Posts tagged ‘WSJ’

Additional Thoughts on Risk

SB7 has some good observations about risk:

I was listening to the WSJ radio podcast while getting some dinner ready, and one of their reporters said, in the context of discussing Fukushima, that some of the engineers at the plant "knew there was a risk" in the plant's older design and could conceivably face charges for not doing something about said risk.

This kind of talk really grinds my gears.  In any engineering situation there is always some risk.  You can have less risk, or more risk, but risk is not something you either have or do not have.

I will go one step further.  This ex post facto witch hunt aimed at folks who discussed risks  (an pogrom that occurs in nearly every product liability lawsuit with fishing expeditions through company memos) is the WORST possible thing for consumers concerned about the safety of their products and environment.  Engineers have to feel free to express safety concerns within organizations no matter how hypothetical these suppositions may be.

Some concerns will turn out to be unfounded.  Some suggested risks will be deemed too small to economically overcome.  And some will turn out to be substantial and require action.  And sometimes well-intentioned people will make what is, in retrospect, the wrong trade-offs with risks.   These witch hunts only tend to suppress this very valuable and necessary internal dialog within organizations.  Nothing is going to turn the brains of engineers off faster than an incentive system that punishes them retroactively for well-intentioned discussions about risk.

Hope and Change

Via the WSJ, discussing the US's Siberian Gulag in the Caribbean:

The Obama administration on Monday announced plans for new Guantanamo Bay military trials and for the first time laid out its legal strategy to indefinitely detain prisoners who can't be tried but are too dangerous to be freed.

President Barack Obama issued an executive order to conduct periodic reviews of the cases of the nearly 50 detainees who will be detained indefinitely.

It used to be that people who had never been convicted of any crime but that certain people in the government considered dangerous were called "free men."

Licensing to Restrict Competition

The WSJ has yet more examples of crazy job licensing, example:  (ht Alex Tabarrok)

But economists—and workers shut out of fields by educational requirements or difficult exams—say licensing mostly serves as a form of protectionism, allowing veterans of the trade to box out competitors who might undercut them on price or offer new services.

"Occupations prefer to be licensed because they can restrict competition and obtain higher wages," said Morris Kleiner, a labor professor at the University of Minnesota. "If you go to any statehouse, you'll see a line of occupations out the door wanting to be licensed."...

Texas, for instance, requires hair-salon "shampoo specialists" to take 150 hours of classes, 100 of them on the "theory and practice" of shampooing, before they can sit for a licensing exam. That consists of a written test and a 45-minute demonstration of skills such as draping the client with a clean cape and evenly distributing conditioner. Glass installers, or glaziers, in Connecticut—the only state that requires such workers to be licensed—take two exams, at $52 apiece, pay $300 in initial fees and $150 annually thereafter.

California requires barbers to study full-time for nearly a year, a curriculum that costs $12,000 at Arthur Borner's Barber College in Los Angeles. Mr. Borner says his graduates earn more than enough to recoup their tuition, though he questions the need for such a lengthy program. "Barbering is not rocket science," he said. "I don't think it takes 1,500 hours to learn. But that's what the state says."

Many, many other examples -- it takes 750 hours of training to be a manicurist in Alabama.  Somehow my daughter learned to paint her own nails during the course of a single sleepover.

Raising Better College Students

Two great takes on the Amy Chua article on the superiority of Chinese moms.  I will begin by saying that I went to an Ivy League school and would love to see my kids go there as well.  But the be-all end-all drive to get into such a school, combined with 6% admissions rates, seems to be a recipe for a lot of unhappiness.  Especially since the vast, vast  (did I say vast?) majority of the most successful people I have met in my life went to non-name-branded schools.

The first take is from the Last Psychiatrist:

I'll explain what's wrong with her thinking by asking you one simple question, and when I ask it you will know the answer immediately.  Then, if you are a parent, in the very next instant  your mind will rebel against this answer, it will defend itself against it-- "well, no, it's not so simple--" but I want to you to ignore this counterattack and focus on how readily, reflexively, instinctively you knew the answer to my question.  Are you ready to test your soul?  Here's the question: what is the point of all this? Making the kids play violin, of being an A student, all the discipline, all of this?  Why is she working her kids so hard?  You know the answer: college.

She is raising future college students.

Oh, I know that these things will make them better people in the long run, but silently agree that her singular purpose is to get the kids into college.  Afterwards she'll want other things for them, sure, but for 18 years she has exactly one goal for them: early decision.

