Coyote Blog

For years I have said that daylight savings time likely made no sense as an energy saving program.  It was first used back in World War I, when electricity demand was primarily driven by illumination.  At that time, shifting the clock around to better match working hours with sunny hours (ie times with natural light) probably did save electricity.  But today, electricity demands are driven much more heating and cooling.  The same logic no longer holds.  In Arizona, the earlier the sun goes down, the less electricity we have to use when we are home in the evenings to keep the house cool.

It seems that research has confirmed my gut feel:

The result of the study showed that electricity use went up in the counties adopting daylight saving time in 2006, costing $8.6 million more in household electricity bills. The conclusion reached by Kotchen and Grant was that while the lighting costs were reduced in the afternoons by daylight saving, the greater heating costs in the mornings, and more use of air-conditioners on hot afternoons more than offset these savings. Kotchen said the results were more "clear and unambiguous" than results in any other paper he had presented.

Of course, daylight savings time will never go away, because modern environmentalism has become more a matter of making empty feel-good gestures than performing rational acts that actually improve something.

Over the last several years, we have been replacing many of the full-sized pickups we use in our campground business with mini-trucks from Japan.  They are cheaper to insure, cheaper to buy, easy to repair, and get about 60 miles to the gallon.  We typically buy them used in container-loads of six or seven, and we used to get them for less than $10,000 a container -- now they cost almost this much individually.

This year the prices have sky-rocketed, and they have been hard to find.  I finally discovered the reason.  It seems the EPA has halted their importation.  These are trucks that are from an emissions regime (in Japan) harsher than ours and that have three times the gas mileage of the trucks they are replacing.  But apparently the EPA doesn't have rules for them and doesn't know how to categorize them, and anything a bureaucrat doesn't have rules for must be illegal, right?  So now we are forced to go back to full-size pickup truck purchases until the EPA can catch up with the market.

Update: Apparently the EPA is going to review these trucks model by model.  This is so stupid.  They need some kind of class waiver.

The absolute dysfunctionality of our county government here in Phoenix is just beyond belief.   While not really breaking any new ground, this article in the ABA journal has a pretty good history of Arpaio and Thomas hyjinx.

Via Katherine Mangu-Ward, word count by Pew Research when Americans are asked about Congress

This would make a great piece of modern art to put on the walls of the Rotunda.

From Ed Morrissey:

Chicago Breaking News reported late last night that former Chicago schools chief and current Secretary of Education Arne Duncan manipulated a system to favor powerful political allies by placing their children in the schools of their choice.  The discovery of a  list, the existence of which had been long denied by the city, and its composition of mainly high-powered political figures calls into question the appeals system used to reconsider applications that had been denied by the top Chicago-area schools:

This is going to be even more fun when this game is applied to jumping the hospital waiting list.

Looking at the chart below, attempt to convince yourself that the cash-for-clunkers program had any real effect on economic activity.

And consider what was NOT purchased by the previous holders of the billions of dollars the government took from them to give to car buyers.

For the first time in five years, I am apparently mathematically eliminated after the first weekend, with my best possible finish in 7th.    Congratulations to our current leaders, who navigated through an incredible series of upsets far better than I did:

Perhaps even more incredibly, Todd Ramsey is shown to have a 71+% chance of winning it all, which are pretty unprecedented odds in our pool this early in the tournament.

A while back, Megan McArdle had what I thought was good advice - using betting as a way to hedge emotional risks.  For example, I was going to be really disappointed if the health care bill passed, so I bet that its passage would occur.  I am still unhappy, but I have some extra cash.

I have been buying on the dips for a while now.  I predicted way back last July that it was going to pass no matter what

It is totally clear to me that Obama and Pelosi will spend any amount of money to pass their key legislative initiatives.  In the case of Waxman-Markey, the marginal price per vote turned out to be about $3.5 billion.  But they didn't even blink at paying this.  That is why I fear that some horrible form of health care "reform" may actually pass.  If it does, the marginal cost per vote may be higher, but I don't think our leaders care.

via shorpy

My health insurance policy, which is an actual "insurance" policy that insures me against catastrophic medical costs but leaves me with responsibility for day to day expenses, just became illegal.   Over the last couple of years, I have documented my learning curve as, for the first time, I actually had an incentive to shop around for medical care, or to push back on doctors when I thought they are calling for too many tests and procedures.  I have learned a lot about saving money, but all of this education is now for naught, as I will now be required to buy a pre-paid medical policy that leaves very little of the decision-making to my family and provides zero incentives for me to be cost conscious.  Apparently, the operators of the US Postal Service and US military procurement felt they were better qualified to manage these cost/value trade-offs than I am.

