Carpe Diem

Steven Landsburg: “Buy America” is Like Racism

University of Rochester Economics Professor Steven E. Landsburg argues convincingly on Fox News why it is a lot like racism for us to give preference with protectionist trade policy to total strangers born in Detroit over total strangers born in Japan or Mexico.

“Both major parties are infested with protectionists who would discriminate on the basis of national origin no less virulently than David Duke or any other racist would discriminate on the basis of skin color.”

Fox News guy doesn’t get it.

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Show Us The Money

NY Times Editorial As the presidential campaign narrows and its costs skyrocket, detailed disclosure of financial resources becomes ever more important. Of the leading contenders, so far, only Senator Barack Obama has released his full income-tax returns — a level of disclosure once routine for candidates after the political corruption of Watergate.

The need for greater transparency regarding the income and overall financial dealings of candidates and their spouses was underscored by Mrs. Clinton’s recent decision to make a $5 million loan to her campaign. Such borrowing is a permitted practice under the campaign laws. But the campaign said the money came from her share of the Clintons’ joint resources, and that calls attention to the lack of information about their family finances. As a former president, Bill Clinton has been making millions annually giving speeches and traveling the globe ($7.5 million in 2005, see this CD post). What is publicly known about his business dealings is sketchy, and clearer disclosure of them is required to reassure voters that Mrs. Clinton’s candidacy is unencumbered by hidden entanglements.

The reluctance of Mrs. Clinton and Mr. McCain to reveal more about their finances ill-serves voters and the nominating process of both parties. It also sets a terrible precedent for future campaigns for important posts at the national and state level.

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Forget the Obituaries, U.S. Economy is Alive & Well

Monthly industrial production for January was released today by the Federal Reserve, and it was 2.3% above its January 2007 level (see graph above, click to enlarge). Industrial production is important because it is one of the recession-indicating variables watched by the National Bureau of Economic Research to determine the onset of a recession.


1. Calculated on an annual basis from the same month in the previous year, January 2008 marked the 55th consecutive month of positive growth in industrial production. The last time annual growth in industrial was negative was June of 2003, more than 4.5 years ago (see chart above).

2. January’s 2.3% annual growth in industrial production was below the long-run trend of 2.9%, possibly indicating a mild slowdown in economic production, but certainly nowhere the negative growth rates in output associated with a recession, see the circled, shaded areas of recession on the graph above.

3. Since the summer of 2007, there has been a slight upward trend in the growth rate of output, further suggesting that the U.S. economy has not entered a recession.

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Detroit Real Estate Boom? 45.5% Increase in Sales

Detroit NewsSales of residential and condominium units in Detroit nearly doubled in January, compared with the same month a year ago, and the region overall got a nearly 15% bump. The city of Detroit led the gainers, posting a 45.5% increase in the month, with 736 closings.

Seven realtors who deal primarily in downtown Detroit area property said they have enjoyed some of their recent best sale months in December and January. Sales of houses and condominiums in Detroit jumped by a 33.9% in December 2007, compared to December 2006. No other market in the Metro Detroit area came close to that kind of increase last year.

Realtors credit tumbling prices, low interest rates and sales of foreclosed properties or properties hoping to avoid foreclosures.

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The Geography of Recession/Slowdown: MT vs. MI

ECONOMISTYou won’t hear the R-word much in the modest governor’s mansion in Helena. The occupant, Brian Schweitzer, insists that Montana’s economy is in better shape than it has ever been. It has had one of the fastest rates of job growth in the country. The state is prospering on the back of booms in mining and farming, as well as steady growth in tourism. Paul Polzin of the University of Montana forecasts that the state’s economy will grow by 4.1% this year, the fifth consecutive year of growth above 4%. “We’ve been searching for realistic doomsday scenarios,” he says, “and we just can’t find any.”

Go to Michigan, by contrast, and it is hard to find anything but gloom. The collapse of America’s car industry, coupled with a nasty subprime mortgage bust, has left the state reeling. It has the highest unemployment rate in the country (7.6%) and the third-highest foreclosure rate, and was the only state to lose a large number of jobs in 2007. In the run-up to the state’s Republican primary (which he won) Mitt Romney traversed Michigan, promising to save voters from a “one-state recession.”

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Deloitte Report: Outsourcing Provides 25% ROI

While outsourcing is generally recognized as a strategy for producing cost savings, few surveys to date have utilized a large enough sample of respondents to provide an accurate estimate of the actual amount of these savings. Deloitte Consulting has attempted to overcome this by surveying a group of 300 executives who are actually involved with outsourcing services worldwide.

Our findings were striking — fully 83% of all respondents reported that their projects had met their ROI goals of slightly above 25%! Despite this apparently positive result we believe that the true potential of outsourcing is still not being fully achieved, hence the title of our report, “Why Settle For Less?

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Ignore the Obituaries, The U.S. Reign Will Endure

The U.S. economy continues to be positively awe-inspiring compared with the competition. The value of U.S. imports in 2006 was roughly the same as the entire GDP of France. The U.S. is the world’s largest exporter; indeed, if all U.S. exporters seceded from the country, they would have the eighth-largest GDP in the world, larger than the entire economy of Canada.

The economy of Brazil is about the size of the economy of Texas (see map above, click to enlarge). The economy of India is about the size of the economy of America’s Plains states. The economy of Venezuela is about the size of the economy of Alabama.

The U.S. share of the value of global-equity trading is more than 40%. The total value of trading on the New York Stock Exchange in 2006 was greater than all of Europe’s combined. While the Sarbanes-Oxley corporate-governance law may have made the U.S. a less-attractive locale for new issues, the NYSE was still the world leader in total new capital raised in 2006.

Foreign Capital Magnet

The U.S. is still the place that foreign capital wants to be and is the largest receiver of foreign direct investment. Nine of the top 50 transnational financial corporations are American, including the top two (Citigroup Inc. and General Electric Capital Corp.). Thirteen of the top 50 non-financial transnational corporations are American, including four of the top eight: General Electric, General Motors Corp., Exxon Mobil Corp. and Ford Motor Co.

From a
Bloomberg commentary by Kevin Hassett
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Government’s Role in the Housing Problem

Thomas Sowell, on the subprime credit crisis:

The government has brought on the housing problem, partly by highly restrictive building policies, which have caused housing prices to skyrocket artificially.

From today’s Seattle Times, confirmation of Sowell’s point:

An intriguing new analysis by a University of Washington economics professor argues that home prices have, perhaps inadvertently, been driven up $200,000 by good intentions.

Between 1989 and 2006, the median inflation-adjusted price of a Seattle house rose from $221,000 to $447,800. Fully $200,000 of that increase was the result of land-use regulations, says Theo Eicher — twice the financial impact that regulation has had on other major U.S. cities.

Bottom Line: Of the $226,800 increase in Seattle house prices from 1989 and 2006, $200,000, or 88%, of the increase was the result of land-use regulation (see chart above, click to enlarge).