Help California now! Why?

California has spent years digging a big hole in which to dump its economy. Finally, they have got the hole deep enough that there is no way to see out. But do they put the shovel down? No way, they rent a backhoe so they can dig faster.

This is a state with out of control spending on every social program imaginable. Pensions are available to employees who have worked thirty years and retire. Pensions at 90% of post-retirement salaries. Firemen can retire at age 50 with thirty years service and their pension can top $100,000 per year. The state provides generous welfare benefits, and extends those benefits to the large population of illegal aliens, undocumented workers, whatever the euphemism du jour for people who are illegally in the U.S. Unions hold strong sway over the state legislature. All of this is supported by high tax rates on businesses and individuals. Employers have been departing the state as fast as they can relocate. Population growth is driven by illegals.

What is the solution to all of this responsibility? Well obviously, we (you and I and the citizens of the other 49 states) must bail California out. And we must do this without the state even making any changes in its irresponsible fiscal behavior.

I for one have no interest in helping California fix its budget mess. Texas has been pilloried for years as being stingy with social benefits, but guess what, we have a healthy economy even in the face of a national economic decline. I see no reason to sacrifice my hard earned dollars to save the citizens of a state who take no responsibility for their own fiscal house.

A year later the President is claiming that the $787 billion stimulus package has worked. There is not much agreement with that position.

The stimulus did not perform as promised, so it is hard to see how it is successful. At the time the stimulus package was enacted the Administration claimed that unemployment would reach 10% without stimulus, but with stimulus it would only reach 8%. Well, it reached 10.5%.

The President also continues to make the jobs created or saved argument. He claims that 1.5 to 2 million jobs have been created or saved due to the stimulus. Certainly, these jobs have not been created, or unemployment would not have increased beyond the worse predictions. Which leaves only the saved side. Jobs saved is not an economic argument because it is a bullshit weasel term. There is no way to know if jobs are "saved."

It is disappointing to see our President struggle so hard to find any positive accomplishment of his first year.

Europe acts responsibly?

The European Union is rejecting requests from Washington to pile on more debt to resolve the global recession. Finance ministers say they are doing enough and do not need to pass another stimulus package to shore up jobs.

How sad is it when the socialist of the EU are the responsible group in a crisis? The leadership in Washington looks absolutely pathetic.

GM, buy American

GM is going bankrupt. Now there's a shocker. The company should have been allowed to move into Chapter 11 months ago. But no, we had to waste billions of tax dollars, that's your money and my money, for those of us who pay taxes, supporting a business in failure.

I reiterate, the "government" is not sending money to mom and pop businesses. They're not to big to fail.

Folks, we have been bamboozled and screwed, by big business, labor unions and politicians with their hands out for campaign dollars.

Whether you are a Democrat or a Republican it is time to get mad about YOUR money being wasted on stupid economics.

Obama on the economic crisis

Yesterday the office of the President-elect put out a video from Sen. Obama.



This is mostly soothing words to make people feel psychically better (which is the proper role for a leader to play.) We don't want a President Carter malaise speech.

There are some policy comments in there. The creation of 2,000,000 jobs to rebuild roads and the crumbling infrastructure. That sounds like a re-creation of the WPA (Works Progress Administration) from the New Deal. And then the bit about a 5,000,000 new green jobs, but I don't think he means the CCC (Civilian Conservation Corps.) Since I am one of those who thinks FDR's New Deal didn't actually accomplish much in the way of reviving the economy (unemployment rates did not improve during the 1930's) it's going to be hard for me to endorse revisiting bad policies.

Economic stress

If the economic crisis on Wall Street is due to a lack of liquidity in the money markets and a tightening of credit, then there is no need for a massive bailout. The federal government, through the Federal Reserve, already has the means to increase liquidity and ease credit.

The appropriate mechanism for dealing with large failures is to allow them to work out through the bankruptcy system. That is what any of us who default, or who are in danger of default, would do. Why we have investment bankers and insurance companies running to Congress rather than the nearest bankruptcy court is not clear.

A large part of the blame must fall on governmental mandates to make loans to those who cannot repay the loans. This is what a sub-prime loan really is, and they are strongly encouraged by federal oversight.

It still seems outrageous for any of us who did not choose to participate in high risk activities to have to pay the bills for those who did. There is high reward for risk, but the alternative is the loss of investment. But I don't believe nationalizing the equity markets would be wise. Politicians would just load up even more stupidity like making loan policies based on political ends rather than credit worthiness.

