Sunday, November 29, 2009

An Early Economic Indicator You Can Count on

The Wall Street Journal reported this week that overtime increased 6.5% from September to October and 14% from the previous quarter. This is a clear sign that the economy is on the move and is a fair substitute for employment growth. In fact, a measure, aggregate hours worked, might be a better indicator to watch then employment growth itself. Firms generally increaes overtime before they are confident enough to hire workes to meet increased demand for their products. That is why unemployment is a lagging indicator and can continue to decline or stagnant even as the economy moves forward.
That doesn't rule out the possibility of a W recession. The problem in housing is no longer sub-prime loans. The problem is after a long period of unemployment, workers have difficulty making mortgage payments while only earning unemployment benefits. With unemployment not expected to peak until next summer, these loans could create the worst wave of foreclosures yet.

Saturday, November 28, 2009

It is time to debate legalization of marijuana

Marijuana is perhaps the nation's fourth largest cash crop with an estimated value to growers of $15 billion to $20 billion a year and a street value twice that. In Washington State, just the value of crops seized by law enforcement made it our state's 8th largest crop.

You have to admit that we haven't had much luck stopping the harvesting sale and ingesting of the drug. The $10 billion in annual law enforcements doesn't seem to have done much good. On top of that, medical marijuana has resulted in a near legalization of the product that makes enforcement of other criminal laws confusing at best.

But all of the income from this crop goes to criminals. Many of them dangerous gangs and local mafia who use revenues to support more heinous crimes. And none of it is taxed. There is an estimated 400,000,000 pounds of marijuana produced in Washington State. If the state were to regulate and tax the stuff it could collect another couple of billion dollars a year in revenue.

The mid-term revenue picture for Washington state is pretty bleak. If you think government is too big and we need to cut back on the services government offers that's a good thing. But there is a good argument to make that we cannot support our higher and K12 education system or health care for children and mental health services within current declining revenues.

The alternative would simply mean raising taxes. The chance of getting an income tax passed by the voters is small and even if voters approved, a positive review by our current elected supreme court is next to nil. We already have a 9.5% sales tax in Washington State and another tax hike would take us up over a scary 10%. It's hard to argue for increasing business taxes when sales are low.

We at least have to have a debate about the need for government services, a fair tax system and the legalization of marijuana. Like alcohol, marijuana has many problems that need to be considered. But you have to ask the question can we deal with these things better if it is regulated. We need to debate this.