Here, by the way, is my favorite quote from today, from Nancy Pelosi (who else):

House Speaker Nancy Pelosi praised the health care legislation for its ability to "unleash tremendous entrepreneurial power into our economy."

Only if one considers rent-seeking to be entrepreneurship.  There will certainly be a mad rush of special interests to Congress to get their pet procedure or drug included in national must-cover rules.  I discussed this rent-seeking process, which used to have to proceed inefficiently state by state but now can be achieved single-source, here.   Naturopath coverage, anyone? (already required under coverage rules in 4 states).   Already a lot of so-called medical research is really just thinly disguised pleas to have a certain procedure in must-cover rules.  For example, I wrote about one study:

In other words, the study surveyed a bunch of cosmetic surgeons.  They were asked "should an expensive procedure you provide be covered by insurance."  They all answered "Hell YES!"  Anyone want to bet whether the funding for the study came from the company that makes the laser equipment?

No, today's post is not on health care, but CO2 abatement.  Marlo Lewis looks at a new Harvard study, and concludes what I have been saying for years -- gas prices are going to have to be forced to $10 or more in this country before we even start making a dent in the Administrations or UN's CO2 abatement targets.   I obviously don't think it is justified based on my views on the climate sensitivity to CO2, but even if it were, let's not pretend it is somehow free.

Sorry to steal the phrase from Marginal Revolution, but it seems appropriate for this story -- Surgery as an excuse to be laid up in bed watching TV

Come to find out that untold numbers of American males at this very moment are propped up in front of their television sets at home, bags of ice strategically placed in their respective crotches.

Cleveland urologist Dr. Stephen Jones has noted a 50 percent increase in recent years in vasectomies performed a day or two [before] the start of the NCAA men's tournament.

That's a lot of slicing and dicing.

You can imagine the dialogue, first between the dude and his woman:

"Honey, doc says I gotta take it easy for a couple of days. I'll be back to normal after the weekend."

Or this one with the boss:

"Sorry, I'll be out Thursday and Friday. Surgical procedure. Nothing big. No, I'll be laid up and it probably will be better if I start up fresh on Monday, OK?

Not sure I have the cojones to try that.

After much back and forth, filibustering, meaningless diversions,  and head fakes, Obama finally admits that the same dollar can't be spent twice.

From the new bill signed by Obama today:

Under the new law, businesses that hire anyone unemployed for at least 60 days would be exempt from paying the 6.2 percent Social Security payroll tax through December. Employers also would get an additional $1,000 credit if new workers remain on the job a full year.

This is absurdly game-able.  How do I know?  Because as I read this here (I have not read the legislation) this is a ridiculous windfall for our company.  As a seasonal business, my current payroll is about 40 people.  Over the next two months, I will hire nearly 400 workers for the summer, most of whom have not been working over the winter as they are retired and just work a few months of the year.  Am I really not going to have to pay Social Security taxes on all these people?

And how is anyone going to administer this?  Are my payroll company and I going to have to figure out the employment status of all of our hires for the last 60 days to figure out what taxes to collect?  Does anyone in Congress even think about this stuff when they pass this garbage?

Update: ADP has more

Update #2: Here is my prediction, if they forgot about seasonal hiring  (again, I have not read the letter of the law yet).  This will be like the cash for clunkers program - in a month or two they will announce that they have used up the money they had allocated for the whole year.

So Obama just signed a new "jobs" package

It's the first of several such measures Democrats have promised this election year to address the public's top worry: jobs. The measure includes about $18 billion in tax breaks and pumps $20 billion into highway and transit programs.

This is fascinating to me.  Let's take it in reverse order, starting with the $20 billion in new spending.  We are going to take 0.14% of the GDP out of some people's hands, who presumably thought they were employing the money productively, and put it into some other people's hands, and that is going to be a net jobs creator? **  Does this Keynesian myth really make sense to thoughtful people any more?

