Archive for January 2007

Why I Really Hate Census Forms

A while ago, I ranted a bit about a stupid census for our business had to fill out.  We get a lot of government data requests that go beyond the numbers required for things like taxes, that are generally being collected by the Census Bureau or the Depart of Labor or some such agency.  I throw out unanswered all but the ones that say my response is required by law, but that still leaves quite a few. 

A commenter on this post asked why I get so worked up  -- wouldn't you rather the government have good data than bad?  And I finally figured out what really irritates me about these forms.  It is this thought, that is always in the back of my head, and which if there was any justice would be put on the forms themselves:

"Information on these forms will be used by the government to justify taking more tax money from you and/or to justify further restricting your freedoms."

Biofuel Stupidity

From the department of absolutely predictable unintended consequences, "Eco-friendly" fuels are destroying the rain forest.  TJIC has a great post that I can't improve on, so I will send you there.

End of the Free Lunch Charade

Mitt Romney promised his state a health care free lunch, and everyone believed him.  So much so that other states are copying his plan.  Well, the charade is ending:

Last year, then-Gov. Mitt Romney made headlines by signing legislation
to cover all the state's uninsured. . . Romney suggested that annual
premiums for a single worker might total $2,400. But when insurance
companies recently provided real estimates, the cost was much higher:

Arnold Kling cries "I told you so."    And, I did too.

Low-deductible health care insurance (Massachusetts does not allow, by law, any other kind) is nuts, but it is what everyone is used to.  For some reason, people have a huge aversion to paying for medical costs directly, even if it is demonstrably cheaper.  Samuelson gets at this in his article when he says:

For decades, Americans have treated health care as if it exists in a
separate economic and political world: When people need care, they
should get it; costs should remain out of sight

Let us take a quick example.  Let's say that the average family generates $1000 in medical costs in a normal year, that is, without any major hospitalizations.  This would mean that if I got an insurance policy with a $1000 deductible, my coverage should be (relatively) cheap, since I am only really insurance against catastrophes -- I am effectively paying my normal annual costs out of pocket.

Now let's say I switch to a zero deductible. The premiums are going to have to be at least a thousand dollars higher a year.  And, in fact, they are likely to be more, given markups and administrative costs.  And that extra $1000+ will now be unavoidable to me, whereas I might have managed my own out of pocket spending lower if I am paying the bills.  Paying for a health care plan that covers one's normal annual medical costs is a dead loss.  There is no free lunch  (except for tax -- historically, medical costs payed by the employer were tax deductible, whereas costs paid out of your own pocket were not, which is one reason our health care market is structured in such a silly manner).

A while back, I switched from a $500 deductible plan to a $3500 deductible plan (I pay for my own health care).  You know how much I save in annual premiums?  $3000!  Talk about the biggest no-brainer ever.  Even if my annual health care spending was $3500, this would still be a break-even decision.  But since my actual spending in a normal year is probably $1000-$1500  (depending mainly on whether my wife or I get sent for some weird test) this was a huge financial gain.  And remember, this decision would not have been available to me in Massachusetts, because they do not allow high-deductible health insurance.  For some reason we are all caught up in this paradigm that health care expenses remain out of sight.  Even my wife, the Harvard MBA  (but from Massachusetts!) took some time to get comfortable with the concept of paying medical expenses out of pocket -- you're not supposed to do that, that's what insurance is for!


Apparently, the Democratic Congress is trying to "take on" high executive pay with some kind of punitive taxation plan.  This fits well into a class of legislation I would describe as "useless at best, probably counter-productive, but of high symbolic value to our base," something to which both parties are unbelievably susceptible.

I'm confused, by the way, about why exactly I should care how much CEOs are paid, particularly for executives that don't work for companies in which I own stock?  I don't think Paris Hilton, George Clooney, or the CEO of Home Depot are worth what they are paid, but I don't know how it affects me except perhaps for some simmering envy.  Does anyone with above a 5th grade education really believe that they will pay one cent less for gas or a refinery worker will make one dollar more if the CEO of Shell is paid less?

I do understand why the shareholders of Home Depot might be pissed off about what they were paying their CEO, or more accurately, what they paid him to go away.  I am sure the Arizona Cardinals felt the same way about Dennis Green.  Now, if Democrats wanted to suggest that shareholder voting and corporate governance rules needed to be amended to make it easier for shareholders to hold managers accountable for bad decisions and to overrule sweetheart deals between buddies on the board, I am very open to listening.

Scary Stuff

Most of you know I tend to avoid the topic of religion like the plague on this blog, but suffice it so say that I am a secular guy.  But that doesn't stop me from being scared of this guy (Chris Hedges at the Nation Institute):

This is the awful paradox of tolerance. There arise moments when
those who would destroy the tolerance that makes an open society
possible should no longer be tolerated. They must be held accountable
by institutions that maintain the free exchange of ideas and liberty.

The radical Christian Right must be forced to include other points
of view to counter their hate talk in their own broadcasts, watched by
tens of millions of Americans. They must be denied the right to
demonize whole segments of American society, saying they are
manipulated by Satan and worthy only of conversion or eradication. They
must be made to treat their opponents with respect and acknowledge the
right of a fair hearing even as they exercise their own freedom to
disagree with their opponents.

