QUOTE OF THE DAY
Bloomberg: The Disgusting Consequences of Plastic-Bag Bans
Conservatives often point out that laws, no matter how benign they may appear, have unintended consequences. They can reverberate in ways that not many people foresaw and nobody wanted: Raising the minimum wage can increase unemployment; prohibition can create black markets.
The efforts in many cities to discourage the use of plastic bags demonstrate that such unintended consequences can be, among other things, kind of gross.
San Francisco has been discouraging plastic bags since 2007, saying that it takes too much oil to make them and that used bags pollute waterways and kill marine animals. In 2012, it strengthened its law. Several West Coast cities, including Seattle and Los Angeles, have also adopted bans for environmental reasons. The government of Washington, D.C., imposes a 5 cent plastic-bag tax. (Advocates prefer to call it a “fee” because taxes are unpopular.) Environmental groups and celebrity activists, including Eva Longoria and Julia Louis- Dreyfus, support these laws.
The plastic-bag industry, predictably, wants to throw them away. It says that the making of plastic bags supplies a livelihood to 30,000 hard-working, law-abiding, patriotic Americans, many of whom have adorable children to support. It cites a 2007 report by San Francisco’s Environment Department that said plastic bags from retail establishments, the target of the ban, accounted for only 0.6 percent of litter.
CNET: Amazon, Overstock argue in NY court against sales tax demand
Amazon and Overstock are duking it out with New York state in a court battle over the issue of collecting sales tax.
In a case being heard by the State of New York Court of Appeals, attorneys for both retailers claimed yesterday that a 2008 New York law requiring them to collect sales tax on online purchases is unconstitutional, as reported by Reuters.
A 1992 Supreme Court decision found that retailers can't be forced to collect sales tax on out-of-state purchases unless they have a physical presence in those states. But the New York law skirted that decision. The state concluded that New York-based entities that "directly or indirectly refer customers" to a retailer's Web site represent a sales presence in the state, requiring that taxes be collected.
Not long after New York passed the law in April 2008, both Amazon and Overstock filled lawsuits against the New York State Department of Taxation and Finance. And now all three are defending their positions in New York State's highest court.
Attorneys for Amazon and Overstock argued yesterday that Web referrals don't correspond to a sales presence and instead are more like buying an ad in a newspaper, Reuters noted. The state's attorney countered that Web referrals are different than advertising in that they lead people directly to make purchases.
In the past, lower courts have favored the state's position. But the five appeals court judges seemed at least open to the arguments from the attorneys for the two retailers, Reuters added.
The New York State Department of Taxation and Finance told CNET that "we're confident in our position, and we await the decision of the court."
Reason: Were the Luddites Right?
In 1948 Norbert Wiener, the father of cybernetics, wrote an urgent letter to Walter Reuther, the president of the Union of Automobile Workers. Wiener warned Reuther that technologies that combined computing machines with production machinery would soon yield an "apparatus [that] is extremely flexible, and susceptible to mass production, and will undoubtedly lead to the factory without employees; as for example, the automatic automobile assembly line." Wiener ominously concluded, "In the hands of the present industrial set-up, the unemployment produced by such plants can only be disastrous."
The mass unemployment that Wiener predicted did not occur. As technology advanced, the number of employed workers in the United States increased from 59 million in 1950 to a peak of 146 million in 2007, and GDP grew from $2 trillion to $13.6 trillion (in 2005 dollars) between 1950 and 2012.
Now, two centuries after Luddites smashed then-newfangled weaving frames in northern England, predictions of permanent technological unemployment are being revived. In a December working paper for the National Bureau of Economic Research, called "Smart Machines and Long-Term Misery," the Columbia economist Jeffrey Sachs and the Boston University economist Laurence Kotlikoff pose the question, "What if machines are getting so smart, thanks to their microprocessor brains, that they no longer need unskilled labor to operate?" After all, they point out, "Smart machines now collect our highway tolls, check us out at stores, take our blood pressure, massage our backs, give us directions, answer our phones, print our documents, transmit our messages, rock our babies, read our books, turn on our lights, shine our shoes, guard our homes, fly our planes, write our wills, teach our children, kill our enemies, and the list goes on."
CNBC: Americans Are Tapping Into Home Equity Again
During the housing boom of the last decade Americans withdrew over $1 trillion in home equity. They did it through cash-out refinances, home equity loans, and home equity lines of credit. The latter allowed them to use their homes like an ATM. They spent the money on cars, televisions, vacations and fancy home upgrades. It was seemingly endless equity, until suddenly that equity was gone.
"Home prices are definitely a factor" in the recent rise home equity lines of credit, said Brad Blackwell, an executive with Wells Fargo Home Mortgage. "As they increase, people have more available equity."
Blackwell also pointed to increased consumer confidence, meaning borrowers now feel better about their ability to repay these loans. Both factors fueled a 19 percent jump in originations of home equity lines of credit at the end of last year, according to Equifax. In 2008, as housing was crashing, home equity line originations dropped 55 percent.
"Nationally we've seen a 31 percent increase in HELOC's year-over-year," said a spokesperson from JPMorgan Chase.
