Coyote Blog

My column for Forbes is up this week, and yet again I address issues related to the stimulus.  This time, rather than questioning the Keynesian multiplier, I observe that Congress has passed several pieces of legislation which act as "anti-stimulus" whose magnitudes dwarf that of any fiscal stimulus programs, even at multipliers greater than one.

Larger corporations are going to face different economics, but they too seem to be anticipating higher future costs from this legislation. For example, while they may not face the penalty for having no health care plan, they will face higher Medicare taxes, taxes on overly rich plans, and increases in health care premiums. If the average business is anticipating a 5% increase in payroll-related expenses, and given that total private payrolls in the U.S. are around $6 trillion, this implies that businesses may be planning for $3 trillion of health care anti-stimulus over the next 10 years.

Similar scale numbers can be found for the overall effects of cap-and-trade. Perhaps the best estimate we have is the CBO scoring of the Kerry-Lieberman bill, which estimated that payments for carbon allowances over the first ten years would total $751 billion. Assuming that the costs of most of these allowances are passed on to consumers, then this bill represents another three quarters of a trillion in anti-stimulus. In addition, expiration of the Bush tax cuts, card check, and a number of new regulatory initiatives all will drive this anti-stimulus expectation higher. Is it any wonder, then, that the private sector yawns when the Congress rushes back from vacation to pass a $26 billion jobs bill?

This week in Forbes, I argue that tallying up the taxpayer money that has been poured into GM actually under-estimates the price of the bailout.

So what if the U.S. government had let GM's bankruptcy proceed unhindered? Allowing the GMs of the world be liquidated, with their assets and employees taken up by more vital entities, is critical to the health of our economy and the wealth of our nation. Assuming GM's DNA has a multiplier below one, releasing GM's assets from GM's control actually increases value. New owners of the assets might take radically different approaches to the automobile market. Talented employees who lose their jobs in the transition, after some admittedly painful personal dislocation, can find jobs designing and building things people want and value. Their output has more value, which in the long run helps everyone, including themselves....

This is the real cost of the GM bailout--not just tens of billions of dollars of wasted taxpayer money, but continued unimaginative use of one of the largest aggregations of wealth and talent in the world.

My column this week in Forbes is up.  Been getting a lot of mail today as it was picked up at RealClearPolitics.  An excerpt:

Here is my first law of economic growth: When we encourage more investment, and ensure this investment is being channeled to the most productive uses, growth will follow.

For all the talk about fiscal stimulus and jobs creation at the federal and state level, almost no one in government is doing anything about reducing the roadblocks to investment.

At first I thought Kevin Drum was re-branding "laissez faire" into "economic nihilism."  But after reading the linked article, which blames deficits 100% on Republican tax-cutting rather than either Democratic or Republican free spending, I suppose he is really equating the policy of opposing tax increases to economic nihilism.    For this to be true, given the definition of nihilism, it means that all meaning, purpose, and everything of intrinsic value flows from the government.  Denying government more money = nihilistic negation of reality.

In my Forbes column this week, I discuss the incredible similarity between the computer models that are used to justify the Obama stimulus and the climate models that form the basis for the proposition that manmade CO2 is causing most of the world's warming.

The climate modeling approach is so similar to that used by the CEA to score the stimulus that there is even a climate equivalent to the multiplier found in macro-economic models. In climate models, small amounts of warming from man-made CO2 are multiplied many-fold to catastrophic levels by hypothetical positive feedbacks, in the same way that the first-order effects of government spending are multiplied in Keynesian economic models. In both cases, while these multipliers are the single most important drivers of the models' results, they also tend to be the most controversial assumptions. In an odd parallel, you can find both stimulus and climate debates arguing whether their multiplier is above or below one.

Over at my climate blog, I discuss the amazing similarity between Obama's claims for the effects of the stimulus and the IPCC's claims for the effects of CO2 on past temperatures.  Both seem to reach their results by assuming that all the other variables in a complex system (climate or the economy) can be isolated and assessed and coincidentally are exactly the value necessary to prove that the variable under study (CO2 or the stimulus) had exactly the effect the studies authors thought it would.

Tyler Cowen writes:

If aggregate demand is so low, why are profits so high?

TJIC responds

SmartFlix  [TJIC's company] has show paper losses every year it's been in existence "¦ but I expect that this year it will show it's first ever paper profit.

"¦which is not a sign of macroeconomic health, but is, in fact, a sign of my very poor expectations for the economy.