Passivity in the face of the rise of the Christian Right threatens
the democratic state. And the movement has targeted the last remaining
obstacles to its systems of indoctrination, mounting a fierce campaign
to defeat hate-crime legislation, fearing the courts could apply it to
them as they spew hate talk over the radio, television and Internet.

Whoa, Nellie.  The "forced to be free" thing never really works out very well, I promise.  I find the outright socialism preached by much of academia to be scary as hell and an incredible threat to me personally as a business owner, but you won't catch me trying to get the government to muzzle them.  Hedges attitude is consistent with opposition to school choice discussed here by Neal McCluskey of Cato:

Another frequent objection to letting parents choose their kids'
schools is that American children need to be steeped in a shared
worldview, lest they be in constant combat as adults. This arose as a
major line of argument in a Free Republic discussion about Why We Fight,
and is very similar to the "Americanization" mission given to
industrial-era public schools, where immigrant students were taught to
reject the customs and values of their parents' lands "” and often their
parents themselves "” and adopt the values political elites deemed

Now, if one were willing to accept a system that would, by
definition, quash any thoughts not officially sanctioned, then in
theory one would be okay with a public schooling system intended to
force uniform thought. In the context of an otherwise free society,
however, getting such a system to work is impossible, because
it would require that incredibly diverse and constantly combative
adults create and run an education system that somehow produces uniform
and placid graduates. It's no more realistic than hoping a tornado will
drop houses in a more perfect line than it found them.

The practical result of our trying to make uniformity out of diversity has, of course, been constant conflict, as Why We Fight
makes clear. Moreover, there is another by-product of this process that
no one mentions when they weave scenarios about choice producing
schools steeped in ignorance: our schools right now teach very little, especially in the most contentious areas like evolution and history, because they want to avoid conflict.

It all kind of makes a mockery of the left's favorite word "diversity."  One suspects what they want is for people of all color and backgrounds to come together and... think just like they do.  This seems to be part of the same strategy here to bring back the fairness doctrine.

PS- Remember, before you flame me, I am a secularist here defending the right of everyone to speak.  I am not defending Pat Robertson per se, because I almost never agree with the guy, but I am defending his right to say whatever he wants on TV.

Social Security: 83% Welfare

In my post earlier today, I analyzed my recent social security statement and found that the government was giving me a -0.8% (yes, that is negative) rate of return on my forced savings.  You can read that post for the methodology, which I admit was simplistic (I have a day job, after all) but I still think is pretty accurate.  There is not getting around the fact that the government is forcing
a retirement program on you that is such a ripoff that a private company would likely get
prosecuted for offering it.

One of the arguments I have seen go back and forth, and that I refer to in that post, is whether Social Security is a retirement plan or a welfare program (its a floor wax and a desert topping!)  One of the reasons this argument comes up so much is that its defenders take both sides of the question, depending on whom they are arguing against.  If you argue that as a welfare program, Social Security is terribly inefficient and pays too many benefits to richer workers, they argue it is a retirement program with premiums and you can't cut benefits to anyone who has paid in.  Argue as I did in this post that it is the worst retirement program in all of America, and its defenders say that you can't analyze it that way because there are welfare benefits embedded.

So I wondered, could I solve this with numbers?  I stared at my belly button for a moment, and decided that 6.5% was a good conservative private return number that I would be willing to plan my retirement around.  I plugged this number into my spreadsheet (Download socialsecurity4.xls) and found that my social security premiums, invested privately, would yield an annuity at 67 of $11,699 per month, or an amount 5.89 times larger than social security is currently promising me for the same inputs.  This tells me that only about 17% (1/5.89) of my taxes in social security are going to my own retirement.  The other 83% are going to a huge welfare program, either directly, as payments for someone else's retirement, or indirectly, through the inherent government inefficiency you accept when you provide intellectual welfare  (I define "intellectual welfare" as the government doing something for you because it doesn't trust you not to screw the task up if you did it yourself -- in this case, the task is saving for retirement).

Postscript:  As pointed out in my postscripts and the comments to the original post, taxes, inflation, spouse survival, etc.  all complicate the analysis, but most of the effects work both ways.   For example, Social Security provides some benefits to surviving spouses I don't include.  That potentially understates the value of the SS package.  However, as pointed out in the comments, private savings would be inheritable by my family in the case of my early death, and would dwarf SS survivor benefits in most cases.  Ditto for disability benefits.

Oops, Our Bad. Sorry.

I thought this was pretty funny, via TJIC.  The Fed apologizes for the Great Depression:

Ben Shalom Bernanke (born December 13, 1953)"¦ is an American
macroeconomist who is the current Chairman of the Board of Governors of
the United States Federal Reserve ("the Fed")"¦

On Milton Friedman's Ninetieth Birthday, Nov. 8, 2002 he
stated: "Let me end my talk by abusing slightly my status as an
official representative of the Federal Reserve. I would like to say to
Milton and Rose: Regarding the Great Depression. You're right, we did
it. We're very sorry. But thanks to you, we won't do it again.""¦

The quote is from Wikipedia, so I take it with a huge grain of salt.  Anyone have a link to another source, because the quote is pretty funny.  Good to see the government take responsibility for the economic messes it creates, even if 75 years late.  Of course, 75 years after the Hawley-Smoot tariffs helped throw a recession into the Great Depression, Congress is about to launch us down the same protectionist path, so don't give the feds too much credit.

