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Column-Specific Comments General Comments Due to an increasing number of comments from readers we regret that we no longer than post comments. Thank you for your support and we hope you'll keep emailing us. Column-Specific Reader Comments As soon as I wipe up the coffee I just
snorted through my nose (amazed laughter) due to the reaction one normally
gets when reading angry economists, I do not intend to argue the opinions you
threw out in you article today (Snow has tough policy to sell, swallow).
Regarding Snow has tough policy to sell, swallow, you were snide this morning. It's unbecoming. ~ D.F. As is so often the case in your columns, your proposal for a Minnesota fiscal board is a highly creative and original one (Fiscal "boatload" now needs bailing out). Hopefully our legislators read the Pioneer Press. ~ E. L. M., Woodbury, MN I enjoyed very much your column today (Fiscal "boatload" now needs bailing out).
I absolutely agree with the direction you're heading, and I appreciate your
raising these fundamental questions. I would have a couple of modifications
from your approach. Regarding Fiscal "boatload" now needs bailing out, I'm surprised you have joined the ranks of the fiscal lazy who continue to focus on the revenue side of our state's budget problems. We don't have a revenue problem in Minnesota. According to the November Forecast from the Department of Finance, revenue will still grow 6.6% over the last biennium. Minnesota has a structural spending problem caused by the big spenders who have added new programs and spending to the baseline budget year after year, whether we had surpluses or deficits. Your suggestion to create a super-legislative reserve fund to handle the ebb and flow of the economy only makes sense if you assume all state spending is necessary and righteous and cannot be reformed. Thank goodness the people of Minnesota elected Tim Pawlenty governor. He has the knowledge and fortitude to reform state spending without taking the lazy way out and focusing on raising revenue. ~ Bill Walsh, Deputy Executive Director, Republican Party of Minnesota Your solution in Fiscal "boatload" now needs bailing out destroys one of the cornerstones of representative and checks-and-balances democracy. By removing the power of the House of Representatives to control the purse, you unbalance the designed system of representation. I agree that a team of wise disinterested persons can do a better job in the short run (although in the long run, I bet that their own personal interests and pet projects do quite well under your system). But before we leap off the Lotterman cliff, shouldn't you spend an hour or two telling us how representative democracy will fair under your system? ~ P.M., St. Paul, MN Regarding Gripped by the economics of repair any economist who appreciates the value of a large vise and has the courage to dumpster-dive for it can't be all boring. I enjoy your columns and feel they usually help simplify what can be a pretty boring subject, at least in college. However, once you get out in the working world and begin to appreciate the reasons your company or employer may be prospering or have to lay you off, the study of economics and business cycles becomes vital. ~ J.G., Roseville, MN What an article (Gripped by the economics of repair)!!! I've read it twice and still would enjoy reading it again. I'm not an economist, but I did grow up on a farm in SD. I do have several vises now and can sure relate to your choice of words. Your discourse on the economic aspect of this kind of endeavor is very interesting. On our travels beyond the U.S. borders, I have noted with interest how other people make more and lasting use of their "things". Our society has such "throw-away" attitude; I have a difficult time holding my tongue sometimes. Suffice it to say, I thoroughly enjoyed your article and will look forward to seeing the next one. ~ O.J.
I wanted to
compliment you on the recent Sunday column (Gripped by the economics of repair)
in which you
used your dumpster find to illustrate trends in consumer behavior. It was
refreshing to picture a dignified man of letters hoisting a 100-some pound
vice over the side of a trash container and reveling in the satisfaction of
resurrecting a valuable tool. I don't come from a traditional farm background
(Pop was a veterinarian) but I share your appreciation for "salvage".
Excellent lesson. ~ S.D. Hudson, WI You may have overlooked one (non-rational) factor that led to the vice being thrown away: the money being spent on a new vice wasn't coming out of the pockets of the people who could have fixed it. When you are spending someone else's money, it gets harder to be frugal. ~ D.W.D., St. Paul, MN Enjoyed your column today (Giving thanks for those who help out ). I think many of us are thankful for the many services we receive from people...the hardware guy tops my list, of course, at our local Ace Hardware. Sure you pay a little more, but he can tell you what to do to fix it, sell you what you need, and, as you say, refer you elsewhere if he doesn't have it. Sad to say that ethos of helpfulness is fast disappearing from other sectors of our economy. To wit: corporations and other institutions, such as banking, being driven to higher levels of complexity and size, all in the name of growth and fiduciary responsibility. They may serve their stockholders, but increasingly they fail to serve the public. It seems to me that as we follow the Wall Street Einsteins who tell us that bigger is better, they are not talking about service to their customers. I dread the day when I will have to web order my glazing and paint online from an International Hardware Store and go the FAQ section of their site to try to find out how to do the storm window repairs. ~ T.K. I've been reading your column since I first discovered it in the St. Paul Pioneer Press more than a year ago. I very much appreciate your thoughtful and balanced commentary. Your two-part piece on education in America - last year I believe - was outstanding. Today's article on Keillor's rant (It's dangerous and foolish to believe you have the last word) and the dangers of believing one has a monopoly on truth was terrific. The addition of historical perspective -Menand's 'The Metaphysical Club' - was particularly appropriate. Be assured, this 'fan letter' could have been written about other columns as well. At least I feel better knowing that I finally got around to telling you what I fine job you do. ~ F.J., Cottage Grove, MN Just want to tell you how much I enjoyed your column today (It's dangerous and foolish to believe you have the last word). I loved the way you approached the subject. Great final thought: "Fight for what you believe in, but don't ever make the mistake of thinking you have a monopoly on truth." I am going to share your piece with my two college-age boys and will use the quote with proper acknowledgement. ~ T.H. Regarding PUC needs to get tough, investors never punished? What planet did you fall from, I bought Qwest at $46.00 and today it trades at around $4.00 (which is up 200% in the last 90 days). How much more do you want to punish us? The employees (which I am) and the investors have suffered greatly from this, some lost 75% or greater from their 401(k) account alone. Extremism is what the country is screaming we DON'T need. The citizens clearly showed us that on election day. I was disappointed you were not more objective. I do, however, realize "anti-corporate" speak is selling these days. ~ J.R.Q. My wife and I are new St. Paul residents and subscribers to the Pioneer Press. I have come to enjoy your column very much (in addition to several others). Your Qwest article this morning (PUC needs to get tough) was particularly good. The PUC's velvet gloved approach to this problem is not a confidence booster -- as you so aptly pointed out. I'm not sure I share your confidence, however, that the courts will treat the Enron thieves much differently from the way the PUC seems to be treating Qwest. Thanks again for your good columns, particularly this morning's. ~ M.M., St. Paul, MN I am an employee of Qwest and would like to put my two
cents in about your article
PUC needs to get tough.
