Best July Gain (8.6%) for DJIA Since 1989
Professor Mark J. Perry's Blog for Economics and Finance
It’s 2020, and cities are so overcrowded that it’s impossible to deliver packages. UPS trucks have nowhere to double-park, and obnoxious bike messengers can’t even ride on pedestrian-jammed sidewalks. How, then, can important parcels reach their destinations in a squalid megalopolis of the future? Through the sewers, of course.
There's no such thing as a free lunch.
Both ObamaCare's supporters and opponents believe that--unlike Europe--America has something called a free market health care system. So long as this myth holds sway, it will be exceedingly difficult to prescribe free market fixes to America's health care woes--or, conversely, end the lure of big government remedies.
The more money that has been spent on government-run healthcare, the less healthcare we have gotten. This kind of result is generally true of all government bureaucracies because of the absence of any market feedback mechanism. Since there are no profits in an accounting sense, by definition, in government, there is no mechanism for rewarding good performance and penalizing bad performance. In fact, in all government enterprises, exactly the opposite is true: bad performance (failure to achieve ostensible goals, or satisfy "customers") is typically rewarded with larger budgets. Failure to educate children leads to more money for government schools. Failure to reduce poverty leads to larger budgets for welfare state bureaucracies. This is guaranteed to happen with healthcare socialism as well.
According to IRS tax data just released, the bottom 50% of taxpayers paid $32.26 billion in income taxes in 2007, and the size of that group is 70.53 million U.S. taxpayers. In the same year, just one American corporation, Exxon Mobil, paid $29.86 billion in income taxes to various governments (updated), or almost as much as more than 70 million Americans paid in U.S. income taxes (see chart above).
TAX POLICY BLOG -- Newly released data from the IRS clearly debunks the conventional Beltway rhetoric that the "rich" are not paying their fair share of taxes and disproportionately benefited from the Bush tax cuts.
Jeff Jacoby writes in today's Boston Globe:
It's not just Target that is offering $29 sports, school and camp physicals, competition is a wonderful thing and "The Little Clinic" is also offering $29 physicals at its retail clinics in nine states, mostly in Kroger and Publix grocery stores.
Car dealers reported problems with the government's online system to get the transactions approved by the National Highway Traffic Safety Administration, which is running the program.
Not coincidentally, the U.K. is by far the most unpleasant country in which to be ill in the Western world. Even Greeks living in Britain return home for medical treatment if they are physically able to do so.
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I just visited the health clinic at the Richfield (MN) Super Target (one of 22 Super Targets in the Twin Cities with convenient, walk-in, affordable health clinics) and took the picture above featuring "camp and sports physicals" for only $29, no appointment necessary. While I was there there was nobody waiting, so it would have been possible to just walk in and get immediate service from a highly-trained, licensed nurse practitioner or physician assistant. Target clinics are open 7 days a week, and operate from 9 a.m. to 8 p.m. Monday-Friday and 9 a.m. to 4 p.m. Saturday-Sunday (total of 69 hours per week).
Q: In places like Canada and UK with government health care, would this type of affordable, convenient, walk-in, free-market alternative even be allowed?
When they first elected him in 1998, Venezuelans hoped that Hugo Chávez would be a healer. Instead what they got was a tyrant who seizes private companies and farms, crushes labor unions, and harasses political opponents. And now after a decade of the so-called Bolivarian revolution, tens of thousands of disillusioned Venezuelan professionals have had enough. Artists, lawyers, physicians, managers, and engineers are leaving the country in droves. An estimated 1 million Venezuelans have moved away since Chávez took power, and a study by the Latin American Economic System, an intergovernmental research institute, reports that the outflow of highly skilled labor from Venezuela to Organization for Economic Cooperation and Development countries rose 216 percent between 1990 and 2007.
(Granite Falls, NC) -- Lines of vehicles stretched out onto the shoulder of US 321 in Caldwell County as the most recent chapter of the Catawba Valley gas wars was launched yesterday.
