Government Incentives 101

Incentives work. Unfortunately, how well they work, and if they acheive the desired effect, is an entirely different matter.

Exhibit A:

A total of 690,000 new vehicles were sold under the Cash for Clunkers program last summer, but only 125,000 of those were vehicles that would not have been sold anyway, according to an analysis released Wednesday by the automotive Web site Edmunds.com.

The average rebate was $4,000. But the overwhelming majority of sales would have taken place anyway at some time in the last half of 2009, according to Edmunds.com. That means the government ended up spending about $24,000 each for those 125,000 additional vehicle sales.

put another way:

The government could have done almost as well by just giving away cars for free, instead of creating an elaborate incentive program

Exhibit B:

Ted Gayer, a scholar at the liberal Brookings Institution, argued in a recent paper that the credit costs the government about $43,000 for each additional home sale it produces. That is because most [~85%] of the two million or so home buyers expected to claim the credit would have bought a house anyway. Only about 350,000 were additional buyers. Expanding the credit to make all home buyers potentially eligible would swell the government's cost per additional home sale to more than $250,000, said Mr. Gayer, co-director of economic studies at Brookings.

Economists at the National Association of Realtors said they don't disagree with Mr. Gayer's analysis of the existing credit's cost to the government. But they said he plays down the impact the program is having in supporting home prices and related expenditures.

What? Seriously, what? OK, two things. First, extending or expanding the program to the point where the government is paying any where close to $250,000 per additional home sale could never happen, could it? Oh, #@(&!$. But at least there is no additional fraud, right? #@(*&!$-ity #@(*&!$. Second, the economists for the NAR want to play up how the program is propping up house values that could not exist without government chicanery. Just as during the run up to this mess, everyone wants to prolong the inevitable as long as possible, but eventually prices will have to adjust to where supply meets demand.

Exhibit C:

Thanks to the federal tax credit to buy high-mileage cars that was part of President Obama's stimulus plan, Uncle Sam is now paying Americans to buy that great necessity of modern life, the golf cart.

The federal credit provides from $4,200 to $5,500 for the purchase of an electric vehicle, and when it is combined with similar incentive plans in many states the tax credits can pay for nearly the entire cost of a golf cart... "The purchase of some models could be absolutely free," Roger Gaddis of Ada Electric Cars in Oklahoma said earlier this year. "Is that about the coolest thing you've ever heard?"

In South Carolina, sales of these carts have been soaring as dealerships alert customers to Uncle Sam's giveaway. "The Golf Cart Man" in the Villages of Lady Lake, Florida is running a banner online ad that declares: "GET A FREE GOLF CART. Or make $2,000 doing absolutely nothing!"

Golf Cart Man is referring to his offer in which you can buy the cart for $8,000, get a $5,300 tax credit off your 2009 income tax, lease it back for $100 a month for 27 months, at which point Golf Cart Man will buy back the cart for $2,000. "This means you own a free Golf Cart or made $2,000 cash doing absolutely nothing!!!" You can't blame a guy for exploiting loopholes that Congress offers.

This is so sad it is actually cool. I mean, forget for a moment the fact that millions of people go to work and have a significant portion of their income go to taxes so that brilliant politicians can spend money on these wonderful government incentives. Forget that Americans will have to pay for all this stimulus either through taxes, inflation, or a burdened economy. We are talking about free golf carts!

Quote of the Day

Hugo Chávez, Christian Socialist:

Cada día soy más revolucionario, cada día soy más socialista…Voy a llevar a Venezuela hacia el socialismo, con el pueblo y los trabajadores…Ni se negocia la revolución, ni se negocia el socialismo, porque cada día estoy más convencido de que el socialismo es el reino de Dios aquí en la tierra. Eso fue lo que vino a anunciar Cristo

Or in English:

Every day I’m more of a revolutionary, every day I’m more socialist… I’m going to take Venezuela toward socialism, with the people and the workers…The revolution is not negotiable, socialism is not negotiable, because every day I’m more convinced that socialism is the kingdom of God on earth. That is what Christ came to announce.

Really no surprise here, as those in power both on the political right and left have repeatedly convinced themselves they are responsible for bringing about "God's will" through government force. Where or how exactly these same leaders convince themselves that Christ allows for murdering, punishing, fining, coercing, or marginalizing those who would oppose him still escapes me, but I am sure it is because I am simply missing those pages in my copy of the Bible, or perhaps I am just using a wrong translation.

Who is Gary Johnson?

