U.S. is not a business, strictly speaking

There’s an interesting and humorous conversation involving the affect of the elderly on the U.S. economy. More specifically, it is trying to hit on the fact that opponents of healthcare reform can't look at U.S. policy strictly as a business because it isn’t one. If we were purely a business we would "euthanize 70 year-olds and harvest their organs for auction." Matt Yglesias shows from this exaggeration that "the problem with this isn’t that it wouldn’t work, it’s that it would be wrong, morally speaking."

If that's the case, we should all be thinking about a way to fund these healthcare reforms instead of trying to not pass them at all.

Austin Frakt points out that government intervention in supporting the retired is inevitable because no one has the incentive to do so themselves. Referring to Yglesias, he agrees that ethics to indeed hinder U.S. policy. Hence the redistribution of wealth falls on the government for healthcare through taxes. In a real business there wouldn’t be a redistribution of wealth to those that don’t pull their weight.

Rather than increased taxes, Ezra Klein offers the alternative of increasing the labor supply by increasing immigration. With more workers paying social security we could offset the "costs" from the elderly.

I completely agree. There seems to be a large amount of illegal immigrants already working in our country, why not make them pay taxes and become part of the system officially.

I thought that this was a unique way of thinking about our economic problems. Maybe those opposed to healthcare reform should think more ethically in light of this and start searching for ways to fund it rather than not pass it.

Lucha Libre Taco Shop

I was watching an old Man vs. Food episode in San Diego where they ate at Lucha Libre Taco Shop. This place is located in Mission Hills and has definitely deserves recognition. I went there this weekend and ordered the Surfin California.  Not only is it a California burrito but also has shrimp. Absolutely unbelievable.

Fighting at a Surf Contest

Last Saturday Sunny Garcia and Jeremy Flores were disqualified from the Burleigh Breaka Pro for fighting. Surfing Magazine says that "Flores states he was intervening when a local surfer was in a verbal argument with Sunny Garcia’s son. The three headed for shore when Sunny came running down the beach to intercept them. He’s then seen assaulting the surfer in the water, punching him several times." Here's the video.

The cameraman who took this footage was also assaulted by Garcia has well.
With Garcia's image as a tough guy I'm not surprised something like this happened but he needs to chill out. I'm leaving Flores out of this because he wasn't strangling anyone in the water. This isn't the tough neighborhood he grew up in; it’s a surf contest in Australia. I understand the need to protect your son but there's no need to chokehold someone because of an argument. Its actions like these that give surfing such a negative reputation.

Unemployment Extension

2/16/2011

Over the next 5 months, millions of people will be losing their unemployment benefits. These benefits are different for each state but are based on guidelines from the Federal Government. Those who have used up all of their benefits, the “99ers,” are waiting on 2 bills to be passed in Congress to change the current Unemployment Extension Tier System.

They are called the “99ers” because they have been unemployed for up to 99 weeks and no longer receive benefits from the government.

The 99er-aiding Amendment would add another 14 weeks of unemployment benefits to the first tier of unemployment.  The second bill, the Americans Want to Work Act of 2010, would add an additional fifth tier to the employment system, thereby adding an additional 20 weeks of unemployment benefits.

The current Tier System is very confusing and differs according to each state, but the standard is 26 weeks of benefits from the State. The Federal Government also offers 4 tiers of emergency unemployment benefits which are extensions once the 26 weeks are all exhausted. A person can go from Tier 1 to Tier 4 which gives them up to 79 weeks of benefits while searching for a job—people are eligible for the third and fourth tier depending on how large their state unemployment is. These benefits come from our taxes.

Is this extension a good idea? Or are we prolonging the unemployment process, allowing people to take advantage of our assistance programs?

Nobel Prize winner, Paul Krugman, claims that those against the extension are "a coalition of the heartless, the clueless, and the confused."

He believes that an extension on unemployment benefits will have trouble being passed because people are misinformed about what these benefits do; they believe that there is a large disincentive to find a job—which is  untrue—and that increasing the budget deficit is a bad thing to do. Krugman believes that by spending money, increasing the budget deficit, we can turn around our “depressed” economy. By not doing so, we are being “cruel” to the unemployed.

He goes onto say:

What’s limiting employment now is lack of demand for the things workers produce. Their incentives to seek work are, for now, irrelevant...anyone who thinks that high unemployment in the first quarter of 2010 has anything to do with workers getting excessively generous benefits must not get out much.

And the truth is that unemployment benefits are a good, quick, administratively easy way to increase demand, which is what we really need. So right now they have the effect of reducing unemployment.

David Moberg uses data from the Congressional Budget Office and Labor Department that says that “for each dollar spent on unemployment benefits, the gross domestic product grows by roughly $1.90 to $2.00.” He also shows that the $65 billion increase in government spending will be offset by this increased consumption and really only will cost $26 Billion.

All of this these recommendations have roots to Keynesian economic theory. These people believe that government spending can affect overall aggregate demand of an economy and its output. They also believe that recessions are economic failures that the government should fix.

Basically Krugman and Moberg believe that these unemployment benefits encourage job growth and national productivity at a relatively low cost to the nation. But with these arguments, why are people still in opposition to these extensions? Let’s look at 3 reasons including some economic theory that can be used in opposition to extending these unemployment benefits. Maybe those in opposition of extending unemployment benefits aren’t as confused as Krugman claims.

First, according to the Real Business Cycle Theory, government intervention has only a small effect on the economy.

Government intervention that tries to increase GDP through consumer spending effects the economy less significantly; the level of consumption is actually determined by business productivity. In 2004 Finn Kydland and Edward Prescott received the Nobel Prize for demonstrating that changes in economic productivity affect GDP, consumption, and investment (either by consumers or the government)—not the other way around. This supports the Real Business Cycle Theory.

