Moral hazard alive and well

JJ is still having problems accessing the blog.  So here is one for today (sorry about yesterday).  Those in the large banks are making record salaries this year after a record-breaking last year. See here.  Do you really believe they are being paid the value of their marginal product or is this looting as a result of moral hazard?

Money for nothing

This is a lovely article:

http://finance.fortune.cnn.com/2011/01/30/money-for-nothing-at-goldman/

This is absolutely the job I need to have. The very first paragraph says it all. It is clear that Goldman has not learned anything from the financial crisis. Except how to take advantage of the rules for their benefit. In some respects, I blame the government for thinking that the new rules would change the behavior that is so engrained on Wall St. It just seems too easy for these companies to find ways around regulation. It also seems that anytime some piece of solid legislation is introduced, these companies lobby hard against it, and eventually get their way. So I ask; Who is really running our government? Because I am sure that this behavior is pervasive at every level of government in this country.

Well there's your problem!.....

This article exposes some reasons as to why we have a painfully ineffiecient government.
http://politicalticker.blogs.cnn.com/2011/01/28/koch-weekend-meeting-fires-up-debate-over-politics-influence/

It seems like there should be some sort of law regulating these types of get-togethers. I have a problem with secret meetings that can influence political decision making. I mean, what are they going to do with 2 billion dollars that they cant do with 1? It just feels sleazy, and stunningly arrogant. Maybe I am over reacting, but I have a very hard time believing that these people have my best interests in mind during these meetings. Mr. Cantor or any other politician should not be allowed to participate in these types of meetings. Just the mere possibility of impropriety should have no place in politics, but I guess if I want things to change, I better win the lotto.

Sorry this was late today, I was on dad duty this morning!

Choices are difficult

Quarterly GDP figures came out this week for the UK and the US.  Our GDP grew--not a lot but still enough to show that the economy is improving.  Their GDP fell.  The British equivalent of the Tea Party took over last year and imposed an austerity budget.  Was it the right thing to do?  What comes next?  This editorial in the Financial Times does a nice job of highlighting the public and private choices that will need to be made.  I can almost see possible paths to various points on their production possibilities frontier. 

We have to take responsibility

See this article: http://www.cnn.com/2011/OPINION/01/27/borger.obama.deficit/index.html

The first two paragraphs really hit home for me. Especially this part: " any pollster will tell you that while people always say they want the deficit fixed, they never believe they're part of the problem. So they won't hear of reducing Medicare and Social Security, which amount to nearly a third of the domestic budget. That kinda rules out any serious discussion." It suggests that as Americans, we are only interested in solving our deficit problem if it is done at the expense of others. Its kind of like the prison dilemma: A lot of folks think we need newer, better prisons, as long as they arent in their hometowns and they dont have to pay for it. We have passed the buck far too often in this country and that attitude has become central to the problem at hand. Its easy to lecture others on what they need to do to fix the deficit problem, its quite another to admit that they are just as much to blame, and accept that they have to make sacrifices too. Government needs to quit wasting time and accept that there is NO good answer. Fixing the deficit will be painful, but necessary. Just like a root canal. It sucks, nobody wants one, but in the end you have to do it, you deal with the pain and move on.

You'll love this one.......

Please read this article http://money.cnn.com/2011/01/26/news/economy/tea_party_budget/index.htm?hpt=T2

Now that your nausea has passed, we can discuss.

I have yet to hear either of them say what this will do to help America. It will lower the deficit. Great. So we will have a generation of people that are ill prepared for the real world? But they won't have national debt to worry about so it's ok. How about housing? Apparently it wont need to be affordable since there won't be a national debt anymore, so it's ok. You know, because the people who truly need help buying a house really care that we have a huge national debt.

Bachmann would replace farm subsidies with farmer savings accounts(whatever that means), ELIMINATE or dramatically scale back the Department of Education to save $29 billion or $31 billion( yeah, that seems worth it, and those almost mean the same thing) and slash programs at the Department of Justice ($7.8 billion).

