May 15, 2008 2:24
If you like index funds and nukes, you'll love John McCain
John McCain gave a speech (warning: the accompanying ad starts playing as soon as you get to the page) this morning about what the world will be like in January 2013 if we go and elect him this fall. It's a clever conceit, and while there's an awful lot of what I guess you could call wand-waving involved (on Iraq: "Civil war has been prevented; militias disbanded; the Iraqi Security Force is professional and competent..."), it does give you some sense of his priorities. Such as Social Security reform:
The reforms include some form of personal retirement accounts in safe and reliable index funds, such as have been available to government employees since their retirement plans were made solvent a quarter century ago.
And energy policy:
A cap and trade system has been implemented, spurring great innovation in the development of green technologies and alternative energy sources. Clean coal technology has advanced considerably with federal assistance. Construction has begun on twenty new nuclear reactors thanks to improved incentives and a streamlined regulatory process.
And job retraining:
Americans, who through no fault of their own, lost jobs in the global economy they once believed were theirs for life, are assisted by reformed unemployment insurance and worker retraining programs. Older workers who accept lower paying jobs while they acquire new skills are provided assistance to make up a good part of the income they have lost. Community colleges and technical schools all over the country have developed worker retraining programs suited to the specific economic opportunities available in their communities and are helping millions of workers who have lost a job that won't come back find a new one that won't go away.
In the end, though, you get the sense--as I almost always do with McCain--that he's far less interested in this issue stuff than in the tone he wants to set:
For too long, now, Washington has been consumed by a hyper-partisanship that treats every serious challenge facing us as an opportunity to trade insults; disparage each other's motives; and fight about the next election.
That could have come right out of a Barack Obama speech. And now it looks like the two of them will spend the next six months trading insults and disparaging each other's motives in an effort to be the one allowed to rid Washington of hyperpartisanship. Big fun.
May 15, 2008 11:23
So that's finally over with
Here's the new Time (available on newsstands tomorrow) with the story that's been keeping me from doing the quality blogging that you deserve. I'll link to it when it goes up online.
The piece isn't really about what the cover line says it's about (it's more about what the next president could and should do to make the economy work better for little folks like you and me), and it also involved a lot more journalism by committee than I'm really comfortable with. But I don't think I actually disagree with anything I wrote, so maybe it will grow on me. It better, because I'm supposed to go on CNN in an hour (12:20 p.m. ET Thursday) to talk it up.
Update: Actually, it's going to be at 12:10. Guess I'd better hit the road.
May 14, 2008 10:52
Okay, it's definitely a deep, deep recession
When the current moderately positive run of economic data began a couple of weeks ago, I mused that maybe we're going to somehow escape the big financial hullabaloo of '07-'08 without a recession. I was dubious even then--after all, Lakshman Achuthan says we're already in a recession, and Lakshman is usually right. But now even more disconcerting evidence is in. The NYT and the WSJ have both proclaimed, on the same day, that maybe we're going to escape the big financial hullabaloo of '07-'08 without a recession.
That kind of big-media consensus can only mean one thing: They're wrong, and we're doomed.
May 12, 2008 1:05
If only print were dead, my job would be so much easier, part 2
I'm writing something large for the magazine today, and I always struggle to post much here when that is the case. Sorry.
What else happens when I'm in composition mode? I drink way too many caffeinated beverages (I'm currently in the middle of an ice-cold Diet Dr. Pepper) and I check Gawker a lot. I don't really like Gawker anymore (I'm a Spiers loyalist); on a normal day I'm unlikely to check it even once. But give me a deadline and a couple thousand words to write, and I check it 15 times a day.
Now loyal readers may note that I used this magazine-writing excuse last week as well, and nothing under my byline actually appeared in dead-tree Time. Well, it's the same piece, it got bumped by Barack, and now I'm trying to totally redo it because I didn't love the earlier version.
But anyway, enough about that. I've got to go see what's new on Gawker. (Hmmm, a post about a less-than-revelatory NYT article about Karl Rove that I read before breakfast. Lame!)
May 9, 2008 4:31
On CNN this weekend: Your $$$$$ and some nice ties
I'm going to be on CNN's Your $$$$$ this Saturday and Sunday, talking with Ali Velshi about what the next president can really do about your $$$$$. Or your $$$. Or your $$$$. But not your $ or your $$$$$$$$$$$$$$$$$$$, because I try to appeal to a middle-class audience.
