Coyote Blog

I often find that my worst enemy in an argument is actually someone trying to agree with me but for completely crazed and illogical reasons.  I call it "getting endorsed by Nazis," after the problem politicians face when they get endorsed by some really wacky fringe group.

I have to almost feel some sympathy today for global warming alarmists who have gotten a prominent new climate change spokesman:

Crazed cult leader Charles Manson has broken a 20-year silence in a prison interview coinciding with the 40th anniversary of his conviction for the gruesome Sharon Tate murders - to speak out about global warming.

The infamous killer, who started championing environmental causes from behind bars, bemoaned the 'bad things' being done to environment in a rambling phone interview from his Californian jail cell.

'Everyone’s God and if we don’t wake up to that there’s going to be no weather because our polar caps are melting because we’re doing bad things to the atmosphere.

If I had even the smallest desire to play such games, I might suggest that this would be a really fun article to Google bomb with some frequently-searched global warming phrase.

Gary Becker via Ilya Somin:

The toughest competition for basketball and football players occurs at the Division I level. These sports have both large attendances at games-sometimes, more than 100,000 persons attend college football games– and widespread television coverage.... Absent the rules enforced by the NCAA, the competition for players would stiffen, especially for the big stars...

To avoid that outcome, the NCAA sharply limits the number of athletic scholarships, and even more importantly, limits the size of the scholarships that schools can offer the best players....

It is impossible for an outsider to look at these rules without concluding that their main aim is to make the NCAA an effective cartel that severely constrains competition among schools for players. The NCAA defends these rules by claiming that their main purpose is to prevent exploitation of student-athletes, to provide a more equitable system of recruitment that enables many colleges to maintain football and basketball programs and actively search for athletes, and to insure that the athletes become students as well as athletes.

Unfortunately for the NCAA, the facts are blatantly inconsistent with these defenses....

I expressed many of the same thoughts in this article at Forbes.  In addition to making the same points as Becker, I slammed on the whole concept of the "amateur athlete" as an outdated holdover from the British aristocracy and their disdain for commerce:

University presidents with lucrative athletic programs will do about anything to distract attention from just how much money their Universities are making off of essentially unpaid labor.  Their favorite mantra is to claim they are holding up an ideal of “amateurism.”

The whole amateur ideal is just a tired holdover from the British aristocracy, the blue-blooded notion that a true “gentleman” did not actually work for a living but sponged off the locals while perfecting his golf or polo game.  These ideas permeated British universities like Oxford and Cambridge, which in turn served as the model for many US colleges.  Even the Olympics, though,  finally gave up the stupid distinction of amateur status years ago, allowing the best athletes to compete whether or not someone has ever paid them for anything.

In fact, were we to try to impose this same notion of “amateurism” in any other part of society, or even any other corner of university life, it would be considered absurd.  Do we make an amateur distinction with engineers?  Economists?  Poets?

When Brooke Shields was at Princeton, she still was able to perform in the “amateur” school shows despite the fact she had already been paid as an actress.   Engineering students are still allowed to study engineering at a university even if a private party pays them for their labor over the summer.  Students don’t get kicked out of the school glee club just because they make money at night singing in a bar.  The student council president isn’t going to be suspended by her school if she makes money over the summer at a policy think tank.

In fact, of all the activities on campus, the only one a student cannot pursue while simultaneously getting paid is athletics.  I am sure that it is just coincidence that athletics happens to be, by orders of magnitude, far more lucrative to universities than all the other student activities combined.

The importance of government largess to sports, including publicly-funded stadiums, has been a frequent topic on this blog.  Recently, the CEO of the Fiesta Bowl John Junker was fired for a number of alleged violations related to campaign contributions and favors for politicians.  This story is virtually inevitable.

The Fiesta Bowl benefits enormously from being one of the four BCS bowl games.  In fact, the difference economically between being one of the four BCS bowl games and being one of the numerous other bowls is roughly the difference between the United States and, say, Peru.   To give one a sense, the prize money for winning a BCS bowl is about $18 million.  The prize money for all other bowl games varies from $325,000 to, at most, $4.25 million.

But the Fiesta Bowl would almost certainly not be one of the four BCS bowls were it not for the city of Glendale building a half billion dollar stadium to be shared by our NFL franchise and the Fiesta Bowl.  It would almost be shocking if a few tens of thousands of dollars were not directed to politicians given the stakes on the table.  And it should be no surprise that politicians in Glendale received many of the payments.