Social Security Ripoff

A few weeks ago I got my annual "Your Social Security Statement" from the government.  This is a statement carefully crafted to look like it's telling you a lot while at the same time covering up Social Security's dirty little secret.  But with a spreadsheet and 5 minutes of work, one can figure out what is really going on.

The statement shows the total of my social security taxes paid into the system, including the employer share.  It also shows my taxed earnings per year, and my "benefits."  The main benefit is the monthly annuity payment Social Security will make to me after I retire.  My statement shows that $140,139 total taxes have been paid into the system on my behalf over the last 25 years.  Based on these taxes and (this is important) the assumption I and my employer will continue to pay in at least $7440 per year until I retire, I can expect an annuity at retirement age of 67 (under current law, which the statement makes clear can be changed at any time) of $1,985 per month.

So I built a spreadsheet (click to download excel file), going back to my first year of employment.  Each year, I added the social security taxes to savings, and grew the accumulated balance by some interest rate.  For past years I used actuals from the report, for future years I used the $7440 tax number the report uses to calculate the social security payout. 

This allowed me to answer a question:  If I had been able to take these social security taxes and instead put them in a savings plan, and then took the accumulated balance out at age 67 and bought an annuity (at current rates), what would be my monthly payment?  Well, assuming a very conservative after-tax rate of return of 5%, I would have $1,077,790 at age 67 to buy an annuity, which at current rates quoted on the Vanguard site, would give me $7,789 a month until I die.  This return is just about four times the amount I get from having the Social Security Administration manage the money for me instead. Ugh.  Also note that I did not assume "risky" equity investments or whatever straw man anti-reformers are using nowadays.    If I assume a higher return of 8%  (the stock market in the 90's returned something like 18%) then my annuity will be $17,860 per month, or 9 times the Social Security payout.  Double ugh.

In fact, this all opens up the obvious question, what actual rate of return is Social Security paying out on your "premiums?"  Well, in fact we can calculate this with the same spreadsheet.  I plugged in 2% for the interest rate.  No go -- resulting annuity is to high.  Then I plugged in 1%.  Still too high.  Could the government be paying you 0% on your money?  I plugged that in.  Still too high.  In fact, the implied rate of return on my money in the Social Security system is -0.8% a year.  In other words, not only is the government not paying me any interest, they are charging me to hold my money.

Social Security defenders insist that it is not a welfare program.  For example, Kevin Drum quotes this with approval:

The men in my family of my father's generation returned home after serving
their country and got jobs in the local steel mills, as had their fathers and
their grandfathers. In exchange for their brawn, sweat, and expertise, the steel
mills promised these men certain benefits. In exchange for Social Security taxes
withheld from their already modest paychecks, the government promised these men
certain benefits as well.

....These were church-attending, flag-waving, football-loving, honest family
men. They are rightfully proud of providing homes and educations for their
children and instilling the sorts of values and manners that serve them well as
adults. And if I have to move heaven and earth, now that they've retired, the
Republican party is NOT going to redefine them as welfare

Fine, let's call it a retirement program.  Well, as a retirement program, it is a really, really big RIPOFF.  Ever worker in this country is being raped by this retirement plan.  In fact, it is the worst retirement program in the whole country:

  • As we see above, it pays a negative rate of return
  • It is not optional - you go to prison if you choose not to participate
  • Unlike a private annuity contract, the government can rewrite your benefits level any time, and you have to take it.  In fact, my statement says "Your estimated benefits are based on current law.  Congress has made changes to the law in the past and can do so at any time.  The law governing benefit amounts may change because, by 2040, the payroll taxes collected will be enough to pay only about 74 percent of scheduled benefits."
  • There are no assets backing this annuity!!  An insurance company that wrote annuities without any invested assets backing them would be thrown in jail faster than Jeff Skilling.  The government has been doing it for decades.

A couple of months ago, news-hog Eliot Spitzer had a well-publicized (what else?) suit against H&R Block for not providing high enough returns in its low-income retirement savings accounts.

New York Attorney General Elliot Spitzer [official website] Wednesday launched a $250 million lawsuit [complaint, PDF] against H&R Block
[corporate website], the largest tax preparation service in the US, for
fraudulently coaxing its customers into a retirement account plan that
lost them money. Spitzer said that money in the retirement accounts
decreased over time because the low interest rate did not cover the
fees associated with the account.

Doesn't this exactly match the situation in my social security spreadsheet?  At least H&R Block's customers had a choice whether or not to sign up.

Postscript: As is usual with retirement issues, tax is a messy topic, so I mostly left it out.  My spreadsheet is correct if you call it an "after-tax" rate of return.  This may mean the nominal rate is higher, but it got taxed, or it could posit some tax-free savings alternative to social security.  Note also that we pay income taxes on the amount that gets taxed by Social Security (at least our employee portion).  This means an IRA type replacement for social security would actually have higher returns and dollars at retirement than those in my spreadsheet, because it would eliminate or at least defer income taxes on the premium.

Also note that the analysis is all in nominal dollars, because that is the way the dollars are on my SS statement - there are not inflation escalators in the program.

