Topic: Trade and Immigration

Brother, Can You Spare a Z$200,000 Note?

Hyperinflations would be almost comic if it were not for the misery they inflict on the people they affect. In the misruled African country of Zimbabwe, the inflation rate of the Zimbabwean dollar has reached an annualized rate of 13,000 percent. According to a story Thursday in the Financial Times, an IMF official predicts the annual rate could be heading towards an incredible 100,000 percent.

One sure sign of a hyperinflation is that the central bank must issue new currency notes in ever higher denominations so that people won’t have to carry bags or wheelbarrows of money around to make everyday purchases. Sure enough, the government of Zimbabwe is now wrestling with that very question. According to the FT story:

The launch yesterday of a new large-denomination bank note of Z$200,000—worth [US$13] at the official exchange rate and [US$1.30] at the more realistic parallel rate—underlines the disarray. The central bank had wanted to issue a Z$500,000 note, but a bank official said this was vetoed by the finance ministry because senior staff thought such a large denomination would have reinforced an impression that inflation was out of control.

At a 13,000 percent rate, that cat is probably already out of the bag.

If You’re Not a Farmer, Then Shut Up

I blogged about the arrogance of some members of Congress during last week’s farm debate in the House.

From the Congressional Record, check out this bluster from farm committee member Tim Walz (D-MN) during the floor debate. (Note that he is objecting to reforms proposed by Reps. Ron Kind (D-WI) and Jeff Flake (R-AZ):

I rise in opposition to my good friend from Wisconsin’s piece of legislation. It’s well meaning, but I believe it does not address the needs of my district. The people of the First District of Minnesota, I think, can probably lay claim to one of the richest agricultural pieces of land in the entire world … I had 14 hearings throughout my district with universal acceptance of making sure the safety net is maintained … When I need advice on the farm bill, I go to a couple of good farmers in my district, Kevin Papp, president of the Minnesota Farm Bureau, and Doug Peterson, president of Minnesota’s Farmers Union. I don’t need to go to the ideologues at the Cato Institute or Club for Growth to know what’s good for rural America.

Have you got it? If you are a taxpayer footing the bill for $30 billion or so of farm subsidies each year, then tough beans–just sit down and let Mr. Walz spend your money on his special interest friends.

A few questions to ponder:

Do you think that there was “universal acceptance” of big farm subsidies at his meetings because they were meetings of farmers?

If Mr. Walz’s district is “one of the richest agricultural pieces of land in the entire world” then why the heck does it need subsidies?

State and Local Workers Retain Advantage

The Bureau of Economic Analysis has released its annual data on employee compensation by industry. (See tables 6.2, 6.3, 6.5, and 6.6).

The new data for 2006 show that the nation’s 16 million state and local government workers earned an average $61,727 in total compensation (wages plus benefits). That is 11 percent more than the $55,470 average earned by U.S. private sector workers.

Looking just at wages, state and local workers earned an average $46,937, which is similar to the $45,995 average earned by private sector workers. Thus the primary state and local advantage is the generous fringe benefits.

The figure below shows that the state and local worker advantage has remained fairly constant since at least 1990. Private pay boomed in the late-1990s, but state and local pay has grown faster this decade.

Source: Chris Edwards, Cato Institute, based on Bureau of Economic Analysis data

For those interested in the welfare of teachers, the BEA data shows that teacher compensation has closely tracked the overall state and local average since 1990. The average compensation in state and local education in 2006 was $62,371

State and local workers are not paid as well as federal workers, on average, but they usually receive similar generous fringe benefits including high job security, and lucrative pension and health care plans.

Federal Pay: Shoot the Messenger

Fedsmith.com ran a commentary today about the new data I cited on average federal worker compensation.

Most of the 31 comments on my blog and the commentary so far are hostile, and many take a “shoot the messenger” approach. Folks, it’s not my data. I didn’t use “fuzzy math” or “twist” the data. The data comes straight from the U.S. Bureau of Economic Analysis.

