Keystone is a Favor to Citizens

An editorial from the Kansas City Star starts with a falsehood, the pipeline is stuck in the legislative process, and ends with:

When that debate occurs, pipeline opponents will be able to point to the already much higher petroleum production in this country and wonder if the environmental risks inherent with the pipeline are truly worth taking.

Keystone is stuck in an administrative process.  The current administration is not going to approve it.  We are left to guess why they won’t approve it but the likeliest candidate seems to be to appease the neo-Luddites that are sometimes referred to as environmentalists.

The argument the editors seem to be making is that the oil industry is doing well and

Critics such as Friends of the Earth say extracting the tar sands oil creates far more harmful carbon dioxide emissions than regular drilling, increases water pollution and destroys forests.

Both of these arguments are irrelevant to building Keystone.  The condition of the oil industry does not imply anything for Keystone.  The tar sands are in Canada.  The tar sands are going to be exploited by Canada.  The two questions are:

  1.  Do we want the oil shipped by train or pipeline?
  2. Do we want to ship the jobs to Japan, China, and elsewhere?

Environmentally, it is a toss up on average between trains and pipelines.  It seems, however, that Keystone wins at the margin.  That is, oil shipped by rail has sharply increased in the last few years and oil spills from rail were way up in 2013.  It could be a aberration rather than a trend but MWG concludes it is a trend because we have the opportunity to have a trackside view.  There are more trains and they are going faster.  Accidents are more likely.  Cost-wise, Keystone is significantly cheaper.

It would be nice to have a serious debate on Keystone but that is not going to happen because the editors and the administration don’t want to allow the debate or the pipeline.  The legislative support that will likely come in January will not change the minds of the obstructionists.  Meanwhile, those of us near the tracks are in greater danger, albeit, slightly.

Gold into Lead

The alchemists wanted to turn lead into gold.  Michael Hiltzik has managed to become a reverse alchemist.  His recent discussion of The Hard Truth About Americans’ Retirement Options manages to turn useful advice into dross.  He quotes Alicia H. Munnell as saying:

“There are only three options,” she writes in her new book, “Falling Short: The Coming Retirement Crisis and What to Do About It.” “The first is to simply accept that we are going to be poor in retirement. The second is to save more while working, which means spending less today. The third is to work longer, which means fewer years in retirement. Those are our only options.”

Yup, no doubt that retiring Americans face some tough choices.  Unfortunately that is the end of the useful advice.  Ms. Munnell reportedly worries about the sunk costs of paying high pensions to early retirees.  If Social Security was an investment then early retirees made a great rate of return.  Low-income folks still make a positive rate of return but economically successful folks do not and will not.

Both Ms. Munnell and Mr. Hiltzik want to increase taxes.  No cuts, she says, is the way to go.  More taxes mean either an even lower “rate of return” on social security or little change in solvency.  Means testing is the way to go.

Then Mr.Hiltzik wanders off on his own and says:

Nor does the book focus on the macroeconomic factors that have made it so hard for the working class to keep up, mainly the stagnant or declining share of economic growth for middle- and lower-income workers. Income inequality not only deprives them of the resources to save, but cheats Social Security of a fair share of the national income. (In 1983, fully 90% of all wages was subject to the Social Security payroll tax; by 2012, the sharp rise in income collected by the wealthy had reduced that ratio to about 83%.) Plainly, rising wages during their working years would alleviate at least some of the threat of a poverty-stricken retirement.

Two obvious points: First income inequality does not deprive anyone of anything.  One might make an argument that the lack of growth in the economy deprived folks of opportunities but that is a separate issue.  Income inequality cheating (we had to quote it for you to believe it) Social Security of a fair share of national income is just an amazing sentence.  We hope you will savor its glory.

Hostility Towards Conservatives

Rusty Cunningham has an editorial in the La Crosse Tribune that is titled Conservatives Hostile Towards Liberal Arts.  Ignoring the title, he starts out well:

Certainly, a university education isn’t for everyone — and shouldn’t be. But it translates into an estimated $1 million more in earning power during a career.

Unfortunately he gets terribly confused shortly after seemingly recognizing that the two sentences above are connected.  To understand why a college degree is valuable is to understand that college degrees are not infinitely scalable.  We don’t have the students or the faculty to add value to everyone.  Those degrees are worth $1,000,000 on average.  Predictable things like the school, degree, and student quality matter as well as random factors too.  Kiplinger has a list of the ten worst majors for your career.  But a really strong record in one of Kiplinger’s choices might be better than a weak record in an in demand field.

In the next paragraph he changes his mind and says:

I have a difficult time understanding why that added earning power isn’t positive for our economy. But I must confess: I didn’t have “the talk” with our son.