Postscript:  Junker's attorney's comments are telling.  This was all about doing what it takes to make the Fiesta Bowl a big player.   And I can tell you, from all the grief I have gotten for defending a Constitutional principle at the expense of holding on to a sports franchise, there is a strong public lobby for the ends justifying the means when sports are involved.  Anyway, here is the quote:

While Junker declined SI.com's request to be interviewed for this story, his lawyer, Stephen M. Dichter, could not resist issuing an e-mailed reminder that it was his client "who took the Fiesta Bowl from a postseason game created so [that] Frank Kush's ASU Sun Devils would have a game in which they could be showcased while they and the rest of the WAC were completely ignored by the national media to its present position as one of the four pillars of the Bowl Championship Series."

From Slate.com via Carpe Diem:

"Maybe it is not the growth that is deficient. Maybe it is the yardstick that is deficient. MIT professor Erik Brynjolfsson explains the idea using the example of the music industry. "Because you and I stopped buying CDs, the music industry has shrunk, according to revenues and GDP. But we're not listening to less music. There's more music consumed than before." The improved choice and variety and availability of music must be worth something to us—even if it is not easy to put into numbers. "On paper, the way GDP is calculated, the music industry is disappearing, but in reality it's not disappearing. It is disappearing in revenue. It is not disappearing in terms of what you should care about, which is music."

As more of our lives are lived online, he wonders whether this might become a bigger problem. "If everybody focuses on the part of the economy that produces dollars, they would be increasingly missing what people actually consume and enjoy. The disconnect becomes bigger and bigger."

But providing an alternative measure of what we produce or consume based on the value people derive from Wikipedia or Pandora proves an extraordinary challenge—indeed, no economist has ever really done it.

Ditto Facebook, free flash games, ichat, etc.  I think the point is dead on, though I have no idea how to fix it.  Maybe as a value of the consumer's time?  If your time is worth $15 an hour, and you spend it on Facebook, then your benefit must have been at least $15?

Thinking about this, it strikes me that there is no GDP credit for leisure time, either.  There is almost nothing more valuable to me .  If everything in my life stays the same but I can use technology or other factors to restructure my time to get one extra hour of leisure, isn't that of huge value?  But there is no credit for it in GDP or earnings accounts.

The article discusses consumer surplus, which strikes me as the heart of the matter.  GDP and earnings metrics track what we pay, not how much value we receive.  If one hypothesizes that consumer surplus is rising as a percentage of purchase price, then we are missing a lot of wealth creation.

Via Megan McArdle

A New York court ruled last month that all income earned by a New Canaan, Conn., couple is subject to New York state taxes because they own a summer home on Long Island they used only a few times a year. They have been hit with an additional tax bill of $1.06 million.Tax experts and real estate brokers say this ruling could boost the tax bill for thousands of business executives who own New York City apartments they use only occasionally. It could also hurt sales in the Hamptons and New York's other vacation-home communities.

"People will think twice about spending any summer time in New York," says Robert Willens, a New York-based tax consultant. "The amount of tax they could be subjected to is likely to outweigh the benefit."...

Judge Joseph Pinto, a New York administrative law judge, made the novel ruling in a 2009 case that was affirmed last month on appeal by the New York state tax appeals tribunal. Mr. Pinto seized on what is meant by a permanent residence, which is the benchmark for whether all, or just the in-state portion, of an individual's income is subject to New York state tax.

Mr. Pinto ruled that the couple's Long Island vacation home qualifies under the law as a permanent abode because it was suitable for living year-round--whether or not the couple actually stayed in the home wasn't relevant. Under the ruling, if an owner doesn't spend a single a day in a home it could still count toward a permanent residence.

I didn't really need a reason to not buy a home in the Hamptons, but just in case I were tempted, this would pretty much kill any such desire.  This, however, strikes me as one of those games (like trade wars) that New York has not thought out well before starting.  My admittedly uneducated guess from knowing some New Yorkers is that more New Yorkers own 2nd homes in Connecticut than vice versa.  If New York state is going to lose a tit for tat tax war if this is the case.

