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Randoms 2014 10 27

Monday Randoms

“Many people who have never run one business for one day are nevertheless confident that they know corporate CEOs are not worth as much as they are paid.” ~Thomas Sowell

from Charles Krauthammer

Obama had never managed anything before running for the biggest management job on earth. It shows. What makes the problem even more acute is that Obama represents not just the party of government but a grandiose conception of government as the prime mover of social and economic life. The very theme of his presidency is that government can and should be trusted to do great things. And therefore society should be prepared to hand over large chunks of its operations — from health care to carbon regulation down to free contraception — to the central administrative state.

But this presupposes a Leviathan not just benign but competent. When it then turns out that vast, faceless bureaucracies tend to be incapable, inadequate, hopelessly inefficient and often corrupt, Obama resorts to expressions of angry surprise.

above tips to Carpe Diem

 

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The Price of Avoiding Failure

from Everything Millennials Need To Know About Politics And Economics in 25 Quotes by John Hawkins in Townhall

my favorites:

4) As my father-in-law once said, when they talk about taxes it’s always for teachers, firemen, and police – but when they spend your taxes, it always seems to go to some guy in a leather chair downtown you never heard of. —Glenn Reynolds

6) If there is no moral foundation for a system of laws, then the law is reduced to “These are the rules. They’re the rules because I say so, and I control all of the guys with guns.” We can ask those who survived Pol Pot, Stalin, or Mao how that worked out…

So the law is either codification of morality or it is thuggery. The real argument is about which moral code will be implemented by the law. To claim to reject a moral underpinning for the law is either a wish to live in a place where the law is whatever one guy says it is today, or else it is a disingenuous attempt to substitute your own moral code for the one that has already been codified. —Beregond

9) When everybody owns something, nobody owns it, and nobody has a direct interest in maintaining or improving its condition. That is why buildings in the Soviet Union — like public housing in the United States — look decrepit within a year or two of their construction… —Milton Friedman

10) Repeatedly asking for government help undermines the foundations of society by destroying initiative and responsibility. It is also a fatal blow to efficiency and corrupts the political process. When everyone gets something for nothing, soon no one will have anything, because no one will be producing anything. —Charles Koch

19) Out of every hundred new ideas ninety-nine or more will probably be inferior to the traditional responses which they propose to replace. No one man, however brilliant or well-informed, can come in one lifetime to such fullness of understanding as to safely judge and dismiss the customs or institutions of his society, for those are the wisdom of generations after centuries of experiment in the laboratory of history. —Will and Ariel Durant

25) Freedom is messy. In free societies, people will fall through the cracks — drink too much, eat too much, buy unaffordable homes, fail to make prudent provision for health care, and much else. But the price of being relieved of all those tiresome choices by a benign paternal government is far too high. Big Government is the small option: it’s the guarantee of smaller freedom, smaller homes, smaller cars, smaller opportunities, smaller lives. – Mark Steyn

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Kansas Tax Cut Debate

from Why Kansas Drives Liberals Crazy by Allysia Finly

The governor has also struggled to communicate Kansas’ modest, but real, progress. Since the tax cuts took effect in January 2013, private job growth in Kansas has surpassed growth in Nebraska and Iowa after trailing for the prior decade. Services (i.e., small businesses) account for 95% of the state’s growth in private jobs, compared with about 70% in Iowa and Nebraska. Last year, Kansas’ private GDP growth exceeded the nation’s and growth in high-tax states like California, New York, Connecticut, Maryland and New Jersey.

this is in response to Reaganomics Tax Experiment Still Going Poorly in Kansas

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Economic Thoughts

HKO_A

The stock market sell off may just be an overdue correction. It may be triggered by the ebola scare or the government’s ineptitude, though that is nothing new.

It may be triggered by a slow down in China, weakness in Europe.

I may be at least partially caused by our own slow growth policies and the failure of endless stimulus to get us out of first gear.

The dollar is strengthening even though our interest rates are at record lows.  This is unusual and may indicate that as weak as our economy is we are still the preferred source for investment.

While a collapsing global market hurts many domestic companies in global commerce it may also cause investment funds to come to our shore pushing both earnings multiples and share prices higher.

