Dispatches from District 48
Modern pirates do not need a ship or swords or cannon, they only need lobbyists. Ever wonder how Captain Morgan rum pays for all that expensive TV advertising? They don't -- you do! At President Obama's insistence, their subsidies (along with many others) were extended in the recent "fairness" tax bill.
The movie peters out a bit at the end, but the first 30 minutes or so of Office Space are a classic, and if you have not seen it, go find it somewhere. If you have seen the movie, you will likely recognize this job description from an article on university administrative staff bloat:
One $172,000 per year associate vice provost had been hired to oversee the work of committees charged with considering a change in the academic calendar-a change that had not yet even been approved. Since the average Purdue graduate leaves school with about $27,000 in debt, the salary of this functionary is equivalent to the education loans of six students.
This new administrator blithely told the Bloomberg reporter, "My job is to make sure these seven or eight committees are aware of what's going on in the other committees."
The entire article is excellent. For example:
A recent paper by two respected economists, Robert Martin and R. Carter Hill, shows that the fiscally optimal ratio of administrators to faculty at research universities is one full-time administrator for every three faculty. Deviations from this ratio produced significantly higher costs per student. The unfortunate reality as Martin and Hill found is that the ratio has almost been reversed--2 administrators to one faculty. Martin and Hill's findings suggest, moreover, that about two-thirds of the growth in higher education costs between 1987 and 2008 can be attributed to the rise of administrative power during this period.
Eugene Volokh is writing about a case against an attorney who defrauded his firm. The details are not important, what caught my eye is what is highlighted below:
Once again, this case does not turn on the bare fact that Attorney Siderits wrote-down his time; this case is about Attorney Siderits abusing his write-down discretion and lying to his law partners in order to collect almost $47,000 in bonuses to which he was not entitled. Attorney Siderits cannot seriously contend that firms must have a written policy forbidding stealing and lying before a misconduct charge for one of these actions can be sustained.
That certainly makes sense, but it does not apply at the California EDD, which administers (among other things) the state unemployment insurance program. We terminated an employee for accepting money from a customer to provide a service, then pocketing the money and not providing the service. I call this "theft", and had assumed all would understand that stealing from customers is a firing offense. When California sent out its unemployment paperwork, we said this employee had been fired "for cause", which in many states means that they are ineligeable for full unemployment payments.
However, after some back and forth, I was eventually informed by the EDD that since I did not have an explicit policy in the employee manual that said "employees may not steal money from customers", then they could not recognize that she was fired for cause. Even if I had put that in the manual, it probably would not have counted because the next thing EDD asked for is something in writing proving, with the employee's signature, that she had read that passage. And from past experience with the EDD, my guess is that they likely would not have accepted firing on the first offense, but would have insisted we needed to have her steal from multiple customers, with written warnings each time, before we terminated her.
Basically, what this all means is that while the law technically says people can't be paid unemployment if fired for cause, California has made the standards of proof so absurd that this requirement is meaningless. Everyone is going to get unemployment.
As it turns out, there is a silver lining from this lack of diligence by the state. My business is seasonal and I can only offer summer work. Most of my employees are happy with this, as they like to take the winter off (many are retired). One is not supposed to collect unemployment if he or she is not actively seeking work, but my employees have discovered that California does zero dilligence to check this. So some of them lie and say they are looking for work over the winter when they are not, and collect unemployment. I know of two couples who spend their winter in Mexico but still collect their California unemployment like clockwork. Not only is California not dilligent about it, but when I tried to report someone I knew who was collecting unemployment but not even in the country, I was threatened by the EDD official that I was risking substantial personal liability by submitting such a claim and opening my self up to civil suits and even prosecution for harassing the worker. So of course I dropped it.
So what is the silver lining? California is so eager to hand money in the off-season to support my employees' seasonal vacations that my unemployment insurance premium rate is already the worst possible. My rates can't go any higher. So if they insist on giving state money to a thief, it's not coming out of my pocket.
This story is simply unbelievable. Shareholders of AIG should have been wiped out in 2008 in a bankruptcy or liquidation after it lost tens of billions of dollars making bad bets on insuring mortgage securities. Instead, AIG management and shareholders were bailed out by taxpayers.
It is bad enough I have to endure those awful commercials with AIG employees "thanking" me for their bailout. It's like the thief who stole my TV sending me occasional emails telling me how much he is enjoying it.
Now, AIG managers and owners are considering suing the government because the the amazing special only-good-for-a-powerful-and-connected-company deal they got was not good enough.
Directors at American International Group Inc., AIG -1.28% the recipient of one of the biggest government bailout packages during the financial crisis, are considering whether to join a lawsuit that accuses the U.S. government of too-onerous terms in the 2008-2009 rescue package.
The directors will hear arguments on Wednesday both for and against joining the $25 billion suit, a person briefed on the matter said. The suit was filed in 2011 on behalf of Starr International Co., a once very large AIG shareholder that is led by former AIG Chief Executive Maurice "Hank" Greenberg. It is pending in a federal claims court in Washington, D.C....
Starr sued the government in 2011, saying its taking of a roughly 80% AIG stake and extending tens of billions of dollars in credit with an onerous initial interest rate of roughly 15% deprived shareholders of their due process and equal protection rights.