Ditto here. We will probably show our largest paper profit this year, but it is mainly because we have cut way back on investment in new projects.  And this has nothing to do with demand - we are experiencing a boom, as the recession pushes Americans towards lower cost recreation of the type we operate, at the same time it cuts state budgets and makes them more amenable to our business model of private operation of public parks.

So why are we cutting back investment?  I run a very low margin service business. Here is a simplified calculation: We make, say, 8% of revenues before taxes and accelerated depreciation. 50% of our costs are labor, and the new health care law may raise our labor costs by 8% or even more.  A four percentage point cut in margins is not a big deal to Microsoft, but it is to us.  Until we figure out how this all will play out, we are still investing but only in above-average opportunities.

When we invest in a new project, it hits that year's income in two ways.  First, we have accelerated depreciation on the new capital equipment.  And second, we typically have a startup loss in the first year.  In the last few years of rapid growth, we have had close to zero paper earnings because of these growth effects.  Once we take our foot off the pedal this year, though, we will show a large positive income.  For us, reduced growth and investment = higher short term reported profits.

As someone who once spent nearly a hundred hours to defeat a $20 Department of Labor claim, mainly to fight the precedent, I can sympathize 100% with Wal-Mart spending millions to fight a $7,000 OSHA claim.  Note that despite all the OSHA wailing about not understanding why Wal-Mart is fighting so hard and causing them so much trouble, they admit at the end that they are trying to set a precedent for future actions.

For several years I worked for Emerson Electric, which among its many divisions owned a ladder manufacturer.  If there ever was a product that simply is what it is, totally WYSIWYG, it's a ladder.  But it turns out in this age of personal responsibility that anyone who ever gets hurt using a ladder, usually doing something stupid, will sue the ladder manufacturer for his or her injury.  Emerson fought every one, all the way to trial and sometimes appeal.  Lawyers said they were crazy, that in any given case, it would be cheaper (considering legal fees) to just settle.  But Chuck Knight (Emerson CEO) knew that these were not individual cases, they were multiple events in an ongoing "game," and game theory gives a different answer.  Fight enough of these, and tort lawyers looking for a quick buck with little work and cost will choose to spend their time elsewhere.

Unless you are from Mars, you probably know LeBron James is a free agent, being courted by a number of teams, ultimately deciding on Miami over his home town and former team in Cleveland.

This has been an odd auction for his services, because except for some tax issues (which certainly may have been a factor in going to Florida), price controls in the league effectively cap how much James can be paid.  And given his talent, it was clear that every team would be willing to pay him the max.  This has led to offers based mostly on non-monetary factors, with Cleveland mainly taking the Glenn Close approach from Fatal Attraction, basically saying it would have to commit suicide if LeBron breaks up with the city.

Many have commented on how much Cleveland, economically, had riding on James and that it may well get the biggest economic benefit, bigger certainly than Miami which has fairly indifferent and easily distracted fans, of any of the teams in the auction.  But with price controls, Cleveland lost because it was not able to bid for LeBron's services what he was really worth  (in fact, it was pretty clear that all the teams involved expected to have a huge consumer surplus from LeBron's acquisition, since his value to any team seems to be higher than the salary cap).

By the way, speaking of surplus or lack thereof, my belief is that New York has continued its tradition of offering long-term lucrative deals to disappointing players.  Having watched Amare Stoudemire for seven years, I can say that he is fully poised to be the next Stephon Marbery for the Knicks.  He can be brilliant, and he is very talented, but he has focus issues that are not going to be enhanced in New York and at times was thrown off-kilter by the media pressure in Phoenix where the press is a cupcake compared to New York.  He is not even much of an upgrade from David Lee, but he gets paid a lot more guaranteed money.

From the Thin Green Line:

So much for criticism that California's environmental leadership "” notably AB 32 "” kills jobs: The state has the most green-collar jobs of any in the nation, and San Francisco leads the Golden State with 42,000 positions. For a city with a population of 809,000, that's pretty impressive.

I think of my father-in-law when I read something like this.  He was a lifelong environmentalist as well as a PHD physicist and a researcher at MIT's Lincoln Labs.  While we often disagreed on various issues, he always tried to bring both science and the scientific method to environmental issues.  I wonder what he would think about this bozo.

