Meet the candidates--Lonestar edition

Continuing something of a series, we'll continue to examine presidential candidates and see if their pronouncements on the economy make any sense. Considering what the country has been going through the last several years, picking a candidate that understands how economics and finance work is of the utmost importance. Sadly, things thus far have looked bleak.

First, while we were away, Tim Pawlenty dropped out of the race, after finishing third in the Ames straw poll... probably doing himself and his family a favor. Basing his decision on one straw poll, however, is a bit odd, as who's to say that idiosyncratic Iowans accurately represent the country's mood (Michelle Bachmann came out on top, for crying out loud).

While we'll work our way through each candidate and pick apart their policies, today we'll be focusing on a recent (apparently formidable) entry, Rick Perry. He's been the governor of Texas since 2000 (right after Bush left) and, over the last 11 years, has presided over a huge population and jobs boom, that's become a much-debated microcosm representing the effects of conservative policy thinking in general. While the unemployment rate in Texas is currently 8.4% (right in the middle, in terms of state rankings), the job growth there has been phenomenal in recent years. In fact, from 2007 to 2010 the Lonestar state accounted for 47% of all job growth in the US (albeit many of those were government jobs). The reason for the mediocre unemployment rate is that Texas' population is growing like gangbusters. Recent estimates put the state's population growth at ~2%, which doesn't sound like much, but when you consider the state's population is ~24m, that means it's adding ~half a million people a year, which is about the population of Wyoming. With that many people flocking in looking for work, it's tough to get the unemployment rate to drop.

Paul Krugman isn't buying the Texas miracle, however. He points out that wages in Texas lag the national average and thus the kind of jobs Perry is creating aren't the kind the nation really needs. Nevertheless, politicalmathblog cites data that shows Texas jobs have enjoyed wage gains that are 6th highest in the nation. Perhaps Krugman's biases are showing through here and he's auto-denigrating the low-tax, freewheeling land of Bush. Politicalmathblog does an impressive job of running the numbers (do read the whole thing) and concludes by saying they're against Perry, personally, but...

My advice to anti-Perry advocates is this: Give up talking about Texas jobs. Texas is an incredible outlier among the states when it comes to jobs. Not only are they creating them, they're creating ones with higher wages.

Well, there you have it. Texas appears to have done quite well at putting people to work. By other common metrics, however, it has failed quite miserably. In terms of health insurance coverage it ranks dead last among states, with an unbelievable ~27% of its people without coverage. It's hard to say how much of an impact a governor has on any of these statistics, but it is something to chew on.

Oh, and finally, Rick Perry recently threatened to beat up Ben Bernanke, the Chairman of the Federal Reserve. See the video here. He also called it treasonous for Bernanke to be printing more money. Umm, I'm not sure what Perry thinks the Federal Reserve usually does, but that is firmly within its job description. That is how the Fed lowers interest rates to get people to buy stuff (well, at least that's how it usually works--now, not so much). Learn more here and here about how the money supply (what the Fed controls) affects the economy. Learn why a devalued dollar can actually be a good thing here. It appears that Perry doesn't understand basic economics. This is the kind of thing we try to learn from watching the candidates and, unfortunately for Perry, he let us in on this secret early on. He can now be discarded as a serious candidate for president.

The Oracle speaketh

Warren Buffett, the oracle of Omaha, took to the New York Times last week to lament the ridiculously low amount of money he pays in taxes each year:

Since 1992, the I.R.S. has compiled data from the returns of the 400 Americans reporting the largest income. In 1992, the top 400 had aggregate taxable income of $16.9 billion and paid federal taxes of 29.2 percent on that sum. In 2008, the aggregate income of the highest 400 had soared to $90.9 billion — a staggering $227.4 million on average — but the rate paid had fallen to 21.5 percent.

It appears that while middle class wages have stagnated, the uber-rich have been doing exceedingly well. While the unevenness of the gains is lamentable, the very odd part of it is that tax rates on the super rich have actually fallen significantly over the last 20 years. Buffett is right to point out this anomaly. As he explains, his tax rate is lower than you might imagine because the rich often receive most of their income from capital gains (i.e., selling appreciated real estate, bonds, or stocks). Since politicians believe (wrongly, according to the Oracle) that high capital gains taxes discourage investment, they tax capital gains at a lower rate than ordinary income (which is the main income source of most Americans). BUT, as Buffett states, the economy did quite splendidly in the 1980s and 1990s when capital gains (and ordinary income) taxes were much higher than they were today. No matter how the money is made, it does seem askew that someone with an income of ~$40m/yr would be taxed at a lower rate than someone making ~$100k/yr, especially when the latter has to do it by putting in 40 hours a week.