This is especially hilarious since it coincides with those miserable commercials celebrating how AIG has successfully paid off all these supposedly too-onerous obligations. And certainly Starr and other AIG investors were perfectly free not to take cash from the government in 2008 and line up some other private source of financing. Oh, you mean no one else wanted to voluntarily put money into AIG in 2008? No kidding.
Postscript: By the way, employees of AIG, you have not paid off all the costs of your bailout and you never will. The single largest cost is the contribution to moral hazard, the precedent that insurance companies, if sufficiently large and well-connected in Washington, can reap profits on their bets when they go the right way, and turn to the taxpayer to cover the bets when they go wrong.
"What scares me about drone strikes is how they are perceived around the world," [retired General Stanley McChrystal] said in an interview. "The resentment created by American use of unmanned strikes ... is much greater than the average American appreciates. They are hated on a visceral level, even by people who've never seen one or seen the effects of one."
Oddly, Obama Democrats used to feel the same way, at least until their guy was pushing the button (in fact, pushing the button far more frequently than Bush did). We are overusing this tool.
Kevin Drum is uncomfortable that Google got off the hook on anti-trust charges merely because it was not harming consumers
Google made a number of arguments in its own defense, and consumer welfare was only one of them. Still, it was almost certainly the main reason they won, and it's still not clear to me that this is really what's best for consumers in the long run. Did Google users click on the products they highlighted? Sure. Did they buy some of the stuff? Sure. Were they happy with their purchases? Sure. Is that, ipso facto, evidence that there's no long-run harm from a single company dominating the entire search space? I doubt it. After all, John D. Rockefeller could have argued that consumers bought his oil and were pretty happy with it, so what was the harm in his controlling the entire market?
The tech industry moves fast enough that antitrust might genuinely not be a big issue there. In the end, it wasn't antitrust that hurt IBM and Microsoft. It was the fact that the industry moved rapidly toward smaller computers and then the internet, and neither company was really able to react fast enough to dominate these new spaces. Nonetheless, I'm skeptical of the tautology at the heart of the consumer welfare argument. If a company is successful, then by definition people must be buying its stuff. On this basis, bigness is simply unassailable anymore. That has broad societal implications that I suspect we're not taking seriously enough.
He seems to be arguing that we consider returning to a pure bigness standard without reference to consumer harm. I am not sure that we ever followed such a standard, but certainly today the alternative to a consumer harm standard is not a bigness standard but a competitor harm standard. Whether he knows it or now, this is essentially what Drum is advocating. We see this in the article he quotes:
But while the F.T.C. said that Google’s actions might have hurt individual competitors, over all it found that the search engine helped consumers, as evidenced by Google users’ clicking on the products that Google highlighted and competing search engines’ adopting similar approaches.
I am not sure what Drum really wants, but the result of eliminating the consumer-harm standard would be an environment where every failed company can haul its more successful competitors in front of the government and then duke it out based on relative political pull rather than product quality. It is pretty well understood out there that this anti-Google FTC claim was initiated and championed by Microsoft, certainly not among the powerless typically championed by progressives, and a company well known to have missed the boat on Internet search and which is apparently trying to do now through government fiat what it has not been able to do in the marketplace. Microsoft learned this technique from Sun and Oracle, which took Microsoft to the FTC in the famous browser case where Microsoft faced years of anti-trust scrutiny for the crime of giving the public a free product.
Already, anti-trust law is an important tool of the corporate state, to allow politically powerful companies to squash competition from those who invested less money in their Washington office. I am not a legal expert at all, but this consumer standard in anti-trust strikes me as a critical shield stopping a hell of a lot more abuse of anti-trust law.
By the way, there is a modern bigness problem with corporations that is very troubling -- we have made government tremendously powerful, giving it many tools to arbitrarily choose winners and losers without any reference to justice or rights. As private entities get larger and richer, they are better able to access and wield this power in their own favor. The libertarian solution is to reduce the government's power to pick winners and losers. The progressive answer is to regulate business more with tools like anti-trust.
But the progressive solution has a built-in contradiction, which why Drum probably does not suggest a solution. Because the very tools progressives suggest to regulate business typically become the tools with which politically connected corporations further tilt the game in their own favor. Anti-trust is a great example. We want to reduce the number of large companies with an eye to reducing corporatism and cronyism, but the very tool to do so -- anti-trust law -- has become one the corporate crony's best tools for stepping on competitors and insulating their own market positions.
And by the way, Rockefeller's Standard Oil did a HELL of a job for consumers. It was nominally punished for what it might some day hypothetically do to consumers.
Here are the facts, via Reason
Standard Oil began in 1870, when kerosene cost 30 cents a gallon. By 1897, Rockefeller's scientists and managers had driven the price to under 6 cents per gallon, and many of his less-efficient competitors were out of business--including companies whose inferior grades of kerosene were prone to explosion and whose dangerous wares had depressed the demand for the product. Standard Oil did the same for petroleum: In a single decade, from 1880 to 1890, Rockefeller's consolidations helped drive petroleum prices down 61 percent while increasing output 393 percent.
By the way, Greenpeace should have a picture of John D. Rockefeller on the wall of every office. Rockefeller, by driving down the cost of kerosene as an illuminant, did more than any other person in the history to save the whales. By making kerosene cheap, people were willing to give up whale oil, dealing a mortal blow to the whaling industry (perhaps just in time for the Sperm Whale).
