Category: Current Affairs

Should we raise taxes?

Martin Feldstein says no. Brad DeLong says yes, at least once the economy recovers further. Alex Tabarrok says maybe, if we can cut the right deal. I would say that taxes, real taxes, already have been raised, the Bush Administration just hasn’t admitted it yet. Milton Friedman has long insisted that the level of government spending is the best measure of what government is taking from the economy.

Addendum: Co-blogger Alex agrees, read his very nice statement of the argument.

Insourcing: the current trend

Michael Walden writes:

While outsourcing has captured current attention, it is not a new phenomenon. If the term is defined as jobs operated by U.S. companies in foreign countries, the current total is 10 million positions, or 7 percent of domestic U.S. employment. Further, there’s been an upward trend in the number of outsourced jobs since the mid-1990s, when trade barriers were significantly reduced following the signing of the NAFTA and GATT agreements.

What is less well publicized and understood is that “insourcing” also occurs in our economy. Insourcing happens when foreign companies establish jobs in the United States.

The latest statistics show insourcing accounts for over 6.5 million jobs nationwide. Although this is less than the number of outsourced jobs, the gap has actually narrowed in the past quarter century. That is, there’s been a recent trend of foreign companies adding jobs in the U.S. faster than U.S companies have increased jobs in foreign countries….

The scorecard on job outsourcing versus job insourcing has actually moved in the favor of the U.S. in recent decades, and policy-makers must consider both when evaluating the worldwide movement of jobs.

Thanks to Daniel Drezner for the link, read his accompanying discussion of the Europeans are dealing with outsourcing.

If pigs had wings

The Disney board just turned down the current Comcast offer. Of course Comcast is free to come back with better terms. The first bid was considered no more than an opening salvo in a longer bidding battle. Disney already has hinted it would consider a better offer.

Now if a better Comcast offer for Disney made sense, what would this imply?

1. It would mean that cable operators are correct in wishing for an earlier release of films to television. DVD releases would end up speeded up as well. Moviegoing would become more of a social event, rather than the only means of seeing a given film. Date movies and large screen spectaculars probably would become more popular in the theater, as they would offer a more unique product. Moviegoing as a whole might well decline in popularity. Large-screen televisions would increase in appeal.

The big gainers would be the cable companies, who would capture a share of the revenue currently going to DVDs. The big losers would be Hollywood and, to a lesser extent, companies such as Wal-Mart and Best Buy, which sell large numbers of low-priced DVDs (they would make back some money on TV sales). In part the offer is an attempt to yank DVD revenue away from movie producers and put it in the hands of a company that pipes movies into your home. The age of video on demand would finally arrive, Comcast is known for its strong promotion of this concept.

2. A takeover would signal a final end to the privileged position of the major networks. Don’t forget that Disney owns ABC, so the biggest cable company would now own a major network. Network programming would end up driven by the demands of cable television. Cable and satellite TV already account for the bulk of American viewing; only 14 percent of the American viewing public does not have either cable or satellite TV. In addition local news would continue to decline in importance and TV will become racier, given the looser role of the FCC in supervising cable content.

3. A takeover would later be seen as a turning point for the convergence of all media with the Internet. Cable supplies most of the bandwidth, and the ascendancy of cable companies will enable your TV, Internet connection, and other electronic devices to talk to each other. With a cable company leading the charge, and controlling and owning the relevant content, it could more easily internalize these benefits and charge you for the integration.

But reread the first word of the title of this post, “If.” Here is Rudyard Kipling’s poem If.

Can’t all this happen without Comcast buying Disney? If these outcomes are value-maximizing won’t arms-length transacting get us to the same place? You can bet on this question with a phone call to your broker. But before making your bet, read about this attempt to use stem cell technologies to grow pig wings.

Questions of the day

You say the rich do not pay enough taxes. In 1979 the top 1 percent of earners paid 19.75 percent of income taxes. Today they pay 36.3 percent. How much is enough?

From George Will’s excellent “The 1st 28 Questions for Kerry.” The entire article makes for compelling reading.

How about this one?

