xrayzebra
05-14-2008, 03:22 PM
Everyone wants to talk about everything "big". Well Walter Williams and
Thomas Sowell do to. So here goes.
Jewish World Review May 14, 2008 / 9 Iyar 5768
Congressional problem creation
By Walter Williams
http://www.JewishWorldReview.com | Most of the great problems we face are caused by politicians creating solutions to problems they created in the first place. Politicians and a large percentage of the public lose sight of the unavoidable fact that for every created benefit, there's also a created cost or, as Nobel Laureate Milton Friedman put it, "There's no free lunch." While the person who receives the benefit might not pay or even be aware of the cost, but as sure as night follows day, there is a cost borne by someone. Let's look at a couple of congressionally created problems.
The Community Reinvestment Act of 1977, whose provisions were strengthened during the Clinton and Bush administrations, is a federal law that mandates or intimidates lenders to offer credit throughout their entire market and discourages them from restricting their credit services to high-income markets, a practice known as redlining. The Community Reinvestment Act encouraged banks and thrifts to make so-called "no doc" and "liar" loans to customers who had no realistic ability to pay them back. A decade of monetary expansion by the Federal Reserve Bank, contributing to the housing bubble, encouraged lending institutions to take risks they otherwise would not have taken. Government actions created the subprime crisis and now government-proposed "solutions," such as foreclosure holidays, bailouts and further regulation of financial institutions, to the problems they created will create more problems.
Congress, doing the bidding of environmental extremists, created our energy supply problem. Oil and gas exploration in a tiny portion of the coastal plain of Alaska's Arctic National Wildlife Refuge would, according to a 2002 U.S. Geological Survey's estimate, increase our proven domestic oil reserves by approximately 50 percent. The Pacific and Atlantic Oceans and eastern Gulf of Mexico offshore areas have enormous reserves of oil and natural gas. These energy sources of oil have also been placed off limits by Congress. Because of onerous regulations, it has been 30-plus years since a new refinery has been built. Similar regulations also explain why the U.S. nuclear energy production is a fraction of what it might be.
Congress' solution to our energy supply problems is not to relax supply restrictions but to enact the Energy Independence and Security Act of 2007 that mandates that oil companies increase the amount of ethanol mixed with gasoline. Anyone with an ounce of brains would have realized that diverting crops from food to fuel use would raise the prices of a host of corn-related foods, such as corn-fed meat and dairy products. Wheat and soybeans prices have also risen as a result of fewer acres being planted in favor of corn. A Purdue University study found that the ethanol program has cost consumers $15 billion in higher food costs in 2007 and it will be considerably higher in 2008. Higher food prices, as a result of the biofuels industry, have not only affected the U.S. consumer, they have had international consequences as seen in the food riots that have broken out in Egypt, Haiti, Yemen, Bangladesh and other nations.
What's the congressional response? On May 1, Sen. Charles Schumer, D-N.Y., chairman of the Joint Economic Committee, convened a hearing on rising food prices saying, "The anxiety felt over higher food prices is going to be just as widespread, and will equal or surpass, the anger and frustrations so many Americans have about higher gas prices." Congress' proposed "solutions" to the energy and food mess they've created include a windfall profits tax on oil companies, a gasoline tax holiday for the summer, increases in the food stamp program and foreign food aid. These measures will not solve the problem but will create new problems.
Americans are rightfully angry about higher energy and food prices but their anger should be directed toward the true villains — the Congress and the White House.
Now Dr. Thomas Sowell weighs in with:
Jewish World Review May 13, 2008 / 8 Iyar 5768
Too ‘Complex’?
By Thomas Sowell
http://www.JewishWorldReview.com | Some people think that the reason the public misunderstands so many issues is that these issues are too "complex" for most voters. But is that really so?
With all the commotion in the media and in politics about the high price of gasoline, is there really some terribly complex explanation?
Is there anything complex about the fact that with two countries— India and China— having rapid economic growth, and with combined populations 8 times that of the United States, they are creating an increased demand for the world's oil supply?
The problem is not that supply and demand is such a complex explanation. The problem is that supply and demand is not an emotionally satisfying explanation. For that, you need melodrama, heroes and villains.
It is clear that many people prefer to blame President Bush. Others prefer to blame the oil companies, who have long been the favorite villains of the left.
Politicians understand that. Numerous times they have summoned the heads of oil companies before Congressional committees to be denounced on nationwide television for "greed," with the politicians calling for a federal investigation to "get to the bottom of this!"
Now that is emotionally satisfying, which is the whole point. By the time yet another federal investigation is completed— and turns up nothing to substantiate the villainy that is supposed to be the reason for high gasoline prices— most people's attention will have turned to something else.
Newspapers that carried the original inflammatory charges with banner headlines on page 1 will carry the story of the completed investigation that turned up nothing as a small item deep inside the paper.