So Rockefeller grew because he had the lowest cost position in the industry, and was able to offer the lowest prices, and the country was hurt, how? Sure, he drove competitors out of business at times through harsh tactics, but most of these folks were big boys who knew the rules and engaged in most of the same practices. In fact, Rockefeller seldom ran competitors entirely out of business but rather put pressure on them until they sold out, usually on very fair terms.
From "Money, Greed, and Risk," author Charles Morris
An extraordinary combination of piratical entrepreneur and steady-handed corporate administrator, he achieved dominance primarily by being more farsighted, more technologically advanced, more ruthlessly focused on costs and efficiency than anyone else. When Rockefeller was consolidating the refining industry in the 1870s, for example, he simply invited competitors to his office and showed them his books. One refiner - who quickly sold out on favorable terms - was 'astounded' that Rockefeller could profitably sell kerosene at a price far below his own cost of production.
Over Christmas break, my son (home from college) and I have played a half dozen or more games of Twilight Struggle, the #1 rated game on Boardgame Geek that refights to US-USSR cold war from the 1950's to the 1980's. There is a good reason for that ranking - it is a very enjoyable game to which he and I have become addicted.
I mentioned it before Christmas, and after playing it once made a couple of comments that I want to revise. I had said I remembered it to be "complex." Actually, for a wargame, the rules are quite simple (no zone of control rules, line of sight, tracing supply, movement costs over terrain, etc etc.). Basically, each turn you play a card from your hand. You may either take the effects of the event on the card, or you may take one of four actions using the operations points on the card (sometimes, if the event benefits your opponent, you have to take the event and the operations points). Your goal is to gain influence over countries and regions, which in turn translates into victory points.
The cards are divided into early, mid, and late-game cards that are staged into the game. This helps avoid anachronisms like Solidarity union forming in Poland in 1950. It also creates a setting where the Russian has early advantages, while the US has late advantages. This really befuddled me for a number of games as I played as Russian against my son, and lost more than I won despite the general sense in the playing community that the game (until recently revised) is a bit unbalanced in favor of the Russian. The problem is that my play style in wargames tends to be methodical and defensive, and to win at Russia you have to open with an RTS-like rush and gain the largest possible lead before the Americans come back in the end game. I finally routed the Americans in the last game when I finally got more aggressive.
The game's complexity comes not from a lot of rules but from three sources:
1) dealing with complexity of scoring possibilities, as while there are only a few types of actions one can take, there are a hundred locations on the map where one can take those actions. The scoring dynamics causes focus of both players to shift around the world, sometimes in Asia, sometimes in Latin America, sometimes in Africa, etc. The cards ensure that no region is ever "safe" (for example the combination of John Paul II's election and Solidarity can turn a strong Soviet position in Poland into a total mess.
2) getting rid of or minimizing the impact of events that benefit your opponent. The latter adds a lot of the flavor of the game. On average, half the event cards in your hand help you, and half help your opponent. If a card helps you, you can take either the op points or the event, but not both. This is sometimes a tough choice in and of itself, made more complicated by the fact that unused events get recycled and can come back later, when they might be more or less useful. But if the card has an opponent event on it, you generally (with a few exceptions) have to take the op points AND trigger an event favorable to your opponent. Managing the latter consumes a lot of the mental effort of the game, and really helps give the game its Cold War flavor of jumping from crisis to crisis.
3) the interaction of the cards. Like most card-driven games, there are a near infinite number of card interactions. This means that there are almost always certain card pairings where the resulting net effect is unclear. We had to keep our iPad nearby locked into a web site of the game maker that includes rulings on each card. Since the game is now 6+ years old, we never encountered a situation where a clear ruling was not available.
Anyway, we think the game absolutely deserves its #1 rating. Highly recommended.
This is one of the more amazing things I have read of late. Environmentalist recants his opposition to GMOs. Good, I hope Greenpeace is listening and will reconsider its absurd and destructive opposition to golden rice.
As an environmentalist, and someone who believes that everyone in this world has a right to a healthy and nutritious diet of their choosing, I could not have chosen a more counter-productive path. I now regret it completely.
So I guess you’ll be wondering – what happened between 1995 and now that made me not only change my mind but come here and admit it? Well, the answer is fairly simple: I discovered science, and in the process I hope I became a better environmentalist....
So I did some reading. And I discovered that one by one my cherished beliefs about GM turned out to be little more than green urban myths.
I’d assumed that it would increase the use of chemicals. It turned out that pest-resistant cotton and maize needed less insecticide.
I’d assumed that GM benefited only the big companies. It turned out that billions of dollars of benefits were accruing to farmers needing fewer inputs.
I’d assumed that Terminator Technology was robbing farmers of the right to save seed. It turned out that hybrids did that long ago, and that Terminator never happened.
I’d assumed that no-one wanted GM. Actually what happened was that Bt cotton was pirated into India and roundup ready soya into Brazil because farmers were so eager to use them.
I’d assumed that GM was dangerous. It turned out that it was safer and more precise than conventional breeding using mutagenesis for example; GM just moves a couple of genes, whereas conventional breeding mucks about with the entire genome in a trial and error way.
Bravo Mr Lynas. It is hard to admit one was wrong. It is even harder, though, for a man like Lynas to declare himself on the "wrong" side of a "progressive" issue like this. He has now likely put himself into a category along with black Republicans who will incur special wrath and disdain from progressives.
