How Obama’s Asian Job Bill Works

According to President Obama, everything his administration proposes either reduces the deficit or increases employment. His stimulus “puts people to work, doing the work America needs” and Obamacare, well that’s going to save trillions in the budget. Cap and trade is no different according to Obama. The President calls it a jobs bill. I couldn’t agree with Obama more on this point, Cap and trade will create a massive amount of jobs in Asia. The only downside is that it will kill millions of jobs in the US. All taxes kill jobs.

I’ll start by giving you a couple of real-life examples. Hav-A-Tampa, a cigar company, announced that it is closing one of its oldest cigar factories and will be sending 500 longtime employees to the unemployment line. The reason you ask? Recently, Obama signed a 700 percent tax increase on tobacco. This caused demand for cigars to fall, which in turn caused a need to reduce costs or go out of business. The manufacturing of the cigars is going overseas. If you’re on the left you’re probably clapping despite the fact that we are in a recession and any job loss is bad news.

If you think cigar jobs are evil, then what about jobs at Microsoft? Upon news in May that Obama was proposing a draconian tax policy on foreign profits, Microsoft announced:

“It makes U.S. jobs more expensive…We’re better off taking lots of people and moving them out of the U.S. as opposed to keeping them inside the U.S.”

Here is a common sense question: If you make US jobs more expensive than the rest of the world, where will jobs be going?

It’s a well known fact in the realm of economics that taxes kill jobs. There are whole fields of study regarding the topic known as tax incidence. The principle behind tax incidence is that the entity that a tax is levied against is not necessarily the entity that pays for the tax. I can write a bill saying that a company must pay half of each employee’s payroll tax, but that doesn’t mean the money is coming out of company profits.

Here’s how tax incidence works:

A tax is like a wrecking ball swinging in the direction of three entities; businesses, consumers, and workers. The slowest one to move gets hit.

Let’s use payroll taxes as an example. I am Barak Obama and in order to provide everyone with a green TV, I’ve decided to increase payroll taxes. I know you are concerned, but don’t worry, I’m not going to tax any individual. I’m going to tax the evil corporations and I’m going to hit them big time, because workers have been pushed around. So to make my plan Pay-Go friendly, I’m raising the payroll tax five percent on every employee and mandate that companies pay the tax. Everyone on the left cheers and goes to the store for their TV.

Taxing is not that simple, because businesses, in particular corporations, are not people. They are an entity and they have the ability to pass the costs off elsewhere. They have three choices: pay the tax and reduce profits/increase losses, pass the costs onto consumers, or cut costs in the same proportion as the tax. Any one of those solutions is possible, but in this day in age, it’s almost always cut payroll costs.

Why? Well remember, it’s the slowest entity that gets hit with the tax. In today’s global economy, it is employees who can’t move out of the way. Fifty years ago we had the most productive, educated and well trained work force. Plus business outside the US was complicated. However, today India, Korea, China, Japan…etc all offer a similar labor force for much less cost. Coupled with the fact that the number of alternative products available to consumers is innumerable in the global market and the American worker doesn’t have a chance when new taxes are introduced.

Tax incidence is the cake and the icing is the fact that by levying any tax the government creates economic waste. I wrote a post a few months ago about how all government spending creates economic waste. That concept works at both ends of government activity; levying taxes and government spending. The official economics graph is below.



The graph shows the economic waste created from a sales tax or VAT. The economic waste is denoted by the orange and purple triangles. Please note: this does not depict tax incidence.

So please. I don’t want to hear anything negative from the alarmists on the right regarding Obama’s jobs bill. There are many unemployed in Asian countries and it should be Obama’s job to find them all a US job.

Who’s Smarter? Astrophysicists or Climatologists? 2 of 3 on global warming

Even as I write this, congress is voting on the Waxman-Markey tax and unemployment bill. In true leftist style, the bill is being crammed through congress without debate or consideration of opposing view-points. Also true to form, Henry Waxman inserted a 300 page amendment to his already 1,000 page bill last night so that no one really has a clue about what they are voting on.

My friends on the left, what does this say about the integrity of your politicians?

Today, there will be no discussion about the validity of man-made global warming on the congressional floor, lucky for you dear reader, I have no such fear of holding a debate here.

