Coyote Blog

In Halbig, the DC Circuit argued that the plain language of the PPACA should rule, and that subsidies should only apply to customers in state-run exchanges.  I am going to leave the legal stuff out of this post, and say that I think from a political point of view, Obamacare proponents made a mistake not sticking with the actual language in the bill.  The IRS was initially ready to deny subsidies to the Federal exchanges until Administration officials had them reverse themselves.  When the Obama Administration via the IRS changed the incipient IRS rule to allow subsidies to customers in Federal exchanges, I believe it panicked.  It saw states opting out and worried about the subsidies not applying to a large number of Americans on day 1, and that lowered participation rates would be used to mark the program as a failure.

But I think this was playing the short game.  In the long game, the Obama Administration would have gone along with just allowing subsidies to state-run exchanges.  Arizona, you don't want to build an exchange?  Fine, tell your people why they are not getting the fat subsidies others in California and New York are getting.  Living in Arizona, I have watched this redder than red state initially put its foot down and refuse to participate in the Medicaid expansion, and then slowly see that resolve weaken under political pressure. "Governor Brewer, why exactly did you turn down Federal Medicaid payments for AZ citizens?  Why are Arizonans paying taxes for Medicaid patients in New Jersey but not getting the benefit here?"

Don't get me wrong, I would like to see Obamacare go away, but I think Obama would be standing in much better shape right now had he limited subsidies to state exchanges because

1. The disastrous Federal exchange roll-out would not have been nearly so disastrous without the pressure of subsidies and the data integration subsidy checks require.  Also, less people would have likely enrolled, reducing loads on the system
2. Instead of the main story being about general dissatisfaction with Obamacare, there would at least be a competing story of rising political pressure in certain states that initially opted out to join the program and build an exchange.  It would certainly give Democrats in red and purple states a positive message to run on in 2014.

A while back I wrote about my concerns about the total absence of any security at all in the Arizona corporate annual reporting system

I started the annual reporting process by just typing in the name of my company and getting started.  There was no password protection, no identity check.  They had no way of knowing I had anything to do with this corporation and yet I was answering questions like "have you been convicted for fraud."  The potential for mischief is enormous.  One would have to get the timing right (an annual report must be due before one can get in) but one could easily open the site on January 1 and start entering false information in the registrations for such corporations as Exxon and Wal-Mart.

See for yourself.  .

I showed how one could open and file the report for a company like Wal-Mart, changing all their officers names, and confessing to all sorts of imagined corporate crimes

Again, note what I am saying.  This is not the result of hacking.  This is not lax security I figured out how to evade.  This is the result of no security whatsoever.  I simply went to the link above, clicked on the Wal-Mart Associates link, and then clicked on the annual report link.  I know from doing my own registration that there is a signature page at the end, but all you do is type in the name of an officer and a title -- data that is right there on the site.  It's like asking you for a password after the site just listed all the valid passwords.

The head of the Arizona Corporation Commission wrote me back. Here is here email in its entirety:

Dear Mr. Meyer:

Thank you for your email regarding the Corporations Division.  The Arizona Corporation Commission is the repository for all business formation documents for corporations and limited liability corporations.  We are in full compliance with state statutes.

Submitting false documents to alter another’s corporate structure or status is a crime and carries a Class 4 or Class 5 penalty.  The Commission or the aggrieved business entity may refer the false filing to the Attorney General’s office for prosecution.  Additionally, the individual business entity may pursue a civil cause of action.  The Commission only accepts on-line charges for a few services such as name reservation or to order a certificate of good standing, and the online payment process is completely secure.

Even though the Commission’s existing security measures comply with the state law and are similar to most other states and other Arizona governmental entities like the County Treasurer’s Office, the Commission is looking at implementing new technology to allow for the online submission of additional services – such as the filing of original Articles of Organization and Articles of Incorporation.  We do intend to provide password protected security features when that new technology is offered to the public.

J. Jerich

Executive Director

Arizona Corporation Commission

I had no doubt that submitting a false annual report for Wal-Mart would be illegal.  Duh.  However, it is just incredibly naive that this is the sole extent of the Commission's security, to prosecute people once the damage is done.  Can you imagine if Amazon had the same security policy - "we are getting rid of passwords because it would be illegal for you to buy something from someone else's account."  I wonder if the commissioners leave their doors unlocked at night, trusting in the threat of future prosecution to deter burglary and mayhem in their homes?

Today I had to do my annual renewal of my corporate registration in Arizona.  As in most states, this involves a bit of information foreplay followed by the purpose of the exercise -- sending in a check to the corporation commission.

But here is the extraordinarily scary part -- I started the annual reporting process by just typing in the name of my company and getting started.  There was no password protection, no identity check.  They had no way of knowing I had anything to do with this corporation and yet I was answering questions like "have you been convicted for fraud."  The potential for mischief is enormous.  One would have to get the timing right (an annual report must be due before one can get in) but one could easily open the site on January 1 and start entering false information in the registrations for such corporations as Exxon and Wal-Mart.

See for yourself.  .  Below is a screen shot of the site letting me in to edit one of Wal-Mart's corporate registrations in Arizona:

Again, note what I am saying.  This is not the result of hacking.  This is not lax security I figured out how to evade.  This is the result of no security whatsoever.  I simply went to the link above, clicked on the Wal-Mart Associates link, and then clicked on the annual report link.  I know from doing my own registration that there is a signature page at the end, but all you do is type in the name of an officer and a title -- data that is right there on the site.  It's like asking you for a password after the site just listed all the valid passwords.

If I disliked Wal-Mart, I could put all kinds of crazy garbage in here.  I did not go further, because I would have had to answer these questions to proceed and I had no desire to mess with another company's critical data, but if I had gone further I could have changed their mailing address, the names of their officers, etc. -- all I had to do was just pay the $60-ish registration fee for them and they would have a big mess on their hands to sort out.   If I had access to a fake or stolen credit card and a public computer, I could have done it all without any hope of being traced.

By the way, from my experience, this is not unique to Arizona.  This criminally lax behavior seems to be the norm in most states.

I have submitted this all as a complaint to the state, so far with no response.  If anyone in AZ knows how I can get someone's attention with this, let me know.

Looking at this map of state licensing regimes (darker is more onerous, with AZ being the worst), it is hard to correlate with states being Republican or Democrat.  That doesn't surprise me, because I have always thought the urge to restrict competition and protect incumbents has always been a bipartisan enterprise.