Speaking of the need for a little science in the environmental movement, I was channel surfing over Bill Moyer's show yesterday on PBS (actually I was navigating to our local PBS station to make sure Downton Abbey was set to record later in the day) when I heard Moyer whip out a stat that even with a carbon tax, the world will warm over 6 degrees this century. Now, I don't know if he was talking in degrees F or C, but in either case, a 6 degree number far outstrips the climate sensitivity numbers used even by the IPCC, which many of us skeptics believe has exaggerated warming estimates. It is constantly frustrating to be treated as an enemy of science by those who display such a casual contempt for it, while at the same time fetishizing it.
How the recent "fairness" tax bill became a vehicle for subsidizing connected corporations.
Baucus' Finance Committee passed a bill in August extending 50 expiring deductions and credits for favored industries. At Obama's insistence, the Baucus bill was cut and pasted word for word into the cliff legislation. Set aside for a moment how this contradicts Obama's talk about "fair shares" and the need to diminish the influence of lobbyists, and look at what this raft of tax favors shows us about the Baucus Machine.
Pick any one of the special-interest tax breaks extended by the cliff deal, and you're likely to find a former Baucus aide who lobbied for it on behalf of a large corporation or industry organization.
General Electric may have been the biggest winner from the cliff deal. GE makes more wind turbines than any other U.S. company, and it lobbied hard for extension of the wind production tax credit. But more important for the multinational conglomerate was an arcane-sounding provision that became Section 222 of Baucus' bill and then Section 322 of the cliff bill: "Extension of subpart F exception for active financing income."
In short, this provision allows multinationals to move profits to offshore financial subsidiaries and thus avoid paying U.S. corporate income taxes. This is a windfall for GE: The exception played a central role in GE paying $0 in U.S. corporate income tax in 2011 when it made $5.1 billion in U.S. profits.
Peter Prowitt, formerly Baucus' chief of staff, is now an in-house lobbyist and VP at GE. GE filings show Prowitt on the lobbying teams that won wind-tax credits, electric-vehicle tax credits, and "Extension of Subpart F Deferral for Financial Services."
The examples in the article go on and on. The best way to get rich in America is not to have a great idea or work hard but to hire an ex-staffer from Senator Baucus's office.
Yesterday, 114-year old Mamie Rearden died in South Carolina. This just a month after the death of 115-year-old Dina Manfredini of Iowa.
Obviously something is killing off 114+ year old Americans, and the government needs to investigate. These two poor women represented a huge percentage of the American 114+ year old population, both dead inside a single month.
If this plea seems absurd, it is. But no more absurd than the near-constant pleas for government action based on other tail-of-the-distribution random events. Heck, at least I had two data points to falsely declare a trend. Those claiming a "trend" in mass shootings from Sandy Hook or in extreme climate from Hurricane Sandy are extrapolating a trend from only a single data point.
OMG, I never even realized -- that's another deadly trend -- things named Sandy! When will Congress act?
Ever since Amazon managed to patent one-click ordering, I have been skeptical of software patents. When I was in the Internet field, I saw companies patent some, uh, patently obvious stuff, roughly akin to patenting an on/off switch. Or even worse, multiple companies would get patents for the equivalent of an on/off switch, with this company claiming it has the patent for on-off switches for lighting, and this one for appliances, and this one for all electrical devices, and then all three end up sitting in court for about 10 years arguing about who has the patent for turning on the bulb in your refrigerator.
Kevin Drum brings us an amazing horror story of a patent that apparently I owe licensing fees for -- and probably you do too.
Vicinanza soon got in touch with the attorney representing Project Paperless: Steven Hill, a partner at Hill, Kertscher & Wharton, an Atlanta law firm.
"[Hill] was very cordial and very nice," he told Ars. "He said, if you hook up a scanner and e-mail a PDF document—we have a patent that covers that as a process."
It didn’t seem credible that Hill was demanding money for just using basic office equipment exactly the way it was intended to be used. So Vicinanza clarified:
"So you're claiming anyone on a network with a scanner owes you a license?" asked Vicinanza. "He said, 'Yes, that's correct.' And at that point, I just lost it."
Drum has a good discussion, including some prior art with which he actually participated.
Hardcore Keynesian theory says that even paying someone to dig a hole one day and fill it in the next is stimulative. This has always seemed insane to me -- how could it possibly be a net gain in growth and wealth to shift resources from productive activities to unproductive ones? But in line with this theory, the Keynesians in the Obama Administration have hit on the perfect stimulus:
A cargo train filled with biofuels crossed the border between the US and Canada 24 times between the 15th of June and the 28th of June 2010; not once did it unload its cargo, yet it still earned millions of dollars... The companies “made several million dollars importing and exporting the fuel to exploit a loophole in a U.S. green energy program.” Each time the loaded train crossed the border the cargo earned its owner a certain amount of Renewable Identification Numbers (RINs), which were awarded by the US EPA to “promote and track production and importation of renewable fuels such as ethanol and biodiesel.”
I almost never watch the network news, but I happened to be in the room when NBC News had a year in review video where it paid tribute to famous people who passed away in 2012. The people they chose were incredible -- probably 85% entertainers and sports figures and 15% government / military figures. And that is NBC's world. I vaguely remember there may have been one exception, but essentially there were no producers, no scientists, no inventors, no business people. Not even someone like Carroll Shelby, a business person who also had a place in pop culture.