The second take is from TJIC:

Professor Amy Chua is part of two broken credentialist mindsets: the Chinese Confucian admissions-to-the-imperial bureacracy memset, and the American academic admissions-to-the-Ivy-League memeset. (But perhaps I repeat myself).

Heck, she’s risen to a top spot in the American conformist system – she’s a PhD and a professor at a top university. Of course she buys into the implied social hierarchy.

I climbed much of the way up that particular hierarchy, and then decided towards the end of the process to bag on a PhD. Why? Because I looked around and realized that PhDs, even professors at Ivy League schools, weren’t really accomplishing much, and weren’t really happy.

I do interviews for Princeton as part of the admissions process.  I am not sure that the admissions office would agree with my approach, but I spend time in the interviews trying to figure out if a high achieving student has succeeded by grimly jumping through hoops under his or her parents' lash, or if they have real passion and interest in the things they do.  I tend not to be impressed by the former.

Seriously, are we really celebrating the creation of a whole generation of our brightest kids who get all their motivation externally?  What happens when the motivation prosthetic they have been using goes away?

Postscript: From the first article

That's why it's in the WSJ.  The Journal has no place for, "How a Fender Strat Changed My Life."  It wants piano and violin, it wants Chua's college-resume worldview.

Oh how I wish my parents had forced me to play electric guitar rather than piano.

Walter Duranty is Alive and Well

From the WSJ, about a recent "documentary" on PBS's Newshour

Mr. Suarez's report, by contrast, is like a state propaganda film. In one segment, an American woman named Gail Reed who lives in Cuba tells him that the government's claim of its people's longevity is due to a first-rate system of disease prevention. He then parrots the official line that Cuba's wealth of doctors is the key ingredient. What is more, he says, these unselfish revolutionary "foot soldiers" go on house calls. "It's aggressive preventive medicine," Mr. Suarez explains. "Homes are investigated, water quality checked, electrical plugs checked."...

As to doctors checking on water quality and electricity outlets, the PBS reporter might be surprised to learn that most Cuban homes have no running water or power on a regular basis. This is true even in the capital. In 2006, Mr. Botín says, a government minister admitted that 75.5% of the water pipes in Havana were "unusable" and "recognized that 60% of pumped water was lost before it made it to consumers." To "fix" the problem, the city began providing water in each neighborhood only on certain days. Havana water is also notoriously contaminated. Foreigners drink only the bottled stuff, which Cubans can't afford. In the rest of the country the quality and quantity of the water supply is even less reliable.

This is particularly ironic since, at the same moment this show was airing, state department reports leaked by Wikileaks revealed that the Cuban government banned the showing of Michael Moore's "Sicko" in Cuba, despite the film being wildly propagandistic in favor of the Cuban government.  Why?  Because the portrayal of the Cuban medical system, as in Mr. Suarez's PBS report, was so unrealistically favorable that ordinary Cuban citizens would immediately recognize it as BS.

Pay to Play

From the WSJ:

The wide-ranging pay-to-play probe concerns whether investment firms like Mr. Rattner's former firm, Quadrangle Group LLC, were held up for fees and favors to secure access to lucrative business from New York's $125 billion public-pension fund.

So government officials, who have all the power, demand bribes from businesses in order for those businesses to participate in a certain market, and when discovered it is the private businesses that are being investigated?

This is just so typical of government, where pay-to-play rules are in fact legislated for businesses from bars to taxicabs.  I can't do anything new in Ventura County without bringing a whole series of checks to the County planning offices -- nearly every single department must be paid off before I can do something as simple as remodel a bathroom or revamp a store.  None of this is under the table, mind you, it is entirely up front and nominally legal.

The Anti-Responsibility Law

Congress just passed a new $26 billion payoff to state governments, easing the pressure on states to institute some sort of fiscal responsibility.  The follows on the heals of last year's tens of billions of dollars in direct aid to state budgets in the original stimulus bill.

Taking the pressure off states for real fiscal reform is bad enough, but this is worse:

Maintaining the salaries and generous benefit plans for members of teachers unions is indeed a top Democratic priority. That's why $10 billion of the bill's funding is allocated to education, and the money comes with strings that will multiply the benefits for this core Obama constituency.Specifically, the bill stipulates that federal funds must supplement, not replace, state spending on education. Also, in each state, next year's spending on elementary and secondary education as a percentage of total state revenues must be equal to or greater than the previous year's level.