So I sat and thought for a minute about my home state of AZ.  Why is it the worst?  We have a pretty good libertarian history here, from Goldwater onwards.  We have at least one fairly libertarian Senator (Jeff Flake).  So what is the deal?

My hypothesis is that it is related to immigration.  The same majority Republican legislators who are generally open to free markets simultaneously have an incredible fear and loathing of immigration.  Perhaps our onerous business licensing regime is driven by nativists wanting to protect themselves from competition by new immigrants, immigrants who would struggle to compete onerous licensing requirements?

So what does this map look like vs. immigrant population density?  Via Wikipedia, here are the states on density of Hispanics

Hmm, we might be getting somewhere, but its not a perfect fit.  So instead, let's hypothesize that business licensing is aimed at non-white, non-hispanic groups in general (similar to early justifications for the minimum wage as a way to keep black workers migrating from the south out of traditionally "white" jobs).  I cannot get it by state, but the map below by county looks pretty dang similar to the licensing map.  Areas in blue have above average percent of non-whites, red is below average.

Not a perfect fit certainly (one would expect Texas to be more onerous), but perhaps close enough to treat the hypothesis seriously.  I had always thought that I would be the last one to play the race card in a policy analysis, but business licensing tends to have an inherently base motive (protect one group from competition from another group) that is pretty easy to square with racial and ethnic fear.

From the AZ Republic

Cancer is skyrocketing worldwide and urgent steps are needed to curtail a catastrophic rise in incidents of the disease, the World Health Organization said in a report this week.

New cancer cases are expected to soar globally from an estimated 14 million in 2012 to 22 million new cases a year within the next 20 years.

Cancer deaths are expected to jump from about 8.2 million to 13 million a year.

I guess my question is, is there really an epidemic of new cancers, or can this be explained by:

• Better and earlier identification of cancers that always existed but went undiagnosed.
• A reduction in early death and disease that allows more people to grow old into the years where cancers are common

In both these explanations, increases in cancer diagnoses could easily be, counter-intuitively, caused by improving local medical care rather than any environmental or genetic factor.

The article seems to imply that the explosion is due to environmental and nutrition issues.  I am certainly willing to believe that rising incomes allow more people to smoke, causing cancer issues.  But my guess is that most of this increase is from my two explanations.  Far be it for me to suggest that folks who depend on fear-driven funding of cancer care might exaggerate the scope of the "epidemic".

The last remaining justification that anyone has given me for the need to close privately-funded concession-run parks in the US Forest Service is that the Forest Service must close to all uses on its lands.  But this justification is now in total tatters, making it all the more clear that closure of private concessionaires was an arbitrary and unjustified action.  Here is why:

• As reported earlier, the US Forest Service is still allowing many recreation uses on its lands.  Individuals can still camp and hike in non-developed areas.  Many US Forest Service campgrounds till seem to be open (example Oak Flats near Globe, AZ).  And many state parks, such as Fool Hollow and Slide Rock in AZ and Burney Falls in CA that operate on US Forest Service land have been allowed to remain open and still use Forest Service land for recreation.  In fact, the only groups that seem to be closed in the US Forest Service are private concessionaires, which increasingly appear to have been singled out for rough treatment by the Administration.
• We have received emails from the US Forest Service that these closures are required to be consistent with the NPS, but the NPS is allowing its parks to be reopened if they are funded by outside agencies.  Both Arizona and Utah have reached agreements to reopen National Parks in their states through use of state funding.  So why can't private parks on Federal lands be reopened through the use of private funding, which is how we operate anyway?  Its almost as if this Administration has some sort of bias against private activity.

I don't like to recommend destinations that are really expensive (why get people excited about a place they can't afford to visit) but we splurged this weekend on the Enchantment Resort in Sedona, Arizona.  It is the most spectacular location I have ever seen for a landlocked (ie non ocean-front) resort.  It is almost impossible to do it justice in photos, because it sits at the end of a box canyon and is surrounded on three sides by red rock walls.    Some pictures are here in the google image result.  Expect to pay $300-400 and up for a night, though you will get a very nice room even for the lower rates, and large casitas for higher rates.  As is usual for resorts, meals are crazy expensive -- its hard to get through breakfast, for example, for less than $20 a person.  But the views and hiking and everything else here are just beautiful.

One of the things I enjoyed was the resort had a native american climb onto a local rock outcropping a couple of times a day and play peaceful flute music that echoed around the resort.  You can see a group gathered around to watch (update:  A reader was nice enough to Photoshop out some of the haze using a levels command trick he taught me a while back -- you can compare below to this original)

It freaked me out for a while because I would here this low-volume music as I walked around the resort and I could not figure out where it was coming from (I kept looking for hidden speakers until I figured it out).

As an added bonus, the night sky is totally dark -- you are out in the wilderness about 15 miles from Sedona and out of site of any other habitation of any sort and almost completely surrounded by canyon walls.  As a result, it is one of the few places where us city folk can see the Milky Way in all its glory (below is my amateur photography (you may have to click to enlarge to really see the Milky Way, but its there).

The restaurant there is quite good and there are excellent tables on the deck outside to watch the sunset.  But if you want a slightly different Sedona experience (though equally expensive) the Restaurant at the L'Auberge resort right in the town of Sedona on Oak Creek is terrific.  The food is great and the location on the creek is very romantic at night.  Here is the view from my table right around sunset.

You can't get closer to the water than that!

Postscript:  If you like the idea of creekside dining but don't want to blow a hundred bucks a person for dinner, I have eaten at a much less expensive, much less highbrow restaurant that had a very similar location.  It is the Rapids Lodge Restaurant at Grand Lake, Colorado, and is a great place to eat on a trip through Rocky Mountain National Park before you turn around and head back to Estes Park.  Here is the view from our table there:

PPS:  Other US resort views I like:  Highlands Inn, near Carmel;  Hapuna Resort, Big Island, Hawaii;  Sanctuary Resort, Phoenix, AZ (though the rooms really need an update);  Trump Hotel, Las Vegas (located right on the bend of the strip so the strip view rooms look straight down the strip at night).

