Archive for the ‘Economics’ Category

ACC on the Agenda.

1. March 2011

The Arts of Collin County project is finally on the Frisco City Council agenda tonight. In light of this, I’m going to repost links to my old posts about it in the hope that it might change someone’s mind. This project is a bad idea, y’all, and here’s why:

Arts of Collin County.

On the Poor Timing of the ACC.

These two take on both its idealogical failings and fiscal perils. Please read them, pass them on and come out in support of getting the ACC added to the ballot so that the citizens who are going to have to pay for it have a chance to vote on it.

On the Poor Timing of the ACC.

5. January 2011

It’s really a sad thing that we still have to be talking about this, but there are still people in Frisco and the surrounding communities that believe that the ACC is a valid use of increasingly scarce municipal funds. In addition to the multitudes of other reasons why it’s a bad idea, I’ve found a new one.

Municipal bonds (muni bonds or munis hereafter) used to be a rather predictable market. They were always considered a safe bet, almost as safe as treasuries, because the municipalities had the power to raise taxes to get money to pay for the bonds of necessary. The bonds would pay a slightly lower yield than Treasurys, but it was okay, because the income was tax exempt.

Recently, however, a flood of munis has hit the market. Perceived risk has increased, driving muni yields up. For instance, today, the 30-year muni rate is 4.9%. The 30-year Treasury rate is 4.25%. This goes against everything that is ever taught in a class about bonds. The perceived risk of the two securities are almost exactly the same, but their tax-exempt status makes munis more attractive, drives up demand and drives down yields.

However, there has been a series of uncertainties in the continuation of the tax-exempt status of the muni bond and the municipalities’ ability to pay, driving yields up. Which is great if you’re an investor. Not so great if you’re the borrower. The President’s deficit reduction panel came out with a plan that called for the removal of the tax-exemption of the muni bond, throwing expectations off and ridding the market of stability.

Because of the increase in interest rates, it is a bad time to sell the bonds for the ACC. It’s simply more expensive to finance any project, but it is especially outrageous to attempt to justify selling these bonds at these rates for an unnecessary project like the ACC.

Obviously, it is just as expensive to finance the ACC as it is to finance a project like Fire Station 7. However, as most members of the Frisco City Council and the fire chief expressed last night, that is a necessary project. It is crucial for keeping the city’s ISO rating at a 1, which affects the homeowner’s insurance rates for everyone in the city, aside from the obvious benefits of faster emergency response times. Additionally, that project may not require the sale of bonds, making it all the better a choice for the City of Frisco’s funds.

The ACC is becoming more and more expensive to build, a trend which shows no signs of stopping. It’s time for even the staunchest of AC supporters to rethink their position.

In Which I Take On a Protectionist.

10. November 2010

This video is an excellent starting point for the topic today. I wouldn’t ordinarily use South Park as a basis for a post, but I think this is fitting.:

You see, whenever I hear people complaining about outsourced jobs, this is all I can think about because it’s usually the only argument the protectionist can come up with. In my experience, I find the most adamant protectionists amongst union members and conservatives whose area of interest is primarily in social conservatism. After my long neglect of twitter, I started logging on and found one user in particular who seemed to fall into that latter category. Naturally, I couldn’t help myself and responded to one of her tweets touting protectionism. After a few rather content-less tweets, she finally produced this:

@alyxwi If you read my profile, it says I am anti-freetrade AGREEMENTS. I am not and never have been against free trade. But the ability to trade freely with anyone in the world and freetrade AGREEMENTS where neither side pays tariffs is not fair and the reason is because the only way it could be is if our economy was equal to the other country’s. We’ve been singing this song for decades. America invents a new technology and decides because of a freetrade agreement to have it manufactured in China. However, China copies the technology in short order and starts selling the product for half the price the inventor does. Of course, they can, because they have no R&D costs to recoup and their manufacturing costs are much lower because they are not paying their workers even half of what American workers make. So time goes on and the original company is driven out of business because of lagging sales…afterall, the same product can be bought for half the price of their model. Their employees all lose their jobs. Once that company goes out of business, the copying company raises its price based on other competitors’ prices.
Just look at the negative trade balances we have with China, Japan, Mexico and Canada. Compare them with the figures even 20 yrs ago. In fact, before NAFTA, we actually had a positive trade balance with Mexico…now the figures are a float in red ink. And to make it worse, the government wants to sign more free trade agreements with South America. We just built a plant in Brazil for GM with stimulus money they were given. We have to realize that the politicians on either side will not stop. They are being paid too well to go along with these programs. The only way we can stop the decline of jobs in this country is to Buy American and be stubborn about it. I’ll guarantee there will be plenty of items you will still need to buy from other countries because there are entire product lines that aren’t even made here anymore!
If you look at the history of America, you will find that its strength & prosperity came after WWII with the industrialization during and following the war.
Economic experts will tell you something different and that’s part of the problem. America was alot better off before experts. I view experts like I do educators…Those who can, do and those who can’t teach (or claim to be experts).

to which I responded with (approximately*) this:

@ConservativeGal Pseudoeconomics can be so alluring, can’t it? Your remarks betray you as a protectionist making a poor attempt at masking herself as a patriot (though coming off more as a nationalist than anything else). One cannot be pro-free trade sometimes, or pro-free trade only when it benefits one’s city/state/country. It is simply inconsistent and does not serve the country well as the basis for fiscal or monetary policy.

