BuckeyeBlog

Over at Reason magazine, Steven Chapman has a good critique of the current “stimulus” mania:

We all know how we got into this economic mess. We spent too much, borrowed with abandon, and acted like the bills would never come due. So what’s the prescription for getting out? Spending more, borrowing more, and acting like the bills will never come due.

When something sounds too good to be true, it usually is. This alleged cure deserves special scrutiny because it invites our policymakers to redouble the very policies that caused the crisis. Congress and the new administration are all too eager to abandon restraint so that we can overcome the consequences of excess.

Read the whole thing here. Unfortunately, our federal policymakers are unlikely to pass up the opportunity to say they are stimulating the economy (I stress say, since it’s hard to believe their plans will accomplish anything). Why pass up the chance to put out press releases saying that you are working on a fix, even if that “fix” only makes the problem worse?

A new report has been released that backs up the claim that the payday lending “reform” legislation passed earlier this year will result in significant job loss across the state. Backers of this legislation deny this, but it seems the data doesn’t support their contention.

The report by William D. Keip, President of Keip Government Solutions, concludes the following:

   10,308                    Total Ohio jobs lost

     6,000                    PayDay Lender jobs lost

$495.3 million         Economic Activity

$218.5 million         Total reduced earnings

$145.1 million         Reduced earnings-direct PayDay Lender jobs

$262.0 million        Total reduced spending

$   14.8 million        Loss of state/local Ohio taxes

Why is this the case? Keip’s report discusses the methodology he used to come up with these figures. However, these numbers rest on the assumption that payday lenders across Ohio will go out of business if Issue 5 is not rejected. Those supporting Issue 5 say this is not the case, that payday lenders will still exist but that they will merely be charging lower interest rates. Is this true? The answer is clearly no.

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What state is declining fastest, according to Forbes?

The turmoil of the mortgage market granted a temporary reprieve from hearing about the woes of America’s Rust Belt. That doesn’t mean things are better. Despite a decade of national prosperity, the former manufacturing backbone of the U.S. is in rougher shape than ever, still searching for some way to replace its long-stilled smokestacks.

Where’s it worst? Ohio, according to our analysis, which racked up four of the 10 cities on our list: Youngstown, Canton, Dayton and Cleveland. The runner-up is Michigan, with two cities–Detroit and Flint–making the ranking.

But don’t worry, state leaders are taking care of pressing issues, like banning payday lending. Of course, they did pass an “economic stimulus” bill that spreads around money to politically-popular projects and saddles future generations with debt. Too bad they aren’t doing something to actually address the state’s problems, like reducing Ohio’s increasing tax burden on individuals and businesses.

Robert Scott, the author of the EPI report which I criticized earlier today, defended his study in a response to my post. In that defense, he draws heavily upon statistics and models from which his conclusions and assumptions are drawn. It’s easy to get caught up in numbers and leave the principles that give them meaning far behind. But detailed observations don’t always reflect the truth, and it’s easy to fall into a trap when one forgets which is the master and which is the servant. For thousands of years, humans observed the sun moving from the east in the morning to the west at night. From this observation, they developed the theory that the sun revolved around the earth. They were so convinced of their beliefs that they were willing to kill others to preserve their theory. As we now know, however, they were wrong. Data and observations by themselves serve only as the various colors on a painter’s palette. One must have the principles to use as a brush if he wishes to paint a picture. (more…)

Ohio state representative Chris Widener was featured on CBS’s “Eye to Eye” segment discussing Ohio’s ban on payday lending. As we saw during the debate on this issue, state legislators like Widener just don’t understand the economics behind payday lending. For instance, he repeatedly refers to some sort of “cycle of debt” seemingy caused by payday lending. I have no doubt that Rep. Widener believes that payday lending causes such a cycle of debt. However, outside of the flawed research by the advocacy group the Center for Responsible Lending, you’ll have a hard time finding any academic who studies this issue agree that payday lending causes this.

As testimony from Dr. Tom Lehman pointed out, those “studies” which show that payday lending causes a debt trap are so full of methodological errors that they are worthless. Unbiased research clearly shows that payday loans do not cause economic problems; instead, people who are already having economic problems turn to them. Eliminating these loans will do nothing to stop the “cycle of debt” that Rep. Widener discusses. In fact, as Dr. Lehman’s testimony illustrates, it is likely to cause even more problem for these folks as they turn to even less attractive alternatives.

