Archive for September 2008

Ecoterrorism Vindicated in England

Apparently 6 vandals who cause $60,000 damage to a power plant in England were acquitted solely on the argument that they were helping stop global warming -- in other words, they admitted their vandalism, but said it was in a higher cause.

It's been a pretty unusual ten days
but today has been truly extraordinary. At 3.20pm, the jury came back
into court and announced a majority verdict of not guilty! All six defendants - Kevin, Emily, Tim, Will, Ben and Huw - were acquitted of criminal damage.

To recap on how important this verdict is: the defendants
campaigners were accused of causing £30,000 of criminal damage to
Kingsnorth smokestack from painting. The defence was that they had 'lawful excuse' - because they were acting to protect property around the world "in immediate need of protection" from the impacts of climate change, caused in part by burning coal.

So the testimony centered not on whether they actually vandalized the power plant - they never denied it - but on whether the criminals were correct to fear global warming from power plants.  I don't know much about British law, but this seems to be a terrible precedent.  Or maybe not - does this mean that I can go and legally vandalize every Congressman's house for wasting my money?

Silly Season is Here

I seldom comment on politics per se, but the whole brouhaha about Obama's use of the phrase "lipstick on a pig" somehow referring to the Republican VP nominee is just silly.  I used the phrase myself the other day.  "Pig" no more was meant to refer to Ms. Palin than using the terms "slavish devotion" or "niggardly" are meant to be racist (though they have similarly been so interpreted). 

PS-  It is entertaining to see that Republicans will play the race/gender victim card as quickly as will the Democrats.

The Opposite Problem

Megan McArdle writes:

Let's be honest, coastal folks:  when you meet someone with a thick
southern accent who likes NASCAR and attends a bible church, do you
think, "hey, maybe this is a cool person"?  And when you encounter
someone who went to Eastern Iowa State, do you accord them the same
respect you give your friends from Williams?  It's okay--there's no one
here but us chickens.  You don't.

Maybe you don't know you're
doing it.  But I have quite brilliant friends who grew up in rural
areas and went to state schools--not Michigan or UT, but ordinary state
schools--who say that, indeed, when they mention where they went to
school, there's often a droop in the eyelids, a certain forced quality
to the smile.  Oh, Arizona State.  Great weather out there.  Don't I need a drink or something? This person couldn't possibly interest me.

from a handful of schools, most of them hailing from a handful of major
metropolitan areas, dominate academia, journalism, and the
entertainment industry.  Our subtle (or not-so-subtle) distaste for
everything from their entertainment to their decorating choices to the
vast swathes of the country in which they choose to live permeate
almost everything they read, watch, or hear.  Of course we don't hear
it--to us, that's simply the way the world is. 

I have written before that I go out of my way not to mention my
double-Ivy pedigree within my business dealings because it tends to cause my
employees (who often have no degree at all) to clam up.  I absolutely
depend on their feedback and ideas, and those dry up if my employees
somehow think that I'm smarter than they are and they start to be afraid to "look stupid."

But McArdle's post causes me to think of another reason not to be snobbish about my eastern degrees.  I meet a lot of rich and succesful people out here in the Phoenix area, and I can't remember the last one that had an Ivy League degree.  I am thinking through a few of them right now -- ASU, ASU, Arizona, Kansas State, Tulane, no college, San Diego State....  Getting uppity about my Harvard MBA around here only leaves me vulnerable to the charge of "Person X went to Montana State and is worth $10 million now -- what the hell have you been doing with that Harvard MBA?"  Here in flyover country, college degrees and family pedigree are not really strong predictors of business success.

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.

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:

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

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:

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.

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.

It Sucks to be a Woman

This weekend, I had a conversation with a group of people about the upcoming election.  As is typical in a fairly diverse group, at least one woman said that she was voting for Obama to protect "women's rights."  When pressed, this seemed to boil down to support for abortion rights. 

Boy, I am sure glad that I am a man, where my rights are not narrowly defined around the availability of a single out-patient surgical procedure.  I get to define my rights to include free speech, commerce, property, gun ownership, immunity from arbitrary search and seizure, and habeus corpus.  Even in the narrow world of medical care, I can aspire broadly to rights such as the ability to use medications not necessarily labeled safe and effective by the FDA, the ability to contract for whatever procedures I want even if the government is not willing to pay for them, and the abilty ride my motorcycle with or without a helmet as long as I am willing to bear the cost and consequences of my actions.