This has happened at least a dozen times over the past few decades and it will probably happen again.
What about those "obscene" oil company profits we hear so much about?
An economist might ask, "Obscene compared to what?" Compared to the investments made? Compared to the new investments required to find, extract and process additional oil supplies?
Asking questions like these are among the many reasons why economists have never been very popular. They frustrate people's desires for emotionally satisfying explanations.
If corporate "greed" is the explanation for high gasoline prices, why are the government's taxes not an even bigger sign of "greed" on the part of politicians— since taxes add more to the price of gasoline than oil company profits do?
Whatever the merits or demerits of Senator John McCain's proposal to temporarily suspend the federal taxes on gasoline, it would certainly lower the price more than confiscating all the oil companies' profits.
But it would not be as emotionally satisfying.
Senator Barack Obama clearly understands people's emotional needs and how to meet them. He wants to raise taxes on oil companies.
How that will get us more oil or lower the price of gasoline is a problem that can be left for economists to puzzle over. A politician's problem is how to get more votes— and one of the most effective ways of doing that is to be a hero who will save us from the villains.
You have heard of the cavalry to the rescue. But have you ever heard of economists to the rescue?
While economists are talking supply and demand, politicians are talking compassion, "change" and being on the side of the angels— and against drilling for our own oil.
Has any economist ever attracted the kinds of cheering crowds that Barack Obama has— or even the crowds attracted by Hillary Clinton or John McCain?
If you want cheering crowds, don't bother to study economics. It will only hold you back. Tell people what they want to hear— and they don't want to hear about supply and demand.
No, supply and demand is not too "complex." It is just not very emotionally satisfying.
Jewish World Review May 14, 2008 / 9 Iyar 5768
Too ‘Complex’?, Part II
By Thomas Sowell
http://www.JewishWorldReview.com | Let's face it. Supply and demand will never replace "need" and "greed" in political discussions of economic issues.
Talking about the "need" for more affordable housing or more affordable medical care is what will get politicians more votes this election year.
Voters don't want to hear about impersonal things like supply and demand. They want to hear about how their political heroes will stop the villains from "gouging" them or "exploiting" them with high prices.
Moral melodrama is where it's at, politically.
Least of all do voters want to hear about the most fundamental reality of economics— that what everybody wants has always added up to more than there is.
That is called scarcity— and if there were no scarcity, there would be no economics. What would be the point, if we could all have everything we want, in whatever amount we want?
There were no economists in the Garden of Eden because everything was available in unlimited abundance.
A politician with good rhetorical skills can create a new Garden of Eden in people's minds, though only in their minds. However, that is sufficient, if that vision or illusion can be kept alive until election day, and its failure to materialize afterwards can be explained away by the obstruction of villains.
One of the many ironies of politics is that those politicians who do the most to reduce supply often express the greatest outrage about high prices.
So long as the voters buy it, the politicians will keep selling it.
Make a list of those politicians who do the most to prevent our drilling for our own oil. Then make a list of those politicians who express the most outrage about the high price of gasoline. Don't be surprised if you see the same names on both lists.
Make a list of those politicians who most loudly lament the lack of "affordable housing." Then make a list of those politicians who have most consistently promoted restrictions on the building of housing, under the banner of "open space" laws, "farmland protection" policies, preventing "urban sprawl," and other politically soothing phrases.
Again, do not be surprised at seeing the same folks on both lists.
Is it really too "complex" to figure out that taking vast amounts of land off the market will make the price of the remaining land far more expensive? Or that houses built on very expensive land will be very expensive housing?
Despite the current decline in housing prices, a recent advertisement in a Palo Alto, California, newspaper listed a vacant lot for sale at $879,000. If you build anything more elaborate than a tent on that property, you are talking about a million-dollar home, be it ever so humble.
Many of the places with very high housing prices have very modest homes on very small amounts of land. The San Francisco Chronicle ran a story about a graduate student seeking a place to live, "visiting one exorbitantly priced hovel after another."
It is not at all uncommon for land to cost more than the housing that is built on it, in those places where politicians have made housing unaffordable with land use restrictions under pretty names— all the while lamenting the lack of affordable housing.
So long as politicians can get some people's votes by publicly feeling their pain when it comes to housing costs, and other people's votes by restricting the building of housing, they can have a winning coalition at election time, which is their bottom line.
Economists may point out that the different members of this coalition have conflicting interests that could be better resolved through competition in the marketplace. But how many economists have ever put together a winning coalition?
So long as voters prefer heroes and villains to supply and demand, this game will continue to be played. It is not because supply and demand is too "complex" to understand, but because it is not emotionally satisfying.
================================================== =========
Now don't your feel better when a politican says he is going to do something
about "it". Like education, energy, health care. They know how to handle
things. Well how to get your vote. And that is all that matters. Right
boutons, dan, and sundry others.