This is roughly equivalent to the government telling mortgage holders that took on too much debt that the government will bail them out, a clear moral hazard.  But then it goes further to force the mortgage-holder to promise to take on a bigger mortgage next year.  Unbelievable.

In a move right out of Atlas Shrugged, Texas is singled out for special penalties in the law because, well, it seems to be doing better than all the other states economically and is one of the few that seem comitted to fiscal responsibility

For Texas, and only Texas, this funding rule will be in place through 2013 [rather than 2011]. This is a form of punishment because the Beltway crowd believes the Lone Star State didn't spend enough of its 2009 stimulus money.

So much for equal protection.  This Congress sure has set an incredible record for itself in choosing to reward and punish individual states (remember Nebraska and Louisiana) in its legislation.

The WSJ thinks perhaps a different kind of multiplier, other than the Keynesian one, is behind this legislation.

Keep in mind that this teacher bailout also amounts to a huge contribution by Democrats to their own election campaigns. The National Right to Work Committee estimates that two of every three teachers belong to unions. The average union dues payment varies, but a reasonable estimate is that between 1% and 1.5% of teacher salaries goes to dues. The National Education Association and other unions will thus get as much as $100 million in additional dues from this bill, much of which will flow immediately to endangered Democratic candidates in competitive House and Senate races this year.

Dispatches from the Corporate State

From the WSJ:

Robert Brownson long believed that his proposed development here, with its 200,000-square-foot Wal-Mart Supercenter, was being held hostage by nearby homeowners.He had seen them protesting at city hall, and they had filed a lawsuit to stop the project.

What he didn't know was that the locals were getting a lot of help. A grocery chain with nine stores in the area had hired Saint Consulting Group to secretly run the antidevelopment campaign. Saint is a specialist at fighting proposed Wal-Marts, and it uses tactics it describes as "black arts."...

Supermarkets that have funded campaigns to stop Wal-Mart are concerned about having to match the retailing giant's low prices lest they lose market share. Although they have managed to stop some projects, they haven't put much of a dent in Wal-Mart's growth in the U.S., where it has more than 2,700 supercenters"”large stores that sell groceries and general merchandise. Last year, 51% of Wal-Mart's $258 billion in U.S. revenue came from grocery sales.

Read the whole article.  There hardly appears to be any major grocery chain or related union that has not contributed significant dollars to preventing their competitor from doing what they have already done - built a store in town.  Knock me over with a feather that Chicago is a major example, training ground for our President and promoter-in-chief of our emerging corporate state.

The only sustainable monopolies are those enforced by the government, which through licensing, regulation, zoning, or all of the above, squash upstart competitors at the expense of consumers in favor of politically connected incumbents.

The Immigration Non-Crime Wave

Proponents of tougher immigration enforcement often use crime as their big scare factor in trying to influence people to their point.  Only tougher laws and Joe Arpaio, they caution, stand athwart the coming immigrant rape of Phoenix.

But when the case is built on one or two high-profile crime where the perpetrator has not even been identified, rather than statistics, we can be suspicious of how strong the case is.  I have cited historical figures here, but the WSJ has the new figures for 2009:

Violent crime fell significantly last year in cities across the U.S., according to preliminary federal statistics, challenging the widely held belief that recessions drive up crime rates.

The incidence of violent crimes such as murder, rape and aggravated assault was down 5.5% from 2008, and 6.9% in big cities. It fell 2.4% in long-troubled Detroit and plunged 16.6% in Phoenix, despite a perception of rising crime that has fueled an immigration backlash....

In Phoenix, police spokesman Trent Crump said, "Despite all the hype, in every single reportable crime category, we're significantly down." Mr. Crump said Phoenix's most recent data for 2010 indicated still lower crime. For the first quarter of 2010, violent crime was down 17% overall in the city, while homicides were down 38% and robberies 27%, compared with the same period in 2009.

Arizona's major cities all registered declines. A perceived rise in crime is one reason often cited by proponents of a new law intended to crack down on illegal immigration. The number of kidnappings reported in Phoenix, which hit 368 in 2008, was also down, though police officials didn't have exact figures.

And just to head off the obvious straw man, 2008 was not somehow a peak year, it was actually well below historical levels.

