Friday, December 31, 2021

As CPS Energy seeks rate hike, new report shows top execs spent big on steak dinners, chauffeurs

By Sanford Nowlin of The San Antonio Current.

CPS is regulated. When we regulate natural monopolies with either Average Total Cost price regulation or Marginal Cost price regulation, it creates an incentive for companies to pad their costs by spending on fringe benefits.

Excerpts from the article:

"CPS Energy's two former top executives used their company purchasing cards to pay for thousands in steak dinners, chauffeur services and other extravagances, according to an analysis of financial records by TV station KSAT.

The report on the officials' spending drew condemnation from Mayor Ron Nirenberg, who said the municipally owned utility's spending must be "reined in," according to KSAT. The story aired the same day as members of city council pushed back at a proposed CPS rate increase, saying the utility first needs to rebuild public trust." 

"Based on its review 4,300 pages of requested CPS financial records, KSAT reports that the utility's former chief operating officer, Fred Bonewell, racked up $53,444.53 in 2019 card purchases — higher than the median household income in San Antonio that same year.

Among the items charged to his card, according to the station: a $683 meal at Saltgrass Steak House, at least three meals running more than $600 each at Paesano's and 100 expensed meals at the same Northside brunch spot."

"former CEO Paula Gold-Williams used her card for $14,000 in luxury chauffeur fares"

Thursday, December 30, 2021

Why U.S. Job Gains Are So Hard to Count During Covid-19

Government gets less data from employers, and economists have a difficult time understanding how the pandemic affects consumer, business behavior 

By Josh Mitchell, Anthony DeBarros & Andrew Barnett of The WSJ by Amrith Ramkumar of The WSJ. Excerpts:

"Economists have struggled to guess the behavior of consumers and companies during unprecedented government stimulus, labor-market shifts and virus fears. Second, the government has seen a sharp decline in the payroll data it collects from employers."

In the days leading to the report on November payrolls, economists surveyed by The Wall Street Journal believed employers added 573,000 jobs that month. The Bureau of Labor Statistics said the actual number was 210,000, and it added 82,000 more jobs to its initial October payrolls estimate for a new total of 546,000.

Even in normal times, predicting job growth is hard. For one, the jobs report, typically released on the first Friday of each month, is one of the first glimpses of economic activity the government offers.

A second reason: the sheer size of the labor market, currently 149 million jobs. A forecast off the mark by 200,000 qualifies as a big miss. But as a percent of overall jobs, it is a rounding error. For November, the median economist forecast was off by 363,000 jobs added, which represented 0.2% of total U.S. payrolls.

The pandemic has added uncertainties. Congress sent households trillions of dollars in stimulus payments and enhanced unemployment benefits. Forecasters were caught off guard by how quickly consumers spent that money, much of it on goods. Economists also struggled to ascertain how quickly businesses would reopen and consumers would return to restaurants and stores. This summer’s Delta variant added uncertainty about whether employers would cut jobs.

The government has far more data than private-sector economists do. But even its estimates have been far off.

BLS surveys about 145,000 employers in the middle of every month and produces an initial estimate that makes up the headline payrolls number of the jobs report. The agency subsequently provides two revisions to that estimate, as it collects more survey responses.

In any given month, many employers respond to the survey late or not at all. The BLS says its big revisions reflect a sharp drop in survey respondents during the pandemic, as often happens during times of economic turmoil. The response rate fell from 59% in February 2020 to 48% in August 2021, the last month for which the BLS has published data."

"The BLS also routinely reaches out to new companies to join the survey sample, to keep up with changes in the types and size of companies that constitute the labor force. There, too, the agency has run into trouble. The share of companies agreeing to be surveyed—the so-called “initiation rate”—has fallen by half over the pandemic to 32% in October. This has led to a smaller sample size, which has likely led to more “noise,” or bigger swings in estimates and re-estimates, Ms. Groshen said. “As your sample decreases, even if it’s representative, you’re going to get more random variation because you don’t have everybody in it,” she said.

Then there is seasonal adjustment. The BLS tweaks the raw survey data to account for seasonal patterns of hiring, such as when retailers boost hiring for the holidays.

The pandemic disrupted those seasonal patterns. It led to the mass closure of schools.

Households shifted spending to goods from services, and to online from physical stores. Retailers likely reduced staffing at in-person stores, said Stephen Stanley, chief economist at analytics firm Amherst Pierpont. The shift may have affected retail employment in November, typically a big month for hiring."

Wednesday, December 29, 2021

Are Expectations Helping To Raise The Price Of Lithium?

