Tuesday, September 26, 2006

Dairy Farms? No Thanks, I'll take tract housing

Connecticut gubernatorial candidate John DeStefano has a plan for Connecticut Dairy farmers. You can click on the link, but in essence, he doesn't think they are getting enough money, so he wants to give them $5 million of state funds, have some sort of summit, have an insurance fund for dairy farmers, and put into place some more price supports and subsidies.

My question is, why should the Connecticut government try to keep these dairy farms open when they obviously are uncompetitive with dairy farms in other states, which have less rain, cheaper electricity, and a lot cheaper land?

If milk is too cheap (and it's a heck of a lot more than gasoline per gallon), why don't these farmers close up shop, sell their equipment, and sell their land and do something else, or even retire?

Someone else could then buy the land who could put it to better use than trying to lobby the state and federal government for subisidies because what they produce can't be produced profitably.

Connecticut has very expensive land, so this land might be suitable to build new houses. Perhaps instead of subsidizing farmers, and then having to form committees to determine why housing is so expensive, we could just eliminate the subsidies to farmers, and then if they couldn't survive, they'd sell their land and the land could be put to more productive use.

Now, you might say that this would cause all Connecticut dairy farms to go under. Well, that doesn't mean we wouldn't have milk in the grocery store. We have orange juice but there are no orange trees in the state. This is because we have highways and railroads, which cross the state line and keep going to where these things come from. Apparently they can even bring milk in on refrigerated trucks.

Some of the dairy farms would probably survive: they'd be competitive enough (they might not be as cheap as Wisconsin, but after adding in transportation costs, they could probably compete).

Believe me, if the government doesn't provide price supports, milk is still going to get produced and pasteurized and distributed. We don't need governments trying to keep dairy farms in business when they cannot compete. Especially in a state where developable land is a scarce commodity.

Friday, September 22, 2006

From Sixteen Volts to Zero

Well, it's more than apparent that Ilkka Kokkarinen's blog, Sixteen Volts was forcibly shut down.

For those of you who didn't know Sixteen Volts, Ilkka Kokkarinen is a professor of Computer Science at Ryerson University in Toronto. Mr. Kokkarinen is a native of Finland, but moved to Canada several years ago to try living in a more free market economy than Finland's. On his blog, he regularly chastised Feminists, as well as many other leftists, for their hypocrisy., often using biting sarcasm...

He supported nuclear power, but was also an avid proponent of public transportation (so much so in fact, that neither he nor his wife owned a car. He commuted via public transportation to Ryerson from the Toronto suburb of Mississauga, while his wife was able to walk to work). He seemed to write about 2 entries per day, fairly long entries at that, and it was quite an entertaining read. In mid September 2006, someone at his college distributed some blog entries he had written, albeit grossly out of context. Ilkka commented that he spoke to the student newspaper about the misquote, but idly wondered if something would happen akin to what happened in I am Charlotte Simmons, a recent novel written by Tom Wolfe.

Well, apparently the Feminists or anti-nuclear power people or whomever he offended managed to force the removal of his entire blog archive (a few weeks ago, Ilkka commented that all his blog entries could likely fill a book), and post an apology. While it was rare that any blog entry of his would get more than 3 or 4 comments, this apology has gotten 58 comments from people lamenting that he's quit blogging. I guess the leftists that were offended couldn't make counter arguments on their own blog, or even in the comments section on his blog, but instead wanted to ensure that no one else could read such offensive material like the stuff Ilkka wrote, which showed that they often contradicted themselves.

Shutting down his blog speaks volumes about how leftists engage in debate. As Ilkka liked to say, "While chasing the rabbit, the hunter is blind to the mountains."

