BuckeyeBlog

So we have arrived at 1000 Islands, a beautiful resort area that I had not heard of until we scheduled it. So I ask my sister for a blog topic, and she suggests, “connectivity is undermining modern society.”

Hmmph. My family also thinks Phil Gramm’s mental recession comment wasn’t entirely out of line. “You just work through it,” says Mom.

The Dispatch reports:

Ohio Sen. Sherrod Brown, who had adamantly opposed [offshore] drilling, is among those warming to the idea. He says any exploration would have to be far from the coast and that the oil produced would be used in the United States, not abroad.

So clearly Senator Brown has no idea how the oil market actually works, does he? After all, it’s not as if U.S. oil is only sold in the U.S., Saudi oil is only sold in Saudi Arabia, Mexican oil is only sold in Mexico, etc. Oil is a global commodity. There is a global market for it. Any attempts to horde oil for sale in only one country would either be completely ineffective or provoke a flurry of harmful counter-measures. As a nation which buys a large share of its oil from overseas, do we really want other nations to refuse to sell their oil to us? (more…)

The Washington Post had a story today about how free trade is helping to move people in Colombia out of poverty. It’s a great reminder that the real way to help people in foreign countries isn’t foreign aid (which has a poor track record of success) but allowing them to sell goods to consumers in the U.S.

Of course, Democratic Presidential candidate Barack Obama is on record supporting increasing U.S. foreign aid but is opposed to a free trade deal with Colombia. Why would he be supporting spending more money on aid programs that will likely do nothing to help people but is opposing a deal that has demonstrable benefits for poor Colombians?

Since we will be celebrating American independence tomorrow, where the theme of “no taxation without representation” played prominently, this video illustrating the opressive nature of high tax rates seems appropriate:

In anticipation of the Fourth of July, Steven Chapman at Reason magazine has an interesting article about how freedom (specifically economic freedom) is essential to the pursuit of happiness:

Two things, it appears, are needed to increase the supply of happiness: freedom and money. As it happens, a substantial amount of freedom is crucial to the creation of wealth. There is no such thing as a rich totalitarian country, as even the onetime totalitarians in Beijing finally realized. So in a very real sense, freedom is the key to happiness.

The survey, by the Institute for Social Research at the University of Michigan, involved asking people in 97 countries two simple questions: “Taking all things together, would you say you are very happy, rather happy, not very happy or not at all happy?” and “All things considered, how satisfied are you with your life as a whole these days?”

What the researchers found is that in the 52 countries where the poll has been done over the last couple of decades, the percentage of people giving upbeat answers rose in 40. Among the places where smiles have been spreading are such developing countries as China and India, which have grown freer as well as more prosperous.

A lot of Congressmen, Senators, and pundits are blaming oil speculators for the rise in energy prices. I’ve already noted on this blog Bob Murphy’s excellent piece explaining the role of speculators and why attacking them illustrates a fundamental ignorance of economic markets. Now Fortune has an interesting piece showing what happens in the real world when you ban speculation. Back in the 1950s onion farmers were able to convince Congress to ban speculation for their commodity. The results?

And yet even with no traders to blame, the volatility in onion prices makes the swings in oil and corn look tame, reinforcing academics’ belief that futures trading diminishes extreme price swings. Since 2006, oil prices have risen 100%, and corn is up 300%. But onion prices soared 400% between October 2006 and April 2007, when weather reduced crops, according to the U.S. Department of Agriculture, only to crash 96% by March 2008 on overproduction and then rebound 300% by this past April.

If politicians have their way and oil speculation is curtailed or banned, you will likely see something similar in the oil market.

Hat tip to the Cato Institute’s excellent blog.

When politicians are promoting “economic development” policies they always claim that they will result in a huge amount of investment in a community, hundreds (or thousands) of new jobs, more tax revenue, and on and on. Of course, these promises are hard to verify and often don’t pan out. This is true in perhaps the most visible case of “economic development” — the eminent domain action in New London, Connecticut, that produced the infamous Kelo decision from the Supreme Court.

Since the government bureaucrats who were stealing taking for public use the property of others won the case, what has happened? Not too much, it seems:

Like so many other projects that use eminent domain and rely on taxpayer subsidies, New London’s Fort Trumbull project has been a failure.  After spending $78 million in taxpayer dollars, the city of New London and the private developer have engaged in no new construction since the project was approved in 2000.  Indeed, since the property owners disputing the takings owned less than two acres in a 90-acre project area, the city has always had a vast majority of the land available for development.  Yet, no new development has occurred.  The preferred developer for part of the site, Corcoran Jennison, recently missed its latest deadline for securing financing for building on the site and was terminated as the “designated developer.”