Ali is, as far as I know, the most prominent Kenya-born broadcast journalist in America. He is also a leading member of CNN's vest mafia, and he had one on when we taped Friday morning. And an excellent tie. My tie was pretty good too. You can gaze upon them both sometime between 1 and 2 p.m. EDT Saturday or between 3 and 4 p.m. Sunday.
May 9, 2008 1:41
Non-coverage of the Time 100 gala
Takeuchi Cullen writes that she didn't go because "besides childcare and wardrobe issues, I had a doctor's appointment I couldn't move."
Poniewozik just told me he didn't go because he doesn't own a tux.
And I didn't go because I was tired, Mrs. CC was about to leave town for a few days, we were gonna have tacos for dinner, and--either this or the tacos is the most important factor--I'm always a bit daunted at the prospect of putting on my tux (I bought it 13 years ago to get married in, and it's a little tight).
I'm writing, of course, about the Time 100 gala last night, which you can read about pretty much everywhere online except on Time's own blogs. Those of us of middling importance at Time (a group to which Lisa, Jim and I apparently all belong) get our invites two days before the event. I guess the idea is to hold out for actual Time 100 honorees and other important folks until the last minute, then fill the remaining seats with staffers.
It seems a reasonable enough approach. But the result is that we have failed to serve you the reader with glamorous photos and unbelievable dinner-table gossip (or even lame photos and lame gossip). So I hereby pledge to either lose 15 pounds or buy a new tux before I get my last-minute invite next May.
May 9, 2008 1:01
On the endogenous nature of economic data (now that's what I call an attention-grabbing headline!)
Nancy Folbre, an economics professor at UMass Amherst, e-mails with a couple good criticisms of my "Don't Ditch the GDP" column:
First, no economist that I know of, either on or off the Sarkozy Commission, has advocated ditching GDP. What's under discussion is the possibility of developing good supplements to it.Second, the viability of economic accounting measures is not completely determined by the ability of existing data. Once we decide something is important, we can figure out how measure it. Data are (at least partially) endogenous!
The first point is right--it's the non-economists (such as Sarkozy) who speak of actually replacing GDP. And as for the second, well, this is why we need to Save the American Time Use Survey!
May 8, 2008 12:27
Newt Gingrich's bold plan to save the Republican Party by overhauling the Census Bureau
I'm a little late to this (it came out on Tuesday), but I just read Newt Gingrich's "Plea to Republicans: It's Time for Real Change to Avoid Real Disaster." It starts with a cogent analysis of just how bad things look for Republicans in this fall's Congressional elections. "The Republican brand has been so badly damaged that if Republicans try to run an anti-Obama, anti- Reverend Wright, or (if Senator Clinton wins), anti-Clinton campaign, they are simply going to fail," he writes.
Then Gingrich offers up "nine acts of real change" to boost the GOP before November. Now Gingrich, whatever you think of his ideology, personal life, or political tactics, is undeniably one of the great idea men of modern American politics. But maybe he's, uh, tired or something.
Most of the list consists of retreads (declare a summer gas tax holiday! bash unions! bash liberal judges!). And then there are the two original suggestions:
5. Overhaul the census and cut its budget radically. ...
6. Implement a space-based, GPS-style air traffic control system. ...
WTF?!?!?! (As this is a mainstream media blog, I should point out that the F stands for Foolishness. Or maybe Fiddledeedaddle.) I'm not much for predicting elections, and I will definitely be among the first to congratulate Gingrich if census reform and space-based air traffic control put the GOP over the top in November. But somehow or other, I just don't think this is going to do it.
May 8, 2008 8:07
Six things I'm sure of about capital gains taxes
A certain Flip has declared that my post from last week about the Congressional Budget Office and capital gains taxes contained the "Worst Argument of the Day." I'm totally honored, except that I didn't actually make the argument for which he condemns me, which was that the decline in tax revenue from 2000 to 2004 was proof that capital gains tax cuts don't increase revenue. (This would indeed have been a really stupid argument, given that the capital gains tax rate was cut in 2003.) I have argued that the decline in real capital gains tax receipts between the business cycle peak of 2000 and the likely peak of 2007 was perhaps an indication that the tax cut hadn't paid its way. But that was a different blog post (and it wasn't a stupid argument).