Postscript #2:  When last social security was a national topic, opponents of reform got a lot of mileage out of the 2001-2002 bear market in stocks.  They would ask, what if people had invested in stocks, they would have lost their money.  Well, as of today, if you had invested every dollar of your retirement savings on the worst possible day, the 2000 peak in the Dow, you would still be up 5% today.  This is a disappointing  return of less than 1% annually, but is STILL higher than the negative return in social security.  And remember, we are using nearly the worst five year before and after dates in this generation.  A real-world steady investment in stocks over the last 20 years, with equal amounts each year, would be way up  (anyone with an exact number is welcome to post it in the comments).

Postscript #3:  In an earlier post, I took on Social Security as intellectual welfare:

Advocates for keeping forced savings programs like Social Security in
place as-is by necesity argue that the average American is too stupid,
too short-sighted, and/or too lazy to save for retirement without the
government forcing them.  Basically the argument is that we
are smarter than you, and we are going to take control of aspects of
your life that we think we can manage better than you can
.  You are
too stupid to save for retirement, too stupid to stop eating fatty
foods, too stupid to wear a seat belt, and/or too stupid to accept
employment on the right terms -- so we will take control of these
decisions for you, whether you like it or not.  For lack of a better
word, I call this intellectual welfare.

Update #1:  In response to some comments, the spreadsheet does work right, it is just labeled wrong.  The column that is labeled "investment income" is actually the saved balance to date plus the investment income.  The "End of Year" column is the correct balance at the end of year after investment income and new contributions.

Update #2:  A commenter reasonably points out that investment at the top of the market in the Nasdaq would still be way underwater.  However, I took this point investment on the worst day as an extreme example.  Even in the Nasdaq, which is still off 50% from its peaks, a steady monthly investment from 1997 or 1998 to date would be above water in total.  Leftists do a lot of bad things for the country, but trying to scare average workers away from equity investments for the long-term is certainly on of the most hypocritical.  I guarantee that every liberal politician has a big fat chunk of their savings in equities, because they know that is the way to create wealth over the long haul.

Update #3:  In a follow-up post, using this same spreadsheet, I conclude that only 17% of my Social Security taxes are going to my retirement while 83% are welfare for someone else.

Health Care -- The Trojan Horse for Fascism

Every time I write that government funded health care and health nannyism are becoming a Trojan horse for fascism, I get several emails telling me I am being a paranoid flake.  So I will have to just keep posting this kind of thing (from England), via Overlawyered:

SOCIAL workers are placing obese children on the child protection
register alongside victims thought to be at risk of sexual or physical

In extreme cases children have been placed in foster care because
their parents have contributed to the health problems of their
offspring by failing to respond to medical advice.

intervention of social services in what was previously regarded as a
private matter is likely to raise concerns about the emergence of the
"fat police".

Some doctors even advocate taking legal action against parents for
illtreating their children by feeding them so much that they develop
health problems.

Dr Russell Viner, a consultant paediatrician at Great Ormond Street
and University College London hospitals, said: "In my practice, I can
think of about 10 or 15 cases in which child protection action has been
taken because of obesity. We now constantly get letters from social
workers about child protection due to childhood obesity."

The Next Milestone In Killing Fair Use

Back in the stone age (say, about 20 years ago) we used to have this quaint concept for media we purchased called "fair use."  I won't get into the legal definitions, but it meant in practice that if I had a book, I could read it at home, or I could take it into work and read it there.  In college, I would read novels in the back of boring lectures, and soon hit on the tactic of xeroxing 20-30 pages of my book and putting the copies in a folder to disguise what I was doing.  Fortunately, fair use let me do so without penalty.  Sometimes a friend would read an article in a magazine he thought was cool, and he would xerox a copy of the article (a sample of the magazine, so to speak) and share it with me.

Increasingly, in the digital age, none of the behaviors are allowed anymore.  For years I used to install my copy of turbo tax on both my home and office computers, and carry my tax file back and forth on a floppy to work on it.  Then, a couple of years ago, Turbo Tax installed a form of rights management that required that I buy a second copy of the same software for my own personal use for my office.  In effect, I could no longer carry my novel to work -- I had to buy a second copy if I wanted to read it at the office.  The same situation has prevailed with digital music files - increasingly recording companies are taking the position that if you want a digital file on both your iPod and your home system, you need to buy two copies.  And the sampling and sharing we used to do all the time with magazine and newspaper articles are not longer permitted for digital media.

Having firmly established the principle that multiple uses by the same individual of the same digital media should require multiple purchases, where do we go next?  Well, I think that we will look back on the release of Windows Vista as the next great milestone in killing fair use.  Microsoft may have left out nearly every product enhancement they originally promised for Vista, particularly the revamped file system, and tried to hide the fact with some pretty desktop eye candy, but they found plenty of time to add numerous DRM and copy protection schemes to the OS. 

Because, having killed fair use for multiple copies, believe it or not, the media companies are attempting to kill fair use even for the original media by the original buyer!  I know this sounds crazy, but in Windows Vista, media companies are given the opportunity to, in software, study your system, and if they feel that your system is not secure enough, they can downgrade the quality of the media you purchased or simply refuse to have it play.  In other words, you may buy an HD DVD and find that the media refuses to play on your system, not because you tried to copy it, but because it feels like your system *might* be too open.  The burden of proof is effect on the user to prove to the media companies that their system is piracy-proof before the media they paid for will play (emphasis added). 