Personally, I believe that Minnesota citizens and taxpayers will not be hurt
by the PUC's decision. I think the changes that are going to come at the next
meeting will be benefical to all concerned. The PUC did have difficult
choices to make. But I think that after things cooled down, and they saw that
Qwest was serious about trying to correct the wrongs made by others, they
decided to give Qwest another chance. After feeding the horses this morning and coming inside to relax with the Sunday paper, I came across your column (We spend plenty on trials but little for victims) and decided I had to write you even before reading the comics! I am so interested in the concept you explain - the economics of our criminal justice system. In effect: unlimited funds to find and prosecute but nothing for the victim. Even if money from government agencies is not forthcoming, you might have stimulated a personal response from people to help out. ~ R.S., Cannon Falls, MN Bless your heart for ripping the lid off this "free trade" myth that many "laissez-faire" capitalist, free-market "posers" continually foist on the unwitting in A tax cut both parties can love. Thank you for speaking up and, hopefully, stimulating some discussion and debate over this major hypocrisy that is constantly paraded around by so-called "free-trade" advocates. Trade should be a two-way street; but it often does not work out that way; especially, when one of the parties suffers delusions of empire. ~ R.S., Lino Lakes, MN In response to your article regarding the elimination of tariffs (A tax cut both parties can love), I have only one response: Are you out of your mind? I suppose that when all manufacturing leaves the U.S. that this will solve the unemployment problem also. Maybe the St. Paul paper should hire a business writer from India to do your job. This will make the newspaper cheaper for the subscriber and then more people will buy it. If this model works then why doesn't the newspaper hire only foreign writers and other staff willing to work at slave labor wages and then just email the stories, which can be printed and distributed here. Of course the writers might all lose their jobs and the government would lose the taxes from these jobs but that obviously isn't a concern of yours. Maybe you could get a job as a Walmart greeter since all they sell is the foreign-made non-taxed goods you believe in. Instead of eliminating the import duties, perhaps we should raise them so that some manufacturing might decide to move back to the U.S. where their actual market is. Your simplistic suggestion is another case of pretending to help the poor in the short term while actually hurting the working person. ~ T.S., Vadnais Heights, MN Your column today (Economic test for Republicans) identifying the "explicit test of the principles of the Bush administration and the new Republican majority in Congress," was absolutely on target. I have long enjoyed your columns, even when I don't agree with you. Today's column gets to the fundamentals of our capitalist system. If the Republican leadership acts in ways that contribute to increased loss of confidence, it is not just our economy but our governmental system that will be put at risk. Thank you for using your knowledge about the economy and your talent for writing clearly and concisely so very well. ~ M.M.M., Saint Paul, MN I read your article regarding tax evaders (Taxes are a necessary evil; tax evaders really are evil). I agree, tax evasion is a bad crime that needs to be prosecuted and punished. However, the purpose of my writing this email is to point out that your descriptives in the article are stereotypical. You mention that "If some punk stole five $10,000 cars...", with no mention of the race of the punk. Yet, in the next paragraph you say "A $50,000 theft by a high-income WHITE guy....". This is your only reference to a person's race in the entire article. Geoffrey Hickman may be white, I don't know if he is or isn't, but that doesn't matter. Not all high-income tax evaders are white, and all white guys are not high-income tax evaders, who get away with it. In fact, I'm quite sure there are plenty of high-income tax evaders who happen to be people of color or even women, and there are many white people who get more than a slap on the wrist when they are caught. This is a sly way of reinforcing a negative stereotype. Why couldn't you have simply left the "white guy" out and said "person", or even better: "A $50,000 theft by Geoffrey Hickman should not be treated differently." I know your response will be, that Geoffrey Hickman is white, he is getting a light sentence, and you are only trying to point out that white people still receive preferential treatment. It may not seem like much, but little innuendos and comments like yours do nothing to help eliminate the division between people, only hurt it. ~ D.G. I thought your article on tax evaders was excellent (Taxes are a necessary evil; tax evaders really are evil). However since I am the director of the Minnesota Department of Revenue's Income Tax division, you were "preaching to the choir." One of my goals has been to make the public more aware of the magnitude of tax cheating and the consequences of their actions. We estimate that the "Tax Gap" for individual income tax in Minnesota may be as much as $660 million annually. I currently have an audit staff of 35 who average about a $5:1 return (average wages - $45,000; average audit revenue generated - $225,000). We are trying to create an audit "presence" as well as reduce the "Tax Gap." I appreciate any opportunity to make the public aware of the problem, the consequences of tax cheating, and the negative impact of budget cuts to our staff. ~ Jerry McClure, Director, Minnesota Department of Revenue Income Tax Your explanation of the "free steaks" promotions (Monopoly power brings on abuses) was very welcome indeed. Many of us have been wondering what has been going with this non-competitiveness issue, which has been raising insurance rates for years. Thanks again for your long series of well-written columns. ~ R.N. I very much enjoyed reading your column ("Caveat emptor" has always applied to the stock market) especially as the same thought came to my mind when I read the letter to the editor to which you refer. Nobody wants to accept or believe that there might be some unpleasant or even disastrous consequences for possibly making bad financial decisions or being just a bit greedy. It is much easier to shift the blame elsewhere. ~ M.M.Q., White Bear Lake, MN Creative books can hide costs has hidden the most important piece of news I have read in months. The information about the U.S./Iran relations was astounding. I feel I should personally offer my most heartfelt apologies to the Iranian people and make restitution for their losses in this horrendous transaction. Please, make every effort to let Americans know of the wrong that has been done in their name. Many of us are very confused as to why these people have such a hate for us. Perhaps it is because of our greed and need for their natural resource, their oil. I don't think I am prepared to kill them for it ~ B.A. I read with interest your column on transfer pricing (Creative books can hide costs). You should be aware that the IRS and most other tax jurisdictions have regulations in place to prevent "over-invoicing" as a method to shift taxable income. I know because I make my living documenting that the transfer prices set for my clients conform to the arm's length standard. If they do not, they face the likelihood of an adjustment that could lead to double taxation and might also lead to penalties. Your Iranian example is interesting, but certainly dated. Most licensing arrangements specify royalties as a percent of sales revenue, which is a very easy number to audit, as opposed to profits, which as the Iranians found out the hard way, is not easily defined. Some parties probably learned this lesson the hard way, but I would doubt that it happens in this day and age. I generally enjoy your articles, and it was nice to see transfer pricing as the subject of an article, but I can assure you that taxpayers do not use it as a sleight of hand without incurring significant risks in doing so. ~ J.A.H., Ph.D. Regarding Bush didn't build the bubble and he didn't burst it, either, just as politicians unfairly get blamed for the economy, they are perfectly willing to take credit they don't deserve. Bill Clinton ran in 1992 pushing the idea that the economy was bad. Soon after he took office, it may have been in March of his first year, I saw him on TV giving a speech and he bragged how the latest economic indicators showed that the economy had turned around and "Already our policies are working," or something about like that. I sat stunned as none of the supposed newspeople bothered to point out that the figures the new president was quoting were for the last quarter of 1992 -- while Bush was still in office. ~ D.W.D., St. Paul, MN I have read several of your columns and you seem for the most part to be "right on" regarding many "Real World Economics" issues but your commentary on your personal voting preferences has absolutely nothing to do with the point of your article (Bush didn't build the bubble and he didn't burst it, either). Why did you "soap box" your personal voting issues in this article? Your voting point of view totally tainted your column. I am not interested in your voting habits I am more interested in economics; your voting statements stained your column. ~V.C. Your article Labor lessons of port lockout suggested that the slowdown, strike and lockout are weapons to be used at will. Not true. I have practiced and taught labor law for years. The port employers used the lockout to fight the slowdown. Although a slowdown is usually illegal, illegality is tough to prove in a dangerous work environment. Further, the employer has to prove that the union leadership is orchestrating the slowdown. Union leaders are not dumb. They don't issue written orders to slowdown. It is done by rank and file word of mouth with no fingerprints. A lockout is then justified---it cannot be used by the employer simply as a negotiating weapon----just like a slow down can't be used as a negotiating weapon. It is important to understand that because, to my knowledge, there is no legal proceeding to adjudicate the legality of the slowdown/lockout and the slow down can start again---only now the stakes are higher. If it is proved to be an illegal slowdown, it is in violation of a presidential decree and a federal court return to work order. Violation brings big penalties but the dockworkers have a long history of playing rough and I doubt that their teeth have been blunted----let alone pulled. The dockworkers are betting that political pressure on the employers will be greater than the pressure on them. ~ T.F. I appreciated your article on unemployment (Changes in society affect the unemployment count). What about the huge "pre-fired" workforce out there? Those who were long ago downsized out of the work force then used as an outsourced independent contractor workforce who worked for the same or less -- and who were paid no benefits and didn't qualify for unemployment or assistance. We seemingly show up nowhere in the data and have been ravaged employment wise as the economy worsens. Death by pin pricks. I suspect the number is at least as big as the official unemployment number -- and that their situation is approaching desperate. ~ J.B., St. Paul, MN A few additional thoughts about your two-part series on unemployment Changes in society affect the unemployment count and Numb to jobless numbers. You may need to add a third part on underemployment. I cannot begin to tell you how many people I know (including me) who are in lesser jobs than those we held in the not-too-distant past, especially, it seems, people over 50 years of age. Typically when we lost jobs we optimistically looked for work while collecting unemployment compensation, expecting a relatively comparable job to appear relatively quickly. We understood a salary jump wouldn't be likely, and were even willing to take a rational