I Have a Dinner Date With a Ghost

Bloomberg reports, Harry's at Hanover Square has reopened. No matter what the reviewer says about the softening of Harry's, the metamorphosis from dark, man-cave to smooth, post-modern lovey-doveyness, the Beef Wellington yielding to Duck Confit Ravioli...none of it matters, Harry's is Harry's and one of those ghosts is my dad.

My dad worked downtown for 40 years and it wouldn't be an exaggeration to say that he probably ate at Harry's about 2,000 times. Lunch most days...Harry's. Dinner with clients...Harry's. Mom would drag us into town to see dad's office...Harry's. Celebrate that big deal...Harry's. Dad, can you meet me tonight, I need to share what's going on in my life and/or need advice...sure, meet me at Harry's. I remember, as a whipper-snapper of 4, playing with my Matchbox cars on the floor of the wine cellar at Harry's close to dad's table; and, as a whipper-snapper of anywhere from 16-20, there were umpteen lunches and dinners with dad's friends imparting career advice to me. And, there was that one night when dad let it out that he had been deeply wounded by someone we both love, where we both cried in our dinners completely unaware that we were in a public place. Then there was the time that Harry, as a favor to dad, got me a job interview with an industry contact of his, which turned out to be for me that one life changing interview that everybody has (or ought to have). No, not the one where you get the job. The one where the interviewer hands you your ass and makes you feel worthless. The one that shocks you out of your naive sleep, fires your ambition and awakens your seriousness. I still wonder if maybe dad and Harry didn't orchestrate the whole debacle for my own good.

Anyway, Harry's is one of those immutable venues - like the parking lot of Giants Stadium, or the golf course, or the room in the basement with the pool table - where I got to soak up the man, where we were viscerally father and son. And Duck Confit Ravioli won't change that. Reservation for one, and a ghost.

This Is Just Cruel..Kicking Them While They Are Down Like That

Man, you gotta feel for the poor French. Their country is falling apart and now this. After 30 years, we still make better wine. I imagine that they are teetering on the edge of a collective national nervous breakdown. If the US team happens to meet up with Les Bleus in the upcoming World Cup, and if we happen to win...well...there isn't enough Prozac in the world for every man, woman and child in France, is there? Let's hope it doesn't come to that.

Lay & Skilling Guilty: Good for Capitalism

So, Lay and Skilling are guilty and headed to prison. As an unabashed capitalist, let me say "Excellent." This is a good thing for capitalism. Capitalism is undermined by law-breaking and corruption that squanders the public trust. People like Lay and Skilling erode capitalism's ability make the case to society that capitalism can contribute in a productive and positive way to our thorniest challenges. Capitalism has tackled hunger and poverty (real poverty, not the car-driving, TV-watching poverty we have in the US) and it can tackle healthcare, the environment and education if we let it, but the Lays, Skillings, Ebbers, and Kozlowskis impede that. They impede our ability to make our case as capitalists that human ingenuity can solve problems under the proper incentive structure of free markets and limited government. They impede our ability make the case that we can cure diseases, make things that once were reserved for the few available to the many, and give us unimagined new things to enhance our lives.

Capitalists hold out the promise of achievements that government has consistantly failed to deliver. We can't have Lays and Skillings keeping capitalists from extending the long, remarkable march of human progress, so good riddance.

Updates and Thoughts on Topics of Interest

Well, the Enron verdict is 25 minutes away. I think it is a safe bet that Lay and Skilling will be donning the orange prison jumpsuits, but note this development is in stark contrast to government sponsored big business that lies and cheats.

Hooverville is humming despite high gas prices, despite trade deficits, despite budget deficits, despite Americans not saving, despite Americans' rampant indebtedness. Can we just maybe, possibly at least consider the possibility that these conditions are not as perilous as purported?

Great news for the prospects of diesel fuel as the next frontier in cleaner and more efficient power trains. Doing more with less, brought to you by capitalism, as opposed to doing less with more brought to you by government.

Be Afraid, Be Very Afraid

Could this happen? Are the Republicans of Great Sausage Factory's Upper Chamber that dumb?