I will confess that this broader view of my rights makes voting more difficult, as neither the Coke nor the Pepsi party consistently protects my rights defined this broadly.

The $9 Billion Dollar Toe

A few weeks ago I was amazed at the story of the city of Chicago spending hundreds of millions of dollars to build the terminal rail station of a rail line that had no plan, no route, no approval, and no money.  Why spend hundreds of millions on a station that could well be orphaned?  The reason, I supposed, was to make a toe in the water investment where the public could later be shamed into voting more funds for building a rail line to actually connect to their fabulous new station.

It appears that California may be doing the same thing. This November, voters in that state will have the chance to approve a $9.95 billion rail bond issue.  $9 billion of this is earmarked for building a high-speed rail line from Anaheim to San Francisco.  But current estimates for this line's cost, which are always way too low, are for $30 billion.  Who in their right mind would proceed with a $30 billion (or likely more) project when only $9 billion of funding has been obtained?  Only scam artists, Ponzi schemes.... and the government.

  Wow!  Boy, I must be dumb or something.  The website supporting this bond issue says that this project will create 450,000 permanent new jobs.  How can anyone oppose that?  This is really amazing, since the entire US railroad industry currently employs 224,000 people, but this one rail line will create 450,000 jobs! 

Update #2:  I like to make predictions about government rail projects, so here is mine for this one:  I don't know what end they are starting with, but if they start from the south, I will bet that $9 billion does not even get them out of the LA area (say past Santa Clarita or Santa Barbara), much less anywhere close to San Francisco.

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:

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.

Good News on the Free Speech Front

Last year, a University of Delaware student was banned from campus and ordered to undergo psychological testing before he could return.  This was the administration's reaction to another student's complaint about certain content on his website, which was described as "racist, sexist, anti-Semitic, and homophobic."

Now, I have a guess that I would not have thought much of this student's professed opinions, but the first amendment is there to protect speech we don't like from punishment by government bodies such as the state-run University of Delaware.  So it is good to see that the US District Court for Delaware granted this student summary judgment on his free speech claim.

In particular, I was happy to see this:

The court also noted that speech is constitutionally protected when it does not cause a substantial disruption on campus"”even
if an individual student feels so upset by the speech that she feels
threatened by it, and even if university administrators strongly
dislike what is being said. That is, the complaining student's
reaction, together with the administrative trouble involved in dealing
with the situation, was not enough to show a substantial disruption
requiring punishment for Murakowski's protected speech.

This is important.  While it seems odd, college campuses have been the vanguard for testing new theories for limiting free speech over the last several years.  One popular theory is that offense taken by the listener is sufficient grounds to hold speech to be punishable.   This definition kills any objective standards, and therefore is a blank check for speech limitation, something its proponents understand all too well.  It is good to see a higher court very explicitly striking down this standards.

New Unemployment Numbers

US unemployment in August "jumped unexpectedly" to 6.1%, by the oddest of coincidences in the first full month just after new, 12% higher US minimum wages took effect

The unemployment rate is higher than it has been in the United States in the last 5 years, but substantially lower than the rate most Western European countries like France and Germany experience even during peak economic times. 

In response, the Obama campaign is urging further increases to the minimum wage and emulation of labor policy and legislation in France and Germany.

That's Depressing

No, the news itself is good news, not bad:

This week, the Republican Party in its national platform called for an end to ethanol mandates in just the latest shot at a fuel alternative that, in some circles, has grown more target than treasure.

This was the part that was depressing:

High ranking politicians, including presidential candidate John McCain,
have publicly opposed ethanol subsidies before, but the platform
approved during the Republican convention in St. Paul, a corn-belt
capital, marks the first time a major U.S. party has taken an official stance against publicly funded ethanol incentives.

Talk about the emperor's new clothes.  If only we could get the first step on the campaign trail out of Iowa.

Yea! The NFL is Back!

