Carpe Diem

Quotations of the day from Alan Greenspan

1. “Capitalism is based on self-interest and self-esteem; it holds integrity and trustworthiness as cardinal virtues and makes them pay off in the marketplace, thus demanding that men survive by means of virtue, not vices. It is this superlatively moral system that the welfare statists propose to improve upon by means of preventative law, snooping bureaucrats, and the chronic goad of fear.”

The Assault on Integrity“, 1963 (HT: Dennis Gartman in today’s The Gartman Letter)

2. “The world of antitrust is reminiscent of Alice’s Wonderland: everything seemingly is, yet apparently isn’t, simultaneously. It is a world in which competition is lauded as the basic axiom and guiding principle, yet “too much” competition is condemned as “cutthroat.” It is a world in which actions designed to limit competition are branded as criminal when taken by businessmen, yet praised as “enlightened” when initiated by the government. It is a world in which the law is so vague that businessmen have no way of knowing whether specific actions will be declared illegal until they hear the judge’s verdict—after the fact.”

“Antitrust,” essay at the National Association of Business Economists (September 25, 1961); published in Capitalism: The Unknown Ideal.

Carpe Diem

War on Cash: Wash Post series on police seizures of millions of dollars in cash from Americans not charged with crimes

The Washington Post has just published the first article of a three-part series (including videos and interactive maps) on the disturbing increase in civil forfeitures and cash seizures that are part of the “spread of an aggressive brand of policing that has spurred the seizure of hundreds of millions of dollars in cash from motorists and others not charged with crimes.”

The Washington Post filed Freedom of Information Act requests with the Department of Justice to compile a database detailing 212,000 cash seizures since 1996 through the federal government’s largest asset forfeiture effort — the Equitable Sharing Program (aka the “Slush Fund for Law Enforcement”).

Here’s an excerpt below from today’s first article in the three-part series, “Stop and seize: Aggressive police take hundreds of millions of dollars from motorists not charged with crimes.” (Part 2 will appear Monday and Part 3 will be published on Tuesday.)

To examine the scope of asset forfeiture since the terror attacks, The Post analyzed a database of hundreds of thousands of seizure records at the Justice Department, reviewed hundreds of federal court cases, obtained internal records from training firms and interviewed scores of police officers, prosecutors and motorists.

The Post found:

There have been 61,998 cash seizures made on highways and elsewhere since 9/11 without search warrants or indictments through the Equitable Sharing Program, totaling more than $2.5 billion. State and local authorities kept more than $1.7 billion of that while Justice, Homeland Security and other federal agencies received $800 million. Half of the seizures were below $8,800.

Only a sixth of the seizures were legally challenged, in part because of the costs of legal action against the government. But in 41 percent of cases — 4,455 — where there was a challenge, the government agreed to return money. The appeals process took more than a year in 40 percent of those cases and often required owners of the cash to sign agreements not to sue police over the seizures.

Hundreds of state and local departments and drug task forces appear to rely on seized cash, despite a federal ban on the money to pay salaries or otherwise support budgets. The Post found that 298 departments and 210 task forces have seized the equivalent of 20 percent or more of their annual budgets since 2008.

Here’s more:

Cash seizures can be made under state or federal civil law. One of the primary ways police departments are able to seize money and share in the proceeds at the federal level is through a long-standing Justice Department civil asset forfeiture program known as Equitable Sharing. Asset forfeiture is an extraordinarily powerful law enforcement tool that allows the government to take cash and property without pressing criminal charges and then requires the owners to prove their possessions were legally acquired.

The practice has been controversial since its inception at the height of the drug war more than three decades ago, and its abuses have been the subject of journalistic exposés and congressional hearings. But unexplored until now is the role of the federal government and the private police trainers in encouraging officers to target cash on the nation’s highways since 9/11.

“Those laws were meant to take a guy out for selling $1 million in cocaine or who was trying to launder large amounts of money,” said Mark Overton, the police chief in Bal Harbour, Fla., who once oversaw a federal drug task force in South Florida. “It was never meant for a street cop to take a few thousand dollars from a driver by the side of the road.”

What does the Justice Department have to say about the Washington Post series?

Justice Department spokesman Peter Carr said the department had no comment on The Post’s overall findings.

MP: So here’s the situation in a nutshell. America’s shameful, expensive and immoral War on Drugs has expanded to now include a new war – the “War on Cash.”

Carpe Diem

Quotations of the day on the miracle of the market…..

“From the point of view of physics, it is a miracle that 7 million New Yorkers are fed each day without any control mechanism other than sheer capitalism.”

~John Holland, scientist, Santa Fe Institute

“I am convinced that if the market system were the result of deliberate human design, and if the people guided by the price changes understood that their decisions have significance far beyond their immediate aims, this mechanism would have been acclaimed as one of the greatest triumphs of the the human mind.”