Update:  In the spirit of equal time, a reader writes that the Enchantment Resort ruined Boynton Canyon.  Its impossible for me to say -- I never knew it in its pristine state.  I will say the resort itself does a pretty good job of keeping a low profile in the canyon -- no buildings that I saw over 2 stories tall, most of the old trees are preserved.

Via the AZ Republic:

The pay gap between the richest 1 percent and the rest of America widened to a record last year.

...

Last year, the incomes of the top 1 percent rose 19.6 percent compared with a 1 percent increase for the remaining 99 percent.

...

But since the recession officially ended in June 2009, the top 1 percent have enjoyed the benefits of rising corporate profits and stock prices: 95 percent of the income gains reported since 2009 have gone to the top 1 percent.

That compares with a 45 percent share for the top 1 percent in the economic expansion of the 1990s and a 65 percent share from the expansion that followed the 2001 recession.

The Federal Reserve is pumping over a half trillion dollars of printed money into inflating a bubble in financial assets (stocks, bonds, real estate, etc).  It should be zero surprise that the rich, who disproportionately get their income and wealth from such financial assets, should benefit the most.   QE is the greatest bit of cronyism the government has yet to invent.

(yes, I understand that there are many reasons for this one-year result, including tax changes that encouraged income to be moved forward into last year and the fact it was a recovery off of a low base.  Never-the-less, despite decades of Progressive derision for "trickle down" economics, this Administration has pursue the theory that creating an asset bubble that makes the rich much richer will in the long term help the economy via the "wealth effect.")

Via the AZ Republic

The true cost to operate Jobing.com Arena ranges from $5.1 million to $5.5 million a year, which is about $10 million to $20 million a year less than the Glendale City Council has agreed to pay hockey-related interests to manage the facility in recent years.

The net management costs, included in documents recently published on the city’s website, are bundled in the city’s solicitation for a new company to operate the city-owned arena.

Glendale council members interviewed by The Arizona Republic said they hadn’t reviewed the documents and were surprised by the figures.

“I wasn’t aware of that,” Mayor Jerry Weiers said. “Then again, I know damn good and well that the way it’s been run, they’re not putting anything extra into it whatsoever.”

This is unbelievably easy to understand .  It is a hidden subsidy, and everyone knows it.  The pictures of politicians running around saying "what, we had not idea" is just hilarious.  The Phoenix Coyotes hockey team has the lowest attendance in the league, and loses money.  In addition, the NHL, which owns the team, has committed to its members that it will not take a loss on the team, meaning that it needs to sell the team for north of $200 million.  The team is worth over $200 million, but only if moved to Canada.  In Glendale, it is worth $100 million or less.

The city was close to a deal a few years ago to sell the team.  It tackled the team value problem by basically throwing $100 million in taxpayer money into the pot for the sale (to make up for the difference in value between the asking price and actual worth).  When this encountered a Constitutional challenge (under the AZ Constitution corporate welfare is illegal though you would never know it living here) the city council disguised the subsidy in the form of an above-market-rate payment for running the arena.

So absolutely everyone knows what is going on here.  This has become a massive black hole for the town of 250,000 people that achieves nothing but the self-aggrandizement of the local politicians, who feel like bigshots if they have a real major sports franchise in town.  Oh, you heard that this all actually pays for itself in tax money?  Hah!

The justifications for previous management deals revolved around a commitment to keeping the team in Glendale. Loyal fans pleaded with council members for the team’s future. And a council majority saw advantages, including thousands of fans trekking to their city 41 nights a year to watch hockey and spend money in the city’s restaurants and shops.

The city collects revenue associated with the team and arena through leases, parking fees and tax collections for food and merchandise sales in the nearby Westgate Entertainment District. Those figures have been on the upswing, particularly since an outlet mall opened last fall.

Total collections were $4.7 million in fiscal 2011, and reached $6.4 million through just the first eight months of the 2013 fiscal year, according to the city. That money helps pay, but doesn’t fully cover, the city’s debt to build the arena.

The town spent $300 million on a stadium and subsidized the team between $25 and $40 million a year, depending on how you count it, all to get an "incremental" $6-8 million in tax money.  And by the way, just because they collect it in this area does not make it incremental -- these sales could well have cannibalized another area of town.

My daughter is ready for her final (in-car) driving test to try to get her driver's license.  But it turns out that the AZ DMV only gives driving tests before 3PM each day.

This is yet another policy designed for the pleasure of government workers (who want to get home nice and early) and not customer-citizens.  Ask yourself:  Who are 99% of the people who take the in-car driving test.  Answer:  16-year-olds, also known as high school sophomores.  And what are they doing up until 3PM weekdays?  Why, they are going to school!

So I have to pull my daughter out of school to take the driving test.  But it is worse than that, because we can't just show up at 2:30, missing perhaps her last class.  The AZ DMV has this insane process that is essentially a series of chained queues.  One waits in line for the receptionist, who gives the "customer" a number based on what task they want to complete (license, tags, etc).  One then waits endlessly for this first number to come up, only to find that the person who calls you up can only complete half the task (at best), so you then have to wait in line for the next person to complete the next task, etc.

Well, reports from all the other parents tell us that if you show up two hours early (e.g. at 1PM), there is a very good chance you will not get the driving test.  If all the prior queues one must work through cause one to show up at the driving test queue even at 3:01 -- Sorry!  You have to come back another day and start all over.

This is obviously insane.  The chained queue process is nuts.  The fact that the one portion school age kids must complete ends before school is out is nuts.  The fact that the person who performs the last step in the chained process goes home first is nuts.

Until last year, and with my previous kid, we did not have to do this.  AZ had a very sensible law that allowed private licensed driving schools to give the driving test.  You could still go through the DMV, but for a $100 or so one could get this done via a high service, no-queue, work-on-the-weekend private company.  But of course our legislature ended this sensible service last year, ostensibly over concerns about quality, but likely because the DMV folks didn't like competition from outsiders who actually gave a sh*t about customer service.

Florida editorial via the Crony Chronicles

The problem with [the theory that sports subsidies help the economy] is that there is scant evidence that such economic benefits actually occur. Numerous studies done over the last 25 years have found that professional sport teams have little, if any, positive effect on a city’s economy. Usually, a new team or a new stadium location doesn’t increase the amount of consumer spending, it merely shifts it away from other, already existing sources. Entertainment dollars will be spent one way or another whether a stadium exists or not. Plus, the increase in jobs is often modest at best — nowhere near enough to offset the millions invested in the projects.