She would also cap Veterans Affairs health care spending (I'm sure this will go over quite well with all of our servicemen who are being shot at overseas), privatize the Transportation Safety Administration(Im all for this if they won't grab my junk), Federal Aviation Administration and Amtrak, repeal the Dodd-Frank Wall Street reform law(c'mon, we all know that there is absolutely nothing wrong with Wall St.), and open the Arctic National Wildlife Refuge to leasing(Drill baby drill!).

I'll just open this one up for comments. Maybe I am overreacting to these proposals, but these two seem awfully jaded.

Your State of the Union Address

I dont know how many of you watched the State of the Union speech last night. It was hard to miss since it was on every channel anyway. So, here we go again. Calls for bi-partisanship, and collaboration on policy were made as usual, as well as the bold predictions for what we should be to the world in the future. But what about right now? Obama called for a 5-year freeze on non-defense spending (a drop in the bucket compared to actual defense spending), and an increase in education and clean energy spending. "At the same time, Obama proposed reforming how government spends and works, including the five-year freeze on non-security discretionary spending, eliminating earmarks from spending bills and reforming the corporate tax code to remove costly loopholes and subsidies, with the savings lowering the corporate tax rate." These are all things we have heard before. Obama also said "We are poised for progress," two years after the worst recession most of us have ever known, the stock market has come roaring back. Corporate profits are up. The economy is growing again." My wallet would disagree.
I also found it interesting that his calls for professional unity were lauded until the cameras went off, then it was back to kindergarten politics with staffers calling GOP plans the "meat ax" approach, and Republicans basically saying they don't care what the President says their ideas are better. They all sound like my kids fighting over who colors better.
I wasn't a fan of Boehner's tie either (totally irrevlevant, but it needed to be said)

If there were no cameras, CNN, or rebuttals. No fake smiles and ovations. If you were giving the state of the union speech, what would you say?

The Dilemma of Unions v Budgets

I saw this article on CNN money this morning http://money.cnn.com/2011/01/24/news/economy/budget_backlash/index.htm

I think it highlights a few things from this class, as well as some others from the past. I find it interesting that most Americans feel that we need to address our serious budget issues, unless it means affecting something that they like, or want. I am not a big fan of unions in general, so I tend to get irritated anytime I read an article about union folks who usually make a good living complaining about wages, or cuts thereto. There was a time when unions were an invaluable asset where worker protection was concerned, but with all of the labor laws in place, they seem to be more of a hinderance these days. We should all be so lucky as to have automatic wage increases regardless of our production or quality. I want that kind of job! I currently work full time, and my company has frozen wages for the last 2 1/2 years. It sucks, but its also business. The fastest way to save money is to cut labor costs (ECON 101). When I read the "The unions are also warning that government agencies won't be able to function properly." I laughed. As opposed to what we currently have? I'll take my chances. So where does your opinion lie? Do you think Federal workers should be fair game for budget cuts??

State of the Union politics

President Obama will deliver his next State of the Union address tomorrow evening. Rebublicans have taken and passed a measure to return government spending to 2008 levels. It is intended to force the Democrats to show where they stand on government spending. Democrats, of course, think that it will further harm the economic recovery. (See article)http://www.cnn.com/2011/POLITICS/01/23/congress.spending/index.html

My question(s) is this: Do you think the partisan bickering is getting in the way of our economic recovery more than actual economics? Don't you think we should have some say in the programs that get cut? It seems easy to cut welfare when you have never needed it.......

America's Crumbling Water Infrastructure

So the last couple of days I have posted articles about how our federal government is facing some serious debt problems. Watch this video in the link below and see yet another huge problem that our country is facing, and something that is not even accounted for it today's federal budget.