Bayonet the wounded

In the grand tradition of Congress they are lining up to bayonet the wounded in the Wall Street mess. If they'd just get out of the way and let the dumbasses, oops, I mean geniuses, on Wall Street suffer from their mistakes, it will all be fine in the long run. Congress is really good at shutting the barn door after the horses get out. I'm sure they will come up with some wonderful regulations to fix last years problems, and in the process compound the problems going forward.

But it never fails, they let the market work when it succeeds but can't suffer the ultimate failures. Business is good at creative destruction. Things that don't work fall apart, and those things that do work, move forward. All we need now is some massive federal intervention and regulation to ensure that the failures stay in place.

Economics is probably the least understood thing in DC. Politics will screw up economic creativity (with creativity comes destruction) every time.

Globalization is helpful

The globalization of our economy is helping to buffer the impact of the current economic downturn. A portion of our problem is the weak dollar. I have heard that 30% of the cost of oil is due to the dollars weakness. (That sounds about right.) The weakness of the dollar is perhaps our biggest problem. Fortunately, the fact that our economy is tied to the global economy keeps our national economy from totally going in the tank. The world's economies are highly dependent upon one another and as long as there is strength somewhere, that helps to support the rest of the world.

Et tu Hillary

I have never doubted that Senator Clinton was an intelligent woman; until now. Her gas tax holiday, which Sen. McCain also verbally supports, is just plain stupid.

I know Americans are largely economically illiterate, but the way to reduce the price of gasoline is not to increase demand through artificially lowering prices; they will pop right back up. And to state, "I am not going to put in my lot with economists" is really nutty. She wants to be President but if economists disagree with an idea she will just ignore them. That is like ignoring your doctor because you don't like what he tells you.

Read the whole article here.

Globalization is good

This Newsweek article by Fareed Zakaria, though lengthy, touches on many areas of importance, especially to us insular Americans.

The bottom line is that globalization makes other countries wealthier. This can only be good for all of us, as a nation with a functioning economy is less likely to engage in aggression or punitive trade habits, as those activities would damage the economy. (America is the apparent exception to this.)

America, and Americans, needs to accustom itself to being one among equals rather than the dominant hyper-power that it was for the last 20 years of the 20th century.

Take a deep breath, gains some perspective and realize that things are actually pretty good. And they look to get better. The future outlook for the world is rosier than it has ever been.

No recession, yet

The U.S. economy grew at 0.6% in the first quarter, matching the fourth quarter of 2007. This is an anemic growth rate. Despite all of the negatives dragging on the economy (housing deflation, high fuel costs, high food costs) we have still not entered into a period of contraction.

It would be nice to see some positive economic news that might signal a return to a period of higher growth. But it is hard to see any.

Locally, the economy still bustles. High oil prices are good for west Texas, and despite the high costs of fuel and fertilizer, high prices for crops is also a boon to our region. If we have a year of rain even close to 2007 this should be a good year for the farmer. With the added benefit of perhaps being able to get the wheat crop out before it rots in the field (2007's good crop largely spoiled in the field due to excess moisture.)

Texas growing

"According to figures compiled by Eschbach, 16 percent of Americans who moved to other states between July 2006 and July 2007 came to Texas, which led the nation for the second straight year in that category."

As one of my friends who moved to the Austin area about 25 years ago asks: Why would anyone live anywhere else?

Read the whole article on relocation here.

State of the economy in west Texas

In my business I talk to a number of business owners in west Texas. The anecdotal evidence is that the economy is good in our area. Though it appears that nationally the economy is weakening, our area is not yet affected.

Employment is full. The chief complaint of business owners is that they cannot hire or retain employees, particularly at the entry level. The strength of the oil patch is a major contributor to this shortage. Good employees can earn a good wage working in oil extraction, processing and the related service companies. That leaves the other industries and trades competing at a wage disadvantage for marginal employees.

Another issue faced by employers is the work ethic, or more to the point, lack of one, of the Millenials. These young people have never had any expectation or responsibility placed on them. They were never allowed to compete. Remember in youth sports they were all winners and no one kept score. Now that they are expected to perform for a reward, in this instance, pay, they are not up to the task. So many of them do not realize that they should show up at a scheduled time and perform a designated task. It is simply beyond their ability to do this.

There are some signs of a slow down in the new home construction and remodeling market, but these do not appear to be as severe as the national trends. Orders for sub-contractors seems to have declined somewhat. This is not necessarily bad as there appears to be a shortage of skilled workers in the trades as well.