The fallout from this op-ed was as you might expect. Someone at Fox News called Buffett a socialist (hilariously mocked in a Jon Stewart piece). Liberals largely cheered Buffett. No matter what part of the political spectrum you belong to (and hopefully it changes depending on the issue), raising taxes makes sense as part of any debt reduction plan. It is quite nuts that tax rates during the go-go days of the 1990s are seen as economy-killing by today's congress. In the chart above (from wikipedia), the large gap between tax rates here and in other rich countries is clearly evident and has even been exacerbated in the last 10 years. Budget-fixing tax increases here wouldn't need to bring us anywhere close to average levels of rich-world taxation. While having something of a taxation gap here isn't necessarily a bad thing (if you don't mind paying for college, health insurance, and most of your retirement), the trend is certainly baffling considering the recent giant income gains going to the top 1% of earners in the US.

Last week in TV

In an effort to bring more mainstream readers to the blog, I'm starting a new segment in which I'll recap the previous weeks television news.

Here’s my report on what happened in the world of television this past week:

- Ashley, my favorite Bachelorette since Trista, chooses J.P.



- Harrison Ford hates the Smurfs



- The end of an era: ABC’s Desperate Housewives to end in May. America cries.



- Project Runway is back, and at it’s all-time best!



And Finally….

Zack Morris is back on television:

Movie Review: Cowboys & Aliens

Cowboys & Aliens has received some pretty negative reviews and didn’t do as well as hoped at the box office (check out this awesome video of Harrison Ford taking out his anger on a Smurf doll), but it’s actually a pretty good movie that’s worth seeing, if for no other reason then to see Harrison Ford finally in something that’s decent again. It’s been at least ten years since his last half-decent movie (see What Lies Beneath, 2000).

The movie is perfectly cast and looks amazing. All of the actors seem to have the right spirit for a movie about aliens and cowboys going to war, and the pacing definitely picks up as the story moves forward. The main problem I have with the movie is that it’s just not as fun as it should be. The cast and crew have talked a lot in recent interviews about how they are taking a somewhat ridiculous plot and playing it straight. The problem is that they’re playing it a little too straight, in my opinion. Word has it that earlier scripts were much campier, more comedic takes on the story. When Ron Howard, along with Steven Spielberg and Brian Grazer (see a great interview of the three of them with director Jon Favreau) came aboard (along with Steven Spielberg & Brian Grazer) as a producer, he was instrumental in changing it to a more serious-minded western. He may have had a point, as I don’t know how campy the original scripts were, but I think they took it a bit too far (why are they listening to someone who hasn’t made a good movie since Apollo 13 anyway?).

The movie needed more laughs, more interaction between Ford and Daniel Craig, and less grumpiness from Ford’s tough, gruff Woodrow Dolarhyde. There is a scene where the cowboys are captured by Indians in which Ford, for the first time I can remember, reminds me a lot of Han Solo, his famous character from the Star Wars trilogy. It’s very brief, but it’s probably the only part of the movie that really gets it right. The rest of the movie, Ford is underused and for the first two-thirds of the film, he’s pretty much just a grumpy old man with not much to like. The movie needed Ford to be the fun, likable guy we remember from such films as Star Wars, Indiana Jones, The Fugitive, and Patriot Games. Instead, we get a little bit of that Harrison Ford, but also the older, grumpier version we’ve seen in some of his more recent work. It’s not that Ford does a bad job (in fact he’s easily the best part of the movie), it’s more that we know how great he can be, and it feels like a waste of great talent. He shows glimpses of greatness throughout the movie, but it never quite comes together.

Aside from Ford, the rest of the cast does a really good job. Daniel Craig (the best James Bond since Sean Connery) is fun to watch, as are some of the cowboys they meet along the way, specifically Sam Rockwell as Doc, and Walton Goggins, best known for his work on FX shows The Shield and Justified (a great show, BTW) as a former associate of Craig’s Jake Lonergan.

In all, Cowboys & Aliens is a success and worth your time, but I was hoping for more from Jon Favreau, the man behind Iron Man, which is one of my favorite super hero movies mostly because of the humor. I feel like for a movie about cowboys fighting aliens, it’s still not ambitious enough. Cowboys & Aliens could have used some of that Iron Man magic (maybe Robert Downey, Jr. should have been involved?). Or maybe it just needed another rewrite, or a couple less.


Verdict: Consume (See it now. Take money out of your emergency fund, retirement, your kids college savings, whatever you have to do to see this movie right now, in the theater)

Going off the grid...

