We're All Technocrats

The auto bailout is dead, at least for now:

A bailout-weary Congress killed a $14 billion package to aid struggling U.S. automakers Thursday night after a partisan dispute over union wage cuts derailed a last-ditch effort to revive the emergency aid before year's end.

Republicans, breaking sharply with President George W. Bush as his term draws to a close, refused to back federal aid for Detroit's beleaguered Big Three without a guarantee that the United Auto Workers would agree by the end of next year to wage cuts to bring their pay into line with U.S. plants of Japanese carmakers. The UAW refused to do so before its current contract with the automakers expires in 2011.

Good.  Chapter 11 was made for this kind of situation, and folks will quickly come to understand that productive assets don't go *poof* in a bankruptcy  (though equity values can).

By the way, you will note that Senate Republicans did not suddenly become economic libertarians.  Their objection seems to be that the bill does not micro-manage the auto industry they same way they would want to micro-manage the auto industry.  You can see in these political battles that Congress brings its usual identity politics to these decisions:  Republicans want to hammer the unions, Democrats want to hammer executive pay.  Which is why these restructuring discussions don't belong in Congress.

Posted on December 12, 2008 at 08:12 AM | Permalink | Comments (9)

Add GM, Ford, and Chrysler to this List

Via TJIC, who had a much better title, "poor credit risks remain poor credit risks, even after you give them a free pony"

Recent data suggests that many borrowers who received help with mortgage modifications earlier this year tended to re-default on their payments, a top U.S. banking regulator said on Monday.

“The results, I confess, were somewhat surprising, and not in a good way,” said John Dugan, head of the U.S. Office of the Comptroller of the Currency, in prepared remarks for a U.S. housing forum.

“Put simply, it shows that over half of mortgage modifications seemed not to be working after six months,” he said.

You can absolutely, without a doubt, add the Big 3 to the list of folks who will be facing default once again just months after getting their first dollop of federal money.

Posted on December 10, 2008 at 09:00 AM | Permalink | Comments (22)

No Issue Too Small To Get Attention from the State

Criminalizing everything:

License-plate frames that celebrate your favorite college or sports team become illegal next month if the frame obscures the state's name.

Starting Jan. 1, police can stop you if "Arizona" isn't clearly visible at the top of the plate. Violators will be fined an average of $135, plus court fees, depending on the city where the violation is discovered.

Wow, while the police are chasing after that guy with a joint, lets make sure we also have the boys in blue vigilant for this.  And I am sure this new law will be enforced as equally and fairly as all the others and these guys will be he first to get tickets:

On Tuesday, half the 26 vehicles in the Arizona Senate parking lot bore frames obscuring the word "Arizona."

Yeah, right.  This is just another "probably cause" for Sheriff Joe Arpaio and his boys to pull over every person with brown skin they run into.


Posted on December 10, 2008 at 08:30 AM | Permalink | Comments (13)

A Civics Lesson in One Sentance

A month or two back, I was participating in the California Regional Council of Rural Counties annual meeting.  At this conference, I was there to have a sort of informal debate on climate change with Joe Nation, a former California State legislator and currently a private consultant on climate issues.

To some extent my role was frustrating for the audience, because they were already stuck with complying with California's AB32 (a sort of state CO2 cap and trade system) and arguing that such legislation was pointless only served to upset them  (my presentation, both in powerpoint and video is here).  By the way, we often lump "government" together, but I can tell you that while the governor and the legislature of California may be 100% behind CO2 alarmism, the county commissioners were very sympathetic to the skeptic position.

Anyway, towards the end of my presentation I made a plea for a carbon tax over cap-and-trade, and said in fact that California's AB32 was living proof of my argument.  The California Air Resources Board (CARB), which is tasked with implementing the plan, has already added hundreds of people to its staff and worked for over two years, is still no where near finished with rule-making.  The complexity, and the battling political constituencies, is simply mind-boggling.  It is already clear that the result is going to be a Byzantine, Rube Goldberg structure of detailed industry-specific reporting and permitting rules.  Nearly 100% of CARB's time is taken up today with various groups running to them begging for some sort of special treatment (think "carbon bailout" and you will get the idea).  No one thinks the process is fair or rational.

Under cap-and-trade, every single industry will report greenhouse gasses, have industry and firm-specific limits, myriads of permits, etc.  For example, we had detailed discussions that day of how cattle flatulence will be treated and measured.  The alternative is a carbon tax, which is dead simple.  There is one single rate to set - the tax per weight of carbon in fuel.  Fuels with more carbon per BTU, like coal, thereby get higher taxes.  The system works like a sales tax, and could be administered by the BOE (who runs the California sales tax system) in its sleep. 

The cap-and-trade system is far more expensive than a carbon tax.  By the basic laws of supply and demand, both systems have to raise the cost of burning certain fuels by about the same amount to get about the same reduction in use.  But the cap-and-trade system brings a huge overhead burden, both in government bureaucracy as well as compliance costs, that make it far, far more expensive for the same amount of benefit.  Until he started sitting on the boards of companies who depend on these inefficiencies in the cap and trade system to make money, Al Gore advocated a straight carbon tax over cap-and-trade.

But we had an opportunity that day.  Because the man who claims to be the author of AB32 is none other than Joe Nation, who was right there in the room.  So we asked him why he took this approach.  Here is what he said, really a civics lesson in one sentence:

I tried pass a carbon tax first, but there was absolutely no support for it among legislators [the same ones who overwhelmingly supported AB32]

If you can understand why this is, you can understand a lot about government.   Because all these concerns that you and I might have about crafting rational public policy are not important to legislators.  Here is how they think about it:

  • Private implementation and compliance costs are meaningless to legislators.  There is no public measurement or accountability for these costs, and most of these costs fall on businesses, who can be ignored as unsympathetic in political discourse.  I operate in Mono County, California, and they put out a new set of reporting requirements driven, they said, by the needs to save a few hours a year of their auditors' time.  But compliance with these new rules costs our company 10-20 hours, at least, a year.  And we are just one of many, many companies reporting.  I complained that it was crazy for them to ask taxpayers to spend hundreds of hours of labor to save them just a few, but they could not have cared less.

  • For legislators, particularly in California, creating large new bureaucracies is good.  It creates a patronage relationship between the legislators and these new government employees that is almost quasi-feudal.  Public employees are an enormous source of support for incumbent politicians, and these bureaucracies also offer future employment opportunities for legislators once they leave office (nice article here).

  • First, last, and always, the vast majority of politicians are gutless.  That means if they can pass the same tax in a way that is more hidden (ie cap-and-trade vs. carbon tax) they will prefer this approach, even if it means the tax is substantially less efficient.  In the case of cap-and-trade, since costs are hidden and spread around like peanut butter rather than easily identifiable, they can pretend the costs don't exist and, if someone starts worrying about rising electricity costs that result, simply blame the rising costs on the evil power/oil/coal/etc companies.  Obama has brilliantly taken this one step further, by outrageously claiming, in the broken windows fallacy of all time, that cap-and-trade will actually boost the economy through green job creation.

  • A carbon tax gives politicians very little room to extract personal value from the electorate.  Really, there is only one number for everyone to argue over.  But cap-and-trade is a Disneyland for lobbyists.  There can be special exemptions, industry specific caps, firm-specific caps, geography-specific caps.  Once everyone sees the first few guys giving campaign donations and parading into CARB for special treatment, everyone feels like they have to in order to avoid being the one guy left out.  My guess is that cap-and-trade will spawn more lobbying than any other legislation in US history.  And politicians, no matter what their public stance, love lobbying, because everyone who comes to ask them for something knows there has to be a quid pro quo.

Update:  A number of related thoughts and posts here, at Reason.

Posted on December 4, 2008 at 11:09 AM | Permalink | Comments (5)

Additional Thoughts on Letting GM Die

I have gotten a lot of email on my posts about allowing GM to die.  Here are a few thoughts:

  1. No matter what our mutual preferences, GM is not actually going to die.  It will go in to chapter 11 and reorganize, and, as that law intends, will continue to operate through that reorganization.  While Lehman and Enron liquidated, they were really special cases having more to do with financial than operating assets.  In the last 20 years, Texaco, PG&E, Worldcom, Delta, and UAL have all passed through chapter 11, and all operated their businesses through bankruptcy.  In fact, all of Enron's pipelines and other operating assets are running A-OK right now, just under new ownership.  Do you remember all those news stories about massive natural gas shortages because Enron's pipelines all stopped operating when it declared bankruptcy?  Yeah, neither did I.

  2. You are welcome to write me about how I suck because your job at GM (or retirement, or health care, or all of the above) is important to you if that helps you psychologically to manage a terrible and stressful time.  But, to cause me to back off my opinion about GM and the bailout, you need to tell me why your job is more important than someone else's job.  Because, unlike private enterprise, the government does not create wealth, but can only move it around (with a leaky bucket, at that).  GM has wasted hundreds of billions of dollars of investment, so having the government invest money to save your job will likely cost >1 job somewhere else.  Just because we don't, and may never know, who that specific person is does not make this an ethical choice. 

  3. I too, all things being equal, value having a healthy auto industry in the US  (which in fact we still have -- it just happens the headquarters of many of the companies that run the plants are over in Japan).  However, if you wish to argue that the bailout is necessary to save a US auto industry, you in fact need to argue that the current set of managers/contracts/systems/performance measures/organization/etc. of GM are better able to manage the employees and assets of GM than a different owner with different managers and approaches.  Because having GM fail does not make the assets or trained people disappear, it merely makes it more likely they will be managed by a different entity.  So all a bailout does is save the GM entity that manages these assets and people.

Posted on November 24, 2008 at 11:23 AM | Permalink | Comments (17)

Get Bob Cratchitt to Do It

The Town of South Attleboro, MA sent out wildly threatening past due letters for folks with balances as low as 1-cent  (thereby investing at least 42 cents to get one back).  In response to charges that this was stupid, City Collector Debora Marcoccio responded:

A computer automatically printed the letters for any account with a balance remaining, and they were not reviewed by staff before being sent out, Marcoccio said.

"It would be fiscally irresponsible for me to have staff weed through the bills and pull out any below a certain amount," Marcoccio said. " And what would that amount be?"

What, are we living in the 19th century with clerks in a musty room preparing bills by hand?  This fix probably requires one whole entire line of program code in the billing system to fix.  I could probably teach myself to code whatever language the payroll system is written in (my guess is COBOL, which, god help me, I already know) in less time than this woman has spent fielding complaints and media inquiries.  Compare this to what TJIC has to do just to get the mail out.

And don't you love people who don't even have enough spine to make a simple decision about the cutoff for minimum bill size.  I have found this is one of those things the government is really, really bad at -- making decisions under uncertainty  (which covers about all decisions, except routine ones embodied in SOP).  Government has no incentives, in general, for productivity, or production, or customer satisfaction.  The only time government employees get feedback at all is when they get negative feedback from having someone yell at them for making a decision that some higher-up didn't like..  So if a decision is not justifiable either by past precedent/SOP or explicitly by the rules, it is not made.

By the way, I had a personal programming milestone last night.  I finally built a website without using a WYSIWIG editor that formatted the way I wanted it to all in CSS without a single table.  I predict that now that I have finally gotten a decent handle on CSS, which mainly consists of learning all the workarounds for when it doesn't work as you would expect, that someone is about to introduce a whole new system for formatting web pages.

Posted on November 19, 2008 at 08:52 AM | Permalink | Comments (9)

Thanks Bush Family

Update:  Chart below is not correct.  It's enough in error that I have deleted it.  Author explains here.

William Biggs has a bunch of charts showing historic federal outlays, but below is his chart for year-over-year changes in federal outlays per capita, adjusted for inflation:

CHART DELETED

Posted on November 19, 2008 at 08:28 AM | Permalink | Comments (7)

Obama Transition Site Gets Stealth Edit

Last week I quoted from the Obama transition site:

The Obama Administration will call on Americans to serve in order to meet the nation’s challenges. President-Elect Obama will expand national service programs like AmeriCorps and Peace Corps and will create a new Classroom Corps to help teachers in underserved schools, as well as a new Health Corps, Clean Energy Corps, and Veterans Corps. Obama will call on citizens of all ages to serve America, by developing a plan to require 50 hours of community service in middle school and high school and 100 hours of community service in college every year.

Now, it says this:

Obama will call on citizens of all ages to serve America, by setting a goal that all middle school and high school students do 50 hours of community service a year and by developing a plan so that all college students who conduct 100 hours of community service receive a universal and fully refundable tax credit ensuring that the first $4,000 of their college education is completely free.

Ben Smith and others argue that Obama never said it was mandatory.  Fortunately, I got a screen shot of the "require" language before the Obama department of Truth got to the page (click for full size):

Obama-screenshot-1

Thanks to Walter Olson for bringing the swap to my attention.

Postscript:  100 hours for $4000 is a pretty good deal.  Not many private sector employers offering $40 an hour to recent high school grads.  Everyone out there OK with the government paying the equivalent of $80,000 a year salaries to 18-year-olds for sorting food at the food bank?

Refresher:  It seems that some basic definitions are in order.  If one is required to work at a certain task, he is not a volunteer.  If one is paid $4000 for 100 hours of labor, he is not a volunteer.  A volunteer is someone who works of his or her own free will without monetary compensation, solely for the satisfaction of helping out.

Posted on November 10, 2008 at 10:13 AM | Permalink | Comments (14)

Public Administration Majors Score Dead Last on GRE Scores

Can't say this surprises me:

Gre 

Seriously - couldn't you have predicted the last three in advance?

Posted on November 3, 2008 at 02:23 PM | Permalink | Comments (27)

No Thanks, We're Waiting on Our Bailout

Via a reader:

An auction that netted $7.5 million in bids on 56 distressed Utah properties fell through last week after the owners -- three banks and two private lenders -- decided they may get a better deal by holding out for the government's bailout plan.

"There were buyers, but we couldn't sell the homes because free enterprise has gone out of the market," said Eric Nelson, founder of Las Vegas-based Eric Nelson Auctioneering.

His company on Sept. 30 put up for sale 56 foreclosed properties and lots, most of which are in Utah County.

The auction, held in Salt Lake City, attracted thousands, including 200 bidders who bid between $275,000 and $615,000 for 10 luxury homes in Midway and Murray that were appraised at between $525,000 and $652,000. They bid between $26,000 and $100,000 for 44 custom lots in Mapleton, Elk Ridge, Lehi, Alpine, Ogden, West Haven and Willard that were valued between $112,000 and $290,000 a piece.

The most-expensive properties on the auction block included a $1.2 million unfinished home in Draper, which attracted the highest bid at $615,000, while a 62-acre parcel in Park City that's valued at $3.5 million, snagged the highest bid at $1.125 million, said Eric Taylor Nelson, the company founder's nephew.

But all those bids were rejected late last week...

"This has never happened before. In the 25 years we've conducted lender-owned auctions, we've consistently closed over 95 percent of all high bids," Nelson said.

"The stock market's historic drop last week and the bailout plan are some of the main reasons why the lenders rejected the bids," he said. "They're thinking, 'Why sell the properties for 50 cents on the dollar when they may get 75 cents or 80 cents through the bailout?' "

Posted on October 27, 2008 at 08:39 AM | Permalink | Comments (3)

First Democratic Agenda Item: Grow Union Membership

Because they have done such a good job helping workers in the auto and airline industries.

Mkas443_merger_ns_20081019212441_2

From the WSJ here.  Its all part and parcel of the "stagnant middle class income" fib, discussed here.

Posted on October 20, 2008 at 09:00 PM | Permalink | Comments (2)

Another State-Run Oil Company Fiasco

And it couldn't happen to a nicer guy (hat tip to a reader):

Venezuela's daily oil production has fallen by a quarter since President Hugo   Chavez won power, depriving his "Bolivarian Revolution" of much of   the benefit of the global boom in oil prices...

The state oil company, PDVSA, produced 3.2 million barrels per day in 1998, the year before Mr Chavez won the presidency. After a decade of rising corruption and inefficiency, daily output has now fallen to 2.4 million barrels, according to OPEC figures. About half of this oil is now delivered at a discount to Mr Chavez's friends around Latin America. The 18 nations in his "Petrocaribe" club, founded in 2005, pay Venezuela only 30 per cent of the market price within 90 days, with rest in instalments spread over 25 years.

The other half - 1.2 million barrels per day - goes to America, Venezuela's only genuinely paying customer.

Meanwhile, Mr Chavez has given PDVSA countless new tasks. "The new PDVSA is central to the social battle for the advance of our country," said Rafael Ramirez, the company's president and the minister for petroleum. "We have worked to convert PDVSA into a key element for the social battle."

The company now grows food after Mr Chavez's price controls emptied supermarket shelves of products like milk and eggs. Another branch produces furniture and domestic appliances in an effort to stem the flow of imports. What PDVSA seems unable to do is produce more oil.

Venezuela has proven reserves of 80 billion barrels, but estimates suggest that it may possess 142 billion barrels - more than anywhere else except Saudi Arabia....

All this means that Venezuela has missed much of the benefit from the oil boom and, now that prices are falling, Mr Chavez faces huge financial problems. Nobody is sure at what point his government would be unable to pay its bills, but most sources consulted believe this would probably happen if oil falls to $80 a barrel. Yesterday, oil was trading at $79.80.

More on "peak oil" being at least partially a function of state mis-management of promising oil reserves here.  Jim Kingsdale estimated last year, when prices were over $100 for oil, that oil prices would probably trade under $50 if the reserves were controlled by private companies rather than government buffoons.

Posted on October 20, 2008 at 02:20 PM | Permalink | Comments (1)

Security Theater

Anyone who flies regularly and has not thought of at least five ways they could easily beat airport security isn't really trying.  Jeffrey Goldberg actually tries a few:

Suspicious that the measures put in place after the attacks of September 11 to prevent further such attacks are almost entirely for show—security theater is the term of art—I have for some time now been testing, in modest ways, their effectiveness. Because the TSA’s security regimen seems to be mainly thing-based—most of its 44,500 airport officers are assigned to truffle through carry-on bags for things like guns, bombs, three-ounce tubes of anthrax, Crest toothpaste, nail clippers, Snapple, and so on—I focused my efforts on bringing bad things through security in many different airports, primarily my home airport, Washington’s Reagan National, the one situated approximately 17 feet from the Pentagon, but also in Los Angeles, New York, Miami, Chicago, and at the Wilkes-Barre/Scranton International Airport...

Schnei­er and I walked to the security checkpoint. “Counter­terrorism in the airport is a show designed to make people feel better,” he said. “Only two things have made flying safer: the reinforcement of cockpit doors, and the fact that passengers know now to resist hijackers.” This assumes, of course, that al-Qaeda will target airplanes for hijacking, or target aviation at all. “We defend against what the terrorists did last week,” Schnei­er said. He believes that the country would be just as safe as it is today if airport security were rolled back to pre-9/11 levels. “Spend the rest of your money on intelligence, investigations, and emergency response.”

Though I have to give props to the TSA for supporting first Amendment rights, I am not sure their concern over free speech and privacy was driving this encounter:

On another occasion, at LaGuardia, in New York, the transportation-security officer in charge of my secondary screening emptied my carry-on bag of nearly everything it contained, including a yellow, three-foot-by-four-foot Hezbollah flag, purchased at a Hezbollah gift shop in south Lebanon. The flag features, as its charming main image, an upraised fist clutching an AK-47 automatic rifle. Atop the rifle is a line of Arabic writing that reads Then surely the party of God are they who will be triumphant. The officer took the flag and spread it out on the inspection table. She finished her inspection, gave me back my flag, and told me I could go. I said, “That’s a Hezbollah flag.” She said, “Uh-huh.” Not “Uh-huh, I’ve been trained to recognize the symbols of anti-American terror groups, but after careful inspection of your physical person, your behavior, and your last name, I’ve come to the conclusion that you are not a Bekaa Valley–trained threat to the United States commercial aviation system,” but “Uh-huh, I’m going on break, why are you talking to me?”