You will notice that this is my second of three posts regarding global warming. In my last post, I discussed how mathematical modeling works and the limitations of using modeling to establish scientific relationships and make predictions. My first point was that mathematical modeling cannot, in and of itself, prove a cause and effect relationship. I illustrated this point by showing a real model I’d created "proving" that voting for Barak Obama causes unemployment. My second point was that mathematical models are only useful for making predictions in the short-term. Global warming models going out 100 years are wrong.

Today I’m going to discuss how solar activity and not carbon dioxide is destined to win the debate regarding what causes fluctuations in global temperatures. I regret that there is no way to write this post without being somewhat tongue in cheek. I am sorry to those who don’t see the humor in some of this. It is merely the symptom of the willing suspension of common sense.

As I’ve often mentioned, it is difficult to parse through a “science” that is so highly politicized. However, there is a growing body of evidence that suggests that solar activity is the main cause of global temperatures. As I understand it, the sun generally goes through 11 year cycles of increasing to decreasing solar activity, which effect global temperatures. I have seen a few models online and most of the models have an R-square of 60% or higher (about the same as the carbon dioxide folks). Here is an article from a Harvard scientist here.

So what C Gen? Our man made global warming models show just as strong of a relationship! However, solar activity models will prevail because it only takes a little common sense to prove a strong cause-effect relationship. If the sun were to extinguish tomorrow, what would the temperature of the earth be? How much heat will carbon dioxide and man generate once the sun is out of the equation?

The very term man-made global warming is a joke since man does not create any heat in the model. The cause and effect chain for man-made global warming goes like this: man makes carbon dioxide, that carbon dioxide traps heat causing a .2 degree Celsius increase in temperatures over the last 50 years, which is causing water to evaporate more than usual adding another .4 degree Celsius increase over the last 50 years. The model cannot account for the fact that carbon dioxide is always increasing, but temperatures are not always increasing. However, the bigger hole is that the sun is nowhere in their equation and yet it is essential for global warming to exist. Doesn’t it sound a little presumptuous to hold solar activity constant when that is the only source for heat in your model?

It is even more concerning when it is well known that the sun has been responsible for dramatic changes in the earth’s temperature in the past. Many astrophysicists point to the little ice age, a long period where global temperatures were unusually cold and sun spot activity was nonexistent. So far, this June is likely to be one of the coldest June’s since the beginning of temperature records. Could it be a coincidence that there was no sun spot activity at the beginning of 2009?

If you need more proof of the sun’s ability to heat a planet, here is an article from that ultra conservative (laying on the sarcasm thick) Nation Geographic about how Mars has also seen global increases in temperature.

If facts weren’t bad enough, top global warming climatologists have made seriously poor defenses of their climate models as it relates to solar activity. Global warming scientist Mike Lockwood had this to say in a National Geographic article about the sun’s ability to affect global temperatures:

"I think you have to bear in mind that the CO2 is a good 50 to 60 percent higher than normal, whereas the decline in solar output is a few hundredths of one percent down," Lockwood said. "I think that helps keep it in perspective."

No Mike, it doesn’t help keep things in perspective since you are comparing apples to oranges. It’s like saying this, “the new F-somenumber is not faster than the new GM Greenster because the new jet has increased its top speed over the F-22 by only 1% and the Greenster beat out the top speed of a Prius by 40%." The sun is thousands of times bigger than the earth and a small change is significant. On the other hand, CO2 is .001% of the earth’s atmosphere. It requires very, very large changes to affect anything, if at all.

Hanson’s NASA finally admitted that the sun is having an effect on global temperatures. This would be a small sign of sanity in the organization had they not gone on to say that solar activity was responsible for 25% of global temperatures. Once again, I ask NASA to explain what the temperature of the earth would be if the sun were extinguished? We know that the sun is responsible for ice ages and temperatures far hotter than we are seeing now in the past? Even if NASA’s estimate is correct, it poses a big problem for carbon dioxide. If carbon dioxide is responsible for causing water vapor to be 66% of temperature increase, why can’t solar and not carbon dioxide be responsible for water vapor’s role?

If global warming scientists were to stay true to the scientific method, they would take their models and science back to square one. Sun-caused global warming has no such cause and effect problems. We know for certain that man has no effect on the sun. The earth also has minimal effect on the sun. The sun is necessary for any global warming to occur. In short, we are sure that the sun heats the planet.