Kevin Drum wonders whether the proposed $700 million bid by Farmers Insurance for naming rights on a prospective LA NFL stadium makes any economic sense.   It is an interesting question.  I wrote:

This has always struck me as one of those agency problems, where the executive's incentives are different from the shareholders. Executives get a ton of benefits personally from this -- higher profile for the company which improves their profile and marketability, they get a prime box for the games, parties, etc.

Before the audience here slips into a round of corporate executive bashing, my sense is that the same perverse incentives are working for municipal leaders who have a mismatch with taxpayer interests when they shove huge amounts of taxpayer funds to owners in stadium deals (deals which economists speak with one voice on -- they never pay off for the community in full). One of the dirty secrets of these deals is that they generally include a sort of kickback in the form of boxes and club seats for the Mayor and city council's use (and sometimes multiple boxes for leaders of other government agencies in the town).

Found by my son Nic on Wikipedia:

The Wilhelm scream is a frequently-used film and television stock sound effect first used in 1951 for the film Distant Drums.^[1] The effect gained new popularity (its use often becoming an in-joke) after it was used in Star Wars and many other blockbuster films as well as television programs and video games.^[2] The scream is often used when someone is pierced with an arrow, falls to his death from a great height, or is thrown from an explosion.

The Wilhelm scream has become a well-known cinematic sound cliché, and is claimed to have been used in over 216 films

This is the sound.

By the way, Nic thanks everyone for their help on his blog and his writing project.  He is writing a novel over the next year, dealing mixing his interest in sports with dystopian themes.  This entry into the Hayek poster contest actually comes really close to the themes in his book.  I thought he was getting on a wrong track by trying to use Atlas Shrugged too much as a model.  While I love the book and it has had a profound effect on me, as a work of fiction it is pretty limited, with black and white characters and no character movement/development at all.  I am making him read the Fountainhead right now as a better example of having more intriguing characters.

I have no particular problem with this post from Kevin Drum where he would like to see some different polling questions about the Ground Zero mosque (though I do think they reflect some naivite about the founders' intentions in building the mosque, as telegraphed pretty strongly by its proposed name).  I think the underlying desire to raise awareness about how small changes to poll question wording can make big changes to poll outcomes is a good one.

Here is my problem with all polls like this.  Consider the question

Do you oppose construction of the Ground Zero mosque?

How I answer this is influenced by the unstated intent of the poller or whomever is paying for the poll.  That is, the answer is likely be used as justification for some government action, in this case confiscation of the property rights of the owners of the land by not allowing them to do with the land as they wish.

In this nanny state of micro-fascism, we have a very hard time separating opposition to something from be desirous of government intervention.  For example, I oppose teenagers spending all day watching crappy TV and playing PS3 games rather than reading.  I oppose overcooked steaks.  I oppose people who take forever in buffet lines, selecting one leaf of lettuce at a time.  I oppose airplane bathrooms that smell bad.  I oppose using "incent" as a verb.  I oppose writers who have really long passages without paragraph breaks.  I oppose commenters who constantly harass me about my horrible proof-reading rather than just getting over it and accepting that I suck.

However, in none of these instances would I advocate government action.  Now, of course, I go further than most, in that I also oppose government action in any number of more controversial activities that I also personally oppose but would never ask to be banned, including prostitution, meth use polygamy, driving without a seat belt, and pulling tags off mattresses.   So a better question would be:

Do you oppose government action to block construction of the Ground Zero mosque?

Read this story, and then imagine if the facts had been reversed:

"A sports conference that always scheduled weekday basketball doubleheaders in which women's teams played the first game -- letting the men play in the later time slot -- has altered the practice, after an anonymous sex discrimination complaint charged that this made the women's games appear to be a "warm-up" act for the men's games.

Now, hoping to avoid possible gender equity suits, other athletic conferences are considering similar scheduling changes.  Last month, the Great Lakes Intercollegiate Athletics Conference announced that it would alternate from season to season the order in which men's and women's teams would play in doubleheaders. The men will play first this season, and the women will play first next season.

Dell Robinson, the conference commissioner, said the decision was made after the league received an inquiry in March from the U.S. Department of Education's Office for Civil Rights. An anonymous complaint filed with the agency argued that the negative connotation conveyed by always having women's teams play first in these doubleheaders was detrimental to women's athletics."

