Congress does not want to address the big problems in our nation

Just the little teensy ones that make for good TV:

The AIG bonuses now being debated in Congress and everywhere else represent about .001 percent of annual GDP. If a typical Congressman spent that fraction of a 2000 hour work year on the topic, it would consume only about 1 minute of his or her time.

Yes, I know, that calculation is silly in many ways, but here is my point: Regardless of how outraged you are about the AIG bonuses, it is probably not an optimal allocation of resources for our elected leaders to spend large amounts of time and energy on the topic. The economy has bigger problems right now, and it would be better to focus attention on those.

I don't trust Dr. Doom with my money

nor my daughters:

Among Roubini’s Facebook friends is Sarah Austin, a pretty blond who is featured in a black minidress on the website she runs, Pop17.com, which posts interviews with internet “personalities.” Austin says she received an unsolicited email from Roubini last fall—complete with links to articles about himself—praising her site and inviting her to a party.

This all sounds rather ... Bushie

A teleprompt blunder has led to Barack Obama thanking himself in a speech at the White House in a St Patrick's Day celebration.

A laughing Mr Obama returned to the podium to take over but it seems the script had finally been switched and the US president ended up thanking himself for inviting everyone to the party.

Mr Obama is an accomplished orator but is becoming known in America as the "teleprompt president" over his reliance on the machine when he gives a speech.

Ed Glaeser wonders about New York City's moderate unemployment

here:

New York’s historically high unemployment rates have much to do with the city’s ability to attract less-well-educated workers. New York has strong social services, abundant public transportation and ethnic enclaves, which make the city more livable for poorer people, especially those from outside the United States. Today, only 16 percent of adult Americans are high school dropouts, while more than 21 percent of New Yorkers lack high school diplomas.

...

Yet despite the city’s many less-well-educated workers, and even though this recession was supposed to decimate Wall Street, New York has, so far, gotten through it with relatively little unemployment. As of January, the city’s unemployment rate was 6.9 percent while the national rate was 7.6 percent. The epicenters of the current recession are California and Michigan, where the state unemployment rates are already in double digits. Nine California metropolitan areas have unemployment rates above 12 percent.

Big Red on the tape

Despite the political silliness of the day, Cornell athletes are competing well:

#14 seed in the NCAA Men's Basketball Tourney

#2 in the nation in wrestling

#3/#4 in lacrosse

heading into the ECAC semifinals in hockey

How Congress Deprives Us Of Prosperity

If a tax is levied on a corporation, and if it is to survive, it must raise the price of its product, or lower dividends or lay off workers. In each case, it is people, not some legal fiction called a corporation, who bear the burden of any tax levied on the corporation.

An important subject area in economics called tax incidence says that the entity upon whom a tax is levied does not necessarily bear the burden of the tax. Some of the tax burden can be shifted to another party. That's precisely what corporations do and as such they are merely government tax collectors....

It's not rocket science to conclude that whatever lowers the cost of capital formation enables workers to have more capital to work with and enjoy higher wages. Policies that raise the cost of capital formation such as capital gains taxes, low depreciation allowances and high corporate income taxes, and thereby reduce capital formation, serve not the interests of workers, investors nor consumers.

Taxes also reduce transactions. I need my computer repaired. You and I agree that the job is worth $200. Suppose there's the imposition of a 30% income tax on you. That means you would net only $140 and might refuse the job.

You might suggest that if I were willing to pay you $285, you would do the job because at that price your after-tax earnings will be $200 — what doing the job is worth to you.

There's a problem. The repair job was worth $200 to me, not $285. So it's my turn to say the heck with it. Or would we — and society — be better off if you and I agreed to the repair job but did not tell anybody? I'd say yes, but we'd be criminals.

You might wonder how congressmen can get away with taxes and other measures that reduce our prosperity potential. Part of the answer is the anti-business climate promoted in academia and the news media. The more important reason is that prosperity foregone is invisible.

In other words, we can never tell how much richer we would have been without today's level of congressional interference in our lives and therefore don't fight it as much as we should.

All I know is that there is plenty of congressional interference going around to know that our future looks a lot poorer.

Deja vu all over again

Here's another fable:
(authorship unknown)

Heidi is the proprietor of a bar in Berlin. In order to increase sales, she decides to allow her loyal customers - most of whom are unemployed alcoholics - to drink now but pay later.

She keeps track of the drinks consumed on a ledger (thereby granting the customers loans). Word gets around and as a result increasing numbers of customers flood into Heidi's bar. Taking advantage of her customers' freedom from immediate payment constraints, Heidi increases her prices for wine and beer, the most-consumed beverages.

