Month: December 2012

Science and the Foundation of the Economy

In case you need more proof that science is the foundation of the modern economy you can read this story from Forbes:

Beyond The Fiscal Cliff, Pharmaceutical Innovation Is The Key To Long-Term Fiscal Health

Medicine is one of the fastest growing segments of the economy, and one of the key components of that growth is the development of new medicines and new medical technology. And both are based, in large measure, on science at the cutting edge. The United States has long dominated the field of medical research.  And it will continue to dominate only so long as we as a nation take science seriously. That means supporting it in education, and where necessary, funding it through government programs.

The World Keeps Spinning ‘round

I just saw Les Miserables. It was quite the epic. I’m not much for musicals, and there were quite a few scenes where I wondered why they were singing. But all in all an excellent movie.

Oddly enough we watched “The Grapes of Wrath” last night, so it was a weekend of social change and the depravations of poverty. And that got me thinking about our current economic situation. Les Mis occurred against the backdrop of a dramatically changing French society, and that change was a by-product of the Industrial Revolution and the effect that had on the French economy and society.

I think that today we are in the middle of a changing world economy, brought about by computers and information technology, and impacted by globalization and the growth of countries like China and India. We may be in the midst of changes that rival those caused by the Industrial Revolution. It is difficult to tell when you are in the middle of it. It might be as monumental, or it might be of trifling importance. But in any event, changed in the world economy are having a significant impact on this country. Manufacturing is effected by the rise of industrial China and the spread of industrialization and factories around the world. That is reverberating throughout the nation’s economy.

We are in the middle of dramatically changing times. And our politicians are arguing not about how to deal with this new world, but about the tax rate on high wage earners. This disconnect is bizarre.

Boehner’s Plan B

The Republican Speaker of the House of Representatives, John Boehner of Ohio tried to make an end run around the President and his proposal for dealing with the so called “fiscal cliff” by asking the House to vote on what Boehner called his “Plan B.” Plan B was basically a bill that would have allowed taxes to go up for taxpayers making over $1 million, and defer discussion of other maters until later. Boehner’s plan was supposed to embarrass the Democrats, since many of them had proposed such a plan earlier in the year. The problem was that he could not muster enough votes in his own Republican caucus. So Boehner walked away, but before he walked away, he announced in a pique:  

 “Now it is up to the president to work with Senator (Harry) Reid on legislation to avert the fiscal cliff.”

 That’s nice, but there’s only one problem with Boehner’s idea, this little gem:

 “All Bills for raising Revenue shall originate in the House of Representatives.”

That’s from the United States Constitution, Article I, Section 7, Clause 1.

It never ceases to amaze me that conservatives claim deep (deep, deep, deep) deference to the Constitution. Many of them carry around pocket versions that they like to wave around to make a point. But when things don’t go there way, they act like they’ve never heard of the Constitution.

Whether Speaker Boehner wants to deal with it or not is simply irrelevant. Its not the dastardly Democrats, or that slippery Obama, or the liberal press corps that is making him deal with the deficit and the budget. It’s the Constitution.

So Boehner can do one of two things. The first is to do his duty under the Constitution, and work out a revenue bill. Or the second is to walk away, but the coda to that option is that he has to stop lecturing us about his deference to, or supposed knowledge of, the Constitution. He simply can’t have it both ways.  

Princes Among Men

In the last few weeks a number of banks have paid huge fines for various malfeasance. The news today was that UBS will pay $1.5 billion to US regulators for rigging the LIBOR interest rate. The British bank Barclays paid a $450 million fine in June as part of the LIBOR scandal, and both Royal Bank of Scotland and Deutsche Bank are negotiating fines with American and British bank regulators. Just a few weeks ago, HSBC was fined $1.92 billion for laundering Mexican drug cartel money. Standard Chartered Bank was fined $327 million for money laundering in Africa and Asia. And this summer ING Bank agreed to pay $619 million to settle charges that they traded with foreign countries in violations of US trade sanctions.

When conservatives argue against regulating banks and financial institutions they imply, if not outright suggest, that bankers are a particularly noble group of people. They are princes among men. Indeed they are, if he princes we are talking about are from the Italian City states of the Renaissance. They are as greedy and rapacious as the Borgia, as malevolent and malicious as the Medici.   

Andy Barr and Community Banking

Newly elected Representative Any Barr was appointed to sit on the House Financial Services Committee. Barr said that “Serving on the Financial Services Committee will enable me to immediately go to work on solving Kentucky’s jobs crisis. … We must return to the day when a local banker and a small businessperson could meet face-to-face and arrange a loan based on trust and accountability.” [Read more here: http://www.kentucky.com/2012/12/13/2442457/andy-barr-gets-seat-on-house-financial.html#storylink=misearch#storylink=cpy]

There are serious concerns about some of the provisions of the Dodd-Frank Reform Bill, particularly provisions that tighten lending requirements. Some have suggested that the lending requirements are too tight, and this is an issue that must be addressed, and hopefully Representative Barr will work on the issue.