I guess I could just declare Flip's post to be a case of the "Worst Reading Comprehension of the Day" and leave it at that. But this capital gains thing keeps nagging at me. There are a few things I feel confident saying about capital gains tax rates and government revenues:
(THE REST AFTER THE BREAK)
May 7, 2008 7:02
The trials of building a Four Seasons in Mumbai
The new Four Seasons Mumbai has just opened its doors. And as the FT reports, (via the Indian Economy Blog), it wasn't easy getting to this point:
Property analysts estimate there is a shortage of 100,000 hotel rooms in India – more than the existing supply. Archaic restrictions that have prohibited the construction of high-rise buildings and sky-high land prices have contributed to the shortage, Vincent Lottefier, chief executive of Jones Lang LaSalle Meghraj, says.Bureaucracy and a shortage of skilled workers make building hotels difficult – the opening of the Four Seasons was delayed by at least two years. The hotel needed 165 government permits – including a special licence for the vegetable weighing scale in the kitchen and one for each of the bathroom scales put in guest rooms. In the end, the hotel cost $100m (€64.5m, £51m), or about $500,000 per room, and prices – which start at $500 per night rising to more than $1,000 – reflect that.
The software and call-center businesses that have been such successes in India were an out-of-nowhere surprise to politicians and regulators, have avoided much in the way of crazy regulation, and are thus extremely competitive globally. Most of the Indian economy remains an entirely different story.
It seems like all this bureaucracy and inefficiency will be a big drag on Indian growth. Then again, I remember when the McKinsey Global Institute made the shocking discovery back in the early 1990s that most of the Japanese economy was insanely inefficient and unproductive. The country's global success in cars, electronics, and a few other sectors was enough to propel it to prosperity. Those industries made the country rich, while the inefficient remainder kept the bulk of the workforce employed.
May 7, 2008 2:25
Productivity gains! Thanks (again) to journos
Bill Carter at the New York Times reports that NBC is launching a 24-hour local news channel in New York, which will subsume the network's current local news operation. Local news audiences are "eroding and aging" (the words of John Wallace, NBC's newly christened president of local media) and the way broadcasts currently work is "just not convenient because of the way people's lives have changed with technology." 24/7 is what the kids want.
The model for this, as anyone in New York knows, is NY1, one thing my company actually gets right. Time Warner has got 24-hour local news networks in a handful of other markets too—makes it easier to convince people to keep their Time Warner Cable and not opt for satellite.
NBC could be headed for more markets, as well. From the Times:
If the plan is deemed a success — and Mr. Wallace said that should be clear by the second quarter of next year — NBC will begin to take the same steps with the other stations it owns, in cities like Los Angeles, Chicago and Philadelphia.
This all works particularly well right now, as TV switches to all-digital, because reporters can be sent out with their own little cameras and without a crew to cost their company money slow them down. NY1 reporters write and shoot their own stories.
The Times story didn't say how, exactly, reporters' jobs would change under NBC's new set-up, but this paragraph is pretty telling to me:
Though it will offer round-the-clock live news, NBC is not planning to employ additional staff on the new channel, relying instead on expanding the duties of its present employees, many of whom will have to be retrained, Mr. Wallace said. He called it “a work-flow change.” He said, “There will be no added staff; we’ll just use them differently.”
Work-flow change, I hear ya there. Did I mention that NBC lives in the GE Building (that's 30 Rock to you Tina Fey fans) caddy-corner to where I live in the Time & Life Building? Here's a picture:
I took that from my office window, uploaded it to my computer, then posted in on this blog, where maybe sometime later today some of the editors and photo people who work here will see it.
May 7, 2008 11:53
Lester Brown eats oysters, worries about "peak water"
In March 1980, Lester Brown wrote a paper for his Worldwatch Institute titled "Food or Fuel: New Competition for the World's Cropland." Let's just say it turned out to be a bit premature. "I was so far ahead of the curve no one even knows that exists," Brown says. (It is still on sale for $9.95, though.)
Now, of course, food vs. fuel is a certified Big Issue. But former tomato farmer Brown, who now runs the Earth Policy Institute, has other concerns. Mainly about the water supply. "It looks like we may hit peak water before we hit peak oil," he says.
There are two giant fossil aquifers--that is, ancient underground aquifers of water that can't be replenished by rainwater--on the planet: The Ogallala Aquifer under the High Plains of the U.S., and the deep aquifer under the North China Plain.
Both are being depleted, but the Ogallala, while certainly crucial to the states of Kansas and Nebraska in particular, isn't make or break for the U.S. food supply: Brown says only 20% of the U.S. grain harvest comes from irrigated land. In China that figure is 80%, and the bulk of it comes from the North China Plain.