~Friedrich Hayek, Nobel economist

“It is something of a miracle that individual selfish decisions (in a market economy) must lead to a collectively efficient outcome.”

~Steven E. Landsburg in the Armchair Economist: Economics & Everyday Life

Carpe Diem

The current state of the US economy in one chart

gdpjobsThe chart above helps explain the current state of the US economy:

1. Measured by the output of real goods and services, the US economy has made a full and robust recovery from the Great Recession, and we are now producing 7.65% more output in Q3 (based on the Atlanta Fed’s GDPNow forecast of 3.6% for real GDP growth in Q3) than in the fourth quarter of 2007. In inflation-adjusted dollar terms, the US economy today is $1.14 trillion larger than in Q4 2007 (in 2009 dollars).

2. From the peak level of civilian employment of 146,595,000 jobs in November 2007, the US employment level in August of 146,368,000 is still 227,000 jobs below that pre-recession peak.

Bottom Line: The US has been producing new record-high levels of GDP in almost every quarter since Q3 2011, and we are now producing 7.65% (and $1.14 trillion) more real GDP today than in late 2007. But we are producing that record-setting level of real output with a quarter-million fewer workers than in 2007. One explanation for America’s record-high output with 227,000 fewer workers is that the Great Recession facilitated what might be one of the greatest expansions of worker productivity in US history. The fact that we’ve been able to greatly expand national output with fewer inputs (workers) represents a huge increase in economic efficiency, but has also left us with a lingering “jobless recovery” and an economy that is struggling to create new, post-recession employment opportunities for millions of Americans.

 

Carpe Diem

Matt Ridley: Whatever happened to global warming?

globalThe excellent chart above is “Climate Science Explained In One Simple Graph” from Steve Goddard’s Real Science blog, and helps to graphically illustrate some key points Matt Ridley makes in his WSJ op-ed today “Whatever Happened to Global Warming?“:

The climate-research establishment has finally admitted openly what skeptic scientists have been saying for nearly a decade: Global warming has stopped since shortly before this century began (see chart above).

First the climate-research establishment denied that a pause existed, noting that if there was a pause, it would invalidate their theories. Now they say there is a pause (or “hiatus”), but that it doesn’t after all invalidate their theories.

Alas, their explanations have made their predicament worse by implying that man-made climate change is so slow and tentative that it can be easily overwhelmed by natural variation in temperature—a possibility that they had previously all but ruled out.

It has been roughly two decades since there was a trend in temperature significantly different from zero. The burst of warming that preceded the millennium lasted about 20 years and was preceded by 30 years of slight cooling after 1940 (see chart).

Most science journalists, who are strongly biased in favor of reporting alarming predictions, rather than neutral facts, chose to ignore the pause until very recently, when there were explanations available for it. Nearly 40 different excuses for the pause have been advanced, including Chinese economic growth that supposedly pushed cooling sulfate particles into the air, the removal of ozone-eating chemicals, an excess of volcanic emissions, and a slowdown in magnetic activity in the sun.

The favorite explanation earlier this year was that strong trade winds in the Pacific Ocean had been taking warmth from the air and sequestering it in the ocean. This was based on a few sketchy observations, suggesting a very tiny change in water temperature—a few hundredths of a degree—at depths of up to 200 meters.

Last month two scientists wrote in Science that they had instead found the explanation in natural fluctuations in currents in the Atlantic Ocean. For the last 30 years of the 20th century, Xianyao Chen and Ka-Kit Tung suggested, these currents had been boosting the warming by bringing heat to the surface, then for the past 15 years the currents had been counteracting it by taking heat down deep.

The warming in the last three decades of the 20th century, to quote the news release that accompanied their paper, “was roughly half due to global warming and half to the natural Atlantic Ocean cycle.” In other words, even the modest warming in the 1980s and 1990s—which never achieved the 0.3 degrees Celsius per decade necessary to satisfy the feedback-enhanced models that predict about three degrees of warming by the end of the century—had been exaggerated by natural causes. The man-made warming of the past 20 years has been so feeble that a shifting current in one ocean was enough to wipe it out altogether.

 

Carpe Diem

Instead of $10.10 per hour, think of the proposed minimum wage as a $5,700 annual tax per full-time unskilled worker

Suppose that instead of discussing an increase in the minimum wage by debating whether or how much an increase from $7.25 per hour to $10.10 would affect employment, future hiring, hours worked, etc. we thought about that increase in the minimum wage as a tax on employers hiring unskilled workers as follows:

Increasing the minimum wage from $7.25 to $10.10 per hour would be a $2.85 “unskilled labor tax” per hour on employers, which would be an “unskilled labor tax” of $114 per week and $5,700 per year per full-time minimum wage worker.