The recent tax increase on the 2% of the wealthiest Americans will be completely used up by this Sunday. In exchange for decreasing the incentives to work and invest of the most productive and successful Americans, we got enough money to operate the government for just over five and a half days, or until some time January 6. It is entirely possible that Obama will not even be back from his Hawaii retreat before the new taxes, which were the first priority for his second term, have already been spent.
(Calculation: Assumes $60 billion first year take from the new taxes on rich, and spending this year of $3.8 trillion, or about $10.4 billion a day.
1. Eliminate all deductions in the individual income tax code
2. Eliminate the corporate income tax.
3. Tax capital gains and dividends as regular income.
4. Eliminate the death tax as well as the write-up of asset values at death
I don't have any idea if this revenue positive or negative (I suspect it would be short-term positive, and long-term very positive), but I don't care. This would:
I would be happy to make this revenue neutral (even if it required an individual income tax rate hike) and sell this to the Tea Party and Occupy Wall Street alike as a plan to reduce waste, corporatism, and crony meddling. The OWS might be upset about 2 & 4, but corporate profits eventually show up as either capital gains or dividends, so they will eventually get taxed on the individual income tax return. Ditto death taxes - currently they are largely offset by the ability to write-up asset basis at death and aggressive tax planning. And anyway, the death tax is a trivial sources of government revenues.
Postscript: I know there is all sorts of literature that supposedly promotes a lower capital gains tax as an economic positive. Frankly, I don't trust it any more than any other literature genned up to promote special tax breaks to any group because that group is supposedly economically more important. In my mind, a lower capital gains tax rate (which means a higher regular income tax rate) is just another way of government expressing an artificial preference for one economic activity over another. Specifically, a lower capital gains rate creates a preference for real estate and stock investors over business owners. Currently, I invest in a second home and flip it for a profit and I get a tax break on the capital gains. But if I invest in a business instead that pays off with regular income, I get no tax break. Why? Why is one type of investing better than another? The answer is that it is not, but the people who buy and sell equities and real estate in large quantities have more political clout than small business owners.
Postscript #2: And Medicare taxes have to go up, at least until the program is restructured.
Postscript #3: This is a great example of what I want to make go away. I consider it far more destructive in the long run than a percentage point rate change. In case it is behind a paywall, here is a bit of it (these giveaways to the rich were in the very same bill that was supposed to be to soak the rich):
Thus Michigan Democrat Debbie Stabenow was able to retain an accelerated tax write-off for owners of Nascar tracks (cost: $78 million) to benefit the paupers who control the Michigan International Speedway. New Mexico's Jeff Bingaman saved a tax credit for companies operating in American Samoa ($62 million), including a StarKist factory.
Distillers are able to drink to a $222 million rum tax rebate. Perhaps this will help to finance more of those fabulous Bacardi TV ads with all those beautiful rich people. Businesses located on Indian reservations will receive $222 million in accelerated depreciation. And there are breaks for railroads, "New York Liberty Zone" bonds and so much more.
But a special award goes to Chris Dodd, the former Senator who now roams Gucci Gulch lobbying for Hollywood's movie studios. The Senate summary of his tax victory is worth quoting in full: "The bill extends for two years, through 2013, the provision that allows film and television producers to expense the first $15 million of production costs incurred in the United States ($20 million if the costs are incurred in economically depressed areas in the United States)."
You gotta love that "depressed areas" bit. The impoverished impresarios of Brentwood get an extra writeoff if they take their film crews into, say, deepest Flatbush. Is that because they have to pay extra to the caterers from Dean & DeLuca to make the trip? It sure can't be because they hire the jobless locals for the production crew. Those are union jobs, mate, and don't you forget it.
The Joint Tax Committee says this Hollywood special will cost the Treasury a mere $248 million over 10 years, but over fiscal years 2013 and 2014 the cost is really $430 million because it is supposed to expire at the end of this year. In reality Mr. Dodd will wrangle another extension next year, and the year after that, and . . . . Investing a couple million in Mr. Dodd in return for $430 million in tax breaks sure beats trying to make better movies.
Then there are the green-energy giveaways that are also quickly becoming entitlements. The wind production tax credit got another one-year reprieve, thanks to Mr. Obama and GOP Senators John Thune (South Dakota) and Chuck Grassley (Iowa). This freebie for the likes of the neediest at General Electric GE -0.82% andSiemens SIE.XE +0.20% —which benefit indirectly by making wind turbine gear—is now 20 years old. Cost to taxpayers: $12 billion.
Cellulosic biofuels—the great white whale of renewable energy—also had their tax credit continued, and the definition of what qualifies was expanded to include producers of "algae-based fuel" ($59 million.) Speaking of sludge, biodiesel and "renewable diesel" will continue receiving their $1 per gallon tax credit ($2.2 billion). The U.S. is experiencing a natural gas and oil drilling boom, but Congress still thinks algae and wind will power the future.
Meanwhile, consumers will get tax credits for buying plug-in motorcycles ($7 million), while the manufacturers of energy-efficient appliances ($650 million) and builders of energy-efficient homes ($154 million) also retain tax credits. Manufacturers like Whirlpool love these subsidies, and they are one reason that company paid no net taxes in recent years.
