Coyote Blog

Most folks, by now, know to be suspicious of this kind of thing.  My wife is looking at buying a high-end sewing machine (e.g. a Bernina).  Apparently, these machines along with high-end bikes are a hotbed for scam artists.  The story is almost always the same - I had to leave the country suddenly, and am selling my machine which I left with an escrow company in the US.

Example 1, person supposedly in Italy

Example 2, person supposedly in Spain

Both suggested escrow companies, but in both cases the escrow companies smelled bad.  Here was one example link the "seller" sent us.  This is unbelievably sketchy, merely a forum web post rather than an actual web site.  Google searches quickly demolished the credibility of the escrow suggestions, and when we suggested an escrow company we knew to be legit, emails from the sellers ended.

New taxes are frequently sold as protecting police, fire, and education, though these together represent barely 25% of all US government spending.  Where does the rest go?  It's a giant bait and switch, made worse by the fact that even within these categories, new headcount is more likely to be added in administrative and overhead roles rather than in promised functions such as "teachers".  This is the subject of my Forbes column this week:

There is a way to reconcile this:   While increases in education spending are sold to the public as a way to improve results in the classroom, in reality most of the new money and headcount are going to anything but increasing the number of teachers.

Let’s start with an example from the city of Phoenix, New York.  Why this town?  Am I cherry-picking?  In fact, I was looking for data on my home town of Phoenix, Arizona.  But I have come to discover that while school districts are really good at getting tomorrow’s cafeteria menu on the web, they are a little less diligent in giving equal transparency to their budget and staffing data.  But it turns out that Phoenix, New York, which I discovered when I was looking for my home town data, publishes a lovely summary of its budget data, so I will use it as an example that helps make my point.

The city’s budget summary for 2012-2013 is here.  Overall, they are proposing a 0.4% increase in spending for next year, which initially seems lean until one understands that they are projecting a 4% decline in enrollment, such that this still represents an increase in spending per pupil faster than inflation.  But the interesting part is the mix.

What are the two things politicians are always claiming they need extra money for?  Classroom instruction and infrastructure.  As you can see in this budget, only two categories of spending go down:  classroom instruction and facility maintenance and cleaning.  Administrative expenses increase 4% (effectively 8% per pupil) and employee benefits expenses increase just under 1% despite a total decline in staffing.  Though I am not very familiar with the program, one irony here is that the fastest growing category is the 8.7% growth (nearly 13% per pupil) in spending with BOCES, a New York initiative that was supposed to reduce administrative costs in public schools.  In other words, spending increases are going to everything except the areas which politicians promise.

I don’t think these trends are isolated to this one admittedly random example.  The Arizona auditor-general recently did a study on trends in education spending in the state.  They found exactly the same tendency to reduce classroom spending to pay for increases in administrative headcounts.

Read it all, as they say.

According to the RIAA prosecutors owned by the RIAA, it is all Kim Dotcom's fault:

Meanwhile, Megaupload founder Kim Dotcom is free on bail, living in his rented home near Auckland and awaiting extradition proceedings to begin in August. Dotcom along with Finn Batato, Julius Bencko, Sven Echternach, Mathias Ortmann, Andrus Nomm and Bram Van Der Kolk are charged with criminal copyright infringement and money laundering.

The men -- along with two companies -- are accused of collecting advertising and subscription fees from users for faster download speeds of material stored on Megaupload. Prosecutors allege the website and its operators collected US$175 million in criminal proceeds, costing copyright holders more than $500 billion in damages to copyright holders.

$500 billion is about 3.5% of US GDP.

The trade group that represents companies like mine that privately operate public parks is looking for a college student to work part-time for us, either this summer or into the fall.  The ideal committment is 20 hours a week for 6-10 weeks but we could accommodate fewer hours for a longer span of time.  We are willing to pay in the ballpark of $13 an hour plus expenses (phone and Internet bills, etc).  We anticipate the candidate would work from his or her own home (or dorm) and already has access to a computer and Internet connection as well as a word processing software of some sort.

Job responsibilities would include:

• Working with our members to accumulate and organize our intellectual property vis a vis this business.  This includes marketing material, regulatory and statutory information, how-to guides, etc.
• Working with our partner agencies, like the US Forest Service, to get statistics on our members' scope  (e.g. we don't even know how many US Forest Service parks are run privately) and to synthesize these into marketing materials

The candidate need not have any specific knowledge of our business, and we have experts in the organization that can supply contacts and information.  Being an all-volunteer organization, we need someone with the time and the focus to gather and organize the information we have.  The candidate will have direct contact with the CEO's of most of the key players in this industry as well as with senior staff officers of a number of public recreation and lands agencies.    We want someone who is bright and unafraid to approach, even pester, strangers for information.  Quantitative skills and/or economics or business-related studies are a plus but are not required.  Experience with web tools such as content management systems like WordPress also a plus.

