(Video) Fed Doing Harm… to Savers

Last night on Freedom Watch I questioned Fed Chairman Bernanke’s ability to be self reflective after he suggested to Congress that they take care to “do no harm.” While that is great advise and all, right now the Fed is actually causing harm, primarily to savers with its never ending zero interest rate policy: 

Backing up this view is a column from MarketWatch.com’s Chuck Jaffe in how savers shouldn’t expect anything good for the next few years. He writes:

Central bankers made it clear that savers will not see any boost in money-fund returns for the foreseeable future, and can be sure that inflation will take its full bite out of their cash. So if you use a money fund for emergency savings, the dollars aren’t growing even as the cost of insurance is rising… In short, it will be at least 2015 before money-fund holders get anything approaching a meaningful return.

See his interview on Mean St. below:

California Bill Proposes Licensing for Pet Groomers

It appears that California truly has gone to the dogs. The state is facing a $9.2 billion budget deficit, a $10 billion unemployment insurance fund deficit, and unfunded pension obligations in the range of $400 billion to $500 billion, yet the busybodies in the state legislature are seeking to add another occupation to the long list of those burdened by unnecessary state regulation: pet grooming. As I noted in a 2007 study, Occupational Licensing: Ranking the States and Exploring Alternatives, California already “leads” the nation by requiring licenses for some 177 occupations, almost double the national average. The new bill, SB 969, proposed by state Sen. Juan Vargas (D-San Diego), would establish licensing standards for dog groomers and dog grooming schools under the Veterinary Medical Board. Violations of the regulations could result in fines of $500 to $2000 and/or imprisonment of 30 days to a year in jail.

The bill would establish minimum age and education requirements for potential licensees (18 years old and at least a 10th grade education), impose licensing fees, and charge the licensing board with developing standardized written and practical demonstration tests for applicants. In addition, it would require an inspection of every licensed pet groomer in the state each year and mandate that licensees maintain detailed records for two years (“including a list of any chemicals used while performing the services and any medical conditions discovered during the performance of services”). Moreover, as a San Diego Union-Tribune article about the bill notes, the legislation has drawn criticism from groomers because it would also force them to individually cage animals that would be calmer if they were not confined.

The Orange County Register today ran an editorial that effectively illustrates the fallacies of licensing pet grooming. As I told the Register,

“Licensing pet groomers is not the answer to poor-quality grooming services. Imposing a top-down state bureaucracy will likely not improve pet safety or grooming quality, but it will result in less competition, less choice for consumers, and higher prices. Higher prices will arise from the reduced competition and the need for practitioners to offset the cost of compliance with unnecessary regulations. When there is less competition, there is less pressure on practitioners to offer the best prices and service quality.”

The artificially higher prices caused by licensing would have some other unintended consequences, such as encouraging people to save money by clipping their pets’ nails or cutting their hair themselves. Since the average person is not as trained as a pet groomer (licensed or not), this will result in more pain—not less—for pets.

If dog groomers want to get together and form their own voluntary certification organization, that is great. They could set their own standards and have the organization certify those that meet those standards. This would signify to customers that the certified practitioners offer a higher standard of service while still maximizing the freedom and choice of both consumers and groomers that elect not to be certified.

There will always be some bad pet groomers, with or without licensing. In cases where pets are injured or the groomer otherwise does not meet reasonable standards of service, there are already laws on the books against negligence, fraud, breach of contract, and causing harm to people or property. Licensing would simply create an illusion of competence (and an army of bureaucrats) while increasing prices and reducing competition and consumer choice.

