Gloom...gloom...gloom
It seems as though every bit of economic data is full of bad news (aside from weekly earnings reported by the BLS last month showing a 3.6% increase from last year). Whats next?
So far I've been lucky, I have a full time job in a strong growth industry. My friends haven't had it so good, and this is just the beginning. According to GDP data we're still in the process of officially labeling this bad boy a recession with 3rd qtr actuals estimated somewhere are a .5% contraction in GDP.
So it makes me wonder...if this is still the beginning, what the hell is the end gonna look like?
Wednesday, November 26, 2008
Saturday, November 22, 2008
Friday, November 21, 2008
Smoke Tax
The Bowling Green Daily News posts at article online regarding a raise in per pack cigarette tax. The author argues that an increase in the tax will increase revenue in states bordering KY as consumers will begin driving across to other states to purchase cigs.
I thought this was an interesting concept, because I am for taxing cigarettes but have yet to see the media bring up this claim. So I thought I would look into it a little more, and did a little analysis to see what exactly would be the radius someone would have to live within in order to see savings in driving across the border. If you take a look, the analysis begins with the $ difference in the sales tax between KY and the border state in question (you choose...). The gas price was just how much gas costs per gallon the day I had decided to do this, so$2.85. The "Gas Cost=Diff in Sales Tax" is the amount (in gallons) it would take to equal the $ difference in sales tax. So...take the first data point, it would take .004 gallons priced at $2.85 to equal the $.01 difference in savings. Now...the 25 MPG is just a number I chose, nothing special about it other than hopefully thats about the average MPG out there.
So...thats the explanation of the variables. The dependent variable here is the mileage it will take to equalize the demand (to equal the savings in sales tax). Obviously, as the $ diff in sales tax increases, consumers living in a larger radius experience savings. So, in order for someone to realize savings on $1 difference in sales tax and consumer must live within 4.386 miles since he would have to drive both there and back, effectively halving the effective "radius of savings".
So...savings for those living within 4.4 miles of the border. I dont know about you, but I'm willing to bet that the revenues lost due to consumers traveling across the border will be a very small portion compared to the revenues gained.
I thought this was an interesting concept, because I am for taxing cigarettes but have yet to see the media bring up this claim. So I thought I would look into it a little more, and did a little analysis to see what exactly would be the radius someone would have to live within in order to see savings in driving across the border. If you take a look, the analysis begins with the $ difference in the sales tax between KY and the border state in question (you choose...). The gas price was just how much gas costs per gallon the day I had decided to do this, so$2.85. The "Gas Cost=Diff in Sales Tax" is the amount (in gallons) it would take to equal the $ difference in sales tax. So...take the first data point, it would take .004 gallons priced at $2.85 to equal the $.01 difference in savings. Now...the 25 MPG is just a number I chose, nothing special about it other than hopefully thats about the average MPG out there.
So...thats the explanation of the variables. The dependent variable here is the mileage it will take to equalize the demand (to equal the savings in sales tax). Obviously, as the $ diff in sales tax increases, consumers living in a larger radius experience savings. So, in order for someone to realize savings on $1 difference in sales tax and consumer must live within 4.386 miles since he would have to drive both there and back, effectively halving the effective "radius of savings".
So...savings for those living within 4.4 miles of the border. I dont know about you, but I'm willing to bet that the revenues lost due to consumers traveling across the border will be a very small portion compared to the revenues gained.
Tuesday, November 18, 2008
I think some people confuse overall success with the idea of long-term vs. short-term success
Paul Krugman does a good job of identifying the successes of the New Deal in his column
To say the New Deal was a failure is to ignore the difference between long-term vs. short-term accomplishments. Something can do poorly in the short-run (as has been argued by two UCLA economists) but can ultimately be successful in the long run as Krugman argues.
Interesting...
Paul Krugman does a good job of identifying the successes of the New Deal in his column
To say the New Deal was a failure is to ignore the difference between long-term vs. short-term accomplishments. Something can do poorly in the short-run (as has been argued by two UCLA economists) but can ultimately be successful in the long run as Krugman argues.
Interesting...
Annoyed
Just watched the Senate Banking Committee interrogate the Big 3Eo's...
As I stated before I agree that the big 3 should be given some help. Not only is it a strong economic force in my state and city (Louisville, KY) but it also stands to reason that helping the big 3 will keep millions of people employed both directly and indirectly.
