Spending freeze logic

A college student gets $250/month spending money from his parents, and they promise to increase that amount each year to account for inflation. But then he goes ahead and spends $500/month, using his parent's credit card to make up the difference.

The college student says to his parents: "Don't worry, from here on out, I am going to freeze my spending at $500/month. You don't have to give me that allowance increase that you promised. See, I am saving you money!"

I will never understand

I will never understand why some potato farmer in Idaho needs to send his tax dollars to Washington so that they can be then be used to fix a bridge in South Florida that he will never use.

It's not as if the politicians and bureaucrats in Washington are wizards at allocating resources. The incentives are terrible and more importantly, they don't have the knowledge that is required to make these kinds of decisions. They act as if they are engineering experts that know exactly which bridges and roads need to be fixed better than the people who actually live there.

I saw a pothole on my way in to work today. I'm not sure why Congress didn't know about it already, but maybe I will call them so they can pass legislation to fix the pothole.

Status Update

From a friend of mine on Facebook:

I'm going to sit my Grandfather down today to watch The Jersey Shore so he can see what he risked his life for in WW2

Obamacare does not reduce the deficit

Here is Greg Mankiw on the absurd claim that Obamacare reduces the deficit:

I have a plan to reduce the budget deficit. The essence of the plan is the federal government writing me a check for $1 billion. The plan will be financed by $3 billion of tax increases. According to my back-of-the envelope calculations, giving me that $1 billion will reduce the budget deficit by $2 billion.

Now, you may be tempted to say that giving me that $1 billion will not really reduce the budget deficit. Rather, you might say, it is the tax increases, which have nothing to do with my handout, that are reducing the budget deficit. But if you are tempted by that kind of sloppy thinking, you have not been following the debate over healthcare reform.

I tried to make a similar argument last year, but unlike my clumsy attempt, this is brilliant.

Capitalism and free trade in practice

I rest my case

When I saw these headlines, there was no doubt in my mind in which state the events they describe occured. I swear it's the humidity that makes us act this way.

Burglars snort man's ashes, thought it was cocaine

MIAMI Wed Jan 19, 2011 3:11pm EST

MIAMI (Reuters) - Burglars snorted the cremated remains of a man and
two dogs in the mistaken belief that they had stolen illegal drugs, Florida sheriff's deputies said on Wednesday.

Read the whole thing. That took place about 90 minutes south of where I live. This next one happened about an hour north.

Cow attacks man, wife hits animal with truck to save husband

ST. LUCIE COUNTY — A 70-year-old man was flown to a local trauma center with serious injuries over the weekend after a cow attacked him at a ranch, according to a recently released St. Lucie County Sheriff’s Office report.

Oscar Wilcox was flown to Lawnwood Regional Medical Center & Heart Institute in Fort Pierce following the New Year’s Day incident at a ranch in the 10300 block of Carlton Road. He was listed Tuesday in critical condition, a hospital spokeswoman said.

Wilcox’s wife told a deputy that her husband was working on a fence in the pasture when she heard him scream. She drove into the pasture and saw a cow “attacking” her husband.

“She was able to hit the cow several times with the truck to get it off of her husband,” the report states.

That my friends, is what true love is all about. When you see a cow trampling your husband, ram her with your F150 untl she stops.

My beloved Florida, rendering satire impossible since 1845.

The unfortunate result of credit card "reforms"

CNBC has produced an interesting spot on the rise of "Payday lending".

There is no doubt that this trend was in part caused by the weak economy and the "credit crunch", but another factor that should not be overlooked is the credit card "reforms" recently passed by Congress.

Price controls inevitably lead to shortages. There is really no way around that fact. In this case, when you cap fees and rates on credit cards, it sounds like a good idea, but consumers who really need credit (to fix a car or keep the heat on or avoid bouncing checks) go elsewhere, and often end up paying much higher fees and rates, whether it comes from payday lending, pawn shops, or even loan sharks.

Mark Halperin's advice

Put this alongside Eugene Robinson in the living in a parallel universe category.

A cheap shot from the Morning Joe roundtable

The crew on Morning Joe this morning was lecturing Sarah Palin on how important it was for her to make a statement regarding the Giffords tragedy and the tone of political discourse in the country.