When thinking of a minimum wage hike as a $5,700 annual tax per unskilled worker (and $6,170 with additional payroll taxes, see below), is there any doubt that an “unskilled labor tax” that high wouldn’t result in predictable changes in employer behavior that would have adverse effects on workers with no or few skills? Is there any doubt that business-minded employers would have to take steps to minimize the impact on his or her business of an annual tax of $6,000 per worker? Typical strategies to offset some of the tax might include reducing the number of current employees, reducing future hiring, reducing the number of hours employees are allowed to work, substituting skilled workers for unskilled workers, investing in automation, reducing non-monetary fringe benefits, etc.

Does thinking realistically about the proposed minimum wage increase to $10.10 per hour alternatively as a $5,700 annual “unskilled labor tax” make minimum wage proponents less enthusiastic about that increase and its inevitable adverse effects on unskilled workers? Maybe not, but at least honestly admitting that a $10.10 per hour minimum wage is exactly equivalent to a $5,700 annual “unskilled labor tax” should help us all understand the significant impact of that kind of increased cost on America’s businesses (many small and family-owned) employing unskilled workers. And let’s all understand that when Obama and other politicians talk about a $10.10 per hour minimum wage, they are really talking about a $5,700 annual tax on employers hiring unskilled workers. So from now on when you hear the term “$10.10 per hour” (According to Obama, “ten-ten” is so “easy to remember”) think instead of a $5,700 annual tax per unskilled worker (and $6,170 with additional payroll taxes, see below) and you’ll better understand why artificially raising the minimum wage through government fiat is a very bad idea.

Update 1: Dwight Oglesby points out in an email that the total “unskilled labor tax” to an employer from a $10.10 per hour minimum wage hike would be even greater than $5,700 because of the employers’ contribution to FICA (6.2%), Medicare (1.45%) and the federal unemployment tax (0.6%). After accounting for those additional costs to employers, the $10.10 per hour minimum wage would bring the annual “unskilled labor tax” up to $6,170.

Update 2: In light of the discussion above, I’d like to propose slightly modifying the name of the current minimum wage bill as follows: The Fair Minimum Wage Act (H.R. 1010 5700). 

Carpe Diem

Thursday afternoon links

cars1. Chart. Summer car sales caught fire, as more vehicles were sold in August — 17.53 million units on a seasonally adjusted annual rate — than in any month since January 2006; and it was the best sales for the month of August since 2003. Wow!

2. 3D Printing: a) This Technology (3D Printing) Could Have The Biggest Impact On American Jobs Since Offshoring and b) The Space Station Is Getting Its First 3D Printer.

3. Beer Smackdown. The Battle Between Craft Beers and Mass-Market Swill/Slop in Florida over the 64-Ounce Growler.

garchnewgarch4. Another Chart. Consumers love to complain about high prices at the pump, and they whine a lot about gas prices not being lower as a result of the US shale oil boom. But the chart above shows one possible positive result of America’s oil bonanza – retail gasoline prices have become more stable in recent years, and have been less volatile this year than in any year since 1998. (Note: Bottom chart is log scale.)

5. Who-d a-Thunk It? Despite federal income tax credits of up to $7,500, electric vehicle sales are stagnant and running out of gas? And here’s one reason from the LA Times article, “Stable gas prices (see Item #4 above) may have contributed to a slackening in interest in non-gasoline electric hybrid and plug-in vehicles. So have the increasingly good fuel-efficiency levels of gas cars in general.”

5. A Good List and So True. The Ten Things Every College Professor Hates.

trade6. Another Chart. Total US trade activity with the rest of the world (Exports + Imports) reached a new monthly record high in July of $437 billion.

7. Good Quote about the World’s Largest Jailer: “We (the US) have too many laws and too many prisoners. Never in the civilized world have so many been locked up for so little.”

8. Photo below from 1957, when it took about 12 men to deliver an Elliot Brothers business computer.

computer

Carpe Diem

In 2010, Obama promised to double exports in 5 years. A completely unrealistic goal — except for petroleum products

oilexport

Remember back in January of 2010 when President Obama set an ambitious goal to double US exports within five years? Well, there are now only 4 months left to go until 2015, and that lofty goal now seems to be unachievable and has vanished from White House talking points.

In the four-and-a-half years since Obama made his promise to double US exports and create two million new jobs, US exports have only increased by a little more than one-third (38%) in nominal terms and by only 26% in inflation-adjusted dollars based on international trade data released today by the BEA for the month of July. At the current annual average growth in exports of about 3.3%, US exports in early 2015 will likely be about $200 billion per month, and only about 40% above the $143.6 billion worth of exports in January 2010 when President Obama announced his lofty goal. No wonder the goal of doubling exports in five years has completely vanished from Team Obama’s talking points.