So let's imagine a alternate world where women's basketball games had always traditionally been played in the second game of the double-header, after men's games.  Does anyone believe that the civil rights folks wouldn't have filed a complaint saying

Having women's games always played after men's games makes them appear to be an after-thought to the main contest, positioning the game later in the prime social hours where potential student fans will be more likely to leave early and head to the bar instead of staying to watch.  The negative connotation conveyed by always having women't teams play last in these doubleheaders is detrimental to women's athletics.

See, its easy to be a race/gender advocate.

Via a reader, the cost of a few politicians deciding that there absolutely had to be an Australian-assembled hybrid.

"My wife was looking for an Australian-made hybrid car," Rudd told John Laws in March, 2007, "and I'm sure some of your listeners would have found this out "“ you can't find one.

"So, that started me thinking about why don't we have one in this country."

There are certain people from whom the phrase "that started me thinking" serves as a 150-decibel alarm. We weren't to know it at the time, but Kevin Rudd turned out to be one such bloke. Instead of settling on a nice secondhand Prius, Rudd's simple quest to find some wheels for the missus quickly led, once he was elected, to the $500 million Green Car Fund.

Why couldn't Ms Rein have been interested in something less expensive, like knitting? No, scratch that "“ once her husband "started thinking", we'd have been stuck with a $2 billion National Crochet Initiative.

Subsidies appear to amount to about $(AU)100,000 per private car sale.  This is a sort of new brand of left-progressive triumphalism that reminds me of an essay Ayn Rand wrote decades ago on statism and prestige.  These are the modern Green equivalents of the Brandenburg Gate -- they cost a lot of money, they don't really do anything useful, but everyone can point at them and marvel.

And speaking of which, our current Administration in the US in by no means immune

U.S. President Barack Obama will attend a groundbreaking ceremony on Thursday for an LG Chem plant in Holland, Michigan, the company said Sunday. It is very unusual for an incumbent U.S. president to appear at such an event for a foreign company, and it is the first time for a Korean firm.

LG is investing US$300 million to build the plant which will produce batteries for electric vehicles. First-phase commercial production is scheduled to begin in the first half of 2012, and once completed in 2013 the plant will churn out lithium ion cells for 200,000 hybrid cars annually.

Ah, there Coyote goes exaggerating -- because the article explicitly says that a private company will be investing the money, so this isn't really a government project.   Ah, but read to the last paragraph

As part of efforts to revive the auto industry by bringing more green vehicles to the road, the U.S. government has lent considerable support to LG's Holland plant, including $151 million from a federal stimulus program. The Michigan state government also offered tax cuts worth $130 million, which together with the stimulus funds will almost offset LG's entire construction costs. The plant will help ease unemployment in the state by creating some 400 jobs, U.S. media reported.

So $281 million of the $300 million LG is investing is actually taxpayer money.  More brave capitalists! But fortunately we will have lots more batteries so rather than burn gasoline, electric vehicles can charge themselves from coal plants.

PS- Don't forget the jobs, though, created for the low low taxpayer cost of $702,500 each!

PS #2 - I had not noticed before I wrote it, but both of these articles also share in common the government subsidizing foreign companies to manufacture in their country, rather than producing these goods elsewhere and importing them.  This reduces the benefit of these investments even further - its pretty clear that both batteries and Prius's would have been made somewhere in the world, so they would have been available to consumers (probably at lower prices), but these investments merely were to shift production across some line on a map.

Update: John Stossel discusses another form of modern statist triumphalism -- the government-funded sports stadium

South Africa's ability to pull it all together for six weeks doesn't mean the World Cup will be a net benefit to the country in the long term. As the ESPN video below explains, South Africa's government spent $6 billion on the tournament. Tournament-related revenues are expected to fall well short of that figure. Some of the hundred million dollar stadiums built for the tournament won't get much use now that the games are over. The video points to one stadium built for the tournament which will likely remain vacant"”it sits over over slums that lack running water.

Fond memories of the month South Africa performed marvelously on the world stage are nice. But $6 billion is a lot to pay for a memory. These spectacles"”the World Cup and the Olympics"”are nearly always money losers. They're a lousy investment in wealthy countries. They're particularly garrish in countries that aren't as affluent.

Remember that Greece got the same kudos for not screwing up the Olympics, but years later it sure seems like the $15 billion that was sunk into those games by the Greek government has contributed to its financial crisis.

