Flat Stanley’s Last 2 Weeks

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Stan here again. I’m going back to L.A. to be with my homie Matthew soon, but I’ve been doing a lot of cool things since I got back from Palm Springs and I wanted to update you on my adventures.

First, Dave took me to school with him one day. St. Cloud State University is right on the Mississippi River, so he let me see it. Here are pictures from the Whitney Overlook, a picture of the river itself, and a BEAVER that we saw right by the walking path! Dave tried to get close enough to get me into the shot, but he scurried away too quickly.

From there, we went on a nice road trip across the state. First, it was up to the northern part of Minnesota to Bemidji. Rumor has it that’s where Paul Bunyan and his blue ox Babe are from. They have two really huge statues up there for everyone to take pictures. Bemidji is just a little bit northeast of Lake Itasca, which is where the Mississippi River begins!

On another day, we went down to Minneapolis and got to explore. We went to the Minneapolis Sculpture Garden where they have lots of really cool sculptures. This one is called Spoonbridge and Cherry. If only we had a big tub of ice cream that were at the same scale!

Then we went to a Twins game. Here’s Dave, Sam, their neighbor Lauren, and yours truly!

Finally, we wrapped it up with a trip to Mall of America. Minnesota has no state sales tax on clothing, so they decided to make a huge mall to get people to come and spend money on clothes here. But I found out it’s much more than just a mall. The mall is the whole outside of it, but the entire inside is an amusement park. It used to be Camp Snoopy, with all Snoopy-themed rides. Now it’s the Nickelodeon Universe, with all kinds of Nickelodeon-themed rides. Some of the roller coasters are really pretty big, but we couldn’t go on them because they said I’d blow away. :(

It’s been a blast being up here in Minnesota for the last two months. I’ve seen about every kind of weather imaginable, met some really nice people, and saw some amazing things, both natural and man-made. Everything out here is so much different from back in Simi Valley, and I’ve learned a lot about how other parts of the country are unique in their own way. I can’t wait to try another new place, but this time with my main man Matthew!

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Flat Stanley — back from Palm Springs!

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What a fun trip I just had! We landed in Palm Springs on Thursday. Dave and Sam took me in the carry-on and then unfolded me so we could get a good picture at the airport. It’s an open-air airport — they said they’ve never seen anything like that before. You go through security, then you go back out into the open and then to the terminal. It almost felt like we were in a zoo or something.

The night we arrived, they had a street fair. They do it every Thursday night in Palm Springs. It was about a mile of street vendors, food vendors, and all kinds of craziness. We saw this one lady who had a dog dressed in the exact same clothes she had. The dog even had a brown skirt that matched the woman’s outfit. I took a picture with her!

On Sunday morning, we went to another street fair. I don’t know what it is about people in the desert, but it somehow makes them really like street fairs. This one was in the parking lot of a local college and there was some really cool stuff there. Dave got a bunch of snacks, but that was about it. One lady was selling baby strollers designed for dogs. I think the crazy lady from the other picture should buy one for her dog.

Another first came the next day, when we went geocaching! I didn’t know what it was, but it’s like the world’s biggest scavenger hunt. You use your phone’s GPS to find locations of nearby caches. The GPS gets you within about 10 feet and then you use clues and try to find something. This was in a little park area right across from the Palm Springs Convention Center. Looks like a statue and some rocks, right?

But there’s more than meets the eye! By one of the benches were a bunch of rocks. One of them was fake. Can you spot the fake rock?

It’s the darker gray one on the bottom right part of the picture. When you turn it over and open it up, there’s a little container with a long piece of paper.

Everyone who finds it signs their name and dates it, and then you move on to try to find the next one! It’s really fun and I think Matthew and his family would all have lots of fun doing it. It’s a great way to get exercise without feeling like you’re just going for a walk. Here’s me in front of the second one we found.

It was in the stop sign, inside a small plastic container poking through one of the holes in the side, third from the bottom.

In all, we found three of the four we were looking for. The fourth one was by a hotel in an open, desert field. There were lots of rattlesnake burrows and Sam is super-scared of snakes, so we gave up on that one pretty quick.

Sam and Dave spent most of the time either eating in restaurants or lounging by the pool. They didn’t want me to get food on me or accidentally get wet, so I had to stay home for those events. But it was a really fun trip and I was glad I could flatten out and travel with them.

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Flat Stanley 3 — on my way to Palm Springs!

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Sam and Dave have decided they have had enough of this crazy Minnesota weather, so they’re headed to Palm Springs for a long weekend. They’re taking me with, so I’ll get to check out Minneapolis, the airport, the plane, and then sunny Palm Springs. Close to home, but it’ll be a different experience. They said they’re just going to lounge by the pool with their neighbors most of the time, so it sounds like fun! I’ll have a full report when we get back to Minneapolis.

– Stan

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Flat Stanley, part 2: crazy weather

Flat Stanley

Stanley here, reporting in on the latest from Minnesota.

The weather here is INSANE! First, on the plus side, I got to see my first falling snow! On Friday, it snowed in the morning. Here’s a picture of me getting all bundled up so I could go outside and play with the dogs, and another picture of the dogs ready to come inside. Sam also took a video, so you can check that out, too. Click on the link that says “Snow”

Snow

Okay, so just when I’m all prepared for more Minnesota winter, playing in the snow with the dogs and building a snowman, the sun comes out. And I mean really comes out. It  was 65 degrees yesterday and hit 75 at one point today. Here I am getting some sun. I’m a little bit pale, so I’m trying to tan a little.

