Thursday, January 28, 2010

Explaining the Shadow Budget

Director of Research Paul Bachman describes the Shadow Budget and its application to the Commonwealth of Massachusetts in an interview with Jim Musser of the Mercatus Center.

The "Shadow Budget" is part of a proposal outlined in BHI's latest study, Massachusetts Fiscal Policy: The Legend v. the Facts.

The study also hypothesizes how the Commonwealth of Massachusetts would have performed it a Tax and Expenditure (TEL) were in place since 1999.

Monday, January 25, 2010

Economists voice support/opposition to Big Ben's reappoinment

Of course economists have an opinion in favor of Ben Bernanke on one hand and opposition on the other hand.

Why do economists disagree?

Thursday, January 21, 2010

Spiking again! Mass. unemployment

Latest unemployment data for Massachusetts. Not good.
The unemployment rate in Massachusetts rose to 9.4 percent in December, breaking a two-month streak of declining unemployment and bucking national trends, according to a release by the Executive Office of Labor and Workforce Development.

David Tuerck interview with WORLD Magazine

David Tuerck explains Massachusetts and its reputation
I don’t think a shift is taking place. First, Attorney General Martha Coakley is a terrible campaigner and Brown is an attractive guy. Also, as I said, President Obama went farther to the left than the union rank-and-file would have liked. Keep in mind that Massachusetts approved Proposition 2½ over 25 years ago and that puts a strong limit on property taxes. We also voted to cut the income tax eight years ago. When we have a statewide issue—like this one—Massachusetts can go to the right.

Stossel updates Ricardo

When Nixon was president, we imported 25 percent of our oil. Since then, our "leaders" have wasted billions on subsidies for alternative energy. The result? Today we import nearly 70 percent of our oil.

Terrible as that sounds, I say, "So what?" Interdependence is just fine! And journalist Robert Bryce, author of Gusher of Lies: The Dangerous Delusion of Energy Independence, agrees. He'll be my guest on Stossel tonight (Fox Business Network, 8 Eastern, and again Friday at 10).

Bryce points out that while Saudi Arabia and Iran are oil exporters, they are gasoline importers. "If even Saudi Arabia and Iran are energy interdependent, why wouldn't we be?" he says. "Energy interdependence" is just a way of saying "division of labor" and "comparative advantage."

Our biggest foreign oil suppliers are Canada and Mexico. Do they threaten us? Venezuela or Iran might, but they need the oil money. They would hurt themselves if they tried to cut us off.

Even if they did try, we'd still get their oil. All the world's oil ends up in the same bathtub. The dictator sells to someone who sells to someone who will then sell to us. Chasing energy "independence" is pointless. Free trade is better. It makes us richer and more secure.

Thursday, January 14, 2010

Let's add a little economics to health care economics

Veronique de Rugy: Economists have shown that if a good’s price is zero or decreasing, then the demand for this good will likely increase. In 2008, consumers were only directly responsible for 11.9 percent of total national healthcare expenditures, down from 43 percent in 1965, according to new data from the U.S. Department of Health and Human Services. This means that someone other than consumers pays roughly 88 percent of all healthcare costs, giving consumers little incentive to mind costs and much incentive to over-consume

Wednesday, January 13, 2010

The Beige Book is out.

Here's the write-up on the economy for the Boston district of the Fed. The bank's report strikes a cautious outlook.
First District business contacts report that activity has picked up in recent months. For retailers and some advertising and consulting firms, the pickup has led to flat to positive year-over-year sales, while manufacturers' revenues mostly remain below year-earlier levels. A couple of commercial real estate contacts see very modest improvement while others remain downbeat; residential real estate sales (but not prices) are up substantially in response to the 2009 new homebuyers' tax credit. Prices are generally said to be stable, except for selected metals prices, which are reported to be rising. With some exceptions, First District business respondents say employment is level or up slightly; some firms intend to raise pay levels modestly in 2010. The outlook remains cautious.

Tuesday, January 12, 2010

New proposed sheet metal apprenticehip rules fail efficiency test

BHI Executive Director David G. Tuerck presented testimony before the state's Board of Examiners for Sheet Metal Workers. The board is considering a proposal that will increase the ratio of three (3) sheet metal workers to one (1) apprentice. Does this make economic sense?

At a hearing of the board in Springfield, BHI argued:
These changes are, by any account, a step in the wrong direction. The national unemployment rate for construction workers currently stands at 19%. The prevailing wage law creates rigidities in construction wages that already make it impossible to relieve this problem by reducing labor costs for public projects. This new regulation will simply increase labor costs and thus further aggravate the current unemployment problem in construction.