But he has already recognized that he can’t claim average for everybody.  Later on he identifies his offspring as a music major that gone on to a master’s degree and is now working on a PhD.  The evidence of needing additional degrees is consistent with music making Kiplinger’s list above.  Noted conservatives like President Obama have been looking for disclose requirements for colleges.  It is not fear of liberal arts or hostile conservatives.  It is just good economic advice.

That being said, few individuals seek to truly maximize their wealth.  Within their skill sets, interest, and biases students try to find a vocation.  Master Cunningham has already moved his music dream far.  We hope he can make a vocation of it but the numbers tell us that it is unlikely to garner a significant return on investment.  What we need to do is be honest with students about the opportunities from various courses of study.  Conservatives will support freedom.  It is important that the information system provide information to support that freedom.   Let the welders be welders rather than bad college students.  Let the music majors be music majors but be honest with them about the opportunities.

From a governmental perspective there is the issue of who pays.  We can talk about that later.  We might also discuss the health of Liberal Arts.

How to Save Capitalism?

Maggie Gallagher has an article on How to Save Capitalism from the Libertarians at NRO.  It is decidedly odd that one of the ways to save capitalism is to fix prices.

I would add at least two more ideas. First, raise the minimum wage by 15 percent, to $8.70 an hour. At this point it is clear that, unlike the $15-per-hour minimum wage that some socialist Democrats agitate for, a 15 percent wage hike for minimum-wage workers would not hurt economic or job growth, and it would demonstrate to all hard-working voters, not just minimum-wage workers, that we are not captives to some strange ideology. The majority of Republicans support raising the minimum wage, according to a recent Pew poll.

It is true that the person we support for president is going to have a bundle of proposals like Ms. Gallagher proposes.  Might the Gallagher list be the best one we get?  Mitt was mildly supportive of it during the campaign and more supportive since then.  He said he was parting company with the conservatives [not the libertarians] in his party.  We loved Mitt but as Ms. Gallagher pointed out there is less room for economic error in 2016.

Three things: First, her point seems to be that throwing fewer people out of work than the socialists is something to be proud of.  How many is the right number to commit to a lifetime of dependance?  Of course raising the minimum wage will hurt low skill workers.  It just won’t hurt as much as doubling it.

Second, what is the strange ideology that folks are captive to?  Economics?  I suppose the libertarians might agree with the economists on this one but it is not ideology.  Believing the government can raise the price of something without adverse consequences is ideology and a strange one at that.

Third, a majority of Republicans support raising the minimum wage.  In our own little county, voters supported raising the minimum wage to $10 by 60% to 40%.  That might be half way to socialism by Ms. Gallagher’s reckoning.  We think that the leftists refer to throwing people out of work as Giving America a Raise.  We have a consensus.  Let’s do what the electorate wants us to do.

So are we willing to accept the way to get elected is to write-off a portion of the low skilled work force?  Let’s make a proposal that only loses 100,000 jobs and some of those folks will find their way out of the dependence trap.  We will get some union votes who might* benefit from the increase depending upon their contract.  We get some folks that are fooled by our actions into thinking that we care.  Perhaps Gruber was right.

Some union contracts are tied to minimum wage levels.  The might* reflects that union workers have the same problem that all workers do.  The power of the union, however, might be able to mitigate the potential job losses from increased prices for, at least, a few years.

Best Quote of the Year

CNN quotes Mary Landrieu:

“I’ve never seen labor and business come together in my life like I have on this issue,” Landrieu said. “I’ve never seen so many senators cosponsor a bill and yet, because of something I can’t quite put my finger on, we haven’t yet passed it — and I think we can do that now, today.” emphasis added.

Senator, let’s make putting your finger on it multiple choice:

A. Democrats
B. Harry Reid
C. President Obama
D. Mary Landrieu

Don’t worry they are all correct answers.

Satire is Hard

We saw this on Best of the Web.  It is from the Washington Post.

How we produce and consume food has a bigger impact on Americans’ well-being than any other human activity. The food industry is the largest sector of our economy; food touches everything from our health to the environment, climate change, economic inequality and the federal budget. Yet we have no food policy — no plan or agreed-upon principles — for managing American agriculture or the food system as a whole.

That must change.

Taranto doesn’t think the satire is intentional and neither do we.  But it should make you laugh.  Read the whole thing and see if you think they are serious.

The problem is if this isn’t satire what is?  We were going to take a satirical column to task but now recognize the difficulty of writing satire in this day and age.

Good Company

Last week we argued that universities have made themselves low-hanging fruit in the political wars because they fail to police themselves.  Today Harvey Silverglate makes a similar point in Liberals Are Killing the Liberal Arts at WSJ.  It happened at Smith College where Wendy Kaminer, a Smith alumna, defended free speech (and academic freedom) at Smith College panel.  She even said (gasp) the n-word in discussing “The Adventures of Huckleberry Finn.”  College newspapers were called to action and the Smith’s president failed to provide support for Ms. Kaminer.  Silverglate does mention that one faculty member spoke out in support of Ms. Kaminer but his comments do not seem to have carried the day.