You say the federal government is not spending enough on education. President Bush has increased education spending 48 percent. How much is enough?

These questions are an object lesson in the virtues of divided government.

Addendum: For the tax data, here is a relevant link, thanks to Paul Barriere.

Coatless Girl

In his stump speech, John Edwards is fond of empathizing with the plight of a 10-year old girl “somewhere in America,” who goes to bed “praying that tomorrow will not be as cold as today, because she doesn’t have the coat to keep her warm.”

Yet, as John Tierney points out, “clothing has become so cheap and plentiful (partly because of textile imports, which Mr. Edwards has proposed to limit) that there is a glut of second-hand clothing, and consequently most clothing donated to charity is shipped abroad. The second-hand children’s coats that remain in America typically sell for about $5 in thrift shops.” (emphasis added)

Rewards for Justice

The State Department’s Rewards for Justice program has been quite successful. At the twenty five million dollar level we captured one ourselves (Saddam) but paid a reward for the capture of Al Qaeda leader Khalid Sheikh Mohammed. Qusay and Uday Hussein were located due to a reward as was Ramzi Yousef and the terrorists responsible for the destruction of Pan Am 103. Know where a terrorist is located? The Rewards for Justice homepage is available in Arabic, Hindi, Pashtu, and Swahili among other languages.

British national patrimony

Thirty years ago the British government drew up a list of 35 privately-owned paintings, on British territory, that should be kept in Britain for reasons of national heritage. The pictures were deemed “of such outstanding quality that they should not under any circumstances be allowed to leave the country.” Many were hanging in country homes, and many have since been acquired by British public sector museums. The British government will help institutions bid more heavily for such pictures, to keep them in the country.

N.B.: Not a single British work is on the list.

Here is the full story.

My take: On one hand, the cosmopolitan British perspective is to be applauded. But why oh why does the British government feel it is a superior artistic investor? Taxpayers never see this money again and most of them never go see the pictures. Don’t cite museum visitorship statistics to me, most people never see the pictures or would know if they are gone. And with the Louvre just a few hours across the Chunnel, it is really necessary to stop a Poussin from going to the United States? Odd that a national patrimony policy should grant its biggest subsidy to foreign tourists and to the reputations of foreign artists.

N. Gregory Mankiw vs. John Kerry

Free-trader Daniel Drezner offers full coverage of Mankiw’s pro-outsourcing testimony before Congress. Brad DeLong defends Mankiw, free trade and outsourcing. John Kerry attacks Mankiw’s words and his campaign. He also dismisses a voter-calling service that had been routing its phone calls through Canada.

My idea: Unless a candidate supports free trade, his party can only drive supporters to the polls with American-made cars.

Update: The Kerry family fortune operates 57 factories in foreign countries.

Markets in everything, part III

Had your fill of match.com? But lacking in guts today? Try an on-line break-up. Did you know you can hire someone to do it for you?

Breakupservice.com, founded in 2002, offers a range of options for heartbreakers who have $50 but not, as cofounder and president Ren Thompson puts it, “the nerve, or the know-how,” to write their own good-byes. According to Thompson, between 1,200 and 1,500 men and women annually turn to the Dublin, Calif.-based company for a custom-tailored “Dear John” or “Dear Jane” letter with that special admixture of grace, verve, tact, and distance.

For the less old-fashioned, Thompson or one of his six breakup representatives also break the news by means of a “Happy Ending counseling call” lasting roughly 15 minutes on average. The conversation doesn’t always begin on a happy note. The most common reactions, Thompson says, are “Is this some kind of joke?” or “Are you recording this?” But once people get over the skepticism, Thompson says, it’s a learning experience. “They have an inkling there’s a problem. Now they have some real closure with real answers. We try to help them look at it as a new beginning.”

Starting afresh is also behind the philosophy at LadyLoveWriter.com and its male-oriented counterpart LoveWriter.com. For $89, New Jersey-based scribe Erica Klein (who works by day as a direct-mail copywriter) will conduct a telephone consultation and compose “The Gentle Breakup Letter,” which she e-mails to the client to write out in his or her own handwriting. Would-be heartbreakers answer eight key informational questions on the order form and then choose from three “emotional styles”: “Light and Casual,” “Straightforward But From the Heart,” or “Super-Romantic” (though Klein can’t recall any client opting for the latter).

