Sleepless in Midland

Texas -- We're number 14

On Wednesday the Mercatus Center at George Mason University announced the publication of an interactive map which gives each state a personal and economic freedom ranking as of 2011. The #1 ranking puts a state at the top as the most free, and that spot was earned by North Dakota. Not surprisingly, the states with the highest numbers, i.e. least free, are California at #49 and New York at #50.

Texas ranked #14 this time. That's worse than than the #8 spot it held in 2009 but better than the #17 spot it earned in 2007. High local debt was an impediment. Here are the first two paragraphs of their Texas analysis.

Texas prides itself on being a freedom-loving state, and at 14th in rank its citizens have something to be proud of. However, its policies are sometimes not as consistent with individual liberty as the rhetoric of its officials and citizens would suggest. Like many southern states, Texas performs better on economic freedom than personal freedom. Yet despite its reputation as a low-regulation state, it is only average for regulatory policy—while it is above average for fiscal policy.

exas enjoys one of the lowest tax burdens in the country. It also does better than average on state spending, fiscal decentralization, and government employment relative to the private sector. However, state and local debt is high (with most of the problem arising at the local level).

Emphasis added. Texas residents have certainly seen the local debts rising. Good economic times cause a fever that induces amnesia about the bad times.

Gold and inflation

Many people watch the price of gold as an indicator of inflation. And I believe Alan Greenspan did too when he was FED chairman. At any rate, gold is thought to be an inflation hedge, and TV ads have been peddling it for years on that basis.

Currently, the price per ounce is $1,695.10, according to Kitco.com , after a choppy election month. And it's down from an all time high back in September, 2011, of around $1,900.

The last big spike in gold prices was in1980 with a peak at around $850. Applying the BLS inflation calculator, that would put an ounce of gold at $2,386 in today's dollars.

So that tells us that if gold really is an inflation indicator, inflation isn't as bad as it was back in the 80s when Paul Volker tightened the FED screws so much to crank down inflation that it sent bank CD rates to around 16%. And going to the BLS again we learn that the CPI in October of this year increased at an annual rate of a mere 2.2 percent.

Ben Berneke is less interested in inflation than the unemployment rate, and he's been priming the fiscal pump for years with little to show for it, because he can't offset the burdens Obama has placed on the economy. Rising wages would precede inflation, but as long as unemployment is high, wages won't rise. So the effect is that inflation is held in check by low levels of employment.

As for the price of gold, when market participants think the price will go up, they buy. When they think the price will go down, they sell. But something else was happening back in the late 70s and early 80s when the gold price peaked that time. There had been a revolution in Iran, and American hostages were being held by the Islamic radicals who took control. The nation was focused intently on developments, and a TV show, Nightline, was even created to cover it. It would be ironic if some situation developed with Iran or Islamic radicals elsewhere that drove the price of gold up again.

How did the CBO conclude that paying people not to work would create jobs?

Answer: They didn't. They pulled numbers out of the air.

The other day the morning paper contained a short unsigned Associated Press filler piece titled, "Report: Extending jobless benefits creates jobs" in which AP says the following:

Washington -- Extending the current level of long-term unemployment benefits for another year would add 300,000 jobs to the economy, according to a report from the Congressional Budget Office.

The Washington Post elaborates:

The report notes that extending unemployment insurance is a particularly effective form of stimulus when the economy is still struggling. That’s because jobless workers who receive benefits are extremely likely to spend the money right away. So, the CBO estimates, if Congress extends all the programs, GDP will likely be 0.2 points higher and employment will be 300,000 higher at the end of 2013 than if Congress does nothing at all.

[They are referring to the CBO report of 11/28/2012. Click Unemployment Insurance in the Wake of the Recent Recession to get the CBO summary, and download the full PDF here.]

One not so minor problem: The economy is much too complex to make predictions like that and expect them to come true. And another contributing factor that can't be measured is the rampant fear present today that things will only get worse.

The report says that the CBO estimates that if unemployment benefits are extended the payoff to the GDP will $1.10 for every $1.00 of budgetary cost in 2013. And they don't admit it, but that's just a wild guess. Researchers are all over the map on whether or how much government stimuli influences the GDP.