We know that Smith is a private school but the story is the same.  Faculty and administration are reluctant to support free speech.  Or as one administrator put it to us, find a route to civility that passes constitutional muster.

Obviously public schools and private schools are different.  Voters have some control over the former and little, if any, over the latter but public schools suffer the sins of the private schools.  The voters see all the excesses as coming from the monolithic university.  We suffer for our own sins and Smith’s too.

University Reform

Ponnuru and Levin have a useful article on university reform.  In living through the impact of what, in the minds of many of the denizens of the university, has been the latest unpleasantness caused by public sentiment on a recent Tuesday.  Well, now it culminates on Tuesday with a month or so of skirmishing.  Anyways, we have a worried group that evil Republicans led by Governor Walker are still in charge.  This is despite the fact that conditions have improved since the previous administration.

Sadly, the response seems to be to circle the wagons even more tightly.  A couple of incidents from the recent past can be used to illustrate.  Universities need to budget for calamities large and small (a computer dies).  To do this they need cash on hand because they have limited situations where they can incur debt and limited situations where they can transfer funds.  So, for example, the textbook rental system has cash on hand because the dollar amount of textbooks purchased in a six year cycle is fairly predictable but the amount in an individual year has more variance.  The nature of governmental accounting means that there are many such funds with balances and the balances are typically higher at the beginning of the year than the end of the year.  As it happened some enterprising law makers summed up all these balances and made a much of it.  The System did not do a great job of pointing out the obvious that there are limited opportunities to move balances around so the state requires this behavior.  They were defensive rather than just answering the question.

The other example is that one of the instructors disparaged conservatives.  The chancellor said it was unprofessional.  In the newspaper article on the dispute, the instructor disparaged conservative students.  Although there may have been some private sanctions, nobody came forward to say the university is better than this.

That is why we at the university are low hanging fruit.  We won’t defend ourselves and we won’t police ourselves.  We think that it was in the Girl with the Dragon Tattoo where the killer says that Swedes would rather die than offend someone.  At the university we have a more complex complex where we are happy to die as long as we can think of ourselves as offended and not offend anyone here.

Brief Comments

It is nice to see that Kevin Williamson agrees with our comments on Robert Reich.

The fanatic does not necessarily even hold out-of-the-mainstream opinions: Robert Reich, the lawyer who sometimes plays an economist on television, brings his unique brand of cracked fanaticism to views that are so common as to be pedestrian.

We understand that the MWG points don’t exactly match those above but it is a similar degree of frustration.  As always, Williamson makes some interesting connections so do read it all.

Meanwhile, Ross Douthat in the NYT has four (well really five) reasons why Obama lost America:

He gets blamed for Republican intransigence.

It’s the economy — yes, stil.

It’s Obamacare — yes, still.

It’s foreign policy — and competence. [you really need to call that two reasons]

We, however, can shorten the list: he gets blamed for his intransigence.  In all cases the administration keeps pushing the same failures.  W saw the light and changes policy and people in Iraq to great effect.  It didn’t make him popular, perhaps because he took too long to change his mind.  Unfortunately, that accomplishment has been undone by the next administration.  The current bunch show no interest in learning from their mistakes.  It might be too late for Obama popularity but it might provide a legacy.

The Silly Season

As we cruise toward election day the silly season is upon us and especially on Facebook.  Here is Robert Reich

Bernie Sanders's photo.

and other was Jon Stewart saying ( i paraphrase) that business folk complying with the law to get tax breaks get atta boys while individuals are made fun of.  As it is a Facebook quote we don’t know the backstory but there are certainly lots of examples of corporate leaders be brought before Congress or attacked by various politicos for following the law.

Reich’s quote is more interesting.  Customers do create jobs.  That is what businesses do.  They try meet customer’s needs.  Of course, many businesses are not successful and they go away.  Successful businesses meet customer’s needs and grow and create jobs.  Businesses have done spectacular things for customers.  The device you read this on and the Internet that delivers it amazes old folks like MWG.

The implication of Reich’s quote is that we give money to “customers”.  We tried Reich’s idea by spending a little short of a trillion dollars trying to get customers to ignite employment.  It was, at best, a non-success.  At the same time we have increased regulation and, often, the cost of labor.  Businesses have been slow to expand and tended to choose capital rather than labor.

An idea with a higher likelihood of success is to reduce the regulatory burden on businesses.  MWG has often commented on business taxes.  A serious proposal would be to eliminate corporate taxes entirely.  There are both specific and general parts of the burden beyond that.  An easy one is to approve Keystone XL pipeline.  It is time to try something that might work.  Our faith in the Republicans snatching defeat from the jaws of victory is high but we live in hope.