Category Archives: Economics

The Calculator Showdown

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I just received this official release related to my previous post. Sounds like a VERY organized "debate." Or perhaps a well-orchestrated ambush. Depends on your perspective, I suppose. Anyway, it’s unusual:


AGENDA

Informational
Meeting of the Board of Economic Advisors Called by the
Chairman

AGREED MEETING
BETWEEN

 

Thomas Ravenel,
Candidate for South Carolina Treasurer and

John S. Rainey,
Chairman of the Board of Economic Advisors

August 24,
2006

10:00 am 

Governor’s
Conference Room

Wade Hampton
Building

I. Call to Order    Chairman Rainey

II. Welcome and Recognitions   Chairman Rainey

III.  Presentation of data that supports a
$27 billion combined unfunded liability of the South Carolina Retirement System
and the state.

     Thomas Ravenel 

 

IV.  Presentation of data that supports
contention that “…in just the last three years, the state’s investment plan has
underperformed the median return of the other states by 70%!”           Thomas Ravenel

V. Definition of “mediocrity” in the
context of a number or range of numbers with respect to investment returns,
specifically as related to the investment plans of “other states” or “large
public pension funds”, as appropriate.

   

Thomas
Ravenel

VI. Source for the proposition that “…the
greatest economic expansion in the history of mankind…” took place between 1980
and 1999. 

     Thomas Ravenel

VII. Review of the performance of Richard
Eckstrom in his management of the South Carolina Retirement System’s and the
state’s funds, by illustration with data, during his term as Treasurer of South
Carolina (1995-1999) relative to that of Grady Patterson, as Treasurer, during
the period 1980 – 1994.     

Thomas
Ravenel

VIII.  Presentation of basis for assertion
that Mr. Patterson’s “…financial strategies haven’t changed since the 1960’s,
resulting in South Carolina once again lagging behind the other 49
states”.

      Thomas Ravenel

IX.  Presentation of basis for assertion
that Grady Patterson, during his tenure as Treasurer, has painted “…a rosy, but
misleading, picture for other state officials and the taxpayers”.

     Thomas Ravenel

X. Closing Comments

     Thomas Ravenel

XI. Closing Comments    Chairman Rainey

XII. Adjournment    Chairman Rainey

Agenda Items III through
IX are issues raised by Mr. Ravenel either in his letter to Chairman Rainey of
August 7, 2006 or in an article in The
Greenville News of August 15, 2006.

Questions and comments
will be entertained following each agenda item from those present, including
press representatives.

More on Sanford veto

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Here’s some stuff I didn’t have room for in my Sunday column.

The bottom line is that even the things the governor says that sound reasonable don’t hold up when you run the numbers:

In his veto letter (on page 3), the governor says the following:

I have heard the arguments from some state legislators that "growing government by 13 percent this year simply puts us back to where we were before we had to make those midyear budget  cuts." That is simply not true.The Budget is $744 million above the previous budget high-water mark that people talk of "getting back to," as is shown by the following chart.

He’s right that it is not true. And indeed, in raw, unadjusted dollars there is a $744 million increase over the highest previous year. But the real reason the statement is not true is that there is no real-world increase at all, and the latest budget falls far short of "getting back to" what we were funding before. In fact, it is actually a $247 million cut when adjusted for inflation.

In 2006, you have to come up with $6.623 billion to have the buying power of the $5.632 billion "high-water" budget passed in 2000. That’s according to the U.S. Department of Labor Bureau of Labor Statistics inflation calculator.

The budget that the governor just vetoed is $6.376 billion. It falls short by $247 million from getting back to where we were before the cuts.

The governor also writes (on page 2) that:

I have consistently advocated limiting the growth in state government spending to a rate that reasonably correlated with the people’s ability to sustain it over time. Some would argue  that this rate is population plus inflation, currently about 5.5 percent. Others say it should be the  state’s average personal income growth, now about 6 percent.