So basically, China is in for a big grain supply shock. And if China is in for a big grain supply shock, we're all in for a grain supply shock. Especially since lots of other countries face similar issues. Saudi Arabia, for example, became concerned in the 1970s that its oil embargo might be countered with a grain embargo. So it began tapping a fossil aquifer to become self-sufficient in wheat production. Now the aquifer is just about tapped out, and the country announced in January that it will soon begin importing all its wheat.
Hmmm, Les, got any good news? You betcha, he said. Nobody's gonna be able to build any more coal-fired power plants in the U.S.
This discussion took place over lunch Tuesday at the Grand Central Oyster Bar. We shared a dozen oysters--six Hog Islands from California, six Malpeques from Prince Edward Island, all excellent. And Lester told me that oysters used to be so abundant in the Chesapeake Bay that farmers would feed them to their hogs.
The photo was taken with my Blackberry. I was wondering why it was so fuzzy; then I took a look at the lens. Coated with dust. Maybe I just need to start carrying a real camera around.
May 6, 2008 2:27
The libertarian case for Hillary
Fresh off his rousing defense of the McCain-Clinton gas tax pander (it's better than price controls), my future co-author Bryan Caplan now makes a more general case for why his fellow objectivists/anarchists should consider voting for Hillary Clinton:
In terms of policy, Hillary and Obama look extremely similar to me; I prefer either to McCain because I think they're more likely to get the U.S. out of Iraq. But Hillary worries me a lot less than Obama because leaving Iraq is likely to be her only major political success. Hillary has a built-in army of enemies, and she's making more enemies every day. (I've talked to Obama supporters who hate her more than Rush Limbaugh does!) Obama, in contrast, is genuinely likeable. At least during his honeymoon period, he might be able to unite the country behind a long list of "progressive" reforms. And that's what makes him dangerous to liberty.
May 5, 2008 5:58
CNBC's Becky Quick "role plays" with Warren Buffett
Yes, it's true, I do have a magazine story to write, but first I must share this video of CNBC's Becky Quick interviewing Warren Buffett. This is like day 226 of CNBC's Berkshire Hathaway annual meeting blitz coverage. I tried to keep up, really I did.
Becky starts off by saying that after more than five hours of questions from shareholders on Saturday and another 3+ hours from reporters on Sunday, it gets kind of hard to figure out what else to ask the Oracle.
Her solution: role play. Buffett has a pretty interesting answer to the second question, but (make a note) you do not want to hire Becky Quick if you're making prank calls pretending to be Ben Bernanke or Hank Paulson. I was really hoping for all-out impersonations.
You can also notice that Buffett is starting to sound a little hoarse. Might be about time to kick the journalists out of Omaha for another year. The whole thing reminds me of that "til-they-drop" press conference Arnie Vinick (a.k.a., Mr. Alan Alda) holds in Season 7 of the West Wing, which I only mention because the West Wing is to me what Scandinavia is to Justin.
May 5, 2008 5:28
If only print were dead, my job would be so much easier
Yeah, yeah, I know: Microsoft backs off and Yahoo's stock implodes! Countrywide turns out to be maybe not worth anything! The Fed says lending standards are tightening a lot! Some guy named Paul Collier writes a really smart blog comment!
So much fun news to blog about. But I've got a magazine story to write. So does Kiviat, for that matter. Sorry.
Update: Scott Karp points out that maybe there was already enough written about Microhoo.
May 5, 2008 9:22
The official word on whether capital gains tax cuts increase revenue (it's no)
The Congressional Budget Office issued a report Friday on Sources of the Growth and Decline in Individual Income Tax Revenues Since 1994. The gist of it was that the big gains in federal tax revenue from 1994-2000 had very little to do with changes in the tax code, while about half of the decline in tax revenue (as a share of GDP) between 2000 to 2004 was the result of the Bush-administration tax cuts.
The report also includes this conclusion about the impact of capital gains tax rates on revenue:
Because taxpayers can choose when to realize capital gains (and losses), more gains are realized when tax rates are lower. However, over time, the increase in realizations induced by lower tax rates is not sufficient to offset the direct impact on revenues from the tax reduction itself, for two reasons. First, revenues will always increase by less than realizations following a tax cut because gains are taxed at the lower rate... Second, increases in realizations are generally much larger in the short term than in the long term because some of the additional revenues in the short term come from gains that would have been realized in later years. ...Separating the effects of changes in the tax rate from other factors affecting capital gains realizations is difficult. The best estimates of taxpayers' response to changes in the capital gains tax rate do not suggest a large revenue increase from additional realizations of capital gains--and certainly not an increase large enough to offset the losses from a lower rate.
