Coyote Blog

Let's suppose a Fortune 500 company went through a rancorous internal debate about strategic priorities, perhaps even resulting in proxy fights and such (think Blackberry, HP, and many other examples).  The debate and uncertainty makes investors nervous.  So when the debate has been settled, what does the CEO say?  My guess is that he or she will do everything they can to calm investors, explain that the internal debate was a sign of a healthy response to adversity, and reiterate to the markets that the company is set to be stronger than ever.  The CEO is going to do everything they can to rebuild confidence and downplay the effects of the internal debate.

Here is President Obama today, talking about the budget battle

“Probably nothing has done more damage to America’s credibility in the world than the spectacle we’ve seen these past few weeks,” the president said in an impassioned White House appearance.

Good God, its like he's urging a sell order on his own stock.   I was early in observing the Republican strategy was stupid and doomed to failure, but you have to show a little statesmanship as President.

Postscript:  

Standard & Poor’s estimated the shutdown has taken $24 billion out of the economy.

If this is true, this number is trivial.  0.15% of GDP (and this from someone hurt more than most) loss from a government shutdown about 4.4% of the year (16/365)

I generally take the Republican side in budget battles.  I have no problem shutting down the government as part of a fight to reduce the size of government.

But the Republicans are lost and without a goal of any sort.  I follow the budget battle closely and even I can't tell you what the Republicans are trying to get any more.  They never got their messaging in place, and have leaped almost at random from issue to issue trying to get something out of the shutdown.  First it was defunding Obamacare, which was never going to fly, and then it was an Obamacare delay, and then it was.... whatever it is now.  I have no idea.

The Republicans are just hanging on trying to save face.  Time to cut bait and move on.  In fact it was time to do this last week.  Take your lumps, let the Left and the media count coup and dance on your grave for a few days, and move the hell on.  Gear up to start highlighting the failures in Obamacare.   These are so bad they could have people forgetting the budget fight within days.

I have gotten a lot of mail with moral support from readers as we try to deal with the fact that the White House has ordered privately-funded parks in the National Forest to close, flying in the face of all precedent and budget logic.

Many, many emails have encouraged me to disobey the order and keep the parks open for the public.  There are three reasons why I have chosen not to do so.

1.  Respect for Contract:  In my 25 or so lease contracts with the US Forest Service (the USFS insists on calling them "special use permits" but legally they are essentially commercial leases), the contract language gives the Forest Supervisor of each Forest the right to suspend or terminate the contract for virtually any reason.  Yeah, I know, this is a crappy lop-sided contract provision, but welcome to the world of working with the Federal government.  So each Forest Supervisor has the right to suspend our lease.  BUT....

The real question here is whether they have proper justification for doing so, or whether their suspension is arbitrary.  In another post I discuss why this action is arbitrary and unjustified:

Historically, the USFS has only rarely used this contract power, and its use has generally been in one of two situations:  a) an emergency, such as a forest fire, that threatens a particular recreation area or b) a situation where the recreation area cannot physically be used, such as when it has been destroyed by fire or when it is being refurbished.  Never, to my knowledge, has the USFS used this power to simultaneously close all concession operations, and in fact in past shutdowns like 1995 and 1996 most all concessionaires stayed open.

Budget considerations alone cannot justify the closure order, as USFS concessionaires do not use Federal funds and in fact pay money to the Treasury.  Closing us actually reduces the income to the Treasury as we pay our concession fees as a percentage of revenues.  Further, the USFS does not have any day-to-day administration responsibilities for these parks.  The only semi-regular duty is sometimes to provide law enforcement backup, but USFS law enforcement officers are still at work (we know this because they showed up to post our operations as closed).

The Administrative Procedure Act makes it illegal for a government agency to make a decision that is arbitrary, capricious or an abuse of discretion.  To this end, the USFS has not actually closed the Forests and still allows camping in the Forests.  Thus, the USFS considers it safe for people to be camping in the Forests and that doing so during the shutdown creates no risk of resource or property damage.  In contrast, the USFS has made the decision that it is not safe to allow camping in developed campsites run by private concessionaires.  The decision that developed campgrounds run by private companies must close, but undeveloped camping can continue, makes no sense and is arbitrary, capricious and an abuse of discretion.  If anything, closing developed areas but allowing dispersed camping increases risks to public safety and for resource damage as developed concession areas are staffed and trained to mitigate such risks (that's the whole point of having developed recreation in the first place).

While we feel good we have a winning argument, this is a complicated point that does not lend itself well to civil disobedience, but we are taking it to court and seeking an injunction to the closure.

2.  The wrong people would go to jail.  Civil disobedience has a long and honorable history in this country.  But the honor of such an act would quickly go out the window if I were to commit an act of defiance but others would have to go to jail.  We run over a hundred sites.  Telling my people to remain open would simply lead to getting my employees thrown in jail for trusting me and following my instructions.  That would be awful.  Just as bad, we can see from examples in the National Park Service that such disobedience would potentially subject my customers to legal harassment.  It's not brave or honorable for me to be defiant but to have others pay the cost.

3.  I could lose everything.  I don't want to seem weak-kneed here, but I would be dishonest not to also raise the small but critical point that I have almost every dollar I own tied up in this company, which does over half its business in the National Forest**.  My retirement and all my savings are in this one basket.   I would likely risk an arrest and a few hours in jail plus the price of bail and months of court appearances to make a point here.  I am not ready to go all-in with everything I own, not when there are other legal avenues still available.  If that makes me a wimp, so be it.

** you can be assured that the moment I have one minute of extra time we are going to be working on diversifying away from the US Forest Service as much as possible.

