Sunday, January 29, 2012

Progress in New Jersey

The WSJ has an interesting update on Governor Christie's progress in New Jersey. A few excerpts:
Economically, unemployment in the state has fallen to 9% from a high of 9.8%. With almost 3.9 million people working, New Jersey has added almost 60,000 private-sector jobs since he took office, while shedding more than 21,000 government jobs. Reforms of the pension and health programs for government employees will save taxpayers an estimated $120 billion over the next 30 years. A new limit on local property-tax increases appears to be working.

Mr. Christie says that he can now push for the tax cuts that he promised would happen if the state controlled its spending. The governor made that promise while seeking the job in 2009, and he recalls the skepticism at various newspapers during the campaign: "They looked at me like I was an alien." Because many media folk couldn't believe the state government could afford to reduce tax rates, "They just basically accused me of lying to get elected."


Having spent his first two years playing defense against unsustainable spending, Mr. Christie is eager to start competing with neighboring states for jobs, talent and capital. Step one was to decide which tax reform would be the biggest draw for new residents and new businesses. He chose to attack the income tax because "that will be the thing that will make us the most competitive from a jobs perspective." His decision was made easier when he saw neighboring New York Gov. Andrew Cuomo push through an income-tax increase in December.

"When Governor Cuomo raised taxes over here that made it even more attractive for me to go after the income tax . . . from a competitive perspective." He adds that with Gov. Dannel Malloy also enacting a tax increase in Connecticut last year, "it's a strategic decision as much as a philosophical decision."

New Jersey has a long way to go. This week the Tax Foundation again rated it dead last among the 50 states for its overall business tax climate. As for individual income taxes, Mr. Christie notes that since 2003 the top marginal rate has risen to 8.9% from 6.25%. If Mr. Christie succeeds in knocking that top rate down to a flat 8%, Jersey will still be above Connecticut's 6.7%. But since Connecticut now edges New Jersey for the country's highest property taxes, according to the Tax Foundation, the Garden State is at least in the ball game.

Saturday, January 28, 2012

Bernanke Explains Central Banking

For those of you wishing to gain some insight into our genius overlords' thinking, these four classes by Ben Bernanke (Central Planner in Chief) might be of interest.

Thursday, January 26, 2012

Shipping Industry as Example of the Business Cycle

I'm a proponent of monetary policy having the potential to create boom - bust cycles (which I guess makes me a "bubble head" in some people's estimation). This article on the boom and bust in container shipping (created in large part by artificial Chinese demand) is an interesting case study.

Tuesday, January 17, 2012

The Harms of Welfare

More and more I'm coming to accept the conclusion that not only does welfare harm those who are robbed to support others, but it also harms the recipients of those stolen goods. This is true both at the individual level and when one looks at groups of individuals. This story on the failures of massive subsidies to the city of Buffalo is a good example of the latter.
Buffalo may be the paradigmatic example of why expensive government revitalization efforts often fail. Back in 2004, the Buffalo News estimated that the city had garnered more federal redevelopment aid per capita than any other city in the country, a total of more than half a billion dollars since the 1970s. Yet, the paper noted, the city had virtually nothing to show for the money.

Officials squandered millions granting loans and subsidies to projects that went bust. There was a proposed trade center near the famed Peace Bridge that was never completed even after the city granted it federally backed loans; a failed shopping plaza on William Street; and several hotels that defaulted on their government loans. Among the past three decades' failures have been a dozen or so businesses in the theater district—"one of Western New York's most heavily subsidized stretches of real estate," said the Buffalo News.


Sometimes these schemes have done real harm. In the 1970s, the federal government decided to invest $530 million to build a 6.2-mile light-rail system through downtown Buffalo. It was supposed to further spur redevelopment, of course.

Opened in 1985 and anchored by a transit mall that banned cars, the rail line fell well below ridership projections—and downtown businesses suffered mightily from the lack of traffic. As Buffalo landlord Stephen P. Fitzmaurice wrote in 2009: "Walk down Main Street on the transit mall; aside from a few necessities like drug and cell phone stores, blight dominates." Last month the city received a $15 million federal grant to restore traffic to Main Street.

These massive investment subsidies failed partly because officials were ill-suited to select the right projects and often instead gave money to favored insiders. Even former Mayor Anthony Masiello described the federal government's redevelopment funds as "a politically motivated system trying to please everybody."
Read the whole thing to see how taxes and regulations also play into Buffalo's poverty.

Monday, January 16, 2012

Death Rates

I found this article on modeling mortality rates interesting. It doesn't deter me from expecting to live well into my 120's though ;-) (And BTW, the calculator that's linked to in the article doesn't make much sense as it doesn't take into account the person's current age. I think the probabilities it calculates only apply to a new born.)

Sunday, January 15, 2012

Bain Capital

While I'm not a fan of Romney, the attacks on his work at Bain Capital by other Republicans are revealing of their attitude towards capitalism. This editorial in the WSJ does a good job of making the point. An excerpt:
One Bain investment during Mr. Romney's tenure was to back an entrepreneur named Tom Stemberg, who was convinced he could provide savings for small-business owners if they were willing to shop at a store instead of taking deliveries. Today, the Staples chain of business-supply stores employs 90,000 people.

Bain also backed a start-up called Bright Horizons that now manages child-care centers for more than 700 corporate clients around the world. Many other venture bets failed, but that's capitalism, which is supposed to be a profit and loss system.

The loss part is what seems to trouble the Gingrich-Perry-Obama critics, especially in Bain's private-equity business. Like some 2,300 other such U.S. equity firms, Bain looks to buy companies that are underperforming or undervalued and turn them around.

Far from "looting," this is a vital contribution to capitalism and corporate governance. One of the persistent gripes of the left is that too many CEOs make too much money even as their companies flounder. Private-equity firms target such companies or subsidiaries, replace their management, and try to unlock the underlying value in the enterprise.
Read the whole piece.

Thursday, January 12, 2012

Chinese Volleyball

For any volleyball fans out there, this page highlights an amazing rally.

(I should resume semi-regular blogging shortly.)

Monday, January 02, 2012

Debt and Unfunded Liabilities

This week's Mauldin letter has a good chart showing the extent of debt and liabilities for several Western nations. It's very unlikely that these will be paid off as they stand, even with increased inflation.

(My understanding is that Japan's situation is even worse, but I don't have the exact numbers.)