“We’re good at caring and compassion,” noted Klein.

Just look at one company’s client testimonials:

I met what I thought was a sweet girl. We dated a couple of times then I realized she was completely psycho. She would not take any of the hints I gave as I didn’t want her around but one phone call with a follow-up letter from breakupservice.com did the trick I never heard from her again. Thanks! Charlie M.

One of the companies also performs furniture and pet retrieval, for fees ranging up to $400.

Here is a previous installment of Markets in Everything.

Haitian life

Haiti remains mired in possible civil war, but this was not the most depressing Haitian news story of the day. The Washington Post reports on water supplies in Haiti:

…three times a day, she [a mother] fills a five-gallon tub, balances it on her head and walks steadily and gracefully back up to her one-room house, careful not to spill a drop. The water may not be safe to drink, but it is precious.

She said she has no alternative to drinking tainted water, which kills thousands of people in Haiti every year. This is her test for the daily water: “If it is clean, nothing will happen. When the water is not clean, my children get diarrhea.”

It is a risk that millions of Haitians must take each day. Although there has been a public campaign to teach people how to drop a small quantity of bleach into their buckets to purify the water by chlorinating it, no one has been able to instruct families on what to do if they have no money to buy the bleach. So some Haitians decide on their own. “Sometimes,” Zilice said, “I use lemon.”

“When we see the doctor, the doctor will say, ‘Take precautions for the water. Put Clorox so you can drink it,’ ” she said. But when there is no bleach, she said her children sometimes become sick with fever. That is when she boils the water if she can. Boiling water is a luxury for the rich. “I don’t always have money to buy charcoal or gas to boil the water,” she said. “I know it is a risk but I have no choice.”

Or how about this?

“Sometimes you see small children go at 5 in the morning to get water before classes. If they do not walk for water they die.”

Sixty percent of Haiti’s 8.5 million people do not have clean drinking water. It puts this whole RSVP business into perspective.

Oscar odds

There is more betting on the Oscars than ever before. Variety magazine reports that on-line betting on the Oscars has grown 300% over the last three years. The U.K. site Betonsports.com has led the way and expects more than one million dollars worth of Oscar wagers this year. The most heavily wagered category, surprisingly, usually is “Best Director.” Presumably there is too much agreement about what movie will win Best Picture in a given year. Here is one set of odds, not surprisingly Lord of the Rings is a favorite for best picture and director. Sean Penn (Mystic River) and Charlize Theron (Monster) are favored to win leading actor and actress respectively.

Outsourcing medical care

More Americans and other nationals are traveling to Thailand for health care. A heart bypass costs 8-15K instead of 25-35K in the U.S. and arguably the service is better. In addition to a good doctor they will give you limo pick-up and convalescence time in a hotel. You can get a nose job for less than a quarter of the price. If you are uninsured, lightly insured, or stuck in a Canadian queue, why not go abroad for your care? Some Thai hotels are helping to organize care services, in conjunction with medical providers. In 2002 Thai hospitals treated 308,000 patients from abroad.

Are you interested? Check out this site and hope they learned more medicine than English grammar. Nonetheless the doctors are promoted: “Asians often seem to do well in high tech academics… not that well in football, but often very well in the class room / laboratory… pretty good in baseball & gymnastics..”

The suppliers offer their own caveat, however: “I probably wouldn’t have Siamese Twins separated in Siam!”

Worry all you want, the bottom line is that one root canal pays for a luxury vacation.

Singapore and India also are taking in foreign patients, 200,000 and 10,000 accordingly, with predicted growth for the future. Medical products are being outsourced to Asia as well, with significant cost savings.

In an age of skyrocketing medical costs, and pressing fiscal problems, surely this is good news. The thing is, other forms of outsourcing are also good for both your wealth and your health, and for the same reasons.

Some of the information in this post is from the recent Business Week article “Sand, Sun, and Surgery,” not yet on-line.