When adjusted using the same official inflation calculator, the state budget grew by 6.41 percent from the one passed last year — not by 13 percent or even 10 percent.

So lawmakers who argue with the governor — if they have a clue as to what’s really going on — would not say, "growing government by 13 percent this year simply puts us back …." First, because it’s not growing by that rate. Second, because it doesn’t put us back at all. If they said either of those things, they’d be just as wrong as the governor is.

Instead, we get THIS insanity

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I had my previous post fresh in my mind when I read about this pandering insanity. For those of you too lazy to follow links, here’s the gist:

WASHINGTON, April 25 — President Bush announced a series of short-term steps on Tuesday intended to ease the rise in energy prices, including a suspension of Bushoilgovernment purchases to refill the Strategic Petroleum Reserve, a relaxation of environmental rules for the formulation of gasoline and investigations into possible price gouging and price fixing.

This is as bad as when Al Gore got Bill Clinton to loosen up reserves to help him get elected in 2000.

I say "as bad as" because I can’t quite decide which is worse: For a president at war in the Mideast to do this, or for a guy who pretends to care about the environment and sensible energy policy to do it in peacetime. Each action has its own loathsome qualities.

Rationing? Even better

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Gas1"Look!" wrote my colleague Mike Fitts in an e-mail yesterday. "– an idea even less popular than your huge gas tax hike!"

"And even better, in my book," I wrote back.

He was referring to this letter on today’s page:

After reading Mike Fitts’ excellent column, (“U.S. helping to keep
oil prices marching upward,” Friday) on the woeful consequences, both
economic and diplomatic, of rising oil prices and of the inevitable oil
shortages to come, I’d like to put another option on the table: oil
rationing, which could bring a variety of benefits.

Many lament the fact that the only ones called upon to sacrifice in
this time of war are those on the front lines (and their families).
Rationing gas would call on everyone to sacrifice, just as during World
War II, when we all had ration cards, not only for oil but for many
other of life’s necessities such as meat, clothing and tires.

Fitts tells us that demand for fuel keeps going up, despite the
steadily rising price, which means leaving it to the market to control
supply and demand isn’t working. So perhaps only the government can
bring this control.

Fitts also points out that since our country consumes 25 percent of
the world’s oil, we can’t lecture other countries on the need to
conserve. But we can lead by example.

Rationing could give us some short-term breathing space as we labor
to find alternatives for the long haul. Yes, it is a political hot
potato, but isn’t it time to at least bring it to the table for
discussion?

HARRIET KEYSERLING
Beaufort

Mike was also referring to my enthusiasm for the idea floated by such disparate voices as Charles Krauthammer, Tom Friedman and Jim Hoagland, advocating a huge increase in the federal gas tax to take the already uncomfortably high gasoline pump prices high enough to depress demand. This would in turn create an oversupply, driving down prices. But (at least in the variant I like), you’d keep the tax rate up and use it additional for such sensible things as reducing the deficit, paying for a Manhattan/Apollo-style project to find and develop viable alternatives to petroleum, and pay for other aspects of our underfunded war — you know, like, put enough troops into Iraq and Afghanistan to get the job done. And note that I call military operations "other aspects" of the war. Reducing our energy dependence and taming deficits are as important to our strategic position as our ability to project force.

Oh, yes: Krauthammer would use the revenue to cut some other tax. But he has to say that; he’s a neocon.

Former Rep. Keyserling’s idea is even better in one respect — everyone would share the pain. With a high tax, the rich would keep on driving Hummers, and the poor would have a lot of trouble getting to work. The main benefit would occur among the middle class, who would make the choice of driving less and, when they bought a car, buying a much more fuel-efficient one. With rationing, everyone would be limited in their consumption. And it would be a more overt, deliberate way of saying, "We’re all in this together, and we’re doing something about it together," rather than letting the market pressure of high prices sort things out.

But then, it wouldn’t produce the revenue. So I qualify my flippant remark to Mike: The higher tax still might be better.