You may want to read up on the former governor of New Mexico, as there are rumors of a 2012 run. Think of him as Ron Paul minus the crazy and about 20 years. Of course, that means he will be rejected by the partisan elites, but politics can be so much more fun when there is a fly in the ointment. A few excerpts from a 2001 Reason interview:

Politics is a herd mentality. Politicians don’t really lead. Politicians reflect what they think is consensus opinion.

...

Any movement at all [on drug policy] that reduces disease, that reduces overdoses, that reduces property crime, that reduces violent crime is good.

I’m a cost-benefit analysis person: What are we spending and what are we getting? My premise is the war in drugs is a miserable failure. I don’t know of a bigger problem in every single state, or a bigger expense that might actually have alternative solutions. Drugs account for half of law enforcement spending, half of prison spending, half of court spending. What are we getting for it? We are arresting 1.6 million people a year in this country on drug-related charges, and it’s a failure.

Go down the list of the main criticisms [against school choice vouchers]: Vouchers only favor the rich. Baloney! People with money live in good neighborhoods that have good schools. Give me a break. Vouchers are for the poor. Vouchers are for those that don’t have money, who live in the worst neighborhoods, go to the worst schools, and can’t get away from them.

Keep going down the list: Vouchers are unconstitutional because you’re giving money to private schools. No. If you want to start calling vouchers unconstitutional, then every single state has got a lot of unconstitutional programs. We give low-income parents money so they can go take their child to child care. We don’t tell them where to take their child. The examples go on and on.

Since I have been governor, K–12 educational spending has gone from $1.1 billion a year to $1.6 billion a year. By all measurements, students are doing just a little bit worse from year to year. For all that money, shouldn’t we be doing just a little bit better? All I suggest is to make K–12 like higher education. Higher education in the United States is the best in the world because these institutions compete with each other for your tuition dollar. Let’s just bring competition to public education. This is not about getting rid of public education; it is about providing alternatives that public schools very, very quickly will react to. Public schools will get better if they are subject to competition.

...

Economic growth occurs only if you are connected with a four-lane highway. A lot of New Mexico is rural, and building 500 miles of four-lane highway is going to make a huge economic difference to all those communities.

To save money, we looked at private alternatives in building the roads. The highway project on Highway 44, which is Albuquerque to Farmington, is designed, financed, built, and guaranteed by a private company. This is completely unique. We are actually the first state in the United States to adopt an innovative financing program for Highway 44, by bonding federal revenues. As a result, other states are copying it, and Wall Street is embracing it.

He has also voiced anti-war positions on foreign policy, and hinted at equal recognition of gay and heterosexual relationships. I have learned not to put too much hope in politicians, but here's hoping he can make 2012 a little more interesting. A lot can happen with respect to voter opinion of Obama's first term, but the awful list of re-treads and hopefuls the Republican are putting forth may create some opportunity, at least in the primaries. That is (SARCASM ALERT), of course, only if Biblical prophecy is wrong and Colin Powell doesn't run and become President.

Poker and the Meaning of Life

Does the game of poker reveal fundamental aspects of human nature? James McManus in The Chronicle of Higher Education searches for deeper meaning:

Humanities professors should recognize that the ways we've done battle and business, made art and literature have echoed, and been echoed by, poker's definitive tactics, as well as its rich lore and history. The long list of questions that students might ponder include: Why would poque, an 18th-century parlor game played by French and Persian aristocrats, take hold and flourish in kingless, democratic America? Why did poque evolve into our national card game, some say our national pastime, instead of piquet or cribbage or whist? How did poker inspire game theory, which in turn has helped our leaders think through every nuclear standoff? How is it useful in research into artificial intelligence? In what ways do its ethos and lingo underscore Stanley's brutality in A Streetcar Named Desire, or does its honor-among-thieves morality play out in American Buffalo? How much does our love for this game have to do with bluffing and cheating, or with the fact that money is its language, its leverage, its means of keeping score?

American DNA is a notoriously complex recipe for creating a body politic, but two strands in particular have always stood out in high contrast: the risk-averse Puritan work ethic and the entrepreneur's urge to seize the main chance. Proponents of neither m.o. like to credit the other with anything positive; huggers of the shore tend not to praise explorers, while gamblers remain unimpressed by those who husband savings accounts. Yet blended in much the same way that parents' genes are in their children, the two ways of operating have made us who we are as a country.