PVP [a new Vista DRM component] eliminates these security gaps, enabling a series of DRM measures that keep
a high-resolution content stream encrypted, and in theory completely protected,
from its source media all the way to the display used to watch it. If the system
detects a high-resolution output path on a user's PC (i.e., a system capable of
moving high-res content all the way to a user's display), it will check to make
sure that every component that touches a protected content stream adheres to the
specification. If it finds a noncompliant device, it can downgrade the content
stream to deliver a lower-quality picture -- or it can even refuse to play the
content at all, depending on the rights holder's preferences.

So you see the next step.  First, they prevented fair use of copies.  Now, they are going to prevent fair use of the original.  Back to the book analogy, its as if the book will not open and let itself be read unless you can prove to the publisher that you are keeping the book in a locked room so no one else will ever read it.  And it is Microsoft who has enabled this, by providing the the tools to do so in their operating system.  Remember the fallout from Sony putting spyware, err copy protection, in their CD's -- turns out that that event was just a dress rehearsal for Windows Vista.

As Rosoff's statement implies, many of Vista's DRM technologies exist not
because Microsoft wanted them there; rather, they were developed at the behest
of movie studios, record labels and other high-powered intellectual property

"Microsoft was dealing here with a group of companies that simply don't trust
the hardware [industry]," Rosoff said. "They wanted more control and more
security than they had in the past" -- and if Microsoft failed to accommodate
them, "they were prepared to walk away from Vista" by withholding support for
next-generation DVD formats and other high-value content.

Microsoft's official position is that Vista's DRM capabilities serve users by
providing access to high-quality content that rights holders would otherwise
serve only at degraded quality levels, if they chose to serve them at all. "In
order to achieve that content flow, appropriate content-protection measures must
be in place that create incentives for content owners while providing consumers
the experiences they want and have grown to expect,"

Nope, no arrogance here.

Matt Rosoff, lead analyst at research firm Directions On Microsoft, asserts that
this process does not bode well for new content formats such as Blu-ray and
HD-DVD, neither of which are likely to survive their association with DRM
technology. "I could not be more skeptical about the viability of the DRM
included with Vista, from either a technical or a business standpoint," Rosoff
stated. "It's so consumer-unfriendly that I think it's bound to fail -- and when
it fails, it will sink whatever new formats content owners are trying to

More links on Vista DRM issues here

Update:  OpenOffice 2.1 is out.  We love OpenOffice at our company.  We stopped buying MS Office a couple of years ago and have been thrilled with the decision.  The version 1 release was weak but since version 2.0 it has been a very strong offering.  It is nice to see Sun getting its Microsoft hatred out in a more productive manner than suing them all over the place.

I vote for Noble House

Nick Gillespie at Reason asks folks for their favorite business novels.  I vote for Noble House by James Clavell.   Ayn Rand's Atlas Shrugged has a great deal of influence on me, but that book is ultimately about government making business impossible, not about the conduct of business per se.  Noble House is a sympathetic and hugely entertaining depiction of business people being business people in as close to a libertarian environment as we might find (1960s Hong Kong) in the modern world.  Sure its not real business -- too much deal making, not enough productive investment, but it is a novel for god sakes, and not a seminar on the capital asset pricing model.

PS - Is there anyone out there who has read both novels and would rather hang out in a bar with Hank Reardon than Ian Dunross?  I didn't think so.

PPS- Personally, I think this business novel is good too.

BMOC Reviews

I am way behind on posting some of these reviews, but Market Power has a review of BMOC here.

There is also at least one new (5-star!) review up at Amazon.  It makes a great, uh... President's Day gift!

Entry for Media Style Guide

Here is something I would like to see entered into every media style guide:  "Do not use 'hits' as a measure for web page traffic, except in quotations.  'Hits" has a specific meaning in measuring web traffic and should not be considered synonymous with 'visits.'" 

Machines Have Each Others' Back

Something about this seems oddly Judgement-Day-ish (in the Terminator sense):  Cameras watching cameras.  Via Hit and Run

Princetonian to Coach the Cowboys?

The Cowboys are apparently looking pretty seriously at former Princeton Quarterback Jason Garrett to be their new offensive coordinator, and possibly even head coach.  Garrett is one of two Princetonians with a Super Bowl ring (quarterback Bob Holly being the other) as part of the mid-1990s Cowboys dynasty. Who will ever forget that great Thanksgiving game against the Packers when Garrett (15-26-311-2-1 for the day) outduelled Brett Favre for a spectacular win after trailing 14-3 at the half?   Well, at least I haven't forgotten.

More Useless Government Information Gathering

Apparently I am required by law to fill out an "annual accommodation report" from the US Census.  Just what I needed.  The IRS, state sales tax authorities, and the Department of Commerce all gather this same information, but for some reason the Census Bureau needs me to repackage it for them  ("estimate time only 34 minutes -- thanks alot").  In fact, they need the data so bad that I am required by law to respond to their request. 

Here is the weird part.  First they ask for revenues including both lodging revenues and sales of merchandise, all as one single number.  Then, they ask for "operating expenses" in which they want me to exclude the cost of any merchandise sold.  What is the point of gathering a revenue number that includes merchandise sales but a cost number that excludes the cost of goods purchased for resale?  Bizarre.  My only guess is that this is so they can stack industries up without double counting, but that makes no sense either.  If this were the case, they would ask me to eliminate all product purchases (e.g. toilet paper for the bathrooms, cleaning supplies).  Also, wouldn't they in that case also ask me to leave out services purchased from other companies?