All the snow is gone now. In fact, just a few minutes ago there were thunderstorms, too! The weather is definitely different out here in the upper Midwest than it is back in California!

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A Visit from Flat Stanley, part 1

Flat Stanley

A few weeks ago, I got a text message from a good friend asking if I’d be willing to help out his son with a Flat Stanley project. I didn’t know what it was, but of course I said yes. Any time Uncle Switz can help out, count me in!

A week later, I received in the mail my Flat Stanley. I had to unfold him and let him rest on the bed to get all his creases out. As you can see, he’s quite big. I was expecting something a little smaller, but this kid’s about 4 feet tall.

He’s asked if he could hijack my blog to post his own blog about his adventures and since I haven’t been using it for a few years, I don’t see the downside. So here’s Stan!

…..

Greetings from Minnesota! My goodness is it cold here! When I arrived last week the weather was not that bad — just a little colder than what I was used to in Simi Valley, California.  But in the last few days, it’s turned cold. The people around here were hoping there wouldn’t be any more snow, since it hasn’t snowed in weeks, but wouldn’t you know it, it snowed this morning! Just a little bit, but not enough to stay on the ground. Then this afternoon it actually hailed — can you see it on the deck in the picture behind me? I would have gone outside to take a better picture but I didn’t want my colors to run.

The people I’m staying with are pretty good hosts. They have two dogs, Koda and Kenzie. Koda is the small crazy one, and Kenzie is the large, sweet one. I’m a little worried they’ll accidentally hurt me, so I’ve decided that it’s safest if I spend most of my time in the basement with their cat, Bella. She’s got the whole downstairs to herself except in the evenings when the whole family comes down to watch television, or the days when Dave works on his computer from home. In the daytime, we sit in the window and watch people and cars go by.

So far, everyone in Minnesota has been really nice. They actually have an expression here: Minnesota Nice. See, people here are so nice and friendly that when you walk down the street and come across a stranger, sometimes they say Hi to you! Dave said one time he was walking in the airport in Minneapolis and he sneezed, and about 5 strangers around him said “Bless you!”

I’m in a city called Sartell, which is about 80 miles northwest of Minneapolis. We live across from a pond and there’s lots of wild life — lots of ducks and one big goose that actually looks pretty scary. I can’t wait for the weather to get a little warmer so I can see more animals — rumor has it there are squirrels, deer, and even cranes.

I miss L.A. and my friend Matthew, but this journey is about learning how other people live in different parts of the country. So I’m going to try not to be homesick. I’ll soak up as much as I can, learn about the people, the land, and the history, and I’ll report back as much as I can. Talk to you in a few days!

– Stan

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Almost Home!

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Tomorrow we’ll be back in St. Cloud from a long but amazing trip through France, Italy and Greece. I would apologize for not posting more updates from the trip as we were in each city (which was our intention), but I’m not going to. Internet was spotty at the hotel in about half of our stops, but the real reason was that we were just being too productive with our time. Whether it was seeing ancient ruins or just relaxing by the pool or the beach, we were on an adventure together and that was more important than typing this out. Sam put a bunch of pictures up on Instagram, and we’ll both be putting a whole set up on Facebook in the next week or so.

There are a few major takeaways from our Europe trip that I want to share in the next few days, but I’ll start with the main one: going to Europe is totally doable for pretty much everyone (as long as you can walk up a few flights of stairs without having to stop to catch your breath). We were worried that people wouldn’t speak English, that we wouldn’t be able to navigate the cities, that we’d get pickpocketed, etc. None of those things were a problem. We had talked about going to Europe for over a year, but neither of us were really sure we would do it. We thought something would come up, some excuse good enough to say no, not this year. But we just went ahead with it, thanks in large part to family and friends taking care of our four-legged family members, and we are so thankful that we didn’t back out. There were only two times when we couldn’t communicate with someone we needed to communicate with, but the rest of the time their English was much better than our French/Italian/Greek, and was sufficient to get the information across. We were surprised at how helpful everyone was — as annoying as tourists can sometimes be, we were greeted with hospitality from pretty much every local we met. We found fellow travelers along the way that helped us by letting us know what mistakes they made, so we wouldn’t make them too. (Look for a Rick Steve’s guidebook in someone’s hand and you’ll know that you can speak English with them; it’s useful when you’re trying to get someone to take a picture of both of you and want to make sure they won’t run off with your camera.) We adjusted to the time change pretty much after only one day. The metro (subway) systems in Paris and Rome were more efficient than anything I’ve been on in the US; we only had to use a taxi once on the entire trip. So if you have always wanted to go to see the Eiffel Tower, get a gondola ride in Venice, or see the Parthenon, just go ahead and do it. No more excuses. If we could do it, you can do it.