Not that this quote really deserves further attention, but here are a couple of random thoughts:

• While AB32 has been law for a number of years, the CARB has made only limited progress actually setting up the enabling regulations and carbon trading schemes.  In effect, AB32 is largely un-implemented at this point, making its lack of effect on job growth fairly unsurprising
• Wow, what a surprise -- the state with the largest number of workers has the largest number of workers in a particular employment category.  My guess is they have the most car mechanics in the country too, and the most SUV owners.  So what?
• The whole definition of a "Green collar job" is total BS.  Basically it means you work in a job that has been deemed to be in a politically correct energy related field.  But why are solar executives green jobs but hydro plant workers not?
• The implication in the post is that this is some kind of public policy victory, but of course there is no evidence at all of why these jobs exist or are located in California
• Even if these jobs are the result of some kind of California public policy initiative, how much did they cost?  How many jobs were lost when the government shifted resources around by fiat?  In Spain, its been calculated that more than 2 jobs were lost for every green job created.

There used to be a joke in Texas during the 80's oil bust -- "How do you make a million dollars in oil?  Start with $10 million."  The same likely applies here -- "How do you create 42,000 green jobs?  Start with 100,000."

When we gave government money targeted at single women with kids we got, incredibly, more single women with kids.  And when we give people money only when they are unemployed, we are going to get more unemployed.  The economics of this are pretty bullet-proof.  We may choose to do so because we have a humanitarian desire to cushion hardship, but we should accept that when we reduce the hardship of being unemployed, and actually give people money for not working, we are going to get more people unemployed for longer periods.

Apparently, Nancy Pelosi lives in a different world (no surprise there) there supply and demand curves slope the opposite direction.

Talking to reporters, the House speaker was defending a jobless benefits extension against those who say it gives recipients little incentive to work. By her reasoning, those checks are helping give somebody a job. "It injects demand into the economy," Pelosi said, arguing that when families have money to spend it keeps the economy churning. "It creates jobs faster than almost any other initiative you can name."

Pelosi said the aid has the "double benefit" of helping those who lost their jobs and acting as a "job creator" on the side.

I am rapidly approaching the point where I am ready to throw out the whole of macroeconomics as unprovable and unproductive, serving the purpose of allowing statists to do whatever they hell they want to do with some fig leaf from some goofball macro-economics theory  (and if the necessary theory is not  on the books, Paul Krugman, formerly a real economist, will be more than happy to whomp one up for his buddies on the Left.)

My first column at Forbes.com is up here (and on the opinion home page, which is kind of cool), and extends on some thoughts I have already posted on my blog about why government decisions in multi-agency task forces, such as those running the Gulf cleanup effort, seem to be made in such a stupid manner.

As most scientists know, one of the best tests of a theory is whether it makes correct predictions about future events.  Since I wrote this article several days ago, we have seen this new story which is absolutely consistent with the decision-making paradigm I describe in the article (from Q&O)

Louisiana has been busily building berms about a mile out from the coast to halt the infiltration of oil into its sensitive marshes, wetlands and prime fishing areas. This process was greatly delayed by federal red tape, and now that the state has permits in hand it's being order to stop because, according to the U.S. Fish and Wildlife Department, it's doing it wrong:

The federal government is shutting down the dredging that was being done to create protective sand berms in the Gulf of Mexico.

The berms are meant to protect the Louisiana coastline from oil. But the U.S. Fish and Wildlife Department has concerns about the dredging is being done.

Plaquemines Parish President Billy Nungesser, who was one of the most vocal advocates of the dredging plan, has sent a letter to President Barack Obama, pleading for the work to continue.

[...]

Nungesser has asked for the dredging to continue for the next seven days, the amount of time it would take to move the dredging operations two miles and out resume work.

Work is scheduled to halt at midnight Wednesday.

Pat Austin is trying to understand the federal obstruction, but finds that political reasoning is the only thing that makes sense of it all:

I'm trying to see both sides here; I'm trying to understand the "coastal scientists" who contend that the berms will "change tidal patterns" and lead to more long term erosion of the islands, but if the islands are killed off by the oil what difference does it make? To borrow from Greta Perry's analogy, if my house is on fire, what does it matter what room I try to extinguish first? It's all doing down.

Read the Forbes article -- why exactly this decision was not only possible but inevitable is discussed in detail.

Via Stossel

A restaurant in Mesa, Arizona is selling lion meat burgers. Enter the animal rights activists:

Dr. Grey Stafford with the World Wildlife Zoo says that serving a threatened species sends the wrong message. "Of all the plentiful things to eat in this country, for someone to request that or to offer that... I was rather stunned," says Stafford.

... Animal rights advocates are expected to protest outside[the restaurant].