cut, understanding we'd likely be in a learning curve. We optimistically expected interviews that didn't materialize. We were treated shabbily when an interview actually was offered. Typically we didn't even get a "thanks, but no thanks" letter. When the pendulum swings back and there is a labor shortage (probably around five years from now) there may actually be a job market for us. But by then we're likely to have joined your other group, those no longer looking. ~ K.L. I regularly read your column, and usually appreciate the economics common sense it provides to real-world situations. In today's column (Free trade is good for business, good for people), however, I think you blew it. You didn't take economists to task for the real reason they haven't convinced the public about free trade, and you repeated their errors: (1) You didn't address the issues of risk and power. (2) A positive-sum game still can have losers. (3) Most of the economic discussions of free trade focus on free trade of goods and free movement of capital. (4) I'd like to see you take on the complexity of negotiating just what "free trade" means. I don't doubt that you've thought of all these issues. Your prior writing leads me to believe you're well familiar with them. But I think today's column avoided too many common sense issues that real people have to think about--issues that help explain why free trade is such a tricky political issue. ~ J.A.K. I read today your views on Ventura's trip to Cuba (Trade with Cuba could speed reform). Is this trip not illegal, if not treasonous? Nixon went to China to worry the Russians, not to engage the Chinese. In fact, a China without the resources and technology developed since then, and developed due to the economic benefits conferred by trade with us and others, would be much less of a threat. Bear in mind that much of their technology has been given to them by us by training exchange students, or stolen outright by such "students" and other exchange visitors. This would not have occurred if an embargo similar to the one in place against Cuba had existed. I wonder, Mr. Lotterman, if someone took away everything you own, all of your personal status, killed some or all of your family, and sent you off to exile in some foreign land, how much, and how soon, you would forget. ~ R.S.F. I enjoyed your article Trade with Cuba could speed reform. However, it's unfortunate that every generation wants to forget about history, and do their own thing. I was in the army in Cuba in 1946 at Guantamano for a few weeks, and had an opportunity to travel to Havana a couple of times after the war when Americans were beginning to take over the economy of the island. I saw prostitutes everywhere, schools were non existent (except the religious schools which I think were only for the rich), bars and saloons and casinos were owned by outside interests, and worst of all, there was extreme poverty. Because of my personal experiences, when Castro took over, I thought he was their hero. I still think so. He saved them from the very same multinational corporations that have taken over our country and our economy since then. The literacy rate, medical treatment, the educational system that everyone has to participate in (were all provided through Castro’s leadership). No one would really know about the improvements unless they visited Cuba, which is not easy to do. I am willing to bet that if they had a free election in Cuba today, he would win hands down. ~ A.S. I read your column pretty eagerly because you raise questions most academics seem to find uninteresting. I, for one, have long doubted the whole concept of "rational economics" (Hog prices and office rents show irrationality in action). What does a parent saving for his children have to do with rationality. Have these academics HAD children? Are they totally oblivious to things like kids who die in accidents, turn into drunks, or develop animosity towards their parents? I mean, are they all so irreligious they don't even know the story of the prodigal son. Yet parents will still save, proving parental optimism conquers all negative evidence. Again, thanks for blowing some fresh air into the musty attics of economics. I don't know how some of these guys got Nobel prizes. ~ J.M. One of the joys of the Press is reading your column. I find them well-reasoned and stimulating. I am specifically writing to thank you for writing on the subject of global warming (U.S. should propose alternative to Kyoto Protocol). I read with interest your recent comments. While there is a diversity of opinion among scientists, this diversity focuses on how much and to what degree. It is not a debate as to whether global warming is occurring. Yet, the average American suffers from the misconception the question still remains open to debate. ~ D.M. I enjoyed your column regarding the possible impact of economists' background on their work (Life lessons color economists' views). However, I must take exception to some of your examples of positive and normative statements. As alternatives I offer the following: Positive: Some people think bald men are ugly. Normative: They are wrong. (You can probably guess why I wear a hat when out in the sun.) ~ J.M.H. You made much of the $10,000 salary being 7 times the per-capita income (Life lessons color economists' views). You're not comparing the same things. The per-capita income in the professor's household if he had a wife who didn't work outside the home (the norm for 1951) and 2 kids (small family for 1951) would be $2,500, about twice the national average. Why didn't you compare the professor's salary to the average salary at the time? Incidentally, Becker's mother probably overestimated the salary of professors at the time. ~ M.D.W. Regarding Life lessons color economists' views, as far as income and how much is "not much," I have found that most people -- most Minnesotans, at least -- like to think of themselves as middle class. Growing up on the farm, I figured we were middle class. We had plenty to eat and everything we needed. But then I went to college (early '80s) and met students from the metro suburbs, and I found out that their idea of having everything they needed included a lot more "everything" than mine. And of course they all thought they were middle class, I suppose because everyone in their circle was just as well off. I remember another student, a great guy from Wayzata, who was shocked and disappointed to find that he didn't qualify for financial aid because his father earned "only" $35,000 a year. I had a different perspective on that, since my financial aid forms showed a family income of $10,000. ~ D.W.D., St. Paul I was thrilled to read your column on Gary Becker and logical positivism (Life lessons color economists' views). I majored in philosophy and roared with laughter at your statement, "Most philosophers have long concluded that this is bunk". ~ J.F. I look forward to your column. It brings an ordinary, common sense approach, to economics, something that, I regret to report, most political types either don’t have or would prefer to ignore. Regarding Health news brings classic "demand shift", the thought that we are going to solve real medical economics problems by driving to Toronto for medicine is ridiculous (and, of course, the Canadian’s have their own basic economic problems with medicine). Notwithstanding what Congress might want to do, I rather think that long-term repeal of the “laws” of supply and demand will not work. As to your column today, I offer only the following: Growing up in Mankato in the mid 1960’s I can confidently state that I never had pizza. It just wasn’t available (that isn’t quite true; somewhere in there Jake’s Stadium Pizza showed up next to where the Vikings train on the MSU campus) and even though my father was in the food supply business, I never saw it. Now you can’t go three blocks without running into a pizza place. ~ B.A. Today is Woman's Suffrage Day, and I want to point out to you your reference to Eli Whitney as being the inventor of the cotton gin in your column Health news brings classic "demand shift". It is fairly well known among feminists that a woman actually invented it. Her name was Catherine Littlefield Greene, and she let Whitney have the patent, perhaps because women couldn't get patents in those days. So, next time you have the chance to refer to this invention, you might mention that! No sense perpetuating half-truths, I think! ~ P.W.H. Having read your piece on the state's role in the Roseau flood recovery (Roseau deserves better), I was wondering if it occurred to you to establish if there is a basis for comparison between the various disasters? Where is the evidence that the process being used to evaluate and provide disaster relief is different for Roseau than it was for East Grand Forks or St. Peter? Too whom did you talk to about the need for a special session? Let me ask this: Should the state of Minnesota spend millions of dollars to rebuild Roseau (three fourths of which is built in a flood plain) before an evaluation has taken place? Should we rebuild first and then build a dike to protect what we rebuilt? Should we build a dike first? Should we relocate businesses, homes...? I believe your column was premature. Perhaps, when all these decisions are made and the state has made it final decisions as to the amount of money that will be allocated to the rebuilding of Roseau, then you may have a basis for your theory. Finally Ed, I don't know you but I appreciate your concern for the people of Roseau and believe that you are sincere. But your column is unfair to those of us in state government that have to make tough decisions based on cost benefit analysis and long term value. It's not that we don't care, it just that we have more to consider than economic theory. Bottom line is that there are no quick or easy answers but reading your column might lead some readers to believe that there are. Roseau will surely get more help, but it won't be until a fair and thoughtful analysis is done. And by the way I thought your disaster assistance program suggestion was a good one. I'm told that a similar plan was proposed about six years ago by the Department of Public Safety but they were unable to get it through the legislature. Isn't politics great? ~ John Wodele, Director of Communications, Office of Governor Jesse Ventura Regarding Understanding price shifts, one has to merely determine if the product or service is made in a foreign country, or, if the item is made here, whether or not it has strong foreign competition. If TV sets were still only made in the USA, as they mostly were in 1961, the price would probably have pretty much kept up with inflation. As you know, most all electronic items are made outside the US now. An example of something which has little or no foreign competition is healthcare. Another is college education. Both of these items have greatly out-paced the rest of the economy in price increases. Housing is still another example. And maybe these areas would have seen even more of an increase in prices if the element of foreign goods were not present elsewhere in our economy. Not a good example, but an item of striking price rises is the cost of a drink out at a bar. When I was out and about 30 years ago, or so, I could get a glass of beer for 15 cents, now it is three dollars (at the same bar!). That's 20 times higher! I asked my 27 year old daughter what she would think if bars were asking $60.00 for a beer ( 20 times $3.00). She said she couldn't imagine it! That's my reaction now. Sticker shock! Of course, a good part of the beer price is for taxes and liability insurance for the bar. In any case, it's an interesting subject, and again you have written an interesting column. Keep it up. ~ R.G.K. Your piece today regarding California missing the boat is right on (California law fogs the issue). Thanks for reminding us all that until we face realities we tilt at windmills. ~ B.K. First, I just want to say how very much I enjoy your columns. They are always intelligent and sensible, and I agree with so many of your ideas. Today's column on California's new auto