‘Invisible hand’ nowhere to be seen

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Here’s another one for you absolute believers in the wonders of the marketplace to ponder. In a very peeved mood, I sent this e-mail tonight to the makers of Tofutti non-dairy "ice cream" and related products:

    This is extremely frustrating.
    I live in West Columbia, SC — zip code 29169. I have been deathly allergic to milk my whole life. The last time I was skin-tested for it, the allergist called his staff in to see the reaction — it was that extreme.
    I love your product.
    I find it almost impossible to get it.
    Over the last few years, local supermarkets — most notably Food Lion and Publix — have stocked it off and on. Each will have it a few months, it will go away, and then come back maybe a month later.
    The nearest Publix ran out several months ago. I keep asking about it, and am told it must be a problem getting it from the distributor.
    Fine. My local Food Lion was at least stocking your vanilla (that, and the Vanilla Almond Bark, are my favorites). I make a point of buying out what they have so they will be motivated to keep it stocked; because of me, they never keep a pint of it more than a week. If market forces work as they should, I should never run out, right?
    I dropped by there tonight. I saw they had it on sale. Only one pint was left. As I picked it up, I noticed that the sign said "close-out price."
    So it’s going out of stock there, too.
    What is the problem? Why can’t your company keep the product in these stores?
    One place is left within 10 miles of me that I know of, and I’m worried now it will run out there. A distributor problem is a distributor problem, right? The store in question is 14 Carrot, between here and Lexington. It’s really out of my way, but I intend to go there tomorrow and buy whatever they have.
    By the way, the other 14 Carrot that your store locator cites (it was the one closer to me) closed several months ago.
    And the Rosewood Market you refer to only carries your "cheesecake" products, which I find to be a little too heavy and rich.
    I want to buy what you have to sell. Can you help me out here?

— Brad Warthen

You may say, "Hey, they can’t keep stocking it for one customer." Well, I wasn’t the only customer. I monitored the stock at Food Lion closely enough to be sure of that. And besides, how can a product — particularly a specialty product such as this — do better than to sell out within a few days each time it is restocked (I made sure of that, too)?

This is a case in which I keep counting on the market to work. And it keeps letting me down.

Markets and health care

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Well, regulars knew that at least one person would have something to say about my last post. It was Lee, of course. Lee comments on everything, usually multiple times. This would make for a lively forum if not for the fact that all of us know what Lee is going to say before he says it. He’s going to give you the standard radical libertarian line, regardless of the subject.

You see, the Lexington Medical Center folks are counting on reactions such as Lee‘s. That’s what they were counting on from the Legislature — ""Aw, gee, who are we to say no to somebody who wants to set up an open-heart center?"

Libertarians think the market works the same way with health care as with selling soda pop.
There are a lot of folks in America who think like Lee. That’s why we pay more in this country for health care than folks in other developed countries do, and we get worse health outcomes.

The fact that a surgical team has to do hundreds of such procedures to be good at it is meaningless to Lee. He’d rather see every hospital in the state take on open-heart if they want to (and since it is a big money-maker, they’ll want to), so that NOBODY can get a bypass from a facility that knows what it’s doing, and we’ll all have to pay for all that duplicative investment.

He actually thinks that the average person is a hard-nosed, discriminating consumer of health care. He thinks that if the average person is told by his physician that a bypass might keep him alive, he’s going to ask how much it costs, and then comparison-shop.

Har-de-har.

Folks, do you realize that one of the arguments LMC has been making in favor of opening this cash cow is that patients are NOT informed? It’s actually one of their better points.

In discussion with some docs who support the proposal, I’ve pointed out that I live almost right behind LMC, and have to pass it to go to any other hospital. So if I cut myself and need some stitches, I go to LMC. Or if I need major abdominal surgery, as I did in 1993, I go to LMC. But if I think I’m having a heart attack, I’m going to Providence (and would even when LMC gets its way on the heart center). And if I have cancer, I’m going to consult the folks who practice at Richland.

