The baby needs new shoes! Do you want to pay 40% of the purchase price in taxes to do so? Probably not, but you DO. See here why...

Going to buy the baby some new shoes!!

Got this idea from Mark Perry.  Go HERE for more on the subject of Tariffs on imported shoes, which is the crux of this posting.

How much in taxes, that we can actually figure out, goes to purchase a $10.00 pair of basic rubber sole canvas sneakers for a child.  We HAVE to assume these are imported from China because there is NO domestic producer of this type of shoe.

Well, I have to earn the money first. So the first taxes I encounter of payroll taxes--Social Security, 6.2% of what I make and Medicare, 1.45% of what I make. So a total of  7.65% of my income.

I calculate I would (roughly) have to earn $10.85 before taxes.

Minus Payroll Taxes (Social Security (6.2%) and Medicare (1.45%) --Total = $.85 cents

I now have my $10.00 to purchase my babies shoes, right? Sort of. I assume I am driving to the store.  Assume I am going to need gas. Gotta pay gas taxes, State and Federal on each gallon of gas I buy.

In Texas the State Gas Tax assessed PER gallon (Texas it is $.20)
Federal Gas Tax assessed PER gallon (18.4 cents---round down to $.18)

Assume I need half a gallon of gas--Total Gas taxes would be =  $.19

Texas State Sales Tax---8% (give or take depending on your locality) =  $.80

Not done yet...Gotta back track a bit.

The shoe was imported.  Imported shoes of the type (cheap!) I want to purchase have a Tariff of 48% (unless it came from Mexico or Canada---NAFTA).  I am going to round to 50% to make the math a little easier.

Assume the shoe had an assessed value of $4.00 at the point of import at Customs.  The Federal Tariff would be $2.00 (50% of $4.00).  The importer of the shoe would now have that shoe for a total cost of $6.00.  They might add a dollar for good measure and sell it to the retailer you are purchasing it from for $7.00. They in turn sell it to you for $10.00.

So, how much in various taxes have you paid on your way to purchasing a $10.00 pair of shoes.

Tariff----$2.00
Payroll taxes--$.85
Gas Taxes--$.19
Sales Tax---$.80

Total: $3.84 in taxes that I had to encounter in order to get the shoes.  That is an effective tax rate of 38.4% on the $10.00 purchase.  I did not include any Federal Income Tax on the income.  The purchaser could subject to no income tax or a high tax. I just let that go. I also am missing other taxes embedded in the price of the good, other than the tariff, that the retailer pays too. Never ends, it seems.  The effective rate is probably higher.

I am not a math person. Tell me where I am going wrong. I am a willing learner.  Thanks!

The point of this posting is this tariff of nearly 50% is regressive and hurts the poor. There is no domestic industry to protect from foreign competition. Those are LONG gone, but the tariff remains.  If Congress and the President wanted to help the poor, this is easy pickings for repeal. 

Why don't they do it???

Average hourly wages for large retailers. How accurate are they??

I have not worked retail in quite some time. I would appreciate anyone seeing this and have worked for any of these companies (or in similar one) confirming these numbers are about right or if they are high or low. From the source, it seems these are "average hourly wages", so new-hires to experienced workers wages are included. Just curious as to how accurate these are. Thanks!



Source: Quartz

My Black Friday piece of Advice, Dos Equis-Style...

"I don't go to the mall very often, but when I do I know 50% Off might save me money but it is the 50% ON that puts me in debt. Stay solvent, my friends."

I've got too much free time on my hands...

A Thanksgiving Day meal costs 71% more compared to 1986 but it takes the average worker TODAY 45 minutes less to earn the money for that meal. This must mean we are better off, right?

Have to give an economics twist on the holiday. A requirement for an Econ teacher.

Here are a couple of graphics from The Conversable Economist.

The first shows, in inflation adjusted dollars, the change in cost of a shopping basket (literally) of some typical food items needed to prepare a Thanksgiving meal. Not inclusive of everything, but a representation.


Source: The Farm Bureau Federation via The Conversable Economist

Look at the blue line.  Pretty flat over time, with a pretty big dip on the left and an up turn on the right.  This means, after adjusting for inflation, the cost of this basket of goods has remained fairly consistent.  Ok, that is good news, I suppose. 

But what about the average consumers ABILITY to purchase these goods in any given year? 

One measure is to look at how many hours of work, given a persons wage, does it take to purchase this market basket of goodies.

