The Importance of a good bar

When the city of New Orleans began filling up with water shortly after Hurricane Katrina last year, bartender Marita Jaeger and her boyfriend decided to skip town. She called her boss, Johnny White’s Sports Pub owner JD Landrum, to see what he'd be doing with the place. At the time, Johnny White's was something of a local landmark. It's motto was "Never Closed," and indeed, the bar had never shuttered its doors. They didn't even have locks. To her surprise, even in all of this – no power, rising water levels, and reports of looting and lawlessness, Landrum refused to close the place down. “I have to keep it open,” Landum told her. “Because people need somewhere to go.”

I was born in the bayou state and have spent a few afternoons at Johnny White's place. It's a dump, but it was the only place open after the storm - indeed during the storm.

The idea that a bar could be such an important part of a neighborhood – important even to the identity of a city – seems lost on some lawmakers who, probably not coincidentally, happen to represent districts nowhere near New Orleans.

Take Virginia Rep. Frank Wolf. Late last year, the Republican congressman attached a provision to the federal Hurricane Katrina Relief bill that prohibited businesses that serve liquor (along with massage parlors, casinos, and – bizarrely – tanning salons) from getting any federal emergency aid or tax breaks.

This twit obviously needs to spend an afternoon at Johnny White's.

No inflation here, move along, nothing to see here...

Soaring metals prices mean that the value of the metal in pennies and nickels exceeds the face value of the coins. Based on current metals prices, the value of the metal in a nickel is now 6.99 cents, while the penny's metal is worth 1.12 cents, according to the U.S. Mint.

According to the government's Consumer Price Index, the inflation rate in the US is negligible, but it seems to me that this is a more accurate indicator of inflation.

Larry Summers

Larry Summers got fired from his last job at Harvard for making some insensitive statements about the lack of women in the sciences. His latest gig is as a columnist for the Financial Times and my guess is that the FT is hoping he'll place another foot in his mouth soon so they can send him packing as well.

It is neither fair nor efficient to audit disproportionately the tax returns of those in the bottom half of the income distribution at a time when most of the $500bn tax gap comes from those with high incomes. There is no policy justification for allowing the erosion of corporate income tax through pervasive use of corporate tax shelters and manipulation of transfer price rules. Not only does this cost the government revenue, it also puts undue competitive pressure on companies that want to meet obligations to their workers.

Much more can done in a range of areas, from disclosure of executive compensation, to ensuring that the government leverages the volume of its purchases, to making financing of education at every level more equitable, to making sure that businesses continue to take responsibility for their workers’ healthcare costs.

Unimaginative ideas written in drool inducing prose. I had thought Summers got a raw deal at Harvard, but if this is represenative of his intellectual skills, maybe they made the right choice.

High tax rates

PARIS (Reuters) - French rocker Johnny Hallyday, one of France's biggest showbusiness stars and a high profile supporter of presidential hopeful Nicolas Sarkozy, said on Thursday he was moving to Switzerland to escape French taxes.

"Like a lot of French people, I'm sick of what they make us pay in taxes," the singer told Europe 1 radio on Thursday, a day after his impending departure for Switzerland was first reported by the weekly L'Express.

"French rocker" just doesn't sound right does it?

When will governments finally realize that high tax rates have consequences?

Leisure Inequality

Here's an interesting article from the Economist about the increase in leisure time.

INCOME inequality may be increasing, but income is not the only measure of welfare. Those at the lower end of the income spectrum have growing amounts of time on their hands. In a forthcoming QJE paper Mark Aguiar and Erik Hurst find that, on average, the amount of time devoted to not working (this includes household work) has increased over the last forty years. How do Americans spend their new free time? Overwhelmingly, staring at the idiot box. Reading and socialising have dropped, despite the newfound leisure.

The interesting thing is that those on the lower end of the wage scale have seen a much larger increase in leisure time than the well off. There are a few explanations for that but my guess is that the rich are deathly afraid of not being rich any longer.

Economic law repealed

Here's an article about the likelihood that the new Congress will raise the minimum wage:

WASHINGTON (Reuters) - The incoming Democratic-led U.S. Congress intends to give a hand to dishwashers, fast-food cooks and America's other poorest-paid workers by raising the federal minimum wage for the first time in a decade.

With the gap between rich and poor widening, Democrats promised such a pay hike as a part of their campaign that saw them win control of both chambers of Congress in the November 7 elections from President George W. Bush's Republicans.

I have commented on this before and believe the macro economic consequences are minimal, mostly because so few people actually make the minimum wage. In a bit of wishful thinking Reuters, citing "some estimates" , believes this will raise the pay of other workers as well:

In addition to raising the pay of people who now earn less than $7.25 per hour, the proposed new minimum wage, an increase would prompt employers to increase the wages of an estimated 8.3 million other low-paid workers, according to some estimates

I think that is unlikely and next we'll be hearing about how more people are now making the minimum wage and therefore we need another raise. For those who believe the minimum wage has no effect on hiring, perform this mental exercise. Instead of raising the minimum to $7.25 why not raise it to $15 or $39 or $50/hour. Think that would have an effect on hiring? The last I checked, politicians did not have the power to repeal the laws of economics or to ensure prosperity for all.

Sarbaes Oxley changes

The SEC voted on some changes to Sarbanes Oxley designed to help small firms comply:

The SEC proposed new official guidance to companies about how to comply with the law. The proposed guidance is intended to reduce compliance costs and provide more flexibility, especially for smaller companies. The idea is to focus the review activity required by Sarbanes-Oxley on the search for, and identification of, material risks--the kind of problems that could change an investor’s view of a company. At the same time, ideally, the rules would not require expensive paperwork in situations where it’s unlikely to have any benefit. The PCAOB is scheduled to announce a related revision next week.

After reading the press release at the SEC, I can't see where this changes things all that much, if at all. Sarbox needs a major overhaul as the costs have far outweighed any benefit.

Huey Long would be proud

What are the people of Lousisana thinking? Rep. William Jefferson has been reelected to the House. He's the one fighting corruption charges after authorities found $90,000 in his freezer. Amazing....

Irrational Exuberance Birthday

According to this post at the WSJ's blog, it's been 10 years since Greenspan first spoke the phrase "Irrational Exuberance" which has since become a well worn catchphrase.

It was 10 years ago tonight that Mr. Greenspan let the phrase slip. (In a nice touch of irony, it came in a speech before the American Enterprise Institute — home to the two writers who in 1999 penned DOW 36,000: The New Strategy for Profiting from the Coming Rise in the Stock Market.) Mr. Greenspan was talking about stocks, of course, but since then, writers have invoked his phrase to describe excesses in everything from hog bellies to Treasury bonds. A search on Factiva for news media mentions of “irrational exuberance” returns 23,131 articles. “Rational exuberance” (clever, that!) returns 776 articles. Talk about excess. The chairman himself some years later, in a Congressional Q&A session following testimony, referred to the speech as “turgid,” musing that the rest of his remarks likely caused people to fall asleep.

But here's what really caught my eye on this post; the Fed Funds rate was exactly the same then as now - 5.25%. The Fed has changed the rate 40 times since then, but one can't help but wonder if we wouldn't have been better off if they had just left it alone for the last 10 years. I suspect the answer is yes.