But the problems with community banks goes far beyond Dodd-Frank. There has been a dramatic decline in the number of community banks over the recent decade, and the cause is not Washington regulation. The cause is the free market and the fact that large banks are just more efficient than small banks. According to a report from Celent, which is a research firm that advises financial instates, there has been an “unprecedented concentration” in banking, and much of it has come at the expense of community banks. A link to the Report is here: The Decline of the Community Bank.

 If Representative Barr wants to truly address the problems facing community banks, he needs to look at all of the issues facing community banks. That includes over regulation, but it also includes the effects of consolidation. The problem is that consolidation is a product of the operation of the free market, and that means that there are, on occasion, negative effects from the free market. I wonder how Rep. Barr will address that.

The GOP and Human Nature

Rick Perry said recently that he wants to “make abortion, at any stage, a thing of the past.” (He was speaking at a press conference organized by Texas Right to Life on Tuesday December 11, 2012.)

This may seem like an admirable and laudable goal, but the problem is that it does not relate to human nature. Whether we like it or not, abortion has existed since the beginning of time, and has existed in every human culture. Abortion exists because unwanted pregnancies exist. And unwanted pregnancies exist because of the fallibility of human nature. People are the product of their nature, and desire, and a hundred other emotions bundled up with the urge for sex, is a product of human nature.

We can only end abortion if we end unwanted pregnancies, and we will only be able to stop unwanted pregnancies if we are somehow able to change human nature.

I recently read a quote from Abraham Lincoln on drinking. Lincoln was addressing the Illinois Temperance Society when he said that to think that criminalizing alcohol would stop drinking and drunkenness is “to expect a reversal of human nature, which is God’s decree and never can be reversed.” [From Raiding Consciousness: Why the War on Drugs is a War on Human Nature, by Lewis Lapham, published in the Winter 2012 issue of Lapham’s Quarterly, and on-line at TomDispatch:  http://www.tomdispatch.com/blog/175626/tomgram%3A_lewis_lapham%2C_drugs_and_the_national_security_state

I am neither praising nor defending abortion, just suggesting that we need to address it as a product of the human condition.

Rand Paul vs. Reality

In a radio interview yesterday, Kentucky Senator Rand Paul criticized actress Ashley Judd, who some suggest may be considering running for US Senate against Paul’s colleague Mitch McConnell. Paul said that Judd was probably too liberal for Kentucky (which is probably accurate) but then he said “She hates our biggest industry, which is coal.”   

Coal is certainly an important industry in the Commonwealth, but it is hardly Kentucky’s biggest industry.

In fact, from the information I could find, coal mining is a fairly minor portion of the overall state economy. Unfortunately I didn’t find any good, comprehensive data.

But the main point is that it is a bit disconcerting for a Kentucky Senator to so thoroughly misunderstand the economy of his state. If we are to solve this state’s problems, and this nation’s problems, we need to first understand them. That means understanding the factual reality of the issues.

You can’t solve problems on hopes and dreams and wishes. We saw how the Republicans tried to solve the problem of the presidential election based on hopes and dreams and wishes, and it wasn’t a pretty sight. We need politicians who can handle reality, and that doesn’t appear to be Senator Paul.

OK, here’s the data on industry in Kentucky:

According to fortune Magazine, there are Six Kentucky companies on the Fortune 500 for 2012. They are: Humana (Health Insurance), Yum Brands (fast food including KFC and Taco Bell), Ashland (oil and specialty petroleum products), Omnicare (Health Care and Pharmacy services), General Cable(electronics and electrical equipment) and Kindred Healthcare (Health care and medical facilities).

According to the State of Kentucky web site:

Kentucky’s Gross State Product (GSP) during the latest reporting cycle was $156 billion. The largest industry groups, based on their contribution to the total state gross product are: manufacturing, services, government, insurance and real estate, retail trade, transportation and public utilities, wholesale trade, construction, mining, farming and agricultural services, forestry, and fisheries.

Unfortunately I was not able to find anything that more accurately quantified that data.

According to the State of Kentucky Economic Development Cabinet, these are the top employer industries in the state:

2011 Manufacturing Employment

 

According to the State EDC, these are the top ten largest employers in the state:

Top 10 Manufacturers/Supportive Service Companies by Employment

 

Here’s a good pie chart from MACED that shows the employment breakdown by industry in Kentucky.

 

As you can see, Mining accounted for about 1 percent of employment in Kentucky in 2004, and I could not find statistics showing that this number went up significantly. In fact, most data shows that it went down.

This MACED chart was the most inclusive data that I could find on the issue.

Even FOX agrees: the stock market does better under Democrats

I was doing some research on GDP growth per administration and I came across the following news report from Fox Business News. I’m not sure if it made it onto FOX Television or not. My guess is not, but I could be wrong.

Anyway, the headline (which is also the link) says it all:

 

History Shows Stocks, GDP Outperform Under Democrats

Even FOX agrees: the stock market does better under Democrats

I was doing some research on GDP growth per administration and I came across the following news report from Fox Business News. I’m not sure if it made it onto FOX Television or not. My guess is not, but I could be wrong.

Anyway, the headline (which is also the link) says it all:

 

History Shows Stocks, GDP Outperform Under Democrats