Related Research and Commentary:

» Occupational Licensing: Ranking the States and Exploring Alternatives

» “California Licenses Most Jobs in Nation” (Los Angeles Business Journal)

» “Lawyer Licensing Laws Lead to Higher Prices, Less Consumer Choice and Access to Legal Services“

» “Occupational Licensing and the Beard Trimming Turf War in Texas“

» “State Licensing Mandates for Movers in Illinois Increase Prices, Reduce Job Opportunities“

New at Reason: The Revamped HAMP and Some Corrections for the Record

Over at Reason.com, I have a piece today commenting on the revamped HAMP (coming on the heals of “new” new changes to HARP) program announced by the White House last week. Some of the changes include:

• Second homes are now eligible to get a modification. This means investor owned homes. The guidelines will say rental homes only, but all you have to do is claim you lan to rent out the home, you don’t even have to have a tenant. So if you bought a vacation home in 2006, or you were flipping houses and got stuck with a couple, you just claim it is to rent out, maybe even post an ad on Craigslist, and poof!, you have a rental property eligible to get modified.
• HAMP is getting extended to December 31, 2013.
• Payments for lenders and servicers that modify mortgages will triple to 18 cents to 63 cents on the dollar. 
• Fannie and Freddie will get an extra incentive push from the White House if DeMarco lets it happen. 

This is wrong on so many levels, but the quick and dirty critique is—the program has failed to match private modifications without subsidies by a measure of nearly 3 to 1 (900,000 for HAMP and 2.6 million for non-HAMP mods); nearly half of the HAMP trial mods have failed dragging out the shadow inventory; and under no circumstances should taxpayers be bailing out investors!

Correcting the Record

On a related note, some of the coverage of the new HAMP details has been inaccurate. Correcting one example: There is a story in the Palm Beach Post from last Friday claiming that HAMP has widely been panned as a failure since it has modified “less than 1 million” homes. Since HAMP has modified 909,953 as of January’s report that is technically correct. But then article says that “The [new] program will be paid for through HAMP’s already allocated $29 billion budget, of which between $9 billion and $10 billion has been spent or is earmarked for current modifications.

First off, the budget for HAMP is $29.9 billion so the rounding is off. Second, and more importantly, according to the Special Inspector General report on TARP published January 26, as of December 31, 2011, HAMP had expenditures of $1.8 billion and had been allocated $22.7 billion. That is substantially different than the Palm Beach Post story.

The article continues saying, “Many economists agree writing down principal balances on underwater mortgages is the best way to corral the housing crisis and reduce foreclosures.” Really? Five paragraphs later the writer concedes, “at least one economist argued the government should just let the market reset itself and stop coming up with new housing subsidies that he believes are delaying a recovery,” before going on to quite Arnold Kling. This is nonsense. For every economist supporting principal modifications I will find you one in opposition. The way the article frames it mods are definitely the way to go and Wall Street is just getting in the way. There are very logical reasons to oppose forced mods and this view is left out of the article by the author. 

The article author also says the acting FHFA director is “Anthony DiMarco”, when his name is in fact Edward J. DeMarco. For the most part, these are homework errors and lead to the improper framing of the story. 

Economic Statistics for 3 Feb 12

Today’s economic statistical releases:

Factory orders rose a very healthy 1.1% in December. November’s orders were also upwardly revised to a 2.2% jump.

A very strong ISM non-manufacturing report showed the index jump to 56.8—well above expectations—based on a huge jump in employment and new orders.

The Monster employment index fell to 133 in January from 140 in December.

The Bureau of Labor Statistics reports that 243,000 new net jobs were created last month, while the unemployment rate fell to 8.2%. Average hourly earnings increased 0.2%, and the average workweek rose to 34.5 hours. The new jobs came entirely from private payrolls, with private jobs increasing by 257,000. All is not quite as rosy as the headline numbers indicate, however:

• Another 132,000 people left the labor force, as the labor force declined from 153,617,000 to 153,485,000.
• The labor force participation rate declined to 63.4, the lowest since February, 1984.
• The number of Americans who consider themselves employed rose to 139,944,000 from 139,869,000 last month, an increase of only 75,000. Meanwhile, the working age population rose from 239,618,00 to 424.269,000, an increase of 2,651,000.

So, some things to keep in mind might be a comparison of the peak of the last cycle’s employment, in November of 2007 to today. In making that comparison, some things become much clearer:

• In November, 2007, 63.15% of Americans had a job. In Feburary, 2012, it was 57.76%.
• In November, 2007, there were 147,118,000 Americans working. This month, that number was 139,944,000. That’s 7.1 million jobs that have disappeared.
• If the labor force participation rate was the same today as it was in November 2007 (66.1%), today’s unemployment rate would be 12.61%.

