Tuesday, January 29, 2008

REAL Economic Stimulus Package

From Fox Business,

NEW YORK -- Wal-Mart Stores Inc., the world's largest retailer, said Tuesday it will cut prices on thousands of items to lure shoppers struggling with the weak economy.

The retailer said it will roll back prices by 10% to 30% on a range of products, particularly Super Bowl snacks, fitness items and home products. The store said it will offer no interest for 18 months on purchases of $250 or more with a Wal-Mart credit card.

The store also said it would include a $100 gift card with the purchase of a $1,296 Phillips 42-inch LCD HDTV.

The company said the latest price cuts will be detailed in its latest home circular.

Supply-side tax cuts and stimulus packages will always be more effective than demand side wealth re-distribution. Without the supply-side price cut from Wal-Mart, the refund checks would be inflationary. Simple economics.

Wednesday, December 19, 2007

What Would a Successful Third Party Candidate Look Like?

Most people I talk to dream of the day when a strong third party candidate can compete in the national elections. This is probably going to stay a dream for a long time as the money both major political parties spend each election cycle is spiraling exponentially. It would be hard for an unaffiliated candidate to raise the hundreds of millions of dollars to get their message to voters. Even then, most people feel a vote for a third party candidate would be throwing their votes away.

Look at recent elections. The third party candidate often loses the election for the party they are a bit closer to. In 1992, Ross Perot took enough fiscal conservative voters from Bush Sr to sway the election to Clinton. In 2000, Ralph Nader took enough green votes from Gore to ensure Bush Jr. won the election. Third party candidates run on specific issues and cause one party to lose in the general election.

How can a third party candidate win? Well, Europe has a system where many more candidates can run in the general election and the top two participate in a run off. This is probably the only way a third party candidate can actually be a significant player. Americans won't go for this because we like our one election that shows instant gratification at the polls. Our system of party primaries is the closest we will likely get to a third party candidate as this is a free-for-all with the top two running in the general election. Pretty much a monopoly on the system from the two parties.

A third party candidate would have to have a platform transcending both national party core issues:
  • Strong on national defense
  • Fiscally conservative/responsible
  • Morally acceptable
  • Immigration policy that secures the border first then treats immigrants in the country as humans that need compassion
  • Energy policy that implements new technologies more quickly while stopping foreign dependence
  • Science-based education
  • Prevent man-made global warming
  • Protect a woman's right to choose with the rights of the baby to exist

This is just a short list. Both sides will find issue with this platform even though the majority of issues are acceptable to people as a national policy. Major political parties exploit one or two personal issues to keep people beholden to their party. Until individuals stand up and recognize no candidate will likely represent every policy exactly like a person believes, then we will have the two party system.

The key to government is to compromise on divisive issues quickly so it doesn't divide the population and get on to real issues facing the country:
  • Rise of major economic powers and trade policies with them
  • Repressive governments worldwide
  • World poverty
  • Education system to prepare Americans for the impending challenges
  • Seriousness of the national debt and government financial obligations

We have very serious national issues today, but both parties have a vested interest in having their voting blocks remain ignorant of the threats and stir up passions with red herring issues that keep people going back to the polls.

Friday, December 14, 2007

Beware of Entangling Alliances

The global push to enforce carbon emissions regulations concerns me. I believe we have an obligation to protect the planet from man-made pollution and emissions, but the debate is all wrong.

George Washington wisely stated "beware of entangling alliances." As a proponent of global cooperation, I think there is some merit to the discussions, but the solutions are not good for the world economy.

This story from the government EPW committee really focuses on what is going on:

A global tax on carbon dioxide emissions was urged to help save the Earth from catastrophic man-made global warming at the United Nations climate conference. A panel of UN participants on Thursday urged the adoption of a tax that would represent “a global burden sharing system, fair, with solidarity, and legally binding to all nations.”

“Finally someone will pay for these [climate related] costs,” Othmar Schwank, a global tax advocate, told Inhofe EPW Press Blog following the panel discussion titled “A Global CO2 Tax.” Schwank is a consultant with the Switzerland based Mauch Consulting firm

Schwank said at least “$10-$40 billion dollars per year” could be generated by the tax, and wealthy nations like the U.S. would bear the biggest burden based on the “polluters pay principle.”

The U.S. and other wealthy nations need to “contribute significantly more to this global fund,” Schwank explained. He also added, “It is very essential to tax coal.”

The Global Warming issue is being waged in a debate to promote more government control over national economies. There is a term "enviro-socialism" that seems very fitting to what is happening today.

Another interesting article concerning the Bali Conference said:

Another point was that as this current economic system got us here in the first place, a climate change response must have at its heart a redistribution of wealth and resources.

