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Paul Krugman Has Bugged My Office

Two weeks ago I was lecturing two of my coworkers about homeownership. I explained to them that there was insufficient reason for me to purchase a home in the current market, and if need be – I would rent indefinitely. I added that I felt a lot of American’s have been misled into believing that the American Dream is owning a home. I believe the American Dream is freedom and economic prosperity, and for many American’s, home ownership prevents economic prosperity. My reasoning is simple. Many homeowners simply buy too much house and end up being house-poor. Others bought homes in an overvalued market and are now upside in their homes (negative equity.) Owning a home also makes people less mobile, in turn makes it tougher for them to relocate to accept better work. Top that off we the fact that most people own homes outside of the city or in suburbs which requires longer commutes and ever-increasing gas bills. For me, weighing these negatives (and an overvalued market) against the perks of homeownership makes renting a no-brainer for me.

So imagine my surprise when I stumbled across a Paul Krugman article in today’s NY Times that confirmed most of my argument.

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Rove Blasts the Economic Rhetoric of McCain and Obama

from the Wall Street Journal:

Rove wants to know why McCain is “angry, frankly, at the oil companies not only because of the obscene profits they’ve made, but their failure to invest in alternate energy.”  Rove points out that the airline industy was not pioneered by the railroad industry and that automobiles where not championed by the makers of buggy whips.

Rove’s point is that innovation rarely comes from people with a vested interest in the status quo.

Rove also bashes Obama for singling out oil companies with his disastrous plan for a windfall profits tax.  Rove points out that the oil industries “record breaking profits” net them about 8.3 cents per sales dollar which is far less than other industries such as electronics which net 14.5 cents per sales dollar or Microsoft that nets a booming 27.5 cents per sales dollar.  He adds that perhaps Obama is looking at the total net profit made by the oil industry, but not even that would put the oil company at the top of the list.  The oil and gas industry made $85 million which seems meager to the nearly half a billion made by the financial services industry last year.

Rove makes a couple of excellent points here.  Either the candidates are simply pandering or they lack a firm understanding of basic economics. In the case of the latter, however, Obama stands to do much more damage to the economy.

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The Best Movie I Have Seen This Month: Resolved

In the peak of the summer blockbuster season, I caught Resolved by channel flipping this afternoon. It focuses two high school debate teams from distinctly different social and economical backgrounds : California’s Long Beach High School and Texas’s Highland Park High School. One of the most interesting things I learned is that these debates are nearly impossible for the average person to comprehend because of a widely used tactic known as “spreading” or speed-reading. Because the debates are subject to a time-limit – participants speed read their arguments at a mind boggling pace. This tactic and format is subject to criticism because the incomprehensible arguments are not at all like the tactics used in actual forums such as congress, court, or even on your favorite news program.

From The Movie - Resolved

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High Gas Prices Are A Step to a Better America

ForeignPolicy.com has a story about how high gas prices are improving America. I am a firm believer that high gas prices equal shorter commutes (equals less pollution if your into that sort of thing) and a lower obesity rate (equals lower health care costs,) both of which are great concerns for a growing number of Americans. It is good to know that I am not alone in this thinking.

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Political Baggage 101

As a sophomore in college, I took a microeconomics class taught by Dr Joseph Horton. The first day’s lecture consisted of the usual happenings such as going over the syllabus and both instructor and student introductions. While introducing myself, I mentioned my aspiration for politics and a possible political career. Dr Horton replied that politics was an honorable career, but that sound economics often disagrees with sound politics. As the semester continued, I began to understand why politics and economics sometimes mesh like water and oil.

Here is a list of unpopular ideas that most economists agree on via an archived blog by one of my favorite economist Dr Greg Mankiw. It should be noted that I strongly support every item on this list and I plan on explaining my stance in future posts.

  • 87.5 percent agree that “the U.S. should eliminate remaining tariffs and other barriers to trade.”
  • 85.2 percent agree that “the U.S. should eliminate agricultural subsidies.”
  • 85.3 percent agree that “the gap between Social Security funds and expenditures will become unsustainably large within the next fifty years if current policies remain unchanged.”
  • 77.2 percent agree that “the best way to deal with Social Security’s long-term funding gap is to increase the normal retirement age.”
  • 67.1 percent agree that “parents should be given educational vouchers which can be used at government-run or privately-run schools.”
  • 65.0 percent agree that “the U.S. should increase energy taxes.”
  • 90.1 percent disagree with the position that “the U.S. should restrict employers from outsourcing work to foreign countries
  • 46.8 percent want the federal minimum wage eliminated.