Quote of the Day:
“Giving back” is a similarly mindless mantra.
I have donated money, books and blood for people I have never seen and to whom I owe nothing. Nor is that unusual among Americans, who do more of this than anyone else.
But we are not “giving back” anything to those people because we never took anything from them in the first place.
~Thomas Sowell in his column today
Unemployment facts based on October BLS data:
1. For workers with some college (but no degree), the unemployment rate in October 2007 was 3.5%, almost the same as October 2006 (3.4%), and about the same as the average rate of 3.6% over the last three years (see chart above, click to enlarge).
2. For college graduates, the October unemployment rate was 2.1%, exactly matching the average unemployment rate for that group of workers during the last three years (see chart above). The jobless rate for college grads has moved in a tight range between 1.8% and 2.5% for the last 24 months, with a slight downward trend.
Bottom Line: As long as unemployment rates remain stable for workers with: a) some college or b) a bachelor’s degree or higher, there is no indication of a pending recession. Unless and until we see an upward trend in the unemployment rates for these two groups, the economy will continue on its expansionary path.
For example, in the last recession of 2001, the jobless rate for college grads increased in almost every month during the year, hitting 3% by December 2001; and the jobless rate for workers with some college increased from 2.7% to 4.2% during 2001.
The continued stability of unemployment rates for the most educated American workers, those whose role is most important in a knowledge-based, intensively-competitive, global economy, suggest that the Goldilocks economy will continue its healthy expansion into 2008.
We’ve been having a lively discussion on Sweden and the EU, vs. the USA for standard of living, per capita income, etc., based on this post, this post and this post.
Thanks to Ironman at Political Calculations blog, there is now an updated, dynamic, sortable database at this link based on 2006 data.
If you click on the last column and sort from highest to lowest, you’ll see that:
1. Based on 2006 data, if the EU countries as a group became the 51st U.S. state, it would be the poorest state in America, with only $27,394 in per capita GDP (PPP adjusted), below even Mississippi (GSP of $28,937).
2. If Sweden, Netherlands, UK, Germany and France were added individually as the 51st U.S. state, they would all rank #49 in per-capita GDP/GSP, ahead of only West Virginia and Mississippi.
3. In other words, updated data show that the results in 2006 are almost exactly the same of the previous posts based on 2002, 2003, 2004 and 2005 data.
From economist Steven E. Landsburg’s recent Slate.com column (“Save the Earth in Six Hard Questions: What Al Gore doesn’t understand about climate change”):
There is nothing particularly peaceable about Gore’s rhetorical approach to climate policy. At his most pugnacious, Gore has depicted the fundamental trade-off as one between environmental responsibility and personal greed. Of course, as everyone over the age of 12 is perfectly aware, the real trade-off is between the quality of our own lives and the quality of our descendants’.
In other words, climate policy is almost entirely about you and me making sacrifices for the benefit of future generations. To contribute usefully to the debate, you’ve got to think hard about the appropriate level of sacrifice. That in turn requires you to think hard about roughly half a dozen underlying issues.
Here are two of Landsburg’s inconvenient questions:
1. Many people (myself excluded, however) believe we should care more about our countrymen than about a bunch of foreigners—hence the sentiment for a border fence. If we are allowed to care less about people who happen to be born in the wrong country, why can’t we care less about people who happen to be born in the wrong century?
2. If you expect economic growth to continue at the average annual rate of 2.3%, to which we’ve grown accustomed, then in 400 years, the average American will have an income of more than $1 million per day—and that’s in the equivalent of today’s dollars (i.e., after correcting for inflation). Does it really make sense for you and me to sacrifice for the benefit of those future gazillionaires?
MP: And if the economic growth rate is 2.5% instead of 2.3%, the average American would make more than $2 million per day in 400 years. Increase economic growth to 3%, and income for the average American would be $15 million per day in 400 years, in today’s dollars!