It is estimated that a water main breaks on average every 2 minutes across the country every single day, or about 300,000 per year. Majority of these water infrastructures across the country were build in the decades following World War II, making some cities like Washington D.C. with 77 year old pipes. It is estimated to replace these old pipes, drinking water over the next 3 decades will cost $250 billion. Problems include: cities are burden by debt and don't have to pay the money for replacing these pipes; President Obama's 50 billion proposal in federal spending to fix infrastructure across the country does not include water projects. Finally, the longer we wait there is a greater possibility that our drinking water can become contaminated. This is a very serious issue and something clearly needs to happen soon; any ideas on how our government can replace this infrastructure? If government can't afford it, who can?

http://www.cnn.com/video/#/video/us/2011/01/19/tsr.kosik.water.infastructure.cnn?iref=allsearch

Could You Retire Without Social Security?

So yesterday I posted an article about how federal tax dollars are being spent on 4 primary things, one of which is social security. If you read that article and thought it was scary take a look at this one because this is going to greatly impact all of us.

http://online.wsj.com/article/SB10001424052748704073804576023890972991846.html

"This week's landmark tax deal sharply changes the financial outlook for Social Security. That has huge implications for your retirement. And most people don't have a clue what's coming.

The deal, by cutting payroll taxes for one year, weakens Social Security's funding. It puts those payroll taxes "in play" as a political football for the first time. And by freezing federal taxes at today's low rates, it will add at least $900 billion—and probably much more—to our spiraling national debt. That threatens the ultimate financial stability of the federal system.

Ten years ago, the national debt was about $3.5 trillion. By 2020, Congressional Budget Office calculations suggest it could be well over $20 trillion. No kidding."

I think this article answers yesterdays quesiton: maybe we should increase taxes because clearly our country is having a hard time saving. Check out these statistics from the article:

"According to the most recent survey by the Employee Benefits Research Institute, a think tank specializing in the topic, fewer than half of workers have even saved $25,000, and only a third have saved as much as $50,000. Forty-four percent have saved less than $10,000, and a quarter have basically saved nothing at all."

Clearly our federal government has a lot of figuring out to do, especially in terms of our national debt as well as the social security issue. One answer would be for citizens to have started to save 20 years ago, but clearly we're a little too late for that. Is there a realistic solution to this problem? I mean what would we do without social security? Who can honestly afford to pay more taxes? I personally have no idea what is realistic or not, any ideas?

Running the Government on 8¢

NEW YORK (CNNMoney) -- Those who clamor for more "limited government" rarely define what they mean. But assuming nothing changes over the next decade, Americans could be left with a de facto limited government -- limited in what it will be able to do.

Today, the United States spends roughly 76 cents of every federal tax dollar on just four things: Medicare, Medicaid, Social Security and interest on the $14 trillion debt. That leaves 24 cents of revenue to pay for everything else the federal government does.

http://money.cnn.com/2011/01/21/news/economy/spending_taxes_debt/index.htm?cnn=yes
(Hope that works Laura)

Of course everyone says that they want to pay lower taxes and have a smaller government, but is that truly what we need? How do you think government spending can change to be more effective? This article lists a number of ideas in which the 8% of government spending could be used on, where do you think it should be spent? How can we continue to ask to raise the debt ceiling if these 'left over' government funds are just going to continue to drop? Do you think taxpayers would be willing to pay more in order to avoid more debt?

Agents or self interested actors?

We talked about politicians as agents or actors yesterday in class.  Another illustration of the problem can be seen in medical research.  Are scientists disinterested pursuers of truth or are they often co-opted by the for-profits who often fund their research?  Here is an interesting piece on the dilemma.  What do you think?

Are you guys more selfish or being true to the rationality hypothesis???

Repeated surveying over the past 30 years shows that younger people are overwhelming less empathetic than they used to be.  (see here)  If it is true, that younger people care less about community and more about themselves (my words not those in the article), then our social welfare function is changing in predictable ways.  But do we really want to live in a world where we don't care about each other's welfare? 