If someone is interested, have them email me at warren -at- camprrm *dot* com or hit the email link above.

Apparently, it is official US policy now that any adult male killed in done and other attacks be labelled a "militant".  Was the drone strike yesterday that killed 12 men really necessary, Mr. President?  Of course, they were all militants.

By the way, kudos to Greenwald to holding his "side" accountable, without even a token "but of course the other side is worse" dilution.  Both Conservatives and Liberals can learn from it.

A guest blogger on Megan McArdle's blog writes:

Here's my first such idea:

Abolish Mortgage-Backed Securities (and Offspring)

CDOs and credit default swaps don't kill financial systems, mortgages kill financial systems. There has been altogether too much opproprium directed at CDOs, credit default swaps and other structuring techniques that spread financial contagion, and not enough directed at the underlying collateral. The record seems to be, however, that Dick Pratt was correct when he called the mortgage "the neutron bomb of financial products."

This makes no sense.  I don't have time for a comprehensive argument, so here are a few bullet points:

• His argument rests on the fact that mortgages have inherently hard-to-quantify risks.  I don't believe that, given how long the financial system worked just fine writing mortgages, but if this is really the case, shouldn't he be proposing to ban mortgages, not just mortgage-backed securities?
• Holding the higher-quality tranches of an MBS simply cannot, by any mechanism I can fathom, be more risky than holding a lot of individual mortgages.  In fact, for a given bank, it should spread the risk geographically and to a larger number of mortgages.
• The first actual problem with MBS's is that the default risks were under-estimated by those packaging the securities.  Basically, the top AAA tranches were too large (or too wide, I think the term is).  This is correctable, and likely already has been corrected (In fact it had more to do with the actions of the government-enforced credit rating oligopoly than with actions of bankers).
• The second actual problem with MBS's is that the default risks were under-estimated by government regulators world-wide when in Basil II and the equivalent US law changes c. 1991, MBS's were given very preferential capital requirement treatment.  Basically, MBS were treated, for capital requirements, as if they were nearly as risk-free as US treasuries, providing incentives for banks to over-weight in them.
• The largest problem was the reduction in credit requirements for mortgages.  Increasing LTV from 80% to 97% or 100% or even 100%+ hugely increased the risk of default, and no one really took that into account in MBS packaging or bank capital requirements.  Bank capital requirements for mortgages and MBS were set as if they were European style recourse loans with 80% LTV.  But the same regulations and requirements applied to MBS built on US-style non-recourse loans with 97% LTV, which is crazy.

Here is a better plan:

1. Narrow the AAA tranches of MBS
2. Fix bank capital requirements vis a vis mortgages and MBS
3. Stop encouraging high loan to values on mortgages

Veronique de Rugy is doing an awesome job debunking the myth that European countries have cut spending in any meaningful way, and that the "austerity" that Krugman et. al. keeping going on about mostly consists of raising taxes.  Perhaps because they so desperately want to raise taxes in the US, Krugman and company seem willfully blind in recognizing the tax increases in Europe and their negative consequences.

Several years ago I wrote a post about how frequently steam plumes are used as illustrations to articles on pollution.  In the US, if you see a cloud coming out of a smokestack, adds are about 100:1 its steam, not smoke.  Look how many of the results today in Google images for "air pollution" are actually plumes of water vapor.

One trick environmental sites will play is to Photoshop the contrast and darkness of the steam plume to try to make it look smokier.  Here is a good example

This photoshopping of steam plumes to make them look like smoke is prevalent enough that I have written about it a few times.  That is why this image tickled me.  I don't know the artist.  He may be making the opposite plea (e.g. turning smoke to steam) but I'll interepret it the way I like:

Postscript:  This is my all-time favorite image in this category:

This image was used by Battelle labs (update:  still is) to illustrate their air pollution expertise.  The sad-faced girl with the inhaler is classic, but what makes this my favorite is the water vapor plume from the nuclear plant (you can see the nuclear reactor dome).  The water vapor from a nuclear plant cooling tower has only pure water -- it has no combustion products and no particulates that might give this poor girl asthma.  It does not even have any CO2 in it, if that is your particular bogeyman.

From Zero Hedge:

The hoped-for April spike in personal income tax revenues for the State of California fell once again below theoveroptimistic assumptions used to get the budget to “balance.” Instead of the $9.4 billion that the government had counted on collecting in April, it only collected $7.4 billion, according to the nonpartisan Legislative Analyst's Office. A 21% shortfall! In addition, corporate taxes were $450 million below forecast. After months of “disappointing” tax revenues, the total shortfall in income taxes now amounts to $3.5 billion for fiscal 2012 ending June 30.