I said those things to a Lexington doc just a few days ago, and his response was, "Well, yeah, that’s because you’re an informed patient." His point was that most people aren’t. They’ll just stop at the first emergency room they get to. Good point — except that if you follow that logic to its natural conclusion, every hospital with an ER should be allowed to do open-heart, whether they ever get the chance to get good at it or not.

So much for the invisible hand.

Eating smokeless

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A little extra data with regard to my post yesterday wondering why we have smoke-free restaurants but not bars or nightclubs.

Here is an official list of such restaurants, helpfully compiled by those evil "statists" (to hear some of my respondents tell it, as they go off on diatribes having nothing to do with the subject at hand) at DHEC.

One day it would be nice to see such a list of places where one could have a brew and hear live music, and still breathe. Anyone? Anyone?

Wouldn’t fresh air sell?

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Aaaarrrgghhh!

I wrote this yesterday — and a lot longer than this — but failed to save it before Mozilla crashed on me. I’ll try again, and be briefer this time.

Check out the last of this bunch of letters from Monday’s page. The one by Carl Zwerling of Irmo. OK, to make it easy, I’ll excerpt it:

Nonsmoking diners unite. Boycott any restaurant that allows any
smoking, even in separate sections. If our state legislators do not
fight the tobacco lobbies (those  donations from the lobbyists must be
quite lucrative), we, the diners, must take it upon ourselves to compel
our restaurants to make the proper and healthy decision to ban smoking.

Maybe if the restaurant owners took it upon themselves to ban
smoking and advertised that their establishments were nonsmoking, they
might be pleasantly surprised to discover how much the bottom line of
their business increased because of the multitude of nonsmoking diners
who swarmed to their smoke-free atmosphere.

Have you ever noticed that nonsmokers greatly outnumber smokers in restaurants?

How about, instead of a boycott per se, some positive economic action to encourage restaurants to go smokeless? I’m not exactly against passing laws to this effect, but why should that be necessary? Why doesn’t the market better serve the needs of nonsmokers?

As a colleague mentioned today, the problem with nonsmokers is that they are so passive, and act as individuals rather than banding together. We may quietly give our custom to smoke-free eating establishments. We may even complain about being choked to death in another restaurant’s "nonsmoking section." (How can any part of a room or building be smoke-free if part of it allows smoking? Airlocks? I haven’t seen anybody try that yet, and it sounds like a lot of unnecessary capital expense when you could just ban smoking.)

But we don’t get together and share information, or tout clean-air restaurants in a way that gets a movement going, and demonstrates to investors that they should open more such establishments.

It seems like the math is there. Only about a fourth of all adults smoke, yet they seem to rule the world when you walk into any place where they are allowed to do their thing. While some nonsmokers don’t mind the smoke, I would wager that most nonsmokers would choose the place with the clean air if given a choice. So why hasn’t the market met that demand? I can only think the demand hasn’t made itself obvious enough.

And how about bars? I’m not what you’d call a bar-hopper, nor do I recommend it to anyone else. But where else can you go to hear live music in an intimate setting? You pretty much have to go to a place where drinks are served, and those places are always unpleasantly smoky.

One of my colleagues suggested this morning (obviously, from these two references, I brought up the subject) that the subset of smokers and the subset of drinkers correlate. I admit they may overlap (I even know of some people who only smoke when they drink), but there are an awful lot more of us who would enjoy a pint of draft (and in my case, no more) while listening to a good combo play a set, and would appreciate being able to breathe while doing so.

Of course, I’m not the type that bars would make a lot of money from. I would only want the one pint, I would probably only stay for a few songs, and I would only do any of this on rare occasion — such as, when I know someone in the band. I can’t imagine being a "regular" at any nightspot. I like to stay home and read too much — if I ever get the time to do that.

Maybe the subsets of smokers and heavy drinkers do correlate. Maybe bars depend financially on all-around addictive personalities. If so, that’s depressing.

If not, my question remains: Why haven’t I ever been in a smoke-free bar?