Conservative Donnybrook

The old saying is: “Yeah, but what does that have to do with the price of bananas?”

Well, when it comes to oil, a lot. OPEC’s president says oil could hit $200 per barrel. The problem, of course, is that the price of everything which is shipped (which is pretty much everything other than online services) is affected by the price of oil. I recently reported on a trucker revolt in downtown Indy. Those revolts have been spreading throughout the country. When trucking companies are hit with high oil prices, does anyone think they absorb the cost? Of course, they don’t. That cost gets priced into the goods we buy.

Last year, we hit $100 per barrel for oil and, at that time, the price of unleaded gasoline was nearly $3 per gallon. When (note I did not say if) the price of oil hits $200 per barrel, gas prices will likely be $6 per gallon. I drive a fuel efficient import (made in Marysville, Ohio before anyone gets all kooky and talking about how they bought a Ford, which was built in either Canada or Mexico, tells how I should support American cars) and the other day my 12 gallon tank cost me over $40 to fill up, with $50 bills not far off. Those sorts of bills used to be reserved for the SUV driving populace. Forty dollars used to be my entire budget for gasoline for an entire month. Consider this: semi trucks typically have 300 (some have 325) gallon tanks.  At $4.16 for a gallon of diesel, which is a decent price right now, it would cost the average trucker nearly $1,250.00 to fill ‘er up.

I used to work at the fuel desk at a truck stop (third shift - drank tons of coffee), and it was a gigantic sale when someone spent $300 to fuel their truck. Now that would get them about two truck stops down the road. I understand their angst and realize that if nothing is done, we’ll soon feel their pain.

Diverting grain to be used to create fuel is not the answer. First, it is extremely expensive to accomplish - more than to drill for oil, or buy from the Middle East. And, second, it drives up the cost of almost every food item, which of course impacts poor people, who spend more as a percentage of their income on food, disproportionately.

Surprisingly, Barack Obama, who seems to be clueless whenever he begins to talk about actual policies as opposed to grand ideas like change, is somehow opposed to relieving the consumer from the burden of government taxes on fuel. Hillary, at least, gets it. McCain has been out front on this issue. But even McCain’s plan is a stopgap measure. First, a hiatus on the gas tax would eventually impact our roads, which the tragedy in Minneapolis teaches us are in a deplorable state. But, second, that sort of relief, while welcome, is temporary. The real problem is that demand has far outstripped supply and OPEC refuses to pump more oil.

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Owner operators and fleet managers staged a protest against the high price of fuel today in the streets of Indianapolis. Around 60 drivers left the Cloverdale Auto Truck Plaza ( a truckstop I once worked for about 40 miles west of Indy) and proceeded in a convoy toward the Statehouse in Indianapolis. Fuel prices have soared in Indiana with the price of diesel averaging $4.16 per gallon as of this writing.

Unfortunately, only about a dozen drivers veered off of I-70 to parade around the Statehouse an hour or so before lunch. While they were loud, honking their horns and waving to the crowds of smokers arrayed around the government buildings, lawmakers did not meet with the drivers.

On the other hand, the truck drivers may have a friend in John McCain who has offered to suspend the gas tax from Memorial Day to Labor Day, during the peak driving months. While the call for suspension smacks of populist pandering, it may well help to bring truck drivers around to the McCain camp. Granted, some of the drivers may well have already been in the camp, but any accretion to McCain’s numbers will be an added benefit.

Aside from the fact that dead-heading from Cloverdale to Indianapolis is a somewhat ironic gesture, since it probably cost these drivers about $40 - $50 a piece, while they hauled no load (weren’t getting paid), the sheer amount of noise they generated was impressive. At $4.16 per gallon , it now takes over $1,250 to fill the tanks of a big rig. It will be interesting to see whether law makers respond since eliminating the petroleum tax would work to eliminate the funds to maintain roads. However, since those taxes are proportional to the price of fuel and were enacted while fuel prices were much lower, the amount of tax that needs to be collected in order to maintain roads today is a much smaller percentage of the price of fuel than when the tax was enacted. It will be interesting to see whether lawmakers will lower the tax to keep it neutral and to give truck driver (and the ultimate consumers of every product that is shipped) a break.