Supply-Side Economics...Sorry, "Voodoo"...Throughout the Ages

I was aware of Ibn Khaldun, 14th century Islamic scholar, who chronicled supply-side economics of that era in what is now Egypt and Tunisia:

"In the early stages of the state, taxes are light in their incidence, but fetch in a large revenue...As time passes and kings succeed each other, they lose their tribal habits in favor of more civilized ones. Their needs and exigencies grow...owing to the luxury in which they have been brought up. Hence they impose fresh taxes on their subjects...[and] sharply raise the rate of old taxes to increase their yield...But the effects on business of this rise in taxation make themselves felt. For business men are soon discouraged by the comparison of their profits with the burden of their taxes...Consequently production falls off, and with it the yield of taxation."

And thanks to Ron Chernow's excellent biography of Alexander Hamilton, I see that Hamilton himself understood the same principles of taxation:

"[officials] can have no motive to abuse this power, because the motive of revenue will check its own extremes. Experience has shown that moderate duties are more productive than high ones."

Roach Clipped

HA! I made oblique reference to the fact that Morgan Stanley's Chief Economist, Stephen Roach had a laughably bad record. But Rich Karlgaard at Forbes doesn't prance about the shrub.

Since I am in a good mood, let me say something charitable. Roach is not a bad economist. He is just a bad market economist, whose job it is to use economic tools, understanding and reasoning to help investors make profitable investments in the markets. Karlgaard and I aren't saying Roach doesn't know economics. He does. He just can't make you any money with it.

Now Playing at the New School: Feminist Jazz Majors of World on War and Peace

I am not a Senator McCain fan, but I would have gladly become one if he had been more aggressive in smacking down the combined arrogance and puerile insouciance of the kids (faculty included) at the New School here in NYC.

Here are the drivelings of senior Jean Sara Rohe, who spoke at the ceremony as well. "I am young and though I don't possess the wisdom that time affords us, I do know that preemptive war is dangerous." You get an A for grasping the obvious and superficiality of thought, Miss Rohe. Preemptive war is indeed dangerous. Most forms of actual war are. But equally dangerous is a false peace. Like many, Miss Rohe seems to harbor the simplistic notion that the absence of war is peace. That is an equally dangerous notion. It results in a September 11 or the Blitzkrieg. So the question that our society has been wrestling with generally for several years since 9/11/01 (although not too much here in the Big Apple) is one taken from Economics 101: Compared to what? Preemptive war compared to what? To the peace that prevailed on 9/10/01. To a Chamberlain-esque notion of peace?

Alas, they don't teach much economics, or any discipline that instills the economic way of thinking for that matter, at the New School. It shows.

More Cognitive Dissonance from the GSF

Say it again, this time in your BEST Dr. Phil voice..."We have high gas prices, because we want high gas prices."

Another Economic Molehill from the MSM

On the same day that Democrats of the Great Sausage Factory announced their feeble energy plan, the Automobile Association of America is forecasting that a record number of travelers will hit the roads this Memorial Day weekend. This would seem to me to indicate that gas prices are hardly a national crisis, but leave it to the MSM to spin it thus. Got that? We're at record numbers, but growth is slowing, so things are really bad. These are the same dodoheads that predicted 1) higher gas prices would curb vacationing and consumer spending last year, and 2) higher home heating oil prices would cool consumer spending this winter and spring. Wrong and wrong.

I can only imagine what they would say if the forecast for travel was growing at recent historical trend..."The Growth in Holiday Travel is On An Unsustainable Path, Say Economists." Yup, sounds about right for the MSM elite, us poor unwashed schmucks are just having too much fun.

Let Humans Die, but Save Those Caribou!!

A Latin American country need not be taken over by Castro-inspired, Chavez-backed leftists in order to expropriate the property or contractual rights of foreign oil companies. Argentina is doing it. Ecuador is doing it. Bolivia is lost. Peru is next. Can we, or should we, rely on Chile, Colombia, Brazil to be the bulwarks against the entire continent of South America, literally from Tierra del Fuego to Lago Maracaibo, becoming a socialist dictatorship? I doubt we can, nor should we. We can topple the trouble-making Chavez petro-dollar machine without firing a shot. It is good economics, but there is a moral case to be made here. How many lives will we save and keep out of crushing poverty if we stop the socialist, Chavismo movement dead in its tracks? Perhaps millions. We won't be touching any damned caribou in ANWR anyway, but it would be worth a few dead caribou nonetheless to interdict poverty, death and suffering in our own backyard.