emissions law (California law fogs the issue) interested me highly. I hope lawmakers pay attention to ideas like yours about increasing gas taxes and providing motivation for the general public to change its gas-guzzling and emissions-producing habits. ~K.O., St. Paul, MN Kudos on another interesting column (Doing the right thing doesn't cost more). One small correction: "TIAA introduced an "equity index" fund in 1994 that is essentially a Standard & Poor's 500-stock index fund." It is the more broadly based Russell 3000. ~ M.S. It’s nice that you would write an article regarding some of the hazards in the healthcare industry (Insurance firms struggle to avoid moral hazard). However, I (and likely most physicians reading your text) am confused regarding the whereabouts of this lucrative "spread" that I am supposedly making money on at my patient’s expense. There are actually laws regulating physicians dispensing pharmaceuticals making it apparently much less than lucrative ( I know little about them, as I don’t know any physicians who have an interest in a pharmacy). You also state that if we need more income to motivate doctors, they can "raise their professional fees." GOOD LUCK! About half the patients I see are covered under either Medicare or Medicaid (federal and state), and we lose money on them now (we typically are paid about one half of our cost to see them). Medicare reimbursements will be cut again this year, after cuts last year. I will see more patients in shorter appointments to make the same dollars. It won’t be long before many, if not most, physicians will be forced to abandon these publicly funded patients just to keep the office doors open. Reimbursements from insurance companies aren’t much better - the patient is paying more, while doctors are seeing less. Primary care physician’s salaries are on the decline and are at the mercy of the government and the insurance industry. Skyrocketing healthcare costs and misinformation such as your column would lead some to believe physicians are to blame. You would serve patients better to call the pharmaceutical companies’ and insurance industry’s moral character into question. The premise of a "moral hazard" complicating your visit with your doctor is in and of itself ridiculous. As a group, practicing primary care physicians are quite likely to deal with more "moral" and more potentially "hazardous" issues in one day than most other groups I can think of. Despite doing a good job, they are continually as a group encumbered with more intense scrutiny, less incentives all around, and more governmental regulation. Where will this lead us? We will soon find out. You might call Regions Hospital and talk with the Family Practice residency program director about the fill rates in their primary care residencies and what percentage are filled by foreign medical graduates. You might ask the physicians who are retiring at ever-younger ages, "Who will take care of me now?" You might not like the answers. Because, from a "Real World Economics" perspective, our country is headed for a health care crisis the likes of which you obviously can’t imagine. ~ G.H.G., MD Your article "Average drug prices need real fix was a good one. The cancer drug that is sold to doctors at $8 per unit and goes for $700 per unit to patients is a great example of the need for government price controls on all medications. The charge of $700 may be legal, but I have no problem thinking of it as a criminal act. There are people serving long prison sentences for robbery of lesser amounts. The profit from this cancer drug is another reflection of the greed that has enveloped our society, especially among those who have the most. The little guy keeps getting screwed. ~ D.O. I am a Minnesota legislator and a big fan of your columns. In fact, I REQUIRE my two staff members to read it. My own history includes a ancient economics degree from St. Thomas. That background has helped me in admiring your work in putting complex, and frequently misunderstood, political economy issues into very clear and understandable explanations. Thank you. However, I was unable to answer my nurse-wife's question about Sunday's column. She pointed out that virtually nobody purchases prescription drugs from physicians. She wondered if there was some financial inventive for pharmacists or whether there was pharmacist reimbursement to doctors. Otherwise, the spread approach is a pretty ineffective way to influence purchases since so few consumers buy from doctors. What are we missing? ~ J.H. I just wanted to send a quick note commending Mr. Lotterman’s columns. Particularly noteworthy was Risk vs. recklessness: Who should bear costs?, pointing out the risk dispersion and possible waste of resources when government insurance subsidies are used to compensate individuals who take on higher risk activities. It is a difficult point to make to people without sounding heartless and Mr. Lotterman did an excellent job. I generally alternate reading the Pioneer Press, Star Tribune, and Wall Street Journal on a daily basis. Mr. Lotterman’s columns are consistently among the best written. I find his analysis to be well reasoned and his arguments well written. I have a fairly low opinion of the media in general, so his columns really stand out when compared to the rest of the media outlets. It is so refreshing to find someone who really thinks before they start writing. Thank you and keep up the good work. ~ D.L. Regarding So who's counting? What median income really means, the minimum wage is $5.15 an hour, not $5.35. Please correct this because most people don’t know it and think it is much higher. Otherwise, good piece and good information. ~ Kris Jacobs, Jobs Now Coalition I read your columns regularly and consider them to be the best on-going features printed about economics in the Pioneer Press over the last 15 years—as long as I’ve been a subscriber. I find them scholarly and yet readable for people lacking economics degrees (or even lacking any college economics courses, as in my case). They also are refreshingly free of political slant. I appreciate your ability to present economic explanations in a nonpartisan manner. I especially enjoyed today’s column, Cost of the commute. I think transportation and energy practices and policies are one of the most important issues in the U.S. today, and I also think both have evolved to their present state due to a fair amount of public tax "subsidy" favoring the individual auto commuter mode of travel. I do own a car and I do use the freeways, though my wife and I drive much less than most Americans these days. We’ve paid a premium to live in a centrally located inner-ring suburb largely in order to decrease our travel time and auto costs (I take the bus to work downtown in the winter and ride a bicycle the rest of the year). This was our choice, and we accept the costs we incur by that choice (i.e., more money for a smaller and older home). However, largely AGAINST our wishes, we also contribute tax dollars to subsidize the cost of gasoline in various ways, such as through excess defense spending and to subsidize road building and maintenance. These subsidies help "enable" the distant-commuting lifestyles of others. People in a recent Pioneer Press story who drive 100 miles per day to work claimed that moving closer to work was "not even an option," as they so highly valued the few daylight minutes they have left to spend at their "country" homes after finishing their commutes. Would they still say that if gasoline averaged $3 a gallon instead of $1.40, and most freeways were operated as toll roads? Some would—but not as many in my judgment. I realize there simply isn’t room in the city or the inner suburbs for all Metro-area residents to live—nor will employers suddenly disperse their locations in such a way as to minimize commuting times for those willing to move closer to jobs. But in any event, transportation and energy costs and policies have received very short shrift from our legislature here in MN, out of all proportion to their relative importance. One additional but non-obvious "cost" of longer commutes can also be in terms of health care. Sitting behind the wheel of a car is one of the least active things a person can do—probably behind only excessive TV viewing. To the extent that people do auto commutes, it can help make their "choice" for them. And I’m sure you’d agree that physical inactivity carries a very real economic cost in terms of poorer health resulting in more health care costs, lower productivity, and more lost time from work, etc. While nobody could suggest forcing Americans to get exercise, reduced physical activity is just one more trade-off or cost of increasing commute times for most people—something lawmakers should include when considering whether to spend more money on roads, trains, and buses to shorten those times. Thanks again for your excellent columns. ~ J.E., Falcon Heights, MN I enjoy your column in the Pioneer Press. In fact it is one of the first items that I read in the paper. You have ability to explain economics in a way that makes sense - I do appreciate you work. I must take exception to your column, Cost of the commute. If I were home early due to a quicker commute or if I had no commute at all, I would not be compensated or paid for that time at home. I only get paid for the time at work. To assign a minimum or medium wage/worth to that time is not accurate in my opinion. ~ S.P., Hasting, MN Well, you had me until you got to the national debt (If you value sound reasoning, watch out for these words). There you sort of blew it. It's really not as simple as "tax more or spend less" because of the constant theft of Social Security and other entitlement surpluses. Even when the government was paying down the investor side of the debt, the total debt was rising because of the entitlement scam. If you want words to watch out for, try "Public Debt" vs. "Intragovernmental Holdings." Only taxpayer money pays off any of it. ~ E.H. Your article What's behind shopping for a bargain? It isn't just being thrifty should preface every economics 101 book. I’ve never understood why someone would wait in line for four hours to buy a hot dog or a gallon of gas for a dollar less, but you're right, maybe it's just fun. ~ J.W. Thank you for writing Sports spending smart? The other day, I came home from my 6-year-old boy's second baseball practice of the year, vowing never to come back until the coach and local baseball organization drastically changed their attitudes and operation. I don't think I have ever been so angry or disgusted. The coach (second reincarnation of Lucifer, I believe) came up to me as practice began and essentially told me my boy was a lousy player, she was cutting him, and was going to send him back to T-ball. I informed her that I wanted to see how he did hitting from a pitcher, which he hadn't had the chance to do yet. Disgusted, she proceeded to make a point of humiliating my son (and alternatively me) through a series of disparaging and debilitating remarks and actions. She clearly was interested in making herself look good first, i.e. WIN AT ALL COSTS! I sent a copy of your article to anyone and everyone in my address book who might actually listen. Thanks again for a fresh perspective! ~ J.A.G., Hudson, WI I want to thank you for your columns in the Pioneer Press. Your informative explanation of current economic issues is in sharp contrast to some of the editorial writers and politicians that appear to substitute economic confusion rather than economic truths. The piece on Social Security and the National Debt sometime ago and that of today (Squeezed and sweating or simply back to work?) were of particular interest. I am almost 80 years of age, have never studied economics formally but have been angered and sometimes fascinated by what is now called "spin." Your column should be compulsory reading for those expressing editorial opinions in the Pioneer Press before they substitute their emotions for economic realities. I look forward to your next column. ~ D.C. Regarding Pork and PACs vs. priorities, principles, what makes you define Crusader as Pork? What changed so significantly for the Army that it is now pork? And why is my family’s livelihood so less important than yours? Maybe we should consider that the Twin Cities doesn’t need two newspapers and we’ll all decide that your job should be consolidated. Having opinions on national defense is everyone’s right. But your service in the Army does not make you an expert on the needs of it. Why don’t you leave that to those in the Army who know? They just happen to think it’s required. It just frustrates me to no end when I hear people like you blather on about understanding all the threats this country faces. Remember China? As recently as September 10th, they were our biggest threat. What do you know about China’s military capabilities on the ground? My guess is the Army brass that so vehemently defend Crusader understand that threat. It didn’t just disappear on September 11th. It’s still there. Pork is spending millions on studying the effects of methane expelled from cows when they pass gas. Defense is not pork. Especially this program. It’s needed and wanted by the customer. "One" would hope that Congress DOES overturn Rumsfeld’s decision. ~ D.Z. U.S. account deficit will shrink one way or the other created exactly the same effect on me (for the balance of payments issue) as did the proverbial apple on Isaac Newton (for the principle of gravity), i.e., as the article hit me on the head I said "Eureka!!!!