We are preparing to go to court to reopen privately-funded parks in the US Forest service that take no Federal money, yet have recently been closed due to budget shortfalls.

Our USFS contracts give the local Forest Supervisor the right to suspend the contract.  However, historically, the USFS has only rarely used this contract power, and its use has generally been in one of two situations:  a) an emergency, such as a forest fire, that threatens a particular recreation area or b) a situation where the recreation area cannot physically be used, such as when it has been destroyed by fire or when it is being refurbished.  Never, to my knowledge, has the USFS used this power to simultaneously close all concession operations, and in fact in past shutdowns like 1995 and 1996 most all concessionaires stayed open.

Budget considerations alone cannot justify the closure order, as USFS concessionaires do not use Federal funds and in fact pay money to the Treasury.  Closing us actually reduces the income to the Treasury as we pay our concession fees as a percentage of revenues.  Further, the USFS does not have any day-to-day administration responsibilities for these parks.  The only semi-regular duty is sometimes to provide law enforcement backup, but USFS law enforcement officers are still at work (we know this because they showed up to post our operations as closed).

The Administrative Procedure Act makes it illegal for a government agency to make a decision that is arbitrary, capricious or an abuse of discretion.  To this end, the USFS has not actually closed the Forests and still allows camping in the Forests.  Thus, the USFS considers it safe for people to be camping in the Forests and that doing so during the shutdown creates no risk of resource or property damage.  In contrast, the USFS has made the decision that it is not safe to allow camping in developed campsites run by private concessionaires.  The decision that developed campgrounds run by private companies must close, but undeveloped camping can continue, makes no sense and is arbitrary, capricious and an abuse of discretion.  If anything, closing developed areas but allowing dispersed camping increases risks to public safety and for resource damage as developed concession areas are staffed and trained to mitigate such risks (that's the whole point of having developed recreation in the first place).

From the Washington Examiner.  Because tenants have to be evicted when their landlord goes on paid vacation.

National Park Service officials cited the government shutdown as the reason for ordering an elderly Nevada couple out of their home, which sits on federal land.

"Unfortunately overnight stays are not permitted until a budget is passed and the park can reopen," an NPS spokesman explained to KTNV.

Ralph and Joyce Spencer, aged 80 and 77, respectively, own their home, but the government owns the land on which it sits.

"I had to be sure and get his walker and his scooter that he has to go in," Joyce Spencer told the local news outlet. "We're not hurt in any way except it might cost me if I have to go buy more pants."

Of course, I am in the exact same position

Well, talk about good timing.  My article on private operation of public parks has been published by PERC and is now up at their web site.  It's called "A Tale of Two Parks" and compares the costs of private and public operation, among a number of other issues.

Not happy with how government-operated parks are being used as a pawn in today's budget battles?  Check it out.

Our concession operations on Federal lands are still mostly open today (we had two US Forest Service local offices ask us to close, but these are both offices that have a tradition of interpreting the rules in odd ways).

By all the rules, being open to the public is the right decision.  We are tenants on US Forest Service land and operate entirely outside of the government budget, receiving no money from the government and we employ no government workers.  No government employee has a duty station in any of the parks we operate.   There is no more reason to close our operations than to, say, ban cars from Federal highways during a shutdown.

However, apparently we have been told by several local folks in the Forest Service that the higher ups (this tends to mean folks up in the Administration) are re-evaluating our status.  I do not know what is going on today, but in the past this has often meant that the administration is considering closing us to make the government closure as painful as possible.  After all, as I have written here and here, parks closures seem to be one of the few things anyone notices in a government shut down.

Update:  Our most recent guidance:  "1.  The Forest Service is allowing concessionaires to continue to operate as long as no Forest Service personnel is needed to ensure safety."  It looks like we may have to close a few sites that are dependent on USFS operated water systems, but otherwise most of our locations will be open.  I am hoping to get out a press release and update our web site but things are still fluid this morning.

Update #2:  Definitely still open everywhere but in one location (Laguna Mountain, CA) where we depend on a USFS-operated water system that will close.  no closure press release 2013

I am just floored at the political incompetence of the Republicans in Congress.  Conservatives are arguing that it is all about how the media unfairly  makes Republicans the bad guys in all budget fights, and I think there is some truth in that.  But this was something that was known in advance, and which could be planned for.  I am not a political expert, but if the press really creates a messaging headwind for Republicans, then that means that they need to begin early and push often on a consistent message.

I thought the attempt to roll back Obamacare altogether was an absurd overreach that was merely attempted to help Congressmen head off primary challenges from the Right.  But even so, the GOP only settled on this approach to the budget battle at the absolute last minute.  What they really needed to do was pick a realistic item they were going to fight for, all agree to it 3-4 weeks ago, and then press like hell at every opportunity on the message for that one thing.

Now even political insiders can't name what is in the mish mash bill the House sent yesterday to the Senate.  I know it has a one year individual mandate delay (just in time to bail the Administration out of dire implementation issues) and a few other random things.  Of COURSE Republicans are going to lose the messaging war when they have not even bothered to message at all, even to those of us who could be convinced to start cutting government almost anywhere.

Via Kevin Drum

Dave Weigel notes a conundrum today: according to a new poll, 54 percent of the public disapproves of Barack Obama's handling of the deficit. And yet, as the chart on the right shows, the deficit is shrinking dramatically. Last year it dropped by $200 billion, and this year, thanks to a recovering economy, lower spending from the sequester, and the increased taxes in the fiscal cliff deal, it's projected to fall another $450 billion.