The fiscal settlement passed last night did absolutely nothing to improve the deficit or the financial sanity of government. Its only purpose, as far as I can tell, was to let Democrats count coup on rich people as a reward for winning the last election. It's like telling your kids that on their birthday, you will take them to do absolutely anything they like, and Democrats chose to display their disdain for rich people as their one act of celebration. A few other observations:
And so ends, I suppose, the 12-year saga of the Bush tax cuts, with tax cuts for the rich revoked and the rest made permanent. The establishment media decided early on that it was going to run with the story line that these cuts were "for the rich." The irony, that will never get any play, is that now, at the end, it is all too clear that this was far from the case. Reversing the tax cuts to the rich only reversed a small percentage of the original tax cuts. In fact, if the Bush tax cuts had been mainly for the rich, then the Democrats would not have even bothered addressing the fiscal cliff.
Blogging has been light during the holidays, but here are some predictions I made back in 2007 I feel pretty good about (note these were made a year before Obama was elected)
What I will say is that folks who have enthusiastically supported the war should understand that the war is going to have the following consequences:
- In 2009 we will have a Democratic Congress and President for the first time since 1994.
- The next President will use the deficits from the $1.3 trillion in Iraq war spending to justify a lot of new taxes
- These new taxes, once the war spending is over, will not be used for deficit reduction but for new programs that, once established, will be nearly impossible to eliminate
- No matter what the next president promises to the electorate, they are not going to reverse precedents for presidential power and secrecy that GWB has established. Politicians never give up power voluntarily. [if the next president is Hillary, she is likely to push the envelope even further]. Republicans are not going to like these things as much when someone of the other party is using them.
1. The prediction was 100% correct, and in fact even went further as the donkeys gained a filibuster-proof majority in the Senate, at least for a year. Though the war likely had little to do with the outcome, which was driven more by the economy
2. Dead-on. Five years later Obama still blames the deficit on Bush. This is no longer true -- Obama has contributed far, far more than Bush to the deficit -- but the Republicans' fiscal irresponsibility during their tenure have robbed them of any credibility in criticizing Obama
3. Mostly true (and usually a safe bet with government). Tax increases were deferred for four years due to an economy I had not foreseen would be so bad, but they are coming. At the time, it seemed logical to blame a lot of the deficit issues on war spending. Today, though, 1.3 trillion is barely 8% of the debt and is almost trivial to more recent money wasting activities.
4. Absolutely true. In spades. The only thing I missed was I thought Obama might be less likely to go overboard with the whole executive authority and secrecy thing than Hillary, but boy was I wrong. Obama has absolutely embraced the imperial presidency in a way that might have made Dick Cheney blush. Accelerated drone war, constant ducking of FOIA and transparency, increased use of treason laws to prosecute whistle blowers, claiming of power to assassinate Americans on the President's say-so, accelerated warrant-less wiretapping, using executive orders to end-run Congress, etc. etc. And I never guessed how much the media which so frequently criticized Bush for any expansions in these areas would roll over and accept such activity from a President of their party.
I continue to be fascinated by the frequent intersection of classical liberals / libertarians and Occupy Wall Street, at least in the diagnosis of what ails us. This post by Russ Roberts I linked previously is a great example. Both groups get energized by criticisms of the corporate state and crony government.
Where they diverge, of course, is in solution-making. The OWS folks see the root cause in the behavior and incentives of private corporations which corrupt government actors with their money, and thus advocate solutions which increase state power over these private entities. In contrast, libertarians like myself see the problem as too much state power to create winners and losers in the market and shift wealth from one group to another. Given this power, the financial incentives to harness it in ones favor are overwhelming and will never go away, so the only way to tackle it is to reduce the power to play favorites.
Russ Roberts over at Cafe Hayek quotes from a Cathy O’Neill review of Nate Silvers recent book:
Silver chooses to focus on individuals working in a tight competition and their motives and individual biases, which he understands and explains well. For him, modeling is a man versus wild type thing, working with your wits in a finite universe to win the chess game.
He spends very little time on the question of how people act inside larger systems, where a given modeler might be more interested in keeping their job or getting a big bonus than in making their model as accurate as possible.
In other words, Silver crafts an argument which ignores politics. This is Silver’s blind spot: in the real world politics often trump accuracy, and accurate mathematical models don’t matter as much as he hopes they would....
My conclusion: Nate Silver is a man who deeply believes in experts, even when the evidence is not good that they have aligned incentives with the public.
Distrust the experts
Call me “asinine,” but I have less faith in the experts than Nate Silver: I don’t want to trust the very people who got us into this mess, while benefitting from it, to also be in charge of cleaning it up. And, being part of the Occupy movement, I obviously think that this is the time for mass movements.
Like Ms. O'Neill, I distrust "authorities" as well, and have a real problem with debates that quickly fall into dueling appeals to authority. She is focusing here on overt politics, but subtler pressure and signalling are important as well. For example, since "believing" in climate alarmism in many circles is equated with a sort of positive morality (and being skeptical of such findings equated with being a bad person) there is an underlying peer pressure that is different from overt politics but just as damaging to scientific rigor. Here is an example from the comments at Judith Curry's blog discussing research on climate sensitivity (which is the temperature response predicted if atmospheric levels of CO2 double).