The budget, supposedly balanced when it was passed last summer, had been spewing red ink from day one. Tax revenues were one problem. Expenditures were the other. The most recent re-revisions pegged the deficit at $9.2 billion. That was a few weeks ago. Now it’s going to be re-re-revised to nearly $12 billion.

Just how bankrupt does a budgeting process have to be for a budget that is supposedly in balance turn out to be $12 billion overdrawn barely 9 months later?  I have a California state tax refund on my desk -- better cash it quick or else its going to be replaced by scrip again.

The same article has this interesting tidbit about California high speed rail:

The CHSRA plan assumes that it would cost 10 cents per passenger mile (the average cost of carrying one passenger one mile at a given load factor) when international high-speed rail systems averaged 43 cents per mile, according to a report that just surfaced. The low-cost leader was Italy with 34 cents per mile; at the upper end were Germany and Japan with 50 cents per mile; Amtrak’s Acela Express, though not truly high speed, was in the middle with 44 cents per mile. And in California, it’s going to be 10 cents per mile?

The CHSRA correctly assumes that train tickets compete with air fares and the cost of driving, which, despite our incessant complaints, are lower in California than overseas. Thus, the US market requires cheaper tickets. And to make the project appear profitable, and thus more digestible for the taxpayer, the CHSRA lowered its projected operating costs to less than a quarter of the international average.

But if actual operating costs are 43 cents per mile and not 10 cents per mile, annual subsidies of $2 billion to $3 billion would be required just to keep the trains running, according to the report. Yet, AB3034, the California High-Speed Train Bond Act, makes these subsidies illegal. A conundrum that the Legislature, the Administration, and the CHSRA have so far successfully ignored.

The Secret Service prostitution scandal in Columbia is interesting.  My understanding is that prostitution is legal in the particular area where this occurred.  So in effect we have a scandal here about engaging in a legal activity.  Things that would convert this to an actual scandal in my mind:

• The officers were on duty, or were on call in some way that there are rules about what they can be doing which they violated (in which case I would be more worried about the drinking)
• The call girls were hired with taxpayer money  (it is only legal to give taxpayer money to corporate whores like Solyndra, not Columbian whores).  Bobby Patrino might have survived the adultery scandal if he hadn't paid her with his employer's money.

The most likely issue is one  of representation.  "You can do whatever you want on your own time, but not when you are representing us."    As in most scandals, the biggest crime will turn out to be bringing negative attention to one's employer.  With which I can sympathize.  If these bozos brought negative attention to me when they were travelling on business representing me, I'd fire them in a second.

Which gets me thinking that I could easily get sued for doing so.  I am pretty sure I don't have a rule in the employee manual that says you can be fired after getting in the papers for haggling with prostitutes.    Even though common sense says that by embarrassing the company they are putting their jobs at risk, common sense does not rule the legal world of employer law.   In my experience, the whole legal process is tilted against the employer, with the presumption being that the employer is a rapacious asshole firing people for no reason unless proven otherwise  (you are saying your employees are "at will?"  I laugh at your naivete).   The employee would just say that there was no rule against getting negative publicity for hiring prostitutes on a business trip and that their activity was entirely legal where it occurred.

Since it is entirely unlikely I will add a morality clause to our employee manual, I think I will add something about actions that bring harm or disrepute to the company.

I have not really posted on Trayvon Martin (except to comment on NBC's corrupt editing of the 911 tape) because a) high-profile criminal cases don't really have the hold on me they seem to have for many other Americans**; b) I have nothing to add; c) I have a bias that would make my commentary suspect.

But since I am about to post on the case, and may in the future, I should explain the bias.  We have a problem from time to time with campground workers we call the "badge-heavy" syndrome.  They get obsessive about rooting our rules violations.  They stalk campers.  They follow people around.  The spy on campers, looking for violations or crimes to report.  The folks they pick out for such treatment are often chosen because they are somehow different from the employee.

This is just awful for customer service.   It drives me crazy.  It is the absolute first thing we discuss at every training session.  Employees who demonstrate that they have this mentality are generally shown the door as fast as possible.  Government-run recreation facilities actually have this problem much worse, because 1) they give all their park staff a law enforcement title, a badge, and a gun, which tends to just encourage this kind of over-zealous harassment and 2) it is almost impossible for them to fire someone for this type of thing (because in the government employee heirarchy of values, enforcement of and consistency with rules is far more important than customer service or visitor satisfaction).

So this is a hot button issue for me.  And my first thought in this case was that Zimmerman's actions seemed just like those of my badge-heavy employees that I frequently have to fire.  So I am not very predisposed to by sympathetic to him, so thus my bias.

Anyway, keeping with my habit in this case of commenting more on issues at the periphery rather than of the case itself, this post from Ken at Popehat (I believe a former US attorney and current defense lawyer) is quite interesting.  Here is the bottom line:

I'm in a rush, but I can't avoid commenting on the affidavit of probable cause submitted in the matter of George Zimmerman's shooting of Trayvon Martin.

