At a loss for the definition of profit

ColoradoBoulevard.net's explanation for a Pasadena, CA, restaurant closure strikes me odd: (Emphasis mine)

Colorado Boulevard has learned that the Fresh & Easy store on the corner of California Boulevard and Lake Avenue will be permanently closing its doors in the next few weeks. Some sources indicated the closure may take place in two weeks.

Yucaipa Companies, parent company of Fresh & Easy, plans to close fifty under-performing stores. Sources pointed out to [sic] the fact that the Pasadena store was making profit, but not enough to offset the cost of its high rent, which in turn deemed the store not profitable in the long run.

I'm wondering if the author just got a bit sloppy or if he, like many, doesn't understand that profit is what remains after all expenses have been paid. If the restaurant is not making enough to offset the cost of rent, it's not making a profit. If it is, indeed, making a profit, it has more than enough to pay the rent.

Maybe the restaurant isn't making enough profit, so that the owners feel their money is best invested elsewhere. Or maybe they foresee something cutting into that profit "in the long" run and they are getting out while they can. Hard to know what's going on from this description.

The efficiency of the private sector

Via Priceonomics:

In 2004, UPS announced a new policy for its drivers: the right way to get to any destination was to avoid left-hand turns. ...

When better tracking systems emerged in 2001, the package delivery service took a closer look at how trucks performed when delivering packages. As a logistics company with some 96,000 trucks and several hundred aircraft, much of UPS's business can be distilled to a series of optimization problems around reducing the amount of fuel used, saving time, and using space more efficiently. (Trucks in UPS facilities park just a few inches apart with their side mirrors overlapping to save space.)

UPS engineers found that left-hand turns were a major drag on efficiency. Turning against traffic resulted in long waits in left-hand turn lanes that wasted time and fuel, and it also led to a disproportionate number of accidents. By mapping out routes that involved "a series of right-hand loops," UPS improved profits and safety while touting their catchy, environmentally friendly policy. As of 2012, the right turn rule combined with other improvements... saved around 10 million gallons of gas and reduced emissions by the equivalent of taking 5,300 cars of the road for a year.

It probably says a lot about me that I find this extremely cool. I love it when someone comes up with a better way to do something we've been doing the same way for years.

I also love pointing out that it's invariably in the private sector that these innovations emerge. Private companies exist to make a profit, and so they have a huge incentive to figure out more efficient ways to do things. Rethinking these types of things saved UPS a ton of money. That's not only good for their bottom line, but good for consumers as well, as it allows them to keep their prices very competitive.

Contrast this to the Unites States Postal Service, which operates in the red to the tune of a billion dollars a year. The USPS has little incentive to be efficient. It's not their money, and the people who run it aren't really answerable to anyone, so there's no real reason to seek out better and cheaper ways of moving packages.

UPS is able to make money because they provide a superior service. Their continued existence depends on their continuing to provide a superior service. The USPS continues to exist because tax payers are forced to fund it, and because federal law makes it illegal for companies like UPS to deliver first class mail. Who has the best incentive to, er, deliver the best service?

Moving in the wrong direction

In light of my previous post, this is not a good sign:

In the Wall Street Journal and the Heritage Foundation’s recently released 2014 Index of Economic Freedom, the United States has dropped from the list of the top ten freest economies in the world. Over the past year the U.S. moved from the tenth-freest economy to the twelfth.

Red States vs. Blue States

Here's something.

The Mercatus Center has just released a study that examines states’ abilities to meet their financial obligations. It isn't a pretty picture, mostly due to rising health care costs and the burden of government worker pensions.

Here's the thing I found most interesting. Take a look at the top and bottom 10 and notice how Red States states compare to Blue States. (Wikipedia has some handy maps which show voting trends over the past couple of decades.)

Top 10:
1. Alaska
2. South Dakota
3. North Dakota
4. Nebraska
5. Wyoming
6. Florida
7. Ohio
8. Tennessee
9. Montana
10. Alabama

Bottom 10:
50. New Jersey
49. Connecticut
48. Illinois
47. Massachusetts
46. California
45. New York
44. Maryland
43. Hawaii
42. Pennsylvania
41. West Virginia
40. Kentucky

 Pretty definitive, no?

Eight of the top 10 fiscally solvent states are solidly Red; eight of the bottom 10 fiscally solvent states are solidly Blue.