The free market approach to discussing the environmental situation is to target particular polluters and help them implement current technologies that will emit less pollution or carbon dioxide. To implement an arbitrary "carbon tax" is irresponsible. You cannot tax industrialized nations if the technology does not allow an alternative. This will destroy economies and prevent underdeveloped nations from participating in the global economy.

There needs to be a cost associated with emissions and pollution from industry and consumers. If there is no cost, then it is automatically cheaper to do nothing than to invest in new technologies. The idea of carbon credits is good in theory, but if that is based on some arbitrary government regulated program rather than true costs of environmental cleanup or market supply/demand, then the program will be very wasteful while consolidating power and money in bureaucracies.

The Bali Conference is the UN demanding to become the global government and using environmental issues to further it's agenda. The UN has proven to be anything but transparent and has shown little progress in helping third world nations enter the global economy. They may hand out a lot of aid, but they are showing very little accomplishment from the investments. This inefficient use of capital will continue to hurt the poor of the world and create an overly bulky organization which does not have the best interest of the world at heart.

Solving the Abortion Debate

Politicians are using this highly divisive issue to keep people locked into predictable voting blocks. This issue reminds me a lot of what I hear from the slavery debates in the early 1800s. Neither side is going to back down and many small compromises are highly criticized by all parties. Will this lead to a Civil War? Well, I doubt it. The first Civil War was caused by economic factors other than slavery, although slavery was the emotional issue used by politicians to fight and wage war.

The abortion issue is one of many red herrings used in DC and local elections to stir up voter interest and passion. By focusing on abortion, politicians can distract people from the impact of rising economic powers on the American economy, repressive governments worldwide, social programs about to go bankrupt, education that focuses on helping people gain economic freedom rather than reading 4-8 years of Shakespeare plays, environmental issues of global economic growth, etc etc.

If DC really wanted to solve the abortion issue, they would come together and create a solution. Because of the passions on both sides, a final compromise would look something like this:

1) Unlimited abortions during the first 3 months of pregnancy. Studies conclude the fetus is inviable in this early stage and the woman should have complete control over her decision to keep or abort the fetus. Does this mean insurance should pick up the tab? Depends on your provider. I imagine if the healthcare system was free-market based, many providers would pay for abortions while charging higher premiums. Government insurance for the poor should offer this as a medical procedure where the woman must pay for some of the bill. There should always be a cost associated with a personal decision.

2) No abortions in the last 3 months, unless the woman's life is at risk. It is time to consider the fetus a baby at this point, capable of living on it's own. There is an obligation of society to protect those who are most vulnerable. Unborn babies definitely fit into this category. 6 months of pregnancy is plenty of time to abort an unwanted fetus, so don't kill someone who can live on his/her own. There needs to be some type of oversight for medical professionals who continually perform "emergency abortions". If a doctor is running a late term abortion clinic and using the loophole created by "unless the woman's life is at risk", there should be some type of medical council which oversees such cases to ensure no one is abusing the system. Again, if you are going to place trust with doctors and limit lawsuits, you need to place trust with them to make good decisions on abortion issues (this would be a great compromise in DC....The Doctor Trust Act of 2008, limit punitive law suits and increase judgment to perform abortions).

3) 3-6 month term abortions determined by the states. This is the gray area of abortion debate and should be left up to the individual states to determine their position. The woman's right to choose has been protected as required by Roe v. Wade and the right of the viable baby to live is protected from late term elective abortions. The constitution grants powers to the states to make decisions based on the lowest possible level.

Why am I writing about abortion on an economics blog? Because this issue is being used to distract people who need to focus on their own economic situation as well as that of many other people in need of assistance. Solve this and other red herring issues quickly and get to the real work that needs to be done to include all people in the economy.

Solving the Healthcare Crisis

As with anything that needs changing, politicians turn it into a crisis to ensure action. True, healthcare costs are rising faster than the average income which pinches the checkbooks of most Americans. The Republicans don't seem to care and the Democrats are promoting national healthcare insurance. Both "solutions" are inadequate and the voters and consumers will be the ones who suffer.

Healthcare is a market industry. It needs to be treated as such. The environment for healthcare providers is unfriendly to free and fair competition. Too much government intervention and too little assistance to the poor.

The free market has caused food to be too readily available and consumers are now getting criticized for becoming obese. If America opens up the healthcare system to the free market, we should be able to complain in 20 years that Americans are too healthy!

1) Limit lawsuits. Doctors normally have 8 years of intense medical training. They work very hard to provide good care for their patients. Sometimes accidents happen, but that shouldn't put doctors out of business. Malpractice insurance continues to be a growing burden to independent doctors and causes medical practices to be consolidated into larger, more bureaucratic organizations devoted to limiting liability rather than providing new and unique ways to ensure care for patients.