It turns out, incredibly, that most airport employees are not screened.  Because, you know, it would be grossly unfair to subject airport staff to the same sort of time-wasting indignities to which we all must acquiesce.  Also, many commercial flights have a belly-full of US mail which I am pretty sure is not inspected in any way. 

Posted on October 20, 2008 at 12:17 PM | Permalink | Comments (3)

My Head is Spinning

I am on vacation this week, so blogging will be light.  Just as well, as I have absolutely no idea where to begin with the Federal plan to semi-nationalize the banking industry.  I fear that the Bush administration has done it to us again.  Economists will be poking through this situation years from now, and may well find the bunkers empty of WMD's.  Another trillion dollar commitment and unprecedented expansion of executive power ramrodded on the back of fear mongering and chicken-little crisis declaration.  Henry Paulson screams to the world that the sky is falling, and then wonders why he can't stop the panicked stampede.  The Fed breaks the discount window wide open and promises to lend and recieve near infinite amounts of bank funds, and then wonders why banks have stopped lending to each other and only will do business with the Fed.

Posted on October 13, 2008 at 07:51 PM | Permalink | Comments (9)

The Panic Imperative

Eric Posner writes:

Many legal academics claimed that courts should serve as fire walls against the conflagration of fear. When the government locks someone up, the courts should realize that in many cases either government officials have panicked or are violating someone’s civil liberties merely to assure frightened citizens that something is being done. For that reason, courts should treat the government’s justifications with skepticism, and never ever trust the executive branch.

These arguments have not yet surfaced in the current crisis. The specter of fear is everywhere, not just on Wall Street. And the scale of the government’s reaction is no less than what it was after 9/11—that is what probably scares ordinary people the most. Yet no one who believes that the government exploited fears after 9/11 to strengthen its security powers is now saying that the government is exploiting financial crisis fears in order to justify taking control of credit markets. No one who thinks that government would use fear to curtail civil liberties seems to think that government would use fear to curtail economic liberties. Why not?

No one, except me of course.  From my October 1 discourse with a Democratic friend:

I find it surprising that you take this administration on faith in its declaration of emergency in the financial sector. You've lamented for years about the "rush to war" and GWB's scare tactics that pushed, you felt, the nation into a war it should not be fighting, all over threats of WMD's that we could never find.  You lamented Democrats like Hillary Clinton "falling for this" in Congress

But now the mantra is the same - rush, rush, hurry, hurry, fear, fear, emergency, emergency. Another GWB declared crisis in which the country needs to give the administration unlimited power without accountability and, of course, stacks of taxpayer dollars to spend.  A decision that has to be made fast, without time for deliberation. Another $700 billion commitment.     And here the Democrats go again. Jeez, these guys may have the majority in Congress but it is sure easy for GWB to push their buttons when he wants to.  Heck, Pelosi is acting practically as the Republican Whip to get GWB's party in line.

This is Iraq without the body bags, and without the personal honor of brave soldiers in the trenches to give the crisis some kind of dignity.

Posted on October 12, 2008 at 10:03 PM | Permalink | Comments (10)

Regulation and Civil Liberties

One of the things I have always found frustrating and confusing is the number of folks who call themselves "civil libertarians" who simultaneously have not problem with economic and nanny-state hyper-regulation.  In fact, ACLU types are often at the leading edge of calls for more regulation on safety or prices or property or whatever.

I have never been able to understand how the two are not inextricably linked.  How can bright-line protections of freedoms of choice and action be essential in one sphere of our lives but unimportant in others?  Here is just one example of how they work together, from none other than our egregious Sheriff, Joe Arpaio:

Arrest records from crime sweeps conducted by the Maricopa County Sheriff's Office add substantial weight to claims that deputies used racial profiling to pull Latino motorists over to search for illegal immigrants....

even when the patrols were held in mostly White areas such as Fountain Hills and Cave Creek, deputies arrested more Latinos than non-Latinos, the records show. In fact, deputies arrested among the highest percentage of Latinos when patrols were conducted in mostly White areas.

On the arrest records, deputies frequently cited minor traffic violations such as cracked windshields and non-working taillights as the reason to stop drivers.

"These are penny-ante offenses that (police) almost always ignore. This is telling you this is being used to get at something else, and I think that something else is immigration enforcement against Hispanic people," Harris said....

Brian Withrow, an associate professor of criminal justice at Wichita State University, said racial profiling is very difficult to prove.

States have thousands of traffic laws on the books, so police can almost always find a reason to stop someone. The U.S. Supreme Court has ruled that police can legally use minor traffic violations as a "pretext" to stop someone they suspect of other crimes. Withrow said the only way to prove racial profiling is by looking at large numbers of traffic stops to see if "patterns and practices" of selective enforcement exist. Otherwise, it's difficult to tell whether police are stopping motorists for legitimate reasons or merely based on race or ethnicity.

Withrow agreed that the arrest records alone are inconclusive. But he found it troubling that they show that Latinos were arrested more frequently than non-Latinos even when the patrols took place in mostly White areas such as Fountain Hills.

"That tells me that that is who is being targeted," Withrow said.

Posted on October 5, 2008 at 08:59 AM | Permalink | Comments (12)

The Bailout is Back

So what does it take to overcome the opposition of Congressmen who said they opposed the bailout bill as too expensive, too big of a giveaway, and too much of a moral hazard?  Why, more moral hazard (in the form of higher FDIC insured balances), increased spending, and, incredibly, money for alternative energy.  Are these guys a joke or what?  (HT Hit and Run)

By the way, I had a conversation yesterday with a very anti-Bush, anti-Iraq-War Democrat -- the sort that can't get through a five minute conversation without making a Dick Cheney crack.  She was lamenting the failure of the bailout package in the House and excoriating Republicans for being so ignorant and narrow-minded.  My response was:

I find it surprising that you take this administration on faith in its declaration of emergency in the financial sector.   You've lamented for years about the "rush to war" and GWB's scare tactics that pushed, you felt, the nation into a war it should not be fighting, all over threats of WMD's that we could never find.  You lamented Democrats like Hillary Clinton "falling for this" in Congress

But now the mantra is the same - rush, rush, hurry, hurry, fear, fear, emergency, emergency. Another GWB declared crisis in which the country needs to give the administration unlimited power without accountability and, of course, stacks of taxpayer dollars to spend.  A decision that has to be made fast, without time for deliberation.  Another $700 billion commitment.     And here the Democrats go again.  Jeez, these guys may have the majority in Congress but it is sure easy for GWB to push their buttons when he wants to.  Heck, Pelosi is acting practically as the Republican Whip to get GWB's party in line.

This is Iraq without the body bags, and without the personal honor of brave soldiers in the trenches to give the crisis some kind of dignity.

Posted on October 1, 2008 at 08:15 AM | Permalink | Comments (6)

Shadegg on the Bailout

I missed this excellent interview with my local Congressman, John Shadegg, whom I don't always agree with but is still way better than 99% of Congress:

 

David Freddeso: Is a bailout necessary to save the economy at this point from complete collapse — from a major failure of multiple institutions at the same time?

Shadegg: I think that’s the most difficult question that could be posed under these circumstances, and it’s the question that I have struggled all week to find the answer to. I have talked to a lot of smart people who know Wall Street, know banking, know the economy quite well, and you hear different opinions. Some will tell you that it is absolutely essential. Quite frankly, I’m skeptical about that.

But I think that in some ways the question doesn’t matter any more. Because Secretary Paulson chose to raise the matter in the way he did — that is, to go public in a very high-profile way, not just with his concern, but with a kind of Chicken-Little, the-sky-is-falling kind of demand — it became a self-fulfilling prophecy.

That is to say, once the secretary of the Treasury announces to the world that there is a pending financial collapse, perhaps as great as the Great Depression, and Congress must act — he has sent a signal that essentially tells world markets that Congress must act. I will tell you that has been one of the most frustrating things about this since the very beginning...

I can’t tell you how many members of Congress were stunned at that news, and were stunned that none of their local bankers were calling them. And then they called their local bankers, as I called my local bankers, and my local bankers said, “I think things are just fine.” I talked to one banker who said, “Gosh, we’ve got money, and we’re liquid, and we’re making a profit. And we’re in the market selling loans, and we’ve got competitors trying to sell loans against us.”

So, at that point, there’s a disconnect. Secretary Paulson is claiming that this is a catastrophe of generational proportions that could go worldwide. And none of what we were hearing back home matches that. And I’m not speaking just for myself, but also for many of my colleagues who were making similar calls. They weren’t being called by their bankers, or by any of the businesses back home saying, “I can’t borrow any money”.... If, in fact, Paulson had struck a chord with the American banking community, wouldn’t you think that after he announced on Friday that there was a crisis of liquidity that threatens the entire nation’s financial solvency and Americans’ jobs from coast to coast, that my community bankers in Arizona wouldn’t have been picking up the phone by Monday morning, if not over the weekend, to say that “I share the Secretary’s concerns”?

 

Posted on September 29, 2008 at 10:53 AM | Permalink | Comments (4)

Exactly

Sometimes I snap at someone for their criticism of a particular politician.  Typically, they assume I am doing so because I support that politician.  But in reality, I am using just sick of the implication that somehow other politicians would have been much better.  I absolutely agree with Don Boudreaux's comment:

Fareed Zakaria (author of a truly fine book and columnist for the Washington Post) rightly argues that Sarah Palin is unqualified to be president of the United States (and, hence, by extension, unqualified to be V-P). Mr. Zakaria is correct that Gov. Palin's recent answer to a question about the economy "is nonsense - a vapid emptying out of every catchphrase about economics that came into her head." He's correct also that she's unfit to be entrusted with the power of the modern presidency.

But Mr. Zakaria is incorrect to suppose that these traits separate Gov. Palin from other candidates for high political office. Calls by Senators McCain and Obama for cracking down on "speculators" are full of classic and wrongheaded catchphrases, as is Sen. Obama's vocal skepticism about free trade. Gov. Palin is merely less skilled in passing off inanities and claptrap as profundities.

Posted on September 29, 2008 at 09:49 AM | Permalink | Comments (1)

My Alternative to the Bailout

This is taken from and expanded from the end of this post.

Everyone involved in the bailout plan says, at least publicly, that they are not trying to bail out a bunch of Wall Street folks who lived high off the risk premium of these investments but now want to avoid the costs when the actual risks become clear.  They claim to be bailing out Wall Street and various large banks because they fear that a financial meltdown and liquidity crisis will starve main street businesses of cash, and create a deep economic slowdown.

OK, if this is the real policy goal -- to maintain the ability of main street businesses to borrow -- then here is my alternative proposal:

  1. Immediately increase the SBA loan gaurantee authority by $100 billion dollars.  That is enough for a million new small business loans of $100,000 each.
  2. Authorize treasury to spend up to X hundred billion to buy rated new issues of bonds and commercial paper of US non-financial companies.  Some limits should be applied - such as the feds cannot buy any more than 30% of a single issue and/or more than 10% of the entire outstanding debt of one company.

That's the plan.  Here are the advantages:

  • The government is addressing the actual policy goal of keeping liquidity in main street business directly
  • The government is investing in success, in main street companies trying to grow, and not in failed banks and financial institutions
  • Moral hazard issues are avoided with financial institutions. 
  • The SBA loan guarantees cost nothing today.  In fact, they are cash positive in the short term due to loan guarantee payments by borrowers.  Of course, they risk future losses,  but such losses in the future are in part covered by the guarantee payments, and a future loss is cheaper than a loss today.
  • Investments in corporate bond issues are much easier to value, and are far less risky, than investments in illiquid mortgage securities.  The taxpayer is far less likely to take a beating on these purchases.
  • Banks may still fail, but the FDIC has an infrastructure and experience for handling this.  If necessary to calm people, the FDIC could make a public commitment to assisted mergers to maintain all depositors.
  • If there is some big financial meltdown, which I still doubt, there might be a need to inject some mortgage liquidity, but since the Feds now own Fannie and Freddie, the vehicle for doing so is easily available.

Update:  I was not clear -- this is actually an alternative to by alternative.  My first, preferred alternative plan is "do nothing."

Posted on September 29, 2008 at 09:36 AM | Permalink | Comments (3)

Final Thoughts on the Bailout (I Still Don't Like It)

I sat this weekend and pondered the pending financial bailout.  A number of fairly smart people who know more about Wall Street than I seem to think it a necessary evil, and this includes several folks who are nearly as libertarian as I.  Is a sort of knee-jerk libertarianism preventing me from accepting a necessary step to avert economic Armageddon?

I don't think so.  By the light of day on Monday morning, I still think it a bad idea.

Here is some of my thinking (to some extent my last point is the one that is most important to me -- if we want liquidity, let's put it in the right place).

  • I am tired of businesses heading to the government bailout trough and arguing that the continued functioning not only of their industry, but of all the existing players in their industry, is critical to the health of the US economy and thus requires some sort of government subsidy/bailout/protection.  Coyote's first law of rent-seeking is that companies will always claim that failure of their business will have a disproportionately negative effect on the economy.  Coyote's first corollary to this law is that Congress usually accepts this argument at the exact point in time when it is no longer true.
  • This bailout is even more grotesque than a normal industrial bailout.  GM can be said to have honestly tried to make the right cars, and just failed.  I don't like bailing them out, because I don't particularly like diverting capital into the hands of organizations that are proven failures at using capital well.  But the financial investors that we are bailing out today knew they were taking a lot of risk by purchasing risky securities and then leveraging them up on their balance sheets.  They lived high for years off of the fat returns for taking this risk, arrogantly explaining that they made lots of money because they were smarter than everyone else and because they were being rewarded for taking on risk.  But then they come running to the government when the returns on their risky securities turned south, which just makes me sick.  They were paid for taking this risk, so take it.  I am sorry that you have no cushion because all those earlier returns are already spent on Maserati's for your mistresses, but that is what chapter 7 is for.
  • As many as 300,000 small businesses go bankrupt every year (this number is very, very hard to pin down, as it is hard to separate personal from business bankruptcy with small business).  Something like 299,998 of them do not get bailed out by the feds.  Why do the other 2 get special treatment vs. other US taxpayers?  Because they are better at lobbying Washington that they are essential?
  • Yes, the government created the Alt-A and sub-prime mortgage markets,and caused them to flourish via Fannie and Freddie aggressively asking for and buying these loans.  And the feds, via tax policy, and local governments, via zoning, helped pump up the housing bubble.  But nothing forced private companies, particularly highly leveraged institutions like banks, to load up their balance sheets with these things, or, crazily, to write insurance policies on their value.  Libertarians want to use these government interventions as an excuse for the bailout, but it doesn't wash. I do think many banks reasonably have lawsuit material against ratings agencies Moodys and S&P, which is fine.  I think new blood in that business would be a very good thing.
  • The total market capitalization of traded equities of public corporations on NYSE and NASDAQ is between $15 and $20 trillion.  That means that the first $150 billion of the bailout is equivalent to about a 1% price move on the exchanges, something that occurs almost every day.  Have we really close-coupled everything so tightly that a cumulative balance sheet hole on the order of magnitude of a 1% move on the stock market can bring down the whole financial system?  If so, we should just let the whole thing come down and rebuild itself in a more robust form.
  • Wall Streeters pat themselves on the back all the time for how creative they are financially.  So get creative here.  Create some sort of new entity and have banks contribute toxic mortgages into the entity in exchange for equity.  Find some pension funds to invest in the new entity at a deep discount.
  • These banks, who are experts in this stuff, claim they cannot value these failing, complex, illiquid mortgage packages.  OK, that may be true.  But how is the government possibly going to do any better?  Such a situation cannot possibly end well for the taxpayers. 
  • I saw folks writing in fear last week that the commercial paper market might dry up.  The commercial paper market dries up all the time.  It comes back eventually.  People treat lending markets like they are charities or something, and they fear that lenders will give up and never come back.  But they are not charities.  They serve just as much of a purpose for lenders and for borrowers.  Businesses and folks with capital need to make money on short term cash.  They are not going to stop lending forever.  Even capital markets dry up from time to time.  The IPO market has disappeared several times, including several years in the post-Internet-bubble period. The junk bond market comes and goes.
  • What is the government really worried about?  I presume that they are worried that liquidity will dry up and the ability of main street businesses to borrow will be impaired.  OK, then save the freaking $700 billion and if main street starts to have trouble borrowing, have the government participate somehow in that lending market.  Buy corporate bond issues, and/or increase the limit on SBA loan guarantees by a $100 billion  (this latter would allow a million new $100,000 SBA loans, and would actually generate money now in guarantee fees and only potentially cost money much later if the loans fail).  This way, we are investing liquidity in successful companies trying to grow rather than in failing banks that got us all into this.  Let's invest in success rather than in failure.

Posted on September 29, 2008 at 09:07 AM | Permalink | Comments (1)

How Much Authority Are We Proposing to Give the Treasury?

Much has been made of the bailout legislation provision that the administration would be immune to any scrutiny of any sort for any decision made vis a vis the $700 billion in bailout funds and the resulting spending decisions.  But I thought this was equally telling of the over-broad power grab that is going on at Treasury:

The SHR [senior House Republican] calls this an insurance program and the original Paulson plan a purchase program. He says Treasury Department people have told him that they considered an insurance program but decided that a purchase program would be better. But he also added that in the draft legislation Paulson has advanced, the Treasury would have the authority to set up such an insurance plan without congressional authorization. From what he said, it struck me that both courses could be followed. After all, neither purchases nor insurance is contemplated to take place unless and until a financial institution comes forward and requests one or the other.

Jeez, how much latitude are they asking for?  Is the bill really so broad that the secretary of the treasury could set up an entirely new government insurance program for financial assets without further Congressional approval?

While I think Cantor is being overly-optimistic about the near-term cash flow of his insurance proposal, it does seem to be at least an incremental improvement over Paulson's plan.

Posted on September 26, 2008 at 09:34 AM | Permalink | Comments (0)

Couldn't The Taxpayer Make Money From the Bailout?

So, apparently the US government is going to authorize up to $700 billion taxpayer dollars to purchase distressed financial assets.  I had an email today that said, to paraphrase, couldn't the government make money off these assets if they buy them for the right price?

My first thought was that this was theoretically possible, though my internal cynic found it unlikely in a pricing game run by elected officials between the taxpayer and powerful Wall Street interests that taxpayers would get the upper hand.

But then I realized there was no possible way this will end well for taxpayers.  Because the government cannot exercise discretion in day to day financial decisions.  It establishes rules and benchmarks and the typical bureaucrat is punished far worse for violating these processes and rules than he/she ever is for reaching a bad result.  So the government will establish rules and benchmarks for what price at which they will buy assets (this will be all the more true given the great rush everyone seems to be in).  And having set this in place, do you know what assets will be put to them?  All the ones that the current holders think are worth less than the benchmark.  This is the winners curse on steroids.

Update from Megan McArdle:

there's a gigantic asymmetrical information problem:  the owners of these securities know much more about them than the Fed.  And there isn't (obviously) a large liquid market for the Fed to check against. So the Fed is likely to overpay, because there won't be a lot of bidders in any one auction.

Megan, of course, reluctantly supports the bailout where I do not.  But she has her eyes open about what she is buying into. 

Posted on September 25, 2008 at 04:46 PM | Permalink | Comments (12)

Think Again

Been smugly thinking that you were smart enough not to take out an interest only mortgage to finance a house at the peak of the market?  Or savvy enough not to invest your savings in a mortgage portfolio or some sort of interest rate swap?

Sorry, think again.  Because GWB and the US Congress have decided to force you to be an investor in crappy, devalued investments.  To the tune of at least $700 billion.

Four years ago, privatization of Social Security was scuttled in large part because Congress thought it unfair to toss the average taxpayer into the volatile marketplace with his/her retirement savings.  Now, the government is forcing us all to participate in the financial markets, but only allowing us to invest in the worst assets.  Just great.