The only time my son (born in Dallas) has every been sympathetic to Adolph Hitler.  Enjoy this bit of Friday randomness:

Our Bodies, Ourselves

I have written on a number of occasions that I thought it odd that the left (and women's groups in particular) don't see a contradiction between their support for government health care and their long-held abortion beliefs that people should be free of government coercion when it comes to decisions about their body and their health.  These views certainly don't seem compatible in England:

A cancer charity has today published research that shows doctors are keeping
  cancer patients in the dark about new treatments that could extend their lives.

Myeloma UK, which conducted the research, said a quarter of myeloma
  specialists questioned in a survey admitted hiding the facts about
  treatments that may be difficult to obtain on the NHS.

The main reason given was to avoid distressing or confusing patients.

Myeloma is a bone marrow cancer that affects around 3,800 people each year in
  the UK. Of these, 2,600 are likely to die from the disease.

Someone Else Joins the "Peak Whale" Bandwaggon

Katherine Mangu-Ward makes a point I have also made on occasion:

take a moment to thank the man who really saved the whales: John D. Rockefeller.

1846, Americans dominated the whaling industry with 735 ships. John D.
Rockefeller gets into the oil refining business in 1865. By 1876,
kerosene is routing whale oil, and the whaling fleet was down to 39 ships, because kerosene was just so darn cheap:

price of sperm oil reached its high of $1.77 per gallon in 1856; by
1896 it sold for 40 cents per gallon. Yet it could not keep pace with
the price of refined petroleum, which dropped from 59 cents per gallon
in 1865 to a fraction over seven cents per gallon in 1895.

This dynamic is also instructive for those fretting that we're going to run out of oil,
just as many undoubtedly worried that we were going to run out of
whales. (Note to self: Check historical record for instances of the
phrase "Peak Whale.")

I don't want to be overly self-referential here, but I actually "found" this reference to peak whale theory over two years ago when digging through the archives of this blog's 19th century predecessor, the Coyote Broadsheet:

As the US Population reaches toward the astronomical
total of 40 million persons, we are reaching the limits of the number
of people this earth can support.    If one were to extrapolate current
population growth rates, this country in a hundred years could have
over 250 million people in it!  Now of course, that figure is
impossible - the farmland of this country couldn't possibly support
even half this number.  But it is interesting to consider the
environmental consequences.

Take the issue of transportation.  Currently there are over 11
million horses in this country, the feeding and care of which
constitute a significant part of our economy.  A population of 250
million would imply the need for nearly 70 million horses in this
country, and this is even before one considers the fact that "horse
intensity", or the average number of horses per family, has been
increasing steadily over the last several decades.  It is not
unreasonable, therefore, to assume that so many people might need 100
million horses to fulfill all their transportation needs.  There is
just no way this admittedly bountiful nation could support 100 million
horses.  The disposal of their manure alone would create an
environmental problem of unprecedented magnitude.

Or, take the case of illuminant.  As the population grows, the
demand for illuminant should grow at least as quickly.  However, whale
catches and therefore whale oil supply has leveled off of late, such
that many are talking about the "peak whale" phenomena, which refers to
the theory that whale oil production may have already passed its peak.
250 million people would use up the entire supply of the world's whales
four or five times over, leaving none for poorer nations of the world.

I wrote more about John D. Rockefeller (including his role in saving the whales) in my praise of Robber Barrons several years ago.  In addition to Rockefeller, the article also discussed Cornelius Vanderbilt as the 19th century precursor to Southwest Airlines.  From the Harper's Magazine in 1859:

...the results in every case of the establishment of opposition lines
by Vanderbilt has been the permanent reduction of fares.  Wherever he
'laid on' an opposition line, the fares were instantly reduced, and
however the contest terminated, whether he bought out his opponents, as
he often did, or they bought him out, the fares were never again raise
to the old standard.  This great boon -- cheap travel-- this community
owes mainly to Cornelius Vanderbilt".

When Government Tries to Pick Winners

Folks like Barack 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

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

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.