From the Sun

John Isner and Nicolas Mahut had been battling on court for almost TEN HOURS when the umpire eventually called time on the titanic struggle.

The first-round Wimbledon encounter - already held over from Tuesday night - will now go into a third day with the incredible scoreline 6-4 3-6 6-7 (7/9) 7-6 (7/3) 59-59.

Records tumbled as both players held their serve for an incredible 118 games in the decider before the enveloping gloom over SW19 brought a halt to proceedings.

In the past, local governments and the legislature have blithely hit up taxpayers to pay for new sports stadiums for local teams.  You may think you have it bad in your city with 4 major sports teams, but we have 4 major sports teams PLUS about seven or eight baseball spring training stadiums.

It seems like the legislature and local government finally got tired of putting all taxpayers on the hook for these stadiums, and had the radical idea that maybe actual, you know, fans who want to use the stadiums should pay for them.  This turned out to be too expensive for ticket prices at the proposed new Cubs spring training facility -- fans aren't used to paying for the full price of their sporting event in their ticket price -- they are used to getting subsidized by non-sports fans.  As a compromise, the legislature proposed a tax on tickets for all spring training games at all stadiums to pay for this one new field.  This seems stupid to me, but it elicited this hilarious response from the baseball commissioner:

Selig told reporters at HoHoKam Park that it was a "dangerous precedent" to tax all ticket buyers primarily to benefit one team and that Major League Baseball has taken over negotiations for a new Cubs spring home.

Right, but it is A-OK if all taxpayers, including those who will never see a baseball game, are taxed to pay for the new stadium.

For the first time in five years, I am apparently mathematically eliminated after the first weekend, with my best possible finish in 7th.    Congratulations to our current leaders, who navigated through an incredible series of upsets far better than I did:

Perhaps even more incredibly, Todd Ramsey is shown to have a 71+% chance of winning it all, which are pretty unprecedented odds in our pool this early in the tournament.

It has bothered me in an earlier post that I missed several critical tricks the Democrats in Congress are using to understate the cost of their health care bills.  These are important enough that I am re-writing the original post:

I hardly know what to do with this.  When this is a pressing enough gender issue to demand NOW's attention, perhaps it is time to declare victory and move on to weightier topics.

A couple of weeks ago, President Obama had members of his cabinet, as well as members of congress, including Flake, over to the White House for a game of hoops.

They were all men.

Sounds like the boys had some fun but If you ask the "Debby Downers" from women advocacy groups like the National Organization for Women, the games lack of estrogen is unacceptable.

"Relationships get built in those more informal settings," NOW President Terry O'Neill told ABC News, "and the relationships have a huge impact on the influence an individual has. We know what happens when we segregated whether it by race or whether it by gender -- you end up with 1st class citizens and you end up with 2nd class citizens."

Fortunately we have moved beyond quotas.  Not.

"It's extremely important, now especially, for the president to have as many women as men in his closest circle of advisors. ... If women had been at the heads of the companies on Wall Street instead of these masters of the universe then we might not be in the predicament that we're in today," O'Neill says. "[The ratio of women to men] needs to be 50/50. Women are 52 percent of the voting public so obviously there needs to be 50/50 of any Cabinet."

I will be counting the men at the next baby shower.

When reading the original House health care bill, it struck me that the new taxes on employers and such began immediately, but benefits were phased in between 2012 and 2017.  Apparently, this same thing is being done in the Baucus Bill, and I have learned that this is specifically aimed at gaming the CBO numbers.  Since journalism majors were such in large part because they didn't want to do any math, this ploy will likely work with the media, who will print the CBO findings but will be uninterested or incapable of deconstructing the numbers games.  From the Gormogons via TJIC:

What the CBO does not highlight, however, is that Sen. Baucus cooked the books. Under the Baucus plan, revenue enhancement (taxes) goes into effect immediately. Coverage does not kick in for two and one-half years. So, to make the numbers work, Sen. Baucus has to collect ten years of revenue to cover seven and one-half years of cost.

'Puter thought the whole thing smelled a little fishy, so he gave Sleestak and abacus, a quill and some parchment and set him on the CBO math. Using the above numbers, Sleestak calculates that projected revenues will generate $910 billion over 10 years. Outflows will be $829 billion over 7.5 years. Based on Sleestak's math, that's an average yearly inflow of $91 billion and an average yearly outflow of $110.5 billion, or a average annual deficit of $19.5 billion each year the benefits are actually paid.