Mob Bust: More than 100 Suspects Nabbed by FBI

This may be a little bit off topic, but I think it is really interesting and somewhat relates to the gun control issue that we talked about last week. Either way, I believe there are significant financial implications regarding the war on drugs and organized crime. This has always been a very controversial issue because taxpayers are currently spending what is estimated at about $40 billion dollar a year (and climbing) to fight the war on drugs alone; yet drugs in America continue to grow. However, this article sheds some light for all the money that is currently being spent on this issue.

NEW YORK - Federal agents dealt another major blow to New York's five Mafia crime families by arresting more than 100 suspected mobsters throughout the Northeast on charges including murder, extortion and narcotics trafficking. The FBI said most of the arrests were made in pre-dawn raids Thursday. Many were in Brooklyn, but they occurred throughout New York City, in New Jersey and New England. Law enforcement officials tell CBS News that this is considered "the largest one-day mob roundup in U.S. history."

http://www.cbsnews.com/stories/2011/01/20/national/main7265045.shtml?tag=cbsContent;cbsCarousel

These arrests, I believe are going to have a significant impact on many of these major Mob families, and therefore will affect the rest of the gangs that did business with them. First, do arrests like these make the billions in taxpayers money worth it or do you think arresting such powerful mob family members is only going to piss people off and create even more violence? Do you think these busts are large enough that they will influence illegal drugs and organized crime markets not only in these couple of states but across the country?

Commercial Catfish Production

Hey everyone, so first off I'm really sorry that I am just now posting my blog for the day. I literally have been busy since I woke up this morning and I just got off work. I promise I won't post this late again.

The other day in class we talked about the Catfish industry and Professor McKinney wanted me to post a blog about the industry as well as catfish noodling... so here it is. Make sure you check out the link at the bottom of this post to see catfish noodling, because it's the real deal in the South.

Catfish is the leading aquaculture industry in the United States. Commercial catfish production generates over 46 percent of the value of aquaculture production in the United States. From the first commercial production in ponds in the 1960s, catfish production has grown rapidly to reach annual sales of 660 million pounds in 2003. The value of the catfish crop in the United States reached $425 million in 2003. Mississippi, in accord with its acreage, reported the greatest value (approximately $243 million in 2003). Check out the link below to read the full article...

http://msucares.com/aquaculture/catfish/index.html

In class we talked about how the US catfish industry is being negatively affected by foreign catfish markets because price per pound is about a $1 difference. Due to US labor and wage rates being significantly higher than these foreign markets there is no way that the U.S catfish industry can compete with price. However, as you can see the catfish industry is the leading aquaculture industry in the US, generating almost 50% of aquaculture production. What do you think can be done to save the U.S catfish industry as a whole from losing these production rates, profits, and corresponding jobs?

Catfish Noodling Video:

http://www.youtube.com/watch?v=biL-QcviQGk

Honeybees: a perfect example of negative externalities and market failure

See the graphic here or video here.  Note the impact of the loss of bees on agriculture and food production.  What exactly is the market failure here and how should it be addressed?  (tax or regulate or ignore are our basic choices when dealing with externalities)

Back to the second theorem

If the social contract has changed between workers and employers in the United States as stated in this piece from The Guardian, what will the future look like in the United State?  One thing that is missing from our theorems is the notion of political and economic power.  Another thing that is missing is the idea that wages are equal to productivity.  If workers get less, does this mean they are less productive today than they were 30 years ago?  Do you believe that?

America's infrastructure rates a D

See here.  Our roads, bridges, water and sewer systems are aging.  But where will the money come from to repair them?  Who will do it? 