However, what annoys me is watching these guys ask for money without a strong showing. If I'm requesting someone money, I'm going all out and am fully prepared. To me the only want that seemed prepared to a high level was Nardelli...
How is it that anyone can ask for 25bln and not have full info on profitability and expected expenditures?
If I'm going to agree any further to this bailout, I need to be sure that these companies are capable of pulling it off. I believe its possible, and I've seen quite a bit of restructuring across all 3. I just need to be sure that they plan on putting the 25bln to good use, and not use it to "get them through" the next couple of months
As I stated before I agree that the big 3 should be given some help. Not only is it a strong economic force in my state and city (Louisville, KY) but it also stands to reason that helping the big 3 will keep millions of people employed both directly and indirectly.
However, what annoys me is watching these guys ask for money without a strong showing. If I'm requesting someone money, I'm going all out and am fully prepared. To me the only want that seemed prepared to a high level was Nardelli...
How is it that anyone can ask for 25bln and not have full info on profitability and expected expenditures?
If I'm going to agree any further to this bailout, I need to be sure that these companies are capable of pulling it off. I believe its possible, and I've seen quite a bit of restructuring across all 3. I just need to be sure that they plan on putting the 25bln to good use, and not use it to "get them through" the next couple of months
Monday, November 17, 2008
Bailout or Bankrupt?
Jeffrey Sachs has a good point
Who will cover those contracts? Personally I would rather bailout one company to keep the satellite industries relying on the business safe than to let the big 3 fail and see the unemployment rate and unemployment benefits enrollment rate rise to a level that could very possible be unsustainable.
Normally I would call against a bailout for moral hazard reasons...but a bailout seems more logical than bankruptcy
Who will cover those contracts? Personally I would rather bailout one company to keep the satellite industries relying on the business safe than to let the big 3 fail and see the unemployment rate and unemployment benefits enrollment rate rise to a level that could very possible be unsustainable.
Normally I would call against a bailout for moral hazard reasons...but a bailout seems more logical than bankruptcy
Thursday, November 6, 2008
Keeping my taxes
The biggest issue this election, for me, was taxes. I've sat and listened to a ridiculous number of accusations of socialism and that Barack Obama was going to take from the rich and give to the poor.
Thats a ridiculous claim. Not only can it be disproven but it simply isn't something to be fearful of. Cutting taxes for the largest consuming base will bolster the economy and strengthen the demand of its people. This translates into buying.
One such argument that I've heard going around from this is that the money will be saved like with the stimulus checks or put into paying off debt. And this would be a plausible argument, if the tax cuts were a one time thing. As we know with taxes, we get hit every paycheck. So cutting the level at which we are taxed translates into a larger paycheck at the end of the week and an increase in what is known as expected income. This expected income is what people budget off of, and is the income with which we plan to spend. Cutting taxes is most definitely not going to change the marginal propensity for Americans to consume, and will increase the magnitude at which Americans consume on goods and services (which are provided by that small business).
The case in which Americans overwhelmingly saved or paid off debt with that stimulus check is that this check amounted to unexpected income. Income of this type is typically saved, or used to pay off debt since the recipient is unsure whether they will ever be thrown such a bone again.
So...stop worrying about taxes destroying the economy, it simply isn't a sound argument
Thats a ridiculous claim. Not only can it be disproven but it simply isn't something to be fearful of. Cutting taxes for the largest consuming base will bolster the economy and strengthen the demand of its people. This translates into buying.
One such argument that I've heard going around from this is that the money will be saved like with the stimulus checks or put into paying off debt. And this would be a plausible argument, if the tax cuts were a one time thing. As we know with taxes, we get hit every paycheck. So cutting the level at which we are taxed translates into a larger paycheck at the end of the week and an increase in what is known as expected income. This expected income is what people budget off of, and is the income with which we plan to spend. Cutting taxes is most definitely not going to change the marginal propensity for Americans to consume, and will increase the magnitude at which Americans consume on goods and services (which are provided by that small business).
The case in which Americans overwhelmingly saved or paid off debt with that stimulus check is that this check amounted to unexpected income. Income of this type is typically saved, or used to pay off debt since the recipient is unsure whether they will ever be thrown such a bone again.
So...stop worrying about taxes destroying the economy, it simply isn't a sound argument
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