Posts tagged ‘Update It’

Libbertarian Disconnect

I don't know that I have ever seen a clearer example of the disconnect of thinking between libertarians and authoritarian political thinking than in this brief paragraph from Dahlia Lithwick.  She is writing about a court case reviewing whether it should be a crime to deny police your identification.  She writes, making fun of libertarians:

It would be easier to credit the Cato and ACLU arguments if we didn't already have to hand over our ID to borrow a library book, obtain a credit card, drive a car, rent videos, obtain medical treatment, or get onto a plane. So the stark question then becomes this: Why are you willing to tell everyone but the state who you are? It's a curious sort of privacy that must be protected from nobody except the government.

Really??  It is strange to her that we would treat privacy uniquely with the one and only organization in this country that can legally use force against us, legally take our money without our permission, and legally throw us in prison?  Is she really so blinded by a love for state authority that she can't tell the difference between a transaction at Blockbuster, which we can choose not to patronize if we don't like their terms of sale, and an interaction with police, where there is not even a hint of it being an arms-length, consensual, balanced interaction.

There is an largeand growing body of evidence that police take advantage of their power mismatch with citizens and abuse their power in multiple ways, large and small.  These abuses have likely always existed, but were covered up by police officers standing up for each other.  Only the advent of portable video cameras has started to really document what really goes on in these interactions.  Just read a few posts at this site to get a flavor.  And cops sure don't like when you ask them for their ID, as they hate anything that might impose accountability on them:

And in today's daily contempt-of-cop story, Ft. Lauderdale Police Officer Jeff Overcash did not appreciate a man asking him for his badge number, so he pulled out his handcuffs and arrested him.And it was all caught on video.

The video shows Brennan Hamilton walking up to Overcash in a calm manner with a pen and notepad in his hand. Overcash, who is leaning against his squad car with other cops, then pulls out his handcuffs and arrests Hamilton.

Overcash charged him with resisting arrest without violence and disorderly intoxication.

Alex Tabarrok makes a good point.   Based on these arguments, Lithwick must be A-OK with Arizona's new immigration laws, right?

Update:  It is interesting that while sneering at slippery slope arguments, she proves their merit.

The slippery-slope arguments"”that this leads to a police state in which people are harassed for doing nothing"”won't really fly, although I guarantee that you'll hear more and more of them in the coming weeks.

But in the immediately proceeding lines she wrote:

Is there something about stating your name or handing over a driver's license that differs from being patted down or frisked, which is already constitutional for Terry purposes?I, for one, would rather hand over my driver's license to a cop than be groped by one.

This is a perfect illustration of the slippery slope, almost textbook.  Libertarians certainly opposed current pat down and frisking rules, but since these are legal, Lithwick uses their legality to creep the line a little further.  And then the legality of these ID checks will in turn be used to justify the legality of something else more intrusive.

Outright Fraud

I was suspicious of GM's announcement that they were paying off government loans quickly, an action that was attached to a clear PR message that can be boiled down to "taxpayers did the right thing giving us billions."  I was suspicious because I had thought most of the money GM got was an equity infusion as well as certain guarantees, such as of the UAW mention and retirement medical plans.  As such, I suspected that a small debt repayment was trivial and just a token PR move.

I was wrong.  Well, actually, everything I wrote above is correct.  But I was wrong in that I underestimated how fraudulent this announcement was.

The issue came up yesterday at a hearing with the special watchdog on the Wall Street Bailout, Neil Barofsky, who was asked several times about the GM repayment by Sen. Tom Carper (D-DE), who was looking for answers on how much money the feds might make from the controversial Wall Street Bailout.

"It's good news in that they're reducing their debt," Barofsky said of the accelerated GM payments, "but they're doing it by taking other available TARP money."

In other words, GM is taking money from the Wall Street Bailout "“ the TARP money "“ and using that to pay off their loans ahead of schedule.

"It sounds like it's kind of like taking money out of one pocket and putting in the other," said Carper, who got a nod of agreement from Barofsky.

"The way that payment is going to be made is by drawing down on an equity facility of other TARP money."

Translated "“ they are using bailout funds from the feds to pay off their loans.

Un-freaking-believable.   And as an aside, I know that we traditionally have a 5-year waiting period, but can we go ahead and add TARP now to the hall of fame of worst legislation?

Update: It turns out it is even worse.  More Here.

Green Fraud

Via Anthony Watt, from the Oregonian

State officials deliberately underestimated the cost of Gov. Ted Kulongoski's plan to lure green energy companies to Oregon with big taxpayer subsidies, resulting in a program that cost 40 times more than unsuspecting lawmakers were told, an investigation by The Oregonian shows.