Healthy, Wealthy & Wise

I went to a great lecture last night, where Glenn Hubbard, dean of Columbia Business School and former Chairman of the Council of Economic Advisors, introduced his new book, Healthy, Wealthy & Wise: Five Steps to a Better Healthcare System. Not alot in Glenn's book is new but what is striking is that the book is a clear and accessible assessment of what is wrong with the current system and an equally clear and simple plan to fix it that is eminently achievable. This is hardly a ponderous treatise, but a simple handbook on how to make progress (if you believe that progress means better outcomes) toward positive healthcare reform.

I won't go into too much of Glenn's arguments because the book really is a quick read, but there are some salient points to emphasize. First, our current healthcare system is not characterized by freely and correctly operating markets, so to say that markets have produced a failed system is wrong. Second, health insurance today is NOT insurance. What we call 'insurance' is actually government subsidized "pre-paid" healthcare spending. Freeing up insurance markets to offer actual, real insurance, not something just called 'insurance' will go along way to reducing the uninsured (tidbit: 30% of "the uninsured" make over $50,000 and choose not to purchase coverage, so alot of the problem of the uninsured is not because people are too poor but that people see no value in it). Furthermore, as people are free to make real choices about what kind of insurance they need, they are likely to opt for high-deductible, catastrophic policies, which will result in them taking higher wages (i.e. less compensation in the form of healthcare) which will be taxed. The incremental taxes from those increased wages, can fund government subsidies for the thorny problems of the chronically ill and the truly poor.

Helathcare is likely to be THE issue in the 2008 presidential campaign. This is a great place to start if you want to intelligently assess who is saying what.

UPDATE: In this article you can see how parts of Hubbard's plan are working their way into reform legislation around the country. Further proof that 1) innovative approaches and true reform actions are likely to come at the state level before the feds ever get a clue, and 2) that we need more folks like Dr. Tom Coburn in Washington.

BACKLASH !!

Wow, the backlash to my previous announcement was nearly instantaneous. The phone rung and I picked up to shouts of "Unacceptable!" A good capitalist generally doesn't refuse to satisfy clear demand, so I shall indeed post a few items going forward, just more infrequently.

To My Loyal Readers, All Four of You

Today brings news of a meeting to be held in late June that represents the big break that my small company has been working towards for four years now. Every entrepreneur dreams of that catapulting opportunity - the one that can tranform their small business that is somewhere between just paying the bills and achieving modest success into an unqualified success that rewards all the personal and financial risks, gray hairs and heart palpitations that were endured along the way. That's what is at stake in late June and so the intense preparation begins now. The bags of Colombian robusto coffee are staged, the take-out menus have been assembled, and the wife and kids will shortly be shipped off to the in-laws. It's hammer time, and given the need for prioritization, blogging will cease until further notice, perhaps forever. Although it takes a small amount of my time, even that little bit of time has a new, much higher value. Your time is valuable too, so my sincerest thanks to any and all who have spent it to surf over here and read my rantings/thoughts. I leave you with a quote that hangs in my office, from an unlikely source of inspiration to a capitalist.

"Far better it is to dare mighty things, to win glorious triumphs, even though checkered by failure, than to take rank with those poor spirits who neither enjoy much nor suffer much, because they live in the gray twilight that knows neither victory nor defeat." - TR

Best to All.
Donny B.

Tax Cuts, Check.

The dividend and capital gains tax cuts extensions have passed. First reaction, fantastic. Second reaction, a pox upon the Republican majority for taking so bloody long. Third reaction, a pox upon the Republican majority for exposing these tax cuts to expiration in 2010. Fourth reaction, to make my day complete I would love to know that my government is giving me at least two of the things that I want out of it, so are there any dead or captured terrorists to report?