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Avignon and Nice

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While Paris exceeded our expectations and made us think we could be great world travelers and some day take on the Amazing Race, those dreams hit a bit of a bump in the south of France. We took the train from Paris to Avignon. 2.75 hours of amazing comfort later, and it was time to rent a stickshift and drive it about 4 miles to our hotel. Stalled twice in the parking lot but got the hang of it. Couldn’t find our hotel because the website we were using had it two blocks to the east. Found it and couldn’t find a spot to park (this will be a central theme on this trip, I think). But finally made it in.

What we’re thankful for in Avignon: 1. Nice hotels. We take them for granted some times, but just having some of the basic amenities turns out to be a treat when you’ve been deprived of them in Paris.

What we miss from the US: 1. Automatic cars. Sure, I’ll probably love a stickshift by the time we’re done here, but when you don’t know where you are, don’t know where you’re going, all the signs are in another language, and pedestrians always have the right of way, you really wish you had one fewer thing to think about. 2. Ice. We still haven’t had any yet. Just can’t get used to the taste of a warm Coke.

After one night in Avignon, it was time to drive over 2 hours to Nice. The trip went great. Only stalled the car once. Then we got into Nice and everything hit the fan. It’s like Santa Monica on steroids. Cars everywhere, parked on both sides of the street. Motorcycles weaving in and out of everything. We found our hotel and considered parking in front to unload but decided to just find a spot. Bad decision. Twenty minutes later we hightailed it to the galleria to a giant underground parking lot. Went down a few stories and found wide open space. What could go wrong? Nothing — until we came back to the car two hours later to find someone had hit the front of the car. Stupid me didn’t get the full insurance coverage and paid with Discover (which doesn’t offer car rental protection), so we’ll likely be out a few hundred bucks, with a maximum of $1000. But as the French say, C’est la vie!

What we appreciated about Nice: 1. The beach. Absolutely beautiful blue water. The sand isn’t sand, it’s rock. But we rented chairs from the Beau Rivage Hotel and had a nice relaxing time reading and getting over the whole car incident. 2. Ice! A whole bucket of it! 3. Alounak. The most amazing dining experience we’ve ever had. It’s a vegetarian place that does a little bit of meat, and Sam wanted to go for dinner on the first night. It’s run by one person. Just one. He does everything. When we stopped by at 8:30 (about right for French dinner), there was a sign on the door saying “Come back in 30 minutes.” We had a drink at a bar and then came back and he let us in. When you’re the only one working, you can’t let the place get too crowded or nobody will get fed.

I don’t know the owner’s name, but we’ll find out tomorrow when we go back. We were one of the last three tables there at night and he regaled us with playing on a Middle Eastern instrument (the centar?) and then told us stories of his family, his philosophy on running his restaurant, and on life in general. Everything he said was so poignant that we’re actually working some of it into our wedding ceemony. Can’t wait to go back and just be part of his experience.

What we miss about the US in Nice: 1. Not much, other than the ability to drive around. But Nice is a vacation spot, so you shouldn’t expect to be able to drive and park everywhere. It’s a nice little town, close to the beach filled with rich people and their dogs. One more day and then it’s off to Italy.

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First Stop: Paris

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We had a great time in Paris. Our room was small, as was expected — but we didn’t expect the sink and toilet could somehow violate the laws of physics and occupy the same space at the same time.

What we are thankful for in Paris: 1. The Metro. I’ve been on many different subway systems in my life, and the Metro was by far the best. The trains ran every 5 minutes and we were never more than 15 minutes away from anything we wanted to get to. 2. The people. Much more friendly and courteous than we have been led to believe. On the rare occasion when someone with whom we needed to interact didn’t speak English, they didn’t chastise us for not speaking French — they apologized for not being about to speak English. But by and large, everyone was very friendly and welcoming. 3. Wine. So much good wine at so cheap a price. 4. The grandeur and the history. The enormity of the Palace of Versailles, the intricacy of the statues, everything is just so big and bold and amazing. There was so much history packed into that one city — it’s hopefully a sign of things to come on our trip.

What we missed about the US while in Paris: 1. Space. Whether it’s to drive, to walk or to move around in your own bathroom, we missed it. We had a nice big room in Avignon at a 4-star hotel (our Paris hotel was 1 or 2 stars, depending on whom you asked), and it was a treat. 2. Sam’s vegetarian products. At the start of the trip, Sam was looking forward to indulging on bread, cheese and wine for a month. Now she’s just wishing she could get a good salad that doesn’t have any meat in it. They have some amazing trois fromage sandwiches (brie, blue, chevre) and some with cheese, tomato and olive tapenade, but it’s starting to wear on her.

All in all, our trip to Paris was actually better than we thought it would be, and has left us very optimistic for the rest of the trip.

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I’m Back!

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It’s sad when you realize that it’s been 7 months since you’ve posted anything in your blog. It’s not that I don’t have anything to say any more, just that I don’t have much time. But if you read this, I thought I’d give you an update on what I’ve been doing and what to expect from me in the future.

I’ve been on sabbatical this semester, working on research and a few other things — finishing(ish) half of the basement, writing supplemental material for the Butters/Asarta Principles of Economics textbook that will be out in full release in Fall 2014, and even doing a little work for the already-out Goolsbee/Levitt/Syverson Micro textbook. I’m thankful to the taxpayers of Minnesota for paying my salary, but any time I get the chance to make some extra money from the private sector, I take it.