OK, but lets accept the logic - somehow if the government spends the money, it is more stimulative than if private people spend the money.  But then the whole package is contradictory, because it includes $18 billion in tax breaks.   Isn't that just taking money away from that great optimizer, the US Government, and handing it back to yucky old individuals who might just save it or pay down debt or something equally silly in the Keynesian world?

**Postscript- to answer a frequent comment I get, it does not matter if it is borrowed or taxed.  Either way it takes money from some private purpose.  There is only so much capital in the capital markets, and more government borrowing squeezes out private borrowing.

Here is as good a reason as any why many businesses (like mine) are currently reluctant to invest:

I've noted any number of times that government taxes comprise 14% of the national income and government spending is at 25% of the national income.

OK, so politicians have two alternatives -- they can make tough choices to reduce spending and reduce their own power, or they can just take more money from taxpayers and in so doing increase their personal power.  Gee, I wonder which will occur?

Combine this is a health care bill no one understands but everyone suspects will raise the price of labor and a climate bill that won't quite die that will raise the price of energy and therefore most other inputs, and is it any wonder that businesses are reluctant to invest when their three highest costs (taxes, labor, energy) are going up by some undetermined amount?

This post at Houston Clear Thinkers is just a devastating analysis of Houston light rail.  In it, we see the age-old story -- rail is enormously expensive, and starves the rest of the system for money, ultimately leading to fewer people riding at much higher costs.  He quotes from Bill King:

Decline in Ridership. Since 2004, Houston population has grown by over 10% from just over 2 million to 2.25 million. At the same time gas prices rose 47% from $1.81 per gallon to $2.67 per gallon. These two factors should have virtually guaranteed an increase in transit. However, exactly the opposite has occurred as bus boardings dropped almost 24% from 88 million in 2004 to 67 million in 2009. Instead of increasing bus service by 50% as it promised the voters in the 2003 referendum, Metro has slashed bus routes and increased fares by over 50%. Today Metro actually operates 225 fewer buses than it did in 2003. An outside performance audit in 2008 found that on-time performance fell by 29% from 2004 to 2008.

Financial Disaster. Since 2003, Metro's sales tax revenues have increased by 43%, rising from $357 million to $512 million. At the same time, its fare revenue increased by 41% from $42 million to $60 million by charging an ever dwindling ridership more. Yet, Metro is in the worst financial shape in recent history. At year end 2003 Metro's current assets exceeded its current liabilities by $125 million. The budget just adopted by the Metro board projects that it will have current accounts deficit of $165 million by the end of this fiscal year, a stunning loss of nearly $300 million in just five years. Over the same period, Metro's debt has swelled by nearly 50% from $546 million to $816 million. [.  .  .]

In the meantime, the cost of the [Metro's Light Rail Transit lines] has risen from the $1.2 billion originally estimated to something well in excess of $3 billion. Metro is seeking to borrow $2.6 billion to build the LRT, over four times what it promised the voters would be the limit in the 2003 referendum. Originally, Metro assured voters that it could build the LRT without tapping the mobility payments that are so critical to the Houston and the other member cities. Metro's projections now show that it can only afford the LRT if those payments are terminated in 2014. [.  .  .]

This is pretty scary.  From the Massachusetts state treasurer, the state health care system (essentially the model for the current version of Obamacare) is going bankrupt, and only huge cash infusions from the Federal government are hiding the full disaster.

"If President Obama and the Democrats repeat the mistake of the health insurance reform here in Massachusetts on a national level, they will threaten to wipe out the American economy within four years," Cahill said in a press conference in his office.

Echoing criticism leveled by congressional Republicans in recent weeks, Cahill said, "It is time for the president, the Democratic leadership, to go back to the drawing board and come up with a new plan that does not threaten to bankrupt this country."

[T]he state's health insurance law"¦Cahill said, "has nearly bankrupted the state."

Cahill said the law is being sustained only with the help of federal aid, which he suggested that the Obama administration is funneling to Massachusetts to help the president make the case for a similar plan in Congress.

"The real problem is the sucking sound of money that has been going in to pay for this health care reform," Cahill said. "And I would argue that we're being propped up so that the federal government and the Obama administration can drive it through" Congress.