House set for health care repeal vote

Washington (CNN) - The House of Representative is set to vote on a repeal of President Barack Obama's health care overhaul this week, fulfilling a campaign promise of congressional Republicans and setting up a clash with the White House and Senate Democrats.
http://www.cnn.com/2011/POLITICS/01/17/health.care/index.html?hpt=T1

On Wednesday the House is scheduled to vote on a repeal of the health care overhaul, however it is believed that this repeal has very little chance of actually passing the Democratic Senate. Republicans have acknowledged these chances, however have indicated there will be attempts to either defund portions of the measure of even eliminate specific provisions in the upcoming months. Besides changing some of the small business issues requiring all this extra work, what issues do you think the Republicians are going to focus their efforts on? What issues do you think are most realistic to repeal?

This article also brings up that there are "promises of a more civil discourse in the wake of the shootings may cause some representatives to tone down their rhetoric over what continues to be a sharply polarizing and emotional issue. I personally think that it's kind of sad that it takes this tragic shooting for republicans and democrats alike to tone down their rhetoric actions. Do you think it is better to have a more civil debate? Is it more efficient?

*Just a heads up, this is my topic for Tuesday. I have a lot of stuff to do tomorrow so I figured I would get this out of the way tonight.

-Matt

Democrats face tough fight on gun control after Tuscan shootings

I know Dave brought up this topic last week, but yesterday Democrats brought up the issue in Washington. Two issues presented include: bringing back the ban on assault weapons, or tightening enforcement of existing gun control law and regulations. I found this article interesting because despite the Tuscon shooting as well as other tragic shootings in the past there is still significant resistance to gun control. Last week the class shared similar ideas about this issue. However, Democratic Senator Schumer says: "There haven't been the votes in Congress". Republicans also cite failure to detect mental illness, not lax gun laws. Is the issue here even gun control? The article also brought up the idea if more people actually carried guns then perhaps someone could have stopped the Tuscon shooter before he did all this damage. What are your thoughts on this idea? If gun control can't get by congress, do we drop the idea and turn our attention to detection of mental illness, not lax gun laws?

Check out the link below:

http://www.cnn.com/2011/POLITICS/01/16/congress.gun.control/index.html?hpt=T2

-Matt

K College Athletic Fields Renovation put on Hold

Kalamazoo College's plans for new athletic fields have been put on hold as residents of the Oakland-Winchell neighborhood protested the plans. According to the Kalamazoo Gazette, "Residents raised concerns about the lights, traffic, and reduced property values." Kalamazoo must get the athletic complex area rezoned which could take a few years.

After watching our Hornets defeat Alma and get off to a 3-1 start in league play on Saturday, I was looking at the plans for the field renovation in the Anderson Athletic Center, explaining to a sophomore baseball player why he most likely wouldn't be playing on the new fields while here at Kalamazoo. President Wilson-Oyelaran overheard me and came over to ensure me and my teammate that this rezoning process was only a setback and that the college would make the renovations happen. I found this very reassuring and was also happy to hear that the President of our college is standing behind the decision to renovate the fields the way she is.

I think there are a lot of faculty members, students, and residents in nearby neighborhoods that don't quite understand the impact these new facilities will have on them. Kalamazoo College claims in its mission statement to be a "nationally renowned" institution, mostly known for its tradition of academic excellence. As an athlete at the school, I am well aware that, other than tennis, swimming, and occasionally a soccer team, our school also has a tradition of losing in athletics. There are many factors that contribute to this. Part of the losing tradition can be attributed to the fact that the football, soccer, and baseball (softball) teams are playing on fields that aren't just of inferior quality to our competitors, but are flat out dangerous to play on. More importantly, however, I think the tradition is due in large part to the lack of support from a variety of people and especially the community.

As a member of these neighborhoods, how could you not want to see these fields (and ultimately the gymnasium and Natatorium renovated? These renovations are the first, and most important step, in turning the losing tradition of Kalamazoo College around. If you aren't an athlete at this school and you are wondering, "Why does it matter to me if we have good sports teams or not?" Can you imagine how much more "nationally renowned" our school would be if we were, say, the Stanford University of Division III? A perfect example is Johns Hopkins University. Johns Hopkins is truly a "nationally renowned" college and it is because of their tradition of academic and athletic excellence. I don't have the statistics to prove it, but I am willing to be the overwhelming majority of adults living on the West Coast have heard of Johns Hopkins, but not Kalamazoo College. I can't imagine that improving the overall reputation of the college would decrease the property value of these nearby neighborhoods.