~
Dale Franks
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Atlanta Streetcar Costs Increase by $22 Million

Earlier this week, Secretary of Transportation Ray LaHood flew to Atlanta to celebrate the ground-breaking of the Atlanta Streetcar. 

Before he handed out balloons and threw a parade, he should have take an objective look at the latest cost estimates. 

I previously disclosed the faulty economic analysis that USDOT used to justify the project. The price-tag of the project has increased according to The Atlanta Journal-Constitution,

The city now estimates the cost at $84.7 million plus $9 million to move water and sewer pipes along the route.

The U.S. Department of Transportation estimates the cost to be $94 million, up from $72 million at the time of the federal grant award last year.

“About $9 million of the added cost comes from a decision to use newer and more expensive streetcars that could last 20 years longer than the refurbished models initially envisioned,” said Duriya Farooqui, Atlanta’s chief operating officer. “The newer cars ride lower and comply with the Americans With Disabilities Act, while the older ones would have required ramps that could have interfered with local businesses,” she said.

It was common knowledge that water and sewer pipes would need to be moved. Yet the city omitted this information from its application for the TIGER Grant. The city also knew about the complications with the compliance of older streetcars with the Americans With Disabilities Act. Proper planning would have factored those costs into the project’s total costs. 

There are two reasons why Atlanta did not disclose these costs in its grant application for federal funds. The first is that the city had no idea that it needed to move water and sewer pipes or that it needed to comply with the American with Disability Act. Mayor Kasim Reed and other leaders should have known about these requirements. 

The second and more likely reason is that the more efficient the project, the more likely that the project will receive funding. City officials figured since some city would get the funds, the best option was to make its grant application as inviting as possible so that Atlanta was that city. The city did not disclose the total project cost. The mayor rightly calculated that the city council would have to approve spending more money on this project; otherwise the city would have to forfeit the grant. 

While the city of Atlanta will pay the additional costs, the funds could have supported other transit projects. Instead of improving transit services for local residents, the money will be spent according to Ray LaHood on, “…A magnet for tourism.” 

This funding is for a 1.3 mile one-way trip scheduled to take about 10 minutes. The average speed will be 7.8 miles per hour while costing riders $2.50 per trip and costing taxpayers much more in subsidies. 

Gaming the system is one of the many problems with the TIGER Grant Program. Despite recommendations from the Department of Transportation Inspector General and the U.S. Government Accountability Office, DOT has not disciplined applicants for submitting incomplete information. This problem is one of many reasons that the TIGER Grants are a poor program that should be abolished. DOT will award a fourth round of TIGER Grants this year.

How is it a good idea for the Federal and Local Governments to spend almost $100 million on this transit line?

Rep. Ann Marie-Buerkle for Vice President?

Fast, and indeed quite furious

From Eric Dondero:

Absolute must viewing! The gentle-lady from New York skewers Attorney General Eric Holder at a congressional hearing on the Obama administration’s growing Mexican gun-running scandal, held on Wednesday. Holder is left sputtering. The fireworks begin at about 5:00 minutes in.

Editor’s note – This website was an early and enthusiastic supporter of Tea Party-backed Ms. Marie-Buerkle in 2010.

Guns, Hookers and Ron Paul

By Jim “The Right Guy” Lagnese

Isaac Brekken for the NY Times

Ron Paul is getting big time support in Pahrump Nevada where citizens there believe in small government, open carry and legal prostitution. Sam Jones, shown at left is an ardent supporter of Ron Paul and the right to keep and bear arms. Mr. Jones was tased and arrested for open carrying in a court house.

From the Times:

On this Thursday, Mr. Jones was keeping busy with two items: One was helping with preparations for Mr. Paul’s campaign stop the next day. The other was attending a court hearing to answer charges he faced stemming from a confrontation with sheriff’s deputies in which he was subdued with a Taser. 

He said he had been reaching for a small copy of the Constitution that he keeps with him; the deputies said he appeared to be going for the other thing he carries on his person: his .45-caliber pistol, according to an account of his arrest in the local paper. 

