Economics of an Eclipse: Tourism Boost or Total Bust?

Thanks to astronomy and a little thing known as the internet, you’d have to be hiding under a rock to be unaware of our impending celestial event today: a solar eclipse where the path of totality stretches across the entire United States.

Cities along that path – where the sun will cast a perfect full shadow around the moon – are hoping and planning for a big bump in tourism.

While viewers in Indianapolis will see about 92% coverage of the sun, those in Evansville will see about 99% and Jeffersonville residents will see about 96%, according to the Indiana Department of Transportation (INDOT).

But Hoosiers interested in seeing the full totality need only travel a few hours south to Hopkinsville, Kentucky, where they can be near the “Greatest Eclipse” point and will be able to see the eclipse last for two minutes and 40 seconds. A number of other Kentucky cities will also be prime eclipse-viewing locations, including Paducah, Bowling Green and Madison.

Cities throughout the country are preparing to cash in on the once-in-a-lifetime event – the most recent coast-to-coast solar eclipse was in 1918 – by building and upgrading infrastructure. A CNBC report on the subject highlights Hopkinsville spending half a million dollars on sidewalk and other improvements, while a Casper, Wyoming, a downtown plaza is costing $8.5 million (which was already planned and needed by the city, but stimulated by the eclipse potential), according to CNBC.

That same report cautions that because the path of totality is relatively accessible and there are numerous highway exits along the route, entities might end up overspending on projects without recouping additional tourism dollars. Additionally, the concern is that too many eclipse tourists could put a strain on things like gas, food and local infrastructure and might backfire in the form of a public relations nightmare if crowds overstress local health care facilities or get stranded without gas or lodging.

The economic benefit (or cost) of the solar eclipse won’t be calculated until after the heavenly bodies have realigned. But if the fervor around scrounging for the last pair of unclaimed eclipse glasses is any indication, it’s possible those cities and towns made a safe bet on a short-term tourism event.

INDOT is also warning travelers in southern Indiana to plan for traffic congestion and reminding Hoosiers that overnight camping at rest areas is prohibited. INDOT is also urging motorists to pay attention to the road during the eclipse, turn on headlights when it gets dark out and don’t stop along the highway to view or take photos.

And remember to take safety precautions when viewing the solar eclipse, from wherever you choose to view it. Wear ISO-certified protective eye glasses or (if you’re like me and didn’t get glasses in time) make a pinhole projection. The American Astrological Society has instructions here on how to construct one.

Happy viewing!

Pres. Obama’s Health Care Plan in Limbo

Businesses everywhere are anxiously awaiting how the Supreme Court will rule on President Obama’s federal health care reform plan this week. The decision will have many ramifications for businesses — and could even force some to reverse adjustments they’ve been making since 2010. CNBC reports:

First, an important caveat: Most of the employer provisions of the health care reform law apply only to businesses with 50 or more employees. So, if your business is smaller than that, you’re mostly off the hook — and you won’t be required to provide health insurance to your employees regardless of what the court decides.

But if your company is larger — or if you’re already growing and expect to someday employ more than 50 people — there’s a lot of unsettled business. Bigger firms that fail to offer their employees insurance could wind up paying government fees, which would kick in when employees obtain insurance independently. At the same time, the law would create exchanges and subsidies for individuals who buy insurance on the open market, and would also expand the Medicaid program.

Of course, there are many other provisions and exceptions. For example, even though companies with more than 50 employees would be required to provide insurance, they would also be allowed to skip paying the $2,000-per-employee government fee for the first 30 employees who didn’t have health insurance. (If you’re having trouble with that exception, rest assured that we had to think it through a dozen times before it made sense, too.) The truth is that once you get deep in the regulations  —many of which haven’t even been written yet —nobody really knows how things will settle out.

The Individual Mandate

Most of the legal attention has been focused on the so-called "individual mandate," which requires people to purchase health insurance, either through their employers or on the market. It was this provision that garnered the most pointed questions from the justices at oral argument in March.