Her sales volume increases massively. A young and dynamic customer service consultant at the local bank recognizes these customer debts as valuable future assets and increases Heidi's borrowing limit. He sees no reason for undue concern since he has the debts of the alcoholics as collateral. At the bank's corporate headquarters, expert bankers transform these customer assets into DRINKBONDS, ALKBONDS and PUKEBONDS. These securities are then traded on markets worldwide. No one really understands what these abbreviations mean and how the securities are guaranteed.Nevertheless, as their prices continuously climb, the securities become top- selling items.

One day, although the prices are still climbing, a risk manager of the bank, (subsequently of course fired due to his negativity), decides that slowly the time has come to demand payment of the debts incurred by the drinkers at Heidi's bar. However they cannot pay back the debts. Heidi cannot fulfill her loan obligations and claims bankruptcy. DRINKBOND and ALKBOND drop in price by 95 %. PUKEBOND performs better, stabilizing in price after dropping by 80 %. The suppliers of Heidi's bar, having granted her generous payment due dates and having invested in the securities are faced with a new situation. Her wine supplier claims bankruptcy; her beer supplier is taken over by a competitor. The bank is saved by the Government following dramatic round-the-clock consultations by leaders from the governing political parties.

The funds required for this purpose are obtained by a tax levied on the non- drinkers.

Universal health care saves money, not lives

BCWUW4:

This is America.

[Don Imus] has a 99.3% chance of surviving prostate cancer for 5 years.

In Europe, he would be 32 times as likely to die.

That continent has only a 77.5% five-year survival rate for prostate cancer.

There’s your government-run health care for you.

Be careful what you wish for.

Quotes of the day

Talent is God-given. Be humble. Fame is man-given. Be grateful. Conceit is self-given. Be careful.--John Wooden

China's work force stays employed by giving American consumers the equivalent of a pay raise--Steve Conover

... it’s easy for [Democrats] to sit here and advocate higher taxes because — you know what? — they don’t pay them.--Rep. Eric Cantor

The vulgar Keynesian does not understand that policy activism itself works against economic prosperity by creating what I call “regime uncertainty,” a pervasive uncertainty about the very nature of the impending economic order, especially about how the government will treat private property rights in the future. This kind of uncertainty especially discourages investors from putting money into long-term projects.--Robert Higgs

This is why politicians love summits -- they get credit for doing something while they are in fact doing nothing.--William Easterly

If Congress and the White House really want to reduce the abortion rate, we will welcome their suggestions. So far, their specific proposals are doing the exact opposite.--Christianity Today Editorial Board

Until my encounter with conservatism I had only known the racial determinism of segregation on the one hand and of white liberalism on the other -- two varieties of white supremacy in which I could only be dependent and inferior.--Shelby Steele

I think many of us ... have had to go through changes, sometimes abandoning or modifying our earlier beliefs in an attempt to stay faithful to our understanding of the truth.--Richard Fernandez

Deja vu all over again

Paul Kedrosky points to a fable:

My neighbor came over the other day. His name is Andrew Ignatius Greedling. He prefers to be know by his initials. He asked if we could loan him some money to pay his gas and electric bill. My wife and I listened intently as he explained how if he didn't pay is energy bills that his home would go into foreclosure, he and his family would be homeless and the vacant house would have a very depressing effect on the whole neighborhood. Glancing over his shoulder I noticed that here in New England in the middle of the winter all of his doors and widows were wide open. I think it was for this reason that I suggested we bring this up at our next neighborhood meeting.

At the meeting he came and made his presentation stressing many of the same points that he had shared with us before. After a vote the neighborhood pledged to give him the money to bring his energy bills current. It's been several weeks now and he's back asking for more money. As before, I glanced over his shoulder and noticed that not only were all his doors and windows still open, but the house next to his was now the same with all its doors and windows open. When I asked him what had happened to the first payment he stated that after some consideration while on a weekend trip to Las Vegas he had decided to use it for a down payment on the house next door and to raise his children's allowances.

Being perplexed by this whole affair, I decided the best thing would be to consult a financial advisor living in the neighborhood. His name is Fredric Edsel Dimsal. He also prefers to be know by his initials. His advice was that our neighborhood organization has no other option then to give Andrew Ignatius Gregory what ever he asks for. I consulted with an elected government official and the answer I received is that keeping the credit lines open is of utmost importance* and that the government was now sending money directly to Andrew Ignatius Gregory to use as needed. This same official said that the government was aware that Andrew Ignatius Gregory was sending a large amount of this money onto his friends in Europe and England who had similar habits as Andrew to save them the embarrassment of having to ask their governments for help.