----All has become clear!" From you, I have come to expect no less. Thank you. ~ E.L.M. Thank you for your editorial the economics of exotic locales. I appreciated being educated! (Having not studied business but only "practicing" same!) Had never thought of these moves as "competition between political jurisdictions". Even a retired, old Swede (known for being unmovable in the thought process) benefited from your writing. ~ R.M. Regarding the economics of exotic locales, those freighters leaving the harbors on Lake Superior might be carrying commodities you can see, but we have the exact same thing going on in our IT industry nationwide. Comparative advantages have taken over when it comes to sending work offshore- period. Let’s take India for example. Their 1+ billion population, combined with their government’s backing of technology in general, has given their people remarkable opportunities. The information pipeline has literally sent what used to be done here to facilities overseas. A very similar business model was adopted by manufacturing decades ago, and one that’s given some of India’s IT companies profits of nearly $200 million on about $700 million in revenue (example given was a company called Wipro). Those are phenomenal numbers when you consider most US firms are satisfied with 5-7% of net- 25-30% is unreal... It’s a beautiful thing when you can collect hard currency on the front end and pay your employees on a 30 or 40 to 1 conversion rate on the backend. There aren’t U.S. parent companies involved, but it’s certainly working to advantage of their bottom lines. ~ D.M. Your column the economics of exotic locales was typically thoughtful. And I really don’t think there’s a way to keep foreign ships from registering anywhere they please. But NOTHING says such a ship automatically has the right to dock on U.S. soil. And I also see no reason why the country shouldn’t impose access fees on these ships that cover the costs that they create. It is easy to see how governments would compete for the fees of something as meaningless as "registry." But sailing into national waters and docking at ports have not only COSTS but tremendous VALUE, too. It is only good business to harvest as much of that value as possible. If we leased an oiling drilling site to some foreign company, would we look around to see what others charge for it? Heck, no. We’d assess the commercial value of the site and then price it accordingly. Whatever the traffic will bear. Same with access to our transportation network, which is what docking really means. Nor do I think it follows that we can’t give a discount to shipping lines that choose to register with us. That is called a "relationship," and all business rewards those who choose a business relationship. ~ J.M., Minneapolis, MN You missed the whole point of the off-shore move (the economics of exotic locales). Although apparently legal they are no longer paying their share of the national defense, which enables them to conduct business. I am amazed that Congress continues to allow this practice. It is clear that corporations have no morality except the bottom line. Some day this will come back at them for people at some point will refuse to tolerate their antisocial behavior. ~ Anonymous In Oligopolists lose at "follow the leader" you said that we should basically ignore the shenanigans of Saddam Hussein. According to the article, Iraqi oil accounts for only 2-3% of the total world output. My question is: How can the Bush Administration use Hussein’s actions as a justification for drilling in the Alaskan National Wildlife Refuge if the boycott would have such a negligent effect on the U.S.? The situation in Venezuela may have also added some weight to this assertion. But with the recent coup d’etat, and the installation of a pro-business (and presumably pro-U.S.) person this justification evaporates as well. What gives?? ~ D.B. I read your article Change hurts some as it helps many with great interest. Although copper has been around for a long time and wireless is exploding very rapidly, I doubt that copper is going to the graveyard quite yet. ~ R.H. Thank you for a well-written and timely piece (Change hurts some as it helps many). Your columns have been most instructive, and I appreciate the time and effort you have put into your articles. I look forward to reading more in the future. ~F.Z., Bismarck, ND Another must-read column (Change hurts some as it helps many). I am now in a habit of reading everything they print of yours. Not sure what you do different, but it makes it relevant to me. I do have a critique of this column, though. It is an interesting twist to talk not about the buggy whips but the buggies themselves (why have whips without the buggies?) But in one way you are telling the same story that thousands of others do. That is, you also present the PROBLEM without a hint of the SOLUTION. ~J.M., Minneapolis I read and enjoy your columns pretty regularly. As a noneconomist editor, I don’t dare comment on the substance of what you say. BUT I do have a comment on how you say it. At the literary level, of course, your writing is above average for an economist. But you know that. On a purely mechanical level, however, I have been disappointed to find an error in your column. Twice (most recently in the Tobin piece--Economist Tobin had rare Keynesian policy success) I have seen the name "Thomas Sergeant." Both times, the clear implication from the context was that this was a reference to the guy I know from the Minneapolis Fed, and that’s not how he spells his last name. His name is actually "Thomas Sargent." Spelling is not your responsibility as much as your newspaper’s copyeditor, I suppose. And it’s not such a big thing from some perspectives. But seeing an error in a column naturally makes me wonder what else is inaccurate. Other readers may have the same reaction, and that can reflect on you, fairly or not. ~ Kathy Rolfe, Managing Editor, Quarterly Review, Federal Reserve Bank of Minneapolis At the risk of stepping in front of the (proverbial) biodiesel "train," I submit that increased soybean production for biodiesel will have negative environmental consequences (Lotterman: Any benefit to soybean growers would be global). Soil erosion will likely increase if soybeans replace acres currently planted with alfalfa, pasture, small grain and corn. Soybeans contribute to the potential for increased soil erosion in the following ways: (1) erosivity of soils is increased due to soybeans effect on soil tilth and structure; (2) soybeans leave small amounts of residue after harvest, giving inadequate protection from water erosion in the fall and spring before the next crop is established; (3) soybeans use relatively little water prior to mid-July, which leads to greater spring runoff; and (4) soybeans have relatively little crop growth, and consequently little soil protection prior to mid-July, especially when planted in 15" or wider rows. According to Minnesota Agriculture Department of Agriculture Statistics, soybean acreage is increasing throughout most of the state. As an example, in the 11-county area in south central Minnesota, corn and soybean acreage has increased from 87% in 1975 to 96% in 1999 primarily because of increasing soybean acreage. Given that the acreage of soybeans has been increasing, biodiesel cannot be blamed for what has happened. Nevertheless, further increasing the acreage of soybeans on erodible soils does not bode well for the environment, particularly soil erosion and sedimentation. ~ G.L. Thanks for the column on biodiesel (Lotterman: Any benefit to soybean growers would be global). It was timely in that I had just remarked to someone that the discussion we had heard on the radio yesterday wasn’t very helpful because all the "experts" calling in with information had ties to either petroleum or farm interests. Given your attachment to the farm (I’m a farm boy, as well, and both of my brothers farm), I guess if you say it’s a dumb idea, then it really must be. I must, however, take exception to a statement you made about taxes and wealth redistribution. You say that your values lead you to accept high taxes in order to help others. That’s fine. But plenty of people who don’t want such high taxes also have values that say we should help others, they just don’t want the government to confiscate their money and make all the decisions for them. Such people may prefer a system of charity to a system of government programs. Such people may value both helping others, and also value limited government. Please don’t fall into the trap of suggesting that all who would prefer lower taxes are selfish and uncaring. ~ D.W.D., St. Paul Your comments were astute and insightful (Lotterman: Any benefit to soybean growers would be global). However, your insight did not stretch quite far enough. Great credit must be given to ADM marketing folks for creating the currently accepted myths of biodiesel. ADM skills are great, and the analytic skills of politicians is minimal. The benefits of biodiesel (economic, environmental) are not substantiated by any "system" analysis that includes all the steps. If the stuff was so great, it would not need subsidies. If "we" really want to fix both the economics of energy and the environmental, CAFE standards are conceptually simpler, do not require complex laws and subsidy arrangements and readily enforced. As an aside, one wonders why we just don't drop both English and math from school curricula and substitute these with music and art appreciation, dance, physical education and dance. It sure looks like the ability to read and reason quantitatively has atrophied to the point of vestigial. ~ P.T. In the biodiesel scam (Lotterman: Any benefit to soybean growers would be global), I think of the unintended consequences of most poor legislation. [Most legislation is low quality.] The one that occurs to me is that truckers will avoid the bio "enhanced" fuel like the plague and force many truck stops in Minnesota out of business. And why not? The truckers will be able to purchase fuel that will not damage their engines in neighboring states. With the range of most trucks in the many hundreds of miles, it will not be a problem to avoid Minnesota fuel purchases. R.B., Oakdale, MN Excellent article regarding steel import tariffs that the President recently imposed (Steel tariffs cave to politics, but are bad economic policy). I would agree that it was a political decision and not an economic one. These tariffs are maybe good for the steel industry short term but will cause other industries to have layoffs and surely higher prices that are always passed on to the consumer, which is me. So the net result is I am paying more tax so we can continue to support an