Records also show that the program, a favorite of Kulongoski's known as the Business Energy Tax Credit, has given millions of dollars to failed companies while voters are being asked to raise income taxes because the state budget doesn't have enough to pay for schools and other programs....

According to documents obtained under Oregon's public records law, agency officials estimated in a Nov. 16, 2006, spreadsheet that expanding the tax credits would cost taxpayers an additional $13 million in 2007-09. But after a series of scratch-outs and scribbled notes, a new spreadsheet pared the cost to $1.8 million. And when energy officials handed their final estimate to the Legislature in February 2007, they pegged the added cost at just $1.2 million for the first two years and $4.1 million for 2009-11.

The higher estimates were never shown to lawmakers. Current and former energy staffers acknowledged a clear attempt to minimize the cost of the subsidies.

"I remember that discussion. Everyone was saying, yes, this is going to be a huge (budget) hit," recalled Charles Stephens, a former analyst for the Energy Department who left in 2006. "The governor's office was saying, 'No, we need a smaller number.'"

Hmm, sounds eerily like what is going on with the health care bill in Congress.

Update: It turns out that all of the "green" companies so far have sold their tax credits for cash to companies like Wal-Mart and US Bank.  This is no enormous problem (though the optics are terrible for the state) but it is yet another reason why the Oregon budget gets busted by this program -- a startup solar company won't use tax credits for years as it will take some time to be profitable (if they ever are) but Wal-Mart can use them right now.

Licensed to Parent

I guess it was inevitable, but a court in California has determined that the most basic function of parenting, ie educating your children, requires a license from the state.  If you don't have such a license, you have to turn your kids over to the state to educate them for you (via Overlawyered)

Parents who lack teaching credentials cannot educate their children at
home, according to a state appellate court ruling that is sending waves
of fear through California's home schooling families....

"Parents do not have a constitutional right to home school their
children," wrote Justice H. Walter Croskey in a Feb. 28 opinion signed
by the two other members of the district court. "Parents who fail to
[comply with school enrollment laws] may be subject to a criminal
complaint against them, found guilty of an infraction, and subject to
imposition of fines or an order to complete a parent education and
counseling program."

Whoa!  No Constitutional right to educate our kids how we see fit?  With an imminent government takeover of our kids' eating habits as well, that will leave exactly what parental duties to parents? 

Of course we are just concerned about the well-being of the children.  Of course it has nothing to do with unionized teachers protecting their turf.  Or not:

Teachers union officials will also be closely monitoring the appeal.
A.J. Duffy, president of United Teachers Los Angeles, said he agrees
with the ruling.

"What's best for a child is to be taught by a credentialed teacher," he said.

Update:  It is being argued that this is actually more narrow than it first appears.  The current debate seems to come down to whether the judge is an idiot and the decision is overly broad or whether the judge is an idiot and the decision is narrow.

Ah, the Joy of Settled Science

Since many advocates of anthropomorphic global warming theory have declared the twenty-year-old science to be "settled," then there must not be very much controversy or disagreement in the peer review reader comments to the UN's Fourth IPCC report.  Except, no one seems willing to publicize these comments.  Even US government organizations paid for by taxpayers.  Steve McIntyre is again having to resort to filing FOIA's to get the details of climate research.

Update: It appears that Congress is taking a similar approach to climate research when it comes to openness about earmarks.

Classic Moral Hazard

According to the WSJ($), you and I are going to take on the pension obligations of UAL:

A bankruptcy judge approved a
proposal from United Airlines parent UAL Corp. to transfer four
underfunded employee pension plans to the federal government, paving
the way for the largest pension default in U.S. corporate history.

The plans, which have a shortfall of $9.8 billion,
cover more than 120,000 United workers and retirees. United, the
nation's second-largest carrier in terms of traffic, wants to transfer
them to the federal Pension Benefit Guaranty Corp., or PBGC, which
would add to the already heavy strain on the agency from a spate of
pension defaults in recent years. Since accounting for United's
obligations last year, in anticipation it would assume them, the agency
has taken on obligations exceeding its assets by $23.3 billion  [ed note- the agency takes in only about $1 billion a year in premiums, so $23.3 billion in the hole is a very big number]....

The court's decision could have wide
repercussions in the airline industry, which is struggling with high
fuel costs, intense fare competition and overcapacity. Sidestepping its
pension liabilities will help UAL attract additional funding, while
giving it a huge cost advantage over many of its rivals, which are
saddled with underfunded defined-benefit retirement plans of their own.
That will put further pressure on those airlines to slash their costs
or in some cases seek bankruptcy protection in hopes of terminating
their own pension plans.