While many estimates have been made, the consensus value often used is ~3°C. Like the porridge in “The Three Bears”, this value is just right – not so great as to lack credibility, and not so small as to seem benign.
Huybers (2010) showed that the treatment of clouds was the “principal source of uncertainty in models”. Indeed, his Table I shows that whereas the response of the climate system to clouds by various models varied from 0.04 to 0.37 (a wide spread), the variation of net feedback from clouds varied only from 0.49 to 0.73 (a much narrower relative range). He then examined several possible sources of compensation between climate sensitivity and radiative forcing. He concluded:
“Model conditioning need not be restricted to calibration of parameters against observations, but could also include more nebulous adjustment of parameters, for example, to fit expectations, maintain accepted conventions, or increase accord with other model results. These more nebulous adjustments are referred to as ‘tuning’.” He suggested that one example of possible tuning is that “reported values of climate sensitivity are anchored near the 3±1.5°C range initially suggested by the ad hoc study group on carbon dioxide and climate (1979) and that these were not changed because of a lack of compelling reason to do so”.
Huybers (2010) went on to say:
“More recently reported values of climate sensitivity have not deviated substantially. The implication is that the reported values of climate sensitivity are, in a sense, tuned to maintain accepted convention.”
Translated into simple terms, the implication is that climate modelers have been heavily influenced by the early (1979) estimate that doubling of CO2 from pre-industrial levels would raise global temperatures 3±1.5°C. Modelers have chosen to compensate their widely varying estimates of climate sensitivity by adopting cloud feedback values countering the effect of climate sensitivity, thus keeping the final estimate of temperature rise due to doubling within limits preset in their minds.
There is a LOT of bad behavior out there by models. I know that to be true because I used to be a modeler myself. What laymen do not understand is that it is way too easy to tune and tweak and plug models to get a preconceived answer -- and the more complex the model, the easier this is to do in a non-transparent way. Here is one example, related again to climate sensitivity
When I looked at historic temperature and CO2 levels, it was impossible for me to see how they could be in any way consistent with the high climate sensitivities that were coming out of the IPCC models. Even if all past warming were attributed to CO2 (a heroic assertion in and of itself) the temperature increases we have seen in the past imply a climate sensitivity closer to 1 rather than 3 or 5 or even 10 (I show this analysis in more depth in this video).
My skepticism was increased when several skeptics pointed out a problem that should have been obvious. The ten or twelve IPCC climate models all had very different climate sensitivities — how, if they have different climate sensitivities, do they all nearly exactly model past temperatures? If each embodies a correct model of the climate, and each has a different climate sensitivity, only one (at most) should replicate observed data. But they all do. It is like someone saying she has ten clocks all showing a different time but asserting that all are correct (or worse, as the IPCC does, claiming that the average must be the right time).
The answer to this paradox came in a 2007 study by climate modeler Jeffrey Kiehl. To understand his findings, we need to understand a bit of background on aerosols. Aerosols are man-made pollutants, mainly combustion products, that are thought to have the effect of cooling the Earth’s climate.
What Kiehl demonstrated was that these aerosols are likely the answer to my old question about how models with high sensitivities are able to accurately model historic temperatures. When simulating history, scientists add aerosols to their high-sensitivity models in sufficient quantities to cool them to match historic temperatures. Then, since such aerosols are much easier to eliminate as combustion products than is CO2, they assume these aerosols go away in the future, allowing their models to produce enormous amounts of future warming.
Specifically, when he looked at the climate models used by the IPCC, Kiehl found they all used very different assumptions for aerosol cooling and, most significantly, he found that each of these varying assumptions were exactly what was required to combine with that model’s unique sensitivity assumptions to reproduce historical temperatures. In my terminology, aerosol cooling was the plug variable.
By the way, this aerosol issue is central to recent work that is pointing to a much lower climate sensitivity to CO2 than has been reported in past IPCC reports.
One of the charities my family supports is Teach for America. Among other things, we sponsor a local teacher in the program. A bunch of our friends were kind enough to chip in with gifts for the kids in her class and my wife and I delivered them last week at the Phoenix Collegiate Academy, a charter school in South Phoenix for 5-8 graders.
The fun of delivering the presents was reduced later on finding out that at almost that same moment, another group of kids was being killed in Connecticut. But through a strange series of articles that seemed to have used the Sandy Hook massacre as an argument for teacher unionization and against charter schools (yeah, I don't get the connection either), I found out that teachers unions hate Teach for America. Which means that I will likely double my contribution next year.
Postscript: Teach for America began as a senior thesis at Princeton. Its key idea is to make teaching a viable job option, as least for a few years, for top college grads. The program is quite selective, and combines talented highly motivated young people with a proven teaching approach. They then drop these teachers into the public school system, often in classrooms with a high percentage of kids who qualify for school lunch programs (ie low income).
It's clear from the article that teachers union and education establishment types hate these teachers. Since they make a contrast by calling themselves "professionals", the presumed implication is that these young people are unprofessional. Its amazing to me that anyone who has spent even ten minutes in a room with a group of TFA teachers could be so hostile to them. I have met many of them, and they are a consistently amazing bunch who are both smart and genuinely love their kids.
