Carson Sasser
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Articles filed under "Economics"
Ethanol Production Raising Price of Tortillas

The Associated Press reports that tortilla prices in Mexico jumped nearly 14 percent over the past year. The Mexican government and economists say that increased US production of ethanol from corn contributes to the problem.

So, here in the US our government is encouraging the production of ethanol as an alternative to gasoline, which uses corn that otherwise might be used to produce tortillas, which drives up the cost of tortillas in Mexico, which potentially causes a lot more Mexicans to come to the US so they can make enough money to buy tortillas. Central planning never works as intended; the variables are too numerous and too complex for mere humans to comprehend.

You might ask, why isn't corn production in the US increasing to meet the additional demand? I don't know; I'm a mere human. But I suspect it's because of government manipulation of agriculture. We support the price of some commodities. We limit the production of other commodities. Governments need to get out of the way and let a free market handle these supply and demand problems.

The biggest question in my mind is, why can't Mexico produce enough corn to supply all the tortillas they need at a reasonable price? The answer is probably the same as the above: government manipulation.



What Will You Stimulate with Your Rebate?

It looks as if Congress will approve rebates of several hundred dollars each for most all Americans -- whether they paid any income tax or not. These rebates are supposed to stimulate the economy and prevent us from having to endure a recession. Congress is assuming that everyone will run right out and spend all that money. They're probably right.

I already did my part. A couple of weeks ago I bought a luxury motorhome. Looks like I'll continue to do my part because operating that thing costs about 45 cents per mile just for fuel. That is, I'll be doing my part to stimulate the economy but not to help us become energy independent.

I would consider giving my rebate to someone who needs it more than I do, but they're getting a rebate too -- and they probably don't have a luxury motorhome to maintain and operate. Anyway, it looks like I'll have to spend my rebate on repairs needed by my luxury motorhome, because it was born as a luxury motorhome over ten years ago. The previous owner used up a lot of the luxury.

It's probably going to take all of my rebate, and my brother's too, to pay for all the needed repairs. But that's okay because he owns half of the luxury motorhome. We haven't worked out which half yet. I thought about foisting off on him the half that includes the fuel tank but then I realized that half also contains the bedroom and bathroom.

In case Congress is listening and another rebate is considered for next year, we need to have a satellite television antenna installed on the roof of our luxury motorhome.



A Trillion is a BIG Number

In discussing the proposed financial institution bailout in his column yesterday Dr Thomas Sowell said that "many people have trouble even forming some notion of what such numbers as billion and trillion mean." To get some idea of the magnitude of a trillion he suggests thinking about it in terms of what was going on in the world a trillion seconds ago. The answer is not much. No one on the planet knew how to read. That could have been because no one knew how to write. It was over 31,709 years ago. I suspect there were no politicians around back then.

If you could earn a dollar a second (that's $3,600 per hour) and worked 24/7 with no sleep or vacations it would take you over 31,709 years to earn a trillion dollars. You would be earning over $32 million per year but it would still take you more than 31,709 years to earn a trillion dollars. If you don't think you can work that long and if you can recruit 31,708 people with the same earning ability to help out, you can earn the trillion dollars in about a year.

If the trillion dollar debt the government is about to incur is divided equally among 300 million Americans it will come to $3,333.33 per person. It seems to me that will drag down the economy as much or more than letting a few rogue companies go belly up.



Inexplicable Factory Workers

CBS News reports that factory workers in Ohio doubt that either Obama or Clinton's ideas go far enough to stem the tide of manufacturing jobs leaving Ohio.

Those ideas are welcome here in heavily unionized and heavily Democratic northwest Ohio, but at the same time, no one seems to believe they go far enough to reverse the powerful tide of globalization that many blame for the constant manufacturing job losses.

Democrats love labor unions. Labor unions love Democrats. Labor unions are the biggest reason that manufacturing jobs first migrated South and now migrate abroad. Factory workers love unions and Democrats. Go figure!

Factory workers that make washing machines want their pay forced up as high as possible, but they don't want to have to buy a television set built with the same high-cost labor.

High pay rates seem nice but if your cost of living increases proportionately you haven't improved your life style. In fact you may have lost ground due to having to pay a higher tax rate.

Democrats and labor unions (and Republicans) should get out of the way and let the free market work.