It's amazing they got the local paper to print this.  Most local papers would be defunct without a sports page.  As a result, local newspapers generally bring to bear tremendous pressure in favor of subsidies to attract and keep new professional sports teams.   Our local paper the AZ Republic tends credulously publish every crazy, stupid benefit study of sports teams on the road to promoting more local subsidies for them.

No, not the Pope.  The AZ Cardinals QB.   Anyone with some high school experience might want to send in a resume.

The extent to which the media is aiding and abetting, with absolutely no skepticism, the sky-is-falling sequester reaction of pro-big-government forces is just sickening.  I have never seen so many absurd numbers published so credulously by so much of the media.  Reporters who are often completely unwilling to accept any complaints from corporations as valid when it comes to over-taxation or over-regulation are willing to print their sequester complaints without a whiff of challenge.  Case in point, from here in AZ.  This is a "news" article in our main Phoenix paper:

Arizona stands to lose nearly 49,200 jobs and as much as $4.9 billion in gross state product this year if deep automatic spending cuts go into effect Friday, and the bulk of the jobs and lost production would be carved from the defense industry.

Virtually all programs, training and building projects at the state’s military bases would be downgraded, weakening the armed forces’ defense capabilities, according to military spokesmen.

“It’s devastating and it’s outrageous and it’s shameful,” U.S. Sen. John McCain told about 200 people during a recent town-hall meeting in Phoenix.

“It’s disgraceful, and it’s going to happen. And it’s going to harm Arizona’s economy dramatically,” McCain said.

Estimates vary on the precise number of jobs at stake in Arizona, but there’s wide agreement that more than a year of political posturing on sequestration in Washington will leave deep economic ruts in Arizona.

Not a single person who is skeptical of these estimates is quoted in the entirety of the article.  The entire incremental cut of the sequester in discretionary spending this year is, from page 11 of the most recent CBO report, about $35 billion (larger numbers you may have seen around 70-80 billion include dollars that were going away anyway, sequester or not, which just shows the corruption of this process and the reporting on it.)

Dividing this up based on GDP, about 1/18th of this cut would apply to Arizona, giving AZ a cut in Federal spending of around $2 billion.  It takes a heroic multiplier to get from that to  $4.9 billion in GDP loss.  Its amazing to me that Republicans assume multipliers less than 1 for all government spending, except for defense (and sports stadiums) which magically take on multipliers of 2+.

Update:  I wrote the following letter to the Editor today:

I was amazed that in Paul Giblin’s February 26 article on looming sequester cuts [“Arizona Defense Industry, Bases Would Bear Brunt Of Spending Cuts”], he was able to write 38 paragraphs and yet could not find space to hear from a single person exercising even a shred of skepticism about these doom and gloom forecasts.

The sequester rhetoric that Giblin credulously parrots is part of a game that has been played for decades, with government agencies and large corporations that supply them swearing that even trivial cuts will devastate the economy.  They reinforce this sky-is-falling message by threatening to cut all the most, rather than least, visible and important tasks and programs in order to scare the public into reversing the cuts.  The ugliness of this process is made worse by the hypocrisy of Republicans, who suddenly become hard core Keynesians when it comes to spending on military.

It is a corrupt, yet predictable, game, and it is disappointing to see the ArizonaRepublic playing along so eagerly.

Of late I have been seeing a lot of examples of people trying to claim that complex, even chaotic multi-variable systems are in fact driven by a single variable.  Whether it be CO2 in climate or government spending in Keynesian views of the economy, this over-simplification seems to be a hubris that is increasingly popular.

The worst example I believe I have ever seen of this was in the editorial page today in the Arizona Republic.  Titled Arizona vs. Massachusetts,  this article purports to blame everything from Arizona's higher number of drunk driving accidents to its higher number of rapes on ... the fact that Arizona has lower taxes.  I kid you not:

In the absence of discernible benefits, higher taxes are indeed a negative. We would all like to keep more of what we earn. That is, if there are not other negative consequences. So, it is reasonable to ask: What do Massachusetts citizens get for these increased public expenditures? A wide range of measures from widely disparate sources provide insight into the hidden costs of a single-minded obsession with lower taxes at all costs.

The results of such an investigation are revealing: Overall, Massachusetts residents earn significantly higher salaries and are less likely to be unemployed than those who live in Arizona. Their homes are less likely to be foreclosed on. Their residents are healthier and are better educated, have a lower risk of being murdered, getting killed in a car accident or getting shot by a firearm than are Arizonans. Perhaps these factors explain the lower suicide rate in Massachusetts than in Arizona as well as the longer life spans.

None of this supposed causation is based on the smallest scrap of evidence, other than the spurious correlation that Arizona has lower taxes at the same time it has more of the bad things the authors don't like.  The authors do not even attempt to explain why, out of the thousands of variables that might have an impact on these disparities, that taxation levels are the key driver, or are even relevant.

Perhaps most importantly, the authors somehow fail to even mention the word demographics.  Now, readers know that I am not very happy with Arizona Conservatives that lament the loss here of the Anglo-Saxon mono-culture.   I think immigration is healthy, and find some of the unique cultures in the state, such as on the large tribal reservations, to make the state more interesting.

However, it is undeniable that these demographic differences create wildly different cultures between Arizona and Massachusetts, and that these differences have an enormous impact on the outcomes the authors describe.  For example, given the large number of new immigrants in this state, many of whom come here poor and unable to speak English, one would expect our state to lag in economic averages and education outcomes when compared to a state populated by daughters of the revolution and the kids of college professors (see immigration data at end of post).  This is made worse by the fact that idiotic US immigration law forces many of these immigrants underground, as it is far harder to earn a good income, get an education, or have access to health care when one does not have legal status.  (This is indeed one area AZ is demonstrably worse than MA, with our Joe-Arpaio-type fixation on harassing illegal immigrants).

By the way, it turns out Arizona actually does pretty well with Hispanic students vs. Massachusetts  -- our high school graduation rate for Hispanics is actually 10 points higher than in MA (our graduation rate for blacks is higher too).  But since both numbers are so far below white students, the heavy mix of Hispanic students brings down Arizona's total average vs. MA.   If you don't understand this issue of how one state can do better than another on many demographic categories but still do worse on average because of a more difficult demographic mix, then you shouldn't be writing on this topic.