I was skeptical, and still am a bit, of the notion of throwing great teachers into a failing public school system. They clearly help individual kids, which is why I am still behind it, but they do nothing to help the overall system. It's like sending great engineers into Solyndra -- at some level, it seems like a waste (though I am impressed with this particular charter school, which seems to be doing a good job with the limited resources it has -- it gets far less money per pupil than the average public school in Phoenix but does a better job given the demographic of its students).
I had thought that post-9/11 and with the very visible object lesson of TSA security theater that this would have already been understood, but I will repeat it: There are no security steps that we are willing to tolerate as a free society that would make it impossible, or even substantially more difficult, for a motivated deranged person to shoot up an elementary school.
Promises by politicians up to and including the President to take "steps" to improve safety are illusory. What we will get, if anything, will be incremental steps that will hassle law-abiding citizens (think: taking your shoes off at the airport and not using your iPad during takeoffs) without doing anything to deter actual criminals. In particular, any honest and knowledgeable security person will tell you that there is no realistic way, short perhaps of turning ourselves into North Korea, of stopping a killer who is determined to die as part of his crime.
What state has the highest income inequality?
Hint: Think Hunger Games
Answer here. It turns out that this was a trick question. It was not any of Districts 1 through 50. It is the Capitol, the District of Columbia. By far. Second place New York (district one) is not even close.
The act of shopping is often denigrated by the literati as shallow and self-indulgent. But shopping is at the very heart of why a free market works. It enforces discipline on suppliers because they buyers will be comparing their price and quality and feature set to their competitors.
In health care, we have all but ended the act of consumer shopping. Most of our medical expenses are paid by third parties, and we are just not very careful when spending other people's money. These third parties sometimes try to be diligent about what we pay, but it is a losing task and in doing so they end up irritating everyone.
You can find it on the Internet for $250 or less. But if Medicare is paying, a standard-issue brace for back patients costs more than $900.
In a report expected Wednesday, federal investigators say Medicare paid an average of $919 for back braces that cost suppliers $191 apiece, providing a window on how wasteful spending drives up health care costs.
“The program and its beneficiaries could have paid millions of dollars less if the Medicare reimbursement amount … more closely resembled the cost to suppliers,” says the report from the inspector general of the Health and Human Services Department. The Associated Press obtained a copy.
I discuss the phenomenon in health care more in this part 1 on a three part series I wrote at Forbes
The various cities in the Phoenix metropolitan area have spent a fortune renovating ten spring training fields for 15 major league teams. I have seen a number like $500 million for the total, but this seems low as Scottsdale spent $100 million for just one complex and Glendale may have spent as much as $200 million for theirs. Never-the-less, its a lot of taxpayer money.
The primary subsidy, of course, is for major league teams that get lovely facilities that they use for about one month in twelve.
But these subsidies always get sold on their community impact. But that economic impact turns out to be really narrow. For in-town visitors, the economic impact is typically a wash, as money spent on going to sports games just substitutes for other local spending. But these stadiums are held up as great economic engines because they attract out of town visitors:
Cactus League baseball and year-round use of its ballparks and training facilities add an estimated $632 million to Arizona economy, according to a study released Monday by the Cactus League Baseball Association.
The study found that 56 percent of the 1.7 million fans attending games this past spring were out-of-state visitors and the median stay in metro Phoenix was 5.3 nights.
Spring training accounted for $422 million in economic impact in 2012, up 36 percent from the previous study in 2007. Both were done by FMR Associates of Tucson.
One of the flaws of such studies is they never, ever look at what the business displaces. For example, for local visitors, they never look at local spending sports customers might have made if they had not gone to the game. All spending on the sports-related businesses are treated as incremental. For out-of-town visitors, no one ever considers other visitors coming for non-sports reasons who are displaced (March was already, without all the baseball, the busiest hotel month in Phoenix) or considers that some of the visitors might have come to the area anyway.
However, let's for one moment of excessive credulity accept these numbers, and look at the out of town visitors. 56 percent of 1.7 million people times 5.3 nights divided by 2 people per room is 2.52 million room nights, or at $150 each a total of $378 million. So most of their spring training economic impact is hotel room nights. This by the way is the same logic that supports various public subsidies of local college bowl games.
Which begs the question, why are we spending upwards of a billion dollars in taxpayer money to subsidize sports teams and hotel chains? If the vast majority of the economic impact of these stadium investments is for hotels, why don't they pay for them, or split the cost with the teams?
PS- as an aside, it seems that to be successful in the corporate state, one needs ready access to consultants who will put absurdly high numbers on the positive impact of one's government subsidies. It's like money laundering, but with talking points. Take your self-serving spin, hand it with a bunch of money to a consultant, and out comes a laundered "study". In this case, the "study" architects are FMR Associates, which bills itself as specializing "in strategic research for the communications industry." The communications industry means "PR flacks". So they specialize in making your talking points sound like they have real research behind them. Probably a growing business in our corporate state.
Last week I mentioned that my dad had passed away. I had not really meant to make a big deal about it on my blog, but I wanted to give my support for the oral history idea. However, a lot of you expressed support and condolences, for which I am thankful, and were curious about my dad from some of the small references I dropped. I didn't answer any of the friendly requests I got for information, mainly because dad was so private about his life and accomplishments that it seemed odd for me to do anything but the same. But his obituary appeared this weekend in the Houston paper so I thought I would share that for those who are interested.