So Wrong, I Almost Wish It Would Pass

Sometimes a proposed law is so wrong and so destructive, but so typical of a certain philosophical bent, that I almost wish it would pass, if for no reason than to have an Atlas Shrugged-type object example of disastrous results.  Such is the case for a California ballot initiative that has qualified for the signature-gathering stage.  The initiative, in part:  (full text linked here)

  • Imposes one-time tax of at least 55% on property
    exceeding $20 million of a California resident or held in California by
    nonresident.  [note that this is an asset tax, not an income tax]
  • Imposes one-time tax (between 36.5% - 54.3%) on income exceeding $10 million when resident dies or leaves California.
  • Imposes
    additional 17.5% tax on total incomes of taxpayers with income
    exceeding $150,000 if single, $250,000 if married; 35% if incomes
    exceed $350,000 if single, $500,000 if married.
  • The proceeds of this money will be used to:
    • To
      purchase 30% to 51% of the outstanding shares of stock in ExxonMobil,
      Chevron, General Motors, Ford, Goldman Sachs, JP Morgan Chase, and
      Citigroup, in order to ensure California has an uninterrupted source of
      energy and financial capital.
    • To drain and restore the Hetch Hetchy Valley to it's condition at the beginning of the 20th century.
    • Use
      any Surplus funds to combat Global Warming, make infrastructure repairs
      and improvements, and to research alternative energy sources.

Beyond the unbelievably Marxist confiscation going on here, it begs the question of just what supply of energy and financial capital that California is not getting today that this will somehow ensure.  The implication seems to be that ExxonMobil, GM, and Citigroup are too fair-minded, selling their wares too even-handedly, and that California would prefer their attention tilted towards California.

Of course this initiative is profoundly immoral, so I can't do anything but deride it, but it would make for a spectacular object lesson (though one would have thought the Soviet Union's experience to be sufficient to this task, but apparently not).  I am sure GM's troubles would be greatly helped by replacing its board of directors with the California State Legislature  (the only American organization running a bigger deficit than GM) and replacing Citigroup's credit analysists with California social services beauracrats.  I would kind of like to see this in the same way I would love to see what happens if I threw a crate of flourescent tubes off a 10th-floor roof  -- I would never actualy do it, because it would be unsafe and destructive, but I can still dream about how compelling the disaster would be.

Postscript: One could probably label this the Arizona and Nevada economic stimulation act and probably not be far off the mark.

Ubiquitous and Unknown and the Same Time

Don LaFontaine died the other day (ht Whatever).  You definitely know who this guy was, even if you don't.

When Did the Media Stop Distringuishing Between Facts and Guesses?

The Associated Press has an article on how the demographics of New Orleans changed post-Katrina:

Those who have moved back to New Orleans in the three years since
Hurricane Katrina devastated the city are likely to have higher incomes
and more education than people who haven't come back, demographic data

New Orleans remains predominantly black, as it was before Hurricane
Katrina struck in 2005, U.S. Census Bureau figures show. But people who
have some college education, are above the poverty line, own homes
and have no children are more likely to have returned to the city than
others, says William Frey, a demographer at the Brookings Institution
in Washington.

The city was 59 percent black in 2006, the most recent census
figures available, compared with 68 percent in 2005. Census data shows
20.6 percent of New Orleans residents were below the poverty level last
year, compared with 24.5 percent in 2005.

OK, the fact that the demographics of New Orleans have changed coincident with the Katrina evacuation  is a fact.  It is based on probably the best demographic data available, though it is not clear that Mr. Frey has the evidence at hand to separate the effects of economic growth in New Orleans from migration patterns in explaining the drop in people below the poverty line, but I will cut him some slack compare to this next statement:

"The people who have come back are the people with the best resources
to come back," said Frey, a demographer at the Brookings Institution in
Washington who has studied the demographics of New Orleans. "The people
who have not come back are lower-income, minorities, largely renters.
They were the least equipped to come back and have not been able to."

This is a guess.  The data Mr. Frey is working with sheds no light on the reason certain groups did not return.  His statement that they did not come back because they did have the resources to do so is an unproven hypothesis.  I could easily offer a counter-hypothesis, that the issue was that these folks did not have the resources or the knowledge to leave New Orleans to find opportunities to escape their poverty, and having been granted the unique opportunity by the Katrina evacuation to get out, they have found opportunity elsewhere and see no reason to return to the place where they were formerly impoverished.  I actually think my hypothesis is more likely than Mr. Frey's, but in the end both of us are guessing.