Let's Make Sure the Internet Remains Just as Innovative as General Motors

Via the WSJ

A federal appeals court ruled last month that the Federal Communications Commission lacks the authority to regulate the Internet. No worries, mate. This week the Obama Administration chose to "reclassify" the Internet so it can regulate the Web anyway. This crowd is nothing if not legally creative.

For the past decade, broadband has been classified as an "information service" and thus more lightly regulated than traditional telephone services. This has led to an explosion of new investment and Web innovation, but it hasn't sat well with Democrats who want more control over the telecom business, as well as with some Web companies (Google) that want more leverage over Internet service providers like Time Warner or Verizon.

FCC Chairman Julius Genachowski did their dirty work this week by announcing that he plans to reclassify broadband lines so his agency can regulate them under rules that were written for Ma Bell in the 1930s. This means subjecting the Internet to new political supervision"”from the federal government and 50 state public utility commissions. The goal is to put one more industry under Washington's political thumb.

Irony

Via the WSJ, on the Mortgage Banker's Association (MBA) being underwater on their real estate loan:

On Friday, CoStar Group Inc., a provider of commercial real estate data, announced that it had agreed to buy the MBA's 10-story headquarters building in Washington, D.C., for $41.3 million. The price is well below the $79 million the trade group says it paid for the glass-walled building in 2007, while it was still under construction. The price also falls short of  the $75 million of financing that the MBA received from a group of banks led by PNC Financial Services Group Inc. for the purchase.

John Courson, chief executive officer of the trade group, declined in an interview Saturday to say whether the MBA would pay off the full loan amount. "We're not going to discuss the financing," he said. A spokeswoman for the MBA added that the MBA has reached "an agreement with all relevant parties" regarding the outstanding amount on that loan but declined to provide any details.

...In an interview late last year, Mr. Courson said he believed mortgage borrowers should keep paying their loans even if that no longer seemed to be in their economic interest.  He said paying off a mortgage isn't only a matter of personal interest.  Defaults hurt neighborhoods by lowering property values, Mr. Courson said. "What about the message they will send to their family and their kids and their friends?" he asked.

Funniest Quote of the Week, Maybe the Year

This is truly hilarious, from our President via the WSJ:

From the outset, the White House's core claim was that reform would reduce health costs for individuals and businesses, and they're sticking to that story. "Anyone who says otherwise simply hasn't read the bills," Mr. Obama said over the weekend. This is so utterly disingenuous that we doubt the President really believes it.

This is hilarious.  Not only had few people been able to slog through the old 2000+ page bill, but Harry Reid threw the whole thing out and substituted a double secret replacement bill on Saturday the NO ONE has read, Obama included.  So this statement is technically true, but reverse statement is also equally true - "anyone who agrees with the President simply hasn't read the bill, either."

Totalitarians Catching Up to the Internet

Via the WSJ:

His first impulse was to dismiss the ominous email as a prank, says a young Iranian-American named Koosha. It warned the 29-year-old engineering student that his relatives in Tehran would be harmed if he didn't stop criticizing Iran on Facebook.

Two days later, his mom called. Security agents had arrested his father in his home in Tehran and threatened him by saying his son could no longer safely return to Iran.

"When they arrested my father, I realized the email was no joke," said Koosha, who asked that his full name not be used....

In recent months, Iran has been conducting a campaign of harassing and intimidating members of its diaspora world-wide -- not just prominent dissidents -- who criticize the regime, according to former Iranian lawmakers and former members of Iran's elite security force, the Revolutionary Guard, with knowledge of the program.

Part of the effort involves tracking the Facebook, Twitter and YouTube activity of Iranians around the world, and identifying them at opposition protests abroad, these people say.

Interviews with roughly 90 ordinary Iranians abroad -- college students, housewives, doctors, lawyers, businesspeople -- in New York, London, Dubai, Sweden, Los Angeles and other places indicate that people who criticize Iran's regime online or in public demonstrations are facing threats intended to silence them.

Although it wasn't possible to independently verify their claims, interviewees provided consistently similar descriptions of harassment techniques world-wide. Most asked that their full names not be published.

The Marginal Vote Will Be Even More Expensive

Coyote Blog, July 16, 2009

It is totally clear to me that Obama and Pelosi will spend any amount of money to pass their key legislative initiatives.  In the case of Waxman-Markey, the marginal price per vote turned out to be about $3.5 billion.  But they didn't even blink at paying this.  That is why I fear that some horrible form of health care "reform" may actually pass.  If it does, the marginal cost per vote may be higher, but I don't think our leaders care.