Expectation of future price is a shift factor for demand. When buyers expect prices to go up significantly in the near future, demand today increases. That will cause prices today to rise. That is happening right now (although other factors are at work, too).

See Lithium Prices Soar, Turbocharged By Electric-Vehicle Demand and Scant Supply: The lithium price surge is setting off a scramble for supply and fueling fears about long-term battery metals shortages by Amrith Ramkumar of The WSJ. Excerpts:

"Lithium prices are rising at their fastest pace in years, setting off a race to secure supplies and fueling worries about long-term shortages of a vital ingredient in the rechargeable batteries that power everything from electric vehicles to smartphones. 

An index of lithium prices from research firm and price provider Benchmark Mineral Intelligence doubled between May and November and is up some 240% for the year. The index is at its highest level in data going back five years. 

Driving the run up are bets on continued scarcity. Demand is multiplying as Tesla Inc. and other auto makers ramp up sales of electric vehicles. Supply, meanwhile, has been constrained by limited investment in new projects following a recent bear market and supply-chain bottlenecks. Producers often face environmental opposition and cumbersome permitting processes when trying to extract the silvery-white metal."

"Most lithium comes from countries such as Australia and Chile. There are two main sources: a salty brine that is pumped out of the ground and spodumene, a mineral contained in hard rocks. After extraction, chemical processes are used to make battery-grade lithium compounds."

"Environmental opposition and permitting delays also are obstacles for companies, including Lithium Americas in Nevada and Piedmont Lithium Inc., a North Carolina-based producer."

"The challenge for lithium producers is that it takes many years and heavy investment to get projects off the ground, creating mismatches between quickly growing supply and demand. Prices soared in 2017 and 2018, only to fall rapidly after companies ramped up output.

Some analysts expect a similar pattern to play out this time, but only if producers increase capacity and sentiment cools off. 

“There’s enough lithium out there. The issue is the investment required to get there,” said Eric Norris, president of Albemarle’s lithium unit, on the company’s earnings call last month."

"Some analysts see the flood of money piling into the sector eventually pushing supply up and cooling the rally. Citigroup analysts project demand will outpace supply this year and next year before production tops consumption through 2025. 

But red-hot sentiment could still fuel price gains well into next year, some analysts say. 

“It’s more about the perceptions that market players have, not the real shortages of the material,” said Lukasz Bednarski, principal research analyst at IHS Markit focused on lithium. He expects a price correction at some point next year."

Tuesday, December 28, 2021

There is no truck driver shortage in the US

By Nicol├ís Rivero of Quartz. Excerpts: 

"The country is facing a shortage of 80,000 truck drivers, warned the American Trucking Associations (ATA), an industry group representing big US trucking companies, on Oct. 25. It’s a warning they’ve more or less repeated every year since 2005."

"But the assertion that the US is suffering from the latest round of a 16-year truck driver shortage is misleading at best. About 2 million Americans work as licensed truck drivers, and states issue more than 450,000 new commercial driver’s licenses every year, according to the American Association of Motor Vehicle Administrators. In fact, it's the most common job in 29 states.

The problem is retention. Many of those licensed drivers are no longer behind the wheel because they can find better working conditions and pay elsewhere. Jobs in factories, construction sites, and warehouses pay similar wages, and don’t require people to work 70-hour weeks, sleep in parking lots, or wait in line for hours without pay or bathroom breaks to pick up a container at an overwhelmed port.

The real shortage is of good trucking jobs that can attract and retain workers in a tight labor market. The annual turnover of drivers at big trucking companies averaged 94% between 1995 and 2017, according to ATA statistics."

"Economic theory suggests that when there’s a shortage of something—in this case, workers willing to driver trucks—prices (or wages) will rise and more people will be motivated to supply it. Eventually, the shortage should abate. Yet the “driver shortage” rhetoric has been repeated by the trucking industry since the late 1980s. How could such a clear shortage persist for three decades in a market economy?

In 2019, two economists for the US Bureau of Labor Statistics (BLS) set out to investigate the mystery of the perpetual driver shortage: Was there something fundamentally broken about the trucking labor market?

The short answer, they found, is no. The labor market for trucking works about the same as the labor market for all sorts of blue-collar work. Differences in pay entice workers to enter the truck driving industry—and leave it for better opportunities. “There is thus no reason to think that, given sufficient time, driver supply should fail to respond to price signals in the standard way,” the authors wrote.

The real world is testing those economists’ theory. Trucking wages have risen 6.7% since April, when the American covid-19 epidemic began in earnest, according to BLS figures. The number of working truckers is, accordingly, up 7%. When trucking companies raised wages in the runup to the 2020 holiday shopping season, trucking employment went up. When trucking companies cut wages immediately after, employment went down."