It's a piece of crap....

This is not the worst affidavit I've ever seen — but it's damn close, and the decision to proceed based on it in such a high-profile case is stunning. Cynics may say that I've been spoiled by federal practice, where affidavits are on average considerably more careful and well-drafted, particularly in some districts. But if it takes a high-profile case to highlight shoddy practices in everyday cases, so be it. An affidavit like this makes a mockery of the probable cause process. There's no way that a judge reading this affidavit can make an intelligent or informed decision about the sufficiency of the evidence — even for the low hurdle of probable cause.

** footnote:  I lived in Boulder through the whole Jon Benet Ramsey case.  I believe this was like aversion therapy, the equivalent of your dad forcing you to sit in a closet and smoke three cigars to put you off smoking, which has turned me off high profile criminal cases forever.

Professor Rizzo was keen that I check out the $12,000 solar picnic table at University of Rochester

Most kids use this to hook up their laptops.   Here are a few assumptions

• 3 hours of use per day (heroic, I am pretty sure it is less than this)
• 65 watt draw from one laptop
• 160 days with sun (Rochester is apparently in the top 10 US cities for number of heavy cloud days)
• 10 cents per kw-hour

This means the table would produce 31,200 W-hr per year or 31.2 KW-hr per year.  This yields an annual electricity savings of $3.12, giving the table a payback time on its investment of 3,846 years.  If one assumes a cost of capital anywhere north of 0.026% per year, then the sun will go dark before this table pays itself off.

Another solar company which received $2.1 billion in loan guarantees from the Obama Administration has gone bankrupt.  The good news is that it has not spent much of that taxpayer money, and its bankruptcy is probably due more to the bankruptcy of its German parent, which in turn is likely related to the huge cuts Germany has made in its feed-in tariff subsidies.

The big asset possessed by Solar Trust is the Blythe solar project, a planned 1000MW facility that apparently has all of its permitting in place.  The Blythe facility was originally going to be a solar-thermal facility, with adjustable mirrors focusing the sun on a central boiler that would in turn power turbines.   This plan was scrapped last year in favor of a more traditional PV technology, and I know local company First Solar has been hoping to save itself by getting the panel deal (First Solar also has been hammered by the loss of German subsidies).

If we take the cost of this planned 1000MW facility as the stated $2.8 billion (of which 2.1 billion would be guaranteed by US taxpayers), we see the basic problem with solar.   A new 1000MW  natural gas powered electric plant costs no more than about $1 billion.  It produces electricity 24 hours a day.  This solar plant, to be the largest in the world, would produce 1000 MW for only a few hours of the day.  That area of desert gets about 7 peak sun hours per day (the best in the country) so that on a 24 hour basis it only produces 292 MW average.  This gives it a total capital cost per 1000 MW of $9.6 billion, making it approximately 10 times costlier than the natural gas plant to build.  Of course, the solar plant has no fuel costs over time, but solar is never able to close the gap over time, particularly with current very low natural gas prices.

Update:  Apparently the $2.8 billion was just for the initial 484 MW so you can double all the solar costs in the analysis above, making the plant about 20x costlier than a natural gas plant.

I found this to be one of the most immoral statements I have read in a long time (bold added)

Saez and Diamond argue that the right marginal tax rate for North Atlantic societies to impose on their richest citizens is 70%.

It is an arresting assertion, given the tax-cut mania that has prevailed in these societies for the past 30 years, but Diamond and Saez’s logic is clear. The superrich command and control so many resources that they are effectively satiated: increasing or decreasing how much wealth they have has no effect on their happiness. So, no matter how large a weight we place on their happiness relative to the happiness of others – whether we regard them as praiseworthy captains of industry who merit their high positions, or as parasitic thieves – we simply cannot do anything to affect it by raising or lowering their tax rates.

The unavoidable implication of this argument is that when we calculate what the tax rate for the superrich will be, we should not consider the effect of changing their tax rate on their happiness, for we know that it is zero. Rather, the key question must be the effect of changing their tax rate on the well-being of the rest of us.

From this simple chain of logic follows the conclusion that we have a moral obligation to tax our superrich at the peak of the Laffer Curve: to tax them so heavily that we raise the most possible money from them – to the point beyond which their diversion of energy and enterprise into tax avoidance and sheltering would mean that any extra taxes would not raise but reduce revenue.

Another way to state the passage in bold is, "if one can convince himself he will be happier with another person's money than that other person would be, it is not only morally justified, but a moral imperative to take it."

This is the moral bankruptcy of the modern welfare state laid bare for all to see.  Not sure if this even deserves further comment.  Either you see the immorality or you bring a lot of very different assumptions about morality to the table than I.  For those of you who accept the quoted statement, how are you confident you will always be the taker, the beneficiary?  You might be if the box is drawn just around the US, but from a worldwide perspective all you folks in the American 99% may find yourselves in the world's 1%.