2) Private Health Savings Accounts. This is a great idea from DC. Finally, they stepped up and started solving some serious national problems. It is too burdensome for employers to provide 100% medical insurance to employees and shouldn't be required anyway. Also, employer-provided insurance causes workers to be trapped in a job for longer periods of time than necessary. The workers must take steps to owning private savings and investment accounts to increase their ability to take new jobs when available. The HSAs allow people to save tax free money and shop around to doctors that are cheaper and better.

3) Lower Entry Requirements for New Medical Practices. The free market works most efficiently when new businesses can start up quickly and painlessly. This creates more competition, which increases choices for consumers and weeds out poor performing medical practices. Current regulations and training requirements keep good doctors from starting new businesses. Also, many tasks required to be performed by doctors can easily be performed by nurses. If more nurses and physician assistants could perform the same care, the cost of healthcare can be reduced dramatically.

4) Increase the Number of Doctors. The American Medical Association acts as a Doctor's Union to prevent large numbers of medical professionals from being trained. By limiting the number of doctors, the AMA has maintained high salaries for doctors at the expense of the consumer. This has also increased the cost of medical school as they can charge soon-to-be-doctors more money. More doctors opening up more private practices nationwide will go a long way to lowering overall medical costs. When more people have HSAs and can shop around to more medical practices, the healthcare "crisis" will be eliminated without sacrificing the care to patients.

One big problem we have in this country is the appeal of getting things for free or paid by "the rich" through taxes and wealth redistribution schemes. People love the idea of getting things for free and are increasingly expecting to get some things for free. Healthcare costs money. You either pay for it directly, send more income to DC to have them solve your problems or decrease the quality of care. I have heard the phrase in business "you can either get it fast, cheap or good...pick 2." This applies to almost anything in the market. Also, "you get what you pay for."

All freedom comes with responsibilities. Economic freedom make people responsible for their own economic decisions. If you want to not thing and worry about your retirement savings, cost of healthcare or other financial decisions, then you will never achieve economic freedom and will always be captive to politicians using your ignorance as a reason to further their own political agenda.

Two Americas

This is one of the most divisive and controlling phrases I have seen in a long time. We live in a nation that is truly blessed in so many ways, including the freedom to move up the economic ladder. John Edwards is playing class warfare in a way to stir up resentment and hatred, rather than solving problems.

In America, we have nearly unlimited potential for social and economic mobility. There was an article out a couple months ago that said over the last 10 years, half of the people in poverty moved up the economic ladder. This was from the Treasury Dept. Notably, the article also reported that the top bracket moved down the ladder in a lot of cases.

Politicians like Edwards consistently use class warfare arguments to further their political careers. Rather than helping the poor with more relevant education and training, or showing them how to invest more wisely, they just tell voters they will make their lives better in some mysterious and undefined way. Most people I know would love to make more money and have better lives, but to continually stir up emotions in people just to hold on to your elected position is unethical. Tell Edwards to start solving problems and not rip the country apart in a class-based civil war.

To the poor people reading this article, don't fall for "tax the rich" and "Two Americas" nonsense. You have an opportunity to become one of the rich! Don't vote to punish those who have made it before you. Just work to make your dreams come true. Make sure you take advantage of your education to get into college or a training program. Continually develop skills which employers will pay for. Take jobs that give you more opportunity to develop skills so you can apply for increasingly more difficult jobs with more pay attached.

Another irony is that politicians use the "tax the rich" rhetoric to convince the poor and middle class to vote for them. The politicians then implement income taxes that prevent the poor and middle class from moving up the economic ladder. The poor and middle class voters have now trapped themselves in their tax bracket because of jealously and envy.

Redistribution of wealth is not how the debate should be framed. Helping lower and middle income families into higher income brackets is the debate. My question to Edwards, why should we bring the upper class down rather than bring the lower class up?

Role of Religion in Government

Just reading an article about polls indicating an increased trend towards Huckabee. Republican candidates are becoming increasingly beholden to religious voters rather than promoting good ideas to help our nation.

The Constitution specifically states "Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof." The reason for this is to ensure everyone practices their own religion free from government interference. The role of the government is not to enforce biblical law of a particular religion, it is to serve the people who vote for direction on different choices.

I believe in God, but still feel politicians use religion to keep voters in easy to define and manipulate voting blocks. People should work to promote their religious beliefs outside of government. If the majority of Americans are of a particular religion, then they will vote for policies that their religion agrees with. We can't make the elections about which candidate is the most religious. How many Christian leaders over the last decade have turned out to be less than advertised (to say the least)? When people vote solely on who looks and acts like them, they are being duped by insignificant criteria.

Vote for ideas and progress towards end goals you know are important to improve the world.