Posted on September 25, 2008 at 01:35 PM | Permalink | Comments (0)

The Ultimate Lottery Ticket

A government job can be a great deal.  Likely it pays more than a comparable private job, it's generally impossible to get fired from, and it has outrageously good medical and pension plans.  And, if you don't shy away from a bit of perjury, can be made to pay off spectacularly:

During the workweek, it is not uncommon to find retired L.I.R.R. [Long Island Railroad] employees, sometimes dozens of them, golfing there. A few even walk the course. Yet this is not your typical retiree outing.

These golfers are considered disabled. At an age when most people still work, they get a pension and tens of thousands of dollars in annual disability payments — a sum roughly equal to the base salary of their old jobs. Even the golf is free, courtesy of New York State taxpayers.

With  incentives like these, occupational disabilities at the L.I.R.R. have become a full-blown epidemic.

Virtually every career employee — as many as 97 percent in one recent year — applies for and gets disability payments soon after retirement, a computer analysis of federal records by The New York Times has found. Since 2000, those records show, about a quarter of a billion dollars in federal disability money has gone to former L.I.R.R. employees, including about 2,000 who retired during that time.

97 percent?  Wow!  And just to demonstrate that year was not some kind of outlier:

In each year since 2000, between 93 percent and 97 percent of employees over 50 who retired with 20 years of service also received disability payments.

The article goes on to demonstrate that this is occurring at what appears, from the injury statistics, to be one of the safest railroads in the area.  Say what you will about the NY Times, but when they get their teeth into local corruption they can still do a masterful job, as evidenced by this long article discussing many apparently ridiculous payroll situations at the LIRR.

I can say from experience that there is a group of people in this country for whom getting a lifetime disability payment (e.g. from the Social Security Administration) is as good as hitting the lottery.  I remember one time I got a survey form from the SSA asking about a former employee.  I didn't pay much attention to the form's purpose as I filled it out -- I get all kinds of such government wastepaper with breathless admonishments about the urgency of my reply.  Anyway, about 2 weeks later I got a very threatening letter from the attorney for this former employee, threatening me with all kinds of dire consequences if I did not immediately retract my (honest) answers to the SSA inquiry.  Apparently, I was endangering a lifetime disability determination that this person had been working on obtaining for years. 

Every day, in fact, I get job applicants who try to cut deals with me of one sort or another (e.g. can you pay me under the table in cash?) because they say they are fully able to do outdoor maintenance work but they can't show any income because it might endanger their lifetime disability payments.  In a similar vein, I have three cases I know of in my company today where workers filed workman's compensation claims of injury several days after they were terminated.

I've said it before, but the reckoning is coming on state and local government pensions, which in most cases are unfunded, undisclosed liabilities of startling magnitude.  The disaster that is fast approaching in these state and local government finances will make Social Security's problems look pitiful by comparison.

Postscript:
  Railroad labor law is just weird and a total mess.  Being the first major industry, and the first major industry that was regulated, a whole regulatory structure was put in place for railroads that (fortunately) has been applied to few other industries.  Whatever the problems we have with state workman's comp programs, they are models of governance compared to how things work in the railroad industry.

For example, I remember when I worked for a railroad in the 1990's, carpel tunnel claims were common.  By the nature of the comp system, workers got cash payments for injuries in addition to medical treatment (I recall a figure at the time of $7500 per wrist for carpel tunnel, but that may be off).  It was a common piece of advice among railroad workers that if one wanted to get the money together for a down-payment on a new pickup truck, one only had to go to Dr. X or Y and get a carpel tunnel diagnosis.

Posted on September 22, 2008 at 02:40 PM | Permalink | Comments (8)

Blogging on the Bailout

I would blog on the most recent bank bailout, but I don't really understand what the proposal is.  The administration apparently wants to take $700 billion and ... do something with it.  Frankly, I would prefer them to just let the banks totter over and spend the money, if they really feel it necessary, to clean debris up afterward, as they did with the RTC in the 1980s.   At least that way we would avoid the moral hazard and know the money was going to cleaning up the worst messes.  My guess is that $700 billion pseudo-randomly injected into whatever companies can cry the loudest at the treasury's door is not only creating bad incentives, but is probably going to waste at least half of the money.

Posted on September 22, 2008 at 05:33 AM | Permalink | Comments (17)

No Surprise To Anyone Who Is a Fan of "The Wire"

One of the recurring themes in HBO's fabulous series "the Wire" was how well-intentioned government officials could be led astray by perverse incentives, and, tied to this, the overwhelming pressure that can build up in government to fix the metrics rather than the problem.

In Charleston, they apparently thought they had a real public school success story on their hands:

Sanders-Clyde is a school in downtown Charleston that serves some of the poorest students in the county. Most of its children come from the nearby homeless shelter or public housing apartments. Its test scores once were the worst in the county, and its future was so bleak that the county board planned to close it.

Then MiShawna Moore became the school's principal in 2003. She tailored lessons for students, helped their parents pay bills, washed students' clothes and opened the school building on weekends. The school's test scores began to rise.

By 2007, the school outscored state and district averages, far exceeding the progress of schools with students from similar backgrounds. Educators hailed Moore as a model for other principals, the community showered her school with praise, and federal and state awards went to the school in recognition of its achievement. Moore was so successful that she was asked to lead a second downtown school, Fraser Elementary, to duplicate her accomplishments.

But suddenly, the bottom dropped out:

This year, the school's PACT results fell sharply in every subject and at every grade level.

So what changed?  The curriculum?  The students?  No, what changed was who was in charge of compiling the scores.  For the first time, they took the measurement process out of the hands of the person being rewarded for the measure:

This was the first time that the school district monitored the school's testing. District officials took tests away from the school each night and put monitors in classrooms daily. Janet Rose, the district's executive director of assessment and accountability, told The Post and Courier in May that the extra scrutiny would validate the school's scores.

Oops.  It seems the former high-flying principal suddenly needs to spend more time with her family

A few weeks after the tests this spring, in a move that surprised parents and officials, Moore announced that she was leaving Charleston County.

Hat tip to Andrew Coulson

Posted on September 12, 2008 at 03:19 PM | Permalink | Comments (3)

Now I Understand - Obama Means Five Million New Government Jobs

I have not been able to figure out how Obama gets to a 5 million job creation number from his alternative energy plans.  As I pointed out,

OK, so the total employment of all these industries that might be related to an alternate energy effort is about 2.28 million.  So, to add 5 million incremental jobs would require tripling the size of the utility industry, tripling the size of the utility construction and equipment industry, tripling the size of the auto industry, tripling the size of the aircraft industry, and tripling the size of the shipbuilding industry.  And even then we would be a bit short of Obama's number.

But now I think I am starting to understand.  Tom Nelson gave me the clue with this article from the town of Frankfort, Kentucky:

Commissioners again discussed the possible creation of a sustainability coordinator position for the city.

Andy MacDonald, of the Mayor's Task Force on Energy Efficiency and Climate Change, told commissioners that the creation of the position is "the next critical step" to reduce the city's environmental footprint.

Commissioner Doug Howard brought up the possibility of asking the city's recycling coordinator to fulfill part of the proposed position's duties until money is available.

OK, so we need both a recycling coordinator and a sustainability coordinator for a town of 27,741 people (2000 census).  At this rate, that would imply nearly 22,000 government jobs across the country just in the government recylcing and sustainablity coordination field.  Now I am starting to understand.  Obama means five million new government jobs.

Posted on September 9, 2008 at 10:47 AM | Permalink | Comments (2)

Crowding Out Private Alternatives

Due to the very nature of political pressures as well as poor accounting, a lot of government services are provided to the public below their true cost or market clearing price  (there are exceptions, like intra-city mail, but in these cases the government must pass laws to prevent private competition in order to maintain its market share).  When the government provides these below-cost or below-market-price services, it tends to crowd out private options.  So I am wondering why Kevin Drum is so surprised:

I guess rescuing them was the right thing to do. I'm still a little taken aback by the apparent fact that American banks are now almost flatly unwilling to make mortgage loans unless they're backed by Fannie or Freddie, but that seems to be the case whether it takes me aback or not. So rescue them we must. I suppose my next question is whether it's worth thinking about how to restructure the American home mortgage industry so that it can operate efficiently even in the absence of massive levels of government backup. Or is Fannie/Freddie style backup just the way the world works these days and there's no point fussing over it?

As evidenced by the current bailout (and their huge accretion in market share over the last several years), Fannie and Freddie were under-pricing the service they were providing.  So of course, all things equal, bankers will demand the Fannie/Freddie backing because that will be a more profitable product and will be less work for the banker.  This seems like a "duh" kind of thing.  Like the "mystery" of why in Massachussetts, while everyone is obligated to sign up for health insurance, only the ones who were eligeable for free coverage did so.

I have written before of a similar phenomenon in business loans, where loans with SBA backing have crowded out everything else out there, such that a small business really can't find a lender who will make small business loans except with SBA backing.  Bankers are people too, and they can get lazy.  They have come to rely on these government programs, but certainly the lending function would still exist in a robust form if these programs did not exist.  Bankers would have to find other risk-mitigation tools, or else the loans would be more expensive, reflecting that the banks could not get rid of all the risk and had to price that into the loan.

By the way, don't you love the technocratic hubris of "thinking about how to restructure the American home mortgage industry so that it can operate efficiently even in the absence of massive levels of government backup."  Why do I, or Drum, or anyone outside of banking have to think about this at all?  I don't personally know the best private alternative to government mortgage gaurantees.  So what?  The financial field has been rife with innovation over the last several decades.  Just remove the government backup and let the the banks figure it out.  And let them go bankrupt when they figure wrong.

Postscript: As an ironic aside, the bank that holds my SBA loans was closed by the FDIC last week, my guess is due to a bad mortgage book in the Las Vegas area.  This doesn't have a lot of impact on me except that as I have paid down my loans, they became wildly overcollateralized, and I was in the process of trying to renegotiate some of my collateral out of the deal.  That will have to be put on hold, I guess.

Update:  More on government crowding out private options, in an entirely different industry:

Basic dental care in Britain is free to those under 16 or over 60, the unemployed, students, military veterans and some low-income families. For others, government dentists offer lower prices than private practitioners.

However, the government does not cover cosmetic dentistry, and a recent reorganization of the way dentists work has prompted many to leave the public sector. Katherine Murphy, a spokeswoman for The Patients Association, an advocacy group, said it was proving increasingly difficult for Britons to get anything beyond basic dental care from Britain's National Health Service.

Update #2: More on Fannie and Freddie, again via Rick Perry:

The Fannie Mae-Freddie Mac crisis may have been the most avoidable financial crisis in history. Economists have long complained that the risks posed by the government-sponsored enterprises were large relative to any social benefits.

We now realize that the overall policy of promoting home ownership was carried to excess. Even taking as given the goal of expanding home ownership, the public policy case for subsidizing mortgage finance was weak. The case for using the GSEs as a vehicle to subsidize mortgage finance was weaker still. The GSE structure serves to privatize profits and socialize losses. And even if one thought that home ownership was worth encouraging, mortgage debt was worth subsidizing, and the GSE structure was viable, allowing the GSEs to assume a dominant role in mortgage finance was a mistake. The larger they grew, the more precarious our financial markets became.

Posted on September 9, 2008 at 09:01 AM | Permalink | Comments (7)

Good Money After Bad

If the world's citizens will not freely lend the Big Three automakers money of their own free will, then Congress is considering using force to make it happen.

Auto industry allies hope to secure up to $50 billion in federal t loans this month to modernize plants and help struggling car makers build more fuel-efficient vehicles.

Congress returns this coming week from its summer break, and the auto industry plans an aggressive lobbying campaign for the low-interest loans.

I wrote earlier on why we should not be afraid to let GM fail.  Paul Ingrassia makes this point:

Any low-interest loans to develop fuel-efficient cars should be made available to all car companies, not just the Detroit Three. The law passed by Congress last year is framed to make this highly unlikely. But if developing fuel-efficient and alternative-energy cars is deemed worthy of taxpayer subsidies for public-policy purposes, it's just common sense not to put all our eggs in Detroit's basket.

I would have gone further and said that US automakers are perhaps the last one's one would entrust with limited capital resources to develop such a new technology.  What would have happened to the PC revolution had the government circa 1975 limited all the available investment capital for new computing technologies to IBM, DEC, Honeywell, etc.

Posted on September 8, 2008 at 08:29 AM | Permalink | Comments (6)

When Government Tries to Pick Winners

Folks like Barrack Obama have decided that wind power is the answer.  They haven't studied the numbers or really done much to investigate the technology, and god forbid that they have put any of their own money into it or run a company trying to make thoughtful investment decisions.  But he's just sure that such alternative energy technologies work and make sense because, uh, he wants them to.

But when government picks winners, disaster almost always follows.  Oh, sure, the programs themselves get a lot of positive attention in the press, and people are happy to line up to accept subsidies and tax rebates.  But the result is often this:  (ht: Tom Nelson)

According to the Massachusetts Technology Collaborative, the agency that oversees the state’s major alternative energy rebate programs, the small wind initiative was canceled because the turbines it has funded are producing far less energy than originally estimated.

An MTC-sponsored study released earlier this summer found that the average energy production of 19 small turbines reviewed was only 27 percent of what the installers had projected. The actual production for the 19 turbines, which received nearly $600,000 in public funding, ranged between 2 and 59 percent of the estimates.

A $75,663 turbine at Falmouth Academy that received $47,500 in state money, for example, has produced only 17 percent of the projected energy in the year since its installation. Another, smaller device in Bourne is producing only 15 percent of the originally estimated energy.

So the state government funds 2/3 of the project and the project still doesn't make sense

Mr. Storrs criticized the state for dropping the rebate program, which over two years has covered upward of half the cost of several turbines on Cape Cod and dozens of others throughout the state, saying, “It is not what you would hope a progressive [state] like Massachusetts would cancel. You would hope that they are supporting alternative sources of energy.”

Actually, he is correct.  Sinking hundreds of thousands of dollars into faulty technology for terrible returns based solely on the fact that a certain technology is somehow politically correct is exactly what I too would expect of a progressive state like Massachusetts.

The state board complains that the technology choices and siting decisions were wrong.  Well, who would have imagined that investors in certain projects would be lax in their engineering and due diligence when the government was paying 2/3 of the freight, and when the main reason for the projects was likely PR rather than real returns?

If the bit about PR and political correctness seems exaggerated to you, check this out:

During the hearing on the proposal two months ago Mr. Storrs told the planning board that the project was meant in part to help educate the public about wind energy. Town Planner F. Thomas Fudala said it would be informative to see whether the roof-mounted ones actually work. “Even if this fails, it will be useful information,” he said.

Mr. Storrs responded, “I know that sounds weird, Tom, but you are absolutely right.”

Wow, I bet this kind of investment decision-making really give the local taxpayers a big warm fuzzy feeling.  By the way, this article also includes an example of why Al Gore and others proposing 10-year crash programs to change out the entire US power infrastructure are impossibly unrealistic, even forgetting about the cost:

Mr. Storrs said he first ordered the Swift brand turbines last year as part of a bulk order along with the Christy’s gas station in West Yarmouth.

But the planning board had already adopted its new turbine regulation, which, in part on the advice on Ms. Amsler, had prohibited the roof-mounted machines.

“The town was just trying to be responsible in terms of looking out for its residents, trying to make sure these things are not going to pop up everywhere if they aren’t going to work,” said Thomas Mayo, the town’s alternative energy specialist.

At Mr. Storrs request, however, the planning board then went back and reconsidered its regulation. After a public hearing featuring testimony from Ms. Amsler as well as from a representative of Community Wind Power who argued that the Swift turbines work well and as advertised, the planning board decided to change the bylaw and allow Mashpee Commons to move forward with its project.

The Mashpee bylaw requires a return on investment plan, a maintenance plan, as well as proof that the proposal meets several safety and aesthetic prerequisites.

Town Meeting adopted the new bylaw in May, Mashpee Commons quickly filed its application, and received a special permit in early June. During the comment period for the special permit, the state program was suspended.

After receiving the special permit, Mr. Storrs said he applied for Federal Aviation Administration approval, which is required for any structure over three stories in town. More than two months later, he said he is still awaiting that approval.

Mr. Mayo said the town’s application for FAA approval of a site under consideration for a large municipal turbine took six months to approve.

Posted on September 2, 2008 at 12:03 PM | Permalink | Comments (5)

The Modern China. Really. We Swear.

Rick Reilly of ESPN  (what a travesty that he is not the last page of SI any more -- I can hardly pick the rag up any more) has an article on many of the shams pulled off by the Chinese with NBC's help what an auspicious example of Chinese solidarity were these Olympic games.

Posted on August 25, 2008 at 08:12 PM | Permalink | Comments (0)

Great Moments In Government Spending: The Station to Nowhere

Mayor Daley of Chicago has a great idea:  despite already having rail transit service between O'Hare Airport and Downtown, he wants to build a new non-stop express rail line to save travelers about 9 minutes.  After all, if Moscow just did this, it must be a good idea.

OK, this is dumb enough.  But what is really amazing is that Chicago embarked on building a $320 million downtown station for the project without even a plan for the rest of the line -- no design, no route, no land acquisition, no appropriation, no cost estimate, nothing.  There are currently tracks running near the station to the airport, but there are no passing sidings on these tracks, making it impossible for express and local trains to share the same track.  The express service idea would either require an extensive rebuilding of the entire current line using signaling and switching technologies that may not (according to Daley himself) even exist, or it requires an entirely new line cut through some of the densest urban environments in the country.  Even this critical decision on basic approach was not made before they started construction on the station, and in fact still has not been made.

Though the article does not mention it, this strikes me as a typical commuter rail strategy -- make some kind of toe-in-the-water investment on a less-than-critical-mass part of the system, and then use that as leverage with voters to approve funding so that the original investment will not be orphaned.  Its a kind of blackmail that both makes me sick, and is necessary for these systems as voters would never ever approve the kind of money that would be required to build the whole project  (If this express line requires $320 million just for one station on one end of the line, can you imagine the total cost?  $10 billion? for 9 minutes time savings).

Posted on August 21, 2008 at 08:47 AM | Permalink | Comments (15)

More Great Moments in Government Spending

Apparently, 3-1/2 miles of new border wall near San Diego will cost at least $57 million, or $16.3 million a mile (or a bit over $3000 per foot).  For comparison, the 350 mile long Maginot line cost France about $150 million in the 1930s, or about $2.3 Billion in today's dollars.  This puts the cost of the Maginot line, underground tunnels, bunkers, gun emplacements, and all, at $6.5 million current dollars per mile.  Of course, the Maginot line was not built as a continuous wall to catch individual infiltrators, but on the other hand the San Diego wall is (presumably) not being built  30 kilometers deep with layered emplacements to handle massed tank and artillery attacks.

It could be worse for taxpayers - they could be laying railroad track instead of building a wall, since that costs about $96 million per mile here in Phoenix.

I can't wait for those huge administration cost savings that are promised from nationalizing health care.

Update: I just thought of one other comparison- like the Maginot line, at least one end of this San Diego wall hangs in the air, meaning it just ends hundreds of miles before the border does, allowing it to be easily flanked.

Posted on August 18, 2008 at 04:38 PM | Permalink | Comments (17)

A Senior Moment

Via TJIC:

http://www.boston.com/news/nation/articl…

If you’re a senior citizen and make less than $50,000 a year, Barack Obama has a deal for you: the rest of your life free of federal income tax.

Sounds appealing, right?

If we look at two people, each making $49,999, which one should get a sizeable government subsidy?

Why, the one who’s already living off of welfare, and has taxpayer supplied healthcare, subsidized transportation, “senior centers”, discounted meals at restaurants, etc., of course!

Posted on August 12, 2008 at 08:23 AM | Permalink | Comments (8)

Buying Dollars for $45.50 each

Our light rail cheerleader in chief, the Arizona Republic, laments that if Proposition 203 does not make it to the ballot this November, "light rail [in Phoenix & Maricopa County] will lose a chance to win hundreds of millions of dollars for the system's expansion".