WSJ, Nov 19, 2009

What does it take to get a wavering senator to vote for health care reform?

Here's a case study.

On page 432 of the Reid bill, there is a section increasing federal Medicaid subsidies for "certain states recovering from a major disaster."

The section spends two pages defining which "states" would qualify, saying, among other things, that it would be states that "during the preceding 7 fiscal years" have been declared a "major disaster area."

I am told the section applies to exactly one state:  Louisiana, the home of moderate Democrat Mary Landrieu, who has been playing hard to get on the health care bill.

In other words, the bill spends two pages describing would could be written with a single world:  Louisiana.  (This may also help explain why the bill is long.)

Senator Harry Reid, who drafted the bill, cannot pass it without the support of Louisiana's Mary Landrieu.

How much does it cost?  According to the Congressional Budget Office: $100 million.

Couldn't We Just Close Government Based on this Doctrine?

The WSJ on new EPA CO2 rules under the Clean Air Act:

Usually it takes an act of Congress to change an act of Congress, but Team Obama isn't about to let democratic"”or even Democratic"”consent interfere with its carbon extortion racket. To avoid the political firestorm of regulating the neighborhood coffee shop, the EPA is justifying its invented rule on the basis of what it calls the "absurd results" doctrine. That's not a bad moniker for this whole exercise.

The EPA admits that it is "departing from the literal application of statutory provisions." But it says the courts will accept its revision because literal application will produce results that are "so illogical or contrary to sensible policy as to be beyond anything that Congress could reasonably have intended."

Well, well. Shouldn't the same "absurd results" theory pertain to shoehorning carbon into rules that were written in the 1970s and whose primary drafter"”Michigan Democrat John Dingell"”says were never intended to apply?

It is interesting to see the Obama administration using the exact same logic to limit the reach of the Clean Air Act vis a vis Co2 emissions as the Bush Administration did to say the Clean Air Act should have not applicability to CO2 emissions.

Yet one not-so-minor legal problem is that the Clean Air Act's statutory language states unequivocally that the EPA must regulate any "major source" that emits more than 250 tons of a pollutant annually, not 25,000. The EPA's Ms. Jackson made up the higher number out of whole cloth because the lower legal threshold"”which was intended to cover traditional pollutants, not ubiquitous carbon"”would sweep up farms, restaurants, hospitals, schools, churches and other businesses. Sources that would be required to install pricey "best available control technology" would increase to 41,000 per year, up from 300 today, while those subject to the EPA's construction permitting would jump to 6.1 million from 14,000.

So the Bush Administration argues that the Clean Air Act applies to 0% of CO2 sources and they are accused of breaking the law.  But the Obama Administration argues the Clean Air Act applies to 0.2% - 0.7% of sources and this is somehow a vastly superior legal argument?  The courts rejected 0.0% as non-compliant but they will accept 0.2%?

The Future of Newspapers

I couldn't really get up enough energy to post about the whole Van Jones kerfuffle.  Apparently, as one of Obama's 129 czars, this guy whose job it is to redistribute billions of dollars from one group of individuals to another and issue diktats to be followed by private citizens and businesses, is *gasp* a communist.  Well, no sh*t.  All of these various czars have communist roles so why is it surprising Obama might have picked a communist to hold one of them.  The only surprise was that Van Jones was dumb enough to admit it in print rather than hiding it in leftish double-speak like most of the rest of the administration.

Anyway, all that aside, you gotta love the NY Post, which has no problem dropping any pretense of statesmanship and is perfectly willing to skewer its cross town rival.  This editorial is pretty dang funny.  An excerpt:

Newspaper of record? The Times isn't so much a newspaper as a clique of high school girls sending IMs to like-minded friends about their feuds and faves and raves and rants. OMFG you guys! It's no more objective than Beck is....

The Times continues to treat communism as a cute campus peccadillo like pot smoking or nude streaking. A Times think piece (Sept. 9) worried that Jones' fall was "swift and personal." Being a communist is personal but being the pregnant teen daughter of a vice presidential candidate is public business?

In a quasi-related post, Virginia Postrel says the Washington Post lost $1.10 per copy of their newspaper last quarter.  Wow!