Mr. Jones has been one of the fiercest critics of efforts to ban firearms at public meetings. “The Constitution doesn’t say we have the right to bear arms everywhere, except the Pahrump, Nev., courthouse,”

In reaction to his arrest, Mr. Jones has gone full bore for Ron Paul.

“It’s a mentality, ‘Leave me alone, let me do my thing, government, keep out of my business,’ ” said Carl Bunce, Mr. Paul’s Nevada campaign chairman. “They like as little government as possible in their lives, and Ron Paul is obviously the only candidate talking about reducing the size of federal government, so it’s an instant tie in their minds to support that candidate.”

Large blue Ron Paul signs with red borders are ubiquitous in Pahrump, mainly because of Sam Jones, one of Mr. Paul’s most fervent backers here. He says 83 of the signs have been put up around the town, with the materials paid for by about two dozen Paul supporters.

We wish Mr Jones well and good luck in his search for freedom and justice.

Author’s note: Pahrump is home town to Art Bell and Apple Computer co-founder Ronald Wayne.

Senate Approves Lawmakers Insider Trading Ban. Whatever.

After a “60 Minutes” report brought to the attention of the American public that Congress was capitalizing on non-public information, lawmakers quickly collaborated with one another and proposed two bills banning insider trading by members of Congress and their staff. One in the House and one in the Senate. The House bill had floated around for six years largely ignored until it was immediately embraced by 270 House members the week after the public became informed.  The Senate bill took about two weeks to craft following the “60 Minutes” report. Isn’t it amazing how quickly our representatives can act when the issue threatens their lives and jobs?

This whole hoopla over Congressional insider trading is a non-issue. I wrote an op-ed in the Washington Times about this bill being largely a public relations campaign, a sorry and despicable attempt by members of congress to regain America’s trust by drafting and passing a law that at first glance looks like our representatives protecting our interests, but in reality accomplishes next to nothing and may even disrupt existing insider trading laws.

Congress has a public approval rating below 15 percent, and this bill reeks of desperation.

One of the creators of the Senate bill, Sen. Scott Brown, Massachusetts Republican, had this to say:

“We can send the message to the American people that we’re trying to re-establish the trust that seems to have been lost with them, and who knows, maybe we’ll be in double figures in terms of the approval rating pretty soon.”

Co-sponsor of the House bill, Rep. Tim Walz, Minnesota Democrat, had this to say:

“If this thing doesn’t move and doesn’t happen, hepatitis will be more popular than the U.S. Congress, I can guarantee you that.”

The only thing that was accomplished throughout this lawmaking process was media time for our representatives to return to the pulpit, clamor to regain our trust, and most importantly, waste our time while not devoting much needed attention to real issues like deficit reduction, tax reform, a slew of government housing issues, relentless money printing, and the list goes on.

At least some sense came from one Congressman who voted no to the legislation. Sen. Tom Coburn, Oklahoma Republican, had this to say:

“The assumption here is that some of our colleagues are doing insider trading on the stock market. Nothing could be further from the truth. The real insider trading is the horse-trading that goes on in this body that is not always in the best interest of the country.”

Well said.

The jobs report

A good job report this month drops the “official” unemployment rate to 8.3%.  That, of course, will be touted as significant progress and, on one level, it is.  The number of jobs created is above the maintenance level.  That means a real net gain.

But there are some underlying numbers that are much less positive.

While the job creation is “well above expectations”, there’s another record that masks the real unemployment number.

Namely 1.2 million workers (another record) fell out of the labor force.  That’s one reason the official rate looks good. 

And, probably the most important number to be considered – the labor participation rate – fell to 63.7% which is a 30 year low and reflects the loss of those 1.2 million workers from the work force.  Neither of those numbers are good.

That said, the report on the numbers of jobs created is a good report and may signal some growth. It is, for a change, above the maintenance level of jobs.   But you have to keep in mind that in overall terms, and despite the official numbers, the job situation still has a very, very long way to go.

~McQ

Twitter: @McQandO

The call to control sugar sure sounds familiar, doesn’t it?

I’ve been writing about attempts like this for over 20 years.  Each time I do I remind people that much of the road to totalitarianism is paved with good intentions – well, at least sometimes.  This would be one of those times.