Postscript: The form has this notice:  "Your report to the Census Bureau is confidential by law.  It may be seen only by persons sworn to uphold the confidentiality of Census Bureau information and may be used only for statistical purposes.  The law also provides that copies retained in your files are immune from legal process."

Does anyone above the age of eight really believe this?  Ask major league baseball players what they think about promises of confidentiality and immunity from legal process.  (emphasis added)

With Barry Bonds still in their sights,
federal investigators probing steroids in sports can now use the
names and urine samples of about 100 Major League Baseball players
who tested positive for performance enhancing drugs, following a
ruling Wednesday from a federal appeals court.

The 2-1 decision by the 9th U.S. Circuit Court of Appeals
overturned three lower court decisions and could help authorities
pinpoint the source of steroids in baseball. It could also bolster
the perjury case against the star outfielder, who is under
investigation for telling a grand jury he never knowingly used
performance-enhancing drugs.

Investigators seized computer files containing the test results
in 2004 during raids of labs involved in MLB's testing program. The
samples were collected at baseball's direction the previous year as
part of a survey to gauge the prevalence of steroid use. Players
and owners agreed in their labor contract that the results would be
confidential, and each player was assigned a code number to be
matched with his nam

Did DVD Save 24?

Hollywood seems to treat digital media like DVD as the greatest threat to their existence ever crafted.  But it appears to me that DVD may have saved 24.

From the second season onward, there has been intense pressure on the makers of 24 to convert from their popular serialized format (all 24 episodes are one story arc) to a more usual format where each episode stands on its own.  While prior shows like Alias and X-files have had running story arcs, their individual episodes stood on their own much better than do episodes of 24.  What that means is that 24 does not syndicate well at all, cutting off a very lucrative revenue stream. 

But what makes 24 difficult to syndicate makes it a very popular DVD offering.  In fact, if you look on Amazon, all five seasons are among the top 20-30 sellers in the DVD category.  Incredibly, a DVD of the first four episodes of the new season, which were televised about a week ago(!), is ranked #16.  My guess is that DVD sales do not fully make up for lost syndication revenue (I have no idea of the exact numbers) but these sales must have made it easier to continue down this innovative path.

Who's In Charge Here, Part 2

A few weeks ago I wrote about the changing relationship between attorney and client:

It used to be that clients would suffer some sort of injury and seek
redress in the courts.  To do so, they would hire an attorney to help
them.  The attorney was the hired help, compensated either hourly or
via a percentage of any awards.

Today, the situation is often reversed.  It is the attorney who is
identifying lawsuit targets for class actions and shareholder suits,
and then seeking out clients who can maximize his chances of success.
Clients, who typically make orders of magnitude less than the attorney
in class actions (think 50-cent coupons and $8 million attorney fees)
are selected because they are sympathetic, or give access to a
particularly plaintiff-attractive jurisdiction, or, in cases such as
ADA suits in California, because they have effectively become partners
with the attorney in serial torts.

At that time, the issue was Bill Lerach suing his clients for dropping him as attorney (Because, after all, it was really his lawsuit and not theirs).  This time, the issue is in a class action against Microsoft (emphasis added, via Overlawyered)

Judge Scott Rosenberg ruled Friday that Microsoft attorneys could
not ask the named plaintiffs about their relationship with attorney
Roxanne Conlin. The company's lawyers wanted to question the
plaintiffs, arguing that Conlin had referred to them during jury
selection as "just regular people who bought software" and who
volunteered to step forward to sue Microsoft.

The lawsuit was brought by Joe Comes, a Des Moines businessman who
owns a chain of pizza restaurants, and Patricia Anne Larsen, a retiree
from northwest Iowa, and two business _ Riley Paint Inc. of Burlington
and Skeffington's Formal Wear of Iowa Inc. of Des Moines.

Microsoft attorney David Tulchin said Larsen has been a friend of
Conlin's since 1982, when Larsen held fundraisers for Conlin's failed
run for governor. In 1999, Conlin represented Larsen in an employment
discrimination case against Larsen's former employer, Eaton Corp.

Tulchin said Comes has been Conlin's son's best friend since high school.

Microsoft attorneys claimed Conlin recruited these friends to act as
plaintiffs in the case so she could sue the company
and that her
comments during jury selection opened the door for Microsoft to
challenge the plaintiffs' motivation in filing the lawsuit.

Who would even imagine such a thing?  In this class action, as in many, the class members will probably get coupons while Conlin makes millions.  Or, as Microsoft observes:

Tulchin claimed that Conlin and her co-counsel, Richard
Hagstrom of Minneapolis, have the most to gain in the lawsuit

Attorneys like Conlin know they are vulnerable on this

Conlin said Microsoft wants the jury to believe that class-action
lawsuits are attorney-driven cases brought for money when in reality
they are a way for individuals with small claims to come together to
take on large, powerful companies.

"Businesses like Microsoft have poisoned the public view of these
forms for seeking redress by spending billions of dollars to spread
propaganda. Now they seek to collect on their investment by improperly
suggesting to the jury that the plaintiffs are not real plaintiffs,"
she said.

You think?

Economics is a Science. Seriously.

