Category Archives: Economics

The Big Three Bailout Is Unpopular

Posted on December 4, 2008 | Comments Off

A new poll finds that 61% of Americans oppose bailing out the Big Three car companies.

The same poll finds that 36% of Americans are car company executives, UAW members, or fools; 3% expressed no opinion.

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Posted in Bailouts, Economics

The First Rule of Merging with Chrysler Is Don’t

Posted on November 14, 2008 | Comments Off

GM is putting their merger plans with Chrysler on hold. Looks like someone finally spoke to Daimler-Benz.

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Posted in Bailouts, Economics, General Foolishness

Stock Market Selloff?

Posted on October 28, 2008 | Comments Off

Following the economy, especially lately, can be confusing. Reporters are not helping matters.

A CNN.com article, for example, blames yesterday’s stock market plunge on a selloff.

But there was no selloff; every seller requires a buyer.

Just as more people were selling, so were more people buying. Describing yesterday’s market as a selloff only tells half the story.

The same article says that today’s 600-point gain happened when “investors scooped up a variety of shares.” But those buyers cannot buy unless somebody sells to them. Again, the article only tells half the story. And here is one case where two halves do not a whole make.

So what really happened yesterday and today? High trading volume. That may not sound very exciting. But at least it’s accurate.

Flaws and all, the article can still teach us an important lesson, if only we let it: sometimes financial reporters don’t know what they’re talking about.

Don’t believe everything you read, in other words.

Something to keep in mind while trying to make sense of these troubled times.

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Posted in Economics, Media

U.S.-Colombia Free Trade Agreement Stirs in Its Sleep

Posted on October 28, 2008 | Comments Off

The stalled U.S.-Colombia free trade agreement has become a campaign issue in Florida’s 25th District, which is home to a substantial Colombian-American population. Rep. Mario Diaz-Balart is using his support of the agreement as a club with which to beat his challenger.

That challenger, Joe Garcia, doth protest. He says he is “for fair trade and getting it done in a way that protects American jobs and American commerce.” That’s another way of saying that he thinks consumers are paying too little for goods and services.

Trade cannot be fair unless it is free. For more on how the U.S.-Colombia free trade agreement promotes both fairness and freedom, see this study that Fran Smith and I co-authored in July.

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Posted in Economics, Elections, Political Animals, Trade

More Trade Means More Peace

Posted on October 21, 2008 | Comments Off

If goods do not cross borders, then soldiers will.

It’s an old saying. Maybe even a cliche. But there is some truth to it. What wonderful news, then, that India and Pakistan have re-opened a trade route through the Kashmir region.

Soldiers have been crossing that border for 60 years. Replacing those soldiers with spices, apples, and other, ahem, non-fatal goods will have two positive effects. First, those goods will become cheaper and more abundant in India and Pakistan.

Second, the new trade route will help to strengthen the blossoming but still fragile peace; killing the customer is bad for business. Indians and Pakistani in and around Kashmir are developing a financial incentive to get along.

Expanding international trade is not just good economics. It is good foreign policy. Congress and our next president, whoever he is, would do well to heed that lesson.

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Posted in Economics, International, Trade

Pesimistic Bias

Posted on August 29, 2008 | Comments Off

Last quarter’s economic growth was revised upward to 3.3%. This is fifty percent faster than the hundred-year moving average of 2.2%. What wonderful news.

Or is it? “[T]he outlook for the remainder of the year remained grim,” warns the second sentence of a New York Times article.

Bad reporting is one reason why polling data shows that the public systematically thinks the economy is in worse shape than it actually is. But is it right to blame the Times for simply giving the people what they already want — a cloud to go with their silver lining?

Pessimistic bias is wired into the human brain, it seems. Which makes this writer pessimistic about the state of economic reporting.

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Posted in Business Cycles, Economics, Media, Philosophy

Corporate Tax Avoidance

Posted on August 18, 2008 | Comments Off

The New York Times fumes that “This country’s corporate tax rates are among the highest in the industrial world, yet the taxes that corporations pay are among the lowest.”

The article doesn’t mention this, but one of the top causes of tax avoidance is high rates. State and federal tax rates add up to an average of about 40%; the European average is now below 25% and declining. Little wonder, then, that few companies are paying the high U.S. rate if they have better options.

The lesson is simple – lower tax rates mean less tax avoidance.

Of course, it would be best to abolish the corporate tax altogether. It’s really an indirect sales tax. Businesses pass on their costs, you see. When it comes down to it, consumers pay every cent of corporate tax. Direct sales taxes are much more transparent — and harder to dodge.

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Posted in Economics, Taxation