industry the is unwilling to get to the point where they can compete worldwide. This does not make sense to me. . . . The problem: most people do not see it as a tax on themselves, so it will continue to happen. Again very good article. It should have been on the front page with a headline: "Tariffs increased on steel. Who's paying the price? You taxpayers of course!" B.L., Mahtomedi, MN I've enjoyed your column Don't blame it on forecasts. I take heat when I don't completely support tax cuts all the time. I don't think we should spend extra revenues, but I agree that tax cuts are not the end all solution. I recently heard Tim Pawlenty say he was proud of his effort in getting $1.9 billion in "permanent" tax cuts in 1999. And this last year the state "permanently" cut taxes by $2 billion when they took over the education levy from local property taxes. The state was not taking in any additional revenue to pay for the education taxes they took over. The legislators were able to do this because we had a "temporary" spike in revenues due to the economic boom of the mid- to late 1990s. Note that Pawlenty and other legislators are proud of the "permanent" tax cuts that were based on a "temporary" increase in revenues. We would not have a budget deficit if the legislators were required to do long-term strategic planning, rather then just looking down the road a couple of years towards reelection or a biennium budget. To be fair I think they are correct to give back any excess in revenues collected in the form of some type of refund. But it should only be returned based on that specific year with the surplus. And if they want to play the game that way, then in the same way surpluses are reduced during the good times by giving money back to the taxpayer, deficits should be decreased during bad times by getting money back from the taxpayer. However, the same people who think we must give back all money when we have a surplus would never think it is right to increase taxes when we have a deficit. I blame the legislature and the governor for only looking out for their own political interest, rather then what would have been best for the State of Minnesota. As it is, most people can't discern that they've been given nearly $8 billion in tax cuts and tax rebates over the past five years. I don't think the surplus money should have been spent on new or existing programs but that "temporary" increase in revenues should have never resulted in "permanent" tax reductions. Again, thank you for the column. I enjoy reading once in a while articles that take a larger perspective of the issues. ~ M.E. Thank you so much for your articles. I so enjoy them! I find myself quoting you during the day. In fact, another reader commented in the editorial section today about your article last week (Hungry inherit the work). When I read that, I figured a student or students had been whining in one of your econ classes, and it caused you to write the article. Being a past student of yours and a person who has been working in the real world for over a decade now, YOU ARE RIGHT! It is so unbearable listening to people who want something for nothing. You must earn it. There is always something to be learned in your articles. Thank you so much for including the great history that you do to back up your thoughts. It adds so much to your thoughts and makes it all so clear. I look forward to reading more of your wonderful writing. ~ L.L.B. Thank you for Hungry inherit the work. From my point of view, observing a few young people, general public, and relations, it seems to me that many expect automatically to step from school attendance, (just doing what is required), into high-paying jobs that will cover all the costs of the many wonderful consumer products, the rest of us had to work 10 or more years to enjoy. Motivation to excel and hunger just do not come automatically. Somehow education must demonstrate the value of hard work. I feel your article would be a valuable tool to enable worthwhile class discussion in most any high school classroom. M. & G.N., Lake City, Minnesota I would like to commend you for the excellent column Hungry inherit the work. I recently retired from a position as state mathematics education specialist. In my 11 years there, I worked hard to improve the instructional practices of Minnesota teachers, which I believe will improve the learning of Minnesota students. I continue to work as a consultant in much the same capacity. It is often an uphill battle, but columns such as yours give hope. Thank you again! ~ J.S. What a great article (Hungry inherit the work)! This should be mandatory reading for every school board, teacher and student. It would also be good if some of our legislators would read and understand it. ~ D.P. Regarding your column Hungry inherit the work, amen and amen and amen. Now if you can just get them to put that on the front page. ~ P.S. Bloomington, MN I am writing in regard to your article Hungry inherit the work. In 1974, I earned a degree in mechanical engineering. The program included two semesters of economics (macro and micro), which gave me a good understanding of the topics you discuss in your article. First of all, labor is not always the most important resource in any economy. An abundance of labor brings the limits of other commodities to the forefront in determining the limits of production, commodities such as capital and natural resources. Also, there is a trade-off between labor and capital. An increase in the amount of capital invested decreases the amount of labor needed, and increasing the amount of capital invested per worker has traditionally been the quickest way to increase productivity. India, for example, has an abundance of skilled labor. But its capital is poorly allocated, some important natural resources are lacking or inefficiently managed, and the government is very bureaucratic and inhibits economic growth. That is why India remains in the shape it’s in. It is true that students from other countries have better math and science test scores than American students. But the best American students in these fields are still very good. What’s more, the percentage of American students with the highest talent in math and science (about 7%) largely matches, in absolute numbers, how many new jobs there are each year that require such skills. About 60,000 bachelor degrees in engineering are awarded each year, and the numbers in the sciences, math, and information technology are comparable. Many of the foreign schools whose students score so well are not required by law to take the wide range of students that American schools must handle, and that skews the test scores. In addition, the students at these foreign schools are under enormous pressure. Where is the dividing line between discipline and abuse? What levels of threats and "hunger" are necessary to squeeze this level of achievement from students? Hint: check the suicide rate. Specifically, check the suicide rate at MIT (the world’s best engineering school) for the last 35 years. Technological innovation and the information revolution have been very important factors in the economy for the last 30 years. But so has the decline of the manufacturing sector as corporations have closed down American factories and built new factories offshore where the wages are a fraction of what they are here and the environmental laws are lax. That is what has wrecked blue-collar employment and many of the white collar technical jobs that supported the manufacturing sector. The importation of large numbers of foreign scientists and engineers (195,000 H1-B visas were allocated last year for foreign technical workers) wrecks the incentives for American students to enter and stay in these fields. It is a supply and demand problem, with an abundant supply of imported professionals depressing wages for everyone in these fields. Poor job security is another disincentive to stay in these professions. You are right to say that hungry, motivated people will surpass complacent people. But the larger question is, how we can maintain our economy and our high standard of living in the face of foreign competition from literally billions of third world people willing to work for wages on which we would starve? I grew up in Chicago. "Leo the lip" said a lot of things. Thanks for picking one of the smarter ones as an example. ~ R.C. Your article Hungry inherit the work intrigued me. The lackadaisical attitude of some of your students is nothing new, as I am sure you are well aware. I think that what you are seeing is not that children (or parents) are changing or forming worse attitudes but that secondary schools are not as elite as they once were. The advance in education is not in educating children any better than before but in the ability to, increasingly, spend more money. Inflated grades and inflated "self-esteem" are the legacy of post-modern thought in our schools. Thank goodness there are always some students who will compensate for the system and succeed anyway. Your article mentioned historic economic growth during the enlightenment years. Even the cottage industry (putting-out system, if you will) period had its people with limiting attitudes. Work till payday and then get drunk for a few days and do it all over again, and again. Of course there were people who did use that system to better themselves through hard and intelligent work. For me the most worrisome aspect of your article was the "earnings premium" gap you alluded to. The lesser- or non-educated keep falling further behind economically, and certain political types keep fanning class warfare for votes. American taxpayers are being isolated from the masses that depend on the largesse of government spending and funding. Economic concerns and pressures have, in my opinion, always been one of the main catalysts for the dramatic changes that have occurred throughout history. People don’t change, but technology keeps changing. Another revolution? Probably not. But there will be some uncomfortable times coming unless, as you said, "many American families change their attitudes about what their children need to learn". ~ B.S., Chetek, WI I enjoyed your article on the regressiveness of farm subsidies (Farm subsidies a regressive reality). It reminds me of the findings by Aaron Wildavsky, a noted political scientist. Professor Wildavsky has found that the higher a person’s socioeconomic status, the more politically active they are. As your article points out, politicians are merely taking care of their own by allowing organizations and individuals with greater political muscle the ability to recoup greater subsidies. ~ S.D. I thought your article on the energy programs (Real costs of programs must be weighed against benefits) was quite good. Another way to look at it is who pays the costs and who gets the benefits. It is my belief that the gasohol is a red herring. A major claim is that it is good for the environment and provides clean air. Tell that to the people who live by the ethanol plant. They are not counting the pollutants that enter the air from the fermentation process. More than ethanol is produced. These higher alcohols are called fusel oils and are what give you the headache if not properly removed when distilled for whiskey. The same pollution of the air happens in the rural areas, however, they do not complain about it. Another major pollutant is the tons and tons of carbon dioxide produced by fermentation. This is one of the gases that produce global warming. Where does the energy come from? The politicians would have you believe that the corn is made out of sunshine water and air. Not so. The energy in the corn comes from oil. Gasoline is made directly from oil, and corn is made indirectly. To grow corn you plow, disk, drag, cultivate and spray, all with diesel tractors. All of the machinery is manufactured with electricity or other fuel. The herbicides, fungicides and fertilizers are all made from oil. Ammonia is made from natural gas. The corn is harvested with diesel tractors and dried with propane. The processing to ethanol also requires much natural gas and electricity. Imagine for a moment that the