But why?  Lions are listed as "threatened." The best way to save threatened and endangered species is to"¦eat them.

As a reminder, here is the effect of the cash-for-clunkers new car sales "stimulus."

A lot of taxpayer money was spent to line the pockets of a few lucky buyers without doing anything to change the overall trend of auto sales.

Well, it looks like with the end of the housing stimulus program, we are seeing the exact same effect:

Sales of new homes collapsed in May, sinking 33 percent to the lowest level on record as potential buyers stopped shopping for homes once they could no longer receive government tax credits.The bleak report from the Commerce Department is the first sign of how the end of federal tax credits could weigh on the nation's housing market.

The credits expired April 30. That's when a new-home buyer would have had to sign a contract to qualify.

...

New-home sales in May fell from April to a seasonally adjusted annual sales pace of 300,000, the government said Wednesday. That was the slowest sales pace on records dating back to 1963. And it's the largest monthly drop on record. Sales have now sunk 78 percent from their peak in July 2005.

Analysts were startled by the depth of the sales drop.

"We all knew there would be a housing hangover from the expiration of the tax credit," wrote Mike Larson, real estate and interest rate analyst at Weiss Research. "But this decline takes your breath away."

Opponents of free trade will often say publicly that they are all for free trade but it must be "fair," which they generally would define as balanced between imports and exports.  This is a dodge, because they know many of our trading partners are not going to open up trade to be entirely free so they can use that inevitability as an excuse not to remove American protectionist barriers.

But trade does not need to be balanced to create wealth, and in fact it is not just exports that provide a boost to real incomes.  Daniel Ikenson at Cato has these two charts comparing the CPI for items that face competition from imports and those that don't:

See his article for more discussion.

This is also related to something I read about a while back, that we may be underestimating income gains among the lower income quartiles in this country because we adjust to real wages based on an average inflation rate.  The argument was that the inflation rate for the poor has been lower  (the Wal-Mart effect) than the inflation rate for the rich (prices at the Four Seasons keep going up).  One estimate put the difference in inflation rates as high as 6 percentage points, in part because the poor proportionally consume a lot of goods that are imported while the rich consume proportionally a lot of services that are produced domestically with high cost labor.

I have written a lot about the Cash for Clunkers law, and the fact that it was a hit with its beneficiaries because it bought cars that blue-booked for just under $1500 for two or three times that amount.  Other studies have shown that the program did abate some CO2, but at ridiculously high prices per ton.

But I have found a reason to love the Cash for Clunkers program:  it is a fabulous demonstration project for just how utterly pointless government stimulus programs can be.  Stimulus programs tend to be hard to evaluate in our complex economy -- sort of like trying to calculate the effect of a butterfly flapping its wings on world climate.  But since cash for clunkers only lasted a few weeks and hit only one industry, we can learn a lot about the effectiveness of government stimulus.

Here is the US Census data for auto dealer sales (source).  Thanks to my friend Scott who first pointed me to the analysis:

The dotted line simply averages the sales for the month of the clunkers program and the month after.  I think it is pretty clear that we spent a few billion dollars making some used car owners happy (by overpaying for their vehicles) but did absolutely nothing to move the trend line in auto sales, as the program appears to have just pulled forward purchases rather than stimulated new ones.

Update: Welcome Instapundit readers.  This is all in the family blogging day, as my son just started up his own blog with a post ranking baseball players.  Feel free to give him grief for being a Yankees homer.

That's the headline from the Arizona Republic today.  Do editors realize this is becoming a national running joke?

The number of people filing new claims for unemployment benefits unexpectedly rose last week by the largest amount in three months. The surge is evidence of how volatile the job market remains, even as the economy grows.

This is one of the better simple explanations of both the appeal and hidden risk of CDO's. The example, which is short and is worth working through, ends this way:

Suppose that we misspecified the underlying probability of mortgage default and we later discover the true probability is not .05 but .06.  In terms of our original mortgages the true default rate is 20 percent higher than we thought--not good but not deadly either.  However, with this small error, the probability of default in the 10 tranche jumps from p=.0282 to p=.0775, a 175% increase.  Moreover, the probability of default of the CDO jumps from p=.0005 to p=.247, a 45,000% increase!

The dark magic of structured finance conjured many low-risk securities out of many risky securities.  Like all dark magic, however, the conjuring came at a price because if you didn't get the spell exactly correct it was easy to create something much more risky and dangerous than you were likely to have ever imagined.