Weigel notes that this has deprived conservative yakkers of one of their favorite applause lines: "You don't hear Republicans lulz-ing at Obama for failing to 'cut the deficit in half in my first four years,' because he basically did this, albeit in four and a half." That's true. It's also true that contrary to Republican orthodoxy, it turns out that raising taxes on the rich does bring in higher revenues and therefore reduces the deficit.

The logic here is that Obama has been diligent about cutting the deficit, so therefore Republicans are wrong to try to use the debt ceiling and continuing resolution as a vehicle for forcing more cuts.

It is just possible that a person from another planet landing today might buy this story, but how can anyone who has lived through the last 5 years read this without laughing their butts off?  Every one of Obama's budgets have been dead on arrival, even within his own party, because they have raised spending to such stupid levels.  There has not been even a hint of fiscal responsibility in them.  And the Democratic Senate has passed one budget in something like five years**.

The only fiscal discipline at all has come from the Republican House, and they have only had success in keeping these deficit down by ... using continuing resolutions and debt ceilings as bargaining chips.  This is the President that treated the almost insignificant sequester as if it were the end of the world, and now these sycophants from team Donkey are giving Obama the credit for the deficit reduction?

PS-  This is not an advocacy for Republicans as much as for divided government.  The Republicans when they had years of controlling the Presidency and both houses of Congress under Bush II did zero to get our fiscal house in order and in fact with the Iraq war and Medicare part D, among other things, showed a profligacy that belies their current pious words.

PPS- Kevin Drum needs to have the balls not to play both sides of the street.  He has made it clear in other articles that he thinks it is an economic disaster that the government is spending so little right now.  When he shows a deficit reduction chart, if he were consistent, he should be saying that Republicans suck for forcing this kind of deficit reduction against Obama's better judgement and we need the deficit to go back up.  Have the courage of your convictions.  Instead, he plays team loyalty rather than intellectual consistency, crediting Obama for deficit reduction while at the same time hammering Republicans for austerity.  Dude, its one or the other.

PPPS-  For the first time during this Presidency, both the President and both house of Congress offered a budget:

[The] House passed a budget calling for spending $3.5 trillion in 2014, the Senate passed one calling for $3.7 trillion, and Obama submitted one calling for $3.77 trillion

So the actor that submitted the highest budget gets the credit for deficit reduction?

I find Republican strategy in the recent Obamacare and budget fight to have been insanely aggravating, and that is coming from someone who hates Obamacare.

Yes, I understand why things are happening as they are.  From a re-election strategy, their approach makes total sense.  A lot of these House guys come from majority Republic districts where their biggest re-election fear comes from a primary challenge to the right of them.  I live in one of these districts, so I see what perhaps coastal media does not.  In everyday conversation Republicans are always criticizing their Congressmen for not rolling back Obamacare.  Republicans need to be able to say in a primary, "I voted to defund Obamacare".  Otherwise I guarantee every one of them will be facing a primary opponent who will hammer them every day.

But from the perspective of someone who just wants the worst aspects of this thing to go away, this was a terrible approach.  Defunding Obamacare entirely was never, ever, ever going to succeed.  Obama and Democrats would be happy to have a shutdown last months before they would roll back his one and only signature piece of legislation.  They may have caved in the past on other issues but he is not going to cave on this one (and needs to be seen not caving given his recent foreign policy mis-steps that has him perceived as weak even in his own party).  And, because all the focus is on Obamacare, we are going to end up with a budget deal that makes no further progress on containing other spending.

The Republicans should have taken the opportunity to seek targeted changes that would more likely have been accepted.  The most obvious one is to trade a continuing resolution for an elimination of the IPAB, one of the most undemocratic bits of legislation since the National Industrial Recovery Act.  Another strategy would have been to trade a CR for a 1-year delay in the individual mandate, a riskier strategy but one the Administration might leap at given that implementation problems in exchanges are giving them a black eye.  Finally, an even riskier strategy would have been to tie a CR to a legislative acknowledgement that the PPACA does not allow subsidies in Federally-run exchanges.  This latter might not have been achievable (and they might get it in the courts some day anyway) but if one argues that any of these is unrealistic, then certainly defunding Obamacare as a whole was unrealistic.

I think as a minimum they could have killed the IPAB, but now they will get nothing.

Update:  This line from All the President's Men seems relevant:

You've done worse than let Haldeman slip away: you've got people feeling sorry for him. I didn't think that was possible. In a conspiracy like this, you build from the outer edges and go step by step. If you shoot too high and miss, everybody feels more secure. You've put the investigation back months.

A huge portion of Detroit's operating costs go to police and fire.  If you include retiree health care and pensions, way over half of Detroit's budget goes to police and fire**.  That is an enormous increase since 1960.

So one might expect the schools to suck and the streetlights to be broken (which they do and are), but you would expect great freaking fire and police coverage.  But you would be wrong.  Detroit has one of the highest crime rates in the country.  This is what you get for your money there:

If you're a Detroiter who needs a police officer, it will take 58 minutes to get help -- more than five times what it takes elsewhere in the United States...

Here are some of the other problems outlined in the bankruptcy filing:

-- Response times for Emergency Medical Services and the Detroit Fire Department average 15 minutes, which is more than double the 7-minute averages seen in other cities.

-- The police department closes only 8.7% of its criminal cases, which the filing blames on the department's "lack of a case management system, lack of accountability for detectives, unfavorable work rules imposed by collective bargaining agreements and a high attrition rate in the investigative operations unit."

-- The city's violent crime rate is five times the national average, and the highest of any city with a population exceeding 200,000.

** This is in large part due to the power of their unions, and their ability in elections to translate hero worship for police and fire fighters into political power that will allow them to get anything they want.  As a politician, try to stand up for sanity and you will be deluged by union ads arguing that you don't respect our men who are risking their lives for you, etc. etc.