Well, let's think about that.  The proposition would raise $42.6 billion statewide through a 1% point increase in the state sales tax rate.  But here's the rub:  Phoenix and Maricopa County constitute a huge part of the state's population, and presumably, retail spending.  In fact, checking the most recent Arizona state tax facts (for May, 2008), we find that Maricopa County pays about 64% of the state sales tax.  That means that approximately $27.3 Billion of that $42.6 billion in new taxes will be paid right here in the Phoenix metropolitan area. 

Good grief.  So, with a tax increase of $27.3 billion in Phoenix, we can get $0.6 billion back from the state for our light rail boondoggle.  Gee, thanks.  That hardly sounds like my definition of "winning" money.

By the way, this was hilarious:

Ziemba believes that Proposition 203 would have an "extremely significant" impact on light rail expansion if it becomes law.

"This would be the funding to really take our light rail system to the next level, to expand it to more roots, to connect it to more of the county," he said. "It will provide the resources to connect the light rail system in a meaningful way throughout Maricopa County."

Why is that so funny?  Well, because the next $306 million in light rail spending is expected to get us 3.2 whole miles of track.  So at this rate, this $27.3 billion tax increase would net us $600 million which would, before inevitable cost overruns, get us at most 6.5 miles of track.  Wow, that sure sounds meaninful to me.

Posted on August 11, 2008 at 07:53 PM | Permalink | Comments (5)

Let's Make Sure To Put These Guys In Charge of Health Care

I suspect many of my readers also read Megan McArdle, but in case you missed her story, its pretty funny (as long as you are not the person experiencing it):

While consuming my one (1) beer, I was apprehended by agents of the Pennsylvania Liquor Control Board.  They called my parents, fined me, and made me attend a class on the horrors of underaged drinking (did you realize that drinking can lead to uncontrollable vomiting?)  It was during that class, with the errors of my ways now readily apparent, that I made a pledge to myself to quit underaged drinking with all due speed.  And on January 29th, 1994, I honored that pledge....

The problem, you see, is that at the time of my conviction, I did not have a Commonwealth of Pennsylvania Driver's License.  Indeed, I had no driver's license at all, being one of those benighted city people who get their first driver's license at the age of 23.  The laws of the State of Pennsylvania, however, say that the Department of Transportation is entitled to suspend the driver's license of anyone arrested for underaged drinking.  And the Commonwealth of Pennsylvania Department of Transportation is, apparently, determined to exercise this privilege.  Thus, the spectacle of a 35 year old woman being informed that she is about to have her driver's license suspended for underaged drinking.

To add insult to injury, I am expected to fill out a form and, at my own expense, mail it to the DOT in order to commence this suspension.

This would be funny and mildly annoying if it were not for the fact that until they clear the suspension, I cannot get a DC driver's license, because states are required to scan for violations from other states before they issue a new license.  (No word on how I got one out of the State of New York). And until I get a DC driver's license, I cannot register the car I just bought.  The DMV here, after much wrangling, gave me temporary tags, but it looks like I'm going to have to garage the thing for three months unless the Commonwealth of Pennsylvania relents.  Which, at this time, they show no evidence of doing.

Posted on August 11, 2008 at 10:53 AM | Permalink | Comments (7)

The Fannie and Freddie Fiasco

Sloppy thinkers often confuse support for free-market capitalism with "doing what big business wants."  In fact, the two are often entirely different, as large well-connected companies often thrive through the very fact of government regulation, using the government to step on competitors and create rent-seeking opportunities, while in turn rewarding politicians out of their profits with electoral support.

The Fannie Mae / Freddie Mac fiasco is turning out to be a prime example of such crony capitalism in operation.  These two quasi-private companies enjoyed many special perks (from huge tax breaks to an implicit government guarantee), enriching both themselves and a circle of Wall Street banks while protecting themselves from criticism by waving the "we're helping the little guy" banner.  Leftish Congressmen ranged from platitude spouting dupes to willing participants in the fraud, and helped enable the whole mess.

Paul Gigot, a long-time critic and whistle-blower of Fannie and Freddie has a great, long editorial on these companies and their Congressional enablers.  If the WSJ article is gated, Volokh has a long excerpt.

Posted on July 23, 2008 at 12:40 AM | Permalink | Comments (4)

Massive Campaign to Bring Back Indentured Servitude

On several occasions I have have lamented the declining standard of activism:

Activist:  A person who believes so strongly that a problem needs to be remedied that she dedicates substantial time to ... getting other people to fix the problem.   It used to be that activists sought voluntary help for their pet problem, and thus retained some semblance of honor.  However, our self-styled elite became frustrated at some point in the past that despite their Ivy League masters degrees in sociology, other people did not seem to respect their ideas nor were they particularly interested in the activist's pet issues.  So activists sought out the double shortcut of spending their time not solving the problem themselves, and not convincing other people to help, but convincing the government it should compel others to fix the supposed problem.  This fascism of good intentions usually consists of government taking money from the populace to throw at the activist's issue, but can also take the form of government-compelled labor and/or government limitations on choice.

It seems that there is a surprisingly large coalition ready to take this to its logical extreme:  A group called Service Nation is set to spend a ton of money lobbying the government to create a program to force every young person into servitude by 2020.

Not satisfied with taking 20-40% of our income to spend as they see fit, the government hopes also to be able to order around the labor of millions of young adults.   I feel like I am reading some bizarre historical re-enactment of the Soviet or Chinese youth programs.  This whole program, which I am tentatively going to label "happy face fascism," makes me so sick I can't even address it further tonight.  More later.

PS:  This is, not coincidentally, exactly the idea Obama has been pushing (here and here).  I say not coincidentally, because this is how one skirts stupid campaign finance laws - you get your supporters to take your top campaign planks and run with them as "independent" efforts that are not subject to campaign finance restrictions.

PPS: Just to head off an argument that came up last time in the comments, I have been a consistent opponent of the military draft as well.

Update:  I know the allusion is over-used, but we are in 1984-land when people keep using the term "voluntary universal national service" as do the leaders of this effort.  By universal, they mean that everyone has to do it.  So they are calling for "national service that everyone is required by law to perform but is voluntary." I do not think that word means what you think it means.

The solution is to develop a system of voluntary universal national service for our country and for the world. To call upon all young adults to take at least one year to learn the hard and rugged skills of practicing idealism.

Yes, lets teach them the "hard and rugged skills" of being forced to do labor that no one is willing to pay for voluntarily, so must be performed by slaves instead.

Another thought:  TJIC made a relevant observation to this the other day:

I’m seeing more and more grudging praise for the efficiency of the Chinese dictatorship these days.

It tends to go something like this:

Sure, sure, they’re horrible, and democracy is better, but if they decide that they need to put in { more mass transit | a factory | a new canal | an Olympic village }, they just tell everyone in the village “move!”, and the job gets done.

I get the same impression.  Service Nation is the end result of such thinking.

Clarification:  Service Nation denies they support mandatory service, and have removed the word "universal" from their site.  However, it should be noted that many of the prominent supporters and board members of Service Nation have individually advocated for mandatory service.  Also, no denial that they are seeking to create a new, massive government beauracracy.

Posted on July 23, 2008 at 12:19 AM | Permalink | Comments (25)

Trough Leader

Holman Jenkins argues that despite the fact that GM's all-electric car the Volt will likely lose money on every sale, GM knows exactly what it is doing with this program.  The main customer, apparently, is not the end consumer, but the government.  GM is betting that an Obama, beholden in his new presidency to unions and environmentalists, will be open to a massive government subsidy of the US auto industry.  The Volt program may be part of a plan to buff up GM's attractiveness at the government trough:

GM executives are not nuts. They justify the costs and risks of the Volt as a way of changing GM's image in the minds of consumers and politicians. To commit a pun, the Volt is GM's vehicle for making a bailout of GM politically acceptable.

The company has already started signaling it expects Washington to provide a whopping $7,000 tax credit to Volt purchasers. In Europe and the U.S., under whatever fuel economy and emissions regulations prevail, GM also expects special favoritism for the Volt. The goal is to re-enact the flex-fuel hoax, in which GM receives extra credit for making cars that can burn 85% ethanol, even if they never see a drop of such fuel.

CEO Rick Wagoner last week laid out the case to Barack Obama personally for turning GM into a ward of the state, by way of direct and indirect subsidies to support a transition to "alternative" fuel vehicles. GM has done yeoman's work getting its structural costs (i.e., labor) in line, but shareholders should note that a big part of the company's turnaround gamble consists also of eliciting favor once again from Washington after a period in which the domestic auto makers were nothing but whipping boys on Capitol Hill.

Posted on July 3, 2008 at 09:17 AM | Permalink | Comments (5)

Having Your Trees and Eating Them Too

What I already knew, before today:  When the timber industry was booming, local governments made out well as Federal law gave them a cut of USFS and BLM timber sales dollars in their county.

What I already knew, before today:  Under environmental pressure, serious logging has virtually ended in the National Forest, particularly in northwestern states like Oregon. 

What I learned today:  For the last 15 years, despite the fact there have been no timber sales, the Feds are still paying local government as if there still were timber sales.  The payments last year were $238 million a year to Oregon counties alone.

And for some reason that nobody seems to be able to understand, the local economies have not adjusted structurally to the new economic reality.  I wonder why?

Of the county's general fund, a full 67 percent -- about $12 million -- had come from the federal timber payments.

Finally, it looks like Congress may cut them off.  Good.  Because the only thing worse than killing an industry for suspect environmental reasons is continuing to pay that industry for not producing anything.

Posted on July 2, 2008 at 03:49 PM | Permalink | Comments (3)

Repairing Years of Protectionism

Often, government interventionism is like a wack-a-mole game, with one set of regulations that create unintended consequences that are the justification for more regulation, and so on.

On the bad-worse scale of government interventionism, this is probably one of the better ideas, the State of Florida's buyout of US Sugars cane growing operations around the Everglades  (via bird dog).

Not mentioned anywhere in the article is the fact that sugar-cane production in the US likely would not even exist at all were it not for the substantial import quotas and tariffs placed on foreign sugar.  The US government has had a policy of propping up US Sugar via enforced higher prices.  So after years of the government in effect paying US Sugar to grow cane around the Everglades, the Florida government is now paying it not to.

Posted on June 28, 2008 at 01:42 PM | Permalink | Comments (9)

Who the Hell Cares?

Apparently another interest group is claiming that Arizona is "missing out" on jobs in some critical growth industry, and therefore (wait for it) that industry must be subsidized to come to Arizona.

Arizona is getting its "clock cleaned" in the competition among Western states to land solar-panel manufacturing companies within their borders, according to the economic-development group that is losing the fight.

At least nine companies that make solar equipment have passed up the Valley of the Sun in the last year in favor of neighboring states, according to the Greater Phoenix Economic Council.

From those nine projects alone, Arizona is missing out on more than 3,800 jobs, $2.3 billion in investment and $732 million in state and local revenues during the next decade, GPEC President and CEO Barry Broome said.

I am too tired to do my usual fact-checking on "incremental" state revenue numbers, but suffice it to say that $732 million in state and local tax revenues is a pipe dream.  There are three or four million people in Phoenix -- why is it we need the government to focus on someone employing 3,800 people?

The article's main "logic" is that our sunny climate should attract solar panel manufacturers.  Why?  I know they're customers may be here, but since most panels today come to Arizona from Japan or Germany, I don't think shipping costs are a big deal for panels.

The proposal is for a transferable income tax credit and property tax relief.  The author says the group is opposed to straight cash handouts, though.  Uh, OK.  And explain to me why a "transferable income tax credit" that the author says can be sold to other companies for cash is different than a cash handout?

I sometimes find it hard to identify the consistent element of what makes for a "desirable business"  (ie deserving of such subsidies) vs. one that is not so deserving.  The only consistent element I can find is that my business is always in the latter group, paying our taxes so that someone else's business and job can be subsidized.  It is for this reason that I generally barf when some group cries that they are not recieving equal proection (ala the 14th ammendment).  Take on tax and subsidy policy that takes from one group to fund another more politically connected group, and then talk to me about equal protection.

Postscript:  Here are the favored industries I can remember in the news of late in Arizona for getting special tax treatment:

Rock and Roll themed amusement park
Solar panel manufacturing
Neutriceutical production
New shopping mall parking lot
Spring training baseball parks

Readers are encouraged to add others in the comments.

Another Thought: I would dearly love to see a solar panel technology that can be rolled out of the factory cheaply in sheets like carpet out of Dalton, Georgia.  However, while I am increasingly convinced that someone is going to invent that technology soon, that technology will not be related to traditional silicon fabrication methods.  Therefore, nearly all of the plants that Arizona is desperately trying to subsidize to move here are likely using dead-end technologies, driven in part by bubble economics and subsidies that are not sustainable as the market grows (see ethanol).  Current silicon and germanium panels make no economic sense anywhere, and survive only due to massive (50% subsidies) and a desire to make a token green statement.

I am sure our local paper was cheerleading for ethanol plants in years past, and it is good we did not subsidize many here, because they are failing all over.  And I can't prove it, but I wouldn't be a bit surprised that one of the reasons our local semiconductor manufacturing operations have shrunk is because of this same effect, with subsidies attracting the least, not the most, viable enterprises.

Posted on June 22, 2008 at 11:29 PM | Permalink | Comments (12)

The Rail Transit Debacle

The Anti-Planner links an absolutely scathing article in the Miami Herald on the absolute disaster they have made of their mass transit system.  This is a great summary:

Miami is just one more example of the points the Antiplanner keeps making about rail transit:

1. Transit agencies might run excellent bus systems. But when they start building rail, they quickly get in over their heads by optimistic forecasts, unforeseen costs, and the sheer humongous expense of building dedicated transit lines.

2. Though all rail systems require periodic expensive maintenance, few transit agencies set aside any money for this because it is easier to spend the money now and let future managers worry about the future.

3. Though the rail systems are usually built to serve downtown white-collar workers, in the end it is the transit-dependent people who rely on buses who pay the cost.

4. There is only one thing rails can do that buses can’t do better, faster, and more flexibly, and that is spend a lot of your money.

I would like to observe one other thing at work in the Miami example that looks to be exactly what we are facing here in Phoenix in the next election.  Miami offered up a transit tax referendum for something like $800 million.  They promised a mix of highway improvements and rail.  In several cases, including the upcoming referendum in Phoenix, I have tried to warn people that the people who put these referendums together are rail-ophiles.  They have learned, however, that rail alone won't sell a bond issue or tax, so they throw in a bunch of highway improvement promises, which people really will pay for, as window dressing.  Often, however, these improvements never get done, as they are empty promises to sell the tax.  We see exactly this in Miami:

But five years and more than $800 million later, the county has spent more than half the new money on routine Transit operations and maintenance while adding 1,000 jobs to the payroll.

   There were initial achievements. The county added 11 million miles of bus service, gave free rides to seniors, and briefly experimented with 24-hour rail. It spent $40 million on hundreds of tiny public-works projects....

   For example, here is the cost estimate that was attached to the 44 road projects that county commissioners asked for: $0. The projects have since been estimated to cost $428.2 million.

   Nor was any money earmarked for an unspecified number of flyover intersections on the list of promised improvements. Such projects, which involve raising an existing road to pass over another, cost as much as $18 million apiece today. None have been built.

So this tax was sold in part as a highway improvement tax, but $0 was actually budgeted.  The highway piece was a lie to sell the tax.  Beware Phoenicians.

Posted on June 22, 2008 at 11:12 PM | Permalink | Comments (18)

I Warned You

Earlier, I predicted there was no way the Democrats would fulfill their promise to reign in the imperial presidency, since they hoped to have a President from their own party next term.  In practice, the party affiliation of the President seldom has much to do with their desire to increase executive power.  For example, while GWB and the Republicans rightly deserve a lot of blame for the worst parts of the Patriot Act, in fact most of that act was actually proposed by Bill Clinton circa 1995  (and, ironically, was defeated by Republicans led by John Ashcroft).  I am starting to believe that, like the expression there are no atheists in foxholes, we might equally well be able to say that there are no civil libertarians in the White House.

I told you so.  And here:

In the past 24 hours, specifically beginning with the moment Barack Obama announced that he now supports the Cheney/Rockefeller/Hoyer House bill, there have magically arisen -- in places where one would never have expected to find them -- all sorts of claims about why this FISA "compromise" isn't really so bad after all. People who spent the week railing against Steny Hoyer as an evil, craven enabler of the Bush administration -- or who spent the last several months identically railing against Jay Rockefeller -- suddenly changed their minds completely when Barack Obama announced that he would do the same thing as they did. What had been a vicious assault on our Constitution, and corrupt complicity to conceal Bush lawbreaking, magically and instantaneously transformed into a perfectly understandable position, even a shrewd and commendable decision, that we should not only accept, but be grateful for as undertaken by Obama for our Own Good.

Accompanying those claims are a whole array of factually false statements about the bill, deployed in service of defending Obama's indefensible -- and deeply unprincipled -- support for this "compromise."

Posted on June 22, 2008 at 11:02 PM | Permalink | Comments (3)

Those Short-Term, Quarterly Focused Corporations

Everyone has heard the knock on corporations -- they are supposedly short-term focused and incapable of making investments that don't pump up the current quarter.  We hear this in particular from government officials, right before they try to sell some egregious bit of pork-spending that is supposedly for "investment" in things these awful corporate guys won't invest in.

But of course the entire existence of the oil industry is proof-positive that this knock on large corporations can't be universally true, or else the oil industry would have gone out of business for lack of reserves some time in the late 19th century.  The oil industry routinely makes huge investments that take 10 years or more to even start to pay out (e.g. Alaska pipeline, shale oil, deep Gulf).  One major reason that supplies are currently tight is that most of the world's oil reserves are held by state companies (like Pemex) that are incapable of making the long-term investments their fields needs because there is so much pressure on the government to divert the oil profits into social programs rather than into renewing the reserve base.

And now look who is singing the same tune as Hugo Chavez and the other oil producing kleptocrats - Barrack Obama:

“Opening our coastlines to offshore drilling would take at least a decade to produce any oil at all, and the effect on gasoline prices would be negligible at best since America only has 3 percent of the world’s oil,” Obama said in a statement that did not explicitly distinguish between oil and gas drilling."

Of course, offshore drilling was approved 10 years ago, but was vetoed by Bill Clinton.  I don't believe for a second that this is his real reason for opposing drilling (in fact, I believe him to be in the pocket of radical environmentalists and perfectly happy to demagogue oil companies for high prices rather than take responsibility for past government action).  However, if we take him at his word, this is an absolutely unbelievable lack of long-term focus from a man people like to call "visionary."

Posted on June 22, 2008 at 10:56 PM | Permalink | Comments (5)

Where? In Freaking Eloy?

JD Tuccille has a roundup on the state boondoggle that won't die, the proposed 3/4 of a Billion dollar state subsidy for an amusement park. 

Now, this seems like an awful lot for an amusement park, particularly considering that the Arizona desert has been the death of many theme parks.  The reason is that no one wants to be outside for extended periods of time in June-Sept in the Phoenix or Tucson areas.  Because it is freaking hot.  The average daily forecasts is generally for 108-112F for these summer months.  But theme parks live and die in the summer, when kids are out of school.  Even though they have milder weather and a large population base at Magic Mountain in LA, they still only open for weekends and holidays during the non-summer months.  My guess, from running a similar seasonal business, Magic Mountain loses money most of the year and make 100%+ of their profit in the summer.

So spending $750 million of taxpayer money on a theme park in the Arizona heat would be a bad idea if located in Phoenix.  But what happens when we put it in Eloy, Arizona?  Eloy is just as hot, but is in the middle of nowhere, as shown below at the point of the "A" balloon.

Eloy

People will come here, from where?  Tucson folks in the summer will want to go someplace even hotter than Tucson?  Phoenix folks will want to drive 2 hours to spend their time in the hot sun, when the same distance north puts them in the cool mountains?  And here is beautiful downtown Eloy, brimming with wealth enough to repay over a billion dollars of principal and interest.