And from a purely practical standpoint, while I suppose one might argue that the total happiness in this particular instant could be maximized by taking most all the rich's marginal income, what happens tomorrow?  It's like eating your seed corn.  Taking capital out of the hands of the folks who have been the most productive at employing capital and helicopter dropping it on the 99% feels good right up until you need some job creation or economic growth or productivity improvement.

To this day, over 30 years after I had it explained in economics class, I am still floored by the line I read in the introductory macro textbook describing the Keynesian manipulation of Y=C+I+G+(X-M) to demonstrate a "multiplier" effect.  The part that I never could get over was at the very beginning when they said "I, or Investment, is considered exogenous" - in other words, the other variables could be freely manipulated, the government could grow and deficit spend as much as it liked, and investment would be unaffected.  Huh?

My memory was that Keynesians considered "I" a loser.  They felt anything that was not G or C actually acted as a drag, at least in the near term (in the long run we will all be dead).  This despite the fact that "I" is the only thing that grows the pie over time.

A few years ago I was asked to give a presentation in front of a group of Phoenix business leaders on climate and alternative energy.  I can't remember what particular group it was, but it was some public-private group that was heavily invested in advocating for local subsidies to promote strategic businesses - the sort of local MITI that most large cities have, that has this delusion that they can ramp up the city's growth by focusing public and private investment into a few selected industries (that they select, of course).

I told them that I thought their focus on solar manufacturing was dumb.  First, the whole idea that because Arizona is a good solar market meant that it should have some advantage in solar manufacturing made absolutely no sense.  This only makes sense for products with high transportation costs or a particular input cost that can be gotten more cheaply in one particular area (the location of aluminum manufacturing near cheap electricity in the Northwest comes to mind).  By the same logic all car manufacturers would be located in LA.

Second, I said that the whole solar business was completely driven by subsidies.  If the subsidies were to go away, the heart of the business would go away faster than pets.com.  I specifically mentioned First Solar in a positive context here, saying that though they where wholly dependent on subsidies for their revenues, they at least acknowledged as a corporate strategy they needed to get costs low enough to compete without subsidies.  (Someday, solar will get to that point, I hope, but I am skeptical that current approaches will yield the breakthrough, but that is another discussion).

If you want to understand the financial problems First Solar is having, let me show you four items.

First, from their 2010 annual report:

Geographic Risk. Our solar modules are presently predominantly sold to our customers for use in solar power systems concentrated in a single geographic region, Germany. This concentration of our sales in one geographic region exposes us to local economic risks and local public policy and regulatory risk in German.

This is way back in the notes on page 133.  By the way, I took a whole course in business school on reading financial reports.  Here is the key lesson for those not in the financial industry:  read them from the back.  Skip all the glossy crap at the front, go straight to the notes.

OK, here is the second bit of information.  Here is a world map of solar insolation, which is essentially the total solar energy available to produce power in a location when adjusted for atmosphere, weather, latitude, etc.

See Germany?  I won't insult your geographic knowledge by pointing at it, but much of Germany is in that yellow-green color which, for solar potential, means (in scientific terms) "it sucks."  Let's zoom in, and compare it to the US to get a feel for it (combined from two charts here)

Apparently the better sites in Germany have the same solar potential as ... Seattle!  The sliver of absolute best sites in Germany have approximately the same solar potential as Buffalo, NY.

So we have a company whose fortunes are dedicated almost entirely to selling solar panels into one of the most unpromising solar sites in the world.   Why is Germany buying so much solar?

OK, here is the third bit of information.  For years Germany had enormous feed-in tariffs (mandated above-market minimum prices)  for solar electricity:

The German feed-in tariff scheme has been in operation since 1991 and is regarded as one of the most successful in the world. In Germany, feed-in tariff rates are differentiated according to the source of the renewable energy. Separate tariffs are determined for biogas, biomass, hydroelectric, geothermal, solar and wind energy sources. The tariff paid for solar generators varies between EUR 45.7c/kWh and EUR 57.4c/kWh, depending on the capacity of the system and other design features. The tariff is greater for generators that are attached to the roof of a building or structure and greater again for generators that are attached to another part of a building. In Germany, the feed-in tariff is paid for a period of 20 years

Note the language from several years ago where "most successful" is determined without references to costs.

0.574 Euros per kWh is equal to about $0.75 today and even more several years ago when exchange rates were higher.  Remember this is a wholesale price, and should be compared to a $0.04 to $0.06 wholesale electricity price in the US  (I use US numbers to as its not clear to me Europe has a particularly competitive wholesale market.  The French have some sort of fixed price system set around $0.06).