Further, the large swaths of this state that are part of various Indian nations complicate the picture.  AZ has by far the largest area under the management of tribal nations in the country -- in fact, almost half the tribal land in the country is in this one state.  These tribal areas typically add a lot of poverty, poor education outcomes, and health issues to the Arizona numbers.  Further, they are plagued with a number of tragic social problems, including alcoholism (with resulting high levels of traffic fatalities) and suicide.  But its unclear how much these are a result of Arizona state policy.   These tribal governments are their own nations with their own laws and social welfare systems, and in general fall under the purview of Federal rather than state authority.  The very real issues faced by their populations have a lot of historical causes that have exactly nothing to do with current AZ state tax policy.

The article engages in a popular sort of pseudo-science.  It drops in a lot of numbers, leaving the impression that the authors have done careful research.  In fact, I count over 50 numbers in the short piece.  The point is to dazzle the typical cognitively-challenged reader into thinking the piece is very scientific, so that its conclusions must be accepted.  But when one shakes off the awe over the statistical density, one realizes that not one of the numbers are relevant to their hypothesis: that the way Arizona runs its government is the driver of these outcome differences.

It's really not even worth going through the rest of this article in detail.  You know the authors are not even trying to be fair when they introduce things like foreclosure rates, which have about zero correlation with taxes or red/blue state models.  I lament all the negative statistics the authors cite, but it is simply insane to somehow equate these differences with the size and intrusiveness of the state.  Certainly I aspire to more intelligent government out of my state, which at times is plagued by yahoos focusing on silly social conservative bugaboos.  I am open to learning from the laboratory of 50 states we have, and hope, for example, that Arizona will start addressing its incarceration problem by decriminalizing drugs as has begun in other states.

The authors did convince me of one thing -- our state university system cannot be very good if it hires professors with this sort of analytical sloppiness.  Which is why I am glad I sent my son to college in Massachusetts.

PS- If the authors really wanted an apples to apples comparison that at least tried to find states somewhat more demographically similar to Arizona, they could have tried comparing AZ to California and Texas.  I would love for them to explain how well the blue state tax heavy model is working in CA.  After all, they tax even more than MA, so things must be even better there, right?  I do think that other states like Texas are better at implementing aspects of the red-state model and do better with education for example.  You won't get any argument from me that the public schools here are not great (though I work with several Charter schools which are fabulous).  For some reason, people in AZ, including upper middle class white families, are less passionate on average about education than folks in other states I have lived.  I am not sure why, but this cultural element is not necessarily fixable by higher taxes.

Update- MA supporters will argue, correctly, that they get a lot of immigration as well.  In fact, numerically, they get about the same number of immigrants as AZ.  But the nature of this immigration is totally different.  MA gets legal immigrants who are highly educated and who come over on corporate or university-sponsored visa programs.  Arizona gets a large number of illegal immigrants who get across the border with a suitcase and no English skills.  The per-person median household income for MA immigrants in 2010 was $16,682 (source).  The per-person median household income for AZ immigrants was $9,716.  35.3% of AZ immigrants did not finish high school, while only 15.4% of MA immigrants have less than a high school degree.  48% of AZ immigrants are estimated to be illegal, while only 19% of those in MA are illegal.  11% of Arizonans self-report that they speak English not at all, vs. just 6.7% for MA (source).

I don't know if its the distance from the Mainland or something about its history, but Hawaii often appears to be among the worst states for regulatory capture by local businesses.  This example was brought to me by a co-worker, who lives in AZ but wants to buy a condo in Hawaii.  They want the condo for their own use, but also hope to rent it out.  This kind of model is more appealing nowadays given the ease (and low cost) with which one can advertise rentals on various Internet sites.

But not so fast, not in Hawaii.  In legislation that reminds be of stuff from the 1990's when businesses tried to fight Internet-driven disintermediation, Hawaii is proposing to force non-Hawaiians to use a local broker to list their rental properties.  Apparently local residents can still list their properties on low-cost Internet sites, but folks on the mainland (also known as "the United States") must use a high-cost locally licensed broker, who typically charge 50% of rental fees as a commission.  These type of commission rates are farcical - they imply that fully half the value of a one-week condominium stay is due to the broker, not the condo itself, its location, etc.  The only way brokers can charge these fees is by maintaining a tight cartel enforced by government licensing laws.

Any reasonable person will look at this law and immediately know it is about crony protection of local real estate brokers.  Of course, that is not what the law says.  It is all about "consumer protection"

The legislature also finds that requiring nonresident owners to employ a licensed professional such as a real estate broker or salesperson or a condominium hotel operator is an important consumer protection measure. Consumers who use real estate companies, real estate brokers, real estate salespersons, or condominium hotel operators for their transient accommodation rental needs can do so with the knowledge that all money generated will flow through a client trust account, the appropriate federal tax form 990s will be generated, and accurate transient accommodations taxes and general excise taxes will be paid. Real estate companies, real estate brokers, real estate salespersons, and condominium hotel operators must comply with specific licensing and bonding requirements, thus offering additional protections for consumers.

So consumer protection is defined as making sure taxes get paid and the government forms get filled out.  Because God knows my entire vacation would be ruined if Federal tax form 990 was not filled out properly.

This is total BS, and Milton Friedman called it years ago when he wrote on licensing:

The justification offered is always the same: to protect the consumer. However, the reason is demonstrated by observing who lobbies at the state legislature for the imposition or strengthening of licensure. The lobbyists are invariably representatives of the occupation in question rather than of the customers. True enough, plumbers presumably know better than anyone else what their customers need to be protected against. However, it is hard to regard altruistic concern for their customers as the primary motive behind their determined efforts to get legal power to decide who may be a plumber.

This is also a great example of voters agreeing to add costs on everyone but themselves.  If the almost inevitable Constitutional concerns with this law forced in-state and out-of-state condo owners to be treated equally, local owners would immediately push back, hard, against the costs this law would impose.  Only  by structuring this law to apply to those annoying out-of-staters could it ever be passed.

I have been considering taking advantage of low prices in Hawaii to buy a condo, but I may rethink that plan given this pending legislation.

From the AZ Republic

A Flagstaff police officer who used his baton, boot and a cable to kill an injured dog after a fellow officer accidentally hit the animal with his car in August will not face criminal charges, according to the Navajo County Attorney’s Office.