"Trucking companies are once again hiking wages in an effort to attract drivers ahead of the holiday season. This year, drivers are in higher demand than ever thanks to the extreme backlog of containers clogging up shipyards: Ports simply can’t offload containers onto trucks fast enough. So trucking firms are giving drivers splashy pay raises of up to 25%, offering bonuses of up to $1,000 per day for drivers who get stuck waiting in lines at ports, and guaranteeing minimum salaries no matter how much cargo drivers are able to haul.

The market, in other words, is working as expected. Companies need more drivers, so they’re raising pay and benefits and attracting more employees."

Monday, December 27, 2021

Why Did Charles Dickens write A Christmas Carol?

Money might have been a big factor.

See The Writer's Almanac with Garrison Keillor. Excerpt:

"It was on this day in 1843 (Dec. 19) that Charles Dickens published A Christmas Carol. Dickens wrote the novel after his first commercial failure. His previous novel, Martin Chuzzlewit (1842) had flopped, and he was suddenly strapped for cash. Martin Chuzzlewit had been satirical and pessimistic, and Dickens thought he might be more successful if he wrote a heartwarming tale with a holiday theme.

He got the idea for the book in late October of 1843, the story of the heartless Ebenezer Scrooge, who has so little Christmas spirit that he wants his assistant Bob Cratchit to work on Christmas Day.

Dickens struggled to finish the book in time for Christmas. He no longer had a publisher so he published the book himself, ordering illustrations, gilt-edged pages and a lavish red bound cover. He priced the book at a mere 5 shillings, in hopes of making it affordable to everyone. It was released within a week of Christmas and was a huge success, selling six thousand copies the first few days, and the demand was so great that it quickly went to second and third editions.

At the time, Christmas was on the decline and not celebrated much. England was in the midst of an Industrial Revolution and most people were incredibly poor, having to work as much as 16 hour days, 6 days a week. Most people couldn't afford to celebrate Christmas, and Puritans believed it was a sin to do so. They felt that celebrating Christmas too extravagantly would be an insult to Christ. The famous American preacher Henry Ward Beecher said that Christmas was a "foreign day" and he wouldn't even recognize it.

When Dickens's novel became a huge bestseller in both the United States and England, A Christmas Carol reminded many people of the old Christmas traditions that had been dying out since the beginning of the Industrial Revolution, of cooking a feast, spending time with family, and spreading warmth and cheer. Dickens helped people return to the old ways of Christmas. He went on to write a Christmas story every year, but none endured as well as A Christmas Carol."

Sunday, December 26, 2021

Surging Inflation Has Workers Demanding Bigger Raises. Could It Lead to a Wage-Price Spiral?

Wage increases prompted by higher prices could protect workers while potentially fueling inflation, economists say

By David Harrison and Sarah Chaney Cambon of The WSJ. Excerpts:

"The COLA is making a comeback.

Higher prices, a worker shortage and a revitalized labor movement are bringing about the return of pay increases tied to inflation, known as cost-of-living adjustments, or COLAs.

On Tuesday, striking workers at food maker Kellogg Co. ratified a contract that included a COLA, the second major labor agreement in recent weeks to feature such pay adjustments. Analysts say COLAs could spread in future negotiations between employers and unions.

Under a COLA, a worker’s pay rises to compensate for the increase in consumer prices. The idea is to protect wages in times when consumer prices are rising rapidly and unpredictably.

The provisions were often part of union contracts 40 or 50 years ago when inflation was high. Starting in the 1990s, as inflation slowed to more modest levels, COLAs became less prominent.

Now, resurgent inflation is leading some workers to ask for higher wages. Annual inflation in November accelerated to 6.8%, the Labor Department reported, the fastest in 39 years."

"“COLAs exist not primarily because inflation is higher, it’s because there’s uncertainty about inflation,” he said [Harry Katz, an economist at Cornell University]. The provision “provides a way of basically sharing the risk.”"

"COLAs could also themselves contribute to inflation. Raising wages to compensate for higher prices could lead to a situation in which companies raise prices to recoup higher wages, which causes workers to ask for yet higher wages, causing the two to feed off each other."

"Such a wage-price spiral emerged in the 1970s and was broken only by tighter monetary policy, Mr. Walden said [Michael Walden, professor emeritus at North Carolina State University]."

"Michael Walden, professor emeritus at North Carolina State University"

"A shrunken labor force, combined with a strong demand for labor, has given workers greater bargaining power. That could prompt more unions to ask for COLAs."