I have to disagree with Ed Driscoll, though.  He like many conservatives argues that this economic problem of newspapers is somehow because the Times has dropped its objectivity.  I am not sure anyone has evidence that is true.  One could make, I think, an equally strong case that the Times should be less objective and go openly partisan.  After all, this notion of politically neutral newspapers is a pretty recent phenomenon in the US.

I actually think the problem with newspapers like the Washington Post is the "Washington" part.  Local business models dominated for decades in fields where technology made national distribution difficult or where technology did not allow for anything but a very local economy of scale.  Newspapers, delivery of television programming, auto sales, beverage bottling and distribution, book selling, etc. were all mainly local businesses.  But you can see with this list that technology is changing everything.  TV can now be delivered via sattelite and does not require local re-distribution via line of sight broadcast towers or cable systems.  Amazon dominated book selling via the Internet.  Many of these businesses (e.g. liquor, auto dealers, TV broadcasting) would have de-localized faster if it had not been for politicians in the pocket of a few powerful companies passing laws to lock in outdated business or technological models.

Newspapers are ripe for a restructuring.  How can one support a great Science page or Book Review section or International Bureau on local circulation?  How much effort do the NY Times, Washington Post, LA Times, SF Chronicle, etc. duplicate every day?  People tell me, "that's what the wire services are for."  Bah.  The AP is 160 years old!  It is a pre-Civil War solution to this problem.  Can it really be that technology and changing markets have not facilitated a better solution?

The future is almost certainly a number of national papers (ala the WSJ and USA Today) printed locally with perhaps local offices to provide some local customization or special local section.  Paradoxically, such a massive consolidation from hundreds of local papers to a few national papers would actually increase competition.  While we might get a few less stories about cats being saved from trees in the local paper, we could well end up not with one paper selection (as we have today in most cities) but five or six different papers to choose from  (just look at Britain).  Some of these papers might choose to sell political neutrality while some might compete on political affiliation.

If I were running the Washington Post, I would think very seriously about creating a national news offering, a USA Today with substance.   If you offered me a Washington Post re-branded as a national paper, with some strong side offerings like the NY Times Science section and a good local sports section and a local news section, I'd toss my Arizona Republic in a second.  Its going to take some good thought as to how to weave together the national offering with locally customized content and to manage local vs. national advertising accounts, but with technology this is doable -- Clear Channel does something similar in radio.

I wonder, in fact, why no one has done this yet -- when you look at the circulation numbers, only the USA Today and WSJ, the two papers pursuing this path, are seeing growth.  My only thought is that news is one of those businesses dominated by passionate people who are tied deeply, emotionally into the industry in a way that makes it impossible to envision or consider new models (aviation is another such business, in my opinion, and the US auto business is probably another).  What we need is for the Post and a few other major papers to fail and then let some really bright, right people from outside the business come and shake it up.  This is, by the way, one of the unsung benefits of bankruptcy, is that it takes assets out of the hands of the people who got the company in the mess to begin with -- a benefit we short-circuited when we spent billions of taxpayer dollars in the auto industry to keep GM and Chrysler assets out of new and potentially more innovative hands.

More Union Payback

Mark Mix has an article in the WSJ on various paybacks to unions buried in the current health care bill.  The steps range from forced-unionization of certain health care professions to direct subsidies of union health care funds to exemption of union health care plans from the rules everyone else will have to follow.

Update: The Greg Conko study also looks good, but I am only part way through it.

Economic Ignorance

The WSJ is reporting that Obama's speech will propose:

Starting next year, the plan also calls for annual fees of $6 billion on health-insurance providers, $4 billion for medical-device makers, $2.3 billion on drug makers and $750 million on clinical laboratories. The fees would be levied on individual companies based on market share.

Don't you love that, by the way.  The benefits are not programmed to begin until 2013 but the taxes start in 2010.  But let's rewrite this paragraph to be less economically ignorant:

Starting next year, the plan also calls for annual fees of $6 billion on customers of health-insurance providers, $4 billion for customers of medical-device makers, $2.3 billion on customers of drug makers and $750 million on customers of clinical laboratories. The fees would be levied on individual companies based on market share, then passed on to their customers in the form of price increases, as are all such fees, particularly on low-margin industries such as health insurance.

Congratulations.  Obama has embarked on his quest to reduce the cost of health care by increasing the costs of health care suppliers by over $13 billion per year.  That should work.