George Reisman at Mises:

When it comes to matters such as the theory of evolution and
stem-cell research, so-called liberals"”i.e., socialists who have stolen
the name that once meant an advocate of individual freedom"”ridicule
religious conservatives for their desire to replace science with the
dictates of an alleged divine power. Yet when it comes to matters of
economic theory and economic policy"”for example, minimum-wage
legislation"”these same liberals themselves invoke the dictates of an
alleged divine power. Their divine power, of course, is not the God of
traditional religion, but rather a historically much more recent deity:
namely, the great god State.

Traditional religionists believe that an omnipotent God came before
all natural law and was not bound or limited by any such law, but
rather created such natural laws as suited him, as he went along. Just
so, today's liberals believe, at least in the realm of economics, that
the State is not bound or limited by any pre-existing natural laws. In
the case in hand, the State, today's liberals believe, is free to
decree wage rates above the level that would exist without its
interference and no ill-effects, such as unemployment, will arise.

Where have I heard that before?  Oh yeah, I remember:

So here is this week's message for the Left:  Economics is a
science.  Willful ignorance or emotional rejection of the well-known
precepts of this science is at least as bad as a fundamentalist
Christian's willful ignorance of evolution science (for which the Left
so often criticizes their opposition).
  In fact, economic
ignorance is much worse, since most people can come to perfectly valid
conclusions about most public policy issues with a flawed knowledge of
the origin of the species but no one can with a flawed understanding of

In fact, the more I think about it, the more economics and evolution are very similar.  Both are sciences that are trying to describe the operation of very complex, bottom-up, self-organizing systems.  And,
in both cases, there exist many people who refuse to believe such
complex and beautiful systems can really operate without top-down

By the way, the author partially addresses the Card and Krueger study on New Jersey fast food that purportedly showed that employment goes up as minimum wage goes up.  Unfortunately, the author does not get into the now fairly well-known problem with this study.  For those who don't know, here it is:

Card and Krueger looked at the employment in fast food restaurants in New Jersey both before and after the minimum wage went up.  Here is the key process fact you need to know -- they did not look at every restaurant, just at some branches of national chains (e.g. McDonalds).  They did not include, say, Joe's sub shop.  The restaurants they studied shared a couple of traits in common:

  • They were all far more professionally managed than the average small restaurant
  • They all had higher labor productivity than the average restaurant
  • They all had far more capital equipment (e.g. automation of labor) than the average restaurant

In other words, they studied the restaurants that were able to incur a wage increase with the least impact on their total costs (and eventually prices).  Follow-up studies have shown that there was probably a real reduction in total restaurant employment in New Jersey in the studied period, but the differences in productivity cited above caused the impact to disproportionately hit small ma and pa operations as opposed to large capital intensive nation chains.  In fact, during this period, the national chains experienced a gain in market share vis a vis smaller shops, as the higher minimum wage made it harder for local shops to compete with the national chains.  So, in fact, what Card and Krueger observed was not an economic miracle on the order of seeing the virgin Mary in your pancakes, but a predictable shift of market share from low capital to high capital competitors in response to higher wage rates.

This theme of regulation, including the minimum wage, advantaging larger competitors is an old one.  I discussed it a while back in the context of Wal-Mart's support for a higher minimum wage:

Apparently, though I can't dig up a link right this second, Wal-mart
is putting its support behind a higher minimum wage.  One way to look
at this is a fairly cynical ploy to get the left off its back.  After
all, if Wal-mart's starting salary is $6.50 an hour (for example) it
costs them nothing to ask for a minimum wage of $6.50.

A different, and perhaps more realistic way to look at this Wal-mart
initiative is as a bald move to get government to sit on their
competition.  After all, as its wage rates creep up, as is typical in
more established companies, they are vulnerable to competitors gaining
advantage over them by paying lower wages.  If Wal-mart gets the
government to set the minimum wage closer to the wage rates it pays, it
eliminates the possibility of this competitor strategy. 

Manufacturing Jobs Myth

From TJIC:

"America cannot be great if most of its workers are in the service
sector"¦" Senator Byron Dorgan (D-North Dakota) declares in his book
"Take This Job and Ship It,""¦

This typical reading of historic manufacturing and service jobs stats is ignorant.  My first rule of quoting a statistic, which I admit I sometimes violate, is to make sure you understand how it is calculated.  Nothing could be truer than with manufacturing jobs statistics.

The best way to illustrate this is by example.  Let's takean automobile assembly plant circa 1955.  Typically, a large manufacturing plant would have a staff to do everything the factory needed.  They had people on staff to clean the bathrooms, to paint the walls, and to perform equipment maintenance.  The people who did these jobs were all classified as manufacturing workers, because they worked in a manufacturing plant.  Since 1955, this plant has likely changed the way it staffs these type jobs.  It still cleans the bathrooms, but it has a contract with an outside janitorial firm who comes in each night to do so.  It still paints the walls, but has a contract with a painting contractor to do so.  And it still needs the equipment to be maintained, but probably has contracts with many of the equipment suppliers to do the maintenance.

So, today, there might be the exact same number of people in the factory cleaning bathrooms and maintaining equipment, but now the government classifies them as "service workers" because they work for a service company, rather than manufacturing workers.  Nothing has really changed in the work that people do, but government stats will show a large shift from manufacturing to service employment.