As an ex-engineer who used to do a lot of operations analysis as well as post-disaster failure analysis, this shares a central theme that I have found in many such failures -- people tend to overestimate their own knowledge.

Coming in to a class at HBS, the professor had us all do a 20 question survey.  It asked us questions like "what is the population of Argentina" and then asked us to give the lowest and highest number we thought it would be such that the answer had a 95% chance of being in that range.  Based on this, only one of our 20 answers should have been out of my limits.  About eight of the answers were out of my ranges.  It was a really good lesson in overestimating one's knowledge.

Which leaves me with a thought -- if we define a large part of the problem as overestimating our understanding of a certain phenomenon, from your observation of the Obama administration and its personalities, what gives you any confidence that a new lager of government regulators will solve this problem?

I hate to quote almost all of someone's blog post but hopefully Todd Zywicki will treat it as a compliment

Some of the results in this new article by Zeljka Buturovic and Dan Klein in Econ Journal Watch (a peer-reviewed journal of economics) are startling:

• 67% of self-described Progressives believe that restrictions on housing development (i.e., regulations that reduce the supply of housing) do not make housing less affordable.
• 51% believe that mandatory licensing of professionals (i.e., reducing the supply of professionals) doesn't increase the cost of professional services.
• Perhaps most amazing, 79% of self-described Progressive believe that rent control (i.e., price controls) does not lead to housing shortages.

Note that the questions here are not whether the benefits of these policies might outweigh the costs, but the basic economic effects of these policies.

...

It would be hard to find a set of propositions that would meet with such a degree of consensus among economists to rival these propositions"“which boils down to supply restrictions raise prices and price controls create shortages.  These are issues on which economic theory is exceedingly clear, well-confirmed over decades of empirical support, and with a degree of unarguable consensus among trained scholars in the field.  Apparently the existence of a "consensus" among trained scholars on certain policy issues is less important on some issues than others.

Repeat after me:  There is nothing wrong, immoral, evil, or even unsavory about short-selling.  No one gets mad at you for selling an over-valued security which you actually own, so there should be no ethical difference in selling an over-valued security you don't actually own.  Somehow people who are traditionally long in the market (e.g. corporate executives) have convinced the world that short-sellers should be vilified.  I don't understand it.  If you love the stock and short-sellers drive it down, you should treat it as a gift that the stock you love can now be bought more cheaply.

So I thought this was particularly awesome:

On Oct. 8 and 9, 2008"”as the Federal Reserve was bailing out American International Group Inc."”an account Sen. Isakson held invested more than $30,000 in ProShares UltraShort 7-10 Year Treasury and UltraShort 20+ Year Treasury, the records show. These are "leveraged short" funds, designed to gain $2 for each $1 drop in the daily value of U.S. Treasury bonds.

Isakson claims he was not actively managing the account, a claim that is probably true given the ethics rules in Congress (not that anyone follows those).  My response in his place would have been, "F*cking-A right I was shorting government bonds.  Haven't you been paying attention over the last 12 months?"

Unfortunately, Isakson falls out of my hero category into my "hypocritical goat" category for this:

In February, Sen. Johnny Isakson (R., Ga.) argued on the Senate floor that "we don't need those speculating in the marketplace to take unfair advantage of the values of equities that are owned by Americans all over this country for the sake of making a buck on a short sale."

Again this unaccountable bias that somehow people who are long are morally superior, and somehow more entitled, than people who are short.

Ht Radley Balko

This comes from an email I got from some folks called the Federation for American Immigration Reform.

FAIR's new report, The Environmentalist Guide to a Sensible Immigration Policy examines the relationship between America's mass immigration policies and skyrocketing population growth.  It details how both are severely limiting America's ability to make meaningful progress toward important environmental goals.

"Some environmental groups like to pretend that this correlation does not exist," said Dan Stein, President of FAIR. "Because of pressures brought to bear by politically charged special interests demanding open borders, groups sincerely interested in advancing sensible environmental policies remain muzzled on the issue.  Overpopulation fueled by uncontrolled immigration - the root cause of most resource depletion - is unfortunately deemed too radioactive to discuss in some circles."

Since the first Earth Day in 1970, U.S. population has grown by 50 percent, or about 100 million people. U.S. population now stands at approximately 308 million and is currently growing by nearly three million a year "“ the equivalent of adding a new Chicago each year.  By 2050, an estimated 438 million people will live in this country with more than 80 percent of the increase coming from post-2005 immigrants and their children.