Eloy2_2

This project is absolutely guanteed to fail, leaving the bill with taxpayers.  I mean, seriously.  Never have I seen such a lock.  I wish there was a way to short this.

This is only the most eggregious of a laundry list of proposed government pork being pushed under the banner of "job creation" at a time when the state budget is over a billion dollars in deficit.

Posted on June 18, 2008 at 05:03 PM | Permalink | Comments (7)

Interesting Story on Housing and Crime

A reader sent me a link to what was a pretty interesting story on housing programs and crime in the most recent issue of the Atlantic.  In short, federal housing policy over the last 20-30 years has been to blow up central housing projects (fans of the Wire on HBO will have a good idea of this type of place) that tended to concentrate poverty in a few neighborhoods in favor of voucher programs that would spread the very poor around.  The idea was to get the poor into middle class neighborhoods, with the hope that middle class schools, support networks, and values might be infused in the poor.

Some now seem to be worried that exactly the opposite is happening.  As the article relates, city centers are being revitalized by sending the poor and associated criminal elements outwards.  But in turn, certain here-to-fore quiet suburbs are seeing crime spikes, and these crime waves seem to line up well with where the housing vouchers are being used.

A couple of thoughts:

  • [insert libertarian rant on government playing god with poor people's lives, drug prohibition, government schools, etc.]
  • The people of Houston would not be at all surprised by this, and might call it the Katrina effect.  It may well be that the dispersion of poor families will eventually result in reductions in total crime (say in the next generation or two), but hardened criminals of today don't stop being criminals just because they move to new neighborhoods -- certainly Houston has found this having inherited many criminals from New Orleans.
  • I still think that if we are going to give out subsidized housing, that this in the long-run is a better approach.  The authors of the article seem to fear that the poor, having been dispersed, lost their support networks.  But it strikes me that it was this same network that reinforced all the worst cultural aspects of the old projects, and long-term I think fewer new criminals and poorly motivated kids will exist in the next generation if we can break some of this critical mass up. 
  • The article is an interesting example of how new attitudes about race can get in the way of discussion as much as the old ones.  Stories about increasing crime in the suburbs after an influx of black poor is just too similar to the old integration fears held by whites in the 1960s and 1970s. 

Posted on June 16, 2008 at 09:26 AM | Permalink | Comments (5)

If You Can't Do the Time, Don't, uh, Put off Mowing?

Here in the west, one can be rewarded as an environmentalist for keeping one's home landscaping natural, rather than trying to create a golf-course-like lawn.  In Canton, Ohio, you may be going to jail (via a reader):

CANTON City Council has unanimously approved toughening the city's high-grass and weeds law, making it possible for repeat violators to get jail time.

Council passed the legislation Monday night by a vote of 12-0. The amended law will take effect in 30 days. ...

The revised law makes a second high-grass violation a fourth-degree misdemeanor, which carries a fine of up to $250 and up to 30 days in jail. Existing law makes the first violation a minor misdemeanor, with a fine of up to $150 but no jail time. Violators initially are mailed a notice and given five days to mow the grass. ...

City officials say they are targeting the most egregious violators of the high-grass law, which applies to grass and weeds higher than 8 inches.

Posted on June 13, 2008 at 10:42 AM | Permalink | Comments (7)

But We Can Run Healthcare

By now, this story has been linked all over, but it is still hilarious.  The folks who want to run the US healthcare system and the US energy industry have found that they are not competent enough to manage even the Senate cafeteria:

Year after year, decade upon decade, the U.S. Senate's network of restaurants has lost staggering amounts of money -- more than $18 million since 1993, according to one report, and an estimated $2 million this year alone, according to another.

The financial condition of the world's most exclusive dining hall and its affiliated Capitol Hill restaurants, cafeterias and coffee shops has become so dire that, without a $250,000 subsidy from taxpayers, the Senate won't make payroll next month....

In a masterful bit of understatement, Feinstein blamed "noticeably subpar" food and service. Foot traffic bears that out. Come lunchtime, many Senate staffers trudge across the Capitol and down into the basement cafeteria on the House side [where food service is provided privately]. On Wednesdays, the lines can be 30 or 40 people long.

This is not a new issue - it has been a festering sore that the Senate has been unable to manage for decades.  And we're talking about a single freaking cafeteria here.  More from Alex Tabarrok

Posted on June 10, 2008 at 07:27 PM | Permalink | Comments (0)

How Mussolini-Style Fascism Almost Came to the US

First, it was the National Recovery Act, where FDR explicitly tried to creat an economic system modelled on Mussolini-style fascism.  This was killed by the Supreme Court.  But the will of government to create an economic system where private companies win and lose based on how well connected they are to politicians never goes away.  The lastest attempt to set up such a managed system was via the Lieberman-Warner climate bill:

But perhaps even more pernicious is the way that “carbon credits” are distributed.

The credits are best described as a pulled-out-of-thin-air government-created fiat currency, that is accepted only by the government in exchange for the government’s permission to let you emit CO2. (If ever a system was perfectly set up to be abused and politicized by politicians, this is it.)

Government bureaucrats will decide sector by sector and industry by industry which companies get the credits. Implicitly, that same decision by government regulators also determines which companies will need to buy credits from the politically-connected companies who could get their carbon credits for free.

Posted on June 7, 2008 at 12:33 PM | Permalink | Comments (3)

They Knew Exactly What They Were Doing

OK, so this guy committed fraud:

In the hundreds of bills for which he has provided estimates to lawmakers since 2000, the actuary, Jonathan Schwartz, said legislation adjusting the pensions of public employees would have no cost, or limited cost, to the city.

But just 11 of the more than 50 bills vetted by Mr. Schwartz that have become law since 2000 will result in the $500 million in eventual costs, or more than $60 million annually, according to projections provided by Robert C. North Jr., the independent actuary of the city pension system, and by Mayor Michael R. Bloomberg’s office....

Mr. North and other city employees made the calculations on the 11 bills when they were before the Legislature, but for the other bills, no alternative to Mr. Schwartz’s projections could be found. The New York Times reported last month that in an arrangement that had not been publicly disclosed, Mr. Schwartz was being paid by labor unions. He acknowledged in an interview that he skewed his work to favor the public employees, calling his job “a step above voodoo.”

But really, did any of the legislators supporting these bills really think the costs were zero?  If the public employees union is asking for a pension change, you can be sure it is not to save the state money.  This does not let legislators off the hook for failing to exercises any common sense.

Posted on June 7, 2008 at 12:17 PM | Permalink | Comments (2)

Bankrupcy of the Modern Transit Model

The Anti-planner observes:

Over the past 25 years, the population of the Pittsburgh urban area has remained fixed at about 1.8 million people. Driving, however, has increased by almost 50 percent.

During this period, Pittsburgh has spent hundreds of millions of dollars upgrading light-rail lines, building exclusive busways, and — in the latest project — building a $435 million transit tunnel under the Allegheny River. Despite (or because of) this investment, transit ridership has dropped by more than 25 percent.

Although the numbers vary slightly from place to place, Pittsburgh’s story is pretty typical of transit everywhere. Sure, some cities have seen ridership gains, but subsidies to transit are huge and transit does not make a notable (meaning 5 percent or more) contribution to personal mobility in any urban area except New York (where it is 10 percent).

He has a good summary of what's wrong and what might work instead.  I appreciated this observation in particular:

Why do we put up with this? The answer, of course, is that transit is pork. “For most transit agencies in the United States, if they were to write a mission statement that is reflective of what they do, they would indicate that they exist for the purpose of serving their employees and vendors,” not transit riders, notes Cox.

Posted on June 7, 2008 at 11:35 AM | Permalink | Comments (6)

Congressmen Make Themselves Outlaws

From recent legislation:

“It shall be illegal and a violation of this Act,” declared the House of Representatives, “to limit the production or distribution of oil, natural gas, or any other petroleum product… or to otherwise take any action in restraint of trade for oil, natural gas, or any petroleum product when such action, combination, or collective action has a direct, substantial, and reasonably foreseeable effect on the market, supply, price, or distribution of oil, natural gas, or other petroleum product in the United States.”

Well, OPEC nations may or may not be in violation of this law.  My guess is that if incompetence and general third-world type fraud is actionable, then they are guilty.  It may be tougher to prove outright conspiracy.

BUT, there is one nation that has, right there on the public record, clear government legislation that substantially limits development of some of the largest potential new oil reserves in the US.  That country is the United States, and by passage of this law, the entire Congress has made itself outlaws.

Posted on May 26, 2008 at 08:34 PM | Permalink | Comments (12)

1970s, Here We Come

The economy, the Democratic Party, and the Republican Party are all acting more and more like they did in the 1970s.  Keep your head down, and expect more of this kind of garbage.

Posted on May 22, 2008 at 02:36 PM | Permalink | Comments (9)

Congress, Sue Thyself

This is almost beyond parody:

The House of Representatives overwhelmingly approved legislation on Tuesday allowing the Justice Department to sue OPEC members for limiting oil supplies and working together to set crude prices, but the White House threatened to veto the measure.

The bill would subject OPEC oil producers, including Saudi Arabia, Iran and Venezuela, to the same antitrust laws that U.S. companies must follow.

The measure passed in a 324-84 vote, a big enough margin to override a presidential veto.

The legislation also creates a Justice Department task force to aggressively investigate gasoline price gouging and energy market manipulation.

"This bill guarantees that oil prices will reflect supply and demand economic rules, instead of wildly speculative and perhaps illegal activities," said Democratic Rep. Steve Kagen of Wisconsin, who sponsored the legislation.

I am sure, either through scheming or more likely incompetance, that OPEC countries are under-supplying their potential capacity for oil production.  But if we want to deem this a crime, who is the biggest criminal?   The US is the only country I know of that has, by statute, made illegal the development of enormous domestic reserves.  Just last week, Democracts in Congress, in fact the exact same folks sponsoring this bill, voted to continue an effective moratorium on US oil shale development.  No country in the world is doing less to develop the most promising oil reserves than is the US.  Congress, sue thyself.  I mocked this idea weeks ago when Hillary first suggested it.  If this passes, I would love to see the US counter-sued for not developing ANWR.  Or large areas of the Gulf.  Or most of the Pacific coast.  Or all of the Atlantic coast.  Or our largest-in-the-world oil shale deposits. 

Posted on May 20, 2008 at 05:07 PM | Permalink | Comments (8)

More Reasons to Fear Public Employee Unions

Most all local governments have extensive programs in place for government inspection of elevators because, you know, private businesses can't be trusted to operate safe equipment.  But it turns out the least safe elevators are operated by the government itself:

New York City Transit has spent close to $1 billion to install more than 200 new elevators and escalators in the subway system since the early 1990s, and it plans to spend almost that much again for dozens more machines through the end of the next decade. It is an investment of historic dimensions, aimed at better serving millions of riders and opening more of the subway to the disabled.

These are the results:

¶One of every six elevators and escalators in the subway system was out of service for more than a month last year, according to the transit agency’s data.

¶The 169 escalators in the subway averaged 68 breakdowns or repair calls each last year, with the worst machines logging more than double that number. And some of the least reliable escalators in the system are also some of the newest, accumulating thousands of hours out of service for what officials described as a litany of mechanical flaws.

¶Two-thirds of the subway elevators — many of which travel all of 15 feet — had at least one breakdown last year in which passengers were trapped inside.

The whole thing is pretty depressing.  But perhaps just as depressing is the fact that the NY Times, in a quite lengthy article, never once questions why the government is in the elevator maintenance business at all.  You see, the New York City Transit system hires all of its own maintenance people, presumably because, though the article never mentions it, the public employees union insists that these functions remain in house.  OK, here is a quiz:  How many private elevator owners in New York City have their own staff repair elevators?  My guess is the answer is close to zero.  Everyone uses third party elevator equipment repair companies or operate under long-term service contracts with the manufacturer.  Why?  Well, lets see what problems NY Transit faces:

“They don’t have enough competent people with the proper training,” said Michele O’Toole, the president of J. Martin Associates, which the transit agency hired in 2006 to evaluate its elevator operations. “It all reflects back to qualifications, training, capabilities.”...

Elevators and escalators are spread out over a far-flung system, requiring more mechanics and slowing responses to breakdowns. There has been little standardization of parts, so mechanics must cope with a bewildering hodgepodge of machinery. And the machines, which operate 24 hours a day, are subject to all sorts of abuse: Elevators become makeshift bathrooms, and escalator steps are pounded by heavily loaded hand trucks.

Guess what?  These are all classic reasons for outsourcing.  Manhattan elevator maintenance companies are set up to handle a far-flung elevator inventory, and can more efficiently stock parts, buy special equipment, and provide specialized training than can any individual operator.   Shared external capacity can also be sized and used much more efficiently to deal with random failures -- the more elevators in a region one maintains, the better staff can be utilized across a stochastic system.

But of course, the NY Times is never going to go against any public employee union, so it takes the line that this is a good governance issue, rather than a structural issue where an individual elevator owner is always going to be less efficient than outsourcing to a large regional third party company.  It compares NY Transit to other public transit agencies, but not to other private owners of elevators.  My guess is Donald Trump owns more elevators than NY Transit - how does he handle elevator maintenance?

By the way, the article says that there are 167 elevators and 169 escalators in the system.  They also say there are 200 full-time maintenance people.  So, on average, one person spends 60% of their year on a single elevator or escalator.  Think about the elevators and escalators you ride every day.  Can you imagine someone working on it for 1200 hours a year?

And what is this in the quotes above about slow responses to breakdowns in the far-flung empire?  With 200 people for 336 devices, they could practically assign an individual repair person to each one.   I can see him now, with his toolbox, sitting on a folding chair in the back of the elevator with a box of Krispy Kremes, waiting to spring into action at the moment of failure.

Posted on May 20, 2008 at 12:17 AM | Permalink | Comments (6)

The State Protects Itself

Dibor Roberts was convicted, somehow, for being attacked by a police officer.

The jury in the Dibor Roberts case returned a verdict that I can only describe as contemptible, finding her guilty of resisting arrest and felony flight from a law officer as a result of a brutal attack upon her by Sgt. Jeff Newnum of the Yavapai County Sheriff's Department.

Greg Nix of Larson newspapers has an interesting insight, suggesting that the trial could have come down to the prosecution painting a picture for the jury of "'angry black woman' v. 'respectable white officer.'" He adds, "I grew up in the South so running the 'angry black woman' strategy is nothing new and generally works for getting convictions."

Perhaps he's right, and the decision was essentially racist. Or maybe the prosecution succeeded in picking jurors who bow down and bang their heads on the floor every time they see a uniformed government employee. Or the result could have resulted from a little bit of both factors.

Posted on May 17, 2008 at 09:27 AM | Permalink | Comments (6)

I Wanted to Get Control

Yavapai County Sheriff Steve Waugh tells motorists that may be concerned with the authenticity of a police officer asking them to pull over at night in a deserted area that they should continue on to a more public, well lighted place.  Sgt. Jeff Newnum of the same police department says that he would give his wife the same advice.   There have been several well-publicized incidences in Arizona of people being attacked by criminals impersonating an officer making a traffic stop.

But when Dibor Roberts attempted to follow this advice, officer Newnum ran her car off the road, broke the window of her car with his nightstick, and grabbed the cell phone she was using to call 911.  Now, it is, incredibly, Ms. Roberts who is on trial for her actions.   All because she was driving 15 miles an hour over the limit on a deserted rural road.  The post title comes from the Sgt Newnum's explanation in court of his aggressive tactics.

Posted on May 15, 2008 at 05:50 PM | Permalink | Comments (4)

Legislation for the Benefit of One

What follows is by no means the worst excess of our Congress.  But it is an interesting demonstration of how Congress attempts to disguise legislation that is intended to help just one important contituent.  The program looks moderately innocuous:

[T]his year’s farm bill contains a special-interest provision you’ve probably never heard of — the Qualified Forestry Bonds program. This provides federally funded tax-credit bonds for forest purchases that meet the following four criteria:

The forest must be adjacent to U.S. Forest Service Land;

Half of the parcel must be turned over to the U.S. Forest Service;

It must include at least 40,000 total acres; and

It must be subject to a “native fish habitat conservation plan approved by the United States Fish and Wildlife Service.”

Well, it looks like it might be some land acquisition scheme by the US Forest Service, though by my observation they really aren't staffed or resourced to manage the land they already have.

But here is the truth of it:

But this farm-bill provision offers a lesson on how things are sometimes done in Washington. Only one parcel of land in the entire United States meets the criteria set for the Qualified Forestry Bonds program. You see, the U.S. Fish and Wildlife Service has approved exactly one “Native Fish Habitat Conservation Plan,” covering a 1.6-million-acre parcel that reaches from western Montana into eastern Washington State. And that parcel is owned by the Plum Creek Timber Company, the single largest private landowner in the United States.

Posted on May 15, 2008 at 08:44 AM | Permalink | Comments (2)

Where the Subsidies Go

A week or so ago, I discussed federal energy subsidies and hypothesized, without a lot of facts, that a lot of them go to failing alternative energy projects rather than to oil company shareholders.  I asked readers if they had any more information, and the discussion is here.

But ask and ye shall receive, and the WSJ has an article today on federal energy subsidies and where they go.  The answer is:  in bulk dollars, a lot of them go nuclear, hydro, and traditional fossil fuel production.  However, it is interesting to look at them on an output basis:

For electricity generation, the EIA concludes that solar energy is subsidized to the tune of $24.34 per megawatt hour, wind $23.37 and "clean coal" $29.81. By contrast, normal coal receives 44 cents, natural gas a mere quarter, hydroelectric about 67 cents and nuclear power $1.59.

The wind and solar lobbies are currently moaning that they don't get their fair share of the subsidy pie. They also argue that subsidies per unit of energy are always higher at an early stage of development, before innovation makes large-scale production possible. But wind and solar have been on the subsidy take for years, and they still account for less than 1% of total net electricity generation. Would it make any difference if the federal subsidy for wind were $50 per megawatt hour, or even $100? Almost certainly not without a technological breakthrough.

By contrast, nuclear power provides 20% of U.S. base electricity production, yet it is subsidized about 15 times less than wind. We prefer an energy policy that lets markets determine which energy source dominates. But if you believe in subsidies, then nuclear power gets a lot more power for the buck than other "alternatives."

The same study also looked at federal subsidies for non-electrical energy production, such as for fuel. It found that ethanol and biofuels receive $5.72 per British thermal unit of energy produced. That compares to $2.82 for solar and $1.35 for refined coal, but only three cents per BTU for natural gas and other petroleum liquids.

I will repeat what I said in my earlier post, just so no one is confused about my position:

I personally don't care where [the subsidies go]. I am all for eliminating all of this subsidy mess, equally, whether it's for oil exploration or energy-from-donkey-poop or for CEO salary enhancement.

Posted on May 12, 2008 at 08:17 AM | Permalink | Comments (3)

All Your Law Are Belong to Us

If you need any further evidence that politicians consider themselves our masters rather than public servants, read this from Cory Doctorow:

The State of Oregon is sending out cease and desist letters to sites like Justia and Public.Resource.Org that have been posting copies of Oregon laws, known as the Oregon Revised Statutes.

We've sent Oregon back two letters. The first reviews the law and explains to the Legislative Counsel why their assertion of copyright over the state statutes is particularly weak, from both a common law perspective and from their own enabling legislation....

Particularly galling is the fact that Thomson West has also made a copy of these statutes and has done so without a commercial license, but the Legislative Counsel explicitly told Tim Stanley of Justia that they weren't going to send cease and desist letters to West. Evidently, it is much easier to pick on the little guys.

Ignorance of the law is no excuse -- but we will only tell you what we want you to know.  How anyone can consider the text of public laws not to be in the public domain is amazing to me.

