An Economics Disaster

Even Nobel laureates forget their economic fundamentals sometimes. Paul Krugman, who knows better, recently fell for the broken window fallacy in a post at his New York Times blog. He argues that the tsunami that hit Japan last year has boosted the economy. An error that basic demands correction; my attempt ran today in The American Spectator:

Imagine for a minute that the tsunami never happened. Japan’s GDP growth would probably be slower; Krugman is almost certainly correct on that. And yet, a tsunami-less Japan would be better off. For one, the survivors wouldn’t have 15,000 holes in their hearts where their families, friends, and neighbors used to be.

As far as the economy goes, all that reconstruction spending would instead go to creating brand new wealth, as opposed to merely replacing what people already had to begin with. It is better to build than to rebuild.

Read the whole thing here.

CEI Podcast for May 17, 2012: Ethanol’s Overstated Benefits


Have a listen here.

Senior Fellow Marlo Lewis takes apart a study claiming that ethanol lowers gas prices by more than a dollar per gallon in some regions. Unrealistic assumptions and dodgy methodology make the results less than trustworthy. Ethanol, Lewis argues, is widely used only because the federal government requires it to be. If it had to compete on a level playing field like most other products, it would be a flop.

Guess the State

“Please, don’t take the steam tray. Sir!”

Man Protests All-You-Can-Eat Restaurant After Getting Kicked Out for Eating Too Much

CEI’s Battered Business Bureau: The Week in Regulation


Just another week in the world of regulation:

  • 62 new final rules were published last week, down from 70 the previous week. That’s the equivalent of a new regulation every 2 hours and 43 minutes — 24 hours a day, 7 days a week. All in all, 1,384 final rules have been published in the Federal Register this year. If this keeps up, the total tally for 2012 will be 3,838 new rules.
  • 1,577 new pages were added to the 2012 Federal Register last week, for a total of 28,191 pages. At this pace, the 2012 Federal Register will run 76,606 pages.
  • Rules are called “economically significant” if they have costs of $100 million or more in a given year. The 20 such rules published so far in 2012 have compliance costs of at least $15.4 billion. Two of the rules do not have cost estimates, and a third cost estimate does not give a total annual cost. We assume that rules lacking this basic transparency measure cost the bare minimum of $100 million per year. The true cost is almost certainly higher.
  • One economically significant rule was published last week. There were a total of 5 significant actions last week, as defined by Executive Order 12866. So far, 152 significant final rules have been published in 2012.
  • 12 of last week’s final rules affect small business. So far this year, 259 final rules affect small businesses. 40 of them are significant rules.

Highlights from final rules published last week:

  • An economically significant rule from the Centers for Medicare and Medicaid Services implements section 2401 of the Affordable Care Act. It increases this year’s federal Medicaid spending by $820 million, and this year’s state Medicaid spending by $480 million. Since these costs are government spending instead of compliance costs, I am scoring it as zero-cost for this year’s compliance cost tally.
  • Just in time for summer, the FDA published a rule delaying implementation of an earlier rule amending its surprisingly detailed sunscreen regulations.
  • The EPA is liberalizing its [alpha]-[p-(1,1,3,3-Tetramethylbutyl)phenyl]-[omega]- hydroxypoly(oxyethylene) tolerance requirements for pesticides. A separate rule liberalizes “residues of α-(p-nonylphenol)-ω-hydroxypoly(oxyethylene) mixture of dihydrogen phosphate and monohydrogen phosphate esters and the corresponding ammonium, calcium, magnesium, potassium, sodium, and zinc salts of the phosphate esters and α-(p-nonylphenol)-ω-hydroxypoly(oxyethylene) sulfate, ammonium, calcium, magnesium, potassium, sodium, and zinc salts” in pesticides.
  • If you want to get a commercial driver’s license, you should be aware of new federal minimum standards.

For more data, updated daily, go to TenThousandCommandments.com.

Politics Is About Power, Not Ideology

People who want to be president are not normal. That’s what makes Robert Caro’s sprawling biography series on Lyndon Johnson so fascinating. Caro is largely sympathetic to Johnson’s politics and marvels at his adept political maneuvering. But he is also unafraid to show just how bad a human being Johnson was. Late in the first volume, he sums him up well:

A hallmark of Johnson’s career had been a lack of any consistent ideology or principle, in fact of any moral foundation whatsoever — a willingness to march with any ally who could help his personal advancement.