“New London’s Fort Trumbull project has been an unmitigated disaster,” said [Institute for Justice] Senior Attorney Dana Berliner, who litigated the Kelo case with Bullock.  “Despite the infusion of close to $80 million in taxpayer funds and three years elapsing since the Kelo decision, there has been no new construction in the area and nothing to show but brown, empty fields.  The developer was so desperate for funding that it applied to the federal Housing and Urban Development agency to obtain taxpayer-subsidized loans to build luxury apartments on the land where Susette’s neighborhood once stood.

As this case illustrates, it’s a good idea to be very, very skeptical of politicians who are promising huge economic benefits from government meddling.

H/T Reason magazine’s Hit & Run blog.

Economist Tyler Cowen had an excellent article in Sunday’s New York Times about why globalization fears are unfounded:

Trade advocates focus on the benefits of goods arriving from abroad, like luxury shoes from Italy or computer chips from Taiwan. But new ideas are the real prize. By 2010, China will have more Ph.D. scientists and engineers than the United States. These professionals are not fundamentally a threat. To the contrary, they are creators, whose ideas are likely to improve the lives of ordinary Americans, not just the business elites. The more access the Chinese have to American and other markets, the more they can afford higher education and the greater their incentive to innovate.

Conservative and liberal economists agree that new ideas are the fundamental source of higher living standards. We urgently need new biotechnologies, a cure for AIDS and a cleaner energy infrastructure, to name just a few. Trade is part of the path toward achieving those ends. A wealthier China and India also mean higher potential rewards for Americans and others who invest in innovation. A product or idea that might have been marketed just to the United States and to Europe 20 years ago could be sold to billions more in the future.

Those benefits will take time to arrive, but trade with China has already eased hardships for poorer Americans. A new research paper by Christian Broda and John Romalis, both professors at the Graduate School of Business at the University of Chicago, has shown that cheap imports from China have benefited the American poor disproportionately. In fact, for the poor, discounting in stores such as Wal-Mart has offset much of the rise in measured income inequality from 1994 to 2005.

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The Washington Post reports on the flap over privatizing the Senate’s cafeterias.

Now remember, gasoline is $4.00/gallon, 130,000 troops are afield in Iraq, tens of thousands of young adults will be graduated by public schools unable to read, and the Democrat senate caucus finds time to not only contemplate, but to debate, the issue of privatizing the Senate food service.  Have they ever heard of the phrase “no-brainer”?

Here’s what Ohio’s junior senator had to say about this burning conflict: (more…)

Over at NaugBlog, Matt takes apart Governor Strickland’s claim that President Bush is to blame for the GM plant closings in Ohio. To build on his analysis, it’s interesting to read an editorial in Investor’s Business Daily that points out how unions in Ohio (and elsewhere) are a large reason why car manufacturing jobs are shrinking in the upper Midwest:

It’s tempting to blame automakers for [moving jobs to Mexico]. Indeed, they do deserve a big chunk of the blame for poor management decisions. And by far, their worst decisions yet came when they agreed to company-destroying labor pacts with the United Auto Workers union that practically guaranteed Big Auto’s demise.

We don’t fault workers for trying to get more in labor negotiations. But the fact is, past UAW deals have saddled U.S. companies with such high costs that they can no longer make cars here and compete on a global market. So they make cars elsewhere.

Like a coyote caught in a trap, U.S. automakers have been desperately gnawing off a leg to escape certain death. They’re closing plants and slashing jobs in Michigan, Ohio and other U.S. union havens, in favor of non-union, foreign places. Like Mexico and China.

Meanwhile, foreign companies have no problem making cars here. They do it in the non-union South, where the UAW is weak.

Though little noted, last year was a watershed for U.S. carmakers. For the first time, foreign producers in the U.S. made more cars — 54% of the total — than the former Big Three. As recently as the 1980s, Ford, Chrysler and GM made 73% of all cars here.

Why is this? U.S. carmakers pay their workers an average of about $73 an hour in wages and benefits — way more than others.

According to the Center for Automotive Research, there’s a $16.15 per hour gap between what Detroit’s Big 3 pay workers and what Toyota pays workers in the U.S. Add to that a $5 billion a year difference in health care and other retirement costs, totaling thousands of dollars in extra costs on every car sold, and U.S. automakers operate at about a $12 billion a year disadvantage.

It doesn’t take an MBA to understand this is an industry in peril.

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