Uh, these people would exist whether they live on one side of the map or the other, its not clear how immigration contributes to over-population, unless they are taking some coldly Malthusian argument that more of them would die young in poverty than do once they improve their lives in the US.   Sure, they may be wealthier having come to the US and use more energy and consume more, but my strong sense is that as they come to the US and get wealthier, then their birthrates actually fall, even if they remain higher than the US average.

As Obama pushes the US into a corporate state model like those in Europe, here is one cost we will face: increases in long-term unemployment.  Already we see higher structural barriers being created to employment (preference for preferred unions, higher minimum wage, reduced internships) combined with increasing incentives to remain unemployed (extension of unemployment benefits, subsidized medical services).

Most countries who move to this model experience very high long-term structural unemployment.   The costs to add an employee in Europe are really, really high, meaning that it is only done reluctantly and the preference is for highly skilled workers  (who is going to give a job for life to an untested, unskilled young worker?)  Further, these states are run by a troika of large corporations, unions, and government insiders who protect each other from competition.  Young unskilled workers are a competitive threat to established unions.  Since these unions workers get above-market wages, they are protected from younger workers who are willing to offer their admittedly less skilled labor much cheaper.

I was playing around with data released from the World Bank, and compared the US to a number of other industrialized countries on this metric.  Even in past recessions, long-term unemployment has remained low in the US (click to enlarge).  The metric is percent of total unemployed that are unemployed for longer than 1 year.

The narrative is that small business credit markets are frozen.  John Stossel argues the facts say otherwise?

More melodramatic prose from today's Washington Post: "White House moves to free up lending for small businesses."  "Unfreeze the markets." "Free up lending." Given such language, I would think that loans to small businesses have stopped. The market must be broken, right?

... lending to [small] companies has fallen. Federal data show that lending to small businesses by community banks declined by about $8 billion, or 2 percent, between September 2008 and September 2009.

A decline of two percent. TWO PERCENT. That constitutes a credit "freeze"? Considering the rash of bank failures from 2008 - 2009 due in large part to bad loans made by banks, a decline of two percent in loans to small businesses strikes me as a prudent response.

So does our science-based President address the narrative or the facts?  Here is a hint:  narratives can affect elections, while facts are often ignored.  Therefore, Obama is proposing to use $30 billion of TARP money to so something about the $8 billion drop in small business lending.

I accept the following reaction, as embodied in the last sentence, from the University of Florida as entirely rational.  However, can you imagine this same reaction if all the facts were the same but the genders were reversed?

According to University of Florida spokesman Steve Orlando, six out of 10 new UF students will be women in fall 2010, which is the largest gender gap favoring female students that UF has ever had. UF's fall 2009 enrollment was 54% female and 46% male, according to the UF Office of Institutional Planning and Research.

UF is aware of the gap but not doing anything to balance the numbers, Orlando said. But he said the school isn't discriminating against male applicants. "Boys wouldn't be admitted because they're boys," he said. "Girls are being admitted because they are doing the things to be admitted and boys aren't."

Government bureaucracies do not exercise power by allowing activities to occur - they only have power, and thus have reason to justify their continued funding and jobs, when they say no.   Every incentive that they have is to say no.  When a government agency allows progress to proceed smoothly, it is doing so because some person or small group is fighting against the very nature of the organization.  Anyone who believes otherwise about government agencies is challenged to go build and open a new restaurant in Ventura County, California.  Here is the latest example:

The [weatherizing] program was a hallmark of the American Recovery and Reinvestment Act, a way to shore up the economy while encouraging people to conserve energy at home. But government rules about how to run what was deemed to be a ''shovel-ready'' project, including how much to pay contractors and how to protect historic homes during renovations, have thwarted chances at early success, according to an Associated Press review of the program.

''It seems like every day there is a new wrench in the works that keeps us from moving ahead,'' said program manager Joanne Chappell-Theunissen. She has spent the past several months mailing in photographs of old houses in rural Michigan to meet federal historic preservation rules. ''We keep playing catch-up.''

And of course, even in a skeptical article about a "stimulus" project, no one ever mentioned what productive activities the $5 billion was being used for by private individuals before the government yanked it away for this little catastrophe.

By the way, the overblown rhetoric award has to go to this:

''This is the beginning of the next industrial revolution with the explosion of clean energy investments,'' said assistant U.S. Energy Secretary Cathy Zoi. ''These are good jobs that are here to stay.''

Given that the first one was about steel mills and railroads and oil and electricity, if this new industrial revolution is all about caulking, I think I am getting nostalgic for the first one.