This related post has a graph with aggregate supply and aggregate demand. Past QF or the full-employment GDP is when workers get this greater bargaining power and prices are rising high enough that they seek COLAs.

Fed Focuses on Inflation Sentiment

Friday, December 24, 2021

Conflicting opinions from economists on the value of giving gifts

The battle seems to be over inefficiency (spending money on items others might not want) vs. the idea that if you spent money on someone it is a believable signal that they care about you or having a relationship with you. A program on PBS recently stated that one of the more common gifts that King Henry the VIII got at Christmas was money.

See Holiday shopping? Consider the most economically efficient gift of all: cash, and avoid the deadweight loss of Christmas by Mark J. Perry. Excerpt:

"2. In a 1993 American Economic Review article “The Deadweight Loss of Christmas,” Yale economist Joel Waldfogel concluded that holiday gift-giving destroys a significant portion of the retail value of the gifts given. Reason? The best outcome that gift-givers can achieve is to duplicate the choices that the gift-recipient would have made on his or her own with the cash-equivalent of the gift. In reality, it’s highly certain that many gifts given will not perfectly match the recipient’s own personal tastes and preferences, or it might be the wrong size, color, or style.  

In those cases, the recipient will be worse off with the sub-optimal gift selected by the gift-giver than if the recipient was given cash and allowed to choose his or her own gift. Because many Christmas/holiday gifts are mismatched with the preferences of the recipients, Waldfogel concludes that holiday gift-giving generates a significant economic “deadweight loss” of between one-tenth and one-third of the retail value of the gifts purchased."

See Gift Giving Is Better for Society than Economists Think by Michael Thomas Tony and Anthony Gill. Excerpt:
"A newcomer often is welcomed into a household with a large feast containing more food than can be reasonably consumed. Engagement and wedding rings are expensive signals of a prospective spouse’s fidelity in good times and bad. Clubs, fraternities, and religious organizations often require individuals to go through rigorous rituals to prove their loyalty before gaining the benefits that full membership entails.

So it is with gift giving for holidays and other occasions. Giving gifts, even ones filled with the deadweight loss of mismatched preferences, indicates that one is willing to forego resources in the present in order to maintain a relationship in the future. When times get tough for you, I will assure you that I will be there to sacrifice again. Knowing that I am willing to sacrifice for you makes you more willing to want to continue engaging with me. Your reciprocal sacrifice helps solidify the mutual trust to make a relationship work effectively.

Societies around the world have ritualized these times of “burnt offerings” as a way of communicating trust and a desire to enter into, or remain in, a social network. We learn to gift within our families in the hope that such generosity will translate itself in the broader society.

Gifting: The Gift that Keeps on Giving

Prof. Waldfogel and other economists who rue the inefficiency of holiday gift giving only see the costs and benefits in static terms. The real benefits are dynamic and embedded in the deadweight losses, ironically. By continually showing, through gifts small and large, our willingness to sacrifice for one another we build a cultural fabric of trust and willingness to assist in times of need. Norms of sacrifice, trust, and graciousness are crucial for the functioning of broad-based markets over long periods of time. Our willingness to give and to reciprocate graciously when receiving is what makes us wealthier over time."
Related posts:

Is Christmas Gift Giving Inefficient? (2018)

Are Homemade Gifts Better Or More Special? (2009)

What Anthropologist Melvin Konner Fails To See When He Criticizes Economists And Their Views On Gift Giving (2015)

- Dilbert by Scott Adams

Thursday, December 23, 2021

Is Increased Demand Causing Supply-Chain Problems?

See An Insider Explains the Supply-Chain Crisis: Consumers flush with cash and pandemic restrictions combined to drive demand for goods through the roof. Economist Phil Levy doesn’t see a return to normal until at least 2023 by Tunku Varadarajan of The WSJ. 

He interviewed Phil Levy, chief economist for Flexport, a San Francisco-based tech company for global-logistic services. I like the point he makes about ports not being able to handle the surge in demand. It is like a restaurant that is sometimes so crowded you can't get in. Why not build it bigger? It might be too costly because that extra room might sit empty most of the time. Also, he makes a point about inelastic supply for some goods. That is a steep supply line, so any increase in demand will mean big price increases Excerpts:

"The pandemic is at the root of the supply-chain crisis. Covid-19 has led to work disruptions at factories and ports in China, with quarantines and shutdowns hitting the production and movement of goods. Mr. Levy cites the monthlong shutdown owing to Covid cases in May 2021 at the Chinese port of Yantian, which handles a third more volume than the Port of Los Angeles.