This would contradict Moberg’s claim of offset government spending through increased consumption.

Second is the concern of how to pay for these extended benefits. The typical alternatives are to increase taxes or cut spending from other areas. It seems likely that taxes would be chosen since Obama has already proposed large budget cuts that have angered many people. Even if taxes aren’t increased now, according to traditional debt financing, taxes will be increased for future generations to pay off this debt.

In response to Krugman and his increased spending, Josh Hardwick says that if taxes are increased, now or in the future, there is a disincentive for others to work and small businesses to grow. This causes a decrease in available jobs and an increase in unemployment.

This can be explained by looking at a labor supply and labor demand graph.

While there is a temporary increase in taxes, business owners have a reduced incentive to expand their business; they’re forced to shrink their demand for employees (labor supply) in order to pay the same amount in taxes as before.

At the same time a reduction in labor supply decreases workers’ wages. With a decrease in wages, workers are less likely to enter the workforce because their free time as risen in value in relation to the time they would spend at work (a decrease in labor demand). This is called the Substitution Effect.

Finally, there is evidence that unemployment benefits create a significantly large enough disincentive for people to actually take jobs.

Thomas F. Cooley and Peter Rupert refer to a recent Beveridge Curve from the Bureau of Labor Statistics. This graph shows the relationship between current unemployment and job creation. Over the past year unemployment has remained constant while the number of jobs created as risen. They claim that this is caused by an inefficient market system and that workers are becoming pickier.

Tarheel Red points to 2 important studies, both in Denmark and Pittsburgh.  Just as unemployment benefits were about to run out, the “return to work rate” miraculously spiked upwards. These studies suggest that people will do what is in their own best interest. When unemployment benefits give workers more value than a potential job, most workers will choose the benefits.

Plus, the longer someone is out of the workforce, the more their skill set declines. I would imagine that it is very unlikely for someone that has been out of the work force for a year (52 weeks) let alone 99 weeks, could perform as well in their respective profession as when they left their job. Keep in mind that those in school gaining new skills are not counted as unemployed.

To be honest, I can see why people are in opposition to this extension. There are widely held economic theories and behavioral studies that support it. That’s why the debate between Classical and Keynesian economists has gone on for decades.

And continuing to extend these benefits can’t be a self sustaining policy. By increasing unemployment benefits in order to increase GDP, we are basically paying ourselves through higher taxes. Eventually benefits will end and these people will have to accept the jobs that are already being created.

Taking all of this into consideration, I would still have to agree with Krugman and extending the unemployment benefits because this recession is nothing like we’ve ever seen before. Classical Economic Theory can’t explain everything that is going on in the economy and perhaps government intervention is the way to go. Just by doing nothing, unemployment is very high (no, the market is not self-correcting itself) and because those receiving unemployment benefits will be consuming everything they receive, it makes sense that consumption and output will increase.

Even if there is a chance it could be a wrong move, instead of doing nothing, I would rather help out those suffering from unemployment.

**Update 4/1/11: “The Federal extended unemployment benefits… will continue through 2011” with 99 weeks in states with high levels of unemployment. But, there is no fifth tier. The 99ers are receiving no more benefits.

New Waves

Artificial perfect waves in what is called the Wavegarden in Spain. How sic is that!

"What should you do?"

In spirit of "What should you do?" by Life. Is. Messy.
What should you do?

Broadening of Topics.....

I assumed that this blog would evolve as I discovered what I really wanted to talk about. As you can see from the other posts it has not all been about surfing or California. I would like to keep writing about Southern California and surfing but include other topics that include economic reforms affecting California and surfing related discussions about the entire world not just SoCal.

Tavarua

Back in July 2010 the Fiji government passed a "decree" that liberalized all surf spots in the country including those controlled by the Tavarua Resort. Mnay including Kevin Naughton from Surfline believe that this was a huge mistake but the conversation still continues today.

Tetsuhiko Endo as well as Surfer Magazine are speaking out about this decision by the Fiji government with opinions and new interviews of local Figi surfers. Endo interviews the head of the Fijian Surfing Association (FSA) who speaks about the creation of jobs caused by this "decree" and the many benefits it will give the people of Fiji. Endo agrees that Fiji should have control of the surf spot becuase foreigners usually don't know what is best for the countries that they try to influence but is unsure of  all the benefits that the advocates of the "decree" preach, such as inflow of money and job creation. he also comments about Naughton's article and believes that his view point is one that is of a wealthy tourist and is forgetting what's best for Fiji.

I completely agree with the liberation of the surf spot. What these bloggers are not talking about or very little is how this "liberation" of Tavarua went about. It seems somewhat chaotic how this process was done. What's done is done and I find it very hard that this ruling will be reverse because the owners of Tavarua were already giving a lot of money back to the community and government. Naughton as well as the owners of Tavarua suggest that there should be a limit of surfers surfing Cloudbreak and Restaurants at a time. They claim that its to protect the environment but I believe that it is to increase their own profits and protect the "surfing Nirvana" as Naughton says for themselves. Obviously it is impossible and wrong to regulate the number of people that are able to surf at a time. What would you think if you weren't allowed to surf at the beach down the street because it was full. This already happens during contests, which inconveniences many people, but occurs for only a couple days at most. 

What should now be undertaken by the Fijian government is a reform on policies supporting the environment such as environmental protection projects and measures to protect the local population to offset the increased level of tourism that the FSA now predicts will come. This is to address the concern that an increased inflow of foreigners/ tourists will have negative effects on the environment and surrounding area proposed by Naughton.