In two weeks, I’ll be in Paris with my fiancee, Sam, on the first day of a 6-week trip through France, Italy and Greece. It still doesn’t seem real, and probably won’t until we land on another continent. Going to Europe is something I always wanted to do but never really thought I would — kind of like skydiving or being on Survivor. But I have the summer off, and we have amazing neighbors who can watch the cat and my almost-in-laws who can watch the dog (giving her back is another issue entirely…), and I’ve got decent credit. The stars are aligned to give us this chance, and we’re taking it. Other than liking wine, we don’t really consider ourselves too “cultured,” but we’re hoping we’ll pick up a little bit of how the rest of the world lives, view some amazing museums and castles, and hopefully gain an appreciation for how lucky we are to be able to do this kind of thing. And it’s a chance to get away from it all, especially since our iPhones won’t work in Europe (or so the Sprint website tells us).

I’ll be posting occasionally about our trip on this blog — to keep our friends and family informed, and also to have a record of the trip for us to look back on. I don’t want to be that annoying guy bragging about his fancy Europe trip — honestly, that’s not how we’re viewing this trip. And it won’t be that fancy. Heck, for most of it, we’ll be eating street food and kicking back in a park with some wine, cheese and bread.

I’ve decided that what I’m going to do is provide short posts about the different cities we’re in. No real travel advice — that’s what TripAdvisor is for. I’m not going to bore you with all the details of everything we do. You probably won’t care and it will take time away from all the amazingness we’re hoping to experience. I’m sure I’ll post some pictures on Facebook, so you can check those there. But on this blog, I’m going to try to keep things short and sweet. I’m simply going to post a few things that we really appreciated about each place we went to, and a few things we really miss about our life in America. I figure this way we’ll be able to look back on the trip and really focus in on what made it special, but come back with a renewed appreciation for “real life” back in St. Cloud.

Studies have shown that when couples spend their money on trips and experiences together, it increases their happiness more than when they spend their money on “things.” By having a little documentation of our experience, we’ll be able to look back on this and relive the memories. And hopefully you can come along for a little bit of the journey.

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The $5 trillion question

Economics, Politics

Much has been made this week by the Obama administration about Mitt Romney’s $5 trillion tax cut plan which he said in the debate repeatedly that he didn’t have. Romney’s plan is to change every tax bracket’s percentage, so the 10% bracket would now be 8%; 15% would now be 12%, etc. It’s over 10 years, and it’s $4.8 trillion, so that’s $480 billion per year. That’s a big tax cut. But in the debate, Romney said it wouldn’t add to the deficit at all and the rich wouldn’t pay a smaller share of the tax burden than they already do. That means one of two things has to happen: he has to cut deductions that the rich can take, and/or he has to grow the economy as a result of the tax cuts. I’m not sure he can grow the economy fast enough if he doesn’t cut deductions — that would be some pretty fast growth. Team Obama says Romney is either going to blow a hole in the deficit or have to raise middle-class taxes — unless he comes up with enough deductions, which they say he can’t.

I remember when President Obama was running for office, he promised that not one of your taxes would be raised. Not one. Then they raised taxes on cigarettes in the first year, and added a variety of other things for Obamacare. When asked about this promise, the administration’s defense is that, when you consider all the taxes that went down, the average middle class family got a tax cut. They moved the goalpost and hope you don’t notice. Saying “not one of your taxes” will go up is quite different than saying that some will go up but even more will go down, so on net you’ll be better off. But if that kind of defense is reasonable for Obama, to look at the totality of the situation, not one single aspect of his tax policy, then how can he get away with this attack on Romney? How can he only look at the $4.8 trillion (over 10 years) from the rate cut, and not look at the change in deductions he’s proposing?

The Obama camp says Romney isn’t being specific enough and he hasn’t actually proposed any deductions. And they’re correct. Romney won’t tell you which deductions he wants to eliminate — so Obama assumes he won’t eliminate any and, as a result, the middle class gets a tax increase. Not sure if that’s the fairest treatment coming from an administration that has itself promised to lower corporate tax rates and make up the loss by closing “loopholes and deductions” for business, but won’t say which of those they’ll touch. They’re both doing the same thing — not being specific. Romney says there’s a reason for that: you let Congress work it out rather than say “here’s my plan”. Let them come up with something instead of forcing your plan down their throats.

But even if you ignore the hypocrisy of the Obama administration vague about tax reform policies, we should still address income taxes. They’re the biggest source of revenues for the federal government, so we need to know if we should believe Romney or Obama. Actually, you don’t have to believe either of them. The question being asked by Obama’s people is not even the correct question. Their argument is that Romney’s problem is one of basic math: there aren’t enough deductions taken only by rich people to get back the $5 trillion in tax rate cuts. Only that’s not what Romney has to do to close the $4.8 trillion in revenue that he’ll lose from the rate cut. He doesn’t have to exclude non-rich people from decreasing their deductions because they’re all going to get a rate cut too. As I told a former student on Facebook, “I don’t care if you cut my deductions if you cut my rates too; then I get to keep more of every additional dollar I earn.”

