QUOTE OF THE DAY
WSJ: Silicon Valley's 'Suicide Impulse'
It's a measure of how far Silicon Valley has strayed from its entrepreneurial roots that a top regulator is calling on technology companies to do less lobbying and more competing.
In a letter to the editor responding to a report in this column on how Google spent $25 million lobbying to stop an antitrust case against it, Federal Trade Commission Chairman Jon Leibowitz wrote that companies should not draw the lesson that lobbying pays. Instead, he urged: "Stop! Invest your money in expansion and innovation." Mr. Leibowitz asserted in his letter, published Jan. 18, that "Google's lobbying expenses had no effect on the care, diligence or analysis of the agency's incredibly hard-working staff or the decisions reached by any of the FTC's five commissioners."
Whatever the effect of Google's big-ticket lobbying, regulators deserve much of the blame for companies calculating that lobbying is a good investment. Still, Mr. Leibowitz has a point: Tech executives should think twice before again lobbying government to get involved in their industry.
The precedent for the potential antitrust case against Google was the massive prosecution in the 1990s of Microsoft, the giant of the desktop era. Competitors such as Netscape, Oracle and Sun Microsystems lobbied hard to get regulators to bring the case that did end up paralyzing Microsoft.
Points and Figures: The Chosen Road To Nowhere
Whenever a business feels like it has to hire a lobbyist to work with the government, it’s doomed. At all costs, it should try and ignore the government and work around anything that the government sets up to constrain it.
Case and point is Silicon Valley. Our high tech industry is one of our most dynamic. It’s a meritocracy. Capital flows in and around it. The invisible hand works pretty well. It’s highly competitive. But, they have succumbed to the allure of lobbying.
No matter which political party you caucus with, as soon as you show any interest, they get their meathooks in you. All they want is your money in return for providing you with services rendered. Many times, you actually don’t need those services rendered.
In 1999, economist Milton Friedman issued a warning to technology executives at a Cato Institute conference: “Is it really in the self-interest of Silicon Valley to set the government on Microsoft? Your industry, the computer industry, moves so much more rapidly than the legal process that by the time this suit is over, who knows what the shape of the industry will be? Never mind the fact that the human energy and the money that will be spent in hiring my fellow economists, as well as in other ways, would be much more productively employed in improving your products. It’s a waste!”
He predicted: “You will rue the day when you called in the government. From now on, the computer industry, which has been very fortunate in that it has been relatively free of government intrusion, will experience a continuous increase in government regulation. Antitrust very quickly becomes regulation. Here again is a case that seems to me to illustrate the suicide impulse of the business community.”
Star Tribune: North Dakota struggles to cope with its oil-boom prosperity
High pay, high rent
Twelve years ago, Williston's population stood at a little more than 12,500 people. Now, officials there estimate the town services 38,000 on a daily basis, based partly on water and sewer use. They expect it could hit 50,000 by 2017.
North Dakota's population grew 2.2 percent to 699,628 in the year ending July 1, according to the Census Bureau. Many newcomers are from Minnesota. For years, more people moved from North Dakota to Minnesota than vice versa. That trend has changed in recent years, with North Dakota gaining approximately 4,500 to 6,500 Minnesotans each year between 2009 and 2011.
Housing is the region's biggest problem. Most apartments and extended-stay hotels command rents that only those with lucrative oil field jobs can afford -- not government or retail jobs.
On a large flashing sign next to the highway, the Value Place hotel advertised rates of $699.99 a week, well above rates for its other hotels around the country. Some people living in campers said they pay RV park owners $800 a month to park and hook up to water and sewer. Classified ads in the local Shopper listed a furnished two-bedroom apartment for $2,200. A trailer with a queen bedroom listed for $1,650 a month.
Though some longtime residents are getting big mineral payments from the oil, others struggle to continue living there, even though wages are going up, too.
Gordon Weyrauch, manager of Williston Home & Lumber, said it's hard to keep good employees even at $16 an hour: "Seems like when you get somebody that's really good, there's always another company stealing them away."
A sign outside the local Wal-Mart advertises starting wages of $17 an hour.
Some desperate employers are acting as landlords.
ESPN: Shot to cost fan $22K in taxes
With a half-court hook shot, Michael Drysch has gone from an average computer technician in the Midwest to a viral Internet sensation.
The 50-year-old from McHenry, Ill., swished a shot Friday night at the Miami Heat game as part of a promotion with lip balm brand Carmex and the LeBron James Family Foundation. He won $75,000 for himself and the Boys & Girls Club of America.
Drysch got tackled by James after the shot went in, but the government also will tackle his $75,000 prize.
"A lot of people don't realize: You don't win what you win," said Robert Raiola, an accountant with FMRTL in Cranford, N.J., whose clients include athletes.
It's not something Drysch was unaware of. When asked Friday night on NBA TV what he would do with the money, Drysch responded, "Give the government half."
Well, at least it won't be that much.
Drysch's prize is a lump sum based on that $75,000 number, but IRS regulations stipulate that 25 percent of the prize must be withheld for federal income tax.
That leaves Drysch with a check of $56,250.
WSJ: Fed Policy is a Drag on the Economy
As they meet this week, Federal Reserve Chairman Ben Bernanke and his colleagues will be looking at an economic recovery that has been far weaker than expected. Early in 2010 they predicted that growth in 2012 would be a robust 4%. It turned out to be a disappointing 2%. And as the recovery fell short of their expectations, they continued and then doubled down on the emergency interventions used in the panic in 2008.
The Fed ratcheted up purchases of mortgage-backed and U.S. Treasury securities, and now they say more large-scale purchases are coming. They kept extending the near-zero federal funds rate and now say that rate will remain in place for at least several more years. And yet—unlike its actions taken during the panic—the Fed's policies have been accompanied by disappointing outcomes. While the Fed points to external causes, it ignores the possibility that its own policy has been a factor.
At the very least, the policy creates a great deal of uncertainty. People recognize that the Fed will eventually have to reverse course. When the economy begins to heat up, the Fed will have to sell the assets it has been purchasing to prevent inflation.
If its asset sales are too slow, the bank reserves used to finance the original asset purchases pour out of the banks and into the economy. But if the asset sales are too fast or abrupt, they will drive bond prices down and interest rates up too much, causing a recession. Those who say that there is no problem with the Fed's interest rate and asset purchases because inflation has not increased so far ignore such downsides.
Real Clear Markets: 35% Is Way Too High For Corporate Taxes
If there's one policy agreement between Republicans and Democrats, it's that the 35% corporate tax rate in the United States should be reduced to 28% or 25%. The current rate, highest in the advanced industrial world, disincentivizes investment and encourages corporations to relocate overseas.
Unfortunately, the deficit is a major hurdle facing any proposal to reduce the corporate tax rate. Because of the fiscal pressures facing the government, most politicians recognize that any corporate tax rate cut must be paid for by eliminating tax preferences and "loopholes." But few politicians have identified enough revenue-raising measures to offset the cost of a significant reduction of the corporate tax rate-cutting the rate from 35% to 25% would cost roughly $1.2 trillion over ten years.
I believe that there is a sensible answer: a modest limit to the deductions that corporations claim for the interest they pay on their bonds and other debt.
CARTOON OF THE DAY