Valarie Ramey has analyzed the research on the effects of stimuli on GDP, and she reported in a podcast interview by Russ Roberts with her last year that the effect varied from about $0.80 to $1.20 increase in GDP for every $1.00 the government spent. Download or listen to that interview at econtalk.org.

For Mr. Roberts' own 2010 evisceration of CBO estimates, see CBO estimates. And for the Heritage blog take, see Unemployment Benefits: No Free Lunch.

In any event, here's some good news for the unemployed. The CBO currently has four job openings. Go for it. Their standards really can't be very high.

A new use for pennies -- floor covering

Most people who see a penny in the parking lot won't bother benging over to pick it up. But a creative tattoo artist in Garfield, Pennsylvania, had an idea -- use them for floor covering.

There was plenty of bending over for that project, but with a lot of help -- 300 man hours worth -- she covered the 800 square feet of her store floor with around 250,000 pennies.

Watch a video here.

Apparently, it is cheaper to pave the floor with money than to buy tile. Ben Bernanke must be proud.

Entrepreneurial spirit still lives -- teen builds mobile shower for ND oil field workers

The spark: "The recent high school graduate [Evan Jensen] got a whiff of himself and his 21-year-old brother, Justin. The two had been sleeping in a pickup while looking for work in the oil fields of western North Dakota. 'We smelled,' he said. 'Bad.' "

The idea: A mobile shower where oil field workers can take a shower and clean up for a small price thus saving them a long drive to a motel or truck stop.

The seed money: He used $15,000 he earned from trapping muskrats over the past two years plus money invested by relatives.

The product: They built a 53-foot semitrailer with a five-stall shower, an office, and laundry facilities. A 6,000-gallon tanker provides fresh water and collects the discharge.

The price: They charge $10 for a shower and $1 for a towel and washcloth. Soap is free.

He built that.

Via Carpe Diem.

Low hemlines and a cool economy

A few weeks ago I saw a woman wearing a dress with a hem rubbing the floor. At first I thought she might be a member of a religious cult that discouraged exposed legs, but over the weeks I've noticed a couple of others. Is the hemline trying to tell us something?

The hypothesis is that high hemlines are coincident indicators of a hot economy, and low hemlines a cold economy. Here's a 2010 paper that sets forth the theory. Notice the last sentence in the abstract: "Hence, the current economic crisis predicts ankle length shirts around 2011 and 2012."

[Dress on the right is Christian Dior from the collections at Vogue.com.]

Side note #1: The sightings were in Midland, Texas, in which the economy is decidedly uncool at the moment. However, it's an industry town, and said industry goes through periods of boom and bust. Could the hemlines be predicting an end of the boom? Nah. Three sightings don't represent a trend.

Side note #2: On the other hand, a quasi government entity wanting to invest in an apartment complex could easily be a contrary indicator.

Who builds business? Not the government.

President Barack Hussein Obama:

If you’ve got a business -- you didn’t build that. Somebody else made that happen.

The best economies are ones that developed in spite of rather than because of the government. The old Soviet Union provided ample evidence that central planning commissions don't do a very good job. And President Obama was rightly excoriated for pandering to people who want something for nothing with his irrational claim that a successful business wasn't built by the entrepreneur who actually built it.

But it's extremely difficult to get the government to keep its hands off of business. An example of this is going on right now in Midland, Texas, where the local government wants tight control over development of a short stretch of highway between Odessa and Midland. It has a connector road to the airport, and that's what has the government exited. The F-Troop insecurity that affects many people out here in the boonies makes them want to put on their freshest face when the out-of-town bosses arrive by air and get chauffeured to town along that stretch of highway. Better that they see raw desert than a business that doesn't meet the highest standard of governmental aesthetics.

To some of us, a thriving business is a thing of beauty, and the best government is one that stays out of the way rather than meddle. (See the results of the eminent domain case the Supreme Court handed down in Kelo vs. City of New London. That land taken from the citizens for government approved economic development eventually became a dump.)

So is it possible to have it all? Great beauty and thriving businesses?

The government is only concerned with the surface. So here's a compromise. In a previous post about this I suggested tall fences between the roadway and the businesses painted with murals to look like the solemn desert that drivers see now. But here's another alternative.