“It’s one of the major Chinese ports. And every time you shut down at one of those places, you’re interrupting the flow of containers.” Buildups and backlogs accumulate. “How do you ever work them down?” Ports have fixed capacity: “You can’t suddenly process twice or three times as many ships once a lockdown is lifted.”

Ninety percent of all exported goods move over the ocean. These include not only finished goods but also parts. “So even if you’re manufacturing in the U.S.,” Mr. Levy says, “the odds are you’re using some imported parts.”

Ports are built “so you can just meet peak demand.” It’s too expensive to build at excess capacity, “because then most of the time you’d have lots of extra stuff sitting around.” The peak season is August through November, “when it’s, ‘How do you stock store shelves for the holidays?’ ” The problem is that a system that can “barely handle” a normal peak season has seen “above peak demand for about an entire year and a half,” placing it under “a cumulative strain it wasn’t really built for.”

A major cause is what Mr. Levy calls “the defining economic characteristics of the pandemic.” There has been a “marked tilt” in buying behavior, a shift from services toward goods. “We still buy more services than goods, don’t get me wrong,” he says. But whereas U.S. consumers spent 69% of their money on services before the pandemic and 31% on goods, the breakdown now is more like 65% to 35%.

The pandemic recession was unlike previous ones. “One of the ways that economists would normally have defined a downturn is that you get a decrease in production and a decrease in income.” But American pocketbooks “were a lot more full than they normally are with a downturn.” It’s not hard to see why, he says, pointing to the Cares Act in March 2020 and other government cash infusions in January and March 2021, “which were directly putting money in. Pretty much all the movements in income track the movements in government transfers.”

This meant that the pandemic “didn’t have the effect that you often would’ve expected with a downturn, which is people don’t have money to spend. They did. And then their preference of what they spend it on tilted towards goods.” Some of this income was saved, too, so that consumers were flush even after government support ended.

Demand for durable goods—those, like Mr. Levy’s oven, that last longer than three years—dropped briefly after the pandemic started, then “shot right up in the early summer of 2020.” So while U.S. gross domestic product gradually recovered in the second and third quarters of 2020, the recovery in U.S. imports was much more rapid—reaching pre-pandemic levels by October 2020 and continuing to increase."

"Whereas goods consumption previously “might move up or down by 0.2%, here you were seeing moves that were 10, 15 times that.”"

"As consumption shifted to goods, Mr. Levy says, the initial burst was in durables. That’s one reason why Federal Reserve Chairman Jerome Powell described inflation as “transitory,” a judgment he’s since withdrawn. “ ‘Transitory’ was transitory,” Mr. Levy chuckles, apologizing for the labored joke—“trade economist humor,” he says. “We find it where we can.”

Mr. Levy, who was a senior economist for President George W. Bush’s Council of Economic Advisers, isn’t entirely unsympathetic to Mr. Powell’s initial thinking. “It was based on what we saw with the surge in durables. If everybody had moved up their purchases of sofas or exercise machines, and so forth, by definition those aren’t the things you buy month after month after month. If I buy three years’ worth of sofas all in one year, our expectation is this will be short-lived.”

The durables spurt started in May 2020, and by month’s end they were “right back to what they were pre-pandemic.” They rose to 10% above that level in June 2020. “By the time you got to about March 2021, durables consumption was about 35% higher than it had been.” That was the peak; now it’s 18% above pre-Covid levels.

But there’s been another twist. The buying of nondurables—goods that last less than three years—has shot up. After a spurt in March 2020—remember the panic buying of toilet paper—nondurable consumption went down in April 2020, then made what Mr. Levy calls “a slow, steady climb to where they are about now—13% or so above pre-pandemic numbers.” With “inelastic supply and a big surge in demand, prices have to go up.”"

"A return to previous patterns of consumption would also reduce the strain on the supply chain. Yet for consumer demand to abate, people’s buying power would need to decline, or there would have to be a shift back toward buying services."  

"The supply-chain crisis, Mr. Levy contends, has no parallel in history. We’ve had shocks before, such as the oil crisis of 1973. But “global-trade liberalization and distributed specialization,” allied to an ease of shipping and transport, fueled by ideas like “just-in-time inventory”—that’s all new."

 Related posts:

Flushing out the true cause of the global toilet paper shortage amid coronavirus pandemic (2020)

Ventilators and the law of increasing opportunity cost (2020) 

Coins are more valuable right now than they normally are (2020) 

Does socially responsible investing make the world a better place? (2019) 

Supply, Demand and the High Price of Vanilla (2019)

Wednesday, December 22, 2021

Life Is Full Of Tradeoffs: If We Want To Do More To Fight Climate Change We May Have To Lower Tariffs On Solar Panels Which Might Put U.S. Firms Out Of Business

One of the fundamentals of economics is opportunity cost which is the value of the best foregone alternative. We often say "there is no such thing as a free lunch." If if you want more of one thing you give up something else. This article is a good example. It does mention that we could give solar firms tax credits instead of using tariffs. But again, that still poses a tradeoff as it means more taxes would have to be collected elsewhere.