Library of Economics and Liberty: Some Wisdom of Don Corleone
I just finished re-reading The Godfather. It's full of grist for the social science mill. My personal favorite:
"There are men in this world," he said, "who go about demanding to be killed. You must have noticed them. They quarrel in gambling games, they jump out of their automobiles in a rage if someone so much as scratches their fender, they humiliate and bully people whose capabilities they do not know. I have seen a man, a fool, deliberately infuriate a group of dangerous men, and he himself without any resources. These are people who wander through the world shouting, 'Kill me. Kill me.' And there is always somebody ready to oblige them."
Personality psychology, criminology, labor economics, game theory, international relations, sociology of poverty - these are just the start of the list of academic disciplines that could profitably pursue Don Corleone's insight. And if you're interested in what economists have awkwardly dubbed "non-cognitive ability," read the whole book.
Reuters: The latest foreclosure horror: the zombie title
Five years ago, Keller, 10 months behind on his mortgage payments, received notice of a foreclosure judgment from JP Morgan Chase. In a few weeks, the bank said, his three-story house with gray vinyl siding in Columbus, Ohio, would be put up for auction at a sheriff's sale.
The 58-year-old former social worker and his wife, Jennifer, packed up their home of 13 years and moved in with their daughter. Joseph thought he would never have anything to do with the house again. And for about a year, he didn't.
Then it started to stalk him.
First, in 2010, the county sued Keller because the house, already picked clean by scavengers, was in a shambles, its hanging gutters and collapsed garage in violation of local housing code. Then the tax collector started sending Keller notices about mounting back taxes, sewer fees and bills for weed and waste removal. And last year, Chase's debt collector began pressing Keller to pay his mortgage, which had swollen, with penalties and fees, from $62,100.27 to $84,194.69.
Bloomberg: Why Municipal Pension Systems Are a Terrible Idea
Scituate, Rhode Island, population 10,329, operates a pension plan for its police department. The plan is underfunded to the tune of $8.4 million, a liability that has quadrupled since 1999. That doesn't sound like a big shortfall until you realize that Scituate's pension plan has only 33 participants, meaning that it is short by more than a quarter million dollars per employee.
Worse, Scituate isn't alone. Rhode Island, with just 41 cities and towns, has 36 separate municipal pension systems, and their unfunded liabilities total more than $2.3 billion. Most, like Scituate's, are less than 50 percent funded. Cranston, Rhode Island's third-largest city, has funded just 17 percent of its $330 million pension liability. All but one of these plans have fewer than a thousand members.
Pension plans are underfunded all over the country, but Rhode Island and a handful of other states are in worse shape than usual because of a bad structural decision: letting municipalities of all sizes run pension plans independently. In most states, public employee pension systems are run either by the state government alone or by the state and a handful of the largest cities. For example, New York City is the only municipality in New York state with its own plans; all other cities and counties participate in two large statewide funds.
Pension systems are complicated, and overseeing them properly takes time and expertise. This is a heavy lift for municipalities overseeing small pension plans. In the case of Scituate, the board that was supposed to oversee the police pension plan met only once between 1999 and 2011. Until 2007, Scituate was using an investment return projection of 9 percent, far more aggressive than is typical.
This lack of attention has meant that local plans are much more likely than statewide plans to have become deeply underfunded. Of the 110 statewide pension systems covered by the Public Funds Survey, the worst-funded is the Illinois State Employees' Retirement System, with a funding ratio of 35.5 percent. Sixteen of Rhode Island's 36 local plans are worse funded than Illinois SERS.
MarketWatch: U.S. Postal Service shows $1.3 billion quarterly loss
The U.S. Postal Service recorded a net $1.3 billion loss during in October through December, a much narrower deficit than a year earlier, but still reflective of agency's fiscal woes as the holiday season is historically its most profitable time.
The loss for the first quarter of the government's fiscal year is down substantially from the $3.3 billion shortfall a year earlier. A continued decline in first-class mail and a Congressional mandate to set aside more than $5 billion a year for future retiree health-care expenses were the driving factors for the most recent loss, the Postal Service said.
"We have mitigated our losses," said Chief Financial Officer Joe Corbett. "However, our liquidity concerns can only be fully resolved if Congress takes action to address our unsustainable business model."
Mail volume, and associated revenue, has been declining for several years, but the holiday season and heavy campaign mailing ahead of November's presidential election eased the typical decline. For the quarter, operating revenues declined less than 1% from a year earlier to $17.7 billion.
Holiday cards and gift shipments make October through December historically the most profitable period for the Postal Service. The shipping business did well during the quarter, increasing 4.7%, but first-class mail volumes declined 4.0%.
Early this week the Postal Service announced that it will eliminate Saturday delivery of mail, but not packages, in August as an effort to cut losses. Postmaster General Patrick R. Donahoe said the move is expected to save $2 billion per year.
The Postal Service recorded a $15.9 billion loss for the fiscal year ended Sept. 30, 2012, the largest deficit in its history.
CARTOON OF THE DAY