In this case I’m talking about a study claiming sugar is toxic and should be controlled by government.

I thought immediately of the climate debate (complete with modeling).  This is just a variation of the same sort of argument and solution.

More importantly, I thought of the saying above and reminded myself that since I began writing about these sorts of attempts 20 years ago a lot more paving stones have been laid in that road. 

Like ObamaCare. 

20 years ago an attempt such as this would have, for the most part, been laughed away.  Oh sure, some people have been pushing to have government control many things over the years.  But for the most part, the structure to justify and/or facilitate such grabs really wasn’t in place.  Much more of a totalitarian infrastructure now exists than did back then.

In the case of things like this, ObamaCare changed that game.  Because government has now passed a law which puts it in charge of controlling health care costs and requiring insurance of all Americans, it also is in the position to act to do what this law allows it to do legally – exert more control over our everyday lives.

What would have essentially been laughed away 20 years ago now has to be taken seriously.  We have to remind ourselves that the game has changed to the point that it isn’t at all inconceivable that something like controlling sugar and its intake through government aren’t at all as far-fetched as it once was.

To the details:

Lustig has written and talked extensively about the role he believes sugar has played in driving up rates of chronic illness such as heart disease and diabetes. Excessive sugar, he argues, alters people’s biochemistry, making them more vulnerable to metabolic conditions that lead to illness, while at the same time making people crave sweets even more.

It’s sugar, not obesity, that is the real health threat, Lustig and his co-authors – public health experts Laura Schmidt and Claire Brindis – say in their paper. They note that studies show 20 percent of obese people have normal metabolism and no ill health effects resulting from their weight, while 40 percent of normal-weight people have metabolic problems that can lead to diabetes and heart disease. They contend that sugar consumption is the cause.

In other words, not everyone gains a lot of weight from over-indulging in sugar, but a large proportion of the U.S. population is eating enough of it that it’s having devastating health effects, they say.

"The gestalt shift is maybe obesity is just a marker for the rise in chronic disease worldwide, and in fact metabolic syndrome, caused by excessive sugar consumption, is the real culprit," said Schmidt, a health policy professor who focuses on alcohol and addiction research.

Obesity is bad.  Sugar causes obesity.  Control sugar. (Global warming is bad.  CO2 causes global warming.  Control CO2)

Think through that formulation.  Does anyone actually believe that if we “control sugar like alcohol and tobacco” that we’ll suddenly solve the obesity problem?

Is it really obesity or is it more of a rich, indulgent and sedentary lifestyle where many eat well beyond the recommended daily calorie intake each and every day?

The solution?  Well, back again casting a glance at global warming, the same:

But while individuals certainly can make small changes to their diets to eat more nutritiously, that alone is not going to effect major public health improvements, Lustig and his co-authors said.

In their paper, they argue for taxes on heavily sweetened foods and beverages, restricting advertising to children and teenagers, and removing sugar-ladened products from schools, or even from being sold near schools. They suggest banning the sale of sugary beverages to children.

Since these “scientists” are sure you can’t manage your own health or that of your children and since they’re convinced that you have to be controlled, they’ll just use the tax system for what it should never be used for – to control behavior, force change, and penalize you if you don’t comply.  Sound familiar?

Who gets to decide what is “sugar-laden”?  Why?  Who the hell are they to make such a decision for you?

By the way, banning junk food at school simply has no effect on obesity per one study.

Now obviously this is in the beginning stages, the stage where this would have mostly been waved away 20 years ago.  But no more.  You have to take all of these attempts at removing choice, freedom and liberty seriously.   There are forever do-gooders out there who see no problem whatsoever in using the power of government to control your life for your own good (a variation of “for the children”) or at least their definition of “good”.

Laura Schmidt, one of the authors of the study which recommends controlling sugar uses those battles of 20 years ago, and the losses to good effect in her plea to us to voluntarily give up more choice and freedom:

We need to remember that many of our most basic public health protections once stood on the same battleground of American politics as sugar policy does today.

Simple things like requiring a seat belt and having an airbag in your car to save you in a crash were once huge political battles. Now, we take these things for granted as simple ways to protect the health and well-being of our communities.