For years I have been saying that the government has only one lever to reduce costs (as any thought that they might reduce costs through increased productivity is just a joke rebutted by all of history):  Force people to use less, either by raising the price, reducing the supply, or outright banning certain expenditures in certain situations.

Newspapers are Under-Scale

I am sure I could rattle off a myriad of problems at newspapers - changing lifestyles, the explosion of free content over the Internet, competition from cable TV, etc.  Built into these trends are some structural problems that newspapers probably cannot overcome.  At some point, there comes a time of survival when you have to stop fighting trends and start figuring out how to make money in the new regime.

Here is one thing I can say with certainty:  Every single newspaper in this country, with the possible exceptions of the WSJ and USAToday, but including the NY Times, are under-scale.

How do I know?  Just listen to the situation.  If they cut costs, they fear the quality of the product will fall and they will lose readership.  But the readership is already not covering costs and is in fact already falling.  This is a classic death-spiral of an under-scale entity.  It almost does not matter what caused the company to suddenly be under-scale when it previously was fairing OK -- technology change, new competition, shifts in customer expectations in habits, or all of the above.

There is no tweaking one can do in an underscale business.  One either needs to get much bigger, or find a defensible niche.  The latter is hard in the newspaper business, since these publications have essentially focused on just one metropolitan area or city, its hard to find a tighter niche that both has a customer following and would allow massive cost cutting.   Community newspapers are one example.  The only forward-looking idea I can come up with is a metropolitan sports-only daily.  Could such a thing sell in New York?  Possibly -- one can argue that is what the Dallas Morning News is, a sports daily with some news sections attached.

This scale problem should not be a particularly surprising finding.  The local newspaper business has always known it had a scale problem.   With thousands of newspapers across the country all reporting many of the same stories, there has always been a huge issue of duplication of effort.  Newspapers took a swipe at this problem with the formation of the Associated Press, which effectively acts as a shared reporting resource.

But it has been decades since this model has even been tweaked.  In that time, sophisticated new readers expect more than just bland 5-paragraph AP stories, and newspapers who rely on such content find most of their stories online for free, if not in their own paper, then in others.  And most large papers have been progressively tempted, for a variety of reasons, to have their own writers on national stories.  Ever seen the press pool for a Superbowl game?  The staff and talent they have built that could serve a whole country is only serving one city.

Many other local distribution models are dying or dead.  Local TV network affiliates were created when local re-broadcast was the only technologically feasible approach to getting TV signals to homes.  They survive today only through constant lobbying which has produced must-carry rules on cable and TV operators, or most of us would be just fine getting the network feed without local content (after all, how many folks watch CNN and FOX and MSNBC?).  Local auto distributorships and beverage wholesalers similarly fight rear-guard actions in the legislature against new national channels.

I think the time has come for publications like the NY Times to give up its city-centric model and go to full-bore national distribution.  My Arizona Republic has 4-5 standard sections plus an additional section (e.g. "Scottsdale") customized to my neighborhood.  I don't see why such a model would not work nationally  (the WSJ does something a bit similar but it is only customized regionally).  I would love a Washington Post delivered here that had an Arizona/Phoenix section and possibly a local sports section.

I can hear the cries now - but what about competition?  We will see thousands of newspapers collapse to 7 or 8 national brands.  But this is a false view of competition here.  Right now I have one newspaper choice.  Even having two or three national offerings with an Arizona section would increase my choice substantially.

$485 Billion in Value Destroyed, and Counting

David Yermack has an awesome essay in the WSJ this weekend, encouraging Congress to just say no to spending $25-$50 billion bailing out Ford and GM.  Why?  Well, beyond the obvious moral hazard, these companies are value destruction machines of epic proportions.

Over the past decade, the capital destruction by GM has been breathtaking, on a greater scale than documented by Mr. Jensen for the 1980s. GM has invested $310 billion in its business between 1998 and 2007. The total depreciation of GM's physical plant during this period was $128 billion, meaning that a net $182 billion of society's capital has been pumped into GM over the past decade -- a waste of about $1.5 billion per month of national savings. The story at Ford has not been as adverse but is still disheartening, as Ford has invested $155 billion and consumed $8 billion net of depreciation since 1998.