In 1986 the nominal average hourly wage was $8.94 (average for the year--Data HERE--BEFORE TAXES). So in 1986 a worker had to work ($28.74 / $8.94) 3 hours and 15 minutes to pay for the market basket.(the prices for each years market basket are below)

In 2011 the nominal average hourly wage was $19.46 (before taxes).  In 2011 a worker had to work ($49.20 / $19.46) 2 hours and 32 minutes to pay for the same market basket.

The average worker today worked 45 minutes less to earn the money for Thanksgiving dinner than he/she did in 1986. 

Variables to consider: If taxes and/or other deductions are higher today than the nominal wage would certainly be lower, hence take more time to purchase the market basket.  Are the quality of the goods in the basket better, worse, the same?   What else am I missing?  Start a list...

Source: Farm Bureau Federation

"Manufacturing Is ALIVE and Manufacturing jobs are DEAD!!" Not a winning campaign slogan, but it is the truth...

Well, mostly true.  A new report Manufacturing the future: The next era of global growth and innovation is circulating on the econ blogoshere and it speaks of the divergence in manufacturing output relative to manufacturing employment.

IMPORTANT NOTE: This report is on GLOBAL manufacturing, NOT just the US!

Note 3 things in the graphic below.  Employment in manufacturing in 2006 was only 14% of jobs in the private sector.  Private Sector R&D in manufacturing is very high relative to other sectors, but I assume these would not be blue collar "on the assembly line" jobs. Employment in manufacturing from 1996-2006 shows a net loss relative to other sectors.

The "old" manufacturing model was how does/do management and white collar workers assist the line worker in producing the best product.

Going forward the new mantra will be how does/do management and white collar workers assist the machines/robots/ technologically advanced production lines in producing the best product.

Notice the line workers job missing in the second part?

The future....

Read here how Seattle re-invented itself as the high tech hub it is famous for. Oh, wait, what? It did not do ANYTHING? Ok, then they should AT LEAST reimburse Bill Gates for the U-haul rental that made it possible...

Decaying cities looking to revitalize often make pilmages to successful cities to learn how "they did it" and to see if they can copy that success at home.

Often there is no "they did it" at all.  It was luck and spontanaiety.

Seattle is a nice example. Seattle was not always the clean, high tech, progressive, shining city on the hill that we all know and love today:

"...But in the late 1970s, Seattle was in very different conditions. Seattle as an economy was heavily focused on traditional manufacturing, and services for lumbers and [?] industries. As you can imagine, in the 1970s, these were not great industries to have. The only innovative part of their economy was Boeing. But Boeing was struggling in the late 1970s, laying off people by the thousands. So the economy was in really poor shape, and people were leaving the city by the thousands..." (Source: EconTalk)

So, what did the governing Fathers (and Mothers) of the city do to re-rev its engines?  Well, nothing, to be exact:

"...But there's something that happened that changed the history of the city forever, and it has to do with Microsoft. Microsoft was not founded in Seattle. At the time it was in Albuquerque, New Mexico. Albuquerque at the time was more high tech than Seattle. And in fact the main reason Microsoft was there was that their first client was there. Microsoft stayed there for four years and was doing fine, was prospering. But in 1979, Bill Gates and Paul Allen, the founders, decided that they wanted to be close to their families--who were in Seattle. So they relocated the company back to Seattle. Now, at the time this was a small company, 15 employees. And nobody really paid attention to this move. But in retrospect, that was the seed that was responsible for the growth of the high tech sector in Seattle and the complete reshaping of the local economy, and the rebirth of the city both economically, culturally, and in terms of amenities...."(Source: EconTalk)
 

So, a fateful decision by 2 young entrepreneurs who had an idea, ambition and just wanted to be closer to home, saved a city and revitalized a region. 

Adam Smith put it this way (emphasis on the last sentence):

“Every individual is continually exerting himself to find out the most advantageous employment for whatever capital he can command. It is his own advantage, indeed, and not that of the society which he has in view. But the study of his own advantage naturally, or rather necessarily, leads him to prefer that employment which is most advantageous to society... He intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was not part of his intention” ― Adam Smith, An Inquiry into the Nature & Causes of the Wealth of Nations, Vol 1
 

Or dumb luck. Either one.  :)

Note: I heard this story from a podcast at EconTalk.  If you need something to listen to on long walks or a jog/run I recommend there podcasts. Each last about an hour. The Host, Russ Roberts, comes from the Libertarian-leaning point of view but he often has guests on the "other side".