Lower oil prices certainly improve the spending power of Main Street and every lower income consumer and every small business running even a small fleet of trucks. It is a spending stimulus worth billions of dollars of tax cuts, but not if you are in the oil production business.

It also raises the relative costs and reduces the relative value of alternative energy sources.  Lower oil prices are very bearish for Tesla Automotive.

How will the ebola scare affect the economy.  Consumers may avoid air travel and malls.  They may drive more wearing out tires quicker.  They may accelerate online buying (AMAZON) even more than they were before. The sales of protective gloves and face masks on Amazon are soaring (Johnson and Johnson).

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Cherry-picking CEO Data

Economist Mark Perry writes in Carpe Diem When we consider all US CEOs and all US workers, the ‘CEO-to-worker pay ratio’ falls from 331:1 to below 4:1

Excerpts:

The AFL-CIO is comparing: a) the average salary of a small sample (350) of the highest paid US CEOs, out of a total CEO population in 2013 of 248,760 CEOs, according to BLS data here, and b) the average worker pay for production and nonsupervisory workers, which represents only 8.5 million factory workers out of a total of 136.3 million payroll employees nationwide. In other words, the AFL-CIO’s reported “CEO-to-worker pay ratio” of 331:1 is calculated by ignoring 99.9% of all US CEOs and 93.8% of all US workers. A more accurate description would be to call it a ratio of the pay for 350 of the highest-paid US CEOs to the pay of only 6.2% of the American labor force, or a ratio of an unrepresentative, infinitesimally small, and statistically insignificant group of CEOs to a small minority and unrepresentative group of US factory workers. It’s a completely bogus and meaningless comparison.

The top chart above shows a more statistically valid comparison of CEO pay to average worker in the US pay by considering: a) the average annual pay of all US CEOs in every year from 2002 to 2013 (data here) and b) the average annual pay of all US workers in a comprehensive, national BLS dataset that includes workers in 22 major occupational groups, 94 minor occupational groups, 458 broad occupations, and 821 detailed occupations (132.6 million workers for 2013). Based on those data, the average CEO earned $178,400 last year, the average worker earned $46,440, and the “CEO-to-worker pay ratio” was 3.84:1, and that’s a LOT different from the AFL-CIO’s ratio of 331:1 by a factor of more than 86 times! Call it a “statistical falsehood-to-truth ratio” of 86:1 for the AFL-CIO’s exaggerated, bogus ratio. The chart also shows that the real CEO-to-worker pay ratio has not been increasing as is frequently reported, but instead has been remarkably constant over the last 12 years, averaging 3.8:1 in a tight range between a maximum of 3.89:1 in 2004 and a minimum of 3.69:1 in both 2005 and 2006. The ratio of 3.84:1 in the most recent year (2013) was actually slightly lower than the ratios in 2004 (3.89:1) and in all years between 2009 and 2012.

Likewise, the bottom chart displays a more statistically valid comparison of average CEO pay to the annual pay of a full-time minimum wage worker. In 2013, a full-time minimum wage worker earned $14,500, and therefore the CEO-to-minimum-wage-worker pay ratio was only 12.3:1 compared to the grossly inflated 774:1 ratio reported by the AFL-CIO. That’s a “statistical falsehood-to-truth ratio” of 63:1 for the AFL-CIO’s exaggerated ratio. Because of the recent increases in the minimum wage between 2007-2009, the CEO-to-minimum-wage-worker pay ratio in recent years has been lower than the most recent 12-year average of 12.76:1.

HKO

They cherry pick data to compare a subgroup of the wealthiest CEOs with a subgroup of the lowest paid production workers.  This is statistical malfeasance of such a high order that any student of statistics can see right through it.  Is this a matter of incompetence or fraud?

This gross misuse of such data is becoming both typical and dangerous.  Is the media too ignorant of basic statistics to see such obvious flaws or are they so monolithically indoctrinated that they refuse to consider that the complete information may shake their poorly founded beliefs about their reality?

A simple Google search will reveal that there are far more articles available that reinforce this falsehood than there are to correct or clarify it.  This is also true in the discussion of inequality,  AGW, and other social issues that require clear information to make correct policies.

“A lie gets halfway around the world before the truth has a chance to get its pants on.” Winston Churchill