Let's hope that Ilkka starts blogging again, albeit with a pseudonym, as I do... And let's hope that he blogs in English instead of Finnish. Finnish is just too damned hard to learn. I speak German fluently, and can figure out Dutch/Afrikaans. In Swedish, Norwegian or Danish, I can pick out certain words. But Finnish is of course not an Indo-European language, and the only major languages related to Finnish are Estonian and Hungarian (English is distantly related to Sanskrit, Russian and most of the languages of Europe, and it's closely related to the other Germanic languages, albeit with significant influence from French and Latin). Finnish is not a widely spoken language, nothing like English, so let's hope Ilkka blogs again in English!

Seventeen volts anyone?

Sunday, September 17, 2006

Who Should Pay for Metro North?

The Metro North Railroad takes commuters from Connecticut, Westchester and Long Island to Manhattan (and intermediate points).

The railroad is currently in the process of buying new railroad cars for the New Haven line (which goes from New Haven, Connecticut into New York, plus a few additional spur lines). These new Kawasaki railroad cars are being paid for by both Connecticut and New York state, with Connecticut picking up 65% of the tab and New York taking on 35% of the cost. This ratio was worked out by the number of riders from each state.

However, I think that this is a totally unfair division of costs. In the United States, if you work in one state and work in another, you pay income tax to the state where you work. Then, when you file your taxes, you get a credit for those taxes. So if your home state has a lower rate than the state you work in, you will wind up paying nothing in income tax to your home state. This is the case with Connecticut and New York. New York's income tax rates are higher, so Connecticut natives who work in New York pay taxes to New York. For those New Yorkers that work in Connecticut, they pay income taxes to Connecticut, and then since New York taxes are higher, they make up the difference by paying New York the additional amount.

Many more people commute into Manhattan from Connecticut than commute out of Manhattan to Connecticut. While there are some commuters from Fairfield county to Westchester and vice-versa, I would imagine most of these people drive.

My question is, even if Connecticut residents make up 65% of the passengers (or 65% of the passenger miles or whatever metric they used based on ridership), why should it foot 65% of the bill? Most of the Connecticut residents riding the train pay nothing to Connecticut in income taxes! Shouldn't the split be done instead on commuter destination?

Suppose Connecticut cut its funding. The railroads would be no fun to ride. People would either move out of Connecticut (but from an economy perspective the loss is minimal: they didn't work here) or find jobs in Connecticut that they could drive to. This would boost tax revenues (plus add in the fact that we aren't spending money on the railroad).

Since New York gets a big tax bonus by having better commuter trains (which makes commuting easier, which means more commuters), shouldn't it pay for the trains? It just seems odd that Connecticut would spend lots of money so rich people could commute to another state and end up paying nothing in income taxes to Connecticut.

Isn't it also a bit odd that Metro North is subsidized at all in the first place? Yeah, I know, highways are subisidized too. I don't like that, and I don't like this subsidy any better. This is a subsidy so mainly wealthy can take the train to work: in 1998, the average commuter earned nearly $100,000. Why exactly are we subsidizing the entire railroad? And if you say that there are poor people who can't afford the tickets, couldn't we figure out some way to give just the income qualified people a discount?

Tuesday, September 05, 2006

Insurance Politics

Connecticut is the historic home of the insurance industry in the United States. Yet Attorney General Richard Blumenthal and a few state representatives seem to have little concept of how insurance works.

Connecticut borders Long Island Sound, and recently, Andover Cos. began requiring policyholders who live within 3/4 of a mile from the Sound to install storm shutters.

Why would Andover require storm shutters? They don't own a storm shutter company, so won't profit directly. Rather, Andover will reduce its risk exposure. According to Wikipedia, storm shutters prevent windows from being broken, and also prevent air pressure from building up in a house, which can ultimately cause structural collapse.

However, politicans don't like the fact that homeowners may have to install these shutters.

But Attorney General Richard Blumenthal and Speaker of the House James Amann are calling for a reversal of the new practice, saying it unfairly punishes homeowners. They fear that other insurance companies will copy Andover's requirement, forcing more coastal homeowners to install expensive shutters.

"This standard is unfair, unreasonable and unprecedented," Blumenthal said Thursday.