The Democrats have no good ideas for controlling Medicare costs after a government takeover.  If they did, they would have already implemented these ideas on Medicare or in Massachusetts.  Their only plan is price controls and rationing.  Here is an example of price controls hitting a wall in Medicare:

Walgreens drugstores across the state won't take any new Medicaid patients, saying that filling their prescriptions is a money-losing proposition "” the latest development in an ongoing dispute over Medicaid reimbursement....

In a news release, Walgreens said its decision to not take new Medicaid patients stemmed from a "continued reduction in reimbursement" under the state's Medicaid program, which reimburses it at less than the break-even point for 95 percent of brand-name medications dispensed to Medicaid patents....

Washington was reimbursing pharmacies 86 percent of a drug's average wholesale price until July, when it began paying them just 84 percent. While pharmacies weren't happy about the reimbursement reduction, the Department of Social and Health Services said that move was expected to save the state about $10 million.

Then in September came another blow. The average wholesale price is calculated by a private company, which was accused in a Massachusetts lawsuit of fraudulently inflating its figures. The company did not admit wrongdoing but agreed in a court settlement to ratchet its figures down by about 4 percent.

So the Government is reimbursing retailers at 80% of wholesale costs.  Even forgetting their overhead,  Walgreens was asked to sell dollar bills to the government for 80 cents.

What both stories have in common are government health plans that are subsidized from the outside:  The Feds are pouring money into Massachusetts and money is sucked out of the private medical side to subsidize Medicare.  But what happens when there is only one system, when there is nothing outside of it to subsidize it?  What are they counting on to save them?

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The new FCC broadband policy just looks stupid.  It is classic political campaign fodder -- who can be against high-speed Internet access?  But what are they really trying to achieve?  Well, it does not seem that respect for individual preferances or decision-making has anything to do with it (emphasis added)

In addition, the plan is designed to encourage more people to subscribe to broadband. About two-thirds of U.S. households have high-speed Internet access now. Many people in the other one-third could get broadband but choose not to buy it, either because they think it's too expensive or because they don't see a need for it. The FCC plan calls for increasing adoption rates to more than 90 percent of the population.

So their major goal is to encourage people who do not value high-speed Internet access to suddenly value it.  How?  By force?  By subsidizing people who don't really even want it?   "We elites can't imagine living without Twitter for a whole day so the rest of you need to value the same things too. "

Next week I am on a panel talking about alternative energy.  These guys have already told me they don't want to re-fight the global warming science battle at this venue, and my guess is that there will be a lot of pragmatist corporate types who won't really care about individual liberty or role-of-government issues  -- they will only care if there is money to be made, even if it is by rent-seeking.  My best bet, I think, will be to discuss why alternative energy is a bad investment.  My sense is that it is a bubble investment, like goofy Internet stocks in the 1990's or housing in the 2000's.  Already, I think we see the crash in the corn ethanol business.

My two assumptions are

• I can't think of any industries that were initially heavily subsidized that eventually found their way to competing successfully and growing without subsidies.
• With the exception of agriculture, the public's tolerance for growing subsidies to a single industry eventually wanes.

I would love for commenters or emailers to send me contra-examples if they have them to either of these assumptions.  In particular, can you think of an industry that could not have grown initially without subsidies eventually prospering without subsidies.

To the second point, I looked at the numbers two ways.

1. In Germany, which is often held up as the model, feed-in tariff subsidies are between $0.06 (wind) and $0.50 (solar) a Kwh.  If the US reached a goal of 20% of its production in wind and solar (total production today is about 4000 billion KWh) then the subsidy would be between $50 billion and $400 billion a year.  It is hard to imagine these remaining popular for any period of time.  (lots of German numbers here and in the linked PDF)
2. Venture capitalists and investors are expecting the growth stocks they invest in to grow at, say, 30% a year.   Let's assume alternative energy companies grow at 30% a year and the number of companies, attracted to the growth and subsidies, doubles every two years.  In this scenario, assuming unrealistically that the supply curve for alternative energy is flat rather than upward sloping, the amount of subsidies to support this growth would have to nearly double every year.  They would increase 21-fold in five years and 440-fold in 10 years.   In fact, given the shape of real supply curves, new more expensive capacity at the margin is replacing cheaper and cheaper alternatives, resulting in the need to grow subsidies even faster to keep up.   Never has happened, never will.  Once the industry outgrows the government's willingness to grow subsidies, the whole thing crashes.