The theory behind the idea that government should nudge (or coerce, as the case may be) us into "better" behavior is based on the idea that many people are bad at delay discounting.  In other words, we tend to apply huge discount rates to pain in the future, such that we will sometimes make decisions to avoid small costs today even if that causes us to incur huge costs in the future (e.g. we refuse to walk away from the McDonalds french fries today which may cause us to die of obesity later).

There are many problems with this theory, not the least of which is that many decisions that may appear to be based on bad delay discounting are actually based on logical and rational premises that outsiders are unaware of.

But the most obvious problem is that people in government, who will supposedly save us from this poor decision-making, are human beings as well and should therefore have the exact same cognitive weaknesses.  No one has ever managed to suggest a plausible theory as to how our methods of choosing politicians or staffing government jobs somehow selects for people who have better decision-making abilities.

Here is a great example.  These are the people who think YOU have a problem with delay discounting:

When all the numbers are crunched, one fact is crystal clear: Yes, a disaster was looming for Detroit. But there were ample opportunities when decisive action by city leaders might have fended off bankruptcy.

If Mayors Jerome Cavanagh and Roman Gribbs had cut the workforce in the 1960s and early 1970s as the population and property values dropped. If Mayor Dennis Archer hadn’t added more than 1,100 employees in the 1990s when the city was flush but still losing population. If Kilpatrick had shown more fiscal discipline and not launched a borrowing spree to cover operating expenses that continued into Mayor Dave Bing’s tenure. Over five decades, there were many ‘if only’ moments.

“Detroit got into a trap of doing a lot of borrowing for cash flow purposes and then trying to figure out how to push costs (out) as much as possible,” said Bettie Buss, a former city budget staffer who spent years analyzing city finances for the nonpartisan Citizens Research Council of Michigan. “That was the whole culture — how do we get what we want and not pay for it until tomorrow and tomorrow and tomorrow?”

Ultimately, Detroit ended up with $18 billion to $20 billion in debt and unfunded pension and health care liabilities. Gov. Rick Snyder appointed bankruptcy attorney Kevyn Orr as the city’s emergency manager, and Orr filed for Chapter 9 on July 18.

I have made this argument before -- your lifetime Medicare taxes cover only about a third of the benefits you will receive.   Social Security taxes are set about right -- to the extent we come up short on Social Security, it is only because a feckless Congress spent all the excess money in the good years and has none left for the lean years.

But Medicare is seriously mis-priced.  I have always argued that this is dangerous, because there is nothing that screws up the economy more than messed up price signals.  In particular, I have argued that a lot of the glowy hazy love of Medicare by Americans is likely due to the fact that it is seriously mis-priced.  Let's price the thing right, and then we can have a real debate about whether it needs reform or is worth it.

A recent study confirms my fear that the mispricing of Medicare is distorting perceptions of its utility.

As debate over the national debt and the federal budget deficit begins to heat up again, an analysis of national polls conducted in 2013 shows that, compared with recent government reports prepared by experts, the public has different views about the need to reduce future Medicare spending to deal with the federal budget deficit. Many experts believe that future Medicare spending will have to be reduced in order to lower the federal budget deficit [1] but polls show little support (10% to 36%) for major reductions in Medicare spending for this purpose. In fact, many Americans feel so strongly that they say they would vote against candidates who favor such reductions. Many experts see Medicare as a major contributor to the federal budget deficit today, but only about one-third (31%) of the public agrees.

This analysis appears as a Special Report in the September 12, 2013, issue of New England Journal of Medicine.

One reason that many Americans believe Medicare does not contribute to the deficit is that the majority thinks Medicare recipients pay or have prepaid the cost of their health care. Medicare beneficiaries on average pay about $1 for every $3 in benefits they receive. [2] However, about two-thirds of the public believe that most Medicare recipients get benefits worth about the same (27%) or less (41%) than what they have paid in payroll taxes during their working lives and in premiums for their current coverage.

Update:  Kevin Drum writes on the same study.  Oddly, he seems to blame the fact that Americans have been trained to expect something for nothing from the government on Conservatives.  I am happy to throw Conservatives under the bus for a lot of things but I think the Left gets a lot of the blame if Americans have been fooled into thinking expensive government freebies aren't really costing them anything.

I am a bit late on this, but like most libertarians I was horrified by this article in the Mail Online about Obama Administration efforts to nudge us all into "good" behavior.  This is the person, Maya Shankar, who wants to substitute her decision-making priorities for your own

If the notion -- that a 20-something person who has apparently never held a job in the productive economy is  telling you she knows better what is good for you -- is not absurd on its face, here are a few other reasons to distrust this plan.

• Proponents first, second, and third argument for doing this kind of thing is that it is all based on "science".  But a lot of the so-called science is total crap.  Medical literature is filled with false panics that are eventually retracted.  And most social science findings are frankly garbage.  If you have some behavior you want to nudge, and you give a university a nice grant, I can guarantee you that you can get a study supporting whatever behavior you want to foster or curtail.  Just look at the number of public universities in corn-growing states that manage to find justifications for ethanol subsidies.  Recycling is a great example, mentioned several times in the article.  Research supports the sensibility of recycling aluminum and steel, but says that recycling glass and plastic and paper are either worthless or cost more in resources than they save.  But nudgers never-the-less push for recycling of all this stuff.  Nudging quickly starts looking more like religion than science.
• The 300 million people in this country have 300 million different sets of priorities and personal circumstances.  It is the worst hubris to think that one can make one decision that is correct for everyone.  Name any supposedly short-sighted behavior -- say, not getting health insurance when one is young -- and I can name numerous circumstances where this is a perfectly valid choice and risk to take.
• The justification for this effort is social science research about how people manage decisions that involve short-term and long-term consequences

Some behavioral scientists believe they can improve people's self-control by understanding the relationship between short term memory, intelligence and delay discounting.