It is difficult for me to even start on how much this pisses me off.  These pensions are real obligations that UAL took on, and represent value provided in exchange for work that has already been done.  As outlined below, I am not big on the defined benefit pension model, but that does not change the fact that these companies are defaulting on a solemn obligation.  The temptation I guess is always great when finances get tight to defer obligations that are the farthest in the future, and so pension underfunding is one of the first things to occur.  There is no way management should get a pass for this, and I am flabbergasted that equity holders expect to retain anything out of the bankruptcy when employees have not been fully paid.

This being said, there is plenty of blame to go around, including for the union and the government.  The UAL unions should have been dropping the hammer on the company in the form of strikes or whatever at the first sign of under-funding.  Instead, they were more concerned about jacking up their salaries to the highest levels in the industry, ignoring the reality that airline finances by the late 90's were basically a balloon that if you pushed on it in one place, it popped out in another.  Unions allowed the underfunding to continue in large part lulled by the promise of the PBGC and taxpayers to make the pension funds whole if they continued to be underfunded.  This is the moral hazard that occurs in any kind of financial insurance like this, and the unions apparently were both right and wrong - we taxpayers will take on the obligations but their benefits will also get a haircut.

One of the lessons I thought was learned from the S&L bailouts of the 90's was that you can't provide such financial insurance without a parallel regulatory structure to make sure some kind of minimum fiduciary responsibility exists.  But, not learning a thing, the government has this pension guarantee program in place and exercises virtually no oversight over the funding or management of the insured pensions.

It is astounding to me that a large number of people still support defined benefit plans over defined contribution plans. What I don't honestly understand is why the rank and file still buy into this.  Defined contribution plans are much easier to monitor and audit and keep companies honest.  Once the money is in a vehicle such as a 401K, the money can't be taken away by the company or lost in a bankruptcy (unless the 401K is invested in the company's stock, which any adviser will tell you to never, ever do (see "Enron").  Now, I understand that there can be some tricky migration issues from one system to another, and companies use the transition as an excuse to cut back on their net contributions, but these are workable and negotiable issues .  My guess is that the support for defined benefit plans comes mainly from union leadership, since these plans give
them control of huge amounts of funds and thereby gives them extra
power (see Teamsters for the classic example, or more recently, the situation at Calpers).  I wrote more on this topic here.

The issues here are surprisingly similar to the Social Security debate, as discussed here.  Would you rather have the money in your own account, despite the fact you will then have to bear market risks, or would you rather the money remain in the hands of your company or your Congress.  In entirely parallel situations, money entrusted to UAL management and to Social Security has all been spent, with nothing now left to pay retirees. 

Update:  It just occured to me to ask - why don't frequent flyer mile holders ever have to take a haircut in an airline bankruptcy?  We frequent flyers are creditors too, holding a claim on the company in the form of our miles.  In fact, I would think my claim as a holder of miles is much much worse than other creditors.  For example, why should employees have their pensions cut before I get my miles account cut?  Heck, employees seem to have a much better claim than I do, especially since many of my miles were earned, like everyone else's, as marginally ethical kickbacks directly to me for influencing my employer's spending on air travel.  Despite this, it appears that pensions will be cut, and salaries will be cut, and bondholders will lose value, and stockholders will be diluted, but my miles will all still be good.

Update #2: Assymetrical information has a nice post along the same lines, pointing out an issue with corporate defined benefit pensions that I forgot to mention:  If you are 20 years old with a company, are you really willing to make a bet that your company will even exist in 60 years to pay off your pension?  Not to mention the portability issues, since few people remain with the same company to retirement.  I think I actually have a couple of defined benefit pension plans I am vested in from early in my career - one from Exxon, when I was about to quit to go back to school and was offered, due to poorly structured plan rules, the chance at early retirement instead.  I think I qualify for like $1.23 a month for life from that plan.

More also from Will Collier:

I don't mean to tread on Martini Boy's turf here, but the pensions
crisis among all of these old-line companies illustrates a great no-no
of long-term investing: lack of diversification. In the end, even
though they presumably didn't have much choice in the matter, all those
UAL employees who've been promised a defined-benefit pension are in the
same boat as the Enron and WorldCom employees who voluntarily put all
of their 401(k) money in their own company's stock. They bet the house
on one horse, and by they time old age caught up with the grizzled nag,
there was barely enough left of it to cart off to the glue factory

Kevin Drum also points out that these defined-benefit funds are easy to manipulate, since managers can play with the "expected returns" variable to change the necesary annual contribution.