...

Tewes was called after another officer hit a loose dog with his car Aug. 19. Tewes and the other officer decided the dog needed to be euthanized, but Tewes was concerned about using his gun in the neighborhood.

According to a Coconino County sheriff’s investigative report, Tewes repeatedly tried to bludgeon the dog to death, but it didn’t die. He then tried to jump on the dog’s head and cave in its skull, but that also didn’t kill the animal. Eventually, after some 20 to 30 minutes of trying to kill the dog, he used a hobble, which is like a metal cable, to try to strangle the dog. It took several tries before the dog died.

We give police officers unique and dangerous powers and authority.  It is amazing the poor judgement of the people we so entrust.

I saw this at Flowing Data -- this is apparently a chart prepared by some sustainability group at MIT to map solar potential of different sites in Cambridge, MA

Look at all the sites marked "excellent".  I have news for the brilliant folks at MIT.  Even the best, flattest roof facing south in Cambridge, MA still rates a "sucks" for solar potential. (source)

Even with massive state and Federal subsidies, those of us who live in the bright red areas find that roof-top solar PV is still an - at best - marginal investment with very long payback times.  We all hope to change this in the future, but there is no way a city like Cambridge with approximately half the solar insolation we get in AZ is going to have "excellent" roof top solar PV sites.

An interesting set of data I read the other day:

In 2011, the Arizona Health Care Cost Containment System, Arizona's Medicaid program, paid for 53 percent of the state's 84,979 births, while private insurance paid for 42 percent, according to state statistics. The remainder were paid for by individuals....

Sen. Sylvia Allen, R-Snowflake, estimated that including pre- and postnatal care, it costs Arizona about $7,500 per birth for a delivery with no complications. Using those estimates, the 2011 deliveries would have cost Arizona taxpayers nearly $338 million....

In 2010, 58 percent [of Arizonans] had private insurance and 18 percent were on Medicaid.

So, 18% of Arizonans are having 53% of all births.  Another way to put this is that the 18% of people who get this procedure from the government for free account for half the demand, despite the fact that these folks are the ones who, if rational, should be the least likely to have a lot of births because they presumably have the most difficulty affording an extra mouth to feed.

God forbid I start sounding like some crotchity Conservative, but I continue to be amazed that pregnancy is treated as an "emergency procedure."  It strikes me that unlike, say, cancer, individuals can choose to avoid this condition fairly easily if they can't afford it.  I certainly know my wife and I put FAR more deliberation into having children than we did any other decision in our lives.  There is a terrible tension here - no one wants to turn away an expectant mother and endanger her child, but freely giving away an expensive procedure without any sort of restrictions nearly begs for a baby boom.  Those who try to argue that Obamacare won't increase health care expenses (in other words, arguing that demand curves don't upward) only have to look at these numbers.

PS-  Apparently, our state legislature is appalled by these numbers.  This is the same legislature that has proposed about a zillion abortion restrictions over the last year.  It will be interesting to see if fiscal issues change anyone's thinking on the abortion issue now that there is suddenly a $7500+ incentive to allow an abortion.

Update -- Thinking about this, I think the 18%/53% comparison is directionally correct but the difference is exaggerated due to Medicare.  I doubt Medicare delivers many babies, but a large part of the AZ population is on Medicare.  If the numbers were reset to show the percentage of Arizonans of child-rearing age on Medicaid, the number would be north of 18% but likely well below 53%.

It is never dull here in AZ.  It appears that Michael Marin, upon being convicted of arson in court yesterday, may have committed suicide right there in court.

"Burning Man" Michael Marin reportedly died after his "medical emergency" in the courtroom yesterday, which came after a jury handed down a guilty verdict in Marin's arson case.

Fox 10 had its camera on Marin's face as the verdict came in, and it sure looks like he put something in his mouth before he started having an apparent seizure and fell unconscious in the courtroom.

Video at the link if you are morbidly inclined.

I just read JD Tuccille's High Desert Barbeque, also about arson in AZ as it turns out, and enjoyed it thoroughly.  But authors like Tuccille who are writing satire have to work hard to stay more outrageous than the news here in AZ.  Seriously, a guy starts a fire in his own house, escapes from the second floor in a scuba mask and tanks, and then crunches a cyanide tablet in court as the verdict is read?  Come on, who is writing this stuff?

PS-  I may be missing the legal definition on this, but Marin was convicted of arson on an occupied structure when he was the only occupant.  I find it odd that the arsonist himself "counts" as an occupant towards this charge which, I presume, carries worse penalties than arson on an unoccupied structure.  Upping the charge this way reminds me of the NYC police asking people on the street to show them their weed and then busting them on the charge of public display of said weed.

From the AZ Republic

Valley Metro is set to break ground today on the first light-rail expansion, a 3.1-mile stretch into downtown Mesa that city leaders hope will bring a sorely needed economic boost.

The $200 million extension is expected to attract thousands more East Valley riders daily and potentially nurture new development along the line.

If we assume "thousands" means two thousand, then this means the metro area is spending $100,000 per new daily rider for this expansion, not including the additional operating subsidies that will be required to run the trains.  Given that none of these people will likely be able to give up their car, since the route goes so few places, why should they get a $100,000 subsidy?

How about we charge them what it costs?  The payment on a 30-year 5% bond is around $13,000,000 a year.  So if there are 2,000 additional round trip riders boarding or debarking at these new stations each day, that is 1.46 million trips.  So the tickets should be $8.90 per trip plus the cost of actually running the train.  We'll round it to $10, though the cost is probably higher.  If people really think this train is so great, they should be more than willing to pay the $10 a trip it costs for the expansion.

No, they are not?  What this means is that people think this is a really go idea as long as someone else pays.

PS-  If these seem unreasonably high, or simply an artifact of looking at this expansion on a stand-alone basis, think again.  For the original system, the capital cost was $75,000 per round trip rider and the public subsidy in 2010 was $32.73 per trip.  In other words, on the main system, riders would have to pay $32.73 a trip more to be actually covering the cost of the service they are receiving.  So if anything, these incremental numbers for the expansion are probably optimistic.

PPS - I am sure transit authorities would argue that the public did support paying for other people's transit by approving the sales tax increase for this purpose a few years ago.  But the train piece was packaged in with a bunch of highway improvements in the same proposition that people really did want.  It would never have passed on its own.  Transit official may disagree, but the proof is in their actions - they have never allowed the public to vote on the transit piece alone.