This has mostly been used to counter compulsive gambling and substance abuse, but Shankar's entry into government science circles may indicate that health insurance objectors and lapsed recyclers could soon fall into a similar category

I am sure there is a grain of truth in this -- all of us likely have examples of where we made a decision to avoid short term pain that we regretted.  But it is hilarious to think that government officials will somehow do better.  As I have written before, the discount rate on pain applied by most legislators is infinite.  They will do any crazy ridiculous thing that has horrible implications five or ten years from now if they can just get through today.  Why else do government bodies run massive sustained deficits and give away unsustainable pension and retirement packages except that they take no consideration of future consequences.  And it is these people Maya wants to put in charge of teaching me about delay discounting?

• It probably goes without saying, but nudging quickly becomes politicized.  Is nudging 20-something health men to buy health insurance really in their best interests, or does it help keep an important Obama program from failing?

Postscript:  Here is a great example of just how poorly the government manages delay discounting.  In these cases, municipalities are saddling taxpayers with almost certainly bankrupting future debt to avoid paying any short-term costs.

Texas school districts have made use of another controversial financing technique: capital appreciation bonds. Used to finance construction, these bonds defer interest payments, often for decades. The extension saves the borrower from spending on repayment right now, but it burdens a future generation with significantly higher costs. Some capital appreciation bonds wind up costing a municipality ten times what it originally borrowed. From 2007 through 2011 alone, research by the Texas legislature shows, the state’s municipalities and school districts issued 700 of these bonds, raising $2.3 billion—but with a price tag of $23 billion in future interest payments. To build new schools, one fast-growing school district, Leander, has accumulated $773 million in outstanding debt through capital appreciation bonds.

Capital appreciation bonds have also ignited controversy in California, where school districts facing stagnant tax revenues and higher costs have used them to borrow money without any immediate budget impact. One school district in San Diego County, Poway Unified, won voter approval to borrow $100 million by promising that the move wouldn’t raise local taxes. To live up to that promise, Poway used bonds that postponed interest payments for 20 years. But future Poway residents will be paying off the debt—nearly $1 billion, all told—until 2051. After revelations that a handful of other districts were also using capital appreciation bonds, the California legislature outlawed them earlier this year. Other states, including Texas, are considering similar bans.

Or here is another example, of New York (the state that is home to the mayor who tries to nudge his residents on everything from soft drinks to salt)  using trickery to consume 25 years of revenue in one year.

Other New York deals engineered without voter say-so include a $2.7 billion bond offering in 2003, backed by 25 years’ worth of revenues from the state’s gigantic settlement with tobacco companies. To circumvent borrowing limits, the state created an independent corporation to issue the bonds and then used the money from the bond sale to close a budget deficit—instantly consuming most of the tobacco settlement, which now had to be used to pay off the debt.

By the way, I recommend the whole linked article.  It is a pretty broad survey of how state and local governments are building up so much debt, both on and off the books, and how politicians bend every law just to be able to spend a few more dollars today.

I had pretty good experiences this week with not one but two movies rated 6 and under (which is pretty low) on IMDB

Atlas Shrugged, Part II:  A mixed bag, but generally better than the first.  The first episode had incredibly lush, beautiful settings, particularly for a low budget indie movie.  But the acting was stilted and sub-par.  Or perhaps the directing was sub par, with poor timing in the editing and dialog.  Whatever.  It was not always easy to watch.

The second movie is not as visually interesting, but it tossed out most of the actors from the first movie (a nearly unprecedented step for a sequel) and started over.  As a result, the actors were much better.  Though I perhaps could wish Dagny was younger and a bit hotter, she and the actor who played Rearden really did a much better job (though there is very little romantic spark between them).  And, as a first in any Ayn Rand movie I have ever seen, there were actually protagonists I might hang out with in a bar.

The one failure of both movies is that, perhaps in my own unique interpretation of Atlas Shrugged, I have always viewed the world at large, and its pain and downfall, as the real protagonist of the book.  We won't get into the well-discussed flatness of Rand's characters, but what she does really well -- in fact the whole point of the book to me -- is tracing socialism to its logical ends.  For me, the climactic moment of the book is Jeff Allen's story of the fate of 20th Century Motors.  Little of this world-wilting-under-creeping-socialism really comes out well in the movie -- its more about Hank and Dagny being harassed personally.  Also, the movie makes the mistake of trying to touch many bases in the book but ends up giving them short shrift - e.g. Jeff Allen's story, D'Anconia's great money speech, Reardon's trial, etc.

I would rate this as worth seeing for the Ayn Rand fan - it falls short but certainly does not induce any cringes  (if only one could say that about the Star Wars prequels).

Lockout:  This is a remake of "Escape from New York", with a space prison substituting for Manhattan and the President's daughter standing in for the President.  The movie lacks the basic awesomeness of converting Manhattan to a prison.  In fact, only one thing in the whole movie works, and that is the protagonist played by Guy Pierce (who also starred in two of my favorite movies, LA Confidential and Memento).

The movie is a total loss when he is not on screen.  The basic plot is stupid, the supporting characters are predictable and irritating, the physics are absurd, and the special effects are weak.  The movie is full of action movie cliche's -- the hero throwing out humorous quips (ala Die Hard or any Governator movie), the unlikely buddy angle, the reluctant romantic plot.  But Pierce is very funny, and is thoroughly entertaining when onscreen.  I think he does the best  job at playing the wisecracking, cynical hero that I have seen in years.