Is this kind of statistical shift really worth complaining about?  By complaining about the shift of jobs from manufacturing to services, you are first and foremost complaining about a chimera that is an artifact of how the statistics are compiled.  So if we were to correct for this, would manufacturing jobs be up or down?  I don't know, but given on the wailing about "shrinkage" of manufacturing in the US, I bet you would not have guessed this:

Considering total goods production (including things like mining and
agriculture in addition to manufacturing), real goods production as a
share of real (inflation-adjusted) Gross Domestic Product (GDP) is
close to its all-time high.

  • In the second quarter of 2003, real goods
    production was 39.2 percent of real GDP; the highest annual figure ever
    recorded was 40 percent in 2000. See the Figure.

  • By
    contrast, in the "good old days" of the 1940s, 1950s and 1960s, the
    United States actually produced far fewer goods as a share of total
    output, reaching 35.5 percent in the midst of World War II.

So manufacturing is close to an all time high as a percentage of the economy.  There is absolutely no way anyone who looks at this graph can, with a straight face, talk about the "shrinking" of America's manufacturing sector.   If manufacturing employment is somehow down vs. some historical "norm", then that means that manufacturing productivity has gone up faster than service productivity.  So what?  And to the extent there has been a shift, as TJIC writes, who cares?

Yeah, we hates the service sector.

Who needs lawn care, child care, food preparation, legal
services, stockbrokers, professors, blogs, actors, and contract
software engineers ?

Let's get everyone involved in good 19th century atoms-and-mortar activities like raising corn and smelting iron.

Sure, some flakes argue "those are jobs for machines", but we
aim to recapture the glory of our national greatness, when men were
men, women were women, America was strong, and the average life lasted
50 years and ended with pneumonia, a threshing accident, or a crushing

The same populists who complain today about the shift from manufacturing to services complained a hundred years ago about the shift from agriculture to manufacturing.  And I am sure all of us would much rather be waking up with the sun each day to push a plow.

We Want Less Effective Products

Here is a question for you.  What product is coming under fire from "consumer advocates" for providing more of what consumers are buying the product for?  Answer.

Colts 38, Pats 34

Wow.  That game didn't suck.

Chavez Declared Dictator

Hugo Chavez has had himself declared dictator of Venezuela

Venezuela's National Assembly has given initial approval to a bill
granting the president the power to bypass congress and rule by decree
for 18 months.

President Hugo Chavez says he wants "revolutionary laws" to enact
sweeping political, economic and social changes. He has said he wants
to nationalise key sectors of the economy and scrap limits on the terms
a president can serve.

Mr Chavez began his third term in office last week after a landslide election victory in December.

The bill allowing him to enact laws by decree is expected to win
final approval easily in the assembly on its second reading on Tuesday.
Venezuela's political opposition has no representation in the National
Assembly since it boycotted elections in 2005.

Recognize that Chavez is the man, more than any other world leader, that progressives in this country have adopted as their hero.  Nowhere will you see a better illustration of what end-game progressives are really after.

Trading Big Oil for... Big Corn?

Via QandO, Nancy Pelosi said this:

"It is important to our children's health and their global competitiveness to rid this nation of our dependence on foreign oil and Big Oil interests"

So Nancy Pelosi wishes to rid the nation of American oil companies.  Hoping that this country has come too far to consider something so insane as nationalization, this presumably means replacing oil with some other substitute.  But since energy consumption still will be huge in the future, presumably we are just replacing big oil with big ... something else.  I would never say that oil companies are completely free of rent-seeking impulses, but they are paragons of free market reason compared to companies like ADM, aka big Ethanol, whom Pelosi is likely to favor.

Affirmative Action in Ohio

I got a prospectus recently asking for bids to operate a marina facility in Toledo, Ohio.  Typically, when privatizing a recreation facility, the government issues a contract that is essentially a lease -- they lease the facility to a private company who runs it for profit.  Companies compete for the lease by bidding the rent they will pay for the lease, the winning company being a combination of the best qualified and the one offering the highest lease payments.

This prospectus is very similar.  However, in the bid I noticed a collection of requirements called "affirmative action compliance" that were almost as thick as the description of the facility and the sample lease terms.  In the routine course of operating such a lease, from time to time a private company must do maintenance and construction work on the facility.  For example, marina docks are nearly constantly under re-construction, in a process similar to painting the Golden Gate Bridge (more rebuilding work is presumably required in Ohio when the lakes and rivers catch on fire). 

The state of Ohio seems extraordinarily concerned about the racial makeup of any workers who might do construction on the docks in the course of the marina's operation.  In fact, in this prospectus they have quotas on minority hiring -- you need to have at least 9% minorities and 6.9% female work hours in any construction project you perform.  But it is even more detailed than that.  Because these quotas apply as well to EVERY INDIVIDUAL TRADE.  They list the following trades:

Asbestos workers, boilermakers, bricklayers, carpenters, cement masons, electricians, elevator constructors, glaziers, ironworkers, lathers, operating engineers, painters, plasterers, plumbers & pipefitters, roofers, sheet metal workers, other trades

Not only does the job have to have at least 9% minority hours, but each and every category listed has to have 9% minority hours.   So, overall, you could have 50% of your work force be minorities, but if the folks who constructed your elevator were all white, you fail the test.

*CLUNK*  That is the sound of the prospectus hitting the circular file.