I almost hate beating on the silly folks who run the City of Glendale even further, but they keep screwing up.

One of the reasons I think that city officials like those in Glendale like to dabble in real estate and sports stadiums is what I call the "bigshot effect."  They don't have any capital of their own, and they don't have the skills such that anyone else would (voluntarily) trust them to invest other people's money, but with a poll of tax money they get to play Donald Trump and act like they are big wheels.  The Glendale city council did this for years, and when their incompetence inevitably led to things starting to fall apart, they have simply thrown more money at it to try to protect their personal prestige.

But unfortunately, incompetence generally is an infinite reservoir, and apparently the City has screwed up again.  Years ago, when the City promised the rich people who owned the AZ Cardinals a new half billion dollar stadium, they put a contract to that effect on paper.  Granted, this was a sorry giveaway, spending hundreds of millions of dollars for a stadium that would be used by the Cardinals for 30 hours a year, by the Fiesta Bowl for 3 hours a year, and by the NFL for a Superbowl for 3 hours every 6-7 years.  But, never-the-less, the City made a contractual agreement.

And then, in its rush to be real estate bigshots, the city turned about 3700 parking spaces promised contractually to the Cardinals over to a developer to create an outlet mall (of the sort that has been quietly going bankrupt all over the country over the last few years).  Incredibly, the city did this without any plan for how to replace the parking it owed the Cardinals.  To this day, it has no plan.

Apparently, there were also some shenanigans with $25 million that had been escrowed to build a parking garage.

The demand letter also blames the parking problem on the city's dealings with Steve Ellman, Westgate's former developer and a one-time co-owner of the Phoenix Coyotes. The letter states that Ellman's relationship with the city has been "characterized by a lack of transparency."

The letter raises questions about a January 2011 arrangement in which the city and Ellman equally split a $25million escrow fund that had been earmarked to build a parking garage in Westgate, the team said.

Ellman put that money in escrow in 2008 after failing to keep a promise to the city to provide a set amount of permanent parking in Westgate.

By early 2011, half of that money went back to Ellman's lenders as part of a deal to try to keep the Coyotes in Glendale, while the city received the other $12.5 million in the account.

What a mess.  This is what happens when politicians try to be bigshots with our money.

For years now I have lampooned the crazy money Glendale, AZ has thrown at the Phoenix ice hockey team in a desperate attempt to trade taxpayer money for prestige.  Let me bring you up to date:

Years ago a town of about 250,000 people committed about $200 million in taxpayer money to build a stadium for a professional ice hockey team, to attract it away from Scottsdale or downtown Phoenix to what is frankly the ass-end of the metropolitan area  (I have no problems with the west side of town, but from a geographic, demographic, and economic logic standpoint this was roughly equivalent to moving the LA Lakers to Riverside or San Bernardino).

For some weird reason, moving an ice hockey team to the desert with no base of hockey fans and locating it a good 45 minutes from the wealthier parts of town caused the team to go bankrupt.  Lots of people were willing to pay good money to haul the team back to Canada where there are, you know, ice hockey fans, but few wanted to pay good money to keep it on the west side of Phoenix.

So enter the NHL, which took the team over.  The NHL commissioner promised the other owners that it would not lose money on the deal, so it set the price of the team not at the market price (which appears to be around $100 million based on the Atlanta sale) but based on its costs, which were about $200 million.   It has agreed to try to keep the team in Glendale, but only if the city covers its operating losses of $25 million each year, which incredibly, the city has done for two years (note this is $100 a year for every man, woman, and child in the city to subsidize a hockey team).

The team may be worth $200 million in Canada, but it is only worth $100 million in Glendale (at most) so it does not sell.  The city agreed to make up the $100 million difference  with a bond issue (and throw another $90+ million in to boot), which almost closed the deal with one buyer until the Goldwater Institute pointed out that this kind of subsidy was illegal under the AZ constitution.  And so the situation sits.  The asking price is still $200 million, which no one will pay if they have to keep the team in Glendale.  And the city keeps forking over $25 million a year to the NHL to keep the team running.

OK, so that is the background.  Here is the new news.

The league, which purchased the Phoenix Coyotes at a bankruptcy court auction in 2009, has been managing the team and city-owned arena until an owner willing to keep the team in Glendale can be found. The city paid $25 million to the NHL during the 2010-11 season and pledged another $25 million for the current season, which is expected to come due in May.

To fulfill that pledge, the city put $20 million in escrow and still needs to come up with $5 million.

The hefty payouts have nearly drained the city's reserves, leading to a recent drop in the city's bond rating.

And the city is looking at a deficit next fiscal year that one councilwoman has estimated could reach $30 million. A possible sales-tax hike, furloughs and program cuts are on the table to close the spending gap....

During Tuesday's budget talks, [Glendale Mayor] Scruggs asked council members to join her in signing a letter to NHL Commissioner Gary Bettman to "release us from that $20 million in escrow and let us pay over time."

None of the councilmembers responded to her request. Councilman Manny Martinez later told The Republic he would "have to think about it in light of what is going on."

Scruggs said if the city can get back the $20 million from escrow and pay the NHL an initial $5 million, "our problems and everything our employees are fearful of would pretty much go away."

Translation:  Dear NHL, we are idiots and committed a bunch of money to a stupid purpose that we can't really afford.  Would you pretty please let us out of our commitment?  Hilarious and pathetic.  The chickens are coming home to roost by the millions.

Even funnier, the Glendale mayor is trying to blame the NHL for bad faith

The mayor said she and four others councilmembers pledged the second payout last May because city staff and NHL Deputy Commissioner Bill Daly said a deal with a team owner was nearly complete and that "we should never have to pay that $25 million."

Scruggs said the city was told the money was just a place holder so that the NHL wouldn't move the team out of Glendale.

"Given the stress that our budget is under, there should be a payment plan developed," Scruggs said. "They have no right to that money. They held us hostage for a year."

She said the NHL never intended to do business with Chicago businessman Matt Hulsizer, who wanted to buy the team but walked away from the negotiation table in frustration just weeks after the council pledged the second payment to the NHL....

Scruggs said the NHL last spring "misled us and they can't do this to our city."