Again, what does she have to do with any of this? What a cheap shot. Yet, they were clearly convinced that they were being fair and balanced, and that they were conducting a careful examination of the issue from both sides.

But as Jonah Goldberg said this morning, "You can’t cover a debate that shouldn’t exist in the first place 'fairly.'"

Eugene Robinson: Violent political rhetoric comes exclusively from the right

This is just incredible.

Pima County Sheriff accusses Palin and Angle of being accessory to mass murder; Brokaw praises Sheriff

I was watching MSNBC this morning and Tom Brokaw was praising the Pima County Sheriff for speaking out against inflammatory political rhetoric. This the same man who has made several TV appearances arguing that the Tucson massacre was linked to conservative political rhetoric. He even went so far as to call out Sarah Palin and Sharron Angle. Last night I watched Geraldo Rivera interview the Sheriff, and Geraldo ended the interview by asking him, "Are you sure you don't want to take anything that you just said back?". The Sheriff declined.

So why is Mr. Brokaw praising this guy? How did Mr. Brokaw not notice the fact that the Pima County Sheriff was accusing his political opponents of accessory to mass murder?

As for Palin, I find it infuriating that she is being linked to this. But I guess if you are going to be dumb enough to use "crosshairs" on a map targeting specific Congressman, and something like this happens, then there are going to be consequences.

And she definitely should not have said that thing a couple of months ago about "punishing our enemies".

Correction: It was the President who talked about "punishing our enemies".

GOP "looking backwards" and "living in the past"

Those are the talking point I keep hearing when I turn on MSNBC. The White House and the Democrats are trying to frame any effort to repeal or fix the health care law as a sign that the Republicans don't care about jobs, and are instead "living in the past".

It's a curious approach considering the fact that 1) the law has for the most part not been implemented, and 2) the health care law and the willingness of employers to hire people have a lot do with one another.

The best explanation of the financial crisis

Russ Roberts of George Mason University, host of the wonderful weekly podcast Econtalk (and creator of the Youtube sensation Hayek vs. Keynes rap video) was unsatisfied with many of the competing explanations about why the 2008 financial crisis occurred. He was no fan of Fannie Mae and Freddie Mac or of the Community Reinvestment Act, and he acknowledges that Federal reserve policy was likely a contributing factor. But none of these stories fully explained why privately owned financial institutions acted so recklessly, to the point where they put their own existence in jeopardy. After researching the financial industry and interviewing several dozen experts on the topic, Roberts developed his own theory about why the crisis took place.

His narrative, entitled "Gambling With Other People's Money", focuses on the role of the creditor. He asks, why did creditors continue to lend to financial institutions that engaged in increasingly risky and leveraged activities? After all, creditors don’t participate in the upside of these risky bets, so why in the world did they go along with it without demanding higher and higher interest rates, or asking for more collateral, or requiring covenants that restrict the amount of risk the borrower takes on?

His answer is that over the course of the last three decades or so, with only one or two exceptions (e.g. Drexel Burnham), the government has never allowed creditors of any large financial institution to take a loss. In every case, not only were these institutions bailed out, creditors were made completely whole. They weren’t asked to take 50 cents on the dollar, or even 90 cents on the dollar. In every case, they received 100 cents on the dollar. He then asks “Did the rescue of creditors in the past increase the chances of future rescues sufficiently that creditors were careless?” He concludes yes.

He also makes an important distinction between the incentives of equity holders vs. creditors.

Equity holders don't want to get wiped out, but they are typically diversified, and they want a lot of risk-taking by some of their investments so they can make high rates of return on the upside. But because creditors don't share in the upside, they only care about the downside, and need to make sure the firm stays solvent. So, it's creditors that monitor solvency, not equity holders. It’s creditors who monitor prudence and recklessness.

For me, Roberts's narrative is the most compelling that I’ve read.

Below is a link to the paper, and a link to the podcast where he presents his story.

http://mercatus.org/publication/gambling-other-peoples-money

http://www.econtalk.org/archives/2010/05/roberts_on_the_2.html