The second paragraph above is particularly fascinating. As in so many other areas, here poker and the "American" identity, we see an interplay, or tension, between contrasting extremes. The existence of this type tension in just about every sphere of human existence, would suggest that instead of "moderating" the extremes into some (undefined and lukewarm) middle, one would do better to seek to embrace the essence of both extremes (hot and cold, conservative and risky, routine and flexibility, tradition and change, individuality and community, humility and sovereignty) at the same time, just as the best do with poker:

The national card game still combines Puritan values—self-control, diligence, the slow accumulation of savings—with what might be called the open-market cowboy's desire to get very rich very quickly. The latter is the mind-set of the gold rush, the hedge fund, the lottery ticket of everyday wage-earners. Yet whenever the big-bet cowboy folds a weak hand, he submits to his Puritan side. As Walter Matthau drily put it, poker "exemplifies the worst aspects of capitalism that have made our country so great."

Picture Time

OK, lame excuse for a post, I know, but I took this picture of an insect hanging outside my 17th floor office window, and check it out - you can see through the bug and make out the lines of the building across the street.



Is this some type of visual illusion, or did the flash on the camera/phone make the insect translucent? Bonus points if someone can identify the bug.

CATO on the Nobel Peace Prize

Jason Kuznicki of Cato does such a good job expressing my same basic response to Obama winning the Nobel Peace Prize that I am reproducing his post in full:

Worse choices have been made than Barack Obama for the Nobel Peace Prize.

There was Woodrow Wilson in 1919, an award that rates as one of history’s more grotesque international jokes. Wilson promised to keep us out of war and promptly got us into it, meanwhile laying the ideological and geopolitical foundations for 90 years of war-nationalism, war-liberalism, and war-socialism. To say nothing of saddling us with the terrible idea of world government. Among those who weren’t Nazis or communists, Wilson may have done more than any other individual to promote human suffering in the last hundred years.

So yes, there have been worse choices. (Next to Wilson, I’d have to give Al Gore and Yasser Arafat both honorable mentions. We could go on, of course.) But still, Barack Obama? Seriously? I doubt the committee has any idea how badly their choice will be mocked in the United States.

Over here, the prize will be a disappointment to the anti-war left, the anti-war right, and, of course, the pro-war right. The only contingent I can see taking pride in it over here is the establishment left, which hasn’t had much time lately for substantive work on peace, but which is always happy to make speeches and receive awards. Sometimes, the American image abroad is just that important.

Rather than piling on in what is sure to be a bipartisan laugh-fest, let’s think about what Barack Obama actually could have done for world peace. And weep.

Like Wilson, Obama ran a campaign promising peace and the international rule of law. Politically, peace is a winning message, and the advocates of peace would do well to remember this. Decade after decade, American voters are willing to give peace a chance.

Obama promised to withdraw from Iraq and to close the illegal Guantanamo Bay prison camp. He promised to end the Bush-era detention and rendition policies that have tarnished America’s reputation abroad and weakened trust among nations.

Americans embraced those promises, which are fully consistent with the ideals of the Nobel Peace Prize. The prize, recall, is awarded “to the person who shall have done the most or the best work for fraternity between nations, for the abolition or reduction of standing armies and for the holding and promotion of peace congresses.” Ending wars, treating prisoners of war humanely, and ensuring international criminal suspects’ due process of law are exactly the sorts of things that the peace prize was designed for. They’re just what you’d expect a laureate to do.

But once in office, Obama didn’t deliver. The promises disappeared, replaced by vigorous defenses of virtually every presidential power that the Bush administration invented for itself, including not only those that subvert domestic civil liberties, but also those that threaten the international rule of law.

And the withdrawal from Iraq? Delayed and partial. The latest word — received just as the peace prize was announced — is that it’s “complicated.” Sort of like a bad Facebook relationship.

Our other war, in Afghanistan, continues to escalate, even as its strategic goals seem further and further removed. As Cato author Glenn Greenwald notes, U.S. airstrikes in Afghanistan continue to kill and maim the innocent, with very little to show in the way of stabilizing the country or defeating international terrorism. Withdrawal from Afghanistan is both possible and desirable, as my colleagues Malou Innocent and Ted Galen Carpenter argue. Yet our latest Nobel laureate doesn’t see peace as an option here either.

How sad. Not to sound bitter or anything, but when does the Cato Institute get a peace prize?

With Obama, one is captivated by his words and potential, but at some point he should be judged, and awarded, based on his accomplishments.

On Fire

The title pretty much says it all. Latin jazz virtuoso Michel Camilo with an earlier (and perhaps best) incarnation of his trio - the animated 6-string bass pioneer Anthony Jackson and the seemingly three armed, three legged drummer (high hat, bass kick, and cowbell? No problem)Horacio "El Negro" Hernandez:



As a recovering musician, this is how I get my fix.