"Can you create commerce in order to regulate it?" Associate Justice Anthony Kennedy asked at the time, apparently trying to figure out how the United States could justify requiring people to buy health insurance under the Commerce Clause of the U.S. Constitution. He later added that he believed the government faced "a heavy burden of justification," and was "changing the relationship of the individual to the government."

Under the mandate, individuals who fail to acquire insurance would be subject to government fees — although the exact nature of those fees, and whether they would amount to taxes, penalties or something else — is one of the more esoteric but important issues in the case before the court.

Despite the 2,400-page law’s complexity, the possible outcomes really fall into three categories. The court could strike down the law, uphold the law, or strike down some provisions. If that happens, it’s most likely that the court would get rid of the individual mandate will while upholding the rest of the law.

Also, Barbara Lewis of Inside INdiana Business spoke with Ice Miller’s Greg Pemberton about the possibilities and what they mean for the business community.

Regulatory Relief or Justification?

A serious effort to reach out to job-creating businesses and stimulate economic growth or a political move now that the road to change in Congress is much less friendly? Reactions to President Obama’s call for reviewing federal health and safety regulations that might be too burdensome on business vary from those two camps to a few areas in between.

Two different perspectives, first from the Competitive Enterprise Institute, which has its doubts; second a CNBC analysis, which indicates the results might be surprising. As always, we’re interested in your take.

This executive order is hardly a war on red tape, and no affected businesses or consumers are going to be able to sue anybody to force compliance — it’s just an “order” to agencies to behave, says CEI’s Wayne Crews. 

Actually confronting regulation, the crippling extent of which remains unappreciated by both parties, requires going far beyond the words of an executive order. Some options include:

  • Implement a bi-partisan “Regulatory Reduction Commission” to vote up or down annually on a package of rules to eliminate.
  • Institute a moratorium or freeze on regulatory rulemaking now.
  • Hold hearings on Sen. Mark Warner’s (D-VA) “one-in, one-out” requirement for any new rule.
  • Rediscover federalism, that is, circumscribe the federal regulatory role regarding health and safety matters best left to states.
  • Enlarge regulatory flexibility and exemptions for small business.
  • Establish an annual Presidential address or statement on the state of regulation and its impact on productivity and GDP.
  • Sunset regulations after fixed period unless explicit reauthorization is made.
  • Implement a supermajority requirement for extraordinarily costly mandates.

As for CNBC.com, Senior Editor John Carney writes:

NBC news reports that the efforts will be run out of Cass Sunstein’s office inside the Office of Management and Budget. That’s hardly surprising. The entire op-ed reads as if Sunstein had a large role in authoring it. He’s long been an advocate of cost-benefit analysis of government regulation.

It’s important to note that in Sunstein’s interpretation, cost-benefit analysis does not have the implicitly libertarian outcomes that the leftist critics and some free market types expect. Indeed, it could be that both the critics and friends of this new executive order will be surprised.

Sunstein’s cost-benefit analysis, for instance, could well be used to support greater regulation of hedge funds or a stronger version of the Volcker Rule by pointing to the relatively modest costs involved and the potential costs of possible systemic risks. In advance of actually doing the cost-benefit analysis, we cannot know if any particular regulation will pass muster.

I suspect that in actual operation, we’ll discover that Sunstein-ian cost-benefit analysis is modestly pro-regulation. Especially when regulators are allowed to include vague things such as how a regulation impacts on equity, this kind of “watch the consequences” analysis is pretty open-ended and far more subjective than it might seem. 

Catch the Brokaw CNBC Special on Baby Boomers

We eagerly await the visit from broadcasting legend Tom Brokaw, as he will keynote the Indiana Chamber’s 21st Annual Awards Dinner in November. And while Brokaw is retired from the national news, it seems he hasn’t quite given up his journalistic desire. Be sure to mark your calendars or set your DVRs to record his March 4 presentation on CNBC about the Baby Boomber Generation. Here is some info:

They were born between 1946 and 1964, a vast and prosperous group of Americans who lived through the Cold War, Vietnam, Watergate and the housing bubble.  They wore Buster Browns, played with hula-hoops, ate at the drive-thru and watched the Beatles play on “The Ed Sullivan Show.” Raised during a time of unprecedented affluence, they exhibited extraordinary optimism and faith in the future.  Now, as the oldest among them approach the age of retirement, they face a world of new challenges and opportunities they never anticipated or dreamed possible. 