The report then cites a bunch of studies on the subject, the most recent of which is Leonard Burman's 1999 book, The Labyrinth of Capital Gains Tax Policy. Which is kind of disappointing; one would hope lots of people would be studying the the capital gains rate cuts of 1997 and 2003 to figure out what they actually accomplished. And maybe they are; but if so they're so far keeping their work under wraps.
So on the one side we get lots of confident claims from supply-side zealots that the cuts more than paid for themselves--claims that rely both on the latest data on tax receipts and the (almost certainly erroneous) belief that the movements of stock market and other financial markets are driven entirely by capital gains tax rates. And on the other we get the serious economists telling us that capital gains rate cuts don't increase revenue, but not offering anything in the way of up-to-date evidence for this. Which helps explain why the zealots continue to be taken more seriously by the media than they deserve.
May 3, 2008 9:40
Liveblogging the Berkshire Hathaway annual meeting
8:42 a.m. (all times Central): It's begun! They're playing the movie. Starts out with a musical montage with scenes from Berkshire subsidiaries. Makes me wonder if "It's a Beautiful Day" is, in fact, the most-played song at annual meetings. Then goes to a cartoon in which Warren and Bill Gates (Berkshire director and Buffett bridge buddy) talk Charlie Munger (Berkshire vice chairman and Buffett's Cali-based BFF) into running for President. He wins and quickly gets going on the nation's problems. If everyone eats a Dairy Queen Blizzard each day we'll all cool off, taking care of this whole global warming thing. For the nation's healthcare issues, everyone should switch to See's Candies: Munger has been eating them his whole life, and he's healthy at age 84. Experts at the Nebraska Furniture Mart pick the Cabinet. You get the idea.
9:12 a.m.: If I had to sum up this movie in a phrase, it would be “sketch comedy." Warren and Charlie have a nice little bit: Buffett discovers something called the Internet and calls up Munger to suggest they invest in Web stocks. The answer is no—until Warren phones Jamie Lee Curtis, who answers lying in bed, and then calls up Munger to suggest “maybe we could all buy them together.” Interspersed are commercials for Berkshire products, including a touching story about a man who writes his wife a heartfelt letter. The narrator intones: “If you’re not that guy,” there are some Berkshire-owned jewelery stores that can help out. They’re also showing clips from that fantastic John Bird/John Fortune subprime mortgage market meltdown video.
9:32 a.m. Last video bit was about Warren and Susan Lucci swapping jobs. Now Lucci is on stage with Munger. When he asks where Warren is, she says he got hung up at the studio, shooting All My Children. That's okay, he says, since she has "some important qualities Warren lacks." Now she's saying she wants to make some changes, like paying shareholders a dividend. This is a popular idea with the crowd.
9:36 a.m. Warren is back! He's sending Lucci off to Borsheim's.
9:38 a.m. Introduction of the directors, including Warren's son Howard Buffett, Bill Gates, Yahoo's Susan Decker, etc.
9:40 a.m. First question from a shareholder, who's come all the way from Bombay: How can people learn to invest smartly (aside from reading Berkshire's annual letter to shareholders). Warren's answer is to read Ben Graham's The Intelligent Investor. "If you read it, you will not behave like a lemming."
9:44 a.m. Next question: How is the operational integration of Cologne RE progressing? I'm going to take this as an opportunity for a bathroom break.
9:51 a.m. Where's the market going to head next? Buffett: "Charlie and I don't have the faintest idea of where the stock market is going to go next week, next month, next year. We're not in that business, we don't know how to be in that business. It's just not our game." It's all about buying good companies on the cheap then hanging on to them for a long, long time, folks.
9:54 a.m. A question about who to hire as managers. Whomever is passionate, says Buffett. Mrs. B worked at the Nebraska Furniture Mart until she was 103 and a year after she retired, she died. “That is a lesson to our managers.” If you listen to Buffett enough, you realize that he tells the same stories in the same ways over and over again... but they’re such good stories.
Click on "read full entry" below to, you know, read the full entry.