oil has run out, as it will eventually. How will they grow the corn? For these reasons, the claim that the ethanol produced will make us less dependent on oil is false. If we as a society do things which are not scientifically correct, we are going to be in real trouble. (I have a degree in Chemistry and am a member of the American Chemistry Society.) ~S.B. After reading Calculate "opportunity cost" when figuring true loss, we wanted to comment that knowing the true amount "lost" by the ENRON employees in their 401(k)s could help solve the real problem of pension planning instead of just fueling the hype. ~ Middle class investors You need to continue this article (Sorting out government aid to business) and clarify two issues. Are you suggesting that we taxpayers support "a few dozen of the small struggling firms?" Are you suggesting that, since "the Seligs and McCombses of the world have some bargaining power," that we taxpayers succumb to the bidding war? The only reason given is we can help finance the ball club with the taxes paid on ballplayers’ salaries. I think that experts who have specialized in this area agree that when all the issues are considered, the taxpayer loses out. How can we ever decide equitably which business to support with tax dollars? ~ D.H., Vadnais Heights, MN You have hit the nail exactly on the head with your comments. Large businesses regard subsidies as another form of revenue and jump through whatever hoops and make whatever promises they need to, to get those subsidies. Your are also correct with your comments about small business—they greatly resent governmental favoritism of large enterprises. As an operator of a one-person office, I can tell you no one ever offered to subsidize my rent. One short story: One of my clients went through protracted negotiations with the St Paul Port Authority, that finally resulted in getting a substantial amount of money out of them. When I asked why he did it, he said "As long as I have to be a whore I’m going to be a good one." That pretty well sums up the attitude on the other side of the table. If the governmental types knew what in contempt they are held by the businessmen who are trying to get money out of public coffers, it is unlikely they would even show up for negotiations. ~J.M, New Brighton, MN As a one-time economics major, I have appreciated the clear view you have provided in your columns, often with a different perspective than the usual political rhetoric. But I have to take exception with your views on tax-increment financing (Sorting out government aid to business). I work in community development for one of the aging suburbs you accurately describe. The mega-project you describe sounds a lot like Best Buy in Richfield. But at least 95% of potential TIF projects are much, much smaller. Last year, the Pioneer Press printed a map of Ramsey County, showing the many, mostly small, TIF projects that have been completed over the years. In my experience, redevelopment assistance is mostly provided to relatively small projects, as long as they meet the goals of the community. Firms with 50-100 jobs are the norm. We would all like to hit a career "home run," but reality is mostly "singles." In my experience, firms generally target an area because of business reasons (markets, access, location of employees, etc.) and then start talking to municipal officials about a possible site. It is rare that a city gets into a situation where a company, large or small, will be able to pit two or more cities in competition with each other on the basis of how much assistance is provided. We are fortunate to be in a location that we are confident will attract other companies willing to invest, if the first one goes away. And what type of assistance are we providing? You make it sound like a poker game, with incentives to raise the stakes in padding the company coffers. Assistance is often in the form of buying the old buildings, relocating the business or residential tenants, cleaning up the land, replatting, rezoning, infrastructure improvements, etc. Maybe - only maybe - writing down the cost of the land, or helping on moving expenses. All of the things are done to make a previously used site (though not necessarily a "brownfield") more or less competitive with a cornfield farther out. It is certainly true that companies that know how to play the game (getting a hard-to-get site, not usually getting a lot of money) can have an advantage over the existing businesses. One classic example from a few years ago occurred on the East Side of St. Paul, where the City cleared out the old Whirlpool plant to make room for a shopping center that included a Rainbow Foods store. Three nearby groceries shortly thereafter closed their doors. The market for food on the lower East Side is relatively fixed; more business for one store means less for others. Many cities have "no TIF for retail" policies for that very reason. Economists generally look at the societal, or macro, benefits in analyzing the appropriateness of public behaviors. But as long as we have a system of local property taxes and local governments, individuals and cities will be motivated to take steps to attempt to better themselves. The public asks the mayor, "What are you doing about x site?" Responding that it is not the city’s business is not the way to get re-elected. My colleagues in outstate-Minnesota towns feel this very directly, as they often are working to "save" their communities by attracting new businesses. We don’t feel the same pressures in the suburbs, for the most part, because we don’t count on employing all our residents and serving all of our retail demand within our borders. But there are incentives in that direction nevertheless. I am playing the community development game within the rules set by the state, and within the goals set by the leadership of the community, as any professional would. If the results produce the wrong results (and we could certainly do better), I would suggest changing the rules of the game. I would be interested in reading about any ideas you might have that would enable redevelopment to take place (taking advantage of the enormous investments in infrastructure) without needlessly wasting public monies. D.B., Falcon Heights, MN I enjoyed your column Sorting out government aid to business, particularly the part about tax-increment financing used for large, well-heeled businesses at the expense of the smaller mom-and-pop operations that are more likely to produce jobs and revenue in the long run. Small and mid-sized manufacturers have been the Port Authority’s bread and butter for 70 years. Our 14 fully developed business centers in Saint Paul are filled with them. And, as I’m sure you know, we offer a variety of job recruiting, training and retention programs to help these businesses grow in Saint Paul and the East Metro. Over the past 6 years we have helped create or retain more than 14,000 jobs for Saint Paul and the East Metro. ~ St. Paul Port Authority official My employer came to my city and state at least partly because of incentives like those you discussed (Sorting out government aid to business). I've been somewhat ambivalent about such aid, but I haven't had any major problems when it's been used as an "incubator" to get something going. What I did notice is how hard it seems to get these businesses "out of the trough." In my employer's case, the city coughed up again so a second building could be built for expansion. The city council finally balked when the company brought them a proposal of aid for a second expansion (and third building). What I found interesting was the puzzled-to-incredulous-to-indignant corporate response, basically "How can you deny us this after what we've done for you?" My thoughts were, "What don't you get about using your own resources for your own purposes? How many times are you going to come back to the well?" Some interesting points, well raised, sir. ~ Anonymous Once again you are right on (Political rhetoric needs balance). Its unfortunate that most politicians cannot or will not subscribe to what should be painfully obvious—macro economics. I guess in the world of politics micro is more important. Thanks for the insight. ~ J.J., Osceola, WI As I read the opening portion of Political rhetoric needs
balance, I was already to rage at the fact that taxes are cut when a surplus
exists but never raised when a deficit exists. Thank you for cutting me off at the pass,
as us cowboys say. When will the voters retain some institutional memory about how
we get wealthy and how we get not so wealthy? If the voters are too lazy to think and to
analyze, it is your duty to keep up the drum beat. And you are. If only your commitment to
balanced thinking would be employed by the network news analysts who have at their
disposal the greatest educational tool in the world, television, then perhaps incremental
improvements could be made. Keep it up. ~ R.F. Yes, State's 4% jobless rate isn't that bad, unless you happen to be one of the 4%. I have worked continuously the last four years as a temp paralegal and now can’t find a job. Tell you what, I’ll gladly trade you jobs for two weeks, (I have a B.A. in economics). I’ll write your column. I also have an M.A. in journalism, and you can sit around and collect unemployment of $335 a week and apply for jobs. Then after two weeks, you can tell me that 4% unemployment isn’t so bad ~ D.D., St. Paul, MN Thanks for the op-ed Survivor funds are tough call. I was just wondering, why can’t I find any other commentary on this topic, especially. in major papers—like the Washington Post, New York Times, etc. I just did a lexisnexis search and yours is just about the only one I can find. Is it just too sensitive a topic? I guess what I don’t understand about this whole thing is that it seems to me the fund was established to help people return as best as possible to the financial situation they were in before this terrible day (thus the deductions for Social Security or insurance), not help everyone make as much money as possible. It seems that they’re looking a gift horse in the mouth--because, really, the government didn’t have to do this. I can’t imagine that anyone’s going to win their lawsuit anyway. I really dislike that whereas I used to have such sympathy/compassion for the victims, I’m starting to feel myself get angry—especially when I compare their situation to Lockerbie, etc. I even find myself hoping that those who are suing airlines end up with absolutely nothing. This whole thing is a terrible tragedy and I feel like the government and public are doing their best to sort it out. This fund was intended to help people, not stiff them. Why doesn’t anyone appreciate that? ~ L.H. , New York City My compliments on your piece on business rent seeking (No room for rent seeking) and its conclusion that legislatures need to be self-policing in avoiding decisions that advance such actions by private firms. You are certainly correct that rent-seeking behavior "...seems part of human nature." Certainly it is economically expected behavior as firms seek to advance their own interests in securing the benefits of an artificially (that is, legislatively) created transfer. It is significant that U.S. antitrust law, under the Noerr-Pennington doctrine, exempts from antitrust liability the efforts of firms to influence government action to secure anticompetitive advantage. It remains for legislatures to recognize that the standard tests of government appropriateness, effectiveness and efficiency are best met when the administrative law machinery of delegation and agency discretion are carefully adhered to. ~ C.S. I just finished reading what you had to say about "rent seeking" (No room for rent seeking) and thought I would write to tell you how much I always enjoy reading your column. You have a real gift for presenting issues in a logical, understandable and engaging way. More especially, I appreciate how you come across as a calm "voice of reason," avoiding the fear mongering and hyperbole that seems to infect so much economic discourse today. I always feel better after reading your column, because you leave the overall