While this standard is apparently unprecedented in Connecticut, I fail to see how Andover's new policy is unfair or unreasonable (obviously, Andover would have to honor all existing claims on existing policies which terms have not yet expired). Insurance companies require all sorts of things all the time to qualify for lower priced insurance: we need to wear seat belts, not smoke, etc. to get lower rates.

We live in a competitive society, and somewhere out there, an insurance company should be willing to sell you insurance for the right price. If someone is convinced that storm shutters are not necessary, then they don't have to install them, and they can purchase insurance from one of the many other companies that sell insurance. Andover's market share is less than 1%.

There's talk of the economic hardship this would cause, and says it could cost up to $100,000 per house to install these shutters. Yet the same article quotes one contractor as saying they cost between $12 and $45 per square foot. At $45 per square foot, the upper range, that would cover 2,222 square feet of windows. Even if you have large 2 foot by 3 foot windows, you'd need 370 windows to hit $100,000.

Let the insurance companies decide what to require or not require in their policies. With competition, people will be able to choose among the various companies, and will be able to do their own cost-benefit analysis of installing shutters, wearing seatbelts, or quit smoking. And if they'd prefer not to do these things, they'll still be able to find insurance from someone. Just please don't get Mr. Blumenthal involved. But there doesn't seem to be any insurance against that...

Monday, September 04, 2006

Should Corporations give to Charity?

When I was in business school, a bunch of people interviewed with some company. There was a question that went something like this: if you were managing the company, and made an unexpected profit windfall (like you discovered oil on otherwise worthless property), what would you do with the profits? The answer they were looking for was that you should give 10% to charity.

I've always wondered why corporations should give money to charity. After all, it's not really their money: it's the shareholders', and shouldn't the shareholders have the right to decide? I'm all for compassion, but for me, compassion means donating your own money or time, not someone else's (this is why I don't think that governments can be compassionate: it's just redistribution. It may in times be necessary, but that doesn't make it compassionate).

There are a few times when I think a corporation should give to charity. The first is if it's not really charity: on the surface, it looks like charity, but so much good will is generated, that it's a win-win. Sponsoring a little league team may bring the company free advertising or it may boost employee morale (if many of the workers' children play for the team). In other instances, charity may help source more employees (such as giving to a local tech school). Donations to certain public policy think tanks may result in more favorable laws being passed. These activities are obviously in the shareholders' best interest.

The second type of charity that I'd support is if a corportion were trying to reverse an earlier wrong. Even without the PR benefit. (For instance, if a record company distributed a CD that advocated cop killing, which is within the first amendment rights, but then someone followed the advice. The corporation may not have acted illegally, but it certainly didn't act responsibly).

Finally, I'd support general charity to whatever organization if the board truly believed that the shareholders wanted to give to these charities. This is obviously easier to ascertain when you have only a few shareholders. The reason for this is taxes. For instance, if a company has five shareholders, and they all think that Planned Parenthood (or the National Right to Life) is great, then the corporation giving away the money is more efficient from a tax perspective. If the corporation gives $100 to the organization, it actually only costs about $66 less in profit because taxes will be less now that income has dropped by $100.

If however, the corporation keeps the $100, then it pays $33 in taxes on it. Then it has $67. IT distributes this to the shareholders, who have to pay 20% tax on the dividends received, so they're left with about $54 (donating this will then bring them a tax benefit, but in a 33% bracket would be about $18).

However, in most cases, I would not support corporate charity. It's not really charity. Under most circumstances, large corporations with a diverse shareholder base have no business giving away their shareholders' money. Let the shareholders do that.

Friday, September 01, 2006

Gasoline Taxes and Road Building

While I'm all for low taxes, I believe that gasoline taxes and tolls on highways can be perfectly reasonable, provided, however, that there are some constraints to them.

Roads cost money to build and maintain, and therefore, I think it's fair that the people that actually use the roads pay for their use. If someone has managed to position their life so they can walk to work and walk to the stores they need, why should they have to pay taxes so I can drive a car? However, the collary should also be true: if I drive, why should the gas taxes and tolls go to items other than those that are necessary to maintain the road?