Yes, averages are only one indicator of pay gaps. But is it justified that the federal average has grown so much more quickly than the private sector average? Why should fringe benefits in the government workforce be so much more generous than in the private workforce?

And shouldn’t we have a “government of the people” rather than a class of elite overlords increasingly separated from the realities of taking risks, being fired, facing salary cuts in downturns, and having to work hard to get pay raises?

Life without Farm Subsidies

When the House passed a massive farm bill last month, supporters justified ongoing subsidies as a “safety net” for family farmers. But a story in the New York Times this morning on the New Zealand dairy industry shows that farmers can survive and thrive in a free market without subsidies.

The story begins by describing how technologically sophisticated the country’s export-oriented dairy industry has had to become to meet global competition.

Dairy farming in New Zealand was not always this sophisticated. But ever since a liberal but free-market government swept to power in 1984 and essentially canceled handouts to farmers — something that just about every other government in an advanced industrial nation has considered both politically and economically impossible — agriculture here has never been the same.

The farming community was devastated — but not for long. Today, agriculture remains the lifeblood of New Zealand’s economy. There are still more sheep and cows here than people, their meat, milk and wool providing the country with its biggest source of export earnings. Most farms are still owned by families, but their incomes have recovered and output has soared.

For more on the lessons we should learn from New Zealand’s successful reforms, check out a Free Trade Bulletin we published in 2005 titled, “Miracle Down Under: How New Zealand Farmers Prosper without Subsidies or Protection.” The Kiwi example also featured prominently in an online debate I had in May with the chief economist of the American Farm Bureau.

The New Zealand dairy industry and our own fruit and vegetable sectors prove that farmers can thrive without government subsidies and trade protection. Yet it looks like we will be saddled for another five years with an expensive and anti-market farm bill.

New Federal Pay Data

The Bureau of Economic Analysis just released its annual data on employee compensation by industry. (See tables 6.2, 6.3, 6.5, and 6.6).

The new data for 2006 show that 1.8 million federal civilian workers earned an average $111,180 in total compensation (wages plus benefits). That is more than double the $55,470 average earned by U.S. workers in the private sector.

Looking just at wages, federal workers earned an average $73,406, which is 60 percent greater than the $45,995 average earned by private sector workers.

Average federal pay has soared in recent years, growing much faster than private sector pay between 2001 and 2005. However, federal pay growth slowed in 2006, while private sector pay accelerated. As a result, average compensation for federal civilians grew 4.0 percent in 2006, compared to the average in the private sector of 4.2 percent.

Hopefully, federal pay increases will continue slowing to help relieve the soaring taxpayer costs of federal workers. I’ve proposed freezing federal pay to help reduce the deficit and privatizing expensive activities such as air traffic control.

The BEA data show that compensation for federal civilian workers cost taxpayers $203 billion in 2006, up from $145 billion in 2001 when President Bush took office. (The costs of military compensation have grown even more rapidly, from $98 billion in 2001 to $156 billion in 2006).

The acceleration of federal compensation is clear in the figure below covering 1990-2006.

Source: Chris Edwards, Cato Institute, based on Bureau of Economic Analysis data

For further information, see

http://www.cato.org/pub_display.php?pub_id=6611

http://www.cato.org/pubs/tbb/tbb-0605-35.pdf

(Data note: The BEA data for number of employees is measured in full-time equivalents.)

A Correction

In my post last week on the House farm bill, I quoted a Congressional Quarterly article that said that “[chairman of the Agriculture Committee, Representative Collin] Peterson also worked to stave off a last-minute revolt by Congressional Black Caucus (CBC) members by dedicating $1 million [sic] in extra funding for historically black universities and for black farmers.” (link requires subscription).

Further reporting has disclosed that the figure dedicated to those causes was $100 million (see here). Apologies.