Further, the same striking pattern emerges when we look at other measures of success. I took a look at William P. Ruger and Jason Sorens' latest edition of Freedom in the 50 States. In it, they rank the states by a host of measures of personal and economic freedom. If you take a few minutes to thumb through the various charts, you'll see that Red states consistently outperform Blue states, especially when it comes to fiscal issues.

There was a time when we didn't have the data to determine whether conservative or liberal policies lead to better outcomes over the long run. But that time has long past. We now have many decades of data to examine, and the results are clear: liberal policies don't hold up over time.

And this is true on the world stage as well. Compare East Germany to West Germany, Hong Kong to mainland China, or North Korea to South Korea. In each case we see free market policies along side state-controlled economies within the same culture and time. The free market approach wins every time, and the differences are dramatic.

Obama's economic illiteracy

Barack Obama: "Voting for unemployment insurance helps people and creates jobs. And voting against it does not".

I wish some reporter would ask the president how taking money (via taxes) from a productive member of the private sector and giving it to someone who is producing nothing creates a job.

I also wish some reporter would ask how the above can in any way be called "insurance." Insurance is when you voluntarily pay a fee to someone in exchange for their assuming a specific risk you wish to avoid in the future. In the case of unemployment payments, we are taking money, by force, from one person and giving it to another, who hasn't worked for it and to whom it does not belong. That's not insurance.

We can argue about whether paying people not to work is a good idea, but let's call it what it is: welfare, or, more accurately still, forcible income redistribution.

The "fix" is in on ObamaCare

The deadline for "fixing" the ObamaCare website has come and gone.

I put "fixing" in quotes because Obama's definition of "fixed" is pretty pathetic. Here's how USA Today sums it up:

That seems to have worked, at least to some degree. The White House announced Sunday that it had hit its target of having the website function smoothly for "the vast majority" of people who want to sign up, which it defines as about 80%.

So Obama gave himself a passing grade for partially completing an assignment that he assigned himself three years ago and which he promised would be completed two months ago. Color me unimpressed.

But here is the section of the USA Today piece I found most interesting:

At this point, the administration has two things going for it. The first is that technological problems can be fixed. The second is that the critics have yet to propose an alternative that would deliver what Obamacare promises: to replace a harsh and costly insurance market with one that ensures good coverage at a fair price.

Things are pretty bad when one of the things the administration "has going for it" is that the site might actually work at some point. But let's put that aside. It's the second thing the administration "has going for it" that caught my eye.

To begin with, it's factually false that critics have yet to propose an alternative to ObamaCare. (See this, this, this, and this, for example.) 

Next, notice the double standard. Critics aren't challenged to propose alternatives that are better than ObamaCare -- a very low bar since ObamaCare is, so far, making things worse, covering far fewer people at much higher prices. No, opponents are being criticized for not proposing an alternative that delivers everything ObamaCare promised.

ObamaCare promised to defy the laws of economics. It promised a lot more stuff to a lot more people at a lot less cost. It was a blatant con, and it's no surprise that it's failing miserably, as was predicted.

But, according to USA Today, ObamaCare still has a chance because the people who pointed out that you can't do the impossible can't do the impossible either.

Obama votes present on the economy

Yesterday, I learned that President Obama has been blowing off his "daily" national security briefings. Today, I read that he's been blowing off his "daily" economic briefings as well.

Just what is this guy doing? And why does he deserve another term?

Considerable quote

Richard Epstein:

It is not possible to have such a thin and immature understanding of how an economic system is put together by accident. That can only arise from the failure to adopt the right premises in the first place.

h/t: Instapundit

Capitalism can't fund Socialism

Best thing I read today:

Whatever the outcome of the American presidential election, one thing is certain: the fighting of it will be the most significant political event of the decade. Last week’s Republican national convention sharpened what had been until then only a vague, inchoate theme: this campaign is going to consist of the debate that all Western democratic countries should be engaging in, but which only the United States has the nerve to undertake. The question that will demand an answer lies at the heart of the economic crisis from which the West seems unable to recover. It is so profoundly threatening to the governing consensus of Britain and Europe as to be virtually unutterable here, so we shall have to rely on the robustness of the US political class to make the running.