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Sam Zell, the new owner of the Chicago Tribune and Chicago Cubs among other entities, thinks that the Democrats (specifically Senators Clinton and Obama) are scaring the American public into thinking the economy is worse than it really is. I happen to agree with him. One thing I cannot understand is why everyone says this is a terrible time to buy a house or stock. Common sense would dictate that buying a product when it is a buyers market is a good thing, no?

Anyway it’s good to see that the Trib is in good hands. I just hope he doesn’t rename Wrigley and sell the Cubs to a terrible owner.

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I (personally, not Conservative Donnybrook, as I am only a cog in the wheel) have previously endorsed the Fair Tax. Unfortunately, in attempting to keep things simple, the examples I used were inaccurate. Therefore, I shall try again, but keep in mind that this will necessarily be more complicated than the previous attempt.

Let me begin by reintroducing the players. We have Bob. Bob is the sort of guy who always wants to be first on his block to get the latest toy. And then we have Margaret. Margaret has no such compulsion and buys used goods all the time. Bob and Margaret both earn $74,000 a year in wages. They each rent a nice apartment in the same complex in Las Vegas (Clark County sales tax = 7.25%). Bob and Margaret are both healthy, stingy (they make no charitable contributions), and neither runs a business - in short, they do not have any deductions other than the standard deduction. They are both single. (We are trying to keep this as simple as possible, while still maintaining some semblance of realism.) And, just for the ease of doing the math, let us suppose they each get paid annually (one pay check per year). Let us follow them down to the car lot where they will each be purchasing a car. Of course, in order to really do this right, we have to follow them down to the car lot twice. Once prior to any changes in the tax system, and once again after the Fair Tax is adopted. Continue Reading »

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We are approaching the point of no return for democracy in America. That point occurs when a majority of the citizens no longer pay for governmental services and rely upon a minority of citizens to provide for their delivery. Today, the bottom 50% of wage earners pay 3% of the federal income taxes in 2005. We are two steps away from that point of no return I mentioned.

First, if that number should ever reach the point where the bottom 50% of wage earners (a voting majority of the country) were to reach 0% of the taxes, we would no longer have the votes to roll back the ever increasing burden on the top wage earners. Indeed, we may already have reached that point. Second, if those who are the bottom half of wage earners ever realize that they are not paying taxes, but rather are recipients of the public largesse, they will be lost as a source of reform. I think at present many of those who in reality receive more than they pay still believe that they are paying taxes and rankle at that notion. This is the only reason I still have hope. Alexis de Tocqueville noted in Democracy in America (highly paraphrased): “Once the majority of Americans realize that they can vote themselves all sorts of goodies and get their neighbors to pay for it, all bets are off. But, generally, I think the Americans are on to something.” Or words to that effect. Continue Reading »

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Slate has a pretty interesting piece arguing that independent coffeehouses actually benefit when a Starbucks moves in next door.

Ever since Starbucks blanketed every functioning community in America with its cafes, the one effect of its expansion that has steamed people the most has been the widely assumed dying-off of mom and pop coffeehouses. …[but] strange as it sounds, the best way to boost sales at your independently owned coffeehouse may just be to have Starbucks move in next-door.

That’s certainly how it worked out for Hyman. Soon after declining Starbucks’s buyout offer, Hyman received the expected news that the company was opening up next to one of his stores. … Each new Starbucks store created a local buzz, drawing new converts to the latte-drinking fold. When the lines at Starbucks grew beyond the point of reason, these converts started venturing out—and, Look! There was another coffeehouse right next-door! Hyman’s new neighbor boosted his sales so much that he decided to turn the tactic around and start targeting Starbucks. “We bought a Chinese restaurant right next to one of their stores and converted it, and by God, it was doing $1 million a year right away,” he said.

It probably helps that Starbucks’ coffee doesn’t taste very good. Anyway this rings true. I don’t remember a ton of independent coffee shops being around in my hometown before the days of ubiquitous Starbucks storefronts, but now they’re much more common.