See Biden’s China and Climate Goals Clash Over Solar Panels: Expiring tariffs on Chinese imports have the administration facing a trade-off between cheap renewables and solar made in the U.S. by Josh Zumbrun of The WSJ. Excerpts:

"The Biden administration faces a looming decision on solar-energy tariffs that pits its goal of combating climate change against its ambition to wrestle high-tech manufacturing supply chains from China.

Early next year, U.S. taxes on imported solar panels are set to expire after a four-year run. Many climate activists and solar-energy users want the administration to scrap the tariffs, saying they make solar panels needlessly expensive."

"U.S. solar manufacturers are petitioning to extend the tariffs for another four years. They say without them, the U.S. will effectively cede the business of making solar panels to Chinese companies, which already dominate key portions of the solar supply chain."

"The Energy Department estimates that 40% of America’s electricity could be solar as soon as 2035, and the industry could “employ as many as 1.5 million people—without raising electricity prices.”

Relying entirely on tariff-free goods from China may be the cheapest option to achieve that outcome. But advocates for tariffs say that view is shortsighted, as it may make it impossible for an American solar supply chain to compete.

We have to keep the tariffs to allow the domestic industry to get further scale and further capacity,” said Michael Stumo, chief executive of the Coalition for a Prosperous America, a group of manufacturing, agricultural and union organizations"

"Solar panels are made in four steps. The raw material, polysilicon, is molded into ingots—large, rod-shaped crystals. Ingots are sliced into paper thin wafers, which are processed into solar cells. Finally the cells are assembled into the familiar modules, or panels, that wind up on roofs.

The U.S. has no significant capacity to produce wafers or cells, having seen a nascent domestic industry wiped out during the past decade.

But there are a number of American factories capable of producing polysilicon, which is also used in semiconductors, and a handful of struggling U.S. manufacturers still make solar modules.

This dynamic—where American companies can perform the first and last steps in the process, but not the middle two—leads some analysts to believe it could be possible to reconnect a wholly American supply chain."

"Critics of the tariffs aren’t convinced, noting that many industries rely on global supply chains, and that the tariffs have been in place for four years already without leading to a revival.

Total solar jobs have declined since the tariffs took effect, according to estimates from the National Solar Jobs Census, a privately funded survey. While installations have increased and costs improved, Americans often pay significantly more for solar modules than other countries without the tariffs do, said Ms. Zoco of IHS Markit.

Both supporters and critics of the tariffs support another policy option: the proposed Solar Energy Manufacturing for America Act, introduced by Sen. Jon Ossoff (D., Ga.). The bill had been included in the House-passed version of the Biden administration’s $2 trillion budget bill and would create significant tax credits throughout each step of the solar supply chain."

Tuesday, December 21, 2021

Striking out: estimating the economic impact of baseball's World Series

By Victor A. Matheson and Robert A. Baade. From International Journal of Sport Management and Marketing Vol. 3, No. 4.

"An empirical analysis of the economic impact of the Major League Baseball's post-season on host-city economies from 1972-2000 suggests that any economic benefits from post-season appearances are small or non-existent. An examination of 129 playoff series finds that any increases in economic growth as a result of the playoffs are not statistically significantly different than zero and that a best guess of the economic impact is $6.8 million per home game. As a general method of economic development, public subsidisation of a baseball team's attempt to reach the World Series in order to reap a city-wide financial windfall should be seen as a gamble at best." 

Related Posts:

The San Antonio Spurs And Federal Subsidies. (2016)

Even If You Don't Like Sports, You Might Be Paying For Them  (2011)

New York City Tax Payers To Pay $1 Billion To See Baseball (2008)

Does It Pay to Host the Olympics?  (2009)

As Covid-19 Closes Stadiums, Municipalities Struggle With Billions in Debt  (2020)

Economic benefits from mega-events like the Olympics are often overstated  (2021)

Do states with income taxes put their sports teams at a disadvantage?   (2021)

Monday, December 20, 2021

Why Washington Won’t Fix Student Debt Plans That Overload Families

Lawmakers know federal Plus loans burden millions of parents and graduate-degree earners with balances they can’t afford, yet Congress repeatedly punts on changing the programs. Here are five reasons.