RELATED: Steve Conover has a nice poker parable about the U.S. and China and treasuries.

Cartoon of the day

(Via Mark Perry)

No bonuses; no campaign donations!

Christopher Dodd strikes back at his benefactor.

Not long ago, in our very own galaxy

'Star Wars' scientists create laser gun to kill mosquitoes (via Tim Kane).

A surefire way to take from the poor

is through price controls.

March Madness trivia of the day

Justin Wolfers reports:

Here’s my favorite new fact about N.C.A.A. basketball: teams that are behind by one point at halftime are actually more likely to win than teams that are one point ahead. This striking finding comes courtesy of a terrific new paper by my Wharton colleagues, Jonah Berger and Devin Pope. Their findings are summarized in this graph, which collects info from 6,572 N.C.A.A. basketball games since 2005:

Congress: Let's do more of what has failed miserably

Peter Wallison writes about one of Barney Frank's latest flashes of genius:

After their experience with Fannie Mae and Freddie Mac, you'd think that Congress would no longer be interested in creating companies seen by the market as backed by the government. Yet that is exactly what the relevant congressional committees -- the Senate Banking Committee and the House Financial Services Committee -- are now considering.

In the wake of the financial crisis, the idea rapidly gaining strength in Washington is to create a systemic risk regulator. The principal sponsor of the plan is Barney Frank, the chair of the House Financial Services Committee. A recent report by the Group of Thirty (a private sector organization of financial regulation specialists), written by a subcommittee headed by Paul Volcker, also endorsed the idea, as has the U.S. Chamber of Commerce and the Securities Industry Financial Markets Association.

...

But increased government power and higher costs are not the worst elements of the proposal to designate and supervise systemically significant companies. The worst result is that we will create an unlimited number of financial institutions that, like Fannie Mae and Freddie Mac, will be seen in the financial markets as backed by the government. This will be especially true if, as Mr. Frank has recommended, the Federal Reserve is given supervisory authority over these institutions. The Fed already has the power -- without a vote of Congress -- to provide financing under "exigent circumstances" to any company, and will no doubt be able to do so for the institutions it supervises.

A company that is designated as systemically significant will inevitably come to be viewed as having government backing. After all, the designation occurs because some government agency believes that the failure of a particular institution will have a highly adverse effect on the rest of the financial system. Accordingly, designation as a systemically significant company will in effect be a government declaration that that company is too big to fail. The market will understand -- as it did with Fannie and Freddie -- that loans to such a company will involve less risk than loans to its competitors. Counterparties and customers will believe that transactions with the company will generally be more secure than transactions with other firms that aren't similarly protected from failure.

As a consequence, the effect on competition will be profound. Financial institutions that are not large enough to be designated as systemically significant will gradually lose out in the marketplace to the larger companies that are perceived to have government backing, just as Fannie and Freddie were able to drive banks and others from the secondary market for prime middle-class mortgages. A small group of government-backed financial institutions will thus come to dominate all sectors of finance in the U.S. And when that happens they shall be called by a special name: winners.

Senator Grassley, do you subscribe to bushido?

No, not "Bush I Do". The Japanese warrior code.

Because the U.S. Congress may eschew responsibility even more than greedy corporate executives.

Yet here is what Grassley had to say:

AIG executives should follow "the Japanese example" by publicly apologizing and "do one of two things: resign or commit suicide."

If the government won't enforce contracts, then who will?

It doesn't matter whether it's AIG executives or mortgages. And then what of property rights? With no property rights, individual rights will erode, too.

And in the short term, this type of uncertainty creation will not help markets or households.

UPDATE: Andrew Ross Sorkin agrees, and with much more meat.

UPDATE: Robert Higgs agrees, with the meaty uncertainty of Vulgar Keynesianism.

Yes, educational vouchers could leave some kids behind

But what if it is less than what the current arrangement leaves behind?

Quotes of the day

Of course, if a scholar or commentator makes claims about what financial markets are going to do - or offers general advice about prudent investing - I think it's entirely appropriate to ask them about the content of their investment portfolios. "But... that would be a tax upon hypocrisy!" Precisely.--Bryan Caplan

The problem with Jim Cramer is the problem with the Jonas Brothers: what he does simply isn't much good, for all that people seemingly have a large appetite to consume it. ... this is a minor sideshow. Going after Jim Cramer is like trying to fix your marriage by getting new drapes.--Megan McArdle