Posted on May 9, 2008 at 08:30 AM | Permalink | Comments (3)

The San Francisco Sweatshop

Several companies have been discovered to have benefited from what is in effect slave labor in certain countries.  I have never had a problem with folks in poor countries freely opting to take jobs at factories for less money than our privileged middle class attitudes think to be "fair."  But there have been examples of governments using their coercive power in a cozy relationship with certain companies, forcing people to provide their labor to companies for wages below what they would freely accept.   It is an obscene form of modern slavery.

Today's example, though, does not come from Myanmar or China, but from San Francisco, California, USA, where the government is forcing its citizens to work for free to benefit itself and a few favored corporations to produce products for export.

The resale of recycled materials is apparently big business for a few government contractors:

“When we look at garbage, we don’t see garbage, O.K.?” said Robert Reed, a spokesman for Norcal Waste Systems, the parent company of Sunset Scavenger and Golden Gate Disposal and Recycling Company, the main garbage collectors in the city. “We see food, we see paper, we see metal, we see glass.”...

Jared Blumenfeld, the director of the city’s environmental programs, addressed one of the main reasons the city keeps up the pressure to recycle. “The No. 1 export for the West Coast of the United States is scrap paper,” Mr. Blumenfeld said, explaining that the paper is sent to China and returns as packaging that holds the sneakers, electronics and toys sold in big-box stores.

This "No. 1 export product" is wholly a product of major government subsidies.  Reading the article, you get a sense for the enormous amount of extra capital and operating expenses the city pours into the recycling program.  Here is just one example:

San Francisco can charge more for its scrap paper, he said, because of its low levels of glass contamination. That is because about 15 percent of the city’s 1,200 garbage trucks have two compartments, one for recyclables. That side has a compactor that can compress mixed loads of paper, cans and bottles without breaking the bottles. (These specially designed trucks, which run on biodiesel, cost about $300,000 apiece, at least $25,000 more than a standard truck, said Benny Anselmo, who manages the fleet for Norcal.)

Anyone really think they are making enough extra money on scrap paper to cover this (at least) $4.5 million incremental investment  ($25k x 15% x 1200)?   Suspiciously absent from the article is any mention of costs or budgets.  City recycling guys have given up trying to defend recycling on the basis of it being cheaper than just burying the material.  The city is subsidizing this material a lot.

But it's not enough.  Even with these enormous subsidies, the city is not producing as much recycled materials to meet its goals.  So it is going to make its citizenry provide it more labor.  For free.

...the city wants more.

So Mr. Newsom will soon be sending the city’s Board of Supervisors a proposal that would make the recycling of cans, bottles, paper, yard waste and food scraps mandatory instead of voluntary, on the pain of having garbage pickups suspended.

The city is going to coerce every single resident to labor for them each week, just so San Francisco and Norcal Waste Systems can have more scrap paper for export.  This is a labor tax of immense proportions.  I know, whenever I make this point about recycling, everyone wants to poo-poo it.  "Oh, its not much time, really."  Really?  Lets use the following numbers:  Five minutes per day of labor.  One million residents.  $20 per hour labor value (low in San Francisco).  That is $608 million if forced labor.  I'm not sure even Nike has been accused of using this much forced labor.

Anticipated Rejoinder: Yeah, I know, the response will be "It's not for the exports, it's to save the environment."  OK, here is my counter:

  1. Nowhere in the article does it really say how this program, or going from 70 to 75% recycling, is specifically going to help the environment.  I took the article at its face value, where it justifies the program on the basis of exports and hitting an arbitrary numerical target and beating out San Jose.  I am tired of unthinking acceptance of recycling as a net benefit.  Every study has shown that aluminum recycling creates a net energy benefit, but every other material represents a net loss.  It makes us feel good, though, I guess.
  2. Should proponents support the direct subsidy by government and the labor tax, there is still some burden to show that this is the best possible environmental use of 30 million San Francisco man-hours of coerced labor in the course of a year.
  3. For those really worked up about CO2, explain to me why we shouldn't bury every scrap of waste paper as a carbon sink.
  4. The last time I visited, San Francisco was one of the grubbier US cities I have seen of late, with trash everywhere on the streets and sidewalks.  It may just have been a bad data point, but are residents really happy the city trash department focusing on scrap paper pricing yield rather than picking up the trash?
  5. I class battery and motor oil recycling programs differently.  These substances have unique disposal needs and high costs of incorrect disposal.

Posted on May 8, 2008 at 11:10 AM | Permalink | Comments (10)

Just When You Thought the DMV Couldn't Get Any Worse

Arizona required emissions inspections of vehicles, but only for vehicles in the cities of Phoenix or Tucson.  So, as you can imagine, they only have testing stations in Phoenix and Tucson.

Our company is headquartered in Phoenix.  That is our legal address and the address on all our titles and registrations and licenses and such.  Because all of our vehicle registrations show the company headquartered in Phoenix, then the state of Arizona treats all our trucks as being located in Phoenix.  As a result, we are required to get emissions tests each year on about 20 vehicles.

But wait.  None of our vehicles are actually in Phoenix.  In fact, none have ever even crossed into this county.  They are all in places like Flagstaff and Sedona and Payson that have no emissions requirements, and therefore, no testing locations.  As a result, I am apparently required to, once a year, have all of our trucks driven to Phoenix for an emissions test that they are not actually required to have based on where they operate.  In additions to the cost of the test itself, and any repairs mandated by the test, it costs us 400 miles x $0.55 per mile gas and depreciation plus 8 hours x $12 hour labor for the driver or $316 per vehicle to get them to the test site and back.  A sort of annual pilgrimage to worship at the alter of mindless bureaucracy.

Recognize that none of this was obvious to me at 8AM this morning.  I spent my entire morning not worrying about my 500 employees and not improving productivity and not pursuing some projects we are considering for expanded customer services, but trying to figure this situation out.  All because some state legislators didn't realize that maybe corporate vehicle fleets are not necessarily registered in the location in which they are used.

I still think there must be a legal way to show my vehicle domiciled at one physical address but have the mailing address be my corporate office in Phoenix.  But if there is, I have not found anyone who will admit it.

Posted on May 8, 2008 at 09:58 AM | Permalink | Comments (14)

Question about Energy "Subsidies"

Kevin Drum and Alex Knapp write that there appears to be $20-$50 billion in federal energy subsidies each year going to the oil industry, and that this should be a target for elimination before any windfall profits tax.  I wrote in the comments:

I agree 100%.  Let's cut all the subsidies.

However, before you get too excited, my guess is that most of the money marked as "oil company subsidies" really in fact goes to non-oil projects like alternative energy. In the same way that a huge portion of federal "highway" funds don't go to highways but to silly politically correct failing transit projects, my guess is that, similarly, "oil industry" subsidies go for a lot of silly alternative energy projects.

I personally don't care where it goes. I am all for eliminating all of this subsidy mess, equally, whether it's for oil exploration or energy-from-donkey-poop or for CEO salary enhancement. But recognize before you make this the liberal rallying cry, much of this subsidy money may well be going to liberal pet projects.

Anyone have any better idea where this money goes that they are referring to?

Posted on May 5, 2008 at 01:32 PM | Permalink | Comments (34)

Subsidizing Real Estate Developers Ruled to be Clearly in the Public Interest

The city of Phoenix's $97 million subsidy for the developers of a new Phoenix shopping mall has been ruled by a local judge as being "'undoubtedly' in the public interest."  Even weirder, the developers lawyers are so mad at having their largess questioned that they are demanding the Goldwater Institute pay them $600,000 in attorneys fees as punishment for even questioning whether funding private mall parking lots that would have been built anyway is really in the public interest.

The subsidy, which I described in more detail here, provides $97 million for the construction of a parking garage at a new mall in North Phoenix, with the only condition being that the mall owners provide free parking in the garage to the public.  I can think of only three reasons this would be in the public interest:

1.  Without the subsidy, the mall might not provide enough parking
2.  Without the subsidy, the mall might charge for parking
3.  The parking garage could serve other surrounding businesses or homes within walking distance

Now, some of you on the coasts may be confused about this, so let me give you one other piece of background.  There are hundreds of shopping malls in the Phoenix area, from local strip malls to huge mega-malls of the type in this case.  At least 99.9% of the parking at all of these malls has been paid for with private funds.   Every one of these has plenty of parking.  This might not be the case in Boston, where land costs are high, but here in Phoenix, land is relatively cheap and malls are plentiful -- If I can't find a parking space, I would just go to a different place to shop.

Further, do you know the total number of these spaces at mall in Phoenix that are not free?  Zero.  OK, there may be one mall downtown that charges money to park, but for any mall in the area in which this one is being constructed, it would be insane to charge to park.  There are just too many competitor malls with free parking.

Finally, as to #3, look at the satellite view here.  Enough said. 

So the city paid $97 million in return for nothing of value, or at least nothing of value that the mall owners would not have provided on their own out of their own self-interest.  The only thing that I can identify the $97 million bought was possibly influencing the decision of one store (Nordstrom's) to locate in this particular development rather than 1 mile away, over the city line in another development planned in the City of Scottsdale.

About the numbers:   I really can't get away without taking on this statement in the same article:

According to its developers, CityNorth is expected to generate $1.9 billion in annual economic activity

In 2005, the metro Phoenix area had a GDP of $160 billion dollar.  The retail component of this is about $12 billion.  So this one mall / real estate project in one small part of Phoenix, one of hundreds just like it all over town, will increase our city's GDP by over 1% and in particular increase the city's retail output by 16%.  Sure.  I really wish our local paper would be just a tiny bit more credulous about printing these numbers from promoter's press releases.

Posted on May 5, 2008 at 09:00 AM | Permalink | Comments (2)

The Newest Threat to the Republic

There are two America's:  The one that is trying to steal my freedom from the top down (wiretaps, proscutorial abuse, expanding executive power) and the one that is trying to steel freedom from the bottom up.  Reason, as quote by TJIC, has a nice piece on one of the bottom-up fascists:

Amid the hustle and bustle of downtown Los Angeles, there exists another world, an underground world of illicit trade in - not drugs or sex - but bacon-wrapped hot dogs. Street vendors may sell you an illegal bacon dog, but hardly anyone will talk about it, for fear of being hassled, shut down or worse. Our camera caught it on tape. One minute bacon dogs are sold in plain view, the next minute cops have confiscated carts, and ordered the dogs dumped into the trash.

Elizabeth Palacios is one of the few vendors willing to speak publicly. “Doing bacon is illegal,” she explains. Problem is customers love bacon, and Palacios says she loses business if she doesn’t give them the bacon they demand. “Bacon is a potentially hazardous food,” says Terrence Powell of the LA County Health Department. Continue selling bacon dogs without county-approved equipment and you risk fines and jail time.

Palacios knows all about that. She spent 45 days in the slammer for selling bacon dogs, and with the lost time from work, fines, and attorney’s fees, she fears she might lose the house that bacon dogs helped buy. She must provide for her family, but remains trapped between government regulations and consumer demand. Customers don’t care about safety codes, says Palacios. “They just want the bacon.”

TJIC, as he often does, captures a number of the best comments.  The full reason video is below:

Posted on April 26, 2008 at 09:28 AM | Permalink | Comments (5)

City Branding

This is the kind of local government silliness that really drives me up a tree.  The town of Peoria, Arizona (Peoria is basically a suburb of Glendale which in turn is a suburb of Phoenix) apparently has paid $81,000 for a new town logo:

Peoria's new tagline, "Naturally Connected," came under attack this week.

The city is working on establishing a brand name to better market itself.

"Naturally connected?" resident Dolores Ceballos said at Tuesday's City Council meeting. "I'm still trying to feel it here. I can't find it.

"Nine years ago, I moved here, not because of a logo. I came for the downtown and for the schools."

Ceballos questioned the city's expenditure of taxpayer dollars for such an endeavor.

Peoria has paid $81,000 to North Star Destinations Strategies in Tennessee, which developed the tagline and new logo that features the city's name with swirling lines and Southwestern colors of blue, green and brown.

But what the Republic misses, but those of us with any business experience understand, the logo development, overpriced as it may be, is only a fraction of the branding effort.  The town is going to have to spend 10x this amount to start pushing the logo and the craptacular "naturally connected" tagline into peoples' faces. 

Corsette said that because the tagline and logo are not in use yet, it's hard for people to feel a connection.

"It's not surprising people don't get it," he said. "Once we start using it in context of everything the city does, it will resonate with people and take on some meaning and it will be a positive thing for us."

An important component to the draft manual is the education of the public and city employees, he said.

Can't wait to see the time and effort on the manual and training effort that will go into educating public employees on how to use the logo.

Posted on April 21, 2008 at 12:45 PM | Permalink | Comments (10)

Government-Think in Marion County, Florida

I just encountered an absolutely classic bit of government think.  Here is the background.

In Florida, on each night stay in the campgrounds we run in Marion County, we collect a 6% state sales tax, a 0.5% county sales tax, and a 2% tourist development tax, for a total of 8.5%.  Until this month, we reported and paid all three taxes to the state of Florida on one simple return.  The state then divvied the money up to the counties.  Apparently, this latter process could take up to 90 days before the County got their tourist development money.

The County commissioners of Marion County did not like waiting 90 days for their tourist development money.  Remember, this is not general revenue money, but supposedly trust fund money that must be spent on tourist advertising and the like.  Also, recognize that 90 days for a government body to disperse money is pretty normal - I find I often have to wait as long as 6 months to get a check out of the feds.

Anyway, the County wanted its money faster.  So it decided to collect the money itself.  First this involved more staff hours and designing a new online collection system, costs that are completely incremental because the state of Florida was performing these functions before (and still are performing them).  Today, it now requires two systems and clerical staffs to collect money that was once required by just one. 

Already, this seems like idiocy to any business person.  Is adding a whole new staff and systems really worth getting money 90 days faster?  I guess it is possible, but even if one could argue this point, we now get to the real government-think.  Because there is no way anyone in whatever cost-benefit trade-off they ran considered the time and effort that would be required of individual taxpayers.  Even in my small company, this will now require extra clerical labor each month as well as an initial system reprogramming to add the extra tax authority.  If one considers thousands of other businesses in the exact same position, the amount of investment is enormous.

But in my experience, when running cost-benefit trade-offs, the government never, ever considers investment and time required of the citizens who must comply.  I have seen governments make changes designed to save a few man-hours a month in their own clerical departments that cause thousands or millions of man-hours of extra work among taxpayers.   A year or two ago, Mono County, California forced us to go from one to twelve reports each month for our lodging tax payments just to save auditors a few hours work every three years.   And do you know why?  Because the government treats us all as serfs.  As far as they are concerned, our labor is free, because they have the power to compel us to do whatever they ask without compensation.

Postscript:  Here is my other Florida county tax collector pet peave.  All the tax collectors in Florida put their own personal name all over everything.  Their web site is not "marion county tax collector"  but "George Albright, Marion County Tax Collector." Their stationary has this man's name all over it.  When I right a check to them, I am supposed to include this man's name.  I hate this kind of public employee self-aggrandizement.  It is a blatant use of taxpayer money to try to aid one's next election chances, and it is a waste of money when a new person comes in office because every piece of printed material must be thrown out and reprinted.  This seems to be fairly unique to Florida.  Look at the Marion County links for other states in the same search and you don't see the same thing going on in those states.

Posted on April 17, 2008 at 08:36 AM | Permalink | Comments (18)

Big Flashing Red Bullsh*t Alarm Going Off

Huge alarm bells are going off as I read this headline in the Arizona Republic, whose motto should be "Happy to credulously print any crazy number your lobbying group puts in a press release."  In this case, the headline reads:

Ariz. economy reaped $500M from Super Bowl

Uh, sure.  Right.  Bet that is a quality number.  Lets first vet the source.  Who provided the paper with this number?

A study released today by the Arizona Super Bowl Host Committee estimates professional football's championship game at University of Phoenix Stadium in Glendale generated an economic impact of $500.6 million for the state.

Oh, I see.  Certainly a disinterested party.  And how was this number arrived at?

Arizona State University's W.P. Carey School of Business completed the economic-impact report based on surveys of more than 1,500 visitors who came to the Valley to attend the game or take part in festivities.

The survey revealed that visitors stayed in Arizona for an average of 3.9 nights and spent an average of $617 each day on hotels, food, alcohol, transportation, recreation, shopping and other categories. The report also calculated the amount that organizations dropped during Super Bowl week.

Well, its good to see the business school at America's #1 party college on the case.  I would have thought this would be a very challenging study to conduct.  In my naiveté, I might have assumed that these Superbowl visitors might have displaced other potential visitors who would have been there anyway.  I would have fixated on the fact that Superbowl week is also Phoenix Open week and, given the beautiful winter weather here, one of the prime tourist weeks of the year even without the Superbowl.  I might have wondered how hotel stays during a week when most local resort hotels are full anyway could have been credited to the Superbowl, particularly when many locals left town to avoid the scene.   I might have been worried that I was not counting truly incremental revenues, but the folks in the business school at the university with Americas hottest coeds must be smarter than I am.

So apparently, these geniuses have found a way to assume that 100% of this $617 per day times 3.9 days is incremental and that there is no substitution effect.  However, they have also managed to somehow assume that University of Phoenix Stadium is even larger than I thought.  Because using these numbers, the only way to get to $500 million is if there were nearly 210,000 visitors.  Wow.  This does not even include the thousands of us from Phoenix who were also in the stadium. 

Look, the way to do this study is simple.  You look at sales tax receipts in Maricopa county over the period of January 2007-February 2008.  You calculate an underlying growth rate.  Then you compare the sales tax receipts for the Superbowl months (Jan-Feb 2008) with the same months a year previously, and see how much growth there is, if any, above the underlying growth rate.  I will tell you the answer right now:  It ain't anywhere close to $500 million.  I will eat my hat if its over $50 million.

Here is a reality check:  In 2004 the entire retail trade, from restaurants to stores to hotels, was $16.4 billion for all of Arizona.  This is $315 million per week.  Basically the study is saying that the entire retail trade for the whole state of Arizona was more than doubled in Superbowl week. 

Bullshit.

Posted on April 16, 2008 at 05:56 PM | Permalink | Comments (7)

Duh

A reader pointed me to this article about a really amazing piece of government science:

A strong and deadly earthquake is virtually certain to strike on one of California's major seismic faults within the next 30 years, scientists said Monday in the first official forecast of statewide earthquake probabilities.

They calculated the probability at more than 99 percent that one or more of the major faults in the state will rupture and trigger a quake with a magnitude of at least 6.7.

Uh, okay.  Next up:  California demonstrates more than a 99% chance that I will be dead in 100 years.  I would also give them the false precision award:

An even more damaging quake with a magnitude of 7.5 or larger, the earthquake scientists said, is at least 46 percent likely to hit on one of California's active fault systems within the next three decades.

Are they really sure that its not 46.1%?

"The report's details should prove invaluable for city planners, building code designers, and home and business owners who can use the information to improve public safety and mitigate damage before the next destructive earthquake occurs," said geophysicist Ned Field of the Geological Survey, who headed the Working Group on California Earthquake Probabilities, which developed the forecasts.

Really?  How?  They should have given me the money and I would have written a two sentence report:  "You are going to have an earthquake in the future -- duh, its California.  Plan for it."

Update: A reader notes that this was funded by some insurance companies or trade group, and the whole point is the unspoken message "insurance rates are going up."  You guys are so cynical.

Posted on April 15, 2008 at 08:16 AM | Permalink | Comments (5)

Senior Government Official Using His Position to Presure Textbook Publishers

Anthony Watt has an interesting story of a senior NASA official using his government position to pressure textbook manufacturers to change their books to reflect his view of the world.

Posted on April 11, 2008 at 09:11 AM | Permalink | Comments (0)

But We Didn't Mean For Those Laws to Apply to Us

Today's emails seem to be following the theme of government exempting itself from its own regulations.

In the first story, many California government employees (and their families!) are issued with license plates that effectively exempt them from traffic law violations.