Hypocrisy Or Nuance?

E.J. Dionne today says that the concept of states' rights is cool, but only when it advances certain, particular policies. You can guess which policies he's talking about. So is this yet another one of those sophisticated parsing of the policy landscape to come up with a highly nuanced overarching solution set? Or is it a naked advocation of hypocrisy? Seems to me it could only be the former if you were one of those individuals who thought you had all the answers.

Barkleyesque Politics??

One of my favorite quips is Charles Barkley's amazement at the changing times, citing the fact that, at the time, the best rapper was white (Eminem) and the best golfer was black (Tiger Woods). I can't present an exact corollary but there is a whiff of this kind of oddity in the world of politics.

As the MSM is quick to point out, the Republican party is facing the potential of electoral losses in 2006 and beyond due to a variety of factors, not least of which is a record of governance that is completely at odds with their principles and constituents' desires. Nowhere are the GOP's problems more pronounced than in Ohio, but they have a glimmer of hope and it comes in the form of a black man, Ohio Secretary of State Ken Blackwell.

On the opposite side of the aisle, arguably the poster child for the worst brand of corrupt, statist Democratic machine governance is Newark, NJ (incidentally just 10 miles as the crow flies from the boyhood home of Donny Baseball), but that town has just elected itself a mayor whose vision and energy offer hope for the future. Cory Booker is a 180 degree turn from what Newark has known for decades (and no, he is not white, although outgoing mayor Sharpe James accused him of being white in their last election contest). The Barkleyesque irony is that Booker's vision and plan for Newark's future involves...gasp...capitalism and free enterprise!

Here is a great article that is not so much about Booker as about the backstory of dysfunction and bad governance, and the the promise, that Booker has injected himself into. I wish him the best and sincerely hope he succeeds, Newark is a tragedy that didn't need to happen. Democrats seem to be pining and searching for a new type of superstar politician that can connect broadly with the nation and not just in its traditional liberal enclaves. In cruder terms they are looking for someone who can win in the red states. Obviously it is too early to tell, but could that red-state winning politician be a pro-economic growth, black mayor from New Jersey? Whaddaya say Charles Barkley?

Latest In a Great Rivalry

In my opinion, the greatest, most thrilling rivalry in the business world is Boeing vs. Airbus. Coke vs. Pepsi? Phooey! McDonald's vs. Burger King? Pshaw! Boeing vs. Airbus has the combined drama, gravity and intrigue of any of the great healthy rivalries on earth. It is Yanks/Red Sox, OSU/Mich., Oklahoma/Texas rolled into one.

And here is the latest chapter.

Hmmmm.

Airlines bailed out:
Free-trading, conservative capitalist George W. Bush - 2
Leftwing, former radical socialist Luiz Inacio Lula da Silva - 0

Let's COMPETE

I have argued here numerous times that we need Sarbanes-Oxley like we need a hole in the head. I doubt that the legislation in its entirety will ever go away, but an encouraging development is legislation that would rectify the most deleterious provisions of SARBOX. Sen. Jim DeMint and Rep. Tom Feeney have proposed legislation to address the quicksand that is Section 404. Read about it here.

Whoops, Sorry For Your Wrecked Economy...Bad Data

Check this out. Scientists have discovered phenomena that shouldn't exist according to their computer models. But we must ratify the Kyoto Protocol and adopt all manner of other expensive measures because the same type of computer models tell us global warming is absolutely an indisputable fact?? Hmmm.

The Right Policy Tool At the Right Time

The San Francisco Chronicle covers how Google's stock performance has generated a surge in tax receipts for California's treasury. More generally, the Chronicle also reviews the role that capital gains taxes play in the total personal income taxes collect by the state.

"In the late 1990s, taxes on capital gains and stock options started flooding into the state treasury. In fiscal 2000-01, they reached $17.5 billion, representing 39.3 percent of personal income tax revenues.
Thinking those gains would last, the state embarked on a spending spree. But stock-market income fell off a cliff after early 2000.
In 2002-03, capital gains and stock options contributed only $5.4 billion, or 16.6 percent to personal income tax revenues."