Go ahead and let the landowners build whatever buildings they want, then take voluntary donations from those who are dissatisfied with the aesthetics and use the money to build a facade and hire the artists to paint murals. The artists at at Dashart.com.ua could put up some very interesting images.

Their work has a fairy tale look to it. So maybe for Texas a theme focusing on the legends of the wild west might be appropriate. Pecos Bill meets Yosemite Sam. Throw in caricatures of Elfego Baca for good measure.

Or better yet, who better to do the art work than Midland's own Rubi Sosa?

Having it all, a thriving economy behind a thing of beauty. Everybody's happy.

Obama's Truth Teams

1984 is coming. There's an anachronism if there ever was one. It was on a bumper sticker seen long ago warning of a coming to life of George Orwell's "1984," a futuristic story of repression and the propaganda used to manipulate people into submission.

All of this comes to mind as we learn from Bluegrasspundit.com of President Obama's campaign to use websites to manipulate the facts. News.yahoo Tells us all about it.

Let's take one of those website, KeepingHisWord.com. The goal is a laughable attempt to convince his followers that he kept his 2008 promises. Here's a sampling:

Reducing our dependence on foreign oil

“This time we cannot fail.”
—President-elect Barack Obama commits to reducing our dependence on foreign oil, December 16th, 2008.
New research published this week by Bloomberg reports that “the U.S. is the closest it has been in almost 20 years to achieving energy self-sufficiency.”.

That, we are to believe, is Mr. Obama keeping his word. The truth is that any progress toward energy self-sufficiency was made in spite of, not because of, Mr. Obama. Any increases in production came about because of the oil boom in North Dakota, something which Mr. Obama had nothing to do with.

In fact, most of his efforts have been directed at decreasing production. You'll recall that he halted drilling in the Gulf after the BP blowout. That certainly did not help achieve energy self-sufficiency. And closer to home, the Obama administration is trying to use a lizard to handicap oil and gas producers in Texas and New Mexico.

Let's not forget that he vetoed the Keystone XL pipeline which would have brought Canadian oil to Gulf Coast refineries. True, that oil would be imported, but Mr. Obama's veto does nothing to reduce our dependence on foreign oil. And surely all but the most loyal Obama supporter would agree that it would be better to import oil from Canada than from the Middle East.

Let's ignore the newspeak and get right to the point. They're "half-truth teams."

Cheers for Sears

The good news for Sears is that it plans to close a bunch of unprofitable stores, and hopefully that action will help the bottom line enough to allow it to cut prices and compete with Best Buy, Walmart, and online competitors.

But what must really hurt is the highly public announcement that CIT Group Inc. would quit extending credit to Sear's vendors. See Sears Supplier Loans Are Said to Be Halted by CIT Starting Today. Therefore, Sears would have to pay those vendors up front for orders. That sounds bad, but the report says merchandise financed by CIT accounts for only 5% of Sears' inventory. So unless other creditors follow suit, it shouldn't hurt that much.

I've got a soft spot for Sears. I admit it. The stores have always been a reliable place to buy tools, car batteries, tires, and plenty of other stuff. At one time wrenches and other non-electric tools bought at Sears carried a lifetime warranty. But times change, and that was back in the day when a tool would last a lifetime.

Hang in there Sears. Your fans are rooting for you, even those of us who sought out the cheaper prices elsewhere. If the store closures can bring down those prices, then the game is still on.

Making it political

The Sears store closings will inevitably result in employee layoffs and put those people out there looking for new jobs. The political issue of the day is Mitt Romney's work for a restructuring company that took over failing businesses and -- gasp -- laid off employees. So basically Sears is doing on its own what countless other businesses have done. That's the way the market place works. And thankfully no one is asking for a Sears bailout or some other form of government intervention.

Also, there's this nagging question. Lefties have left no doubt how much they hate Walmart. So would they cheer if Walmart was hurting? What about if Walmart decided to close a bunch of stores, would lefties continue to cheer big employee lay off? Just wondering how that all works together.