Further, IBD reported in March that the average American household has a net worth of about $487,000. If real net worth grows at only a modest 2.5%, the average American household in 400 years would be multi-billionaires, with a net worth of almost $10 billion.
Question: Most people favor income redistribution from the wealthy to the poor through progressive taxes, estate taxes, etc. Isn’t it then inconsistent for those people to show concern for the future rich, and advocate that the relatively poor (people living today) make sacrifices today for the relatively rich of the future (people living 100 years from now)? Won’t that be a transfer of wealth and income from the poor (today) to the rich (tomorrow)?
And if one’s position is that we should care about the rich in the future and make sacrifices today to leave them a cleaner environment, why doesn’t he or she treat the rich living today with the same respect and concern, e.g. advocate a flat tax on income instead of a progessive income tax?
SHANGHAI, China (AP) — PetroChina became the world’s first company worth more than $1 trillion on Monday, surging past Exxon Mobil as the Chinese oil producer’s shares nearly tripled in their first day of trading in China (see chart above, click to enlarge).
Adding the value of PetroChina shares traded in Shanghai, Hong Kong and New York — and those still owned by the government — the company’s total market capitalization ballooned to just over $1 trillion, compared to Exxon Mobil Corp.’s $488 billion.
Bottom Line: PetroChina, at $1 trillion market capitalization, is worth more than Microsoft, Google, Procter and Gamble ($217 billion, not pictured above) and Wal-Mart combined ($966 billion), and is worth 5.5X the value of Wal-Mart.
BEIJING — China has the world’s fifth largest number of households with more than $1 million in liquid assets, trailing only the U.S., Japan, Britain and Germany, said a report released by the Boston Consulting Group.
There were 310,000 Chinese millionaires at the end of 2006, up from only 124,000 in 2001, more than 48,000 of which have more than $5 million in liquid assets. Given China’s continuous and rapid economic growth, the report also predicted the number of millionaires to double by 2011, reaching 609,000.
These households, which only account for 0.1% of the total number of households in China, possess 41.4% of the country’s total wealth, said the report.
According to this WSJ report, America’s inequality peaked in 1929, when the top 1% controlled about 48% of the wealth.
We hear a lot of hand-wringing about income inequality in the U.S., but perhaps there are some lessons from China. When a country experiences significant, dynamic change from new technologies, innovation, globalization, opening of markets, increased competition, etc., income inequality increases because talented entrepreneurs are able to generate huge amounts of wealth at levels that are not possible in a static, insulated, uncompetitive environment. Some of the same dynamics that are creating more millionaires and more income inequality in China, are probably also creating the same outcomes in the U.S. Not to worry.
Bottom Line: Wouldn’t most Chinese agree (and wouldn’t you agree) that the average person in China today is better off today than 10, 20 or 40 years ago, even though income inequality has never been higher?
From yesterday’s Washington Post:
When U.S. sugar farmers needed help this summer defending a $1 billion, 10-year subsidy plan in a new House farm bill, they found it in some surprising places.
The House sugar vote illustrates the hold that agricultural interests maintain on farm policy even as the number of full-time commercial farmers has shrunk to a few hundred thousand. Sugar groups have used campaign cash and far-reaching alliances with labor unions and politicians to expand their influence far beyond the 15 states and few dozen congressional districts where sugar is grown by fewer than 6,000 farmers.
So far this year, nine sugar farm or refinery groups have made more than 900 separate contributions totaling nearly $1.5 million to candidates, parties and political funds, according to federal election records and CQ MoneyLine. American Crystal Sugar Co., a Minnesota-based sugar-beet cooperative with 3,000 members, has made 317 contributions totaling $819,000. In July alone, its political fund contributed more than $70,000 to 26 House members, 24 of whom sided with it on the July 27 sugar vote.
Bottom Line: Wouldn’t you invest $1.5 million today to get $1 billion over ten years ($100 million per year)? Your annual Internal Rate of Return (IRR) would be 6,666.67%, a return that would certainly catch the attention of Satan.