There are obviously many technical and contentious debates that one can have over investment tax policy, but one thing is clear within the general framework of existing tax policy - the 2003 tax cuts on dividends and capital gains were exactly the correct response to the fiscal crisis that the country faced at that time. In 2000, our economy suffered from the bursting of an investment bubble, which shut down capital investment and eradicated the jobs that supported the investment spending. A crisis of confidence exacerbated the situation as the scandals at companies like Enron and WorldCom unfolded. What was desperately needed was a reinvigoration of investment spending. Lower taxes on the components of investment return, dividends and capital gains, accomplished just that. Investment returns have rebounded, employment has rebounded, and now states' fiscal health has rebounded. Contrary to the "sop to the rich" rhetoric, the dividend and capital gains tax cuts of 2003 were a policy tool brilliantly crafted to meet the challenges at hand.

Budget Deficit Discussion

Greg Mankiw has a fantastic post for fiscal policy wonks. I love how Mankiw can broaden the issue and turn common notions upside down with such ease and aplomb.

I won't comment beyond the fact that I am puzzled at how economics professors of the left now hate budget deficits. As a counter-point to DeLong's hawkishness, I would reference Nobel laureate William Vickery, who argued for massively large deficits.

Bloomberg News Back In Form

There must be elections coming up because Bloomberg News, after a welcome hiatus, is back pimping for Democratic economic policy. In a Bloomberg TOP story that I can't find on their website (too embarrassed, Al?), Ryan Donmoyer, who appears to have a history of railing against cap gains tax cuts, unleashes an attack on Republicans that is dripping with class warfare ethos, not to mention ananlytical inanity. The article is nutty on so many fronts. The title of the article is "Republicans Set Aside Middle-Income Tax Cuts to Focus on Rich." Here's the opening line.

"Republican lawmakers, facing the prospect that their power to cut taxes may soon be curbed, plan to extend tax breaks that mostly benefit the wealthy and Wall Street at the expense of reductions for middle-income households."

Pretty subtle. First it assumes that Republicans can simply cut any tax at will and implies that they have made a conscious choice to screw the poor. The political reality is that Republicans are pretty much limited to the extension of capital gains dividend taxes at this point. They are facing immense deficit pressure and these tax cuts have been wildly successful and are the only tax cuts that are defensible given the political environment. (Don Luskin has the analysis.) So Donmoyer's analysis begins completely divorced from the political realities driving tax policy. Then, in a double whammy, Donmoyer assumes that all tax cuts are equal in their effect and that tax policy is solely about social engineering.

"IRS data showed tax show taxpayers who earned at least $1 million reaped 43% of all savings from reduced rates on dividends and capital gains."

and

"In contrast, households earning less than $75,000 received about 70% of the benefits from increasing the child credit and 64.4% of the benefits from creating the 10% bracket on the first $14,000 of income"

For centuries, civilizations have understood that the essenestial purpose of taxation is to raise revenue for the state. The cap gains and dividend tax cuts are raising huge sums for the state, in contrast to the child tax credit and the bottom income bracket, which are not revenue generators. No matter for Donmoyer. He simply ignores the revenue generation capacity of the policy alternatives, and frames the debate solely on where the benefits go. He also has not heard of something called the "investor class" which refers to the 55% of Americans that own stocks either directly or indirectly. Sure these tax cuts benefit the rich, but it also benefits millions of the unrich. Donmoyer is hardly making the flawed but understandable error of where the perfect is the enemy of the good. He is flatly presenting his idealogical viewpoint that tax policy should be progressive/redistributive.

Watch out David Cay Johnston, Ryan J. Donmoyer is gunning for your title as 'Journalistic King of the Tax Policy Class Warriors'.

The Americans That Jobs Can't Find?