As a society, we have very little to show for this $465 billion. At the end of 1998, GM's market capitalization was $46 billion and Ford's was $71 billion. Today both firms have negligible value, with share prices in the low single digits. Both are facing imminent bankruptcy and delisting from the major stock exchanges. Along with management, the companies' unions and even their regulators in Washington may have their own culpability, a topic that merits its own separate discussion. Yet one can only imagine how the $465 billion could have been used better -- for instance, GM and Ford could have closed their own facilities and acquired all of the shares of Honda, Toyota, Nissan and Volkswagen.

First Democratic Agenda Item: Grow Union Membership

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

auto_jobs

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

Another Bubble! We Need More Regulation!

From the WSJ:

Despite recent declines, prices are still higher than they were a
year ago. But the recriminations over what went wrong have begun,
complete with calls for more government involvement, efforts to make
the industry more transparent and reforms to restore market confidence....

"[the market] is out of control," says H. Djusdil Akrim, director of a
factory in Makassar, Sulawesi's biggest city.... "It's a wild, wild market
-- and no one is running it," he says. "I think we need more
regulation."...

No one knows when the market will hit bottom. Some
traders are sitting on stockpiles they bought when the market was hot,
and if global growth slows further, as expected, demand could weaken.

Whatever happens, the latest volatility is a wake-up call for the ... industry, which has been growing steadily for years.

I blame George Bush.  Oh, by the way, the industry is seaweed.

Democracy and Unions

George McGovern has an editorial in the WSJ urging the Democratic party to abandon the idea of stripping secret balloting from union organizing elections:

The key provision of EFCA is a change in the mechanism
by which unions are formed and recognized. Instead of a private
election with a secret ballot overseen by an impartial federal board,
union organizers would simply need to gather signatures from more than
50% of the employees in a workplace or bargaining unit, a system known
as "card-check." There are many documented cases where workers have
been pressured, harassed, tricked and intimidated into signing cards
that have led to mandatory payment of dues.

Under EFCA, workers could lose the freedom to express
their will in private, the right to make a decision without anyone
peering over their shoulder, free from fear of reprisal.

There's no question that unions have done much good
for this country. Their tenacious efforts have benefited millions of
workers and helped build a strong middle class. They gave workers a new
voice and pushed for laws that protect individuals from unfair
treatment. They have been a friend to the Democratic Party, and so I
oppose this legislation respectfully and with care.

To my friends supporting EFCA I say this: We cannot be
a party that strips working Americans of the right to a secret-ballot
election. We are the party that has always defended the rights of the
working class. To fail to ensure the right to vote free of intimidation
and coercion from all sides would be a betrayal of what we have always
championed.

I have always been a bit torn on this issue.  I don't in general think the government needs to get involved in how private organizations do their business.  However, by force of law, unions are not a normal private organization. They have special rights, including ones that mimic taxation, other groups do not have:

Unfortunately, we don't live in a free society, and the term "union"
comes with a lot of legal baggage.  Recognized unions are granted
certain legal powers and rights that an average group of self-organized
folks don't.  For example, they are the only private organizations in
this country that I know of that have taxation power, and the power to
demand absolutely that certain monies be withheld from employee
paychecks (even of employees not in the union) and given to them.
Perhaps more importantly, companies can't ignore them - they have
to negotiate with a recognized union.  Unions also have informal
powers.  For example, the legal system tends to tolerate a lot of
violence and physical intimidation by union members (in strikes and
such) that it does not tolerate in other contexts  (seventy-five years
ago, the situation was reversed and the system tolerated a lot of
company violence against workers).

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.

Must Have Been Those Tax Cuts For the Rich

From Mark Perry  (a new favorite of mine)

Tax1

In related news, comes this from the WSJ via Evan Coyne Malloney

New data from the IRS will be out in a few weeks on who pays how much
in taxes. My contacts at the Treasury Department tell me that for the
first time in decades, and perhaps ever, the richest 1% of tax filers
will have paid more than 40% of the income tax burden. The top 50% will
account for 97% of all federal income taxes, while the bottom 50% will
have paid just 3%.

Here is the same data from 2005:

Tax

This is really a huge threat to the Republic and the minority protections built into the Constitution.  Our government was most explicitly not meant to be a tyranny of the majority, where 51%+ of the people can legally abuse the rest with impunity, but this tax picture sure seems to be stepping over this line.  A particularly worrisome subset of this problem is the increasing legislative predilection for funding  projects with millionaire's taxes, as discussed here and here.  I discussed more about the implications of 52.6% voting for the other 47.4% to support them here.