Question: Why is Congress selling special-interest legislation to Big Sugar at such a low price? They are giving $1 billion of benefits away to Big Sugar for a mere $1.5 million in campaign contributions. What gives? Couldn’t they have charged $3 million or even $30 million? After all, Congress has a monopoly on special-interest legislation. What could Big Sugar say – “If you give us the sugar subsidies we want, we’ll take out business elsewhere?”
From Political Calculations blog:
The Sweden-based free-market advocacy group Timbro compared the relative wealth of the nations of Western Europe against individual U.S. states. The key finding in Timbro’s report was that:
“If the European Union were a state in the USA it would belong to the poorest group of states. France, Italy, Great Britain and Germany have lower GDP per capita than all but four of the states in the United States. In fact, GDP per capita is lower in the vast majority of the EU-countries (EU 15) than in most of the individual American states. This puts Europeans at a level of prosperity on par with states such as Arkansas, Mississippi and West Virginia.”
Timbro’s study was based on 2002 economic data, but since it was published, economic data for both 2003 and 2004 has been published. So, the question is now: what’s changed in those two years? To find out, Political Calculations has created the following dynamic table comparing each U.S. state’s Gross State Product (GSP) or each E.U. nation’s Gross Domestic Product adjusted for Purchasing Power Parity (GDP-PPP) data for 2004, their respective populations and their corresponding per Capita economic data, which you may sort according to the column headings, either from highest to lowest value or vice-versa.
Bottom Line: If you click on the last column of the “US vs EU: 2004 Edition” chart, and sort it from highest to lowest, you’ll find that Sweden would rank at the bottom of U.S. states (#49 including D.C), just barely above Mississippi and West Virginia.
1. Sunday NY Times: When you consider that farm income is at record levels (thanks to the ethanol boom, itself fueled by another set of federal subsidies); that the World Trade Organization has ruled that several of these subsidies are illegal; that the federal government is broke and the president is threatening a veto, bringing forth a $288 billion farm bill that guarantees billions in payments to commodity farmers seems impressively defiant.
What finally emerges from Congress depends on exactly who is paying closest attention next week on the Senate floor and then later in the conference committee. We know the American Farm Bureau will be on the case, defending the commodity title on behalf of those who benefit from it most: the biggest commodity farmers, the corporations who sell them chemicals and equipment and, most of all, the buyers of cheap agricultural commodities — companies like Archer Daniels Midland, Cargill, Coca-Cola and McDonald’s.
2. Sunday NY Times: The Senate has one last chance to rid the country of an irrational, outdated and unfair 70-year-old program of federal farm supports that enriches the few at the expense of the many, distorts international trade and damages the environment. It has one last chance, in other words, to produce a farm program of which the country can be proud.
The old-fashioned bill would perpetuate a system that directs more than half of all farm payments to less than one-tenth of the farms, most of them concentrated in eight states and most of them producers of big row crops like corn, cotton, soybeans, wheat and rice.
To make matters worse, these lucky few get their billions regardless of market conditions — and conditions now happen to be particularly good, given the strong demand for corn-based ethanol as well as for American farm products abroad. So whenever you hear its proponents describe this welfare-for-the-rich program as a safety net, remember this: for the most part, it provides an extra bounce for those who don’t need a safety net while failing to catch those who do.
The chart above (click to enlarge) is from a study by Robert Ohsfeldt (Texas A&M Health Science Center) and John Schneider (Department of Health Management & Policy, University of Iowa) that supports Greg Mankiw’s statement in today’s NYTimes that:
“The Census Bureau reports that 18 million of the uninsured have annual household income of more than $50,000, which puts them in the top half of the income distribution.”
As the chart shows, more than 38% of the uninsured have incomes of $50,000 or higher. To the extent that these 18 million remained uninsured, we would have to assume that many of them remain uninsured voluntarily (or are self-insured and pay for medical services as needed), since their income levels would certainly indicate that they can afford basic health insurance, but choose not to buy it.