Via the WSJ, President Obama is proposing debt forgiveness for student borrowers

The White House proposes that the government forgive billions of dollars in student debt over the next decade, a plan that cheers student advocates, but critics say it would expand a program that already encourages students to borrow too much and stick taxpayers with the bill.

The proposal, included in President Barack Obama's budget for next year, would increase the number of borrowers eligible for a program known casually as income-based repayment, which aims to help low-income workers stay current on federal student debt.

Borrowers in the program make monthly payments equivalent to 10% of their income after taxes and basic living expenses, regardless of how much they owe. After 20 years of on-time payments—10 years for those who work in public or nonprofit jobs—the balance is forgiven.

Already, it's pretty clear that many students pay little attention to size of the debt they run up.  Easy loans for students have essentially made them less price sensitive, however irrational this may seem (did you make good short - long term trade-offs at the age of 18?)  As a result, tuition has soared, much like home prices did as a result of easy mortgage credit a decade ago.  The irony is that easier student debt is not increasing access to college for the average kid (since tuition is essentially staying abreast of increases in debt availability), but is shifting student's future dollars to university endowments and bloated administrations.  Take any industry that has in the past been accused of preying on the financially unsophisticated by driving them into debt for profit, and universities are fifty times worse.

So of course, the Progressives in the White House and Congress (unsurprisingly Elizabeth Warren has a debt subsidy plan as well) are set to further enable this predatory behavior by universities.  By effectively capping most students' future financial obligations from student debt, this plan would remove the last vestiges of price sensitivity from the college tuition market.  Colleges can now raise tuition to infinity, knowing that the bulk of it will get paid by the taxpayer some time in the future.  Just as the college price bubble looks ready to burst, this is the one thing that could re-inflate it.

Postscript:  By the way, let's look at the numbers.  Let's suppose Mary went to a top college and ran up $225,000 in debt.  She went to work for the government, averaging $50,000 a year (much of her compensation in government is in various benefits that don't count in this calculation).  She has to live in DC, so that's expensive, and pay taxes.  Let's say that she has numbers to prove she only has $20,000 left after essential living expenses.  10% of that for 10 years is $20,000 (or about $13,500 present value at 8%).  So Mary pays less than $20,000 for her education, and the taxpayer pays $205,000.  The university makes a handsome profit - in fact they might have given her financial aid or a lower tuition, but why bother?  Mary doesn't care what her tuition is any more, because she is capped at around $20,000.  The taxpayer is paying the rest and is not involved in the least in choosing the university or setting prices, so why not charge the taxpayer as much as they can?

Postscript #2:  It is hard to figure out exactly what Elizabeth Warren is proposing, as most of her proposal is worded so as to take a potshot at banks rather than actually lay out a student loan plan.  But it appears that she wants to reduce student loan interest rates for one year.  If so, how is this different from teaser rates on credit cards, where folks -- like Elizabeth Warren -- accuse credit card companies of tricking borrowers into debt with low initial, temporary rates.  I  find it  a simply astounding sign of the bizarre times we live in that a leading anti-bank progressive is working on legislative strategies to get 18-year-olds further into debt.

It strikes me that a service business model that relies on frequently suing your customers is not really sustainable.

My folks out in the field operating campground face far greater problems with customers than any of these petty complaints that Suburban Express is taking to court.  My folks have drunks in their face almost every weekend screaming obscenities at them.  We have people do crazy things to avoid paying small entry fees.  We get mostly positive reviews online but from time to time we inevitably get a negative review with which we disagree (e.g. from the aforementioned drunk who was ticked off we made him stop driving).

And you know how many of these folks we have taken to court in 10 years?  Zero.  Because unless your customer is reneging on some contractual obligation that amounts to a measurable percentage of your net worth, you don't take them to court.

Yes, it is satisfying from an ego perspective to contemplate taking action against some of them.  There are always "bad customers" who don't act in civilized and honorable ways.   But I  tell my folks that 1)  You are never going to teach a bad customer a lesson, because by definition these same folks totally lack self-awareness or else they would not have reached the age of fifty and still been such assholes.  And 2) you are just risking escalating the situation into something we don't want.  As did Suburban Express in the linked article.

The first thing one has to do in the customer service business is check one's ego at the door.  I have front-line employees that simply refuse to defuse things with customers (such as apologize for the customer's bad experience even if we were not reasonably the cause).  They will tell me that they refuse to apologize, that it was a "bad customer".   This is all ego.  I tell them, "you know what happens if you don't apologize and calm the customer down?  The customer calls me and I apologize, and probably give him a free night of camping to boot."  In the future, if this dispute goes public, no one is going to know how much of a jerk that customer was at the time.  Just as no one knows about these students in the Suburban Express example - some may have been  (likely were) drunken assholes.  But now the company looks like a dick for not just moving on.

This is all not to say I am perfect.  It is freaking amazingly easy to forget my own rule about checking one's ego at the door.  I sometimes forget it when dealing with some of the public agencies with which I am under contract.  One of the things you learn early about government agencies is that long-time government employees have never been inculcated with a respect for contract we might have in the private world.  If internal budget or rules changes make adhering to our contract terms difficult, they will sometimes ignore or unilaterally change the terms of our written contract.