May 3, 2008 9:12
How Warren Buffett spent his morning
First event of the Berkshire Hathway annual meeting: Warren Buffett gets his portrait painted by performance artist Michael Israel. It takes 8 minutes. Afterwards, Buffett goes to shake Israel's hand... and then thinks twice.
Then Warren did some TV interviews and walked around the exhibition space, visiting the booths and displays of Berkshire's subsidiary companies, like Dairy Queen, GEICO and Clayton Homes, which has a whole house here in the Qwest Center -- with a price tag of $69,500 on it.
At the Justin Brands display, which includes two Texas longhorns, Buffett asked how much the cattle sleep. Did I mention this all started at 6 a.m.?
May 3, 2008 5:18
The business of boxed chocolate
One thing I meant to tell you about yesterday—before I got seduced by the blueberry martinis and diamond necklaces at Borsheim’s—was my conversation with Brad Kinstler, the CEO of See’s Candies.
In this year’s annual report, Warren Buffett bragged about See’s. Per-capita consumption of boxed chocolates might not exactly be a growth industry, Buffett wrote, but boy does it throw off cash, which can then be invested and used to buy other businesses. When a Berkshire predecessor company bought See’s in 1972, the chocolatier required $8 million of capital to pull in $30 million in sales and $5 million in pre-tax earnings. Today, See’s sells $383 million a year, with pre-tax profits of $82 million—and $40 million of capital required to run the business. Buffett glows that only $32 million has had to be invested since 1972 in order to reach a total of $1.35 billion in pre-tax earnings.
See’s, which has stores in 10 Western states but opens up temporary outposts in more then 30 states between Thanksgiving and Christmas (when the company does half its sales), raised prices on January 1. That’s pretty much a January 1 tradition at See’s. This year, the cost of a pound of chocolates went from $14.50 to $15.00. Yet even while consistently exercising its pricing power, See’s still generally sells chocolates for at least $5 per pound less than the quality-chocolate companies it considers to be its competitors.
Why? Kinstler says they simply make good chocolate less expensively. Part of that comes from vertical integration; by directly controlling production at its three California factories, See’s can more acutely react to changes in demand. See’s also doesn’t spend a whole lot of money on product development or marketing. The product line doesn’t vary much from year to year—“We don’t feel the need to re-invent ourselves,” says Kinstler—and the design of the black-and-white boxes that traditional See’s assortments come in hasn’t changed, or even really been talked about, in a long, long time. “We’re not selling the packaging,” says Kinstler, “we’re selling the chocolate.”
That if-it-ain’t-broke attitude also permeates the company’s growth strategy. See’s will open eight stores this year, a modest increase over its current base of 200. At Christmas, it will open 120 gift centers—those temporary, mall-based outposts—instead of 110 like last year. Kinstler calls this approach “conservative,” but in a retail landscape littered with companies that had a good idea then ruined it by getting as big as they could as fast as they could, you might more simply call it “smart.” It’s also, as I found out, tasty:
May 2, 2008 7:00
Welcome to Omaha! A Berkshire Hathaway weekend preview
Berkshire Hathaway is expecting a record turn-out for tomorrow’s annual meeting. The crowd-control paraphernalia—what do you call those metal divider things?—is all set up in front of the Qwest Center and ready to go.
There’s plenty for shareholders to ask the Oracle—how his new bond insurance business is going, the deal for Wrigley, those rumors about buying American Express, when he thinks all this credit craziness will end, details on who is going to take over Berkshire after he’s gone. Tune in tomorrow for a play-by-play as he and Charlie Munger field five hours of questions.
To tide you over, here’s a little video previewing the weekend and talking to some of the people showing up about why they’re here. We’ve got shareholders, yes, but also the CEO of a Berkshire subsidiary—who will be among the Berkshire executives pushing his wares in 200,000 square-feet of exhibition space—and a member of the Karuk Tribe of California who has come to protest how the dams of one of Berkshire’s energy subsidiaries are ruining the Klamath River and its salmon population.
(Thanks to Caitlin for the editing and to Danny for finding an Internet connection.)
If you want to hear what Warren Buffett has to say about the booming size of the annual meeting and how you can’t get a hotel room in Omaha, check out this interview from CNBC. For the record, I asked to talk to Buffett, but was told no. I hate how bloggers get no respect. Someday, MSM. Someday.