Obama as Robin Hood

The whole "Joe the Plumber" case epitomizes the looney left (which includes the Obama campaign). They attack any person or institution that sheds some much needed light on Obama's real agenda. A plumber in Ohio, who said his name is Joe, asked Obama essentially this: If I become a small-businessman making over $250,000 a year, are you going to take more of my income and give it to other people? Part of Obama's response was that spreading the wealth around is good for everybody. McCain, of course, jumped on Obama's socialist comment big-time and it got a lot of play in the media.

The looney left's response? Joe is not a plumber (because he doesn't have a license). Joe only makes $40,000 per year so he would actually be helped by Obama (never mind all those who do make over $250,000). Joe is behind on paying his state taxes (he owes about $1200). Joe was a plant by the McCain campaign (not substantiated; if so, so what?). Joe is only his middle name (I'm not kidding; someone felt this needed to be pointed out).

They seem to be saying that Joe is unqualified to ask such a question so Obama's unguarded response should not count. Apparently it's okay for debate moderators to ask hypothetical questions, but not the average Joe.

Joe the Plumber is not running for president. Barack Obama is. So the spotlight should be on Obama, not on Joe the Plumber. In the context in which it was made Obama's comment that spreading the wealth around is good for everybody clearly reveals his socialist bent. While spreading the wealth around is a desirable result of capitalism, it is not guaranteed on an individual basis; it is linked to the extent of an individual's contribution. Capitalism provides equality of opportunity; socialism provides equality of outcome (everyone ends up poor).

Obama wants to take money from the wealthy and give it to the poor. If that sounds admirable to you, you're a socialist.



Corn is Not the Answer

The government got it wrong again. Ethanol produced from corn, or any other substance, is not the answer to the world fuel shortage and the high prices the shortage generates. An MSNBC article and a Fox News column fill in the details. Using corn for fuel is not expected to alleviate the fuel shortage, but it has and is expected to continue to cause a world food shortage. Some even say that we should start hoarding nonperishable foods.

This is a prime example of what can happen when the government interferes in the market. Without the government ethanol mandates and subsidies the diversion of corn from food to fuel would not have proceeded at the current pace and we wouldn't be facing a food crisis.

On the other side of the coin the federal and state governments are shutting off cheaper sources of fuel and other energy. They are restricting the exploration and development of new oil supplies and are restricting the building of new nuclear power plants. They won't allow us to tap the massive supply of oil in the lower Gulf of Mexico because some Florida beach might get a few dark spots. All the presidential candidates have said they won't allow the extraction of the huge oil reserves from the Arctic National Wildlife Refuge because it might upset a few animals.

What good is a pristine stretch of beach in Florida if you can't afford to drive there to enjoy it? How much food can you grow on a white sand beach? The Florida tourism economy is likely to be hurt as much by high fuel prices as spoiled beaches. Do you think the ANWR animals might choose to learn to live with a few oil wells and pipelines rather than be slaughtered for food?

We should be reducing government interference in energy, food and other markets instead of calling for more controls. National and world markets are too complex for a few officials to be able to manage them effectively. Consider the orange juice market. The Juice Authority sets the price of a gallon of OJ at X dollars. The JA then has to (1) issue a specification for the quality of OJ to prevent its producers from watering it down, (2) establish an inspection agency to see that the specification is met, (3) set prices for the oranges and other supplies that are needed to produce the OJ, (4) set prices for the seed, fertilizer and equipment needed by the orange growers, (5) set prices for the supplies needed by the orange growers' suppliers, and on and on down the chain.

So, setting the price of OJ means that the price of steel must also be set, because it is needed to build the equipment used by the orange growers. The price of fuel must be set, because it is used in large quantities by the orange growers and the truckers that haul the oranges to the OJ producer's plant. If all these and other prices aren't set correctly the OJ production process will break down and no more OJ will be produced -- unless Congress also gives the JA the additional power to force the OJ producer and all the suppliers to continue the process at a loss. Then we have socialism in all its faded glory. And this is what Barack Obama wants to give us if he becomes President.



Government Can't Fix Economy

From Roger Cohen's column in The New York Times about the government's attempts to fix the financial meltdown:

But as the state intervenes, in what Ed Yardeni, an investment analyst, called “a giant global game of Whac-A-Mole,” the moles keep popping out of new black holes in our financial system.

“We’ve tried rubber mallets, now we’re using bazookas, but we’re flying blind,” Yardeni told me.