Thomas Sowell do to. So here goes.
Jewish World Review May 14, 2008 / 9 Iyar 5768
Congressional problem creation
By Walter Williams
http://www.JewishWorldReview.com | Most of the great problems we face are caused by politicians creating solutions to problems they created in the first place. Politicians and a large percentage of the public lose sight of the unavoidable fact that for every created benefit, there's also a created cost or, as Nobel Laureate Milton Friedman put it, "There's no free lunch." While the person who receives the benefit might not pay or even be aware of the cost, but as sure as night follows day, there is a cost borne by someone. Let's look at a couple of congressionally created problems.
The Community Reinvestment Act of 1977, whose provisions were strengthened during the Clinton and Bush administrations, is a federal law that mandates or intimidates lenders to offer credit throughout their entire market and discourages them from restricting their credit services to high-income markets, a practice known as redlining. The Community Reinvestment Act encouraged banks and thrifts to make so-called "no doc" and "liar" loans to customers who had no realistic ability to pay them back. A decade of monetary expansion by the Federal Reserve Bank, contributing to the housing bubble, encouraged lending institutions to take risks they otherwise would not have taken. Government actions created the subprime crisis and now government-proposed "solutions," such as foreclosure holidays, bailouts and further regulation of financial institutions, to the problems they created will create more problems.
Congress, doing the bidding of environmental extremists, created our energy supply problem. Oil and gas exploration in a tiny portion of the coastal plain of Alaska's Arctic National Wildlife Refuge would, according to a 2002 U.S. Geological Survey's estimate, increase our proven domestic oil reserves by approximately 50 percent. The Pacific and Atlantic Oceans and eastern Gulf of Mexico offshore areas have enormous reserves of oil and natural gas. These energy sources of oil have also been placed off limits by Congress. Because of onerous regulations, it has been 30-plus years since a new refinery has been built. Similar regulations also explain why the U.S. nuclear energy production is a fraction of what it might be.
Congress' solution to our energy supply problems is not to relax supply restrictions but to enact the Energy Independence and Security Act of 2007 that mandates that oil companies increase the amount of ethanol mixed with gasoline. Anyone with an ounce of brains would have realized that diverting crops from food to fuel use would raise the prices of a host of corn-related foods, such as corn-fed meat and dairy products. Wheat and soybeans prices have also risen as a result of fewer acres being planted in favor of corn. A Purdue University study found that the ethanol program has cost consumers $15 billion in higher food costs in 2007 and it will be considerably higher in 2008. Higher food prices, as a result of the biofuels industry, have not only affected the U.S. consumer, they have had international consequences as seen in the food riots that have broken out in Egypt, Haiti, Yemen, Bangladesh and other nations.
What's the congressional response? On May 1, Sen. Charles Schumer, D-N.Y., chairman of the Joint Economic Committee, convened a hearing on rising food prices saying, "The anxiety felt over higher food prices is going to be just as widespread, and will equal or surpass, the anger and frustrations so many Americans have about higher gas prices." Congress' proposed "solutions" to the energy and food mess they've created include a windfall profits tax on oil companies, a gasoline tax holiday for the summer, increases in the food stamp program and foreign food aid. These measures will not solve the problem but will create new problems.
Americans are rightfully angry about higher energy and food prices but their anger should be directed toward the true villains — the Congress and the White House.
Now Dr. Thomas Sowell weighs in with:
Jewish World Review May 13, 2008 / 8 Iyar 5768
Too ‘Complex’?
By Thomas Sowell
http://www.JewishWorldReview.com | Some people think that the reason the public misunderstands so many issues is that these issues are too "complex" for most voters. But is that really so?
With all the commotion in the media and in politics about the high price of gasoline, is there really some terribly complex explanation?
Is there anything complex about the fact that with two countries— India and China— having rapid economic growth, and with combined populations 8 times that of the United States, they are creating an increased demand for the world's oil supply?
The problem is not that supply and demand is such a complex explanation. The problem is that supply and demand is not an emotionally satisfying explanation. For that, you need melodrama, heroes and villains.
It is clear that many people prefer to blame President Bush. Others prefer to blame the oil companies, who have long been the favorite villains of the left.
Politicians understand that. Numerous times they have summoned the heads of oil companies before Congressional committees to be denounced on nationwide television for "greed," with the politicians calling for a federal investigation to "get to the bottom of this!"
Now that is emotionally satisfying, which is the whole point. By the time yet another federal investigation is completed— and turns up nothing to substantiate the villainy that is supposed to be the reason for high gasoline prices— most people's attention will have turned to something else.
Newspapers that carried the original inflammatory charges with banner headlines on page 1 will carry the story of the completed investigation that turned up nothing as a small item deep inside the paper.