Some light global warming reading:

Here is a post on global warming modeling

Here is a post on the insanity of the left’s tax and unemployment policy

Here is a great article about how tax and unemployment policies are killing Spain

Young Oliver Twist Voters

As many young voters laud Obama and his policies with complete reverence and adulation, I am reminded of a book written by Charles Dickens. The outcry from the young for Obama health care and cap and trade is almost the equivalent of Oliver Twist’s famous quote, “please sir, I’d like some more.”

I have long been confused by polling numbers regarding Obama support by age demographic. The Washington Post and ABC recently came out with a new poll regarding Obama’s approval rating. Now, this poll is wrong and heavily skewed to favor Obama. However, I doubt that an honest poll would show much difference as far as which age demographics support Obama the most. According to the poll, 71% of those polled between the ages of 18-29 approve of Obama and 66% of those between the ages of 30-39 approve of Obama. These two age demographics represented the largest amount of support for Obama. The real question is why are younger voters out of their minds?

In truth, Obama policies are going to place a large burden on the younger generations. Let me rephrase, Obama policies are going to squeeze the younger generations so tight that they will never enjoy the lifestyle or financial securities that their parents enjoyed. My progressive friends keep telling me I’m not looking at the “long term” benefits to Obama’s vision. However, I seriously doubt they’ve considered the reality of what Obama policies will bring in the “long term.”

To understand the idea of generational theft, you must understand the promises made, the promises being made, and the sacrifices you will be forced to make (I’m talking your average guy, NOT JUST THE RICH). You also need to understand the economies that each generation has/is facing and what that means. My point in this post is not to say we need to cut the older generations off, but that we need to be careful about programs we are reforming and ensure that great new promises aren’t going to bankrupt the young.

Currently, we the people have promised to provide assistance to retirees in the form of income. We also have promised health care assistance to the elderly and poor. Previous generations, especially the Greatest Generation, have and will benefit greatly from this while you pick up the tab. Please remember that those of the Greatest Generation have enjoyed many perks to employment such as pensions, free health care, and full retirement benefits under social security. Baby Boomers have been seeing these benefits paired back as they look to retire, but most people in the generation have enjoyed at least some or all of these benefits at sometime in their working lives. Add the fact that these generations worked at a time of US economic dominance and it is no wonder most are able to retire before the age of 60.

As the ranks of retirees begin to swell with the Baby Boomer generation, we in the generations remaining in the work force are on the hook to support these promises made. Why? Because we are taxed on our income and to earn income you generally have to be working. We are left following through on the promises that were made by a congress that voted long before we were born. As it stands, social security and Medicare/Medicaide are broke. To add to the Gen X and Millenial working woes, these two generations will never see the job perks of the past. Pensions and employer paid health care are a thing of the past. Our only retirement plan is simply, save everything you can.

Now Obama and the progressives are on the scene and they argue that not enough promises are being made. He wants to promise to cover everyone’s health care and reduce the average temperature of the planet by .5 degrees Celsius. The young people of this country cheer. Finally, they have a candidate that speaks for them or do they? What is that one question they all answer “the rich?” It happens to be, “who is going to pay for all of these promises?”

Well my young friends, below is a graph of Obama’s policies. It shows totals over the next ten years. First is the amount of revenue generated by implementing Obama’s tax on the rich. The second is the deficit of Obama’s health care by itself. The third is the deficit incurred by the entire Obama budget. Data was pulled off of the OMB and NY Times.



To the young readers of this post:

To believe that the rich are going to pay for you to live your wildest dreams is naïve. If health care costs spiral out of control, you are going to pay them and you will pay them for the next 30 years. The funny thing is that you will not even need to use the health care you are paying for. The Baby Boomers will thank you for all the hard work you are doing so that they can have cheaper health care. Cap and trade is coming out of your retirement fund. I hope that the .5 degrees Celsius is worth it.

The next question would have to be: how will government fix these failing programs by the time you want to retire? The favorite for social security is increasing the retirement age from 65-75. This won’t start until after the Baby Boomers. How are you going to finance 10 extra years of income on your own? Surely, you aren’t thinking that you are going to make more money over the next 30 years to pay for it? Not while you pay for retiree’s health care and global temperature reduction? I wish I had an answer for you.