I favor congestion-based tolls. These would be tolls that would be charged only during peak periods: by peak periods, I mean only those times when traffic moves less than the speed limit. As I wrote in a previous blog entry, these tolls would be set at such a rate so that enough people were deterred from using the road until the speed limit could then be attained. I believe this would be a more sensible allocation of a limited resource than to force everyone to sit in a traffic jam.

Now, if the congestion-based tolls are throwing out so much money that no other funding for roads is needed, this would tell me that the road infrastructure is woefully inadequate. The excess funds should be used to build more roads. The objective with congestion-based tolls isn't to raise revenue, it's simply to reallocate resources to those willing to pay for them.

Regular tolls are fine, as long as the toll can be collected efficiently. I hate having to wait 20 minutes to pay $1 for a toll. Gasoline taxes and various property taxes on cars are also acceptable, so long as these funds are not diverted to other sources.

So whatever gasoline taxes and tolls would have to be to maintain the road system is where I think the taxes should be set. However, there's one slight problem here. If a small state, such as Rhode Island, needed to have higher taxes than the neighboring states (perhaps because of more miles driven by its residents, more miles per car, or whatever), this could cause locals to cross state lines when making purchases. Taxes need to be high enough to cover costs, but not so high that people start finding alternative fuel sources in other states. States like these would probably have to revert to more tolls. Traffic fines should also be used solely for the road system.

The cost of the road system are construction costs, repair, snowplowing, traffic police salaries, and the cost for emergency rescue personnel for the portion that they deal with automobile accidents.

So would this make gas taxes higher or lower?

Currently, gasoline is taxed at $0.184 per gallon by the federal government, and then the states add their own taxes. This brings in about $30 billion to $40 billion per year, according to various estimates. The most recent highway bill signed by Bush had $286.4 billion in spending over six years, which right there is more than the gas taxes collected. This would indicate that the gas taxes aren't enough to fund federal transportation spending. Add to the fact that much of the $0.184 collected is block granted back to the states, and it looks like the federal gas tax is woefully short of where it should be. The highway bill was also filled with lots of local projects, not for the interstate highway system. The bridge to nowhere in Alaska is only the most ridiculous example.

Republicans and Democrats alike call for tax holidays of the gas tax. I guess my question would be: during this time, would you still build and repair roads, have police and fire units, etc? If so, then who's going to pay for it all if not the drivers. If I set up my life so that I don't need to drive, why should my income taxes go up to pay so people can drive?

At the same time, gas taxes shouldn't be thought of as a piggy bank to fund other non-road related projects.

There's a few other things I haven't mentioned. Pollution. In my above proposal, there's no allocation for pollution. I would definitely favor some sort of duty on pollution to encourage people to reduce their own. Charge each car based on the amount of particulates per mile times the number of miles driven; this will encourage people to get cars that pollute less. I don't really care if the car is a hybrid or runs on ehanol. Base it on the output. I never understood why there should be tax breaks for hybrids. Why not tax breaks for really fuel efficient cars, most of which happen to be hybrids. But what if someone else came up with a different way? Like reducing the number of cylinders in use when on a highway.

Public transportation. Many governments seem to think that drivers should pay for public transportation, because for every guy on the railroad, he's not on the road. However, if we were going to have a closed system, in which gas taxes and tolls and fines pay for roads and highways, then why should the drivers pay for the railroad riders? Yeah, they reduce congestion. So what. If a factory were to build worker housing next to the factory, should the owner get the same tax break because he's reducing congestion as well? Or if a company allows its employees to work from home or have flex commuting, should they get a tax break? Well, they sort of would, because under my proposal congestion wouldn't happen often: except when there was a wreck, there should be little congestion due to peak tolls.

So in any event, keep road taxes and tolls as high as necessary to maintain and build the roads. Don't expect subsidies, and don't expect to subsidize anyone else...