It is very disheartening as an athlete to hear that when we finally have gotten the plans to pass through the college, that members of our own community are the ones stopping us from leveling the playing field with our competition. Sorry for such a long post and thanks for putting up with my posts for the week!

Are people really making rational choices? Congress as a case in point.

The 2nd amendment gives us the right to bear arms and many in Congress are loudly supporting anyone's right to bear weapons.  Yet, many of having a serious discussion about the use of plexi-glass in the Capital building to protect congresspeople from harm.  (see here for a brief posting on this)  Have you been to the Capital lately?  It feels like you have gone through security at an airport.

U.S. Bills States $1.3 Billion in Interest Amid Tight Budgets

According to Michael Cooper of the New York Times, the federal government is billing the states for the billions they have borrowed to pay unemployment benefits. They will charge $1.3 billion in interest this fall. Michigan alone owes Washington $3.7 billion and will be expected to pay $117 million in interest this fall. Michigan is just one of 30 states that owe money to the federal government for their unemployment programs. I can't help but wonder where this money is going to come from? Any ideas or comments on the topic?

David said this was off topic but I don't think so

Building on his "gun control" post, I want to present the ABC poll on the shooting done recently.  Go here.  The poll results are a bit messy.  But clear from them (at least to me) is that gun control is not something a clear majority support--it is one of those "almost half believe" issues.  And about a quarter of respondents believe violence against the government (our government) may be justified.  How do you build a social contract, a social welfare function out of such extremism?  I imagine that many folks have always held extreme views but in the more recent past, it has not been socially acceptable (think social contract) to express them openly or to act upon them openly.  Are we better off now that extremists don't feel extreme?  I think I need a weekend to mellow out.......

U.S. Gun Laws

This may be a bit off topic from what we've talked about in class, but I couldn't help myself. The following is a quote from Nicholas Kristof, a columnist for the Opinion Pages of the New York times:

Just since the killings in Tucson, another 320 or so Americans have been killed by guns — anonymously, with barely a whisker of attention. By tomorrow it’ll be 400 deaths. Every day, about 80 people die from guns, and several times as many are injured.

I just don't understand why we haven't done anything to fix this problem. I understand the U.S. constitution tells us that we have the right to bear arms, blah blah blah. That doesn't mean we can't make stricter laws to prevent people who shouldn't own guns from owning them. There has to be a way to respect one's second amendment rights yet still inhibit their ability to kill people. Any ideas? Opinions on the topic? What kind of effect would stricter guns laws have on our economy?

Food as a basic commodity

Food prices are rising, and if shortages occur, people in many countries will be hurt.  See here.  Is this a "public sector" issue that government must intervene in or is this a fundamental outcome of scarcity in our world economic system?

Bill to repeal Michigan Business Tax surcharge introduced in state legislature

The first bill introduced to Michigan state legislation this year is to repeal the 21.99% surcharge placed on businesses in 2007. The surcharge is believed by many to be a "job killer." According to Jackie Headapohl of the Kalamazoo Gazette:

(http://www.mlive.com/jobs/index.ssf/2011/01/bill_to_repeal_surcharge_on_the_2007_mic.html#incart_hbx)

The Mackinac Center said their data shows the repeal of the surcharge would create more than 8,300 new jobs in the first year. "Greater investment and employment would positively compound each year thereafter and employment would increase by 27,900 by the end of 2016," the organization said.

This sounds like to easy of a fix to me. What, if any, other policies do you think could contribute to job creation in Michigan?

Chinese Scholar comments on American Politics

After our discussion in class today, I found this bit in the New York Times that describes the extreme separation between political parties in the U.S.