May 2, 2008 3:07
The Kiviat konspiracy
As you have probably noticed, I'm back from vacation, and Barbara Kiviat is still writing posts. That was partly already in the works because she's going to the Berkshire Hathaway annual meeting this weekend, but I've also asked her to keep on writing here whenever the mood strikes her, and she has agreed. I haven't actually gotten around to asking anyone else at Time if that's okay, but I figured we'd abide by the glorious tradition established by Lisa Takeuchi Cullen: Announce online first, ask questions later.
Oh, and that guy Bill Saporito who was supposed to blog during my absence but didn't? He was really busy. Plus, his back hurts. A lot.
May 2, 2008 12:26
So just what kind of 'recession-like episode' are we in?
The phrase is Brad DeLong's, and I like it. The latest indicators, out this morning, are the April payroll employment (down 20,000, after seasonal adjustments) and unemployment rate (5%, down from 5.1% in March). That's better than most economic forecasters expected, but it's entirely possible the payroll number will be revised to -100,000 (or even plus 50,000) a month or two from now. (That happens a lot.)
As has been said here and elsewhere again and again, the proximate cause of our current recession-like episode was the unprecedented buildup in U.S. consumer indebtedness in the first part of this decade (household debt rose from $7 trillion in 2000 to $13 trillion by the end of 2006). That's what's behind the mortgage mess, it's why consumer spending has turned anemic, etc. Personal consumption expenditures account for about two-thirds of economic activity in the U.S., so this is a really big deal. But even people with big loans to pay down still need to spend, so consumer spending is generally prone more to slowdowns than to the kind of sharp drops you'll see in, say, corporate investment spending.
Meanwhile, Corporate America, outside of the financial and housing sectors and a few old-line manufacturers, is in pretty good financial shape. It already had its big meltdown for the decade, back in 2001 and 2002. That doesn't mean companies won't tighten their belts if consumer spending stays weak. It does mean most of them probably won't be falling off any cliffs.
Then there's the rest of the world, which so far is chugging along reasonably well as the U.S. sputters. This has been a boon to U.S. exporters. Exports only make up 12.7% of GDP, but they're up almost 10% in inflation-adjusted terms over the past year, so that certainly helps. The economic strength elsewhere is also helping keep oil prices high, which isn't so great.
Put at all together and you get a mostly weak picture, but a muddled one. Which is pretty much what today's jobs report delivered.
May 2, 2008 10:07
It's raining in Omaha
Got in last night for the big Berkshire Hathaway Annual Meeting. They're expecting more than 30,000 people this year, up from about 27,000 last, and way up from the 450 who showed up in 1986 or the 7,500 who came in 1996.
Even though it's raining,there's that Warren Buffett/Charlie Munger excitement in the air. Last night, the Avis (Avis!) car rental counter was hopping with shareholders--twice as many clerks on duty as usual.
Also, a little excitement on the plane: there were about 15 agricultural students from Denmark heading to Nebraska to visit farms. Oh, yeah, that other thing they have here... I very proudly told them "Hej!" Then one of them explained that it's actually pronounced "hi"-- which makes me call into question this whole notion of learning other languages. We really are more the same than we are different.
May 2, 2008 9:15
The good times are still rolling in Asia
So maybe the Great Decoupling thesis wasn't nonsense. Reports Time's Michael Schuman from Hong Kong:
Finding an empty table at a Starbucks in Hong Kong on a Sunday afternoon these days feels like winning the lottery. So does getting a reservation at a good dim sum restaurant or renting an affordable apartment. While the U.S. suffers the convulsions of an impending recession and massive wealth destruction, here the malls are stuffed full and the streets bumper-to-bumper with BMWs. The good times keep rolling, and not just in Hong Kong, but across much of emerging Asia, from Shanghai to Mumbai. Sure, the U.S. turmoil has had some impact — jittery investors have knocked back stock markets from last year's lofty heights — but in general, the story of America's economic woes has been confined to the morning newspapers. ....It's not that the U.S. and Asia are somehow more loosely linked. With increasingly interconnected global manufacturing and financial systems, the influence of the U.S. isn't going to just vanish. However, Asia's developing economies are becoming so advanced that they can generate their own growth. It is domestic demand and investment that are protecting Asia's economies from the U.S. recession. Asians simply have more money to buy the TVs, cars and houses to keep their own economies roaring on. Wages in China's urban areas, for example, jumped nearly 19% in 2007. "It is the internal dynamics that are giving Asia its dynamism," says Ifzal Ali, chief economist at the ADB [Asian Development Bank] in Manila.