Last week's payroll number of 138,000 was below consensus expectations. My initial reaction was, "so what?" First, I generally don't like using "consensus estimates" as a benchmark. Secondly, employment numbers tend to be lumpy, and thirdly, statistical seasonal adjustments just as often distort the picture as they do correct for distortions. But the reaction to this number has been interesting. There is the typical reaction that you find in most mainstream economic analyses and the MSM, which is that the economy itself is slowing down and thus creating less jobs. No surprise there. However, an alternative hypothesis is emanating from some quarters that perhaps the employment numbers, starting with this one, are beginning to show that the robust economy is bumping up against the ceiling of labor resource constraints. In English, that means employers can't find enough workers (or capable workers) to do all the work that they wish to have done. The evidence for this is far from overwhelming, but there is definitely something to it as a decent hypothesis. The work week is creeping up indicating that employers might be giving their current workers more hours given the inability to find qualified workers to accommodate growth. In addition, productivity gains keeping coming at us like the Energizer Bunny, implying that employers continue to pursue productivity enhancing investments to stretch the capacity of existing workforces.

If this hypothesis is indeed what is going on, it has many economic implications, but I think one of the most notable implications is that it would make the immigration debate platitude "immigrants do the jobs that Americans won't do" not merely silly, but 180 degrees from reality - immigrants are filling jobs that can't seem to find an American.

The Most Assinine Platitude in America Today

And there are all alot of them, but here it is:

"People have a right to affordable healthcare."

Let's examine. What exactly is "healthcare"? I will start with the simplest input. It is the knowledge and experience of healthcare professionals - doctors, nurses, EMT technicians, etc. Where does this knowledge come from? Schooling. Lots of very expensive schooling. Granted medical school students are readily financed, but the ultimate financial obligation rests with them, they have invested in ("bought") the intellectual capital of a medical education. It also comes from rigorous on the job training. Internships are brutally intense and pay very little, so again there is a big personal investment in the hands-on training required to provide "healthcare." Then there are intangible, yet important, aspects of "healthcare" like a doctor's bedside manner, for lack of a better term. This is essentially a doctor's interpersonal skills, communication ability and so on, all things that are valuable and obtainable at cost as well (granted, to some it comes naturally, but mostly this too is acquired at a real cost). All of this is bought and paid for, it someone's property. Why do I have a right to any of this? Do I have a right to the benefits of an electrical engineer's training, in the form of subsidized consumer electronics, at below market value? How about a lawyer's advice or financial planner's expertise? No, I have to pay the going rate for these things. Why is a doctor's bought-and-sweated-for knowledge and experience mine to have by rights at anything less than the going rate?

You can extend the analysis to medical equipment - ultrasound imagers, MRIs, blood analyzers, etc. Someone invents these things and someone has to build them, from raw materials, in a factory where workers are paid and electrical bills are incurred, etc. Do I have a special right to the use of such equipment at a special rate that is deemed to be "affordable" yet may not cover the input resources?

Hospitals too. A building of steel and concrete, built on somebody's land, by a construction crew...you get the point.

How did we ever get to the point where we feel that the real cost of all of these inputs (education, land, labor, invention) must be ignored? We blithely bandy about the word "healthcare" with all of its connotations of life and the individual and we think nothing of advocating stealing what is somebody else's property, which is exactly what we do when we invoke the need for "healthcare" at anything less than the full market value of all that it takes to provide it?

And this is not to even contemplate the variations in quality of "healthcare." What should be affordable? A John Hopkins-educated doctor? A Central State-educated doctor? A 2006 model MRI or a 2002 model? But that is another post.

So there it is, in all its idiotic glory, the dumbest platitude in policy discussions today. Say it with gusto and look completely foolish.

Laffer Curve vs. Naked Economist

People just love to trash the Laffer Curve. Don Luskin is having none of it.

And this just in, so the Naked Economist appears to be indeed, without clothes.

Who Knew?

I had a little fun the other day, cheekily implying that the low gas prices in Wyoming were attributable to Dick Cheney. Well, apparently they are attributable to these people.

Attention Parents: "The Village Has Decreed...

that henceforth all of 'our' children cannot drink beverages that the Beverage Subcommitte of the Department of Child-Raising, aka "the Village", has found to be inappropriate for them."

Earl Woods, Rest In Peace Good Sir

Having lost my father, who introduced me to golf and taught me everything I know, recently, my thoughts and prayers go out to Tiger and his family.