-Robert Caro, The Years of Lyndon Johnson: The Path to Power, p. 663.

Similar sentiments apply to both 2012 candidates. Power. Always power. Caro’s books are about that at least as much as they are about LBJ, their nominal subject. And that is why they will always be relevant.

GAO Releases Study About a Study on Studies

Voltaire once wrote that “I have only ever addressed one prayer to God, and it is very short: ‘My God, please make all our enemies ridiculous.’ God has granted my wish.” As with Voltaire, so with classical liberals.

The Pentagon — the same agency that has an official 26-page brownie recipe — recently released a study about studies. Now GAO has produced its own study about that study about studies. Yahoo’s Alyssa Newcomb explains:

The study of a study of studies began in 2010 when Defense Secretary Robert Gates complained that his department was “awash in taskings for reports and studies.” He wanted to know how much they cost.

Two years later, the Pentagon review is still continuing, which prompted Congress to ask the GAO to look over the Pentagon’s shoulder. What they found lacked military precision.

It goes downhill from there.

CEI Podcast for May 10, 2012: Freeing Our Farms


Have a listen here.

Immigration Policy Analyst David Bier explains how the Labor Department’s byzantine restrictions on immigrant agricultural workers hurt immigrants and native-born Americans alike. Current immigration policy keeps many immigrants in dangerous black markets, raises food prices for consumers, makes it difficult for farmers to hire workers and create jobs, and reduces the government’s tax revenues.

There Is Nothing Left to Cut

There are currently four living ex-presidents. All of them are wealthy. According to Politico, all of them are also accepting taxpayer largesse:

George W. Bush may have raked in $15 million from speeches alone in 2010, but he still expensed $1.3 million to taxpayers, including $80,000 in phone bills, ABC News’s Jonathan Karl reported in “Spinners and Winners.”And Bill Clinton also made it big on the speech circuit — bringing in $10 million — and billed more than $1 million in expenses to taxpayers. Jimmy Carter, meanwhile, received over half a million in expenses, including $15,000 for postage, and taxpayers also paid $830,000 for George H.W. Bush.

Entitlement reform is what it will ultimately take to balance the books, and should be one of Congress’ highest priorities. But wasteful spending such as George W. Bush’s phone bill should be reined in, too. Fortunately, a bill from Rep. Jason Chaffetz would end taxpayer giveaways to ex-presidents with incomes over $400,000 per year.

CEI’s Battered Business Bureau: The Week in Regulation


Just another week in the world of regulation:

  • 70 new final rules were published last week, down from 81 the previous week. That’s the equivalent of a new regulation every 2 hours and 24 minutes — 24 hours a day, 7 days a week. All in all, 1,265 final rules have been published in the Federal Register this year. If this keeps up, the total tally for 2012 will be 3,704 new rules.
  • 1,307 new pages were added to the 2012 Federal Register last week, for a total of 26,614 pages. At this pace, the 2012 Federal Register will run 76,478 pages.
  • Rules are called “economically significant” if they have costs of $100 million or more in a given year. The 19 such rules published so far in 2012 have compliance costs of at least $15.4 billion. Two of the rules do not have cost estimates, and a third cost estimate does not give a total annual cost. We assume that rules lacking this basic transparency measure cost the bare minimum of $100 million per year. The true cost is almost certainly higher.
  • One economically significant rule was published last week. There were a total of 8 significant actions last week, as defined by Executive Order 12866. So far, 147 significant final rules have been published in 2012.
  • 4 of last week’s final rules affect small business. So far this year, 247 final rules affect small businesses. 36 of them are significant rules.

Highlights from final rules published last week:

For more data, updated daily, go to TenThousandCommandments.com.

CEI Podcast for May 3, 2012: Paving the Way for Innovation and Job Creation


Have a listen here.

Unemployment remains stubbornly high, more than three years after the financial crisis hit. Congress has tried a number of measures, from fiscal stimulus to stricter financial regulations. None of them have worked. That’s because they get in the way of the key driver of economic growth – innovation. And as any entrepreneur will tell you, innovation requires investment. John Berlau, CEI’s Senior Fellow for Finance and Access to Capital, suggests a number of reforms to make innovation, investment, and job creation easier.