RICHMOND FED -- In July, the seasonally adjusted manufacturing index — our broadest measure of manufacturing activity — jumped to 14 from June's reading of 6 (see chart above, click to enlarge). Among the index's components, shipments leaped 14 points to 16, new orders rose eight points to finish at 24, and the jobs index edged up one point to end at −5.
LOS ANGELES (July 27) -- June home sales increased 20.1% in California compared with the same period a year ago, while the median price of an existing home declined 26.4%, the California Association of Realtors (C.A.R.) reported today.
“Many first-time buyers, especially those who were previously priced out of certain areas, are realizing that tax credits from both the state and federal governments, increased affordability, and low interest rates are creating a prime time to purchase a home,” said C.A.R. President James Liptak. “June marked the 10th consecutive month of positive sales gains, and the fourth month of rising median home prices (MP: both compared to the previous month)."
Other highlights of the June report include:
Paul Krugman: The standard competitive market model just doesn’t work for health care: adverse selection and moral hazard are so central to the enterprise that nobody, nobody expects free-market principles to be enough.
Wall Street Journal -- New-home sales soared in June from the previous month, the third increase in a row and supplying fresh evidence the housing market is beginning to recover from its long crisis. Sales of single-family homes increased by 11.0% to a seasonally adjusted annual rate of 384,000 compared to the prior month, the Commerce Department said Monday.
MP: The three consecutive monthly increases in new home sales for April, May, and June of this year was the first time since the summer of 2004 that new home sales increased three months in a row. The sales increases in four out of the last five months follows a long string of declines in 18 out the previous 21 months going back to May 2005 (see chart above, data here).
Update: The 11% June increase is the largest monthly percentage increase since the July 2000 gain of 11.85%, almost nine years ago, see First Trust Portfolio report here.
Five hundred jobs is a helluva lot better than no jobs at all. In this disastrous economy, company layoffs and plant shutdowns are as plentiful as glazed doughnuts. Meanwhile, for years the City Council has been blocking the corporate behemoth Wal-Mart from building a megastore on the old Ryerson Steel yard at 83rd Street and Stewart Avenue.
Paul Krugman: There are, however, no examples of successful health care based on the principles of the free market, for one simple reason: in health care, the free market just doesn’t work.
It's pretty easy to find articles in the media and in various food blogs complaining (or worse, whining) about how expensive food is these days. But the chart above tells quite a different story.
DAILY NEWS -- The international black market for kidneys — preying on the desperate and run by a shadowy network of greedy organ brokers — is flourishing, a Daily News probe found. The arrest of a Brooklyn man Thursday on organ trafficking charges sheds a new spotlight on an underground business where wretchedly poor foreigners — particularly in India — are paid $2,000 to $10,000 for kidneys.
American Enterprise Institute's Nick Schulz interviews Thomas Sowell about his latest book, The Housing Boom and Bust:
Moneterey County Herald -- Low prices and good interest rates are sparking an increase in home sales in Monterey County. "It's very, very busy. There's a lot of buyers out there," said Becky Jones, an agent at Shankle Real Estate in Monterey. Potential buyers are thinking "that maybe we've seen the bottom, or close to it."
HUNTSVILLE (WATE) -- The federal minimum wage has gone up to $7.25 an hour and in a county that already has Tennessee's highest unemployment rate, a grocery store has to make some changes.
From sex toys to old Chevys, Revolico.com takes communist Cuba's black market to the web.
HAVANA — On this Communist-run island, the black market is a vast, irrepressible force, an underground river of unlicensed services, goods pilfered from government stores and coveted items carried in from abroad. Cuban authorities go to great lengths to curtail it; they cannot.
Over the years, buying and selling en la calle — in the street — has been practiced by generations of Cubans forced to make ends meet in a state-controlled economy where official wages are woefully inadequate and most forms of private commerce are banned.
But Cuba’s informal economy is an imperfect marketplace. Without advertising, it relies heavily on word-of-mouth, and its commercial activity tends to flourish in small circles — among neighbors, coworkers and other trusted acquaintances.
Then came Revolico.com. Its name essentially translates as “disarray,” and while Havana residents jokingly call it “the Cuban eBay,” the site is really closer to Craigslist. For Cubans who make a living through the black market, it's a godsend.