Protectionism is what the Fed is (only somewhat inadvertently) doing right now by devaluing the dollar and by extension attempting to boost exports in a way that only a weak dollar can. Too bad that’s going to manifest as skyrocketing inflation in a year or so when the credit markets loosen up. Inflation will kill as many, if not more, jobs as this recession has. And it’ll hit everyone and spur more government spending. That sure doesn’t sound like it’s a good thing.

Protectionism is not realizing that a growing global economy is the result of the growth of emerging market countries and that it helps Americans too. When the Chinese are making our cars more cheaply than American laborers ever could (as a result of the inefficiency of minimum wage laws and union monopolies on blue collar labor) it allows the American car companies to grow their domestic businesses too. It can expand into new markets, it can create new domestic, higher-paying jobs and invest in new capital, thereby creating profits and jobs in other markets and companies.

In addition, we can get cheaper goods and after the initial wave of frictional unemployment, the laid-off workers will acquire other skills and find new jobs, likely doing something taking more skill. See, when we don’t have to waste time and capital on easily produced goods, we can spend our time creating higher-value or higher-quality goods which can be sold at a higher profit margin than the lower-quality goods the foreigners are now producing. And those foreign workers are getting paid much more than they ever have been in their lives before now, so their buying power is much increased, growing their economy and the global economy on the whole. This emerging market provides investment opportunities for American venture capitalists and investment firms, which provides more profit opportunities for Americans.

The alternative is Americans making the same goods they’ve always made. The alternative is more expensive goods everywhere. The alternative is economic stagnation and chilled international commerce. The alternative is weaker international relations, achieved through the absence of international trade. That’s what protectionism, your brand of “free trade”, has to offer. That sure doesn’t sound like it’s a good thing.

You don’t like experts? I’m no expert. I’m a college sophomore. But the principles of economics I’ve put forth here are so noncontroversial, so absolutely basic that they are taught in every macroeconomics class and required for any Liberal Arts student at my school. But aside from that, your absolute rejection of knowledge offered by these thoroughly abhorrent and evil (your idea, not mine) experts casts a veil of ignorance over your argument from the start. Paul Krugman may be a moron in the “intellectual” tradition of Keynes, but Friedman, Hayek, Mises and their intellectual heirs are correct about economics and many of them have doctorates. They’re all well-educated and regarded as experts. Before condemning them all on some hatred for the abstract idea of expertise, think about it. Your doctor is an expert in the human body. Do you wish he were less of an expert? How about the professors at your child’s college, whom you pay to thoroughly and correctly educate him? How about the engineer designing the bridge over which you have to drive every day, or the architect who drew up the plans for the house in which you to live every day? Want them to be less expert?

*I was typing this on my phone around 1 a.m. which resulted in a few incorrectly autocorrected words that I did not see last night. That’s all I changed.

If you disagree with me about anything, I’d love for you to contribute to the discussion.

Links for Wednesday 6.10.10

6. October 2010

We’re halfway to Friday, y’all.

  • I’d like to bring special attention to this first story. A fellow WordPress blogger with whom I have previously corresponded has published a story about how his photographs were used in a publication without proper attribution and compensation. Well, it was brought to his attention and now the whole thing has exploded in the publisher’s face. This brings me to my point. Copyright laws are far from effective. Instead of allowing organizations like the RIAA and the MPAA to get legislation like the DMCA passed where organizations get a cut of the fines, we should simply be making sure that stolen goods get paid for. The possibility of fines isn’t deterring would-be digital thieves, and it’s a form of wealth redistribution, and it’s wrong.
  • Is there an Obama/Clinton ticket looming in the future? That’s probably better than another Obama/Biden ticket. Clinton could actually have a moderating effect on Obama…
  • Mises Institute’s Jim Fedako draws a parallel between starving and government coercion.
  • My beloved Reason Magazine’s Nick Gillespie re-covers the Fulton fire, with bonus takes from Olbermann And Krugman!

Arts of Collin County.

1. June 2010

Today, after weeks of debate about the Arts of Collin County project, the City Attorney announced that the petition filed by the Frisco Tea Party to introduce a referendum to allow voters to decide whether or not to release the rest of the bonds was invalid. Apparently, the Frisco Tea Party didn’t file the petition correctly.

It seems that the only way for the bonds to be stopped is for the council introduce the measure themselves. As it stands, there are three members who would support the measure and three who wouldn’t. However, place four is up for grabs and if John Keating wins that seat, the measure stands a good chance of being introduced.

It’s not that I have anything against the arts and such. I played the trumpet for five years and enjoy creating the occasional piece of art. But at this time, it is not a good idea to spend additional funds that the city already doesn’t have to build a nonessential building which is predicted to run deficits forever. If the project can be redesigned so that it’s shown to be solvent, I’m all for it.

The economic climate is such that no one needs to be spending more than is absolutely necessary. The Arts of Collin County project, while surely culturally enriching is not necessary. The argument has recently even made in favor the the ACC that construction costs are much lower because the economy has tanked. However, it is not enough to make up for the fact that McKinney has dropped out of the project, costing the other three parties approximately nineteen million dollars.

If this project was really as popular as its proponents make it out to be, allowing the public to re-vote on releasing the bonds would only serve to show how important it is to the people of this city. If, on the other hand, the people really want to postpone the project until the economy recovers, allowing them to vote on the measure is the right thing to do.

If you are for a fiscally responsible municipal government and lower taxes, you simply cannot support the progression of the Arts of Collin County project at this time. Allowing the people of the city to vote on releasing the rest of the bonds is the right thing to do.