(PS - the subsidy could also be in the form of taxes that increase the cost of alternatives, or production and/or import restrictions on the alternatives).

Any help along these lines in the comments is appreciated.

Update: This seems relevant:

First Solar shares skidded 8% Friday to close at $116 after the company issued a murky business outlook beyond June. Until then, however, "orders look very strong," First Solar CEO Robert Gillette said in a post-earnings conference call.

This commentary, along with price pressure and expected subsidy cuts solar panel makers get from the German government is making investors a bit more wary of First Solar, whose shares have been on a bumpy ride the past 18 months....

First Solar, helped by government tax credits extended to businesses for using solar power, has rewarded its investors since going public in November 2006 at $20 a share. The stock peaked at $317 in May 2008. But the shares have been skittish ever since.

Germany, the world's biggest solar market, is weighing a 15% cut on so-called solar feed-in-tariffs. This could make solar installations less attractive.

First Solar projects 60% of its 2010 sales from German-related contracts, according to Wedbush Securities analyst Christine Hersey.

Remember from above, the German feed-in tariff for solar is around $0.58 per KwH, or fully $0.50 above the price paid for the fossil fuel base load.  At this subsidy level, the US would be paying $400 billion a year in subsidies and/or higher prices.

First Solar has grown at over 150% per year for the last 3 years so the 30% assumption above is conservative, as is the assumption about the number of competitors doubling every two years.

Another interesting note - First Solar makes a pre-tax margin around 33% of sales, which is over 6x larger than health insurance companies make (and are excoriated for).  Is it any wonder Germany no longer wants to keep subsidizing First Solar's bottom line to levels far above most equipment manufacturing companies.

For years I have argued that the killer app that may someday actually lead to school choice will not be individual liberty (because no one in government gives a rip about that any more) and not education quality (because again, its clear no one really cares) but speech and religion.  If the right messes up schools enough, the left might finally be willing to shed their alliance with the teachers unions and consider school choice.  From a live-blog of a Texas Board of Education meeting (via Radley Balko)

9:27 - The board is taking up remaining amendments on the high school world history course.9:30 - Board member Cynthia Dunbar wants to change a standard having students study the impact of Enlightenment ideas on political revolutions from 1750 to the present. She wants to drop the reference to Enlightenment ideas (replacing with "the writings of") and to Thomas Jefferson. She adds Thomas Aquinas and others. Jefferson's ideas, she argues, were based on other political philosophers listed in the standards. We don't buy her argument at all. Board member Bob Craig of Lubbock points out that the curriculum writers clearly wanted to students to study Enlightenment ideas and Jefferson. Could Dunbar's problem be that Jefferson was a Deist? The board approves the amendment, taking Thomas Jefferson OUT of the world history standards.

9:40 - We're just picking ourselves up off the floor. The board's far-right faction has spent months now proclaiming the importance of emphasizing America's exceptionalism in social studies classrooms. But today they voted to remove one of the greatest of America's Founders, Thomas Jefferson, from a standard about the influence of great political philosophers on political revolutions from 1750 to today.

Per Nancy Pelosi:

"Think of an economy where people could be an artist or a photographer or a writer without worrying about keeping their day job in order to have health insurance."

Yeah, its a world where only the suckers work hard and try to be productive.

I absolutely couldn't believe what I was listening to on NPR the other day, with the breathless coverage of the moron in Southern California who for some reason couldn't slow his Prius but did manage to alert the national media.   Your brakes on your car can stop it even at full acceleration. Why couldn't he?  Why didn't he shift into neutral?  Why didn't he turn the engine off?  How amazing was it that a one in a million problem (because even if the sudden acceleration issue is a real hardware problem, it is very, very rare) occurs at just about the exact height of the Toyota panic in SoCal, the world's largest media market?

I am glad someone else is showing some skepticism.  The media is just incredible.  I used to feel guilty that I was too hard on the media in stories like this in my novel, but now I think I stopped short of reality.