 

Great links to Vintage online catalogs from yesteryear. How much fun is this!!!

Mark Perry at Carpe Diem has the following links to vintage catalogs that are online and you can view them by flipping pages just like the old days.

Great resource for teachers and students as a primary source for fashion, culture and technology.

How much fun it is to look through these and see how much has changed. I had fogotten some of the products and fashions!

1. Wishbook Web, the “vintage Christmas catalog archive project,” with online versions of old Christmas catalogs (Sears, Wards, J.C. Penny, FAO Schwarz, etc.) from 1933 to through 1988.
2. Online Radio Shack Catalog Archive, back to 1939.
3. Online Radio Shack Computer Catalogs, back to 1977.

Why we can't have nice things. One graphic that will show you why Government "Investment" in infrastructure is almost impossible to come by these days.

The spending side of the Federal Budget is the sum of two major categories that spending can be slotted into: Mandatory Spending ("Non-Discretionary"--must happen under the law per previous legislation) and Non-Mandatory ("Discretionary"---can happen, or not happen, with active legislation). 

Mandatory spending occurs on things that are required when: (1) recipients meet eligibility requirements, such as Social Security, Medicare, Medicaid, and/or (2) "automatic stabilizers" like employment compensation, food and housing  kick in as the state of the economy changes (i.e. recession).

Non-Mandatory ("Discretionary") spending is spending on "everything else".  You could term it government "investment"---roads, bridges, infrastructure, science, space exploration, education, Big Bird, on and on...You know, the fun stuff and stuff that complements and enhances private investment.  What economists call "Public Goods".

Using historical tables from the Office of Management and Budget (OMB), I cropped the most significant mandatory spending budget items for the years 1967 and 2012 and calculated the percent each budget category was/is relative to the total budget of the respective year. I use 1967 because it is the first year of the Medicare program (federal payments for the health care of retirees).

Keep in mind, the numbers you see below are in "millions". So for instance, in 1967 the total spending on Mandatory and Non-Mandatory budget items was $157,467 millions (see number at the bottom), or a little over $157 Billion dollars. In 2012 the total is 3,595,422 million or almost $3.6 Trillion. 

In 1967, 32% of the Federal spending was on Mandatory items in the budget. That means 68% could be spent on the "Public Goods" mentioned above.


Fast forward...In 2012, 63% of the Federal spending is on Mandatory items. That means only 37% left to spend on Public Goods/Government Investment in stuff.

That is quite a reversal of fortunes in the last 45 years. 

Can you see now why it is difficult to have any new "public goods" toys?

Note: Numbers may not add up because I rounded AND I cut lots of categories to include only the essential budget items.

Is our emphasis on "manufacturing" as industrial policy in 2012 really folly and based on political pandering? Does it miss the point regarding the changing nature of the modern economy? Yes, I think so. Find out why here...

Is our emphasis on "manufacturing" as industrial policy in 2012 really folly and based on political pandering? Does it miss the point regarding the changing nature of the modern economy?

I think in many ways we are chasing ghosts from the past and not looking to the future. 

The value in manufacturing increasingly takes place in the intellect and creative crevices of the mind, not in the calluses on the hands or sweat of the brow of the laborer. 

Here is an excerpt from a commentary on the topic from The Financial Times (the whole article is below).

When you look at the value chain of manufactured goods we consume today, you quickly appreciate how small a proportion of the value of output is represented by the processes of manufacturing and assembly. Most of what you pay reflects the style of the suit, the design of the iPhone, the precision of the assembly of the aircraft engine, the painstaking pharmaceutical research, the quality assurance that tells you products really are what they claim to be.

Physical labour incorporated in manufactured goods is a cheap commodity in a globalised world. But the skills and capabilities that turn that labour into products of extraordinary complexity and sophistication are not. The iPhone is a manufactured product, but its value to the user is as a crystallisation of services.

Many of those who talk about the central economic importance of manufactured goods do so from an understandable concern for employment and the trade balance. Where will the jobs come from in a service-based economy, manufacturing fetishists ask? From doing here the things that cannot be done better elsewhere, either because of the particularity of the skills they require, or because these activities can only be performed close to home. Manufacturing was once a principal source of low-skilled employment but this can no longer be true in advanced economies.

Video: The Miracle of the Pencil...And everything else...