Unfortunately, Ohio legislators like Rep. Widener ignored the hard data and instead relied on anecdotes and ideologically-driven “research” upon which to base their votes. And it really seems they believe these falsehoods about payday lending and payday borrowers. The banning of payday lending was a shameful expample of legislators failing to do their job. It’s sad that Rep. Widener feels so proud of this abdication of duty that he goes on TV to brag about it.

The Center for Freedom and Prosperity has released a video by the Cato Institute’s Dan Mitchell that discusses the economic problems that would follow adoption of Senator Barack Obama’s idea to impose Social Security taxes on incomes over $250,000. There’s a lot of good information in this video about tax rates, economic growth, Social Security, and proper tax policy:

The Warren Tribune Chronicle had a great editorial today that should be read by all policyamakers. Its title? Ohio Needs to Cut Burdensome Regulations:

Yikes. The apocalypse is upon us.

Strickland said the economic pressures the state is facing extend far beyond school funding. He said he doesn’t think the energy and foreclosure crises are just part of a normal cycle of ups and downs.

”Part of what’s happening with the economy is, I think, potentially cataclysmic,” Strickland said. ”Whether or not people will maintain confidence in our financial institutions, whether or not there will be some way to deal appropriately with the energy crisis we face, it’s affecting everything. It’s not only affecting schools. It’s affecting households, it’s affecting the ability of people to work and get to work and feed their families.”

Don’t forget global warming, AIDS and Dick Cheney.

During the 2006 gubernatorial race, a friend wondered during the Strickland-Blackwell debates, “Do you think Strickland is deliberately trying to emulate Ronald Reagan?”

No doubt about it. Apparently having checked that off the list, though, now the governor appears to be trying to emulate Jimmy Carter.

The United States Playing Card Company has decided to join DHL in the lifeboat leaving Ohio. Where is it going? To a location about 10 miles southwest of its current campus; the short distance makes a big difference due to a invisible, intangible line that lies between the two locations–Ohio’s border with Kentucky.

Phil Dolci, President of USPC, comments on the move:

We have a rich history of manufacturing in Cincinnati and Norwood. From the introduction of the Bicycle(R) and Bee(R) playing card brands in the late nineteenth century to the production of World War II escape decks that helped prisoners of war map their way out of Germany to the more recent Texas Hold’m Poker cards and sets, we have enjoyed a long and successful history. USPC is committed to growing our leadership position in the future and enhancing the appeal of our iconic playing card brands. To continue to compete in the global marketplace over the next 100 years, it was obvious we needed to modernize our equipment and facilities. Over the course of the last year, we conducted an exhaustive search in Ohio, Indiana and Kentucky for a new location that would position us to retain our employees and provide the best platform to serve our global customer base in the most efficient manner.

Obviously, Ohio lost in this comparison of states. Why? Martin E. Franklin, Chairman and CEO of the Jarden Corporation (USPC’s parent company), offers insight:

We believe the technological and logistical advances that will be made from this move will provide excellent returns on our investment.

In other words, management determined that the most successful business climate existed in Kentucky, not Ohio (or Indiana). Companies such as DHL and USPC that are leaving the state are only part of the picture. It is relatively easy to identify and quantify these companies. What can’t be easily quantified are the numerous companies that choose not to move to Ohio or establish themselves here in the first place. Were we able to identify and count these companies and determine the loss of their potential economic influence to our state, Ohio’s economic picture would look even worse. Northern Kentucky is the winner in this story; it landed a thirty-plus million dollar investment and what will be one of the top ten manufacturing employers in the region, and Ohio provided its sales pitch. Will Kentucky at least pay Governor Strickland a commission?

Some thoughts about Texas left over from my previous post. As mentioned, according to the US Dept of Labor, Texas added 139,000 jobs so far in 2008. Think what kind of job growth they would have there under a strong national economy. So far in 2008 Ohio has added a paltry 6,000 jobs.

Since the bottoming out of national manufacturing employment in March, 2004, Texas has added 40,000 jobs in the high-paying manufacturing sector. Ohio has lost a further 61,000 jobs.

Weekly wages in Texas are $831 through the 3rd quarter of last year. In Ohio, $730.

Could it be just a coincidence that one manufacturing state with no income tax, no compulsory unionization and a regulatory environment that gets out of the way of free markets is growing so much more robustly in terms of employment and wages than another manufacturing state burdened by a lack of economic and workplace freedom?

Nope, no coincidence. Our empirical work has and will continue to demonstrate this truth: the path to prosperity is lit by economic freedom, individual liberty and limited government.