The 99% consume what the 1% create

They make it look so easy, those dang one percenters that the occupiers are so obsessed with. It's tempting to suggest that the occupiers are really just resentful of the people who have the talent to see possibilities the occupiers can't see.

Jim Powell at Forbes explains it in The Genius of "One Percenters" Is Their Amazing Command of the Obvious. He summarizes a few successes and notes how the people who created popular products and successful businesses were observant enough to discover and then fill a need. Examples include:

Fred Smith who saw the need for overnight delivery and created Fed-Ex.
George de Mestral who took a close look at the burrs that stuck in his pants and invented Velcro.
Ray Kroc who saw the demand for fast food and created McDonalds.
George Crum, whose customers wanted fried potatoes that wouldn't go saggy, invented the potato chip.
Peter Dunn and Albert Wood were looking for drugs that might reduce blood pressure, and they came up with -- boing! -- Viagra.

Many of the examples Mr. Powell cites required a basic knowledge in some field to get to the point where they knew enough to conduct experiments in that field. And in some cases they came up with a product then had to figure out what it was good for. But they thought they could do it, and they did it. Anyone who thinks they can't do it probably can't.

Elizabeth Warren much like FDR's enablers

A couple of weeks ago we talked about Robert Higgs and the regular attacks against historians who come up with new theories that challenge the prevailing wisdom. (He had dared bring to light the theory that FDR had prolonged the Great Depression with misguided measures to "fix" the economy.)

If you haven't yet tired of hearing about Higgs, here he is again.

This time he talks about Elizabeth Warren. It was not too long ago that she expressed her exited contention that anyone who ever got rich did so only with government help because the government paid for the highways, the government paid to educate the workers, and so on.

Higgs almost comes to her defense, if by saying she wasn't as bad as some of her predecessors can be called a defense. We should feel lucky, he says, that the view of many Democrats of earlier times doesn't prevail today. That view was that the government owned everything, and any part of a person's earnings the government didn't take was a gift to the earner.

He cites a book titled FDR Goes to War by Burton and Anita Folsom which tells of the debates that eventually resulted in the law that established income tax withholding. A couple of notable quotes:

Rep. Emanuel Celler (D-N.Y.) -- The government always has a moral if not actual lien on all our income.

Sen. Happy Chandler (D-Ky.) -- ... the government can take everything we have if the government needs it.

Higgs says we are lucky we only have the likes of Elizabeth Warren to contend with. So are you feeling lucky?

Higgs' article: Government Officials Want You to Know that Your Earnings Belong to Them.

Classroom socialism experiment

I was talking to someone the other day who started complaining that the problems of the world could be blamed on capitalism. Um 'k. That's my exit cue.

But here's a cute story about how a professor tried a socialism experiment with the students in a class. Daniel Mitchell tells it. And it's one of those stories that is just too perfect to be true. But one of the secret rules of the bloggers' code is that it's OK to present an unbelievable story so long as there's a good lesson to be learned.

It goes like this. A professor at a local college proposed an experiment in a class of Obama fans whereby all test grades would be averaged and everyone would get the same grade. As they approached the first test some students studied and some coasted. As you can guess, the average test scores started falling as soon as those who studied got tired of carrying the ones who didn't.

There's a lesson the Wall Street occupiers could learn from this. There has to be an incentive to work. Take away the incentive, or make the worker share it with those who don't work, and the worker becomes a non-worker. Eventually there is nothing left to share.

Does Government Spending Stimulate Private Activity?

That's the title and subject of a research paper by Valerie A. Ramey -- Click for PDF -- in which she reports on the results of her study on the effect of government spending on private spending, unemployment, and employment. (Via Econtalk.org.)

It's a timely topic with President Obama having already spent billions of dollars in an attempt to stimulate the economy and apparently believing that the failure so far is due to not having spent enough. The President and his enablers will not be happy with Ms. Ramey's report.

Her conclusion:

For the most part, it appears that a rise in government spending does not stimulate private spending. Increases in government spending do reduce unemployment. For all but one specification, it appears that all of the employment increase is from an increase in government employment, not private employment.

Extrapolating a bit, if everyone works for the government then there would be no unemployment. Given the level of economic competence demonstrated so far by this administration, such a result might actually be in contemplation.