So it got me thinking — how much could they really cut my deductions if they cut all the rates by 20%? I broke out my 2011 tax returns and discovered a little something. Between mortgage interest and other deductions, I had a total of $17,662 in deductions. If you cut all of the tax rates by 20%, I would have the same tax liability if I could only take $1,275 in deductions. Let me reiterate: you can cut my deductions by 92% and I would still be better off under Romney’s plan. Let me keep even half of those deductions and you’ve given me a $1,700 tax cut.

2010 tax data says that there were about $5 trillion in total deductions taken by all income earners. $2 trillion went to people who ended up with zero tax liability (the 47%), so I guess we can’t touch that. That leaves $3 trillion in deductions by everybody else. Those earning over $1 million in income had $649 billion in deductions, but at a tax rate of 35%, removing all of those deductions only gets us back $227 billion — and we need to get to a total of $480 billion. Guess what? You can remove all the deductions for everyone making over $250K, and half the deductions for everyone making over $100K, and you’d end up with $460 billion (by my rough calculations). If the economy grows even slightly in response to this, you’re easily at $480 billion. A revenue-neutral tax cut that encourages effort by reducing marginal tax rates. Exactly what Obama’s Simpson-Bowles commission wanted.

So when you hear Axelrod or Gibbs on television saying Romney’s math doesn’t add up, it’s because they’re assuming you can only reduce deductions for those earning above $250K. But that’s not a standard Romney needs to apply if he’s cutting rates too. You can eliminate some deductions on those who aren’t the “so-called rich” (i.e. $100K-$250K). They’ll still benefit overall from the tax cut, and you can get enough tax revenue back so it doesn’t add to the deficit. Romney can easily lower rates and broaden the tax base and do it in a revenue-neutral way.

UPDATE, October 10: Watch Stephanie Cutter, Obama spokesperson, repeat the statement that Romney has a problem with math. She says he can’t close the $5 trillion gap by only removing deductions for those at the top and no economist can prove otherwise. And she’s right! She says that if you remove deductions from the middle class, they’ll face a $2,000 tax increase. But that’s completely ignoring the 20% rate cut! As I believe I’ve shown, removing some deductions from those who aren’t rich can be done and they’ll still pay lower taxes overall.

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When Choice is Bad

Economics, Politics

Imagine this.Your child is enrolled in public school. Every day, you send your child to school with money for lunch, and every day that child has the meal that the school provides. The same meal for everyone. And unless school lunches have changed drastically since I was in school (which, I grant you, is possible), it’s a lot more unhealthy than what you’d like your child to be eating.

And now imagine that the school district changes the rules. It expands the cafeteria and adds space for a dozen new places to serve lunch. You’ll still have the option of eating the regular school lunch meal, but if you want to choose a cheaper option, you can do that. And if you want a healthier option, or a more expensive but tastier option, you can do that too.

And now suppose that after the first year, a report comes out that says the average child spends 40% more for their school lunches than they used to. Is that a bad thing? If so, why?

Welcome to the 2012 Presidential campaign.

Paul Ryan’s Medicare reform proposal is front and center, and it’s basically the situation I’ve described. Insurance companies would bid to give the exact same level of coverage as Medicare (Medicare is, after all, just government provided insurance — they list what they’ll pay to providers and providers decide if they want to allow Medicare patients, something that physicians and hospitals are increasingly saying they won’t do). The government will take the second lowest bid and that’s what every person on Medicare will get in the form of “premium support” — aka, a check you can use to pay the insurance bill each year. If you’re only 65, in great shape, or don’t have that much money, you can choose a cheaper option and pocket the difference. If you’re in not-so-good shape or you have a lot of money and want a better plan (so that your favorite doctor will actually see you and accept your insurance plan, when they currently don’t accept Medicare patients), you can do that too. But two important things should be noted:

1. None of this affects anybody over 55, so anyone talking about how seniors are affected is fear-mongering or uninformed.

2. Anybody under 55 has the option to just choose Medicare (the regular school lunch in my analogy) and be completely unaffected by the evil Paul Ryan.

Apparently, a study has shown that on average, seniors would end up paying over $6,000 more for their medical care. The question is: why?

It’s because people decide they want a plan that’s better than Medicare!

Anyone who is citing this report as a defense of sticking with the status quo of Medicare needs to realize that this report is actually an indictment of Medicare as a bad option. The reason people are going to spend more money is because, now that they have a choice, they are going to choose to get better health care than Medicare currently provides. Today’s generation of seniors are the wealthiest seniors ever in this country. Many of them have planned well, have lots in savings, and want to make sure they’re around to spend time with their families. So if, given the option, they choose a better plan than they’re currently getting, that should be a GOOD thing. If students have the option of choosing the regular school lunch but instead they choose something better, tastier, or healthier, and spend more money in the process, that’s good.

Given that I started with the public school example, let me return to that. Every kid is entitled to attend public school, but parents can pull them out and send them to private school instead. And when you pull your kid out of public school to put them in private school, you end up spending more. And given that you always have the option to put your kid back in public school, if you continue to send your kid to private school, it must be because you think the increase in quality that you get from the private school is worth the price you pay for it. So if you compare people in areas with only public school vs. those that also have good private schools in their area, OF COURSE you’ll find that the average family spend more on their kid’s education when there are private school options. And that’s GREAT! It means they’re paying for a better education!