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There’s some buzz in the blogosphere about the rollout a new solar panel manufacturing process by a company called Nanosolar that promises to dramatically reduce the cost of solar energy. (Here’s some rather breathless coverage from Popular Science.)

Matt Yglesias expresses skepticism about some of the more optimistic claims, but then writes:

…the point remains that renewable energy is not some outlandishly expensive hypothetical alternative. … And if the rich world decisively commits itself to renewable electricity, the number of firms trying to find cost-effective ways to deliver this sort of electricity will skyrocket…

Presumably, he’s talking of the “rich world” “committing” through government action and regulation. But if such strides are being made in cost-effectiveness, won’t government action be less necessary to promote the uptake of renewable energy? It is worth noting that Nanosolar received a $20M grant from the Dept. of Energy, but over $110M in private venture capital.

Jonathan Adler at Volokhs seems to have it right:

… if such power sources are cost-competitive, the transition will occur without need for government subsidies and mandates.

Anyway, perhaps we should heed the wisdom of Homer Simpson here: “And Lord, we are especially thankful for nuclear power, the cleanest, safest energy source there is. Except for solar, which is just a pipe dream.“

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Three cheers for the resurgence of common sense. Bill found it in the Supreme Court’s desision and brought the Pope’s recent message to our attention. Here is a lovely article (HT: New Oxford Review online edition) from the Daily Mail. Note the trademark sensibility and insouciance: “Prudence does not mean failing to accept responsibilities and postponing decisions; it means being committed to making joint decisions after pondering responsibly the road to be taken.”

Kudos as well go to the Wonder from Down Under, Cardinal Pell: “In October, the Australian Cardinal George Pell, the Archbishop of Sydney, caused an outcry when he noted that the atmospheric temperature of Mars had risen by 0.5 degrees celsius. ‘The industrial-military complex up on Mars can’t be blamed for that,’ he said in a criticism of Australian scientists who had claimed that carbon emissions would force temperatures on earth to rise by almost five degrees by 2070 unless drastic solutions were enforced.”

It’s as I’ve said for a long time, folks: environmentalism (as with any “ism”) ought to be guardedly approached. It’s a cult, and it’s a business. The “broad concensus of scientists” emerging is the broad concensus of foundation-funded academics who want to stay on the gravy train and those who dare not rock the boat for fear of being ostracized into non-published oblivion. That’s a conspiracy, fellas. 

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President Bush reached an agreement with lenders today that punishes a majority of lower and middle class families for being prudent.  That’s right, a deal to freeze interest rates for people who made bad decisions by paying too much for a home has been announced. 

This unfairly benefits persons who paid way too much for a home they could not afford by giving them reprieve from real-world responsibility of paying their debts and managing their expenses.  This agreement also punishes the countless prudent lower and middle class persons who did not over-extend themselves by purchasing over-priced homes with horrible loans.  The market needs to suffer through a large correction and prudent potential buyers should benefit from this.  With unsavvy homeowners benefiting from such a reprieve of responsibility the housing market with retain some of its over-inflated prices.  This, in turn, will help keep prudent and responsible buyers from entering the market and this will prevent the market from being built on the shoulders of responsible and economical buyers.

Way to go, Mr. President.  You just rewarded fiscal irresponsibility and ensured a large roll for an already over-sized government.

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We are now racking up, as a nation, $1 million per minute in debt. Let me write that out for you: $1,000,000 per minute; $16, 667 per second; $60,000,000 per hour;  $1,440,000,000 per day (that’s in the billions folks!). Staggering, I know. And yet, we persist in thinking that a national drug plan is a good idea. Even Republicans (link requires a subscription to National Review, which really, you ought to have anyway) according to Ramesh Ponnuru.

Ramesh makes the point that Americans generally believe that they believe in smaller government when asked, but mention a specific program and you get the whole, “well, I’m not sure about that program” routine. The facts speak for themselves. Democrats own the organ of spending (Congress), spending shoots up. Republicans take over the organ of spending (on a program of fiscal restraint ironically enough), spending shoots up. Unfortunately, folks, we’ve run out of parties unless the Libertarians ever gain traction. The moral of this story is unlimber your wallets, because the ride could get bumpy from here on out.