And then I will get really pissed off.  Sometimes, I have to -- the changes are substantial and costly enough to matter.  But a lot of the time it is just ego.  The changes are small and de minimis from our financial point of view but I get all worked up, writing strings of eloquent and argumentative emails and letters, to show those guys at the agency just how wrong they are.  And you know what?  Just like I tell my folks, the guys on the other end are not going to change.  They are not bad people, but they have grown up all their lives in government work and have been taught to believe that contract language is secondary to complying with their internal bureaucratic rules.  They are never going to change.  All I am doing is ticking them off with my letters that are trying to count intellectual coup on them.

To this end, I think I am going to tape these two lines from Ken White's post on the wall in front of my desk

• First, never miss a good opportunity to shut up.
  
• Second, take some time to get a grip. You will not encounter a situation where waiting 48 hours to open your mouth will destroy your brand.

Several sources have reported that the new Obama budget calls for privatizing the TVA.  My company is already doing our part -- we have privately taken over the operation of four TVA campgrounds (under a long-term lease) and are looking at others.  Our first was here, and has turned out to be a really good operation for us.  It is impossible to get bank loans for improvements on leased land, but over time, by applying cash flow from the operation back into improvements, we have put nearly a million dollars in to the property.  We took on three new TVA campgrounds this winter and are just now scrambling to get them open.

This just came in over the transom via email.

WASHINGTON, D.C.///February 20, 2013///Sequestration will cut visitor access to the rim of the Grand Canyon, significantly delay the spring opening of key portions of Yellowstone and Yosemite, reduce emergency response help for drivers in the Great Smoky Mountains, limit access to the beach at the Cape Cod National Seashore, and impair the experiences in many other ways for millions of visitors at America’s national parks.   In addition, local, regional and state economies that depend on national parks will take huge hits as visitors are either turned away or skip visits due to the impact of the mindless sequestration budget cuts.....

CNPSR Spokesperson, Joan Anzelmo, former Superintendent of Colorado National Monument said:  “Congress might just as well put a big “Keep Out !” sign at the entrance to Yellowstone, Grand Canyon, Yosemite, the Cape Cod Seashore, and every other iconic national park in the U.S.   This foolhardy path tarnishes America’s ‘crown jewels’ and is a repudiation of the nation’s national parks often touted as ‘America’s best idea’.  Millions of Americans depend on national parks for their vacations and livelihood.  Those Americans are being told that national parks don’t count … that people who use national parks don’t count … and that people who live and work near national parks don’t count.”

A few observations:

• It's a 5% freaking cut.  I bet Wal-Mart is a more tightly-run organization than the NPS, and I further bet if I forced an immediate 5% cut at Wal-Mart they would do it without cutting store hours or service to customers.
• Again, we see government officials cutting the most cherished, visible services, rather than the chaff, in order to maximize citizen outrage rather than do their freaking job and set priorities
• It's a freaking 5% cut.  Did I say that already?
• I could cut huge chunks from the NPS budget while improving service by having private companies perform many operating functions.  Our company runs nearly 175 parks and in every one we have seen something like a 50% reduction in cost over government operation while simultaneously increasing staffing in the parks.
• This is absolutely boilerplate from every single agency and constituency that gets threatened with even the tiniest budget cut -- "you are telling XXX group they don't count."  Barf.
• I was going to make some observations about their budget over the last few years, but all their budget detail pages online seem to be down

I am currently as depressed and cynical as I have ever been today due to this absurd reaction to a trivial spending cut.  I have about zero hope that Federal spending will ever be reigned in.  Politicians of both parties and the special interests that support them will spend and spend until we find ourselves calling Greece asking for a bailout.

If the Republicans are supposed to be the voice of fiscal responsibility in Washington, then we are doomed.  They are absolutely as bad as Obama, running around in panic that the trivial cuts required by the sequester (not 8% this year or 5% or even 2% but 1% of Federal spending).  I have never seen a private organization with a large administrative staff that could not take a 5% reduction and generally be better off for it.   I absolutely guarantee that I could take 5% or more off the top of every agency's budget and you would never notice it.

This includes the military.  In fact, this includes the military in particular.  The military is never asked to prioritize.   We still have armored divisions in Germany.  It is always incredible to me that Republicans, who doubt that the government can ever manage or spend wisely, suddenly cast aside all these doubts when it comes to the military.   I understand the honor that folks accord to front-line soldiers vs., say, DMV workers.  But they are not the ones spending the money.  I am tired of such honor for the troops being used to bait and switch me from a very reasonable focus on DOD spending and waste.

When it comes to the military, Republicans use the same "closing the Washington Monument" tactics that Democrats use for social programs, essentially claiming that a 5% (or 1%) spending cut will result in the cessation of whatever activity taxpayers most want to see continue.  This process of offering up the most, rather than the least, important uses of money when spending cuts are proposed as a tactic to avoid spending cuts is one of the most corrupt practices imaginable.  No corporate CEO would tolerate it of his managers for a micro-second.

About two years ago at Forbes I imagined a hypothetical budget discussion at a corporation that followed Congressional budgeting practices.

I cannot believe the sky-is-falling panic around the sequester.  It is all so much BS.  The sequester represents a trivial percentage reduction in spending down to levels we have not seen for, like, 2 years or so.  But apparently everyone is getting into the act claiming the world will end if we cut a couple of percent from the growth rate of government spending.  As an illustration, this is the over-wrought absurd email I just recieved:

If implemented, the US Navy directed cancellation of ship repair and maintenance due to lack of an approved Defense budget and sequestration will have a drastic impact on the commercial ship repair industry across the nation.   The more than 150,000 expert ship repair professionals that have been cultivated across the nation cannot be easily replaced by a new workforce.    In addition, many of our yards nationwide do both defense and commercial work.  The Navy cancellations would severely undermine their ability to continue operating in a high quality, efficient  manner.