It’s easy to see hear President Obama quote an increase of $6,000 and just say that since seniors will pay more, this must be bad. But it’s simplistic and incorrect. Heck, it’s easy to cite any statistic and get mad about it. It’s been reported recently that student loan debt now exceeds student credit card debt, and that’s spun as a bad thing. It could be a very GOOD thing — it could mean students are spending less on credit cards. I need to look into the numbers to see exactly what’s happening, but how many people actually do that? Not many. Most will just read that A > B and make a judgment, without understanding whether A has increased or B had decreased, or why either of those has happened.

When it comes to the Medicare issue, this seems to me like a very simple thing: is having more choice a bad thing? I don’t think it is.

P.S. Some argue that the reason seniors would have to pay more is because Ryan limits the amount of the annual increase in the voucher. His initial plan did that, but his new plan (co-authored with Senate Democrate Ron Wyden, recalculates the payment every year based on insurance company proposals. If health care costs go down (which Obamacare is supposed to do, right?), then you get less money. If and when that happens, remember: that would be a GOOD thing.

P.P.S. While finding information for this post, I came across this very level-headed analysis of the Romney and Obama plans from a professor at Indiana University that I recommend you read.

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Park ‘N Tax

Economics

In preparation for an upcoming trip to LA, I went to the Park ‘N Fly website to book my parking. It’s annoying that they actually charge you a $3 reservation fee to book when you’re actually helping them manage their capacity better, but the idea of showing up and having the lot full is a little too risky for me.

I know what to expect — about $10/day. So I was suprised when I put in the dates (6 days total) and my quote was a “special internet rate” of $26.70. HALF OFF! I thought it must be a mistake, and eagerly clicked through the next few buttons until I hit the final payment screen.

And that’s when I saw it. My grand total was actually close to what I expected it would be before I logged on: $64.64 including taxes and fees. How can the taxes and fees more than double the price, you ask? Here’s how. I was charged a “Daily $5.50 Shuttle Charge” for each day. In the end, it brings the price right back up to where I thought it was, but it still confused me. Why do I have to pay $33 for shuttle service if I park for 6 days, when I’m only going to take the shuttle twice. Heck, if I’m staying for two days, I’m still doing to use the shuttle the same number of times: once to the airport and once back from it. But in the end, it doesn’t matter what they call it — I got a huge break on parking but was then assessed a new fee, and I’m right back where I started.

So why the special fee? Taxes. The sales tax paid was only $1.94, the normal sales tax rate on my $26.70. By shifting more than half of the total cost from a service to some newly created “fee,” Park ‘N Fly avoids paying half of the regular taxes. I don’t know how they do it, but I’m not a tax attorney. And it might not sound like a lot, but by doing that they’re easily saving between $5-10K per week, I think closer to the higher number — probably enough to pay almost all of their labor costs.

Ultimately, I don’t care. I’m still paying $10/day. And chastising a business for trying to avoid taxes is like chastising a child for trying to get out of cleaning up its bedroom. It’s what they’re supposed to do. I’m just wondering how long it will take for the state of Minnesota to catch on, pass a new law, and force Park ‘N Fly to find some other way to limit its tax liability.

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“Public” Goods and Private Solutions

Economics

There are lots of things the government spends money on that we consider public goods, but what an economist considers a “public good” is usually a little different. To an economist, a public good is one that shares two distinct features: it is both non-excludable and non-rival. In a nutshell, this means that there is no way of excluding those that don’t pay for it from enjoying the good, and the use or enjoyment of the good by one person has no effect on the use or enjoyment of the good by another. Combine those two properties and the result is that even though many benefit from the good, nobody wants to pay for it simply because they don’t have to. We call that the “free-rider problem.” The common solution to this problem is taxation and then government provision: nobody wants to pay for the good and there is no practical way of making people pay for it when they’ll simply choose not to, so let the government use taxes to provide it for everyone.

When I teach this concept in my principles classes, I use education as an example of a good that is publicly provided but does not meet the economist’s definition of a public good. K-12 education is non-excludable — not only can you not be prevented from receiving it, even if you’re an illegal immigrant (I would write the more politically correct “undocumented worker” but we’re talking about kids, and they’re not supposed to be working, right?), but you are in fact required to attend. But K-12 education is not non-rival: time spent with one student is time away from another student; when school teachers say that class size is a factor in their performance as teacher, this is evidence of this fact.

Higher education is close to non-rival when you have a traditional lecture format. One extra student in the classroom doesn’t impact everyone else, unless they’re that annoying person who always asks off-topic questions just so they can hear themselves talk. (Don’t be that guy; and yes, it’s usually a guy.) But higher education in the form we have today is excludable — you have to pay for it or you’ll get kicked out of the room.

But even when something does meet the economist’s definition of a public good, does that mean the government should tax people to fund it? First, the total benefits have to outweigh the total costs, so there are public projects that simply shouldn’t be done, as the public benefit is too small. Second, discussion of public goods often assumes that the tax/spend approach is the only way to get things done. As it turns out, there are lots of goods that appear to be “public goods” but the private market finds a solution to the free-rider problem. Radio is a public good — it’s costless to turn it on and my reception doesn’t interfere with yours. But private radio exists because they sell advertising to all those businesses who view the free-rider issue not as a problem but as an asset — they want as many people as possible to turn on their radios.