What is being challenged is nothing less than the most basic premise of the politics of the centre ground: that you can have free market economics and a democratic socialist welfare system at the same time. The magic formula in which the wealth produced by the market economy is redistributed by the state – from those who produce it to those whom the government believes deserve it – has gone bust. The crash of 2008 exposed a devastating truth that went much deeper than the discovery of a generation of delinquent bankers, or a transitory property bubble. It has become apparent to anyone with a grip on economic reality that free markets simply cannot produce enough wealth to support the sort of universal entitlement programmes which the populations of democratic countries have been led to expect....

[T]he myth of a democratic socialist society funded by capitalism is finished. This is the defining political problem of the early 21st century.

Read the whole thing.

Who really pays?

Stephen Moore examines how changes in tax rates affect government revenue and the economy in general. This is a keeper you'll want to refer back to when you come across claims that "the rich don't pay their fair share" and other nonsense. An excerpt wouldn't do it justice; be sure to read the whole thing -- and bookmark it for later.

Republicans pushing for Internet sales tax

This seems like a bad idea, both economically and politically, especially in a foundering economy right before an election.

Despite their lip service to cutting taxes, a handful of Republican senators are pushing for a sales tax on Internet purchases. Senator Mike Enzi of Wyoming has introduced the so-called Marketplace Fairness Act that would create a new national online tax that would take away more of our money and freedom. The Republican cosponsors of S. 1832 are Sens. Lamar Alexander, Roy Blunt, John Boozman, and Bob Corker. These Internet sales tax schemes are nothing new but greedy politicians seem more determined than ever to pass it this year.

There's a reason Republicans are known as the stupid party.

Oh, and anytime politicians start talking about "fairness," check your wallet.

An expensive leap of faith

In his recent Wall Street Journal piece, economist Art Laffer takes a look at the effects of "stimulus" spending in countries around the world and concludes:

It worked miserably...

[T]hose with the largest spending spurts from 2007 to 2009 saw the least growth in GDP rates before and after the stimulus.

The four nations—Estonia, Ireland, the Slovak Republic and Finland—with the biggest stimulus programs had the steepest declines in growth. The United States was no different, with greater spending (up 7.3%) followed by far lower growth rates (down 8.4%).

What I can't figure out is why this is a surprise to anyone. If your family was in severe financial trouble, would your solution be to max out your credit cards and go on a spending spree? Seems to me you'd do just the opposite: cancel the cable service, stop eating out so much, maybe look for a second job.

Yet a lot of Really Smart People keep telling us that the way to get out of debt is to borrow more money. Maybe I'm just not smart enough, but I gotta go with Laffer on this one:

[S]timulus spending really doesn't make much sense. In essence, it's when government takes additional resources beyond what it would otherwise take from one group of people (usually the people who produced the resources) and then gives those resources to another group of people (often to non-workers and non-producers).

Often as not, the qualification for receiving stimulus funds is the absence of work or income—such as banks and companies that fail, solar energy companies that can't make it on their own, unemployment benefits and the like. Quite simply, government taxing people more who work and then giving more money to people who don't work is a surefire recipe for less work, less output and more unemployment...  

In other words, the transfer recipient has found a way to get paid without working, which makes not working more attractive, and the transfer payer gets paid less for working, again lowering incentives to work.

I love that last sentence.

Our economy is dying and we desperately need to increase production, but somehow the answer is to punish those who are actually being productive and reward those who aren't? Well there's your problem!

But, the Really Smart People insist, there's a magic "multiplier effect" that somehow makes every dollar the government spends generate two or three dollars of output. Yeah, that makes no sense to me either. First, how does taking a dollar out of my pocket and putting it in yours make it worth more? And second, even if there is such thing as a multiplier effect, how come it only works when the government spends my money and not when I spend it? Good luck convincing me that some politician in Washington knows how to spend my money better than I do.

In reality, every dollar of public-sector spending on stimulus simply wiped out a dollar of private investment and output, resulting in an overall decline in GDP.

Yep, exactly. The pool doesn't get deeper when you take water out of the deep end and pour it in the shallow end. (It actually gets shallower, because you're apt to spill some along the way.)

Take it home, Arty:

The evidence here is extremely damaging to the case made by Mr. Obama and others that there is economic value to spending more money on infrastructure, education, unemployment insurance, food stamps, windmills and bailouts. Mr. Obama keeps saying that if only Congress would pass his second stimulus plan, unemployment would finally start to fall. That's an expensive leap of faith with no evidence to confirm it.