In the second story, the town of Ann Arbor, Michigan sets out on a voyage of discovery in which they find out that minimum wages can drastically increase costs and that different people have different needs.  And so, they exempt themselves from the law.  I am particularly sensitive to this story because the reason the city claims it is unfair to apply the law to them exactly matches my business:

After several months of negotiation, Ann Arbor elected officials Monday agreed to waive the city's "living wage'' law for the Ann Arbor Summer Festival.

What's been at issue is the application of the wage law to the festival's temporary workers. Under the living-wage law, groups that have contracts of $10,000 or more with the city must pay above-minimum wages. That wage level is now around $12 an hour for employees who don't receive health benefits.

Because the increased wages would significantly add to the costs of putting on the festival

Wow, who would have thought that artificially setting wage rates above the market clearing price would increase costs?  But to continue:

City Council Member Chris Easthope, who's promoted the change, argues that the festival's seasonal employees - almost all students - are not the kind of workers the wage law was meant to protect.

"This isn't an attempt to drop people below living wage levels, but to recognize there are some short-term events that struggle. I don't think that, when it was adopted, the living wage was meant to have that effect on a one-month event.''

Let's see.  I hire temporary seasonal workers in Michigan for about three months of the year.  And thought they are not students, most are retired people in their seventies who are also likely "not the kind of workers the wage law was meant to protect."  In fact, many of my workers are disabled and work slower, so I probably have a better argument than the city.  So where is my exemption? 

Posted on April 8, 2008 at 12:12 PM | Permalink | Comments (3)

Frightening Incompetence

Every food service operation has some problems matching supply with demand, but strikes me as staggering incompetence (via a reader):

Hospitals are throwing away as much as half of their food, NHS figures show.

Close to 13 million meals were thrown away last year, with 33 hospitals dumping more than a quarter of their food, including two that discarded more than was eaten.

Meanwhile, almost 140,000 patients left hospital malnourished, double the figure a decade ago.

Last year, Ivan Lewis, the health minister, admitted that many elderly people were in effect being starved in hospitals. He said that some were given a single scoop of mashed potato as a meal, while others were "tortured" with trays of food placed beyond their reach and no help with eating.

Maybe the last bit shows that the Brits are enshrining the same "duty to die" that is being discussed in Canada.

Posted on March 31, 2008 at 10:34 AM | Permalink | Comments (5)

The Statist Trap

I thought this comment was kind of interesting for what it reveals:

And to some degree, doctors are the property of the state. It is impossible to have medical education without significant state subsidization, and although I don't know the specifics of every single country in Africa, that's a safe generalization to make.

For instance, here in the US, your medical education is heavily subsidized by the state. Probably on the order of 100k/student. Resident training programs also receive about 100k/resident from government entitlement programs.

I haven't a clue whether or not there is a net subsidy of medical education in this country, but assume it to be true.  This is the statist trap in a nutshell.  Statists insist that the government should subsidize (or, in more extreme cases, entirely fund) public education.  But once you have attended these government schools, which one virtually has to do because of the steps the government takes to maintain its education monopoly, you then become the property of the state because the statists claim "well, you took our money for your education..."

Posted on March 29, 2008 at 05:28 PM | Permalink | Comments (15)

Another Government Program that Misses the Point

Apparently, the state of Arizona, fearing the coming old-folks demographic boom, is looking to create programs to keep older Americans working longer (and by extension off the government teat longer).

The thought of millions of boomers taking their early-retirement benefits is causing concern about the stability of Social Security and Medicare.

"We know not everybody is going to up and retire all at once," Starns said, "and we will have younger workers coming in. But if you look at all the demographics, there just won't be enough people to fill all the jobs that could be vacant."

Add that possibility to existing shortages of workers in health-care and other fields, she said, and "there could be some pretty significant problems in society."

Arizona, which launched its Mature Workforce Initiative in 2005 to avert such a crisis, was one of five states lauded last month for efforts to engage people 50 and older in meaningful jobs and community service.

The San Francisco-based Civic Ventures think tank also cited California, Maryland, New York and Massachusetts, saying the five states recognize older workers as "an experience dividend," rather than a drain on resources.

Of course, since it is government, the state of Arizona is, with one hand, patting itself on the back for instituting vague and meaningless but well publicized programs nominally targeted at this issue, while with the other taking steps that have real and substantial effects in exactly the opposite direction.

First, Arizona has some of the toughest laws in the country to penalize businesses for hiring, even accidentally, young vigorous immigrants who don't have all their government licenses in order.   Young workers are pouring into this state every day, but Arizona is turning them away and locking them up. 

Second, Arizona has been legislating as fast as it can to make it nearly impossible to hire older workers.  I know, because the vast majority of my work force managing campgrounds is over 65.  These workers tend to work for a free camp site plus minimum wage.  They like the job despite the low pay because they get a place to park their RV and because the job is part time and very flexible in how they work (not to mention offers the opportunity to take whole chunks of the year off).  I like these workers because they are experienced and reliable and paying them minimum wage helps offset their slowing productivity and higher workers comp costs as they age. 

Here is the math:  Older workers might work 30-50% slower than a younger worker (I have workers right now in their nineties!)  They also have higher workers comp costs, maybe equating to as much as 10% of wages.  This means that an older worker at the old minimum wage of $5.15 an hour might be financially equivalent to a younger worker making $9.50 an hour, which is about what we might have to pay for such a worker. 

However, many states have implemented higher minimum wages with annual cost of living escalators.  States like Oregon and Washington now have minimum wages over $9.00.  At $9.00 an hour, an older worker is now financially equivalent to a younger worker making $16.50 an hour, well above what I can hire such a person for.  This means that as minimum wages rise, I have to consider substituting  younger workers for older but slower workers.

Last year, Arizona adopted just such a minimum wage system with annual escalators.  Though we have not reached the point yet, the state soon may make it impossible economically to hire older workers.  Already, we are looking at some automation projects to reduce headcount in certain places.  This is sad to me, but in a business where a 12% rise in wages wipes out my entire profit, I have to think about these steps.  I have to react to the fact that, no matter how many "policy advisers on aging" the state hires, in reality it is increasing the price to my company of older people's labor vis a vis younger workers.

Posted on March 26, 2008 at 09:18 AM | Permalink | Comments (3)

Our Technology Is Not Economic -- Do We Invest in R&D, or Lobbying?

Lobbying of course!  Silly rabbit. 

The wind industry's trade group spent nearly $816,000 to lobby last year as wind companies tried to persuade Congress to extend a key tax credit and make power companies use more renewable sources.   

Despite the efforts of the American Wind Energy Association, neither desire found its way into legislation this past year.   

The group, whose members include General Electric Co., BP PLC, AES Corp. and FPL Group Inc., is still pushing for the tax-credit extension after lawmakers failed to tuck into the economic stimulus plan. The industry argues that 116,000 jobs and $19 billion in investments are at risk if the 1.9 cents per kilowatt-hour tax credit doesn't get a second wind. It expires in 2008.

Here is the really, seriously amazing part:  In 2004, there were just over 400,000 people employed in the US power generation, transmission, and distribution business.  This means that, incredibly, this advocacy group is claiming nearly 30% of the electric utility industry owes their job to wind power, despite wind generating a bit less than 1% of all the power in the US.  If this is true, then here is a solution - forget the 1.9 cent subsidy, and cut some staff. 

Oh, you mean that job number probably isn't real, kind of like those municipal stadium and sports team subsidy studies.  Really?  Boy are you cynical.   

(HT Tom Nelson)

Posted on March 25, 2008 at 07:58 PM | Permalink | Comments (1)

Government as Price-Maker vs. Taker

Megan McArdle makes a great point that should be absolutely uncontroversial:

government is much better as a price taker than a price maker. Government procurement is all kinds of tedious and cluttered with red tape, but in the end there's no gigantic problem with the government pencil supply. Defense procurement, on the other hand, is pretty well agreed to be godawful-expensive for what we get, the only excuse being that we can't think of another way to buy fighter planes.

That means that government procurement alongside a free market looks a lot different from government procurement when the government is the only buyer. Yes, the health care market is extremely screwed up, but the prices in it do tell you something about demand for various services, and provide some signals about cost/benefit. You may think that viagra is a prime example of wasted pharmaceutical R&D spending (though if you do, I am willing to bet that you are either under forty, or female), but the fact that a lot of people are willing to pay a fair amount of coin for it tells you that they probably feel it is improving their lives in some significant way. Governments can estimate cost-benefit when the benefit is limited to crude mortality improvements, but they are pretty much at sea when it comes to quality-of-life. America's price signals are wildly distorted by its insurance markets--but they're almost certainly better than no signal at all.

Europe's governments operate their health care systems in the context of an existing US market that provides information about demand for new treatments (and of course I would argue, also the new treatments). They don't use that price information to set what they pay for drugs, but it does filter through to their markets--for example, more widespread use of Herceptin for breast cancer in the US is putting pressure on the British government to provide it. I think an American shift to single-payer would be more problematic than the European example for a variety of reasons related to our government structure. But one important reason is that if we did, we'd have no where left to get prices from.

Posted on March 14, 2008 at 07:06 PM | Permalink | Comments (3)

If Only Abuse of Power Was Considered Worse Than Sex

In a previous post I lamented that Eliot Spitzer was lauded by the press as "Mr. Clean" despite (or because of) abuse of power, but was forced to quit within days of revealing an episode of consensual sex.  If only abuse of power had such an immediate impact on politicians as sex:

The Justice Department and the housing department’s inspector general are investigating whether the [HUD] secretary, Alphonso R. Jackson, improperly steered hundreds of thousands of dollars in government contracts to friends in New Orleans and the Virgin Islands.

On Wednesday, Democratic lawmakers also raised concerns about accusations that Mr. Jackson threatened to withdraw federal aid from the director of the Philadelphia Housing Authority after he refused to turn over a $2 million property to a politically connected developer.

Update:  More on the press and its support for prosecutorial abuse of power, in Spitzer's case and others.

Posted on March 13, 2008 at 08:22 AM | Permalink | Comments (0)

Why Libertarians are Dancing on Spitzer's Grave

Eliot Spitzer has been brought down for a crime most libertarians don't think should be a crime, by federal prosecutors who should not be involved even if it were a crime, and using techniques, such as enlisting banks as government watchdogs of private behavior, that stretch the Fourth Amendment almost out of recognizable shape.  So why are we libertarians so happy?

He routinely used the extraordinary threat of indicting entire firms, a financial death sentence, to force the dismissal of executives, such as AIG's Maurice "Hank" Greenberg. He routinely leaked to the press emails obtained with subpoena power to build public animosity against companies and executives. In the case of Mr. Greenberg, he went on national television to accuse the AIG founder of "illegal" behavior. Within the confines of the law itself, though, he never indicted Mr. Greenberg. Nor did he apologize.

In perhaps the incident most suggestive of Mr. Spitzer's lack of self-restraint, the then-Attorney General personally threatened John Whitehead after the former Goldman Sachs chief published an article on this page defending Mr. Greenberg. "I will be coming after you," Mr. Spitzer said, according to Mr. Whitehead's account. "You will pay the price. This is only the beginning, and you will pay dearly for what you have done."

Jack Welch, the former head of GE, said he was told to tell Ken Langone -- embroiled in Mr. Spitzer's investigation of former NYSE chairman Dick Grasso -- that the AG would "put a spike through Langone's heart." New York Congresswoman Sue Kelly, who clashed with Mr. Spitzer in 2003, had her office put out a statement that "the attorney general acted like a thug."

These are not merely acts of routine political rough-and-tumble. They were threats -- some rhetorical, some acted upon -- by one man with virtually unchecked legal powers.

Eliot Spitzer's self-destructive inability to recognize any limit on his compulsions was never more evident than his staff's enlistment of the New York State Police in a campaign to discredit the state's Senate Majority Leader, Joseph Bruno. On any level, it was nuts.

As I wrote before, the real crime here is that despite all his history, he was until two days ago a press darling labeled as "Mr. Clean."  In reality, he has always been Mr. Abuse of Power and Mr. Personal Vendetta.  I am happy to see him brought down, even if for the wrong reasons.

Update: A lot more here

Posted on March 11, 2008 at 01:22 PM | Permalink | Comments (6)

Stranger than Fiction -- Eliot Spitzer and Prostitutes

My novel BMOC included an incompetent and power-abusing Senator who managed to remain a darling of the press as long as he focused his attention on pork-barrel spending and using government power to help and hurt his friends and enemies.  However, the press finally turned on him when it became known he was involved with prostitutes.  The fairly cynical (if not realistic) moral was that it was fine to abuse government power, just don't get caught in a sex scandal.

Well, it seems that we will get to test that notion in real life.  Apparently, NY governor Eliot Spitzer has been dallying with prostitutes.  Now, I couldn't really care less about his purchase of sex -- I have argued many times for legalization of prostitution.  But it will be an interesting test of my book's cynical hypothesis, since to date the press has been in love with Spitzer despite (even because of) his abusive practices as AG and governor.  The radio news a few minutes ago actually said "Mr. Spitzer, who to date has had a squeaky clean reputation..."  Huh?  Only if you read the fawning PR work done for him by the NY Times in the past.

Update: Here is the passage from the book.  Sound familiar?

Taking a deep breath, Givens said, “Senator, there is a reason that this one is not going away. I will spell it out: S-E-X. The press doesn’t give a shit about a few billion dollars of waste. No one tunes in to the evening news if the teaser is ‘Government pays too much for a bridge, news at eleven.’ The Today Show doesn’t interview the contractors benefiting from a useless bridge.”

“However, everybody and his dog will tune in if the teaser is ‘Your tax dollars are funding call girls, film at eleven’. Jesus, do you really think the CBS Evening News is going to turn down a chance to put hookers on the evening news? Not just tonight but day after day? Just watch – Dan Rather will be interviewing hookers and Chris Mathews will be interviewing hookers and for God’s sakes Barbara Walters will probably have a weepy interview with a hooker.”....

“You guys in the Senate can get away with a lot, as long as long as a) you don’t get caught or b) the scandal is so boring or complex that it won’t sell newspapers. Hell, I saw a poll the other day that a substantial percentage of Americans to this day don’t understand or even believe what Richard Nixon did was wrong. But if you polled those same people, every freaking one of them would say that they knew and believed that Bill Clinton got [had sex with] an intern.

Update #2: Disclosure -- I did not like Spitzer, even at Princeton.  This, however, was not uncommon.  In fact, Spitzer managed to inspire a jihad in response to his governance of the student council there.

Update #3:  ROFL!  I got this email from a reader:

I eagerly await your comments on the latest imbroglio involving your favorite Princeton classmate.  Please don't take the high road.

It seems I may not be the only person who does not care for Mr. Spitzer.

Update #4:  I hope the girls paid sales taxes on their transactions and have all their payroll taxes in order.  Certainly Mr. Spitzer has established the principle that illegal businesses still owe taxes.

That seems to be the axiom in New York these days, where Gov. Eliot L. Spitzer (D), struggling to close a $4.4 billion budget gap, has proposed making drug dealers pay tax on their stashes of illegal drugs. The new tax would apply to cocaine, heroin and marijuana, and could be paid with pre-bought "tax stamps" affixed to the bags of dope.

Update #5:  Libertarians like myself will point out that this is all between consenting adults.  Of course, that did not stop Eliot Spitzer from trying to prosecute Dick Grasso for a pay package that was approved by consenting (and quite sophisticated) adults.

Update #6: It is being reported that Spitzer will resign.  QED folks.  Spitzer uses the state police to spy on political rivals and the press continues to call him a squeaky clean reformer.  But pay for sex with a consenting adult, and your gone. 

Update #7:  Tom Kirkendal has been all over Spitzer for years.  He writes:

But I hope that the most important lesson that Spitzer's political career teaches us is not lost amidst the glare of a tawdry sex scandal. As with Rudy Giuliani before him, Spitzer rose to political power through the misuse of the state's overwhelming prosecutorial power to regulate business interests. In so doing, Spitzer manipulated an all-too-accommodating mainstream media, which never misses an opportunity to take down an easy target such as a wealthy businessperson. Spitzer is now learning that the same media dynamic applies to powerful politicians, as well. 

However, as noted earlier here, where was the mainstream media's scrutiny when Spitzer was destroying wealth, jobs and careers while threatening to go Arthur Andersen on American Insurance Group and other companies? Where was the healthy skepticism of the unrestrained use of the state's prosecutorial power to regulate business where business had no available regulatory procedure with which to contest Spitzer's actions?

Posted on March 10, 2008 at 12:25 PM | Permalink | Comments (14)

I Really, Really Needed My Camera Today

I was driving back to Phoenix today from San Diego on Interstate 8 and I really needed my camera. 

As many of you in this area will have observed, the INS is out in force, setting up roadblocks and checkpoints on highways to look for illegal immigrants.  On top of our current rules requiring employers to act as immigration agents, our labor force is drying up in Arizona, making the search for workers harder.  That is why I thought it was hilarious that at the INS checkpoint near Yuma, the INS had a big sandwich-board type sign out front on the road saying "We're hiring!"

Posted on March 6, 2008 at 09:15 PM | Permalink | Comments (3)

There Are Two Americas, update

In a previous post, I observed that there did indeed seem to be two Americas:  the one productive people want to live in, and the one productive people are trying to escape because the local government is so controlling and confiscatory.  I further observed that, unfortunately, both Democratic candidates appeared to be from the latter.

This is an interesting follow-up
:

"When California faced a Mount Everest-sized $14 billion deficit in 2003, one of the major causes for the red ink was the stampede of millionaire households from the state," says a report called "Rich States, Poor States" by economists Arthur Laffer and Stephen Moore. "Out of the 25,000 or so seven-figure-income families, more than 5,000 left in the early 2000s, and the loss of their tax payments accounted for about half the budget hole."

I am not sure how they got to this number, but holy crap!  20% of the wealthiest families left the state?  I'm not sure even Hugo Chavez is doing that poorly.

Update:  Even more here, comparing inward and outward migration rates of states vs. a state-by-state economic freedom index.

Posted on February 21, 2008 at 10:01 PM | Permalink | Comments (4)

The Tony Soprano Test

I must say that I find this state Supreme Court decision from Washington State terrifying.  It is interesting that the State of Washington has exactly the same proprietary attitude over the garbage business as does the Mafia in New York:

In a decision released this morning, the Court stated that hauling construction waste is not a private enterprise and “is in the realm belonging to the State and delegated to local governments.” The court found specifically that the provision of waste hauling service is a “government service” and constitutional protections do not apply to government-provided services.

I don't know the Washington State constitution, so it may indeed mention "construction waste hauling" as an enumerated power of the government.  If it does not, and by "constitutional protections do not apply" they mean the US Constitution, then this is a stunning over-reading of said document.  Nowhere, in the US Constitution at least, is there a provision for the government providing services of any kind, much less construction waste hauling. 

Posted on February 21, 2008 at 09:57 PM | Permalink | Comments (2)

There are Two Americas!

OK, I guess I have to admit that there are two Americas:  The one that no one wants to live in any more and the one where everyone is moving to. 
Unitedvanlines
Unfortunately, it appears that our next president will be from Illinois or New York, two of the eight states the local government has screwed up so bad that no one wants to do business there any more.  I guess both Hillary and Obama can claim that their states have licked the immigration problem bay increasing taxes and regulation so much that no one wants to come to their states any more.

Posted on February 16, 2008 at 11:04 AM | Permalink | Comments (20)

This Explains a Lot About Michigan

The state of Michigan is a hoot.  The politicians craft laws that create one of the worst business environments in the nation, and then scratch their head and wonder why all the jobs seem to be leaving.  One explanation may be that they simply don't understand even the fundamentals of business.

Case in point:  I have to pay a yearly registration fee as a corporation in Michigan.  That fee is based on the number of shares of stock my company has outstanding.  If my company were worth a million dollars, and had issued one share worth a million dollars, we would pay lower fees than if the same company had issued a million shares each worth one dollar.  Basing taxes and business fees on economically meaningless numbers is probably a leading indicator of some deeper issues.