Rejoice in his life rather than mourn his death. In every big drive straight down the middle and every wedge stuck within 5 feet, see the love of a father and the integrity of a good man. Teach your sons and daugters the game and teach them to be the person your father taught you to be.

Spring Has Sprung...

...and if you are looking for a quick lunch in Chelsea/Gramercy/Flat Iron, that means ridiculous lines at the Shake Shack. So, consider this alternative - Rickshaw Dumpling Bar - on 23rd b/t 5th and 6th. The food is yummy and the place is a well-oiled machine. It is beautiful when a business plan comes together. There is a lesson here regarding immigration, entrepreneurialism and the economy, but my peking duck dumplings in peanut soup over noodles are getting cold.

The Diesels Are Coming!

Here is a great roundup of what some of the premier automakers are thinking regarding plans for diesel cars in the US market.

My takeaways:
1) too bad that California seems to be a roadblock to getting an energy efficient diesel powertrain wrapped up in a bitchin' BMW skin.
2) Dieter Zetsche appears to be making a bolder move than I first thought by hitting the market early with MB's BlueTec models. Who knows if it will pay off, but it seems like as good a strategy as any to make up the ground they have been losing to BMW.

Dividend and Cap Gain Tax Cut Extension

We are so bloody close I can taste it, but as I said, the stock market is waiting until the votes are counted. Bloombeg has the story - and forget about Bush, this will boost the ECONOMY, which is good for all Americans. Don Luskin tells you why.

"The Drill Bit Is Mightier Than the Sword"

This is about as succinct and clear as it is gonna get. US-style environmentalism relegates hundreds of millions to repression and poverty. Yes, that's you Sierra Club. By drilling in ANWR, on the OCS, in the Gulf, and mining shale in Colorado and Wyoming we'd be toppling brutal dictators like it's going out of style.

"Net Neutrality" Is Collectivism

The NYT editorializes about "net neutrality," in a typically squishy and woolly-minded fashion. To begin with they don't even describe what "net neutrality" is, they just launch into bald assertions and the emotional language of modern liberalism. In sentence #1, you learn all you need to know, "it keeps the Internet democratic." Next thing you need to know is that the opposition to this undeniably pure notion are those ghastly profit-seekers, telephone and cable companies. The rest of the editorial is thin on facts or analysis but has plenty of emotionally charged language. In arguing for net neutrality, we hear it's "democratic", it protects the "little guy" who is "treated equally", it appeals to "grass-roots political groups". Gee, with all this unalloyed goodness, how can one be opposed? On the negative side, we must avoid it because it is "two-tiered", where those that "pay large fees would get priority"; it would be a "financial windfall" achieved through "discrimination" where "speech" is "curtailed." Sounds pretty evil to me.

But wait. How do these evil companies "provide Internet service"? Do they actually invest in (meaning "buy") things like miles upon miles of fiber optic cable, servers, routers, switches, and all the labor and technical expertise it takes to make it all work? Yes they do, and when you buy something, you own it and can generally use it the way you want, like charging others for its use. This generally also means being able to charge more to those who value said property's use more than than others. That's why Mr. Marriott can charge people more to stay at his hotel on the beach than for his hotel at the airport or why an airline can charge you more to fly on their planes on a moment's notice versus with a month's advance notice. Telecom companies own the digital pipes and all that goes with it to make it work, so prohibiting them from optimizing the value of these assets is usurping that value, which is also known as 'stealing'; and, giving it to parties that merely don't want to pay for in the future what they now use freely is called 'redistribution'.

The NYT isn't favoring anything that is one iota "democratic", it is merely picking Google's and Microsoft's vision of things, which entails free-riding on others' property rights. There was such an uproar over Kelo vs. New London, where the government used its power to take individuals' property and hand it over to another private entity. Net Neutrality achieves exactly what was so disgusting in Kelo, the government taking property rights away from one private citizen to serve the needs of another private citizen. In that case it was sympathetic Suzette Kelo who had property usurped, in this case it is highly unsympathetic AT&T and Verizon. But we don't grant and revoke rights based on the degree of sympathy we have for particular actors, at least we don't if we live up to our principles of protecting property rights. Any sort of wealth transfer or redistribution of resources, as net neutrality is, is to some degree a collectivtist endeavor.