NEW YORK, July 24 (Reuters) - A gauge of future U.S.economic growth edged higher in the latest week, while its measure of annual growth continued to stride at five-year highs, feeding hopes that a smooth recovery is due this year, a research group said on Friday.
Caracas, July 22 - Venezuela, a traditional coffee exporter that boasts one of the best cups of java in South America, may have to import coffee for the first time ever this year or face shortages, industry experts said. Producers say rising costs and prices fixed by the government have caused production to fall and illegal exports to rise. The government says poor climate and speculation by growers and roasters is to blame.
~Michael Ramirez (HT: Tom Sullivan)
Today the federally-mandated minimum wage increases to $7.25 per hour, a 10.7% increase from the previous $6.55 per hour. What effect will the higher wage have on employment and compensation for unskilled workers? That's a controversial issue.
MP: Let's assume that there is no correlation between: a) changes in the minimum wage and b) the teenage unemployment rate. That is not the same thing as saying that "the minimum wage has no negative effect on teenage employment." Here's why:
Even if the same number of teenage and unskilled workers are employed after a hike in the minimum wage, reflected in NO change in the teen jobless rate (and this is probably not accurate), there are many other adjustments that employers could and will make to offset the monetary increase in hourly labor costs:
1. Fewer Hours - unskilled workers might still be employed, but at a reduced number of hours (the BLS counts workers as "employed" even if they work 1 hour per week, so reduced hours wouldn't show up in unemployment rates). Full-time workers now become part-time workers. Overtime hours could be eliminated. Full-time restaurant workers now are forced to work a split-shift (e.g. 11 a.m. - 2 p.m. and 5 p.m. - 8 p.m.). Therefore, we would expect a negative relationship between increases in the minimum wage and HOURS WORKED, even if there was no change in either employment levels or the unemployment rate for unskilled workers.
2. Reduced Benefits - employers can easily adjust "total compensation" for unskilled workers and offset higher monetary wages by: a) no longer providing free or discount uniforms and forcing employees to now pay for uniforms, b) no longer providing free or discount food at restaurants, c) reducing or eliminating "employee discounts" on the employer's merchandise, d) eliminating paid holidays, e) eliminating scholarship programs, f) eliminating group discounts available through large companies like McDonald's, g) eliminating employer sponsored or subsidized health care benefits, h) eliminating bonuses, i) eliminating company-sponsored holiday parties, etc.
For example, see the list of benefits here for hourly McDonald's workers in Canada (I couldn't find a comparable list for the U.S., but I assume the benefits would be pretty similar here), and you'll see that there are at least ten non-monetary benefits offered to even unskilled minimum wage workers at McDonald's that could be adjusted in the face of higher monetary wage costs resulting from legislated minimum wage increases.
Bottom Line: Demand curves slope downward, and the market for unskilled workers is no exception. Employers WILL respond to increases in the minimum wage, in many ways that will NOT show up in the teenage unemployment rate, but still to the DISADVANTAGE of unskilled workers. The most likely outcome from an increase in the minimum wage to $7.25 per hour will probably be some combination of both increased unemployment for unskilled workers and reductions in compensation.
The laws of supply and demand are not optional. They weren’t enacted by Congress and Congress can’t override them. Minimum-wage laws don’t make low- and unskilled Americans more productive, more experienced, or more desirable. They merely make them more expensive - and more likely, therefore, to be unemployed.
Every Chicago resident living south of Madison Street should be in an uproar! Many of our neighborhoods are suffering in well documented food deserts and increasing violence, yet we are slamming our doors to the one food retailer who is ready, willing and able to invest hundreds of millions of dollars in our poorest neighborhoods without asking for any financial incentives?
BUSINESS FOR A FAIR MINIMUM WAGE (July 21, 2009, Boston, MA) -- Business owners across the nation are welcoming the July 24 increase in the federal minimum wage from $6.55 to $7.25 per hour. National business leaders and small business owners in states where workers are getting a raise say the increase will boost consumer buying power and promote economic recovery.
According to today's report from the National Association of Realtors:
Here is a list of the 100 Things Your Kids May Never Know About, including: