It costs $74,000 to put $44,000 in a worker’s pocket and to give her $12,000 in benefits.

Tim Cavanaugh explains why those greedy capitalists refuse to create jobs.  He cites Michael P. Fleischer, heartless controller of the means of production at Ramsey, N.J.’s Bogen Communications Inc. Fleischer gives the case of the median-pay employee at his company. She makes $59,000 a year:

Before that money hits her bank, it is reduced by the $2,376 she pays as her share of the medical and dental insurance that my company provides. And then the government takes its due. She pays $126 for state unemployment insurance, $149 for disability insurance and $856 for Medicare. That’s the small stuff. New Jersey takes $1,893 in income taxes. The federal government gets $3,661 for Social Security and another $6,250 for income tax withholding. The roughly $13,000 taken from her by various government entities means that some 22% of her gross pay goes to Washington or Trenton. She’s lucky she doesn’t live in New York City, where the toll would be even higher.

 

Employing Sally costs plenty too. My company has to write checks for $74,000 so Sally can receive her nominal $59,000 in base pay. Health insurance is a big, added cost: While Sally pays nearly $2,400 for coverage, my company pays the rest—$9,561 for employee/spouse medical and dental. We also provide company-paid life and other insurance premiums amounting to $153. Altogether, company-paid benefits add $9,714 to the cost of employing Sally.

 

Then the federal and state governments want a little something extra. They take $56 for federal unemployment coverage, $149 for disability insurance, $300 for workers’ comp and $505 for state unemployment insurance. Finally, the feds make me pay $856 for Sally’s Medicare and $3,661 for her Social Security.

When you add it all up, it costs $74,000 to put $44,000 in Sally’s pocket and to give her $12,000 in benefits. Bottom line: Governments impose a 33% surtax on Sally’s job each year.

High Speed Rail is no panacea

Richard Florida loves trains. He loves them so much he advocates for trains when little evidences shows they will help achieve the goals he desires. He argues that our current system has reached the end of its useful life: 

It has led to overinvestment in housing, autos, and energy and contributed to the crises we are trying so hard to extricate ourselves from today. It’s also no longer an engine of economic growth. With the rise of a globalized economy, many if not most of the products that filled those suburban homes are made abroad. Home ownership worked well for a nation whose workers had secure, long-term jobs. But now it impedes the flexibility of a labor market that requires people to move around. My own research shows that the most innovative, most productive, and most highly skilled regions have rates of homeownership of 55-to-60 percent, while those where homeownership exceeds 75 or 80 percent are economically distressed.

I could buy the argument that homeownership harms labor mobility a makes economic transition harder. And I’m sympathetic to Florida’s argument that we over-subsidize homeownership. But I don’t think the data is saying that Florida thinks it is saying. The productive, highly-skilled regions Florida favors are dominated by San Francisco, San Jose, Austin, San Diego, New York, and Los Angeles. I don’t think policy, such as heavily subsidizing trains, as Florida later suggests, is going to turn Detroit or Cleveland, into San Diego or San Francisco. One reason these cities have lower home ownership rates is that, except for New York, they have pretty climates that people flock to and they have serious naturally imposed growth boundaries. They limit the supply of housing, increase the price, and make it more difficult to buy a home.

Florida goes on to describe what he see as the fix. High speed rail: 

Infrastructure is key to powering spatial fixes. The railroads and streetcar, cable car, and subway systems speeded the movement of people, goods, and ideas in the late 19th century; the development of a massive auto-dependent highway system powered growth after the Great Depression and World War II. It’s now time to invest in infrastructure that can undergird another round of growth and development. Part of that is surely a better and faster information highway. But the real fix must extend beyond the cyber-economy to our physical development patterns—the landscape of the real economy.

 

That means high-speed rail, which is the only infrastructure fix that promises to speed the velocity of moving people, goods, and ideas while also expanding and intensifying our development patterns. If the government is truly looking for a shovel-ready infrastructure project to invest in that will create short-term jobs across the country while laying a foundation for lasting prosperity, high-speed rail works perfectly. It is central to the redevelopment of cities and the growth of mega-regions and will do more than anything to wean us from our dependency on cars. High-speed rail may be our best hope for revitalizing the once-great industrial cities of the Great Lakes. By connecting declining places to thriving ones—Milwaukee and Detroit to Chicago, Buffalo to Toronto—it will greatly expand the economic options and opportunities available to their residents. And by providing the connective fibers within and between America’s emerging mega-regions, it will allow them to function as truly integrated economic units.

It is hard to take this argument seriously. Why will an inflexible, uneconomic, transportation system help the economy? High speed rail does not quickly move goods or ideas. Goods are moved by freight rail, and our freight rail system is the best in the world. Ideas are quickly moved by the internet.

High speed rail quickly moves people. But where is the evidence that high speed rail will help the economy? Japan has high speed rail and the building of high speed rail didn’t help Japan out of its economic malaise.

Florida recognizes that high speed rail might be expensive, “truly national high-speed rail system runs somewhere between $140 and $500 billion. That’s a lot of money, but measured in 2009 dollars, Eisenhower’s Interstate Highway System cost $429 billion to build—which makes it look like something of a bargain.” There’s a major difference however—the Interstate Highway System paid for itself through gas taxes. High speed rail will never pay for itself. It doesn’t pay for itself in Europe, which is better suited than the U.S. for high speed rail.  Plus, Florida’s estimate of the cost of nationwide high speed rail is low—it will cost $100 billion in California alone.

It’s too bad that people like Florida don’t look at actual performance. For example, there good arguments that rail in Los Angeles should never have been built. In L.A., the push for rail has forced transit ridership down. 

As Randal O’Toole writes about rail in L.A. and is equally applicable to Richard Florida, “how many miles of rail costing how many billions of dollars will be needed before rail advocates finally concede that rail transit is a failure?”

I’m shocked!

What do you mean that soaring costs are causing Canada to reassess it’s health model?Government provided health care is a civil right. We shouldn’t care about the pesky things like the economics not working out.

‘I’m a Marxist’ says Dalai Lama

Nevermind that capitalism has helped millions of people, the Dalai Lama is still a marxist…

"Still I am a Marxist," the exiled Tibetan Buddhist leader said in New York, where he arrived today with an entourage of robed monks and a heavy security detail to give a series of paid public lectures.

"(Marxism has) moral ethics, whereas capitalism is only how to make profits," the Dalai Lama, 74, said.

…

"(Capitalism) brought a lot of positive to China. Millions of people’s living standards improved," he said.

Ah yes, theft is good, but freedom is bad. I’m don’t understand the Dalai Lama’s definition of ethics.

Tyler Cowen’s rules for books and movies

One of the most interesting people I know is Tyler Cowen. He reads and incredible amount of books and sees a lot of movies. The Post has an interesting article about Cowen and in the article Cowen explains one of his rules: 

"How do you decide when to walk away from a movie?"

This is one of Cowen’s favorite rules, as it relates to consumption of information. "People should be more willing to walk out of movies," he tells anyone who will listen. "Most movies — they grab you or they don’t, and if they don’t, just leave. Just go. You have already lost money. Why lose the time?"

If a movie doesn’t hook Cowen, he reads a book outside while his wife remains in her seat. Most recent movie they both left: "Greenberg," starring Ben Stiller.

With books, Cowen is even more brutal. If a book is bad, he often throws it away, so it doesn’t waste anyone’s time. "What if the next book they were going to read is ‘Moby-Dick’?" But if a book is good, he might give it away — to libraries, friends or, if he’s on a plane, total strangers (he leaves them in the seat-back pocket for the next passenger to discover). "He drives the flight attendants crazy," his wife says.

The Further Left You Are You, the Less You Know About Economics

Todd Zywicki of GMU writes:

Some of the results in this new article by Zeljka Buturovic and Dan Klein in Econ Journal Watch (a peer-reviewed journal of economics) are startling:

• 67% of self-described Progressives believe that restrictions on housing development (i.e., regulations that reduce the supply of housing) do not make housing less affordable.
• 51% believe that mandatory licensing of professionals (i.e., reducing the supply of professionals) doesn’t increase the cost of professional services.
• Perhaps most amazing, 79% of self-described Progressive believe that rent control (i.e., price controls) does not lead to housing shortages.

Note that the questions here are not whether the benefits of these policies might outweigh the costs, but the basic economic effects of these policies.

Those identifying as “libertarian” and “very conservative” were the most knowledgeable about basic economics.  Those identifying as “Progressive” and “Liberal” were the worst.

It would be hard to find a set of propositions that would meet with such a degree of consensus among economists to rival these propositions–which boils down to supply restrictions raise prices and price controls create shortages.  These are issues on which economic theory is exceedingly clear, well-confirmed over decades of empirical support, and with a degree of unarguable consensus among trained scholars in the field.  Apparently the existence of a “consensus” among trained scholars on certain policy issues is less important on some issues than others.

Why are the Obamas and the Bidens so heartless?

The White House released the Obamas and the Bidens tax returns yesterday. The Obamas gave 6% of their income to charity and the Bidens gave a miserly 1.4%. They are they so heartless? Don’t they care about the helping the poor and other charitable works?  Their actions speak far louder than their words.

Why the stimulus isn’t working…

What evidence is there that faster internet spurs economic growth?

I like fast internet. Who doesn’t? But what evidence is there that faster internet spurs economic growth?

I wonder because the Federal Communications Commission just came out with a new plan. “It’s “a 21st century roadmap to spur economic growth and investment, create jobs, educate our children, protect our citizens and engage in our democracy,” says FCC Chairman Julius Genachowski.” Apparently faster internet is an elixir for anything that ails you.

USA ranks as low as 15th in the world in broadband adoption, threatening “America’s global competitiveness.” according to the FCC Chairman.  What evidence is there for the claim that our internet threatens our global competitiveness?  I’m not saying it couldn’t be better, but I just do see our internet as being a problem. How do people use broadband right now in the 14 countries with faster internet? What are all of the amazing things they are doing with the internet that we can’t do? Also, there are places in the U.S. that have fiber to the curb? What are the amazing things these people doing with the internet or than pirating music faster.

There is a role for the FCC to make improvements. Here are some ideas:

1. Fight against monopolies. The reason, in many cases why we have monopolies in the provision of internet is because local governments have granted monopolies to Comcast, Cox, Verizon, etc. When monopolies are created by the government, they harm consumers by limiting choice.

2. Widen the reach of mobile broadband. The FCC proposes to do with by charging fees on the channels TV broadcasts current use. Government ownership of the airwaves is the problem, not the cure. The problem with government ownership is that the government makes decisions based on politics. The FCC should propose to auction off this spectrum, not impose fees. When the spectrum is in private hands, either those of the broadcasters or other people, they will have the incentive to better utilize the spectrum. I don’t know how the spectrum will be used, but I’m sure it will be used better than it is today.

Sometimes even Mother Jones gets it right

Every once in a while environmental groups get an environmental issue right. Now if they only would have fought ethanol subsidies from the beginning, we might not have wasted billions upon billions trying to support an unsustainable industry.  Here’s the conclusion from a recent post on the Mother Jones website:

Bottom line: corn ethanol is no greener than gasoline. In fact, it’s almost certainly less green, and at the very least, there’s no urgent need for the U.S. government to pay billions of dollars to subsidize its production. Too bad Iowa is the first state on the primary calendar every four years, isn’t it?

Now if only Mother Jones would see that subsidies are wasteful—both financially and environmentally.  Then we really might be on to something.