UPDATE: A reader, who is highly tapped in to the telecom world, writes to add his perspective:

"NN does not exist now, i.e. there is no rule on the books today preventing the Bells from prioritizing traffic on their networks and they do it all the time, continuously. So the NYT can't say NN does anything (like keep the Inet democratic) because it doesn’t exist. The Internet seems to work fine to me.

All web sites are not treated equally by the Internet today. Proponents of strict NN say it will squeeze out the little guy and create a "two-tier Internet." But web sites with real money already get priority access to cable and DSL customers today through purchases of better servers, larger pipes, content distribution service (from companies like Akamai). They mirror their sites, use expensive load balancing (some on a global basis), and do all kinds of optimization to make things work better and faster. There is a whole ecosystem of hundreds of companies that do this stuff. Left to private enterprise it will all get sorted out but, yes, you have to pay.
Its unreal how fast the Internet community can go from "gov't hands off the Internet" to "we need the gov't to intevene here". It's clearly a function of economics and the MSM can't seem to recognize it but merely goes along with it because of the buzz words you mentioned.

Having been a close witness of gov't regulation of telecom since the 1996 Telecom Act was put in place, I have no reservations saying that gov't involvement will be detrimental to the Internet. To enforce the Wyden, Dorgan/Snowe or yesterday's Markey bill will require the gov't to get involved in how the carrier's design their networks, how they pass traffic betw them, how customer premises equipment is configured. The list is long. You don't want the gov't involved in this stuff.

Lastly, the vitriol of the NN crowd is pretty unreal. I've been to a couple of conferences on the topic and it gets heated real fast with a lot of cursing and name calling. Its pretty wild to see after 10 years of the boring telecom crowd. There is also this fringe element (like what you see at anti-war demonstrations or these immigration marches) that want the Bells nationalized or forced to provide 100Mbps to every home for free and stuff. Its really a lot of fun. Completely divorced from economic reality but fun. "

Good Career Advice: Be Wrong...?

The WSJ has a review of the career of John Kenneth Galbraith. As I pointed out yesterday, JKG was pretty much wrong on the big points and the article highlights JKG's modest admission:

"Asked on 'Meet the Press' whether he had underestimated the extent of risk that even large corporations face, he paused and replied, "Yeah, I think I did.""

And also check out this stunning smackdown of another eminent economist.

How is it that a handful of academic economists can make a career, nay make a highly lucrative and respected career, of being so conspicuously wrong?

Uh Oh, MS's Roach Is Not All Doom & Gloom Anymore

Now that we are experiencing undeniably robust economic prosperity in the US, Morgan Stanley's Chief Economist, Mr. Grumpy Himself, is getting more positive. My first reaction is, "Great, now that we are entering year 4 of economic expansion, soaring stock prices, soaring commodity prices, robust productivity, wage growth and low unemployment, Roach is calling some upside." If that is the type of advice and analysis Morgan Stanley's clients are getting, it is no wonder the firm has been losing ground. Most Wall Streeters with his record would have been removed to the safe house ages ago.

The most hilarious thing about Roach's change of heart is the reason behind it. No joking, it's the International Monetary Fund. Now that they have decided to tackle "global imbalances" the dark skies are clearing says Roach. Yes indeed, thank heavens that the C-student bureaucracy at a multi-lateral government agency with a terrible record of intervention is going to start tackling problems that have heretofore not inhibited global growth.

I noted the new IMF mission here.

Will the Bad Ideas RIP too?

Don Luskin beats me to the punch. Indeed may Galbraith the man rest in peace. However, let us not candy coat the historical record on the matter of his ideas - Galbraith's grand vision of things has been proven wrong by history. Somehow, the military industrial complex allowed a pimply-faced college dropout to become the wealthiest man on the planet and General Motors to sink into near oblivion. It allowed Google to be worth $125 billion and Southwest and JetBlue to rise while Delta, United and TWA sunk into bankruptcy.