In posting just before this one I extolled the virtues of the Capitalism and Creative Destruction (by implication) through a high tech device---a Smartphone.  Now, I would like to do the same with a
very low tech device---a Pencil!

Here is a nice video (about 6 minutes long) illustrating the Miracle of the Pencil and how it comes to the marketplace.  Innumerable resources and activities have to be co-ordinated to create such a simple thing at such a low price.  Look at a pencil, then look at EVERYTHING else around you.  Think about the effort it took to get those things within your reach. 

I dont think the word miracle is that far-fetched...

HT: Cafe Hayek and the links from there...

Look at this photo then look at your Smartphone. I see the most environmentally friendly device EVER produced. What do you see?

If you have a Smart Phone take it out. Look at all the things it came pre-loaded to do and all the apps you have added to it. 

Now, think of all the separate "gadgets" you either have or used to have that now your pocket-sized phone can do anywhere you go. This photo below really should be much bigger and have many, many more items in it.

I see a device that saves an incalcuable amount of societal natural resources. Start adding it up! Impossible, isn't it? 

Why can't we give a shout out now and then to an economic system, though it has its faults, that produces goods and services that make our lives richer, better and environmentally better off? 

Just askin'...

Source: Carpe Diem

Eye-Opening video (very short) on Brazils effort to curb destruction of the Amazon Rainforest in order to grow food. Will make you think about your next bite of food!

Balancing the need to grow food for a world that is growing richer and the need to be mindful of the effect on the environment is no easy task.

Here is a recently produced video of Brazil's effort to curb "rogue" farming and illegal destruction of the Amazon Rain-forest.

Eye-opening and makes you think! Worth 4 minutes of your time if you are interested in the topic.

Nice Infographic showing the Income and Wealth of the Characters in "Twilight". Very Walmart family-like...

I am not a fan of this movie series.  Don't hate me for it.

This is a nice example and illustration of people who are "income poor" but asset rich and are considered "wealthy".  We tax income at much higher rates but don't tax physical or financial assets until they are sold (for the most part, anyway, at the FEDERAL level). 

I guess you could say the characters from this movie are kinda like the children of Sam Walton of Wal-Mart fame.  Asset rich, income "poor".   Ok, no jokes about them being retail Vampires.  :)

Source: Business Insider

Taking stock of my own ignorance---a 24/7 task...

"I always try to take stock of my own ignorance in certain subjects before I label someone else as such. That seems only fair and I usually find, upon genuine reflection, I don't really know as much as I thought I did..."

Not an original thought. I have seen variations of it from a variety of philosophers. It is prompted by various postings I see in the blogosphere and on my Facebook newsfeed.

I try to post things (here and on my FB page) that either informs; points out something different to; or makes laugh, anyone who wants to read it.  For me it is fun, stimulating, educational, professional development, a hobby, blah, blah, blah...All good stuff!

Many others post things that mock, demean or other wise plays on the "ignorance" of others, and the comments flow in agreement and then some. Congratulatons: you win the game of intellectual superiorty!  I hope you feel better in your cozy blanket of smugness.  I say you are lazy and ask if you were really as smart as you think (know) you are, why not just forgo the "low-hanging fruit" of judgement and let it pass by? 

I guess (ok, er, I know) I have a thin skin. That stuff bothers me, especially when it comes from people I know and respect OR from people  I don't know but I read and respect.

I will just let John Coffey speak for me.  He says it best and definitively. 

Teachers/Students---Here is a link to a TERRIFIC explanation of the the Pros and Cons of a Carbon Tax OR a Cap and Trade system to reduce Carbon Emissions.

There are two primary ways under consideration for reducing carbon emissions that contribute to climate change---A straight carbon tax on individual consumption of fossil fuels (i.e. gasoline) at the point of sale OR a "cap and trade" system  that affects producers of goods and their use of carbon based fuels/energy/inputs.  Both are designed to make emitting carbon more expensive, either directly for the consumer or the producer. Ultimately, the consumer bears the brunt of either policy in higher prices.

Here (Economics in Plain English) is a terrific and pretty definitive lesson/explanation (complete with graphs!) on the pros and cons of implementing a carbon tax.  It contains MANY, MANY Microeconomics topics and concepts that are covered in class and on the AP Microeconomics test.  If you are interested in the topic, this is a must see!

Economics in Plain English also has a most excellent explanation of the Cap and Trade system HERE.

Read both, ponder them, then decide which would be more effective.