Cap and Trade Redux

I’ve already posted on the uselessness of Cap and Trade two days ago. However, there was a debate in congress yesterday worth viewing. I’m indebted to C Thinker from Politics and Critical Thinking. The blog is featured on my list. He does an excellent job covering the debate, so I’m only going to post the videos of Gore, Gingrich and Waxman. We need Gingrich back into some form of office!

Here is Al Gore


Here is Newt


Here is the Cap and Trade bill's owner, Waxman, getting owned by Newt


Any questions?

Those Little Cap and Trade Assumptions Sometimes Make a Big Difference

I’ve been working through the 2007 MIT study on Cap and Trade. This study is the Holy Grail in terms of how Cap and Trade will impact the economy and global temperatures with today’s proposed legislation. My goal here is to inform on those little details that get missed when politicians start talking about the doomsday that global warming will bring. The study is long and being an economist, I hope to have a full economic rundown for you. However, the idea of Cap and Trade without respect to the “science” of Global Warming is and of itself an absurdity.

One of the first things you should know about the study are the assumptions being made. Although the study tries to take into effect as many possibilities, the success and limitation of negative environmental and economic effects requires that all nations adopt a similar carbon trading system. How much of an impact you may ask? Well, if only developed nations (US, Europe, Japan, Canada, Australia and New Zealand) follow through on enacting cap and trade, MIT estimates that we will reduce global temperatures a whopping .5 degrees Celsius over 100 years. If developing nations (India, China, Indonesia, Higher Income East Asia, Mexico, Central and South America, Middle East, Africa, and the Rest of the World) also commits, we will have reduced temperatures by 2 degrees Celsius over 100 years. These reductions are in relation to the “no cap and trade policy” case.

The study also assumes that government will redistribute the tax revenue from cap and trade back to households as a way to offset increasing cost to energy. I don’t believe I need to touch on that one. If anyone believes this will be the case, you are welcome to comment, but I will be laughing at you. Even with the redistribution, the social cost is very high.

The economic effects of the “all nations institute a similar cap and trade policy” are enormously negative for the US if it does not come true. I know this because those with government economics degrees at MIT point it out more than once. I quote! “The cost of policy in the US is greatly affected by policies in the rest of the world.” That is because Cap and Trade in and of itself is punishment to the US. Other countries can benefit in lower energy costs while the US punitively manufactures higher costs on…ourselves. This creates an incentive for countries, such as China (who has surpassed the US as the largest carbon emitter) to stay away from carbon trading, because switching to such a system requires them to punish themselves even more than the US and they would also have to forgo the reward for lower fossil fuel prices (fossil fuel prices drop significantly if the US stops using them). If only the common sense of Clinton were still around today. There’s no point in punishing ourselves for .5 degrees Celsius over 100 years if China’s not aboard. If we aren’t creating carbon, I guarantee someone else will pick up the mantle.

The study also states that it cannot account for government waste in the program. Since the government is doing two actions, taxing and spending, there inevitably will be government waste in both actions (See my post on Government Spending early in the week). Don’t worry. I’m sure John Murtha will be there to make sure enough Cap and Trade taxes are used to keep his airport open.

I’ve been working on a post on the problems for the “science” of global warming and one will be forth coming. I am having trouble finding credible information on either side of the argument so it is taking a long time. However, even without debating global warming, anyone can see the folly of Cap and Trade. Believe me, .5 degrees Celsius over 100 years lower than the no policy option is hardly worth the cost to the tax payers and the economy.
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Update:
Actually, this is old news. I am have pointed out the ineffeciveness of Cap and Trade Legislation. Now, I do not believe in man made global warming. However, James Hansen, the NASA scientist well known for his vocal defense of global warming science, also agrees with me. The UK Guardian outlines a letter Hansen sent Obama in January pleading with him not to follow the "ineffectual...approach" of Cap and Trade. Though I don't agree with all Hansen's proposed solutions, I will agree that this country needs to invest in "fourth generation nuclear plants, which use nuclear waste as fuel."

Update #2:
The Washington Post had a sobering article on the real potential, or lack thereof for solar and wind power. The Post points out the obvious, "the sun doesn't always shine and the wind doesn't always blow." They also point out the large premium that we will pay for energy when nature is not being accomodating. Also, the large subsidies and money needed to lay the infrastructure.