Posted on February 14, 2008 at 01:51 PM | Permalink | Comments (10)

So That's Why

I have always wondered why the Denver airport has so much goofy modern art all over the place.  Even the subway tunnels have art on the walls (I must admit I am kind of partial to the little fans on the outbound train trip).  There are replicas of paper airplanes hanging from the ceilings, a fountain that is supposed to model the Front Range, and a fake Mayan temple in one terminal concourse.  It turns out that Colorado has a law that says that 1% of the budget for public building construction has to go for art.  Given that the airport costs overran to $4.8 billion, that was a $48 million boondoggle for every goofy public artist that could pull up to the trough.

1318971united_nations_picturre_in_d

Posted on February 14, 2008 at 09:46 AM | Permalink | Comments (7)

When You Convert the Police to Revenue Generators

When you convert the police from crime solvers to revenue generators, this is a pretty logical outcome.  Hat tip to a reader.  A man has his cars stolen, the police ticket them and tow them but refuse to return them to him.

Posted on February 13, 2008 at 09:09 PM | Permalink | Comments (2)

No Wonder Police Want To Make Videotaping Them Illegal

Wow, this officer is a total loser.  Absolutely out of control.  Hand-held video recorders may well be the greatest defense yet against the over-bearing state.  No wonder many police organizations want to ban videotaping of police officers.  Sometimes I watch "The Wire" and wonder, even as a libertarian, if the government and police suckage portrayed there is exaggerated.  And then I see this ... in Baltimore now less!

Update:  The guy in the video likely supports this site.

Posted on February 13, 2008 at 02:25 PM | Permalink | Comments (7)

$100 Million Incentive to Move About 1 Mile

The City of Phoenix is subsidizing a mall developer to the tune of $100 million dollars.  Why?

Desperate to keep another Nordstrom store out of Scottsdale, the City of Phoenix put together a $100 million incentive deal to lure the upscale retailer to the new CityNorth development.

That picture emerged in Maricopa County Superior Court arguments Monday over the constitutionality of the package.

That deal bought a parking deck -- at $30,000 per parking spot.

You see, the developer and its allies in city hall were afraid that Nordstrom's might instead locate their new store waaaaayyyyy over in Scottsdale, probably at the shopping development getting started ... about a mile away and all of one exit further down loop 101, as show below or here.
100milliondollarmove

Here is the gist of it:

At issue in the lawsuit is an agreement between the developers of CityNorth and the city of Phoenix that enables the developers, Related Urban Development and the Thomas J. Klutznick Co., to retain half of the project's sales taxes in exchange for free public parking spaces in a parking garage. The agreement goes for 11 years or $97.4 million, whichever occurs first.

Now, those of you who are from New York or Boston may be saying -- Hmm, free public parking.  Thats a good deal.  Well, in Phoenix, its absurd.  All the mall parking is free.  All the mall parking garages are free.  Every mall around these two locations provide free parking and parking garages.  In fact, a mall developer would get run out of town on a rail in north Scottsdale or Phoenix for even uttering the words "paid parking."  People freak out around here if the valet parking is not free.  Further, the city is trying to somehow portray that the parking is a useful asset for the community at large.  Look at the Phoenix site above.  Do you see a lot of stuff in the surrounding acres that is demanding a lot of parking?

Effectively, this is all a smoke screen for the city giving a $100 million handout to developers to build something, ie free parking, they already had to build.  And the incremental sales revenue argument is absurd.  All the wealthy Scottsdale folks who want to shop at Nordstrom's are already doing so, or are shopping at nearby Desert Ridge.  Only the worst sort of analysis would show incremental sales from this location - all it will do is shift sales around a bit.

I am reminded of my previous post on the subsidization of business relocations as a prisoners dilemma problem.

 

Posted on February 12, 2008 at 07:59 PM | Permalink | Comments (0)

How Public Decisions Get Made

The Anti-Planner has an absolutely fabulous article about a Wisconsin passenger rail proposal, but in fact what the article really is about is how government decisions get made.

According to RTA’s latest newsletter, the KRM would cost about $200 million to start up and would require a $6.3 million annual operating subsidy. For that it would carry about 1.7 million trips per year, which translates to 6,700 per weekday.

In other words, RTA wants to spend $200 million to take 3,350 people to and from work each day. The Milwaukee-Racine-Kenosha urbanized areas have about 750,000 commuters, so RTA’s proposal would take less than half a percent of them to work. But they would all have to pay for it in the form of some local taxes plus a diversion of a share of federal and state gasoline taxes to fund the rail line.

By the way, though this post isn't meant to be entirely about rail itself, let's use Coyote's test on this rail proposal.  As a reminder, here is Coyote's test:

Take the total capital charge and compare it to the cost of buying every projected rider at $22,000 Prius.  Then, take the operating subsidy (which is always higher than projected) and see how it compares to the average gas consumption in a year of said Prius's.  If the projected capital charge and subsidy could have bought every rider a car and all the gas they need to drive it, then the rail line is not only an average run-of-the-mill government boondoggle, but a total and complete ripoff.

And, the KRM... FAILS.  And fails miserably.  The $200 million charge would have bought every rider TWO Prius's and still have some money left over, and the operating subsidy, sure to be larger in reality, would buy each rider about 627 gallons of gas a year, which at 30mpg would get them 19,000 miles per year.  But don't worry, KRM, every single new rail system to which I have applied the test has failed (Phoenix, Houston, LA, Albuquerque).

But lets continue:

The planned commuter line would run 14 round trips per day, which means each train would have about 240 people on board. That’s about five bus loads. So why not just buy five buses for each planned trainset and move people by bus instead?

The newsletter explains that RTA considered a bus alternative, but it would attract only a third as many people as the rail line. It would also cost only an eighth as much to start up, so I always wonder why don’t they just invest three-eighths as much in buses and carry as many people as the rail line.

But then I noticed that the rail line was projected to have seven stops between Milwaukee and Kenosha, while the bus line would stop 27 times. As a result, the bus would take almost twice as long as the train. No wonder it attracted so few people!

The train would average just 38 miles per hour and RTA admits that it would not go significantly faster than motor vehicles, so there is no reason why buses could not be run on schedules similar to the train. So why didn’t they consider an alternative in which buses stopped only seven times?

It turns out they did. The report from the consultant hired by RTA included a bus-rapid transit alternative that stopped fewer times than the regular bus alternative. It included some exclusive busways, so it cost a lot more than the regular bus alternative, but it would cost only half as much as the train. Moreover, it was projected to carry as many riders as the train.

Naturally, RTA told the consultant to drop this alternative from further consideration.

The Anti-Planner shoots back what to me looks like a really good proposal:

The consultant had also estimated that the bus-rapid transit alternative would disrupt traffic more than the trains. But if the busways (which would move no more than about 5 buses per hour) were opened to low-occupancy vehicles that pay a toll, they would actually relieve congestion. Plus, the tolls would pay for most if not all of the new lanes, and by varying the toll, the lanes would never get congested so the buses could meet their schedules. This would result in transportation improvements for both auto drivers and transit riders, and at a very low cost to taxpayers

Posted on February 5, 2008 at 09:06 AM | Permalink | Comments (18)

Notice: All the World's Major Problems Have Been Solved

Clearly, all the major problems of the world have been solved, because Arlen Specter wants to focus the Senate's time on the New England Patriots' violation of NFL rules for which they were severely punished and which violations in no way tread on any law, just NFL rules.

In a telephone interview Thursday morning, Senator Arlen Specter, Republican of Pennsylvania and ranking member of the committee, said that Goodell would eventually be called before the committee to address two issues: the league’s antitrust exemption in relation to its television contract and the destruction of the tapes that revealed spying by the Patriots.

"That requires an explanation," Specter said. "The N.F.L. has a very preferred status in our country with their antitrust exemption. The American people are entitled to be sure about the integrity of the game. It’s analogous to the C.I.A. destruction of tapes. Or any time you have records destroyed."

Please, to the friends of Arlen Specter:  It is time for an intervention, before the man hurts himself any more. 

Next Up:  Kay Bailey Hutchison calls Jerry Jones in front of Congress to explain why the Cowboys gave up on the running game in the fourth quarter of this year's playoff game against the Giants.

Posted on February 1, 2008 at 11:26 PM | Permalink | Comments (8)

The New Micro-Fascism

Get ready, because global warming will soon be an excuse for government micro-management of any number of everyday behaviors.  We have already seen California's attempt to have the government take control of your home thermostat.  In England, the target is patio heaters:

Britain’s growing café culture and taste for alfresco drinking and dining may be under threat from MEPs who want to ban the patio heater.

A vote in Brussels today is expected to call on the European Commission to abolish the heaters to help to tackle climate change. Such a move could cost the pub and catering trade dear.

Pubs spent about £85 million on patio heaters after the smoking ban was introduced last year. Besides forcing smokers into the cold there is concern that a ban on patio heaters could bring a significant cash loss to pubs, cafés and restaurants.

By the way, something not mentioned in the article, perhaps because it takes a knowledge of actual science and stuff, is that these heaters tend to burn LPG and propane, which due to their molecular structure produce far less CO2 per BTU than other fossil fuels.

One is left to wonder what pareto-style ranking of CO2 reduction opportunities put patio heaters at the top of the list.  In fact, there is no possible rational analysis that would make this a legislative priority.  It is a great illustration of two points about such technocratic endeavors:

  1. Government cannot correct supposed market irrationalities because governments always act more irrational than private players in the market, no matter who is in charge.
  2. Most legislation supposedly to fight global warming is using global warming as a fig leaf to hide the actual reason for the legislation.  My guess in this case is that the sponsors of this legislation have some other reason for wanting the ban, but dress it up as global warming.  This mirrors the larger issues, there socialists, unrepentant Ehrlich admirers,  and anti-globalization loonies have repackaged themselves as fighting global warming and then, surprise, proposed the same government actions they were pushing for pre-global-warming-hysteria.

Posted on January 31, 2008 at 10:27 AM | Permalink | Comments (3)

Trojan Horse for Totalitarianism

Over at Maggies Farm, The News Junkie discusses a topic close to my heart, how feel good government programs like health care and education become Trojan horses for fascism. 

Posted on January 29, 2008 at 08:49 AM | Permalink | Comments (0)

When Government Intervenes in Bargaining

A lot of conservatives have an incredible loathing for unions.  Which is one of the reasons why I differ from them as a libertarian.  In a free society, any group of people, including workers at a company, should be able to associate to achieve certain goals, including to increase their bargaining power in wage negotiations.  As I said here:

If a group of even two people want to get together at GM and call themselves a "union" and approach management to negotiate, they should be able to have at it.  In a free society, this is how things should work -- any number of employees should be able to organize themselves.  If they get enough people, then they will have enough clout, perhaps, to be listened to by management.

Here is where the problem comes in, though.  Over history, governments have intervened to increase the power of unions vs. the companies they work for.  Some of the early legislation was fine from an individual rights perspective - e.g. "companies can't hire thugs to beat the crap out of workers to get them to come back to work."  However, over time, the government has passed laws to increase the bargaining power of unions artificially and to increase their power in general (e.g. to violate workers association rights by forcing them to join a pre-existing union or to at least pay union dues as a pre-condition to work in certain companies or industries).  In some states we have come nearly full cirle, to the point that it is almost impossible to prevent unions from using violence in strikes, for example against people crossing picket lines.

So when I see studies like this one, I don't see it as an indictment of unions per se, since unions exist in "right to work" states, but rather an indictment of government intervention trying to ham-handedly balance bargaining.  Here is the interesting chart, from a study by Arthur Laffer:

Righttoworkstates

Michigan in particular has made itself downright hostile to employers.  Given that the official government position is that "we aim to tilt the bargaining power against you in your negotiations with your largest suppliers," it is a wonder any business locates there.

Posted on January 29, 2008 at 08:46 AM | Permalink | Comments (1)

Looming Problems at Fannie Mae

Maxed Out Mamma tells us that Fannie Mae may already have huge subprime exposure (emphasis added):

Maybe most voters believe that FNMA and FHA are just in the conservative loan business. HAHAHAHAHAHAHAHA. Certainly no "trained journalist" is going to ask any questions about this topic.

Both Fannie and FHA will go to DTIs of over 60% in some cases. Especially refis. Try this thread on FHA. If only I had saved down the 100 odd links or so I've run into over the last year about how brokers were getting loans that the subprime companies refused (who have since defaulted) through under FNMA!!! The reason they did it as a last resort was only because FNMA paid less for the loan. FNMA is already going to run into huge problems because of the slopover into their portfolio in the interim between most of the subprime lenders going down and FNMA's meaningful tightening of lending standards. So FNMA already faces years of worsening financial trouble without any new risks. Why does OFHEO oppose this? Hmmmm?

You can get information on Fannie's loan types at efanniemae.com. Believe me, they do high LTV, hybrids, 40 year etc. This page will show you information about Fannie's ARM products. Take a look. Take a good look. You want a 100% interest-only? They got it!! In fact, they'll take downpayment assistance, and go up to 105% with special programs. Chortle! Ya want interest-only ARM hybrids with DAP? Sure. BRING IT ON, cries Fannie. Simultaneous seconds? Sure 'nuff!!! (By the way, this is the escape from the refusal of the MI companies to play.)

The bottom line is that every risk afflicting Alt-A lenders in high-cost areas can afflict Fannie and really has. It's just that no one is paying attention.

Posted on January 25, 2008 at 10:55 AM | Permalink | Comments (6)

Why These Particular People?

People have been defaulting on mortgages for all of recorded history.  In Roman times, such a default could well result in the mortgage-holder getting sold into slavery, so things have improved a bit.  But seriously, people default on their mortgages all the time.  So what makes those currently in default more deserving of taxpayer aid than those before them or after them?  I mean, other than the fact that the press is paying attention to these particular defaults?  A similar question was reasonably asked of 9/11 victims who scored government compensation when victims before or after of other transportation accidents and building fires have not been so rewarded.

I challenge any politician to answer this question with an answer other than "well, these people are in the media spotlight right now and as a politician, I want to be in the spotlight with them."

Update: More analysis here, including the bright side of the burst housing bubble:

Countrywide wants to be able to take its loans that the market won't accept and refi them under FHA or FNMA. That's what this is all about. Don't forget that.

It's not about homeownership. Let's look at the latest 25th percentile (starter homes) list prices for a range of CA cities, compared to the price in January 2007:

LA: $365,000/ $429,920
OC: $414,900/ $499,000
Riverside: $259,900/ $335,000
Sacramento: $229,900/ $316,477
San Diego: $325,000/ $392,279
San Francisco: $380,000/ $468,376
San Jose: $489,950/ $580,589
Santa Cruz: $489,000/ $577,400

What you see above is great news for all the people who would like to buy homes without going bankrupt a few years down the line. It's VERY bad news for banks and financial companies that made the original bad loans without bothering to check whether the borrowers could pay the danged loan. You figure out who this country should reward - responsible aspiring home owners or stupid banks.

Posted on January 24, 2008 at 12:29 PM | Permalink | Comments (5)

Dilemma that's Not Really a Dilemma

When businesses get US Census surveys, they are not the happy smiling documents one gets as an individual.  Stamped all over it is "Your Response Is Required By Law" and when filling it out, one has the suspicion that he is facilitating his own doom by providing government weenies the data ammunition they need to tax or regulate us more. 

The survey asks for total revenues and costs and payrolls cut a bunch of different ways, and takes about 1-2 hours to fill out if one is trying to be accurate.  However, I looked at the survey closer this year and  I noticed that this seven-page survey is for an individual business location

I have nearly 200 campgrounds and other recreational sites.  One of the tricks of our business is we have learned to operate a lot of small dispersed sites in a cost-effective manner.  But now it turns out that to be strictly compliant with the census process, I need to fill out all of this information for each of these sites.  In other words, rather than spend 1-2 hours (the feds say it should take an hour) on one summary report, in fact what I am technically legally supposed to do is fill out two hundred such reports, at a cost of at least 200 hours of my time.  That is 10% of a standard man-year.

So -- do I do it the "right" at the cost of 200 hours of my time or do I do it the way I did it last year?  I won't give my actual answer, which I think the post title telegraphs fairly well, but you can think about yours  (yes, Travis, I know, more rope).

Posted on January 23, 2008 at 11:04 AM | Permalink | Comments (6)

Unvarnished Technocracy

The New York Times editorial board had one of the most jaw-dropping pieces I have read in a long time.  In it, they are absolutely unapologetic in saying that they think the government can spend your money better than you can -- and the larger the government take, the happier we all will be.

The munificence of American corporate titans warms the heart, sort of. The Chronicle of Philanthropy reports that the top 50 donors gave $7.3 billion to charity last year — about $150 million per head....

Yet we’d be so much happier about all the good things America’s moneyed elite pay for if the government made needed public investments.

The flip side of American private largess is the stinginess of the public sector. Philanthropic contributions in the United States — about $300 billion in 2006 — probably exceed those of any other country. By contrast, America’s tax take is nearly the lowest in the industrial world.

Oh my God, does anyone actually believe that Congress does a better job spending your money than you do?  Apparently they do:

Critics of government spending argue that America’s private sector does a better job making socially necessary investments. But it doesn’t. Public spending is allocated democratically among competing demands. Rich benefactors can spend on anything they want, and they tend to spend on projects close to their hearts.

LOLOLOL.  Has anyone looked at the last highway bill?  How many tens of thousands of politically motivated earmarks were there?   

Philanthropic contributions are usually tax-free. They directly reduce the government’s ability to engage in public spending. Perhaps the government should demand a role in charities’ allocation of resources in exchange for the tax deduction. Or maybe the deduction should go altogether. Experts estimate that tax breaks motivate 25 percent to 30 percent of contributions.

At the end of the day, this is not about a better prioritization process for spending -- this is about the NY Times getting a bigger say for itself in said spending.  They know that Warren Buffet couldn't give a rat's behind what the NY Times thinks about how he spends his money, but Congressmen trying to get reelected do care.  The NY Times wields a lot of political, but little private, influence, so they want to see as much spending as possible shift to political hands where the Times wields clout.

Postscript: Boy, here is some quality journalism:

Federal, state and local tax collections amount to just more than 25.5 percent of the nation’s economic output. The Finnish government collects 48.8 percent. As a result, the United States spends less on social programs than virtually every other rich industrial country, according to the Organization for Economic Cooperation and Development. The Finnish government probably has money to build children’s health clinics.

"Probably has money?"  What does that mean?  Do they have government-funded children's health clinics or not?  The Times couldn't work up enough energy to fact-check that?  And by the way, who, other than the NY Times, declared that the best marginal use of additional public funds is for children's health clinics?

Postscript #2: Many of the very rich have been funding schools that are competitive with government-monopoly schools.  In this and many other cases, wealthy people fund programs that work better and cheaper than government alternatives.  I am sure that not only would the feds be happy to have this money to spend themselves (on some fat earmarks for key donors, most likely) but they would additionally be thrilled to get rid of the competition.

Update:  I must be going senile.  I missed the most obvious logical fallacy of all.  The NY Times says that our democratic government is the best possible mechanism for allocating funds.  But doesn't that also mean its the best possible mechanism for setting spending levels?  How can it complain that our democratic government is doing a bad job in setting total spending levels but does a great job in allocating that spending?

Posted on January 22, 2008 at 06:28 PM | Permalink | Comments (4)

Why We Don't Need More Highway Funds

We don't need more highway funds because right now, as estimated by the Anti-Planner, about 40% of Federal highway funds go to non-highway projects.   In particular:

Over the past fifteen years alone, America has spent well over $100 billion on rail transit construction projects but has little to show for it. As mobility advocate John Semmens pointed out a few days ago in a recent Washington Times op ed, transit’s share of urban travel has actually declined since 1995.
Transitvdriving_800_2

Wow, money well spent, huh?  I have written many times on commuter rail follies in Phoenix and other western cities that are utterly unsuited to rail transit.  The most recent news here in Phoenix is that design flaws are appearing, even before the first train is run.

Posted on January 16, 2008 at 09:45 AM | Permalink | Comments (2)