One example I have often used in my classes is a fireworks show. You can see them from miles away, so there’s no effective way to charge admission; and your enjoyment doesn’t interfere with mine — unless you’re the parent who wants to narrate to their child the size, shape and color of every single explosion; we all have eyes, so we don’t need your commentary. Here in St. Cloud, we have a pretty good fireworks show along the Mississippi River every year. For the last two years, Sam and I have gone and got good seats in a wonderful spot right by the river (sorry, not divulging that to you — it’s ours!). And true to the notion that it’s a public good, we haven’t paid a dime for it.

Hello. My name is Dave, and I’m a free-rider. It’s been a year and a half since I last paid for something I didn’t have to. (I gave $10 to Wikipedia for the awesome public service they provide. I’m crazy like that sometimes.)

In a recent opinion piece in the St. Cloud Times, the editor of the Opinion Page, Randy Krebs, argues that the government should pay for fireworks. He actually gives himself a huge pat on the back for boldly stating that somebody else’s money should be spent in a way that he prefers. Brave, indeed.

I would link to his piece, but the St. Cloud Times now charges for subscription and, as you know by now, I’m a free-rider. The Times gives you a few free views a month and I’ve used all of mine up. If you haven’t used up yours, you can start here and then scroll down until you find his piece from yesterday. You see, the Times has found a way to take what seems like a public good (information on the internet), and make it a private good by selling ads and charging subscriptions. This is what XM and SIRIUS also managed to do with satellite radio. But don’t tell Randy that — he probably thinks that without government support, there’s no way for newspapers to continue to exist in this country.

But back to the fireworks. Currently, the fireworks show is funded by charitable contributions people make at grocery stores, matched up to $10,000 total by Coborn’s grocery stores, and a few other big-name donors kick in the rest of the money. Randy doesn’t think it’s fair that a small group of rich people should have to shoulder all of the burden — it should come from all of us. (I wonder what he thinks about the fact that half of US households pay no federal income tax, yet still are covered by our military and judicial system…)

Yet somehow the show still goes on. Must be magic. No, it’s not magic — it’s called charity. It’s companies giving back to the community. It’s ironic, actually. People on the political left like Randy rail on “evil corporations” as though they just suck the life out of every consumer and worker out there, and then when a company wants to foot the bill for fireworks as a way to give back to the city, Randy thinks the government should be doing it instead. The next time someone tells you that we can’t cut government spending because that means we’ll have fewer teachers, police or firefighters, remind them that not everything people like Randy want to spend money on is a vital service. The fireworks show costs $50,000-$60,000 per year, which is enough to pay for one teacher. Which one do you want to fire to pay for all the pretty explosions, Randy?

I propose a different solution, one that doesn’t use taxpayer money to pay for a non-vital service. One that doesn’t take sales tax money away from teachers or police, to spend it for fireworks shows that a majority of people in town are not going to watch anyway. I’m going to propose that people who are going to watch the fireworks show start making charitable donations at Coborn’s. It’s worth a few dollars per person. Take the money you would have spent on a movie and contribute that. Heck, I’ll even pitch in some money to make up for the last two years when I haven’t paid. If we all chip in a little bit, there won’t be any funding problem at all. Let it begin with me.

And Randy will have to suggest some other super-important way that we spend taxpayer money.

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Creating Jobs

Economics, Politics

I watched the Sunday news shows yesterday, since I was out of town this weekend. And the argument I kept hearing from the Obama representatives on different channels was this:

1. Mitt Romney touts his major qualification as his experience in the private sector working for Bain Capital.

2. But private equity companies like Bain don’t have the goal of creating jobs — it’s only about creating wealth and profits for its investors.

3. Therefore, Mitt Romney doesn’t know how to create jobs better than President Obama.

This entire argument hinges on point #2 above. In a speech in Iowa, Obama said of private equity companies: “The people who work in these firms will tell you that’s [creating jobs] not their goal.”

I don’t know any economist who would disagree with that. The goal of a private company is almost never to create jobs — that’s the goal of stimulus programs that spend other people’s money to dig ditches or create unneeded alien defense forces. To Obama, a company that doesn’t try to create jobs is a horrible thing. In fact, private companies have an incentive to try to downsize, streamline, cut labor costs, and actually reduce labor. For shame! The government should be the ones creating jobs because they can pick and choose and have “smart” growth and an “economy that lasts.” To see how well that’s worked out so far, read this brilliant piece by Kim Strassel.

President Obama seems not to have noticed that private companies have existed for decade after decade in this country, and have done remarkably well at creating jobs. Not because that’s the stated goal, but because the only way someone can bring a new product to market is to start a business, and those businesses inevitably need people around to help with all kinds of things, from janitorial services to clerical work to manufacturing to website design. Even when sectors of the economy fall away, new ones spring up. We lament the loss of manufacturing jobs or textile jobs, but what about the growth in medical implants, web design, and a host of other industries that employ people in jobs that 20 years ago weren’t even imaginable? If you told people 10 years ago that firms would hire people to manage their Twitter accounts, and pay them well to do so, they’d think you were from another planet. Is the goal of a company who hires a Twitter manager to create a job for that person? No — it’s to increase profits. Oh, the horror!