Although this might not have been what Obama had in mind when he promised to double US exports in five years, he might want to brag about a rather remarkable US export success story — the phenomenal increase in American-made petroleum products. Thanks to America’s amazing shale revolution that dramatically boosted domestic oil output starting in about 2007, US exports of refined petroleum products like gasoline, diesel, jet fuels, and heating oil have more than tripled in constant 2009 dollars (see chart above, data here) to a new monthly record high in July of $8.4 billion.

So here’s a talking point for Obama to consider: “When I made my promise in January 2010 to double US exports, we were selling only $3.5 billion of refined petroleum products to the rest of the world (in 2009 dollars). In July of this year, American-based refineries sold $8.4 billion worth of petroleum products that were “Made in the USA.” I’m proud of the fact that American oil producers and refiners have helped me meet my goal of doubling US exports, and they did it in record time — there are still six months left to go before my 2015 deadline and petroleum exports have already doubled. Further, shovel-ready jobs in the oil and gas industry have expanded by a whopping 36% since January 2010, compared to an increase of only 7% in US payrolls during that time.”

MP: Realistically, we won’t hear any bragging from Obama about the boom in US hydrocarbon-based exports because it’s not part of the “green energy” future that Obama envisions, and probably wasn’t at all what he had in mind when he promised to double US exports. Nonetheless, the tripling of US petroleum exports since 2007, and the more than doubling of those exports since January 2010, is another part of America’s amazing shale revolution — which continues to provide one of the strongest reasons to be optimistic about the US economy and America’s future.

Carpe Diem

Natural gas production in the Utica Shale has increased almost 7X in 2 years and its potential just got even bigger

uticaThe chart above shows natural gas production in the Utica Shale area of Ohio and Pennsylvania (see map below), based on EIA data. In only two years, the production of natural gas in the Utica Shale region has increased from about 200,000,000 cubic feet per day in September 2012 to 1.34 billion cubic feet per day this month based on the EIA’s most recent estimate (see chart). And we can expect the eye-popping increase in shale gas in the Utica to continue, according to a news report today from Bloomberg about Shell’s recent discovery of two new very promising natural gas fields in the Utica:

Royal Dutch Shell’s natural gas discoveries near the Pennsylvania-New York border indicate that the Utica shale formation extends hundreds of miles farther east than originally thought.

Two gas finds in Tioga County, Pennsylvania, announced today by Europe’s largest oil company are more than 300 miles away from the epicenter of Utica shale drilling in Monroe County, Ohio. Shell, which has been selling gas assets in other parts of the U.S. to focus on its highest-profit prospects, said it owns drilling rights across about 430,000 acres in the discovery zone, an area five times the size of Philadelphia.

Since the discovery of Utica four years ago, exploration has been dominated by a handful of domestic wildcatters such as Chesapeake Energy Corp. and Gulfport Energy Corp. Oil majors including Exxon Mobil were late to the race after initially assuming the formations wouldn’t yield hefty returns.

The Utica “could be much bigger” than previously mapped, said Kayla Macke, a Shell spokeswoman.

Shell’s discoveries, known as Gee and Neal, were found about two miles underground. The Gee well was producing 11.2 million cubic feet of gas a day when output began a year ago. The Neal well saw a peak in daily production of 26.5 million cubic feet after drilling ended in February.

Shell, based in The Hague, held off on publicizing the well results for months to avoid alerting competitors to the potential bonanza in that part of Pennsylvania.

utica

HT: Robert Kuehl

Carpe Diem

Q&A with Jason Riley about his book “Please Stop Helping Us: How Liberals Make it Harder for Blacks to Succeed”

In the Reason TV interview above, Jason Riley, WSJ editorial board member and author of the book “Please Stop Helping Us: How Liberals Make it Harder for Blacks to Succeed” says, “My beef with the black left is that they want to keep the focus on what government or Washington or politicians or whites in general can do for blacks, instead of what blacks can do for themselves.” Further, in Jason’s new book he writes, “The sober truth is that the most important civil rights battles were fought and won four decades before the Obama presidency. The black underclass continues to face many challenges, but they have to do with values and habits, not oppression from a manifestly unjust society. Blacks have become their own worst enemy.”

In a wide-ranging 20-minute conversation with Reason’s Nick Gillespie, Jason Riley discusses topics in his book including the Civil Rights acts of the 1960s, affirmative action racial profiling in higher education, black-on-black violence, the Drug War, the case against the minimum wage because of its negative effects on blacks, and how the best anti-poverty program available for blacks is an intact family. You can find the transcript and more information here.