However one wants to look at it, these are enormous subsidies.  People putting up solar panels in Germany were getting paid 10-15x what a market price for the same electricity might have been.

Finally, here is the fourth piece of evidence leading to First Solar's woes.  In 2010 and 2011 Germany, whose consumers began to balk at paying the highest electricity rates in the world in order to subsidize the method of electrical generation least suitable to Germany, began substantially cutting these tariffs.  In 2012 they will cut them even further:

German Environment Minister Norbert Roettgen and Economy Minister Philipp Roesler are set to hold a press conference on Thursday to outline the government's new approach on subsidies. However, the indications are that the cuts will be heavier than the market has been expecting:

• a 30% cut in the feed-in-tariff (FIT) to 13.5 cents per kilowatt hour for new large solar installations

• and a 20% cut in the FIT to 19.5 cents for new small plants

The market has of course been expecting cuts in the German FIT system. However, this news is decidedly worse than expected and likely to continue to pressure solar stocks - particularly those such as Yingli (YGE) with a significant exposure to German solar demand.

From a peak of $0.75 per kWh, Germany will now pay $0.255 per kWh for smaller installations, still four times the market price for wholesale electricity but only a third of what they paid during First Solar's boom years.  As I wrote yesterday, Germany was essentially paying $2 for milk from brown cows and $25 for milk from black cows.  This can't be sustained.

If one assumes a wholesale electricity price of 6 cents, First Solar's German customers were getting a 92% subsidy.  Sure, First Solar now faces other problems like Chinese competition and they have shot themselves in the foot on quality, but at the end of the day the only way they can survive is to convince some other government to turn on the taxpayer money spigot to keep them in business.  I am hoping we in Arizona and the US will not be the suckers, but I fear that we will.  One can argue the projects I discussed the other day, including the one where we taxpayers loaned First Solar the money to sell its solar panels to its own subsidiary, are evidence of this.  My guess is that First Solar will be throwing a lot of money and time towards Obama, praying for his re-election.

The most frequent justification I see from the Left for increasing government involvement and control of the health care system is that the US spends more per capita on health care than any other country but apparently gets little extra benefit from the spending in terms of health outcomes**.

Intriguingly, the exact same statement can be made of the American education system, which is already nearly fully nationalized.  We spend more per capita than any other country and get only middling results.  I wonder why those who use high spending with modest results as a justification for rethinking the health care system do not come to the same conclusion for the public education system?

To some extent, the US spends more on education and health care because we think are critical and because we are wealthier.  We spend on items way down the Pareto chart where we get less bang for the buck because we can.   And to my mind, it's no coincidence that both health care and education are dominated by third part expenditures.  Take the price value decision making out of the ultimate consumers hands, and, well, the whole price-value equation is bound to get screwed up.

** There are several reasons US often looks bad in these health comparisons.  The first is that we have a lot of life-shortening habits (eating, smoking, driving, crime) completely out of control of the health care industry.  So our lifespans are shorter, but control for those exogenous factors and our health care system looks among the best.  Check out this data, which shows that correcting for crime and accidents, US has the highest life expectancy in the world.

The other problem is the data is often cherry-picked by academics sympathetic to the state health care model.  As seen in the link above, we have the highest cancer survival rates in the world, and the highest life expectancy for people who reach 65.   Even our supposed out-groups, such as black males, have higher cancer survival rates in the US than the average in most European countries.  But you seldom see these metrics included in comparisons.

I also refer you to an oldie but goodie, showing how a study failed to correct for differences in lifestyles between countries.

My Forbes article is up for this week, and discusses 10 reasons why legislation frequently fails.  A buffet of Austrian economics, Bastiat, and public choice theory that I wrote for the high school economics class I teach each year.

Here is an example:

3.  Overriding Price Signals

The importance of prices is frequently underestimated.  Prices are the primary means by which literally billions of people (most of whom will never meet or even know of each others' existence) coordinate their actions, without any top-down planning.  With rising oil prices, for example, consumers around the world are telling oil companies:  "Go find more!"

For a business person, prices (of raw materials, labor, their products, and competitive products) are his or her primary navigation system, like the compass of an explorer or the GPS of a ship.  And just as disaster could well result from corrupting the readings of the explorer's compass while he is trekking across the Amazon, so too economic damage can result from government overriding price signals in the market.   Messing with the pricing mechanisms of markets turns the economy into a hall of mirrors that is almost impossible to navigate.  For example:

• In the best case, corrupting market prices tends to result in gluts or shortages of individual products.  For example, price floors on labor (minimum wages) have created a huge glut of young and unskilled workers unable to find work.  On the other side, in the 1970s, caps on oil prices resulted in huge shortages in the US and those famous lines at gas stations.  These shortages and gas lines were repeated several times in the 1970's, but never have returned since the price caps were phased out.
• In the worst case, overriding market price mechanisms can create enormous problems for the entire economy.   For example, it is quite likely that the artificially low interest rates promoted by the Federal Reserve over the last decade and higher housing prices driven by a myriad of US laws, organizations, and tax subsidies helped to drive the recent housing and financial bubble and subsequent crash.  Many will counter that it was the exuberance of private bankers that drove the bubble, but many bankers were like ship captains who drove their ships onto the rocks because their GPS signal had been altered

I had never seen Ansel Adams series of photos from a US internment camp for Japanese-Americans during WWII.  I had mixed feelings about them.  Adams said that he wanted to portray the resiliency of those imprisoned, showing how they made the best of a bad situation.  And certainly I have great respect for that, and the cultural strengths we see at work are a prelude to how Japan itself was rebuilt after the devastation of WWII.

But at another level I find these photos incredibly creepy.  They look too much like the fake photos staged by Germans and Russians of various eras to airbrush the horrors of their concentration camps.   I am willing to believe we Americans were better jailers, but none-the-less I was disturbed that these looked a lot like propaganda photos.

This is kind of cool -- evidence of European settlers along the US eastern coast 19,000-26,000 years ago.

Part of the story involves changing sea levels and Arctic ice extents.  These things change without fossil fuels?  Who knew?

Kevin Drum asks whether money corrupts politics, and comes to the conclusion that it does.  I disagree.

Money does not corrupt politics, the expansion of state power corrupts politics.  Every time the state gains a new power to take money from person A and give it to person B, or to throttle company A's business in favor of company B, private individuals start to scheme how they might access that power to their own benefit.

Think back to the much smaller US government of the 19th century.  Don't you long for the day when political corruption mainly meant packing the Post Office with one's kin?  It is absolutely no coincidence that the largest political scandal of that century (the Crédit Mobilier) accompanied the largest expansion of Federal power in that century (the Federally-funded construction of the Transcontinental Railroad).

Political corruption follows the power.  Sure, this power is often bought in dollars, but if we were to entirely ban money from the political process, the corruptions would remain.  And it would shift payment from money to other goods, like quid pro quo's, barter, and access to grass roots labor supplies.  Anyone remember machine politics?

Here is an example from an Administration schooled from an early age in Chicago machine politics

The Heritage Foundation has issued a new report that charges the Obama administration sent presidential earmarks, taxpayer dollars, to Democratic lawmakers to help convince them to vote for controversial proposals such as cap and trade and the health care bill.

“When you examine the recipients of those grants, there were at least 32 vulnerable house Democrats who received significant federal grant money during the run-up or directly after the votes on those pieces of legislation,” says Lachlan Markay, one of the authors of the report.

The amount of earmarks spiked around the time of difficult votes such as cap and trade, then dropped, only to spike again around controversial financial regulations known as Dodd/Frank, and spiked the most just before the vote on the health care bill....

On their websites, lawmakers didn’t advertise their votes, but did tout at length the money they’d gotten for various local projects.

“As a way to counteract the negative voter sentiment that would come from voting for unpopular legislation,” says Markay. “These were attempts to make sure that constituents knew they were bringing money home to their district.”...

Numbers from the non-partisan Congressional Research Service show that the value of administration earmarks under President Obama increased by a 126 percent in his first two years in office and the actual number of administrative earmarks increased by 54 percent.

Those are dramatic increases that are 11 times more than Congress itself increased earmarks, which the White House did not explain today.

By the way, of all the ways that access to political power can be bought, political spending under our current rules is by far the most transparent.   Just as in narcotics or prostitution, a ban wouldn't eliminate it, it would simply drive it further underground and into other forms of currency.

First, I will admit that this was probably a throwaway line, but it does represent the worldview of a lot of Americans.  In an article showing a funny story about poor preparation of college students, Kevin Drum ended with this:

This does not bode well for our coming economic war with China, does it?

Trade is not war.  Trade is cooperation, exactly the opposite of war.   By definition, it benefits both parties or it would not occur, though of course it can benefit one more than the other.

Treating trade like war is a very dangerous game engaged in by some politicians.  At best, it leads to protectionism that makes the country poorer.  At worst, it can lead to real war.

Consider two examples of a country treating trade like war, both from Japan.  In the 1930's, Japan developed an imperial desire to directly control all the key resources it needed, rather than to trade for them.  The wealthy ports of China and iron-rich Manchuria were early targets.   This desire was compounded when the US used trade embargoes as a policy tool to protest Japanese invasions and occupation of China.  This eventually led to war, with Japan's goal mainly to capture oil and rubber supplies of southeast Asia.  Obviously, this effort led to Japan essentially being left a smoking hole in the ground by late 1945.

The second example was in the 1980's, as Japan, via MITI, actively managed its economy to promote trade.  The "trade as war" vision was common among Japanese leaders of the time.  The results was a gross, government-forced misallocation of resources and bubble in the real estate and stock markets that led to a couple of lost decades.