This is a good thing. Eventually, consumers in China and India will begin to compete with those in America for the title of engine of world growth. This might mean that the U.S. economy doesn't play the dominant role it has in the world over the past six decades, but it does mean a healthier global economy. With more sources of growth, a sick America can no longer send the rest of the world into the hospital ward.
I hope that's right. But I also wonder if it's just that Asia only beginning to feel the impact of the U.S. slowdown.
May 1, 2008 5:42
Wyden-Bennett vs. McCain on health care
With all the talk here and on Swampland over the past couple of days about John McCain's health-care plan, it's worth remembering that there's already a bipartisan bill in Congress that would do pretty much what McCain says he wants to do as far as taking health insurance out of the hands of employers, yet actually addresses many of the hard questions about making coverage universal and keeping costs down that McCain so far has not.
That would be the Healthy Americans Act, sponsored in the Senate by Oregon Democrat Ron Wyden and Utah Republican Bob Bennett (although it's really Wyden's baby). And today the Congressional Budget Office and Joint Committee on Taxation came out with an analysis that says the bill would, over time, "tend to become more than self-financing and thereby would reduce future budget deficits or increase future surpluses." Bloggeth Ezra Klein: "In other words, we can cover the 47 million uninsured without spending more money. As a talking point, this is huge."
Both Wyden-Bennett and McCain would remove the existing tax subsidy for employer-provided health insurance--in which companies get to deduct the cost of that insurance from their income taxes, but employees aren't taxed on the value of the health insurance they receive--with an across the board break for individual taxpayers. In McCain's case it's a $5,000-per-family tax credit; with Wyden-Bennett it's a $15,210 per family (of three) tax deduction that begins to phase out at an annual income of $125,000 for joint returns or $62,500 for individuals.
But while McCain pretty much stops there and leaves the rest to the market (apart from some not-very-well-developed thoughts about special programs for the hard-to-insure), Wyden-Bennett includes subsidies for the lower-middle class, new state Health Help Agencies to coordinate the purchase of insurance, a universal coverage requirement, and a tax on employers to help pay for it all. It's all so health-wonkish I can barely bear it, but it's clearly a far more thought-out plan than McCain's--and is both more sweeping and farther along the road to becoming reality than Clinton's or Obama's. So, uh, maybe it is what we all ought to be discussing.
I'm not saying it hasn't been discussed at all. Joe Klein gushed about it in the pages of Time last summer. Ruth Marcus wrote a column about it in February. The CBO report is getting a smattering of coverage. But nothing like the McCain plan. Funny that, huh?
May 1, 2008 2:45
So would the McCain health plan cost more or less than what we've got now?
For those of you who don't stop by Swampland first on the way to this blog, here's McCain's adviser Doug Holtz-Eakin splainin' something about his boss's health insurance plan:
For the typical ESI [employer-sponsored insurance] recipient -- $12,000 policy — nothing changes. The tax liability on the policy ($12,000 x .35) when insurance is taxed as compensation is $4,200; this will be immediately offset by the credit of $5,000. In short, if they want to stay with the current plan, it just means a lot of computer entries on the pay stub.
If that's the case, the McCain plan would decrease the tax subsidy only for those with more-generous-than-average corporate health plans, while increasing it for those with plans that are average and worse, plus all the people out there who currently have no health insurance at all. Which means that, at least initially, the McCain plan would substantially increase the tax subsidy for health care, but distribute it more fairly and evenly than it is now. Over time, though, the subsidy is likely to shrink, as James Kvall of the Center for American Progress explains in yet another of Karen T's posts:
This would work by holding down the growth in the credit to the inflation rate (about 2% a year), unlike the current benefit which rises with health care premiums (about 6%). Surprisingly quickly, the tax cut turns into a tax increase, even for typical workers with ordinary health care plans.
Now if you believe that the tax subsidy for health care is a major part of what drives health care costs up, as many conservative economists do, this is a good thing. If you don't, everything's messier. The McCain plan would still be fairer than the current system, in which the people with the swankiest employer-paid health plans get the biggest tax break. But it might well mean a decline in the quality of health-care available to most people now covered by corporate plans.
And that's still leaving aside all those questions about adverse selection, the value of expert decision-making, etc. I don't think this McCain plan is some kind of scam. It just shows clear signs of having been designed by free-market-oriented economists who don't know all that much about the health-care system. As a mostly free-market-oriented non-economist who doesn't know all that much about the health-care system, I'm naturally sympathetic to it. But I'm also extremely dubious of how well it would work in practice.