By Rebecca Ballhaus & Andrea Fuller of The WSJ

This reminds me of the area of economics called "Public Choice." That is the economic analysis of politics and political decision making. One of the ideas it has is "concentrated benefits and dispersed costs." Key passages from the article are highlighted in red bold that demonstrate this. Universities benefit greatly from these student loan programs while the costs are spread over all Americans. So the schools have a big incentive to fight to keep these programs as they are while it will not be worth it for anyone else to work to change things.


"U.S. lawmakers know the federal Plus student-loan programs have plunged millions of families into debt. They aren’t eager to fix the problem.

Congress in the 1990s created a way for parents to borrow essentially unlimited amounts to send their children to college. It did the same for graduate students roughly a decade later.

For undergraduate debt, the government imposes a dollar limit. The Parent Plus and Grad Plus programs let people borrow the total cost of attendance—room and board, books and personal expenses on top of tuition—for as many years as it takes to get the degree."

"The Plus programs combined have become the fastest-growing portion of student loans, miring 3.6 million parents and 1.5 million graduate students in debt. Plus loans made up about 12% of the outstanding $1.6 trillion in federal student loans as of June 30, but roughly 26% of the $78 billion in new loans in the academic year that ended then, a Wall Street Journal analysis shows. Their interest rates, at 6.28% for new loans this year, are significantly higher than for other federal student loans.

In 2018 and 2019, graduate students who were supposed to begin repaying Plus loans a decade prior collectively owed 70% of what they borrowed, just shy of the 74% that undergraduates from the same period still owed, a Journal analysis of new Education Department figures found. Parents had 60% of their debt outstanding at the end of that decade, the most recent data available show.

The beneficiaries are the universities, especially expensive private ones, which urge students and parents to take out Plus loans to cover shortfalls in tuition and fees."

"Democrats have largely opposed proposals to cap borrowing or restrict eligibility since 2011, when historically Black colleges and universities, or HBCUs, mounted intense pushback after the Obama administration strengthened the credit and income requirements for Parent Plus borrowers. The administration reversed the changes.

Restricting what families can borrow would send students to private lenders with higher interest rates and less favorable repayment terms, Democrats say, and would do little to rein in tuition costs. They want to expand access to plans that tie monthly payments to earnings and forgive the balance after roughly two decades—for which parents largely don’t qualify."

"There is a growing consensus that Grad Plus actually costs the government money, in part because so many borrowers have enrolled in plans that forgive loans after a period. Mr. Delisle [Jason Delisle, a senior policy fellow at the Urban Institute] estimates that eliminating Grad Plus would save $181 million to $3.9 billion annually, based on recent CBO figures."

"Lawmakers, congressional aides and former administration officials in interviews said an obstacle to legislative changes is the fear of angering universities, which are major employers.

Late in his presidency, Barack Obama proposed a government college-ratings plan to analyze data on graduation rates and student-debt loads, which could cause poorly performing schools to lose student-aid money. After college presidents and trade associations pushed Congress to oppose the plan, the administration announced it wouldn’t move forward—citing, in part, the lack of support from colleges and universities."

"Congress designed the Parent Plus program for higher-income parents needing liquidity to pay for children’s education. But as tuition rose faster than inflation, lower-income families increasingly sought Plus loans, student-debt researchers said. About half of recent Parent Plus borrowers had children who received federal grants meant for low-income students, the Journal’s analysis found."

"policy makers long assumed graduate students would easily be able to repay their loans. Instead, the Journal’s analysis of federal data has shown, master’s programs and professional programs often don’t provide graduates enough early career earnings to begin paying down their federal loans."

"orthodontists face unusually high debt: an average of $428,000, according to the association. That is about 2.6 times their average starting salary in a 2018 association survey."

Here are some earlier posts on related topics:

Maybe That College Degree Is Not As Valuable As You Thought (2010)

As college costs rise, sticker shock eased by student aid (2010)

Does It Pay To Go To College? (2009)

Who Is Most Likely To Default On Their Student Loans? (2016)

Student loan delinquency is higher than for other borrowing (2015)

The Diminishing Returns of a College Degree: In the mid-1970s, far less than 1% of taxi drivers were graduates. By 2010 more than 15% were (2017)

Student-Debt Forgiveness Is a Wonderful Boon, Until the IRS Comes Calling: Education analysts, student advocates warn of impending crisis from one-time tax bills individuals may not be prepared to pay off (2018)

The Diminishing Returns of a College Degree (2017)

For Some Grads, College Isn't Worth Debt (2014)

Is It Getting Too Expensive To Go College? (2011)

Is the U.S. student loan system broken? (2019)

Is College Still A Good Investment? (2012)

Many college dropouts are worse off economically than if they hadn’t started college (2019)

More employers offer workers help paying off student loans (2019)

Sunday, December 19, 2021

Making Money Off of Fake ATM Receipts

By Tim Devaney and Tom Stein of allBusiness. Excerpt:

"Most people often throw away the receipt after withdrawing cash from an ATM. John de Lisle is one fellow who values ATM printouts — not because he got millions printed on his bank statement — but because he earns a four-digit annual income from his hobby printing fake bank receipts.