Zhang Guoqing, a Chinese scholar, commented on American politics in The Beijing News:

Over the past two years, the health-care reform that Obama has advocated has created a vast divide within American society and between diametrically opposed political parties, while immigration has separated the American people into two camps that cannot bear the very existence of the other… Against the background of a high unemployment rate, and the trouble in stimulating the economy, this type of social divide presents enormous hidden dangers.

What do you think are the most serious 'hidden dangers' in having the type of social divide described above?

Social Welfare and oxytocin

From the New York Times: "Oxytocin has been described as the hormone of love. This tiny chemical, released from the hypothalamus region of the brain, gives rat mothers the urge to nurse their pups, keeps male prairie voles monogamous and, even more remarkable, makes people trust each other more.Yes, you knew there had to be a catch. As oxytocin comes into sharper focus, its social radius of action turns out to have definite limits. The love and trust it promotes are not toward the world in general, just toward a person’s in-group. Oxytocin turns out to be the hormone of the clan, not of universal brotherhood. Psychologists trying to specify its role have now concluded it is the agent of ethnocentrism." 

So, this hormone makes it more likely that you will be benevolent toward people you see as coming from a trusted group and less likely that you will be benevolent to those who come from groups that you fear or have prejudice towards.  And here I thought the social welfare function was complicated enough!!!!  Biology, psychology, education, and politics all play a significant role in determining our social contract.  Do we need communities? Do we need each other?

KVCC non-smoking policy

For six years, KVCC has had a policy that smokers can not be hired for any job at the college. The article can be found here:

http://www.insidehighered.com/workplace/2005/01/31/kalamazoo1_31

This seemed outrageous to me when I first read it. However, my mom, a professor at the school, explained it to me much better. KVCC was able to show that workers who smoke call in sick at a much higher rate than workers who don't smoke. Not to mention the health care costs for smoking workers is drastically larger than the costs for non-smokers. Should an organization be able to do this? They aren't discriminating based on race, gender, religion, or sexual orientation. They are simply hiring healthier and more cost efficient workers. I personally don't see a problem with this.

Fed Transfers $78.4 Billion to Treasury

The U.S. Federal Reserve’s 2010 net income grew to $80.9 billion largely due to a boost in earnings from securities it acquired during the financial crisis, according to preliminary unaudited results the central bank announced Monday. (short article below)

(http://blogs.wsj.com/economics/2011/01/10/fed-transfers-784-billion-to-treasury-for-2010/)

The Fed is transferring $78.4 billion of this income to the Treasury Department. What do you think the Treasury Department will do with the payments? What do you think they should do?

Rep Gabrielle Giffords' Shooting

Arizaona Congresswomen Gabrielle Giffords was shot yesterday and is in critical condition. The moderate democrat is a tough critic of the state's immigration laws and is in favor of health care reform. She narrowly won her re-ellection against Tea Party member, Jesse Kelley, last November.

The first Jewish wowan elected to the House from Arizona has been targeted and harassed last spring after healthcare votes. She is also on Sarah Palin's "targeted list."

The suspect, Jared Loughner, is not formally associated with the Tea Party. According to today's New York Times article.

The healthcare reform is greatly debated between Democrats and Tea Party members. How does this effect the movement to repeal health care reform?

What is truth and how do we recognize it?

Externalities abound, no doubt, but how do we know when they are costly enough that we must address them as a society?  Consider the plight of the young human male (see here).  Are we really poisoning our environment with chemicals?  If so, is it really having a huge impact?  How do we determine costs and benefits in a way that most members of society would agree with and then act upon? 

Capitalism A Love Story

I love the theory of capitalism. According to the two fundamental theorems of welfare, perfectly competitive markets can provide economically efficient outcomes and experience suggests that most markets work exceedingly well. A perfectly competitive market would even out inequalities according to the second welfare theory. True, we don't live in a perfectly competitive market, thus we are taking public finance.