On a lighter note, your humble blogger will be away next week, so you'll be left in the tender hands of Bags. Since August is in high gear, I thought I'd throw out a few trip possibilities for those still pondering what to do. Living in Salt Lake, of course, will make this a bit easier. All (pretty conservative) drive times are from SLC (using google maps).

Capitol Reef National Park -- Drive time: 3 hr 57min. A bit hot this time of year, but you could spend the afternoon hours by the pool in Torrey and the mornings and evening hiking. Darkest night sky of any Park in the US; check out their star parties. El Diablo Cafe is a gem.

Zion National Park -- Drive time: 5hr 4min. Busy this time of year, but the Kolob section would be less over-run than the main canyon. Relatively cool cause of it's elevation. Also, plenty of trails that are easily accessible by the Park-run buses. Do Angels Landing. Check out Cafe Oscars in Springdale (which offers grass-fed beef).

Canyonlands National Park -- Drive time: 4hr 49min. Plenty hot, but you'll have the place to yourself. Rent a jeep in Moab and take a couple days along the ~100mi White Rim trail. Let me know how it is. One of the most desolate National Parks.

Arches National Park -- Drive time: 4hr 40min. Delicate Arch will be crowded, but there are plenty of lesser-known hikes and you can always find stuff to do around Moab (bike slickrock, run the river, jeep, etc.).

Great Basin National Park -- Drive time: 5hr 1min. One of the least visited National Parks. Take your snow shoes, if you wanna do Wheeler Peak (13,000+ feet). There's a cool cave and plenty of open space to camp without being bothered. Also has star parties and super-dark night skies. The primitive campsites are also a great option, giving you a toilet and fire pit without the crowds. Cooler weather also.

Bryce Canyon National Park -- Drive time: 4 hr 43min. Probably would provide a good break from the heat this time of year. Get a permit to camp in the backcountry and you could probably find miles of trail to yourself. It's amazing how few people actually hike in these Parks. The hoodoos are a must-see for any American. The trails in and around the Amphitheater provide an amazing amount of "oohs" and "aahs."

Grand Teton National Park -- Drive time: 5hr 43min. Cooler weather up here also, along with the posh town of Jackson Hole. Run the Snake River, hike to Jenny Lake, shop and dine in Jackson.

Yellowstone National Park -- Drive time: 6hr 34min. Also cooler, but sure to be bustling this time of year. It's a big park, however, so you're sure to find some solitude if you're willing to hike. See Old Faithful, watch rare wildlife, camp with nothing but what's on your back in the nation's first National Park.

I'm always amazed by how many people come from around the world to enjoy what's in our backyard; such accessible empty, stunning landscapes are found in very few other places. Let's enjoy, support, and preserve one of the amazing things that America's leaders got right.

Stay safe out there.

Crises all around

Just briefly wanted to address the ways in which developed economies look to be heading off a cliff. First, while a debt ceiling deal was reached in the US, the package won't help our debt levels going forward. There are several reasons for this. One, spending cuts made up most of the deal, which will hurt the economy, whereas the best way to get out of debt is to grow the economy (see the 1990s for an example). Second, nothing was done to address long-term entitlements, the main source of our coming (but NOT CURRENT debt problem). Third, tax increases weren't on the table (Republicans were even against closing tax loopholes, because it would increase revenue). While tax increases now wouldn't help the economy, obviously, they will have to occur if we're to pay for the large number of baby boomers about to retire and get our budget eventually to balance. The party that disagrees is in denial. Despite what you've heard, overall tax (i.e., revenue) collection is currently at its lowest level in decades. That's part of the reason why the budget deficit is so high (i.e., it's not just that the government is spending tons of money). None of this was solved with the recent debt deal. In fact, looking at the markets the last few days (see figure), their outlook has grown quite dim.

This is exacerbated by what's going on in Europe. Countries such as Greece, Ireland, and Portugal have been on the brink for months. Recently, Italy and Spain have seen their borrowing costs soar due to a loss of market confidence. It's a death spiral as higher borrowing costs will make it even harder on their finances. While Germany could bail out Greece, it has little hope of being able to afford the same for huge Italy and Spain... and the leaders there seem to be content to watch their continent burn while they're on holiday. The Euro could very well come undone and we could be seeing years of stagnation. The sad thing is that better decision-making could have helped prevent this.

To bring this home, however, remember the words of Baron Rothschild, an 18th century British nobleman, who said the best time to buy (stocks, whether individually, through a mutual fund or 401(k)) is when there's blood in the streets.

Poolside Chat, Part Three