Carpe Diem

Tuesday night links

1. 5 Parts of the Country with Labor Shortages

2. Excellent animated map of drilling and production in the Eagle Ford Shale.

3. 45 Most Powerful Photos of 2012 (HT: Marginal Revolution)

4. Mayor of Ithaca, NY Announces Support for Legalizing Marijuana

5. Why Warren Buffett Is Wrong About Taxes

6. Decriminalization of Weed Drops Youth Crime Rate to the Lowest Level since the State Started Keeping Records in 1954.

23 thoughts on “Tuesday night links

  1. “Decriminalization of Weeds Drops Youth Crime Rate…”

    Is that really the cause of lower youth crime? A chart in the article shows “California Youth Arrest Rates for Serious Violent and Property Crimes” began to fall sharply around 1975, when the War on Drugs began.

    It fell from about 5,000 per 100,000 to about 3,000 per 100,000 from 1975 to 1985, rose to around 3,500 in 1990, when the U.S. had a crack cocaine “epidemic,” and then fell steadily thereafter to about 1,500 per 100,000.

    Moreover, the steep rise stopped around 1975.

    • Is that really the cause of lower youth crime?

      “Between 2010 and 2011, California experienced a drastic 20 percent decrease in juvenile crime”

      Has a 20 percent crime drop in a single year since 1975 typical? I’m guess not, since if that was the case crime would have declined by 99.9675 percent since 1975.

        • Peak, sadly, you dismiss out of hand anything that could indicate the currently illegal drugs aren’t the harbingers of civilization’s demise or that the illegality of drugs is the primary driver behind many crimes today and not the drugs themselves.

          What are you going to say if in 2012 crime continued to drop? That two data points don’t indicate a trend, as well as simply assert that the legalization of drugs and crime rates are not correlated (as stupid a statement that I’ve seen you make on this topic)?

  2. 2. Excellent animated map of drilling and production in the Eagle Ford Shale.

    It would be more useful if we had an animated map of the economics of the Eagle Ford Shale.

    3. 45 Most Powerful Photos of 2012 (HT: Marginal Revolution)

    I can’t speak for others found all those photos that showed the effects of the CIA’s drone war much more powerful.

  3. conrad makes some valid points about buffet’s wrongheaded and self serving claims about taxes. (buffet is just talking his own book and seeking to make life insurance relatively more attractive as a wealth management tool)

    but i think he left somehting important out of his discussion of the 90′s. the boom in the 90′s followed a tax cut, not a tax hike.

    this is an excerpt from one of out letters to investors. (note that i can actually use capital letters if forced)

    The narrative we often hear is that Clinton’s increase of the marginal rate for top earners drove increased tax revenues and nearly closed the budget deficit and that this tried and true idea is just what we need now. The facts, however, tell another story. The tax hike was in 1993. Income tax revenue as a percentage of GDP was 7.7%, in 1993, essentially identical to the 7.6% the year before and lower than any year in the 80′s. In 1994, it was 7.8%, tied with 1984 for the lowest year in the 80′s, and 1995 was 8% tied with 1988 for the second lowest year in the 80′s. Thus, we see that the tax hike had little if any effect on revenues and levels were stubbornly at very low absolute levels. What is being left out of this revisionist Clinton history is that in 1997, a major tax cut was pushed through. Capital gains fell from 28% to 20%. This drove a large jump in tax revenues. 1997 saw 9% income tax as % of GDP, 9.6% in 1998 and a peak of 10.2% in 2000. And this is only half the story as increase in overall revenues is not just a function of the % of GDP but the growth of GDP as well. Revenues grew 33% from 1992-6, and 39% from 1996-00, a 20% increase in growth rate. If we truncate the Clinton administration into 2 parts, pre 1997 tax cut and post, we see a very clear distinction. Post the cut, business investment skyrocketed and the economy grew at a 4.4% annualized rate, 33% faster than the period before the tax cut and real wages grew 1.7% a year reversing their decline in the pre tax cut portion of Clinton’s administration. This same trend is clear in Reagan’s cap gains tax cut. In light of this data, we think the case is quite convincing that the current proposed hike in the top tax rates will produce nothing but economic friction and that a hike in cap gains (from 15% to 23.8%, a 59% rise) will probably reduce revenues and will certainly harm investment and growth. DC appears to have mistaken the brake for the gas in their tax policy. This set of proposed changes look to be extremely harmful economically and unlikely to generate additional revenue. We have long passed the point where it could. The tax base needs to be broadened, not further focused. In the 80′s, 12% of Americans paid no net federal income tax. That number is now about 50%. That is the source of the recent revenue decline, but paying taxes again is a tough sell to voters who are enjoying a free ride. This populist instinct is likely the greatest threat to recovery past 2012. As Pogo said “We have met the enemy and he is us.”

    conrad is correct to focus on investment as an engine for growth. with cap gains taxes soaring by roughly 2/3 under the current tax plan, such investment is going to be reduced. as mark is fond of saying, if you tax somehting, you get less of it. this is as true of investment as anyhting else.

    and warren is simply lying through his teeth and misremembering/misrepresenting his own past.

    taxes sure seemed to matter to him when he was starting out.

      • John Hofmeister, former President of Shell Oil (Nov 12, 2012):

        “The fundamental problem is that the annual decline rate of existing fields is 4 to 5 million bpd, so each year we need 4 to 5 million new barrels per day of production just to stay even.

        Demand growth requires additional supplies on top of that, and if the supplies don’t come online to meet demand growth, higher prices are the inevitable result.

        We have not been able to keep up with demand growth and the decline rate simultaneously.”

        • I agree with Hofmeister, but I don’t see any reason for alarm. I do not see the shortfall he describes to be a crisis.

          If energy prices increase 30%, demand will drop. Petroleum users will become more efficient and will develop alternatives.

          • John Dewey, so, oil rises to $120, new tech is implemented, oil falls back below $100 quickly, and everything is peachy.

            How about this scenario: The U.S. economy recovers, oil rises to $200, the U.S. economy falls back into recession/depression, and oil falls back below $100 quickly.

          • Peak, I do not believe that oil shocks cause sustained recessions. It’s a convenient excuse. But recessions are caused by government interventions, sometimes which are foolish reactions to events such as oil shocks.

            Consider the very short-lived the Arab oil embargo of 1973. Some economists have argued that the spike in gasoline prices caused consumers to reduce demand for domestic goods, and that caused the 1973-1974 recession. IMO, though, that recession was caused by the Federal Reserve’s increases in interest rates in 1973. Those interest rate increases were aimed at the inflation – inflation which I believe was caused by the very same Federal Reserve after it slashed interest rates by 50% in 1971.

    • i’m not sure you can really look at those 2 factors the same way mark.

      a shift from coal to gas i get. that’s just substitution.

      but drought or no, the drop in grain is a drop in real output which seems like somehting that contributes to a potential recession.

      you could call it one time etc but so are lots of things that set off recessions. the dotbust, the housing crash, volcker hiking rates to break inflation, etc…

      that does not make them non contributors to recessions.

      • We can forget grain then. If you just take out coal, rail shipments are still up almost 3% YTD. So while coal shipments by rail might “suck,” that’s not really an indication of a recession. That’s an indication of a switch from coal to natural gas. The strongest gains this year for rail shipments are for petroleum, motor vehicles and lumber, suggesting some strength in energy, cars and housing.

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