Pretty straight forward plea, no?  And she has precedent with which to justify it.  While you may agree that seatbelts and airbags are good things, you may not agree that a government mandate for each is.

That’s where we are on this.  Her solutions seem benign and certainly a product of good intentions:

First, we think that the public needs to be better informed about the science of how sugar impacts our health.

Second, we need to take what we know about protecting societies from the health harms of alcohol and apply it to sugar.

What doesn’t work is all-out prohibition — that’s very old-school and often creates more problems than it solves.

What does work are gentle "supply side" controls, such as taxing products, setting age limits and promoting healthier versions of the product — like making it cheaper for a person to drink light beer rather than schnapps.

After the “light beer rather than schnapps” remark she says:

The reality is that unfettered corporate marketing actually limits our choices about the products we consume. If what’s mostly available is junk food and soda, then we actually have to go out of our way to find an apple or a drinking fountain. What we want is to actually increase people’s choices by making a wider range of healthy foods easier and cheaper to get.

Corporate marketing “limits our choices”?   Really?  I must have missed it then.  When I enter the local Kroger, the first section I walk into is produce – apples abound.  Its not hidden away somewhere with very few choices.  It’s a cornucopia of good stuff. 

In reality, there’s no limiting of choice by corporate marketing.  This is a false assertion.  But she knows the language of freedom and tries very hard to spin this attempt to limit yours.

And after that she gets to what she really wants.  “Gentle supply side controls?”

– Contact the U.S. Department of Agriculture and Congress to encourage them to take sugar off the Generally Regarded as Safe (GRAS) list. This is what allows food producers to add as much sugar as they want to the products we eat.

– Support our local, state and federal officials in placing a substantial tax on products that are loaded with sugar. Ask them to use the proceeds to support a wider range of food options in supermarkets and farmer’s markets.

– Help protect our kids by getting sports drinks and junk food out of our schools. Ask our school boards to replace those vending machines with good old-fashioned drinking fountains. Ask local officials to control the opening hours and marketing tactics of the junk food outlets surrounding our schools. That way, kids can walk to school without being barraged by advertising for sugary products that taste good but harm their health.

Again, follow the pattern set by the global warming crowd.  Get a normal respiratory gas which is naturally occurring declared a pollutant and then tax the crap out of it while mandating all sorts of controls on its emission.  Some pattern here.

Rick Moran wonders:

Why do liberals insist they are the only ones smart enough to not run out and buy everything being advertised on TV and the rest of us are just sheep being led to the slaughter by evil corporate marketers?

It is the premise under which much of this attempt to control founds itself.  There seems to be an innate belief that government must do much more than it does in order to protect the poor, dumb proles from themselves and their urges.

If you listen to the liberal side of the house, the Puritan ethic of self-discipline, delayed-gratification and hard work seem to have somehow died in the early 20th century to be replace by a self-indulgent, live-for-today bunch of slackers who need a controlling hand from above (it occurs to me that this study will probably be used to justify the sugar tariff).

Unfortunately there are always those ready to oblige. 

The real answer is the same as it has always been.  Again, Moran:

The answer is better parenting. Don’t indulge your children’s natural desire for everything to be sweet. The answer is balance – giving your kids healthy food while recognizing that kids adore sweets and, in moderation, are actually good for them. Keep an eye on processed foods and the sugar content. If you don’t know how to read a list of ingredients, learn.

People taking responsibility for their own health and the health of their families is what is needed. Not some draconian regimen that puts sugar in the same class as whiskey.

Unlike 20 years ago, you’d better take this seriously.  Again, it’s a fairly simple formula – freedom equals choice.  Limiting choice means limiting your freedom. As odd as this may sound, it’s an important principle:  Freedom means the right to make stupid mistakes or do stupid things of which other may disapprove.  Freedom means the right to fail.  As long as your stupidity and failure don’t violate the rights of others, then it is really none of their business.

This and all other attempts like it are designed to make this the business of others.  And, as usual, their solution is to limit freedom.

Fight it with everything you have.

~McQ

Twitter: @McQandO