It all began in 2004 when he saw a thermal ATM receipt printer on eBay for sale. “Interfacing it with my PC would make an interesting electronic project … it would be fun to see what people would want to print on a receipt,’ he says.

Initially he got requests from people who apparently wanted to use the invoice for insurance fraud, so he placed safeguards by using fake bank names, fraudulent numbers, and false terminal numbers.

The safeguards are sufficient for experts to detect the receipts are not genuine. But it appears real enough for practical jokers to pull a stunt on friends, relatives, and even new acquaintances they want to impress.

His clients — mostly males between the ages 20 to 40 — agree that it often works. After dropping hints of extra wealth, thanks to $250,000 ATM receipts, they often get dates or nocturnal conquests from women who are attracted to someone apparently filthy rich."


Related posts:

People are hiring out their faces to become deepfake-style marketing clones

Why would men bring fake cell phones to bars?

Are sellers paying Amazon customers to delete negative reviews?

Fake Reviews and Inflated Ratings Are Still a Problem for Amazon 

Photos show China's most surreal tourist spot— a fake Instagram-worthy town full of pretend farmers and phony fishermen

The Myth of Authenticity Or The Story Behind Products 

Fake Authenticity

Students: Make a mistake on purpose, its good for you!

A fake job reference can be just a few clicks away.

Fake Economist Fools Portugal.

Slave Redemption in Sudan. (Fake slaves are sold to those who buy slaves and then give them their freedom)

Can A Product Work Just Because It's Expensive?. (fake medicine)

If It Pays To Have Friends, Can You Pay To Have Friends?. (you can hire fake boyfriends)

Study: Half of American Doctors Give Patients Placebos Without Telling Them.

Saudis grapple with fake street sweepers .

Rent a White Guy: Confessions of a fake businessman from Beijing (by Mitch Moxley in The Atlantic Monthly, excerpts below)

Can adding a phantom third story to their homes help families find a wife for their son?

Why do employers pay extra money to people who study a bunch of subjects in college that they don’t actually need you to know? Signaling

Mexicans buy fake cellphones to hand over in muggings
Conspicuous Consumption, Conspicuous Virtue, Thorstein Veblen (and Adam Smith, too!)

How does a company selling used luxury goods spot fakes? (signalling and conspicuous consumption).

Why do stores sometimes pay people to be fake shoppers? 

What if companies can't afford real models for their ads? Use AI generated fake pictures 

Excerpts from "Rent a White Guy"

"Not long ago I was offered work as a quality-control expert with an American company in China I’d never heard of. No experience necessary—which was good, because I had none. I’d be paid $1,000 for a week, put up in a fancy hotel, and wined and dined in Dongying, an industrial city in Shandong province I’d also never heard of. The only requirements were a fair complexion and a suit.

“I call these things ‘White Guy in a Tie’ events,” a Canadian friend of a friend named Jake told me during the recruitment pitch he gave me in Beijing, where I live. “Basically, you put on a suit, shake some hands, and make some money. We’ll be in ‘quality control,’ but nobody’s gonna be doing any quality control. You in?”

I was.

And so I became a fake businessman in China, an often lucrative gig for underworked expatriates here. One friend, an American who works in film, was paid to represent a Canadian company and give a speech espousing a low-carbon future. Another was flown to Shanghai to act as a seasonal-gifts buyer. Recruiting fake businessmen is one way to create the image—particularly, the image of connection—that Chinese companies crave. My Chinese-language tutor, at first aghast about how much we were getting paid, put it this way: “Having foreigners in nice suits gives the company face.”

Six of us met at the Beijing airport, where Jake briefed us on the details. We were supposedly representing a California-based company that was building a facility in Dongying. Our responsibilities would include making daily trips to the construction site, attending a ribbon-cutting ceremony, and hobnobbing. During the ceremony, one of us would have to give a speech as the company’s director. That duty fell to my friend Ernie, who, in his late 30s, was the oldest of our group. His business cards had already been made."

"For the next few days, we sat in the office swatting flies and reading magazines, purportedly high-level employees of a U.S. company that, I later discovered, didn’t really exist."