TJIC rightly asks how this kind of game is any different from the one played by Madoff.  The only difference is that folks had the right to say "no" to Madoff whereas we will not have this ability with Congress.

I consider winning the Olympics for one's town to be roughly equivalent to army choosing to quarter itself in my house.  So I am pleased that this particular financial locust will go someplace else to pig out.  I am happy to watch it occur in some exotic locale to which I do not pay taxes.

I am reluctant to pile on Obama, though he certainly would have claimed credit had Chicago won.  I will say that the US managed to win an Olympic bid during even the Carter administration, though because the Montreal Olympics were such a financial disaster, LA really didn't have any competition when it was bidding in 1978.  One other city expressed interest that year - Tehran.  What a disaster that would have been.

Please don't tell me the LA Olympics "made money."  The city of LA and state of California subsidized the games in all kinds of ways that never hit the income statement of the organizing committee, starting with police and congestion costs.  Only in comparison to the financial disaster that was Montreal could the LA Olympics be called a financial success.

Kevin Drum shows this chart as evidence we need government health care like the rest of the "civilized" world:

I write back in the comments:

I wonder if the graph you show is a bug or a feature.  My guess is that you could draw the same chart in the same shape with the US on the far left for consumption of items as diverse as "big screen TVs" and "pro sports tickets."  We would chalk up spending in any other area as simply a result of wealth.  Why not on health care?  Why is it so bad that we spend more money on something like health care which is arguably less frivolous and more critical than TV's or baseball games?

I would understand it if the argument was that we are not getting our money's worth, but that meme is just about dead.  The evidence is pretty clear that though life expectancy in the US is lower than some of these other countries, this is due to issues unrelated to health care (specifically murders and auto accidents).  When the cause of death is limited to things amenable to the health care system, the US ranks #1 in the world in life expectancy.  This is not even to mention the customer experience in accessing the health care system, which for all its irritations, is still ranked the best in the world.  We pay the most, and get the best results, because we can afford the best.

It makes me nervous that you think this is a problem.

PS- I certainly think there are efficiencies that could be wrung out from the health care system if people actually shopped with their own money for their own health care, as they do for every other product and service they buy.  This is proved out in the falling prices for non-insurance covered health procedures, such as laser eye surgery.  But it is a laugh to think the government will wring these savings out.  The government has never, ever, ever made a process more efficient.  All it can do to cut costs is a) institute price controls on suppliers, which eventually lead to shortages and reduced R&D and/or b)  Eliminate services.

Update: OMG, we need government take over of the automotive sector, because we spend more money on cars than any other country, and by the left's logic that is a sign of failure of the status quo.

From the comments of this post, which wondered why Americans are so opposed to the climate bill when Europeans seem to want even more regulation.  Leaving out the difference in subservience to authority between Europeans and Americans, I wrote this in the comments:

I will just say:   Because it's a bad bill. And not because it is unnecessary, though I would tend to argue that way, but for the same reason that people don't like the health care bill - its a big freaking expensive mess that doesn't even clearly solve the problem it sets out to attack. Somehow, on climate change, the House has crafted a bill that both is expensive, cumbersome, and does little to really reduce CO2 emissions. All it does successfully is subsidize a bunch of questionable schemes whose investors have good lobbyists.

If you really want to pass a bill, toss the mess in the House out. Do this:

1. Implement a carbon tax on fuels. It would need to be high, probably in the range of dollars and not cents per gallon of gas to achieve kinds of reductions that global warming alarmists think are necessary. This is made palatable by the next step....
2. Cut payroll taxes by an amount to offset the revenue from #1. Make the whole plan revenue neutral.
3. Reevaluate tax levels every 4 years, and increase if necessary to hit scientifically determined targets for CO2 production.