This has happened at least a dozen times over the past few decades and it will probably happen again.
What about those "obscene" oil company profits we hear so much about?
An economist might ask, "Obscene compared to what?" Compared to the investments made? Compared to the new investments required to find, extract and process additional oil supplies?
Asking questions like these are among the many reasons why economists have never been very popular. They frustrate people's desires for emotionally satisfying explanations.
If corporate "greed" is the explanation for high gasoline prices, why are the government's taxes not an even bigger sign of "greed" on the part of politicians— since taxes add more to the price of gasoline than oil company profits do?
Whatever the merits or demerits of Senator John McCain's proposal to temporarily suspend the federal taxes on gasoline, it would certainly lower the price more than confiscating all the oil companies' profits.
But it would not be as emotionally satisfying.
Senator Barack Obama clearly understands people's emotional needs and how to meet them. He wants to raise taxes on oil companies.
How that will get us more oil or lower the price of gasoline is a problem that can be left for economists to puzzle over. A politician's problem is how to get more votes— and one of the most effective ways of doing that is to be a hero who will save us from the villains.
You have heard of the cavalry to the rescue. But have you ever heard of economists to the rescue?
While economists are talking supply and demand, politicians are talking compassion, "change" and being on the side of the angels— and against drilling for our own oil.
Has any economist ever attracted the kinds of cheering crowds that Barack Obama has— or even the crowds attracted by Hillary Clinton or John McCain?
If you want cheering crowds, don't bother to study economics. It will only hold you back. Tell people what they want to hear— and they don't want to hear about supply and demand.
No, supply and demand is not too "complex." It is just not very emotionally satisfying.
Jewish World Review May 14, 2008 / 9 Iyar 5768
Too ‘Complex’?, Part II
By Thomas Sowell
http://www.JewishWorldReview.com | Let's face it. Supply and demand will never replace "need" and "greed" in political discussions of economic issues.
Talking about the "need" for more affordable housing or more affordable medical care is what will get politicians more votes this election year.
Voters don't want to hear about impersonal things like supply and demand. They want to hear about how their political heroes will stop the villains from "gouging" them or "exploiting" them with high prices.
Moral melodrama is where it's at, politically.
Least of all do voters want to hear about the most fundamental reality of economics— that what everybody wants has always added up to more than there is.
That is called scarcity— and if there were no scarcity, there would be no economics. What would be the point, if we could all have everything we want, in whatever amount we want?
There were no economists in the Garden of Eden because everything was available in unlimited abundance.
A politician with good rhetorical skills can create a new Garden of Eden in people's minds, though only in their minds. However, that is sufficient, if that vision or illusion can be kept alive until election day, and its failure to materialize afterwards can be explained away by the obstruction of villains.
One of the many ironies of politics is that those politicians who do the most to reduce supply often express the greatest outrage about high prices.
So long as the voters buy it, the politicians will keep selling it.
Make a list of those politicians who do the most to prevent our drilling for our own oil. Then make a list of those politicians who express the most outrage about the high price of gasoline. Don't be surprised if you see the same names on both lists.
Make a list of those politicians who most loudly lament the lack of "affordable housing." Then make a list of those politicians who have most consistently promoted restrictions on the building of housing, under the banner of "open space" laws, "farmland protection" policies, preventing "urban sprawl," and other politically soothing phrases.
Again, do not be surprised at seeing the same folks on both lists.
Is it really too "complex" to figure out that taking vast amounts of land off the market will make the price of the remaining land far more expensive? Or that houses built on very expensive land will be very expensive housing?
Despite the current decline in housing prices, a recent advertisement in a Palo Alto, California, newspaper listed a vacant lot for sale at $879,000. If you build anything more elaborate than a tent on that property, you are talking about a million-dollar home, be it ever so humble.
Many of the places with very high housing prices have very modest homes on very small amounts of land. The San Francisco Chronicle ran a story about a graduate student seeking a place to live, "visiting one exorbitantly priced hovel after another."
It is not at all uncommon for land to cost more than the housing that is built on it, in those places where politicians have made housing unaffordable with land use restrictions under pretty names— all the while lamenting the lack of affordable housing.
So long as politicians can get some people's votes by publicly feeling their pain when it comes to housing costs, and other people's votes by restricting the building of housing, they can have a winning coalition at election time, which is their bottom line.
Economists may point out that the different members of this coalition have conflicting interests that could be better resolved through competition in the marketplace. But how many economists have ever put together a winning coalition?
So long as voters prefer heroes and villains to supply and demand, this game will continue to be played. It is not because supply and demand is too "complex" to understand, but because it is not emotionally satisfying.
================================================== =========
Now don't your feel better when a politican says he is going to do something
about "it". Like education, energy, health care. They know how to handle
things. Well how to get your vote. And that is all that matters. Right
boutons, dan, and sundry others.