Cavuto

Here's the link to a humorous, yet pointed Cavuto commentary that reflects some intelligent economic thought.

This on a day when Barry O'B is reportedly going to appoint a 41 year old college professor turned campaign adviser to head his economic team--further evidence that this Govt. in the White House "knows nothing". At the very least, I'm confident Mr. Goolsbee knows nothing about what it would take to motivate entrepreneurs to take a risk and hire some folks.

Freeze or Get Down?

"Well, which is it, young feller? You want I should freeze or get down on the ground?" A great line from Raising Arizona. The confused bank customer asks this of an inept bank robber who has ordered everyone both to freeze and to get down on the ground.

The same scene will be replayed today at the White House when Barry O'B reportedly will sit down with a couple of too-big-to-fail bank CEOs. On the one hand, they've been told they screwed things up. They were greedy and preditory for making the loans that created the real estate bubble and the resulting meltdown of the financial system. They took too many risks and had to be bailed out at tax payer expense.

Now that they have become more cautious (the only thing in banking worse than not making a loan is making a bad loan), they're being told they're greedy for hoarding cash. They're not loaning money to small businesses to create jobs. This, of course, leads to higher unemployment which leads to such inconvenient outcomes as tea party protests and plummeting presidential popularity polls.

Well, which is it going to be, young feller? You want we should make good, safe loans that have a chance of being repaid or you want we should make risky small business loans that may in the short run create jobs and take the pressure off of you, Mr. President, but will surely add to the risk?

Loaning money to small business loans is tremendously risky. That's why Congress created the Small Business Administration--to make the loans that were too risky for bankers to make. You see, bankers have to make a profit or they go out of business. The SBA has never been profitable because even with government regulation, too many small businesses fail and default on their loans. Without the government backstop, many of those loans would never be made because they're too risky. (Kind of like the subprime loans that never would have been made had not the banks been pressured to do so by government regulators.)

In the end, tho, it just doesn't matter, Mr. Banker CEOs. You're too big to fail. Just make the loans, take the risk. The Government will just bail you out: it's Fannie and Freddie all over again.

Taxing Effect

Start with a dollar, double it every day ($1, $2, $4, $8. . .) and you'll be a millionaire sometime after lunch 20 days later.

Do the same thing, but this time pay a daily 35% income tax and in 20 days you will have a whopping $22,371. That's no typo--$22,371 versus $1,048,576.

What lessons should we learn from that?

An Apple a Year

How would you like a diet that only required you to eat one less apple per year?

At his cabinet meeting the other day, Barry O'B made a grand production out of asking his bureau chiefs to find a way to cut $100 million with an "m" in wasteful government spending. Thought at the time that surely he meant $100 billion with a "b", but it slipped from my mind.

Today's lead editorial in IBD shocked me back to life. Remember, this guy sent a budget to Congress that totals $3.6 trillion with a "t". That's a proposed budget for one year.

Here's a blurb from IBD:

To get a real sense of just how little is being asked of his Cabinet, consider:

• If Obama were your dietician, you'd only have to give up an apple a year to abide by his diet plan.

• If he wanted you to cut your gasoline consumption, you'd have to drive just one-third of a mile less in a year.

• And if he wanted you to waste less water, you'd only have to reduce the time you spend in the shower on one day of the year by 30 seconds.

We forget how big a billion is, can't comprehend the size of a trillion. A hundred million is actually quite a lot of money to most of us. But it's really nothing on a relative scale.

There just isn't enough money to do what he and the Dems in Congress want to do. You could and take all we've got and that still wouldn't be enough.

Read the whole editorial here.

Masterpiece 4--The Supermarket

One morning recently a water main in Montgomery County broke and we were all told that for three days we were to boil our tap water before drinking it. Word got to me about 9:30 in the morning.

Along about noon I decided to run up to the Safeway on the corner to buy a case or two of bottled water. The thought of boiling water for two days just didn't sit well. Just as I was climbing into the truck it hit me that I must be dreaming: there won't be a drop of water left. Everyone in the neighborhood has beaten me to it, the shelves will be bare.

