A book probably worth buying. Woodie Guthrie: American Radical

A recent book by Will Kaufmann, who played the guitar and showed slides to illustrate Woody Guthrie’s life. Click here to watch. He’s nowhere near as good as Woody, but it’s good to see :

Do tax holidays stimulate the economy? Reality says no, but opinions differ

Citizens for Tax Justice looked at the data of a recent experiment on a tax holiday on clothing and some other items:

This past August for the first time, Arkansas offered a sales tax holiday of its own. While the sales tax revenue figures are still coming in, it’s now clear that holiday cost the state about $2.1 million in lost revenues and an additional $710,000 loss in revenues for cities and counties that collect their own local sales taxes.

Naïve state officials hoped to see an increase in sales tax revenue based on the assumption that consumers would go out and purchase more taxable items. Indeed, sales tax holiday proponents often argue that sales tax holidays actually generate new sales tax revenue, as in this report from the Florida Retail Association.

But so far the Arkansas revenue figures aren’t showing much offsetting revenue generated. The Deputy Director of the Department of Finance and Administration, Tim Leathers has admitted they “couldn’t detect any increase in consumers spending more money while they were in there buying school supplies.” Revenue officials have yet to tally September’s sales tax revenues to see if there were shifts in consumption by month, but either way it seems that the sales tax holiday didn’t provide a real and needed boost for state coffers.

The sales tax holiday did cost the state and cities and counties a lot of revenue.

It did not cause consumers to buy more taxable items to compensate for lost revenue (they might well have bought more untaxed items, however, which means they will buy fewer of those in future).

It did not cause out-of-staters to travel to Arkansas to take advantage of the tax holiday. Not surprising. Buy $100 worth of stuff, if tax is 6%, you save $6, or about enough for the gas a 25 mile one-way trip (if you fully expense it, it’s only enough for a 6 mile trip).

It might have shifted September sales into August but, if so, the effect was small.

On other words, tax holidays are just one more way to deplete government coffers and force the system closer to chaos. One only wishes Republicans had complete freedom to destroy their states, while leaving everyone else alone, so that they might learn something, but the lie machine is always able to come up with one more excuse to do the wrong thing.

A simple explanation of why the gold standard is insane

This is a remark I posted over at The Capital Spectator. I have heard an uncountable number of arguments in favor of or against the gold standard. But none of them are as simple and irrefutable as this:

There’s a much simpler gedanken experiment that explains why the gold standard is completely irrational, and it is one based in historical reality.

Suppose that a gold meteorite shatters over a country that is on the gold standard. Suddenly, everyone is much wealthier. However, the ability of factories to produce is not increased, nor is the population better educated, nor–in short–is there anything additional to spend money on.

Alternatively, suppose a scientist develops a magic elixir that heals the ills of age, makes crops produce in greater abundance, and–just as an added benefit–makes everyone smarter and more attractive. In a nation on the gold standard, there is now an additional good, but no money to pay for it. Therefore, people cannot be better off. Some may give up one good in order to buy the elixir, but they will be giving up exactly as much as they are gaining.

The history is well-known. In the latter half of the 19th century, there was a deflation that was relieved by a major gold strike. In the early 20th century, despite remarkable advances in technology, there was a deflation called the Great Depression that was relieved by going off the gold standard.

The gold standard is insane. It’s an astonishment that it lasted this long.

Really: why aren’t people who have just a little historical memory using this very simple argument to refute the gold bugs? Can any person read it and not be persuaded that the gold standard makes no sense? Why can’t Democrats/liberals/progressives/sane people make these simple arguments that cut through the complexity? We used to be pretty good at it. We had public intellectuals like Stephen Jay Gould, John Kenneth Galbraith, and Carl Sagan who could take complicated issues and explain them so clearly that even kids could get it.

Just for fun

Avedon posted this link of Jack Benny v. Groucho. Great comedy is immortal.

Euro debt crisis update

Peter Spiegel of FT says that they’re thinking of giving a 60% “haircut” to Greek debt, meaning that bondholders accept the value of the debt dropping by that much. Otherwise, they have to pony up something like $350B-$650B over a decade to keep it from defaulting. That wouldn’t be so bad if Greece were the only problem. The Greeks have raised something less than $100B from privatization. Strangely, deep recessions are not very good times to sell things if the goal is to make money. John Mcdermott of FT says that the EC report on Greek debt sustainability says that a best-case scenario with a 60% haircut is for debt to stabilize at 120% of GDP in 2020 with the injection of ca. $150B.

Lucas Papademos, in an OpEd in FT, describes Greek debt as 30% domestic, 40% foreign private, and the rest presumably foreign governments. He says that a forced restructuring of Greek debt would be catastrophic.

Nouriel puts breakup at a 10% chance, 40% chance of a crisis in 12 months, and 50% chance of muddling through.

This is not investing. It’s gambling.