Wall Street Journal and New York Times today

by philg

Over breakfast at Hi-Rise Bakery in Harvard Square, I read the Wall Street Journal for the first time in many months.  Here’s what I learned…


International business is all about Asia these day, especially China.  New product ideas come from Japan.  New manufacturing plants are built in China.  Europe is mentioned only as a troublesome complainer in World Trade Organization talks, trying to prevent American, Canadian, and Australian firms from labeling wine as “Chablis” or cheese as “Roquefort”.


The editorial page has some really thoughtful witers, notably a former NASA employee saying that the Shuttle is NASA’s Vietnam.  It will never work because the reusable rocket idea is flawed, Homer Hickam notes, and the Shuttle is parked in the middle of a bunch of explosive rocketry rather than safely perched on top of all the nasty stuff.  “Simply put, had that spaceplane been on top of the stack, the destruction of Challenger and Columbia wouldn’t have occurred.”  He advocates replacing the Shuttle with expendable launchers and a new spaceplane.


The rest of the editorial page is devoted to right-wing gloating.  There is an article on how high-tax Democrat-controlled states such as California, Massachusetts, and New York lost population between 1995 and 2000 to Republican-controlled low-tax states such as Arizona, Nevada, Florida, the Carolinas, and Texas.  One reason cited for this migration is the high cost of housing in places such as LA or NYC.  But the author doesn’t explain why, if LA and NYC suck so badly, people are willing to pay $1 million for a tiny residence there…


A reader writes from Rhode Island to attack Howard Dean, a Democratic Party presidential candidate who proposes increased taxes and more ridistribution of income.  The reader, C. Dale Reis, notes that his parents could afford to support a family on a single income because taxes were low back around 1950.  Today, because taxes are so much higher, it takes two incomes to generate a middle-class lifestyle.



Our political system has turned the house and car every few years that my laborer father could afford into transfer payments from his bank account to the social system set up to buy votes for the politicians.  And what the middle class has gotten in return is the breakup of the traditional family and the resulting decline of our moral values.


Mr. Dean professes to care about “the children.” But it has been the increase in taxes over the past generation that has spawned latch-key suburban children, urban gangs, and overly aggressive toddlers coming out of day care.


One of the main editorials is about the latest statistics on SAT scores.  It seems that the black-white gap has grown quite a bit over the past 10 years.  A typical black student will score 206 points lower than a typical white student on the SATs.  Public schools are blamed, of course, with the suggestion that vouchers and school choice are the answer.  A study is cited where the conclusion is that “students who have roughly equal skills and knowledge will have roughly equal earnings”.  At first glance this seems reasonable.  You can’t cheat the marketplace forever, no matter how many layers of racial preferences are imposed by society.  On the other hand, look at all the business executives who earn fat salaries while remaining ignorant of all things related to making products, accounting, and other skills that were traditionally associated with managing a business.  If Carly Fiorina can rise to the top of HP, why can’t a black man get paid a fat salary despite a low level of knowledge and skill?  [One simple comprehensive explanation that the Journal does not consider is whether the racial quotas in colleges and graduate schools has something to do with it.  Why bother to study for standardized tests if you know that the color of your skin will guarantee you a spot in the college of your choice?]


Shifting over to the New York Times there is a fun article on Richard A. Grasso, the head of the New York Stock Exchange.  The Exchange itself doesn’t make that much in profit, only $28 million last year.  Grasso, however, decided to help himself to $12 million in annual salary, nearly half of the entire enterprise’s profits, and $140 million extra in “deferred savings and retirement benefits”.  The extra $140 mil, equivalent to about 5 years of profits for the NYSE, is held in a special account on which he is guaranteed at least an 8% annual return, risk-free.  That’s 10 times the interest rate that investors in money-market accounts are getting.


That’s all the news for today…

12 thoughts on “Wall Street Journal and New York Times today”

  1. The top marginal income tax rate in the 1950s was over 90%. Is the WSJ really advocating a return to this policy?

  2. I have found a principle which seems to be useful to me in interpreting economics;

    housing costs expand to absorb the available income.

    In 1950 the social norm was a one-income family. Therefore family housing costs were limited to what a one-income family could afford. As the two-income model became acceptable the amount of income available increased – so housing costs went up. The result being that you really can’t compete now on one income.

    If you want to live in LA or NYC, your pocketbook has to compete with that of anyone else who’s interested, (including Richard A. Grasso, I guess) so prices are sky high.