Much to my surprise, I was way off. At the head of every aisle and in the free space in the meat and produce sections stood pallet upon pallet of bottled water, much of it even on sale. No price gouging there. Seemed like there were even a couple extra checkout registers open to handle the rush of soccer moms and seniors who were similarly disinclined to boil for three days. Safeway recognized and responded to the market demand in a matter of hours--in a matter of minutes, really.

The American supermarket is itself a masterpiece.

This is not my original idea. A George Mason University econ professor in the summer of '83 must be given the credit. Tho I can't remember his name, I will never forget his eloquent soliloquy on the American supermarket.

Stop for a second the next time you're at Safeway or Giant, for that matter, Walmart, Staples or Lowe's--they're the same thing. Appreciate the abundance around you--the complex economic system necessary to bring it all together. Fresh produce, meat, and dairy. Frozen dinners, ice cream, orange juice, and pizza. Canned goods, cake mixes, pasta, potato chips and sodas of every variety. Accross the river in Virginia you can even buy wine and beer.

Today's supermarket offers a much more international fare than its ancestor just a generation ago--roses from Ecuador, salmon from Chile, strawberries from Mexico, apples from New Zealand, shrimp from Costa Rica. Asparagus year round.

And it's not just the food. Think of the packaging--the boxes for cereal, the bags for chicken nuggets, the cans for everything from beans to blueberry pie filling. You have bug spray, matches, medicine, make-up, magazines. Every soap and detergent you can imagine, every paper product you'd ever need for your Sunday picnic. Diapers for the baby, Depends for the mother-in-law.

Somehow it all comes together in this one magical place. From around the country, from around the world. Seven days a week, the shelves always full.

How lucky we are.

Up Next, It's the Minumum Wage

As if there aren't enough economic probs for small business owners, the minimum wage is set to increase nearly 12%.

Take the case of Phyllis Tampling, owner of Jim's Restaurant in Prattville, Ala. Food prices have soared (hard to imagine the price of potatoes going up 75% in one week) but she's been unable to pass the costs on due to competition not only from other restaurants, but also from prices at the pump and the checkout line. Now she's looking at mandated salary increases. Those who aren't on minimum wage will also have to get raises in order for them to stay ahead of those who are. It's a ladder of wage inflation.

I wonder how it will all balance out at Jim's Restaurant. Higher wages would mean fewer profits. Raising prices would mean fewer sales and fewer profits. Refusal to raise wages could lead to employee turnover which also would eat into profits.

The market will work it all out one way or another. My prediction is inflation and further economic contraction.

You have to hand it to the little guys--the Phyllis Tamplings of the world--for sticking with it.

Tax Big Food?

The Carpe Diem blog has a great graph of the profits of Big Oil v. the profits of Big Food. From '05 to '07, profits for Exxon Mobil are up 12% while profits for Monsanto are up 289% and for ADM up 107%.

So why are Congress and the press on Big Oil's back but not Big Food's?

Politics.

Focus groups hate Big Oil but have never heard of Big Food. There are more farm states than oil states, more farm states represented by Dems, Dems control Congress and can demagogue the issue. For Presidential candidates (except McC), the Iowa caucus rules out any attacks on Big Ag. and, therefore, Big Food. The environmentalists hate Big Oil. They run the Dem Party, which controls Congress and can demagogue the issue. Folks who don't do the grocery shopping have no idea how bad food inflation has been. But those who don't do the grocery shopping do buy gas every other day.

Walk In Clinics

Here's the wave of the future in health care--walk in clinics. To get your allergy shot or strep test, you see a nurse practitioner. Wait minutes instead of weeks. Pay $60. They're popping up in Walmarts and Walgreens around the country.

Cigna and Wellpoint look out.

And all without any help from the government. Isn't free market capitalism a wonderful thing? The invisible hand of the market.

Thanks to the Carpe Diem blog for the link.