Jim Johnston is The Heartland Institute's senior fellow for energy and regulatory policy and a member of its Board of Directors. He retired in January 1993 from his position as senior economist at Amoco Corporation, whose Economics Department he joined in 1975. His primary responsibilities while at Amoco included the economic analysis of public policy issues and the hedging of corporate risk.
Prior to his employment at Amoco, Mr. Johnston served as an economist with the RAND Corporation, the Institute for Defense Analyses, and the Secretary's Office of the U.S. Treasury. He served on the U.S. delegation to the United Nations Conference on the Law of the Sea.
Mr. Johnston's current research has focused on electric utility deregulation in Illinois and other states; pollution trading under the climate change treaty, Clean Air Act, and the RECLAIM system for the South Coast Air District; and a general theory of regulation, published in the Cato Institute's Regulation magazine.
The caucuses in Iowa and the primary in New Hampshire have made Rep. Ron Paul a credible alternative to Mitt Romney going into the primaries in South Carolina and Florida. The Republican establishment is not happy. Pity.
The conventional wisdom is that a moderate or even a strong conservative will have to move toward the center in order to capture the independents in between conservatives and liberals. That is like two armies going head-on toward each other.
But there is another popular military strategy. It is called flanking the opposing army, and it means attacking from behind in addition to a direct frontal assault. That, in policy terms, is what Ron Paul is doing.
Among all the candidates, including of course the president himself, Paul has the most complete economic policy for a recovery. Put simply, it is to reduce government spending and curtail the policies that continue the recession, such as those of the Federal Reserve. In addition to the best economic policy being offered by any of the Republican candidates, Paul has a set of social policies that appeal to liberals, especially young ones. He is against foreign wars that are not related to domestic defense, and he is for decriminalizing marijuana, to mention a couple.
The latter has received a strong push-back from the Republican establishment. Their thinking is that such a policy will lose Paul the conservative base, and therefore he cannot be nominated.
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(NOTE: Paul Fisher, a member of The Heartland Institute’s Board of Directors, is co-author of this piece.)
The story about the failure of Enron by Phil Rosenthal that appeared in the Chicago Tribune on December 4, 2011 missed out on several interesting points in law and economics.
First and foremost, Jeffrey Skilling and Ken Lay were convicted of wire fraud even though they had no personal gain from the fraud. The Supreme Court later unanimously found the “honest services” version of fraud was too vague and ruled only bribes and kickbacks are illegal.
By contrast, Andrew Fastow, then chief financial officer of Enron, established the off-book entities where much of Enron’s debt was parked. To be legal the off-balance-sheet special-purpose entities were supposed to be independent of Enron. But Fastow did not let this happen. Indeed, he siphoned off tens of millions of dollars to his personal account by virtue of being an officer of both the partnerships and Enron. He was the prosecution’s best witness against Skilling and Lay. But here Fastow’s story was mixed.
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Bill Niskanen (March 13, 1933 - October 26, 201)
The economics profession has lost one of the giants. His best known work is a positive, as opposed to a normative, theory of bureaucracy. Bureaucracy and Representative Government was published in 1971.
The model of bureaucracy is based on a special form of monopoly where the government uses the rents to increase, rather than restrict, output. The government presents the consumer-taxpayer with an all-or-nothing decision. Under those conditions, as Milton Friedman has pointed out, consumers buy much more of a good or service than would be the case in a competitive market. Niskanen took this basic principle and applied it to government behavior, where the frequent cry is to eliminate waste and duplication.
Not only has waste been increased by government, but competition has been eliminated in many areas. In the private sector duplication, called competition, is encouraged. The result in government behavior, according to Niskanen, has been to double its size compared with a private sector provision of goods and services. His work was an inspiration to others who worked to explain government operations.
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The income tax in the U.S. is the most progressive among the developed countries. Who made it so?
John Goodman and Michael Stroup tell you at Townhall. An excerpt:
Barack Obama wants the rich to pay more taxes. Since the days of Ronald Reagan, says the president, Republicans have been protecting the rich at every opportunity — shielding them from the obligation to pay their fair share. Yet here are some facts about U.S. income taxes that most people don’t know:
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Broadening the tax base and lowering the rate, the current whiz-bang solution to both the government debt problem and the recession, has the support of Sen. Dick Durbin (D-IL) from the political left and Sen. Tom Coburn (R-OK) on the political right. That in itself ought to make folks suspicious. Now that the Chicago Tribune has endorsed the idea in an editorial on August 7, 2011, it is all the more important to examine this presumed path to Nirvana.
The first question that should be asked is why are some economic activities taxed differently from others? One model is that government can easily tax politically unpopular firms and individuals in order to fund programs for favored constituencies. This is a form of the free lunch idea. If it were true, there would be no limit on the size of government. Although many of us believe the government is too big, it is not infinitely large.
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Energy future includes vast deposits of natural gas from shale. Hydraulic fracturing is used to free the gas from the shale rock. It now appears that oil can be recovered from shale as well.
In an article from The New York Times, Daniel Yergin of IHS CERA claims:
“This is very big and it’s coming on very fast … ‘tight rock’ fields that now produce about half a million barrels of oil a day will produce up to three million barrels daily by 2020 … this is like adding another Venezuela of Kuwait by 2020, except these tight oil fields are in the United States.”
This is an important paper on the pros and cons of clearing of derivatives traded over the counter from the ISDA (International Swaps and Derivatives Association). Craig Pirrong is a first rate scholar, especially on this subject.
A quick summary of The Economics of Central Clearing: Theory and Practice:
Regulations requiring the clearing of certain OTC derivatives through central counterparties (CCPs) are causing a profound change in market structure and trading practices. This paper discusses how CCPs are structured and what effects increased use of them will have on the financial system.
Even shorter version: There are dangers.
You should have a copy. Go here to get a PDF.
Heartland Institute Policy Advisor Brian Wesbury — who is rightly well-known in America for his incisive analysis of markets and the economy — has a new and excellent video on the debt ceiling debate and how not raising the ceiling will not lead to a default.
Click here (or on the image in this post) to watch it.
Paul Ryan made an excellent speech to the Economic Club in Chicago this week. The focus was his debt reduction plan. In it, Ryan observes that government spending has increased at a record rate, but the economy has not recovered to any substantial degree.
Control of government spending, according to Ryan, is crucial for a solution. Ryan emphasizes health care costs must be controlled by restructuring the health care bill passed Democrat controlled Congress in 2010. However, Ryan absolves the original Troubled Asses Relief Program (TARP) initiated in 2008 during the Bush Administration by Treasury Secretary Hank Paulson (the former CEO of Goldman Sachs).
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A brilliant discussion of the financial crisis occurred at the Milken Institute on May 2, moderated by Alan Schwartz, Executive Chairman, Guggenheim
The speakers were:
Kenneth Griffin, Founder and CEO, Citadel
Raymond McDaniel Jr., Chairman and CEO, Moody’s Corp.
Jim Millstein, Chairman, Millstein & Co. LLC; former Chief Restructuring Officer, U.S. Treasury Department
Thomas Wilson, Chairman, President and CEO, Allstate; Deputy Chairman, Federal Reserve Bank of Chicago
The star of the event was Ken Griffin of Citadel, with occasional brilliance of Thomas Wilson of Allstate. It is worth listening to the 74 minute video. While there are some abbreviations that are passed over quickly, They can be unwound easily with Google searches.