  3. All I can say it, thank god Grasso’s children will not have to pay taxes when they inherit that $140 mil.

  4. thats an interesting idea…you dont want the shuttle part below everything else where all the crap falling off is going to destroy it…

    the old system seems so much simpler…and better…

  5. PHil,

    You appear to have plenty of free time. So, I thought I would rephrase my question from before…not “do you feel guilty squandering your talents,” but “would you feel guilty about living your life as you do if you a. Had inherited millions from mom and dad, never working a day in your life and b. Never accomplishing, i.e., getting a PhD? Basically, do you think you feel ok about living in the lap of leisure because you lived your life as a spoiled teenager at age 40.

  6. Tom: your question is addressed to some extent in the book How to be Good by Nick Hornby (http://www.amazon.com/exec/obidos/ASIN/1573229326/). I have a bit more leisure time and material comfort than the American average, after 23 years in the labor force, though mostly my surplus of “free time” as you put it is due to my unmarried childless status. My modest extra amount of time and cash is not a very interesting distinction, though, when you compare nearly any American’s living standard to that of an African or Indian. It would be possible for nearly any American to reduce his or her standard of living in half and still be very comfortable (in fact the average standard of living in 2003 is roughly double that of what was average in 1950 and we didn’t consider the middle class in 1950 to be living in squalor). With the surplus cash that American could raise 10 or 15 people in the Third World from adject poverty into a comfortable healthy standard of living. But of course most people are selfish and would rather have a McMansion and a garage full of SUVs than provide significant help to unfortunates either here in the U.S. or in foreign lands. Hornby’s book looks at what happens when one member of a married middle-class couple decides that being 95% selfish is not longer acceptable and that he should do whatever he can to help the poor.

  7. Looking back at the previous comment I see how poorly written it was. Glad you could decode it. I think that’s an interesting point. I remember reading an article some years back about extreme cheapskates who worked little if at all, and spent the rest of their free time doing artistic things, volunteering, relaxing, travelling on the cheap, whatever. One couple in particular had saved up a modest amount of money, something like $50,000 and invested it wisely, living in a bare bones place with other people sharing the rent, and not working at all except as volonteers. At one time these people were hippies, in the 90s they were “slackers.” Anyone who has had a wage slave job, where you spend most of your income supporting yourself so you can work, I think, would see that as extremely appealing. I know I do. It seems like so much of what people spend their money on is so that they can work, i.e., expenseive clothing, professional degrees and training, computers, a reliable car that can get them to and from work, etc. Not to mention stuff that you use once and toss out. It’s a lot worse in places with bad wage to housing-cost ratios, obviously. Tom

  8. I agree; Grasso is overpaid given his role.

    But you are aware that salaries are deducted BEFORE net income is calculated? In other words, it’s $28 million AFTER his salary (which I believe strengthens the case that he’s overpaid). Second, it is common for pension plans–at nearly any public company whose records you can find–to aim for pension returns in the 6-8% range. Pension assets are long-term holdings, paid out in the distant future; as a result, the target rate of return should be linked to the historical rate of return on a portfolio of bonds/equities. (Pension funds have little if anything to do with money market interest rates, except perhaps for those disbursements expected to take place within 6 months to a year.) Many workers who take part in pension plans (including many government employees) have access to a similar vehicle with a comparable rate of return, though they are obviously entitled to less of a payout as their deferred compensation was less–that is, they took less cash today in lieu of putting that money into a pension plan for the future, which is what Grasso did.

  9. Philip,
    I see that you are number 2 in the Harvard Law weblog rankings. Does this mean there is nobody more interesting than you and Dave Winer at Harvard these days?

  10. H A R D . . . T R U T H

    . A typical black student will score 206 points lower than a typical white student on the SATs.

    H A R D . . . T R U T H

    Niggers – – Nigerians – – are stupid .

    Look at the ENTIRE CONTINENT of AFRICA ,and show me one single country that ‘works’. Show me O N E .

    Procreation without compassion . . for their own children . . . . mere savages .

    I wish I could say that whites are better ; but I cannot .

    I hate being human .

  11. I agree with you Phil about low SAT scores. I know a number of blacks and hispanics who would score much higher on the SATs but intentionally score lower because they know they will be accepted anywhere they please because they have non-white skin. Blacks and hispanics get a completely free ride through life because of affirmative action, you’re absolutely right, Phil. Schools that are predominately black/hispanic are exactly equal to those populated by middle class whites, right? Issues of overcrowding, etc. simply do not exist. Therefore the only rationale is that minorities who are eligible for affirmative action aim for low scores. Good work, Phil. You’ve figured it out! Get rid of affirmative action and minority students will get exactly the same scores as white students.

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