What is the difference between this hypothetical family budget and the US Government's budget?

One answer is:  eight zeros, because these are essentially the US budget numbers with eight zeros knocked off.

A second answer is:  Prisons and the printing press.  Because the biggest difference is that in the family budget context, everyone sees these numbers as simply insane, while on the national level at least half of folks think they are just fine.  The difference is that the US government can take money from other people at whim and by force, backed by the threat of incarceration.  And if that fails, it can print money  (actually using bits and bytes rather than the printing press, but that's just a detail) to pass the cost of its extravagance onto other people in the form of inflation.

Update:  The chart above probably over-estimates the belt-tightening.  If you really wanted a comparable situation to today's federal government, the example would say that the family spent $37,000 last year, proposed to spend 38, 285 next year, but agreed to only spend 37,900 for a $385 "cut", said cut being claimed despite the fact that actual spending will be $900 more than last year.

I had thought the situation in Greece would eventually hammer home for everyone the perils of reckless enlargement of the state and deficit spending.  But apparently, it is not to be.  This is how Kevin Drum describes the core problem in Greece:

the austerity madness prompted by the 2008 financial collapse

So the problem is not a bankrupt state, but the "austerity" which by the way has at best carved only a trivial amount out of spending.  And it was triggered not by a ballooning deficit as a percent of GDP and an inability to meet interest and principle payments, but by the US financial crisis.

This is willful blindness of absolutely astounding proportions.  Which means the same folks are likely just rehearsing to ride the US right into the same hole.

One of the amazing aspects of our new post-modern outlook on personal responsibility and obligations is that folks who are profligate and take on too much debt are increasingly considered victims to which other people owe something (generally a bailout).

We see this no only among US mortgage holders but in Greece as well

Greek Prime Minister Lucas Papademos told lawmakers to back a deeply unpopular EU/IMF rescue in a vote on Sunday or condemn the country to a "vortex" of recession.

He spoke in a televised address to the nation, ahead of Sunday's vote on 3.3 billion euros ($4.35 billions) in wage, pension and job cuts as the price of a 130-billion-euro bailout from the European Union and International Monetary Fund.

The effort to ease Greece's huge debt burden has brought thousands into the streets in protest, and there were signs on Saturday of a small rebellion among lawmakers uneasy with the extent of the cuts.

So outsiders generously agree to pay for 130 billion Euros of past Greek spending if only the Greeks will cut their current spending by 3.3 billion Euros (at which spending level the country would still be running large deficits).  And people riot as if they have been gang-raped.  Incredible.

Let the Greeks go.  Of course, this is not actually about bailing out Greece, but about bailing out, indirectly, European banks that invested in Greek bonds.  The banks seem to run public policy in Europe, even more so than in the US.

When a country

• Increases the minimum wage, and therefore the minimum skill / productivity needed for a job
• Adds substantially to the costs of labor through required taxes, insurance premiums, pensions, etc
• Makes employees virtually un-fireable, thus forcing companies to think twice about hiring young, unproven employees they may be saddled with, good or bad, for decades
• Puts labor policy in the hands of people who already have jobs (ie unions)
• Shift wealth via social security and medical programs from the young to the old

It gets this

The bitterly ironic part is that when these folks hit the streets in mass protests, it will likely be for more of the same that put them there in the first place.

 
Want to argue that such policies are hurting workers rather than helping?  Good luck, at least in Italy

Pietro Ichino, a professor of labor law at the University of Milan and a senator in the Italian legislature, is known as the author of several “neoliberal” books and studies recommending that the Italian government relax its extraordinarily stringent regulation of employers’ hiring and firing decisions. As Bloomberg Business Week reports, that means that Prof. Ichino must fear for his life: “For the past 10 years, the academic and parliamentarian has lived under armed escort, traveling exclusively by armored car, and almost never without the company of two plainclothes policemen. The protection is provided by the Italian government, which has reason to believe that people want to murder Ichino for his views.”

Memo to US:  Don't get cocky, you are going down the same path

 Update:  Interesting and sort of related from Megan McArdle

An apparent paradox that frequently puzzles journalists is that Europeans work fewer hours than workers in the United States, while in some countries, hourly productivity appears to be the same, or even higher, than that of American workers.
This is not actually a paradox at all.  Much of the decline in European hours worked per-capita came in the form of unemployment.  Rigid labor laws which make it hard to fire (and thus, risky to hire) shut less productive workers out of the market, particularly the young, and those who had been displaced due to disruptive industry change.  So does anything that raises the cost of labor, like, er, loads of mandatory vacation and leave.  When you exclude your least productive workers from the labor force, your measured hourly productivity will be higher, particularly if you use metrics like GDP per hours worked.