impression that—at least for most of us in this country—the system is working pretty well. Thanks so much for your good work! I look forward to your next contribution. ~ P.H. After reading your editorial Instead of 401(k) limits, overall review is needed, I was wondering if you did not read the entire Enron debacle, or if you chose to ignore the real issue. What is so devastating is that the company CEOs cashed in their retirement, while blocking out the employees from doing the same. They also wanted to get out. If this is called "government as nanny" then that is what we need. These greedy corporations cannot be taken on by the individual. I just wish you had been more complete and open in this article. Certainly you had ALL the facts, rather than just the ones you gave. ~ I.L. With a more than passive interest, I read your article Enron episode teaches investors to act like parents. I fit the description of the conservative investor by taking the high road and putting my money in those well-rated utilities that paid reasonable dividends and afforded better than average safety. I acquired my stake in Enron through the acquisition of Portland General Electric shares over a thirty-year period of random purchases and reinvestment of dividends. My holdings netted 5,100 shares over that time. When Enron merged with PGN, a two-for-one split provided me with 10,200 Enron shares. The stock ballooned in price until in reached a little more than $90 per share. During this period of doubling and redoubling the market price, I watched Enron’s spiraling quotations closely. I read all the news I could find; watched each day’s changes; combed through the annual and quarterly reports and so on. I also closely followed analysts’ reports. All through the period, experts reported mostly Strong Buy, Accumulate or Hold. And only occasionally would a Sell opinion appear. In fact, right after the stock had sunk to under a dollar a share, at least one analyst was still reporting favorable opinions of the stock. It was obvious that I had more faith in the analysts’ opinions that I no right to respect. Of course, as it turned out, the analysts were in the same boat as the rest of the investors: The company failed to report negative offsets to the earnings picture from the public, the investors and the SEC. Your article was right on point. The lesson is what former President Reagan coined. "Trust everybody, but cut the cards." And that goes for the SEC and the brokers. ~ L.K. I guess you are right from an economist’s view (Economies must let companies fail). But from the viewpoint of the folks losing their jobs, it's a bummer. My bet is the government will come to the aid of companies left in the steel industry particularly with the sentimental glasses that the country is viewing it self in right now. Bethlehem Steel may not be down for the count, they did survive the Depression. ~ Anonymous I just finished reading your article Avoiding rate traps. This is indeed a major oversight in journalism. I once understood the details of which you wrote, but it has been nearly two decades since the days of my economics and finance classes. After reading your column, I’m reminded of the words of a finance professor of mine, "You have to remember, this article was written by a journalist." No offense intended in your direction. Thanks for the clarity on this issue! ~ M.M. Thank you for your article Avoiding rate traps. It raises both concern and intrigue. Why? You are absolutely correct. There is no free lunch. This is one of the ramifications of "supply-side" economics. When you attempt to raise corporate and consumer spending by lowering interest rates you then accordingly have a measured risk of inflation. When that inflation does eventually arise, you lower interest rates to "ward off inflation" and so on and so forth. This exemplifies the balancing of the tight rope that is forever the goal with all actions taken in preemptive steps. Supply-side economics has the benefit of taking measured steps to minimize measured risk. However, your article implies that you are VERY optimistic about today’s economy. I wish we were so lucky as to be concerned about inflation. Inflation is measurable and to some degree manageable. Should the signs of inflation appear, I am sure the Federal Reserve would have by then, acted by already raising interest rates incrementally at that time. Alan Greenspan himself has said that today’s economy calls for monetary policy to be managed at Internet speed. This implied both the raising and lower of interest rates at extraordinary speed. The Federal Reserve would no doubt move to quickly raise interest rates nearly as quickly as they have lowered them should inflation be just around the corner. The real concern today is not inflation, it is deflation. It is deflation that has Japan in turmoil with little hope for immediate rebound. Deflation is a less traditional and more unmanageable economic trend. Should the U.S. "trend" towards inflation as you suggest, we have policies to draw on that would eventually "thwart" the inflationary pressure. Should the U.S. "trend" toward deflation we have fewer proven policies from which to draw upon. Should we approach deflation our popular U.S. "supply-side" economics has few tools to use that are "measurable" and proven. Deflation can be the worst of all economic trends, especially for the impatient U.S. economy. Deflation stands the risk of being unmanageable. Given the options, I hope you are right and that inflation is a concern. Thank you for your article. ~ A.P. I just finished reading your column, Focus on the economy of real goods, services. I agree with you. On September 11, our priorities changed and for the better. I truly believe that we will all be getting back to the basics, and realize what is really important in our lives. Hopefully, we will all slow down a little and discover how our lives have been blessed. ~ C.F. Thanks for pointing out the difference between the real economy and the market economy in Focus on the economy of real goods, services. As I understand it, Henry George's Progress and Poverty was a pioneer in making this distinction between social accounting and private accounting. He challenges the traditional methods of combating recession, Keynesism and monetarism, as inadequate because they merely have the effect of driving up economic rent on land, doing nothing to enable capital and labor to access the land and natural resources that are necessary for creating production, i.e. the real economy. ~ R.N. You presented a very balanced picture on money to the airlines (Bailout must weigh benefits to society, airlines). Thanks. ~ F.C. Somehow the flow of your article on a maybe depression (Extreme times call for measured response; Fed's role: ensure calm, prevent panic) was like the analogy you gave for the Fed and Smoot-Hawley Act. You frightened us to death with details and parallels and then somehow think a seeming off-the-cuff "don’t worry" will undo our psyche battered by the previous preponderance of ink. ~ B.B. Thank you for stating in
Rhetoric over federal budget muddies Social Security
issue that Social Security surpluses are paying down only debt held by the
public. Clearly Social Security surpluses cannot reduce the total debt when, by law, all
such surpluses are immediately invested in special issue, non-marketable Treasury
securities. The fact that the Treasury uses the funds obtained from the Social Security
Administration in exchange for the special issue bonds to redeem a Treasury bond held by
John Q. Public, only leaves the public debt where it was initially. ~ T.S. Both you and the politicians are missing the point of the "lock box" (Rhetoric over federal budget muddies Social Security issue). The lock box would be run like the 401(k) that many companies run. The money deposited would stand alone and untouchable for ANY reason. A company cannot use 401(k) money to pay down company debit with the promise of making good on those funds in the future. I feel, and many people I talk to feel, that Social Security money will not be there, or retirement age will be pushed way back and dollar amounts so low as to be worthless. We want our deposits LOCKED away from ALL other programs and politicians. ~ J.I.M. I just want to tell you how much I enjoy reading your Sunday columns. I have several times sent them to my brother who believes that any economic problems of the eighties were Jimmy Carter’s fault and any current problems are Bill Clinton's fault. He can never find any faults with what you say. I was really interested in your column on capping salaries of health care workers in a tight labor market (Putting a cap on salaries, fees doesn't work in tight labor market). This relates closely to what has happened in Wisconsin where I am a high school teacher. Around 1993 our legislature decided to basically take away collective bargaining rights and local control of school budgets. It has had its intended results. Property taxes have eased slightly, and average teacher pay has fallen. The unintended results are a teacher shortage and more and more teacher turnover. Three to four years ago when an elementary ed job opened up we would have 200-300 applicants. This year we had 16. Hard to hire jobs like Spanish had one applicant, and he had to be begged to come here. The quality of people coming to interviews (I have been told) has fallen dramatically. Another bad side of this is that teachers know that they don’t have to perform very well to keep their jobs (We have a three-year probationary period of employment). I still have this feeling that the real reason for the cost controls was to purposely make schools fail or perform poorly (which Wisconsin schools haven’t) to try to end public education for this grand idea of privatizing everything in this country. Whatever the reason capping salaries and cost controls doesn’t work. Keep up the good work and I’ll keep reading. ~ J.S. I read with absolute disgust your Sunday column on nursing pool (Putting a cap on salaries, fees doesn't work in tight labor market). You couldn't have been more wrong if you tried. If you are going to venture into topics, you best know what you are talking about. ~ B.P. You are right on the mark in Putting a cap on salaries, fees doesn't work in tight labor market. I hope that the state legislature is paying attention ! As someone who has a loved one in a nursing home, I see what is going on first hand. ~ E.G.S. While you claim in
Events bring
changes that are certain to involve trade-offs that "Healthcare is too
important to be left in the hands of a single official," Dr. Bob Geist's commentary
(8/8/01) asserts that Attorney General Hatch's actions against Allina are simply an
enforcement of the law. In the midst of this debate, the public needs to recall that it
was the single decision of a previous attorney general that firmly installed managed care
in Minnesota. You’re right in making the point that people think themselves the standard, and that everyone else changes (Did the Canadian dollar fall, or did the U.S. dollar rise?). There must be many examples of this. Have you ever noticed that whenever men and women differ, women are the "standard" (according to them, anyway!) and there’s something "wrong" with the way men are?!! Better not write about that, if you know what’s good for you! There is at least one inverse corollary to this, however—in sports. Say a football game ends 49-48. Both sides say things like, "Our offense was great, but our defense sucked." Notice, no one ever says, "Our offense was on fire, and theirs was, too." or "Our defense was worthless, and theirs was, too." No, in sports, the blame or credit all rests with self. ~ D.W.D. I enjoy your column every week, and was wondering when you would write about the health insurance marketplace (Health, auto insurance both involve tradeoffs). Your statement, "In the United States, households can get all the health services they can pay for" is, for many Americans with Medicare, untrue. It is illegal for Medicare providers to charge more than Medicare rates to provide services for patients with that insurer. There are very | |||||||