The regulation will have adverse long-run effects as well. It effectively restricts labor supply for sheet metal workers at a time when experienced workers are reaching retirement age in greater numbers than before. By attempting to shift the composition of the workforce from younger to older workers, the regulation promises ultimately to invite labor scarcities and escalating labor costs.
Entire testimony is available at

Do taxes matter?

Apparently for retailers in Massachusetts this past holiday season. Business is down!
Holiday sales at local merchants dropped 2.6 percent compared with the same period in 2008, the third straight year of declines in Massachusetts, according to a survey released yesterday by the Retailers Association of Massachusetts.

Results of the 2009 survey of 3,100 business owners were in line with the association’s projection of a 3 percent drop for November and December sales. That comes on top of a 7 percent plunge during the same months in 2008.

Some businesses, including jewelers and home goods shops, saw a small uptick in Christmas sales, but the recession, coupled with an increase in the state’s sales tax, made it another tough year for Massachusetts merchants, according to Jon Hurst, president of the Retailers Association of Massachusetts.

“Retailers were more prepared this year with lower inventories and lower expectations,’’ Hurst said. “This year’s decline isn’t as bad as 2008, but that was really the worst holiday season that the retail sector had seen in a long time.’’

Research firm ShopperTrak yesterday reported that sales across the country rose 1.7 percent for the 2009 holiday shopping season while traffic at shopping centers dropped 2.9 percent for the same period. Winter weather also seemed to take a toll in New England, with BJ’s Wholesale Club blaming a severe snowstorm before Christmas for taking away sales.

Hurst and other local merchants suggested Massachusetts fared worse than other states because of the sales tax increase. State lawmakers hiked the sales tax in August to 6.25 percent from 5 percent.
BHI's analysis of last year's tax hike is here.

Monday, January 11, 2010

Impending chaos the result of EPA new power on GHG?

It's not just business that wants to slow down the Environmental Protection Agency and its new rules to regulate greenhouse gases under the Clean Air Act. States want the EPA to take another look.
A growing number of state regulators are urging the Obama administration to slow the rollout of proposed federal rules curbing industrial greenhouse-gas emissions, saying the administration's approach could overwhelm them with paperwork, delay construction projects and undercut their own efforts to fight climate change.

The concerns echo some criticisms that business groups -- including the American Petroleum Institute and the National Association of Manufacturers -- have voiced about the potential consequence of new regulations, though the states generally don't challenge the legality of the proposed regulations, as some business groups have. Indeed, many state regulators continue to say they support the Environmental Protection Agency's effort to regulate greenhouse gases. Their concerns, they say, have more to do with how quickly such rules should be phased in, and how to pay for an expansion in regulatory oversight at a time when their budgets are in the red.

Regulators from around the U.S., including Kansas, Pennsylvania, Florida and California, are calling on the EPA to go slowly with its new rules, and in some cases warning that they lack funding to regulate some of the new emissions sources that would be covered.

The states' warnings vary in urgency, with some saying the EPA's proposal can be easily tweaked and others urging the agency to reconsider the proposal, predicting dire consequences. South Carolina regulators, in a letter to EPA dated Dec. 23, said the proposal will cause chaos and warned that many construction projects -- and jobs -- are at risk.
Read: BHI's Comments on Regulating Greenhouse Gas Emissions under the Clean Air Act;
Advanced Notice of Proposed Rulemaking RIN 2060-AP12

Robert Pozen on TARP

Robert Pozen:
The lesson from these transactions is clear. If the Treasury bails out large banks in the future, it should demand the same terms as those received by sophisticated institutional investors. Some of the rescued banks will become profitable, while others will become insolvent. Taxpayers need to maximize their gains on the successful turnarounds to compensate for their losses on the bailouts that inevitably fail.
Pozen, chairman of MFS Investment Management, is the author of Too Big to Save: How to Fix the U.S. Financial System

Thursday, January 7, 2010

Unemployment claims change little

Making the way for job growth?
Fewer than 435,000 Americans filed for first-time unemployment claims last week, the second week in a row that claims have been this low in more than a year.

The trend suggests that the economy is nearing the point when job growth will outstrip job loss in the US economy. But economists are cautious about the report released Thursday by the US Department of Labor because of the enormous variation between the seasonally adjusted and unadjusted numbers.

For the week ended Jan. 2, 434,000 Americans filed for first-time benefits (a sign they've just lost a job). That was up only 1,000 from the week before, when counted on a seasonally adjusted basis and economists had been expecting a rise to 440,000.

But because unemployment tends to peak around this time, government statisticians smooth this data so that the numbers can be compared week to week. In actuality, nearly 646,000 Americans filed for benefits last week, according to the unadjusted data.
Press release from DOL.

Wednesday, January 6, 2010

Those expensive public pensions

Chris Edwards thinks state and local governments can realize large savings by trimming compensation packages for public employees.