Done. Advantages:

1. no loopholes, no exceptions, no lobbyists, no pork. Keep the legislation under a hundred pages.
2. Congress lets individuals decide how best to reduce Co2 by steadily increasing the price of carbon. Price signals rather than command and control or bureaucrats do the work. Most liberty-conserving solution
3. Progressives are happy - one regressive tax increase is offset by reduction of another regressive tax
4. Unemployed are happy - the cost of employing people goes down
5. Conservatives are happy - no net tax increase
6. Climate skeptics are mostly happy -- the cost of the insurance policy against climate change that we suspect is unnecessary is never-the-less made very cheap. I would be willing to accept it on that basis.
7. You lose the good feelings of having hard CO2 targets, but if there is anything European cap-and-trade experiments have taught, good feelings is all you get. Hard limits are an illusion. Raise the price of carbon based fuels, people will conserve more and seek substitutes.
8. People will freak at higher gas prices, but if cap and trade is going to work, gas prices must rise by an equal amount. Legislators need to develop a spine and stop trying to hide the tax.
9. Much, much easier to administer. Already is infrastructure in place to collect fuel excise taxes. The cap and trade bureaucracy would be huge, not to mention the cost to individuals and businesses of a lot of stupid new reporting requirements.
10. Gore used to back this, before he took on the job of managing billions of investments in carbon trading firms whose net worth depends on a complex and politically manipulable cap and trade and offset schemes rather than a simple carbon tax.

Payroll taxes are basically a sales tax on labor.  I am fairly indifferent in substituting one sales tax for another, and would support this shift, particularly if it heads of much more expensive and dangerous legislation.

Update: Left out plan plank #4:  Streamline regulatory approval process for nuclear reactors.

Update #2: Readers of TJIC wonder if this is effective, calling it just a rebate of the tax.  I answered in the comments as follows:

I think "rebate" is the wrong way to think of it. Of COURSE if you paid a higher price and then had the exactly that amount rebated to you, then it would not be a very powerful incentive. But that is not what is being proposed.

I think things are easier if you consider payroll taxes to be a sales tax on labor, which they are in effect. So we have a sales tax regime, with differing tax levels on different types of products. If we raise taxes on one item, but drop taxes on the others, then sales of that one item are certainly going to suffer. Its price just went up relative to all the other things we buy. Let's imagine a simplified world where we can buy any of 10 items (call them A, B, C, etc), each priced at $10, and we have $100 in income. Now imagine the same world tilted such that we have $105 of income and all items are $10 except "A" which now costs $20 each. On average, most people will buy less "A" and more of other stuff.

I'm a libertarian, so I grit my teeth at such games. I don't like the taxes in the first place. I don't like the government playing outcomes games with taxes. But my point is that if we are going to insist on doing something to limit CO2, then shifting the sales tax burden so that total taxes are the same but taxes on fuels are higher while taxes on labor are lower strikes me as a substantially lower cost solution than any of the other alternatives being suggested.

I wondered today what kind of subsidy a rider on the Phoenix Light Rail system was receiving.  Hillary Foose, the public information officer of Metro light rail, was kind enough to send me a link to this board presentation.   Since the rail system opened mid-fiscal year, I will use their own projections for the 2009/2010 fiscal year.

Public accounting is a pain in the butt for someone used to private finances, because it is all cash accounting rather than accrual and they mix together capital expenditures with operating expenditures.  But the table on page 62 carves out the operating budget for the existing 20-mile line from the development and capital budgets.    Here are the key numbers:

Fare Revenue:  $8,985,159

Operating Expenses:  $33,733,168

So already on an operating basis we have a 73% subsidy.  But we have sunk $1.4 billion of capital money into building the line  (actually this is a little low as Metro has spent tens of millions more this year).  Unfortunately, in government accounting, there is no depreciation or interest charge that shows up.   So I am going to charge them with the payment on a 30-year $1.4 billion 5% note, which would be just over $91 million a year.

Totaling the $91 million with the other operating expenses, we get a 93% subsidy for light rail.  This means the true cost of the $1.75 ticket for a light rail ride is actually $25!  METRO says that light rail riders love the service.  I should think anyone who gets a $25 service for $1.75 should be happy.

Another way to look at the subsidy is on a per rider basis.  So far, METRO has averaged about 17,000 round trip riders per weekday (based on about 34,000 boardings per day).   The $115.8 million annual subsidy (capital+expense minus revenues) works out to just over $6,800 per rider per year that the rest of us (who may not live or work near the line**) pay each current rider.