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What do the Middle East, South East Asia, Eastern Europe, and Eastern Africa all have in common? They lay in the Eastern Hemisphere and have garnered the attention of the United States; economically, politically and militarily. What do Caribbean nations, Latin American nations, and South America have in common aside from being the neighbors of the United States? They are found in the Western Hemisphere and suffer from a (near) complete lack of attention by their northerly wealthy counterpart (no, NOT Canada). I suppose maybe it’s a case of not knowing what we’ve got until it’s gone. I offer the following supposition: The United States ought to spend more money, time and resources in the Western Hemisphere.

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Enough is enough. Mike Huckabee says energy independence is crucial. Ron Paul makes more sense to me. Especially in light of the points David Henderson makes in the article “The Myth Of The Oil Weapon” in the latest American Conservative magazine (I hope it will be available in the online archive next week, but you should be subscribing to the thing anyway. Go get it and read it, already.) about their dependence on us. I am convinced the unfortunate and backward price-controls of the Nixon and Carter administrations are the root cause of so much of the oil problems we still face, not any “OPEC embargo.” We’re still being led to believe we’re captives. We’re not.

Update:   

Here are some interesting numbers.

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John Derbyshire over at the Corner wrote this this morning.

The question presents itself: What changed in the 1960s that so adversely affected those scrambling to escape poverty? I might suggest that the “unilateral disarmament” that the United States engaged in at the Kennedy Round of GATT negotiations marked the beginning of the end for the then-emerging American middle class.

After blinking in our negotiations at the Kennedy Round, U.S. Commerce Secretary, Alexander Trowbridge said:

The Kennedy Round represents a very large step toward the thing we’ve heard so much about in the postwar years: the truly one-world market. . . .The American domestic market - the greatest and most lucrative market in the world - is no longer the private preserve of the American businessman.

And, Mr. Trowbridge was happy about it!

Derb puts his finger on the causes, “Globalization, rising inequality and unskilled immigration.”

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It would seem that Governor Daniels has been reading some of my suggestions over at another blog I participate on: Indiana Political Review. There I suggested,

I think the way to do this is to put a cap on the property tax, say 1% of the assessed value of the property. Further, the assessed value must be tied to real-life market values (based on comparables in the same neighborhood, for instance) so as to prevent the assessor from simply inflating the assessments to get around the caps. In order for the government to deviate from the cap level, they would have to make a case to the people of Indiana to adopt the measure in a statewide ballot.

Setting the government’s salary, so to speak, would force them to evaluate each and every expenditure to make sure it is in the best interests of the State of Indiana. In addition to the restraint that such a system would impose on the taxing authorities of this state, this system would promote the predictability of future tax bills. I was hit with a 62% increase during the last few weeks (on top of the 100% increase 4 years ago, that equates overall to a 224% increase from what I was paying just four years ago). I want to be sure that I won’t have to eat another 62% (or worse) next year or the year after that. This system ensures it. The predictability in turn will promote stability in property prices and may even increase the value of homes when buyers can safely project their costs into the future instead of having to discount today’s price in the face of unknowable tax increases in the future. If property values are enhanced, assessed values will increase and the government will enjoy more revenue. Everyone wins in the end.

The current system leads to a Detroit-style Urban Death Spiral, which sort of sounds like a cool amusement park ride, but trust me, it’s not a ride you want to be on.

I am gratified that the Guv has reposed so much confidence in my ideas.  Continue Reading »

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This is a good Q&A on Governor Daniels’ proposal to address the horrific property tax problems in Indiana. I would amend it to implement a permanent, non-raisable 1% tax on grocery for those not on AFDC, WIC, EBT cards, etc. instead of increasing the general sales tax rate from 6% to 7%. Otherwise, quite a decent springboard. Bosma and Kenley, et alia, jumped aboard. How long till Bauer’s wig tells him what the reasons we can’t pass it are? Sorry about the bandwidth-hogging Evil PDF format. IN.gov’s fault, not mine. I simply refuse to link to the LGN (local Gannett News) Indianapolis Red Star, so I went directly to the source.

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