On Thursday, March 4th at 9PM ET/PT, CNBC presents “TOM BROKAW REPORTS: BOOMER$!” a CNBC original reported by NBC News Special Correspondent Tom Brokaw.  After defining “The Greatest Generation” in his bestselling book, Brokaw now turns his sights to their successors, the generation that vowed to change the world.

“Now, at this critical crossroads in the nation and in their lives, what do boomers do next – and how do they get there? It’s a question that affects all of us and will for a long time to come,” said Brokaw.

Economic Club Speaker was Chided for ‘Outlandish’ Economic Predictions — That Came True

Patrick Byrne, CEO of Overstock.com, was widely criticized by financial professionals and journalists for predicting a global financial crisis more than two years ago. Byrne, a native of Fort Wayne who received his education from Cambridge and Stanford, warned of a market meltdown perpetrated by cheap credit and writing checks on the bank accounts of future generations. The man who took Overstock.com from a half-million dollars in annual revenue to nearly $1 billion annually, takes little pleasure in accurately predicting our current economic situation but continues to advocate for what he feels are positive reforms – specifically to the controversial practice of short selling stocks.

Byrne will appear at the Economic Club of Indiana luncheon in Indianapolis on November 5. Get your tickets today.

IEDC: National Media Lauding Indiana’s Business Climate

In a recent web article from the Indiana Economic Development Corporation (IEDC), it seems many national news media and sources are looking at Indiana as a model for how to take care of business, so to speak:

National news broadcaster CNBC listed the Hoosier state as the “Most Improved State for Business” in its 2008 survey of states. Indiana ranked the best in the Midwest and third in the nation for Business Friendliness in the survey, the best in history for the state and far better than the rest of the industrial Midwest.

Forbes magazine also provided Indiana acclaim by rating the state’s business tax climate as the best in the Midwest and sixth lowest cost of doing business nationally in 2008.

Indiana’s low cost of doing business and tax-friendly environment scored accolades from a Chief Executive magazine survey of the nation’s top CEOs. The magazine’s fourth annual “Best & Worst States” survey polled 605 top executives in early 2008 who listed Indiana as the best place in the Midwest for business, scoring an eighth place national finish and edging out neighboring states by more than 15 places on the survey.

To view all of the rankings, read the piece on IEDC’s web site (PDF).

Economic Rankings on the Way Up

There’s no questioning that the creation of the Indiana Economic Development Corporation (IEDC) has provided a major lift to Indiana’s business attraction and expansion efforts. Now the public-private organization is able to utilize some extra talking points with others taking notice of the state’s improved business climate and performance.

News of the CNBC survey (Indiana making the largest improvement nationwide from 26th to 13th overall with top 10 rankings in business friendliness, transportation and cost of doing business) traveled fast last week. Low business costs (especially compared to Midwest neighbors) were also cited in Forbes and Milken Institute reports. The IEDC has more in its Why Indiana section.
 
The state, and all those who made it possible, deserves credit for the improved performance. Fortunately, we know no one is going to be satisfied until we’re topping the various polls, lists and surveys. Indiana improved in eight of 10 categories in the CNBC tally, but moving from 48th to 37th in economy (I’d place us a little higher than that seeing the struggles elsewhere) certainly leaves room for more.
 
Other states, of course, aren’t standing still. We’ve got to continue to meet the education and workforce challenges, among others, to keep up and maintain the progress. That’s the impetus behind the Chamber’s Letters to Our Leaders and continuing to work with all involved for the benefit of our state’s employers and their employees.