There are a number of ways in which I have likely understated the subsidy:

1. I used their June revenue projections, which likely will continue to be revised downwards as ridership continues to slump
2. I used their own expense projections, and we know how often governmental bodies hit their expense numbers
3. I assumed no new capital spending necessary over a 30 year life.  Rail experience has shown this to be overly-optimistic.  Rail lines have to be rebuilt every 15-20 years or so.  They take tons of capital maintenance dollars.   When we look back twenty years from now, we'll likely come to the conclusion I grossly understated the capital charge.

**Footnote: Since over a third of the capital to build the line came from the Feds, many of the people subsidizing the METRO riders don't even live in this state.

Update: The other thing I left out is lost parking revenue.  The revenue numbers for fares is in fact overstated.  It should net out lost parking revenues, for example at baseball games.  This is the only time I ride the Metro, because I substitute a $2.75 Metro round trip ticket for a $10 city garage parking expense.  But the city has never acknowledged this cannibalization.

Update #2: I have posted an update here

I have no vocal chords as I screamed them out yesterday at the game as the Cardinals beat the Eagles to win the NFC championship.  Yesterday's game was one of the more unlikely events I have ever personally witnessed, and caps an incredible playoff run where a team that just 45 days ago was absolutely pathetic somehow found themselves in week 16 of the season.   During the final Eagle drive (the one around 2 minutes to go, not the pathetic last play) the crowd was the loudest I have ever heard at any sporting event  (the previous personal best was probably some games at the old Palestra in Philly, the home of "Big 5" basketball).

Anyway, this screen shot from weather.com  seemed appropriate:

In penance for that other game link, here is my favorite online flash game, called desktop tower defense.

Rick Reilly of ESPN  (what a travesty that he is not the last page of SI any more -- I can hardly pick the rag up any more) has an article on many of the shams pulled off by the Chinese with NBC's help what an auspicious example of Chinese solidarity were these Olympic games.

The government claims that it is important to crack down on gambling because people who gamble might do themselves financial harm.  Of course, just like the teenager who is thrown in jail because it is better for him than smoking marijuana, so goes the case of Salvatore Culosi:

"¦ Salvatore Culosi "¦ was a 37-year old optometrist in the
Washington, D.C. suburb of Fairfax, Virginia. According to friends,
Culosi was a wealthy, self-made man. He was easygoing and friendly, a
guy who enjoyed his success.

He was also a small-time gambler. Culosi and his friends
regularly met at bars in the area to watch sports, and frequently
wagered on the outcomes of games. The wagers weren't insignificant "”
$50, $100, sometimes more on a given afternoon. But the small circle of
friends also had the means to back up their wagers. No one was betting
the mortgage, here"¦

Fairfax police detective David J. Baucom met Culosi in a bar
one evening last October, befriended him, and was soon making wagers
himself"¦ Baucom began upping the ante, encouraging Culosi to wager
larger sums than what the friends were used to"¦

Baucom eventually encouraged Culosi to wager at least $2,000
in a single day, the lower threshold under which Culosi could be
charged under state law with "conducting an illegal gambling
operation." On January 24 of this year, Detective Baucom assembled the
Fairfax County SWAT team, and marched off to Culosi's home to arrest
him.

According to press accounts, police affidavits, and the
resulting investigation by the Fairfax prosecutor's office, Baucom
called Culosi that evening, and told him he'd be by to collect his
winnings. With the SWAT team at the ready just behind him, Baucom
waited outside Culosi's home in an SUV. As Culosi emerged from the
doorway, clad only in a t-shirt and jeans, SWAT officer Deval Bullock's
finger apparently slipped to the trigger of his Heckler & Koch MP5
semiautomatic weapon, already aimed at the unarmed Culosi.

The gun fired, releasing a bullet that entered Culosi's side,
then ripped through his chest and struck his heart, killing him
instantly.

Jeff Charleston, who went nearly wire to wire to win.  Here is the top ten, which yours truly finally managed to crack for the first time.  I picked the fewest correct games, by far, of anyone in the top 10 but got a lot of upset correct and thus scored a bunch of bonus points.  Memphis fans have to be squirming today.  I almost didn't watch the last 2 minutes of the game -- Memphis seemed to have it totally in hand.

The whole thing here.

Congrats to Jeff, and he can send me an email if he would like a free copy of either of my books.  And no, Bennett doesn't win 2 copies for being in second.