Carpe Diem

Despite Media Reports to the Contrary: U.S. Retail Sales Are Actually Increasing, Not Falling

The Commerce Department today reported that: 1) total retail sales in December 2007 were 4.1% above December 2006, 2) sales for the 12 months of 2007 were up 4.2 percent% from 2006, and 3) total sales for the October through December 2007 period (QIV) were up 4.9% from the same period a year ago. All of those three measures suggest that retail sales are strong and healthy. But you would never know that from the media headlines:

December Retail Sales Slide 0.4% (WSJ)

US December Retail Sales Down 0.4% (CNN)

US Retail Sales Unexpectedly Declined in December (Reuters)

Consumer Spending Slowdown Deepens (AP)

US Retail Sales Fall in December (BBC)

Report Feeds Recession Worry (AP)

Reason: All of these reports focused on the decline in retail sales from November to December, which is actually fairly typical: In more than half of the last 8 years (5 out of 8), retail sales have either declined from November to December (2001, 2003, 2007) or remained flat (2000 and 2005).

Bottom Line: The chart above (click to enlarge) shows the annual growth in retail sales from the same month in the previous year, from 2001-2007. Over the last 18 months, there has actually been a positive, upward trend in retail sales, not a recessionary decline, see arrow above!

Carpe Diem

Drive What I Mandate You Should, Not What I Drive

Most of the presidential candidates support hiking federal fuel efficiency laws. But do they practice what they preach about fuel efficiency when it comes to the vehicles they drive? Hardly. A review of some of the vehicles the candidates drive appears in today’s Detroit News editorial by R. Burr and H. Payne:

Mike Huckabee: “When it comes to his own vehicles, the Baptist minister strays from his scripture of fuel efficiency.” Vehicles includes a 2007 Chevy Tahoe (16 mgp, pictured above) and a Chevrolet Silverado (12 mpg) two of the biggest light trucks on the planet.

John McCain: Vehicles include a Lexus (his wife’s) and a CTS Cadillac (18 mpg).

Barack Obama: Travels with a Secret Service convoy of Chevy Suburban SUVs (12 mpg). His personal vehicle was a gas-guzzling, 340 horsepower Chrysler 300C (17 mpg) until he was exposed, and he bought a more politically correct Ford Escape SUV hybrid (27 mpg).

John Edwards: Now drives an Escape hybrid (30 mpg) after he was inconveniently caught driving a bigger SUV last summer while preaching that Americans should sacrifice their SUVs.
Carpe Diem

People Pay With Time, Not Money, For Health Care

The RAND Health Insurance Experiment shows that:

1. Patients are responsive to out-of-pocket costs; if people face a high deductible, rather than first-dollar coverage, they will reduce their health care spending by about 30%.

2. This reduction in health care spending has no effect on the patient’s health care in most cases.

3. Patients reduce their spending not by comparing the marginal value of various medical services with other uses of money; rather, they reduce their spending by deciding not to initiate care in the first place.

Why #3?

According to John Goodman, the “Father of Health Savings Accounts”:

The health care system is a bureaucratic, institutionalized structure, in which normal market processes have been systematically suppressed. Since most people pay with time, not money, when they buy care, providers are not competing on price or quality. Since price and quality data are not available, patients find it impossible to trade off money against health services, the way they would do in a normal market. Hence, their only real choice is whether to enter the system at all. And the higher the expected cost of entry, the less likely they are to do so.

Sources: NCPA and John Goodman’s Blog

Carpe Diem

Ethanol:Profitable Only With Tax-Breaks and Tariffs

Current grain-based ethanol production systems damage soil and water resources in the U.S. and are only profitable in the context of tax breaks and tariffs.

The current focus on ethanol from corn illustrates the risks of exploiting a single source of biomass for biofuel production. A growing percentage of the U.S. corn harvest – 18% in 2006 – is directed towards grain ethanol production. This has not only resulted in record-high corn prices, it has produced strong incentives for continuously-grown corn, higher-than-optimal use of nitrogen fertilizers, the early return of land in conservation programs to production, and the conversion of marginal lands to high-intensity cropping. All of these changes exacerbate well-known environmental problems associated with intensive agriculture.

From The Ecological Society of America’s policy statement on “Biofuel Sustainability.” The Ecological Society of America is the country’s primary professional organization of ecologists, representing 10,000 scientists in the United States and around the world.

Carpe Diem

Conspicuous Consumption and Race: $500 Sneakers

Do blacks actually spend more on consumerist indulgences than whites? And if so, what, exactly, makes black Americans more vulnerable to the allure of these luxury goods?

Three economists from the University of Chicago and Wharton have taken up this rather sensitive question in a recent unpublished study, “Conspicuous Consumption and Race.” Using data from the Consumer Expenditure Survey for 1986-2002, they find that blacks and Hispanics indeed spend more than whites with comparable incomes on what the authors classify as “visible goods” (clothes, cars, and jewelry). A lot more, in fact—up to an additional 30%. The authors provide evidence, however, that this is not because of some inherent weakness on the part of blacks and Hispanics. The disparity, they suggest, is related to the way that all people—black, Hispanic, and white—strive for social status within their respective communities.

Read more here in Slate.

Carpe Diem

Quote of the Day: Thomas Sowell

In the 1970s, severe government restrictions on building became common in coastal California. With supply restricted and demand not restricted, it was inevitable that prices would soar beyond many people’s ability to pay.

The main impetus behind severe restrictions on building is environmentalist zealots who demand that vast amounts of land be set aside as “open space” on which nothing can be built.
It is not uncommon for substantial proportions of all the land in an entire county — sometimes more than half — to be set aside as “open space.”


Environmentalists often talk as if they are trying to save the last few patches of greenery from being paved over, when in fact 90% of the land in the United States is undeveloped and forests alone cover more area than all the cities and towns in the country combined.

Read more here.

Carpe Diem

Paul Krugman Has Predicted 9 Out of the Last None Recessions Under Bush Administration

1. “Right now it looks as if the economy is stalling…” — Paul Krugman, September 2002

2. “We have a sluggish economy, which is, for all practical purposes, in recession…” — Paul Krugman, May 2003

3. “An oil-driven recession does not look at all far-fetched.” — Paul Krugman, May 2004

4. “A mild form of stagflation – rising inflation in an economy still well short of full employment – has already arrived.” — Paul Krugman, April 2005

5. “If housing prices actually started falling, we’d be looking at an economy pushed right back into recession. That’s why it’s so ominous to see signs that America’s housing market … is approaching the final, feverish stages of a speculative bubble.” — Paul Krugman, May 2005

6. “In fact, a growing number of economists are using the “R” word [i.e., "recession"] for 2006.” – Paul Krugman, August 2005

7. “But based on what we know now, there’s an economic slowdown coming.” – Paul Krugman, August 2006

8. “This kind of confusion about what’s going on is what typically happens when the economy is at a turning point, when an economic expansion is about to turn into a recession” – Paul Krugman, December 2006

9. “Right now, statistical models … give roughly even odds that we’re about to experience a formal recession. … The odds are very good — maybe 2 to 1 — that 2007 will be a very tough year.” – Paul Krugman, December 2006

Bottom Line: In other words, to paraphrase Megan McArdle, Paul Krugman has predicted nine out of the last none recessions under the Bush administration.

(Source: The Q&O Blog, via the Mighty Angus at Kids Prefer Cheese.)

Update: According to LyinginPonds, Paul Krugman ended up as the #2 most partisan columnist in 2007 (tied with Joe Conason), right behind the #1 most partisan columnist: Ann Coulter.