The Virginia Ship Repair Association urges you to learn more and voice your concern. We have provided templates for mailing  letters to your members of Congress, as well as contact lists to make phone calls. Please join us in this effort to preserve our maritime interests, protect our shipyards and secure the future of our workforce.

US Shipyards among the great pork-barrel spending stories in this country's history.  Show me a shipyard with lots of defense business (e.g. Ingalls in Pascagoula) and I will show you a Senator from that state who wielded immense power on Congressional defense committees.

From South Bend Seven come a couple of comments I liked today.  The first was on the Left and current budget plans:

If I was on the Left I would look at these figures and then begin to think long and hard about whether knee-jerk opposition to things like Medicare block grants or defined-contribution public pensions is such a good idea. The biggest threat to redistribution to the poor is existing redistribution to the old.

To the last sentence, I would add "and redistribution to upper middle class public sector workers."  I am constantly amazed at the Left's drop-dead defense of above-market pay and benefits for public sector workers.  This already reduces funding for things like actual classroom instruction and infrastructure improvements, and almost certainly the looming public pension crisis will reduce resources for an array of programs much loved by the Left.

The second observation relates to a favorite topic of mine, on technocracy:

Often enough I think "you know, we need more scientists in charge of things." Then I remember that the scientists we get are Steven Chu and I think "yeah, maybe not so much."

Then I think about all the abominable committee meetings and discussion sessions I've been in with scientists and I think "perhaps best not to put scientists in charge."

Then I look over at my bookshelf, notice my cope of The Machinery of Freedom, and think "why are we putting anybody in charge at all?"

If this Administration has any one theme, it is a total confidence that a few people imposing solutions and optimizations top-down  is superior to bottom-up or emergent solutions.   Even the recent memo on targeted killings reflects this same philosophy, that one man with a few smart people in the White House can make better life-or-death decisions than all that messy stuff with courts and lawyers.   Those of us who understand our Hayek know that superior top-down decision-making is impossible, given that the decision-makers can never have the information or incentives to make the best decisions for complex systems, and because they tend to impose one single objective function when in fact we are a nation of individuals with 300 million different objective functions.  But the drone war / targeted killing memo demonstrates another problem:  technocrats hate due process.   Due process for them is just time-wasting review by lesser mortals of their decisions.  Just look at how Obama views Congress, or the courts.

The best time to argue for general principles is when they work against one's own interest, to firmly establish that they are indeed principles rather than political opportunism.  Two examples:

First, from a topic rife with political opportunism, the Supreme Court a three-judge panel recently ruled Obama's NLRB not-really-recess appointments were unconstitutional.  I think that was the right decision,  but a President has got to be able to get an up or down vote in a timely manner on appointments.  As much as I would love to see all of Obama's appointments languish for, oh, four years or so, and as much as I really don't like his activist NLRB, having to resort to procedural hacks of this sort just to fill administrative positions is not good government.  The Senate rules (or traditions as the case may be) that even one Senator may put a hold on confirmations is simply insane.  While I am a supporter of the filibuster, I think the filibuster should not apply to certain Constitutionally mandated activities.  Specifically:  passing a budget and appointment confirmations.

Second, readers of this blog know how much I dislike our sheriff Joe Arpaio.  He was unfortunately re-elected a couple of months ago, though the vote was closer than usual.  This week, an Arizona group who also does not like Joe has announced it is going to seek a recall election against him.  Again, as much as I would like to see Arpaio ride off into the sunset, this practice of gearing up for recall elections just days after the election is over is just insane.  It is a total waste of money and resources.  While I don't like to do anything that helps incumbents, there has to be some sort of waiting period (perhaps 1/4 of the office term) before we start this silliness.

Kevin Drum is claiming that the government has already done much fine work on deficit reduction, reducing spending by $1.8 trillion and increasing taxes by $600 billion.

This is fantasy, pure and simple, and perhaps why the term "reality-based community" has fallen out of favor among Progressives.   There has been and will likely be no reduction in spending -- these "spending cuts" are merely reductions in spending growth rates from the Administration's initial wet dream spending proposals. I am sure the tax increases are probably real, but Obama and the Congress were already proposing to spend most of those in new stimulus and other boondoggles right in the end of year tax legislation.

The tax numbers are characteristic of the stupid budget games played by both parties.   For example, the recent tax law represents a tax increase over law in place on 12/31/2012, but represents a massive tax cut vs. law set to be in place on 1/1/2013.  This gives the administration cover to call it both!  When it wants to portray itself as a deficit hawk, as in this case, it was a tax increase.  When it wants to portray itself as being populist, it was a tax cut.

Charts like this are absolutely worthless.  We will likely get deficit reduction over the next few years, but it will be entirely due to rising tax revenues from an improving economy.

And here we are back to my constant theme -- if you want to posit a trend, then show the trend.

I have already written that the supposed European austerity (e.g. in the UK) is no such thing, and "austerity" in these cases is being used to describe what is merely a slowing in spending growth.

Apparently the same Newspeak is being applied to spending cuts in the US.  How else  can one match this data:

With these words from President Obama (my emphasis added)

"If we're going to raise revenues that are sufficient to balance with the very tough cuts that we've already made and the further reforms in entitlements that I’m prepared to make, then we’re going to have to see the rates on the top two percent go up"

Seriously?  The only small reductions in the budget were because some supposedly one-time expenses (like TARP bailouts, war costs, and stimulus spending) were not repeated.  Allowing one-time costs to be, uh, one-time does not constitute "tough cuts."

Tough cuts are when we knock government spending back down to 19-20 percent of GDP.  Clinton level spending in exchange for Clinton tax rates.   That's my proposed deal.