because that stuff is worth money.

The popular tone seems to be that banks are not lending to small businesses. There are counter-examples, and bankers insist they are making loans to those who can offer both some decent collateral and a reasonable prospect of making payments. I conclude that the problem—if it is a problem—is that banks have tightened their underwriting standards.

Banks have to do this because they can’t afford more bad loans. The Federal Reserve requires bankers to hold some small fraction of real assets against all the promises of payment (loans) they hold.

Maxed Out Mama, who always looks deep into the data, sees cause for optimism:

If one tried, one could make a case that the economy will continue decent growth in 2010, or one could make the case that the economy would subside once more in the later part of 2010. There are indications both ways. Usually, that is an encouraging sign.

I won't try to make any case. In my view this is somewhat fragile and the final trajectory for 2010 depends most on government policy and fuel prices (which will control a lot about spending power).

Income tax withholdings (WIET) are up compared to this period last year. But, last year was horrible. It appears Main Street is no longer collapsing. That’s the good news.

The bad news is that Main Street is still in a fragile condition:

According to the U.S. Census Bureau, about 67% (pdf) of owner-occupied American homes have mortgages against them. According the the Mortgage Bankers Association, 15.02% of those mortgages are at least one payment late. That works out to be 10%, a record high.

Since 3.63% of mortgages are only one payment behind, that leaves about 11.4% of mortgage holders (7.6% of all homes) who can’t just be dismissed as having lost a payment slip.

In the third quarter of 2009, 1.2% of mortgages began foreclosure. That’s “only” .8% of all homes, and “just” in one quarter. Multiplying by four quarters puts 3.2% of all owner-occupieds in foreclosure. How many on your block?

After a decade or more of mainstream urging, I suggest that nearly everyone who wants to “go green” has done so. Or has at least started down a greener path.

Green messages may have reached a saturation point, becoming ubiquitous so we stop noticing them. There are still fortunes to be made—even outside subsidy capture—but green isn’t cutting-edge cool anymore.

So what’s next?

Going gray:

Forty years from now, one out of four Americans will be 65 or older.
Twenty million will be over 85.
One million will be over 100.

Teach a man how to beg for fish and he'll never learn to fish.

Quoted from: Cobb

The State of New York is considering relaxing requirements and increasing benefits available to welfare recipients. But maybe the poor in New York are already overpaid:

When tax credits and medical and housing benefits are included, an average single mother of two with an $8.25-an-hour job in New York City receives a $63,000 annual income. On welfare alone, that same mother would pull in $43,000 a year—a whopping amount for non-work, to be sure, but still less than work provides.

Assume a 2000-hour work year. Then, a little math reveals (43,000 ÷ 2000) that NYC welfare pays $21.50 per hour. That’s just the handout, not compensation for adding any value to anything in the form of meaningful work.

Outside the U.S. Coast Guard’s awesome rescue effort, the one organization that truly shined in the immediate aftermath of Hurricane Katrina was Walmart. It has become a stock example of the power and effectiveness of capitalist enterprise in the humanitarian sphere.

Anheuser-Busch is another example, by its reponse to the Haiti earthquake:

The day after the earthquake, the company’s AmBev business in Latin America immediately shipped nearly 350,000 cans of fresh drinking water from a brewery it operates in Santo Domingo in the Dominican Republic, about 160 miles from Port-au-Prince, to be among the first to provide relief to victims of this tragedy. In addition, the Anheuser-Busch brewery in Cartersville, Ga., is working with the American Red Cross to ship another 600,000 cans of water. In total, the company will donate nearly 1 million cans of water.

Next time you’re tippling, toast to the evil capitalists who save thousands of lives.

H/T: Make the Logo Bigger

Café Hayek has a post where commenters are asked to compose “Hayeku”:

A haiku is a three line poem. The first line has five syllables. The second line has seven. The third line has five.

A hayeku (HT: Ike Pigott for the name and the encouragement) is a haiku from an Hayekian perspective. Here’s one to get you started:

Why do we pretend

That “mandatory” spending

Is mandatory?

The idea (and the pun) tickles me. But people seem to think that any seventeen-syllable sentence qualifies as poetry if broken into three proper chunks. Nope. Like the example offered, it’s just a choppy sentence, not a haiku.

We now have a financial system that is completely based on moral hazard.

Quoted from: Simon Johnson

Via: Naked Capitalism

Bastiat’s concept of a negative railroad involved unneccessary breaks in the line that would provide employment to porters and baggage handlers. The same principle applies to duties and tariffs imposed at borders:

Just think how many jobs Congress could create by encouraging states to erect their own tariff walls? High-taxing and heavily regulating states would then be able to protect their workers from states with lower taxes and less-burdensome regulations. California wineries would never again lose market share to rivals in Oregon and Washington state. Michigan autoworkers would never again be displaced from their jobs by workers in Tennessee and South Carolina.

While pseudo-intellectual elites are wringing their hands about globalistical warmening threatening to drown worthless places like Tuvalu, the actual climate is freezing people off Peruvian mountaintops:

For alpaca farmer Ignacio Beneto Huamani and his young family, life in the Peruvian Andes, at almost 4,700m above sea level, has always been a struggle against the elements. His village of Pichccahuasi, in Peru's Huancavelica region, is little more than a collection of small thatched shelters and herds of alpaca surrounded by beautiful, yet bleakly inhospitable, mountain terrain.