In fact, the NHL was totally serious about the Hulsizer deal.  That deal fell through not because the NHL screwed up, but because Glendale did.  The deal fell through because Glendale had committed to a subsidy of the deal which may not have been Constitutional, and even if it had proved legal, became impossible when Glendale's bond ratings started tanking and they realized they could not move the paper.  Glendale officials have been amateurish and dishonest through this entire process.

By the way, several years ago, Jim Balsillie offered a deal worth over $200 million for the team, PLUS he offered to pay off something like $150 million of Glendale's stadium debt.  Glendale opposed the deal, because they would have been left with an empty stadium and tens of millions in debt (given the crash in RIM's fortunes, the offer is unlikely to be renewed).

Glendale is likely going to wish they had taken the first offer.  There is a very good chance that Glendale will lose the team without any sort of payment on their debt and after paying $25 million a year to the NHL.  Glendale will end up with hundreds of millions in debt, an empty stadium, a junk-level bond rating and a busted budget.

There is a saying in the investment world - your first loss is your best loss.  Glendale is about to learn this very expensive lesson.

As I mentioned the other day, I sometimes have this fantasy that we have some sort of libertarian streak in the Arizona Republican party.  The Goldwater Institute and Jeff Flake give me hope.  But then the Arizona legislature gets to work and my hopes are dashed.

A big national Republican issue is the excessive power Congress has delegated to the EPA and FDA to regulate and ban substances, from BPA to CO2.  So what do the Republicans do in AZ?  They propose a law to give an un-elected bureaucracy the power to willy nilly ban substances without a bit of legislative oversight.

The legislature had previously outlawed 30 chemicals that could be used to make the "bath salts"-type mixtures, and dropped another eight substances on the bill Governor Jan Brewer signed last month.

As Boca Raton Florida-based attorney Thomas Wright III told New Times shortly before Brewer signed the legislation, "To suggest they're putting a ban on bath salts is dumbing down the general public."

Republican state Senator Linda Gray is now explaining this to everyone, as she's proposed a new method to attempt banning "bath salts."

House Bill 2388 is the new hope, which would allow the state's Board of Pharmacy and the Department of Public Safety to ban the sales of chemical substances at their pleasure.

According to a Senate fact sheet, the pharmacy board "must make a formal finding that the chemical composition defined by the Board has a potential for abuse and submit the finding to DPS."

The pharmacy board then has to "consult" with DPS about its proposed rule, and that's that. The board just has to let the governor and the legislature know once a year which chemicals it's decided to ban.

So after all the concern about regulation voiced by Republicans about the EPA, they are giving even more sweeping powers to... the Board of Pharmacy and the Department of Public Safety?   This should be all the proof you need that the Coke and Pepsi party have equivalent authoritarian streaks.  As many other libertarians have observed, the Republicans have a healthy distrust of government, except when it comes to anyone such as the DPS or military that carries a gun, and then they are willing to hand over infinite trust and authority.

In many ways, this law is exactly like the environmental laws Republicans hate that require detailed analyses of potential harms but no counterveiling analysis of benefits.  In this case, the Pharmacy board is required to analyze the potential for abuse of chemicals but there is absolutely no language  requiring any consideration of the benefits of the substance's use or legality.  By the language of the law, if there is a potential for abuse, it must be banned no matter how otherwise useful the product is or could be.

Ken over at Popehat had a great article about  a proposed cyber-bullying law in Connecticut.  While he later reports the bill may have died in committee, it is still instructive to look at it, as its twin may well get passed in AZ and many other states are proposing such laws faster than the little animals pop up in a whack-a-mole game.

I am becoming increasingly convinced that these are all stealth attempts to protect politicians and public officials from criticism.  Look at the proposed law in CT:

(a) A person commits electronic harassment when such person, with intent to harass, annoy or alarm another person, transmits, posts, displays or disseminates, by or through an electronic communication device, radio, computer, Internet web site or similar means, to any person, a communication, image or information, which is based on the actual or perceived traits or characteristics of that person, which:
(1) Places that person in reasonable fear of harm to his or her person or property;
(2) Has a substantial and detrimental effect on that person's physical or mental health;
(3) Has the effect of substantially interfering with that person's academic performance, employment or other community activities or
responsibilities;
(4) Has the effect of substantially interfering with that person's ability to participate in or benefit from any academic, professional or community-based services, activities or privileges; or
(5) Has the effect of causing substantial embarrassment or humiliation to that person within an academic or professional community.

One of the tricks of these laws is to mix and thereby conflate outrageous behavior most all of us are willing to restrict (e.g. make a credible threat to someone's life) with everyday behaviors such as annoying people.

Let's say I were to write in my blog that, say, Joe Arpaio is an jerk and should not get re-elected.  Let's analyze the statement

• It's transmitted electronically
• It will very likely annoy Arpaio, since he is known to be annoyed by all criticism
• I am trying very hard to interfere with his employment by preventing his re-election

By this law, therefore, even this relatively mild criticism is illegal.   In fact, since all criticisms of politicians can be said to negatively affect their re-election chances, by part 3 any political criticism online would be illegal.

I honestly don't think this is a bug, it is a feature.  Already police departments and other public officials are using cyber-bullying laws to stomp on those who criticize them.

From today's AZ Republic

Women have wrinkles, pores and curves. And there's a movement across the world to make sure advertisers can no longer pretend otherwise.

Now, that movement has come to Arizona.

House Bill 2793, proposed by Rep. Katie Hobbs, D-Phoenix, would require advertisers who alter or enhance a photo to put a disclaimer on that ad alerting customers that "Postproduction techniques were made to alter the appearance in this advertisement. When using this product, similar results may not be achieved."

Really?  You mean my wife isn't going to suddenly look like Demi Moore if she uses Dove soap?  Next you are going to tell me that drinking Miller Lite does not cause me to suddenly be surrounded by hot women.

Update:  Apprarently this is about empowering women by treating them like moronic rubes

"As an organization, we are all about empowering women and eliminating discrimination," Richard said. "We want to make sure that young women get a better start and better self-image."

He said girls need to understand that these photos aren't all real. Someone has airbrushed out the model's wrinkles and pores, or put a woman's head on top of a computer-generated perfect body.

"You need to disclose that so our young women don't grow up thinking a poreless face is possible," he said. "That's not the way that I think anyone wants to raise their daughters."