In Work and Labor, a sociology class today, I found myself increasingly frustrated with how the professor and text describe capitalism, rather bashing the institution at the theoretical level. I understand that this is from the sociological lens, but one cannot disagree with something they do not understand. Granted I am biased as an econ major, but I can't stop thinking that to have a liberal arts education econ 101 is as, if not more necessary, as two cultures courses. How can one understand people and culture if they do not have a basic grasp of economics?

Flying carp and public choice

In another pitched battle over property rights and externalities, Great Lakes states have been fighting to control the carp invasion before the Great Lakes are infested with the fish.  See here for a video.  They will decimate native species and are a danger to boats.  But shipping helps the economy in the short run and keeping the carp out would raise costs in the fishing industry.  See here for an editorial.  The issue reminds me of the phosphorus in the dishwasher regulation (only a bit more gruesome).

Tree-conomics

Today we started to look at what the world would look like for a public sector to be unnecessary. Adam Smith's Invisible Hand would solve all market issues. In my notes I wrote that there are three main violated market assumptions: property rights & enforceable contracts, economies of scale, and private information. Public goods falls into this violation.

Who owns the trees that take in CO2 and give us O2? We all do, some privately and some publicly. NYT's blogger Nancy Folbre more eloquently states the argument between public and private common goods here.

Read the article, it's shorter than it seems. Are there other common resources that may need to be regulated so the public uses them most efficiently and/or equitably? Or will the Father Smith's theorem take care of it all?

Kansas Doesn't Need Red Ink

Most local and state governments are trying to figure out how to operate in the red. The City of Minneapolis chose to forgo snow calling several snow emergencies and plowing upwards of five inches of snow because there simply was not enough money in the budget weekend after weekend of snow storms in the snowy state of Minnesota last December.

Perhaps Dorothy was right when she said "there's no place like home," the state of Kansas closed 2010 in the black. Kansas followed the rule of keeping revenues and spending in balance; creating programs and living within their means. The progressive government uses professional managers to to keep local finance in check. Check out this article in the Morning Sun to read more.

A new day in Washington

The New York Times ran a particularly scathing editorial today (see here) entitled "Pomp and Little Circumstance" about the ceremonial changing of the party in power in the House.  Will the change make a difference?  Did the people truly speak in the last election?  Given, the Pew quiz that you all looked at and hopefully took, what do you think it means for "the people to speak?"

DYI: Laundry Detergent with Phosphates

Dirty dishes are not getting so clean reported National Public Radio last December. Seventeen States banned phosphates in dishwasher detergent because of the harm phosphates casue to the ecosystems of lakes, bays and streams.

NPR noted that dishwasher users could rinse dishes before loading up the dishwasher or running the applier twice. None of us can calculate an accurate cost benefit analysis whether its better to society if we pre-wash our dishes or use phosphate- laden detergents. Consumer Reports commenters suggest using white vinigar to improve on the phosphateless detergents. I, for one, say lets make our own.

--Laura Koch

What is Public Finance Anyway?

So, like the rest of you, I signed up to take "Public Finance" this quarter. I know what public finance is in general terms, but I could not articulately define the topic. Wikipedia , the go to source for all information, defines it as "Public finance is a field of economics concerned with paying for collective or governmental activities, and with the administration and design of those activities." Our textbook defines the topic as "the study of government economic policy, which has both positive and normative dimensions. (Tresh, 4)" Also known as the study of how policies should promote society's economic objectives.

The topic is so grand and encompasses a lot of different topics. It puts into practice the economic models we have poured over in other cousres.

I want to learn about public finance in order to understand how policy has and can effect people with economic disparities, specifically cyclical poverty and indigenous peoples. Why are you taking this course and what do you want to get out of these ten weeks?

Take the political news survey

The Pew Research Center does these quizzes periodically.  Go here.  Take the quiz and see how literate you are on political issues of the day.  How did you do?  How many of these issues relate to course material?