Another testimonial to the fact that the economy is too complex for the government to manage. Each step the government takes precipitates dozens of additional steps it must take, but it doesn't know the direction in which it should move. Lack of information leaves trial-and-error as the only mode of operation open to the government.

Economists have known and have been saying this for over a century, but neither of the two candidates for President get it. I just heard McCain talking about how his government will fix the economy and get it back on track. Obama counters each McCain fix with about three of his own. McCain wants to fix what he sees is wrong with the economy while Obama wants to take charge of its day-to-day operation. Neither will succeed. In fact, both will aggravate the problems.

My opinion is that Obama will do more damage than McCain. Isn't it pathetic that in choosing a President we have to resort to picking the one that will inflict the least amount of damage on the country?



Thomas Sowell on the Complexity of Economics

At the risk of appearing to be a shill for Sowell I'm recommending that you read another series of his columns:

Sowell makes it easy for people other than devious politicians with inflated egos to understand the effects of supply and demand versus the politicians' actions on the "affordability" of those products that we need or want.

All three presidential contenders want to enact one or another price control on fuel but none of them wants to tap our greatest reserves of oil.

Barack Obama wants to levy an additional tax on the oil companies, which will increase the price of fuel. Apparently he sees it as punishment for their supposed greed. But guess who eventually gets punished. Clue: It's not Obama or the oil companies.

Most of the liberal politicians today want to increase the income taxes of the "wealthy" taxpayers. Think about it. How do you actually tax the wealthy? The vast majority of them are in controlling positions relative to their income. Tax their businesses' profits and they will pass it on to consumers of their products. Tax their salaries and they will raise them -- and pass the cost on to consumers.

Consumers of products and services pay all the taxes regardless of their income. Since the non-wealthy consume vastly more products and services than the wealthy, the non-wealthy pay vastly more of the taxes. It doesn't matter who files the return and sends a check to the IRS, we all pay too much in taxes in the end.

Have you heard someone boast that they don't have to pay income taxes? Next time give them a lesson in trickle-down taxes and economics.



Senator Stabenow on Economics

I just heard Senator Debbie Stabenow from Michigan say on Morning Joe that nine out of ten workers in the USA are employed by the auto industry. If that's true she has identified the problem with our economy. If 90 percent of our workers are building cars and six percent are unemployed how can we expect to produce all the other goods that we need with the remaining four percent -- like houses. But wait a minute! I thought the collapse of the housing market was caused by overbuilding.

One of the most dominant complaints lately has been that our economy has shifted too far from manufacturing toward service. I suppose we can stop worrying now that Senator Stabenow has spoken.

Obviously, though, the senator is wrong. What she probably meant to say is that nine of ten workers contribute, to some extent, to the auto industry. But I don't believe that either.

The biggest problem we have in this country is that too many demagogues like Stabenow are in leadership roles.



Obama Economics

Barack Hussein Obama's solution to the high fuel cost problem is to raise the cost of fuel. He wants to impose a "windfall profits tax" on the oil companies, which will of course be passed on to fuel users. After noticing that the oil companies are still making a nice profit, Barack will probably push to raise his windfall profits tax and so on. Apparently the man hates profits. Never mind that his largest constituent base's retirement funds depend heavily on corporate profits.

And there's this other little fact that Barack ignores. The government profits a lot more than the oil companies from each gallon of fuel sold. Some estimates show the government profiting three times as much. Do you think Barack will levy a windfall profits tax on the government?

Since I was a teenager the percent increase in the cost of a Coca-Cola is as much or more than a gallon of fuel. And it has been reported that Coca-Cola's profit rate last year was greater than the oil companies' profit rates (where profit rate is roughly defined as the amount of profit divided by the amount of money invested in making that profit.) But we don't hear any calls from Barack for a windfall profits tax on Coca-Cola.

Some people point out that the concern is about the "obscene" amount of the oil company profits, not the profit rate. Well, that's like complaining to a bank that your neighbor is making more off his savings than you although both of you are getting the same interest rate, while ignoring the fact that your neighbor has ten times as much money in his account as you have in yours.

It is also argued that the focus is on the oil companies because their products are essential to our everyday lives and products like Coca-Cola are not. Well genius, that is why the oil companies' gross revenues and profits are huge compared to companies like Coca-Cola. In times of shortages it is easier to do without Coke than fuel.

It is also worth noting that liberal Democrats will argue at the same time that oil is essential to our everyday lives and that we should implement extreme measures to limit its supply.




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