When my father started his construction business a few decades ago, he didn’t wake up one day and say, “I want to start a business so that I can employ some people.” He said, “I want to do something I’m good at, that will help provide for my family.” Creating jobs for others was incidental. His business was successful because he put in a lot of hours and didn’t cut corners. Now at least a dozen people depend in large part on my father’s business for their income. Private companies don’t start out trying to create jobs, but despite that, they are remarkably good at it.

The argument happens at the consumer end also. I don’t set out to create jobs when I decide which goods I’m going to buy. If I did, I’d buy the most expensive things I could and buy lots of them, so I could create all kinds of high-paying jobs for everyone around me. No, I do the exact opposite, and if you’re rational you probably do too. I look for the best value for my money, which sometimes means going with the cheapest product and sometimes it means paying a little more for better quality. I do everything I can to spend as little money as possible. And guess what happens? The market system rewards companies that can produce something better or cheaper, because millions of people like me will buy the product. And those companies grow and…wait for it… they create jobs!

The market economy has been creating jobs for centuries, and now we’re being told that unless you specifically try to create jobs (which no business explicitly does) you’re some kind of “bad” business? And unless you’ve had a job in a company that tries to create jobs, like a Keynesian government does, you don’t know how to run an economy? That kind of “first-stage” thinking (to use Thomas Sowell‘s terminology) explains a lot of the economic policies that have been in place over the last 3 years, that have left us with a 3-year slow recovery and an extra $5 trillion in debt.

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Taxing Obesity

Economics

This article from yesterday discusses a new study by the British Medical Journal that says a 20% “fat tax” could result in a significant decrease in obesity. We know that taxing alcohol and cigarettes raises prices and reduces consumption — perhaps not as much as some might like, but it works. So why not tax cheeseburgers? If you know me or my blog, you know I’m a libertarian and I’m against taxing people to try to get them to behave the way you want them to. The solution is not to make getting fat expensive; it’s to make people pay the costs of their own obesity. (And health care reform that allows people to get care even with pre-existing conditions like diabetes and high blood pressure only makes the moral hazard problem here worse, but I’ve already written enough about that.) So given that the nanny state wants to take care of us, and every time someone gets sick they cost their neighbors money, we need people to eat healthier.

Fine. I want people to eat healthier. If we’re all in the same boat, I would love it if other people didn’t weigh so much when I’m on that boat. But what surprised me this woman’s comment that was included in the report:

“I’d pay 20 percent. It’s worth it,” one woman said. “I would eat a lot more healthy just to save more money.”

Think about this for just one second. This is a woman who already has the option to eat healthy food. We all do. I THINK about getting a donut on the way to work almost every day. I actually change my route to work so I can go by Walmart just so I have the option of stopping in really quick. I give in to that craving about once every two weeks, and when I do I only get one. The rest of the time, I have a protein shake and a banana for breakfast on my drive to work. It’s boring, it doesn’t taste nearly as good as a few donuts would, and it’s more expensive. But I do it to stay healthy.

This woman has the same options and could choose the healthier options, but she chooses not to. Why not? Because a) bad food often tastes better, b) bad food is almost always cheaper, and c) she either has little money or little willpower. Unless one of these 3 things changes, she will likely continue to eat the way she already does. And because of that, we have to now tax unhealthy foods (to change condition b) to force her hand. But what gets me is that she thinks she’s going to save money.

I’ll let the BMJ’s study speak for itself and stipulate that it will actually decrease obesity. But the two follow-up questions I have are:

1. Is it worth it economically?

2. Should this woman actually WANT her bad food taxed (which it appears she does)?

In regards to #1, a friend of mine from graduate school has written several papers about the economic effects of Walmart. This one shows that even though access to cheap food through Walmart makes us fatter, and does increase health care expenditures as a result, those higher health care costs do not completely offset the savings from food. In short: we are fatter and happier.

In regards to #2, and saying this as politely as I can, I don’t think she’s thought this all the way through. Suppose she currently has the option to buy healthy food for $8 or unhealthy food for $5. She goes for the fatty food and saves money. If we tax her fatty food and make it more expensive, the logical conclusion from not only the BMJ study but also this woman’s own words is that she will buy more healthy food and less fatty food. But when the demand for healthy food goes up as everyone starts wanting more of it, the price of healthy food is going to rise. That price differential is likely to stay close to the same, only instead of her choice being between $8 and $5, it will be between $9 and $6. In terms of the 3 reasons she currently doesn’t eat healthy food (a, b and c above), NONE of those changes. And she will have even less money to spend on other things because all food is now more expensive. So after all is said and done, she pays a dollar more to eat healthy than she would right now, and she actually thinks that’s a good thing!

This is the equivalent of the government taxing imported cars so that people will buy American cars, and people who currently don’t buy American cars say they welcome it because it will get them to buy an American car, which they feel they should be doing anyway. It’s just those darn imports are either better or cheaper. They don’t realize that when the demand for American cars rises, the price also rises and they end up paying more for that American car they didn’t want in the first place. If you think you should be buying an American car, just DO IT! If you think you should be eating healthier or exercising more, just DO IT! You have the choice now and the terms of that choice are better when the government stays out of it than when they try to influence you to make the “right” decision.

With reasoning like that, I guess I see why the government assumes they know better than we do about what we eat and how we treat our bodies.

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